01 Jul 2014

A failure to respond in matters of bankruptcy, isn’t always intentional


5 min

A tale of bio hazards, spiritual healing and an urn

For a bankruptcy trustee, the appointment to a bankrupt through the court process is, put in the words of Forrest Gump, "like a box of chocolates ... You never know what you're gonna get."

One recent appointment in our Melbourne office was a matter handed down in the Federal Court. As this is still an active matter, I will refer to the bankrupt as Mr X. As is common with many of the court driven appointments, we are armed with very little information at the commencement of our appointment. With the case of Mr X, all we were initially advised was that:

  • The petitioning creditor was owed a fairly modest sum (< $10,000) which related to outstanding body corporate fees;
  • Mr X did not respond to the petitioning creditor's demands (we were in fact advised that he had an "evasive nature"); and
  • Mr X did not attend the court on the date of the bankruptcy hearing.

There being nothing unusual with the above, we went on our merry way conducting our typical investigations into the bankrupt's assets and liabilities. Within a few days we identified that:

  • Mr X owned an unencumbered property which was worth some $350,000;
  • Mr X had funds held in a bank account exceeding $250,000;
  • Mr X was the registered owner of dozens of mostly low value motor vehicles (all of which were currently unregistered); and
  • Aside from the petitioning creditor's modest debt, there appeared to be no other creditors of the estate.

Putting the above information together we decided that there must have been some underlying dispute or reason why the petitioning creditor's debt was not paid by Mr X, and so we politely wrote to Mr X (who to date had been uncontactable) requesting he urgently contact our office to resolve the issues before costs begin to escalate.

True to the warnings from the petitioning creditor, Mr X proved to be evasive and our multiple attempts to contact him were unsuccessful. Keen to see a prompt resolution, the trustee decided to personally take a drive down to the bankrupt's property. I don't think the trustee knew what he was getting himself in for... as the property can only be described as something akin to what would be aired on the TV show "Compulsive Hoarders".

On what was a fairly modest plot on a community title, Mr X's property was piled up to the brim with vehicles, junk, wires and scrap metal that blocked every possible entrance and window to the property. The following satellite footage courtesy of Google may provide some perspective on the scale of the problem in comparison to the substantially tidier neighbouring properties:

The bankrupt appeared not to be home and so the trustee left a note and a business card on what he suspected was the property's front entrance.

Not too long after, out of the blue, our office received a visit from an overly emotional and extremely excitable spiritual healer carrying the trustee's business card. She requested an urgent meeting to discuss the affairs of her father, Mr X.

The meeting went like no other we had ever attended before. Firstly, the daughter proceeded to advise that she was the sole living relative of Mr X and that in "recent decades" they had become estranged. She then advised that she went to visit her father some 12 - 18 months prior to our appointment in attempts to reconcile matters and that she happened to find him in the house, deceased. She then proceeded to advise us that she herself had fallen on hard times and had therefore been periodically visiting the premises since that date to collect and sell his assets ... hence how she came across the trustee's business card.

Being the sole heir, we advised her that we expected there may be a substantial surplus in the estate and that in turn some of that money may ultimately flow to her. After this news was delivered, there were screams of elation and disco-dances in our boardroom as though she had just won the Powerball.

To top the meeting off, as we were winding down and saying our goodbyes, she queried whether we would like to meet Mr X. Now, following a two hour meeting where the majority of the conversation was steered towards her deep belief in spiritual healing we assumed she meant some sort of a séance complete with candles and a ouija board - but no - she had in fact decided it would be fitting to bring Mr X's ashes to the meeting ... and she proceeded to plant the urn right on the boardroom table!

A few months have now passed and after cleaning up the property (which was officially declared a bio hazard) and paying out all known creditors, we are now in a position to hand over the surplus assets to the State Trustee. Perhaps fortunately, we have not heard further from the daughter, nor have we again had the pleasure of meeting Mr X.

And who said accounting was boring!

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