Turner, James George v Official Trustee in Bankruptcy (No 2)
[1997] FCA 1057
•8 SEPTEMBER 1997
FEDERAL COURT OF AUSTRALIA
BANKRUPTCY - property of bankrupt - application by debtor that Trustee not sell properties at appraised value - intimidatory and disruptive behaviour on part of debtor - whether Trustee acted reasonably in all circumstances to obtain best price for creditors - whether legal requirements that properties must be sold at auction - whether costs can be paid from debtor’s protected moneys.
Bankruptcy Act 1966 (Cth) s 178
Re: Tyndall (1977) 30 FLR 6
JAMES GEORGE TURNER -v- OFFICIAL TRUSTEE IN BANKRUPTCY (No2)
NO TG 7012 of 1997
HEEREY J
MELBOURNE (BY VIDEO LINK FROM HOBART)
8 SEPTEMBER 1997
IN THE FEDERAL COURT OF AUSTRALIA
TASMANIA DISTRICT REGISTRY
TG 7012 of 1997
BETWEEN:
JAMES GEORGE TURNER
APPLICANTAND:
OFFICIAL TRUSTEE IN BANKRUPTCY
RESPONDENTJUDGE:
HEEREY J
DATE OF ORDER:
8 SEPTEMBER 1997
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
The application be dismissed.
The applicant pay the respondent’s costs, and to the extent necessary these costs are to be paid out of the sale proceeds attributable to protected moneys.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
TASMANIA DISTRICT REGISTRY
TG 7012 of 1997
BETWEEN:
JAMES GEORGE TURNER
APPLICANTAND:
OFFICIAL TRUSTEE IN BANKRUPTCY
RESPONDENT
JUDGE:
HEEREY J
DATE:
8 SEPTEMBER 1997
PLACE:
MELBOURNE ( BY VIDEO LINK FROM HOBART)
REASONS FOR JUDGMENT
The debtor, James George Turner, applies under s 178 of the Bankruptcy Act 1966 (Cth) for an order that the Official Trustee in Bankruptcy not sell the debtor’s properties at Glen Huon in Tasmania for a sale price of $150,000. The properties in question are contained on five separate titles. There is a useful description contained of them in a valuation by Mr Charles Henty Lewis, a valuer retained by the debtor. Mr Lewis says:
“The topography of the subject property varies from gently sloping and undulating on the areas containing reasonable soils to divided and steeper areas on the balance of the property. There are pockets of good soils capable of seed potato production on three of the five titles. The property is located in a high rainfall district and experiences harsh winters due to the elevated location of 400 - 500 metres above sea level. Boundary fencing is old and generally serviceable with the exception of approximately 600 metres of roadside fencing, which has been partially covered by roadside works. This section of fencing is not stock proof. The property contains several old timber sheds in poor condition. They are not considered to add to the value of the property.”
Mr Lewis makes the following general comments:
“The highest and best use of the subject property is considered to be as five individual rural residential lifestyle blocks with the property subdivided along existing title boundaries. The property is not of sufficient size to constitute a viable rural property as a single unit. Small scale tree farming or seed potato production are considered to be its best use if sold as a single unit.”
As to the general condition of the market, Mr Lewis says:
“The marketability of the subject property, given the prevailing depressed economic conditions in the Huon is considered to be fair. “
The valuer who was consulted by the Official Trustee and who participated in the marketing of the property is Mr Hamish Colin Geoffrey Kyle. Mr Kyle says as to the general marketing situation:
“The marketing of rural and rural/residential properties is extremely difficult in Tasmania at present. The market could best be described at present as ‘fickle’. There is a very low demand for land without structural improvements unless for adhesion by a nearby owner. There is also a very low demand currently for properties distant from sealed roads and other services, such as these properties.”
Mr Kyle gave evidence and was cross-examined. I accept his evidence, which I should say I do not regard as necessarily inconsistent with the passages quoted from the valuation of Mr Lewis.
The history of the marketing of this property commences in June 1995 when Websters Limited provided the Official Trustee with an appraisal of the properties. The appraisal was as follows:
“Lot 1, $55,000 to $58,000
Lot 2, $35,000 to $40,000
Lot 3, $75,000 to $80,000
Lot 4, $20,000 to $25,000
Lot 5, $60,000 to $65,000”
The total of the separate appraisals was thus in the range $245,000 to $268,000. I should say immediately that more than a year later, in September 1996, Websters noted that their property division, particularly in the Huon region, had identified a reduction of at least 20 per cent in land values over the previous twelve months.
On 25 March 1996 I gave directions that the Official Trustee sell each of the parcels of the land. On 22 April the Official Trustee requested Websters to sell the properties. The Official Trustee encountered difficulties in transmitting the titles into his name. The debtor refused to deliver to the Official Trustee duplicate certificates of title in his possession in relation to two of the properties. A further difficulty was encountered by the conduct of the debtor in relation to the proposed marketing. The debtor handed to Websters’ office in the Huon a letter dated 4 July 1996 headed:
“To Whom it Should Concern - Especially Real Estate Agents.”
The letter made allegations of misconduct by the Official Receiver and included the following:
“Any real estate agent who offers this land for sale will immediately have me on the doorstep with a writ for aiding and abetting the Official Receiver in an invalid, fraudulent and bad at law bankruptcy and attempting to sell protected property of a bankrupt. If a writ is issued you will suffer a heavy loss. I am a qualified accountant and have excellent and accurate records. NOTE VERY CAREFULLY - the land the Official Receiver proposes to unlawfully sell is wholly protected property under the Bankruptcy Act. So if you want to get chopped up thru (sic) the courts with the Official Receiver - attempt to unlawfully sell my land in this unlawful and invalid bankruptcy.”
Websters reported this to the Official Trustee by letter of 9 July 1996 noting, amongst other things:
“We would be quite happy to attempt to sell the suggested Lot 5 or any part of the property. However, at this stage we feel we would be asking for trouble if we advertised in the newspaper or placed signs on the property. We have had several people who have expressed interest in the property as a whole, however are definitely not interested in portions as they do not wish to be a neighbour of Turner. I suggest you will agree with me that there is not a simple solution to this problem.”
By September the Official Trustee was able to finalise the transmission of all titles into his name. However, by a letter dated 9 September Websters advised they were not prepared to assist the Trustee in the sale of the properties. The Managing Director of that company advised that he was not able to assist further, given the debtor's threats of legal actions and intimidatory actions towards Websters’ staff. Accordingly, on 23 September, the Trustee retained D R Dickinson and Associates, registered valuers, estate agents and auctioneers.
By a letter of 30 October 1996 Mr Kyle of that firm gave an appraisal of the properties. The prices totalled from $160,000 to $175,000. The letter stated that the sale of several or all blocks as one would be discounted by up to 10 per cent. Applying that discount produces a total of $144,000 to $157,000. On 5 November the Official Trustee instructed Dickinsons to proceed to sell the five properties by individual public tender.
Mr Kyle and other personnel from Dickinsons’ office then proceeded to market the properties. They inspected the properties and obtained valuation information.
The properties were advertised in the Mercury on 14, 21 and 28 November and in the Tasmanian Country Newspaper on 15, 22 and 29 November. The former is the main Tasmanian daily. The latter is a newspaper which is sent free to farmers and is also available on sale in newsagents. The advertisement, which is seven cm by four cm, reads:
“For Sale - by Tender Sunnyhill Road - Glen Huon. Under instructions we offer 4 rural/residential blocks and one regrowth bush block of, BLOCK 1, 55.69 Ha; BLOCK 2, 10.78 Ha; BLOCK 3, 25.91 Ha; BLOCK 4,3.578 Ha, and BLOCK 5, 21.27 Ha. Block 2 is regrowth bush and the remainder are pasture and some bush. TENDERS CLOSE WITH THE AGENTS 3 pm Thursday, December 5, 1996.”
Then there is reference to another property at New Norfolk offered by another vendor, together with the name, address, and telephone number of Dickinsons.
By the close of tenders on 5 December 1996 only two tenders had been received. The first of these was from P F Mazengarb and B G Watson. Mr Watson owns land nearby. That offer was only for block 1 and was for $35,250, which was less than the appraised value. The other tender was from the debtor. It was for $300,000 for all lots. However, it was, to say the least, highly conditional. It was, as to $200,000, to be paid from the sale of antique furniture and paintings, and also from the sale of "protected money, cattle when fattened," and the remainder from what was said to be damages in some five separate legal actions, including an action against Dickinsons for "knowingly and fraudulently aiding and abetting Official Receiver in invalid and fraudulent bankruptcy."
After discussions with the Official Trustee, Dickinsons were instructed not to accept either tender. On 13 March 1997 Dickinsons received an offer to purchase the five blocks from a Mr Patrick Allan for $150,000. However, that offer was conditional on the purchaser entering the property before settlement and "making improvements", which on further inquiry turned out to include the spraying of the properties. The Official Trustee considered it was not appropriate to accept such an offer. On 8 May Mr Kyle contacted a Mr Johns of the company North Forest Products Limited. On 26 June that company offered $140,000 for all the properties. Mr Kyle recommended against acceptance of that offer and it was refused. Subsequently North Forest Products offered $150,000 and Mr Kyle recommended acceptance. The offer was duly accepted.
I am not satisfied that any of the criticisms of the Official Trustee's conduct have been sustained. In my opinion the Official Trustee acted reasonably in all the circumstances in discharging the duty that lay on him to get the best price obtainable for the benefit of the creditors. Those circumstances, I might add, included the disruptive and intimidatory conduct of the debtor himself. As to the general obligations on the trustee and the approach the court must adopt under section 178, I refer to what was said by Deane J, when a member of this Court, in ReTyndall (1977) 30 FLR 6 at 10.
The advertising of the property was certainly not lavish, but Dickinsons were given a limited budget of $500 by the Official Trustee. In fact they spent a few hundred dollars more than that. The spread of advertisements was likely to bring the properties to the attention of anyone in Tasmania who was in the market for rural property of this kind. It would have been possible, of course, to have fewer advertisements, but of a larger size, including descriptive prose flattering to the property. Whether such a campaign would have achieved any different result is doubtful in the extreme. In any event, the decision of the Official Trustee and his agents Dickinsons as to the appropriate marketing of these properties was a commercial decision. There is obviously often room for debate as to these matters and I am not persuaded that the course that was taken fell outside of what was reasonably open.
The price achieved is consistent with the initial appraisal that Mr Kyle made. It is not markedly different from the valuation of the debtor's own valuer Mr Lewis. There was reference in the course of evidence to some other individual properties which achieved a higher price. I do not think it is necessary to canvass that evidence in any detail. I accept what Mr Kyle said as to the differentiation of those properties, but in any event the critical question here is whether the trustee acted reasonably in all the circumstances and I am not satisfied that he did not.
Some other complaints of the debtor were that the amount of his claim for protected moneys were such that the creditors would not recover anything at all. On the Official Trustee's evidence that is not the case. The price of $150,000, after allowing for sale expenses and the Official Trustee's estimate of protected moneys which is a maximum of $28,000 will result in an estimated net surplus to creditors of $30,025. This is not the occasion to enter into debate over the true extent of the protected moneys. Whatever that amount be, the duty of the Official Trustee is still to get the best price available on the market for this property of the estate.
There was also a complaint by the debtor that the properties were not sold by auction. There was no legal requirement for the Official Trustee to take that course. The properties have to be advertised adequately. Whether an auction, or sale by tender, or an offer at a fixed price, is the most appropriate course is a matter for commercial judgment. I am not satisfied that there was any failure to take a proper course. For those reasons the application will be dismissed with costs.
Counsel for the Trustee sought an order that the costs of this application of the respondent be paid by the applicant and paid out of the sale proceeds attributable to protected moneys. I think such an order is appropriate. The essential feature of protected moneys is that they do not fall into the estate, they remain the property of the debtor to use as he sees fit for his own purposes. But by the same token if he chooses to bring an application such as the present one which I find to have been without merit, I do not see why property available to him in his personal capacity should not be available likewise to meet the costs of the Official Trustee incurred in opposing the application.
So I will order the costs of the respondent be paid by the applicant and to the extent necessary are to be paid out of the sale proceeds attributable to protected moneys.
I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey
Associate:
Dated: 8 September 1997
Counsel for the Applicant: P G Wood Solicitor for the Applicant: Piggott, Wood and Baker Counsel for the Respondent: The debtor appeared in person Solicitor for the Respondent: Date of Hearing: 8 September 1997 Date of Judgment: 8 September 1997
0
0
0