Thomas v Tyler - [2004] FMCA 864

FEDERAL MAGISTRATES COURT OF AUSTRALIA

THOMAS v TYLER

[2004] FMCA 864

BANKRUPTCY – Application under ss.120, 121 Bankruptcy Act – whether to appoint court expert to value the property subject to the application.

Federal Magistrates Court Rules 2001, r.15.09
Bankruptcy Act 1966 (Cth), ss.77, 120, 121

Applicant:

GAVIN THOMAS

Respondent:

MICHAEL TYLER

File No:

SYG1291 of 2004

Delivered on:

16 November 2004

Delivered at:

Sydney

Hearing date:

16 November 2004

Judgment of:

Raphael FM

REPRESENTATION

Counsel for the Applicant:

Mr B Skinner

Solicitors for the Applicant:

The Argyle Partnership

Counsel for the Respondent:

Mr R Marshall

Solicitors for the Respondent:

Purcell Insolvency Lawyers

ORDERS

Parties to bring in Short Minutes of Order for reference to expert and adjournment.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG1291 of 2004

GAVIN THOMAS

Applicant

And

MICHAEL TYLER

Respondent

REASONS FOR JUDGMENT

This proceeding which is a claim under ss.120 and 121 of the Bankruptcy Act 1966 (Cth) (the “Act”) involves two important issues requiring evidence. The first relates to whether or not the bankrupt was the person who transferred the property which it is now claimed should be returned to the trustee. The second is the value of that property, because if it was transferred at a market value then the provisions of those two sub-sections are not relevant.
Yesterday I heard evidence on the first matter from the trustee. I have not yet heard any further evidence either from the trustee's side or from the respondent about that but there was introduced into evidence the valuer who had prepared a number of valuations of the property at various times to speak about the value of the property at the time it was transferred.
Before the valuer could commence his evidence, Mr Marshall, who appears on behalf of the respondent, objected to the third of the three valuations (which I accept as the most relevant one) being introduced into evidence. Mr Marshall's objection to the valuation was on the basis that it provided no methodology whatsoever as to how the valuer had come to the figure that he suggested the property might be worth. Mr Marshall had prepared for his argument a set of written submissions which I had the opportunity of reading and which I considered to be both thorough and on point. I would have been disinclined to allow that evidence.
The next day Mr Skinner sought to tender a large number of documents which came from various sources on subpoena or in the process by which the trustee obtains documents under s.77 of the Act. The intended effect of Mr Skinner's tenders would be to admit, subject to some consideration about weight and certainly subject to the opportunity for Mr Marshall to cross-examine Mr Potter the valuer, both Mr Potter's valuations and some other valuations which had been obtained by the bankrupt and also by the respondent.
By noon on the second day of the hearing (noting that the afternoon of the first day of the hearing was not utilised for the purposes of this case because of the interposition of another case), I was faced with a very lengthy argument as to admissibility of documents prior to some more lengthy cross-examination of a valuer. Because I took the view that the evidence of value of this property is an essential integer of the establishment of the case under ss.120/121, I proposed that I should appoint a Court expert to provide a valuation of the property pursuant to Rule 15.09 of the Federal Magistrate's Court Rules 2001. This proposal of mine has been supported by Mr Skinner who appears for the trustee but is objected to by Mr Marshall who appears for the respondent.
Mr Marshall's objection is really this. He says Mr Skinner's side have not prepared their case as well as they might insofar as the valuation is concerned and they should not be allowed "off the hook" on this by my interposition of a court expert. Thus the matter can proceed in the manner in which it appeared to be going namely, that I should have to consider the admissibility of each of these documents and then might be left with a filleted valuation to which, hopefully for Mr Marshall's client, I would give little weight. Mr Marshall also provided me with a copy of an affidavit of the respondent explaining why he would be disadvantaged by a delay. The affidavit was prepared for the purposes of an anticipated application for an adjournment from Mr Skinner but I think it is equally relevant to my proposal.
I had considered that the appointment of a court expert would not require a full adjournment of the matter but having heard both Mr Marshall and Mr Skinner I am satisfied that it would not be in the interests of justice to force them to continue with the other limb of the case and that the matter should be adjourned. This approach therefore requires me to consider seriously Mr Tyler's affidavit.
Mr Tyler's affidavit indicates that an adjournment of the matter will cause him difficulties because it will prevent him from negotiating some changes to his holdings which would advantage him by providing him with better access to the land and at the same time allow him to dispose of some lots that may be surplus to his use. In that way he can repay some of his mortgage upon which he is paying interest at the rate of $5,800 per month. He also notes that he is primarily a potato farmer, has little assistance on the farm and that these proceedings have been a major distraction to him.
I accept all of this, although I note from the papers that I have seen that the property was purchased because Mr Tyler was required under his potato farming contract to have an area of land that was not being used to grow potatoes on so that in the event that disease occurred he would have an alternative supply or possibly a piece of land upon which potatoes could be grown disease free.
My main concern when considering the question of appointment of a valuer was that I do not consider these proceedings just to be proceedings “inter partes”. They are bankruptcy proceedings. There is a public interest in the outcome of these proceedings. If Mr Skinner is successful his client will have the benefit of additional funds to satisfy unsecured creditors of the bankrupt, that are not currently available. This is an important matter to take into account. It is doubtless the very reason why the trustee has bought the proceedings in the first place. I believe I am required to balance all the interests when coming to a decision such as the one that I have proposed.
It is to be hoped, although it is not necessarily required, that a valuation by a court expert will be accepted by the parties as a fair and true valuation of the land as at the date of the transfer. It would certainly give the court some confidence although of course the rules provide for the report to be the subject of cross-examination and other evidence if necessary. The current state of the valuations is not good. The range itself tells how difficult a decision I am faced with. The range is somewhere between the $635,000 paid for the land and $1,300,000.
In all the circumstances and, whilst not in any way deprecating the situation of the respondent, I am of the view that the appointment of a court expert and the adjournment of the case is the appropriate way to proceed.
I request that the parties bring in short minutes for the reference, the adjournment and the reservation of costs.

I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate:

Date: