Scott (as trustee of the Bankrupt Estate of Ryan) v Ryan
[2016] FCCA 1209
•20 May 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SCOTT (AS TRUSTEE OF THE BANKRUPT ESTATE OF RYAN) v RYAN | [2016] FCCA 1209 |
| Catchwords: BANKRUPTCY – Sequestration order made – application by trustee in bankruptcy for sale of residential property and for bankrupt to vacate land – power to make such orders – should the court make the orders concerned – exercise of discretion – obligations on bankrupt arising under section 77(1) – bankrupt seeks stay, dismissal or adjournment of application on basis of considerations of justice and equity – bankrupt asserts fees incurred in the administration of his estate are manifestly excessive – application of section 178 of Bankruptcy Act – does the court have jurisdiction to fix remuneration of trustee independently of regulatory scheme established under the act – considerations relevant to annulment. |
| Legislation: Bankruptcy Act 1966, ss.19, 19(1), 30, 30(1), 40(1), 44, 54(1), 58(1)(a), 77(1), 153A, 153B, 162, 167, 178, 179 Bankruptcy Regulations 1966, rr.18.12A, 18.12C, 18.12E, 18.12F, 18.12H, 18.12I |
| Cases cited: Cook v Tagamilitsky [2001] FMCA 117 Farella v Official Trustee in Bankruptcy (No 2) [2011] FCA 619 Bulic v Commonwealth Bank of Australia [2007] FCA 307 Horne (as Trustee of the Bankrupt Estate of Sekulovski) v Sekulovski [2009] FCA 1154 Vince (as Trustee of the bankrupt estate of Sopikiotis) v Sopikiotis (No 2)[2012] FCA 1298 McDonald (as former trustee of the bankrupt estate of Sanders) v Sanders [2007] FMCA 649 Pattison (as trustee of the bankrupt estate of Bellin) v Bellin [2000] FCA 1167 Brake v Townsend [2006] FCA 1156 Re Stelnicki [1982] 62 FLR 430 Adsett v Berlouis & Ors (1992) 37 FCR 201 Mannigel v Aitken (1983) 77 FLR 406 Healey v Prentice (No 2)[2000] FCA 1598 Macks & Anor v Maka & Anor [2015] SASC 200 |
| Applicant: | ANDREW JOHN SCOTT (IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF JAMES RYAN) |
| Respondent: | JAMES RYAN |
| File Number: | ADG 71 of 2016 |
| Judgment of: | Judge Brown |
| Hearing date: | 13 May 2016 |
| Date of Last Submission: | 13 May 2016 |
| Delivered at: | Adelaide |
| Delivered on: | 20 May 2016 |
REPRESENTATION
| Counsel for the Applicant: | Ms Clarke |
| Solicitors for the Applicant: | Cowell Clarke |
| Counsel for the Respondent: | Mr Moran |
| Solicitors for the Respondent: | Griffins Lawyers |
ORDERS
Orders pursuant to sections 30 and 77 of the Bankruptcy Act 1966 (Cth) that:
(a)The respondent deliver up vacant possession of the premises known as Unit 2, 28 Sixth Avenue, Glenelg East in the State of South Australia being the whole of the land in Certificate of Title Volume 5012 Folio 136 ("Land") to the Applicant within forty-two (42) days;
(b)In the event that the respondent fails to give up vacant possession of the Land in accordance with order 1(a) a Writ of Possession be issued forthwith in favour of the applicant;
(c)The respondent remove from the Land all vehicles, rubbish and chattels which have not vested in the applicant ("Personal Property") within forty-two 42 days;
(d)In the event that the respondent fails to comply with order 1(c), that the applicant may remove and dispose of the Personal Property as he sees fit after forty-two 42 days have passed from the making of this order.
An order that the applicant’s costs of this application be paid from the bankrupt estate of the respondent.
All extant applications be dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 71 of 2016
| ANDREW JOHN SCOTT (IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF JAMES RYAN) |
Applicant
And
| JAMES RYAN |
Respondent
REASONS FOR JUDGMENT
Introduction
On 6 May 2015, Credit Corp Services Pty Ltd filed a creditors’ petition, in this court, naming James Ryan (formerly known as Mark Steve Capotondi) as the respondent.
The creditor’s petition was based on a judgement debt, in the sum of $20,279.59, together with interest, calculated in an amount of $2,064.07, obtained against the respondent, in the Magistrates’ Court of South Australia, sitting in its civil division, at Adelaide, on 15 April 2013.
The creditor’s petition was personally served on Mr Ryan at premises described as 26B Sixth Avenue, Glenelg East on 25 May 2015.[1] It followed a bankruptcy notice, issued by the Official Receiver on 18 December 2014, as a consequence of the above mentioned judgement debt. The bankruptcy notice was served on Mr Ryan on 12 February 2015.[2]
[1] See affidavit of Ricky Wilson filed 4 June 2015
[2] See affidavit of Karen Michelle Guazzelli filed 6 May 2015
The creditor’s petition was listed before Registrar Grant on 15 June 2015. On that date, the Registrar made a sequestration order against the estate of Mr Ryan. Mr Ryan was not present, when the order was made. In addition to the sequestration order, an order was made fixing costs in the sum of $6,287.97, which sum was to be paid from the estate of the respondent.
The sum of $6,287.97 was made up of professional costs of $2,426.00, which were calculated by reference to schedule 3 attached to the Federal Court Rules and disbursements, particularly fees for the filing of the creditor’ petition in an amount of $3,861.97.
At this stage, the Registrar had before it a consent to act as trustee given by Andrew John Scott (hereinafter referred to as “the trustee”). The court noted that the relevant date of bankruptcy was 23 March 2015.
On 6 July 2015, Mr Ryan sought to review the sequestration order made on 15 June 2015. His application was supported by a lengthy affidavit, which Mr Ryan had prepared himself. Attached to this affidavit were numerous documents, relating to the debt in question. The application for review was originally listed on 29 July 2015. At the request of Mr Ryan, the proceedings were adjourned to 26 August 2015, when they came on before me.
On 26 August 2015, I dismissed the application for review and directed that the creditors’ costs of the review be paid out of Mr Ryan’s estate, with the costs, if not agreed, to be taxed.
I provided oral reasons in support of this judgment, which were subsequently transcribed. I said as follows:
“Mr Ryan seeks that that sequestration order be set aside pursuant to the provisions of section 104 of the Federal Circuit Court Act 2000.
That section authorises this court to review any relevant decision of a Registrar, in respect of powers delegated to such a Registrar, by the court. Pursuant to rule 20.03 of the Federal Circuit Court Rules 2001 such a review is to proceed by way of a hearing de novo.
As a consequence, I am required to consider afresh all the relevant material. … Mr Ryan accepts that there have been proceedings against him, in the Magistrates Court of South Australia, in respect to a credit card debt. However, it is his position that he returned the credit card, which related to the debt in question to the credit provider concerned. Thereafter, a person or persons all unknown to Mr Ryan have accrued the various debts in his name, in respect of transactions of which he is ignorant and therefore for which he cannot be legally liable. These debts were apparently incurred in 2006, both in this country and in the United States.
Accordingly, it is Mr Ryan’s position that there is mala fides in respect of the debt, given that he returned the credit card in question to the bank concerned and thereafter someone else has used the card and incurred a significant level of debt.”
At this stage, I was also provided with a transcript of the decision of Magistrate Schammer, delivered on 7 November 2014, in the Magistrates’ Court of South Australia. These reasons were delivered in respect of Mr Ryan’s application to set aside the judgement entered against him in the debt recovery proceedings instituted by Credit Corp Services Pty Ltd against him in the Magistrates’ Court.
In this judgement, Magistrate Schammer gave a procedural history of the matter up to that stage. Credit Corp Services Pty Ltd originally issued its proceedings, in the Magistrates’ Court, against Mark Steve Capotondi of 2/28B Sixth Avenue, Glenelg East, on 18 April 2012.
These proceedings were subsequently amended in September 2012, to change the name of the defendant to Mark Capotondi, also known as Marcus Capotondi, also known as Markus Capotondi.
A default judgement was entered against the defendant on 15 April 2013. In August 2014, the court ordered that the default judgement be varied to show the name of the judgement debtor (and the name of the defendant) as James Ryan, formerly known as Mark Steve Capotondi.
On 8 October 2014, Mr Ryan issued an application, in the Magistrates’ Court, seeking various orders, but particularly that the default judgement against him be set aside. Thereafter, Mr Ryan sought to be able to file a defence in the proceedings and that an order for costs, made against him, be discharged.
Magistrate Schammer noted that Credit Corp Services Pty Ltd’s claim was to recover a credit card debt. The credit card account in question was held by a person named Mark Capotondi and was with the National Australia Bank.
After considering the evidence, Magistrate Schammer considered that Mr Ryan did not have an arguable defence to the claim against him. The Magistrate found that the evidence that Mr Ryan and Mr Capotondi were one and the same person and that Mr Ryan had used the name Mark Capotondi to be overwhelming.
The Magistrate also rejected the claim that the credit card notices in question had been sent to the wrong address and therefore the claim for payment were invalid in some way. It being Mr Ryan’s position that his proper address was 28B Sixth Avenue, Glenelg East rather than unit 2/28B Sixth Avenue, Glenelg East.
As at 26 August 2015, Mr Ryan maintained his position that the debt was not legally his. He deposed that he had been the victim of some form of identity theft. He conceded however that he had been in the United States, at applicable locations, when the relevant debts were incurred in his name. He also conceded that other debts, on the credit card, had been incurred in the vicinity of his home at Glenelg East.
It was his position that he intended to institute further proceedings, in the Magistrates’ Court, to set aside the judgement debt and do whatever it took to clear his name. In particular, Mr Ryan asserted that he had complained to the police that he had been the victim of criminal behaviour.
It was the creditors’ petition that any foreshadowed application to return to the Magistrates’ Court was misconceived and Mr Ryan’s only remedy was to seek to review the Magistrates’ decision, in the Supreme Court of South Australia, which application was procedurally out of time and, as such, required an extension of time.
The court’s jurisdiction to make a sequestration order is contained in section 43 of the Bankruptcy Act 1966.[3] The petitioning creditor needs to establish that the respondent, to any such petition, has committed an act of bankruptcy and was personally present or ordinarily resident in Australia, at the time of such act of bankruptcy.
[3] Hereinafter referred to as “the Act”
The conditions precedent, for a creditors’ petition, are set out in section 44 of the Act. They are as follows:
·The debt owed is more than $5,000.00;
·The debt is a liquidated sum, due at law;
·The debt is payable immediately or at a certain future time;
·The act of bankruptcy, on which the petition is founded, occurred within six months of the presentation of the petition.
The situations, in which a person is taken to have committed an act of bankruptcy, are set out in section 40(1) of the Act. In particular and of relevance to the current matter, pursuant to section 40(1)(g), a person commits an act of bankruptcy if a creditor obtains a final judgment against him or her which remains unpaid following service of a demand for payment and it cannot be demonstrated, by the debtor in question that the payment of the judgment has been stayed or there is some form of cross-claim or set-off in respect of it.
On 26 August 2015, I was satisfied that Mr Ryan had committed an act of bankruptcy as the judgement debt obtained against him, by Credit Corp Services Pty Ltd, remained unsatisfied. I was also satisfied that Mr Ryan was not then in the process of applying to have the judgement debt set aside or had any entitlement to cross-claim and that the prospects of such remedies, if embarked upon, were highly uncertain.
I was also satisfied that there were no issues arising regarding the service of the petition upon Mr Ryan. At that stage, I also considered that I did not have authority to inquire into Mr Ryan’s assertion that he had been the victim of a sophisticated form of identity theft.
The current application
On 2 March 2016, Mr Scott, in his capacity as the trustee of Mr Ryan’s estate, applied to the court seeking the following orders:
·Mr Ryan deliver up vacant possession of the premises situated at unit 2, 28 Sixth Avenue, Glenelg East within 28 days;
·In the event that Mr Ryan failed to comply with the order for vacant possession, a writ of possession be issued forthwith in Mr Scott’s favour;
·Mr Ryan remove from unit 2, 28 Sixth Avenue, Glenelg East all vehicles, rubbish and chattels, which had not already otherwise vested in Mr Scott’s possession;
·If Mr Ryan failed to clear the property of chattels, Mr Scott be authorised to dispose of those items, as he saw fit;
·Costs to be paid from Mr Ryan’s estate;
·In addition, but no longer of direct relevance to these proceedings, an order was sought that Mr Ryan provide Mr Scott and file with the court a statement of his affairs.
The application was personally served on Mr Ryan, on 8 March 2016, at unit 2, 28 Sixth Avenue, Glenelg East. The application was initially made returnable on 16 March 2016. On this occasion, Mr Ryan was ordered to file and serve his statement of affairs within seven days but the further hearing of the matter was adjourned to 13 April 2016.
On 13 April 2016, Mr Scott’s application for vacant possession of unit 2, 28 Sixth Avenue, Glenelg East was adjourned for hearing on 13 May 2016. Mr Ryan has been represented throughout the most recent round of proceedings, concerning the Glenelg East property, by his solicitor, Mr Moran. Mr Moran has argued strenuously on his client’s behalf.
I acknowledge that the proceedings have great moment for Mr Ryan, as the property concerned is his home and the loss of it would be emotionally and financially devastating for him. From the trustee’s point of view, the proceedings have been on foot for a significant period of time and, as a consequence, he wishes to finalise his administration of Mr Ryan’s estate.
The proceedings were initially adjourned, on Mr Moran’s application, so that his client could investigate the possibility of borrowing money in order to satisfy the judgement debt in question, which remains outstanding at the time of the current hearing.
I am informed by Mr Moran that Mr Ryan is able to borrow approximately $30,000.00 from relatives and possibly an additional sum by means of refinancing the mortgage secured against the Glenelg East property through monies to be advanced by his current employer.
Mr Scott has calculated the liabilities owed to unsecured creditors, known to him, to be $30,377.00. This includes the judgement debt to the petitioning creditor, Credit Corp Services Pty Ltd. The other unsecured debts are therefore fairly minor.
However, as at 27 April 2016, Mr Scott had calculated his remuneration and disbursements as amounting to a sum of $65,609.00. In addition, the costs allowed in respect of the original petition and the review proceedings have been calculated, subject to taxation, in the amount of $17,232.00.
In addition, Mr Scott calculates that there would be realisation charges, due to the Commonwealth of Australia, in the sum of $7,875.00 and an estimated amount of interest of $3,038.00. Realisation charges are automatically levied by reason of Federal legislation. Creditors, when paid out, are entitled to interest.
In all these circumstances, Mr Scott has indicated, in correspondence with Mr Moran that he would be willing to agree to an annulment of the bankruptcy, if Mr Ryan provides him with the sum of $131,316.00.
From Mr Ryan’s perspective, given the original amount of the judgement debt secured against him, the sum required to annul the bankruptcy and so avoid the loss of his home, is unconscionable. He seeks to review Mr Scott’s professional fees and pursue any possible avenues, available to him, to tax or review the various costs awarded against him.
Against this background, Mr Ryan seeks the intervention of the court to prevent his eviction from the Glenelg East property and its sale until such time as he is in a position to put a concluded proposal to Mr Scott to annul his bankruptcy. On the basis of considerations of justice and equity, he seeks the involvement of the court, in some way, to settle the issue of Mr Scott’s remuneration expeditiously and fairly.
Through his counsel, Ms Clarke, Mr Scott acknowledges that this is a lamentable state of affairs, so far as Mr Ryan is concerned. However, from Mr Scott’s perspective, Mr Ryan has failed to cooperate with the administration of this estate and has engaged in various unnecessary actions against Mr Scott, which he (Mr Scott) has been obliged to resist with a high degree of rigour, given his statutory obligations to the creditors affected by Mr Ryan’s bankruptcy.
As such, Mr Scott contends that he has little control over the extent of the services which he has had to provide in this case and it is unreasonable for Mr Ryan to claim now that they are disproportionate to the subject matter of the administration when his (Mr Ryan’s) conduct has been primarily responsible for their current level of magnitude.
These proceedings are directed to resolving this difficult and perplexing issue arising from Mr Ryan’s bankruptcy. It is hard not to be sympathetic to Mr Ryan, who has provided medical material, from a psychiatrist, Dr Tingay, which indicates that Mr Ryan suffers from the following:
“Generalised anxiety disorder, chronic, moderately severe. Dysthymia, chronic, moderately severe. A traumatic childhood which has resulted in him having basic mistrust of others, having poor social skills and feeling somewhat helpless and hopeless at the moment.”
The legal principles applicable
One of the consequences of bankruptcy is that property of the debtor concerned vests in the appointed trustee.[4] As a result, the statutory responsibilities of a trustee in bankruptcy include the identification of property previously held by the bankrupt and obtaining possession of that property.
[4] See Bankruptcy Act 1966 (Cth) at section 58(1)(a)
The Bankruptcy Act provides trustees with a number of powers to achieve these ends. In particular, pursuant to section 77(1), a number of duties are imposed upon a bankrupt, the effect of which is that he is required to cooperate with the trustee appointed to his estate and provide information about his financial affairs and the location of property.
In particular, pursuant to section 77(1)(e) the bankrupt is required to execute all necessary documents in respect of his property, including its realisation and pursuant to section 77(1)(g) the bankrupt is required to “aid to the utmost of his power in the administration of his estate.”
Pursuant to section 54(1) a bankrupt is required to provide a statement of his affairs, within fourteen days of the date of sequestration. Mr Ryan completed a statement of affairs on 23 March 2016, approximately a year after the original sequestration order was made. It is Mr Scott’s position that Mr Ryan has been recalcitrant in discharging the statutory obligations upon him, in this regard, which have also unnecessarily added to the costs arising in administering the estate.
The duties, incumbent upon Mr Scott, as the trustee of Mr Ryan’s bankrupt estate, are set out in section 19(1) of the Act. They include the following:
(b)determining whether the estate includes property that can be realised to pay a dividend to creditors;
(f)taking appropriate steps to recover property for the benefit of the estate;
(k)exercising powers and performing functions in a commercially sound way.
In this matter Mr Ryan’s estate was subject to a sequestration order made on 15 June 2015. As a consequence of this order, pursuant to the provisions of section 58(1)(a) of the Act, the Glenelg East property has vested in Mr Scott. Accordingly, I am satisfied that one of the duties incumbent upon Mr Scott is to determine whether that property can be sold, in order to pay a dividend to Mr Ryan’s various creditors, including Credit Corp Services Pty Ltd.
It is not asserted by Mr Ryan that currently there are any other assets, to which he was previously legally entitled, which would be sufficient to discharge his debts. Unless Mr Ryan can borrow monies from family and friends or extend his mortgage, the only source of funds to annul his bankruptcy is the equity in the Glenelg East property.
Section 30(1) of the Act provides that:
“(1) The Court:
…
(b)may make such orders ... as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.”
Section 77(1) of the Act provides that:
(1)A bankrupt shall, unless excused by the trustee or prevented by illness or other sufficient cause:
…
(e)execute such instruments and generally do all such acts and things in relation to his or her property and its realization as are required by this Act or by the trustee or as are ordered by the Court upon the application of the trustee; and
…
(g)aid to the utmost of his or her power in the administration of his or her estate.”
It is Mr Scott’s position that a combination of sections 30, 77(1)(e) and 77(1)(g) of the Act are the source of the court’s power to make the orders sought by him.
The respondent’s position
On 11 May 2016, Mr Ryan filed an application, in which he seeks the following orders:
“1. That this application be specially returnable to the hearing on 13 May 2016 at 3:15 pm.
2. Pursuant to sections 30, 162, 167, 178 and 179 of the Bankruptcy Act 1966 and regulations 8.12E, 8.12H and 8.121 of the Bankruptcy Regulations 1996 that the Applicant's application dated 2 March 2016 be dismissed, adjourned and/or stayed and that in lieu thereof the following is to occur:
a. the remuneration and disbursements (including legal costs claimed by Cowell Clarke) claimed by the Applicant be assessed , reviewed and/or taxed;
b. the “Petitioning Creditor's Costs re Review Application Pursuant to Court Order (Subject to taxation)” claimed by the Applicant be taxed;
c. the Respondent be given an opportunity to have the bankruptcy annulled pursuant to sections 153A (or alternative under section 153B) of the Bankruptcy Act 1966.
3. The Applicant pay the Respondent's costs of this application and the action generally and that the Applicant not be entitled to indemnity from the Respondent's estate in respect of the costs of this application and the action generally.”
It is Mr Moran’s submission that the powers arising under section 30(1)(b) are discretionary.[5] I accept that this is so. In these circumstances, it is Mr Moran’s contention that the discretion should be exercised in favour of his client, whilst the court exercises its inherent jurisdiction to oversee the level of costs sought by Mr Scott, which Mr Ryan regards as being unreasonable and oppressive.
[5] See Cook v Tagamilitsky [2001] FMCA 117 at [9] per Raphael FM
Mr Moran contends that the source of the court’s authority to, at the very least adjourn the proceedings, whilst issues relating to costs are investigated, lies in section 178 of the Act, which reads as follows:
“(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.”
It is the trustee’s submission that there has not been a relevant, act, omission or decision, made by him, to activate the court’s discretion arising under section 178. In the alternative, if the decision, which it is claimed has triggered the application of section 178, is the decision to seek vacant possession of the Glenelg East property that decision was made more than sixty days prior to Mr Ryan’s application to the court and is therefore out of time.
The proceedings have been vigorously contested from the perspective of both the trustee and Mr Ryan. Mr Ryan has sought to explore every possible avenue to avoid the seizure of his home. It is Ms Clarke’s submission that this attitude has suffused each of Mr Ryan’s interactions with her client, causing the costs to exponentially increase over time.
The evidence
The trustee relies on the following evidence:
i)An affidavit of himself filed 7 March 2016;
ii)An affidavit of his solicitor, Andrew Bullock, filed 11 March 2016, which deals with service issues;
iii)An affidavit of his solicitor, Mathew Hawke, filed 12 May 2016, which deals with correspondence between Mr Ryan and the trustee.
Mr Ryan relies on the following affidavits:
i)An affidavit of himself filed 6 May 2016;
ii)A further affidavit of himself filed 11 May 2016.
The trustee deposes that Mr Ryan is the registered proprietor of unit 2, 28 Sixth Avenue, Glenelg East. This is not controversial. The property is subject to a mortgage in favour of the Bendigo & Adelaide Bank Limited. As at 24 February 2016, the bank was owed the sum of $231,379.68.
In the course of his duties, as the trustee of Mr Ryan’s estate, Mr Scott has obtained several valuations of the Glenelg East property. These valuations have indicated a value of between $400,000.00 and $430,000.00 for the property. Accordingly, Mr Scott believes that there is likely to be approximately $170,000.00, of equity, in the Glenelg East property, if it is sold, after payment of the moneys due to the Bendigo & Adelaide Bank. If Mr Scott’s costs remain in the quantum calculated by Mr Scott, it would leave little, if any, surplus to be applied to Mr Ryan.
On 2 July 2015, Mr Scott wrote to Mr Ryan informing him that he required vacant possession of the Glenelg East property, within 21 days, otherwise he would apply for an order for possession. It is common ground that Mr Ryan has not complied with this direction.
The trustee has deposed as to other proceedings, concerning Mr Ryan, in which he has been involved. On 6 October 2015, the Bendigo & Adelaide Bank, as previously indicated, the mortgagee of the Glenelg East property, commenced proceedings in the Supreme Court of South Australia seeking an order for possession of the property. On 8 October 2015, Mr Ryan applied to have the judgement, which was the subject of the sequestration order against him set aside. This application was dismissed on 7 November 2015.
On 25 November 2015, the Supreme Court of South Australia, on the motion of the mortgagee, ordered that Mr Ryan vacate the Glenelg East property. On 25 January 2016, the mortgagee obtained a warrant for possession of the property.
Mr Ryan then filed an application to stay the enforcement of the order for possession, which was ultimately dismissed as the court held that Mr Ryan, as a bankrupt, had no standing to bring the application. Thereafter, it is common ground between the parties that Mr Ryan reached an accommodation, with the Bendigo & Adelaide Bank, to avoid the enforcement of the order for possession. It is Mr Scott’s position that he incurred costs as a consequence of the various proceedings initiated by Mr Ryan.
Mr Scott wrote to Mr Ryan, on 4 April 2016, indicating that a sum of $104,279.00 was required to annul the bankruptcy. At this stage, Mr Scott indicated that his investigation had revealed that Mr Ryan had the following unsecured creditors:
Bendigo Bank $5,626.00 Credit Corp Services Pty Ltd $24,317.00 HSBC Bank Australia Limited $680.00 Panthera Finance $1,541.00 Total $32,164.00
In addition, the trustee estimated his professional remuneration and disbursements from 15 June 2015 (the date of the sequestration order) to 30 March 2016 to total $30,381.00. This included liaising with Mr Ryan himself and his secured lender, the Bendigo & Adelaide Bank.
It is the position of Mr Scott that Mr Ryan has failed to cooperate with him; initiated numerous lengthy telephone calls and other correspondence to the trustee and his staff; and made unjustified complaints to AFSA, regarding the trustee’s conduct. It is Mr Scott’s position that this has inflated his professional costs to a significant degree.
On 6 May 2016 Mr Ryan applied to the Australian Financial Security Authority (AFSA) to review the remuneration of the trustee. The grounds provided for the review are as follows:
“The issues causing the applicant to seek a review is that there are reasonable grounds to believe that the Trustee may have acted improperly, or without due care and diligence, in the administration of the estate. The context of the remuneration claim is in response to a request from the applicant for the Trustee to annul the bankruptcy. In relation to the trustee's remuneration and disbursements (excluding legal fees), the Trustee is claiming $43,759. The Trustee has filed an application seeking possession of the applicant’s home. The applicant is seeking to annul the bankruptcy-without the need for his home to be sold.
The bases for the concern are as follows:
The level of remuneration claimed (along with the claimed legal fees of $29,000) appears high relative to the claimed “Known Unsecured Liabilities” of $32,164.
It is not apparent that work would have been required justifying this level of remuneration given, for example, there has been limited correspondence between the applicant and the Trustee, and investigations by the Trustee would necessarily have been limited given the assets of the applicant and the number of purported creditors
The Trustee has refused to provide an itemised account of his fees and disbursements.
The Trustee has prematurely sought an order for possession of the applicant’s home and continues to pursue the application despite it being apparent that the bankruptcy may be able to be annulled without the need to sell the applicant’s home.
In an earlier claim for remuneration, the trustee claimed remuneration for communicating with AFSA with respect to a complaint made by the applicant and only apparently removed that amount after it was questioned by the applicant’s solicitor.”[6]
[6] See affidavit of James Ryan filed 6 May 2016 at page 36
Mr Ryan has deposed that he is presently employed as an IT specialist by the People’s Choice Credit Union. His annual gross salary is $78,000.00 per annum. It is his position that he is currently one month in advance of the mortgage payments, secured against the Glenelg East property and the Bank’s earlier action has been entirely resolved.
As previously indicated, a cousin is willing to loan him the sum of around $30,000.00, when a term deposit matures shortly. In addition, Mr Ryan is eligible for a staff loan through his employer. I have not been advised the precise amount he could be loaned. Obviously, it is likely to depend on his level of remaining equity.
On this basis, Mr Ryan contends that he will be in a position to make a significant payment to the trustee shortly. In these circumstances, particularly whilst he awaits the outcome of his application to review the trustee’s level of remuneration with AFSA, he seeks a stay of the vacant possession proceedings.
Division 5 of Part VII of the Bankruptcy Act deals with annulment of bankruptcy. The division provides two mechanisms for annulment. Firstly, pursuant to section 153A, a bankruptcy is annulled if the trustee concerned is satisfied that all the bankrupt’s debts have been paid in full. Secondly, pursuant to section 153B, a bankruptcy can be annulled if the court is satisfied that a sequestration order ought not to have been made.
It seems to be the position that Mr Ryan is seeking to annul his bankruptcy by reaching an accommodation with the trustee in respect of the moneys owing by him. The difficulty being that, although there is agreement between him and Mr Scott as to the amount due to the unsecured creditors, the parties disagree fundamentally about the costs due, which have arisen since the sequestration order was made.
In this context, the solicitors for the trustee rely on section 153A(6) which defines the expression bankrupt’s debts for the purpose of an annulment. It means the following:
“All debts that have been proved in the bankruptcy and includes interest payable on such of those debts as bear interest, and the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee.”
Accordingly, it is the trustee’s position that Mr Ryan’s bankruptcy cannot be annulled until his expenses and other costs relating to the administration of the estate have been settled in full. Ms Clarke, counsel for the trustee, contends that Mr Ryan has come to the end of the line so far as challenging the sequestration order and matters arising from it and therefore, it is in the interests of all concerned, including Mr Ryan’s unsecured creditors, that the estate be finalised through the sale of the property concerned, otherwise still more costs will be fruitlessly incurred.
Mr Ryan, in his application to AFSA, has indicated clearly his level of disquiet about the conduct of Mr Scott. He has also made passing reference, in his application to the court, to the legislative provisions contained in section 179 of the Act. The section empowers the court to remove a trustee from office on the application of either a creditor or the bankrupt.
Mr Moran has not formally made such an application at this stage. His main focus has been on achieving an adjournment of proceedings until such time as the remuneration issue is determined, which he then hopes will seamlessly translate into an annulment of the bankruptcy, avoiding the sale of the Glenelg East property.
Yates J in Farella v Official Trustee in Bankruptcy (No 2)[7] summarised the considerations relevant to the discretion to remove a trustee in the following terms:
·The discretion must be exercised in the interests of an orderly administration of the estate;
·Substantial grounds relating to the erroneous administration of the estate or misconduct were required;
·Before exercising the discretion the court needs to be mindful of the well-established policy that it should not interfere in the day-to-day administration of the estate by the trustee;
·What is the likelihood that the trustee will be held to account for the impugned conduct;
·Section 179 is not a vehicle for pressing general law rights or obligations.
[7] Farella v Official Trustee in Bankruptcy (No 2) [2011] FCA 619 at [14] – [19]
In addition Mr Moran has invoked the provisions contained in section 153B of the Act, which allows the annulment of a bankruptcy on the basis the sequestration order in question ought not to have been made or the petition in question ought not to have been presented or ought not to have been accepted by the Official Receiver.
Again, Mr Moran has not fleshed out the grounds of this application. Rather his application prospectively seeks that Mr Ryan be given an opportunity to seek such an annulment, presumably at some unspecified time in the future but after the current application has been delayed in some way.
In Bulic v Commonwealth Bank of Australia[8] Tracey J, amongst a number of other considerations, said as follows in respect of the discretion arising under section 153B:
[8] Bulic v Commonwealth Bank of Australia [2007] FCA 307 at [12]
“An applicant who seeks an annulment of his or her bankruptcy “carries a heavy burden.” It is incumbent on an applicant to place before the Court all relevant material with respect to his or her financial affairs…
…
The power conferred on the Court by s.153B(1) is discretionary in nature. Even if persuaded that the sequestration order ought not to have been made, the Court can, in appropriate circumstances, decline to annul the bankruptcy…
…
Considerations which may have a bearing on the exercise of discretion include unexplained delay in the making of the application, whether or not the applicant is solvent, whether or not the applicant has made full disclosure of his or her financial affairs and a failure by the bankrupt to oppose the creditor’s petition and attend the hearing at which the sequestration order was made…”
In the light of these strictures, it is apparent that Mr Ryan is likely to face significant difficulties in respect of his as yet inchoate application under section 153B. He has not as yet provided clear evidence that he was solvent at the time of the sequestration order or is now. There has been a significant delay since the sequestration order was made, during which the trustee has incurred significant costs. Given the delay in filing his statement of affairs, it is also arguable that Mr Ryan has been recalcitrant in providing full disclosure of his financial affairs, which perhaps has compounded his difficulties. He did not attend the original sequestration hearing.
Consideration
I am satisfied that Mr Ryan still has outstanding unsecured creditors. Therefore, pursuant to the provisions of section 19(1) the trustee has the duty of taking appropriate steps to recover property for the benefit of the estate. The only such property available is the Glenelg East property. On the basis of Mr Scott’s evidence, I am satisfied that there is sufficient equity, in the property, to satisfy the debts owing to Mr Ryan’s unsecured creditors.
In Horne (as Trustee of the Bankrupt Estate of Sekulovski) v Sekulovski[9] Tracey J considered a similar application to the current matter, which concerned a bankruptcy trustee seeking orders for vacant possession of a bankrupts residential property so that it could be sold and the proceeds made available to creditors.
[9] See Horne (as Trustee of the Bankrupt Estate of Sekulovski) v Sekulovski [2009] FCA 1154 at [8]
His Honour was satisfied that the court had the necessary authority to make such orders, pursuant to the provisions of sections 30 and 71(1)(g) of the Act. He said as follows:
“It is plainly necessary that the Applicant be in a position to provide any purchaser of the property with vacant possession in order to facilitate a sale, and it is also necessary, in order to achieve that end, that the property be placed in such a condition that it may be attractive to a potential purchaser. The Respondents, despite having been given the opportunity to do so, have prevaricated and have not responded to requests that they vacate the premises. Accordingly, in my view, it is appropriate that the orders sought in the application should be made.”
In this matter, Mr Ryan was given notice, in July of 2015, that Mr Scott sought vacant possession of the Glenelg East property, so that it could be sold. Mr Ryan has not cooperated with that process or with the administration of his estate, as is evidenced by his failure to provide his statement of affairs promptly.
In these circumstances, I am satisfied that it is appropriate that Mr Scott be granted vacant possession of the property, from an appropriate date, so that he can prepare it for sale and secure the best price possible. Given Mr Ryan’s long standing opposition to this course, it is likely that he will be obstructive of such a process, particularly if he remains in occupation of the property until the point of sale. His continued occupation may have the consequence of deterring potential purchasers.
In correspondence emanating from Mr Moran, Mr Ryan has indicated that he did not pay the judgement debt due to Credit Corp Services Pty Ltd as he maintained that the debt had arisen because of identity fraud. However, given his current predicament, Mr Ryan is prepared to extinguish the debt, whilst reserving the right to challenge it later. In other correspondence, Mr Ryan has indicated that his complaints regarding the alleged fraudulent use of the credit card, have been referred to the Australian Federal Police for investigation.
On the basis of Mr Ryan’s unsupported assertions, which were rejected by the Magistrates’ Court of South Australia and which are not currently the subject of any explicit legal challenge, I am not in a position to look behind the judgement debt, which gave rise to the relevant creditors’ petition.
As Bromberg J said in Vince (as Trustee of the bankrupt estate of Sopikiotis) v Sopikiotis (No 2):[10]
“…the validity of the debts claimed against Ms Sopikiotis are matters for the Trustee and are not matters open to challenge in this proceeding. They do not give rise to any challenge to the right of the Trustee to possession of the Camberwell property.
As to the validity of the bankruptcy, Ms Sopikiotis alleges that she was never properly served with the bankruptcy notice and asserts that proper legal processes were not followed. I will refer to that matter again later. However, in the face of an extant sequestration order, I can only proceed on the basis that the matters raised by Ms Sopikiotis are closed and do not bare upon the Trustee’s entitlement to the relief which he seeks.”
[10] Vince (as Trustee of the bankrupt estate of Sopikiotis) v Sopikiotis (No 2)[2012] FCA 1298 at [13] - [14]
It is the trustee’s position that the debt to Credit Corp Services Pty Ltd has been outstanding for a significant period of time, with the default judgement being obtained in April of 2013. Thereafter, Mr Scott contends that there had been significant delays, occasioned by Mr Ryan, in the administration of the estate. These factors should militate against the court exercising any discretion in Mr Ryan’s favour. It is essentially the trustee’s position that Mr Ryan is currently engaged in delaying tactics to avoid the seizure of his home.
It is Mr Moran’s position that his client has good prospects of having the bankruptcy annulled, particularly if his client is successful in challenging the amount of remuneration sought by Mr Scott.
In this context, Mr Moran relies on the case of McDonald (as former trustee of the bankrupt estate of Sanders v Sanders[11]. In the case, Driver FM (as His Honour then was), considered conflicting Federal Court authority regarding whether the court had the authority to fix the remuneration of a trustee. In Pattison (as trustee of the bankrupt estate of Bellin) v Bellin[12] Goldberg J said as follows:
“The nature of the amendments … confirms the conclusion that there was not a legislative intention that the Court would, in any situation, fix the remuneration of a trustee. Rather, the fixing or determination of a trustee's remuneration is to be made by the creditors, the committee of inspection or by reference to the IPAA scale.”
[11] See McDonald (as former trustee of the bankrupt estate of Sanders v Sanders [2007] FMCA 649
[12] See Pattison (as trustee of the bankrupt estate of Bellin) v Bellin [2000] FCA 1167 at [27]
On the other hand, in Brake v Townsend[13] Greenwood J said as follows:
“…it seems to me that s 178(1) may well confer a power to determine or fix the quantum of the costs (both expenses and remuneration) in respect of an administration. In addition, s 30(1)(b) of the Act confers a power upon the court to make such orders as the court considers ‘necessary for the purposes of carrying out or giving effect to the Act in any case or matter’.”
[13] See Brake v Townsend [2006] FCA 1156 at [98]
In these circumstances, Driver FM considered that the court did have power to assess and determine a trustee’s remuneration pursuant to a combination of the powers arising under sections 30 and 178 of the Bankruptcy Act. However, such a power could be enlivened only when the prescribed statutory mechanism, for dealing with a trustee’s remuneration proved to be unworkable.
In the case before him, Driver FM was not prepared to simply accept what the trustee’s claim for remuneration was, when opposing groups of creditors had different views about the validity of those expenses. In these circumstances, His Honour referred the matter to a registrar, with relevant taxation experience, to investigate and report to the court as to what was the appropriate level of remuneration.
In this particular case, Mr Moran urges the court to take a similar approach. On the other hand, it is Ms Clarke’s position that the system for the assessment of the trustee’s costs has not become unworkable in the sense envisaged by Driver FM, as the legislature has inaugurated a regime to assess such costs, which is subject to a proper level of regulatory oversight.
Mr Moran places significant emphasis on the reference to justice and equity contained in section 178(1) in support of his submission that the court appoint a registrar to assess Mr Scott’s fees. In Mr Moran’s memorable phrase, Mr Ryan “can’t come back to court to get his house back” if he is ultimately successful in his application to AFSA and Mr Scott’s remuneration is substantially reduced. In Mr Moran’s submission, there will be no prejudice to the trustee, if this approach is taken, given the level of equity remaining in the Glenelg East property.
Mr Moran contends that the trustee has statutory duties not only to the creditors but also obligations to him, which include avoiding the seizure and sale of his home, if at all possible. In this context, Mr Moran relies on the case of Re Stelnicki.[14] The case concerned a trustee’s desire to sell the bankrupt’s stock-in-trade, in circumstances where otherwise the evidence available indicated a significant excess of assets over liabilities, after realisation, apart from the stock-in-trade. As such, the bankrupt concerned was fearful that a forced sale of his stock-in-trade would result in him being deprived of his means of livelihood, when other assets could be converted and this was inequitable to him.
[14] Re Stelnicki [1982] 62 FLR 430
Cox J, whilst being loathe to substitute his judgment for that of the trustee, considered that it was just and equitable to restrain the sale of the items in question. Cox J said as follows:
“…the margin is such that the trustee representing the creditors is not really at risk through a short delay of failing to obtain payment in full, while the delay sought is not such as to seriously suggest any hardship to the creditors.”
Although this is not a case in which any error has been demonstrated in the commercial judgment of the trustee, it is none the less in my view just and equitable that the bankrupt have the opportunity to discharge the relatively small deficiency without further of his stock-in-trade being exposed for sale by auction.”
I am not certain that the situation arising in this case is analogous to that which arises in the present matter. In this case, the amount of the debts, when combined with the sums currently due to the trustee, which I accept have the potential to increase, are very close or perhaps even in excess of the equity currently available in the Glenelg East property. There are no other sources of property available to satisfy the creditors. Accordingly, in my view, there is the potential for prejudice to arise to the various creditors of Mr Ryan if the sale is restrained or delayed.
In this context, I consider what was said by the Full Court of the Federal Court in Adsett v Berlouis & Ors.[15] In the case, the Full Court approved the following comments of Smithers J in Mannigel v Aitken[16]:
“In the case of bankruptcy the trustee is in charge of the assets of the bankrupt and those assets are to be applied for the benefit of the creditors and if there be any surplus for the benefit of the bankrupt. It is clear that the minimum standard required of the Trustee is that he shall handle the assets with a view to achieving the maximum return from the assets to satisfy the claims of the creditors and to provide the best surplus possible for the bankrupt. Obviously a great deal of discretion and judgment is required to be exercised by the Trustee.”
[15] See Adsett v Berlouis & Ors (1992) 37 FCR 201 at 208
[16] See Mannigel v Aitken (1983) 77 FLR 406 at 408-409
It is clear, I think, from this passage that the obligations of a bankruptcy trustee are first and foremost to the creditors of the estate. It is a misstatement, I think, to assert that there is any equal duty to the bankrupt. I accept however that the discretion arising under section 30(1)(b) is a wide one, which must be exercised within parameters defined by normal commercial acumen.
As such, it is relevant that the equity in the Glenelg East property is close to being fully consumed. The parties disagree as to why this is so. From the trustee’s perspective it is because he has had to respond to a recalcitrant and oppositional bankrupt, who has engaged in protracted correspondence and litigation with him. From Mr Ryan’s perspective, the trustee has been unrestrained and excessive in the manner in which he has calculated his remuneration, which has been out of proportion to his level of indebtedness.
At this stage, Mr Moran does not point to any particular decision of the trustee being wrong or vitiated by any specified incident of mala fides. Mr Ryan has been provided with copies of some of the itemised accounts in respect of the work done by Mr Scott and his staff. Mr Moran does not point to any obvious irregularities in respect of those accounts, other than the incident raised in Mr Ryan’s reference to AFSA and that the accounts appear to be high when the level of the original debt is considered.
It is, I think clear, from more recent authority than that provided by Stelnicki that the court’s power to intervene pursuant to section 178, in the affairs of a trustee, is closely constrained and may be engaged only when considerations of justice and equity require the court’s intervention. The onus of establishing the need for the court to intervene is on the applicant concerned. As Madgwick J said in Healey v Prentice (No 2)[17]:
“An applicant no doubt carries the onus of establishing the onus of establishing this. It is plain that the Court should not be too ready to intervene for fear of making the role and work of a trustee unmanageable…”
[17] Healey v Prentice (No 2)[2000] FCA 1598 at [21]
In the context of Mr Moran’s submissions, it is necessary to set out the legislative scheme, which provides for the remuneration of bankruptcy trustees. Pursuant to section 162 of the Act, a trustee’s remuneration is to be fixed by resolution of the creditors and failing that, the trustee may, pursuant to the Regulations, apply to the Inspector-General to decide the relevant remuneration.
In Adsett v Berlouis & Ors[18] the Full Court said as follows:
“Where a trustee in bankruptcy is appointed in the expectation that he or she will be remunerated, and there is no prior agreement to act gratuitously, the Act assumes the existence of a right to be remunerated. Section 162 provides a mechanism for fixing the quantum of the remuneration … .”
[18] Adsett v Berlouis & Ors supra at 2010
Accordingly, Mr Scott is entitled to be remunerated. The resulting question is how that remuneration is to be calculated and the manner of oversight of such calculations, both administratively and judicially. In this context, section 167 is relevant.
In broad terms, the section authorises the making of regulations dealing with the review of the actions of trustees, in respect of their remuneration and how that remuneration is to be set. The relevant regulations are regulation 18.12A; 18.12C; 8.12E; 8.12F; 8.12H and regulation 8.12I.
In summary, the regulations provide that:
·The application for review of remuneration is to be made to the Inspector General, not the court [regulation 8.12E];
·The time to apply for a review of remuneration does not commence until the trustee has provided a notification [regulation 8.12C];
·The Inspector-General is bound to refuse an application, unless the bankrupt can establish that:
ØThe trustee’s remuneration may have been fixed in a manner that is inconsistent of the requirements of the Act or these regulations;
ØThe trustee may have acted improperly, or without due care and diligence, in the administration of the estate [regulation 8.12F – these are both described as threshold matters];
·Only the trustee has the right to apply for the Inspector-General to review a bill of costs for services provided to the trustee by a third party, such as a solicitor [regulation 8.12I].
In my view, the import of the regulations is clear. At the outset of his administration of a bankrupt estate, the trustee is required to give notice to the bankrupt concerned as to the manner in which his/her remuneration will be calculated and an estimate of the expected amount of remuneration. This arises as a consequence of regulation 8.12A.
In this case, Mr Scott provided to Mr Ryan a notice to this effect, which included the basis on which his (Mr Scott’s) remuneration would be calculated. Mr Scott chose to have his remuneration calculated on an hourly basis, with the hourly rate to depend upon the experience of the person, within his office, providing the work in question. The maximum fee was $620.00 per hour for a partner; with the minimum being $120.00 for an administrative person. These fees did not include GST.
In addition, Mr Scott provided an estimate of his remuneration, for his administration of Mr Ryan’s estate, to be in a range from $30,000.00 to $45,000.00. In this regard, Mr Scott’s estimate, which was provided in August of 2015, has proven to be inaccurate. However, in my view, it is a relevant consideration, in this context, that Mr Scott has had to respond to actions initiated by Mr Ryan, including the mortgagee proceedings, which he was not in a position to anticipate, when he provided his estimate.
In these circumstances, it seems unfair for Mr Ryan to now complain about a lack of proportionality between the original debt and the work performed by Mr Scott. In my view, a bankrupt should not be in a position to behave in such a way as to increase the costs of his trustee, but then object to the payment of those costs on the basis of proportionality.[19]
[19] See Macks & Anor v Maka & Anor [2015] SASC 200 at [70]
However, I concede that ultimately these are matters for the Inspector-General. Their relevance is that, under section 178 of the Act, Mr Ryan seeks the intervention of the court on equitable grounds. The basis of this intervention is that the court should metaphorically say to itself “oh my gosh” when it sees the extent of the remuneration sought by Mr Scott.
It is submitted, essentially that, on the basis of such astonishment, the court should intervene pursuant to section 178, on equitable grounds. As Madgwick J observed in Healey it is necessary for Mr Ryan to establish that the impugned conduct of the trustee was obviously incorrect.
I am not persuaded that this is the case. Mr Scott’s charges are significant. However, it is apparent that what was a relatively uncomplicated matter has ballooned in ways unanticipated by Mr Scott and for reasons which were beyond his control. In my view, Mr Moran is unable to point to any breach of regulation 8.12A. It is not my function to substitute my judgment for that of the trustee. Rather, I am obliged, I consider, to stand back from the day-to-day management of the estate, which is Mr Scott’s business.
As such, it seems to me that the only proper avenue for Mr Ryan to challenge Mr Scott’s level of remuneration is by way of seeking a review pursuant to regulation 8.12E. Such an application is subject to the threshold matters specified in regulation 8.12F. In my view, these regulation matters are also germane to any possible intervention of the court pursuant to section 178 of the Act.
Apart from asserting that Mr Scott’s remuneration is excessive, Mr Moran is not in a position to assert that this remuneration has been fixed in a manner that is inconsistent with the requirements of the Act or the regulations made thereunder. He does not complain that Mr Scott has behaved in a manner inconsistent with his obligations under the applicable regulations.
In addition, Mr Moran has made no specific assertions that Mr Scott has acted improperly or without due care and diligence. The complaint launched against Mr Scott is one of implication. In effect the extent of the remuneration claimed is such that it is ipso facto excessive, when compared to the amount which led to the sequestration in the first place. I do not accept that this is a proper basis for the court’s involvement pursuant to section 178.
In my view, a combination of sections 162 and 167 of the Act make it clear that any issue arising in respect of the calculation of the remuneration due to a trustee is a matter for the Inspector-General and not the court.
As Goldberg J noted in Pattison[20] “there is no specific provision in the Act which entitles or empowers the court to fix or determine the remuneration of a trustee.” This is clearly the case. As such, any power of the court to intervene, pursuant to section 178 of the Act, must be closely considered.
[20] (Supra) at [27]
This was the view, I think, of Greenwood J in Brake v Townsend.[21] His Honour considered that the exercise of any power arising under section 178 and its intersection with the proper application of section 162 had to be carefully considered. In the case before me, I do not consider that there is any proper justification for the court seeking to intervene, in any way, in the calculation of Mr Scott’s remuneration. In my view, that is a matter solely for the Inspector-General through the mechanisms provided by the relevant regulations.
[21] (Supra) at [98]
In particular, I am not of the view that this regulatory process has broken down so that this court, as a consequence of any considerations of justice and equity, should involve itself in such a process. In particular, I am not prepared to intervene on the basis that Mr Ryan asserts that the fees appear to be excessive or because, until the issue of the fees is resolved, he is not in a position to pay an amount to reach an annulment of his bankruptcy, through the operation of section 153A of the Act.
I reach this conclusion because of the basis on which Mr Ryan puts his case. He seeks an order that he be given an opportunity to have his bankruptcy annulled. Accordingly, his application is prospective in nature. It cannot be said, with any degree of certainty that he will be able to achieve such an annulment, on the basis of the discharge of his various debts or on the alternative ground arising under section 153B that the relevant sequestration order ought not to have been made.
Essentially, Mr Ryan seeks to prevent the sale of the Glenelg East property until he is in a position to put forward a proposal for annulment to Mr Scott. In order to do so, he seeks the court’s intervention in respect of Mr Scott’s remuneration.
It is a circular argument. Mr Ryan cannot put a proposal for annulment until the issue of the remuneration is settled and, by necessary implication, the level of the remuneration has been significantly reduced, either by the court or by AFSA.
As a consequence of the operation of section 153A(6), before there can be any annulment, Mr Ryan must satisfy all the debts, which have been proved in his bankruptcy, including the costs, charges and expenses of the administration of the bankruptcy, which must include Mr Scott’s remuneration.
The onus is on Mr Ryan to establish that grounds for annulment arise, either under section 153A or 153B. I do not consider that he has done so, particularly given the prospective nature of his application. There are thus no grounds arising, in my view, relevant to considerations of justice and equity to justify the intervention of the court, as proposed by Mr Moran.
Conclusions
Mr Ryan is entitled to pursue his application with AFSA regarding the level of Mr Scott’s remuneration. This is not a case, such as in Stelnicki, where there were obvious and ample sources of property, which could be readily tapped to satisfy the debts of the bankrupt concerned, rather than engaging the clearly parlous mechanisms proposed by the trustee.
The only means to satisfy the various creditors concerned, including Mr Scott, is through the sale of the Glenelg East property, regrettable as that is to Mr Ryan. Given the extent of Mr Ryan’s debts, even if he is able to reduce the monies due to Mr Scott, there is no obvious indication, as in Stelnicki that the realisation of Glenelg East can be avoided. In this context, the court must be cautious about interfering with the day to day management of an estate or attempting to substitute its own commercial judgement for that of the trustee.
Mr Ryan remains able to review the fees of Mr Scott under the prescribed process, which he has already engaged. I hope that process can be concluded sooner rather than later. However, given the delays in this matter and the lack of any obvious fault in the process adopted by Mr Scott, I am not satisfied that there is sufficient justification for the proceedings to be further adjourned.
There has been much correspondence between Mr Ryan and Mr Scott and between the Bank and Mr Scott regarding the Glenelg East property. Mr Ryan has instituted proceedings to delay the trustee’s actions, which has of itself increased the costs of the administration. He has not cooperated with that administration. These are factors which militate against the further adjournment of the proceedings.
However, in my view, the most significant factor in favour of the trustee’s position is that the evidence relating to Mr Ryan’s proposal to seek an annulment of the bankruptcy is far from certain. I have no actual evidence from the relative who is prepared to advance the sum of $35,000.00. I have nothing concrete from Mr Ryan’s employee regarding a staff member mortgage advance.
In these circumstances, I am satisfied that it is appropriate for the court to accede to Mr Scott’s application, which has been on foot since 2 March 2016, following a request that Mr Ryan vacate the property delivered on 2 July 2015. I am concerned that further delay will only add to the expenses of all concerned.
I am further satisfied that, as the property concerned has vested in Mr Scott and there is likely to be equity within it to satisfy the various claims on Mr Ryan’s estate, it is incumbent upon Mr Scott that he undertake the necessary acts to realise the property.
It is also clear that Mr Ryan is unlikely to comply with directions provided to him by Mr Scott and therefore it is necessary for the court to make the orders, pursuant to the powers arising under section 30(1)(b) of the Act, to give effect to the sequestration order made by it earlier and so that Mr Scott is able to satisfy his obligations, arising under section 19, to Mr Ryan’s creditors.
I acknowledge Mr Ryan’s idiosyncratic health concerns. In these circumstances, I propose to allow him a period of 42 days from the date of this judgment, in order to vacate the premises in question. Whether Mr Ryan and Mr Scott will reach an accommodation, with one another, in that period, leading to an annulment, is a matter for them.
However, I am not prepared to further delay these proceedings on the basis of either Mr Ryan’s uncertain proposals in this regard or his inchoate criticisms of Mr Scott’s administration. In my view, it would not be justice and equitable to do so, particularly given the potential for further delay to add further to the costs of the matter.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding one hundred and forty (140) paragraphs are a true copy of the reasons for judgment of Judge Brown
Associate:
Date: 20 May 2016
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