Williams v Arnold

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

REASONS FOR JUDGMENT 1 The applicant, Mr Steven Williams, is a trustee in bankruptcy in the United Kingdom. He seeks the aid of the Federal Court of Australia in connection with the bankruptcy estate of the first respondent, Mark Summers Arnold, under s 29(2)(a) of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act). Section 29(2)(a) relevantly provides that in all matters of bankruptcy, the Court is to act in aid of and be auxiliary to the Courts of prescribed countries that have jurisdiction in bankruptcy. The United Kingdom is a prescribed country. 2 Section 272(1) of the Insolvency Act 1986 (UK) (the Insolvency Act) provides that a debtor's petition may be presented to the Court on the grounds that the debtor is unable to pay his debts. Under s 272(2), the petition is to be accompanied by a statement of a debtor's affairs containing such particulars of the debtor's creditors, debts and other liabilities and assets as may be prescribed. 3 On 26 July 2001, in the Sheffield County Court, it was ordered that Mr Arnold be adjudged bankrupt under the Insolvency Act. The bankruptcy was subsequently transferred to the Birmingham District registry. Under the Insolvency Act, the Official Receiver attached to the Sheffield County Court was, by virtue of the order of 26 July 2001, receiver and manager of Mr Arnold's estate. The order was made by the County Court following acceptance of a debtor's petition presented by Mr Arnold. The statement of affairs accompanying Mr Arnold's petition stated that he had no assets and owed creditors a total of £38,895. That sum included £30,000 said to be owing to the Inland Revenue Commissioner for income taxes. 4 Under s 279(1)(b) and s 279(2)(b) of the Insolvency Act, Mr Arnold was discharged from bankruptcy at the expiration of three years beginning with the day on which the bankruptcy order was made. Thus, he was discharged from bankruptcy on 26 July 2004. 5 On 16 December 2005, Mr Williams was appointed as trustee of the bankruptcy estate of Mr Arnold with effect from 21 December 2005. Mr Williams was appointed at the request of the Inland Revenue, who considered that Mr Arnold had concealed income and assets both from the Inland Revenue and from the Official Receiver. Following an investigation by the Inland Revenue, the Inland Revenue raised assessments against Mr Arnold in respect of several years of income and on 22 May 2006, the Inland Revenue lodged a final proof of debt in Mr Arnold's bankruptcy in the sum of £275,555. The proof was based, at least in part, on the assessments. Mr Williams admitted the Inland Revenue's proof of debt in full. An application made by Mr Arnold to the Chancery Division of the High Court of England and Wales to reverse that decision was dismissed on 19 February 2008. 6 On 14 May 2010, Mr Williams applied to the Birmingham District Registry of the Chancery Division of High Court of Justice of England and Wales, for a Letter of Request to be issued to the Federal court for the purpose of enabling him to seek: · recognition in Australia of the bankruptcy of Mr Arnold and his appointment as trustee; · orders enabling him to realise all of the property of Mr Arnold located in Australia; · declarations that such property is vested in him; · consequential orders to assist in the realisation of any such property, including orders for possession and sale and the like; · the appointment of a receiver of the property of Mr Arnold situated in Australia and vested in Mr Williams, together with any consequential orders as may be necessary to facilitate that process. 7 By Letter of Request dated 14 May 2010, a judge sitting in the Birmingham District Registry of the Chancery Division of the High Court of Justice requested that, for the assistance of that Court, the Federal Court of Australia: · vest in Mr Williams, or a Court appointed receiver and manager, Mr Arnold's property in Australia together with possession and control thereof, with liberty to sell and lease the same and receive the proceeds of such sale or leasing; · grant to Mr Williams, or such receiver and manager as the Court may appoint, the power of investigating the property of Mr Arnold and any offences that he may have committed; · grant such other orders on the application of Mr Williams or any such receiver and manager as may be necessary and proper for the purpose of implementing the objects set out above. 8 There is evidence that suggests that Mr Arnold has or has had property in Australia. There are three different items of property in question as follows: · Real property situated at 66 Kalandar Street, Nowra, being the land in folio identifier 21/592905, previously volume 13495 folio 90 (the Kalandar Street Property); · Real property situated at 14/29-31 Kinghorne Street, Nowra, being the land in folio identifier 14/SP31373 (the Kinghorne Street Property); and · Shares in the capital of Corpers (No 468) Pty Ltd (ACN 003 320 947) (Corpers). 9 Mr Arnold acquired the Kalandar Street Property by transfer dated 6 February 1981 and is still registered as the proprietor of the Kalandar Street Property. Assuming therefore that he is the beneficial owner of the Kalandar Street Property, it would appear to have been property that formed part of his bankrupt estate. As I have said, it was not disclosed in the statement of affairs that accompanied his debtor's petition. 10 Mr Arnold acquired the Kinghorne Street Property by transfer dated 4 October 2005. There is no material to indicate the date of any contract pursuant to which that transfer was given. The consideration for the transfer was $180,000. At present, therefore, there is no evidence to suggest that the Kinghorne Street Property is property of the bankrupt estate. 11 Corpers was incorporated on 18 June 1987. However, on 14 January 2007 Corpers was deregistered by the Australian Securities and Investments Commission (the Commission) pursuant to s 601AB of the Corporations Act 2001 (Cth) (the Corporations Act). Under s 601AB, the Commission may decide to deregister a company in the circumstances set out in that section. Section 601AB(3) sets out the procedure to be adopted by the Commission. Documents filed with the Commission show that at the time of deregistration of Corpers, Mr Arnold was the holder of two issued shares in the capital of Corpers and the address of the Kalandar Street Property was recorded as its principal place of business. Mr Arnold was a director of Corpers as well as being a shareholder. 12 Clearly, the Court should act in aid of and be auxiliary to the High Court of England and Wales in relation to the bankruptcy of Mr Arnold. It is appropriate to make an order to that effect. However, Mr Williams seeks specific orders as well, as contemplated by the Letter of Request. 13 First, Mr Williams seeks declarations that the Kalandar Street Property and the Kinghorne Street Property vest in Mr Williams. He also seeks orders that vacant possession of the Kinghorne Street Property and the Kalandar Street Property be given to him, as well as orders that he be authorised to remit to the United Kingdom any money received from the sale of any property of Mr Arnold. 14 In relation to Corpers, Mr Williams seeks an order under s 601AH of the Corporations Act. Under s 601AH(2), the Court may make an order that the Commission reinstate the registration of a company if an application for reinstatement is made by a person aggrieved by the deregistration and the Court is satisfied that it is just that the Company's registration be reinstated. Mr Williams does not presently know whether Corpers at any stage had assets and, if so, what happened to those assets. It is conceivable that a liquidator could bring a proceeding against former directors. Mr Williams is a person aggrieved and seeks reinstatement of the registration of Corpers. The Commission has indicated that it has no objection to that course and would not oppose appropriate orders being made. 15 Mr Williams seeks to be registered as the holder of the issued shares in the capital of Corpers. It would be appropriate that such an order be made once Corpers' registration has been reinstated. The register of members of Corpers should be corrected pursuant to s 175 of the Corporations Act to record Mr Williams as the holder of the shares in the capital of Corpers that were previously held by Mr Arnold. 16 Mr Williams also seeks the making of an order that Corpers be wound up and that Mr Warren White, an official liquidator, who has consented to be appointed, be appointed official liquidator. In the circumstances, it is also just and equitable that Corpers be wound up pursuant to s 461(1)(k) of the Corporations Act and that Mr White be appointed as liquidator. 17 On the present state of the evidence, I would not be disposed to make any orders in relation to the Kinghorne Street Property. However, liberty should be reserved to Mr Williams to make any further application in relation to the Kinghorne Street Property if evidence emerges as to any interest having been acquired prior to Mr Arnold's discharge from bankruptcy. For example, it may be that the Kinghorne Street Property was acquired with funds that formed part of the bankrupt estate. 18 In relation to the Kalandar Street Property, it is appropriate in the circumstances to declare that legal title to the property vest in Mr Williams as part of the bankrupt estate. There is evidence that the Kalandar Street Property is presently unoccupied and it would be appropriate to order that possession be given to Mr Williams to facilitate a sale. 19 Mr Williams asks for orders that the costs of this proceeding be paid out of the bankrupt estate. That appears to me to be a matter for the English Court. The Federal Court of Australia will act in aid of and be auxiliary to the English Court, however, the question of the costs of the proceeding in this Court would be a matter for the English bankruptcy court. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.