Chubb v Dunlop
[2011] FMCA 813
•14 October 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CHUBB v DUNLOP | [2011] FMCA 813 |
| BANKRUPTCY – Trustee’s application for writ of possession – orders made in absence of bankrupt – application to set aside or stay – whether discretionary power – stay sought in support of Federal Court appeal from sequestration order – stay refused – interim application dismissed. |
| Bankruptcy Act 1966 (Cth), ss.37(2), 52(2)(a), 52(3) Federal Court of Australia Act 1976 (Cth), s.29(1)(a) Federal Magistrates Court Rules 2001 (Cth), rr.16.05(2)(a), 16.05(2)(b) |
| Eykamp v Deputy Commissioner of Taxation [2010] FCA 797 Fishburn & Ors v Dunlop [2009] FMCA 1331 Pattison v McKinnon [2008] FCA 1624 |
| Applicant: | MORGAN JAMES CHUBB (AS TRUSTEE OF THE BANKRUPT ESTATE OF JAMES HENRY DUNLOP) |
| Respondent: | JAMES HENRY DUNLOP |
| File Number: | SYG 186 of 2011 |
| Judgment of: | Smith FM |
| Hearing date: | 14 October 2011 |
| Delivered at: | Sydney |
| Delivered on: | 14 October 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr J Gardner |
| Solicitors for the Applicant: | John Gardner Solicitor |
| Counsel for the Respondent: | Ms J Tangsilsat |
| Solicitors for the Respondent: | Thai-Oz Solicitor & Migration Services |
ORDERS
The interim application filed by the respondent debtor on 1 September 2011 is dismissed.
The applicant trustee has liberty to apply in the event that any order as to his costs is required.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 186 of 2011
| MORGAN JAMES CHUBB (AS TRUSTEE OF THE BANKRUPT ESTATE OF |
Applicant
And
| JAMES HENRY DUNLOP |
Respondent
REASONS FOR JUDGMENT
(revised from transcript)
This proceeding was commenced in this Court’s bankruptcy jurisdiction in February this year, by Mr Chubb as trustee of the estate of Mr Dunlop appointed under a sequestration order made by Driver FM on 10 November 2009. In his ex tempore reasons given after a contested hearing, his Honour addressed Mr Dunlop’s grounds of opposition to a creditors’ petition. Mr Dunlop claimed that he was solvent and merely a recalcitrant debtor in relation to payment to the petitioning creditors (see Fishburn & Ors v Dunlop [2009] FMCA 1331). His Honour looked at the evidence tendered by Mr Dunlop as to his assets, and was not satisfied that it established his ability to pay his debts in a reasonable time, nor that he was solvent. His Honour made a 21 day stay under s.52(3) of the Bankruptcy Act 1966 (Cth), because his Honour thought that: “Mr Dunlop needs to focus clearly on the issue at hand and to consider his options”.
However, the bankruptcy did commence, and Mr Chubb was appointed as trustee. Over the ensuing years, he endeavoured to perform his duties to collect the property of Mr Dunlop which had vested in him pursuant to the provisions of the Bankruptcy Act. He received little cooperation from Mr Dunlop in this respect, although extended negotiations went on in an effort to try to realise sufficient of Mr Dunlop’s former assets to meet the debts for which proofs have been lodged.
In particular, Mr Chubb identified an asset of Mr Dunlop, being real estate in the Coffs Harbour region. In his principal application in the present proceedings, Mr Chubb sought orders of an extensive nature requiring Mr Dunlop to give vacant possession of the land, to deliver up other property thought to be located on it, and to be restrained from preventing Mr Chubb from performing his duties under the Bankruptcy Act.
The principal application was listed on a first court date before Registrar Hedge on 22 March 2011. Mr Dunlop and the solicitor for Mr Chubb attended by telephone. Mr Dunlop appears to have claimed that he had not been properly served, and Registrar Hedge made directions for service of the supporting material.
Service had been effected by the time the matter was listed again on 3 May 2011, when it was referred to my docket for hearing. Mr Dunlop and the solicitor for Mr Chubb again attended by telephone. I made directions setting out a timetable for the completion of evidence by all parties, and the listing of the matter for hearing before me on 27 July 2011.
Mr Dunlop did file bulky material. This essentially sought to re‑litigate the issues which had been before Driver FM at the hearing of the sequestration order. It explained Mr Dunlop’s resistance to paying the debt of the petitioning creditors, who are a firm of solicitors who had acted for Mr Dunlop in the course of a protracted planning dispute concerning the Coffs Harbour land. It also repeated the evidence previously presented to Driver FM in support of Mr Dunlop’s claim that he was solvent. I was unable to detect in that material any ground of dispute as to Mr Chubb’s title to the property as trustee under the Bankruptcy Act, or as to his entitlement to a writ of possession in aid of the required administration of Mr Dunlop’s estate in bankruptcy.
There was no appearance by or on behalf of Mr Dunlop on the day of the hearing. I was very satisfied that he was on full notice of the hearing, and that he had been given a full opportunity to attend and to present orally his grounds of opposition to the relief sought by Mr Chubb. After considering all the material before me on that day, including the material filed by Mr Dunlop, I was satisfied that Mr Chubb had made out an entitlement to a writ of possession. I was satisfied that this Court had jurisdiction to order such a writ (see, in particular, Pattison v McKinnon [2008] FCA 1624). I declined to make any of the other orders sought in the principal application, and these were not pressed. My reasons would appear in the transcript of that hearing.
I then made orders on 27 July 2011 in the following terms:
1.The Respondent and any occupants of the whole of the land known as 590 Coramba Road Karangi NSW 2450 (“the property”) being the property described as Lot 22 in Deposited Plan 853824 must vacate the property and deliver up all keys for all buildings and improvements on the property to the Applicant no later than 4pm on 19 August 2011.
2.A writ of possession issue forthwith in the event that the Respondent or any other occupants fail to provide vacant possession of the Property in accordance with order 1 above.
3.These orders may be entered, and orders 1 and 2 are conditional and take effect, only if the District Registrar is satisfied that the Applicant has filed an affidavit satisfying the requirements of Uniform Civil Procedure Rules 2005 (NSW) r.39.3(2)(a) and (b).
4.The application is otherwise dismissed.
5.The Applicant must serve a copy of this order on the Respondent and attach a copy of the order to the gate of the property by 5pm on 5 August 2011. Service on the Respondent may be effected by post at the addresses for service given to the Court if personal service is not able to be effected.
The file shows that pursuant to my orders the solicitor for Mr Chubb did file an affidavit addressing the matters which I adopted from the Uniform Civil Procedure Rules in relation to the issue of writs of possession. In particular, so as to satisfy the Court that there was no other occupant of the land or person known with a right of possession. A Registrar was satisfied on this material that it was appropriate to issue the writ in accordance with my orders, and did so on 31 August 2011.
Evidence has also been filed to show compliance with my other orders made on 27 July 2011, in relation to service on Mr Dunlop. Mr Dunlop was served personally with my orders on 1 August 2011.
It seems that the Sheriff of New South Wales acting upon the writ of possession gave notice of his appointment to Mr Dunlop dated 8 September 2011. The notice told all occupants of the land that they should vacate the premises prior to 9am on Monday 17 October 2011 or action would proceed to evict without further warning.
On 1 September 2011 an interim application was filed on behalf of Mr Dunlop by his present solicitor, seeking two orders as follows:
1.Order made on July 27, 2011 by Federal Magistrate Smith, to be set aside.
2.Stay of the issued writ of possession.
The interim application was supported by an affidavit by Mr Dunlop sworn 5 August 2011. It attempted to explain his absence from the hearing before me on 27 July 2011. In short, Mr Dunlop claimed that he had thought that a friend, who is a “retired solicitor”, or someone working in his office, “would look after the matter and take care of the court notifications”. He claims that he thought that his friend would be “meeting with Mr Gardiner [solicitor for Mr Chubb] re resolving the matter without the need of a formal hearing”.
There is no supporting evidence from any person who, in fact, accepted professional instructions to represent Mr Dunlop in the proceedings before me on that occasion, or who had any communications with Mr Gardner. There is no evidence that there ever was, in fact, any prospect that the matter would be ‘resolved’ prior to the hearing. The affidavit does not persuade me that Mr Dunlop had a reasonable excuse for being absent at the hearing on 27 July 2011.
However, I might have been ready to give Mr Dunlop the benefit of the doubt, and to exercise my powers under Federal Magistrates Court Rules 2001 (Cth) r.16.05(2)(a) to set aside my order and recall the writ of possession, if Mr Dunlop had been able to point to some merit in his opposition to the application by Mr Chubb for a writ of possession.
However, his affidavit did not address that issue, and his solicitor has not today presented any submissions pointing to any good ground for disputing Mr Chubb’s entitlement to a writ of possession. As I have noted above, the material Mr Dunlop had previously filed did not, in my opinion, raise any valid ground of opposition. In my opinion, he has failed to establish a sufficient basis for me to exercise my discretion under r.16.05(2)(b) and to stay the writ of possession as consequential relief.
The interim application was returnable before me on 20 September 2011. Mr Dunlop was represented by his solicitor, Ms Tangsilsat, and Mr Chubb was represented by his solicitor, who was on the telephone. In effect, Ms Tangsilat moved the Court for a stay on the writ of possession based on an assumption that this relief was available on the broadest discretionary considerations. She tendered the notice from the Sheriff, which I have referred to above. She also tendered a photocopy of a purported first page of a recent contract for the sale of land, being the property which has, in fact, vested in the trustee. The contract purports to be between Mr Dunlop as vendor and Ms Tangsilsat as purchaser. Ms Tangsilsat submitted to me that this was evidence that Mr Dunlop had the ability to pay his debts, or would soon have the ability once he had reached agreement with his trustee for the adoption of this contract.
Mr Chubb’s solicitor had not been notified of this proposal, nor received any notice of it from Ms Tangsilsat, and was unable to respond. He agreed to a short adjournment of the interim application so that he could take further instructions. In view of that agreement, I was prepared to adjourn the present application until today. I was not persuaded that Mr Dunlop had made out a case even for an interim stay in relation to the writ of possession, notwithstanding the notice issued by the Sheriff. However, I noted that Mr Dunlop would have a further opportunity before the Sheriff’s deadline, to consider his case for relief under his interim application, and to reach agreement with his trustee in relation to raising money to pay his debts during the interval.
An affidavit was subsequently filed by Mr Chubb dated 10 October 2011, which refers to his administration of the estate.
It noted that two proofs of debt have been lodged in relation to debts which had not previously been disclosed by Mr Dunlop in the course of the sequestration proceedings. It noted that Mr Chubb had received no notice of the sale of the property proposed by Mr Dunlop, and indicated that he would not consent to it, since it showed a price representing a very substantial undervalue of the property. Another affidavit was also filed on behalf of Mr Chubb rejecting an assertion which had been made by Mr Dunlop.
Prior to today’s listing, Mr Dunlop filed an affidavit attaching an application he has filed in the Federal Court on 30 September 2011.
It seeks an extension of time to appeal from the 2009 orders of Driver FM. It is marked “date and time to be advised by the registry”.
There is no evidence before me that any application has been made to the Federal Court on the basis of urgency in relation to the application for extension of time. Nor, it seems, has Mr Dunlop made any application for a stay of the sequestration order and proceedings under it, including the proceedings of Mr Chubb in relation to realising the assets of the estate. The attached proposed notice of appeal from Driver FM’s sequestration order contains only one ground, “the appellant was solvent at the time the sequestration order was made”.
Mr Dunlop’s affidavit then attaches the evidence that was before Driver FM at the time that the sequestration order was made, and invites me to address the issue of solvency. However, in my opinion, this is not an issue which can properly be raised in the proceedings before me brought by Mr Chubb. If an assessment of Mr Dunlop’s evidence in opposition to the creditor’s petition is relevant to discretionary considerations relating to the present proceedings, then I would respectfully agree with Driver FM in thinking that Mr Dunlop’s affidavit clearly did not establish solvency under the established tests in relation to s.52(2)(a) (see Eykamp v Deputy Commissioner of Taxation [2010] FCA 797 at [7]). I consider that it does not even raise a real prospect that the Federal Court would grant the required lengthy extension of time to appeal from the sequestration order, or a stay on proceedings under the sequestration order in support of Mr Dunlop’s present application to that Court.
In short, if I had a discretion to stay the present writ of possession in the absence of any grounds being shown for setting aside my order for the issue of the writ, then I would not have been persuaded to exercise that power on the grounds set out in the affidavit of Mr Dunlop and addressed by the written and oral submissions of Ms Tangsilsat to me today.
In my opinion, I do not have power to issue a stay on the writ or Mr Chubb’s administration of Mr Dunlop’s estate in bankruptcy purely upon the basis of an outstanding attempt to appeal to the Federal Court from the sequestration order. In my opinion, this is clear from the provisions of the Bankruptcy Act and the Federal Court of Australia Act 1976 (Cth).
In relation to the Bankruptcy Act, s.37(2) provides that a first instance bankruptcy court does not have the power “to rescind or discharge, or to suspend the operation of … a sequestration order”.
Under s.29(1)(a) of the Federal Court of Australia Act, that Court has power to stay “all or any proceedings under the judgment appealed from” and that power is given to other courts from whom appeals to the Federal Court have been instituted. However, the extension to other courts is expressly excluded in relation to this Court by the statement in parentheses in s.29(1)(a) “not being the Federal Magistrates Court”.
Given the express exclusion of this Court’s powers of stay in relation to appeals to the Federal Court from a sequestration order, in my opinion it would be inappropriate for me to make an order for that purpose on the present application. In my opinion, if Mr Dunlop wishes to take further steps to stay the writ of possession based on his application filed in the Federal Court, then he must seek relief in that Court.
In my opinion, for the reasons given above, the appropriate order today is for me to dismiss the interim application which was filed by Mr Dunlop on 1 September 2011.
I note that Mr Chubb intends to rely upon his rights of indemnity in relation to his costs, but I will reserve liberty to apply in relation to these.
I certify that the preceding twenty‑nine (29) paragraphs are a true copy of the reasons for judgment of Smith FM
Date: 20 October 2011
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