Duncan in His Capacity as trustee of the Bankrupt Estate of Devine v Devine

[2016] FCCA 690

FEDERAL CIRCUIT COURT OF AUSTRALIA

DUNCAN IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF DEVINE v DEVINE [2016] FCCA 690

Catchwords:
BANKRUPTCY – Sequestration order made – application by trustee in bankruptcy for sale of residential property and for bankrupt to vacate land – power to make such orders -  should the court make the orders concerned – exercise of discretion – obligations on bankrupt arising under section 77(1) – is bankrupt prevented by illness from complying with direction – matters to be considered.

Legislation:

Bankruptcy Act 1966 (Cth), ss.19(1)a 58(1)(a), 30; 30(1)(b), 54(1); 77CA, 77(1), 116(1)

Federal Circuit Court of Australia Rules 2000 (Cth), r.11.08

Minister for Immigration & Multicultural & Indigenous Affairs v SGLB (2004) 78 ALD 224
Official Receiver v Fall [2008] FMCA 489
Horne (as Trustee of the Bankrupt Estate of Sekulovski) v Sekulovski [2009] FCA 1154
Cook v Tagamilitsky [2001] FMCA 117
Adsett v Berlouis & Ors (1992) 37 FCR 201
Mannigel v Aitken (1983) 77 FLR 406
Vince (as Trustee of the bankrupt estate of Sopikiotis) v Sopikiotis (No 2)[2012] FCA 1298
Griffin v Pantzer [2004] FCAFC 113
Griffin v Pantzer [2003] FCA 793

Applicant: STEPHEN JAMES DUNCAN IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF JAMES DEVINE

Respondent: JAMES DEVINE

File Number: ADG 358 of 2016

Judgment of: Judge Brown

Hearing date: 16 March 2016

Date of Last Submission: 16 March 2016

Delivered at: Adelaide

Delivered on: 4 April 2016

REPRESENTATION

Counsel for the Applicant: Mr Leech

Solicitors for the Applicant: Cowell Clarke

Counsel for the Respondent: In Person

Solicitors for the Respondent: Not Relevant

ORDERS

1. The respondent deliver up vacant possession of the premises known as 3 Ferguson Avenue, Sefton Park in the State of South Australia being the whole of the property compromised in Certificate of Title Register Book Volume 5303 Folio 74 (“Land”) within forty-two (42) days.

2. In the event that the respondent fails to give up vacant possession of the Land in accordance with order 1 hereof, a Writ of Possession be issued forthwith in favour of the applicant.

3. The respondent remove from the Land all vehicles, rubbish and chattels which have not vested in the applicant (“Personal Property”).

4. In the event the respondent fails to comply with order 1.3, that the applicant may remove and dispose of the Personal Property as he sees fit after forty-two (42) days have passed from the making of the order.

5. An order that the applicant’s costs of this application be paid from the bankrupt estate of the respondent.

6. All extant applications be dismissed.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT ADELAIDE

ADG 358 of 2016

STEPHEN JAMES DUNCAN IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF JAMES DEVINE

Applicant

And

JAMES DEVINE

Respondent

REASONS FOR JUDGMENT

Introduction

1. On 2 April 2014, the Deputy Commission of Taxation filed a creditor’s petition, in this court, naming James Devine as respondent.  The creditor’s petition was based on a judgement debt, in the sum of $221,778.70, entered against Mr Devine in the District Court of South Australia on 10 September 2013. 

2. The petition was personally served on Mr Devine on 5 April 2014.  Ultimately, on 5 May 2014, a sequestration order was made against the Estate of Mr Devine.  It seems to be the case that Mr Devine did not attend court when the sequestration order was made.  Stephen James Duncan was appointed trustee. 

3. On 22 September 2015, Mr Duncan, in his capacity as the trustee of Mr Devine’s estate, applied to the court seeking the following orders:

   ·Mr Devine deliver up vacant possession of the premises situated at 3 Ferguson Avenue, Sefton Park within twenty eight days;

   ·In the event that Mr Devine failed to comply with the order for vacant possession, a writ of possession be issued forthwith in Mr Duncan’s favour;

   ·Mr Devine remove from 3 Ferguson Avenue, Sefton Park all vehicles, rubbish and other chattels, which had not already otherwise vested in Mr Duncan’s possession;

   ·If Mr Devine failed to clear the property of chattels, Mr Duncan be authorised to dispose of these items, as he sought fit;

   ·Costs to be paid from Mr Devine’s estate.

4. The application was personally served, on Mr Devine, on 24 September 2015 at 3 Ferguson Avenue, Sefton Park.  The Ferguson Avenue property is Mr Devine’s home and has been for many years.  It is his position that he has nowhere to go and it would be oppressive and unfair to evict him from his home. 

5. One of the consequences of bankruptcy is that property of the debtor concerned vests in the appointed trustee.[1]  As a result, the statutory responsibilities of a trustee in bankruptcy include the identification of property previously held by the bankrupt and obtaining possession of that property. 

   [1]  See Bankruptcy Act 1966 (Cth) at section 58(1)(a)

6. The Bankruptcy Act 1966 (Cth) “the Act” provides trustees with a number of powers to achieve these ends. In particular, pursuant to section 77(1), a number of duties are imposed upon a bankrupt, the effect of which is that he is required to cooperate with the trustee appointed to his estate and provide information about his financial affairs and the location of property.

7. In particular, pursuant to section 77(1)(e) the bankrupt is required to execute all necessary documents in respect of his property, including its realisation and pursuant to section 77(1)(g) the bankrupt is required to “aid to the utmost of his power in the administration of his estate.” 

8. Pursuant to section 54(1) a bankrupt is required to provide a statement of his affairs, within fourteen days of the date of sequestration.  Mr Devine completed a statement of his affairs on 5 March 2015.  It is Mr Duncan’s position that Mr Devine was recalcitrant in discharging the statutory obligations upon him in this regard.

9. When completed, Mr Devine’s statement of affairs indicated that his sole source of income was unemployment benefits.  He further estimated the value of the Ferguson Avenue property at $380,000.00 but indicated that it was subject to a mortgage, in favour of the Westpac Bank, in the sum of $148,000.00, with a further charge, in favour of Veteran’s Affairs, in the sum of $10,273.47, also secured against the property. 

10. Mr Devine further disclosed credit card debts of approximately $38,000.00.  He also indicated ownership of a motor vehicle, valued at $14,000.00, but asserted it was subject to a chattel mortgage, in the sum of $12,343.16. 

11. Of some significance in these proceedings, Mr Devine attributed ill health as the reason for his insolvency.  He further disclosed that, prior to his bankruptcy, he had operated a business as a security agent and had experienced difficulties in collecting debts due to this business.  This is a source of controversy between him and Mr Duncan.

12. In this context, Mr Devine indicated that he believed he was owed the sum of $30,563.92 by Vatino Brothers from August 2013 and a further sum of $241,871.74 by the Dukes Group from November 2011.  It is Mr Devine’s case that, if Mr Duncan pursued these sums with more diligence, he would be able to extinguish the bankruptcy and it would not therefore be necessary to realise the Ferguson Avenue property. 

13. Mr Duncan instructed a real estate agent to appraise the value of the Ferguson Avenue property in August of 2015.  The real estate agent concerned valued the property at between $380,000 and $435,000.00.  As at 8 September 2015, the sum of $150,249.46 was secured against the property. 

14. As at 30 June 2015, Mr Duncan calculated that Mr Devine owed his various creditors the sum of $270,847.00.  In this context, he advised Mr Devine of his intention to sell the Ferguson Avenue property. 

15. Pursuant to section 116(1) of the Act property that has previously belonged to a bankrupt and which has subsequently vested in his bankruptcy trustee is to be divided amongst the outstanding creditors of the bankrupt concerned. 

16. Such divisible property includes moneys owed to a bankrupt.  In this context, on 30 June 2015, when he advised Mr Devine of his intention to sell the Ferguson Avenue property, Mr Duncan wrote to him in the following terms:

    “Upon my appointment, you advised a number of invoices remained outstanding to you in respect of security services provided by you to Northpark Shopping Centre and Parafield Plaza Shopping Centre, totalling $282,435.  At this time you also advised that creditor claims in your Bankrupt Estate were $141,971, accordingly no action was taken in relation to your property as it was alleged that debtor recoveries would be sufficient for your bankruptcy to be annulled.

    Copies of your outstanding invoices were not received until February 2015.

    On receipt of the invoices, I contacted both debtors and requested payment in full.  As advised, both debtors disputed the alleged invoices outstanding and sought evidence of the underlying contracts and supporting documentation for each invoice.

    To date, despite our requests, you have not supplied any further information.  In the absence of any additional supporting documentation for the alleged outstanding invoices, I am of the opinion that the claim of the Estate against the debtors is weak and any legal proceedings would likely be unsuccessful.

    Accordingly, it is now apparent that debtor recoveries will not be sufficient to discharge al creditor claims in your Estate, which as at today’s date total $270,847.”[2]

    [2]  See affidavit of Stephen James Duncan filed 22 September 2015 at page 38

17. Mr Devine does not accept that this is the case.  It is his position that Mr Duncan has not been diligent in pursuing the debts in question, which he contends remain recoverable.  As such, Mr Devine asserts that it is neither necessary nor fair for the Ferguson Avenue property to be realised.

The history of the proceedings to date

1. Mr Duncan’s application was first returnable on 23 November 2015.  On 12 November 2015, Mr Devine filed an affidavit in which he deposed that he had been served with the District Court proceedings, initiated by the Deputy Commissioner of Taxation, on 12 May 2013.  Thereafter he had instructed his accountant, Mr Glaser to file his outstanding tax returns and business activity statements and seek a remission of interest and penalties due in respect of the late payment of tax. 

2. On 31 May 2013, Mr Glaser wrote to the Australian Taxation Office, on Mr Devine’s behalf, informing the office that Mr Devine had been suffering depression and hepatitis.  As a consequence of these illnesses, as well as experiencing marital breakdown and the loss of his parents, Mr Glaser explained that Mr Devine had not been in a position to complete his necessary taxation returns. 

3. In these circumstances, Mr Glaser sought a moratorium of sixty days from the Australian Taxation Office, in respect of its proceedings, during which period Mr Glaser anticipated that he would be in a position to bring Mr Devine’s affairs up to date and the amount of tax owing would be significantly reduced.

4. It is Mr Devine’s understanding that Mr Glaser did not receive a response to his letter.  In these circumstances, the Australian Taxation Office entered judgement, in default of a defence, against Mr Devine on 10 September 2013 in the District Court of South Australia.  A bankruptcy notice, seeking payment of $222,872.41, was issued against Mr Devine on 2 October 2013.  This was the basis for the subsequent creditor’s petition.

5. In February 2014, Mr Glaser lodged Mr Devine’s taxation returns for the financial years ending 30 June 2007-2013.  As I understand it, it is now Mr Devine’s position that the amount of tax owed by him (not including late penalty payments) is somewhere in the vicinity of $90,000.00. 

6. On this basis, Mr Devine sought the following orders from the court:

   ·The sequestration order of 5 May 2014 be annulled;

   ·The court instruct the Australian Taxation Office to reopen his internet account with it so that Mr Glaser could deal directly with the office to reach a compromise in respect of the amount owed to the Australian Taxation Office;

   ·He be able to personally pursue all moneys allegedly owed to him, arising from his security business;

   ·The court appoint a solicitor to assist him in regards to these matters;

   ·The proceedings be adjourned until his psychiatrist deemed him to be capable of conducting them.

7. Of this latter application, Mr Devine provided a letter, dated 31 October 2015, from Dr Koopowitz, a psychiatrist, who has been treating Mr Devine since 1 August 2015.  Dr Koopowitz diagnosed Mr Devine as suffering from a longstanding major depressive disorder, complicated by obstructive sleep apnoea. 

8. Dr Koopowitz further opined that Mr Devine was not in a position to represent himself in court, due to his illness.  Dr Koopowitz described Mr Devine as being disorganised, circumstantial and over inclusive in his thinking, to the extent that he often loses track of what he is saying unless redirected.”

9. On 23 November 2015, Mr Duncan’s application was listed for hearing on 12 February 2016.  It was further ordered by the court that if any deponent of an affidavit filed in the proceedings was required for cross-examination, notice was to be given on or before 29 January 2016. 

10. The hearing scheduled for 12 February 2016 did not proceed.  On this date, it became apparent that Mr Devine wished to cross-examine both Mr Duncan and one of his associates, Nicholas David Gyss, who had filed an affidavit in the proceedings on 19 November 2015.  Mr Gyss is a chartered accountant in Mr Duncan’s office. 

11. Mr Devine had not given notice that Mr Duncan and Mr Gyss were required for cross-examination.  It was also his position that the proceedings should be adjourned because of his continued ill health.  In this regard, Mr Devine provided a lengthy report from Dr Koopowitz, dated 9 February 2016, in which Dr Koopowitz provided a lengthy personal history of Mr Devine, as well as the following diagnosis:

    “In summary, taking his response to the medication into account, it has become abundantly clear that Mr Devine has in fact been suffering from a serious and unrecognised medical condition in the form of a Major Depression.  This life threatening condition, if untreated, not only ruins lives, but also has a 20% mortality rate.  If untreated one in five sufferers will kill themselves.”

12. Mr Leech, counsel for Mr Duncan opposed the adjournment of the proceedings.  It was his position the case had been outstanding for a significant period of time and, notwithstanding the obvious concerns the court held for Mr Devine’s safety, it was necessary for the matter to be resolved, particularly as he had been on notice for a significant period of time that Mr Duncan wished to proceed with the sale of the Ferguson Avenue property. 

13. I decided to adjourn the proceedings until 16 March 2016.  On this date, both Mr Duncan and Mr Gyss were available to attend court to be cross examined.  At this stage, it was clear to me that it was Mr Devine’s overall position that he should not be compelled to leave the Ferguson Avenue property because Mr Duncan could proceed against the creditors whom he had nominated and it would therefore not be just for him to be evicted from his home.

14. In these circumstances, I was persuaded that considerations of fairness dictated that the case should be adjourned until Mr Devine could put his case directly to Mr Duncan and Mr Gyss regarding the two alleged shopping centre debts.  The hearing proceeded on 16 March 2016.  I was not prepared to adjourn the proceedings any further. 

The affidavit material

1. Mr Duncan relies on the following affidavits:

   i)An affidavit of himself filed on 22 September 2015;

   ii)Three affidavits of Nicholas Gyss filed on 19 November 2015, 11 February 2016 and 15 March 2016 respectively. 

2. Mr Devine relies on the following affidavits:

   i)Three affidavits of himself filed on 12 November 2015, 10 February 2016 and 10 March 2016;

   ii)An affidavit of Bernie Glaser filed on 9 March 2016;

   iii)An affidavit of Peter Lombardi filed on 10 February 2016.

3. Mr Gyss, on the delegation of Mr Duncan, was responsible for managing Mr Devine’s bankrupt estate.  He first met with Mr Devine on 12 May 2014.  At this stage, Mr Devine indicated to Mr Gyss that he had been unwell, suffering from depression and hepatitis.  Mr Devine also indicated his belief that the tax debt was not as large as had been hitherto delineated by the Australian Taxation Office.  

4. Mr Devine also indicated to Mr Gyss that he was owed approximately $190,000.00 by the operators of two shopping centres, for whom he had previously provided security services.  However, due to the malfunction of his computer hard drive, he was not able to access the relevant accounts and provide them to Mr Gyss. 

5. It is Mr Gyss’ evidence, supported by an email he wrote on 14 May 2014, that he responded appropriately to Mr Devine’s submissions to him regarding the two shopping centre debts.  However, at this early stage, his focus was on Mr Devine completing the pro forma statement of affairs.  Mr Gyss wrote to Mr Devine in the following terms:

   “Once again I want to stress the importance of getting your statement of affairs completed and returned to our office.

   The immediate priority is for you to get the information to us regarding your outstanding debtors.  If the collectible debts are what you say they are, and the actual ATO debt is only what you think it is, then the collection of the debts may be sufficient to pay out the bankruptcy.

   Timing is important here and to collect these debts as soon as possible is the priority.

   If you need help with the hard drive to get access to the information you need, let us know and we will see what we can do.”[3]

   [3]  See affidavit of Nicholas David Gyss filed 19 November 2015 at page 45

6. It is Mr Gyss’ evidence that Mr Devine was remiss in respect of completing his statement of affairs.  As a consequence, he was compelled to apply to the Official Receiver, pursuant to section 77CA of the Act, in order to compel Mr Devine to comply with the statutory requirement that he complete his statement of affairs.  Notwithstanding this intervention, it is clear that it took a significant period of time for Mr Devine to comply with his obligations in this regard.

7. On 29 January 2015, Mr Duncan wrote to Mr Devine, at the Ferguson Avenue address, informing him that the trustee intended to place the property on the market.  As a consequence, Mr Gyss had a telephone conversation with Mr Devine on 3 February 2015, in which Mr Devine reiterated that he was owed approximately $200,000.00, in respect of security services provided to the Dukes Group, which operated the Northpark Shopping Centre.  Mr Devine was asked to “bring in invoices for outstanding amounts.”  On 5 March 2015, Mr Devine completed his statement of affairs at Mr Duncan’s office. 

8. Mr Devine provided Mr Gyss with copy tax invoices on the letterhead of Ardent Protective Services to the Northpark Shopping Centre and the Parafield Plaza Shopping Centre, which bore dates between 1 July 2008 and 12 July 2013.  As a consequence, on 19 February 2015, Mr Duncan wrote to the Manager of the Northpark Shopping Centre seeking payment in the sum of $251,871.74. 

9. On 3 March 2015, Mr Duncan wrote to the Manager of the Parafield Plaza Shopping Centre seeking payment of $30,563.72 on behalf of Mr Devine in respect of services provided to the shopping centre.  These demands were supported by the invoices provided by Mr Devine. 

10. Subsequently, Mr Duncan instructed his solicitors to investigate the possibility of recovering the moneys concerned from the operators of each of the relevant shopping centres.  As a consequence, Mr Duncan’s solicitors wrote further letters of demand requiring payment of the sums said to be owed by each shopping centre. 

1. On 27 May 2015, solicitors acting on behalf of the Northpark Shopping Centre wrote to Mr Duncan’s solicitor asserting that the invoices produced by Mr Devine had not been tendered on or near the dates which each bore. 

2. In these circumstances, it was asserted by the Northpark Shopping Centre that, as Mr Devine had not rendered his accounts on a timely basis, the shopping centre was not in a position to gauge whether the invoices were or were not an accurate reflection of the services provided by Mr Devine. 

3. In these circumstances, the solicitors for the Northpark Shopping Centre requested copies of relevant timesheets or contracts of service, in order to assess whether the invoices in question accurately reflected the hours said to have been worked by Mr Devine. 

4. Solicitors for the Parafield Plaza Shopping Centre made a similar request.  On 28 May 2015, Mr Hawke, a subordinate of Mr Gyss wrote to Mr Devine asking if he could provide the records sought by his alleged creditors, particularly any timesheets.  On 5 June 2015, in a telephone conversation with Mr Hawke, Mr Devine indicated that he had no signed contracts, with either shopping centre concerned, nor did he have any timesheets. 

5. On 12 October 2015, Mr Duncan compromised the potential claim against Votino Bros Pty Ltd, the operators of the Parafield Plaza Shopping Centre, in an amount of $5,000.00.  It was the advice of Mr Duncan’s solicitors that, in the absence of documentary evidence from Mr Devine, the claim could not otherwise be successfully mounted in court. 

6. The solicitors provided similar advice in respect of Duke Northpark Pty Ltd, the operators of the Northpark Shopping Centre.  In his oral evidence to the court, Mr Duncan advised that his solicitor had indicated to him that given the “severe lack of accounting” on Mr Devine’s part, over a period of six or seven years, that if he elected to take the Northpark Shopping Centre to court, in respect of the debt alleged by Mr Devine, it was likely that he (Mr Duncan) would lose the case in question with the overwhelming likelihood that costs would be awarded against him.  In these circumstances, he elected to take the advice of his solicitor and not proceed with the action in question.

7. Mr Duncan and Mr Gyss also deposed that similar difficulties arose in respect of any proposed action against the Parafield Plaza Shopping Centre and that therefore the compromise reached was an appropriate one.

8. Mr Gyss has deposed that the trustee has received four proof of debts, against the estate of Mr Devine, as follows:

   ·Commonwealth Bank in the sum of $29,810.24 in respect of a credit card debt;

   ·AGL Energy Limited in the sum of $1,324.21 for an electricity and gas account;

   ·Triumph Australia Pty Ltd in the sum of $2,591.00 in respect of a judgement debt in the local court of New South Wales;

   ·The Deputy Commissioner of Taxation in the sum of $220,627.34 in respect of income tax and BAS amounts, as at 5 May 2014. 

9. It is impossible not to feel sympathetic for the situation in which Mr Devine currently finds himself.  It is his evidence that he has been suffering from undiagnosed depression since around 2003, when his marriage ended.  He acknowledges that in the years thereafter he was not properly attentive to his business affairs and “stopped billing the shopping centres”.  He also arranged for sub-contractors to run his business from time to time.[4]

   [4]  See affidavit of James Devine filed 15 January 2016 at paragraph 11

10. In mid-October 2011, Mr Devine acknowledges that his contract with the Northpark Shopping Centre was terminated.  In August of 2013, his contract with the Parafield Plaza was also terminated.[5]  He also deposed that he left the running of the business to his sub-contractors, because he was bedridden for lengthy periods of time.

    [5]  Ibid at paragraph 16-17

11. Notwithstanding his evidence that, when the respective contracts were terminated, he was not up to date with his invoicing, it is Mr Devine’s position that there is no valid reason why the respective proprietors of the Northpark and Parafield Plaza Shopping Centres should not honour the invoices subsequently tendered on his behalf.  This is his chief complaint against Mr Duncan. 

12. It is further Mr Devine’s position that both Mr Duncan and Mr Gyss have been insensitive to his ongoing health issues and, as such, have not honoured their professional duties to him as his bankruptcy trustee.  He also complains that it was unconscionable that the potential action against Votino Bros Pty Ltd was compromised for $5,000.00. 

13. Mr Devine is also critical of Mr Gyss in respect of undertakings alleged given by him at a meeting held on 11 February 2015, at Mr Glaser’s office.  This meeting was attended by Mr Devine, Mr Glaser, Mr Lombardi, Mr Gyss and Mr Hawke.  At this meeting, Mr Devine alleges that he was told by Mr Gyss that the trustee would not sell his home but would pursue the two shopping centres concerned in order to ensure that the full extent of the moneys said to be owed to Mr Devine were collected in full. 

14. Mr Gyss disputes that any such representation was made.  Mr Lombardi was called by Mr Devine to provide his recollection of what took place at the meeting in question.  Under cross examination, Mr Lombardi considerably qualified his evidence as to what was said at the meeting in question, which was likely to have been emotionally laden. 

15. In these circumstances, on balance, I doubt that Mr Gyss provided any unqualified assurance that no steps would be taken in respect of Mr Devine’s home.  Given his experience in insolvency matters, it seems to me to be highly unlikely that Mr Gyss would have made such a representation.

16. In his affidavit material, Mr Devine has deposed as follows:

    “If I am forced by the Applicant to vacate my home at 3 Ferguson Avenue, Sefton Park, I wil have nowhere to go.  I have contacted HousingSA who have advised me that there is a long waiting list for housing.  One of my sons is about to travel overseas, and my other son has advised that I won’t be able to live with him.  I have lived in the house for just over 20 years.

    In my Statement of Affairs dated 5 March 2015 I had advised the Applicant that my home at 3 Ferguson Avenue, Sefton Park is valued at $380,000 and that I owe $160,000.  The house is in poor condition and currently I am having to shower in the shed.”[6]

    [6]  See affidavit of James Devine filed 15 April 2016 at 26-27

Findings of fact

1. Both Mr Duncan and Mr Gyss are experienced chartered accountants, with extensive experience in both personal and corporate insolvency.  I accept their evidence that they were not insensitive to Mr Devine’s personal predicament, arising from his prolonged ill-health, of which they were each well aware.  However both Mr Duncan and Mr Gyss were of the view that their fundamental professional and statutory obligations were to Mr Devine’s creditors, rather than to Mr Devine. 

2. I accept Mr Duncan’s evidence that he was advised by his solicitors that there were no reasonable prospects of success in any litigation against either of the proprietors of the shopping centres in question.  The rationale of this advice being that there was scant documentary evidence in support of Mr Devine’s claim and he himself was likely to be a poor witness. 

3. In these circumstances, I accept Mr Duncan’s evidence that he believed that he would be remiss, in his obligations as Mr Devine’s bankruptcy trustee to his creditors, in incurring further expenses, which the estate would have to bear, given the great difficulties incumbent in such litigation, which had scant, if any, likelihood of being successfully concluded. 

4. With all due respect to Mr Devine, I do not think his assessment of the prospects of success against the two entities concerned can be regarded as being in any way a reliable one.  Certainly not when compared to the assessment provided to Mr Duncan by his solicitor.  I am satisfied that Mr Devine has incomplete records of the extent of the services which he provided and when he provided them. 

5. These issues are complicated by the fact that Mr Devine sub-contracted with other individuals.  The disputed period is now some considerable time ago.  No doubt these problems arise because of Mr Devine’s long-standing mental health issues but this factor does not transform the prospects of success of any proceedings.  It was Mr Duncan’s responsibility to assess those prospects.  I accept he did so properly and after obtaining appropriate advice.  In my view, there is no indication of any lack of bona fides on his part.

6. I also accept Mr Devine’s evidence that he has been and remains ill, suffering from a variety of complaints including depression, hypertension and back pain.  He has been prescribed a wide range of medication.  Dr Koopowitz has been a staunch advocate for Mr Devine.  However, he did not attend to be cross-examined, particularly in regards to his opinion that Mr Devine is not medically able to represent himself in these proceedings.  Nor was Dr Koopowitz able to provide any prognosis as to when or if Mr Devine’s various health issues are likely to resolve. 

7. It is axiomatic that Mr Devine is unable to afford legal representation, given his status as a bankrupt.  The proceedings have been on foot for some months now and it is apparent that he has not been able to secure legal aid or pro bono assistance.  Given the nature of these proceedings, I can appreciate why this would be so.  In these circumstances, Mr Devine seeks the assistance of a “court appointed lawyer” or a litigation guardian. 

8. Pursuant to Rule 11.08 of the Federal Circuit Court Rules 2001: 

   “A person needs a litigation guardian in relation to a proceeding if the person does not understand the nature and possible consequences of the proceedings or is not capable of adequately conducting, or giving adequate instruction for the conduct of, the proceedings.”

9. Mr Devine has prepared a number of affidavits on his own behalf.  From the contents of these affidavits, it is clear to me that he understands the nature of these proceedings and their possible consequences, namely that they are an application to remove him from his home as a consequence of his bankruptcy.  He has also prepared some written submissions, which refer to the applicable legislation and cite a number of authorities.

10. Mr Devine is resolutely resisting this application on a number of grounds, which, in my view, he has been able to articulate clearly by reference to relevant legislation.  These grounds relate to his contention that it is fundamentally unfair that Mr Duncan should be able to realise the Ferguson Avenue property, when there are other causes of action open to him in respect of the shopping centre debts. 

11. In addition, Mr Devine has been able to muster assistance from both Mr Glaser and Mr Lombardi, each of whom has filed affidavit material attacking the credibility of Mr Gyss.  I agree, with respect, with Dr Koopowitz’s opinion that Mr Devine is an intelligent person.  As such, I do not believe that Mr Devine is totally bereft of resources in these proceedings.  He has clearly considered them closely and has had a significant period of time and notice in which to prepare for them.

12. I accept that these proceedings are inherently stressful and difficult for Mr Devine.  However, in my assessment, these difficulties chiefly stem from the invidious consequences which will flow to Mr Devine, if Mr Duncan’s application is successful.  I have no doubt that Mr Devine is well aware of the possible consequences of the proceedings.  It is for that reason he has gone to some lengths to oppose the orders sought by Mr Duncan.

13. In all these circumstances, I am concerned that Mr Devine’s application is directed towards achieving either a complete or lengthy deferral of Mr Duncan’s application.  I am concerned that such a deferral will achieve little in terms of Mr Devine’s possible improved capacity to present his case.  More significantly, such a deferral has the likely consequence of being unfair to Mr Duncan and the interests of the creditors of Mr Devine, whom he (Mr Duncan) has been appointed to assist. 

14. As Gleeson CJ pointed out in Minister for Immigration & Multicultural & Indigenous Affairs v SGLB[7] many persons appearing as litigants, before courts and tribunals, suffer from psychological disorders or psychiatric illness.  These conditions may affect their capacity to do justice to their case.  However, this does not mean that such cases should be indefinitely deferred.  Rather it is incumbent on the court to consider the interests of all the parties concerned in the relevant case to ensure that justice is done to all, not just one party.

    [7]  See Minister for Immigration & Multicultural & Indigenous Affairs v SGLB (2004) 78ALD 224 at 228 [19]

15. So it is in this case.  Mr Devine’s various infirmities may affect his capacity to do justice to his case or presenting as well as a skilled legal professional might do.  However, in my view, Mr Devine is capable of putting his case, although others may do it better.  I have no doubt that he is fully cognisant of all the relevant matters arising from his case. 

16. Since the institution of the current round of proceedings, Mr Devine has attended at court, on time, on four separate occasions.  He has prepared seven affidavits and some written submissions.  He has made several applications, both in writing and orally, in respect of the matter.  He has responded politely and appropriately, for which I am grateful, to questions I have asked him.

17. I appreciate that the consequence of these proceedings is likely to be extremely deleterious for Mr Devine personally.  In court, it was clear to me that he was often in a significant degree of physical discomfort, in relation to his back.  In this context, I am mindful of the admonitions of Dr Koopowitz, regarding those individuals, such as Mr Devine, who suffer severe depression. 

18. I have no wish to do any harm to Mr Devine.  I accept that Mr Duncan and Mr Gyss share a similar view.  In their evidence both indicated that one of the integral components of insolvency practice was the difficult outcomes for those individuals affected by it. 

19. However, in my view, the inevitably invidious consequences of these proceedings, for Mr Devine personally, cannot be a ground for either the extended or indefinite deferral of these proceedings.  Such an outcome would not be fair to Mr Duncan and the interests of the persons whom he represents.

Legal principles applicable

1. The duties, incumbent upon Mr Duncan, as the trustee of Mr Devine’s bankrupt estate, are set out in section 19(1) of the Act.  They include the following:

   (b)determining whether the estate includes property that can be realised to pay a dividend to creditors;

   (f)taking appropriate steps to recover property for the benefit of the estate;

   (k)exercising powers and performing functions in a commercially sound way.

2. In this matter, Mr Devine’s estate was subject to a sequestration order made on 5 May 2014. As a consequence of this order, pursuant to the provisions of section 58(1)(a), the Ferguson Avenue property has vested in Mr Duncan. Accordingly, I am satisfied that one of the duties incumbent upon Mr Duncan is to determine whether that property can be sold, in order to pay a dividend to Mr Devine’s various creditors, including the Australian Taxation Office.

3. Given my findings in this matter, I am also satisfied that the sale of this property is a commercially sound way in order to achieve such an outcome.  I am further satisfied that any litigation, along the lines proposed by Mr Devine, would not be commercially sound. 

4. Section 30(1) of the Act provides that:

   “(1)   The Court:

   …

   (b)may make such orders ... as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.”

5. Section 77(1) of the Act provides that:

   (1)A bankrupt shall, unless excused by the trustee or prevented by illness or other sufficient cause:

   …

   (e)execute such instruments and generally do all such acts and things in relation to his or her property and its realization as are required by this Act or by the trustee or as are ordered by the Court upon the application of the trustee; and

   …

   (g)aid to the utmost of his or her power in the administration of his or her estate.”

6. I am satisfied that these provisions combined to provide jurisdiction for the court to grant the orders sought by Mr Duncan, including the power to make orders for the sale and vacant possession of the Ferguson Avenue property.[8]

   [8]  See Official Receiver v Fall [2008] FMCA 489 at [11]-[12] per Lucev FM

7. In Horne (as Trustee of the Bankrupt Estate of Sekulovski) v Sekulovski[9] Tracey J considered a similar application to the current matter, which concerned a bankruptcy trustee seeking orders for vacant possession of a bankrupts residential property so that it could be sold and the proceeds made available to creditors. 

   [9]  See Horne (as Trustee of the Bankrupt Estate of Sekulovski) v Sekulovski [2009] FCA 1154 at [8]

8. His Honour was satisfied that the court had the necessary authority to make such orders, pursuant to the provisions of sections 30 and 71(1)(g) of the Act.  He said as follows:

   “It is plainly necessary that the Applicant be in a position to provide any purchaser of the property with vacant possession in order to facilitate a sale, and it is also necessary, in order to achieve that end, that the property be placed in such a condition that it may be attractive to a potential purchaser.  The Respondents, despite having been given the opportunity to do so, have prevaricated and have not responded to requests that they vacate the premises.  Accordingly, in my view, it is appropriate that the orders sought in the application should be made.”

9. In this matter, Mr Devine was given notice, as long ago as January 2015, that Mr Duncan sought vacant possession of the Ferguson Avenue property, so that it could be sold.  The subject proceedings themselves were initiated in September of 2015 and have been significantly deferred, with Mr Duncan’s acquiescence because of the difficulties incumbent in them for Mr Devine.

10. It is Mr Devine’s submission that the powers arising under section 30(1)(b) are discretionary.[10]  I accept that this is so.  In these circumstances, it is Mr Devine’s contention that the discretion should be exercised in his favour because the failure of the trustee to pursue the two debts allegedly owed to him. 

    [10]  See Cook v Tagamilitsky [2001] FMCA 117 at [9] per Raphael FM

11. Although, Mr Devine concedes that Mr Duncan has statutory obligations to his creditors, it is also his position that Mr Duncan has obligations to him as well.  In this respect, he relies on the comments of the Full Court of the Federal Court in Adsett v Berlouis & Ors.[11]   In the case, the Full Court approved the following comments of Smithers J in Mannigel v Aitken[12]:

    “In the case of bankruptcy the trustee is in charge of the assets of the bankrupt and those assets are to be applied for the benefit of the creditors and if there be any surplus for the benefit of the bankrupt.  It is clear that the minimum standard required of the Trustee is that he shall handle the assets with a view to achieving the maximum return from the assets to satisfy the claims of the creditors and to provide the best surplus possible for the bankrupt.  Obviously a great deal of discretion and judgment is required to be exercised by the Trustee.”

    [11]  See Adsett v Berlouis & Ors (1992) 37 FCR 201 at 208

    [12]  See Mannigel v Aitken (1983) 77 FLR 406 at 408-409

12. It is clear, I think, from this passage that the obligations of a bankruptcy trustee are first and foremost to the creditors of the estate.  It is a misstatement, I think, to assert that there is any equal duty to the bankrupt.  I accept however that the discretion arising under section 30(1)(b) is a wide one, which must be exercised within parameters defined by normal commercial acumen. 

1. In this case, I am satisfied that it would not be a proper exercise of discretion for Mr Duncan to quixotically tilt at windmills and pursue claims against potential creditors of Mr Devine in the vain hope of securing some surplus of funds, which may conceivably be applied to Mr Devine. 

2. I accept Mr Duncan’s evidence that the more likely outcome of such proceedings is greater costs being levied on Mr Devine’s estate.  As such, I do not find that it would be a commercially prudent decision for Mr Duncan to make.  On the basis of the findings, which I have made, following the evidence and cross-examination of Mr Duncan and Mr Gyss, I reject this submission made by Mr Devine. 

3. The predicament in which Mr Devine currently finds himself has had its genesis over many years, during which Mr Devine has not been in a position to attend to his business affairs properly, particularly in terms of completing his taxation returns, when due, and then paying his taxation liabilities promptly.  He did not respond, in a timely fashion, to the District Court proceedings issued by the Australian Taxation Office.  He did not attend at court when the creditor’s petition was presented. When bankrupted, he was tardy in the completion of his statement of affairs.

4. I appreciate that it is Mr Devine’s position that his illness has rendered him emotionally and intellectually paralysed over many years.  However, the delays arising from Mr Devine’s end, in the finalisation of his financial affairs, must have consequences, so far as the exercise of any possible discretion in his favour.  In all these circumstances of this case, I do not think that it would be proper to exercise any discretion, which reside in the court pursuant to section 30(1)(b) of the Act, in Mr Devine’s favour.

5. It is also Mr Devine’s case that he has been treated high-handedly by the Australian Taxation Office, as a consequence of its failure to negotiate, with his accountant, following the preparation and submission of his taxation returns, of some form of instalment payment plan, which would include  a remission of late penalties and interest. 

6. There is no challenge to the judgment debt, on which the bankruptcy is founded.  The Australian Taxation Office maintains its debt and has provided a proof to Mr Duncan in an amount of $254,352.79, which has not as yet been adjudicated.[13]  I am not in a position to look behind the validity of the sequestration order, on the basis of Mr Devine’s claims of a lack of probity on the part of the Australian Taxation Office.  As Bromberg J said in Vince (as Trustee of the bankrupt estate of Sopikiotis) v Sopikiotis (No 2):[14]

   “…the validity of the debts claimed against Ms Sopikiotis are matters for the Trustee and are not matters open to challenge in this proceeding. They do not give rise to any challenge to the right of the Trustee to possession of the Camberwell property.

   As to the validity of the bankruptcy, Ms Sopikiotis alleges that she was never properly served with the bankruptcy notice and asserts that proper legal processes were not followed. I will refer to that matter again later. However, in the face of an extant sequestration order, I can only proceed on the basis that the matters raised by Ms Sopikiotis are closed and do not bare upon the Trustee’s entitlement to the relief which he seeks.”

   [13]  See Bankruptcy Act at section 102

   [14]  Vince (as Trustee of the bankrupt estate of Sopikiotis) v Sopikiotis (No 2)[2012] FCA 1298 at [13] - [14]

7. Mr Devine’s final contention turns on the construction of the introductory words of section 77(1), which regulate the duties of a bankrupt vis-à-vis his trustee.  The bankrupt is obliged to comply with the various directions of his trustee “unless…prevented by illness or other sufficient cause.”

8. Pursuant to the powers imposed upon him by section 77(1)(e) & (g), Mr Duncan has directed that Mr Devine provide him with vacant possession of the Ferguson Avenue property.  Mr Devine has not complied with that direction and, in order to gain such compliance, Mr Duncan has sought the intervention of the court.

9. It is Mr Devine’s contention that “his longstanding Major Depressive Disorder which is an illness that prevents him from being able to deliver up vacant possession of the land.”[15]  Again, in my view, I must be careful not to conflate humanitarian concerns for Mr Devine’s welfare with the plain reading of the provision concerned.  It is one thing to say that it will create hardship for Mr Devine if he is compelled to leave the property, another for him to assert that he is physically or practically incapable of it.

   [15]  See respondent’s written submissions at paragraph 18

10. The Full Court decision of Griffin v Pantzer[16] was concerned with a bankruptcy trustee’s desire to seize documents of a bankrupt, in respect of which a claim of privilege, on the basis of self-incrimination, was made.  In this context, Allsop J (as His Honour then was) made the following comments regarding the operation of section 77:

    “Section 77 is a provision at the core of the working of the Act. Central to the ability of the trustee to take over the affairs of the bankrupt is his or her ability to gather in the assets of the bankrupt, understand the affairs of the bankrupt (in the wide sense provided for) and administer the estate of the bankrupt in the interests of creditors, and in the public interest.”[17]

    [16]  See Griffin v Pantzer [2004] FCAFC 113

    [17] Ibid at [170]

11. In regards to the introductory phrase, His Honour said as follows:

    “The introductory words to s 77(1), "prevented by illness or other sufficient cause" have their origins in the nineteenth century legislation. They plainly relate, in my view, to physical capacity. The word "prevented" makes that clear, as used in the context of acts, which the bankrupt has to perform.”[18]

    [18] Ibid at [181]

12. Emmett J, in the court below, took a wider view of the phrase in question, so that it included practical aspects.  He said as follows:

    “I consider that `other sufficient cause' in the context of `illness' refers to physical or practical difficulties in complying with the requirements of s 77. I do not consider that it embraces a privilege such as the privilege against self-incrimination. There is nothing to prevent a bankrupt from producing documents that are the subject of the privilege against self-incrimination any more than there is an obligation imposed upon a person not to produce documents the subject of legal professional privilege. It may well be that a bankrupt has a right not to produce documents in some circumstances but that right does not prevent the bankrupt from producing them…”[19]

    [19]  See Griffin v Pantzer [2003] FCA 793 at [20]

13. I accept that it will be onerous for Mr Devine to have to leave the property concerned.  I accept that, as he deposes, there is a long waiting list for public housing in South Australia and he has limited funds.  However, these factors are not sufficient to prevent Mr Devine from physically complying with the direction that he vacate the property, albeit that it will be extremely arduous for him.

14. I also accept that there will be practical difficulties, arising for Mr Devine, from having to move.  However, in my view, it would not be in the interests of Mr Devine’s creditors, nor of the public generally, if those practical difficulties were permitted by the court to defer indefinitely Mr Duncan’s direction that the property be vacated so that it can be readied for sale.

15. It is implicit in Mr Devine’s submission that he will not be in a position to overcome the practical impediments to him vacating the property for the foreseeable future.  In my view, an appropriate response to the obvious practical difficulties arising for Mr Devine in the case, is for the court to extend the time stipulated for him to vacate the property concerned, whilst bearing in mind he has been on notice in this regard for more than a year.  I will stipulate a period of 42 days.  In this period, I hope that Mr Devine will be able to seek assistance from appropriate sources, including Dr Koopowitz, to provide him with the support he requires.

16. Mr Duncan’s application for vacant possession of the property concerned was personally served on Mr Devine on 24 September 2015.[20]  Given his attendance at court thereafter and his engagement with the proceedings, there can be no doubt that the application has been properly served on Mr Devine.

    [20]  See Affidavit of William Phillip Eglinton filed 28 September 2015

17. I also accept that it is appropriate to make the orders as sought by Mr Duncan, subject to a greater period of grace for Mr Devine to comply with the directions provided to him.  I am satisfied that, as the property concerned has vested in Mr Duncan and there is likely to be equity within it to satisfy some of the claims on Mr Devine’s estate it is incumbent upon Mr Duncan that he undertake the necessary acts to realise the property.

18. It is also clear that Mr Devine is unlikely to comply with directions provided to him by Mr Duncan and therefore it is necessary for the court to make the orders, pursuant to the powers arising under section 30(1)(b) of the Act, to give effect to the sequestration order made by it earlier and so that Mr Duncan is able to satisfy his obligations, arising under section 19, to Mr Devine’s creditors.

19. For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.

I certify that the preceding one hundred and seven (107) paragraphs are a true copy of the reasons for judgment of Judge Brown

Date: 4 April 2016