Unal v Cetinkaya

Case [2015] FCA 270

FEDERAL COURT OF AUSTRALIA

Unal v Cetinkaya [2015] FCA 270

Citation: Unal v Cetinkaya [2015] FCA 270
Appeal from: Cetinkaya & Anor v Official Trustee in Bankruptcy & Anor and Unal v Official Trustee in Bankruptcy & Ors and Official Trustee in Bankruptcy v Cetinkaya and Ors
[2014] FCCA 1389
Parties: METIN UNAL v RECEP CETINKAYA, BAHAR CETINKAYA and OFFICIAL TRUSTEE IN BANKRUPTCY AS THE TRUSTEE OF THE ESTATES OF RECEP CETINKAYA AND BAHAR CETINKAYA
File numbers: VID 407 of 2014
VID 408 of 2014
VID 409 of 2014
Judge: BEACH J
Date of judgment: 27 March 2015
Catchwords: BANKRUPTCY AND INSOLVENCY – appeals from decisions of the Federal Circuit Court of Australia made pursuant to ss 134(4) and 178 of the Bankruptcy Act 1966 (Cth) – dispute between former bankrupts and current proprietor of property previously owned by former bankrupts over assignment of cause(s) of action vested in the Official Trustee – appropriateness of Official Trustee entering into proposed assignment – direction under s 134(4) to assign cause(s) of action to former bankrupts – review under s 178 of Official Trustee’s conduct – no error in law or fact established – appeals dismissed
Legislation: Bankruptcy Act 1966 (Cth) ss 30(1), 58, 77C, 121, 134, 178
Corporations Act 2001 (Cth) ss 424(1), 447D, 479(3)
Federal Court of Australia Act 1976 (Cth) s 25(1AA)(a)
Property Law Act 1958 (Vic) s 172
Transfer of Land Act 1958 (Vic) ss 42(1), 44(1)
Cases cited: Bufalo v Official Trustee in Bankruptcy [2011] FCAFC 111
Citicorp Australia Ltd v Official Trustee in Bankruptcy (1996) 71 FCR 550
Freeman v National Australia Bank Ltd [2004] FCAFC 318
Healey v Prentice (No 2) [2000] FCA 1598
Macchia v Nilant (2001) 110 FCR 101
Moore v Macks [2007] FCA 10
O'Brien v Komesaroff (1982) 150 CLR 310
Re Cirillo; Ex parte Official Trustee in Bankruptcy (1996) 65 FCR 576
Re Tyndall; Ex parte Official Receiver (1977) 17 ALR 182
Zaravinos v Houvardas (2004) 32 Fam LR 490
Date of hearing: 10 November 2014
Place: Melbourne
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 125
Counsel for the Appellant: Mr G T Bigmore QC with Mr T Elder
Solicitors for the Appellant: Tony Hargreaves & Partners
Counsel for the First and Second Respondents: Mr T J Sowden
Solicitors for the First and Second Respondents: Law 554
Counsel for the Third Respondent: Mr P Fary
Solicitors for the Third Respondent: Harris Carlson Lawyers

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 407 of 2014
VID 408 of 2014
VID 409 of 2014
ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA
BETWEEN:

METIN UNAL
Appellant
AND:

RECEP CETINKAYA
First Respondent

BAHAR CETINKAYA
Second Respondent

OFFICIAL TRUSTEE IN BANKRUPTCY AS THE TRUSTEE OF THE ESTATES OF RECEP CETINKAYA AND BAHAR CETINKAYA
Third Respondent

JUDGE:

BEACH J

DATE OF ORDER:

27 MARCH 2015

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1.The appeals in each of proceedings Nos VID 407, 408 and 409 of 2014 be dismissed.

2.The appellant…

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AGLC
Unal v Cetinkaya [2015] FCA 270
Case
[2015] FCA 270
Decision Date

CaseChat Overview and Summary

The Federal Circuit Court of Australia was asked to decide two appeals by the former bankrupts, Mr and Mrs Cetinkaya, against the Official Trustee, and by Unal against the Official Trustee, regarding the assignment of causes of action related to a property previously owned by the Cetinkayas. The central issue was whether the Official Trustee was appropriate in entering into a proposed assignment of the causes of action to the Cetinkayas and if there was any error in the Official Trustee's conduct in relation to this assignment. The court was also required to consider whether the Official Trustee's decision to assign the causes of action to the Cetinkayas was in accordance with the statutory provisions under the Bankruptcy Act 1966.

The court thoroughly examined the background and the timeline of events, noting the complex history of the property ownership and the financial dealings between the Cetinkayas, Unal, and the ANZ Bank. The court concluded that there was no established error in law or fact in the Official Trustee's conduct. The court found that the Cetinkayas' claims regarding the property transfer were not substantiated and that the Official Trustee had acted appropriately in managing the assets of the bankrupt estates. The court also determined that the assignment of the causes of action to the Cetinkayas was in line with the statutory framework and did not constitute an error.

In light of these findings, the court dismissed all the appeals. The Cetinkayas' appeals against the Official Trustee's decision to assign the causes of action were dismissed, as was Unal's appeal against the same decision. The court ordered that the appellants pay the respondents' costs of and incidental to the appeals. This decision underscores the importance of adhering to statutory procedures in the administration of bankrupt estates and the limited scope for judicial review of the Official Trustee's decisions.

Orders

Orders of the court

1. The appeals in each of proceedings Nos VID 407, 408 and 409 of 2014 be dismissed.

2. The appellant pay the respondents’ costs of and incidental to each of the appeals.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

For the reasons that follow, each of the appeals should be dismissed.BACKGROUND FACTS The background to the present appeals is protracted and convoluted. Her Honour set out a summary of some of the background facts in her reasons at [7] to [34] which I have substantially drawn upon and are not disputed, save for various allegations made by the Cetinkayas that I have identified as such. Each of the Cetinkayas are of Turkish extraction and neither read nor write in English. Mr Recep Cetinkaya speaks and understands some English, but Mrs Bahar Cetinkaya does not. On 18 September 1984, the Cetinkayas became joint proprietors of the property along with two others. On 3 July 1986, the Cetinkayas became directors and shareholders of Brunswick Motor Body Repairs Pty Ltd (ACN 006 598 358) (the company). The company operated a panel beating business from the property. From about 1994, the Cetinkayas were the sole registered proprietors of the property. On 10 May 1994, the Cetinkayas gave a mortgage over the property to the ANZ Banking Group Ltd (ANZ Bank). The mortgage secured, inter-alia, all moneys owed by them to the ANZ Bank on any account whatsoever. On 10 August 1994, they also gave a separate guarantee in favour of the ANZ Bank in relation to the indebtedness of the company and also a letter of acknowledgment confirming that the mortgage also secured their obligations under the guarantee. On 6 February 1996, ANZ Bank issued a demand to the Cetinkayas pursuant to the guarantee for the moneys owed by the company. On 14 May 1996, the ANZ Bank obtained judgment against the Cetinkayas for a debt of approximately $145,000 and for possession of the property. By letter dated 27 June 1996, the Sheriff required the Cetinkayas to vacate the property by 2 August 1996. The Cetinkayas claimed that they then sought assistance from an accountant, being Unal. The Cetinkayas claimed that from about 1993 to 2007, Unal acted as their accountant and financial advisor. On 1 August 1996, the Cetinkayas entered into a contract to sell the property to Unal for $131,000. The sale was settled on 11 December 1996. A transfer of land was registered on 31 December 1996 and Unal became the registered proprietor (the transfer). The mortgage to the ANZ Bank was discharged at the same time. Unal then gave a mortgage over the property to the Commonwealth Bank of Australia. The Cetinkayas have alleged that at that time, rather than transferring the property to Unal, they believed that a family trust had been set up with the property transferred to the trustee of that trust. They also alleged that the property was worth $300,000 at the time of the 1996 transfer. Each of the Cetinkayas became bankrupt pursuant to debtor’s petitions lodged on 14 October 1997. They filed statements of affairs allegedly with the assistance of their then solicitor, Mr Chiodo Madafferi. The Cetinkayas claimed that they were referred to Madafferi by Unal, and that their statements of affairs were completed with the assistance of Madafferi but without an interpreter. The Official Trustee was appointed trustee of each of their estates.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

In the first application, the Cetinkayas sought to review the conduct of the Official Trustee pursuant to s 178 of the Act. Section 178 provides: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. The Cetinkayas sought orders that, inter alia, the Official Trustee “assign to [the Cetinkayas] all its interest[s] in the causes of action as pleaded in… County Court proceeding CI-08-05385”. As I have said, that proceeding was commenced by the Cetinkayas against Unal seeking to set aside their transfer of the property to Unal on the grounds of fraud and mistake of fact. The transfer occurred prior to the Cetinkayas being made bankrupt on 14 October 1997. In support of their application the Cetinkayas filed affidavits of Bojana Balen (their solicitor) affirmed on 26 July and 3 December 2013, the affidavit of Recep Cetinkaya sworn on 6 December 2013, the affidavit of Bahar Cetinkaya sworn on 6 December 2013 and the affidavit of John Patrick Kennedy (Senior Case Manager at the Australian Financial and Security Authority) sworn on 15 January 2014. Unal relied upon the affidavits of Peter Anthony Brown (solicitor for Unal) sworn on 26 September and 10 December 2013. As I have said, the relevant cause(s) of action of the Cetinkayas against Unal vested in the Official Trustee at the time of sequestration. However, the Official Trustee was not made aware of the County Court proceeding until September 2009. As set out above, since that time the Cetinkayas and Unal have been in dispute about the assignability of the cause(s) of action by the Official Trustee and the conduct of the Official Trustee with respect to the assignment. In respect of this application, her Honour ordered that the Official Trustee assign to the Cetinkayas all its interest in the causes of action as pleaded in County Court proceeding CI-08-05385. Her Honour ordered, by way of consideration for such assignment, that in the event that the Cetinkayas were successful in pursuing their cause(s) of action, whether in that proceeding or new/substituted County Court proceedings, they were to pay to the Official Trustee out of the fruits of the cause(s) of action such sum as was required to pay in full all claims proved in their bankruptcies up to the limit of the recovery, minus their legal costs and the Official Trustee’s costs reasonably incurred in the administration of the bankrupt estates. The prosecution of the County Court proceeding was to be at the expense of the Cetinkayas.MLG 1946 of 2013 In the second application, Unal sought to review certain decisions of the Official Trustee under s 178 of the Act made in respect of the assignment.

Ratio Decidendi

Legal Principle Established

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