Michell as trustee v Williamson
[2019] FCCA 3568
•25 November 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MICHELL AS TRUSTEE v WILLIAMSON & ANOR | [2019] FCCA 3568 |
| Catchwords: BANKRUPTCY – Application by trustee to grant the trustee vacant possession of the bankrupts’ home – application by bankrupts to adjourn matter until conclusion of matters before the Australian Financial Security Authority – respondents to deliver up vacant possession of their home – applicant’s costs to be paid by the respondents on a party-party basis – liberty to apply. |
| Legislation: Bankruptcy Act 1966 (Cth) |
| Cases cited: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 Coshott v Burke [2012] FCA 517 Williamson v Michell (Trustee) [2019] FCA 481 |
| Applicant: | STEPHEN JOHN MICHELL (AS TRUSTEE FOR THE BANKRUPT ESTATES OF GREGORY JOHN WILLIAMSON AND GAIL ELIZABETH WILLIAMSON) |
| First Respondent: | GREGORY JOHN WILLIAMSON |
| Second Respondent: | GAIL ELIZABETH WILLIAMSON |
| File Number: | MLG 827 of 2016 |
| Judgment of: | Judge Burchardt |
| Hearing date: | 22 November 2019 |
| Date of Last Submission: | 22 November 2019 |
| Delivered at: | Dandenong |
| Delivered on: | 25 November 2019 |
REPRESENTATION
| Counsel for the Applicant: | Mr Lhuede |
| Solicitors for the Applicant: | Piper Alderman |
| Counsel for the First Respondent: | Mr Ng |
| Solicitors for the First Respondent: | Belleli King and Associates |
| Counsel for the Second Respondent: | Mr Ng |
| Solicitors for the Second Respondent: | Belleli King and Associates |
ORDERS
THE COURT DECLARES THAT:
The Respondents, Gregory John Williamson and Gail Elizabeth Williamson are in breach of their undertakings to this Honourable Court as set out in the orders made 31 August 2016 in this proceeding.
THE COURT ORDERS THAT:
Order 3 of the Orders made 31 August 2016 in this proceeding is vacated.
By no later than 28 February 2020, the Respondents and each of them deliver up vacant possession of the property located at 19 John Joseph Court, Narre Warren North, Victoria, more particularly described in Certificate of Title Volume 10418 Folio 316 (the Narre Warren Property) to the Applicant.
The Applicant’s costs of this Application to be paid by the Respondents and each of them on a party-party basis to be taxed pursuant to the Federal Court Rules.
The Applicant’s costs of this Application are proper costs of the administration of the several bankrupt estates of the Respondents.
The parties have liberty to apply.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT DANDENONG |
MLG 827 of 2016
| STEPHEN JOHN MICHELL (AS TRUSTEE FOR THE BANKRUPT ESTATES OF GREGORY JOHN WILLIAMSON AND GAIL ELIZABETH WILLIAMSON) |
Applicant
And
| GREGORY JOHN WILLIAMSON |
First Respondent
| GAIL ELIZABETH WILLIAMSON |
Second Respondent
REASONS FOR JUDGMENT
The matter before the court is an Application in a Case filed on 13 November 2019. The trustee in bankruptcy of Mr and Mr Williamson seeks a declaration and orders. The net effect of this relief would be to grant the trustee vacant possession of the bankrupts’ home, which the trustee wants to sell.
The bankrupts seek an adjournment. This adjournment would last until the outcome of a complaint made by them or by, I think, Mr Williamson to the Australian Financial Security Authority, AFSA.
It became apparent during the conduct of the matter that the arguments in support of the adjournment are also the arguments put against the substantive application. There was some very brief mention by counsel for the respondents to a desire to put on further material, but that was not pressed or articulated in any way.
The starting point for consideration of this matter must be, in my view, the decision of Moshinsky J in the matter of Williamson v Michell (Trustee) [2019] FCA 481. I propose to read out relatively substantial tranches of this judgment, although of course I refer to all of it. At paragraphs 1 to 5, His Honour said:
1. The first applicant, Gregory John Williamson (Mr Williamson) became bankrupt pursuant to a debtor’s petition accepted by the Official Receiver on 4 February 2013. The second applicant, Gail Elizabeth Williamson (Mrs Williamson) became bankrupt pursuant to a debtor’s petition accepted by the Official Receiver on 5 February 2013.
2. There are two proceedings before the Court. By proceeding No. VID 118 of 2018 (the Annulment Proceeding), Mr and Mrs Williamson seek annulment of their bankruptcies pursuant to section 153B of the Bankruptcy Act 1966. The respondent to that proceeding is Stephen John Michell, the trustee of the bankrupt estates of Mr Williamson and Mrs Williamson (the Trustee).
3. By proceeding No. VID 691 of 2018 (the Proof of Debt Proceeding), Mr and Mrs Williamson seek review, pursuant to section 104 of the Bankruptcy Act, of decisions of the Trustee to admit certain proofs of debt. The proofs of debt were lodged by Simon Wallace-Smith (the Liquidator) in his capacity as liquidator of Pakenham Automotive Pty Ltd (in liq) (Pakenham Automotive). The respondents to the Proof of Debt Proceeding are the Trustee and the Liquidator. The Liquidator did not participate in the proceeding.
4. The Proof of Debt Proceeding involved a challenge to two decisions of the Trustee; one in relation to Mr Williamson, the other in relation to Mrs Williamson. Although the application refers to decisions of the Trustee made on 15 June 2018, the Trustee later revoked these decisions and substituted new decisions dated 27 September 2018. Accordingly, the proceeding was conducted by reference to the Trustee’s decisions made on that date. The decisions in issue are:
(a) In respect of the estate of Mr Williamson, a decision to admit a proof of debt lodged by the Liquidator to the extent of $111,220. This comprises two components (the sum of which is in fact $111,221):
(a) an amount of $33,442.63; and
(b) an amount of $77,778.37.
(b) In respect of the estate of Mrs Williamson, a decision to admit a proof of debt lodged by the Liquidator to the extent of $33,442.63.
During the hearing, counsel for Mr and Mrs Williamson said that Mr Williamson does not challenge the whole of the amount of $77,778.37. The challenge is limited to a figure of $22,893.27.
5. The two proceedings were heard together. The Trustee opposed the annulment application. In relation to the Proof of Debt Proceeding, the Trustee adopted a role akin to an amicus curiae. In other words, his participation was directed to assisting the Court rather than adopting an adversarial position.
In paragraph 7 and 8, His Honour continued:
7. In relation to the Annulment Proceeding, for the reasons set out below, I have concluded that the application for annulment of the bankruptcies should be dismissed.
8. In relation to the Proof of Debt Proceeding, I have concluded that:
(a) In respect of the bankrupt estate of Mr Williamson, the decision of the Trustee dated 27 September 2018 to admit a portion of a proof of debt lodged by the Liquidator (namely to admit the proof of debt to the extent of $111,220) should be varied such that the proof of debt is admitted to the extent of $54,885.10 and otherwise rejected.
(b) In respect of the bankrupt estate of Mrs Williamson, the decision of the Trustee dated 27 September 2018 to admit a portion of a proof of debt lodged by the Liquidator (namely to admit the proof of debt to the extent of $33,442.63) should be reversed, such that the proof of debt is rejected in full.Having set out extensive authority at paragraph 21, His Honour continued:
In Coshott v Burke (2012) 10 ABC(NS) 459; [2012] FCA 517, Rares J said at [56]:
The function of the Court under s 104 is not to consider the correctness or otherwise of the trustee’s decision in light of the material before the trustee, but to determine in light of the material before the Court whether the applicant for review has a debt that should be admitted to proof or has established that a debt admitted to proof ought not to have been.
That section is of some significance because of course criticism has been advanced by counsel for the respondents against the conduct of the trustee generally, but His Honour was not engaging in an exercise of reviewing what the trustee did in those terms.
At paragraph 25, His Honour continued:
25. Both Mr and Mrs Williamson commenced their evidence by admitting to several false statements in their sworn affidavit evidence. Mr Williamson also admitted to procuring false evidence from another person for the purposes of these proceedings. In light of these matters, I do not accept the evidence given by Mr Williamson or Mrs Williamson unless it is corroborated by third-party evidence.
At paragraph 30, His Honour noted:
30. Both the Trustee and Mr White were cross-examined. I accept their evidence.
Paragraph 31 and continuing through to 34, His Honour said:
31. Mr and Mrs Williamson seek annulment of their bankruptcies on the basis that their debtor’s petitions were an abuse of process for the following reasons:
(a) Mr and Mrs Williamson were solvent at the time of lodging their petitions and would not have done so if they had been properly advised; and
(b) Mr and Mrs Williamson’s debtor’s petitions were not for a purpose provided by section 55 of the Bankruptcy Act, but for the collateral purpose of frustrating the Liquidator’s Proceeding.
32. Mr and Mrs Williamson submit (and the Trustee appears to accept) that the presentation of their debtor’s petitions was an abuse of process because it was intended to:
(a) stymie the Liquidator’s Proceeding, which was listed for hearing on 3 February 2010; and
(b) defraud creditors, particularly the Liquidator, by relying on false creditors to “control the numbers” at creditors’ meetings.
33. Mr and Mrs Williamson’s written submissions note that the Trustee had, in his affidavit, described the presentation of the debtor’s petitions as being part of an elaborate scheme to defraud creditors. Mr and Mrs Williamson’s submissions state that they do not quarrel with this characterisation.
34. Mr and Mrs Williamson’s written submissions note that they pleaded guilty to and were convicted of offences arising out of their debtor’s petitions and information provided to the Trustee. The submissions note that:
(a) Mrs Williamson pleaded guilty to and was convicted of the federal offence of knowingly signing a false declaration on the basis that her statement of affairs included several false creditors; and
(b) Mr Williamson pleaded guilty to and was convicted of the federal offence of failing to disclose accurate information to his trustee in bankruptcy at a meeting on 21 October 2014, by failing to disclose to the Trustee that the purported creditors Athena Commodities and Trading Ltd, Verity Tone Investments and other named entities were not genuine creditors.At Paragraph 36, His Honour noted:
36. Mr and Mrs Williamson submit that:
(a) In respect of Mr Williamson, apart from the Liquidator’s claim (which is disputed), the only creditor who has lodged a proof of debt is the Australian Taxation Office in the sum of $10,719.72.
(b) In respect of Mrs Williamson, apart from the Liquidator’s claim (which is disputed), the only creditor who has lodged a proof of debt is the ATO in the sum of $38,315.09.
(c) The ATO would not be prejudiced by orders annulling the bankruptcies as Mr and Mrs Williamson propose that the annulment be subject to payment into Court by them of the amounts required to discharge the claims made by the ATO.
At Paragraphs 38 to 40, His Honour continued:
38. In their written submissions, Mr and Mrs Williamson acknowledge that their conduct in lodging the debtor’s petitions, and their subsequent conduct in providing false information to the Trustee and not cooperating with the Trustee, has been “appalling”.
39. Mr and Mrs Williamson concede that their conduct, taken in isolation, may be an appropriate reason for the Court to decline to annul their bankruptcies. They submit, however, that to look at their conduct in isolation, without considering the Liquidator’s alleged misconduct in pursuing claims that were palpably unfounded, would lead to a distortion that would not be in the public interest.
40. Mr and Mrs Williamson submit that:
(a) The mere fact of a bankrupt having committed offences against the Bankruptcy Act in the course of the bankruptcy is not necessarily a barrier to the exercise of the discretion in favour of annulment, referring to Ozer v Australian Liquor Marketers Pty Ltd [2000] FCA 291 at [7].
(b) In this case, the public interest is best served by annulling the bankruptcies, thereby placing the Liquidator in a position where he can seek leave to proceed with the Liquidator’s Proceeding.
(c) This would not result in a “win” for Mr and Mrs Williamson, as their conduct will have resulted in significant costs and expenses associated with the administration of their bankrupt estates, as well as their convictions.
I pause there to remark that, of course, if the course of conduct that is apparently envisaged by Mr and Mrs Williamson takes place, they will indeed be getting a win of the sort that they eschewed in that case:
(d) Annulment would be the most appropriate way to resolve an “absolutely diabolical mess”, which originated from an abuse of process and illegal conduct by Mr and Mrs Williamson, but was also “contributed to and made even more diabolical” by the conduct of the Liquidator.
At paragraphs 43(a) to (c) the Court continued, and this is now in answer to the trustee’s submissions:
(a) Mr and Mrs Williamson cannot satisfy the Court that they were solvent at the time that they presented their petitions, or at present;
(b) Mr and Mrs Williamson have been party to an elaborate scheme to defraud their creditors, which has involved knowingly signing false statements of affairs, permitting third parties to participate as creditors knowing them to be making false claims, and relying upon a third party’s false claim to being a secured creditor to preclude the Trustee from realising their assets;
(c) in the course of their bankruptcies, Mr and Mrs Williamson have concealed rental receipts on an inherited property in Cowes, a bank account containing a significant amount of money, and a vintage motor vehicle from the Trustee for the purpose of keeping those assets beyond the reach of creditors.At paragraphs 44 to 47, His Honour continued under the heading Consideration:
44. Mr and Mrs Williamson entered bankruptcy on their own petitions. They did so to avoid the consequences of the Liquidator’s Proceeding. It appears that Mr and Mrs Williamson were unable to defend that proceeding and would have been unable to pay the judgments sought by Pakenham Automotive and the Liquidator had the proceedings not been stayed by the bankruptcies.
45. At the time of their bankruptcies, Mr and Mrs Williamson were the sole registered proprietors of two real properties and there was substantial equity in the properties. It appears that, as the Trustee submits, rather than incurring the costs of defending the proceeding and the risk of losing and paying the Liquidator, Mr and Mrs Williamson chose to enter an elaborate scheme to defraud their creditors. This involved procuring: a third party to claim to be a secured creditor over the properties and to lodge caveats over the titles; and other third parties to claim to be unsecured creditors so as to control any vote at a creditors’ meeting. This was done solely with the objective of fraudulently circumventing the operation of the Bankruptcy Act and defeating the ability of the Liquidator to obtain judgment in the Liquidator’s Proceeding.
46. At the time of submitting their petitions, Mr and Mrs Williamson signed false statements of affairs with a view to fraudulently obtaining control of creditors’ votes in their own bankruptcies in order to ensure that their properties would not be available to creditors. Before entering bankruptcy, apparently in combination with their then solicitors, they granted mortgages on their properties to a fictitious creditor, so that any trustee who sold them would have no surplus proceeds to distribute.
Having been caught and prosecuted for making these false statements, Mr and Mrs Williamson have, as the trustee submits, sought to obstruct and avoid the consequences of their bankruptcies. The evidence established that they have concealed assets and failed to disclose assets and income; they used secret bank accounts to conceal cash assets and income from the trustee; and they have given false evidence in their affidavits in these proceedings, as they each conceded early in their oral evidence.
At paragraph 49 and continuing, His Honour went on:
49. First, I am not satisfied that Mr and Mrs Williamson were solvent at the time they presented their petitions or that they are now solvent. Mr and Mrs Williamson have given evidence of their financial position at the time of their bankruptcy, excluding the false creditors contained in their statement of affairs. This is presented in balance sheet form. However, insolvency for the purposes of the Bankruptcy Act is a cash flow test, sections 5(2), 5(3). Mr and Mr Williamson’s evidence is that they were unable to pay the legal costs of defending Pakenham Automotive’s action against them. This suggests that they were cash flow insolvent.
50. Further, Mr and Mrs Williamson have not filed material that demonstrates that they are now solvent. In particular, the affidavits they have filed do not address their ability to pay the significant fees and expenses incurred by the Trustee and the prior trustees of the bankrupt estates over the five years since their appointment. In the case of the Trustee, in respect of the period up to 17 October 2018, these are estimated to be $280,834.92 with respect to Mrs Williamson and $311,113.39 with respect to Mr Williamson. These amounts do not include the remuneration of former trustees. They also do not include the Trustee’s costs from 17 October 2018 onwards, which are estimated to be $41,250 in respect of each estate. Mr White prepared a spreadsheet that sets out the position of each of Mr and Mrs Williamson’s bankrupt estates. The spreadsheet shows that, factoring in the quantum of the trustees’ remuneration and expenses, the costs of realising assets and the creditors’ claims, Mrs Williamson’s estate is predicted to have a net deficiency of $134,146.30 and Mr Williamson’s estate is predicted to have a net deficiency of $160,145.05. Even if the amounts allowed for the Liquidator’s proofs of debt are adjusted in accordance with my conclusions in relation to the Proof of Debt Proceeding, substantial deficiencies will remain. Further, although Mr and Mrs Williamson have indicated that they wish to challenge the Trustee’s remuneration, it is not possible at present to predict whether that challenge will be successful and, if so, to what extent.
At paragraphs 56 to 58, His Honour went on:
56. I am satisfied that the conduct of Mr and Mrs Williamson has materially contributed to the delays in and the costs of finalising the administrations.
57. Seventhly, there has been delay in making the annulment application.
58. Eighthly, Mr and Mrs Williamson have not put forward a proposal to pay the costs of the trustees. Mr and Mrs Williamson have not offered to pay, or undertaken to the Court to pay, the fees and charges incurred in the course of the administration of the Trustee, nor those of the prior trustee, nor those of the Official Trustee. Their submissions indicate a preparedness to have the proceeds of the sale of the two real properties applied to meet the Trustee’s costs, but only after they are taxed.
At paragraph 60, His Honour said:
Mr and Mrs Williamson entered into bankruptcy voluntarily by their own petitions. Their purpose was to misuse the bankruptcy regime to create an elaborate scheme to defraud creditors. Their scheme having now been discovered, they no longer have a use for the process and seek annulment. In my view, in these circumstances, and in light of the other matters referred to above, it would not be in the public interest for their bankruptcies to be annulled.
His Honour then went on to consider the objections to the proofs of debt filed by the liquidator. It is not necessary to go through that in any great detail. The point to be taken from that is that His Honour was not satisfied on the balance of probabilities, on the evidence before him, that the claims that he disallowed were made out.
Contrary to the submissions made so vigorously by counsel for Mr and Mrs Williamson, the Court made no finding of misconduct against the liquidator, but rather noted that, given the absence of anything more than an amicus curiae, these claims were not made out. I note that at paragraph 70, His Honour observed:
As noted above, the Liquidator has not participated in this hearing. Accordingly, he has not put on evidence and submissions in support of the proofs of debt. In these circumstances, the material in support of the proofs of debt is limited to the material that was before the Trustee for the purposes of making his decision.
The matter, as I said, went off on the balance of probabilities. It should be noted that Mr and Mrs Williamson conceded swearing false affidavits; in other words, they are both perjurers. The next comment I would make is that the Williamsons were not cash-flow solvent in 2013. They have not put on any evidence before me that they are solvent now. The trustee, it should be noted, did not slavishly adopt the claims made by the liquidator – indeed, disallowed the bulk of the liquidator’s claims.
It should be remembered that Moshinsky J was not judging whether the trustee’s assessment of the liquidator’s claim was correct. Rather, he was embarking upon the matter, himself, de novo. As I have said, Moshinsky J did not find misconduct either by the trustee or the liquidator. As I say, he was just not satisfied on the balance of probabilities that the challenged sums were made out.
This is all the more the case in circumstances where the liquidator did not appear, for obvious and understandable reasons. That brings us now to the affidavit of Mr Michell, the trustee, filed 14 November 2019. He deposes to orders made by consent in this Court before me on 31 August 2018. The bankrupts undertook to cooperate with a sale of their property, and it is common course that they are now refusing to do so.
At paragraphs 20 and following, Mr Michell deposed:
20. In the course of the annulment application, the following affidavits were filed:
20.1 an affidavit of Greg sworn 19 April 2018 in which he deposed that he had sold a 1929 Model A Roadster (Roadster), which Roadster I had suspected to be in Greg’s possession and about which I have been making enquiries since around 2017 to a friend, Mr David Murray;
20.2 an affidavit of Mr David Murray sworn 18 April 2018 in which Mr Murray deposed to purchasing the Roadster; and
20.3 an affidavit of Gail sworn 19 April 2018 in which she referred to Greg’s affidavit of that same date and confirmed that the matters set out therein were true and correct.
21. Immediately prior to the hearing of the Annulment Application, Mr Ng informed Mr Lhuede by email that the Roadster was, in fact, still in Greg’s possession and advised the location where the Roadster was being stored. I have subsequently taken possession of the Roadster and sold it by public auction through Manheim Auctions. Given the hiding of this vehicle and denial of ownership or use by Greg, it is not exempt property of the bankrupt under section 116(2)(ca) of the Act.
At paragraphs 23 and 24, Mr Michell continued:
23. Now produced and shown to me and marked “SJM-43” are true copies of screen captures of posts on Facebook made by Greg in relation to the Roadster. In particular, I note that:
23.1 On 29 June 2019 Greg posted a photograph of the Roadster with the caption, “I am looking for information as to who currently has this 29 roadster, sold at Manheim Auctions. Please share.”
23.2 around 18 weeks ago, Greg responded with a comment on the photograph of the Roadster saying, “It’s mine and was sold illegally Trying to find who bought it”
23.3 around 13 weeks ago, Greg responded with a comment on the photograph of the Roadster saying, “Auction’s house will not give details Can’t be registered as I have import approval”
23.4 On 3 August 2019, Greg again posted the photograph of the Roadster with a caption, “Looking for the current owner of this roadster recently sold at Manhiem (sic) Auctions”
24. From these comments I note that Greg is alleging that the sale of the Roadster is ‘illegal’, and I infer that he is attempting to obstruct the new owner of the Roadster from registering it by withholding the import approval. This is notwithstanding his admission to deny he has an ongoing interest in the vehicle, his filing of false affidavits in Court and subsequent conviction for offences relating thereto.
At paragraph 25, Mr Michell went on to say:
On Monday, 21 October 2019, I entered into a contract for the sale of the Cowes Property. There will be no equity released to the bankrupt estates from such sale as I anticipate that all the net proceeds will go to paying down bank debt secured thereon.
The affidavit goes on to detail compositions proposed by the bankrupts from 2016, which I will come back to. At paragraph 36, Mr Michell deposed:
On or around 18 July 2019, I was contacted by Peter Goodin, registered trustee in bankruptcy on behalf of the bankrupts and Mr Roy Mouneimne. Mr Goodin advised me that Mr Mouneimne had taken an assignment of a debt in the bankrupt estate of Gail and had requested that a meeting of creditors be convened for the purpose of removing me as trustee and appointing Mr Peter Vince in my place. Now produced and shown to me and marked “SMJ-49” is a true copy of the statutory declaration provided to me regarding the assignment of debt.
At paragraph 48, Mr Michell deposed:
My right to reimbursement out the bankrupt estates for expenses properly incurred by me in the conduct of the administrations and payment of my remuneration are both matters dictated by express provision within the Act. I understand the Bankrupts continue to dispute both the accounts I have received to date for legal costs and for payment of my remuneration claim. It is likely, based on the valuation I have received from the Narre Warren Property and other realisations to date, that there will be insufficient funds to meet all my remuneration and expenses in full, let alone provide sufficient funds for a dividend to creditors.
Now, if one goes to “SGM-32” which is the composition proposed in 2016, what that says, relevantly for these purposes, is:
1) The debtor and his wife are the joint registered proprietors of two residential properties located at 19 John Joseph Court, Narre Warren South, and 20 McKenzie Road, Cowes. Both properties are encumbered by mortgages held by Westpac Banking Corporation.
2) Based on valuations and appraisals obtained by him, the trustee of the bankrupt estate (“the trustee) estimates that the equity held by the debtor and his wife in the abovementioned properties is $352,000. As such, the equity held by the debtor, alone, is effectively half of his sum of $176,000.
3) The debtor proposes to make available the sum of $175,000 under this section 73 proposal for distribution rateably amongst his creditors, subject to the costs and remuneration of the estate.
The trustee’s response to this suggestion, it is sufficient to note in my view, was considered and reasonable. There were various ancillary costs that he sought to have put up in advance that did not happen. He asked for $35,000 to convene a meeting of creditors. Messrs Belleli and King took issue with the amount and then conclusive correspondence followed. As I say, the trustee’s position throughout these matters seems to me to be considered and reasonable.
“SGM-38” was a further composition proposal put in February 2017, and, once again, this adopted the then valuation of the trustee as the basis for the composition. I note that this was, of course, for both properties, and one of them has been sold with no likely equity return. A further composition proposal was put on 2 August 2019 which proposes that the husband will put up $54,885, and the wife’s debts are disclosed as the Australian Taxation Office in the sum of $22,000 and Cameron Industrial $5,000 for rent, all of which are proposed to be paid by a non-identified third party.
The trustee rejected this on the understandable basis that there was no provision for his fees. What is really fascinating is the position of Mr Mouneimne. He paid the full $5,000 debt out to the creditor on 17 July 2019. He paid the entire amount with no discount. One might say that the creditor must have thought all her Christmases had come at once. This was a debt some six years into an extensive administration, bought for full value to become an unsecured creditor. It is a ludicrous proposition.
Obviously, the person who bought this debt could never have got back more than he paid, and, indeed, less because he had solicitors acting for him and must have had to pay them as well. The debt was, as I say, at least six years old at the time. As an assignee, of course, Mr Mouneimne promptly sought a meeting of creditors to remove the trustee in circumstances where, as counsel for the Williamsons conceded, the costs that would have redounded to him as a result would have been wildly in excess of his $5,000 claim.
It is quite obvious that he was acting, for whatever reasons, on behalf of Mr and Mr Williamson. I have no hesitation, whatever, in forming that firm inference because no other explanation makes any conceivable sort of sense. I note that the affidavit of Mr Ng filed in this matter now puts the value of the properties at $800,000 although that sits uneasily with their acceptance of the $350,000 valuation as recently as 2017. Now, Mr and Mrs Williamson have made an application to AFSA out of time, and I have read exhibit “DN-4” which constitutes an extensive series of complaints, it would seem, by Mr Williamson.
The submissions of counsel for the Williamsons laid strong emphasis on the asserted misconduct of the liquidator, but while this has been asserted, it has not been proved. The trustee’s submissions emphasise the history of the matter including the bankrupts’ disgraceful conduct. As counsel submitted, the trustee had an immediate right to possession of the properties. Turning to my consideration of the matter - self-evidently, an adjournment application involves a question of discretion which must be exercised judicially.
In my view, there is no good reason to adjourn. The bankruptcy took place in 2013, and there is a public interest in the finality of the matter. The dispute now is really largely about the trustee’s fees, but there is nothing in the materials, including what I understand to be Mr Williamson’s lengthy document to AFSA, that suggests misconduct by the trustee is likely to be established. I note that AFSA will be aware that Mr and Mrs Williamson are perjurers because they have asked for and received a copy of Moshinsky J’s judgment.
Furthermore, the bankrupts are still misconducting themselves. First of all, there is this matter of the Roadster, which is probably of lesser significance, but this business with Mr Mouneimne is extremely disturbing. It has incurred more costs in the administration of the estate. I note that the minute the trustee pointed out some of the likely consequences of Mr Mouneimne’s position, he promptly withdrew into the background from which he had emerged.
Next, the trustee is correct. He is entitled to immediate possession of the property which vested in him upon the bankruptcy in 2013. There is no evidence, further, that the bankrupts can pay even the reduced - and substantially reduced amount of costs in the event that their application to AFSA was likely to be successful. In my view, the trustee is entitled to the declaration and the orders, subject to one matter as to costs which I will need to hear from the parties about, that he seeks.
However, Mr Williamson, very unfortunately, is obviously seriously ill. I note that in his affidavit at paragraph 16 he says he anticipates making a full recovery in three months. Associate Professor Hayward actually says several months but does not give an exact figure. I understand from the material that both the bankrupts are elderly.
ORDERS DELIVERED
In my view, the appropriate date for possession, given these circumstances, should not be 31 January, but 28 February, and I am going to amend the proposed minute and initial it, accordingly.
But I think the proper exercise of my discretion is that the applicant’s costs of the application should be paid by the respondents and each of them on a party/party basis to be taxed pursuant to the Federal Court Rules.
The question of indemnity costs generally starts with consideration of the judgment of Shepherd J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, although the categories of case which can give rise to indemnity costs is not a closed one. In the end, it involves an evaluation by the Court of the totality of the conduct of the parties. There is no question in this case of any Calderbank offers or anything of that sort.
In my view, while the conduct of the respondents goes very close to the line, it does not quite cross it. There is, after all, a complaint on foot to AFSA; although, having read it, I should make it clear, it does not leap out to me as being one that is likely to engage AFSAs interest that much, but that is a matter for AFSA.
I certify that the preceding forty-four (44) paragraphs are a true copy of the reasons for judgment of Judge Burchardt
Associate:
Date: 9 December 2019
0
4
2