Gleeson (Trustee) v Khoury

[2016] FCCA 1263

FEDERAL CIRCUIT COURT OF AUSTRALIA

GLEESON (TRUSTEE) v KHOURY [2016] FCCA 1263

Catchwords:
BANKRUPTCY – Application by Trustee in bankruptcy for real property to be sold – property vested in the Applicant – Respondent and Applicant tenants in common in equal shares – undefended proceedings – Court orders sale of real property.

Legislation:

Bankruptcy Act 1966 (Cth), ss.19, 27, 30, 58, 77(1)(e), 77(1)(g), 116(1)

Federal Circuit Court of Australia Act 1999 (Cth), ss.15, 16, 18
Transfer of Land Act 1958 (Vic), s.51(1)

Applicant: BRUCE GLEESON (IN HIS CAPCITY AS TRUSTEE OF THE BANKRUPT ESTATE OF GEORGE KHOURY)

Respondent: BELINDA KHOURY

File Number: MLG 476 of 2016

Judgment of: Judge Hartnett

Hearing date: 12 May 2016

Delivered at: Melbourne

Delivered on: 12 May 2016

REPRESENTATION

Counsel for the Applicant: Mr Koroneos

Solicitors for the Applicant: Koroneos Lawyers

The Respondent: No Appearance

THE COURT DECLARES THAT:

The Applicant and the Respondent are the beneficial owners of the land described as Lot 1016 on Plan of Subdivision 447709H being the whole of the land comprised in Certificate of Title Volume 10660 Folio 180 and known as 46 Scarlet Drive, Bundoora in the State of Victoria (‘the Property’) as tenants in common in equal shares.

THE COURT ORDERS THAT:

1. The Property be sold.

2. The Property be sold subject to the Law Institute of Victoria’s standard form contract and any special conditions reasonably required by the Applicant.

3. The Applicant have the sole conduct of the sale of the Property and be authorised to instruct an agent and/or auctioneer for that purpose.

4. The Applicant be empowered to offer the Property for sale and to sell the Property by public auction with power to fix a reserve price, or alternatively, to sell the Property by private treaty at the best available price.

5. Any sale of the Property by the Applicant may be made to the Respondent either as a result of sale at auction or by private treaty, without the requirement for the payment of a deposit and upon such terms as to the payment of the balance of the purchase price as the Applicant considers appropriate.

6. The Respondent whilst residing in the Property pay all mortgage debt, rates and taxes and keep the Property insured and provide evidence of these payments to the Applicant.

7. The Applicant personally serve the Respondent with this order within 10 days from the date of the making of the order and the Respondent shall deliver up vacant possession of the Property together with all keys for all buildings and improvements on the Property to the Applicant’s solicitors within 28 days after service of this order to her.

8. In the event that the Respondent fails to deliver up vacant possession of the Property in accordance with paragraph 7 above, a writ of possession shall issue forthwith in favour of the Applicant.

9. The Respondent must remove from the Property all vehicles, rubbish and chattels which has not vested in the Applicant (the Personal Property) within 28 days after service of this order.

10. In the event that the Respondent fails to comply with paragraph 9 above, the Applicant is empowered to remove and dispose of the Personal Property on the Property as he sees fit after 28 days have passed after service of this order.

11. After any sale of the Property at auction or by private treaty, the Applicant be authorised to deduct:

    (a)From the proceeds of sale:-

    (i)the commission and other expenses of any real estate agent employed by the Applicant;

    (ii)the remuneration and expenses of the Applicant in respect of the sale of the Property;

    (iii)the legal expenses of transferring the land to the purchaser;

    (iv)any taxes including but not limited to Capital Gains Tax, Land Tax and Goods and Services Tax (GST);

    (v)all necessary adjustments of rates and taxes on settlement of the sale;

    (vi)insurance and any other reasonable expenses for protection and maintenance of the Property; and

    (vii)the mortgagee(s) debt secured over the Property;

    (b)from the Respondent’s share of the proceeds of sale (after deduction of the expenses in sub-paragraph 11a above):

    (i)the costs of disposal (if any) of any Personal Property remaining at the Property after the time has expired in which the Respondent is required to deliver up vacant possession in accordance with paragraph 7 of these orders;

    (ii)Storage fees (if any) of any Personal Property remaining at the Property after the time has expired in which the Respondent is required to deliver up vacant possession in accordance with paragraph 7 of these orders;

    (iii)any costs of insurance, payment of rates and expenses not paid by the Respondent in accordance with paragraph 6 of these orders;

    (iv)the Applicant’s costs of this proceeding calculated in accordance with paragraph 12 of these orders.

12. The Respondent pay the Applicant’s costs of this proceeding, such costs to be assessed in default of agreement.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 476 of 2016

BRUCE GLEESON (IN HIS CAPCITY AS TRUSTEE OF THE BANKRUPT ESTATE OF GEORGE KHOURY)

Applicant

And

BELINDA KHOURY

Respondent

REASONS FOR JUDGMENT

(Edited Ex Tempore Reasons)

1. Before the Court is an application filed by Mr Bruce Gleeson in his capacity as Trustee of the bankrupt estate of George Khoury. George Khoury is the husband of the Respondent, Belinda Khoury.  The Respondent is now a tenant in common in equal shares with the Applicant in the land described as Lot 1016 on plan of subdivision 447709H being the whole of the land comprised in Certificate of Title Volume 10660 Folio 180 and known as 46 Scarlet Drive, Bundoora in the State of Victoria (‘the real property’).

2. The application was filed on the 10 March 2016. The orders sought are pursuant to ss.19, 27, 30, 58, 77(1)(e), (g) and 116(1) of the Bankruptcy Act 1966 (Cth) (‘the Act) and ss.15, 16 and 18 of the Federal Circuit Court of Australia Act 1999 (Cth). In addition to the orders which are sought, there is sought by the Applicant, a declaration that the Applicant and the Respondent are the beneficial owners of the real property. The application is for the sale of the real property and ancillary orders, including orders as to the application of the proceeds of sale. The Court this day makes orders as sought in the application filed on 10 March 2016.

Consideration

1. The application is supported by an affidavit of Bruce Gleeson sworn on 8 March 2016. 

2. The Court is satisfied there has been service on the Respondent of the application and affidavit. There is filed an affidavit of service sworn by Mr Robert Felix Preac on 15 March 2016.  Service upon the Respondent was personal at 46 Scarlet Drive, Bundoora in the State of Victoria on 11 March 2016 at 4.18 pm.

3. The matter first proceeded before the Court on 14 April 2016 on a directions hearing.  The Court ordered on that day:-

   “1. The directions hearing be adjourned to 12 May 2016 at 10 am.

   2. In the event that the Respondent fails to file any affidavits or any other material by no later than 4pm on 28 April 2016 in opposition to the application, the Applicant has liberty to apply on the return date to proceed with the application on an undefended basis.

   3. The Applicant’s costs of this day are reserved.”

4. This day the matter proceeded on an undefended basis. The Respondent failed to comply with the earlier orders of the Court, and failed to appear when called.  In fact, the Respondent has failed to participate in the proceedings in their entirety. 

5. The Court also has before it, an affidavit as to service of the order of the Court made 14 April 2016.  That affidavit of service was sworn by Ms Barbara Anne Rigby, law clerk, on 3 May 2016.  That affidavit attests to service on the Respondent of a sealed copy of the order made 14 April 2016, together with a covering letter, by pre-paid post to the Respondent at 46 Scarlet Drive, Bundoora, in the State of Victoria being her last known address.

6. The Court relies upon the factual evidence before it as contained in the affidavit of Mr Bruce Gleeson. 

7. Mr George Khoury was made a bankrupt pursuant to a sequestration order made by the Court in Sydney on 25 August 2015. Upon the sequestration order being made, the Applicant was appointed the Trustee of the estate of Mr George Khoury.

8. At the time of the making of the sequestration order, Mr Khoury and his wife, the Respondent in these proceedings, were registered as the joint proprietors of the real property. On 1 September 2015, the Applicant caused caveat number AM148918P to be registered against the title to the real property.

9. In the ensuing period, the Applicant has sought to reach agreement with the Respondent, such that the Respondent purchase the Trustee’s vested interest in the real property or join with the Applicant in a sale of the real property.  No resolution has been able to be reached by the parties in this regard.

10. The Applicant on 17 September 2015 caused a letter to be sent to the Respondent advising, amongst other things, of his appointment as Trustee of the estate and his interest in the real property.

11. On 14 October 2015, the Applicant’s solicitors, on the Applicant’s instructions, wrote to the Respondent stating, amongst other things, that the Applicant had registered a caveat over the real property and invited the Respondent to make an offer to purchase the Applicant’s interest in the real property.  No response was received to that correspondence.

12. On 8 December 2015, the Applicant caused a transmission application pursuant to s.51(1) of the Transfer of Land Act 1958 (Vic) to be made so that the Applicant was registered as a tenant in common of the real property. Annexed to the affidavit of the Applicant and marked exhibit “BG6” is a true copy of a title search for the property obtained on 11 January 2016 which clearly records that the Applicant is now a tenant in common with the Respondent of the real property.

13. On or about 12 January 2016, the Applicant’s lawyers wrote to the Respondent again inviting the Respondent to make an offer to purchase the Applicant’s interest in the real property. That correspondence further stated that if no agreement was able to be reached between the parties, then the Applicant would make application to sell the real property.  That correspondence is relevantly as follows:-

    “We refer to the Trustees letter to you dated 17 September 2015 and to our letter dated 14 October 2015.  We confirm we act for Bruce Gleeson, the Trustee of the property of George Khoury, a bankrupt (“the Trustee”).

    As you know, the abovenamed became bankrupt on 25 August 2015 by order of the Federal Circuit Court of Australia and the Trustee is the Trustee of the bankrupt estate.

    Upon bankruptcy the bankrupts half interest in the property at 46 Scarlet Drive, Bundoora, Victoria being the land described as Lot 1016 on Plan of Subdivision 447709H (“the property”) vested in the Trustee pursuant to ss58 and 116 of the Bankruptcy Act, 1966.

    The half interest of the bankrupt in the property is an asset of the bankrupt estate. It is the responsibility of the Trustee to realise the bankrupt’s assets for the benefit of the unsecured creditors of the bankrupt estate.

    The bankrupt’s half interest in the property has now been registered to the Trustee. Accordingly, the Trustee and you are now the registered proprietors of the property as tenants in common in equal shares.  We enclose a copy of the most recent title search, for your information.

    Accordingly, please advise whether you are prepared to make an offer for the Trustee’s right, title and interest in the property.

    If you intend to make an offer, the offer should be based on 1 valuation obtained from a licensed valuer or 3 market appraisals from local real estate agents in Bundoora.  The offer should also be made on the understanding that you will be required to accept responsibility for all encumbrances over the property, including the mortgage to Westpac Banking Corporation.

    Should the offer be accepted, you will be required to pay all legal costs, registration fees, taxes, Bank fees and any other expense incurred as a result of the transfer of the Certificate of Title to your name.

    Alternatively, you may prefer to join with the Trustee to arrange the sale of the property. 

    You should be aware that any equity that arises or accrues as a result of an increase in market value will vest in the Trustee either during bankruptcy or after discharge unless one of the following events occurs:-

    The Trustee sells the bankrupts interest to you or another family member for its equity, subject to your existing mortgage; or

    The bankrupts interest in the property is realised by the Trustee;

    The property is sold by the mortgagee;

    The unsecured creditors in the bankrupt estate are paid in full, together with the Trustees fees and costs of administration;

    The Trustee disclaims the bankrupts interest in the property;

    The bankrupt’s interest in the property re-vests with the bankrupt pursuant to s 129AA of the Bankruptcy Act;

    The bankrupt raises funds to pay out all the unsecured creditors, all interest claims, all estate realisation charges, all Trustee’s remuneration, all expenses and all legal costs.

    Please respond to this letter within 7 days.  Should your response not be received within 7 days, the Trustee will commence an action in the Federal Circuit Court of Australia seeking partition orders so that the property can be sold without further notice to you.  Such an application to the Court can be extremely costly and the Court may order that the costs of the Trustee’s application be paid from your share of the proceeds of sale.

    If you do not have a solicitor, we recommend you engage a solicitor or contact your local community legal centre for independent legal advice.”

14. No response was received to the above correspondence. 

15. In submissions from the bar table, Counsel for the Applicant confirmed an appraisal of the real property suggested it to have a value of between $600,000 to $700,000 and that the encumbrance to the Westpac Bank as at September 2015 was approximately $458,000.

16. The proceeding being undefended and the necessary evidence being before the Court, the Court shall make the orders as sought in the application pursuant to the relevant sections of the Act as described in paragraph two of these reasons.

I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Judge Hartnett

Date: 24 May 2016