Francis in His Capacity as trustee of the Bankrupt Estate of Franco v Franco (Aka Donald Ismael Franco Gonzalez)
[2016] FCCA 2882
•9 November 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FRANCIS IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF FRANCO v FRANCO (AKA DONALD ISMAEL FRANCO GONZALEZ) | [2016] FCCA 2882 |
| Catchwords: BANKRUPTCY – Application for orders for sale of property and to vacate land – application for issuance of property seizure and delivery order – power to make orders sought – whether to make property seizure and delivery order – whether sufficient failure by bankrupt to cooperate with trustee to warrant property seizure and delivery order. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.19(1), 30(1), 54, 58, 77(1) Bankruptcy (Estate Charges) Act 1997 (Cth) |
| Cases cited: Low v Tsoutsoulis [2013] FCCA 1115 Official Receiver v Fall [2008] FMCA 489; (2008) 5 ABC(NS) 772 Official Receiver v Maher & Anor (No 3) [2011] FMCA 603 |
| Applicant: | IAN CHARLES FRANCIS IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF DONALD ISMAEL FRANCO |
| Respondent: | DONALD ISMAEL FRANCO (AKA DONALD ISMAEL FRANCO GONZALEZ) |
| File Number: | PEG 344 of 2016 |
| Judgment of: | Judge Antoni Lucev |
| Hearing date: | 9 November 2016 |
| Date of Last Submission: | 9 November 2016 |
| Delivered at: | Perth |
| Delivered on: | 9 November 2016 |
REPRESENTATION
| Counsel for the Applicant: | Ms A Chryssidis |
| Solicitors for the Applicant: | Gadens |
| For the Respondent: | No appearance |
ORDERS
Pursuant to sections 30(1), 77(1)(g) and 129(2) of the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”), the Respondent:
(a)vacate and surrender possession of the premises known as 4 Moorhen Drive, Yangebup in the state of Western Australia, being the whole of the land contained in certificate of title Lot 72 on deposited plan 13006, Volume 1547, Folio 797 (Land) to the Applicant within 28 days;
(b)remove from the Land, all vehicles, rubbish and chattels which have not vested in the Applicant (Personal Property) within 28 days; and
(c)deliver up all keys for the buildings and improvement on the Land to the Applicant within 28 days.
In the event that the Respondent fails to remove the Personal Property within 28 days, the Applicant may remove and dispose of the Personal Property as he sees fit at the expiration of those 28 days.
Pursuant to sections 30(1), 77(1)(g) and 129(2) of the Bankruptcy Act, the Respondent surrender possession of the following motor vehicles to the Applicant within 28 days:
(a)1995 Nissan Coupe registration 1DEG252;
(b)2003 Polmac Boat Trailer registration 1TJD488;
(c)2009 Holden Commodore Utility registration 1TOUGHSS; and
(d)2012 Daelim Motorcycle registration 1FP536
Pursuant to ss.30(1) and 77(1)(a)(ii) of the Bankruptcy Act, the Respondent surrender possession of any passport issued to him in the name of “Donald Ismael Franco”, “Donald Ismael Franco Gonzalez” or any other name, whether issued by the Australian Government or the government of any other country or external territory, to the Applicant within 28 days.
A sealed copy of any orders made be served on the Respondent by:
(a)affixing to the front door of the Land an envelope addressed to the Respondent containing a sealed copy of the orders; and
(b)sending a copy of the orders addressed to the Respondent at 4 Moorhen Drive, Yangebup WA 6164.
That the Applicant's costs of this application be paid from the bankrupt estate of the Respondent.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PERTH |
PEG 344 of 2016
| IAN CHARLES FRANCIS IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF DONALD ISMAEL FRANCO |
Applicant
And
| DONALD ISMAEL FRANCO (AKA DONALD ISMAEL FRANCO GONZALEZ) |
Respondent
REASONS FOR JUDGMENT
(Delivered ex tempore and edited)
Introduction and orders sought
The applicant, the Trustee in Bankruptcy of the bankrupt estate of Donald Ismael Franco (“Trustee” and “Bankrupt” respectively) seeks orders in terms of an application filed on 2 August 2016 (“Application”) as follows:
1. Pursuant to sections 30(1), 77(1)(g) and 129(2) of the Bankruptcy Act 1966 (Cth) (Act), the Respondent:
(a) vacate and surrender possession of the premises known as 4 Moorhen Drive, Yangebup in the state of Western Australia, being the whole of the land contained in certificate of title Lot 72 on deposited plan 13006, Volume 1547, Folio 797 (Land) to the Applicant within 28 days;
(b) remove from the Land, all vehicles, rubbish and chattels which have not vested in the Applicant (Personal Property) within 28 days;
(c) deliver up all keys for the buildings and improvement on the Land to the Applicant within 28 days
2. In the event that the Respondent fails to vacate and surrender possession of the Land in accordance with paragraph 1(a) and (c), a Property (Seizure and Delivery) Order be issued forthwith in favour of the Applicant in respect of the Land.
3. In the event that the Respondent fails to remove the Personal Property within 28 days, the Applicant may remove and dispose of the Personal Property as he sees fit at the expiration of those 28 days.
4. Pursuant to sections 30(1), 77(1)(g) and 129(2) of the Act, the Respondent surrender possession of the following motor vehicles to the Applicant within 28 days:
(a) 1995 Nissan Coupe registration 1DEG252;
(b) 2003 Polmac Boat Trailer registration 1TJD488;
(c) 2009 Holden Commodore Utility registration 1TOUGHSS; and
(d) 2012 Daelim Motorcycle registration 1FP536
(together Motor Vehicles)
5. In the event that the Respondent fails to surrender possession of the Motor Vehicles in accordance with paragraph 4, a Property (Seizure and Delivery) Order be issued forthwith in favour of the Applicant in respect of the Motor Vehicles.
6. Pursuant to sections 30(1) and 77(1)(a)(ii) of the Act, the Respondent surrender possession of any passport issued to him in the name of “Donald Ismael Franco”, “Donald Ismael Franco Gonzalez” or any other name, whether issued by the Australian Government or the government of any other country or external territory, to the Applicant within 28 days.
7. A sealed copy of any orders made be served on the Respondent by:
(a) Affixing to the front door of the Land an envelope addressed to the Respondent containing a sealed copy of the orders; and
(b) Sending a copy of the orders addressed to the Respondent at 4 Moorhen Drive, Yangebup WA 6164.
8. An order that the Applicant's costs of this application be paid from the bankrupt estate of the Respondent.
9. Any other order as the Court deems appropriate.
Evidence in support of application
In support of the Application, the Trustee relied upon the following affidavits:
a)Affidavit of Ash Mohebi sworn on 11 July 2016 (“Mohebi Affidavit”);
b)Affidavit of Ian Charles Francis sworn on 28 July 2016 (“First Francis Affidavit”) and exhibit ICF1 (“Exhibit”);
c)Affidavit of Ian Charles Francis sworn on 18 August 2016 (“Second Francis Affidavit”);
d)Affidavit of Service of Leah Danielle Kissane sworn on 24 August 2016 (“Kissane Affidavit”);
e)Affidavit of Service of Courtney Jayne Manzoney affirmed on 2 September 2016 (“Manzoney Affidavit”);
f)Affidavits of Service of Michelle Veenstra sworn on 28 September 2016 (“Veenstra Affidavit”);
g)Affidavit of Service of Nerida Smith sworn on 4 October 2016 (“Smith Affidavit”);
h)Affidavit of Ian Charles Francis sworn on 21 October 2016 (“Third Francis Affidavit”); and
i)Affidavit of Service of Lyndon Jakob sworn 28 October 2016 (“Jakob Affidavit”).
The Court is satisfied as to service of all relevant affidavits.
Orders made
On 30 September 2016 the Court made the following orders:
1. The respondent file and serve a notice of appearance by 14 October 2016.
2. The respondent file and serve a notice of grounds of opposition and any affidavit in support of the notice of grounds opposition by 14 October 2016.
3. The applicant file and serve any affidavit in reply to any affidavit filed by the respondent and any further or amended outline of submissions 14 days before the hearing.
4. The respondent file and serve an outline of submissions 7 days before the hearing.
5. The matter be listed for hearing on 9 November 2016 at 10.15am.
6. The applicant serve a copy of these orders on the respondent by Registered Post, and file an affidavit of service as to that service by 7 October 2016.
7. Costs be reserved.
AND THE COURT NOTES that these orders have been amended pursuant to r.16.05(2)(e) of the Federal Circuit Court Rules 2001 (Cth) to amend the Applicant’s name by substituting “Franco” for the second “Trustee”.
A copy of the orders made on 30 September 2016 was sent to the Bankrupt on 4 October 2016: see Smith Affidavit.
Bankrupt’s response
The Bankrupt has not:
a)filed any appearance or actually appeared in the proceedings (including the hearing today);
b)filed any opposition to the orders sought by the Trustee in the Application;
c)contacted the Trustee since service of the Application, or the additional documents, on him; or
d)provided the Trustee with vacant possession of the property at 4 Moorhen Drive, Yangebup (“Yangebup Property”) or provided possession of certain motor vehicles (“Vehicles”) referred to in the First Francis Affidavit.
Factual background
The bankruptcy
The Trustee was appointed as trustee in bankruptcy of the estate of the Bankrupt on 3 August 2015 on the making of a sequestration order by a Registrar of this Court (“Sequestration Order”), the Sequestration Order being made on the application of the Deputy Commissioner of Taxation (“Deputy Commissioner”): Exhibit, tabs 1 and 2.
Despite written requests from the Trustee, the Bankrupt has failed to lodge a statement of affairs as required by s.54 of the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”): First Francis Affidavit at [8].
The Trustee is aware of one creditor in the estate of the Bankrupt, being the petitioning creditor, the Deputy Commissioner, who has lodged a proof of debt in the amount of $153,010.56: Exhibit, tab 4.
The Deputy Commissioner also has an order for its costs on the making of the Sequestration Order in the amount of $5,450: Exhibit, tab 1.
The total amount owing to the Deputy Commissioner on the making of the Sequestration Order (including the costs) is $158,460.56.
Because of the Bankrupt’s failure to lodge a statement of affairs, the Trustee has been unable to determine if there are presently any other creditors in the estate of the Bankrupt.
The Trustee has attempted to obtain details of the assets and liabilities of the Bankrupt: Second Francis Affidavit, annexure “C”.
Passport of Bankrupt
The Bankrupt has failed to provide the Trustee with his passport, as required by s.77(1)(a)(ii) of the Bankruptcy Act: First Francis Affidavit at [26], and Second Francis Affidavit at [3].
Fees
The Trustee’s fees to 18 August 2016 have been approved in the amount of $39,780 (exclusive of GST): Second Francis Affidavit at [10].
The Bankruptcy (Estate Charges) Act 1997 (Cth) provides that a charge is imposed in respect of amounts received by a person where they are the trustee of the estate of a bankrupt under the Bankruptcy Act. As at 30 September 2016, the charge is 7% of funds received in to the estate. The charge is payable to the Australian Financial Security Authority (“AFSA”). Based on funds received in to the estate to date, the estimated realisation charge is $10,623.38.
Other fees of the estate include the AFSA interest charge, property insurance charges and the legal costs of the Trustee, which altogether total approximately $17,000 as at 25 August 2016.
Amounts owing
As at 25 August 2016, the Trustee is aware of a total of $235,695.22 payable in the bankrupt estate of the Bankrupt, compromised as follows:
a)debt owing to the Deputy Commissioner $153,010.56;
b)Deputy Commissioner's petitioning creditor costs $5,450;
c)Trustee’s remuneration as approved $49,952.50;
d)estimated realisation charge $10,623.38;
e)estimated AFSA interest charge $1,130.19;
f)estimated legal costs $13,200;
g)property insurance charges $2,328.92.
Property of the Bankrupt
Meadow Springs Property
As at the time of the time of the appointment of the Trustee to the estate of the Bankrupt, the Bankrupt was the sole registered proprietor of property at 16 Pineknoll Gardens, Meadow Springs (“Meadow Springs Property”): Mohebi Affidavit at [4], Second Francis Affidavit at [5], Third Francis Affidavit, annexure at page 2.
On the making of the Sequestration Order, the Meadow Springs Property vested in the Trustee in his capacity as trustee of the bankrupt estate of the Bankrupt: Bankruptcy Act, s.58.
The Meadow Springs Property was sold by the Bankrupt on 2 October 2015 (with the consent of the Trustee), with the Trustee receiving sale proceeds in the amount of $137,015.16: Second Francis Affidavit at [6].
Yangebup Property
The Bankrupt was, at the time of his bankruptcy, the sole registered proprietor of the Yangebup Property.
On the making of the Sequestration Order, the Yangebup Property vested in the Trustee in his capacity as trustee of the bankrupt estate of the Bankrupt: Bankruptcy Act, s.58.
The Trustee became registered on the title of the Yangebup Property in the place of the Bankrupt on 2 June 2016: Exhibit, tab 9.
Based on:
a)real estate agent appraisals as to the estimated value of the Yangebup Property; and
b)information received from RAMS Financial Group Limited as to the debt secured by a first registered mortgage in favour of Westpac Banking Corporation (“Westpac”),
the Trustee asserts that there is equity in the Yangebup Property estimated at between $180,000 and $250,000 after payment of the mortgage debt owing to Westpac: First Francis Affidavit at [16]-[18] and Third Francis Affidavit at page 4.
The Trustee has requested that the Bankrupt provide the Trustee with vacant possession of the Yangebup Property: First Francis Affidavit at [19]-[22], and Third Francis Affidavit at page 3. The Bankrupt has failed to provide vacant possession of the Yangebup Property to the Trustee as required: Mohebi Affidavit at [15]-[17], and Second Francis Affidavit at [3]. The request appears to consist of the sending of a letter by the Trustee’s solicitors in May 2016 requesting vacant possession, to which no response has been received, and a number of unsuccessful attempts to speak to the Bankrupt in person at the Yangebup Property.
Motor vehicles
The Bankrupt is the registered owner of the Vehicles: First Francis Affidavit at [25].
The Trustee has requested that the Bankrupt provide the Trustee with possession of the Vehicles. The Bankrupt has failed to provide to the Trustee possession of the Vehicles: Second Francis Affidavit at [3].
Consideration
Under s.19(1) of the Bankruptcy Act, a trustee in bankruptcy has a duty to:
a)determine whether the estate includes property that can be realised to pay a dividend to creditors;
b)take appropriate steps to recover property for the benefit of the estate; and
c)take whatever action is practicable to try to ensure that a bankrupt discharges all of the duties of a bankrupt under the Bankruptcy Act.
See also Official Receiver v Fall [2008] FMCA 489; (2008) 5 ABC(NS) 772 at [9] per Lucev FM.
Section 30(1) of the Bankruptcy Act provides:
The Court:
(a) has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court; and
(b) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.
Section 77(1)(e) and (g) of the Bankruptcy Act provides a bankrupt must:
(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.
In order to satisfy his duties as Trustee of the bankrupt estate of the Bankrupt, the Trustee has attempted to obtain possession of:
a)the Yangebup Property;
b)the Vehicles; and
c)the Bankrupt’s passport.
The Bankrupt has failed to provide possession of the Yangebup Property, the Vehicles and his passport to the Trustee.
The Bankrupt has:
a)failed to do such acts and things in relation to the Yangebup Property and the Vehicles as are required for the Trustee to realise the Yangebup Property and the Vehicles and to otherwise aid the Trustee in the administration of the Bankrupt’s estate by failing to provide his passport to the Trustee or to complete a Statement of Affairs; and
b)by the failures set out in (a) above failed to aid the Trustee in the administration of the Bankrupt's estate as required by s.77(1)(e) and (g) of the Bankruptcy Act.
The failure of the Bankrupt to provide vacant possession of the Yangebup Property, and possession of the Vehicles, to the Trustee means that if the Trustee is obliged to rely upon the cooperation of the Bankrupt in the sale of the Yangebup Property and the Vehicles, it is possible that delays and costs incurred in the administration of the Bankrupt’s estate to the prejudice of the known creditor, and also ultimately to any surplus which otherwise may be payable to the Bankrupt if the known creditor in his estate is paid.
The Court has the power to direct the issue of a Property (Seizure and Delivery) Order (“PSDO”) under s.78(2) of the Federal Circuit Court of Australia Act 1999 (Cth) which provides:
A person in whose favour a judgment of the Federal Circuit Court of Australia 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.
In Low v Tsoutsoulis [2013] FCCA 1115 at [13] per Lucev FM (“Tsoutsoulis”) (applying Official Receiver v Maher & Anor (No 3) [2011] FMCA 603 at [9]-[12] per Lucev FM (“Maher (No 3)”) the then Federal Magistrates Court said:
13. Although that matter [Maher (No 3)] dealt with an application to the Court for a discrete PSDO arising from a failure to comply with an earlier order for delivery up and vacant possession of land, the same principle applies in this case, where the PSDO is sought in the event that there is non-compliance with the delivery up and vacant possession order. 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.
The Trustee has requested the Bankrupt deliver up vacant possession of the Yangebup Property, and possession of the Vehicles and the Bankrupt’s passport. To date the Bankrupt has not complied with any of the Trustee’s requests.
This case is however distinguishable from Maher (No 3) and Tsoutsoulis. In Maher (No 3) there was a failure to comply with earlier orders of the Federal Magistrates Court for delivery up and vacant possession of land, which justified the need for a PSDO: Maher (No 3) at [13] per Lucev FM. In Tsoutsoulis there had been a long history of correspondence and involvement between the bankrupt and his trustee which warranted the making of both delivery up and PSDO orders at the one time: Tsoutsoulis at [6], [11]] and [13] per Lucev FM. The history here is not as long, and the Bankrupt’s failures not as egregious as in Tsoutsoulis: indeed it would appear that there was a degree of cooperation by the Bankrupt in relation to the sale of the Meadow Springs Property. There is nothing to indicate that if the Court makes the usual orders for delivery up of vacant possession of the Yangebup Property (and delivery up of the Vehicles and the Bankrupt’s passport) that the Bankrupt will not cooperate. That is in marked contradiction to Maher (No 3) and Tsoutsoulis. The orders for PSDOs are unnecessary at this stage: although the Bankrupt has not complied with requests from the Trustee which would have enabled the Trustee to realise the Yangebup Property and the Vehicles the Bankrupt’s actions are not marked by the non-compliance with Court orders as in Maher (No 3), or the active resistance to the Trustee’s requests, as was the case in Tsoutsoulis. The Court, in the exercise of its discretion, considers it unnecessary, at this stage, to make orders in terms of the PSDOs sought by the Trustee. This conclusion does not mean that the Trustee should hesitate to seek a PSDO subsequently, if it becomes necessary.
There is therefore nothing before the Court that ought prevent it from making the orders sought by the Trustee, save for the orders for PSDOs. The usual orders for delivery up having been made it follows that the Trustee’s costs should be paid from the estate of the Bankrupt.
Conclusion
For the above reasons there will be orders in terms of proposed orders 1, 3, 4, 6, 7 and 8 in the Application.
I certify that the preceding forty (40) paragraphs are a true copy of the reasons for judgment of Judge Antoni Lucev
Date: 10 November 2016
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