Shepard v Ireland (No.2) [2011] FMCA 199 (24 March 2011)

Federal Magistrates Court of Australia

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Shepard v Ireland (No.2) [2011] FMCA 199 (24 March 2011)

Last Updated: 25 March 2011

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SHEPARD v IRELAND (No.2)

[2011] FMCA 199

BANKRUPTCY – Appointment of controlling trustee under Part X – duty to call creditors’ meeting within 25 working days – application by trustee for extension of time – 17 working days extension allowed.

Bankruptcy Act 1966, ss.33, 194

Shepard v Ireland [2011] FMCA 187

Applicant:

ADAM SHEPARD

Respondent:

WILLIAM EDWARD IRELAND

File Number:

SYG 508 of 2011

Judgment of:

Smith FM

Hearing date:

24 March 2011

Delivered at:

Sydney

Delivered on:

24 March 2011

REPRESENTATION

Counsel for the Applicant:

Mr M Rosenblatt

Solicitors for the Applicant:

Somerset Ryckmans

Counsel for the Respondent:

No appearance by or on behalf of the Respondent

ORDERS

(1) Pursuant to s.33(1)(c) of the Bankruptcy Act 1966 (Cth) the time provided in s.194(1)(a) is extended by 17 working days after 1 April 2011.
(2) Order 1 is conditional upon the applicant giving copies of his affidavit sworn on 23 March 2011 with its annexure, together with a copy of these orders, to the petitioner in proceedings SYG144/2011 and to all other unsecured creditors identified in the respondent’s statement of affairs or otherwise known to the applicant, by post dispatched no later than 3 pm on 28 March 2011.
(3) Any creditor of the respondent has liberty to apply to the Court to vacate or vary Order 1, by filing an interim application with a return date for hearing obtained from the Associate to Smith FM which allows 2 working days’ notice to the applicant.
(4) No orders as to costs.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY

SYG 508 of 2011

ADAM SHEPARD

Applicant

And

WILLIAM EDWARD IRELAND

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

1. This judgment explains the orders which I am making on a final basis, in response to Mr Shepard’s application for an extension of time for convening a creditor’s meeting under s.194 of the Bankruptcy Act.
2. I have previously explained the nature of the application and its statutory context in my judgment in Shepard v Ireland [2011] FMCA 187. I explained my reasons for allowing only a short adjournment on an ex parte application. I stood the matter over to today to allow service of the application on the National Australia Bank. The NAB is a creditor of Mr Ireland and has a pending creditor’s petition, the hearing of which will be required by statute to be adjourned for the period up to the first meeting of creditors.
3. Notice has now been served on the NAB’s solicitors, who have responded that “The bank does not wish to appear on your client’s application”. My concern that a petitioning creditor might wish to oppose the proposed extension has, therefore, been allayed.
4. My concern that I was unable to assess whether there was any merit in postponing the summoning of creditors to vote on the proposed insolvency agreement, based on lack of knowledge as to the contents of the proposal, has also been allayed. Mr Shepard today filed an additional affidavit, attaching a draft of the personal insolvency agreement which was given to him at the commencement of his appointment. He has also explained shortly his provisional opinion that “The PIA in the form proposed would offer an advantage to creditors as opposed to the lodgement of a debtor’s petition”.
5. The terms of the draft personal insolvency agreement provide for monetary contributions to be paid over time which, prima facie, would give a very small dividend to Mr Ireland’s unsecured creditors. It also offers a promise that assets of a family trust might be available, although the terms and substance of this promise are obscure. Mr Ireland’s capacity to give that promise, and its fruitfulness, are, it appears, matters which Mr Shepard would like more time to investigate.
6. Mr Shepard’s affidavit filed on the last occasion explains other matters in relation to which he requests an extension of the time for first convening the meeting of creditors. He certainly points to a complexity in Mr Ireland’s financial affairs, but I remain unsure as to any prospect that Mr Shepard will be able substantially to get to the bottom of those affairs within the time requested – or, indeed, within the time allowed under the Act to a controlling trustee. However, I accept that there may be a prospect of investigations in relation to some particular matters, not fully explained in the evidence before me, which will assist Mr Shepard to report to creditors on the proposed personal insolvency agreement. These may include obtaining further information allowing him to advise in relation to “antecedent transactions”, and the desirability or otherwise of the full investigatory powers of a bankruptcy administration being invoked by creditors.
7. On the material now before me I am satisfied that there is a sufficient prima facie purpose in allowing Mr Shepard an additional 17 working days for convening the creditors’ meeting, counted from the current date provided under s.194.
8. I retain some hesitancy in making that order, however, due to the absence of notice of the application on all but one of the creditors set out in Mr Ireland’s statement of affairs. As I sketched in my previous judgment, these include some very substantial creditors for liabilities which are not only liabilities under guarantees triggered by corporate collapse. They include a leasing liability to Mercedes Finance in the sum of $150,000, liabilities for personal services provided by a variety of corporate entities and other persons, and liabilities under several substantial loans made personally to Mr Ireland, including the indebtedness to the National Australia Bank and loans by Barclays Bank and a relative of Mr Ireland. Based on the newspaper reports attached to Mr Shepard’s previous affidavit, it appears possible that there may be other smaller creditors owned monies for personal services, who might well regard Mr Ireland’s indebtedness to them as substantial.
9. All Mr Irelands’ creditors would have had a right to receive knowledge of the contents of the proposed insolvency agreement next week and, after receiving submissions on this from Mr Shepard, I can see no reason why they should not be given that benefit without delay and before receiving the postponed documentation in relation to the creditors’ meeting. I shall attach a condition that this should occur, and I also consider that they should be given notice of the orders I am making today.
10. My orders give every creditor an immediate right to apply to me to vacate or vary the extension of time, so as to bring forward the required date for holding the first creditor’s meeting. Whether any creditor should make such an application, is a matter upon which they should take legal and financial advice before applying to the Court.
11. For all the reasons set out in my previous judgment and above, I accede to Mr Shepard’s application, by making the orders set out at the commencement of this judgment.

I certify that the preceding eleven (11) paragraphs are a true copy of the reasons for judgment of Smith FM

Date: