Jones v Porter
[2021] FCCA 234
•11 February 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Jones v Porter [2021] FCCA 234
File number: SYG 3233 of 2017 Judgment of: JUDGE STREET Date of judgment: 11 February 2021 Catchwords: BANKRUPTCY – Application for inquiry into administration of estate by trustee – whether there are substantial grounds for believing that the trustee erred in the administration – no basis for inquiry into administration made out – second further amended application dismissed. Legislation: Bankruptcy Act 1966 (Cth), ss 19, 27, 139ZQ,
Sch 2, 90-15
Privacy Act 1988 (Cth), s 16A (Schedule item 4); Sch. 1, cl. 6.2(b), cl. 46
Cases cited: Cock v Howden [1915] 20 CLR 552
Re Alafaci; Registrar in Bankruptcy v Hardwick (1976) 9 ALR 262
Number of paragraphs: 33 Date of hearing: 11 February 2021 Place: Sydney Counsel for the Applicant: In person Counsel for the Respondents: Mr A Spencer ORDERS
SYG 3233 of 2017 BETWEEN: RICHARD JONES
Applicant
AND: JASON PORTER
First Respondent
PAUL WESTON
Second Respondent
ORDER MADE BY:
JUDGE STREET
DATE OF ORDER:
11 FEBRUARY 2021
THE COURT ORDERS THAT:
1.Oral submissions are limited to half an hour without further leave.
2.The second further amended originating application filed on 20 March 2020 is dismissed.
3.The applicant pay the respondents’ costs of the proceedings as taxed or agreed.
REASONS FOR JUDGMENT
JUDGE STREET:
This is an application within the Court’s jurisdiction under s 27 of the Bankruptcy Act 1966 (Cth) (“the Act”) for an inquiry under s 90-15 of Sch 2 to the Act.
The principles in relation to the conducting of an inquiry have been addressed by the learned Ryan J in Re Alafaci; Registrar in Bankruptcy v Hardwick (1976) 9 ALR 262 where His Honour reflected on what was said in Cock v Howden [1915] 20 CLR 552:
I do not wish to be taken as presuming to lay down any rule as to the procedure to be followed in, or the approach to be made by the court to, a case of this sort; but it seems to me that in such a case there is a preliminary question to be decided by the court — namely on the grounds and facts before it, has a case been made for inquiry into the trustee's conduct? If the answer to that question is “yes”, the next question is — what is to be the scope of the inquiry? It may be that the material already before the court sufficiently defines the scope of the inquiry; on the other hand, the court may find it necessary to define the subjects for inquiry — eg in the form: “Did the trustee do (or fail to do) so and so?” — and to give directions before proceeding to inquire. In any event, the court will seek to inquire into specific matters, and to ensure that the trustee is given proper opportunity to prepare and present his case on those matters. If in the course of inquiry into those matters it emerges that there are other aspects of the trustee's conduct in relation to the bankruptcy into which the court, as the authority having control over trustees, should inquire, the court will safeguard the interests of the trustee as may be necessary by such means as the granting of adjournments and the giving of directions. It will act similarly as may be necessary when the inquiry is completed and the question then arises of what order or orders, if any, should be made under s 179(1)(a) and (b).
The first issue for the Court is to determine whether there are substantial grounds for believing that the trustees (“the respondents”) erred in the administration. If the Court considers an inquiry is unlikely to reveal misconduct, it should not make an order and put the respondents and the creditors to the expense and trouble involved.
In this case there are no substantial grounds for believing that the trustee erred in the administration, and the proceedings have been conducted in a way which has clearly put the trustee and creditors to significant expense that should never have been incurred.
The proceedings were commenced on 18 October 2017. The applicant was made a bankrupt on 5 October 2012. Prior to the sequestration order, the applicant transferred away two of the three significant assets he owned for nil consideration. The third asset was sold by a mortgagee. Having divested himself of his assets, the applicant left Australia in August or September of 2012, having failed to comply with a bankruptcy notice served to him on 16 April 2012. There were a combination of deficiencies in the Statement of Affairs of the applicant dated 16 November 2012, which did not identify any residential address in Australia and it is apparent that the applicant obstructed rather than co-operated with the trustees including the making of 3 complaints to the Inspector General.
Both respondents in this matter were originally the trustees, and one has since retired.
The sequestration order was made at a time while the applicant was overseas. This appears to be part of the basis upon which the applicant asserts that there has been a failure to properly perform the trustee’s duties. Those assertions included allegations of misconduct, dishonesty and negligence, all of which the Court finds are baseless and should not have been advanced.
Whilst in England, the applicant advised the trustee that he did not have access to the internet and that he could not telephone the trustee, and advised the trustee that he had no access to personal documents and could not complete a Statement of Affairs. When the applicant did complete a Statement of Affairs, he did not provide an address or telephone number, a name of a contact person not living with him, a passport number, a driver’s licence number or the amount of his pension.
When the applicant returned to Australia, he filed an application on 26 April 2013 to review the sequestration order, which was ultimately heard on 2 May 2014, and was dismissed on 24 July 2014. In that application, the applicant made no offer to address the remuneration to which the trustee had become entitled in the event that his application was successful.
The applicant refused to arrange for a telephone interview with the trustees and, as at 12 September 2013, made no attempt to arrange an interview with the trustees in person or by telephone. The Court accepts the respondent’s submission that there is no evidence to suggest he ever did so. These were steps taken by the applicant not to co-operate with the trustees and were a clear breach of the bankrupt’s duty once a sequestration order was made.
Despite the applicant’s repeated claims that he is disadvantaged by ill health and financial position, he appears to have been able to make all the arrangements necessary to conduct legal research in relation to the issues that he has raised and to prepare numerous documents for other Courts when required and to attend either by telephone or in person for Court dates over more than seven years.
Until the realisation of the Dorrigo property and the Armidale properties in June 2018, the estate was without funds.
Between 28 August 2014 and at least June 2018, the trustees have been engaged in litigation nearly all instigated by the applicant and all disputation by the applicant has ultimately been in substance unsuccessful. The Court accepts the detailed litigious history as well as the trustees’ detailed chronology and the trustees’ complaint response identified in the two affidavits of the senior manager Raguragavan Nithiaseelan sworn 20 December 2018 and complaint response in the affidavit of Jason Lloyd Porter sworn 20 December 2018 who resigned on 19 June 2015 as a trustee, confirmed by orders made on 31 July 2015. It is unnecessary to set out this voluminous history. The steps recounted are consistent with a proper discharge and performance of the trustees’ duties and advancement of the interests of creditors of the bankrupt estate. There were unsecured creditors of approximately $458,000.00 and about $608,000.00 owed to secured creditors. The applicant has not paid any of the costs that have been ordered against him in those actions.
There has been a large volume of evidence that has been admitted before the Court, including three court books and the affidavits filed subject to relevance. An outline of case submissions was filed by both parties.
The applicant’s outline of case submissions has failed to identify any particular conduct that could be said to warrant an inquiry by this Court. There are high-level broad assertions advanced in relation to generalised allegations of non-compliance with duty, all of which, for the reasons that have already been identified by Mr Spencer, appear hollow and without substance. Neither the trustees nor their lawyers can be said to have a conflict of interest. In respect of the dissipation of property by the applicant, the trustee and the interests of Purnell Motors, the petitioning creditor, were as the respondent submits co-extensive, aligned and no conflict existed. There are unsubstantiated assertions of deceit, conflict of interest, and impartiality as well as subjective characterisation of the applicant’s status and unsupported allegations of knowledge concerning alleged departure from duty by the trustees advanced by the applicant. None of these assertions have a proper evidentiary foundation. The breadth of the allegations or complaints by the applicant are sweepingly wide, unfocused, duplicative, fragmented, and unsubstantiated. The applicant has also endeavoured to go beyond his alleged pleaded complaints and to re-agitate as complaints matters determined in other proceedings. The Court accepts the respondent’s submission that this should not be allowed and is a powerful discretionary factor weighing against the preliminary question of whether there are substantial grounds for believing the trustees erred in the administration of the estate.
There are complaints in relation to the evidence used by the trustee in seeking to advance the interests of the creditors in respect of the sale of other property and what the applicant contends was a breach of privacy. Those allegations are hollow and without substance as expanded upon below.
The applicant complains about the steps taken while he was overseas. It is apparent on the evidence that the applicant knew that there were steps being taken to make him bankrupt when he left overseas, and the transfer of properties before his bankruptcy are matters which speak for themselves, and there was a successful recovery by the trustee in that regard.
The applicant also makes complaint in relation to s 139ZQ notices issued in 2013 to other parties and in July 2014 for the Armidale property. The Dorrigo property was transferred back to the trustee after the receipt of the 2013 notice, a fact of which the applicant was aware by 20 August 2013. Any arrangement he had with Ms Hombsch had come to an end and the applicant had no continuing right of occupation as against the trustees. Ultimately Judge Smith made declarations on 16 June 2017 declaring the applicant’s transfer of the Dorrigo property on 1 September 2010 to be void and the transfer of the Armidale property on 13 July 2010 to be void against the trustee. The applicant was required to give vacant possession pursuant to Court orders made on 30 June 2017, in respect of both the Armidale property and the Dorrigo property and had done little to do so by 30 June 2017. The complaints by the applicant concerning the notices and proceedings related to the notices, the tenancy, the caravan and Crest are all without substance. The Court notes these proceedings were not brought under s139ZS of the Act.
The applicant makes complaint in relation to a company Crest, the superannuation trustee of a self-managed fund the sole asset being the Armidale property under a deed made in 2012. The applicant was the shareholder of Crest which shares vested in the trustee on bankruptcy. The applicant moved goods and chattels to the Armidale property that Crest failed to transfer to the trustees. There is no basis to find that the trustees breached any duty concerning those alleged assets. Further the applicant’s complaint in relation Crest is not one that identifies any proper basis for any inquiry by this Court.
The applicant raises an assertion in respect of disproportionality between the costs that have been incurred during the sequestration and the original debt the subject that gave rise to the sequestration. It is apparent that significant litigation has been brought by the applicant that has no doubt, unfortunately, wasted much of the assets that might otherwise have been available to pay creditors. The applicant’s complaint in relation to that proportionality is without substance and does not identify any proper basis for an inquiry.
The applicant’s assertions in relation to the failure to take out insurance and/or an inventory list at the time of taking of possession of property does not give rise to any circumstance that properly justifies this Court engaging in an inquiry in relation to the duties of the respondents.
There is no proper basis identified in the applicant’s material for the assertions of breach of duty under s 19 of the Act by the trustees. However, there are sweeping and wide assertions of non-compliance advanced by the applicant all of which are without substance. There are no substantial grounds for believing that the trustees erred in their administration or failed to act in the manner required by the Act or general law. The Court finds that there is no proper evidentiary basis to advance an assertion that the trustees have engaged in misconduct warranting an inquiry. There is no evidence that the Court accepts that reflects indifference by the trustees to the standards and the duties of the trustees.
The applicant’s complaints in relation to other proceedings in which the trustee, together with an entity called Purnell Motors, were seeking to recover and preserve assets for the benefit of the estate does not identify any proper basis upon which it could be said there is an evidentiary foundation to believe the trustee departed from the trustee’s duties.
The applicant has also complained in relation to the conduct of the trustees in other proceedings that the applicant has brought. There is one case in which there was a mild criticism by the learned Katzmann J which resulted in the impact on a costs order. That does not identify a basis upon which there should be an inquiry conducted by this Court, and there is nothing else in the conduct of those proceedings that has been identified that warrants an inquiry as alleged by the applicant. That is because there is no evidence to suggest that the trustees have failed to comply with their duty in the conduct of those proceedings or have departed from the requirements of the standards in relation to the administration of the estate.
The applicant advanced submissions asserting departures from duty by the trustees that were without evidentiary foundation and which were without substance. The fact that the applicant was made a bankrupt is not a basis upon which the applicant is entitled to advance the Court should conduct an inquiry. When one delves into the substance of the conduct that the applicant complains about, it is all conduct related to the trustees seeking to administer properly the estate to recover assets for the benefit of the creditors, as is their duty, in circumstances made unnecessarily difficult by the conduct of the applicant.
The assertions in relation to the disclosure of private information or alleged breach of privacy are, on their face, without substance. Further the applicant’s allegations are misconceived, taking into account cl. 6.2(b) and cl. 46 of Schedule 1 to the Privacy Act 1988 (Cth) (“the Privacy Act”), s 16A (Schedule item 4) of the Privacy Act and the role of the Trustees, who were appointed jointly and severally under the Act. Nor is it apparent that the trustees conducted themselves in some way that was contrary to the proper standards in respect of the s 139ZQ notices.
The assertions of dishonesty were completely baseless and should not have been advanced by the applicant. There was no basis for any such assertion and certainly no conduct identified to support that assertion or the assertion of the trustees acting in self-interest or engaging in any conflict of interest. No proper basis has been revealed for the Court to conduct an inquiry in the circumstances of this case.
The applicant’s submissions descend into re-agitation of issues concerning other litigation as well as seeking to focus upon the steps that have been taken in these proceedings. Steps in the other litigation do not identify any proper basis for an inquiry, nor did the steps in these proceedings. It is, however, worth observing that these proceedings appear to have been ones in respect of which the applicant was permitted to range far beyond the ordinary approach that should be adopted by a Court.
There is a second further amended application that has been filed, not properly so described, purporting to identify grounds in respect of the basis upon which it is contended there should be an inquiry. Those grounds make assertions in respect of matters, none of which this Court is persuaded have substance. None of the matters through to from (a) to (aa) in paragraph 1 identify a proper basis upon which this Court is satisfied that there should be an inquiry or that there is a basis to believe there has been a departure by the trustee which could be described as substantial, that is, establishing substantial grounds for believing the trustee erred in the administration.
These proceedings should have been brought to a conclusion much earlier, but that is not a criticism in respect of which the Court levels at either party. The Court has a duty in bankruptcy proceedings to conduct them expeditiously. It is most unfortunate in the present case that they were not conducted expeditiously, and it has no doubt put both parties to significant cost and expense. The Court finds that that cost and expense has been really at the behest of the applicant in seeking to pursue these proceedings.
The applicant also made criticism in respect of the reports to creditors, seeking to assert that there was misleading statements or inaccuracies in the same. The Court does not accept the assertions and they do not identify substantial grounds for believing that there has been any failure by the trustees to properly administer the estate. In that regard, there is no basis in respect of the reports to creditors to conduct an inquiry.
The applicant has made other allegations in relation to trespass and damage by the trustee which appear to be without substance. The trustee had a right and duty under the Act to take possession of the property vested in the trustee. No case of trespass has been made out. The applicant has not established that there has been any loss or damage to property owned by him in respect of which there is any liability by the trustee.
Accordingly, the second further amended application is dismissed.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the transcript of the published oral reasons for judgment of Judge Street delivered in open Court on 11 February 2021 and the parties were sent a sealed copy of the Court’s orders. Associate:
Dated: 12 March 2021
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