Miao v Michell

[2019] FCCA 2314

FEDERAL CIRCUIT COURT OF AUSTRALIA

MIAO v MICHELL

[2019] FCCA 2314

Catchwords:

BANKRUPTCY – Application for relief pursuant to section 90-15 of Schedule 2 to the Bankruptcy Act 1966 – non-appearance by the Applicant at the Hearing – long history of litigation – application for removal of trustee – claims for damages – claims not made out by the Applicant – all applications dismissed.

Legislation:

Bankruptcy Act 1966, ss.58, 178, 179 and s.90-15 of Sch.2

Cases cited:

Body Corporate SP 31235U v Miao [2014] FCCA 2457

Cummings v Claremont Petroleum Inc (1966) 185 CLR 124

Macchia v Nilant (2001) 110 FCR 101

Miao v Owners Corporation SP 31235U [2015] FCA 352

Miao v Michell [2015] FCA 22

Miao v Michell [2015]  FCCA 2910

Miao v Michell [2018] FCCA 1068

Miao v Michell [2018] FCA 2000

Miao v Michell [2018] FCCA 2859

Moore v Macks [2007] FCA 10

Re Alafaci; Registrar in Bankruptcy v Hardwick (1976) 9 ALR 262

Re Gault, Gault v Law (1981) 57 FLR 165

Re Tyndall: Ex parte Official Receive (1977) 17 ALR 182

Re Wheeler; Ex Parte Wheeler v Halse (1994) 54 FCR 166

Wilson v Commonwealth of Australia [1999] FCA 219

Applicant:

SHIRLEY MIAO

Respondent:

STEPHEN JOHN MICHELL

File Number:

MLG 2865 of 2018

Judgment of:

Judge Blake

Hearing date:

24 July 2019

Date of Last Submission:

24 July 2019

Delivered at:

Melbourne

Delivered on:

22 August 2019

REPRESENTATION

Counsel for the Applicant:

None

Solicitors for the Applicant:

None

Counsel for the Respondent:

Ms Gobbo

Solicitors for the Respondent:

SLF Lawyers

ORDERS

(1)     The Application filed on 24 September 2018 and the Statement of Claim filed on 25 January 2019 be dismissed.

(2)     All extant Applications be dismissed.

1. FEDERAL CIRCUIT COURT

OF AUSTRALIA

AT Melbourne

MLG 2865 of 2018

SHIRLEY MIAO

Applicant

And

STEPHEN JOHN MICHELL

Respondent

REASONS FOR JUDGMENT

Introduction

1.      This proceeding arises out of an application filed by the bankrupt applicant in this proceeding, Ms Shirley Miao (‘Applicant’) on 24 September 2018. The application sought both final and interim relief (‘Application’) from the Court. A Statement of Claim was also subsequently filed by the Applicant on 25 January 2019 (‘Claim’).

2. The Applicant is unrepresented. In the Application and Claim, she seeks various forms of relief under section 90-15 of Schedule 2 to the Bankruptcy Act 1966 (‘Act’), including the removal of the Respondent, who is the trustee. 

3.      For the reasons set out in the decision below, I have decided to dismiss the Applicant’s claims for relief.

The history of proceedings in relation to the Applicant

4.      This matter is one of a number of applications commenced by the Applicant in relation to her bankruptcy.

5.      On 3 July 2014, Stephen John Michell (‘Respondent’) was appointed trustee of the bankrupt estate of the Applicant pursuant to a Sequestration Order made by Registrar Allaway of this Court.

6.      The Applicant filed an application to review the sequestration order made by Registrar Allaway. This review application was heard by Judge Burchardt in this Court on 17 September 2014 with judgment delivered on 7 November 2014. Judge Burchardt dismissed the application for review and affirmed the sequestration order: see Body Corporate SP 31235U v Miao [2014] FCCA 2457.

7.      The Applicant appealed Judge Burchardt’s decision, which was heard by Justice Beach in the Federal Court. The appeal was dismissed on 13 April 2015: see Miao v Owners Corporation SP 31235U [2015] FCA 352.

8.      The Applicant subsequently commenced Federal Court proceeding number VID17/2015.  The proceeding arose out of a refusal by the Respondent to allow the Applicant to travel overseas.  The Applicant’s application was heard and determined by His Honour Justice Beach on 27 January 2015: see Miao v Michell [2015] FCA 22.

9.      The Applicant commenced proceeding numbers OC1562/2014 and OC1803/2014 in the Victorian Civil and Administrative Tribunal.  Those proceedings disputed the ability of the Respondent to collect rent in respect of a property situated at 2/144-148 Nicholson Street, Footscray (‘Property’).

10.    In this Court, the Applicant commenced proceeding MLG 1439/2015.  That proceeding, which was commenced against the Respondent, sought the Respondent’s removal from office and an order that the tenants pay rent directly to the Applicant.  The application was dismissed by Judge Riethmuller: Miao v Michell [2015] FCCA 2910.

11.    The Respondent then commenced a proceeding in this Court numbered, MLG 1356/2016, against the Applicant.  The Respondent sought a new certificate of title in respect of the Property.  On 1 August 2016, Judge Burchardt ordered the issue of a new title.

12.    Then, in proceeding number MLG 1004/2018 the Applicant sought in this Court, an urgent injunction to restrain the Respondent from selling the Property.  The matter was heard by Judge Kelly who dismissed the Applicant’s application: see Miao v Michell [2018] FCCA 1068.

13.    The Applicant sought leave to appeal the decision of Judge Kelly in the Federal Court of Australia in proceeding number VID 594/2018.  The matter was heard and determined by Justice Steward who dismissed the application: see Miao v Michell [2018] FCA 2000.

The conduct of this proceeding

14.    As mentioned above, this proceeding was commenced by the Applicant on 24 September 2018.  The Application included an application for interim relief, filed on the same date.

15.    In support of the Application, the Applicant filed three affidavits each affirmed on 21 September 2018.

16.    A perusal of the Application and the accompanying affidavits of the Applicant discloses that the Applicant sought to agitate a number of claims. The nature of those claims in many instances is not clearly expressed. This is unsurprising. The Applicant has been unrepresented throughout the proceeding. 

17. The Applicant’s Application for interim relief came on before Judge Wilson (as His Honour then was) on 25 September 2018. Wilson J, in an ex-tempore judgement delivered on 27 September 2019 and subsequently transcribed in [2018] FCCA 2859, refused the Application for interim relief.

18.    In arriving at his decision, Wilson J noted that the Applicant’s application to stop the sale of the Property by the Respondent had been traversed before Judge Kelly of this Court.  Further, His Honour noted that the judgment of Judge Kelly was the subject of an appeal in the Federal Court before Justice Steward.  At the time the matter was dealt with by Judge Wilson, the appeal before Justice Steward had not been determined.  It has since been determined unfavourably for the Applicant, as noted at paragraph 15 above.

19.    Following the judgment of Judge Wilson  on 27 September 2018, the Applicant filed a Statement of Claim on 25 January 2019 (defined earlier as the ‘Claim’). The Applicant also filed an affidavit in support of the Claim affirmed on 25 January 2019.

20.    A further hearing was conducted by Judge Wilson on 27 February 2019 in relation to all outstanding claims in the Application and the Claim.  The Applicant appeared in person at that hearing.  The Respondent was represented by Ms Gobbo of Counsel.  His Honour was subsequently appointed to the Family Court of Australia prior to delivering  judgment in relation to these matters.

21.    As a result of Judge Wilson’s elevation to the Family Court of Australia, it became necessary to rehear the matter.  Following case management, the matter was listed before me to be reheard on 24 July 2019.

22.    When the matter came on before me, the Applicant did not appear.  She was called formally outside of Court and did not respond to the call.  No communication was received by my chambers in relation to the Applicant’s whereabouts.  While the Applicant as an unrepresented litigant may not be expected to understand all Court procedures, the Applicant had previously communicated to the Court her inability to attend a directions hearing before Judge McNab on 24 April 2019.   No similar communication was received by my chambers. I am satisfied that the Applicant knows what to do if she is not able to attend court.

23.    My chambers in fact emailed both the Applicant and Respondent on 22 July 2019 informing them that the time of the hearing had changed from 10am to 10:30am on the same day, being 24 July 2019. Further, Judge McNab’s chambers emailed both parties with a copy of the Orders made on 24 April 2019, which listed this matter for hearing before me on 24 July 2019 at 10am.

24.    After hearing from Ms Gobbo, I determined to proceed to hear and determine the matter in the absence of the Applicant.  I did so on the basis that I would have regard to all of the affidavit material (which is extensive) filed by the Applicant in this matter, the Applicant’s written submissions (which are also extensive) and the transcript of the hearing before Judge Wilson. 

The Law

25. Section 90-15(1) of Schedule 2 to the Act provides that the Court may make such orders as it thinks fit in relation to the administration of a regulated debtor’s estate. Subsection (3) provides that the orders a Court may make include, relevantly, an order determining any question arising in the administration of an estate, or an order that a person cease to be the trustee of the estate. The Court may also make an order in relation to any loss that the estate has sustained because of a breach of duty by the trustee.

26. Section 90-15(4) of the Act provides that in making an order, the Court may take into account the following:

a)        whether the trustee has faithfully performed, or is faithfully performing, the trustees duties;

b) whether action or failure to act by the trustee is in compliance with the Act and the Insolvency Practice Rules;

c)        whether an action or failure to act by the trustee is in compliance with an order of the court;

d)        whether the regulated debtors estate or any person has suffered, or is likely to suffer, loss or damage because of an action or failure to act by the trustee; and

e)        the seriousness of the consequences of any action or failure to act by the trustee, including the effect of that action or failure to act on public confidence in registered trustees as a group.

27. Section 90-15 of Schedule 2 to the Act effectively replaces the former sections 178 and 179 of the Act.

28.    In Moore v Macks [2007] FCA 10, Besanko J considered the operation of section 178 of the Act. Justice Besanko held that the fundamental purpose of section 178 of the Act is to give the Court a supervisory role to review acts, omissions or decisions of the trustee. Besanko J also held that the operation of the section was to be understood in its historical context and in the context of the broader relationship between the court and the trustee in bankruptcy as an officer of the court.

29. A review of the relevant authorities in respect of this section also discloses that the following considerations are relevant to the operation of section 178 of the Act:

a) When acting pursuant to section 178, the Court is carrying out a supervisory role judicially, rather than an administrative role standing in the shoes of the trustee. Grounds for judicial review must be established by an applicant: Re Wheeler; Ex parte Wheeler (1994) 54 FCR 166 at [170]. The exercise of the Court’s power is wholly in its discretion.

b)        The act, decision, or omission of the trustee under review need not be absurd, unreasonable or taken in bad faith before it is subject to review: Re Tyndall; Ex parte Official Receiver (1977) 17 ALR 182 at [186]. The act, omission or decision may be subject to review even though it was commercially sound at the time it was made: Macchia v Nilant (2001) 110 FCR 101. The trustee’s opinion will be a relevant factor in the exercise of the Court’s discretion. The fact that the Court might take a different course to the trustee in bankruptcy at the relevant time is not a basis to disturb the trustee’s decision: Re Tyndall at [186].

c)        The Court’s exercise of discretion is subject to the principle that the Court will not unduly interfere with the day-to-day administration of a bankrupt estate by the trustee in bankruptcy: Re Tyndall at 186.

d) Section 178 of the Act does not provide a vehicle for the bankrupt to pursue his or her personal interests at the expense of creditors (Cummings v Claremont Petroleum NL (1996) 185 CLR 124 at [139], nor does it create a cause of action which sounds in damages: Macchia.

e)        Ultimately, the question is what result would be ‘just and equitable’ in the circumstances of the case.

30.    Regard also needs to be had to the decision of Justice Riley in Re Alafaci; Registrar in Bankruptcy v Hardwick (1976) 9 ALR 262. In this matter, the Registrar in Bankruptcy called for an inquiry into the conduct of a trustee. At page 268, Justice Riley stated:

‘Before the application is heard, therefore, the trustee will know the grounds on which the court will be asked, inter alia, to inquire into his conduct and the facts on which the Registrar proposes to rely in support of his application that the court do so inquire.

…

… in such a case there is a preliminary question to be decided by the court-namely on the grounds and the 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 – e.g. in the form: ‘did the trustee do (or fail to do) so-and-so?’ – and to give directions before proceeding to inquire’.

31. Section 179 of the Act was also the subject of comment before Justice Besanko in Moore v Macks. Besanko J held that section 179 was governed by similar, but not identical considerations, to those which are relevant to section 178 of the Act. I do not propose to traverse all of the observations made by Justice Besanko in respect of section 179, other than the following:

a) Section 179 of the Act reflects a more general operation of the Court’s supervisory role and permits the Court to carry out or inquire into the ‘conduct’ of a trustee in relation to a bankrupt estate or affairs;

b) Section 179 of the Act requires a court to engage in a process which may involve two stages. First, to consider whether there is a basis to inquire into the conduct of a trustee. Second, if an inquiry is undertaken, the Court must consider what, if any order, should be made as a result of the inquiry. If there is no basis to inquire into the conduct of the trustee, it is not necessary to consider the second stage.

c)        The issue of whether to conduct an inquiry is in the broad discretion of the Court, however a court should be reluctant to conduct an inquiry unless there are ‘substantial grounds for believing that the trustee erred in his administration’: see Re Gault, Gault v Law (1981) 57 FLR 165 at [173]. The requirement has also been put in terms of ‘sufficient grounds’ (see Re Gault) and ‘a proper cause to believe that the trustee may have failed to act in relation to a bankruptcy in the manner required by the Act or the general law’: Wilson v Commonwealth of Australia [1999] FCA 219.

d) The onus is on the applicant to establish the grounds or case for an inquiry. Further, as with section 178 of the Act, a Court ought not unduly interfere with the day-to-day administration of a bankrupt estate by a trustee in bankruptcy: Re Tyndall at 120.

32.    When the authorities above are considered, it is apparent that the principal issue that the Court needs to consider is whether the Applicant has established the basis for an inquiry into the conduct of the Respondent.  In order to determine that issue, it seems to me, having regard to the authorities set out above, that the following issues arise and need to be considered by the Court:

a)        The Respondent as trustee must know the grounds on which the Court will be asked to inquire;

b)        The grounds for review must be established by the Applicant;

c)        Whether a review is in order is ultimately a matter for the Court exercising its discretion in conformance with law;

d)        The Court’s discretion is wide and should be exercised having regard to what is just and equitable;

e)        The Court, in exercising its discretion, should not unduly interfere with the day-to-day administration of a bankrupt estate;

f) The Court will not ordinarily initiate an enquiry under section 179 unless it is satisfied that a proper case for an inquiry has been demonstrated (although this is not a rule that is of universal application).

33.    I now turn to consider the evidence in this matter having regard to the principles set out above.

The failure of the Respondent to lease part of the Property

34.    Many of the Applicant’s claims and complaints, including apparent claims for compensation, relate to her allegation that the Respondent failed to lease a part of the Property. These claims are set out in various documents filed by the Applicant including by the Applicant in paragraph 3.1 of the Application, proposed order 4 of the Application and paragraph 5 of the Claim.

35.    The essence of the allegation is contained in paragraph 2 and paragraph 9 of the Affidavit for Statement of Claim affirmed by the Applicant on 21 September 2018, and paragraph 2 of the Applicant’s Affidavit for Amended Claim affirmed on 25 January 2019.  The allegation is a bald allegation that the Respondent left 50% of the Property vacant for years thereby reducing the rental income.  There is also a complaint about the Respondent inventing third-party costs and expenses.

36.    The Respondent has filed comprehensive affidavits in this proceeding.  In his affidavits, he has given detailed evidence about the circumstances which led to the non-leasing of 50% of the Property.  In paragraphs 7 to 14 of his affidavit sworn on 13 February 2019, the Respondent gives a detailed account of what occurred.  He deposes, among other things, to the fact that a partition wall had been erected without permit approval, thereby dividing the property into two shops, that the Applicant then entered into lease arrangements with the tenants without knowledge or consent of the Respondent, and the failure of the tenant in shop 2A to pay rent, which led to that tenant’s eviction.  The Respondent also deposes that, while the tenant in shop 2A was evicted in around March 2017, the goods were not removed until mid-2017 despite notice being given by the Respondent.

37.    The Respondent also deposes, without waving privilege, that he obtained advice about the risks of reletting or selling the premises in the absence of permits authorising the division of the Property.  On that basis, the Respondent moved to sell the property on a ‘where is, as is’ basis.  Once that decision was made, the Respondent deposes that he determined it was not appropriate to lease out shop 2A.

38.    The Respondent explained his decision regarding the reletting of the Property to the Applicant in a letter dated 28 February 2018. The circumstances surrounding the leasing of shop 2A and the steps the Respondent took in relation to it are also set out in a notice that the Respondent gave to creditors dated 16 January 2019. That information is detailed on pages 4 and 5 of the Creditors report annexed as SJM-13 to the Respondent’s affidavit sworn on 13 February 2019. 

39.    It is pertinent to point out that the partition of the Property into two shops, the leasing of the two shops by the Applicant to the tenants directly after the trustee’s appointment without the trustee’s knowledge or consent, and the fact that the trustee was not able to attain a copy of the lease are all facts that are not challenged by the Applicant.

40.    Counsel for the Respondent submitted that, when the material in relation to the reletting of the Property is looked at, the Respondent was simply exercising ordinary commercial judgement in the course of a trustee administering the estate. I accept that submission. Faced with the circumstances that he was faced with, which included the Applicant entering into leases after his appointment, and only discovering the partition and the fact it was not approved under permit after his appointment, the Respondent appeared to take what steps were necessary to ensure the administration of the estate, in those circumstances, was as smooth as possible.  I am unable to discern any unreasonable conduct or any bad faith displayed by the Respondent in his attempts to realise an asset for the creditors.  I am satisfied that this ground does not give rise to any basis for an inquiry having regard to the principles distilled above, and that this ground does not give rise to making an order for the relief claimed.

Improper transfer of the Property to the Respondent

41.    This claim arises from Proposed order 2 of the Application.  Proposed order 2 of the Application is not expressed in clear terms.  I understand it to be a complaint about the transfer of the Property to the Respondent.  In her ‘Affidavit for Statement of Claim’ affirmed on 21 September 2018, the Applicant at paragraph 8 makes assertions of an inappropriate and unlawful transfer of the Property to the Respondent.

42. This allegation is misconceived. The Applicant is a bankrupt and has been declared as such. Under section 58(1)(a) of the Act, the property of a bankrupt vests in the trustee, in this case, the Respondent. This claim of the Applicant is misconceived and I do not regard it as giving rise to any basis to order an inquiry, or making an order for the relief claimed.

The contract of sale for the Property is illegal

43.    At paragraph 11 of her ‘Affidavit for Amended Claim’ affirmed on 25 January 2019, the Applicant makes the allegation that the special conditions clause set out in clause 21.1 of the Contract of Sale for the Property was illegal.  The substance of the clause referred to by the Applicant deals with sums of money owed to the Owners Corporation.

44. Two observations are to be made about this complaint at the outset. First, while the Applicant takes issue with the clause, she does not identify with any precision how the special condition in the contract about which she complains is invalid. Secondly and more fundamentally, the Applicant is not a party to the contract of sale. Her property has, for the reason set out earlier, vested in the trustee. In these circumstances, she has no standing to challenge the contract of sale, save and except if she can identify a basis for an inquiry under section 90-15 of Schedule 2 to the Act.

45.    The Respondent has dealt with this aspect of the Applicant’s claim at paragraphs 15 and 16 of his affidavit sworn on 13 February 2019.  In substance, the Respondent deposes that there were outstanding amounts owed to the Owners Corporation which, by law, attach to the property.  He also deposes that the way in which he dealt with this was to adjust the purchase price to take account of the outstanding Owners Corporation fees that were owed.  These were matters about which the Respondent took advice.

46.    I see nothing untoward in the approach taken by the Respondent in relation to this issue.  It again represents ordinary commercial judgement of a trustee in the position of the Respondent. I do not regard the complaint by the Applicant as giving rise to any basis to order an inquiry having regard to the principles discussed earlier, or making an order for the relief claimed.

The sale of the Property including an injunction to stop the sale, and orders to reinstate the Property to the Applicant

47.    As best can be ascertained, this claim relates to the engagement of a real estate agent to sell the Property.  It arises from Ground 2 of the Application. The Applicant also claimed that the sale of the Property was a sham.

48.    This claim has been dealt with by the Court previously. Judge Wilson refused to grant an injunction restraining the sale of the property: see Miao v Michelle [2018] FCCA 2859. That is the subject of Wilson J’s Interim decision of 27 September 2018. Moreover, as noted earlier in these reasons, there had been an earlier application before Judge Kelly and an appeal from the decision of Judge Kelly to the Federal Court of Australia that was heard by Justice Steward. Justice Steward dismissed the Applicant’s appeal.

49.    In short, there are three things to be said about this. First, these claims have been dealt with. Second, to the extent there might be any residual issue, I am not satisfied that the Respondent did anything other than exercise ordinary commercial judgment in seeking to realise assets for creditors. Third, the property had, by the time this hearing occurred, been sold.

50.    Given the above, these matters have been dealt with and could not form the basis of the Court ordering an inquiry or granting any relief claimed.

Permission to lease the Property

51.    This claim arises from proposed order 5 of the Application. In this proposed order, the Applicant seeks an order permitting her to lease the vacant part of the Property.

52.    As has already been noted, the Property has been sold and for the reasons previously articulated, I am satisfied there was not anything untoward in relation to the Respondent’s actions in selling the Property. This allegation cannot found the basis for the Court to conduct an inquiry, or order other relief.

The complaint about the Respondent’s remuneration

53.    The Applicant makes various complaints about the remuneration and expenses of the Respondent in his position as trustee.  These complaints are articulated in the Applicant’s ‘Affidavit for Interim Application’ affirmed on 21 September 2018 from paragraph 11 through to paragraph 14.  They cover a range of matters.  It is not always easy to identify with precision the substance of the complaint.  The task is made more difficult given that in many cases the complaint is comprised of bald assertions, without any context or specific facts tied to times, dates and places.

54.    In his affidavit sworn on 13 February 2019, the Respondent deposes as to the situation with his remuneration. At paragraph 21 of his affidavit, he gives evidence that, as at 30 November 2018, he had obtained approval from creditors for his remuneration in the amount of $50,201.50 plus GST.  He also gives evidence that his outstanding remuneration as at that date totalled $192,345.25 excluding GST.

55.    On 16 January 2019, the evidence discloses that the Respondent issued a report to creditors. The Creditors’ Report is annexed as SJM-13 to the Respondent’s affidavit. The Report includes a statement of receipts and payments for the estate for the period 3 July 2014 to 10 January 2019.  All monies received by or paid from the estate have been recorded, including rental payments. The Report also documents a number of other matters, including the litigious history of the Applicant.

56.    A close review of the Report discloses that the Respondent provided a detailed account of the situation pertaining to his remuneration. Pages 30 and 31 of the Creditors’ Report make clear that the Respondent disclosed to creditors the details of his remuneration and prepared an explanation of the additional costs that have been incurred. The Respondent also included a notice of proposed creditors’ resolution in relation to this remuneration and further notices in relation to internal disbursements incurred.

57.    Finally, at paragraph 25 of his affidavit, the Respondent deposes that on 8 February 2019, creditors approved his request for additional remuneration in the amount of $192,345.25 plus GST for the period 1 September 2014 to 30 November 2018. Internal disbursements were also approved by creditors.

58.    It is to be observed that the Respondent has given a thorough and detailed account of the estate monies and his own remuneration.  The Applicant’s assertions that there have been false invoices or amounts charged improperly, lack particularity, are without merit and, in many cases, are scandalous. 

59.    There is little doubt that the Respondent’s remuneration in the administration of the estate is not insignificant. I must say, however, that when regard is had to the explanation, and litigious history of the Applicant, it is not difficult to draw a conclusion that the Respondent’s fees and expenses in administering the estate have arisen in large part because of the conduct of the Applicant and, in particular, her failure to cooperate with the Respondent in his capacity as trustee.

60.    Having considered the above matters, I am not satisfied that the Applicant’s complaints in relation to the Respondent’s remuneration, or his accounting of the estate monies (including allegations relating to false invoices and charges) are capable of forming the basis for the Court to order an inquiry or giving rise to any other relief claimed by the Applicant.

The claims for damages

Damages for loss of rent

61.    There are various components to the claim for damages. One of the claims that is clearly articulated is a claim for damages arising from the decision of the Respondent not to rent out 50% of the Property. The claim is articulated in, among other places, at paragraph 2 and 3 of the Applicant’s ‘Affidavit for Amended Claim’ affirmed on 25 January 2019.

62.    I have already traversed the circumstances that gave rise to the Respondent electing not to lease half of the Property.  The Respondent had a basis for his actions, and this complaint does not give rise to the grant of relief sought by the Applicant. 

Damages for non-admitted proof of debt

63.    The Applicant seeks an order in her Claim at proposed order 1 of the order sought that the Court add $177,406.59 to the net amount to be returned to the Applicant and that the not admitted proof of debt of $120,000 be not available for distribution to creditors.  The Applicant’s evidence about these matters, such as it is, is set out in paragraph 4 of the Applicant’s ‘Affidavit for Amended Claim’ affirmed on 25 January 2019.  The substance of the complaint made by the Applicant is not easy to distil. Having reviewed the material, I agree with Counsel for the Respondent that the substance of the complaint appears to be that the Owners Corporation fees are not quantified to an amount that the Applicant feels able to agree with, or alternatively, the assertion that there is some form of illegality attaching to the fees.

64.    This, again, is a matter about which the Respondent has given some detailed evidence. His evidence is set out in paragraphs 26 to 40 of his affidavit sworn on 13 February 2019.  I do not propose to repeat all of the material in the affidavit but note the following:

a)        The Respondent received a proof of debt from the Owners Corporation dated 22 March 2018 in the sum of $116,098.62.  The Respondent gives evidence about the components of that notice.

b)        The Respondent then details the reasons why the proof of debt was different from the value of the liability assumed by the purchaser upon the sale of the property.

c)        The Respondent received regular statements of account from the Owners Corporation, including a final certificate in respect of the impending sale of the Property on 28 November 2017.  The amount of the debt in that final certificate was $208,974.79.

d)        The Respondent instructed his staff to conduct a review of the notice.  He also obtained advice in relation to what were admissible amounts in the context of the bankruptcy.  As a result of these reviews and the advice sought, the final certificate issued by the Owners Corporation on 5 October 2018 was for an amount of $174,691.86.  The Respondent also provides an explanation of why this amount differs from the adjustment that occurred in respect of the settlement of the Property on sale.

65.    I accept the evidence of the Respondent in relation to the steps that he took in respect of the proof of debt issued by the Owners Corporation.  When that evidence is considered in context, it is obvious that the Respondent took appropriate steps to review the debt notices being issued by the Owners Corporation to ensure that they were appropriate, and the components going to the make-up of the notice were admissible.  I am unable to discern any basis for the proposition that the proof of debt issued by the Owners Corporation was somehow unlawful, or not properly quantified.  I am not persuaded that this complaint is capable of supporting the relief sought by the Applicant.

Other damages claims

66. I have dealt with the claims for damages largely on the basis that they have been argued by the Applicant in the context of seeking relief under section 90-15 of Schedule 2 to the Act.

67.    It is unclear whether the Applicant also seeks damages on some other basis.  For example, some of the allegations allege ‘breach of duty’ and may be said to give rise, for example, to a claim for damages in tort or otherwise.

68.    To the extent that such claims are pressed, the Applicant faces two fundamental issues.  The first is that she has not established her standing to make that claim in the present circumstances.  Secondly, and just as significantly, the claims that she may be seeking to advance are not particularised and the evidence to support such claims is scant.  On the basis of the materials that I have reviewed, I am not satisfied that the Applicant has identified a basis upon which a claim for damages could succeed.

69.    The other matter that arises is that the Respondent as trustee has a duty to efficiently administer the estate.  A trustee is not required to take any steps which would be unrealistic or expensive, and it is not the role of the trustee to act as directed by the bankrupt.  As has been canvassed earlier, when the complaints of the Applicant are looked at, I am unable to identify any basis upon which it might be said that the Trustee has acted arbitrarily, capriciously or otherwise in bad faith.  Rather, the actions of the trustee appear to me to be an exercise of day-to-day commercial judgement by the trustee seeking to administer a bankrupt estate to the best of his or her ability.

70.    For the above reasons, to the extent that the Applicant seeks to advance claims for damages in a general sense, I would dismiss those claims for the reasons set out above.

The misconduct allegations against the Respondent

71.    Finally, the Applicant sets out at paragraph 19 of her ‘Affidavit for Amended Claim’ affirmed on 25 January 2019 many instances of misconduct said to be attributable to the Respondent.  This list largely mirrors the content of paragraph 12 of the Claim.

72.    A review of paragraph 19 of the Applicant’s Affidavit discloses that the assertions made are sweeping and broad ranging.  There are few facts pleaded such as would constitute evidence in an admissible form.

73.    Set against the Applicant’s failure to provide proper evidence, the Respondent, doing the best that he can given the vague nature of the allegations, has attempted in paragraph 41 of his affidavit sworn on 13 February 2019 to deal with the allegations.  The Respondent specifically rejects all of the allegations of misconduct that are levelled against him.  He then sets out his explanation in relation to each of the claims advanced by the Applicant.

74.    In considering this issue, regard should also be had to the nature and content of the Applicant’s largely unspecified claims. My observations on this are recorded below and apply with equal force here.

75.    I am satisfied having reviewed this material that the Applicant has failed to provide any evidence in an admissible form for the Court to properly consider.  When that is taken into account, alongside the Respondent’s specific denials, it follows that I am satisfied that the Applicant has not been able to make good any allegation of misconduct on behalf of or by the Respondent, such as to warrant the Court ordering an inquiry or granting any of the relief sought by the Applicant.

Other claims

76.    There are a number of other claims advanced by the Applicant in the material that she has filed.  It is not always possible to identify with precision exactly what the nature of the claim was.  In many cases, sweeping assertions  have been made without any particulars or alleged facts.  In other cases, allegations which are scandalous in nature have been made without any attempt to particularise properly those claims. 

77.    The nature of the allegations made by the Applicant in this matter were the subject of a series of observations made by Judge Wilson when he decided the Applicant’s claim for interim relief.  Those observations related both to the Applicant’s assertions and conduct before the Court.  At paragraph [23], Wilson J stated:

Before separately addressing each of the trustee’s propositions, it is necessary to say a little about the applicant’s assertions in respect to the trustee’s conduct. First, I regard it as disgraceful that, under the cloak of privilege, the applicant has filed an affidavit in which she asserts such scandalous criticisms of the trustee. But her criticisms were not limited to the trustee, as she also asserted that his Honour Judge Burchardt did not bring an open mind to the adjudication process. Even recognising that she is a litigant in person for whom the niceties of civil litigation may be anathema, she must desist forthwith from making baseless accusations of judges and officers of this court. Lest it be necessary to state as much, this court has power to prohibit a litigant from commencing litigation without leave. I have made orders that effect in the past, one illustration of which was in Baycorp Collections PDL (Australia) Pty Ltd v Reaper (No 2)[[2017] FCCA 244]. Litigation commenced by a bankrupt that is an abuse of process may very well be dealt with sanguinely by orders permanently staying the proceeding or by orders prohibiting a litigant from instituting litigation hereafter without leave. Unsubstantiated assertions that the trustee stole the applicant’s property or that he committed perjury or that he fabricated evidence or that he misappropriated large amounts of money could very well support a motion for such an order. Citation omitted.

78.    In paragraph [25] of his judgement, Wilson J went on to say:

Next, it is necessary to point out that the applicant’s assertions about the loss she said she will suffer if the sale is effected were wholly unparticularised. She bore the evidentiary burden to make out a case for the injunction she sought. She needed to prove her entitlement to an injunction on the balance of probabilities. She failed to persuade me that she had or will suffer losses that cannot be compensated, assuming she could prove some legal entitlement to compensation. It must not be forgotten that she has been a bankrupt for four years. During that period, she has thwarted the trustee’s legitimate efforts to perform his duties, those duties being recorded by French J in Macchia v Nilant, namely to maximise the return from the realisation of assets and to return any possible surplus to the bankrupt. Citation omitted.

79.    Finally, in paragraph [27] of his judgement, Wilson J stated:

Turning now to the applicant’s compliance or otherwise with her obligation to make full and frank disclosure, the applicant failed to meet that obligation. The obligation to make full and frank disclosure is of undeniable application in this case. Indeed, the obligation’s origins go back to the 1800s in such cases of Brown v Newall [(1837) 40 ER 752], Adelaide Steamship Co and O’Brien v Australasian Temperance and General Mutual Life Assurance Society Ltd [(1891) 24 SALR 128]. In this case, the applicant did not comply with that obligation by informing me of all relevant facts. Instead, she used her affidavit to mainly deride the trustee and to accuse him unfairly of misconduct, no details of which had been provided. It seemed to me that the applicant was committed to waging a personal war on the trustee, to cause him to expend large sums in legal costs and to otherwise do her best to torpedo any sensible overture to realise the property. Conduct of that sort should not be sanctioned [in] this court. Citations omitted.

80.    Having reviewed the allegations in this matter, I agree with the observations made by Judge Wilson. While I accept the Applicant is unrepresented, when a review of these and other claims is examined, it is apparent that there is little if any factual basis to what amount to outlandish claims levelled against the Respondent and others. The lack of any specific facts to support these claims means that I do not give any weight to them and do not have regard to them. This is to be contrasted with the thorough explanation given by the Respondent in relation to all matters and particularly, insofar as the Applicant alleges losses and claims for compensation, the statement of his accounts which are set out in the Creditors’ Report referred to earlier.

81.    Finally, regard should be had to correspondence that the Respondent exchanged with the Australian Financial Services Authority (‘AFSA’).  The relevant correspondence is set out in an affidavit from the Respondent sworn on 1 July 2019. In his affidavit, the Respondent deposes that he was contacted by AFSA and that they informed him that a complaint had been made by the bankrupt about him.  In response to the concerns raised by AFSA, one of the Respondent’s staff members sent an email to AFSA with a number of attachments that pertain to the bankruptcy.  The information sent to AFSA included the report to creditors, a summary of receipts and payments made over relevant periods, details of the Respondent’s remuneration and details of the then work in progress.  Also sent to AFSA was a letter from the Respondent to the Applicant dated 20 December 2018.

82.    On 18 January 2019, the Respondent received a response from AFSA The content of that response, which is annexed as SJM-20 to the Respondent’s affidavit, discloses that AFSA had no concerns about how the bankruptcy had been administered.

83.    This Court is not bound by AFSA’s view in relation to how the bankruptcy has been administered.  It is, however, an important piece of correspondence in the context of this matter when the entirety of the Applicant’s complaints are considered.  The context of this matter is that the Applicant has made numerous complaints about the conduct of the bankruptcy and in particular, the conduct of the Respondent.  As I have found, and as others have found, there is not a basis for the Applicant’s complaints and many of them are made without proper foundation in fact.  That AFSA has not identified any wrongdoing by the Respondent in relation to the Respondent’s administration of the bankruptcy is an important matter to note and one which fortifies the view of this Court that the Applicant has failed to raise any issues that would warrant the Court or anyone else interfering in the administration of the Bankruptcy or granting any of the relief sought by the Applicant.

Disclosure of or access to court file MLG 1356/2016

84.    Finally, the Applicant sought orders disclosing the above case file. This is set out in ground 1 of the Application, ground 11 and proposed order 5 of the Claim.

85.    The Respondent does not take issue with this claim for relief.  This was communicated to Judge Wilson on the last occasion.  The Respondent also confirmed in his most recent affidavit sworn on 1 July 2019 that he has no objection to the Applicant being able to search the Court File.  The Respondent has also caused to be sent to the Registry of this Court, a letter indicating that he does not object to the Applicant inspecting the file.  In light of that correspondence, in this matter appears to have been resolved and there is no need for me to make an order in respect of it.

86.    For the above reasons, I am satisfied that the Applicant has not discharged the onus to establish a proper case for an inquiry. I am also satisfied the Applicant is not entitled to any of the other relief she has claimed. I dismiss all of the Applicant’s claims in the Application and the Claim.

I certify that the preceding eighty-six (86) paragraphs are a true copy of the reasons for judgment of Judge Blake

Associate: 

Date: 22 August 2019