Di Cioccio v Official Trustee in Bankruptcy - Case Study Example

Student’s name Professor’s name Course Date Di Cioccio v Official Trustee in Bankruptcy [2014] FCA 782 (29 July 2014) Name of the Court: Federal Court of Australia Judge: Pagone J Date of Judgement: 29 July 2014 Name of Key Parties: Marc Edward Di Cioccio v The Official Trustee in Bankruptcy Plaintiff: Marc Edward Di Cioccio Respondent: The Official Trustee in Bankruptcy Introduction The controversial question within this proceeding is if the shares bought by Mr. Di Cioccio who has been proclaimed bankrupt falls under the “after-acquired property” within s 58 (1) of the 1966’s Bankruptcy Act1. The query vested in the Official Trustee (the respondent) and is dividable amongst the creditors in connection to s 116. However, Mr. Di Cioccio made an argument in connection to s 58 that his shares did not fall in an acquired property revolving on his trustee within bankruptcy2. Di Cioccio also contended that his shares were not eligible for being divided to the creditors according to s 116 since he had purchased the shares from his income’s savings. He had obtained savings during his insolvency. The savings was beneath the threshold amount with regard to his anticipated contributions to his trustee under Division 4B of Portion 6 of the Bankruptcy Act 1966. S 58(6) defines after-acquired as property which is bought by or has been passed to the bankrupt3. Mr. Di Cioccio bought shares from many firms between June and September of 2013 during his bankruptcy’s period. Mr. Di Cioccio was declared insolvent on January 20th, 2012 and was capable of saving the money partially as a result of being incarcerated between December 2011 and February 2013. He received a cheque of $2,500 on his release on February 13th, 2013 as a result of the duties he performed in jail. After regaining freedom, from February 13th to October 17th, 2013, Mr. Di Ciccio resided in his parent's residence who paid for all his expenses4. During that period, Mr. Di Ciccio saved $8849.63 which he partially utilized in buying the shares. In the dawn of 17th October 2013, Mr. Di Cioccio told the respondent his intent of buying a motorcar5. The respondent was also informed that the money to be used in buying the car was to be derived from selling shares that he had bought from his income’s savings. Then, the Official Trustee notified Mr. Di Cioccio that the shares he bought were properties that had been planted within the Official Trustee in regard to s 58(1)6. Mr. Di Ciccio looked for that decision's review through the administration and estate team of the Australian Financial Security Authority whom in October confirmed it. Mr. Di Ciccio sought reconsideration by that decision’s Court under s 178 of the 1966’s Bankruptcy Act. At the fall of October 30th, 2013, the shares were sold by the Official Trustee and obtained $9,240.19. Description of the Facts and Law The Bankruptcy Act 1966, offers, by s 58(1) (a), that the bankrupt’s property vests directly within the pertinent trustee and, if not precisely excluded, is dividable among the bankrupt’s creditors according to s 1167. After-acquired bankrupt’s assets vests with the trustee through operation of the s 58(1) (b) immediately it is purchased by or is passed to the insolvent. A wide meaning is offered to property by s 5 (1) and is sufficiently broad to take in choses within action and shares8. The natural and common meaning of the words within those provisions broadens to the acquired shares by Mr. Di Cioccio9. Between June 14th, 2014 and September 27th, 2013, Mr. Di Ciccio bought shares in multiple companies at the time of his insolvency10. The precise meaning of those shares is property which would normally land on the trustee as after-acquired bankrupt's asset. Mr. Di Ciccio was paid $2,500 for his release from jail on February 13th, 2013 for the job he had done during his sentence. His parents catered for all his expenses after imprisonment and at that time, he was being offered a Newstart allowance11. After all, Mr. Di Ciccio managed a saving of $8,849.63 a part of which he used in buying the shares. Mr. Di Ciccio was told by the Official Trustee that the shares that he bought were a property that had landed in the Official Trustee in regards to s 58(1). On October 22nd, 2013, Mr. Di Ciccio looked for a reconsideration of that judgment by the administration and estate team of the Australian Financial Security Authority which was affirmed in October12. On October 30th, 2013; the shares were sold by Official Trustee and received $9,240.19. The review's application to this Court relies on the creation of the pertinent Bankruptcy Act 1966’s provisions13. The view was adopted by the Official Trustee, and argued at the hearing, that whichever shares purchased by Mr. Di at his bankruptcy were after-acquired asset in the description of s 58(1) (b). However, the view did not consider the fact that the acquirement of shares was through using bankrupt’s personal savings as Division 4B contemplates14. In contrast, Mr. Di Ciccio argued that received income by him was administered by Division 4B and it never lost its character as revenue left out from ss 58 and 116 through its application within the shares’ acquisition15. The lucid legislative policy is that an income beneath the threshold sum of a bankrupt totally belongs to him and never lands to the Official Trustee16. ‘Income’ for those purposes is confined to money and possess a big meaning broadening, as did the similar word within the 1924 Act’s s 10, to revenue’s payment. In this case, the shares were admitted for the proceedings’ purposes as having been waged from revenue that fell beneath the threshold sum which was unwarrantable for Mr. Di Ciccio to pay the Official Trustee under Division 4B17. At that magnitude, his income was for his personal use. There seems to be indubitable that the Official Trustee could not possess claim of the money which Mr. Di Cioccio had received as earnings if he had planned to use it for own expenditure. The result for Mr. Di Ciccio might appear unkind but, it is plainly or clearly wrong and agrees with one of the crucial, though rivalling policy purposes of the Bankruptcy Act 1966. Application of the Law in the Judgement S 58(1) (a) of the Bankruptcy Act 1966, states that the bankrupt's property, not being an after-acquired asset, vests immediately in the Official Trustee18. Or, if during the debtor’s moment of becoming bankrupt, a registered trustee develops into bankrupt’s estate trustee through virtue of section 156 A within that registered trustee. As such, the judgment of acquiring Mr. Di Ciccio’s shares rests on s (58) (1) (a)19. Section (58) (1) (b), the bankrupt’s after-acquired assets, vests immediately it is obtained by, or, transferred upon, the bankrupt, within the Official Trustee. Also, the after-acquired asset of the insolvent vests, if the registered trustee is the bankrupt’s estate trustee within that registered trustee20. This section made it possible to judge that the Official Trustee acquire the shares of Mr. Di Ciccio since the time he bought them, he was still bankrupt. In the Rodway v White case, it displays conviction for lack of fully disclosing to the trustee all property belonging to a bankrupt contrary to s 265(1) (a) of the Bankruptcy Act21. This appeal brings about a crucial question about if an undischarged bankrupt is required to reveal to the trustee after-acquired property bought with earnings which the insolvent was allowed to retain for personal consumption22. On July 9th, 1999, William Rodway was proclaimed bankrupt on his petition of his debtor being obtained by the Official Receiver. On July 10th 2002, Rodway was acquitted of bankruptcy. Mr. Rodawyas was accused of having committed 21 felonies against s 265 (1) (a) of the Bankruptcy Act23. This was due to lack of revealing to his trustee his interests within shares within varied listed corporations on the Australian Stock Exchange. Rodway bought all the shares during bankruptcy. Honour Magistrate R Black after trying him within the Magistrates Court at Perth in November 2008, he convicted him on all those charges on January 27th, 2009. The judge offered written details of the reasons behind his decisions. In the outcome, the appellant was fined an average of $5,700 and forced to pay costs of respondents amounting to $4,00024. On February 25th, 2009, the appellant looked for an appeal against all the convictions. On April 16th, 2009, McKenzie J made an order demanding leave to be given appeal to one judge upon the single ground triggered by the appeal's notice25. The plaintiff’s argument in front of the learned magistrate as well as upon that petition is that since after-acquirement revenue of an insolvent never comprise after-acquired asset applicable to s 116 (1)26. As such, property like those shares purchased using that income requires no disclosure by the insolvent in regard to s 265 of the Act or whatsoever. As the appeal’s ground was built up in disagreement, such shares are either not bankruptcy’s property, or, by a somewhat wider argument the after-required property’s reporting is never demanded by that part27. The learned magistrate judged that the disclosure’s obligation under s 265(1) did expand to acquired property with the utilization of an insolvent’s after-acquired earnings and found him guilty of the entire felonies28. With the leave that was granted and from the convictions the plaintiff petitions to that court in dependence on s 7(1) of the Criminal Act 200429. In the case of Federal Commissioner of Taxation v Official Receiver, the opinion had been articulated that a bankrupt’s personal earnings never vested within the official receiver within an order’s absence by the Court30. Mr. and Mrs. Sherden traded as partners as also Mr. and Mrs. Cook did. However, no connection existed between both couples and happened as a convenience’s matter that their oppositions and afterward the commissioner’s petitions were jointly listened to31. In this case, the courts judged that the moment a corporation restricted by guarantee conducted its entire business operations; it did so individually within its business’s course32. Additionally, it did not give services to its members, although policies offered by the corporation were merely to the members. The legislative system enacted thus, never vests within the Official Trustee the bankrupt’s income33. Instead, it inflicts a requirement on an insolvent to recompense the trustee a contribution following the trustee’s assessment. Commentary (Meaning, Importance and Impact of the Case) Generally, after-acquired property might be illustrated as property obtained by, or transferred to a bankrupt following the bankruptcy’s order making and ahead of she/he is acquitted from the legal cases34. The Act places an obligation on the bankrupt to offer the trustee with information of such acquirements. In turn, it offers the trustee authority of claiming the property where it is suitable of doing so. The bankrupt possesses an obligation of co-operating with the trustee, particularly concerning informing the trustee within writing of a few after-acquired property in 21 days after knowing of its subsistence. This requirement demands a signed photocopy to be acquired for the office file, which recognizes that the bankrupt has gone through and comprehended the document. Any announcement from the bankrupt through telephone requires being followed up where the bankrupt is demanded to substantiate in a written document. Once the trustee acknowledges that after-acquired property exists he/she has only 42 days to arrive at a decision of either to claim the property or not, through writing for the estate’s benefit. The court might extend this period. However, if unreasonable delay of the matter is detected the court does not extend that period. Where the official receiver remains the manager and receiver of real estate, when subsequent to after-acquired property is taken to her/his attention, the 42 period starts on the day of trustee appointment. This is irrespective of if the trustee is the insolvency practitioner or authorized receiver. Despite the thought Rodway’s decision determinative nature, the Court within this case (Di Cioccio V Official Trustee within bankruptcy) was called on to judge whether the Act was conflicting or incongruent as a result of application of post-bankruptcy revenue to the provisions of after-acquired property. Pajone J (considering the situations virtually equivalent to Rodway), initially, never departed from the judgement within Rodway and Re Gillies that were never within his opinion, ‘clearly or plainly’ wrong35. It cannot be asserted that the adopted construction in Rodway or the expressed observation within Re Gillies is ‘plainly’ or ‘clearly’ wrong. Additionally, it does not mean the observation should never be followed. In rebuffing an appeal from bankrupt’s initial instance defeat, Gordon and HJ’s Edmonds and the Full Federal’s Court decision asserted the following statements. SS 58 and 116 specifically handles with assets, not with property’s character as capital or income. Income is defined by Div 4B of Pt IV. Those provisions never address what is not, or what is, the bankrupt’s property dividable among the creditors of the bankrupt. Their Honours precisely discarded the claim of conflict and incongruence, asserting the functioning of flexible powers within Section 134 of the Act as a safety regulator that should be fairly and sensibly made into application by trustees. Additionally, they asserted the capability to apply post-bankruptcy revenue towards the acquisition of trade tools and other exempt properties that are explicitly left out as being dividable in regard to the Act’s Section 116(2). The resolutions in Di Ciccio and Rodway seem, rather inconsistent and harsh with the fundamental rehabilitative Act’s intention. However, this is provided that but for the acquirement of a collection of property other than the accretion of cash on hand/cash at bank, and/or non-assessable would not magnetize the bankrupt’s trustee interest. Conclusion The controversial question within this proceeding is if the shares bought by Mr. Di Cioccio who has been proclaimed bankrupt falls under the “after-acquired property” within s 58 (1) of the 1966’s Bankruptcy Act. In regard to s 116, the query vested on the respondent and is dividable amongst the creditors. Mr. Di Cioccio protested that considering s 58 his shares did not fall in an acquired property revolving on his trustee within bankruptcy. Di Cioccio also contended that his shares were not eligible for being divided to the creditors according to s 116 since he had purchased the shares from his income’s savings. On October 22nd, 2013, Mr. Di Ciccio looked for a reconsideration of that judgment by the administration and estate team of the Australian Financial Security Authority which was affirmed in October. On October 30th, 2013; the shares were sold by Official Trustee and received $9,240.19. The lucid legislative policy is that an income beneath the threshold sum of a bankrupt totally belongs to him and never lands to the Official Trustee. ‘Income' for those purposes is confined to money and possess a big meaning broadening, as did the similar word within the 1924 Act's s 10, to revenue's payment. In the Rodway v White case, it displays conviction for lack of fully disclosing to the trustee all property belonging to a bankrupt contrary to s 265(1) (a) of the Bankruptcy Act. Works Cited Abbot, Grant. Self Managed Superannuation Fund Strategy Guide 2008.Sydney: CCH Australia. Adams, Alix. Law for Business Students 8th edn. Washington: Pearson Education Limited. 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