Robson (Trustee) v Kiviranta, in the matter of the Bankrupt Estate of Kiviranta
[2019] FCA 715
•20 May 2019
FEDERAL COURT OF AUSTRALIA
Robson (Trustee) v Kiviranta, in the matter of the Bankrupt Estate of Kiviranta [2019] FCA 715
File number(s): NSD 2409 of 2018 Judge(s): THAWLEY J Date of judgment: 20 May 2019 Legislation: Bankruptcy Act 1966 (Cth) s 73
Local Government Regulation 2012 (Qld) s 140
Date of hearing: 20 May 2019 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: No Catchwords Number of paragraphs: 24 Counsel for the Applicant: Mr A Fernon Solicitor for the Applicant: Piper Alderman Counsel for the Respondents: The First Respondent appeared in person ORDERS
NSD 2409 of 2018 IN THE MATTER OF THE BANKRUPT ESTATE OF KIVIRANTA
BETWEEN: WILLIAM ROLAND ROBSON IN HIS CAPACITY AS THE TRUSTEE OF THE BANKRUPT ESTATES OF JARI PEKKA KIVIRANTA AND JEWELLS KIVIRANTA
Applicant
AND: JARI PEKKA KIVIRANTA
First Respondent
JEWELLS KIVIRANTA
Second Respondent
JUDGE:
THAWLEY J
DATE OF ORDER:
20 MAY 2019
THE COURT ORDERS THAT:
1.The amended interim application be dismissed.
2.The respondents pay the applicant’s costs of the amended interim application.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(Revised from transcript)THAWLEY J:
By an interim application dated 18 April 2019 (second interim application), the respondents sought a stay of orders made by consent on 4 April 2019 requiring them to give vacant possession of land known as 2 Campbell Road, Kenthurst (Kenthurst Property).
The interim application was listed for hearing today. Mr Kiviranta appeared and relied upon two affidavits sworn by him and a number of exhibits. I declined an oral application for leave to allow Mr Dimitriou, who was not a legal practitioner, to present argument for Mr Kiviranta. Mr Dimitriou had represented the respondents from time to time in their dealings with the applicant, the Trustee of the bankrupt estates. He had sworn affidavits in support of an earlier interim application which was ultimately resolved by consent.
These proceedings were commenced by an originating application filed by the Trustee on 28 December 2018, seeking orders for vacant possession. The matter was listed for a first case management hearing before me on 14 February 2019. On that occasion, the respondents were represented by Mr Hall. Orders were made by consent for the respondents to deliver up vacant possession of the Kenthurst Property on or before 11 April 2019. In the event vacant possession was not delivered up, a writ of possession was to issue forthwith in favour of the Trustee. An order was also made that any application to set aside or vary the orders made on that day be filed and served by 7 March 2019, such application being given a return date of 14 March 2019.
On 12 March 2019, the duty judge made orders extending the time for any application to set aside or vary the orders for vacant possession to 13 March 2019.
An interim application (the first interim application) bearing the date 8 March 2019 was filed on 14 March 2019 (lodged at 6:04pm on 13 March 2019), in breach of the orders made on 12 March 2019. This sought orders staying the consent orders of 14 February 2019, including the orders for possession. It also sought a number of declarations to the effect that the Trustee had acted in breach of his duties and obligations in various respects and that the Trustee was guilty of misfeasance. It sought an order that the respondents be permitted to seek, as final relief in these proceedings, the declarations and relief sought in the interim application.
On 14 March 2019, orders were made for various steps to be carried out in order for the first interim application to be heard on 4 April 2019.
A “statement of claim” – which set out the factual basis for the allegations of misconduct identified in the first interim application – was filed on 21 March 2019 (lodged at 7:53pm on 20 March 2019) in breach of the orders made on 14 March 2019. Leave was not granted for it to be filed out of time.
On 4 April 2019, the first interim application came on for hearing. The respondents were represented by Mr Hall. After the evidence on that application was read and after substantial argument, a consent position was reached between the parties. The consent orders made were as follows:
1. The orders made on 14 February 2019 be revoked.
2. Pursuant to s 30(1)(b) and s 77(1)(e) and (g) of the Bankruptcy Act 1966 (Cth), the respondents vacate and deliver up to the applicant vacant possession of the land together with the improvements erected thereon comprised in Folio Identifier 3/586786 and known as 2 Campbell Road, Kenthurst in the State of New South Wales (Property) on or before 18 April 2019.
3. Pursuant to s 30(1)(b) and s 77(1)(e) and (g) of the Bankruptcy Act 1966 (Cth), the respondents deliver up to the applicant the keys for all buildings and improvements on the Property on or before 18 April 2019.
4. Pursuant to s 30(1)(b) and s 77(1)(e) and (g) of the Bankruptcy Act 1966 (Cth), the respondents remove from the Property on or before 18 April 2019 all motor vehicles, rubbish, and any other chattels or personal property which have not vested in the applicant as the respondents’ trustee in bankruptcy under s 58(1) of the Bankruptcy Act 1966 (Cth).
5.In the event the respondent fails to comply with order 4 herein, the applicant is empowered to remove and dispose of any and all personal property on the Property as he sees fit.
6.In the event the respondents fail to give vacant possession of the Property to the applicant in compliance with order 2 herein, a writ of possession of the Property issue forthwith in favour of the applicant.
7. The interim application bearing the date 8 March 2019 filed at 6:04 pm on 13 March 2019 be dismissed.
8. The respondents pay the applicant’s costs of the interim application.
9. Reserve liberty to apply.
10. The applicant’s costs of the application dated 21 December 2018 are properly costs of the bankruptcies of the first and second respondents and the applicant’s costs of and incidental to this proceeding, including any reserved costs, be borne equally by each of the bankrupt estates of the respondents.
The consent position reflected the respondents’ desire to have a further opportunity to refinance in order to secure an annulment.
A refinance did not occur. Rather, the second interim application, dated 18 April 2019, was filed. It was supported by an affidavit of Mr Kiviranta sworn 18 April 2019.
At the hearing today, Mr Kiviranta was granted leave to file in Court and rely upon a second affidavit sworn by him. He was also granted leave to file in Court an amended interim application which sought an order restraining the sale of land known as 60 Old Burleigh Road, Surfers Paradise in Queensland (Queensland Property).
The amended interim application sought the following relief:
1.An order staying the orders of the Court made in these proceedings on 4 April 2019, and in which a writ of possession was granted in respect of the bankrupt’s home (2 Campbell Road “Kenthurst”), expiring 18.4.2019 pending the determination of these proceedings;
1A.An Order staying the sale of land describe [sic] as LA BUP1856 Unit 4, 60 Old Burleigh Road Surfers Paradise 4217, such auction held on 6 June 2019 for unpaid rates and charges.
2. An Order that the bankrupt estates of the Applicants’ and as are the subject of these proceedings be annulled, (and on such basis as this Honorable [sic] Court thinks fit);
3. An Order that payment into court within 7 days of $528,815.40 pending the determination of these proceedings, (and on such basis as this Honorable [sic] Court thinks fit);
4. Such other Order(s) as this Court thinks fit.
Particulars
5.A Declaration that in the circumstances in which the Trustee has administered the Estate of the Bankrupts, that he has acted in breach of his duties and obligations as vest in him by reason of his office as a Trustee in Bankruptcy, and that he has since the orders made on 4 April 2019 has not exercised his discretion of his responsibilities to stay the order for possession, to have the bankruptcy annulled and to cooperate with the Applicants to meet the deadline imposed on them.
Mr Kiviranta stated he had not been informed about the intended sale of this property. However, the exhibit to an affidavit of the Trustee’s solicitor, which was read on this application, included a letter to the respondents dated 7 May 2019 forwarding a letter from the solicitors for the Council of the City of Gold Coast containing a “Notice of Intention to Sell” under s 140 of the Local Government Regulation 2012 (Qld). The auction is due to take place on 6 June 2019.
The Council had not been served with the amended interim application. They would have a right to be heard before granting the relief sought in relation to the Queensland Property.
Mr Kiviranta’s affidavit sworn 18 April 2019 referred to finance of approximately $590,000 having been obtained. There was a signed letter of offer showing the terms of the finance and setting out a number of conditions precedent. It was proposed to use that finance, or about $530,000 of it, to pay out the known creditors of the bankrupt estates. That finance, however, was never received because the Trustee was not prepared to warrant that, if that amount was paid to it, the annulment certificate would definitely be issued. The Trustee’s solicitor deposed to the following conversation between the proposed financier’s solicitor and her:
Financier’s solicitor: The threshold issue for my client is that we need absolute certainty that if the money is paid from the escrow account, an annulment certificate will issue.
Trustee’s solicitor: We can’t provide that kind of certainty. The Trustee will do everything he can to ascertain that all creditors have put in proofs of debt in the estate which will involve advertising. When we have ascertained that amount, payment needs to be made to creditors and to meet the liabilities of the estate. There is a risk, albeit a relatively low risk in my view, that another creditor may make a claim in the intervening period between the payments being made and an annulment certificate issuing. If that happens, an annulment cannot occur because there would be another creditor that needs to be paid. Chances are that the situation won’t arise, but my client cannot guarantee it. It has happened in a previous file and so it is a risk, although it is relatively small.
Financier’s solicitor: I will need to take instructions from my client as this is a threshold issue and as it currently stands, if my client cannot receive the assurance it requires, it cannot proceed with the loan.
Trustee’s solicitor: There are also some other matters that will need to be dealt with, if your client intends to advance funds. It is likely that my client will need a release from the bankrupts or the court before the annulment can occur, but I will deal with that once your client has considered the threshold issue.
On 18 April 2019, a solicitor for the proposed financier wrote an email to the Trustee’s solicitor indicating that the “conditions precedent to the loan advance are unable to be met, due to the issues you discussed … yesterday”, which I infer was a reference to the conversation set out immediately above.
I am not satisfied on the evidence adduced that there is a sufficiently strong prima facie case of breach of duty on the part of the Trustee to warrant granting a stay of the order for possession. Nor are there discretionary reasons for doing so.
There is no doubt that not staying the orders for possession will visit serious consequences on the respondents if they are unable to secure a refinance and obtain an annulment or reach some other satisfactory solution with the Trustee. They will be required to give vacant possession of what has been the family home for many years. The property is also used, or at least has been used during the course of these proceedings, by Mr Kiviranta for income producing purposes.
Mr Kiviranta stated that he intended to pay the known creditors of the bankrupt estates within 7 days of today. He stated that the amount owing to the Council, relating to the Queensland Property, had been paid today. Even if I accept that, and I give Mr Kiviranta the benefit of the doubt in that respect, the evidence did not establish that there was funding to pay all of the creditors. I assume that the respondents, having paid the Council, will be able to avoid the sale of the Queensland Property. It was not established, I interpolate, that the proceeds of the sale of that property would be sufficient to pay all of the creditors of the bankrupt estates. There is no dispute that the proceeds of sale of the Kenthurst Property would be sufficient to discharge all creditors of the bankrupt estates.
Mr Kiviranta also indicated that he disputed the Trustee’s fees. I would not grant a stay of the orders for possession in order to ventilate questions of whether the charges of the Trustee are reasonable. They were not shown, on this application, to be unreasonable or improperly incurred. I note that the expenses have been increased by the existence of these proceedings and the interlocutory applications made in them.
The bankruptcies have been on foot since 5 August 2015. The proceedings were commenced by the Trustee because of the failure on the part of the respondents to deliver on funding promised for an annulment. The Trustee has also discussed with the respondents’ representatives the possibility of making a proposal under s 73 of the Bankruptcy Act 1966 (Cth) and this was again discussed with the respondents’ representatives after 4 April 2019.
I also note that it was evident from the material adduced on the first interim application that the Trustee has sought to deal with the bankruptcies expeditiously, affording multiple opportunities for, and assistance with, a possible annulment. Despite repeated promises of finance over the years, none has come to fruition. A period of one month has elapsed since the filing of the second interim application and the hearing today, during which period no finance was secured.
The evidence does not establish any existing funding or any realistic prospect of funding sufficient to obtain an annulment. Sufficient opportunity has been provided to secure such funding. The bankruptcies cannot be permitted to continue without resolution. I also note that as a practical matter there will be time before any sale of the Kenthurst Property for the respondents to continue efforts to obtain and hopefully secure finance.
The amended interim application is dismissed with costs.
I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Thawley. Associate:
Dated: 21 May 2019
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