Actypis v Hurstville City Council and Actypis v Hurstville City Council
[2015] FCCA 3435
•4 December 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ACTYPIS v HURSTVILLE CITY COUNCIL and ACTYPIS v HURSTVILLE CITY COUNCIL | [2015] FCCA 3435 |
| Catchwords: BANKRUPTCY – Interim applications for orders restraining the sale of property which has vested in the Trustee. |
| Legislation: Bankruptcy Act 1966, ss.5, 27, 30, 52, 77, 153A Federal Circuit Court (Bankruptcy) Rules 2006 (Cth), rr.2.03, 7.06 |
| Re Ronald Grafton Sarina Ex Parte: the Council of the Shire of Wollondilly [1980] FCA 66 Sandell v Porter [1966] HCA 28; (1966) 115 CLR 666 |
| Applicant: | NICHOLAS ACTYPIS |
| Respondent: | HURSTVILLE CITY COUNCIL |
| In His Capacity as Trustee of the Bankrupt Estate of Nicholas Actypis: | DAVID HENRY SAMPSON |
| File Number: | SYG 3452 of 2014 |
| Applicant: | MARIA ACTYPIS |
| Respondent: | HURSTVILLE CITY COUNCIL |
| In His Capacity as Trustee of the Bankrupt Estate of Maria Actypis: | DAVID HENRY SAMPSON |
| File Number: | SYG 3457 of 2014 |
| Judgment of: | Judge Nicholls |
| Hearing date: | 4 December 2015 |
| Date of Last Submission: | 4 December 2015 |
| Delivered at: | Sydney |
| Delivered on: | 4 December 2015 |
REPRESENTATION
| Counsel for the Applicants: | Mr D C Eardley |
| Solicitors for the Applicants: | Smith Leonard Fahey |
| Solicitor for the Respondent: | Mr M Chenoweth of O'Neill Partners Commercial Lawyers |
| Counsel for the Trustee of the Bankrupt Estate of Nicholas Actypis and Maria Actypis: | Mr J T Johnson |
| Solicitors for the Trustee of the Bankrupt Estate of Nicholas Actypis and Maria Actypis: | MCW Lawyers |
ORDERS
The application for interim relief of 1 December 2015 sought by Order 3 of that application is refused.
To the extent that the Federal Court (Bankruptcy Rules) 2005 have not been complied with, they are dispensed with due to the urgency of the matter.
The trustee’s and respondent’s applications for costs are reserved and to be determined at the final hearing.
The application for final orders sought by the applicant is set down for final hearing in February 2016 on a date to be administratively advised to the parties.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 3452 of 2014
| NICHOLAS ACTYPIS |
Applicant
And
| HURSTVILLE CITY COUNCIL |
Respondent
| DAVID HENRY SAMPSON |
In His Capacity as Trustee of the Bankrupt Estate of Nicholas Actypis
SYG 3457 of 2014
| MARIA ACTYPIS |
Applicant
And
| HURSTVILLE CITY COUNCIL |
Respondent
| DAVID HENRY SAMPSON |
In His Capacity as Trustee of the Bankrupt Estate of Maria Actypis
REASONS FOR JUDGMENT
The applicants before the Court are Nicholas Actypis (matter SYG 3452/2014) and his wife, Maria Actypis (matter SYG 3457/2014) (“the applicants”, as per the interim application, and the substantive review applications, and the respondents/debtors in the respective creditors petitions and initial proceedings before the Registrar). By applications made on 2 December 2015 and amended today, they seek certain interim and final orders. For today’s purposes they seek that the Trustee of their respective bankrupt estates be restrained from selling, or otherwise disposing of, properties known as 28 Stoney Creek Road, Beverly Hills (“the Stoney Creek Road property”) and 186 South Terrace, Bankstown, NSW. Ultimately, it became clear that the Stoney Creek Road property, said to be a vacant block of land, was the property intended for immediate sale.
The application came before me as duty Judge on 2 December 2015. I set the application, in relation to the interim orders, down for hearing today (on 4 December 2015).
The parties before the Court are Mr Actypis and Mrs Actypis (“the applicants”, see above at [1]), Hurstville City Council (“the respondent”), and David Henry Sampson in his Capacity as Trustee of the Bankrupt Estates of Nicholas Actypis and Maria Actypis (“the Trustee”). All three were legally represented before the Court. Submissions were made by each party.
Anthony Actypis, the son of the applicants, appears to have also provided instructions, if not primarily so, to those representing the applicants. Although the basis and extent of his involvement in the financial and litigation affairs of the applicants is not entirely clear, it appears that he took an active role in relation to applications made by the Trustee in Bankruptcy, involving the applicants’ affairs, before the Supreme Court. I note, at some time during those proceedings he was added as a fourth defendant (see affidavit of Jonathan Prowse of 4 December 2015).
Leave was granted, with no objections, for the filing and reading of the following affidavits:
1)The affidavit of Anthony Actypis, Machine Operator, sworn on 30 November 2015 filed by the applicants in relation to the matter of SYG 3452/2014.
2)The affidavit of Anthony Actypis, Machine Operator, sworn on 30 November 2015 filed by the applicants in the matter of SYG 3457/2014.
3)The affidavit of Anthony Actypis, Machine Operator, sworn on 3 December 2015 filed by the applicants in relation to the matter of SYG 3452/2014.
4)The affidavit of Anthony Actypis, Machine Operator, sworn on 3 December 2015 filed by the applicants in the matter of SYG 3457/2014.
5)The affidavit of Jonathon Prowse, Solicitor, sworn on 4 December 2015, filed by the Trustee in relation to the matter of SYG 3452/2014.
6)The affidavit of Mitchell Hay, Solicitor, affirmed on 4 December 2015, filed by the Trustee in relation to the matter of SYG 3452/2014.
7)The affidavit of David Henry Sampson as Trustee of the bankrupt estate of Nicholas Actypis, sworn on 4 December 2015, filed by the Trustee in relation to the matter of SYG 3452/2014.
The relevant history of this matter can be derived from these affidavits. While Bankruptcy Notices were issued to Mr Actypis and Mrs Actypis, the following chronology refers to both, for ease.
In June 2014, Hurstville City Council registered, in the Local Court in Sydney, Certificates of Judgment against Mr Actypis and Mrs Actypis arising from proceedings before the Land and Environment Court (NSW).
Following service of Bankruptcy Notices and Creditors Petitions, a Registrar of the Federal Court made a Sequestration Order against the estate of Mr Actypis on 27 January 2015, flowing from a judgment debt entered on 18 June 2014 in the amount of $11,668.02. On 3 February 2015, a Registrar of the Federal Court made a Sequestration Order against the estate of Mrs Actypis which flowed from two judgment debts totalling $34,933.93. A Trustee of their Estates was subsequently appointed in the usual way.
Pursuant to r.2.03(1) of the Federal Circuit Court (Bankruptcy) Rules 2006 (Cth) (“the FCC Bankruptcy Rules”), the applicants had 21 days from the making of the Sequestration Orders to seek such review. Plainly, well over 9 months has now passed. In that time, the evidence reveals that the Trustee’s correspondence and communication has been with Anthony Actypis, the applicants’ son. Although some attempt at discussion with the applicants appears to have occurred.
In May 2015, the Trustee commenced proceedings in the NSW Supreme Court seeking the production of Certificates of Title in relation to the applicants’ real property (see [1] above). This was to enable the registration of Bankruptcy applications pursuant to the Real Property Act 1900 (NSW) to allow the Trustee to become the registered owner of these properties.
The matter came on before the Supreme Court on at least nine occasions between 15 May 2015 and 25 September 2015 (see affidavit of Jonathan Prowse of 4 December 2015). From 15 July 2015, Anthony Actypis appeared in person on some occasions, and the applicants were represented by a legal practitioner on at least one occasion.
Relevant to today’s consideration, Mr Prowse, who appeared for the Trustee on each occasion before the Supreme Court, other than two occasions when Counsel appeared, gives evidence that on 25 September 2015 a part of the “resolution” of those proceedings involved an “agreement” with the applicants’ solicitor, who represents them before the Court today, that any listing for the sale of the Stoney Creek Road property would be delayed until the end of October 2015, to enable the applicants to address their financial affairs with a view to obtaining an annulment pursuant to s.153A of Bankruptcy Act 1966 (Cth) (“the Act”).
That “agreement” was said to also involve each of the applicant bankrupts filing a statement of affairs by 30 September 2015 ([8] of Mr Prowse’s affidavit). It appears Mrs Actypis at least took some action in this regard (see Anthony Actypis’ affidavit of 30 November 2015 filed in SYG 3457/2014 at [52] – [53]). The situation for Mr Actypis appears to be that no relevant action was taken.
On the available evidence, it appears that neither of the applicants had paid the relevant amounts to satisfy the debts and the Trustee’s fees by the end of October 2015. That continues to be case now. The Trustee took steps to list the Stoney Creek Road property for sale.
The immediate issue for the Court is whether to grant the injunction on the sale of the Stoney Creek Road property as the applicants seek. Noting, of course, that the applicants have also applied for review of the Registrar’s Sequestration Orders.
A number of elements are relevant in the current circumstances to the question of whether the injunction sought should be granted. These are whether there is a triable issue in the substantive proceedings, any satisfactory explanation for the applicants’ relevant conduct to date in pursuing the substantive review proceedings, any prejudice to the respondent, and the balance of convenience to be weighed in the consideration of the grant of the injunction.
There is no question that the Court has the power to grant the injunction (see s.30 of the Act), and s.15 of the Federal Circuit Court of Australia Act 1999 (Cth). Further, there is no question this Court has power to review the orders made by the Registrar (see s.27 of the Act and rr.2.03 and 7.06 of the FCCA Bankruptcy Rules).
Counsel who appeared for the applicants confirmed that, from the applicants’ perspective, the matter of the triable issue turned on whether the applicants were solvent at the time of the making of the Sequestration Orders. In this context, the applicants’ submission was that, as this time, there was no apparent irregularity with the service of various documents leading to the making of the Sequestration Orders.
The question was also raised, however, as to whether either of the applicants, who are 90 years of age (Mr Actypis) and 80 years of age (Mrs Actypis), and are said to not speak English, understood the nature of the proceedings leading to, and including, the making of the Registrar’s orders and subsequent events. On the evidence it appears their son, Anthony Actypis, took steps to assist them. However, he gives evidence that at various times his understanding was also limited.
There was no dispute that, on the matter of solvency, the onus on the balance of probabilities falls to the applicants to show that as at the time of the making of the Sequestrations Orders they were solvent (s.52 of the Act).
In submissions, the applicants noted what Justice Dean said in Re Ronald Grafton Sarina Ex Parte: the Council of the Shire of Wollondilly [1980] FCA 66, that there was no policy discernible in the relevant legislation which allows a creditor to make bankrupt a recalcitrant, but solvent, debtor.
The applicants pressed that this test, that is the ability to pay debts, be understood in light of what Barwick CJ said in Sandell v Porter (1966) 115 CLR 666 (“Sandell”) at [15]:
“…Insolvency is expressed in s. 95 as an inability to pay debts as they fall due out of the debtor's own money. But the debtor's own moneys are not limited to his cash resources immediately available. They extend to moneys which he can procure by realization by sale or by mortgage or pledge of his assets within a relatively short time - relative to the nature and amount of the debts and to the circumstances, including the nature of the business, of the debtor. The conclusion of insolvency ought to be clear from a consideration of the debtor's financial position in its entirety and generally speaking ought not to be drawn simply from evidence of a temporary lack of liquidity. It is the debtor's inability, utilizing such cash resources as he has or can command through the use of his assets, to meet his debts as they fall due which indicates insolvency…”
In this light, the applicants submitted that they had real property in excess of $1.6 million, yet the amounts owed to the creditors (it appears there is at least one other in addition to the respondent) were exceedingly less. Before the Court, and in the statement attached to Anthony Actypis’ affidavit, it was submitted that the amounts were about $41,000 for Mr Actypis and about $39,000 for Mrs Actypis.
However, the Trustee pointed to the actual cash on hand (as best as that can be seen for Mrs Actypis) which was in the order of $6,600. No cash assets were revealed for Mr Actypis.
It is the case, as was said in Sandell, that the debtors’ own money is not limited to cash resources immediately available. However, I did not respectfully understand this to be an open ended opportunity to dilute the definition of solvency as set out at s.5(2) of the Act:
“A person is solvent if, and only if, the person is able to pay all the person’s debts, as and when they become due and payable.”
If there were assets which could have been sold, or mortgaged, to pay the debts then there is nothing before me to say that that could not have been done in the time immediately leading to the making of the Sequestration Orders, or indeed in the time available until more recently when the Trustee moved to sell one of the properties.
As Barwick CJ said in Sandell, the extension, in relation to the capacity to pay debts, to moneys which could be realised from other assets was “within a relatively short time”. That time, in my view, has now passed.
While some care needs to be taken with short hand descriptors of legal tests, I agree with the focus of the Trustee’s counsel that the relevant focus is on a “cash flow test” rather than an “assets test”. On the available evidence, for current purposes (and I note that the applicants will have the opportunity to provide further evidence in the review of the Registrar’s Sequestration Orders), I am not persuaded by the applicants’ submissions on the issue of solvency.
I take note of the submissions that the applicants had little understanding of the English language. However, they are represented today and were represented at least for some of the time before the NSW Supreme Court. I note also that their son, Anthony Actypis, who makes no claim that he does not have competent English, appeared for them on some of these occasions.
In any event, these submissions derive from evidence of their son and not from them. There was no explanation as to why they were unable to provide any affidavit evidence as their son did, in circumstances where, presumably, they were able to give instructions to solicitors to represent them, even if these instructions were conveyed through, or with, the assistance of their son. Further, there is no evidence before the Court that they were not competent to conduct their affairs in their own language through the use of interpreters, or their daughter, who in the evidence was also involved on their affairs, albeit in a limited way.
Counsel for the Trustee made submissions that they acted with disregard in relation to attempts by the Trustee to fulfil his various duties and obligations under the Act as a Trustee. That is not directly relevant to the question of solvency. However, on the evidence, the applicants, and their son, have had ample opportunity to address the question of their debts and to properly manage their responses.
While their son, Anthony Actypis, says he lacked understanding, his own evidence is that as at 14 May 2015, following communication from the Trustee, he stated that he would take steps to pay the creditors (see [38] of his affidavits of 30 November 2015).
There is no evidence as to what steps he took in this regard. I note his evidence that he understood the seriousness of the situation after meeting with solicitors now representing his parents, some time in September 2015. Whatever the level of his claimed understanding at least, on his own evidence, as at mid May 2015 he knew that the creditors needed to be paid. By September 2015, on his own evidence, he says he understood the seriousness of the creditors not having been paid.
Anthony Actypis has recently put $75,000 in the solicitor’s trust account. This was described by the solicitor representing the applicants at the first Court event on Wednesday 2 December 2015 as a “gift”. Today, I was told that it was placed in the solicitor’s trust account contingent upon a settlement being reached.
Whatever that situation, this does not assist in the matter of the applicant’s solvency as at the time of the making of the Sequestration Orders. Nor was there any explanation why some satisfactory attempt at settlement was not made at least as at September 2015 or even earlier.
In the current consideration it cannot be forgotten that the Trustee, once appointed, has certain statutory obligations and responsibilities that he must address and fulfil. The details of that may be relevant in the substantive review proceedings.
However, for current purposes what is of relevant note is that the Trustee moved to sell the Stoney Creek Road property, in March 2015 in circumstances where the applicants had made no apparent attempt to pay the debt (see the letter from the Trustee’s solicitor of 10 March 2015 annexed to Anthony Actypis’ affidavit). In my view, this was a reasonable step given the Trustee’s statutory obligations and the absence of payment of the debts by the applicants, and in the face of the lack of meaningful engagement by the applicants or anyone on their behalf.
This lack of engagement can also be seen with the matter of the delivery of the Certificates of Titles which necessitated conduct in the Supreme Court of NSW. Section 77 of the Act imposes certain duties on bankrupts. On the evidence before the Court, and noting that none of it has been the subject of cross-examination, the applicants have not acted to properly address their duties in this regard. The delay in providing statements of affairs and the provision of Certificates of Title are examples of this (see s.77 of the Act, and in particular s.77(1)(a), (e) and (g)).
Anthony Actypis, in his evidence, has sought to explain the difficulties faced by him and his parents, the applicants, in this regard. The difficulty with this evidence, on its face, is the absence of any satisfactory explanations, and relevance, of the chronology that he seeks to provide.
For example, at [41] – [42] of his affidavits of 30 November 2015, Anthony Actypis states:
“[41] The Certificates of Title that David Sampson were after were held in safe custody by one of my parents former solicitors.
[42] These Certificates of Title have been in his possession for over 50 years.”
Anthony Actypis’ evidence is that the applicants’ former solicitor had the Certificates of Titles in his possession for “over 50 years”. There is no satisfactory explanation as to why the applicants, or he acting on their behalf, could not have obtained them at an earlier time and discharged the obligation pursuant to s.77 of the Act, and, it must be said, shortened the protracted proceedings before the Supreme Court.
In relation to the matter of their solvency as at the time of the Court’s review of the Registrar’s Sequestration Orders, the applicant’s capacity to argue that they are solvent is not, in my view, directly affected by the sale of the Stoney Creek Road property. Whether that property is held by the Trustee as real property or money still allows them to address the question of their ability to pay debts as they fall due. In that sense, no prejudice falls to them in relation to what they say is the triable issue in the substantive review proceedings.
The creditor in this matter, the respondent, was represented before the Court, and neither consented or opposed the order sought by the applicants, save, if necessary, it wanted to be heard on the matter of costs.
It appears there is at least one other creditor. While statements were made on behalf of the applicants from the bar table, there is no evidence as to what that creditor’s position would be, or how his interests would be affected, if the order sought were to be made. In my view, that creditor’s interests are also relevant to the current consideration. The Court needs to be careful in saying that there is no risk to a creditor in respect of which there is no evidence (as opposed to “reports” from the Bar Table) of that creditor’s knowledge of the state of the current proceedings.
The applicants argued that the balance of convenience argued for the making of the order given, at least, because there was no prejudice to the Trustee or the creditors other than as to time. In the circumstances, little weight is to be given to that submission.
In my view, the question of the urgency of time raised by the applicants today must also be seen in the context of the time available to them to have taken action to satisfy the debts that they were obliged to satisfy. I am not satisfied on the evidence that, even with their lack of English, any satisfactory explanation has been provided as to why they, or even their son, did not act earlier in the time available. After the many months available to them to take the necessary action to pay their debts they have come to Court on the “eve” of the proposed sale of the Stoney Creek Road property by the Trustee, acting in discharge of his statutory duties, in circumstances where they have had opportunity to have taken action and thus avoided the need for the Trustee’s action.
In all, therefore, the applications for the interim orders sought by the applicants is to be refused.
I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of Judge Nicholls
Associate:
Date: 21 December 2015
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