Michell (Trustee), in the Matter of Diu (Bankrupt) v Diu

[2023] FedCFamC2G 248

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 2)

Michell (Trustee), in the Matter of Diu (Bankrupt) v Diu [2023] FedCFamC2G 248

File number:	MLG 2394 of 2022
Judgment of:	JUDGE SYMONS
Date of judgment:	30 March 2023
Catchwords:	1           BANKRUPTCY – Application by trustee seeking a declaration property is vested in the trustee pursuant to s 58 of the Bankruptcy Act 1966 (Cth) – orders sought for vacant possession of the property so as to facilitate its sale – where administration of bankrupt estate has been frustrated by the bankrupt – where bankrupt has not participated in court proceedings – undefended hearing – declaration and orders made
Legislation:	Bankruptcy Act 1966 (Cth) ss 30, 58, 77
Cases cited:	Coshott v Prentice (2014) 221 FCR 450; [2014] FCAFC 88
Division:	Division 2 General Federal Law
Number of paragraphs:	18
Date of last submission/s:	30 March 2023
Date of hearing:	30 March 2023
Place:	Melbourne
Solicitor for the Applicant:	Kemps Legal
The Respondent:	No appearance

ORDERS

MLG 2394 of 2022

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2

IN THE MATTER OF THE BANKRUPT ESTATE OF CHANY DIU

BETWEEN:

STEPHEN JOHN MICHELL AS TRUSTEE OF THE BANKRUPT ESTATE OF CHANY DIU

Applicant

AND:

CHANY DIU
Respondent

order made by:	JUDGE SYMONS
DATE OF ORDER:	30 March 2023

THE COURT DECLARES THAT:

1.The property described in Certificate of Title Volume 10794, Folio 313 being the property located at 14 Arbour Rise, Pakenham, 3810 in the State of Victoria (the Property) is vested in the Applicant.

THE COURT ORDERS THAT:

2.The Applicant is authorised to sell the Property.

3.The Respondent deliver vacant possession of the Property to the Applicant within 28 days of the date of these orders.

4.The Respondent deliver all keys in his possession which provide access to the Property to the Applicant within 28 days of the date of these orders.

5.Should the Respondent fail to deliver vacant possession of the Property and/or keys in accordance with orders 3 or 4 above, a warrant of possession be issued immediately in favour of the Applicant and an affidavit sworn by either the Applicant or the Applicant’s lawyers deposing to the Respondent’s non-compliance with orders 3 or 4 above be sufficient proof to enable the issue of the warrant of possession when filed with the Court.

6.The Respondent remove from the Property all vehicles, rubbish and chattels which have not vested in the Applicant under the Bankruptcy Act 1966 (Cth) (personal effects) within 28 days of the date of this order.

7.Should the Respondent fail to comply with Order 6 above, the Applicant is authorised and empowered to remove and/or dispose of such personal effects as may remain on the Property and at the cost of The Bankrupt Estate of Chany Diu after 28 days have passed from the making of this order, without any obligation to account to the Respondent for such personal effects.

8.The Applicant be appointed trustee for the sale of the Property and is authorised and empowered to sign on behalf of the Respondent any contract of sale, discharge of mortgage authority, transfer of land or other document required to give effect to a sale of the Property.

9.Prior to delivering up to the Applicant vacant possession, the Respondent must do all things as may be reasonably required by the Applicant, his selling agent or lawyers for the purpose of achieving a sale of the Property with vacant possession, including but not limited to, providing access to buildings on the Property for the purpose of valuation and viewing by the potential purchasers.

10.Subject to Order 11, the proceeds of sale of the Property be applied as follows:

(a)first, in payment of all selling costs including agent’s commission, advertising and marketing expenses, conveyancing and legal costs associated with the sale;

(b)second, in payment of any outstanding rates, taxes, charges, fees or other outgoings affecting the Property or deriving from or associated with the ownership or maintenance of the Property up to the time of settlement of the sale of the Property;

(c)third, in payment of the monies which are due or owing to ING Bank (Australia) Ltd under mortgage AN038003X;

(d)fourth, in payment of the monies which are due or owing to South East Water Corporation under caveat AT022245J;

(e)fifth, the reasonable costs and remuneration of the Applicant in attending to the sale of the Property; and

(f)finally, all remaining proceeds to the Applicant as trustee of The Bankrupt Estate of Chany Diu.

11.The Applicant’s costs of this proceeding be paid by The Bankrupt Estate of Chany Diu at settlement of the Property from the sale proceeds.

12.The Applicant serve the Respondent with a copy of these orders by registered post on or before 3 April 2023.

Note: The form of the order is subject to the entry in the Court’s records.

Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).

REASONS FOR JUDGMENT

JUDGE SYMONS:

INTRODUCTION

1. The trustee, Stephen John Mitchell (the Trustee), is the trustee in bankruptcy of the estate of Chany Diu (Mr Diu). The Trustee was appointed on 4 October 2018, this being the same date that a sequestration order was made against Mr Diu by the (then) Federal Circuit Court. At that time, any property of Mr Diu vested in the Trustee under s 58 of the Bankruptcy Act 1966 (Cth) (the Act).

2. The Trustee later became aware that Mr Diu was the sole proprietor of property located at 14 Arbour Rise, Pakenham, Victoria, 3810 being the property identified in Certificate of Title Volume 10794, Folio 313 (the Property).  The Trustee took transmission of the title to the Property on 24 April 2019 and became registered on title as the sole proprietor.  By an application that was filed on 28 October 2022 the Trustee seeks a declaration that the Property is vested in the Trustee and orders, including for vacant possession of the Property, designed to facilitate its sale.

3. Mr Diu has not participated in the proceeding at any stage so that his view on the application is not known.  As I will discuss shortly, I consider that it is appropriate nonetheless to determine the application without further recourse to him having regard to the procedural steps taken prior to today’s hearing which I consider ought to have put Mr Diu squarely on notice as to the nature and extent of the orders sought by the Trustee.

   LEGISLATION

4. The Trustee’s application relies on the general power conferred by s 30 of the Act which, amongst other things, empowers this Court to decide all questions, whether of law or of fact, in any case of bankruptcy and to make orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act (s 30(1)).

5. Section 77 imposes various duties on Mr Diu as bankrupt, including, by s 77(1)(e), that he execute such instruments and generally do all such acts and things in relation to his property and its realization as are required by the Act or by the Trustee and, by s 77(1)(g), that he aid, to the utmost of his power, in the administration of his estate. When read with s 77, s 30 empowers the Court to make orders requiring a bankrupt to take steps in furtherance of the administration. I am satisfied that the Court has power to grant orders (including declaratory relief) of the kind that the Trustee seeks in this proceeding and that such relief is appropriate, having regard to the history of the proceeding and the administration of Mr Diu’s bankrupt estate to date: Coshott v Prentice (2014) 221 FCR 450.

   EFFORTS MADE BY TRUSTEE TO ADMINISTER ESTATE

6. The Trustee’s application is supported by an affidavit of the Trustee sworn on 27 October 2022.

7. The affidavit discloses that the administration of Mr Diu’s bankrupt estate has been frustrated by him for reasons that include:

   (a)the failure of Mr Diu to lodge an acceptable Bankruptcy Form/Statement of Affairs, despite repeated requests being made by the Trustee’s staff;

   (b)the making by Mr Diu of representations that he intended to and would be in a position to procure funds to annul his bankruptcy; and

   (c)Mr Diu’s persistent attitude of disengagement with the Trustee and the administration process.

8. Mr Diu was first notified of the Trustee’s intention to issue proceedings to seek possession of the Property in March 2021.  However, the Trustee’s affidavit reveals that before this course was flagged the Trustee advised Mr Diu in August 2019 that he could instead seek to annul his bankruptcy or to procure the purchase of the Property by a third party.  In September 2019 Mr Diu notified the Trustee of his intention to obtain funds to annul his bankruptcy and in February 2020 he again communicated that this was his intention.  However, no further steps have been taken by Mr Diu in this regard.

9. The Trustee also engaged in negotiations with Mr Diu’s sister between August 2020 and January 2021 in an effort to achieve a sale to her of the Property.  However, these negotiations were not successful and were concluded, when she failed to sign a contract of sale, in March 2021.

10. Thereafter and in connection with the orders now sought in this application, the Trustee:

    (a)On 9 August 2021 issued a letter to Mr Diu instructing him to vacate the Property within 14 days;

    (b)On 26 August 2021, Mr Diu was informed by the Trustee of his options to avoid a sale of the Property; namely annulment or third party sale;

    (c)On 31 August 2021, the Trustee provided Mr Diu with a breakdown of the estimated costs required to annul his bankruptcy.  Mr Diu was requested to submit a proposal for the annulment of his bankrupt estate within 14 days and was informed that if he failed to do so he would be required to vacate the Property by no later than 30 September 2021;

    (d)On 16 September 2021, the Trustee sent an email to Mr Diu requesting that he make contact regarding the letter of 31 August 2021.  The Trustee did not receive a response from Mr Diu;

    (e)On 4 October 2021, the Trustee sent an email to Mr Diu advising him that he would proceed with an application for vacant possession of the Property and seeking confirmation from Mr Diu that he had done so voluntarily.  The Trustee did not receive a response from Mr Diu;

    (f)On 28 October 2021, the Trustee’s legal representative sent Mr Diu a letter requesting him to either vacate the Property or make contact within 14 days.  The letter foreshadowed an application to this Court in the event that Mr Diu took neither step.  No response to that communication was received from Mr Diu;

    (g)On 15 November 2021, the Trustee’s legal representative sent Mr Diu a letter in which the matters identified in the correspondence of 28 October 2021 were repeated.  Again, no response was received from Mr Diu.

    (h)On 1 September 2022, the Trustee’s legal representative sent Mr Diu a letter that enclosed a copy of the draft application to this Court, repeated the request that he vacate the Property within 7 days and informed him that if a response was not received within 7 days the foreshadowed application would be filed.  No response was received from Mr Diu.

    PROCEEDINGS IN THIS COURT

11. As indicated above, the Trustee did file this application on 28 October 2022. The pattern of disengagement by Mr Diu continued in this forum.

12. The matter first came before me on 8 December 2022.  The Trustee appeared by his solicitor, Ms Kumar.  There was no appearance by or on behalf of Mr Diu although the Trustee had produced an affidavit of service which satisfied me that Mr Diu had been personally served on 9 November 2022 with the application, the Trustee’s affidavit and a letter from the Trustee’s legal representative which informed Mr Diu that the matter was listed for a directions hearing on this date.

13. Despite this, in circumstances where it was not clear on the face of the material provided to Mr Diu that the Court might entertain the Trustee’s application on 8 December 2022 and where, the chronology recorded at [11] above reveals that there was an unexplained suspension of communications between the Trustee and Mr Diu of ten months, I considered that Mr Diu should be given an opportunity to file material in response to the Trustee’s application.

14. I made orders on this day including that Mr Diu have until 22 December 2022 to file a notice of appearance, a notice of grounds of opposition and any affidavit in support of the grounds of opposition.  The hearing of the application was adjourned to 30 March 2023.  An affidavit of service filed by the Trustee on 15 December 2022 satisfies me that a sealed copy of these orders was served on Mr Diu by registered post on 9 December 2022.  Mr Diu did not file any material either by 22 December 2022 or by the time that this application came before me this morning.  Mr Diu has not communicated with the Court, and I am informed by the legal representative for the Trustee, Mr Trainor, that he has not communicated with the Trustee.  Mr Diu was served with the Trustee’s written submissions on 21 February 2023 and notified in this correspondence of today’s hearing date.  The Trustee’s legal representative sent this same material to Mr Diu again by email on 27 February 2023.  Despite these measures being taken, Mr Diu did not appear at the hearing this morning and provided no explanation for his failure to do so.

15. I therefore consider that in these circumstances I can hear and determine the Trustee’s application without further recourse to Mr Diu.

    DISPOSITION

16. In his outline of submissions filed on 21 February 2023, the Trustee submits that against the background recorded at [8] to [11] above, the Court should grant the relief identified in his application as to do would give effect to the Trustee’s duties under the Act. The Trustee submits, and I agree, that Mr Diu has been given numerous time and opportunities to achieve an annulment of his estate independently of the bankruptcy process and then numerous time and opportunities to vacate the Property voluntarily.

17. The Trustee is fixed with a statutory function to administer Mr Diu’s bankrupt estate in the interests of creditors and it would be antithetical to that function to delay the administration any longer than is necessary.

18. I am persuaded that it would be appropriate to grant relief (including the making of a declaration) in the terms identified in the Trustee’s originating application.  This will include an order that the costs of this proceeding be paid out of the proceeds of sale of the Property.

I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Symons.

Associate:

Dated:       30 March 2023