Yeo and Rambaldi v Francis
[2018] FCCA 3112
•1 October 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| YEO & RAMBALDI V FRANCIS | [2018] FCCA 3112 |
| Catchwords: BANKRUPTCY – Directions for trustees in bankruptcy – sale of property to satisfy bankruptcy – beneficiary of discretionary trust – declaration that trustees are justified. |
| Legislation: Bankuptcy Act 1966 (Cth), ss.30, 183 |
| Cases cited: Bufalo v Official Trustee in Bankruptcy (2011) FCAFC 111 |
| Applicant: | ANDREW REGINALD YEO & GESS RAMBALDI (IN THEIR CAPACITY AS JOINT & SEVERAL TRUSTEES OF THE BANKRUPT ESTATE OF LOUISE ELLEN FRANCIS) |
| Respondent: | LOUISE ELLEN FRANCIS |
| File Number: | MLG 492 of 2018 |
| Judgment of: | Judge McNab |
| Hearing date: | 1 October 2018 |
| Date of Last Submission: | 1 October 2018 |
| Delivered at: | Melbourne |
| Delivered on: | 1 October 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr P. Fary |
| Solicitors for the Applicant: | Gadens |
| Respondent in person |
ORDERS
The Court makes the following orders pursuant to ss.30 and 183 of the Bankruptcy Act 1966 and 90-15 of the Insolvency Practice Schedule (Bankruptcy) and provides directions with respect to the realisation of the Applicants’ (‘Trustees’) interest under the Will of the Deceased Estate of Dorothy May Francis in the following properties:
(a)102 Caroline Street, South Yarra (‘102 Caroline Street’); and
(b)104 Caroline Street, South Yarra (‘104 Caroline Street’).
The Court declares that the Trustees are justified and therefore acting reasonably in giving consent to the trustee of HL Spry Number 5 Trust to sell the property at 104 Caroline Street by itself and not to take any further action to compel the sale of 102 Caroline Street and 104 Caroline Street together.
The proceedings be listed for telephone mention in the Federal Circuit Court of Australia at Melbourne on 16 November 2018 at 4:15pm.
Costs be reserved.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 492 of 2018
| ANDREW REGINALD YEO & GESS RAMBALDI (IN THEIR CAPACITY AS JOINT & SEVERAL TRUSTEES OF THE BANKRUPT ESTATE OF LOUISE ELLEN FRANCIS) |
Applicant
And
| LOUISE ELLEN FRANCIS |
Respondent
REASONS FOR JUDGMENT
(DELIVERED EX TEMPORE – REVISED FROM TRANSCRIPT)
The bankruptcy of Louise Ellen Francis has a very long history and that is set out in a summary way in a chronology which has been prepared for the benefit of the Court by counsel for the Applicant. I note that a sequestration order was made on 25 July 2011 appointing Andrew Yeo and Gess Michael Rambaldi (‘the Trustees’) as Trustees. The matter has been before the Court in more recent times when the Trustees were in a position to accept an offer to pay out an amount to satisfy the bankruptcy. Negotiations were in place with the Respondent and her brother Mr Nicholas Francis, but those negotiations did not bear fruit.
An application was filed by the Applicant on 27 February 2018 seeking orders in the following terms:
1.Upon the provision by the Trustees of a certificate under section 153A of the Bankruptcy Act 1966 Commonwealth (the Act) within 21 days from the date of this order, the Trustees are released from the trusteeship of the bankrupt estate of Louise Ellen Francis pursuant to section 183 of the Act.
2.Such further or other orders as the court considers appropriate.
As stated earlier, the steps that were being taken to bring the bankruptcy to an end through negotiation by payment through
Mr Nicholas Francis did not bear fruit and the Trustees in bankruptcy are now seeking to sell properties which the bankrupt has an interest in. In particular, properties at 102 and 104 Caroline Street in South Yarra are the subject of these proceedings. The value of the 102 Caroline Street property is estimated to be approximately $7,983,760, and the 104 Caroline Street property has an estimated value of $5,990,810. Those estimations have been provided by Mr Paul Doherty who is the managing director of Australian Professionals Property Service.
An interim application was filed on 7 September 2018 and supported by an affidavit sworn 6 September 2018 by Mr Yeo. The application sought interim orders in the following terms:
On the grounds stated in the accompanying affidavit as described by the rules, the Applicants seek the following orders pursuant to sections 30 and 183 of the Bankruptcy Act 1966 and 90-15 of the Insolvency Practice Schedule:
1.Directions with respect to the realisation of the Applicant’s (Trustees) interest under the will of the deceased estate of Dorothy May Francis (deceased estate) in the following properties:
102 Caroline Street, South Yarra (102 Caroline Street); and
104 Caroline Sreet, South Yarra (104 Caroline Street – collectively the South Yarra properties).
The Applicants sought orders in alternative terms being;
2.a direction that the Trustees are justified and therefore acting reasonably in
(a)seeking the realisation of 102 Caroline Street and 104 Caroline Street together by,
(i) calling for a distribution in specie of the bankrupt’s interests with respect to those properties; and
(ii) seeking they are sold together by agreement or order of the Court (for example, under part IV of the Property Law Act 1958 Victoria,
or
(b)giving consent to the trustee of HL Spry Number 5 trust to sell the property at 104 Caroline Street by itself.
In the course of the proceeding before the Court today, the Trustees were seeking orders in the terms of (2)(b), being a direction that the Trustees are justified and, therefore, acting reasonably in giving consent to the trustee of the HL Spry Number 5 trust to sell the property at 104 Caroline Street by itself and not to take any further action to compel the sale of 102 and 104 Caroline Street together. The affidavits filed by the Applicant and relied upon for the purposes of this application are three affidavits of Andrew Reginald Yeo, sworn by him on 6 September 2018, 21 September 2018 and 1 October 2018. The affidavit sworn by Mr Yeo on 1 October 2018 exhibits correspondence passing between the Trustees and the Respondent. This correspondence is relevant to the valuation of the properties, the sale of the properties and the best option available to them.
The affidavit of Mr Yeo sworn on 6 September 2018 at [3] deposes to receiving an email from Mr Nicholas Francis, the Respondent’s brother and the trustee of the estate of Dorothy May Francis, attaching an advice from Richard Boaden of counsel dated 12 August 2018 (‘the Boaden Advice’). The email stated:
In light of the attached advice, are you content with the sale of 104 Caroline Street proceeding? I am aiming at 15 September 2018.
The Boaden Advice stated, among other things, that the trustee of the HL Spry Number 5 trust, ShineWing Pty Ltd, “can proceed to sell the property 104 Caroline Street and does not need to canvas [the Respondent’s] views, still less seek her consent before doing so.”[1]
[1] Affidavit of Andrew Reginald Yeo sworn 6 September 2018, ARY-1.
The Trustees sent an email to Mr Francis on 14 August 2018 at 12.05am confirming that he was agreeable to the proposed sale of
104 Caroline Street. Mr Yeo deposes at [6] of the 6 September 2018 affidavit that he became aware of an email from the Respondent sent at 6.19pm on 13 August 2018 which, amongst other things, requested a combined value of 102 Caroline Street and 104 Caroline Street and stated her belief that 102 Caroline Street and 104 Caroline Street should be sold together.
The Trustees have then repeatedly sought the views of Mr Francis as to whether he had considered the option of selling the properties together and he has steadfastly refused to consider that option. This is notwithstanding that he was provided with the advice of Mr Doherty dated 21 August 2018, which was in answer to correspondence from the Trustees seeking his opinion as to whether a greater price would be achieved if the two properties were sold together. Mr Doherty stated:
Points 2, 3 and 4 request opinions of value of the property separately and combined. A review of sales in the South Yarra area of properties zoned GRZ schedule 9 and over for the past 12 months reveal yields averaging at approximately $11,500 per square metre which would translate to $7,983,760 for number 102 and $5,990,810 for number 104. Upon considering the premium that would be attached by selling both properties together, I am of the view that a percentage of between 5 and 10 per cent of the aforementioned figures would be entirely realistic.
The response from Mr Francis is set out in an email to the Trustees dated 24 August 2018 sent at 10.11am which, omitting irrelevant parts, states:
Have now read it. What codswallop. How dare you be discussing 102 or 104. I have said 104 will be sold and you now offensively take that to mean that you will sell it. You have another thing coming. How dare you. Are you trying to offend me? I’m trying to accommodate you. I’m selling as executor, not you. I hope “Mr Doherty” is free because he’s certainly unnecessary. Get it?
Mr Francis has then sent correspondence to the Trustees indicating that he is keen to sell 104 Caroline Street and has threatened the Trustees if there is any delay in this occurring. In particular, in a letter of 3 September 2018 sent by email at 11:39, he wrote to Mr Yeo:
Dear Andrew,
I’m told there is a problem with me selling 104 Caroline Street. My understanding was that it has no problems. I’m told the problem is from your end. Nicholas Francis is quite is quite eager to sell 104 but he is not strapped for cash otherwise. Someone has to pay penalties for any delay in selling 104 Caroline Street. Please respond ASAP.
His next correspondence on 4 September 2018 at 1:02 am states:
Yeo, if you are going to frustrate execution of bankruptcy. Yeo is guilty of a criminal offence under the Act. How’s that!
Mr Francis has made absolutely apparent his objection to the sale of 102 and 104 Caroline Street as a parcel, notwithstanding that he has received advice from a real estate agent that a maximum sale price might be obtained by selling both properties together as opposed to separately, and in that regard I refer to a letter from the solicitors for the Applicant dated 15 August 2018 making this plain to him.
The Respondent is opposed to the sale of the property at
104 Caroline Street on its own and has urged that the application be adjourned to further investigate matters. In particular, the sale of one of the units in a block of flats at 57 Darling Road, South Yarra. She asserts that there are 24 units on the block and that she has an entitlement or an interest in nine of them.
The Trustees have sought to engage with the bankrupt in relation to the option of dealing with one or more of the units at
57 Darling Street, South Yarra in correspondence. The Trustees wrote to the Respondent on 5 February 2018 this year seeking her advice in relation to her interest in the properties in the apartment complex at
57 Darling Street. The letter provides (omitting irrelevant parts):
Dear Ms Francis,
I refer to previous correspondence regarding your bankrupt estate and in particular to my letter of 13 December 2017, copy enclosed, and note that I’m yet to receive a response.
As requested, please advise which units in the apartment complex at 57 Darling Street, South Yarra, you currently own or have beneficial ownership of. Please provide your response to my abovementioned letter by no later than the close of business on Friday, 9 February 2018.
There was a response sent from the Respondent by email on
13 August 2018 at 6.19 pm to Mr Hocking, a real estate agent, and Mr Stewart, an accountant of ShineWing Pty Ltd, which is the trustee of the property at 104 Caroline Street. That letter was also copied to Mr Rambaldi and Mr Boaden of counsel. The letter states:
To Greg and Colin,
I completely agree with the necessity to seek a sworn valuation of 104 Caroline Street as per previous discussions with Greg Hocking Holdsworth. Request that you also seek a sworn valuation of 102 Caroline Street to provide separate valuations as well as a combined valuation of the two properties you’ve sold together. My mother was fully aware of the commercial potential of the two properties if combined and always maintained the two should be sold together. Whilst 102 and 104 Caroline Street should be sold together at the same time to maximise the return, the appropriate property divider to the Trustees as previously instructed is 57 Darling Street, not 104 Caroline Street.
That letter was sent after the Trustees had sought a response, and in any case does not overcome the difficulties faced by the Trustees in seeking to sell a unit or units in 57 Darling Street and the difficulties faced if it chose to seek to sell both 102 and 104 Caroline Street notwithstanding the trenchant opposition of Mr Francis. It is a matter for Ms Francis to communicate with Mr Francis in relation to the units at 57 Darling Road, South Yarra, as to whether one of those units may be sold. This is because, as I understand it, the owner of the properties is a discretionary trust of which Mr Francis is the trustee.
There is no material before the Court to suggest that Mr Francis is behaving improperly in relation to the exercise of any discretion he may have as a trustee. I accept the submission of the Applicant that he is not a proper party to the proceeding, and there is no means to compel him to act in a particular way in relation to those units. However, there is the option available for Ms Francis to communicate with him either through herself or through her family and seek to prevail upon Mr Francis to sell one or more of the units that she may have an interest in, but it is not a matter for the Court.
The orders that are sought by the Applicant are appropriate. It may be the case that the sale of these two properties in Caroline Street together may realise a greater return to the owners; however, the option has been clearly provided to Mr Francis and he has rejected that option. To compel the sale of the two properties may involve the Trustees in further litigation in circumstances where the option has clearly been given to Mr Francis. The Trustees have done all that they can to negotiate with interested parties to bring an end to the bankruptcy either through an agreed position through the payment by Mr Francis or through the sale of properties. The Trustees have been threatened with proceedings by Mr Francis if they chose to take particular options.
It is in the interests of the parties to resolve the matter as best as can be done today by giving consent to the sale of the property at 104 Caroline Street on its own and not require the Trustees to take any further action to compel the sale of 102 and 104 Caroline Street together. In regards to the form of the orders, I accept the submissions by counsel for the Applicant, Mr Fary, that these orders are appropriate and in particular refer to the insolvency practice notes, with reference to Bufalo v Official Trustee in Bankruptcy [2011] FCAFC 111.
There is clearly property available to satisfy the debts. There are significant issues with adjourning the matter further. In particular,
Mr Francis has been vociferous in urging the Trustees to allow the sale of 104 Caroline Street.
The difficulty in relation to 57 Darling Street is that the Trustees have not identified any interest of the bankrupt estate in that property and note that the property was not listed in the bankrupt statement of affairs. The bankrupt has not responded to the Trustees’ written request for information regarding the property despite nominating it as a property that the Trustees ought to sell, and I refer to the letter of
5 February 2018 in that regard. Further, the property would appear to be an apartment block of approximately 24 apartments, and the title searches have revealed no apartments in the bankrupt’s name but several in the name of Mr Francis, possibly in his capacity as trustee of the LEF Trust, a discretionary trust.
In light of the very difficult circumstances faced by the Trustees, the orders that are sought, in particular order 2(b), are entirely justified in the context of this case.
I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of Judge McNab
Associate:
Date: 5 November 2018
0