Dudley (Trustee), in the matter of Zaree (Bankrupt) v Zaree
[2022] FedCFamC2G 1070
Federal Circuit and Family Court of Australia
(DIVISION 2)
Dudley (Trustee), in the matter of Zaree (Bankrupt) v Zaree [2022] FedCFamC2G 1070
File number: PEG 69 of 2022 Judgment of: JUDGE LADHAMS Date of judgment: 21 December 2022 Catchwords: BANKRUPTCY – application for declaration of beneficial ownership of property – application for orders for vacant possession and sale of property and for issuance of Property (Seizure and Delivery) Order – where bankrupt failed to comply with obligations under Bankruptcy Act 1966 (Cth) – orders granted Legislation: Bankruptcy Act 1966 (Cth) ss 19, 30, 58, 77, 129
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 213
Civil Judgments Enforcement Act 2004 (WA) s 95
Cases cited: Coshott v Prentice (In His Capacity as Trustee of the Property of Coshott, a Bankrupt) (2014) 221 FCR 450; [2014] FCAFC 88
Low v Tsoutsoulis [2013] FCCA 1115
Division: Division 2 General Federal Law Number of paragraphs: 54 Date of hearing: 6 December 2022 Place: Perth Counsel for the Applicant: Mr R E Lennon Solicitor for the Applicant: Dentons Australia Respondent: The respondent appeared in person ORDERS
PEG 69 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: GREGORY BRUCE DUDLEY AS TRUSTEE OF THE BANKRUPT ESTATE OF BEHRAZ ZAREE
Applicant
AND: BEHRAZ ZAREE
Respondent
order made by:
JUDGE LADHAMS
DATE OF ORDER:
21 December 2022
THE COURT DECLARES THAT:
A.The applicant is the beneficial owner of the land known as 55 Boyare Avenue, Mirrabooka in the State of Western Australia, being the land described as Lot 933 on Plan 15451 being the whole of the land in Certificate of Title Volume 1727, Folio 85 (Mirrabooka property).
THE COURT ORDERS THAT:
1.Pursuant to ss 30(1), 77(1)(g) and 129(2) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act), on or before 9 February 2023 the respondent is to:
(a)remove from the Mirrabooka property, all vehicles, rubbish and chattels which have not vested in the applicant (personal property);
(b)deliver up vacant possession of the Mirrabooka property together with the duplicate Certificate of Title for the Mirrabooka property to the applicant; and
(c)deliver up all keys for the buildings and improvements on the Mirrabooka property to the applicant.
2.If the respondent:
(a)fails to vacate and surrender possession of the Mirrabooka property in accordance with orders 1(b) and (c), a Property (Seizure and Delivery) Order be issued forthwith in favour of the applicant in respect of the Mirrabooka property; or
(b)fails to remove the personal property on or before 9 February 2023 in accordance with order 1(a), the applicant can remove and dispose of the personal property as it sees fit after 9 February 2023.
3.Pursuant to ss 30(1) and 77(1)(g) of the Bankruptcy Act, the applicant:
(a)has the sole conduct of the sale of the Mirrabooka property;
(b)must sell the Mirrabooka property on the terms and conditions in the Law Society of Western Australia’s then current ‘Joint Form of General Conditions for the Sale of Land’ and on any special conditions the applicant reasonably requires;
(c)is authorised to retain and instruct an independent, qualified and licensed real estate agent experienced in selling real estate in Western Australia to sell the Mirrabooka property; and
(d)is authorised to:
(i)decide whether the Mirrabooka property is to be sold by public auction or private treaty;
(ii)decide whether or not to set a reserve for any auction of the Mirrabooka property and, if so, at what price; and
(iii)sign any Contract of Sale, discharge of mortgage authority, Transfer of Land and any other documents necessary for the purposes of the sale of the Mirrabooka property.
4.The respondent do all things the applicant, its selling agent or its lawyers reasonably require, to facilitate the applicant’s sale of the Mirrabooka property, including but not limited to:
(a)providing access to buildings on the Mirrabooka property;
(b)allowing the applicant without interruption to cause to be completed any necessary repairs and maintenance to any building on the Mirrabooka property;
(c)the applicant obtaining a valuation for the Mirrabooka property; and
(d)the applicant allowing potential purchasers to view the Mirrabooka property.
5.The proceeds of sale must be distributed as follows:
(a)first, in discharge of any encumbrance registered on the Certificate of Title to the Mirrabooka property, if any;
(b)second, in all costs and expenses related to the sale and settlement of the Mirrabooka property including Local Government rates, water rates and any other taxes and/or charges required to effect the sale and settlement of the Mirrabooka property including, but not limited to:
(i)any necessary repair and maintenance costs referred to above in order 4(b);
(ii)the Agent’s commission;
(iii)advertising and marketing costs;
(iv)valuation costs; and
(v)fees and disbursements of a solicitor or settlement agent; and
(c)third, in payment of the applicant’s costs referred to below in order 7; and
(d)fourth, the balance of the sale proceeds for the Mirrabooka property be paid to the applicant as Trustee of the Bankrupt Estate of Behraz Zaree.
6.Any party has liberty to apply on three business days’ notice.
7.The respondent pay the applicant’s costs of these proceedings to be assessed if not agreed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE LADHAMS:
Introduction
The respondent, Mr Zaree, became bankrupt on 8 February 2016 upon the making of a sequestration order by the Federal Circuit Court of Australia. The sequestration order was made on the application of the Deputy Commissioner of Taxation. On the same day the applicant (Trustee) was appointed as the trustee in bankruptcy of Mr Zaree’s estate.
The Trustee applied to the Court for orders requiring Mr Zaree to provide vacant possession of his real property and to enable the Trustee to sell the property to discharge Mr Zaree’s outstanding debt. Mr Zaree originally opposed the orders sought by the Trustee. Mr Zaree accepts that he owes a debt to the Australian Taxation Office (ATO) but indicated in his sole ground of opposition to the application that he disputed the quantum of the debt claimed by the ATO. In the course of the hearing before me, Mr Zaree indicated that he no longer disputed the quantum of the debt.
I am satisfied that it is appropriate to make the orders sought by the Trustee. My reasons for this are explained below.
Application and evidence before the Court
The Trustee filed the application on 14 April 2022 seeking orders pursuant to ss 30(1), 77(1)(g) and 129(2) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act). The application was filed again on 12 May 2022. The refiled application did not change the substance of the application of the orders sought, but rather removed a draft watermark that appeared on the original application. The application was refiled upon order of the Court to avoid any confusion that may arise from a self-represented respondent being served with an originating application marked with a draft watermark. The application was accompanied by a genuine steps statement and an affidavit of the Trustee.
The application came before me for hearing on 6 December 2022, with Mr Lennon appearing for the Trustee and Mr Zaree representing himself.
The Trustee read five affidavits into evidence without objection. Those affidavits were:
(a)affidavits of the Trustee, Gregory Bruce Dudley, filed on 14 April 2022 and 7 October 2022; and
(b)affidavits of service of
(i)Ryan Eamonn Lennon filed on 6 May 2022;
(ii)Philip Gerald O’Donnell filed on 11 May 2022; and
(iii)Ryan Eamonn Lennon filed on 18 May 2022.
Mr Zaree relied on two documents at the hearing of the matter, both filed on 31 August 2022. These documents were his notice stating grounds of opposition to the application and an affidavit of Mary-Kate Anastasia Ledger, who was at the time of making the affidavit Mr Zaree’s lawyer. While Mr Lennon objected to the affidavit of Ms Ledger, he acknowledged that his objection related to matters that mainly went to weight. I treated the affidavit as read and heard submissions as to weight.
Mr Zaree confirmed at the hearing that the affidavit of Ms Ledger was the only evidence he relied on.
No witnesses were required for cross examination at the hearing.
Relevant background
Mr Zaree’s bankruptcy has a lengthy history, which is summarised below.
Communications between the Trustee and Mr Zaree regarding the Statement of Affairs (Bankruptcy Notice)
Following the making of the sequestration order and the appointment of the Trustee, the Trustee wrote to Mr Zaree on 9 February 2016 advising Mr Zaree of the appointment of the Trustee, the need to lodge a Statement of Affairs within seven days and the effects of bankruptcy.
It appears that there was no response to the correspondence sent on 9 February 2016 and the Trustee sent similar correspondence to Mr Zaree on 21 March 2016. Again, it appears that Mr Zaree did not respond to this correspondence.
On 1 October 2020 the Trustee again wrote to Mr Zaree noting that despite the attempts of the Trustee’s office to contact him, he was yet to contact the Trustee’s office or complete and lodge his Statement of Affairs with the Official Receiver. The correspondence reminded Mr Zaree that the three-year period of his bankruptcy did not commence until his Statement of Affairs had been lodged and accepted by the Official Receiver. The correspondence also put Mr Zaree on notice that his real property located in Mirrabooka had vested in the Trustee pursuant to s 58 of the Bankruptcy Act and that the Trustee considered there was sufficient equity in the property to take action to realise the equity for the benefit of the bankrupt estate. That correspondence was returned to the Trustee’s office as undelivered, and the Trustee resent the correspondence to Mr Zaree on 29 October 2020.
It appears that at some point telephone contact was established between the Trustee’s office and Mr Zaree. Further Statement of Affairs forms (referred to in this correspondence and some correspondence thereafter as a Bankruptcy Form) were emailed to Mr Zaree for his completion on 12 November 2020 and again on 18 November 2020. There were a number of email exchanges from this point between the Trustee’s office and Mr Zaree, including emails from the Trustee sent on 30 November 2020, 4 December 2020, 5 January 2021 and 20 January 2021 to follow up Mr Zaree in relation to the Statement of Affairs.
In February 2021 Mr Zaree requested a meeting with the Trustee’s office in order to seek assistance in completing the Bankruptcy Form and the Trustee’s office agreed to this request.
The Bankruptcy Form was completed by Mr Zaree and lodged with the Official Receiver on 10 March 2021.
Mr Zaree’s challenges to the quantum of the debt owed to the Australian Taxation Office
After the Bankruptcy Form was completed Mr Zaree worked with his accountant to lodge a number of outstanding tax returns and business activity statements.
Following the processing of Mr Zaree’s tax returns, the Deputy Commissioner of Taxation submitted to the Trustee a new Proof of Debt dated 29 September 2021. The Deputy Commissioner then provided to the Trustee a further Proof of Debt dated 10 November 2021 claiming that Mr Zaree owed the ATO the amount of $163,046.96. The amount claimed in the 10 November 2021 Proof of Debt is less than the amount that was claimed in the 29 September 2021 Proof of Debt.
The Trustee relies on the 10 November 2021 Proof of Debt for the purposes of this application. An officer of the ATO confirmed on 7 September 2022 that the amount in the Proof of Debt dated 10 November 2021 was correct and provable.
In his notice stating grounds of opposition to the application filed on 31 August 2022, Mr Zaree’s sole ground of opposition was that ‘the quantum owed to the Deputy Commissioner of Taxation differs from that which is claimed’. In the affidavit filed on the same day, Ms Ledger deposed that Mr Zaree instructed her that he ‘strongly disputed the quantum claimed by the Deputy Commissioner of Taxation’ and that he had instructed his accountant to review his accounts to determine the quantum owed to the Commissioner. The affidavit made clear that Mr Zaree did not dispute the existence of the debt and only disputed the quantum.
In the course of his oral submissions at the hearing on 6 December 2022, Mr Zaree advised the Court that he no longer disputed the quantum of the debt claimed by the Deputy Commissioner of Taxation.
Real property in Mirrabooka
When the sequestration order was made Mr Zaree was the sole registered proprietor of the real property located at 55 Boyare Avenue, Mirrabooka, Western Australia described as Lot 933 on Plan 15451 and comprising the whole of the property in Certificate of Title Volume 1727, Folio 85 (Mirrabooka property).
The Trustee lodged a caveat over the Mirrabooka property on 11 February 2016.
The Certificate of Title shows that the Mirrabooka property is encumbered by a mortgage to Australia and New Zealand Banking Group Limited (ANZ). On 16 March 2022 ANZ advised the Trustee that the payout figure for the mortgage as at that date was $169,458.99.
A valuation of the Mirrabooka property provided to the Trustee on or about 12 April 2021 estimates the value of the property to be between $360,000 and $380,000.
Based on these figures, it would appear that the equity in the Mirrabooka property is likely to be somewhere between $190,541.01 and $210,541.01.
In the genuine steps statement filed on behalf of the Trustee, the Trustee indicated that the Trustee’s lawyers wrote to the applicant on 30 March 2022 requesting that he agree to give the Trustee vacant possession of the Mirrabooka property. A copy of this correspondence does not appear to be in evidence before the Court.
Consideration of the orders sought by the trustee
The Trustee seeks orders to enable the Trustee to sell the Mirrabooka property and use the equity to pay Mr Zaree’s debts.
As indicated above, the only ground of opposition to the application for vacant possession and related orders was that Mr Zaree disputed the quantum of his debt as claimed by the Deputy Commissioner, but Mr Zaree withdrew the dispute to quantum at the hearing. This effectively addresses Mr Zaree’s sole ground of objection. While Mr Zaree is understandably concerned at the prospect of his house being sold by the Trustee, he did not identify at the hearing any other basis for opposing the orders sought by the Trustee.
I accept the Trustee’s submissions as to why the orders sought are appropriate, and these submissions are reflected in the reasons below.
Trustee’s duties under the Bankruptcy Act
I am satisfied that making the orders will assist the Trustee to carry out his duties under the Bankruptcy Act.
Pursuant to s 19(1) of the Bankruptcy Act, the Trustee has various duties, including duties to:
(a)determine whether the estate includes property that can be realised to pay a dividend to creditors: s 19(1)(b);
(b)take appropriate steps to recover property for the benefit of the estate: s 19(1)(f); and
(c)take whatever action is practicable to try to ensure that the bankrupt discharges all of the bankrupt’s duties under the Bankruptcy Act: s 19(1)(g).
Based on his Bankruptcy Form, it would appear that the only property held by Mr Zaree with sufficient equity to discharge his debt is the Mirrabooka property. Mr Zaree has not given the Trustee vacant possession of that property.
Declaration of beneficial ownership of Mirrabooka property
The Trustee seeks a declaration that he is the beneficial owner of the Mirrabooka property.
It is appropriate to make this declaration. Pursuant to s 58(1) of the Bankruptcy Act, when Mr Zaree became a bankrupt, his property, including the Mirrabooka property, vested in the Trustee. The declaration sought by the Trustee reflects this.
Orders relating to vacant possession and sale of the Mirrabooka property
The Trustee seeks an order pursuant to ss 30(1), 77(1)(g) and 129(2) of the Bankruptcy Act requiring Mr Zaree to remove from the Mirrabooka property any vehicles, rubbish and chattels which have not vested in the Trustee, deliver up vacant possession of the Mirrabooka property together with the duplicate Certificate of Title and deliver up all keys for the buildings and improvements on the Mirrabooka property. The Trustee also seeks orders:
(a)in relation to the conduct of the sale of the Mirrabooka property;
(b)requiring Mr Zaree to do all things the Trustee or his agents reasonably require to facilitate the sale of the property; and
(c)providing for the distribution of the proceeds of the sale of the Mirrabooka property.
I am satisfied that it is appropriate to make these orders based on the provisions cited in the Trustee’s submissions.
Section 30(1) of the Bankruptcy Act confers on the Court the power to decide all questions in any case of bankruptcy and to make such orders (including declaratory orders) as the Court considers necessary for the purposes of carrying out or giving effect to the Bankruptcy Act in any such case.
As the Trustee noted in his submissions, s 30 ‘has been held to provide sufficient power to make orders against a bankrupt for the vacation of property, issuing a warrant of possession and for the sale of a property in circumstances where the bankrupt is not complying with his or her obligations under the Act’: Coshott v Prentice (In His Capacity as Trustee of the Property of Coshott, a Bankrupt) (2014) 221 FCR 450; [2014] FCAFC 88 at [94].
Section 77 of the Bankruptcy Act sets out the duties of bankrupts. Pursuant to s 77, the duties that Mr Zaree owes as a bankrupt include duties to:
(a)execute such instruments and generally do all acts and things in relation to his property and its realisation as required by the Bankruptcy Act or by the Trustee, or as ordered by the Court on the application of the Trustee: s 77(1)(e); and
(b)aid to the utmost of his power in the administration of his estate: s 77(1)(g).
Taking into account the history of the bankruptcy and Mr Zaree’s failure to give vacant possession of the Mirrabooka property and to do such things as a necessary for the Trustee to realise that property, I accept the Trustee’s submission that Mr Zaree has not complied with his duties under s 77(1)(e) and (g) of the Bankruptcy Act. I also acknowledge the Trustee’s submission that Mr Zaree’s failure to provide the vacant possession of the Mirrabooka property to the Trustee would likely result in delays and costs incurred in the administration of Mr Zaree’s estate to the prejudice of the creditors.
Pursuant to s 129(2) of the Bankruptcy Act, the Court may, on the application of the Trustee, enforce possession of the property of the bankrupt.
In the application, the Trustee proposed a time frame of 28 days for Mr Zaree to comply with any vacant possession order. At the hearing, Mr Zaree requested more time to provide vacant possession in order to get the Mirrabooka property in a better condition prior to sale. When asked how long he requested, he indicated that he was seeking a further six months. Mr Lennon was unable to obtain instructions from the Trustee on the day of the hearing to agree to a longer time for Mr Zaree to provide vacant possession, but indicated that he had instructions not to oppose the Court providing additional time. However, he was uncertain as to whether the instructions not to oppose additional time would extend to an additional six months.
At the conclusion of the hearing, I reserved judgment and invited the parties to confer and advise my Chambers whether the Trustee would agree to Mr Zaree having more than 28 days to provide vacant possession. The Trustee subsequently indicated that he would agree to Mr Zaree having until 9 February 2023 to provide vacant possession of the Mirrabooka property.
I am satisfied that it is appropriate to require Mr Zaree to provide vacant possession by 9 February 2023. This gives Mr Zaree more than two months from the date of the hearing and approximately seven weeks from the date on which I make the order to do all things necessary to provide vacant possession of the Mirrabooka property. I do not consider it appropriate to give Mr Zaree a further six months in light of the history of the bankruptcy discussed above and the excessive delay that has already occurred, largely as a result of Mr Zaree failing to submit his Bankruptcy Form in a timely manner. Throughout all of this time, the creditor has remained unpaid.
The terms of the proposed orders for the conduct of the sale and the distribution of the proceeds are standard orders that are appropriate to make. The Trustee would have sole conduct of the sale, is authorised to retain and instruct a real estate agent to assist and may sign any relevant documents to facilitate the sale of the Mirrabooka property. The terms of any contract of sale would be primarily based on the terms and conditions in the Law Society’s ‘Joint Form of General Conditions for the Sale of Land’. The proceeds of sale would be distributed to discharge, in order, any encumbrance registered on the Certificate of Title, costs and expenses related to the sale of the Mirrabooka property and the applicant’s legal costs in relation to this proceeding. The balance of any proceeds of sale would be paid to the Trustee in his capacity as trustee of the bankrupt estate.
The proposed order requiring Mr Zaree to do all things the Trustee or its agent or lawyers reasonably require to facilitate the sale of the Mirrabooka real property reflects Mr Zaree’s duties under the Bankruptcy Act.
Property (Seizure and Delivery) Order
The Trustee seeks an order that if Mr Zaree fails to vacate and surrender possession of the Mirrabooka property in accordance with the orders relating to the vacant possession referred to above, a Property (Seizure and Delivery) Order be issued forthwith in favour of the Trustee in respect of the Mirrabooka property.
As identified by the Trustee in his submissions, the power of the Court to make such an order derives from s 213(2) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (FCFCOA Act), which provides:
A person in whose favour a judgment of the Federal Circuit and Family Court of Australia (Division 2) is given is entitled to the same remedies for enforcement of the judgment in a State or Territory, by execution or otherwise, as are allowed in like cases by the laws of that State or Territory to persons in whose favour a judgment of the Supreme Court of that State or Territory is given.
The relevant state law which, in conjunction with s 213(2) of the FCFCOA Act, enables the Court to make a Property (Seizure and Delivery) Order is s 95 of the Civil Judgments Enforcement Act 2004 (WA).
The Trustee also referred in his submissions to Low v Tsoutsoulis [2013] FCCA 1115, where a Property (Seizure and Delivery) Order was sought in the event that there was non-compliance with a delivery up and vacant possession order. The Court said at [13] (footnotes omitted):
There is no reason why the Court ought not, or cannot, make an order for a PSDO to issue in the event that the delivery up and vacant possession order is not complied with. In the circumstances of this case, it is appropriate that such a PSDO be made as sought, particularly having regard to the history of the matter and the Bankrupt’s lack of co-operation with the Trustee.
Taking into account the history of the bankruptcy summarised above, and in particular, the lengthy delays that have arisen at least in part from Mr Zaree’s failure to comply with his obligations under the Bankruptcy Act, I am satisfied that it is appropriate to order that a Property (Seizure and Delivery) Order be issued forthwith in favour of the Trustee in respect of the Mirrabooka property in the event that Mr Zaree fails to comply with the order requiring vacant possession of that property.
Costs
Having determined it appropriate to make the orders sought in the application made by the Trustee, I am also satisfied that it is appropriate that Mr Zaree pay the Trustee’s costs of the application to be assessed if not agreed.
conclusion
For the above reasons, there will be orders in the terms of proposed orders 1 to 8 of the application, with minor variations to accommodate the additional time that the Trustee has agreed to give to Mr Zaree before he is required to give vacant possession of the Mirrabooka property.
I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Ladhams. Associate:
Dated: 21 December 2022
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