Vince as trustee of the Bankrupt Estate of Sopikiotis v Sopikiotis
[2016] FCCA 3260
•21 December 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| VINCE AS TRUSTEE OF THE BANKRUPT ESTATE OF SOPIKIOTIS v SOPIKIOTIS | [2016] FCCA 3260 |
| Catchwords: BANKRUPTCY – Application for directions pursuant to s.134(4) of the Bankruptcy Act 1966 (Cth) – multitude of proceedings involving the bankrupt –directions as to future matters. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.30, 134(4) |
| Cases cited: Bufalo v Official Trustee in Bankruptcy [2011] FCAFC 111 |
| Applicant: | PETER ROBERT VINCE AS TRUSTEE OF THE BANKRUPT ESTATE OF MARIA SOPIKIOTIS |
| Respondent: | MARIA SOPIKIOTIS |
| File Number: | MLG 1953 of 2016 |
| Judgment of: | Judge McNab |
| Hearing date: | 11 November 2016 |
| Date of Last Submission: | 21 November 2016 |
| Delivered at: | Melbourne |
| Delivered on: | 21 December 2016 |
REPRESENTATION
| Counsel for the Applicant: | Ms Gobbo of Counsel |
| Solicitors for the Applicant: | Maddocks Lawyers |
| Counsel for the Respondent: | Mr Fenwick |
| Solicitors for the Respondent: | Defteros Lawyers |
ORDERS
Pursuant to section 134(4) of the Bankruptcy Act 1966 (Cth) (“the Act”), and section 30 of the Act, the Trustee is justified in distributing the balance of the estate of the Bankrupt in accordance with items 9 and 10 of the Schedule annexed hereto.
Upon the making of the distributions, and the finalisation of the Trustee’s remuneration costs and expenses and payment of the same, the administration of the Estate is deemed concluded.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1953 of 2016
| PETER ROBERT VINCE AS TRUSTEE OF THE BANKRUPT ESTATE OF MARIA SOPIKIOTIS |
Applicant
And
| MARIA SOPIKIOTIS |
Respondent
REASONS FOR JUDGMENT
Nature of Application
By way of application filed 9 September 2016, the applicant seeks directions pursuant to s.134(4) of the Bankruptcy Act 1966 (Cth) (“the Act”), alternatively s.30 of the Act, that:
a)he is justified in distributing the estate of Maria Sopikiotis in accordance with the terms of his Affidavit and Schedule annexed thereto; and
b)upon the making of the distributions, and the finalisation of the Trustee’s remuneration costs and expenses and payment of same, the administration of the Estate is deemed concluded.
The application is supported by affidavits of Peter Robert Vince, the Trustee, sworn 9 September 2016, 10 November 2016 and 18 November 2016.
At [3] of the applicant’s Outline of Submissions filed 21 November 2016, it was noted that Maria Sopikiotis, the Bankrupt, is not the respondent or a party to the proceeding with no application or cross application filed by the Bankrupt in respect of the Trustee’s Application, either seeking to be joined or any other form of relief. Nor does the Bankrupt have any applications or proceedings on foot in respect to the Trustee and the administration of her Estate. Of particular note is that the Bankrupt also brought no application pursuant to s.178 of the Act to challenge any of the Trustee’s decisions and such an application is now out of time.
Ms Sopikiotis has opposed the orders sought by the applicant and has filed submissions dated 9 November 2016 and 15 November 2016. Mr Fenwick of Counsel appeared for the applicant on 11 November 2016 and made submissions on that day and filed subsequent written submissions. The bankrupt also filed an affidavit sworn 7 November 2016.
Background
This matter has a considerable history. On 5 July 2011, in the
Federal Magistrates Court (as it then was), Registrar Caporale made a sequestration order against the estate of Maria Sopikiotis and Peter Vince was appointed the Trustee of the Bankrupt Estate. The court had evidence of his appointment being a ‘Certificate of Appointment of Trustee’ dated 7 July 2011.Mr Vince gave evidence that on 21 April 2010, the Victorian Civil and Administrative Tribunal (“VCAT”) ordered that the Bankrupt pay Owner’s Corporation RP 017740 the sum of $28,326.97. Mr Vince gave evidence that the Owner’s Corporation were the petitioning creditor at the hearing on July 2011 when a sequestration order was made. He also gave evidence that he had conducted investigations into the affairs of the Bankrupt in order to ascertain, amongst other things, creditor’s claims and the existence of any possible assets owned by the Bankrupt that may be able to be realised for the benefit of creditors.[1]
[1] Affidavit of Peter Vince sworn 9 July 2016 at [8]
On 11 November 2011, Mr Vince wrote to the Bankrupt and requested, amongst other things, that the Bankrupt furnish a completed Statement of Affairs (“SOA”) (which he stated he had been requesting since July 2011) and a duplicate Certificate of Title to property owned by the Bankrupt located at 2A Trafalgar Road Camberwell in Victoria. He gave evidence that the Bankrupt did not comply with either of his requests.
On 21 February 2012, Mr Vince commenced proceedings in the Federal Court of Australia against the Bankrupt seeking relief under s.30 of the Act seeking orders:
a)requiring the Bankrupt furnish a completed SOA;
b)requiring the Bankrupt to deliver up to him the duplicate Certificate of Title to the property;
c)requiring the Bankrupt to give vacant possession of the property; and
d)granting a warrant of possession in the event that the Bankrupt failed to give vacant possession.
The application was heard by Bromberg J and on 7 May 2012,
His Honour ordered that the Bankrupt furnish a complete statement of affairs on or before 21 May 2012 (which Mr Vince deposed the Bankrupt failed to do and instead filed a substantially incomplete SOA on 10 July 2013).[2] On 21 November 2012, Bromberg J made further orders which required the Bankrupt to deliver to the Trustee a duplicate title to the property.[2] Affidavit of Peter Robert Vince sworn 9 September 2016 at [13]-[18]
On 10 December 2012, the Bankrupt filed a notice of appeal against the further orders of Bromberg J, made on 21 November 2012. Thereafter, there has been a very significant number of applications made by the Bankrupt or applications arising from the conduct of the Bankrupt which are summarised in the applicant’s outline of submissions in the following terms:
5. The Estate has a long and complex history. Essentially, it involved a straightforward proceeding[3] brought by the Trustee for orders to compel the Bankrupt to complete a Statement of Affairs (SOA) and deliver up the duplicate certificate of title to the Property located at 2A Trafalgar Road, Camberwell (Property), which proceeding was subsequently met with a multitude of entirely unsuccessful proceedings, applications and appeals by the Bankrupt, as follows:
[3] VID 145/2012; paragraphs 12 to 20 of Trustee’s First Affidavit.
(a)An application to stay Justice Bromberg’s orders made in VID 145/2012 heard by Justice Tracey on 20 December 2012;[4]
[4] Paragraphs 21 to 22 of the Trustee’s First Affidavit.
(b)An appeal against the decision of Justice Bromberg in VID 145/2012 which was heard and dismissed by the Full Court on 27 February 2013;[5]
[5] Paragraphs 24 to 25 of the Trustee’s First Affidavit; Exhibit PRV-9.
(c)An application to stay the Full Court’s decision, which application was dismissed by Justice Kenny on 18 April 2013;[6]
(d)An application to review the sequestration order, which application was dismissed by Federal Magistrate Burchardt (as he then was) on 22 February 2013;[7]
(e)An application for leave to appeal the decision of Federal Magistrate Burchardt, which application was heard by Justice Kenny and dismissed on 18 April 2013;[8]
(f)An application in the Supreme Court to review the order of VCAT which gave rise to the Bankruptcy Notice, which application was heard by Associate Justice Lansdowne and dismissed on 10 August 2012;[9]
(g)An application in VCAT that was never served on the Trustee;[10]
(h)An application in the Federal Circuit Court that the Trustee be removed, that his caveat over the Property be removed and that he be restrained from taking any further steps in the administration of the Estate. This application was uplifted to the Federal Court and heard by Justice Gordon who dismissed the Bankrupt’s application on 17 June 2013;[11]
(i)An application to for an injunction to restrain the warrant issued pursuant to the orders of Justice Bromberg, which application was heard by Justice Jessup and dismissed on 5 September 2013;[12]
(j)An application to stay the orders of Registrar Pringle, which application was also heard and dismissed by Justice Jessup on 10 September 2013;[13]
(k)An application to review my conduct and remove me as Trustee issued in the Federal Circuit Court, which application was heard by Judge O’Dwyer and dismissed on 26 September 2013;[14] and
(l)An annulment application filed in the Federal Circuit Court, which application was heard by Judge O’Dwyer and dismissed on 11 October 2013.[15]
[6] Paragraphs 28 to 29 of the Trustee’s First Affidavit; Exhibit PRV-10.
[7] Paragraphs 30 to 32 of the Trustee’s First Affidavit; Exhibit PRV-11.
[8] Paragraphs 33 to 36 of the Trustee’s First Affidavit; Exhibit PRV-13.
[9] Paragraphs 37 to 38 of the Trustee’s First Affidavit; Exhibit PRV-14.
[10] Paragraphs 39 to 40 of the Trustee’s First Affidavit.
[11] Paragraphs 41 to 49 of the Trustee’s First Affidavit; Exhibits PRV-15 and PRV-16.
[12] Paragraphs 50 to 54 of the Trustee’s First Affidavit; Exhibit PRV-18 and PRV-19.
[13] Paragraphs 55 to 60 of the Trustee’s First Affidavit; Exhibit PRV-23.
[14] Paragraphs 61 to 62 of the Trustee’s First Affidavit; Exhibit PRV-24.
[15] Paragraphs 63 to 64 of the Trustee’s First Affidavit; Exhibit PRV-25.
Relevant Law
Section 134(4) of the Act provides that:
(4)The trustee may at any time apply to the Court for directions in respect of a matter arising in connexion with the administration of the estate.
Under this provision of the Act, a Trustee is entitled to seek directions from the court in respect of a matter arising in connexion with the administration of the estate. However, there is no general rule that a court is obliged to give such directions when they are sought by a Trustee.[16]
[16] Re Driller [1972-73] ALR 735
The above section should be read together with s.30(1) of the Act which provides that:
(1) The Court:
(a)has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court; and
(b) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.
The proper subject of “directions” is the manner in which a Trustee is to discharge his functions so as to protect him from liability to a creditor for breach of duty: Re Weber [2006] FCA 636.
In relation to proper subject of “directions”, the Full Court of the Federal Court said in Bufalo v Official Trustee in Bankruptcy [2011] FCAFC 111:
The proper subject of “directions” is the manner in which a trustee is to discharge his functions so as to protect him from liability to a creditor for breach of duty: Re Weber [2006] FCA 636, 154 FCR 80. Finn J there relevantly observed:
[2]While s 134(4) of the Act empowers a trustee to seek directions “in respect of a matter arising in connexion with the administration of the estate”, it is well accepted that the Court is not for that reason obliged to give the directions sought: Re Driller (1972) 21 FLR 159. The proper subject of directions, in my view, is the manner in which a trustee should act in carrying out his or her functions as such: cf Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 at 679. Their proper effect, if full disclosure has been made to the Court of the material facts, is to protect the trustee from liability to a creditor or a bankrupt for a breach of duty of office for things done in accordance with the directions: see generally the decision of Sackville J in Re Sutherland (In the Matter of Scutts) [1999] FCA 147 at [9] ff. The s 134(4) procedure is not of itself an appropriate vehicle to determine the substantive rights of creditors as against a trustee in bankruptcy or creditors amongst themselves: Scutts at [14]; see also Re Lofthouse (2001) 107 FCR 151 at [9].
In Donnelly (Trustee), in the matter of Hancock v Porteous [2002] FCA 607, Stone J had also said:
[17]Section 134(4) of the Act provides that a trustee may at any time apply to the Court for directions “in respect of a matter arising in connexion with the administration of the estate”. The Court is not under an obligation to give such directions; it is a matter for it to decide in the exercise of its discretion; Re Driller (1972) 21 FLR 159. It is however settled that the Court will not give an advisory opinion in the form of a direction; Willoughby v Official Trustee in Bankruptcy [2001] FCA 1345. It is also said that the duty of the judge on a petition for advice is to advise the trustee on questions of law, but not to tell him how to exercise discretionary powers vested in him; In the Will of Osborne (1863) 2 SCR (NSW) Eq 89.
The applicant submits that it is an appropriate matter for the Trustee to seek a direction from the court and refers in particular to the long background of, what it regards, as time wasting obfuscatory applications that have unnecessarily caused the Trustee to incur costs and incur expenses in responding to them.
The Bankrupt filed detailed submissions prepared by Mr Fenwick of Council. The submissions are helpful as it puts into stark relief the sum of the superficially troubling aspects of this matter in relation to the costs that have been incurred.
It notes that the Trustee is seeking a declaration to the effect that it is justified in distributing this estate in accordance with the schedule attached to his application. That schedule reveals that the Trustee:
a)has received $944,316.22 into the estate (item 2);
b)has paid remuneration, costs and expenses (including his own remuneration of $169,768.60 and legal fees of over $300,000 totalling $808,151.95 (item 3 to 8 inclusive);
c)proposes to incur further costs of over $55,000 to complete the administration (largely made up of further remuneration and legal fees) (item 10); and
d)proposes to admit to proof unsecured creditors totalling $111,493 and to pay them a dividend of $0.73 in the dollar from the remainder of the funds in the estate (item 9).
The identification of quantification of the unsecured creditors was made by Mr Vince consequent upon the failure of the Bankrupt to provide details in her statement of affairs of any unsecured creditors with the exception of the petitioning creditor.[17]
[17]Affidavit of Peter Robert Vince sworn 9 September 2016 at [73] – [79]
Much of the litigation instituted by the Trustee in this matter arises from the failure on the part of the Bankrupt to file a Statement of Affairs. The Bankrupt submits that in relation to the question of whether a bankrupt’s failed to file an SOA, if no SOA is filed, leave of the court may be obtained under s.146 of the Act to pay dividends, despite there being no list of creditors that the SOA provides:
Rambaldi v Thake[2007] FCA 847.
It is said that the pre-requisite to consideration of whether an order under s.146 of the Act should be made, is that the subject SOA is so defective in the quantity and quality of information, that it can be regarded as invalid for the purposes of s.54 of the Act, or such that can be said that the Bankrupt has “failed” to file an SOA: Nichols v Geekie [2007] FMCA 1576 at [49] – [50]. In relation to the orders sought pursuant to s.134 of the Act, the Bankrupt submits that the directions are not to be sought to determine the substantive rights of creditors as against a Trustee or about creditors amongst themselves, or in respect of factual disputes: Re Lofthouse (2001) 107 FCA 151; Re Sutherland (In the Matter ofScutts [1999] FCA 147).
It is said that if directions are sought and given, it can only usefully serve to protect the Trustee from liability to a creditor or a bankrupt for a breach of duty in relation to things done in accordance with the directions: Re Weber (2006) 154 FCR 80. It is submitted that the directions are only relevant to in relation to future matters and cannot be used as a mechanism to correct previous issues or deficiencies. It is submitted (by the Bankrupt) that the Court cannot direct the Trustee.
It is submitted at [12] of the Bankrupt’s supplementary submissions that the court cannot direct the Trustee in relation to previous issues which it defines as money received and spent in the administration to date, being items [1] – [8] inclusive of the schedule. The previous issues include the expenditure of about $470,000 and Trustee remuneration and legal fees.
In response to these particular matters raised by the Bankrupt, the Trustee has submitted and/or confirmed that the directions sought by the Trustee are only in respect of costs and expenses proposed to be incurred to finalise the estate, being those amounts referred to in Item 9 and Item 10 of the Schedule marked exhibit “PRB – 32” to the affidavit of Peter Vince sworn 9 September 2016. Having regard to that clarification, that the force of the submission in relation to the previous issues (being costs incurred up to date) referred to at [23] above, have fallen away. The Court may make effective directions in relation to Item 9 and Item 10 of the Schedule.
In relation to the submission made by the Bankrupt that the proper course for the Trustee to follow in the face of the failure on the part of the Bankrupt to file a SOA, was to make application under s.146 of the Act. The Trustee submits that it was not appropriate to make such an application because in the present case, a SOA was filed by the Bankrupt and ultimately accepted by the official receiver.[18] It notes that that SOA that was accepted by the official receiver did not comply with the order of Justice Bromberg, nor did it differ substantially from an earlier SOA filed by the Bankrupt and previously rejected by the official receiver. However, the SOA was accepted by the official receiver. It said that in those circumstances, the application pursuant to s.146 of the Act was not the appropriate course and referred to the decision of Nichols v Geekie.[19] There was a real risk that the Court would find in line with that decision that the Bankrupt had not failed to file an SOA, even though it was defective in form.
[18] The Trustee’s First Affidavit [16] – [18]
[19] [2007] FMCA 1576, op. cit. at [49]-[50]
The other basis for which the Bankrupt challenges the making of directions, is that the calculation of the Owners Corporation Certificate being exhibit “PRV-43” of the affidavit of the Trustee sworn 10 November 2011, does not make arithmetical sense and does not properly explain the debt said to be owing to the corporation. The other based challenges are that the Owners Corporation costs are not clear. The particular matters raised by the Bankrupt in relation to the calculation of the Owners Corporation fees are set out at [24] of the Bankrupt’s submissions:
24. The Trustee’s evidence is confusing in relation to the calculation of the subject fees. This is because:
(a)the Trustee says that he paid $99,616.34 to the Owners Corporation, that sum comprised of individual components adding to over $125,000;
(b)the Trustee states his belief, without stating the basis for that belief, that “levy arrears” of $95,816.34 include “the judgment amount and interest obtained by the Owners Corporation against the Bankrupt as set out in the Proof of Debt exhibited at ‘MS-2’ to the Sopikiotis Affidavit”;
(c)the judgment referenced by the Trustee is an order of the Victorian Civil and Administrative Tribunal made on 21 April 2010 in the total sum of $28,326.97;
(dorders of the Victorian Civil and Administrative Tribunal are enforceable only via registration in an appropriate court;
(e)accordingly, the Owners’ Corporation registered its judgment in the Magistrates’ Court at Melbourne on 26 May 2010;
(f)the Trustee has not put the Magistrates’ Court order into evidence;
(g)the Proof of Debt of the Owners’ Corporation, dated 9 September 2011, claims $74,535.02 and makes no reference to the Magistrates’ Court order;
(h)without comment (other than in relation to the identification of the subject property), the Trustee has put into evidence a document styled “Owners Corporation Certificate”;
(i)the Owners Corporation Certificate, which states that it is “issued on 1 November 2013”, provides that the “present fees for the above Lot are $3,800 per annum for the year commencing 01/05/12 paid quarterly” and that the total outstanding is $95,816.34; and
(j)a document styled “Settlement Statement” (undated) is annexed to the Owners Corporation Certificate and provides for a payment to the Owners’ Corporation of $99,616.34 (being the $95,816.34 referred to in the Certificate together with a further $3,800).
The Trustee’s response was that the debt, further fees and administration costs of the Owners Corporation are all set out in the certificate which was the subject of the evidence of Mr Vince. I accept that the evidence of Mr Vince adequately sets out the debt, further fees and administration costs of the Owner’s Corporation, in particular his affidavit of 10 November 2016.
Conclusion
The Bankrupt has made comments about the costs incurred in the bankruptcy. In the present case, I am not in a position to make any concluded findings in relation to the costs that have been incurred and I accept the submissions of the applicant that the proper treatment of the previous costs is one that can be dealt with pursuant to the legislative scheme. That course may be available to the Bankrupt. The applicant has made numerous applications where she has challenged the conduct of the Trustee and as noted by Justice Gordon in Maria Sopikiotis v Vince (Trustee)[2013] FCA 592 at [17]:
…In all of the judgments given to date (in the Federal Court, the Full Court of the Federal Court, the Federal Magistrates’ Court (as it was then known) and the Supreme Court of Victoria) there has been no suggestion, let alone a finding, that Mr Vince has acted improperly in administering the bankrupt estate of Ms Sopikiotis.
Given the submissions that were filed on behalf of the applicant wherein he clarified that he was not seeking any direction in relation to previous costs and expenses incurred, but seeking directions in relation to the future expenses, in order that the administration of the bankrupt estate could be finalised. In my view, it is appropriate to give the directions that are sought subject to the concession made by the applicant. I accept the evidence of Mr Vince of the basis for the estimation of costs and expenses to be incurred (referred to in Item 10 of the Schedule).
I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of Judge McNab
Date: 21 December 2016
ANNEXURE
| 9. PROOFS OF DEBT TO BE ADMITTED | TOTAL | ||
| Unsecured Creditor | Admitted claim $ | ||
| ACM Group | 869.00 | ||
| ANZ Banking Corporation | 30,474.00 | ||
| ANZ Banking Corporation | 3,529.00 | ||
| Citigroup | 19,162.00 | ||
| St George (C/- Creditcorp) | 18,142.00 | ||
| Commonwealth Bank of Australia (C/- Creditcorp) | 18,430.00 | ||
| National Australia Bank (C/- Creditcorp) | 16,219.00 | ||
| HSBC | 4,668.00 | 111,493.00 | |
| 10. COSTS TO COMPLETE | |||
| Description | Amount $ | ||
| Realisations charges for year ending 30 June 2017 | - | ||
| Interest charges for year ending 30 June 2017 | 11.08 | ||
| Remuneration (inclusive of GST) up until 31 August 2016 | 305.80 | ||
| Provision for future fees and disbursements (inclusive of GST) | 27,500.00 | ||
| Provision for legal fees (inclusive of GST) | 27,500.00 | 55,316.88 | |
| DIVIDEND TO UNSECURED CREDITORS | 0.73 | ||
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