Miao v Michell
[2018] FCCA 2859
•27 September 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MIAO v MICHELL | [2018] FCCA 2859 |
| Catchwords BANKRUPTCY – Injunction to restrain settlement of sale of a property – no serious issue to be tried – balance of convenience did not favour applicant – applicant as an undischarged bankrupt unable to proffer a meaningful undertaking as to damages – no evidence that applicant had suffered losses that cannot be compensated. |
| Legislation Bankruptcy Act 1966 (Cth), ss.58(1), 176, 178 Owners Corporation Act 2006 (Vic) |
| Cases cited Adelaide Steamship Co v Martin (1879) 5 VLR (E) 45 |
| Applicant: | SHIRLEY MIAO |
| Respondent: | STEPHEN JOHN MICHELL |
| File Number: | MLG 2865 of 2018 |
| Judgment of: | His Honour Judge Wilson |
| Hearing date: | 27 September 2018 |
| Date of Last Submission: | 27 September 2018 |
| Delivered at: | Melbourne |
| Delivered on: | 27 September 2018 |
REPRESENTATION
| Applicant: | In person |
| Solicitors for the Applicant: | None |
| Counsel for the Respondent: |
| Solicitors for the Respondent: | SLF Lawyers |
ORDERS
The application for an urgent interim injunction filed on 24 September 2018 is refused.
The applicant pay the trustee’s costs on an indemnity basis.
The further hearing of this proceeding is adjourned to 26 October 2018 at 10:15am to consider any other or further application brought, otherwise this proceeding will stand dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 2865 of 2018
| SHIRLEY MIAO |
Applicant
And
| STEPHEN JOHN MICHELL |
Respondent
REASONS FOR JUDGMENT
(ex tempore)
Unit 2, 144-148 Nicholson Street, Footscray, was once owned by Shirley Miao, the applicant in this proceeding. It is a retail premises consisting of two retail shops. The registered proprietor of that unit was required to pay levies owing from time to time to the owners corporation under the Owners Corporation Act 2006 (Vic).
Pursuant to an order of a registrar of this court made on 3 July 2014, a sequestration order was made against the estate of the applicant. Registration of Unit 2, 144-148 Nicholson Street, Footscray, vested in the respondent pursuant to s 58(1)(a) of the Bankruptcy Act. The applicant should have been discharged from her bankruptcy by now. But, on the respondent’s objection, the Australian Financial Security Authority determined that the applicant’s bankruptcy will end on 28 January 2023. The respondent is presently unwilling to annul the applicant’s bankruptcy.
It is fair to say that the applicant has not been cooperative with the respondent in the administration of her bankruptcy. The respondent has been forced to apply to this court many times by reason of the applicant’s uncooperative approach. Importantly, the applicant has not taken any steps to set aside the judgment on which the sequestration order was based nor has she applied to compromise her liability or otherwise to satisfy the respondent’s claim.
The debt on which the sequestration order was based was not the subject of detailed evidence in this application. The affidavit material advanced by the respondent’s solicitor was surprisingly scant on the issue. Even recognising that the respondent was forced to respond to this application hurriedly, the solicitor for the trustee in bankruptcy chose to exhibit to the solicitor’s affidavit a collection of other affidavits and exhibits yet none of those affidavits or the exhibits to those affidavits revealed details of the debt on which the sequestration order was based.
That was relevant as it bore directly on the observations recently made by the High Court in Ramsay Health Care Australia Proprietary Limited v Compton.[1] When I pointed out to the solicitor for the trustee that his affidavit material was defective in that regard and that, on the return of an application such as this, information about the underlying debt should have been at his fingertips, he attempted to argue that it was the applicant’s application and she bore the onus in evidentiary matters. While I accept that the applicant was and remained the applicant in this injunction application, the solicitor for the trustee ignored, in my view erroneously, that the applicant was a litigant in person unfamiliar with evidentiary niceties and that the trustee, as an officer of the court, and his solicitor, also an officer of this court, should have adduced the key information in this case on such uncontroversial issues. I was not much assisted by that approach. In the small hours overnight, I ascertained from my own research that the relevant debt was an undefended judgment obtained on 18 June 2012 in the Magistrates’ Court at Sunshine in which Body Corporate SP31235S sued the applicant for $53 763.89 with costs of $1 292.
[1] [2017] HCA 28
The trustee’s solicitor did not explain to me the relevance or significance of other taxation orders. Those included –
a)Registrar Conidi’s orders made on 19 July 2016 for $12 250 against the applicant;
b)a registrar of this court’s order made on 20 December 2016 for $14 203;
c)a further order of a registrar of this court also made on 20 December 2016 for $8 450; and
d)an order of a registrar of the Federal Court of Australia made on 23 August 2016 for $15 960.
For some time the respondent has been endeavouring to sell the property that is the subject of this proceeding. The applicant attempted to enjoin those efforts in April of this year when she sought an injunction before his Honour Judge A J Kelly QC in this court. Her application failed.[2] She had earlier applied unsuccessfully for relief before his Honour Judge Burchardt of this court. The trustee’s solicitor told me the applicant has appealed against the orders of his Honour Judge A J Kelly QC and that the Honourable Justice Steward of the Federal Court of Australia will soon convene a case conference in that appeal.
[2] Miao v Michell [2018] FCCA 1068
The solicitor for the trustee told me that in August of this year the trustee entered into a contract for the sale of the subject property, settlement of which is to be effected on 28 September 2018. The sale price in the contract is $480 000. The copy contract exhibited to the trustee’s solicitor’s affidavit revealed that $48 000 of that sum had been paid, leaving $432 000 to be paid at settlement.
The applicant contended that no deposit had been paid. She had no basis for that contention. It stood at odds with the copy contract. I am not willing to find that no deposit was paid. In court, I saw the solicitor for the trustee ask the trustee whether the deposit had been paid as a matter of fact and was told that the sum of $48 000 had in fact been paid into a trust account. The trustee was at all relevant times an officer of this court. I accept his word on the matter and preferred it to the unsubstantiated assertion to the contrary by the applicant.
In essence, in this application the applicant sought orders stopping settlement of the sale to the purchasers due on 28 September 2018. Being unrepresented, the applicant was unable to formulate submissions that addressed the key criteria for the grant of an injunction as espoused in such cases as Beecham Group Ltd v Bristol Laboratories Pty Ltd,[3] Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd[4] and Australian Broadcasting Corporation v O’Neill.[5] I requested the trustee’s solicitor to endeavour to tell me, as best he understood, what was the serious issue to be tried and whether the balance of convenience favoured the making or dismissing the order for the injunctive relief that was sought. The trustee’s solicitor distilled three propositions, yet they amounted to two only, namely –
a)a contention that the sale to the purchasers whose contract will settle on 28 September 2018 is a sham; and
b)a contention that the applicant has and continues to suffer losses arising out of the conduct of the administration of bankruptcy.
[3] (1968) 118 CLR 618
[4] (2001) 208 CLR 199
[5] (2006) 227 CLR 57
Let me address each in turn.
The first basis for the contention that a serious issue be tried arose in this case related to the contract allegedly being a sham. For the purposes of Australian law, a “sham” is something that is intended to be mistaken for something else or that is not really what it purports to be. It is a spurious imitation, a counterfeit, a design or a false front. It is something false or deceptive. That is the classic formulation of a “sham” emanating from the decision of Lord Justice Diplock in Snook v London and West Riding Investments Ltd.[6] The High Court had earlier made observations to similar effect in Scott v Commissioner of Taxation (No 2).[7] There is no shortage of Australian authority on sham transactions, readily illustrated by the decisions in Raftland Pty Ltd v Federal Commissioner of Taxation,[8] WGOC & GH and Anor,[9] Pierce & D’Cruz and Pierce & T[10] and my own decision in Owen & Owen.[11]
[6] (1967) 2 QB 768
[7] (1966) 40 ALJR 265
[8] (2008) 238 CLR 516
[9] [2006] FamCA 539
[10] [2010] FamCAFC 99
[11] [2016] FCCA 2130
The question in this case was whether the contract for the sale of the property in this case, settlement of which is scheduled for 28 September 2018, is a false front, an imitation, a counterfeit or a design in disguise. In my judgment, it was none of those things. It was genuine. The purchasers will acquire good title under it. A significant sum of money will change hands. A deposit has already been paid. The trustee’s solicitor told me that the purchasers were once tenants of the property. It is far from unusual that real estate is sold to a tenant who acquires a fee simple estate in the land being sold and thereby becomes a registered proprietor. That happens every day in commercial life in this country. The fact of the land being sold to a tenant of the land does not indicate that the transaction was a sham.
Next, the applicant said that the price for the sale was so low as to indicate that the transaction was not genuine. I disagree. The evidence revealed a collection of matters about the price. First, the property was sold at public auction at which three people actively bid. Second, in arguing that the sale was at an undervalue, the applicant relied on a kerbside appraisal given on 19 June 2018 stating that the freehold realisable price for the unit was between $780 000 and $820 000. As the author of that appraisal expressly stated, it was not a sworn valuation nor was the appraisal to be used by a third party. It was readily apparent that the price range of between $780 000 to $820 000 was given as no more than a discussion point by an agent seeking to generate business. Precisely why the applicant, then an undischarged bankrupt with no legal authority, was treating with real estate agents for the sale of land of which she was not registered proprietor went wholly unexplained.
Third, the best evidence of the willingness of the market to pay a particular price came from the fact that the land in this case was auctioned publicly and the sale was effected once the public expressed its view about the worth of the land. This was a sale by a trustee in bankruptcy whose duties included the getting in and realisation of the assets of the estate. I canvassed the trustee’s duty in that regard in Winn v Yeo & Rambaldi as former trustees of the estate of Goodwin (a bankrupt).[12] Other authorities on the point include Adsett v Berlouis[13] and Freeman v Joiner.[14] When consideration is invited about the adequacy of the price achieved on any sale of the relevant asset, the trustee is bound by a duty to act as an ordinary prudent person of business would act exhibiting good faith and diligence in the circumstances. Authority to that effect is of considerable veneration traceable to the decision of Lord Justice Fry and Re Brogden.[15] More recently, the point was restated by Sir Reginald Smithers in Mannigel v Aitken[16] and by a different judge of the Federal Court in Wakim v HIH Casualty & General Insurance Ltd.[17]
[12] [2017] FCCA 2528
[13] (1992) 37 FCR 201
[14] [2005] FCAFC 149
[15] [1888] WN 238
[16] (1983) 77 FLR 406
[17] (2001) 111 FCR 58
Even in a mortgagee sale it has long been the law that a mortgagee is entitled to sell at a time convenient to the mortgagee. That much has been the law of England and Australia since the 1940s as was held in Reliance Permanent Building Society v Harwood-Stamper[18] and more recently in Cuckmere Brick Co Ltd v Mutual Finance Ltd.[19] The duty of a mortgagee in the exercise of a power of sale includes a duty to obtain a proper price. This case was not a case involving the exercise of a mortgagee’s power of sale, yet certain parallels can be drawn.
[18] [1944] Ch 362
[19] [1971] Ch D 949
In my view, in the absence of evidence that some of the other perspective purchasers offered more than $480 000, the sale at that price was, on the facts, a proper price and I so find. I reject the contention that the sale is a sham. On that basis, no serious issue to be tried was demonstrated on that ground.
Next, it became necessary to consider the applicant’s claim that she will sustain losses if the sale is effected. She asserted that the trustee’s fees were excessive. She used language in her affidavit in support of the application such as –
a)the trustee committed perjury;
b)the trustee stole the applicant’s property;
c)the trustee had fabricated evidence and had committed criminal offences;
d)the trustee orchestrated schemes to misappropriate the applicant’s estate up to $275 388;
e)the trustee had failed to account for remuneration of $155 451; and
f)the trustee’s legal expenses had been misrepresented by $56 232.71.
The applicant contended that she had suffered such harm that an injunction was the only proper remedy.
In debate with the trustee’s solicitor, the financial position emerged in the manner hereafter described. Using the sale price of $480 000 as a starting point, the trustee contended that proofs of debt had been lodged for about $120 000. Those debts had not yet been admitted. On the assumption that those debts would be admitted in that amount or in substantially similar amounts, that reduced the amount available for distribution from $480 000 to $360 000. The trustee’s costs and disbursements were said to total about $110 000, being approximately $50 000 in fees and approximately $60 000 in disbursements which, when deducted from $360 000, produced a net amount to be returned to the applicant of about $250 000.
The applicant complained that such an amount was unacceptably small. She cited the comparative value attributed to the property of between $780 000 and $820 000. She said the trustee had not let the property for a period, thereby compromising the amount of rental income that could have been derived.
In response to the applicant’s broad and imprecisely articulated assertions about losses, the trustee’s solicitor advanced the propositions set out below. They were –
a)that the trustee had not been remunerated since his appointment;
b)this proceeding was the latest in a series of applications that had been distracting and costly to the trustee, including applications in the Supreme Court of Victoria, in the Federal Court of Australia and in this court;
c)this latest proceeding was an abuse of process as the point about the sale had been disposed of by his Honour Judge A J Kelly QC;
d)the applicant had not made full and frank disclosure;
e)no serious issue to be tried was disclosed;
f)the applicant was guilty of delay;
g)in any event, damages were an adequate remedy; and
h)the applicant, as an undischarged bankrupt, was unable to provide an undertaking as to damages as the price for any injunction.
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).[20] 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.
[20] [2017] FCCA 244
Further, despite the applicant making the allegations about the trustee’s conduct in relation to his remuneration, it is important to observe that the applicant has taken no step to agitate for a remedy or relief, say under s 176 or s 178 of the Bankruptcy Act. Whether or not she would be out of time to make such an application is a different matter on which I express no view.
Next, it is necessary to point out that the applicant’s assertions about 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,[21] namely to maximise the return from the realisation of assets and to return any possible surplus to the bankrupt.
[21] (2001) 110 FCR 101
Many of the arguments agitated by the applicant had been advocated before his Honour Judge A J Kelly QC, and rejected. Among other reasons for refusing the injunction the applicant sought at that stage was delay. The same may be said here as the applicant first learned of the contract of sale on 16 August 2018 and commenced this application only a few days ago and, in any event, imminently prior to the date for settlement. Delay is a well-known discretionary basis for refusing an equitable remedy as was held in Adelaide Steamship Co v Martin.[22]
[22] (1879) 5 VLR (E) 45
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,[23] Adelaide Steamship Co[24] and O’Brien v Australasian Temperance and General Mutual Life Assurance Society Ltd.[25] 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 this court.
[23] (1837) 40 ER 752
[24] Op cit
[25] (1891) 24 SALR 128
Let me say something about the balance of convenience more generally. Here, I weighed in the balance the injury the applicant was likely to suffer if the injunction was not granted with the injury the trustee would suffer if the injunction was granted. In my view, the application of that test was wholly consistent with authorities such as Beecham, Lenah Game Meats and O’Neill, the citations of which have been given earlier. In my judgment, the balance of convenience favoured the position advanced by the trustee. I say that for several reasons. First, the estate has been subject to administration for four years. That is long enough. Next, debts likely (or possibly) to be admitted amount to about $120 000, there being no other asset available for distribution. In addition, the trustee’s own costs and disbursements amount to $110 000 or thereabouts. That too must be met from the only realisable asset, the property in issue in this case. I reject the applicant’s challenges to the trustee’s fees on the basis that those fees have been somehow misrepresented. Further, the trustee has been bedevilled by the applicant’s spurious applications to this court and she has been previously unsuccessful. In addition, she has not brought a separate proceeding by which she challenges the trustee’s conduct in the administration of the estate and instead she has sort to thwart the trustee’s endeavours to sell. As against that, I was not persuaded that the sale price is anything but proper nor that the sale is a sham. The property is an investment property so no question arose that the applicant would lose her home if the sale was settled. In short, the balance of convenience was not in favour of the grant of the injunction.
So far as the undertaking was concerned, the applicant did not offer one. I was unable at law to demand one as has long been the law from Cutler v Wandsworth Stadium Ltd[26] or earlier from Tucker v New Brunswick Trading Co of London.[27] It has been held that the giving of an undertaking is the price for the injunction in National Australia Bank Ltd v Bond Brewing Holdings Ltd.[28] But it has also been held that the requirement to provide an undertaking may be dispensed with in exceptional circumstances as was held in Blue Wedges Inc v Port of Melbourne Corporation.[29] If an applicant lacks the financial capacity to give an undertaking, that is a relevant factor, as was held in Active Leisure (Sports) Pty Ltd v Sportsman’s Australia Ltd.[30]
[26] [1945] 1 All ER 103
[27] (1890) 44 Ch D 249
[28] [1991] 1 VR 386
[29] [2005] VSC 305
[30] [1991] 1 Qd R 301
On this application I was not persuaded that it was appropriate to dispense with the usual undertaking as to damages. This was a baseless application. It added to an already burgeoning list of cost orders that are unsatisfied. If the orders sought were made, it would adversely affect innocent third parties (the purchasers) who should not be drawn into the endless skirmishes between the applicant and the trustee.
Given that the applicant was unable to meet the undertaking as to damages, assuming she volunteered one, that told against the granting of the injunction.
No serious issue to be tried was demonstrated.
The balance of convenience did not favour the applicant.
The applicant did not offer an undertaking as to damages and, even she had, she could not meet it.
This application for an injunction is refused.
I order the applicant to pay the trustee’s costs on an indemnity basis.
I adjourn the further hearing of this proceeding for one month to enable each party to consider whether any further order is to be brought. If no application is brought within one month, this proceeding will stand dismissed.
I certify that the preceding thirty-seven (37) paragraphs are a true copy of the reasons for judgment of his Honour Judge Wilson
Date: 4 October 2018
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