Juratowitch (as trustee of the Bankrupt Estates of Parolin and Parolin) v Parolin

[2016] FCCA 3439

FEDERAL CIRCUIT COURT OF AUSTRALIA

JURATOWITCH (AS TRUSTEE OF THE BANKRUPT ESTATES OF PAROLIN AND PAROLIN) v PAROLIN & ORS [2016] FCCA 3439

Catchwords:
BANKRUPTCY – Application for a declaration and orders pursuant to ss.58  and 116 of the Bankruptcy Act 1966 (Cth) and ss.228 and 232 of the Property Law Act 1958 (Vic) – Respondent’s co-owners of real property- undefended hearing – application granted.

Legislation:

Bankruptcy Act 1966 (Cth), ss.58, 116, 134(1)(a), 181A

Property Law Act 1958 (Vic), ss.225, 228(2)(a), 232
Judiciary Act 1903 (Cth), s.79
Transfer of Land Act 1958 (Vic), s51(1)

Cases cited:

Coshott v Prentice [2014] FCAFC 88

Applicant: DANIEL PETER JURATOWITCH IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATES OF MATTHEW JOHN PAROLIN AND RICHARD AUGUSTO PAROLIN

First Respondent: JUSTIN ROBERT PAROLIN

Second Respondent:  MATTHEW JOHN PAROLIN

Third Respondent:  RICHARD AUGUSTO PAROLIN

File Number: MLG 1991 of 2016

Judgment of: Judge Hartnett

Hearing date: 5 December 2016

Delivered at: Melbourne

Delivered on: 5 December 2016

REPRESENTATION

Counsel for the Applicant: Ms Poulakis

Solicitors for the Applicant: Smith Leonard Fahey Lawyers

The Respondents: No Appearance

ORDERS

THE COURT DECLARES THAT:

1. Pursuant to Sections 58 and 116 of the Bankruptcy Act 1966 (Cth) (‘the Act’) the Applicant is the beneficial owner of two thirds of the land comprised in Certificate of Title Volume 9949 Folio 313 more particularly described as 339 Findon Street Epping in the State of Victoria (the ‘Property’), previously registered in the name of the First Respondent, the Second Respondent and the Third Respondent.

THE COURT ORDERS THAT:

1. Pursuant to Section 134(1)(a) of the Act, the Applicant can exercise a power of sale of the Property.

2. Pursuant to Sections 228(2)(a) and 232 of the Property Law Act 1958 (Vic) and by operation of Section 79 of the Judiciary Act 1903 (Cth):-

   (a)the Respondents and any other occupants of the whole of the Property, vacate the Property and provide vacant possession to the Applicant within thirty (30) days after the date of these Orders;

   (b)the Respondents surrender to the Applicant any duplicate Certificate of Title for the Property within thirty (30) days after the date of these Orders;

   (c)the Respondents deliver up all keys for all buildings and improvements on the Property to the Applicant within thirty (30) days after the date of these Orders;

   (d)the Respondents and any other occupants of the whole of the Property must remove all personal property being vehicles, rubbish and chattels (personal property) from the Property which are not vested in the Applicant within thirty (30) days after the date of these Orders;

   (e)a writ of possession issue forthwith in the event that the Respondents or any other occupants fail to provide vacant possession of the Property in accordance with Order 3(a) above.

3. The Applicant:

   (a)be appointed as trustee for the sale of the Property;

   (b)have the sole conduct of the sale of the Property and be authorised to instruct an agent or an auctioneer for that purpose;

   (c)is solely to decide whether the Property is to be sold by public auction or private treaty;

   (d)do everything necessary or expedient to execute all documents on behalf of the Respondents including any contract of sale, vendor’s statement and Transfer of Land instrument; and

   (e)is solely to decide whether or not to set a reserve for any auction of the Property and, if so, at what price.

4. The Respondents do all things as may be reasonably required by the Applicant, their selling agent or their solicitors for the purpose of achieving a sale of the Property including providing access to buildings on the Property and for the purpose of valuation and viewing by potential purchasers.

5. Two thirds of the net proceeds of the sale of the Property, after payment of any monies due to any encumbrancer or encumbrancers according to their priorities, be paid to the Applicant and the balance of the sale proceeds to be paid to the First Respondent.

6. The Applicant’s cost of the proceedings be paid out of the bankrupt estates of the Second and Third Respondents.

7. Otherwise the application is dismissed and removed from the list.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 1991 of 2016

DANIEL PETER JURATOWITCH IN HIS CAPACITY AS TRUSTEE OF THE BUNKRUPT ESTATES OF MATTHEW JOHN PAROLIN AND RICHARD AUGUSTO PAROLIN

Applicant

And

JUSTIN ROBERT PAROLIN

First Respondent

MATTHEW JOHN PAROLIN

Second Respondent

RICHARD AUGUSTO PAROLIN

Third Respondent

REASONS FOR JUDGMENT

(Edited Ex Tempore Reasons)

1. Before the Court is an application filed 26 September 2016.  The application is filed by the trustee for the bankrupt estates of the Second and Third Named Respondents, Mr Matthew John Parolin and Mr Richard Augusto Parolin.  The First Named Respondent is a tenant in common in one of three equal shares in real property with the Second and Third Named Respondents.  The property owned by the three Respondents is real property situated at and known as 339 Findon Street Epping in the State of Victoria and more particularly described in Certificate of Title Volume 9949 Folio 313 (‘the Property’).

2. On 12 August 2008, a sequestration order was made against the Second Respondent in the Court. On that date, the official trustee was appointed trustee of the bankrupt estate of the Second Respondent. On 26 October 2010, the Applicant was appointed trustee of the Second Respondent’s bankrupt estate pursuant to s.181A of the Bankruptcy Act 1966 (Cth) (‘the Act’). The Second Respondent was discharged from his bankruptcy on 9 October 2011.

3. On 14 August 2008, a sequestration order was made against the Third Respondent in the Court. On that date the official trustee was appointed as trustee of the bankrupt estate of the Third Respondent. On 26 October 2010 the Applicant was appointed trustee of the Third Respondent’s bankrupt estate pursuant to s.181A of the Act. The Third Respondent was discharged from his bankruptcy on 9 October 2011.

4. The Applicant in this application relies upon the application filed; an affidavit sworn by the trustee, Mr Daniel Peter Juratowitch, on 15 September 2016; various affidavits of service going to proof of personal service of the application and Mr Juratowitch’s affidavit on each of the Respondents; affidavits of service as to service upon the Respondents of Orders made by the Court on 20 October 2016; and  further affidavits of service establishing service upon the Respondents of the Applicant’s outline of submissions, a document relied upon by the Applicant and dated 29 November 2016.  The Court was in fact satisfied as to personal service of the application and supporting affidavit evidence on each of the Respondents when the matter last proceeded before it on 20 October 2016.

5. On 20 October 2016, the following Orders were made by the Court:- 

   “(1)   The matter be adjourned to 5 December 2016 at 10 am for  final hearing.

   (2)     The Respondents file and serve affidavit material upon which they seek to rely by 4 pm on 11 November 2016.

   (3) The Applicant file and serve any affidavit material in reply from 4 pm on 30 November 2016.

   (4) The parties file and serve any outline of submissions which they might wish to rely upon four days before the date of the final hearing.

   (5) Liberty to apply.

   (6) If the Respondents do not comply with order 2 then the Applicant is at liberty to seek to proceed undefended.

   (7) The Applicant’s costs are reserved.”

6. The Respondents have filed no affidavit or other material in the proceedings. The Respondents did not appear on 20 October 2016 and failed to answer the call this day. The matter has thus proceeded on an undefended basis.

7. The Applicant’s claim is for vacation, possession, and sale orders in relation to the Property of the Second and Third Named Respondents, the Property having vested in the trustee pursuant to the sequestration orders made in respect of each. 

Legislation

1. Section 58 of the Act provides relevantly as follows:-

   “Vesting of property upon bankruptcy-general rule

   (1)  Subject to this Act, where a debtor becomes a bankrupt:

   (a)  the property of the bankrupt, not being after-acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and

   (b)  after-acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee.

   …”

2. Section 116 of the Act provides relevantly as follows:-

   “Property divisible among creditors

   (1)  Subject to this Act:

   (a)  all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge; and

   (b)  the capacity to exercise, and to take proceedings for exercising all such powers in, over or in respect of property as might have been exercised by the bankrupt for his or her own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his or her discharge; and

   …

   is property divisible amongst the creditors of the bankrupt.

   …”

3. Section 134(1)(a) of the Act is relevantly as follows:-

   “(1)  Subject to this Act, the trustee may do all or any of the following things:

   (a)  sell all or any part of the property of the bankrupt;

   …”

4. Section 225 of the Property Law Act 1958 (Vic) is relevantly as follows:-

   “Application for order for sale or division of co‑owned land or goods

   (1)     A co-owner of land or goods may apply to VCAT for an order or orders under this Division to be made in respect of that land or those goods.

   (2)     An application under this section may request—

   (a)     the sale of the land or goods and the division of the proceeds among the co-owners; or

   (b)     the physical division of the land or goods among the co-owners; or

   (c)     a combination of the matters specified in paragraphs (a) and (b).

   …”

5. Section 228 of the Property Law Act 1958 (Vic) is relevantly as follows:-

   “What can VCAT order?

   (1)     In any proceeding under this Division, VCAT may make any order it thinks fit to ensure that a just and fair sale or division of land or goods occurs.   

   (2)     Without limiting VCAT's powers, it may order—

         (a)     the sale of the land or goods and the division of the proceeds of sale among the co-owners; or

   …”

6. Section 232 of the Property Law Act 1958 (Vic) is relevantly as follows:-

   “Other matters in VCAT orders

   In any proceeding under this Division, VCAT may order—

         (a)     that the land or goods be sold by private sale or at auction;

         (b)     that the co-owners may purchase the land or goods at that sale or auction;

         (c)     in the case of a private sale, that the sale be at fair market price as determined by an independent valuer;

         (d)     in the case of an auction, that the reserve price is the reserve price set by VCAT;

         (e)     that an independent valuation of the land or goods take place;

         (f)     that a sale is to be completed within a specified time;

         (g)     that the costs of the sale be met—

               (i)     by one or more of the co-owners; or

               (ii)     from the proceeds of the sale;

        (h)     that the sale and division of the proceeds of sale or the physical division of the land or goods is subject to any terms and conditions which VCAT considers necessary or desirable in any particular case;

       (i)     in the case of land, that any necessary deed or instrument be executed and documents of title be produced or other things be done that are necessary to enable an order to be carried out effectively;

         (j)     in the case of land to which the Transfer of Land Act 1958 applies, directing the Registrar of Titles to make amendments to the Register within the meaning of that Act or do any act or make any recordings necessary to give effect to an order under this Division.”

7. The Court is conferred with power to apply State legislation pursuant to s.79 of the Judiciary Act 1903 (Cth).[1] 

   [1] Coshott v Prentice [2014] FCAFC 88.

8. The trustee is in the process of taking transmission of the Property pursuant to s.51(1) of the Transfer of Land Act 1958 (Vic).

Consideration

1. In October 2010, the trustee directed personnel at his office to search the records of the Victorian Land Registry.  Those searches revealed that the First Respondent is a joint proprietor, together with the bankrupts, each being a tenant in common holding one of three equal shares in respect of the Property. 

2. In September 2008, the Second Respondent had submitted his Statement of Affairs.  In such Statement of Affairs he disclosed his interest in the Property, which he claimed to also be owned by the Third Respondent and the First Respondent.  In September 2008 the Third Respondent had submitted his Statement of Affairs in which he disclosed an interest in the Property which he claimed was also owned by the First Respondent and the Second Respondent.

3. Pursuant to s.58(1) of the Act, the Second and Third Respondents registered interest in the Property vested in the trustee from the day of his appointment as trustee, and vested in the official trustee prior to the appointment of the Applicant from the date of the official trustee’s appointment.

4. In 2010, the official trustee had approached the First Respondent who is the bankrupts’ father, requesting him to make a commercial offer to purchase the official trustee’s interest in the Property or to join the official trustee in the sale of the Property. The First Respondent responded but no resolution of the matter was reached.  In November 2010 and following his appointment, the Applicant wrote to the Second and Third Respondents, copied to the First Respondent, inviting the Respondents to make an offer to purchase the trustee’s interest in the Property.  In August 2012, there having been no resolution, the Applicant wrote to the First Respondent and placed him on notice that he intended to realise his interest in the Property.  The First Respondent responded to the Applicant in September 2012 however subsequent communication between the Applicant and First Respondent failed to resolve the Applicant’s interest in the Property.

5. On 9 June 2016, the Applicant instructed his solicitors to write to the bankrupts and to the First Respondent which relevantly included advice that the Applicant intended to commence proceedings against the Respondents seeking orders for possession and sale of the Property should there be no response from the Respondents within seven days of 9 June 2016.  No response was forthcoming.

6. Further evidence as relevantly contained in the affidavit sworn by the Applicant on 15 September 2016 is that:-

   (a)on or about 20 March 2015, the Applicant obtained a market appraisal from Barry Plant Real Estate, Epping, which estimated a market value of between $340,000 to $350,000 for the property;

   (b)on 24 June 2016, an updated market appraisal from Ray White Real Estate, Epping, was obtained by the Applicant which estimated a market value of between $400,000 to $440,000 for the Property;

   (c)the current median price based on the recent market appraisals for the property is $420,000;

   (d)the Applicant directed his staff to contact the first mortgagee of the property, RHG Mortgages, to obtain an updated mortgage payout figure in respect of the Property.  The Applicant was informed by Anna Blight of his office and it is his belief that the current mortgage balance is approximately $223,813.28; and

   (e)the Property’s equity position is thus approximately $196,186.72, of which two-thirds (namely $130,660.35) vests in the Applicant.

7. From the Applicant’s investigations, he determined that the Second and Third Respondents were joint and severally liable together with the First Respondent to their secured creditor, RHG Mortgage Corporation Limited, in the sum of $223,813.28 as at 26 June 2016.

8. The Second Respondent, at the time of swearing of the Applicant’s affidavit on 15 September 2016 had unsecured creditors which totalled $138,304.00. The Third Respondent had unsecured creditors as at that date of $176,395.18. 

9. In the absence of any agreement having being reached between the Applicant and the Respondents, the Applicant seeks to proceed with his application this day.

10. The matter being undefended and the necessary supporting evidence being before the Court, the Court shall make the declaration and orders  sought by the Applicant.

I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Judge Hartnett

Date: 18 January 2017