FEDERAL COURT OF AUSTRALIA

Vasiliou v Marchesi [2005] FCA 1471

BANKRUPTCY – Application to remove trustee in bankruptcy – alleged failure of trustee to act in accordance with law – whether proper case for inquiry has been demonstrated – no evidence before the Court to justify removal

PRACTICE AND PROCEDURE – Motion to strike out application – application to have affidavits removed from court file

Bankruptcy Act 1966 (Cth) ss 178, 179

Wilson v Commonwealth of Australia [1999] FCA 219, followed

Turner v Official Trustee in Bankruptcy, unreported Full Court, 27 November 1998, applied

Macchia v Nilant (2001) 110 FCR 101, cited

ANDREW VASILIOU and VASILIKI APOSTOLOU vBRENDAN JOHN MARCHESI

VID 437 OF 2005

MARSHALL J

20 OCTOBER 2005

MELBOURNE

THE COURT ORDERS THAT:

1.         The substantive application is dismissed.

2.         The applicants pay the respondent’s costs of and incidental to the application.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     Mr Vasiliou is a bankrupt. Ms Apostolou is his wife. They are the applicants in the current proceeding. Tasiopoulos Lambros and Co are Mr Vasiliou’s former solicitors. They are the creditors who applied for the sequestration of his estate. Mr Marchesi is Mr Vasiliou’s trustee in bankruptcy. HSBC Bank Australia Limited is Mr Vasiliou’s former financier.

2                     In their amended application the applicants applied for relief in the following terms:

“1.       Removal of the Trustee Second Respondent Named in this prossidings.

2.         That an Order directing the Second respondent to remove the Caveat on 10 Claremont St South Yarra to allow the property to be refinances.

3.         That the property be return to Andrew Vasiliou or Vasiliki Apostolou for repair and maintenance and to be re-leased again.

4.         That a copy of the insurance policy to the subject property be made available.

5.         That all the rents held in trust by the trustee be release to pay for repairs to the building.

6.         That the Third named respondent HSBC Bank be ordered to place the bending sale of the property on hold until the re-financing takes place or until the outcome of this Appeal and to produce all valuations and other documentation to the applicants.

7.         That the First Named Respondent [Tasiopoulos Lambros and Co] pay all costs and looses resulted from all legal or other actions of that of the other respondents named in this Application.

8.         And any other Order that the Court feels fit to make or applied.

9.         Costs.”

3                     Each respondent applied to strike out the application as disclosing no cause of action and being frivolous and vexatious. The trustee and the bank applied by motion to that effect. The solicitor sought the same relief. I dispensed with the requirement that it file a motion.

4                     At the conclusion of the hearing on 14 October 2005, I ordered that the proceeding as against the solicitor and the bank be dismissed with costs. I so ordered because the application, being one under s 178 of the Bankruptcy Act 1966 (Cth), is not one in which orders can be made in respect of the conduct of any person other than a trustee in bankruptcy.

5                     I also ordered, on 14 October 2005, that the application be dismissed as against the trustee, except as to the relief claimed in paragraphs 1 and 9 of the amended application. I did so because none of the relief sought against the trustee (other than for his removal) related to any acts performed by him within 60 days of the commencement of the application, as required by s 178.

6                     I reserved my judgment on whether paragraphs 1 and 9 of the amended application should be struck out. I also amended the title of the proceeding such that the trustee remained the sole surviving respondent. I further deferred consideration of those aspects of the trustee’s motion which deal with an objection to answering a notice to produce and the removal from the Court file of affidavits containing allegedly scandalous material.

7                     The question for current determination is whether paragraph 1 (and consequently paragraph 9) of the amended application should be struck out. In that context, although the applicants made the application for removal under s 178, counsel for the trustee said the Court should treat it as if it had been made under s 179. Section 179 permits the Court to inquire into the conduct of a trustee in relation to a bankruptcy and empowers the Court to remove a trustee from office.

8                     The trustee contends that the application for his removal is untenable and has no prospect of success. He says that there is no admissible evidence in the proceeding which supports his removal. He further says that much of the affidavit evidence of Mr Vasiliou contains unsupported allegations of fraud and criminal activity.

9                     Mr Vasiliou submitted that the following aspects of the trustee’s conduct justifies his removal:

·                    the “failure to defend” proceedings in the High Court concerning Mr Vasiliou;

·                    the evicting of tenants from a property owned by Mr Vasiliou;

·                    the failure to properly insure the property;

·                    the lack of provision of documentation on request;

·                    the lack of impartiality, including collusion with other parties, and

·                    the exhibiting of an aggressive and dishonest attitude.

10                  In his affidavit filed on 11 May 2005, Mr Vasiliou asserted that the trustee had neglected a property at 10 Claremont Street, South Yarra and had placed pressure on the tenants to vacate the building in order to place pressure on Mr Vasiliou to settle with creditors. The affidavit does not add any further material to support what are bare allegations. In his affidavit of 24 March 2005, filed in an associated proceeding and relied upon in this proceeding, the trustee explained that he took steps to remove tenants from the property because of health and safety risks to those tenants. In the same affidavit, the trustee said that he had been unable, at that stage, to obtain building insurance for the property because of its derelict nature.

11                  In an affidavit filed on 17 May 2005, Mr Vasiliou asserted that the trustee interfered with the building’s tenants to try to cause him financial collapse. Again this issue did not rise above mere assertion.

12                  In submissions filed, by way of an affidavit bearing the date 14 October 2005, Mr Vasiliou asserted that the trustee had caused substantial intentional damage to his family trust and had abused his powers. In this context he referred to the discontinuance of a High Court application. No details are given and no basis is established for the formation of any independent judgment that there is something in this aspect of the trustee’s conduct which should be the subject of an inquiry.

13                  The submissions refer to aggressive conduct by the trustee without any particulars of that conduct or any statement why it justifies the trustee’s removal. The submissions also refer to the trustee’s refusal to provide Mr Vasiliou with information required by law, but no particulars are given of that allegation. In the course of his oral submissions, Mr Vasiliou said that he was not given a copy of an insurance policy. There is no evidence before the Court of such a request having been refused by the trustee.

14                  The allegations of impartiality, collusive conduct and aggressive and dishonest attitude are nothing more than unsupported utterances.

15                  In view of the above, there is no evidence before the Court which would justify it inquiring into the conduct of the trustee with a view to considering his removal. It is well established that the Court will not initiate an inquiry under s 179 unless it is satisfied that a proper case for an inquiry has been demonstrated; see Wilson v Commonwealth of Australia [1999] FCA 219 at [44] and the cases cited therein. See also Turner v Official Trustee in Bankruptcy, unreported Full Court, 27 November 1998 as cited in Macchia v Nilant (2001) 110 FCR 101 at 120. In this matter, I have no reasonable cause to believe (on the evidence before me) that the trustee may have failed to act in relation to Mr Vasiliou’s bankruptcy in a manner required by law.

16                  It follows that paragraphs 1 and 9 of the amended application should be struck out. That is the relief sought, in effect, in paragraph 1 of the trustee’s motion. Paragraph 2, which seeks that the trustee not be required to produce documents pursuant to a notice to produce, is now redundant. In paragraph 3 of the trustee’s motion, he seeks that the affidavits of Mr Vasiliou dated 11 May, 17 May and 2 June 2005 be removed from the Court file, pursuant to O 14 r 8 of the rules of Court, on the ground that they contain scandalous and oppressive material. If it becomes necessary to do so, I will hear the parties on whether that aspect of the motion is pursued. Perhaps the solicitors for the trustee will be content to write to the District Registrar of the Court to the effect that they wish to be heard on whether any non party should be granted access to those affidavits, if and when such a request is made. Any further hearing of that aspect of the respondent’s motion can be dealt with at a convenient future date. However, if no approach is made to my staff to list the matter for such purpose within 21 days, the file will be closed and that aspect of the motion will be treated as dismissed, without consideration of its merits and without further costs consequences.

Associate:

Dated:              20 October 2005