Thomas v Tyler (No.5)
[2006] FMCA 1512
•4 October 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| THOMAS v TYLER (No.5) | [2006] FMCA 1512 |
| BANKRUPTCY – Where property vested in trustee as part of the bankrupt estate − where refusal of funding creditors to further fund the trustee − whether trustee can raise funds under s.134(1)(da) − whether trustee can borrow money on the security of the vested property in order to pay provable debts in the bankruptcy. |
| Bankruptcy Act 1966, ss.134(1)(da), 134(4) |
| Re Skender; ex parte Trevor (1996) 67 FCR 441 |
| Applicant: | GAVIN THOMAS |
| Respondent: | MICHAEL TYLER |
| File Number: | SYG1291 of 2004 |
| Judgment of: | Raphael FM |
| Hearing date: | 4 October 2006 |
| Date of Last Submission: | 4 October 2006 |
| Delivered at: | Sydney |
| Delivered on: | 4 October 2006 |
REPRESENTATION
| Counsel for the Applicant: | Mr S. Golledge |
| Solicitors for the Applicant: | The Argyle Partnership |
| Respondent: | No appearance |
ORDERS
Matter adjourned.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG1291 of 2004
| GAVIN THOMAS |
Applicant
And
| MICHAEL TYLER |
Respondent
REASONS FOR JUDGMENT
There comes before me today an application, under s.134(4) of the Bankruptcy Act 1966, for directions concerning the ability of a trustee to borrow monies on the security of a property that was vested in him as part of the bankrupt estate for the purposes of paying what appear to me to be provable debts in the bankruptcy. The debts referred to are discussed by the trustee in his affidavit sworn on 3 October 2006 and filed herein. They consist in the main of some outstanding interest charges in relation to an earlier mortgage of the property that was required in order to have it conveyed into the hands of the trustee, the anticipated costs of certain proceedings in which the trustee has been involved as a defendant in respect of certain cattle, the current agistment costs for those cattle and some other fees which will be necessary to pay prior to the property being sold.
The original application made by the trustee was for a sum considerably in excess of that which I am minded to allow, it covering costs of other proceedings successfully brought by the trustee.
This application by the trustee has been made following the refusal of certain previously funding creditors to further fund the trustee in relation to his administration of the estate, which refusal is understandable given the amount already put forward and the financial position of those funders.
An application of this type is unusual. Normally a trustee who is seized of property, but has debts to pay, will make arrangements for the earliest possible sale of the property. But in this case the sale of the property could not take place because although I made orders which had the effect of the property being transferred into the hands of the trustee on 29 March 2005, the proceedings were not concluded by way of appeal until a decision by the High Court declining special leave to appeal was given on 1 September 2006.
The bankrupt estate has no assets other than this farming property, which by all accounts has a value in excess of the amount the trustee was required to pay in order to have it transferred into his name and, given that farming properties are notoriously difficult to sell, an application to raise funds on the mortgage as permitted by s.134(1)(da) was to be expected. Indeed the trustee may have taken the view that he was entitled to do this without application to the court: Re Skender; ex parte Trevor (1996) 67 FCR 441.
To my mind the trustee is entitled to exercise caution in relation to his administration of this estate, it has not been an easy administration, and is entitled to ask the court for directions under s.134(4) that would have the effect of confirming that he was entitled under s.134(1)(da) to raise funds whilst leaving the amount raised and the purposes for that raising to some extent within his own responsibility. I say “to some extent” because I have considered the amount requested and have come to the view that at this stage the amount is too large. But having heard argument from Mr Golledge and evidence from Mr Lindsay-Johnston I have determined that an appropriate amount would be the sum of $111,500. I have advised Mr Golledge on behalf of the trustee that provided draft short minutes of order are sent with a letter to each known creditor, advising of my preliminary view and providing an opportunity for a party to object to my making the required declaration within seven days of the date of the letter, I would be minded to make the orders at the expiry of those seven days if there is no indication in writing or otherwise to the trustee’s solicitors.
The matter will be adjourned on that basis with a notation that in the event that no objections are made and I am requested to make orders in accordance with the draft short minutes those orders would indicate that the trustee’s costs of the application will be the trustee’s costs in the administration.
I certify that the preceding six (6) paragraphs are a true copy of the reasons for judgment of Raphael FM.
Associate:
Date:
0
1