Slade v Shepard
[2013] FCCA 1237
•3 September 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SLADE v SHEPARD | [2013] FCCA 1237 |
| Catchwords: BANKRUPTCY – Application to review trustee’s decision rejecting proof of debt – order under s.178 in relation to sale proceeds of bankrupt’s property – claim to equitable charge based on trust – application to remove trustee for various grounds. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.30(1)(b), 58, 102, 104, 116(1)(g), 178, 179 |
| Cases cited: Cummings v Claremont Petroleum NL [1996] HCA 19; (1996) 185 CLR 124 at 132 DK Rogers; Ex parte CMV Parts Distributors Pty Ltd (1989) 20 FCR 561 at 562-3 Frost v Sheahan (Trustee) [2009] FCAFC 20 (27 February 2009) at [8] Gage v King McGoldrick v Official Trustee in Bankruptcy [1993] FCA 636; (1993) 47 FCR 547 at 552-553 National Provisional Bank Ltd v Bishop [1965] Ch 450 Re Tyndall; Ex parte Official Receiver [1977] FCA 15; (1977) 30 FLR 6 at 9-10; [1977] FCA 15; 17 ALR 182 at 186 Siahos v JP Morgan Trust Australia Ltd [2009] NSWCA 20 at [27] Sweeney v Howard [2007] NSWSC262 at [56] Trkulja v Martin [2005] FCA659 |
| Applicant: | ABRAHAM LESLIE SLADE |
| Respondent: | ADAM SHEPARD – TRUSTEE OF THE BANKRUPT ESTATE OF ROSLYN ELAIN SLADE |
| File Number: | SYG 821 of 2013 |
| Applicant: | ROSLYN SLADE |
| Respondent: | ADAM SHEPARD – TRUSTEE OF THE BANKRUPT ESTATE OF ROSLYN ELAIN SLADE |
| File Number: | SYG 1479 of 2013 |
| Judgment of: | Judge Altobelli |
| Hearing date: | 17 July 2013 |
| Date of Last Submission: | 17 July 2013 |
| Delivered at: | Sydney |
| Delivered on: | 3 September 2013 |
REPRESENTATION
| Solicitors for the Applicant: | Hall Partners |
| Solicitor for the Respondent: | Somerset Ryckmans |
ORDERS
The application filed by Abraham Leslie Slade on 19 April 2013 with file number SYG821/2013 is dismissed.
The Applicant is to pay the Respondent’s costs as agreed or as assessed.
The application filed by Roslyn Slade on 1 July 2013 with file number SYG1479/2013 is dismissed.
The trustee’s costs be costs of the administration of the bankrupt estate of Roslyn Slade.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 821 of 2013
| ABRAHAM LESLIE SLADE |
Applicants
And
| ADAM SHEPARD – TRUSTEE OF THE BANKRUPT ESTATE OF ROSLYN ELAIN SLADE |
Respondent
SYG 821 of 2013
| ROSLYN SLADE |
Applicants
And
| ADAM SHEPARD – TRUSTEE OF THE BANKRUPT ESTATE OF ROSLYN ELAIN SLADE |
Respondent
REASONS FOR JUDGMENT
Introduction
These reasons for judgment relate to two separate but related applications that came before the court.
The first application was filed by Abraham Leslie Slade (“Mr Slade”) on 19 April 2013. Mr Slade seeks orders against Adam Shepard as trustee of the bankrupt estate of Roslyn Elaine Slade. The bankrupt is Mr Slade’s wife. The relevant orders that Mr Slade seeks are:
1.Order that the court extend the time for the filing of this Application which seeks to review the decision of the Respondent Trustee, to its date of filing;
2. Order that for the purposes of Section 104 of the Bankruptcy Act 1966 the Court:-
(a) Review the decision of the Respondent Trustee in respect of the Applicant’s Proof of debt;
(b) Reverse or vary the decision of the Respondent Trustee;
3. Alternatively to orders 2 and 3 above, and in accordance with Section 178 of the Bankruptcy Act 1966, an order that the net proceeds of the sale in the property 72 Parramatta Road Homebush in the state of New South Wales be paid to the Applicant.
Particulars:-
The Applicant claims this order pursuant to an equitable charge attaching to those funds as a consequence of the Applicant having provided the monies in respect of the purchase of the property and having placed the property in the name of the Bankrupt solely to avoid any exaction by the crown as would otherwise have arisen in relation to Land Tax;
4. Order that upon determination of the matters referred to at 2 above, the balance of these proceedings be transferred to the Family Law Division of the Court and that they be referred to a Judge of the Court sitting in that Division for further determination and consequential orders to be made;
5. Order that the Court in accordance with the jurisdiction conferred upon it for the purposes of making such orders and declarations as to property division and adjustment, under the terms of the Family Law Act 1975 (Cth) determine for the purposes of Section 79 of the said Act, or alternatively under such other sections or provisions of the said Act as the Court thinks fit, the entitlement of the Applicant and the entitlement of the Respondent Trustee to share and participate in a pool of funds coming into existence and presently held by the Respondent Trustee from the sale of a property situated at 72 Parramatta Rd, Strathfield, NSW.
6. Such other order as the Court thinks fit.
7. Costs.
The second application was filed by Roslyn Slade, the bankrupt (“the bankrupt”) on 1 July 2013. The bankrupt seeks orders against Adam Shepard as trustee of her bankrupt estate. The relevant orders that she seeks are:
1. On the grounds set out in the accompanying Points of Claim, an order that Adam Shepard be removed as the Bankrupt’s Trustee in Bankruptcy and that the Official Receiver be appointed as the Trustee of the applicant’s Estate in Bankruptcy;
2. An order pursuant to s.30(1)(b) of the Bankruptcy Act 1966 (Cth), that the Bankruptcy of Roslyn Slade be stayed for a period of 3 months and thereafter for report back to Court whilst the Applicant brings and prosecutes proceedings as are set out in the Draft Statement of Claim accompanying the Affidavit of Roslyn Slade, sworn 19 June 2013;
3. Alternatively to order 1 above, an order pursuant to s.30(1)(b) of the Bankruptcy Act 1966 (Cth), that the Respondent is restrained for a period of 3 months and thereafter for report back to Court, from taking any further step in the administration of the Bankrupt Estate of Roslyn Slade whilst the Applicant brings and prosecutes proceedings as are set out in the Draft Statement of Claim accompanying;
4. That the Trustee be restrained from seeking any costs or reimbursement in defence of this action or this application from the Bankrupt estate.
5. Such other orders as the Court thinks fit;
4. Costs.
The commonality of the defendant, and of many of the relevant facts, meant that it was possible to hear both matters at the same time, and to deliver a single set of reasons disposing of both applications.
Mr Hall for the applicants, and Mr Ryckmans for the respondent, agreed that despite the complexity of some of the issues raised the matter could be dealt with on the basis of limited cross-examination of Mr Slade and the bankrupt, and otherwise on the papers.
Most of the relevant facts are uncontentious. Mr Slade married the bankrupt in 1972. They have 2 adult children. Their marriage is strained by financial difficulties and mental health issues that Mrs Slade has experienced throughout their marriage.
On 21 November 2011 the respondent was appointed as trustee of the bankrupt estate of Mrs Slade pursuant to a debtor’s petition filed by Mrs Slade.
Mr Slade’s grievance with the respondent trustee is that a proof of debt he lodged has been rejected. In the alternative he seeks orders in relation to the proceeds of sale of a property at 72 Parramatta Rd Homebush (“the Homebush property”), which proceeds of sale are held by the trustee.
Mrs Slade’s grievance with the respondent trustee relates to the latter’s alleged conduct as trustee and has several aspects to it. She complains about the manner in which the trustee took physical possession of the Homebush property. She complains about the trustee’s dealings with her (i.e. Mrs Slade’s) brother who holds power of attorney from her mother, who is the main creditor in the bankruptcy. As Mrs Slade’s concerns about the trustee’s administration of her estate are important to her, the court sets out below the points of claim filed on her behalf in this regard:
The Applicant requests that the Court inquire into the conduct of the Trustee in respect of the following matters and allegations:
(i) That he took possession of the premises known as 72 Parramatta Road Homebush on about 11 July 2012, knowing that he was required to have commenced possession proceedings but failed to do so, and disposed each of Roslyn Slade and Leslie Slade of the premises and the property without having obtained a writ in respect of their ejectment, or orders for possession of the said property;
(ii) That he was appointed as Trustee of the Bankrupt Estate by virtue of the casting and controlling vote of Irene Dobrinski in the Bankrupt’s estate, with the person Barry Goldman acting at that meeting by way of her and per medium of power of attorney;
(iii) That for the purposes of the Bankruptcy and where it was required that he seek instructions from Irene Dobrinski, he took his instructions from Barry Goldman acting under power of attorney;
(iv)That having been requested to inquire into and to make examination as to that power of attorney, he failed to carry out any such investigations or alternatively failed to make any reply or given any response to the Bankrupt as to that matter, or of any inquiries carried out or undertaken by him in relation to these matters;
(v) That he failed to take any singular step or alternatively to inform the Bankrupt of what steps had been undertaken by him for the purposes of satisfying himself that the primary creditor in the Bankrupt Estate had intended to and still wished to seek recovery of the alleged debt;
(vi) That he failed to take any step to assist the Bankrupt in making contact with the Bankrupt’s mother with a view to resolving her claim as a creditor to the Bankrupt’s estate, where he was aware of allegations that the Bankrupt had been the victim of sexual abuse and incest as a child whilst under her mother’s care;
(vii) That he informed the Court through his solicitor that the administration of the Bankrupt’s estate had to be dealt with urgently giving due regard to Irene Dobrinksi’s advanced age and years, yet took no steps or alternatively failed to inform the Bankrupt of any steps taken by him for the purposes of (urgently or not at all), inquiring into:
(a) A power of attorney held by Barry Goldman;
(b) The informed wishes of Irene Dobrinski;
(c) Of putting the Bankrupt in contact with Irene Dobrinski;
(d) Convening and attending or participating in a mediation at which these matters concerning the Bankruptcy could be brought to an end.
(viii) That by virtue of the preceding matters he failed:
(a) In his duty as Trustee to administer the bankruptcy impartially and independently or in such manner as a disinterested by-stander would apprehend that he was administering the bankrupt estate free from bias or self-interest;
(b) Failed in his duty and responsibility to properly administer the bankruptcy.
The trustee’s case is that he has acted properly at all times (and will continue to do so in the future) and in all respects in rejecting Mr Slade’s proof of debt, and in the past, current and future administration of the estate.
There are clearly strong emotional undercurrents in these applications. The evidence creates the strong impression that the relationships between Mr and Mrs Slade, Mrs Irene Dobrinski (Mrs Slade’s mother) and Barry Goldman (who holds power of attorney from Mrs Dobrinski, and is Mrs Slade’s brother) are strained if not dysfunctional. A relevant issue for the court to consider is whether it was appropriate for this court’s jurisdiction under the Bankruptcy Act to be invoked as a forum for dealing with a dispute whose legal issues are so heavily overladen with emotional issues.
It seems that Mrs Slade became bankrupt primarily as a result of a judgment against her in the NSW District Court. Her mother Mrs Dobrinski was the judgment creditor. Her brother as attorney for her mother seems to have played an integral role in the prosecution of these proceedings.
Mrs Slade and Mr Slade contend that the latter paid the former’s legal fees in the District Court litigation and that he should now be entitled to lodge a proof of debt in her bankrupt estate in this regard.
Mr Slade and Mrs Slade were both cross-examined. Neither were impressive witnesses. Both were unresponsive at times. Both seemed to struggle with memory. Mrs Slade was clearly stressed. Moreover, and as will be discussed in further detail below, there are significant inconsistencies in their evidence.
Proof of debt by Mr Slade
Mr Slade’s first proof of debt is dated 28 February 2013 and is for $363,143.42. It was rejected by way of Notice dated 26 March 2013. In this proof Mr Slade contended that he had advanced $362,877.32 to the bankrupt, and paid $266.10 in water rates on the Homebush property, a payment he asserted to be on behalf of the trustee. The trustee rejected the first component due to unsatisfactory evidence that the amounts purported to be advanced to the bankrupt were made pursuant to a loan agreement with the bankrupt. The second component was rejected as the payment related to a liability incurred after bankruptcy.
Mr Slade’s second proof of debt is dated 17 April 2013 and is for $117,079.27 as particularised in a schedule which is the annexure “A” to his affidavit sworn 18 April 2013. Documents are also annexed which purport to particularise and substantiate the claim. The trustee also rejects this proof of debt for the following reasons.
The trustee contends that payments totalling $82,100 made to Livingston & Co (the lawyers representing Mrs Slade) were all paid by the bankrupt from a joint cheque account. That is clearly the case. Each of the relevant cheques is signed by Mrs Slade and drawn on an account where the drawer is noted as R.E. Slade and A.L. Slade. The trustee submits that consistent with the decision is National Provisional Bank Ltd v Bishop [1965] Ch 450 where there is a joint account opened by a husband and wife on terms that either could draw from the account, then in the absence of circumstances which indicate that it was intended for a specific or limited purpose, each spouse could draw on it not only for the benefit of them both, but also for his or her individual benefit. Thus the amounts referred to above were all payments made by the bankrupt for her own benefit.
On behalf of Mr Slade this principle was accepted but it was contended that the evidence in this case demonstrated that Mrs Slade’s drawings on the joint account were not authorised, that the principle did not apply to substantial drawings incurred in the defence of a court case by one party only, and that in reality the only person with funds was Mr Slade.
There is no evidence before the court that the drawings by Mrs Slade were not authorised, indeed precisely the opposite impression is formed. Mr Slade wanted to assist his wife with the costs of the District Court proceedings.
Even if it were the case that Mr Slade was the only one to actually have money, the fact is the monies came from a joint account. In the absence of any evidence about the source of these funds the court is entitled to infer that monies drawn from a joint account were joint funds. Moreover there is nothing in the judgment of Stamp J in the decision that would limit the application of the principle as contended on behalf of Mr Slade. His Honour said at p 456:
Where a husband and wife open a joint account at a bank on terms that cheques may be drawn on the account by either of them, then, in my judgment, in the absence of facts or circumstances which indicate that the account was intended, or was kept, for some specific or limited purpose, each spouse can draw upon it not only for the benefit of both spouses but for his or her own benefit. Each spouse, in drawing money out of the account, is to be treated as doing so with the authority of the other and, in my judgment, if one of the spouses purchases a chattel for his own benefit or an investment in his or her own name, that chattel or investment belongs to the person in whose name it is purchased or invested: for in such a case there is, in my judgment, no equity in the other spouse to displace the legal ownership of the one in whose name the investment is purchased. What is purchased is not to be regarded as purchased out of a fund belonging to the spouses in the proportions in which they contribute to the account or in equal proportions, but out of a pool or fund of which they were, at law and in equity, joint tenants. It also follows that if one of the spouses draws on the account to make a purchase in the joint names of the spouses, the property purchased, since it is purchased in joint names, is, prima facie, joint property and there is no equity to displace the joint legal ownership. There is, in my judgment, no room for any presumption which would constitute the joint holders as trustees for the parties in equal or some other shares. That this is the law is, I think, an inescapable conclusion, from the judgment of Pearson J. in In re Young, which, so far as I am aware, has never been doubted, and from the judgment of Diplock J. in Gage v King.
There is no evidence that the joint account was to have some limited operations or was established for a special purpose, or that each of the account holders had agreed to same limitation as to its operation. The words of Stamp J at p.459 are apposite in this regard:
In the absence of some circumstances from which one infers an agreement to the contrary, one must treat the joint account as truly a joint account, a joint account on which each party has power to draw to take the money out of the ambit of the joint account and to employ it as he or she thinks fit either for his own purposes or not, and if he does draw money out and invests it in his own name I see no room for any inference that he holds that investment on trust for himself and his wife either in equal shares or in any other shares.
Insofar as the proof related to the amounts drawn on a joint account, and on the basis of the evidence available to the court at present, the trustee was entitled to reject the claim.
The trustee further contends as to the balance of the amounts claimed that the evidence discloses that only 2 payments of $9,100 and $6357.82 were paid by Mr Slade. The trustee asserts that there is simply no evidence as to who paid the balance of the amounts claimed. Again, as a factual matter, this is correct.
The trustee is empowered by s.102 of the Act to admit or reject proofs of debt. Pursuant to s.104 of the Act a creditor may apply to the court for a review of the trustee’s decision in respect of a proof of debt. The function of the court in the present context is not to consider the correctness or otherwise of the trustee’s decision in the light of the material before the trustee, but to determine in light of the material before the court whether the debt should be admitted to proof: DK Rogers; Ex parte CMV Parts Distributors Pty Ltd (1989) 20 FCR 561 at 562-3. On all the material before the court the trustee was well entitled to reject the proof of debt lodged by Mr Slade. The court formed the distinct impression that the trustee will consider any further or amended proof that Mr Slade may lodge.
The claim as regards the Homebush property
Mr Slade claims an order that the net proceeds of sale of the Homebush property vest in him as a result of an equitable charge attaching to the sale proceeds because he provided the funds for the purchase of the property, and he maintained it.
The trustee contends that there is no evidence that Mr Slade provided moneys towards the purchase of the property such as to give rise to any claim for a resulting trust. If it is found that he did contribute moneys, the trustee contends for a presumption of advancement and that such monies were provided as a gift. It is submitted that the presumption is not rebutted. The trustee further contends that no constructive trust arises, and that the most likely scenario is in fact that Mr Slade loaned monies to Mrs Slade, but that the recovery of this loan is now statue barred.
Mr Slade gave evidence about this issue at paragraphs 12-24 of his affidavit sworn 18 April 2013. The property was purchased in Mrs Slade’s sole name. The purchase price was $115,000. He paid $57,000 using the proceeds of an inheritance from his late father’s estate. The balance of the purchase price was provided on vendor finance. He made the mortgage repayments using income from the business he conducted from the premises. At paragraph 19 he deposes to the following conversation with Mrs Slade:
19. Before buying the building at 72 Parramatta Road Homebush, I said to Roslyn words to the effect
“I am going to buy the building that the newsagency business is located at and I will use my inheritance to do that. I have spoken to the accountant and he has advised me that we should buy it in your name for tax purposes.”
She said, “I don’t have any money to contribute to buying the property”
I said, “I am going to borrow the rest of the money and I will make the mortgage payments. I need this property for the newsagency business and the accountant told me we should buy it in your name instead of mine for tax purposes.”
She said, “I don’t want to buy the property. It’s your business, this is what you want to do, you buy it in your name.”
I said, “Yes I want to buy it for me to carry out the business but the accountant said that it’s best if we buy it in your name.”
Mrs Slade gave evidence about this issue at paragraphs 51-81, and 107-124 of her affidavit sworn 19 June 2013. Her evidence is consistent with that of Mr Slade.
In cross-examination Mr Slade was given the opportunity to explain why, if he provided $57,000, the epitome of mortgage being a document dated 22 August 1986 shows that $85,000 was advanced to Mrs Slade which suggested that the shortfall would be about $30,000. Mr Slade’s evidence in this regard was both unresponsive and evasive. He was insistent it made no difference to his contention. He hypothesised, unconvincingly, that the money ‘might have been used for something else’ or ‘not all of it was used for the property’.
Mr Slade was then cross-examined about a proof of debt which was lodged in fact before the proofs of debt discussed earlier in these reasons i.e. a proof of debt lodged 4 November 2011, which became exhibit R2. In that proof he claimed $536,000 including half the mortgage payments referable to the Homebush property. Indeed in the proof he purported to claim a half interest in the said property. He could not explain the inconsistency between his present case, and that contended in this proof, other than to say “that’s what I was advised to do”.
Mr Slade was then cross-examined about the letter dated 17 December 2012 from his accountants, R C White & Co, which submitted to the trustee a spreadsheet and supporting documentation in aid of Mr Slade’s proof of debt. The letter states in part:
The supporting documentation should establish a trend that Leslie did lend Roslyn money to meet her obligation as required and the trend should also support the claims made in the original proof of debt claimed.
Mr Slade agreed the letter was sent on his instructions and that the supporting documents were provided by him. He agreed the proof claimed $363,000. He agreed that one of the items listed on the schedule was “02.7.84 deposit on 72 Parramatta Rd 30,000” and “02.7.84 Stamp duty on 72 Parramatta Rd 2,600”. His attention was then directed to point 4 of the letter, which states:
Les Slade inherited money from his father’s estate approximately 1980 to 1982 and from his mother’s estate on approximately 2010 and made various loans to Roslyn Slade to assist her with respect to legal and other debts.
When asked whether he agreed with what was represented in that part of the letter he was unresponsive saying that “I might not have had all the documents at the time.” It was put to him the monies he provided were a loan, including the $30,000 deposit. He denied this. He would not accept that his proof of debt was inconsistent with his present claim to being the beneficial owner of the property.
Mr Slade was cross-examined about paragraph 21 of his affidavit which states:
21. On or about late December 2001 I became concerned that Roslyn was not going to give me back my father’s inheritance or my interest in the Parramatta Road property. I say this because we had a discussion in which she said words to the effect,
“You are not getting any money from me and I am not giving you back your father’s inheritance.”
I said, “I bought Parramatta Road, you didn’t want to buy it, I have a big interest in the property.”
It was put to him that this was consistent with his belief in December 2001 that Mrs Slade was obliged to pay him back the money he provided. Mr Slade said he expected to get back much, much more due to capital gain and that “50% of the profit would go to him”. He expressed his entitlement from the property as “interest and capital gain”.
In cross-examination Mrs Slade was not very clear at all in her answers to questions. She tried to confirm the evidence she gave in her affidavit. She was unclear about how much was borrowed to buy the Homebush property. She agreed she was the sole mortgagor and was solely liable for the loan. She accepted that Mr Slade had provided some money that she was obliged to pay him when the property was sold. She agreed that she did say to Mr Slade what was attributed to her at paragraph 21 of his affidavit but sought to distance herself from this as she “was having a nervous breakdown” at the time.
On behalf of Mr Slade it was submitted that his claim to an equitable interest in the Homebush property is consistent with the caveat he caused to be lodged on the property. The court does not accept this submission. The interest claimed is “an equitable interest in the land pursuant to a constructive trust and/or pursuant to the provisions of the Family Law Act”. The facts asserted to support the claims were stated to be:
The parties were married on 21 June, 1972 and lived together until 20 December, 2000. The Caveator looked after and saw to the welfare of the registered proprietor and the children now aged 26 and 24. The husband worked during the whole of the marriage and his wages were included in the matrimonial assets.
The caveat is not consistent with a claim based on resulting trust. The claim based on the Family Law Act is plainly misconceived. No claim for a constructive trust is made on the evidence. The preponderance of the evidence leads to the conclusion that Mr Slade advanced certain monies to Mrs Slade in the expectation that it would be repaid to him at some time. Mrs Slade’s unfortunate bankruptcy has probably led both Mr and Mrs Slade to reconceptualise the arrangements into something that is more beneficial to Mr Slade now. That of course is impermissible. The loan or part thereof may well be statute barred but, insofar as it is not, the court formed the distinct impression that the trustee would entertain a proof of debt in this regard, properly supported by evidence.
There is no evidence to support Mr Slade’s claim as regards the Homebush property.
Removal of trustee
Mrs Slade relies generally on ss.178 and 179 of the Act in support of her claim that the respondent be removed as her trustee in bankruptcy. These sections state:
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.
179. Control of trustees by the Court
(1) The Court may, on the application of the Inspector-General, a creditor or the bankrupt, inquire into the conduct of a trustee in relation to a bankruptcy and may do one or both of the following:
(a) remove the trustee from office; and
(b) make such order as it thinks proper.
(2) The Inspector-General or a creditor may at any time require a trustee to answer an inquiry in relation to the bankrupt's estate or affairs.
The points of claim on which she relies are reproduced at paragraph 9 above in these reasons.
Mrs Slade’s first complaint relates to the manner in which the trustee took possession of the Homebush property. Mrs Slade’s evidence on this point is contained in her affidavit of 17 July 2013 filed by leave in court. She asserts that she occupied the Homebush property as at 9 May 2012 and 11 July 2012. She asserts that when she returned to the premises with Mr Slade on or about 11 July 2012 the locks had been changed. She asserts she had never been served with a notice to occupier or a statement of claim concerning possession. Mr Slade, in his affidavit of 17 July 2013, gives similar evidence. However he annexes 3 letters dated 11 April 2012, 9 May 2012 and 18 July 2012 from the trustee and the trustee’s solicitors to Mrs Slade and her accountant, addressed to the Homebush property, in which the trustee assert that the property is vested in him, that he wishes to sell the property, and that vacant possession is required.
No evidence was led by the trustee on this issue. On his behalf the submission made was that the correspondence attached to Mr Slade’s affidavit was unanswered, and the trustee formed the view the property was unoccupied so simply took possession by changing the locks.
It is significant to observe that Mrs Slade does not deny receiving the trustee’s letters addressed to her on 11 April 2012 and 9 May 2012. Clearly Mr Slade was in possession of those letters. The first sentence of paragraph 5 of his affidavit of 17 July 2013 confirms this. On all the evidence before the court, it seems no complaint was made about the trustee’s actions until 12 July 2013 when the Slade’s present solicitor wrote to the trustee about the issue and contended, in effect, that the trustee should have obtained an order for possession of the property first.
These facts provide no basis for removing the trustee. In Frost v Sheahan (Trustee) [2009] FCAFC 20 (27 February 2009) at [8] the Full Court adopted the following statement of principle:
| 8 | Neither party disputed the primary judge’s summary of the principles applicable to s 178 of the Bankruptcy Act at [34] of the reasons, which included the following: |
1. Section 178 confers a "supervisory jurisdiction over the conduct of the trustee": Cummings v Claremont Petroleum NL [1996] HCA 19; (1996) 185 CLR 124 at 132 per Brennan CJ, Gaudron and McHugh JJ. The section confers on the Court a very wide discretion: McGoldrick v Official Trustee in Bankruptcy [1993] FCA 636; (1993) 47 FCR 547 at 552-553. 2. It is not necessary for an applicant for relief under the section to show that the trustee’s decision was absurd, or unreasonable or taken in bad faith. The Court has a wide discretion to make such order as seems appropriate in the circumstances of the case: Re Tyndall; Ex parte Official Receiver [1977] FCA 15; (1977) 30 FLR 6 at 9-10; [1977] FCA 15; 17 ALR 182 at 186 per Deane J. At the same time, the Court will be slow to make orders which will have the effect of interfering in the day-to-day administration of a bankrupt’s estate and, in cases involving an exercise of business or commercial judgment, will place considerable weight on the trustee’s decision. Furthermore, a Court will not intervene under s 178 simply because the Judge forms a different view from that of the trustee. 3. An order may be made under s 178 even if the trustee’s decision was correct on the material before him, if, for example, additional material is put before the Court.
There is nothing in the evidence that would warrant any intervention by the court consistent with the principles identified by the Full Court. The delay in bringing this complaint, in circumstances where Mrs Slade was clearly on notice of the trustee’s intention to take possession but did nothing in response, entitled the trustee to form the belief that the property was unoccupied. The court has already expressed concerns about the evidence of Mr and Mrs Slade. Those concerns extend to this issue. It is by no means clear to the court that they were, in fact, living in the premises. This decision should not be regarded as the court condoning the trustee obtaining possession of premises forming part of the bankrupt estate without an order for possession, in the ordinary course. On the facts of this case, however, the court is not prepared to interfere with the trustee’s decision, or to remove the trustee under s.179. There is no misconduct of the trustee, let alone behaviour that warrants intervention so long after the fact; see Trkulja v Martin [2005] FCA659 per Gray J at [4]-[5].
The remaining concerns raised by Mrs Slade focus on the trustee’s interaction with the major creditor who is Mrs Slade’s mother, Irene Dobrinski, who is acting through her son Barry Goldman, Mrs Slade’s brother, pursuant to a power of attorney. Her complaint seems to be that the trustee has failed to investigate the exercise of the power of attorney by Mr Goldman, has failed to satisfy himself (in effect) that Mr Goldman’s instructions on behalf of Mrs Dobrinski are in fact Mrs Dobrinski’s instructions, has failed to facilitate the bankrupt’s communication with her mother, and has failed to facilitate a more consensual way of resolving the dispute between the parties.
Section 19 of the Bankruptcy Act describes the duties of the trustee, albeit in non-exclusive terms. The court cannot find anywhere in the statutory scheme created by the Act an obligation on a trustee to act as counsellor, comforter or facilitator of healing in the fractured relationships of those who are involved in the administration of a bankrupt estate. With great respect to Mrs Slade and those who advise her, and while recognising the strongly felt emotions she carries, it is not the trustee’s role to facilitate her communication with her own mother.
Does the trustee have a duty, however, to go behind instructions given to him by a creditor’s attorney? Does a trustee have a duty to, for example, question whether the donee of the power of attorney has a conflict of interest and is in fact acting to his own benefit rather than that of the donor? This proposition is clearly part of Mrs Slade’s contention in this case.
One difficulty in this case is that the Power of Attorney between Mrs Dobrinksi and Mr Goldman is not in evidence. Given that this issue is raised on behalf of Mrs Slade, the court is entitled to infer that if she had a copy it would have been presented in evidence. The necessary corollary of this must be that Mrs Slade does not know the express terms of Mr Goldman’s appointment and is hardly in a position, therefore, to question whether Mr Goldman is acting within the terms of his express or ostensible authority in instructing the trustee. Moreover, given the trustee’s express statutory duties, and duties to the court, the court is entitled to infer that he has satisfied himself both as to the existence of the Power of Attorney, and that the donee is acting within his powers whether express or ostensible. The trustee is a third party as regards the Power of Attorney. As such he is entitled to rely on the wording of the Power of Attorney, or the representations of the principal, and so long as he acts reasonably is protected by the doctrine of ostensible authority: Sweeney v Howard [2007] NSWSC262 at [56] per Windeyer J, endorsed as correct by Macfarlan JA (with whom Giles and McColl JJA concurred) in Siahos v JP Morgan Trust Australia Ltd [2009] NSWCA 20 at [27], cited in Powers of Attorney, dal Pont, LexisNexis Butterworths 2011 at 9.26.
A reasonable assumption to be made in this case is that as both Mrs Dobrinski and Mr Goldman are residents of NSW, that their Power of Attorney was made in NSW, and is governed by the Powers of Attorney Act 2003 (NSW). Section 26 of that Act provides that a review tribunal (which does not include this court) may, on the application of an interested person, and pursuant to s.36 of the Act, decide whether or not to review the making, or the operation and effect, of a reviewable power of attorney. This court is unable to comment on whether the power of attorney in question is reviewable, or whether Mrs Slade is an interested person. However, what is clear from the above is that if Mrs Slade has a remedy it may well be under that legislation, but not under the Bankruptcy Act by virtue of some creative application under ss.178 or 179.
There is no evidence before the court that would warrant the court’s intervention under either ss.178 or 179, in relation to the power of attorney and its exercise.
Mrs Slade complains that the trustee has not used mediation to attempt to resolve her concerns as regards the administration of her bankrupt estate. The evidence does not support her claim. It appears that her solicitor Mr Hall first wrote to the trustee on behalf of Mr Slade on 10 May 2013, and then on behalf of Mrs Slade on 17 June 2013. Mediation was suggested in the course of the correspondence. It should be noted, however, that Mr Slade’s application was filed on 19 April 2013, and Mrs Slade’s on 1 July 2013. The hearing came on very quickly. In these circumstances it is hard to see how the trustee acted inappropriately by not convening, or participating in , a mediation.
Mrs Slade’s final discernible complaint seems to be related to a claim she wishes to pursue against Mrs Dobrinksi, her mother, in the Common Law Division of the NSW Supreme Court, in which she claims damages arising out of the harm she suffered due to the abuse perpetrated against her by her late father, and which her mother did nothing about.
The trustee’s position at the hearing was that any such cause of action did not vest in him under s.58 of the Act as it was not property divisible amongst creditors under s.116(1)(g), it being a right of the bankrupt to recover damages for personal injury or wrong done to the bankrupt. The applicant agreed that this was the case. That being so there can be no basis for Mrs Slade’s complaint, and no case for the court intervening under ss.178 or 179 of the Act.
Insofar as Mrs Slade’s application seeks removal of the trustee, there is no basis for so doing on the evidence before the court.
It also logically follows from the above that there can be no basis for orders 2 and 3 sought by Mrs Slade in her application. Order 4 seeks a restraint on the trustee from seeking costs or reimbursement in defence of the present action. This will be discussed in the context of costs below.
Orders
Having regard to the matters set out above the applications filed by both Mr and Mrs Slade are dismissed.
Costs
There is no reason apparent to the court as to why costs should not follow the event in both claims. Both applications were entirely unsuccessful. There is no reason why the costs incurred by the trustee in defending Mrs Slade’s claim should not be costs of the administration of her estate. Both claims suffered from being claims that were hastily initiated, inadequately considered, and unsupported by the evidence.
I certify that the preceding fifty-nine (59) paragraphs are a true copy of the reasons for judgment of Judge Altobelli
Associate:
Date: 3 September 2013
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