Michell v Yilmaz

[2018] FCCA 2120

FEDERAL CIRCUIT COURT OF AUSTRALIA

MICHELL v YILMAZ [2018] FCCA 2120

Catchwords:
BANKRUPTCY – Application by trustee for vacant possession of bankrupt’s home – bankrupt’s parents also in residence – grounds of opposition failing to appreciate that bankrupt’s property vests in trustee – application for adjournment refused – orders made as sought by trustee.

Applicant: STEPHEN JOHN MICHELL

Respondent: ERCAN YILMAZ

File Number: MLG 2496 of 2017

Judgment of: Judge Burchardt

Hearing date: 26 July 2018

Date of Last Submission: 26 July 2018

Delivered at: Melbourne

Delivered on: 26 July 2018

REPRESENTATION

Counsel for the Applicant: Mr Devanny

Solicitors for the Applicant: CLH Lawyers

The Respondent: In person

ORDERS

1. The respondent deliver up to the applicant vacant possession of the property within 45 days of the date of these orders.

2. The respondent deliver up all keys for all buildings and improvements on the property to the applicant within 45 days of the date of these orders.

3. In the event that the respondent fails to deliver up vacant possession of the property in accordance with the above orders, a warrant of possession will issue forthwith in favour of the applicant.

4. The respondent must remove from the property all personal property being vehicles, rubbish and any other chattels (“personal property”), which does not vest in the applicant and cause any other occupant of the property (if any) to remove any personal property belonging to them within 45 days of the date of  these orders.

5. In the event that the respondent fails to comply with Order 4, the applicant is empowered to remove and dispose of any personal property on the property as they see fit.

6. The property be sold and the applicant have the sole conduct of the sale of the property and be authorised to instruct an agent and/or auctioneer for that purpose.

7. The applicant is to decide whether the property is to be sold by auction or private treaty.

8. The applicant is to decide whether to set a reserve price for any auction of the property, and if so, what price.

9. The applicant be empowered to sign any contract of sale, discharge of mortgage authority, Transfer of Land, Notice to Vacate and any other documents, on behalf of the respondent necessary to give effect to the sale and settlement of the property with vacant possession, in the event that the respondent fails or refuses to sign such documents within such time as required by the applicant’s solicitors.

10. The respondent must do all things as may be reasonably required by the applicant, his selling agent or solicitors 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 potential purchasers.

11. The applicant’s costs of this proceeding be paid in priority in accordance with section 109 of the Bankruptcy Act 1966 from the property of the bankrupt estate of the respondent.

12. The parties have liberty to apply on 3 days’ notice.

THE COURT DECLARES THAT:

(a)A declaration that beneficial ownership of the property located at 454 Boomerang Avenue, Cardross, Victoria 3496, more particularly described in certificate of title Volume 10087 Folio 278 ("the property"), vests in the applicant.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

No. MLG 2496 of 2017

STEPHEN JOHN MICHELL

Applicant

And

ERCAN YILMAZ

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

1. This morning Mr Yilmaz has sought an adjournment.  He is self-represented.  His solicitors, however, withdrew approximately two weeks ago.  He has today contacted Justice Connect who have given him forms to sign which once completed will enable them to consider the matter.  But it should be noted that Justice Connect will only look into the matter.  There is no guarantee they will act.  I note that if the matter is not adjourned, Mr Yilmaz has expressly indicated that he has nothing to add to the materials he has already filed through his solicitors.  The trustee wishes to proceed. 

2. The history of this matter is relevant.  On 20 November 2017 the trustee in bankruptcy filed an application.  The net effect of the orders sought would be deliver up in vacant possession the home in which Mr Yilmaz and his father and stepmother live.  An affidavit was also filed on 20 November 2017 by Stephen John Michell who is the trustee in bankruptcy.  The exhibits to that affidavit show beyond doubt that the matters asserted by Mr Michell are not susceptible of challenge.

3. On 12 November 2015 a sequestration order was made and the trustee was appointed.  He rapidly became aware of Mr Yilmaz’s home and placed a caveat over it.  By letter dated 13 November 2015 Mr Yilmaz was required to provide his statement of affairs.  This took until 5 August 2016 to be provided.  In that statement of affairs Mr Yilmaz indicated a house worth some $350,000 to $380,000 with a related mortgage, if I understand the matter correctly, of about $155,000.  There were sundry unsecured creditors.

4. The trustee has deposed to negotiations between solicitors on behalf of the parties and/or a related party between February 2016 and February 2017.  During this period, an unsecured mortgage to Dialena Nominees Pty Ltd came to light in the sum of approximately $32,000.

5. On 22 May 2017 the trustee sent another letter to Mr Yilmaz which required him and his family to leave the property by 5 June or an application would be made to court.  In due course the application was made on 20 November 2017.  On 23 February 2018 at the first return of the matter, I made orders to progress the matter to trial today.  This included the filing of materials by Mr Yilmaz. 

6. Mr Yilmaz was represented and filed grounds of opposition on 13 April 2018.  The matters asserted as grounds of opposition read as follows:

   (1)The property at 454 Boomerang Avenue, Cardross, Victoria, 3469, is the respondent’s principal place of residence. 

   (2)The Respondent’s parents currently reside at the property and have done so for some time.

   (3)The Respondent intends to resolve the bankrupt estate.

7. It was noted that there was an affidavit in support filed contemporaneously.  At paragraph 1 of that affidavit Mr Yilmaz deposed:

   I am the respondent.  I was, due to my health and personal issues, made a bankrupt on 12 November 2015.

8. At paragraph 8 he deposed:

   I purchased the Property for $50,000 in July 1992.  I continued the $15,000 that my mother had left me to the purchase price and my father contributed approximately $100,000 to the purchase price and to construction of a house on the property.

9. At paragraph 13 the affidavit continued:

   If the trustee’s application is successful, my father will suffer loss.  My father contributed to the purchase price for the Property on the basis that he would be able to live with me at the property.  If the Property is sold, my father and stepmother will have no place to live and will need to find and rent a suitable property.  This will cause my father and stepmother significant financial hardship. 

10. At paragraphs 15 to 18 under the heading Resolution of the Bankrupt Estate Mr Yilmaz deposed:

    I am in the process of rebuilding and re-establishing my cleaning business and it is my intention to resolve my bankrupt estate. 

    I am currently in the process of selling personal items in an effort to make an initial lump sum payment towards my bankrupt estate.  Once I have sold these items I would be better positioned to

    (a) inform the applicant as to the likely amount of this initial payment and;

    (b) provide a payment plan for payment of the balance of the debt. 

    I am aiming to make an initial up-front payment of between $60,000 to $80,000 towards my bankrupt estate and to be in a position to resolve my bankrupt estate in full within the next twenty-four months. 

    At this stage I believe I will be in a position to make monthly payments of between $8000 to $10,000 at a minimum.  Due to the growth of my business, I expect to be in a position to make larger monthly instalments within the next few months. 

11. I should, as it were, interpolate and say that when I queried Mr Yilmaz just now, he has indicated that he has not thus far ben able to realise any of the sales to which he referred, and I note that the affidavit was filed as long ago as 13 April and we are now at the end of July. 

12. The trustee filed a responding affidavit on 26 April 2018.  It will cost $388,000 to pay out the estate, $8000 to $10,000 payments would take over four years to resolve the matter.  The trustee has also annexed a sworn valuation, plainly admissible as a business record in these circumstances, showing that the property is in fact worth $290,000, and it confirms the Dialena Nominees mortgage to which I have referred.

13. The trustee deposed to the fact that Mr Yilmaz has not completed the required income questionnaire from 2016 till 2018 and points to the fact that there has been no contact from Mr Yilmaz’s father, or for that matter, stepmother, claiming any interest in the property.  Against this background I came to the application for an adjournment. 

14. First of all, as already indicated, there is no guarantee Justice Connect will take the matter further.  Secondly, although I could consider the appointment of a pro bono lawyer to assist Mr Yilmaz, there are a number of other considerations that arise.  Firstly, the estate’s debts – and I point out Mr Yilmaz was clear he did not wish to cross-examine the trustee – the estate’s debts are over $100,000 more than the only apparently significant realisable asset of the estate, namely, the property.

15. Secondly, Mr Yilmaz has done nothing to realise cash towards the payment he has proposed.  Again, even if the business was as profitable as hoped, it would take some three to four years to pay out the estate.

16. I need then to consider the possibility that Mr Yilmaz’s father might have an interest in the property. 

17. First, it has never been asserted by him.  I accept that Mr Yilmaz senior might reasonably be thought not to have a lot of command at legal matters but the fact is no such interest has been asserted.  Second, and more tellingly, it has not been asserted by Mr Yilmaz’s lawyers, save in the most generalised terms, and I am entitled to and would assume that the lawyers would have the sufficient command of the law to assert an interest were they to feel that there was one that could be asserted. 

18. Even if Mr Yilmaz’s father asserted an interest in the property giving rise to some sort of resulting or possibly even common intention constructive test, he would still face the difficulty to which counsel has referred of the presumption of advancement.  Furthermore, the facts with which the court would be dealing would be some 26 or more years ago with all the difficulties that gives rise to.  In all the circumstances, it is clear that there is prejudice to the creditors if the matter is adjourned.  It will simply lessen the amounts available for distribution whatever the outcome might be.  Second, the cause of action has not been asserted by either Mr Yilmaz’s father or Mr Yilmaz’s lawyer. 

19. Next, there has been a very substantial delay and Mr Yilmaz has had plenty of time to formulate any such ground of opposition were he minded to press it.  And regrettably, one has to say that Mr Yilmaz’s father’s chances of success would seem to be minimal, in any event, given the various matters to which I have referred.  It is clear the court should not adjourn and I decline to do so.  It is equally clear, and in substance for the same reasons, that the trustee should succeed in the action.

20. The fact that Mr Yilmaz and his father and stepmother live at the residence is conceded.  As I said earlier, it is a matter in which I have, if I may say so, the greatest of sympathy for them, but the ground of opposition as to their residence really proceeds on a fundamental misunderstanding of the nature of bankruptcy.  Once you are bankrupt your property, including where you live, vests in your trustee.  The asserted ground under that heading simply is not made out. 

21. Furthermore, the father’s alleged contribution is not made out.  The matter has been in court since November 2017.  There was plenty of time to agitate any interest that would be asserted and there is simply no proof of it.  The final ground of opposition, namely, that Mr Yilmaz proposed to pay out the estate is plainly not capable of being made out in the light of the history that I have referred to.  Accordingly, I am going to make the orders sought in the originating application save that a period of time for vacant possession should, in my view, be somewhat longer than 21 days given the age of the occupants. 

I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of Judge Burchardt

Date: 26 July 2018