Reaper v Vrsecky (Trustee)

Case [2016] FCA 509

FEDERAL COURT OF AUSTRALIA

Reaper v Vrsecky (Trustee) [2016] FCA 509

Appeal from: Vrsecky v Reaper & Anor (No. 2) [2015] FCCA 2230
File number: VID 635 of 2015
Judge: DAVIES J
Date of judgment: 12 May 2016
Catchwords: BANKRUPTCY AND INSOLVENCY – appeal from Federal Circuit Court – application by Trustee for orders for partition and sale of property – where bankrupt and his wife joint tenants – where mortgage payments made from compensation moneys – calculation of amount fairly attributed to protected money – relevant principles – Bankruptcy Act 1966 (Cth) s 116(3), (4)
Legislation: Bankruptcy Act 1966 (Cth) s 116(3), (4)
Cases cited:

Commissioner of Taxation v Sun Alliance Investments Pty Ltd (2005) 225 CLR 488; [2005] HCA 70

Fox v Percy (2003) 214 CLR 118; [2003] HCA 22

Gilkinson v Repatriation Commission (2011) 197 FCR 102; [2011] FCAFC 133

Metwally v University of Wollongong (1985) 60 ALR 68; [1985] HCA 28

Rameo v Trust Co (PTAL) Ltd [2012] NSWSC 62

Re Iskenderian; Ex parte Iskenderian Bros Pty Ltd (1989) 21 FCR 363; [1989] FCA 184

Re Manivilovski; Ex parte Official Trustee in Bankruptcy (1993) 45 FCR 358

Reaper v Baycorp Collections PDL (Australia) Pty Ltd [2014] FCA 13

Reid v Smith (1905) 3 CLR 656; [1905] HCA 54

Repatriation Commission v Law (1980) 47 FLR 57

Roncevich v Repatriation Commission (2005) 222 CLR 115; [2005] HCA 40

Sistrom v Urh (1992) 40 FCR 550

SLMB v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 129

Stankovic v Van der Velde [2012] FCA 1436

Turner v Official Trustee in Bankruptcy (1996) 71 FCR 418; [1996] FCA 1074

Walsh v Rother District Council [1978] 1 All ER 510
Date of hearing: 24 February 2016, 23 March 2016 and 8 April 2016
Registry: Victoria
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Category: Catchwords
Number of paragraphs: 46
Counsel for the Appellants: The Appellants appeared in person
Counsel for the Respondent: B Devanny
Solicitor for the Respondent: Madgwicks

ORDERS

VID 635 of 2015
BETWEEN:

BRETT REAPER

First Appellant

SHARON FISHER

Second Appellant
AND:

PETR VRSECKY AS TRUSTEE OF THE BANKRUPT ESTATE OF BRETT VINCENT REAPER

Respondent

JUDGE:

DAVIES J

DATE OF ORDER:

12 MAY 2016

THE COURT ORDERS THAT:

1.The appeal be dismissed.

2.The cross-appeal be allowed.

3.Paragraph 2 of the orders of Burchardt J made on 18 September 2015 and amended on 9 October 2015 be set aside and in its place, order that within 90 days of the making of these orders, the Second Appellant has the option to purchase the Respondent’s interest in the property described in Certificate of Title Volume 10609 Folio 987 and known as 12 The Esplanade, Narre Warren South in the State of Victoria, for $221,635.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

DAVIES J:

INTRODUCTION

  1. The first appellant (“Mr Reaper”

Continue reading Reaper v Vrsecky (Trustee)

Sign in free to access the full text

Details
AGLC
Reaper v Vrsecky (Trustee) [2016] FCA 509
Case
[2016] FCA 509
Decision Date

CaseChat Overview and Summary

In this case, the Federal Circuit Court (FCC) was asked to determine the extent to which the trustee of a bankrupt estate could claim a share of the value of a property held in joint tenancy between the bankrupt and his wife. The appellants, Reaper and Fisher, sought to challenge the orders made by the FCC in two separate judgments, one made in February 2015 and the other in September 2015. The central legal issue was whether the property was purchased wholly or substantially with protected moneys under the Bankruptcy Act 1966 (Cth), and if so, to what extent the trustee was entitled to a share of the property’s value attributable to such payments.

The FCC had previously ruled that the property was not purchased wholly or substantially with protected moneys, but that all payments made since 2007 on the loan were from such moneys. Consequently, the FCC held that half of any increase in the property’s value since 2007 was directly attributable to the appellant’s protected payments. The FCC outlined a specific methodology to determine the amount the trustee must pay the appellant for the protected moneys. In applying this methodology, the FCC valued the trustee's interest in the property at $96,000. The court further dismissed the interlocutory application and cross-claims made by the appellants, finding them to be misconceived and lacking in substantiation.

The court dismissed the appeal, allowed the cross-appeal, and set aside certain orders previously made. Instead, it ordered that the bankrupt had the option to purchase the trustee’s interest in the property for $221,635 within 90 days of the judgment. The court’s reasoning was grounded in the statutory framework of the Bankruptcy Act and the specific circumstances of the case, ensuring that the trustee’s entitlement was fairly determined in accordance with the law.

Orders

Orders of the court

1. The appeal be dismissed.

2. The cross-appeal be allowed.

3. Paragraph 2 of the orders of Burchardt J made on 18 September 2015 and amended on 9 October 2015 be set aside and in its place, order that within 90 days of the making of these orders, the Second Appellant has the option to purchase the Respondent’s interest in the property described in Certificate of Title Volume 10609 Folio 987 and known as 12 The Esplanade, Narre Warren South in the State of Victoria, for $221,635.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

In a judgment delivered on 10 February 2015 (“the first decision”), the Federal Circuit Court (“the FCC”) did not accept that the property was purchased wholly or substantially with protected money and held that s 116(3) did not apply. The FCC did, however, accept that all the payments made since 2007 on a loan taken out by Mr Reaper and Ms Fisher in 2004 were from “protected moneys” and held that half of any accrual in the overall value of the property since 2007 was “plainly directly attributable to Mr Reaper’s protected payments” within the terms of s 116(4): Vrsecky v Reaper & Anor [2015] FCCA 32, [62]. At [72]–[74], the FCC held that the methodology to apply to determine the amount which the Trustee must pay Mr Reaper pursuant to s 116(4) in respect of the “protected money” was as follows:72.The methodology that it seems to me is eminently fair in the particular circumstances of this case is to ascertain the value of the property and the extent of the mortgage in 2007 thus isolating the then net equity. That net equity is plainly not referrable to any protected payments to Mr Reaper. It may however be the case that the actual increase in value is very small. That might then resuscitate the s.116(3) case upon which the respondents advance. It is eminently in their interests that these figures be ascertained.73.The next step in the methodology is to ascertain the value of the property now and the value of the mortgage. Half of the increase from 2007 until 2014 (or early 2015 as I suspect will be the case) is plainly directly attributable to Mr Reaper’s protected payments. The other half, adopting the reasoning of Emmett J in Stankovic v Van Der Velde is clearly attributable to Ms Fisher.74.Once these figures are ascertained it will be possible to determine whether the respondents are able to purchase out the trustee’s interest in the property.The FCC ordered the parties to obtain a valuation of the property and produce an agreed estimate of the mortgage on the property as at May 2007 and currently. The matter was listed for further hearing, including the cross-claims and interlocutory application which the FCC had not determined because of the late filing of documents by Mr Reaper and Ms Fisher. The hearing resumed in June 2015 and the valuation and mortgage evidence was presented. Applying the methodology referred to in [72]–[74] of the first decision, the FCC valued the Trustee’s interest in the property at $96,000: Vrsecky v Reaper & Anor (No. 2) [2015] FCCA 2230, [101]. The FCC held that the claims made by the appellants in their interlocutory application were misconceived, stating at [102]–[104]: 102.A number of the matters set out in the Interlocutory Application, which are said to be sought as Interlocutory Orders, are plainly inappropriate. They are so misconceived that it is not appropriate to dignify them with any detailed consideration. By way of illustration only, order (8) seeks “a declaration that the First Respondent does not owe a debt to the Australian Taxation Office on the integrated client account of Urban Habitat Landscaping and Paving Pty Ltd”. This matter is not properly before this Court at all.103.The orders sought also seem to me, on their face, to seek to re-litigate matters previously disposed of in the various court proceedings to which Mr Reaper has been a party. Insofar as the Interlocutory Application seeks an inquiry, pursuant to s.179 of the Bankruptcy Act, not only are the matters asserted not made out, but I am quite satisfied on the materials as a whole that the conduct of the trustee does not make it appropriate to contemplate an inquiry pursuant to s.179. Insofar as the Interlocutory Application seeks, at paragraph 13(h), an inquiry pursuant to s.179 because "the applicant engaged in litigation on a substantially misconceived basis, and in a manner which was unnecessary", I would only observe that the trustee's conduct seems to me to have been, at all times, entirely proper.104.Regrettably, it is Mr Reaper and Ms Fisher who have engaged in unnecessarily prolix and often irrelevant initiatives, and have protracted and expanded these proceedings. Insofar as the Interlocutory Application seeks compensation pursuant to s.178 of the Act (paragraph 14) for "injury harm loss and damage suffered by the respondents as a consequence of circumstances relating to the orders sought herein", that matter is not in any sense particularised. In any event, as I would find, there is nothing to suggest that the trustee's actions have been such as to give rise to any compensable claim, whether under s.178 or otherwise.The FCC also dismissed the cross-claims, essentially for the reason that Mr Reaper and Ms Fisher had not established that any damage had been done to the property, as claimed.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.