MIAO v Michell

[2015] FCCA 2910

FEDERAL CIRCUIT COURT OF AUSTRALIA

MIAO v MICHELL & ORS [2015] FCCA 2910

Catchwords:
BANKRUPTCY – Application for removal of trustee.

Legislation:

Bankruptcy Act 1966, ss.116, 179.

Monamy v Peldan [2006] FCA 1282
Tiver v the Official Trustee in Bankruptcy [2010] FCA 620; (2010) 187 FCR 1; (2010) 269 ALR 522

Applicant: SHIRLEY MIAO

First Respondent: STEPHEN JOHN MICHELL

Second Respondents: ACUEI WILLIAM RIAK & DUKI JS WAN

File Number: MLG 1439 of 2015

Judgment of: Judge Riethmuller

Hearing date: 13 July 2015

Date of Last Submission: 13 July 2015

Delivered at: Melbourne

Delivered on: 13 July 2015

REPRESENTATION

Counsel for the Applicant: The Applicant appearing in person

Counsel for the First Respondent: Ms K Poulakis

Solicitors for the First Respondent: Smith Leonard Fahey

Counsel for the Second Respondent: Ms K Poulakis

Solicitors for the Second Respondent: Smith Leonard Fahey

ORDERS

1. The Application be dismissed.

2. The First Respondent’s costs of and incidental to this proceedings form part of the costs of administering the estate.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 1439 of 2015

SHIRLEY MIAO

Applicant

And

STEPHEN JOHN MICHELL

First Respondent

ACUEI WILLIAM RIAK & DUKI JS WAN

Second Respondents

REASONS FOR JUDGMENT

1. This is an application seeking orders with respect to the trustee in bankruptcy (‘the First Respondent’) pursuant to s.179 of the Bankruptcy Act 1966 (Cth) (‘the Act’) seeking that the trustee be removed. The Applicant also seeks that First Respondent pay $5,760.00 to the Applicant and that the Second Respondents pay monthly rent to the Applicant according to agreements originally entered into with her.

2. The affidavit material is less than clear.  However, it seems apparent that the case concerns real property of a commercial nature which was owned by the Applicant at the time that she was made bankrupt.  A description of the real property is not in the material.

3. Pursuant to the Act, the property vests in the trustee in bankruptcy.  A transfer has not yet been filed, although a caveat has been placed to preserve the property.  The First Respondent has notified the tenants that the tenants must pay the First Respondent the rent that is due on the property now that the property has vested in the trustee.  The tenants now pay the First Respondent, and the locks have been changed. 

4. The Applicant argues that it is not appropriate for First Respondent to take the property from her, that First Respondent ought to return the property and that she should receive the rent from the tenants.  The basis of the application is reliance upon s.116(2)(c) of the Act which provides that the bankrupt's property that is for use by the bankrupt in earning income by personal exertion remains with the bankrupt.  There are further subsections that apply with respect to a limit on the amount of such property and so forth.  For the present purposes it is simpler to decide the case on the section as a whole, namely whether this is property that is used by the bankrupt in earning income by personal exertion. 

5. “Personal exertion” is a phrase that clearly involves a person acting in some way in carrying out work, whether it be ‘blue-collar’ or ‘white- collar’ work.  During the course of argument, for the benefit of the Applicant, I identified some examples where it might be argued that property is used in the course of income earning by personal exertion. , One example is that a piano teacher may argue that their piano is part of the property they use for personal exertion in teaching. Other examples include a plumber with their tools of trade or a seamstress with her sewing machine.  A number of these examples are set out in cases such Monamy v Peldan [2006] FCA 1282 and Tiver v the Official Trustee in Bankruptcy [2010] FCA 620; (2010) 187 FCR 1; (2010) 269 ALR 522. Clearly, receiving rent from a commercial property is not within the meaning of personal exertion, and therefore that property does properly vest in the trustee in bankruptcy.

6. In these circumstances, there is nothing outlined in the Applicant’s material to indicate any wrongdoing on the part of the First Respondent. Rather, the application comprises a complaint about the First Respondent carrying out the tasks required of them as trustee under the Act once a sequestration order has been made. I therefore dismiss the application of the Applicant.

7. It is unfortunate that the Applicant has caused difficulty to the tenants in involving them in these proceedings when they have already accepted that the First Respondent is the appropriate person to receive rent at this time and are paying their rent to the First Respondent. 

8. I note that the solicitor for the First Respondent has indicated to the Court that they will attempt to identify community legal services and/or financial counsellors that may be able to assist the Applicant, given that it is alleged that the Applicant’s debts are somewhat less than 10 per cent of the value of the real property.

9. Clearly this is a case that requires the Applicant to engage with a financial counsellor in order to put in place some form of bridging finance or other finance so as to pay out the creditors and trustee and have the bankruptcy annulled.  The sooner that the Applicant focuses upon this pragmatic solution, the sooner the costs of the bankruptcy will reduce and the costs of these proceedings can be minimised. 

I certify that the preceding nine (9) paragraphs are a true copy of the reasons for judgment of Judge Riethmuller

Associate: 

Date: 29 October 2015