Re McKeering, P.m. v Ex parte Stafford, R.B.

IN THE FEDERAL COURT OF AUSTRALIA     )No QP 282 of 1995
GENERAL DIVISION                   )
BANKRUPTCY DISTRICT OF             )
THE STATE OF QUEENSLAND                  )

RE:The estate of PAUL MURRAY McKEERING, deceased

Debtor

EX PARTE:ROSEMARY BOLTON STAFFORD, CARMEL MARY SPEEDY and AILEEN NORA O'GORMAN as executors of the estate of MARY KATHLEEN McKEERING deceased

Applicants

ANDREW JAMES RATTLE as legal personal representative of the estate of Paul Murray McKeering deceased

Respondent

MINUTES OF ORDER

JUDGE MAKING ORDER:                Drummond J
DATE OF ORDER:  27 June, 1995
WHERE MADE:  Brisbane

THE COURT ORDERS THAT:

The application be dismissed.

The applicants pay the respondent's costs of and incidental to the application, to be taxed.

UPON the applicants giving the usual undertaking as to damages THE COURT FURTHER ORDERS THAT, until the determination of the petition or earlier order:

The respondent be restrained from disbursing any part of the proceeds of sale of the property the subject of the application, if the sale proceeds, other than the costs and expenses of the sale and
the amount due by the deceased estate to the secured creditors referred to in the material.

The proceeds of sale be held in the trust account of McCrea Jones with liberty to Messrs. McCrea Jones to transfer those proceeds to an interest bearing account with a bank upon condition that Messrs. McCrea Jones forthwith notify the solicitors for the petitioning creditors in writing of the details of any such account.

NOTE:Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA   )    No. QP 282 of 1995
GENERAL DIVISION                   )
BANKRUPTCY DISTRICT OF             )
THE STATE OF QUEENSLAND                  )

RE:The estate of PAUL MURRAY McKEERING, deceased

Debtor

EX PARTE:ROSEMARY BOLTON STAFFORD, CARMEL MARY SPEEDY and AILEEN NORA O'GORMAN as executors of the estate of MARY KATHLEEN McKEERING deceased

Applicants

ANDREW JAMES RATTLE as legal personal representative of the estate of Paul Murray McKeering deceased

Respondent

CORAM:    Drummond J
PLACE:    Brisbane
DATE:     27 June, 1995

REASONS FOR JUDGMENT

This is an application to appoint a registered trustee to take charge of a sale about to take place in a few minutes time by way of auction. The registered trustee is the person intended by the petitioning creditors to be appointed administrator of an insolvent estate in the event that an administration order in bankruptcy is made on a petition that is pending before the Court. The petition refers to non-payment of a very substantial judgment debt obtained by the petitioning creditors against the estate of the deceased debtor.

The purpose of the application, as I think I have indicated, is for this registered trustee to be put in charge of the effective conduct of the sale of the deceased debtor's property. It is not the intention of the creditors to stop the auction proceeding.

There are a number of what I would regard as unsatisfactory features concerning the way the auction of the judgment debtor's property has been arranged. The property is a beach house at Peregian on the Sunshine Coast. It is a four-bedroom house that appears to be in sound condition. The auction has only been advertised for some two weeks, in the circumstances, an unusually short period - something confirmed by a real estate agent relied on by the judgment creditors. As the real estate agent relied on by the judgment creditors also says, it has been very narrowly advertised, advertising being confined to the North Coast area and there being, in particular, no advertising conducted which might bring the property to the attention of possible purchasers in Brisbane. An odd time has been fixed for the sale: 5 p.m. on a Tuesday. The reserve, initially fixed at $350,000, a figure which, as I read the material, is one with which the judgment creditors do not cavil, was reduced, apparently on the direction of the solicitor acting for the executor of the deceased judgment debtor, to $300,000. This was done, it is common ground, after that solicitor learned of the filing of the judgment creditors' petition. The solicitor, moreover, is personally interested in the sale proceeding to recoup what are no doubt substantial fees due to him in respect of his role on behalf of the deceased debtor's estate in the litigation that resulted in the judgment I have referred to. The estate, and again this is common ground, appears to be hopelessly insolvent so that the executor who presently has charge of the sale has no personal pecuniary interest in achieving a substantial return from the sale, even though he is the deceased debtor's sole beneficiary.

It is not, however, suggested that there are any other creditors of the estate apart from the judgment creditors and the solicitor and a couple of creditors who are owed what is in the totality quite small amounts. If application had been made to stop the sale, then, given there are other creditors on the material before me, albeit small ones, I would have been very much inclined not to have allowed the sale to proceed because of the factors I have summarised; however, it is not clear to me just how the trustee proposes to proceed if he were to be put in charge of the sale. There is a valuation put before me on behalf of the executor of the judgment debtor prepared by a registered valuer very recently which values the property at $300,000. There is nothing in this valuation that appears unorthodox. There is no reason, on the face of the valuation, to think that it is anything other than a proper valuation exercise. There is evidence that there are potential purchasers prepared to pay in excess of this valuation. There is nothing coming from the petitioning creditors to suggest that the value the registered valuer retained by the executor has placed on the property is inadequate, let alone grossly inadequate. It is largely for that reason that I remain in a state of uncertainty as to just how the trustee would proceed if he were to be put in charge of the sale. I add that that valuation I have referred to provides an explanation for the actions of the solicitor against which a question mark is raised by certain of the material relied on by the petitioning creditors in reducing the reserve in the way I have mentioned.

In the limited time available to me to consider the matter and peruse the material, I have therefore reached the conclusion, which I announced at the outset, that, notwithstanding the proffering of the usual undertakings as to damages on behalf of the judgment creditors, I will not interfere with this sale. The application will be dismissed.

I certify that this and the preceding
three pages are a true copy of the
reasons for judgment herein of the
Honourable Justice Drummond.

Associate:

Date: 27 June, 1995

The Federal Court of Australia considered an application by Rosemary Bolton Stafford, Carmel Mary Speedy, and Aileen Nora O'Gorman, as executors of the estate of Mary Kathleen McKeering deceased, against Andrew James Rattle, the legal personal representative of the estate of Paul Murray McKeering deceased. The applicants sought to appoint a registered trustee to oversee the imminent sale of a beach house at Peregian on the Sunshine Coast. The proposed sale had been advertised for a short period, with limited geographic scope, and was scheduled at an unusual time. The reserve price was also reduced shortly before the filing of the creditors' petition, raising questions about the integrity of the sale process.

The legal issues before the court included whether the auction process was conducted in a manner that would allow for a fair and transparent sale of the property, and whether the proposed appointment of a registered trustee would be justified under the circumstances. The court had to consider the potential for undue influence on the sale process by interested parties, the adequacy of the advertising and reserve price, and whether the sale should proceed given the short notice and limited advertising.

Justice Drummond concluded that despite the concerns about the sale's transparency and fairness, there was no clear evidence that the proposed sale price was inadequate. The executor had obtained a valuation from a registered valuer, which supported the reserve price. Additionally, there was no suggestion from the petitioning creditors that the valuation was grossly inadequate. The court also noted that the executor, who is the sole beneficiary, had no personal financial interest in achieving a high return from the sale, as the estate appeared to be insolvent. Given these factors, and the lack of clarity on how the trustee would manage the sale, the court decided not to interfere with the auction process. The application was dismissed, but the court restrained the respondent from disbursing the sale proceeds until further order, requiring that the proceeds be held in trust pending the outcome of the petition.

The court further ordered that the applicants pay the respondent's costs of and incidental to the application, to be taxed, and upon the applicants giving the usual undertaking as to damages, the court ordered that the respondent be restrained from disbursing any part of the proceeds of sale, except for the costs and expenses of the sale and the amount due to secured creditors. The proceeds of sale were to be held in the trust account of McCrea Jones, with liberty to transfer them to an interest-bearing account upon notifying the solicitors for the petitioning creditors.

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