AustLII [Home] [Databases] [WorldLII] [Search] [Feedback]

Federal Magistrates Court of Australia
You are here:  AustLII >> Databases >> Federal Magistrates Court of Australia >> 2011 >> [2011] FMCA 70

[Database Search] [Name Search] [Recent Decisions] [Noteup] [Download] [Help]

Trinick & Piggott as Controlling Trustees of the Estate of Lam [2011] FMCA 70 (11 February 2011)

[AustLII] Federal Magistrates Court of Australia

[Index] [Search] [Download] [Help]

Trinick & Piggott as Controlling Trustees of the Estate of Lam [2011] FMCA 70 (11 February 2011)

Last Updated: 14 February 2011

FEDERAL MAGISTRATES COURT OF AUSTRALIA

TRINICK & PIGGOTT AS CONTROLLING TRUSTEES OF THE ESTATE OF LAM

BANKRUPTCY – Application to extend period of appointment of controlling trustees – factors for consideration.


Horne in the matter of Peter Wyss [2003] FMCA 214
Hunter Valley Developments Pty Ltd v Cohen [1984] FCA 176; (1984) 3 FCR 344

Applicants:
GLENN DOUGLAS TRINICK & BENJAMIN PETER PIGGOTT IN THEIR CAPACITY AS JOINT AND SEVERAL CONTROLLING TRUSTEES OF THE ESTATE OF PO KWAN LAM

File Number:
PEG 25 of 2011

Judgment of:
Lucev FM

Hearing dates:
7 and 11 February 2011

Date of Last Submission:
11 February 2011

Delivered at:
Perth

Delivered on:
11 February 2011

REPRESENTATION

Counsel for the Applicants:
Mr D Thompson

Solicitors for the Applicants:
David Thompson

ORDERS

(1) That the time during which the property of Po Kwan Lam has and will remain under the control of Glenn Douglas Trinick and Benjamin Peter Piggott pursuant to section 189 of the Bankruptcy Act 1966 (Cth) be extended as though the words “4 months” appearing in section 189(1A)(d) of the Act were substituted with the words “8 months”.
(2) That the Applicants’ costs of this application be costs in the estate of the debtor Po Kwan Lam.
FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT PERTH

PEG 25 of 2011

GLENN DOUGLAS TRINICK AND BENJAMIN PETER PIGGOTT IN THEIR CAPACITY AS JOINT AND SEVERAL CONTROLLING TRUSTEES OF THE ESTATE OF PO KWAN LAM

Applicants


REASONS FOR JUDGMENT

Application

  1. By application filed on 4 February 2011 the applicants, in their capacities as joint and several controlling trustees of the estate of Po Kwan Lam, a debtor,[1] seek the following orders:

Affidavit in support

  1. One of the applicants, Glenn Douglas Trinick swore an affidavit on 4 February 2011 in support of the application.[3] Relevantly, Mr Trinick’s Affidavit provides as follows:
    1. on 14 October 2010 the Debtor signed an authority appointing Glenn Douglas Trinick and Benjamin Peter Piggott as joint and several controlling trustees[4] of his estate pursuant to s.188 of the Bankruptcy Act;[5]
    2. since that date Mr Trinick has had day to day conduct of the appointment. Mr Trinick is authorised by Mr Piggott to make this affidavit on his behalf;
    1. the Debtor provided the Trustees with a Statement of Affairs as required by s.185D of the Bankruptcy Act on 14 October 2010;[6]
    1. on 19 October 2010 Mr Trinick sent a first report to creditors to all of the creditors of whom the Debtor had advised him;[7]
    2. the Debtor’s financial affairs are relatively complicated. His Statement of Affairs discloses, and Mr Trinick’s investigations confirm:
      1. a sushi bar business that he has conducted in his own name;
      2. a family trust known as the Paul Lam Family Trust,[8] of which the Debtor is a beneficiary, an asset of which was a Japanese restaurant;
      3. a corporation, Austal Export Import Pty Ltd, of which the Debtor is the sole director, which is the corporate trustee of the Family Trust, and operated the restaurant mentioned above; and
      4. loans made to the Debtor by relatives in China;
    3. following the circulation of Mr Trinick’s first report to creditors, Mr Trinick continued to investigate the Debtor’s financial affairs;
    4. Mr Trinick also engaged in discussions with the Debtor and his wife regarding the possibility of proposing a Personal Insolvency Agreement to creditors;
    5. on 5 November 2010 Mr Trinick circulated a second report to creditors, to which was attached a notice of meeting calling a meeting of the Debtor’s creditors to be held on 18 November 2010;[9]
    6. that second report and notice of meeting, which were signed by Mr Piggott, were circulated to all of the Debtor’s creditors of whom the Trustees were aware, at the date of that report;
    7. the Trustees recommended to creditors that the meeting called for 18 November 2010 be adjourned for a period of two months;
    8. the reasons for that recommendation were that:
      1. the Debtor was clearly insolvent, and it was in his creditors’ interest that his estate remain subject to control, either by the Trustees in their capacities as controlling trustees or by a trustee in bankruptcy;
      2. important items of property that would be made available to creditors under the possible Personal Insolvency Agreement which Mr Trinick was discussing with the Debtor and his wife were co-owned by his wife and were still in the process of being realised, such that it was difficult at that stage to calculate the likely return to creditors under a Personal Insolvency Agreement as opposed to bankruptcy;
      3. the Trustees’ investigations of the Debtor’s affairs were continuing, but had been slowed by the fact that the Debtor’s (and his wife’s) English is not good; and
      4. despite the fact that their investigations were continuing, the indications were that a Personal Insolvency Agreement would provide a significantly better return to creditors than would the Debtor’s bankruptcy, because the family members (including but not limited to the Debtor’s wife) appeared prepared to contribute assets under a Personal Insolvency Agreement which would not be available to creditors in the Debtor’s bankruptcy;
    1. at the meeting held on 18 November 2010, the creditors in attendance resolved to adjourn the meeting for a period not exceeding two months;[10]
    1. in the period following 18 November 2010, Mr Trinick’s investigations of the Debtor’s financial affairs, and negotiations with the Debtor and related parties regarding a Personal Insolvency Agreement continued;
    2. on 11 January 2011 the Trustees issued a third report to creditors, which Mr Piggott signed, and in which the Trustees stated (amongst other things) that the meeting of creditors would be reconvened on 19 January 2011, and recommended that the meeting be adjourned for a further three weeks;[11]
    3. the reasons for that recommendation were that, for reasons set out below, the Trustees considered it in the best interests of the Debtor’s creditors;
    4. the reconvened creditors’ meeting was duly held on 19 January 2011;
    5. at that meeting creditors resolved to adjourn the meeting for a further period not exceeding three weeks;[12]
    6. the Debtor is close to being in a position to propose a Personal Insolvency Agreement to his creditors. On the basis of Mr Trinick’s discussion with the Debtor and other interested parties Mr Trinick is able to say that it is likely that the proposal will involve:
      1. funds to be realised from the sale of the Debtor’s properties at 118/132 Terrace Road, East Perth, WA and 18 Derry Lane, Mosman Park, WA, which are presently on the market. Mr Trinick has estimated that such sales are likely to yield, as the Debtor’s share of the proceeds, some $850,000.00 in funds available to creditors. This element of the proposal is subject to the matters referred to in sub-paragraph (iii) below;
      2. a contribution to the funds available to creditors by the Debtor’s wife, Shung Ling Chan. This contribution is likely to be in the region of $100,000.00, and will be made from her share of the proceeds of sale of the properties named in sub-paragraph (i) above, of which she is the joint owner. These funds are most unlikely to be available to creditors in the Debtor’s bankruptcy; and
      3. Haru Co Pty Ltd, a company controlled by the Debtor’s daughter Penny Lam, which the Debtor owes $325,066.00, refraining from proving under the Debtor’s Personal Insolvency Agreement in respect of its claim;
    7. the Debtor and his wife’s properties referred to in paragraph (r)(i) above have been on the market for approximately 12 months, and are proving slow to sell. The Debtor’s daughter Gemma is currently seeking a loan to purchase the property at 118/123 Terrace Road, East Perth, WA. Mr Trinick was informed by the Debtor’s solicitors, Wilson & Atkinson, and verily believes that she has applied for a loan and that her application will be dealt with within the next three weeks. Without this purchase, it is likely that the property in question will take a considerable period to sell, and that if the Debtor were to become a bankrupt his creditors would not have access to the funds to be realised from that sale for a long period;
    8. one of the main reasons for the Debtor’s current financial difficulties is an assessment that was made by the Commissioner of Taxation that the Debtor owes $1,472,670.70 in unpaid tax and penalties. Mr Trinick has been informed by the Debtor, and by his solicitors Wilson & Atkinson, and verily believes that:
      1. that assessment was made as a result of interviews held by the Australian Tax Office employees with the Debtor;
      2. it was made on the basis that the Debtor had under declared income and subsequent GST;
      3. the Debtor intends to challenge that assessment by seeking a formal review;[13]
    9. Haru Co Pty Ltd’s willingness to refrain from proving for its debt mentioned in paragraph (r)(iii) above will to some extent depend on the result of the review mentioned in paragraph (t)(iii) above, in that it will be less willing to refrain from proving, or will only be willing to refrain from proving for a part of its claim, if the review is unsuccessful;
    1. on the information available to Mr Trinick at present, he predicts that if the Debtor were to enter bankruptcy, the return to creditors would be in the region of 40 cents in the dollar. As the trustee in bankruptcy would still have to sell the properties mentioned in paragraph (r)(i) above, and deal with the issues raised by the Debtor’s wife’s interest in those properties, the Debtor’s creditors might have to wait a considerable time before there was any distribution of dividends;
    1. on the information available to Mr Trinick at present, and assuming that the Debtor’s application for review of his tax assessment does not result in any significant reduction of the tax he owes, Mr Trinick estimates that creditors under a Personal Insolvency Agreement involving the elements listed above would receive a return of 58 cents in the dollar;
    1. if the Debtor’s application for review of assessment succeeds in reducing the debt he owes to the Commissioner of Taxation, the dividend available for creditors under a Personal Insolvency Agreement would be greater than 58 cents in the dollar;
    1. in light of these considerations, Mr Trinick has formed the view that it would be in the creditors’ interests to continue to pursue the possibility of a Personal Insolvency Agreement, as opposed to allowing the Debtor to enter bankruptcy; and
    2. it will be impossible to pursue the possibility of a Personal Insolvency Agreement if the Trustees’ controlling trusteeship ends on 14 February 2011, as it must if the Court does not extend the period limited under s.189(1A) of the Bankruptcy Act.

Relevant statutory provisions

  1. Section 188(1) of the Bankruptcy Act provides as follows:
  2. Section 189(1A) of the Bankruptcy Act provides as follows:
  3. Section 33(1) of the Bankruptcy Act provides as follows:

Court’s orders of 7 February 2011

  1. When the matter first came on urgently before the Court on 7 February 2011 (urgently because the Trustees’ appointment as joint and several controlling trustees expires on 14 February 2011) the Court evinced a concern as to whether or not the creditors were aware of the application and had been served with a copy of the application. Consequently, orders were made for a copy of the application, Mr Trinick’s Affidavit, and the Court’s Orders of 7 February 2011 to be served on creditors by 4.00pm on 9 February 2011, and for the applicant to file an affidavit of service by 4.00pm on 10 February 2011. The application was adjourned to 10.30am today for further hearing.

Affidavit of service

  1. Ms Michelle Flintoff, employed by a firm run by the Trustees, filed an affidavit of service sworn on 10 February 2011[14] indicating that creditors, with one exception, had been served by the means specified in the Court’s Orders of 7 February 2011, by 4.00pm on 10 February 2011. The one exception is an elderly uncle of the Debtor who seemingly resides in China, has no computer access, and for whom the Trustees presently only have telephone contact. The Chinese uncle has been sent an SMS message on the mobile telephone contact advising of the application to the Court to extend the period of the Trustees’ appointment.
  2. The Court is satisfied on the basis of Ms Flintoff’s Affidavit that service has been so effected, so far as is possible, in accordance with the Court’s Orders of 7 February 2011.

Consideration

  1. The Court has the power under s.33(1)(c) of the Bankruptcy Act to extend the period of appointment of the Trustees. Section 33(1)(c) of the Bankruptcy Act has been found by this Court to apply to s.189 of the Bankruptcy Act.[15]
  2. In exercising the discretion to extend time, no criteria for extending the time for the period of appointment of the Trustees is set out under s.189(1A) of the Bankruptcy Act.
  3. In the Court’s view, it is appropriate to apply principles similar to those ordinarily applied by courts in determining whether to extend time, namely to have regard to:
    1. the fact that relevant time limits ought not be lightly ignored;
    2. the length of the delay and whether there is an acceptable reason for the delay;
    1. the merit of the substantive matter; and
    1. whether there is prejudice suffered by an affected party.[16]
  4. The relevant time limits have not been ignored at all in this case. The period of appointment of the Trustees has not yet expired, and therefore there is no issue with respect to ignoring relevant time limits or the length of the delay. In relation to the matters of merit and prejudice the Court finds, on the basis of Mr Trinick’s Affidavit, that an extension of the period of appointment of the Trustees is potentially of benefit to the creditors in that the Trustees estimate that:
    1. if the Debtor goes into bankruptcy the return to creditors will be 40 cents in the dollar;
    2. if the period of the Trustees’ appointment is extended, and:
      1. the real property is sold;
      2. the Debtor’s wife contributes to the Debtor’s estate; and
      3. the Debtor’s daughter foregoes proving on the corporate debt of Haru Pty Ltd,

the return to creditors will be 58 cents in the dollar; and

  1. if there is any degree of success in the application for review being made to the Commissioner of Taxation then the return to creditors will be greater than 58 cents in the dollar.
  1. At hearing, the Court queried whether or not the proposals said to justify the extension of the period of the Trustees’ appointment were of sufficient substance, and sufficiently likely to come to fruition, to justify the extension sought. Counsel, by reference to Horne’s case, made the point that, more often than not, in such situations proposals were, by their very nature, such that they may or may not reach fruition. In the circumstances, and given that the extension of the period of appointment of the Trustees is only for a short period, the Court is satisfied that an opportunity ought to be given to the Trustees to allow the proposals to reach fruition, for if they do so, it will be in the best interests of the creditors.
  2. As to prejudice, no party or creditor sought to appear to argue that they would be prejudiced by the extension of the period of appointment of the Trustees. Once again, the Court is sufficiently satisfied that the short extension of the period of appointment of the Trustees which has been sought will, if granted, not unduly prejudice any party or creditor.

Conclusion

  1. For the reasons set out above the Court considers that orders ought to be made in the substantive terms of the Minute of Proposed Orders handed up by Counsel at hearing on 11 February 2011. The terms of the proposed orders conform with those made in Horne. There will be orders accordingly.

I certify that the preceding fifteen (15) paragraphs are a true copy of the reasons for judgment of Lucev FM


Date: 11 February 2011

[1] “the Debtor”.
[2] “Bankruptcy Act”.
[3] “Mr Trinick’s Affidavit”.
[4] “the Trustees”.
[5] See Annexure GT1 to Mr Trinick’s Affidavit.
[6] See Annexure GT2 to Mr Trinick’s Affidavit.
[7] See Annexure GT3 to Mr Trinick’s Affidavit.
[8] “the Family Trust”.
[9] See Annexure GT4 to Mr Trinick’s Affidavit.
[10] See Annexure GT5 to Mr Trinick’s Affidavit.
[11] See Annexure GT6 to Mr Trinick’s Affidavit.
[12] See Annexure GT7 to Mr Trinick’s Affidavit.
[13] A letter dated 2 February 2011 was received from Wilson & Atkinson by Mr Trinick’s office on or about that date confirming that they have been instructed to lodge an application for review and that they have prepared that application. Annexure GT8 to Mr Trinick’s Affidavit.
[14] “Ms Flintoff’s Affidavit”.
[15] Horne in the matter of Peter Wyss (2003) FMCA 214 at paras.11-12 per Phipps FM.
[16] Hunter Valley Developments Pty Ltd v Cohen [1984] FCA 176; (1984) 3 FCR 344 at 348-349 per Wilcox J.

AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback
URL: http://www.austlii.edu.au/au/cases/cth/FMCA/2011/70.html