Weston v MILLER

[2016] FCCA 36

FEDERAL CIRCUIT COURT OF AUSTRALIA

WESTON v MILLER [2016] FCCA 36

Catchwords:
BANKRUPTCY – Application for a declaration that the trustee is the beneficial owner of real property and consequential orders – requirement for trustees to administer the bankrupt’s estate – no trustee error or misconduct –application appropriately made – orders made as sought.

Legislation:

Bankruptcy Act 1966, ss.19(1)(j), 19(1)(k), 58, 116, 179(1)

Bankruptcy Regulations 1996 (Cth), Schedule 4A, rr.2.13, 3.5

Cases:
Ferella v Official Trustee in Bankruptcy (No 2) [2011] FCA 619

Applicant: PAUL GERARD WESTON

Respondent: GAIL MILLER

File Number: MLG 1103 of 2014

Judgment of: Judge Hartnett

Hearing date: 13 October 2015

Delivered at: Melbourne

Delivered on: 13 January 2016

REPRESENTATION

Counsel for the Applicant: Mr Serong

Solicitors for the Applicant: Serong Legal

Counsel for the Respondent: Mr Zumeris

Solicitors for the Respondent: De Marco Lawyers

THE COURT DECLARES

That the Applicant is the beneficial owner of the land being the whole of the land contained in Certificate of Title Volume 09700 Folio 906 and Certificate of Title Volume 10890 Folio 528 (“the Land”) and being the land known as 16 Jacka Street, Essendon in the State of Victoria.

THE COURT ORDERS THAT:

1. The Respondent deliver up to the Applicant vacant possession of the Land within 14 days of the date of this order.

2. The Applicant have the sole conduct and control of the sale of the Land, and is authorised to make all decisions with regards to the sale including appointing a real estate agent, appointing solicitors to undertake the conveyance, choosing the method of sale, and setting the reserve price (if any) for any sale.

3. In the event that the Respondent fails to deliver up vacant possession of the Land in accordance with order 1 above a writ of possession shall issue forthwith in favour of the Applicant.

4. The Respondent at her own cost and expense must remove from the Land all vehicles, chattels and personal possessions on the Land and any rubbish on the land which has not vested in the Applicant (the “personal property”) within 14 days of the date of this order.

5. In the event that the Respondent fails to comply with order 4 above the Applicant is empowered to remove and dispose of the personal property as he thinks fit after 14 days have passed from the making of this order.

6. The Respondent has liberty to bid at any auction sale of the Land.

7. The proceeds of sale of the Land be disbursed as follows:-

   (a)first, in payment of all selling costs including agent’s commissions, advertising and marketing expenses and all conveyancing and legal costs associated with the sale and the Applicant’s realisation costs;

   (b)secondly in payment of the amount owing to any encumbrancer;

   (c)thirdly, the net remainder of the then available proceeds to be paid to the Applicant as trustee of the bankrupt estate of the Respondent.

8. The Applicant’s costs of this application be paid by the Respondent, to be taxed in default of agreement.

9. There is liberty to apply.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 1103 of 2014

PAUL GERARD WESTON

Applicant

And

GAIL MILLER

Respondent

REASONS FOR JUDGMENT

1. The Respondent was made bankrupt by a sequestration order of the Court made on the 19 February 2013. The substituted petitioning creditor was the Dental Board of Victoria. On the 19 February 2013 Jason Lloyd Porter and Paul Gerard Weston were appointed trustees of the bankrupt estate of the Respondent.

2. Order 1 of the orders made on the 10 August 2015 in these current proceedings removed Jason Lloyd Porter as an Applicant in the proceedings leaving Paul Gerard Weston as the sole Applicant and sole trustee of the bankrupt estate of the Respondent.

3. The Application before the Court is for a declaration that the Applicant is the beneficial owner of real property as contained in two separate Certificates of Title in which the Respondent’s interest has vested in the Applicant trustee under s.58 of the Bankruptcy Act 1966 (Cth) (“the Act”) and certain consequent orders. The final orders sought by the Applicant in paragraph A of the Application dated 16 June 2014 as amended orally in the conduct of the proceedings as to the inclusion of the second Certificate of Title, and the now single Applicant are as follows:-

   “1. A declaration that the Applicant is the beneficial owner of the land being the whole of the land in Certificate of Title Volume 09700 Folio 906 and Certificate of Title Volume 10890 Folio 528 (“the Land”) and being the land known as 16 Jacka Street, Essendon, Victoria, 3040.

   2. The Respondent deliver up to the Applicant vacant possession of the Land within 14 days of the date of this order.

   3. The Applicant have the sole conduct and control of the sale of the Land, and is authorised to make all decisions with regards to the sale including appointing a real estate agent, appointing solicitors to undertake necessary (sic) the conveyance, choosing the method of sale, and setting of the reserve price (if any) for any sale.

   4. In the event that the Respondent fails to deliver up vacant possession of the Land in accordance with order 3 (sic) above a writ of possession shall issue forthwith in favour of the Applicant.

   5. The Respondent at her own cost and expense must remove from the Land all vehicles, chattels and personal possessions on the Land and any rubbish on the land which has not vested in the Applicant (the “personal property”) within 14 days of the date of this order.

   6. In the event that the Respondent fails to comply with order 5  above the Applicant is empowered to remove and dispose of the personal property as he thinks fit after 14 days have passed from the making of this order.

   7. The Respondent has liberty to bid at any auction sale of the Land.

   8. The proceeds of sale of the Land be disbursed as follows:

   a) first, in payment of all selling costs including agent’s commissions, advertising and marketing expenses and all conveyancing and legal costs associated with the sale and the Applicant’s realisation costs;

   b) secondly in payment of the amount owing to any encumbrancer (if any);

   c) thirdly, the net remainder of the then available proceeds to be paid to the Applicant as trustee of the bankrupt estate of the Respondent.

   9. The Applicant’s costs of this application be paid by the Respondent, to be taxed in default of agreement.

   10. There be liberty to apply.”

4. The Applicant relies upon the Application filed together with an Affidavit sworn by Jason Lloyd Porter on 19 May 2014; a further Affidavit of Paul Gerard Weston filed 5 August 2015; a List of Documents sworn 4 August 2015; and Submissions filed 5 August 2015 and 7 October 2015. The Applicant further relies on the sworn affidavits of service in respect of service upon the Respondent of the following:-

   a)Application returnable on 9 October 2012;

   b)Applicant’s Genuine Steps Statement;

   c)Affidavit of J L Porter sworn 19 May 2014.

5. The Respondent relies upon a Notice Stating Grounds of Opposition and an Affidavit in support (sworn by her on 10 September 2015), both filed on the 11 September 2015. The Respondent also relies upon Submissions filed on 7 October 2015.

History

1. On or about 23 July 1986 the Respondent became registered as the sole proprietor of the real property at 16 Jacka Street, Essendon in the State of Victoria (“the Essendon Property”). The Essendon Property is contained in Certificate of Title Volume 09700 Folio 906 and Certificate of Title Volume 10890 Folio 528. This property has vested in the Applicant as trustee of the bankrupt estate of the Respondent under ss. 58 and 116 of the Act. The Applicant is entitled to be registered as the proprietor on both Certificates of Title on lodgement of a Transmission Application. The Respondent resides in the Essendon Property.

2. On 25 February 2013 the Applicant’s solicitors lodged at the Lands Title Office Victoria a caveat over one Title forming part of the Essendon Property being caveat No AK204127K. A further caveat was lodged against the second title forming the remaining part of the Essendon Property on 21 October 2014 when the Applicant became aware there were in fact two separate Certificates of Title comprising the Essendon Property.

3. On 27 May 2013 the Respondent filed with the Insolvency and Trustee Service Australia (now Australian Financial Security Authority) a Statement of Affairs as required by the Act.

4. On 2 August 2013 the Applicant issued a Report to Creditors. The dividend likelihood was said to be 100 cents in the dollar subject to further creditor claims being received into the estate. The timing of the dividend payment was said to be dependent on realisation of the Bankrupt’s interest in the Essendon Property. The Applicant’s estimate of unsecured creditors was $72,010. Included was the judgment debt of the Australian Dental Board of $27,770. The Applicant’s investigations disclosed relevant enquiries had been made. The professional costs of the Applicant were set out in paragraph 13 as being $13, 258.85 (including GST) for the period of 19 February 2013 to 31 May 2013. The Respondent thereafter challenged some of the estimated debts by correspondence to the Applicant.

5. On 13 November 2013 Serong Legal, Solicitors for the Applicant, wrote to the Respondent on Mr Porter’s instructions, one of the then trustees, concerning the Essendon Property to inform the Respondent of Mr Porter’s intentions and requirements concerning the Essendon Property. Previous correspondence had emanated from the trustees to the Respondent as to the administration of the bankrupt estate. The Respondent was invited to contact Mr Porter to put a proposal to acquire the then Applicants interest in the Essendon property or alternatively to discuss the proposed sale of the property by the then Applicants including the Respondent providing vacant possession to facilitate the sale. The Respondent was further informed that if she did not contact the then Applicants that legal proceedings would be commenced against her in the Court for orders requiring her to surrender possession of the property to the then Applicants as her trustees.

6. On 21 January 2014 Serong Legal again wrote to the Respondent on Mr Porter’s instructions concerning the Essendon Property and repeating Mr Porter’s intention to make application to the Court in the absence of agreement with the Respondent concerning the Essendon property.

7. No response was received from the Respondent in respect of the correspondence of 13 November 2013 and 21 January 2014. On the evidence before the Court the Applicant continued trying to engage the Respondent to avoid this present litigation and upon its commencement continued to explore with the Respondent whether other options were available to progress the satisfactory administration of the estate without the need to sell the Essendon Property. As one example, mediation commenced between the parties on 10 November 2014 and did not conclude until the 15 April 2015. No resolution was achieved.

8. The Essendon Property is subject to a mortgage in favour of Pepper Finance Corporation Ltd (“Pepper Finance”) being mortgage number AD777477M. The mortgage repayments are being made by the Respondent and Pepper Finance have not sought possession and sale of the Essendon Property. The Respondent disclosed in her Statement of Affairs that the amount owed to Pepper Finance was $310,000 and that repayments were up to date.

9. Mr Porter considered the median value of the Essendon Property to be a sum of $1 million and that such sum represented a fair current market value of the Essendon property as at 30 April 2014.

10. Mr Porter estimated the interest of the then Applicants as then trustees of the bankrupt estate of the Respondent, before making allowances for likely sale costs and legal expenses, to be in the vicinity of $690,000 calculated as follows:-

    Median value of Essendon Property  $1,000,000

    Less: Amount due under Pepper Finance Mortgage     ($310,000)

    Balance  $690,000

11. All of the evidence placed before the Court by both parties contained estimates of amounts claimed due to creditors by the Respondent, rather than actual amounts. No debts have been admitted or rejected by the Applicant to the present time save that the petitioning creditor’s claim is provable in the bankrupt estate. There has been no adjudication of the proofs of debt to the present time. No assets have been realised.

12. The Respondent in opposition relies upon ss. 19(1)(j), 19(1)(k) and 179(1) of the Act. There is no application pursuant to s.179(1) of the Act properly before the Court. This is a misconceived application. If there were such an application properly before the Court then it would not be successful as there is no evidence and no substantial grounds to form the basis of any such application and the broad discretion of the Court would not be exercised in the Respondent’s favour when looking to the relevant principles as set out in Ferella v Official Trustee in Bankruptcy (No 2) [2011] FCA 619 at [11] to [20]. Indeed there is much evidence that goes to the conduct of the Applicant in respect of the bankruptcy as being exemplary.

13. The Respondent also relies upon rr.2.13 to 3.5 of Schedule 4A of the Bankruptcy Regulations 1996 (Cth) which go to bankruptcies being administered in a cost effective, appropriate manner.

14. Whilst it is submitted by the Respondent that her bankrupt estate has not been properly administered and that breaches of the duties imposed upon her trustee by s.19(1)(j) and (k) of the Act have occurred, there is no evidence of any such contravention. No evidence exists to support any claim that the Applicant has acted with a lack of diligence and/or engaged in inappropriate conduct in the administration of the bankrupt estate. Unnecessary expense has sought to be avoided and the trustee has performed his functions in a commercially sound way.

15. There is substantial equity in the Essendon Property. No evidence was before the Court at trial that the Respondent’s debts outstanding had been either paid out in full, or reduced in quantum. The Respondent anticipated a payment by her of outstanding council rates with superannuation monies to be obtained by her. Mr Hobbs, a former Solicitor of the Respondent, had claimed a debt of $20,000; the petitioning creditor’s debt remained outstanding, and the Applicant’s costs and disbursements remained outstanding of by then in excess of $66,816.13. There were other claimed debts.

16. After a long period of time and much attempt at resolution the Applicant needs to be able to administer the Respondent’s bankrupt estate and have the creditors provable debt met out of the assets of the estate. The creditors are so entitled. There must be some finality. This application was made appropriately by the Applicant and in compliance with the Applicant’s obligation under the Act. The Court shall make the orders as sought.

I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of Judge Hartnett

Associate: 

Date: 13 January 2016