Woods and Lombe as Trustees of the Bankrupt Estate of Barnes v Barnes (No.3)

[2018] FCCA 1974

FEDERAL CIRCUIT COURT OF AUSTRALIA

WOODS & LOMBE AS TRUSTEES OF THE BANKRUPT ESTATE OF BARNES v BARNES (No.3) [2018] FCCA 1974

Catchwords:
BANKRUPTCY – Application by bankrupt to set aside writ for possession – orders for sale of property by trustees in bankruptcy made as long ago as 2016 – prevaricatory conduct by bankrupt – court having no confidence bankrupt would properly co-generate in sale – application dismissed.

Legislation:

Bankruptcy Act 1966, s.153A

Cases cited:

Woods & Lombe (as Trustees of the Bankrupt Estate of Barnes) v Barnes [2016] FCCA 1792

Woods & Lombe (as Trustees of the Bankrupt Estate of Barnes) v Barnes(No.2) [2016] FCCA 2966

Applicant: ROBERT SCOTT WOODS AND DAVID JOHN FRANK LOMBE AS TRUSTEES OF THE BANKRUPT ESTATE OF LINDSAY HAROLD BARNES

Respondent: LINDSAY HAROLD BARNES

File Number: MLG 216 of 2016

Judgment of: Judge Burchardt

Hearing date: 28 June 2018

Date of Last Submission: 28 June 2018

Delivered at: Melbourne

Delivered on: 28 June 2018

REPRESENTATION

Counsel for the Applicant: Ms McCredden

Solicitors for the Applicant: White Cleland Pty Ltd

The Respondent: In person

ORDERS

(1)The Application be dismissed with costs.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 216 of 2016

ROBERT SCOTT WOODS AND DAVID JOHN FRANK LOMBE AS TRUSTEES OF THE BANKRUPT ESTATE OF LINDSAY HAROLD BARNES

Applicant

And

LINDSAY HAROLD BARNES

Respondent

REASONS FOR JUDGMENT

(Revised from Transcript)

1.

On 25 June 2018, the respondent, Mr Barnes, filed an Application in

a Case in which, relevantly, he sought an urgent hearing.  He also filed a number of other materials in the form of an Affidavit and

a Supplementary Affidavit together with certain annexures.  The Affidavit discloses that he has, as he put it, been thrown into the street, has nowhere to go, and in his attached documents, he asserts that

he won on appeal before Beach J, he was never insolvent and he intends to sell his home to get the money he needs.  If there’s a forced sale, he will lose at least $200,000.  He deposed to a car accident in 2017 and two bad accidents in 2017 when he fell over, and those matters, I should say, are fully supported by medical evidence annexed to the materials.

2.He went on to depose to his current financial situation.  He’s on an Age Pension of some $7,000 per annum.  He is owed money by Centrelink and has various other moneys that are due to come to him in due course.  He deposed to a possible return for work.  He also annexed correspondence from Jellis Craig, a firm of estate agents, which assert that repairs should be undertaken to add approximately $200,000 more to the value of the property were it to be sold.  These repairs would take some six months, and I note that the letter suggested it was desirable that Mr Barnes remain in the property pending sale for security reasons.

3.In the Supplementary Affidavit which largely repeats the first one, the applicant denotes three orders that he seeks:

“1.    Cancellation of the forcible removal of me from my house. 

I need to be here to supervise repairs.

2.    That I be allowed to carry out essential repairs as recommended by Jellis Craig.

3.    That I be allowed to sell the house in a way that maximizes the sale price ie by private sale or auction.”

4.When the matter came on this morning, Mr Barnes made his submissions.  He said he has been thrown into the street, but he is able to stay for a short period of time with some friends.  As he put it, that will not continue.  He has no suit and no access to any of his property.  He is prepared to have the house sold, but wants to undertake repairs.  He will lose $200,000 if not.  He has actually started repairs.  He has chosen a firm to replace the garage door.

5.He has been unable to do anything of recent times by virtue of the accidents to which I have referred, and his car has been destroyed.  He referred to his doctor’s statement which, as I have already indicated, does confirm that he had two serious accidents in 2017 through falls.  He hurt his back and was unable to work, but he is now recovering.  He will go back to work as an accountant.  He has a tax refund of $2,600 coming.  He will lose this $200,000 if the sale proceeds without repairs.

6.Beach J has decided that he should never have been bankrupt.  It was impossible to borrow enough money to pay the costs of the Trustees.  He was removed from the property last Monday, and his possessions remained in the property.

7.Ms McCredden for the Trustees confirmed that the warrant had been executed by the sheriff.  The Trustees are prepared to grant access to Mr Barnes to remove his property on reasonable notice.

8.Some work will be necessary with cleaners, and the Trustee has engaged real estate agents who will advise on any necessary repairs. They wish to clear the property. They suggest that the preferable source rather than applying Mr Barnes’ forthcoming funds to repairs would be for him to use this for his own sustenance. I note that it was posited that the matter eventually be resolved pursuant to s.153A of the Bankruptcy Act 1966 (“the Bankruptcy Act”).

9.In further submissions, Mr Barnes confirmed that he has nowhere to live.  He can’t rent through lack of funds.  He wishes to stay while repairs are carried out.  He pointed out that he did not see the orders made most recently in February 2018 until a couple of weeks ago, although I note that one of those orders required the Trustees to serve the orders by leaving them at the front door of the property in which Mr Barnes lives.

10.

The matter has a lengthy history in the Court.  As long ago as 20 July 2016, I made various orders which included that Mr Barnes provide vacant possession of the property to the applicant’s Trustees by

20 December 2016 and that he remove all his personal possessions that he wished to retain when that occurred.  In the substance of my ruling at [6], I stated – and I was dealing here with the matter before Beach J – His Honour concluded at [46]-[47]:

“If the current material had been placed before the Court at the time of sequestration order, I am not satisfied that section 52(2)(a) would then have been satisfied. 

It also follows that on that same material, Mr Barnes is not now solvent.  That would be a basis for refusing to exercise my discretion to annul the bankruptcy, even if the s.153(b)(1) condition was satisfied.  But I am able to deal with any question of a lack of solvency established by the present material by imposing a condition, as I will, that the annulment will only be effective upon the discharge or compromise of all debts which are still due and payable.  If Mr Barnes cannot discharge the condition there will be no annulment.”

11.At [9], I continued:

“His Honour went on, however, to find that it was appropriate to impose a condition to the annulment, namely, in effect, the payment out of the creditors and the reasonable costs of the trustees.  As his Honour had said at paragraph [66(b)]:

“…the condition is designed to enable Mr Barnes to do what he says he would have done at the time if the sequestration order had not been made.  He will now be given that opportunity.””.

12.At paragraph [17], I continued:

“The fact is that Mr Barnes was given an opportunity to put his affairs in order by Beach J, and did not take it.  His Honour’s orders were clear.  The bankruptcy has therefore not been annulled because Mr Barnes did not comply with the orders Beach J made.  There is no possible basis upon which Mr Barnes can resist the trustees’ application in this particular matter.  The trustee is required to realise the assets of the bankrupt estate for distribution to meet the creditors’ debts and the reasonable costs of the administration of the estate.”

13.On 11 November 2016, I ruled on an Application for Stay of the extant orders, and I note again at paragraph [4] that I said:

It is worthy of note that Mr Barnes has said on a number of occasions that Beach J accepted that he was solvent at the time that the sequestration order was made.  That is, in fact, not correct.  What his Honour actually said at paragraphs [46] – [47] was as follows:

“If the current material had been placed before the court at the time of the sequestration order, I am not satisfied that s 52(2)(a) would then have been satisfied.

It also follows that on that same material, Mr Barnes is not now solvent.”

14.As I indicated earlier, on 8 February 2018, I made orders that there be a writ of possession and provided ancillary orders for the disposition of Mr Barnes’ chattels.  The fact is that Mr Barnes is bankrupt.  That means that his property vested in his Trustees, and, indeed, the Trustees have been on title for some quite considerable period of time.  The loss of his home is extremely regrettable, but inevitable in these circumstances.  I have not read out passages in my earlier rulings which show the prevaricatory nature of Mr Barnes’ position from time to time, but it is strongly apparent that he has, at all times, simply delayed and failed to cooperate with the orders made for the sale of the property.

15.As I pointed out earlier, in 2016, the Trustee is required to sell the property and pay the creditors and the reasonable costs of administration of the estate.  The Trustee has indicated a preparedness to undertake any repairs recommended by the selling agent and permit Mr Barnes to remove his chattels on reasonable notice.  I have no confidence whatever that Mr Barnes would cooperate with the sale.  There is no basis on which to make the orders that he seeks.

16.The course of conduct embarked upon by the Trustees is entirely appropriate and has been, as it were, underway for the better part of two years.  It is obviously extremely regrettable that Mr Barnes’ current circumstances are as difficult as they are, but they have been brought upon himself by his own failure to conduct his affairs properly.  The application will be dismissed with costs.

I certify that the preceding sixteen (16) paragraphs are a true copy of the reasons for judgment of Judge Burchardt

Associate: 

Date:  28 June 2018