Rowe v Official Trustee in Bankruptcy
[2015] FCCA 220
•6 February 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ROWE v OFFICIAL TRUSTEE IN BANKRUPTCY | [2015] FCCA 220 |
| Catchwords: BANKRUPTCY – Application to review a trustee’s decision – whether decision is unjust or inequitable – Trustee's decision not unjust or inequitable – application dismissed. |
| Legislation: Bankruptcy Act 1966, ss.19(1), 58, 60(1), 60(2), 60(3), 60(4), 60(4)(a), 60(5), 178 Property Agents and Motor Dealers Act 2000 (Qld), ss.134A, 137(3) |
Cases cited:
Freeman v National Australia Bank Ltd [2003] FCA 1233
Owen v Menzies [2013] 2 Qd R 327
Re Wheeler; Ex parte Wheeler v Halse (1994) 54 FCR 166
Rowe v Official Trustee in Bankruptcy [2014] FCCA 2819
| Applicant: | CHAD EVERETT ROWE |
| Respondent: | OFFICIAL TRUSTEE IN BANKRUPTCY |
| File Number: | BRG 960 of 2014 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 2 February 2015 |
| Date of Last Submission: | 2 February 2015 |
| Delivered at: | Brisbane |
| Delivered on: | 6 February 2015 |
REPRESENTATION
| The Applicant appeared in person |
| Solicitor for the Respondent: | Mr Muller |
| Solicitors for the Respondent: | Rogers Barnes & Green |
ORDERS
The application filed on 4 November, 2014 be dismissed.
The applicant pay the respondent’s costs of and incidental to the application, to be taxed and paid in accordance with the Federal Circuit Court (Bankruptcy) Rules2006.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 960 of 2014
| CHAD EVERETT ROWE |
Applicant
And
| OFFICIAL TRUSTEE IN BANKRUPTCY |
Respondent
REASONS FOR JUDGMENT
Mr Rowe is currently an undischarged bankrupt, the Federal Circuit Court of Australia having made a sequestration order against his estate on 5 February, 2014. The Official Trustee in Bankruptcy is the trustee of his estate in bankruptcy.
By these proceedings, Mr Rowe seeks to challenge a decision of his trustee to discontinue certain proceedings initiated by him in the Queensland Civil and Administrative Tribunal before his bankruptcy commenced.
The respondent opposes the application.
I have the benefit of written submissions delivered by each of the parties. However, in oral argument before me, the basis for Mr Rowe’s application appeared to change in some respects. He added a claim that the proceedings which the respondent had discontinued were in fact proceedings which were personal to him and in respect of which the respondent had no power to discontinue.
Background facts
Mr Rowe and his ex-wife, Alison Schultz, owned a property situated at 6004 The Boulevarde, Royal Pines Resort, Benowa, Queensland as tenants-in-common. Ms Schultz owned 99 one hundredths of the property and Mr Rowe owned 1 one hundredth of the property.
They resolved to sell the property. For that purpose they engaged Showcase Property Pty Ltd trading as Mint Property Sorrento as their agent. Showcase Property is a licensed real estate agent.
The property was sold through the agency of Showcase Property. Mr Rowe and Ms Schultz were charged $24,066.98 by way of commission for the sale. The commission was deducted from the purchase price otherwise payable to Mr Rowe and Ms Schultz.
In July, 2012 Mr Rowe commenced an application in QCAT (which he amended in August, 2013) against Showcase Property in which he claimed $24,178.73. Mr Rowe’s case was that the commission charged by Showcase Property was unlawfully claimed.
Ms Schultz was not a party to the application.
QCAT dismissed Mr Rowe’s claim for the commission but allowed his claim for certain advertising costs that he asserted were unlawfully claimed and paid to Showcase Property.
Mr Rowe applied for leave to appeal that decision and was successful. His application was remitted for rehearing. The point at issue, apparently, was whether the appointment of Showcase Property was ineffective pursuant to s.137(3) of the Property Agents and Motor Dealers Act 2000 (Qld). Mr Rowe claimed that Showcase Property did not to specifically bring to his or Ms Schultz's notice the information prescribed by s.134A of that Act.
On 11 August, 2014 Showcase Property, by its solicitors, gave written notice to the respondent pursuant to s.60(2) of the Bankruptcy Act 1966 (Cth) to make an election to either prosecute or discontinue the QCAT proceedings.
On 8 September, 2014 the respondent elected to discontinue the QCAT proceedings and subsequently filed a notice of withdrawal of the application in the QCAT proceedings.
On 10 September, 2014 Mr Rowe commenced fresh QCAT proceedings against Showcase Property seeking similar relief as in the initial QCAT proceedings. The respondent subsequently filed a notice of withdrawal of application in those proceedings.
Consideration
Mr Rowe applies, pursuant to s.178 of the Bankruptcy Act, to have the Court review the respondent’s election to discontinue the QCAT proceedings on the grounds that:
a)the respondent provided inadequate reasons for its election;
b)the respondent erred in its determination of the merit of the QCAT proceedings; and
c)the respondent’s election was unjust or inequitable.
However, as I indicated earlier in these reasons, in oral argument Mr Rowe seemed to suggest that the proceedings in QCAT did not fall within the ambit of the trustee’s discretion to discontinue pursuant to s.60(1) of the Bankruptcy Act. He argued that they were proceedings which were personal to him and which, therefore, did not invest in his trustee in bankruptcy.
Relevantly, s.60(2) of the Bankruptcy Act provides:
An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.
Subsections 60(3) and 60(4) provide:
(3) If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action.
(4) Notwithstanding anything contained in this section, a bankrupt may continue, in his or her own name, an action commenced by him or her before he or she became a bankrupt in respect of:
(a) any personal injury or wrong done to the bankrupt, his or her spouse or de facto partner or a member of his or her family; or
(b) the death of his or her spouse or de fact partner or of a member of his or her family.
Subsection 60(5) provides:
In this section, action means any civil proceeding, whether at law or in equity.
The first issue to be decided is whether s.60(2) of the Bankruptcy Act is engaged at all. There are two aspects to that issue. The first is whether the application in QCAT was an action for the purposes of s.60(2) of the Act. If so, the second is whether that application is within the class of exempt actions provided for by s.60(4) of the Act.
As to the first matter, the Queensland Civil and Administrative Tribunal is, despite its name, a court: s.164(1) of the Queensland Civil and Administrative Tribunal Act 2009. In Owen v Menzies [2013] 2 Qd R 327 the Court of Appeal held that QCAT is a State court capable of exercising federal power for the purposes of Chapter III of The Constitution. De Jersey CJ, with whom Muir JA agreed, noted the following characteristics of QCAT that led him to that conclusion:
a)QCAT is a “court of record” (s.164(1) of the QCAT Act);
b)QCAT decides controversies between parties by making binding and authoritative decisions;
c)QCAT has an implied obligation to make decisions according to the parties’ rights and obligations; and
d)QCAT must act independently (s.162 of the QCAT Act).
In those circumstances, I am satisfied that the proceeding in QCAT that was discontinued by the respondent was an action for the purposes of s.60(2) of the Bankruptcy Act. By those proceedings Mr Rowe was pursuing a right of action against Showcase Property. It was a civil proceeding by which there might be a final determination binding upon the parties to the application.
Perhaps buoyed by my decision in Rowe v Official Trustee in Bankruptcy [2014] FCCA 2819, Mr Rowe argues that by his proceedings in QCAT, he is pursuing a statutory right of appeal. But in my view that is plainly not so. The effect of s.137(3) of the Property Agents and Motor Dealers Act is to render the commission agreement ineffective. I was taken to no provision of the Property Agents and Motor Dealers Act which provided for the recovery of amounts paid pursuant to an ineffective appointment of a real estate agent. It seems to me that the cause of action is one permitted by the general law, rather than one which arises under the statue.
Given that I am satisfied that Mr Rowe’s claim in QCAT was an action for the purposes of s.60(2) of the Bankruptcy Act, it is necessary to determine whether the action is within the exempt provided by s.60(4) of that Act. I do not think that it is. His application in QCAT is not an action in respect of any personal injury or wrong done to him as that phrase is understood for the purposes of s.60(4)(a) of the Bankruptcy Act.
I accept the respondent’s submission that pursuant to s.58 of the Bankruptcy Act, Mr Rowe’s chose in action against Showcase Property, pursued in both QCAT proceedings, vested in the respondent upon Mr Rowe becoming bankrupt.
Section 60(2) of the Bankruptcy Act operated to stay the QCAT proceedings until the respondent made an election to either prosecute or discontinue the action. As the respondent points out, the decision to continue or discontinue an action commenced by a bankrupt prior to bankruptcy is placed in the hands of the trustee.
Section 178 of the Bankruptcy Act provides:
178 Appeal to Court against trustee’s decision etc.
(1) If the bankrupt, a creditor or any other person is affected by an act, omission or decision of the trustee, he or she may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable.
(2) The application must be made not later than 60 days after the day on which the person became aware of the trustee’s act, omission or decision.
The respondent accepts that a bankrupt may review under s.178 of the Bankruptcy Act a trustee’s decision to elect to discontinue an action commenced by the bankrupt if the bankrupt is affected by the decision. For a trustee’s election to discontinue an action to be overturned, however, the parties agree that the Court must be satisfied that the trustee’s decision to elect to discontinue the relevant proceedings was wrong and that on the material before the Court, justice and equity requires it to compel the trustee to prosecute that application or to apply to have the application reinstated. Their agreement is in accordance with authority: Freeman v National Australia Bank Ltd [2003] FCA 1233 at [17], [21].
Mr Rowe bears the onus to establish a ground on which the trustee’s decision in this case should be reviewed: Re Wheeler; Ex parte Wheeler v Halse (1994) 54 FCR 166 at 170.
Section 19(1) of the Bankruptcy Act relevantly provides that:
The duties of the trustee of the estate of a bankrupt include the following:
...
(j) administering the estate as efficiently as possible by avoiding unnecessary expense;
(k) exercising powers and performing functions in a commercially sound way.
In Freeman v National Australia Bank Ltd (above) Spender J pointed out:
[12] As the court noted in Citicorp Australia Ltd v Official Trustee in Bankruptcy (1966) 71 FCR 550 at 560 and 561:
‘ … a trustee under the general law must exercise judgment so as to save the estate unnecessary expenditure of money, and that a trustee in bankruptcy is required to discharge the public duty imposed by the Act conformably with the trustee’s obligation to administer the estate in such a manner as to maximise the return from estate assets, and thereby to maximise satisfaction of the creditors’ claims and any possible surplus for the bankrupt.’
[13] It is against those principles of the duty of a trustee in bankruptcy that the decisions made by the trustees in the present case fall to be assessed.
Thus, in considering whether to prosecute Mr Rowe’s proceedings in QCAT, the trustee in this case was duty bound to administer the estate so as to maximise the return from estate assets, and thereby to maximise satisfaction of the creditor’s claims and any possible surplus for Mr Rowe.
Mr Rowe argues that it is clear that the trustee did not take into consideration whether the bankrupt, a creditor or any other person was affected unjustly or inequitably by its decision to discontinue the proceedings. But the evidence does not bear that out.
The evidence reveals that a number of factors were taken into account by the respondent when he made the decision to discontinue the QCAT proceedings.
The evidence demonstrates that the respondent considered the merits of the proceeding. The respondent formed the view that success in the proceeding was not assured. The respondent was unable to ascertain whether the advice required under s.134A of the Property Agents and Motor Dealers Act was provided to Mr Rowe and Ms Schultz. However, it appeared likely that they had been provided with that advice. There was evidence before the respondent that on 16 June, 2011 an employee of Showcase Property sent to Mr Rowe by email, a form 22a (Appointment of real estate agent – sales and purchases) within which was contained advice relating to open listings, sole agencies and exclusive agencies (the advice required by s.134A). The respondent was able to ascertain that both Mr Rowe and Ms Schultz had signed that form. In addition, the respondent took the view that as Mr Rowe and Ms Schultz were both solicitors who signed the form 22a in June, 2011 they were unlikely to have suffered detriment if Showcase Property did fail to provide them with the required notice.
Further, the evidence reveals that the bankrupt estate is without funds to advance the QCAT proceedings to final hearing. Mr Rowe did not offer to cover the legal fees of advancing the QCAT proceedings to final hearing. In argument before me, Mr Rowe suggested that the Court might order that he have permission to conduct the proceedings on behalf of the respondent, or to conduct a proceeding in his own name. However, as the solicitor for the respondent pointed out, it would be for the respondent to conduct the proceedings unless the cause of action was assigned to Mr Rowe. Given that Mr Rowe is presently undischarged, any assignment of the cause of action would be after acquired property which would immediately re-vest in the bankrupt estate.
I accept the respondent’s argument that the only recovery likely to be made by the bankrupt estate is from the property settlement proceedings between Mr Rowe, Ms Schultz and the respondent in the Family Court of Australia. Those proceedings have been heard and are awaiting judgment. At the conclusion of the trial an interim consent order awarding $50,000 to the respondent from the money that was held in a certain trust account was made. At the trial, both the respondent and Ms Schultz argued that the respondent’s entitlement in those proceedings was $50,000 and thus the bankrupt estate has received all to which it is entitled.
The respondent has not yet called for creditors to lodge proofs of debt in Mr Rowe’s estate. However, Mr Rowe’s unsecured debts that are currently known by the respondent amount to about $214,380.
The evidence before me reveals that prior to declaring a dividend to creditors, the respondent must pay:
a)the petitioning creditor’s costs estimated to be $9,708.54 but yet to be taxed;
b)the realisation charge to the Commonwealth which is 6% of the gross realisations made in a bankrupt estate;
c)the respondent’s disbursements. The evidence reveals that the respondent has been billed $56,886.79 (including GST) for legal fees up to 28 November, 2014 in respect of Mr Rowe’s estate;
d)the respondent’s remuneration. The evidence reveals that the respondent’s remuneration for administering a bankrupt estate is a lump sum of $4,000 plus 20% of the gross realisations made in a bankrupt estate.
Mr Rowe’s bankrupt estate is unable to fund the QCAT proceedings.
The quantum in dispute is small. Mr Rowe argues that there will be a return to his estate of $24,066.98 if his application in QCAT is successful. He asserts, without any evidence, that he and Ms Schultz were jointly and severally liable for the payment of commission and so if his proceedings were successful he would recover the entire amount paid to Showcase property by way of commission.
The respondent argues that the commission paid to Showcase Property was paid out of the proceeds from the sale of the property. Because Mr Rowe only had a 1 one hundredth interest in that property, even if the QCAT proceedings were successful, the bankrupt estate would only be entitled to 1% of the amount recovered in those proceedings. The balance would be payable to Ms Schultz. Accordingly, the respondent argues that an award of $240.67 is the best the respondent could hope to recover. The legal fees to advance that action to final hearing would greatly exceed any possible award in favour of the bankrupt estate.
I tend to agree with the respondent’s argument. Even if Mr Rowe and Ms Schultz were jointly and severally liable to pay commission to Showcase Property under the real estate agent’s appointment, given that the commission was paid out of the sale proceeds of the property, Mr Rowe would be bound to disgorge to Ms Schultz anything received by him beyond his 1 one hundredth share. Accordingly, any benefit to his estate would be slight.
I accept the respondent’s argument that in the circumstances, it was appropriate for the respondent to elect to discontinue the QCAT proceedings. To put it in terms of the test set out above, Mr Rowe has not demonstrated that it was wrong for the respondent to elect to discontinue those proceedings.
Mr Rowe argues that the Court needs to consider the interests of others, not just him. He claims that just as he is a person affected by the trustee’s decision to discontinue the proceedings, so too are his creditors. He argues that there is no evidence that the trustee considered whether the decision to discontinue the application in QCAT would unjustly or inequitably affect “other persons”. He argues that the trustee seems to have a narrow focus and has not considered how the decision affects “other persons” such as all others who have dealt with Showcase Property.
He argues that breaches by real estate agents of the Property Agents and Motor Dealers Act not only affect him but also affect “other persons”, namely the public at large. He says that the failure by the trustee to consider “other persons” in this instance is not only unjust, it is inequitable. He argues that by discontinuing the proceedings, his trustee gave Showcase Property “an unjust and inequitable position at the cost and detriment of ‘other persons’; they being real estate agent consumers of” Showcase Property.
However, I have set out above the duties cast upon the respondent when administering Mr Rowe’s estate. The respondent’s election needed to be made against the background of those duties. It is clear on the evidence that the respondent considered the nature of the proceedings the chances of success and the effect of pursuing those proceedings upon the estate and the return that might be generated for creditors. In my view, it formed no part of the trustees’ duties to consider the other matters raised by Mr Rowe in argument.
I am satisfied that the respondent’s decision to elect to discontinue the QCAT proceedings was not unjust or inequitable.
Insofar as Mr Rowe is concerned, given the value of the unsecured creditors presently identified, there is no prospect of a return to him out of the bankrupt estate even if the proceedings in QCAT were successful.
Conclusion
In the circumstances, the application must be dismissed with costs.
I certify that the preceding fifty (50) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 6 February, 2015.
Associate:
Date: 6 February 2015
0
3
3