Colbran (Trustee) v Patten, in the matter of the Bankrupt Estate of Patten
[2023] FCA 1370
•9 November 2023
FEDERAL COURT OF AUSTRALIA
Colbran (Trustee) v Patten, in the matter of the Bankrupt Estate of Patten [2023] FCA 1370
File number: WAD 21 of 2023 Judgment of: FEUTRILL J Date of judgment: 9 November 2023 Catchwords: BANKRUPTCY AND INSOLVENCY – application for vacant possession of real property under s 30(1)(b) of the Bankruptcy Act1966 (Cth) – where property vested in trustee in bankruptcy – whether bankrupts failed to aid the administration of the estate in accordance with s 77(1)(g) of the Bankruptcy Act Legislation: Bankruptcy Act 1966 (Cth) ss 30, 30(1)(b), 54, 58, 77, 77(1)(g), 132, 149 Cases cited: Horne (as trustee of the Bankrupt Estate of Sekulovski) v Sekulovski [2009] FCA 1164
Pattison v McKinnon [2008] FCA 1624
Vince (Trustee), in the matter of Sopikiotis (Bankrupt) v Sopikiotis (No 2) [2012] FCA 1298
Division: General Division Registry: Western Australia National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 23 Date of hearing: 20 October 2023 Counsel for the Applicant: Mr Yong Sheng Wee with Ms AER Causton Solicitor for the Applicant: Jackson McDonald Counsel for the Respondents: There was no appearance for the respondents ORDERS
WAD 21 of 2023 IN THE MATTER OF THE BANKRUPT ESTATE OF KEVIN JOHN PATTEN AND RATCHANI PATTEN
BETWEEN: JONATHON COLBRAN AS TRUSTEE OF THE BANKRUPT ESTATE OF KEVIN JOHN PATTEN AND RATCHANI PATTEN
Applicant
AND: KEVIN JOHN PATTEN
First Respondent
RATCHANI PATTEN
Second Respondent
ORDER MADE BY:
FEUTRILL J
DATE OF ORDER:
9 NOVEMBER 2023
THE COURT ORDERS THAT:
1.By 7 February 2024 the first and second respondents must deliver up vacant possession of the property located at 3 Nychum Pass, Ellenbrook WA 6069 being the whole of the property described in the Certificate of Title Volume 2581 Folio 334 (property) to the applicant.
2.The applicant may apply for further or other relief in aid of paragraph 1 of these orders, which may include orders for enforcement, on 48 hours’ written notice.
3.The applicant’s costs of the proceedings up to the date of these orders be paid out of the bankrupt estates.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
FEUTRILL J:
The applicant is the trustee of the bankrupt estates of the first respondent (Mr Patten) and the second respondent (Mrs Patten) (collectively, the Pattens). On 3 October 2016 a judge of the then Federal Circuit Court of Australia (as that court was then known) made sequestration orders against each of the Pattens. The Official Trustee was originally appointed as trustee of the bankrupt estates. On 25 May 2022 the applicant was appointed as trustee of each of the bankrupt estates. By operation of s 58 and s 132 of the Bankruptcy Act 1966 (Cth), the property of the Pattens has vested in the applicant, as trustee.
The Pattens are the registered proprietors of a property located at 3 Nychum Pass, Ellenbrook in the State of Western Australia, being the whole of the property described in Certificate of Title Volume 2581 Folio 334 (property). By originating process filed 31 January 2023 the applicant seeks orders, amongst others, that the Pattens deliver up vacant possession of the property to the applicant within 90 days, the applicant’s costs be paid out of the Pattens’ bankrupt estates and any other order the Court sees fit to make.
The applicant relies on the general power in s 30(1)(b) of the Bankruptcy Act that gives the Court power to make such orders as the Court considers necessary for the purpose of carrying out or giving effect to the Bankruptcy Act. Further, s 77 of the Bankruptcy Act which imposes various duties on the bankrupt, including, by s 77(1)(g), that the bankrupt aid, to the full extent of the bankrupt’s power, the administration of the estate. I accept and am satisfied that the Court has power, pursuant to s 30(1)(b) and s 77(1)(g) of the Bankruptcy Act, to make orders of the kind the applicant seeks in the originating process: e.g., Vince (Trustee), in the matter of Sopikiotis (Bankrupt) v Sopikiotis (No 2) [2012] FCA 1298 at [4]; Horne (as trustee of the Bankrupt Estate of Sekulovski) v Sekulovski [2009] FCA 1164 at [7]; Pattison v McKinnon [2008] FCA 1624 at [2].
Additionally, the applicant has sought orders in the following terms:
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b)The first and second respondent deliver up all keys and documents for all buildings and improvements on the property to the applicant within 90 days.
c)The first and second respondent must remove from the property all vehicles, rubbish and chattels which have not vested in the applicant (the personal property) within 90 days.
d)In the event that the first and second respondent fails to comply with Order 1 (c), the applicant is empowered to remove and dispose of the personal property on the property, as they see fit, after the expiry of 90 days from the date of this Order.
e)The applicant is appointed as trustee for the sale of the property.
f)The applicant is empowered to do everything necessary or expedient to execute all documents on behalf of the respondent to give effect to these Orders as necessary, including the following documents:
a) Any contract of sale;
b) Any nomination form or similar document;
c) Any transfer of land;
d)Any notice to be issued under a contract of sale; and e) Any other document contemplated or envisaged by ancillary to or otherwise related to, any of the above documents.
g)The net proceeds of sale of the property, after payment of what shall be due to any encumbrance according to their priorities, and of all other proper costs, charges and expenses of the sale, be paid to the applicant.
h)Upon the Orders 1 (a) to (g) being made, the applicant will apply for registration as a proprietor of the Property with Landgate.
i)The interest of the first and second respondent in the Property described in paragraph 1(a) is vested in the applicant as trustee in bankruptcy under s 234 of the Transfer of Land Act 1893 (WA) on 25 May 2022.
On 6 and 18 April 2023 Bank-Smith J made orders for substituted service of the originating process, affidavit in support and other documents on the Pattens. On 18 April 2023 a person in the employ of the applicant’s solicitors despatched a parcel by registered post addressed to each of the Pattens at 3 Nychum Pass, Ellenbrook WA 6069, containing copies of the originating process, affidavit of the applicant sworn 31 January 2023, genuine steps statement and orders for substituted service of 18 April 2023. On 18 April 2023 the Pattens were also sent a copy of those documents by email addressed to Mrs Patten’s email address: [email protected].
On 29 August 2023 a solicitor for the applicant sent a copy of the applicant’s written submissions of 11 August 2023 to Mrs Patten’s email address: [email protected]. On 1 September 2023 a process server served the applicant’s written submissions of 11 August 2023 on the Pattens by attending the Pattens’ property and attaching two envelopes each addressed to Mr Patten and Mrs Patten to the front door of the property.
On 7 September 2023 I ordered that the applicant file and serve any additional affidavit material by 21 September 2023, that the matter be listed for final hearing on 20 October 2023 and that the applicant serve a copy of those orders on the Pattens. On 7 September 2023 a solicitor for the applicant sent the orders of the same day to Mrs Patten’s email address: [email protected]. On 8 September 2023 a process server served copies of the orders of 7 September 2023 on the Pattens by attending the Pattens’ property and attaching two envelopes each addressed to Mr Patten and Mrs Patten containing the documents to the front door of the property.
On 22 September 2023 a solicitor for the applicant sent the affidavit of the applicant sworn on 21 September 2023 to Mrs Patten’s email address: [email protected]. On 22 September 2023 a process server served the affidavit of the applicant sworn on 21 September 2023 on the Pattens by attaching two envelopes containing the affidavit each addressed to Mr Patten and Mrs Patten to the front door of the property.
On 13 October 2023 a solicitor for the applicant sent the affidavit of Raymond Cao affirmed 13 October 2023 to Mrs Patten’s email address: [email protected]. On 16 October 2023 a process server served the affidavit of Raymond Cao affirmed 13 October 2023 on the Pattens by attaching two envelopes containing the affidavit each addressed to Mr Patten and Mrs Patten to the front door of the property.
I am satisfied that the originating process, supporting affidavits (other than affidavits of service), submissions, Court orders and other materials were all served in accordance with the orders of 18 April 2023 and 7 September 2023. Further, the Pattens have had reasonable notice of the originating process, the orders the applicant has sought, the evidence upon which the applicant relies and the legal and factual grounds upon which the applicant relies for the orders sought. Also, the Pattens have had reasonable notice that the final hearing of the originating process would take place on 20 October 2023 and that orders could be made in their absence at that hearing.
The final hearing of the originating process was heard on 20 October 2023. The applicant appeared and made oral submissions. Neither of the Pattens appeared. The applicant read and relied on the following affidavits:
(a)Affidavit of the applicant sworn 30 January 2023 in support of the originating process.
(b)Affidavit of Fedele Sandro Conti sworn on 24 May 2023 that addressed service.
(c)Affidavit of Rachel Louise Rutter affirmed on 25 May 2023 that addressed service.
(d)Affidavit of the applicant sworn on 21 September 2023 in support of the originating process.
(e)Affidavit of Raymond Cao affirmed on 13 October 2023 in support of the originating process.
(f)Affidavit of Fedele Sandro Conti sworn on 17 October 2023 that addressed service.
(g)Affidavit of Savannah Louise Drago sworn on 18 October 2023 that addressed service.
By s 54 of the Bankruptcy Act the Pattens were and are required to file a statement of affairs. They have not done so. As a consequence, notwithstanding that it is well over three years since they were made bankrupt, they have not been discharged from bankruptcy in accordance with s 149 of the Bankruptcy Act.
By correspondence from the Official Trustee and the applicant sent to the address of the Pattens’ property, the Pattens were informed that the property had vested in the Official Trustee and, later, the applicant, as their trustee in bankruptcy. On 30 June 2022 the applicant lodged a caveat under the provisions of the Transfer of Land Act 1893 (WA) based on his interest in that property as trustee in bankruptcy. In addition to the caveat, there is a registered mortgage L967815, registered to the Commonwealth Bank of Australia Limited over the property. The mortgage was registered on 20 June 2012.
In the applicant’s affidavit of 21 September 2023, he deposes that he has received a comparative market report from a real estate agent to the effect that the estimated market value of the property is between $620,000 and $670,000 as at 4 September 2023. As of 15 September 2023, the balance of the loan secured by the registered mortgage was $393,904.45. Based on that information, the applicant deposes, in effect, that he believes that the estimated available equity in the property is between $226,095.55 and $276,095.55.
Further, while the Pattens have not filed a statement of affairs, the applicant has made enquiries to ascertain their creditors. The applicant deposes that based on proofs of debt received from creditors as at 20 September 2023 and bank statements from the Bendigo and Adelaide Bank (which are also creditors of the Pattens), he believes there to be the following amounts owed to unsecured creditors:
(a)$79,152.183 jointly by the Pattens;
(b)$17,065.00 by Mr Patten; and
(c)$16,071.00 by Mrs Patten.
That is, total debts of $112,288.83.
The applicant deposes that the Official Trustee wrote to the Pattens in October and November 2016 and in January 2020 requesting that the Pattens file their statement of affairs. The Pattens made no response to the correspondence of the Official Trustee.
The applicant deposes that he and employees of his firm (RSM Australia Partners) have attempted to correspond with the Pattens requesting them to file their statement of affairs and notifying them of the applicant’s rights, as trustee, regarding realising the property. That included correspondence of 6 June 2022 and 23 June 2022 to which the applicant received no response.
The applicant has engaged solicitors (Jackson McDonald) to provide legal advice. Jackson McDonald wrote to the Pattens on 21 November 2022. Again, no response was received to that correspondence.
Jackson McDonald’s letter of 21 November 2022 includes the following:
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Trustee's Rights over the Property
2.The Trustee is required under the Bankruptcy Act 1966 (Cth), to realise any value in the Property, either by way of sale to a third party or by public sale, with the net proceeds after payment of the secured creditor being distributed to the creditors of the bankrupt estate.
3.Throughout the course of your bankruptcy the Trustee and AFSA has attempted to contact you in respect of you filing your SOA, and more recently advising you the Trustee is required to realise his equitable interest in the Property. The Trustee has received no correspondence from either of you.
4. We are now instructed to realise the Trustee's interest in the Property.
Options to recover the equitable interest in the Property
5.A third-party can purchase or arrange for finance to pay out the Trustee's interest in the Property. Once the Trustee's interest in the Property is paid in full, the Trustee will not have any further claim over the Property. The caveat held by the Estate would be withdrawn, thereby noting your full interest in the Property; or
6.You agree to work with the Trustee's office to market and sell the Property, with the sale process to commence as soon as is practicable; or
7.If you do not respond to this letter, the Trustee reserves his right to make an application in the Federal Court that will seek orders for transmission and vacant possession of the Property. The Trustee will reserve all his rights as to costs in that respect.
Formal Notice to Vacate
8.Please respond by 4pm WST on 12 December 2022, how you would like to proceed. Should you require further time we ask that you please contact us in writing before that date. If we do not receive a response that satisfies the Trustee that a third party has the capacity to pay out the Trustee's interest in the Property, the Trustee requires your assistance to sell the Property.
9.If you fail to respond to this letter by the above date, the Trustee reserves his rights to commence proceedings in the Federal Court for vacant possession and conduct of the sale of the Property.
10.Please direct all enquiries in relation to this matter, including to drop off the keys for the Property to either Anastasia Causton or Dan Butler of this office.
11.We look forward to hearing from you on or before 4pm on 12 December 2022.
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After receiving no response to Jackson McDonald’s letter of 21 November 2022, the applicant filed the originating process in these proceedings on 31 January 2023.
Although there has not been a formal demand that the Pattens deliver up vacant possession of the property to the applicant, I am satisfied, based on the contents of the applicant’s correspondence with the Pattens and Jackson McDonald’s letter of 21 November 2022, that the Pattens have been requested to cooperate with the applicant to facilitate the sale of the property so as to establish a fund for the payment of the Pattens’ creditors. Further, the Pattens have failed to cooperate with reasonable requests of the applicant for their assistance. The property has vested in the applicant. There is no information before me to suggest that the applicant is not entitled to possession of the property as trustee in bankruptcy. On the information available, I am satisfied that there is sufficient equity in the property to satisfy all or a significant proportion of the Pattens’ debts. In the circumstances, I am satisfied that an order should be made under s 30(1)(b) of the Bankruptcy Act to the effect that the Pattens give the applicant vacant possession.
As to the various ancillary orders the applicant seeks in the originating process, I am not satisfied that it is necessary to make orders in those terms or, in the case of certain of the requested orders, that the Court has power to make such orders on the present application. On the hearing of the application the applicant described them as orders that provided notice to the Pattens of what they were required to do, in effect, to give vacant possession. I do not consider such orders to be necessary. Certain of the requested orders are also more in the nature of declarations as to the powers, rights or intentions of the applicant. Again, I am not satisfied that such declaratory orders are necessary.
In the event that the Pattens refuse or fail to provide the applicant with vacant possession, the applicant may apply to the Court for remedies for enforcement of the order for possession. Accordingly, I will make an order to the effect that the applicant has liberty to apply for further or other relief in aid of the order for possession. I will also make an order to the effect that the applicant’s costs be paid out of the bankrupt estates.
I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Feutrill. Associate:
Dated: 9 November 2023
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