Corrigan v Owens and Lofthouse v Owens and Anor
[2008] FMCA 1179
•24 July 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CORRIGAN v OWENS and LOFTHOUSE v OWENS & ANOR | [2008] FMCA 1179 |
| BANKRUPTCY – Interim injunctive relief sought to restrain sale of properties by Trustee – relief not granted. |
| Applicant: | MICHAEL CORRIGAN |
| Respondent: | SUE OWENS |
| File Number: | MLG 1436 of 2004 |
| Applicant: | DAVID JAMES LOFTHOUSE |
| First Respondent: | SUZANN JANET OWENS |
| Second Respondent: | REGISTRAR OF TITLES |
| File Number: | MLG 878 of 2008 |
| Judgment of: | Burchardt FM |
| Hearing date: | 24 July 2008 |
| Date of Last Submission: | 24 July 2008 |
| Delivered at: | Melbourne |
| Delivered on: | 24 July 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr S.P. Gardiner |
| Solicitors for the Applicant: | Aitken Partners Lawyers |
| Counsel for the Respondent: | Mr J. Geale |
THE COURT ORDERS THAT:
IT IS DECLARED that the Applicant is entitled to execute in the name of the Respondent such documents as may be necessary for the sale and/or transmission of title of the following properties including any documents to be lodged with Land Victoria in order to remove any caveats that have been or may be lodged by the Respondent in respect of the properties:
(a)94 Richardson Street, Middle Park, Victoria, being the property more particularly described Certificate of Title Volume 3584, Folio 687;
(b)235 Richardson Street, Middle Park, Victoria, being the property more particularly described Certificate of Title Volume 10074, Folio 251;
(c)24 Hill Street, Hawthorn, Victoria, being the property more particularly described Certificate of Title Volume 8615, Folio 308; and
(d)78 Wattle Road, Hawthorn, Victoria, being the property more particularly described Certificates of Title Volume 9239, Folio 723 and Volume 8039, Folio 848.
(Collectively, “Properties”).
IT IS ORDERED THAT the First Respondent be restrained, personally or by any persons acting on her instructions and/or on her behalf, from engaging in conduct that is likely to have the effect of interfering with and/or jeopardising the offering for sale, sale either at public auction or by private sale and/or transmission of title of the Properties referred to in paragraph 1 of these Orders by the Applicant by engaging in the following conduct:
(a)Making statements, whether verbally or in writing, impugning the title of the Applicant to the Properties and/or the ability of the Applicant to give title in the Properties to prospective purchasers; and
(b)Making statements whether, verbally or in writing, to the effect that the prospective purchasers of the Properties will or are likely to become involved in legal proceedings instituted by the Respondent in relation to the Applicant’s ale of the Properties.
The costs of the proceedings on 21 August 2008 be reserved.
Ms Owen’s application filed on 8 July 2008 be dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 1436 of 2004
| MICHAEL CORRIGAN |
Applicant
And
| SUE OWENS |
Respondent
MLG 878 of 2008
| DAVID JAMES LOFTHOUSE |
Applicant
And
| SUZANN JANET OWENS |
First Respondent
| THE REGISTRAR OF TITLES |
Second Respondent
REASONS FOR JUDGMENT
On 8 July 2008 Ms Owens filed an application in the Court in which she sought the delay of the sales of properties now controlled by her trustee in bankruptcy until after a preliminary inquiry hearing into the trustee's conduct that I am going to commence on 21 August 2008.
It may be noted that the application as filed was not limited till 21 August 2008 but sought a permanent stay, but I accept that she has limited her claim in that way before me through her counsel today.
The trustee seeks the dismissal of the application brought by Ms Owens and ancillary orders to enable sales of the properties to proceed in August 2008. In substance, the ancillary orders are not opposed by Ms Owens in the event that she is otherwise unsuccessful; and I may say in passing that they are, in the event that the trustee is successful, plainly orders that the Court should make.
Ms Owens says first, if she successfully is able to, as it were, get the properties back by a composition with her two trustees in bankruptcy, this will lead to a substantial benefit to her in relation to possible capital gains tax, stamp duty, and what I would describe as sales costs; that is to say, auctioneer's costs, marketing and the like. She says further and alternatively, if her daughter buys the properties there will still be substantial savings in sales costs.
More importantly, she goes on to say that the failure of the trustee to consider and/or accept these two alternative proposals, namely that either she come to a composition with the trustee or the daughter buy the property, shows and in fact evidences and constitutes a breach by the trustee of the trustee's obligations to her. It is submitted on her behalf that this gives rise to a serious issue to be tried. It was submitted that there was a strong case that the trustee had breached his duties.
Ms Owens submits that the balance of convenience is all in her favour. It is submitted that this is a short period of delay which will occasion no prejudice to the trustee or the creditors but would inevitably impose serious penalties on her if the injunction she seeks is not now granted.
The trustee makes the following points. First, Ms Owens asserted that the properties were in fact owned by a trust until the recent High Court decision to refuse special leave. Second, no moneys have yet been paid to the creditors nor have any of the expenses of the administration of the estate been paid. Third, the second trustee in bankruptcy will get any surplus that may arise from the sale of the properties, not Ms Owens. Fourth, that at least some of the costs of sale have already been incurred.
It is important to remember that this is an interlocutory hearing only; the Court does not make final findings of fact on these occasions. Further, what I do today has nothing to do, save in a sort of tangential way, with the inquiry that is due to commence on 21 August 2008. I rather am required to consider whether, on the materials, a serious issue to be tried has been made out, where the balance of convenience may lie, and, bearing in mind all those matters and the interrelationship between them, whether or not it is appropriate to grant the relief that Ms Owens seeks.
In respect of the serious issue, I do not think it is so clear at all that the trustee is in breach of his duties. First of all, auction is a standard prudent commercial approach to the realisation of property; no‑one could seriously suggest the contrary. Second, there is a welter of material, not the least put on by Ms Owens herself, showing that her relationship with the trustee is strained. There is highly likely to be disputation over any composition that the parties seek to enter into, not the least in relation to such matters as the trustee's fees.
Third, Ms Owens' desired course, as proposed, involves a third party, namely the second trustee in bankruptcy, over whom this first appointed trustee, Mr Lofthouse, has no control. I do not say that I find the trustee has not acted in breach of his obligations; that is a matter which will probably be addressed in final detail in August 2008. I merely say that the three matters to which I have referred suggest to me that the serious issue in this case is not particularly strong.
Turning to balance of convenience, it is clear that there will be prejudice to Ms Owens if sale occurs. There is the possibility that she loses the benefits of being the registered owner of properties that were purchased prior to the introduction of capital gains tax. It is not entirely clear how that position stands, because no-one has completely been able to satisfy me as to what happens when the properties vest in the trustee. But I will presume in her favor that matters are as she puts it.
There will be the certainty of stamp duty and sales costs if she is not able to come to a composition. There would also be a certainty of loss to the estate in the ultimate if the properties are not sold to her daughter, because there will be some sales costs engendered. I may say, given the value of properties, the sales costs are likely to be substantial.
But there is another vital consideration, which is that the creditors need to be paid. They have been owed their moneys, from bankruptcy at least, for at least three years. Second, delay needs to be avoided. One notes the Court file shows 192 items filed, which is a very substantial number. The history of the case shows lengthy delay is very likely; it is not likely to be a short adjournment until August 2008.
Ms Owens' application implicitly assumes that her case against the trustee will succeed. That is not yet established, and may or may not ultimately be so. If she ultimately succeeds, it seems to me that it is more probable than otherwise that she would be able to recover damages from the trustee for his misconduct, if that is established. Damages would be in tort, as I would see it, and would be such as to put her in the position she would be in if misconduct had not occurred.
I note in passing that nothing has been said about the usual undertaking as to damages, but it is common cause that, at least at present, there would be likely to be a surplus upon sale of the properties, so I have not given over much weight to that consideration.
As I find, the balance of convenience is clearly heavily in favour of the trustee and for those reasons, I am going to dismiss the application brought by Ms Owens and grant the orders sought by the trustee.
I am going to reserve the costs of both applications until 21 August 2008, partly because, I am sorry, I just do not have the time to allot to hearing costs applications today but also because the outcome of such applications may in some way be influenced by the proceedings in August 2008.
(DISCUSSION FOLLOWED)
Paragraph 3 of the proposed orders of the trustee should read "Reserve costs to the proceeding on 21 August 2008". I will, fourth, dismiss Ms Owens' application filed on 8 July 2008. The Court will engross those orders and send them out.
I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Burchardt FM
Associate: Brooke Evans
Date: 24 July 2008
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