Official Receiver v Fall - [2008] FMCA 489

FEDERAL MAGISTRATES COURT OF AUSTRALIA

OFFICIAL RECEIVER v FALL & ANOR

[2008] FMCA 489

BANKRUPTCY – Application for sale of property and to vacate land – power to make orders.

Bankruptcy Act 1966 (Cth), ss.30, 58(1)(b) and (6), 77(1)(e) & (g)
Property Law Act 1969 (WA), s.126(1)
Federal Magistrates Act 1999 (Cth), s.18

Bray v Bray (1926) 38 CLR 542
Cook v Schwarz [2005] FMCA 1598
Cook v Tagamilitsky [2001] FMCA 117
Official Receiver v Tregaskis & Anor [2006] FMCA 1915
Re Billen; ex parte Sistron [1985] FCA 141

Applicant:

OFFICIAL RECEIVER FOR AND ON BEHALF OF OFFICIAL TRUSTEE IN BANKRUPTCY

THE TRUSTEE OF THE PROPERTY OF ALAN LESLIE ROBINS, A BANKRUPT

First Respondent:

LEE HEATHER FALL

Second Respondent:

ALAN LESLIE ROBINS

File Number:

PEG 224 of 2007

Judgment of:

Lucev FM

Hearing date:

14 April 2008

Date of Last Submission:

14 April 2008

Delivered at:

Perth

Delivered on:

14 April 2008

REPRESENTATION

Counsel for the Applicant:

Mr C. M Donoghue

Solicitors for the Applicant:

Carles Solicitors

Counsel for the First Respondent:

No Appearance

Solicitors for the First Respondent:

No Appearance

Counsel for the Second Respondent:

Mr R. J. Butcher

Solicitors for the Second Respondent:

Butcher Paull & Calder

ORDERS AND DECLARATIONS:

A declaration that the Applicant and the First Respondent are the beneficial owners of the land described as Lot 329 on Plan 13451 being the whole of the land comprised in Certificate of Title Volume 1586 Folio 155 and known as 12 Osprey Way, Thornlie, Western Australia (“the Thornlie land”) as tenants in common in equal shares.
The Thornlie land be sold free from encumbrances (if any) of such of the encumbrancers as shall consent to the sale and subject to the encumbrances of such of them as shall not consent.
The Thornlie land be sold subject to the Law Society of Western Australia’s General Conditions for the Sale of Land.
The Applicant have the sole conduct of the sale of the Thornlie land and be authorised to instruct an agent and/or auctioneer for that purpose.
The Applicant is to decide whether the Thornlie land is to be sold by public auction or by private treaty.
The Applicant is to decide whether or not to set a reserve price for any auction of the Thornlie land and, if set, at what price.
The Applicant be empowered to sign any contract of sale, discharge of mortgage authority, Transfer of Land and any other documents, on behalf of the First Respondent necessary to give effect to the sale in the event that the First Respondent fails or refuses to sign such documents within such time as required by the Applicant’s solicitors.
The First and Second Respondents do all such things as may be reasonably required by the Applicant, its selling agent or solicitors for the purpose of achieving a sale of the Thornlie land including providing access to buildings on the Thornlie land for the purposes of valuation and viewing by potential purchasers.
The First and Second Respondents have liberty to be at the sale of the Thornlie land.
The First and Second Respondents be served personally with this order within 10 days from the date hereof and they shall deliver up vacant possession of the Thornlie land together with all keys for all buildings and improvements on the Thornlie land to the Applicant’s solicitors within 28 days after service of the order on them.
In the event that the First and Second Respondents fail to deliver up vacant possession of the Thornlie land in accordance with order 10 above a writ of possession shall issue forthwith in favour of the Applicant.
The First and Second Respondents must remove from the Thornlie land all vehicles, rubbish and chattels which have not vested in the Official Trustee in Bankruptcy (“the personal property”) within 28 days of this order.
In the event that the First and Second Respondents fail to comply with order 12 above the Applicant is empowered to remove and dispose of the personal property on the Thornlie land as it sees fit after 28 days have passed from the making of this order.
The net proceeds of sale of the Thornlie land, after payment of what shall be due to any encumbrancer or encumbrances according to their priorities and of all other proper costs, charges and expenses of the sale be paid to the Applicant and First Respondent in equal shares subject to any costs order to be met out of the First Respondent’s share.
The Applicant’s costs of the action against the Respondents be fixed in the sum of $2,286.38 and:
(a)in the case of the First Respondent be paid out of her share of the proceeds of sale of the Thornlie land; and
(b)in the case of the Second Respondent be paid out of his bankrupt estate.
These orders shall be stayed for a period of 60 days and be vacated if the bankruptcy is annulled in that period. If the orders are so vacated, then the Respondents do pay the Applicant’s costs of this application fixed in the sum of $2,286.38 and those costs form part of the Bankrupt’s debts under s.153A of the Bankruptcy Act.
The parties have liberty to apply.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PERTH

PEG 224 OF 2007

THE OFFICIAL RECEIVER FOR AND ON BEHALF OF OFFICIAL TRUSTEE IN BANKRUPTCY THE TRUSTEE OF THE PROPERTY OF ALAN LESLIE ROBINS, A BANKRUPT

Applicant

And

LEE HEATHER FALL

First Respondent

ALAN LESLIE ROBINS

Second Respondent

REASONS FOR JUDGMENT

The Applicant seeks orders for the sale of land against the First Respondent and orders that the Respondents vacate land so that the Official Trustee in Bankruptcy may realise the assets of the bankrupt estate of the Second Respondent for the benefit of creditors of the bankrupt estate in accordance with its obligations and duties under the Bankruptcy Act 1966 (Cth).[1] Orders were made at hearing substantially in the terms sought by the Applicant, and the Court then indicated that the Reasons for Judgment would be later published in Chambers. These are those Reasons for Judgment.
[1] “Bankruptcy Act”.
The Applicant relies on the affidavits of the following:
a)affidavit of Majella Helen Pindar sworn 12 November 2007; [2]
b)the affidavits of Shane Hedley Shaw sworn 28 November 2007 and 19 December 2007.[3]
[2] “Pindar’s Affidavit”.
[3] “Shaw’s First Affidavit” and “Shaw’s Second Affidavit” respectively.
The Applicant acts for and on behalf of the Official Trustee in Bankruptcy[4] as Trustee of the bankrupt estate of the Second Respondent.
[4] “Official Trustee”.
Mrs Pindar’s Affidavit deposes to the relevant facts as follows:
a)the Second Respondent became bankrupt in New South Wales by sequestration order dated 18 September 1995 and the Official Trustee was appointed his trustee in bankruptcy;
b)the Second Respondent resides and owns property in Western Australia, and consequently the care and conduct of his bankrupt estate was transferred to the Official Receiver’s Perth office;
c)the Second Respondent filed his Statement of Affairs on 2 September 1996;
d)the Second Respondent was discharged from bankruptcy on 3 September 2004, the discharge having been delayed by notice of objection to his discharge;
e)the First Respondent and the Second Respondent are the registered proprietors of the land known as 12 Osprey Way, Thornlie, in the State of Western Australia (and more particularly described as Lot 329 on Plan 13451 being the whole of the land in Certificate of Title Volume 1586 Folio 155);[5]
[5] “Thornlie land”.
f)the Second Respondent became a registered proprietor of the Thornlie land on 6 January 2004, some months prior to his discharge from bankruptcy;
g)the Second Respondent’s interest in the Thornlie land vested in the Official Trustee upon acquisition by the Second Respondent;[6]
[6] Bankruptcy Act, s.58(1)(b) and (6).
h)the Official Trustee lodged a caveat over the Thornlie land on 1 September 2004 when it became aware that the Second Respondent had acquired the Thornlie land;
i)the Second Respondent did not respond to correspondence dated 6 September 2004 from the Official Trustee seeking details of the acquisition of the Thornlie land and notifying the Second Respondent that the Thornlie land had vested in the Official Trustee;
j)on 12 December 2005 the Official Trustee forwarded further correspondence to the Second Respondent requesting the mortgage loan balance and two market appraisals for the Thornlie land, which correspondence was not responded to by the Second Respondent;
k)on 7 February 2006 the Official Trustee forwarded further correspondence to the Second Respondent by registered mail informing the Second Respondent that as a discharged bankrupt he was being offered the chance to purchase the Official Trustee’s half share equity in the Thornlie land, but no response was received from the Second Respondent;
l)on 23 June 2006 the Official Trustee forwarded correspondence to the First Respondent informing her that the Second Respondent’s interest in the Thornlie land had vested in the Official Trustee, and that she could either join the Official Trustee in selling the Thornlie land or make an offer to buy out the Official Trustee’s equity in the property, but the First Respondent did not respond to that correspondence;
m)the Second Respondent contacted the Insolvency Trustee Service of Australia[7] on 28 June 2006 and requested a payout figure for his bankruptcy;
[7] “ITSA”.
n)on 7 July 2006 the Second Respondent was advised by ITSA that the estimated payout figure was $110,224.82, and, further, was requested to obtain two market appraisals for the Thornlie land;
o)on 24 July 2006 the Applicant contacted the Second Respondent by telephone and was advised that the Second Respondent had instructed real estate agents to make appraisals of the Thornlie land, and that copies of those appraisals were to be forwarded to ITSA;
p)on 24 July 2006 the Second Respondent also requested copies of Proofs of Debt filed by the creditors and a list of creditors from the Applicant, those matters being provided to the Second Respondent by correspondence from ITSA dated 24 July 2006;
q)the Second Respondent did not forward any appraisals for the Thornlie land to the Official Trustee;
r)on 15 September 2006 the Applicant attempted to contact the Second Respondent by telephone, and:
i)the work number given gave a facsimile transmission tone; and
ii)the mobile number given was answered by a woman who stated she did not know the First or Second Respondents;
s)as a result of the withdrawal of Proof of Debt claims by some creditors a new payout figure for the bankruptcy was calculated at approximately $26,000.00, and the Second Respondent was notified of that by correspondence dated 22 September 2006 from ITSA;
t)on 3 October 2006 the Applicant wrote to the First Respondent and advised that given the lack of response from her the matter would now be referred to the Applicant’s solicitors;
u)the Second Respondent contacted the Official Trustee by telephone on 9 October 2006 and advised that he had contacted his remaining creditors and that they had advised him that they no longer wished to make a claim in his bankrupt estate, and as a consequence the Applicant advised the Second Respondent that it was necessary for the creditors to given written advice to the Official Trustee, and the Second Respondent said that he would arrange for his creditors to do so;
v)the Applicant wrote to the Second Respondent on 10 October 2006 giving the Second Respondent until 30 October 2006 to get the creditors to withdraw their Proof of Debt claims in writing, and if that did not occur, to explore the possibility of obtaining finance to pay out the bankruptcy;
w)in the correspondence of 10 October 2006 the Applicant advised the Second Respondent that if he did not respond to this correspondence the Applicant would refer the matter to its solicitors to proceed with legal action;
x)the Applicant contacted the two remaining creditors by telephone on 30 October 2006 and was informed by both creditors that they had no intention of withdrawing the Proofs of Debt;
y)the Applicant advised the First Respondent on 30 October 2006 in writing that due to the lack of response to the Applicant’s correspondence the matter would now be referred to the Applicant’s solicitors;
z)on 1 November 2006 the Applicant wrote to the Second Respondent and advised that two creditors still existed and that the Second Respondent’s inability to move his remaining creditors to remove their Proofs of Debt meant that the Official Trustee had a duty to realise its interest in the Thornlie land for the benefit of creditors, and that with no offer from the Second Respondent to purchase the Official Trustee’s interest in the Thornlie land the matter would now be referred to the Applicant’s solicitors;
aa)on 30 November 2006 the Applicant’s solicitors wrote to the First Respondent and Second Respondent providing draft copies of the Application (in these proceedings) and advised that they had been instructed to delay proceedings for 7 days in order to resolve the matter without legal proceedings;
bb)in a telephone conversation with the Applicant’s solicitor on 7 December 2007 the Second Respondent said words to the effect that approximately $150,000.00 was owed under the mortgage registered against the Thornlie land;
cc)the Applicant obtained an independent valuation of the Thornlie land on 11 December 2007 which showed the value of the Thornlie land at $375,000.00.
The Application, Pindar’s Affidavit and the orders made by this Court on 10 December 2007 have all been served on the First Respondent and Second Respondent.[8]
[8] See Shaw’s First Affidavit and Shaw’s Second Affidavit respectively.
The Applicant has been given numerous opportunities to purchase the Official Trustee’s equity in the Thornlie land or to otherwise obtain his creditor’s consent to withdrawal of their Proofs of Debt. However, the Second Respondent’s remaining creditors have indicated that the existing Proofs of Debt are not withdrawn. The Second Respondent has been given sufficient opportunity to pay out the bankruptcy.
The First Respondent did not appear on the application.
The Second Respondent appeared, and initially sought an adjournment of the application, essentially to allow time for a loan sought by the Second Respondent to be approved. For reasons given ex tempore, and which need not be repeated in these Reasons for Judgment, the application by the Second Respondent for an adjournment was dismissed. In dismissing the adjournment application the Court did indicate that it would be prepared to consider staying any orders that it might make for a sufficient period to allow the Second Respondent to make any necessary arrangements to finance either the payout of his bankruptcy or the purchase of the Official Trustee’s equity in the Thornlie land. The Official Trustee did not demur from that proposition, and provided the Court with a draft order which it said would give effect to any such determination, if it was made by the Court.
Under s.19 of the Bankruptcy Act the Official Trustee has a duty to recover the property of the Second Respondent for the benefit of the bankrupt estate and the bankrupt’s creditors.
The Applicant seek orders under ss.30, 58 and 77(1)(e) and (g) of the Bankruptcy Act in order to recover the Thornlie land. Sections 30 and 77(1)(g) of the Bankruptcy Act allow the Court to make the orders sought by the Applicant. Those orders include that the bankrupt, the Second Respondent, vacate the property, and that a writ of possession issue in the event that the Second Respondent fails to do so.[9]
[9] Cook v Tagamilitsky [2001] FMCA 117 at para. 19 per Raphael FM (“Tagamilitsky”); Cook v Schwarz [2005] FMCA 1598 at para. 11 per Barnes FM (“Schwarz”); Official Receiver v Tregaskis & Anor [2006] FMCA 1915 at paras. 10-11 per Lucev FM (“Tregaskis”).
Sections 30 and 77(1)(g) of the Bankruptcy Act combine to provide jurisdiction for this Court to grant the orders sought against the Second Respondent.[10]
[10] See the cases referred to in footnote 9 above.
Section 30 of the Bankruptcy Act also gives the Court broad powers to make orders to give effect to that Act, and that power extends to making declarations as to the respective beneficial interests of the Applicant and the First Respondent in relation to the Thornlie land, and for orders for the sale and vacant possession of the Thornlie land.[11]
[11] Tregaskis at para. 13 per Lucev FM.
Under s.126(1) of the Property Law Act 1969 (WA) “the Court shall, unless it sees good reason to the contrary, direct the sale” where this is requested by a party with one half interest or more in land. The Applicant is entitled to orders as of right where the Respondents have not discharged the onus of showing that partition is a better option.[12] The same principles apply in the current circumstances.[13]
[12] Bray v Bray (1926) 38 CLR 542 (“Bray”).
[13] Tregaskis at para. 14 per Lucev FM.
In Bray the land was held in a tenancy in common while the land in the present case is registered in the name of the First Respondent and Second Respondent as joint tenants. This makes no difference in a case of bankruptcy as joint tenancy is severed when a bankruptcy occurs, and the Official Trustee becomes an equitable tenant in common with the other co-owner.[14]
[14] Tregaskis at para. 15 per Lucev FM.
Alternatively, the Court has accrued jurisdiction to make orders for sale under s.126 of the Property Law Act.[15]
[15] Federal Magistrates Act, 1999 (Cth), s.18; Tregaskis at para. 16 per Lucev FM.
The Federal Court, then exercising the bankruptcy jurisdiction now concurrently exercised with this Court, has said that there is no restriction in considering what orders it would be appropriate to make in the exercise of the power conferred under the Bankruptcy Act by the kinds of limitations which may be found in property partition legislation.[16]
[16] Re Billen; ex parte Sistron [1985] FCA 141 at para. 17 per Neaves J.
It follows that this Court will not be limited by any restrictions found in s.126 of the Property Law Act.[17]
[17] Tregaskis at para. 19 per Lucev FM.
The Applicant seeks vacant possession of the Thornlie land, and wishes to have sole conduct of the sale of the Thornlie land in order to realise the assets of the bankrupt estate. The Second Respondent has failed to do all such acts and things in relation to the realisation of the land and to aid the Applicant in the administration of the bankrupt estate.[18] The failure of both the First Respondent and Second Respondent to respond to various correspondence to them, and their failure to notify the Applicant as to their willingness to co-operate in the sale of the Thornlie land, has caused significant delay and increased costs in the administration of the bankrupt estate of the Second Respondent. That conduct indicates that further delays and costs are likely to be incurred in the administration of the bankrupt estate to the prejudice of the Second Respondent’s creditors if the Applicant is obliged to rely on the co-operation of the First Respondent or the Second Respondent in the sale of the Thornlie land.
[18] As required by s.77(1)(g) and (e) of the Bankruptcy Act.
The Court has jurisdiction to make the orders sought by the Applicant under ss.30 and 77 of the Bankruptcy Act, and to make those orders in the absence of the First Respondent.[19]
[19] Tregaskis at para. 27 per Lucev FM; Tagamilitsky; Schwarz.
There is nothing before the Court that ought prevent it from making the orders sought in the Application, save for the plea from the Second Respondent that the Court ought to stay the operation of the orders for a period to allow the Second Respondent one final chance to obtain finance to either pay out the bankruptcy or purchase the Official Trustee’s equity in the Thornlie property. Given the nature of the sale of land in circumstances such as those presently before the Court, the Court is prepared to give the Second Respondent one final chance to obtain finance for the purposes set out above. Given the Second Respondent’s history in relation to this matter it ought be under no illusion that this is anything other than a final chance, and that it would be necessary to establish exceptional circumstances to further delay the sale of the Thornlie land.

In the circumstances, the Court will make orders in terms of proposed orders 1–16 in the Applicant’s Minute of Proposed Orders, with the minor amendments referred to in making orders on the day of hearing, and with a further order providing that the orders are to be stayed for a period of 60 days and to be vacated if the bankruptcy is annulled in that period, and for the cost consequences flowing therefrom.

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

Associate: S. Gough

Date: