Kyriackou v Trustee in Bankruptcy - [2003] FMCA 371

FEDERAL MAGISTRATES COURT OF AUSTRALIA

KYRIACKOU v TRUSTEE IN BANKRUPTCY

[2003] FMCA 371

BANKRUPTCY – Application pursuant to s.178 of the Bankruptcy Act – whether contract of sale was entered into prior to sequestration order – application dismissed – contract void as against Trustee.

Bankruptcy Act 1966 (Cth), ss.58, 178

Warlow v Harrison (1859) Exchequer Chamber 1 EL 295
Clarke v The King (1789) 2 TR 147
Cummings v Claremont Petroleum NL (1996) 185 CLR 124
Re Tindel (1997) 30 FLR
Re Dingle Westpac Banking Corporation v Worrell (1993) 47 FCR 478
McGoldrick v Official Trustee in Bankruptcy (1993) 47 FCR 547
Chase v Donnelly (2002) FCA 1565

Applicant:

MICHAEL KYRIACKOU

Respondent:

TRUSTEE IN BANKRUPTCY (for the estate of Michael Kyriackou)

File No:

MZ 909 of 2003

Delivered on:

28 August 2003

Delivered at:

Melbourne

Hearing Date:

25 August 2003

Judgment of:

Bryant CFM

REPRESENTATION

Counsel for the Applicant:

Mr Edwards

Solicitors for the Applicant:

John Finlayson Lawyers

Counsel for the Respondent:

Mr Fice

Solicitors for the Respondent:

Charles Fice Lawyers

ORDERS

That the amended application filed 27 August 2003 be dismissed.
That the applicant pay the respondent's costs pursuant to the Federal Court scale, to be taxed if not agreed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MZ 909 of 2003

MICHAEL KYRIACKOU

Applicant

and

INSOLVENCY TRUSTEE SERVICE OF AUSTRALIA

Respondent

REASONS FOR JUDGMENT

Introduction

The amended application of Michael Kyriackou, the applicant, was filed on 27 August 2003 and seeks:
"To review the decision of the official trustee in bankruptcy to adopt the sale of a real estate property that is under a contract urgently. The settlement date for the contract is 28 August 2003."
The real estate referred to is a property at Oriel Road, Heidelberg West in Victoria. A contract of sale for the sale of the property for $261,500 was entered into between the applicant and the purchasers, Nesain Deniz and Tolga Tekin, on 30 June 2003. On 26 June 2003 a sequestration order was made against the applicant. He is seeking to review the decision of the Registrar who made the sequestration order and the matter is listed for hearing in the Federal Magistrates Court on 1 September 2003.
The Trustee contends that as the contract of sale, the subject of this application, was entered into four days after the making of the sequestration order the applicant's interest in the property had vested in the Trustee pursuant to s.58 of the Bankruptcy Act 1966 (Cth) ("the Act"), and that the contract entered into on 30 June was thus void. The Trustee has informed the purchasers and the mortgagee of his position in the matter.
The applicant contended that the nature of the authority given to the agent to sell the property was such that the authority was one without reserve and thus obliged the applicant to sell. The auction was somewhat unusual in that it seems to have been conducted by telephone over several days and various offers were put. The applicant contends that the negotiations commenced on 24 June 2003 and concluded on 30 June 2003 when a contract was signed. Once the negotiations commenced, however, he contends that his interest passed (to whom it is not clear) and he had no further interest in the land because he was required to sell.
As far as evidence was concerned the applicant filed an affidavit and gave oral evidence. Affidavits were filed for the trustee by Mr Fice, solicitor for the trustee, and Ms Fletcher, who is assisting the trustee in the administration of the estate.
The applicant's evidence is that he gave an authority to sell the property in Oriel Street to Houghton Stotts Real Estate on 27 May 2003. The authority is to sell the property by auction. No reserve price is included. Although the applicant said he gave the agent complete authority to sell at any price he contended that they were to obtain the best price for the property and that he would not have accepted a sale at a price which did not discharge the first mortgage to the Bank of Cyprus. There is clearly an inconsistency in those two applications. He conceded further that he expected them to come to him with offers for his acceptance.
An offer was made on 24 June but it was never accepted by the applicant. On 28 June the applicant apparently signed an offer which had been made for $250,000 but as the auction was still being conducted this was not a concluded contract. The agent informed the bidders that the auction would conclude at 5 pm on 30 June and that the offer put forward on the 28th would be accepted if there were no higher bids. A higher bid was made for $261,500 and that was the offer which was finally accepted by the applicant.
A contract of sale, which had previously been prepared, was signed and dated 30 June. The applicant contends that once the auction commenced on 24 June he had to proceed to conclusion because there was no reserve price and that he had no right to stop the sale. He asserts, as I have indicated, that his interest in the land passed that point, although it is obviously unclear to whom it could have passed because there was no concluded sale.
It is plain that the contract of sale, was entered into between the applicant and the purchasers on 30 June 2003. Prior to that date there was no known purchaser to whom the applicant's interest in the land could pass. The contract itself, under the heading Day of Sale, says:
"Day of sale is the earlier of the date of this contract or the acceptance date of any prior contract note, namely 30 June 2003."
There was no prior contract note and it is clear, in my view, from all of the evidence that the date of the contract was 30 June.
The applicant relied upon two authorities, which were cited to the court, neither of which, in my view, go to the question of when the applicant's interest in the land passed to the purchasers. The first authority relied upon is a case of Warlow v Harrison (1859) 1 EL 295. In my view this case has nothing to do with the time at which an interest in land passes. It is about whether a bid could be accepted from the vendor of a property and the effect of acceptance of that bid on the contract.
In fact what is said in the case, in my view, supports the position of the respondent, rather than the applicant. At page 928 the court said:
"We entertain no doubt that the owner may, at any time before the contract is legally complete, interfere and revoke the auctioneer's authority but he does so at his peril and if the auctioneer has contracted any liability in consequence of his employment and the subsequent revocation or conduct of the owner he is entitled to be indemnified."
That, in my view, makes it entirely clear that it was open to the applicant at any time to revoke the agent's authority, although there may have been financial consequences if he did so.
The second case is a case of Clarke v The King (1789) 2 TR 147. That is an even older decision. This case relates to bids at auction and holds that the person who bids last is the conditional purchaser if nobody else bids higher and all the former bidders are discharged upon acceptance of the last bid. Again this case deals with bids at auction and, in my view, has nothing to do with the case at hand. Similarly, however, to the previous case to the extent that it is relevant it supports the contentions of the respondent and does not assist the applicant.
In this case the contract of sale was entered into on 30 June. On that date an offer was accepted by the applicant and was the last and highest bid in the course of the auction. Until that time the sale was not completed and the applicant could, if he had wished, called off the auction.
On 26 June on the making of the sequestration order the applicant's interest in the land which he then held, passed to the Trustee pursuant to s.58 of the Act. Accordingly the trustee is correct in asserting that the contract entered into by the applicant after the sequestration order was made, is void as against the trustee.
The application in its form which I have described, does not really reflect the main argument which was agitated before me. It does raise in its form the question of whether, if the applicant fails in his contention that the contract of sale took place before the sequestration order, that the court should exercise its discretion under s.178 of the Act to require the trustee to adopt the contract of sale. Section 178 gives the court discretion to exercise what is a supervisory role in relation to the administration of the bankrupt estate of a bankrupt. However the court would not normally interfere with the proper administration of the estate unless there were cogent reasons for so doing.
No evidence was led to support a contention that the court should require the trustee to do something different from the course which has been taken by the Trustee. The applicant simply asserted that the sale should proceed, that it was a practical approach as the property would have to be sold in any event and that the purchaser wishes the sale to go ahead. As a result the applicant contends that the court should interfere to require the Trustee to adopt the contract of sale.
I have considered the matters raised by the applicant which would support an order pursuant to s.178. As I have indicated the nature of the supervisory jurisdiction conferred on the court by s.178 has been discussed in a number of cases including Cummings v Claremont Petroleum NL (1996) 185 CLR 124 at 133, Re Tindel (1997) 30 FLR 6 pages 9 to 10, ReDingle Westpac Banking Corporation v Worrell (1993) 47 FCR 478, McGoldrick v Official Trustee in Bankruptcy (1993) 47 FCR 547 and in the matter of Chase v Donnelly (2002) FCA 1565.
From those cases it is clear that there is a discretion to embark upon a supervisory review of a decision of a Trustee but due weight should be given to not interfering with the day-to-day administration of the estate. The Trustee points out, and it is conceded, that in addition to the first mortgage secured over the relevant property by the Bank of Cyprus caveats have been lodged by two different persons who are in dispute with the applicant and there are pending Supreme Court proceedings in relation to at least one of them. The Trustee points to the difficulty in obtaining clear title in view of the dispute with the caveators and the benefit in the mortgagee taking possession and selling the property. He rightly points out that the purchasers, if they wish to proceed with the purchase, can deal with the mortgagee.
Accordingly I find no basis upon which the court should interfere with the administration of the bankrupt's estate by the trustee and I propose to dismiss the application.

I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of Bryant CFM

Associate: Peter Smith

Date: 29 August 2003