Partis v Wright & Ors Trading As; DGB Lawyers
[2013] FCCA 1367
•10 December 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| PARTIS v WRIGHT & ORS TRADING AS DGB LAWYERS & ANOR | [2013] FCCA 1367 |
| Catchwords: BANKRUPTCY – Interim application for orders supporting the sale of property which has vested in the Trustee. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.19, 30, 134, 178 |
| Khadpekar v Official Trustee in Bankruptcy (No 2) (2009) 175 FCR 247 Re Carson; ex parte Carson; Sadleir (respondent) (1960) 19 ABC 108 |
| Applicant: | GARY PARTIS |
| First Respondent: Second Respondent: | LINDA MARGARET WRIGHT, WARREN LLOYD BUDD AND KIM GAY COOPER TRADING AS DGB LAWYERS MICHAEL EDWARD SLAVEN, THE TRUSTEE OF THE PROPERTY OF GARY PARTIS, A BANKRUPT |
| File Number: | SYG 1967 of 2013 |
| Judgment of: | Judge Driver |
| Hearing date: | 10 December 2013 |
| Delivered at: | Sydney |
| Delivered on: | 10 December 2013 |
REPRESENTATION
The Applicant appeared in person
| Solicitors for the Second Respondent: | Ms E Dear DibbsBarker |
INTERLOCUTORY ORDERS
Pursuant to ss.30(1) and 134(4) of the Bankruptcy Act 1966 (Cth), the sale of the property located at 37 Dorrigo Avenue, Woonona in the state of New South Wales (Property) be completed pursuant to the contracts for sale exchanged 2 December 2013, for a sale price of $779,000.
Pursuant to s.30 of the Bankruptcy Act 1966 (Cth), Mr Partis deliver up by 6 January 2014 to the trustee:
(a)vacant possession of the Property; and
(b)all keys for buildings and improvements on the Property.
Pursuant to s.78 of the Federal Circuit Court of Australia Act 1999 (Cth), in the event that Mr Partis fails to deliver up vacant possession of the Property in accordance with order 2, a writ of execution under Part 8 of the Civil Procedure Act 2005 (NSW) shall issue forthwith.
Pursuant to s.30 of the Bankruptcy Act 1966 (Cth), Mr Partis must remove from the Property all vehicles, rubbish and chattels which have not vested in the trustee (the Personal Property) by 6 January 2014.
Pursuant to s.30 of the Bankruptcy Act 1966 (Cth), in the event that Mr Partis fails to comply with order 4, the trustee is empowered to remove and dispose of the Personal Property on the Property as he sees fit.
The trustee’s costs of this application be taxed and paid from Mr Partis’ bankrupt estate.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1967 of 2013
| GARY PARTIS |
Applicant
And
| LINDA MARGARET WRIGHT, WARREN LLOYD BUDD AND KIM GAY COOPER TRADING AS DGB LAWYERS |
First Respondent
MICHAEL EDWARD SLAVEN, THE TRUSTEE OF THE PROPERTY OF GARY PARTIS, A BANKRUPT
Second Respondent
REASONS FOR JUDGMENT
(revised from transcript)
By application filed on 6 December 2013, the Trustee of the bankrupt estate of Mr Gary Partis seeks interim relief in relation to the sale of property which has vested in the Trustee. The proceedings had originally come before the Court on an annulment application. That was dismissed on 16 September 2013 but I also made other orders relating to the sale of property which had caused friction between Mr Partis and the Trustee. The Trustee has entered a contract for sale of what had been Mr Partis’ property described in Certificate of Title Lot 234 in Deposited Plan 15366 and known as 37 Dorrigo Avenue, Woonona in the State of New South Wales (Property). The contract exchanged on 2 December 2013 (Contract) provides for a sale price of $779,000 (Sale Price).
Mr Partis had indicated his intention to challenge the Trustee’s decision to sell the Property pursuant to the Contract. Accordingly, the Trustee seeks orders confirming the sale, and consequential orders for vacant possession.
Under s.30 of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act), the Court may make such 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 Bankruptcy Act in any such case or matter.
Powers and discretion of the Trustee
Under s.134(1)(a) of the Bankruptcy Act, the Trustee is empowered to sell all or any part of the Property of the bankrupt. The Trustee may, subject to the Bankruptcy Act, use his or her own discretion in the administration of the estate, and at any time apply to the Court for directions in respect of a matter arising in connection with the administration of the estate[1].
[1] Sections 134(3) and (4)
In exercising powers, the Trustee is required by s.19(1) of the Bankruptcy Act to, among other things, administer the estate as efficiently as possible by avoiding unnecessary expense, and exercise powers and perform in a commercially sound way.
In selling property, the Trustee is obliged to exercise that “power to sell with prudence and diligence and to the best advantage of the creditors…”[2].
[2] Re Carson; ex parte Carson; Sadleir (respondent) (1960) 19 ABC 108 at page 120
The Trustee submits that, throughout the course of exercising his power of sale, he has acted reasonably and with diligence, independence, and commercial prudence. Specifically, the affidavit evidence filed by the Trustee indicates the Trustee has discharged his overriding duty to obtain the best price by:
a)engaging an experienced and competent real estate agent to market and sell the Property, and acting on the advice of that agent;
b)overseeing the conduct of the sale by inter alia, approving the marketing strategy and monitoring the progress of the sale;
c)obtaining a valuation of the Property from an appropriately qualified valuer;
d)testing the market by offering the Property for sale at a properly advertised public auction;
e)after the Property failed to sell at auction, listing the Property for sale at a price recommended by the agent; and
f)accepting an offer to purchase the Property which was, in the Trustee’s discretion, a proper price having regard to the valuation, the time the Property had been on the market, and the best interests of creditors and the bankrupt.
Nevertheless, Mr Partis is concerned that the Property is being sold for approximately $11,000 less than the value of the Property established at an earlier stage of the proceedings.
Role of the Court
The Trustee has exercised his discretion and commercial judgment to sell the Property for the Sale Price and the Trustee is not, by the filing of this interim application, asking the Court to substitute its own discretion in this regard.
Equally, the Court is not obliged to give directions in respect of the sale of the Property simply because the Trustee has requested them[3].
[3] Willoughby v Official Trustee in Bankruptcy [2001] FCA 1345 (“Willoughby”) citing Re Driller (1972) 21 FLR 159
However, I accept that an order in relation to the sale is appropriate in these circumstances and is in the interests of the parties, having regard to the background to this matter, Mr Partis’ refusal to consent to the sale and expressed intention to challenge the sale of the Property. In the absence of orders, it is possible that the Trustee’s decision to sell the Property will continue to be contested before the courts. The Federal Court considered similar circumstances in Willoughby.
Further, Mr Partis has indicated that he will not deliver vacant possession (in the absence of compensation) if the sale proceeds at the Sale Price.
Ultimately, whether the Court makes the orders sought or, alternatively, declines to make any order regarding the sale, the result would be identical as far as the sale of the Property is concerned; that is, there would be no impediment to the Trustee completing the sale.
High threshold for interference with exercise of discretion
The Trustee further submits that the Court would need to be satisfied that there was sufficient justification before exercising its supervisory power to makes orders which interfered with the exercise of the discretion by the Trustee.
By analogy, the Trustee submits that the Court would need to be satisfied to the standard applicable on a review of Trustee’s decision under s.178 of the Bankruptcy Act.
In brief, the role of the Court in exercising its powers under s.178 was affirmed in Khadpekar v Official Trustee in Bankruptcy (No 2)[4] as follows:
1.Section 178 confers a “supervisory jurisdiction over the conduct of the trustee”: Cummings v Claremont Petroleum NL [1996] HCA 19; (1996) 185 CLR 124 at 132 per Brennan CJ, Gaudron and McHugh JJ. The section confers on the Court a very wide discretion: McGoldrick v Official Trustee in Bankruptcy [1993] FCA 636; (1993) 47 FCR 547 at 552–553.
2. It is not necessary for an applicant for relief under the section to show that the trustee’s decision was absurd, or unreasonable or taken in bad faith. The Court has a wide discretion to make such order as seems appropriate in the circumstances of the case: Re Tyndall; Ex parte Official Receiver (1977) 30 FLR 6 at 9–10; [1977] FCA 15; 17 ALR 182 at 186 per Deane J. At the same time, the Court will be slow to make orders which will have the effect of interfering in the day-to-day administration of a bankrupt’s estate and, in cases involving an exercise of business or commercial judgment, will place considerable weight on the trustee’s decision. Furthermore, a Court will not intervene under s 178 simply because the Judge forms a different view from that of the trustee. [emphasis added]
3.An order may be made under s.178 even if the trustee’s decision was correct on the material before him, if, for example, additional material is put before the Court.
[4] (2009) 175 FCR 247, citing Frost v Sheahan (Trustee) [2009] FCAFC 20
In the present case, I accept that circumstances do not exist to justify the interference with the exercise of the Trustee’s business judgment to sell the Property at the sale price. Further, I accept that the Court should by order support the course of action that the Trustee has embarked upon.
Orders sought
I will make orders 1 to 6 inclusive as set out in the Interim Application filed on 6 December 2013.
I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Judge Driver
Associate:
Date: 17 December 2013
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