FEDERAL COURT OF AUSTRALIA

Ramsay (Trustee) v Upson [2016] FCA 1546

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to r 26.01(1)(e) of the Federal Court Rules 2011 (Cth) the first applicant have judgment against the first respondent for the whole of his claim.

2.    Pursuant to r 26.01(1)(e) of the Federal Court Rules 2011 (Cth) the first applicant have judgment against the second respondent for the whole of his claim.

3.    Pursuant to s 30 and s 77 of the Bankruptcy Act 1966 (Cth), the respondents vacate Lot 259 on Registered Plan 118026 in the County of Stanley, Parish of Mackenzie (title reference 14250003) located at 73 Timor Avenue, Loganholme in the State of Queensland, within 21 days of the date of the Order.

4.    Pursuant to s 30 and s 77 of the Bankruptcy Act 1966 (Cth), the respondents vacate Lot 260 on Registered Plan 118026 in the County of Stanley, Parish of Mackenzie (title reference 14250004) located at 71 Timor Avenue, Loganholme in the State of Queensland, within 21 days of the date of the Order.

5.    In the event that the respondents fail to give vacant possession of the property referred to in paragraphs 3 and 4 of these Orders in accordance with these Orders, pursuant to r 41.10 of the Federal Court Rules 2011 (Cth) a writ of possession issue forthwith.

6.    The first respondent pay the first applicant’s costs of and incidental to the application to be taxed on a party and party basis.

7.    The second respondent pay the first applicant’s costs of and incidental to the application to be taxed on a party and party basis.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

COLLIER J:

1    Mr and Mrs Upson are bankrupts. On 7 July 2016 the trustee in bankruptcy of their estates (who, for convenience, I will term “the trustee”) filed an originating application against them, pursuant to which he sought the following orders:

1.    Pursuant to sections 30 and 77 of the Bankruptcy Act 1966 (Cth), an order that the Respondents vacate Lot 259 on Registered Plan 118026 in the County of Stanley, Parish of Mackenzie (title reference 14250003) located at 73 Timor Avenue, Loganholme in the State of Queensland, within 21 days of the date of the Order.

2.    Pursuant to sections 30 and 77 of the Bankruptcy Act 1966 (Cth), an order that the Respondents vacate Lot 260 on Registered Plan 118026 in the County of Stanley, Parish of Mackenzie (title reference 14250004) located at 71 Timor Avenue, Loganholme in the State of Queensland, within 21 days of the date of the Order.

3.    An order that, in the event that the Respondents fail to give vacant possession of the property in accordance with those Orders, pursuant to rule 41.10(2) of the Federal Court Rules 2011 (Cth), a writ of possession may issue forthwith.

4.    The Applicant’s costs of this proceeding be paid out of the bankrupt estates of the Respondents, with priority.

5.    Such further or other orders as the Court considers appropriate.

2    On 11 August 2016 I ordered that personal service on Mrs Upson with the originating application be dispensed with in circumstances where the trustee had endeavoured to effect service on numerous occasions and it appeared that Mrs Upson was eluding service.

3    On 6 September 2016 the trustee filed an interlocutory application against Mr and Mrs Upson seeking summary judgment against them in respect of originating application. The orders sought by the trustee were:

1.    That, pursuant to Order 26.01(1)(e) of the Federal Court Rules 2011, the first applicant have judgment against the first respondent for the whole of his claim;

2.    That, pursuant to Order 26.01(1)(e) of the Federal Court Rules 2011, the first applicant have judgment against the second respondent for the whole of his claim;

3.    That the first respondent pay the first applicant’s costs of and incidental to the application against him to be taxed on a party and party basis;

4.    That the second respondent pay the first applicant’s costs of and incidental to the application against him to be taxed on a party and party basis; and

5.    Such further or other orders as to the Court seems appropriate.

4    The trustee filed written submissions in respect of the interlocutory application and was represented by Counsel. Mr and Mrs Upson did not file written submissions, however they both appeared at the hearing of the interlocutory application, and Mr Upson made oral submissions on behalf of them both.

5    Before turning to the interlocutory application before the Court it is helpful to summarise the background facts.

BACKGROUND

6    Most of the background facts are not in dispute.

7    On 12 September 2007 the State of Queensland commenced proceedings in the Supreme Court of Queensland against Mr Upson seeking (materially) restraining orders under s 28(3)(a)(iii) and s 31(1) of the Criminal Proceeds Confiscation Act 2002 (Qld) (the Confiscation Act) in respect of Mr Upson’s property. The Supreme Court of Queensland made orders on 27 September 2007 (and subsequent dates) restraining Mr Upson from dealing with his property other than his pension and rental income.

8    On 24 February 2015 the Supreme Court gave judgment against Mr Upson in those proceedings and ordered him to pay the State of Queensland the sum of $954,450.73, being the adjudged value of the proceeds derived from illegal activity, under s 78 of the Confiscation Act.

9    Mr and Mrs Upson executed debtor’s petitions under s 55(2) of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act) on 5 March 2015 and 13 March 2015 respectively. The trustee, Mr Ramsay, was appointed trustee of each estate in bankruptcy. At the date of the trustee’s appointment, Mr and Mrs Upson owned, as joint tenants, real property including that located at 71 and 73 Timor Avenue, Loganholme in the State of Queensland (the Timor Avenue properties).

10    Following the decision of the Supreme Court, the State filed an application for forfeiture of the property of Mr Upson pursuant to s 56 of the Confiscation Act. In a letter dated 1 May 2015 from the Director of Public Prosecutions (the DPP) to the lawyer for the trustee the DPP said that:

    The restrained property of Mr Upson was available to satisfy the proceeds order of 24 February 2015.

    The bankruptcies of Mr and Mrs Upson would not impede enforcement action by the State of the proceeds order as the restrained property did not vest in the trustee in bankruptcy in light of the operation of s 58A(1) and (2) of the Bankruptcy Act.

    The trustee would have an interest in any enforcement proceeding to the extent that any property not required to satisfy the proceeds order would become subject to sequestration upon the satisfaction and consequent discharge of the proceeds order.

11    It appears that on 1 June 2012 Mr Upson had filed an application pursuant to s 65(2) and s 58 of the Confiscation Act seeking orders that certain property (including the properties at Timor Avenue) be excluded from forfeiture.

12    Mr Upson’s bankrupt estate has a net deficiency of approximately $1.3 million and Mrs Upson’s bankrupt estate has a net deficiency of approximately $2.15 million.

13    It also appears that during the second half of 2015 negotiations took place between Mr and Mrs Upson, the State of Queensland, and the trustee. These four parties executed a deed of settlement on 14 January 2016. In written submissions, Counsel for the trustee summarised this deed as follows:

10.    By a Deed of Settlement dated 14 January 2016 (“the Deed”), the State of Queensland, the Trustee, and the Upsons agreed that, conditional upon the Supreme Court making orders, inter alia, releasing the restrained property and dismissing the applications for forfeiture and exclusion; the real property subject of the restraining orders would vest in the Trustee and, upon payment by the Trustee to the State of Queensland of the Proceeds Assessment Order from the net proceeds of the sale of that real property, the State of Queensland released the Trustee and the Upsons from all claims and the Upsons released the Trustee and the State of Queensland from all claims: (cl.8.3 and 8.4)

“of whatsoever nature [they] may have against any of them in respect of, or connection with the matters of and incidental to the Proceeding, the Recitals and the Property of the Trustee, the Estate of Mr Upson, the Estate of Mrs Upson, Mr Upson and Mrs Upson whether arising at common law, in equity, or under statute or otherwise.”

14    Mr and Mrs Upson did not dispute the accuracy of the trustee’s summary of the deed of settlement.

15    On 17 February 2016 A Lyons J of the Supreme Court of Queensland made consent orders releasing identified property from restraint pursuant to s 256A of the Confiscation Act. This property included the Timor Avenue properties.

16    By letter dated 29 February 2016 the trustee wrote to Mr and Mrs Upson requesting vacant possession of the Timor Avenue properties. Materially this letter was as follows:

NOTICE TO VACATE – 71-73 TIMOR AVE, LOGANHOLME

We confirm we act for Mr Hugh David Ramsay as trustee of the property of Robert James Upson and Sheryl Joy Upson, Bankrupts (the Trustee).

As you would be aware and pursuant to s 58 of the Bankruptcy Act 1966 (Cth), upon acceptance of your debtor’s petitions all your divisible property vested in the Trustee. That divisible property includes the right title and interest in the property located at 71-73 Timor Ave, Loganholme, Queensland (the Property).

Accordingly, the Trustee hereby gives you notice that:

1.    it intends to sell the Property with vacant possession;

2.    you must vacate the Property by midnight, Monday 14 March 2016 (the Due Date);

3.    the Trustee is giving you two weeks’ notice to vacate on the condition that, while you remain in the Property, you must do all things and acts necessary to co-operate with and show goodwill to the selling agent, Ray White Loganholme. This includes, but is not limited to, allowing the agent to inspect the Property, take photographs and erect signage;

4.    the Trustee reserves any rights it has to evict you from the premises prior to the Due Date if you fail comply with condition 3.

Please provide us with a written response confirming your receipt of this letter and acknowledgement of the above.

17    To date, and despite demands from the trustee, Mr and Mrs Upson have refused to deliver up vacant possession of the Timor Avenue properties to enable those properties to be sold for the benefit of their creditors.

SUBMISSIONS OF THE PARTIES

18    Mr and Mrs Upson filed no written submissions. However a number of affidavits affirmed by Mr Upson were filed in these proceedings, and Mr Upson made oral submissions at the hearing referable to that evidence.

19    On the other hand from written and oral submissions the case of the trustee is clear, and may be summarised as follows:

    The Court has power to make an order that Mr and Mrs Upson vacate the Timor Avenue properties.

    The trustee has a prima facie entitlement to possession of the Timor Avenue properties.

    The Court should make a practical judgment about whether Mr Upson has any real prospect of making out his case at trial.

    Mr Upson has asserted in evidence that his ownership of the Timor Avenue properties derives from accident compensation payments in New Zealand, which is protected money, however:

○    there is no documentary evidence in support of Mr Upson’s assertions;

○    given that Mrs Upson is a joint owner of the property, at most Mr Upson can only claim protected status in respect of half of the property;

○    in any event, this claim of Mr Upson falls within the release and discharge the subject of the deed of settlement.

    Mr Upson also asserted that the deed of settlement is void for duress on the part of either (or both) the trustee and the State of Queensland, however:

○    any allegedly coercive conduct of the trustee should be viewed in its totality;

○    Mr Upson informed the trustee on 10 December 2015 that both he and Mrs Upson were “happy to sign without advice from a lawyer. We do not under any circumstances want to incur more costs. We don’t want it to go to court we want to sign”;

○    any pressure placed on Mr and Mrs Upson to sign the deed of settlement falls well short of illegitimate;

○    Mr and Mrs Upson took no step to repudiate the deed of settlement until the trustee took steps seeking vacant possession.

EVIDENCE RELIED ON BY MR AND MRS UPSON

20    The affidavits upon which Mr and Mrs Upson relied were as follows.

Affidavit filed 22 August 2016

21    In this affidavit Mr Upson deposed, in summary:

    He had a very serious industrial accident on 6 August 1978 and began to receive weekly payments from 13 December 1978.

    He received a lump sum payment of $14,000 from “Accident Compensation Corporation” (ACC) as well as continuing to receive weekly payments.

    He used some of the $14,000 as a deposit to purchase a property in New Zealand.

    In 1987 he borrowed $40,000 from the Heritage Building Society using his ACC payments as proof of income. Every second week he would withdraw ACC money from the automatic teller machine and use it to pay his mortgage, which as he recalled was under $100 per week.

    He also collected golf balls and sold them back to various clubs as this money paid for their day to day living expenses and enabled him to use the ACC money on the mortgage.

    He lost a considerable amount of money in the 1987 share market crash.

    On 1 September 1987 he and Mrs Upson sold their New Zealand property and used the profit on the property to buy the Timor Avenue properties.

    In one year 1993 to 1994 he received a total of $83,332.18 from ACC.

    In 1997 the mortgage on the Timor Avenue properties was discharged.

    He and Mrs Upson were refused legal advice from Mr Ramsay in relation to the deed of settlement.

    Mr Ramsay pressured Mr and Mrs Upson to sign the deed of settlement. Mr Ramsay told Mr Upson that the DPP was “playing hard ball and wanted to fire sale all our assets but he did not inform me that he was going to do the same and take away all my rights”.

22    A number of documents were annexed to this affidavit. Despite an attempt by Mr Upson to identify them in a schedule, his identification is frequently incomplete. So far as I can ascertain, the documents were:

    A letter dated 10 March 2016 which appears to be from the New Zealand Accident Compensation Corporation, addressed to Mr Upson, and which states:

Thank you for contacting ACC regarding your entitlement that you receive.

I can confirm that you have been in receipt of a weekly compensation payment since 12/12/1978. This payment is paid to you as a result of an accident you sustained on 05/12/1978 and is payable weekly until the day before your 65th birthday.

    A medical report dated 6 January 1981 written by Mr Brian Otto, an orthopaedic surgeon, in Auckland in relation to injuries sustained by Mr Upson in 1978.

    One page of what appears to be an incomplete medical report of Dr Alistair Hadlow dated 19 June 1993.

    A copy of a search of a property in New Zealand from an electronic freehold register under the Land Transfer Act 1952 (NZ).

    A copy of a certificate of title under the Land Transfer Act 1952 (NZ).

    What appeared to be “ASB FastNet” bank statements.

    A memorandum of transfer of a property in New Zealand on a date in 1987.

    A letter from a firm of solicitors (Jeff Thomas & Associates) dated 22 March 1988 in respect of the purchase of property at 71 Timor Avenue, Loganholme.

    What appear to be details of payments by the Accident Rehabilitation & Compensation Insurance Corporation at Otahuhu Branch at an uncertain period of time. The print outs are dated14, 15 and 18 October 1993.

    A Registration Confirmation Statement under the Land Title Act 1994 (Qld) referring to two properties owned by Mr and Mrs Upson and mortgages in favour of the Heritage Building Society.

    Emails between Mr Upson and Heritage Building Society.

    A letter (with the handwritten date 27/2/2015) from Mr and Mrs Upson to Mr Ramsay, referring to various events and transactions.

    Email correspondence between Mr Upson and Mr Kyle Kimball of Sajen Legal (Mr Ramsay’s lawyers).

    A letter dated 2 December 2015 from Woods Prince Lawyers asking if the trustee was prepared to meet Mr and Mrs Upson’s legal fees in respect of the deed of settlement, and a emailed response by Mr Kimball on the same date stating his instructions that “both estates are impecunious and the trustee is in no position to assist Mr and Mrs Upson”.

    An email dated 16 December 2015 from Mr Ramsay to Mr Upson asking if Mr and Mrs Upson had received the unsigned deed of settlement, and stating that “the matter has become a little urgent as the head of the DPP who also has to sign is away for the month of January 2016”.

    An email dated 16 February 2016 in which Mr Ramsay asked Mr Upson to consent to orders of the Supreme Court giving effect to the deed of settlement.

    An email dated 29 February 2016 from Mr Upson to Mr Ramsay stating that Mr Upson had provided information proving that the Timor Avenue properties were purchased from accident compensation payouts.

    Email correspondence between Mr Upson, Mr Kimball and Mr Ramsay in relation to the Timor Avenue properties.

    A letter from Mr Kimball to Legal Aid New South Wales in respect of Mr Upson’s bankrupt estate.

    Logan City rate notices in respect of the Timor Avenue properties.

    A letter dated 29 July 2016 from Sajen Lawyers to “The Occupants” of 73 Timor Avenue demanding vacant possession.

    A letter dated 24 March 2016 from Sajen Legal to Prime Lawyers.

Affidavit filed 30 August 2016

23    In this very short affidavit Mr Upson deposed, inter alia, that the Timor Avenue properties were purchased using his accident compensation payments.

Affidavit filed 27 September 2016

24    In this affidavit Mr Upson responded to affidavits sworn by Mr Ramsay, and deposed, inter alia:

    He and Mrs Upson did not seek legal advice in respect of the deed of settlement because they had no income. Their income had been taken away by Mr Ramsay. Legal Aid lawyers could not assist them in respect of their bankruptcy.

    He felt “harassed and bullied” to sign the deed of settlement, and did not understand it.

25    Annexed to this affidavit were a number of documents, including correspondence relating property of the bankruptcy (including, for example, renting it out and notices of levies due in February 2016), Mr Upson dealing with the Australian Taxation Office, and Mr Upson dealing with Mr Ramsay in relation to “papers to sign” sent to Mr Upson on or about 9 February 2016 by the DPP.

26    Also annexed are unsigned consent orders of the Supreme Court of Queensland dated 17 February 2016, an order of P McMurdo J dated 27 September 2007, and statements from Heritage Bank from 2015 and early 2016.

EVIDENCE RELIED ON BY THE TRUSTEE

27    The trustee relied on a number of affidavits in support of this interlocutory application, specifically:

    the affidavit of Mr Ramsay filed 7 July 2016 (which affidavit was filed in support of the originating application);

    the affidavit of Mr Ramsay filed 26 July 2016;

    the affidavit of Mr Ramsay filed 6 September 2016 (which affidavit was filed in support of the interlocutory application currently before the Court);

    the affidavit of Mr Kimball filed 7 July 2016;

    an affidavit of service of Mr Dean Sawyer filed 1 September 2016.

28    Materially, Mr Ramsay deposed:

    In or about 2015 the trustee had formed the view that there was very likely to be a shortfall in the assets of the estate of Mr Upson to meet the claims of his creditors, with money possibly available in the bankrupt estate of Mrs Upson but subject to resolution of property rights in respect of assets (including the Timor Avenue properties).

    There was a significant likelihood of the State, Mr and Mrs Upson and the trustee becoming involved in complex, lengthy and expensive litigation concerning the various parties’ rights and interests in real property and the various bank accounts.

    Following the execution of the deed of settlement:

(a)    the Supreme Court dismissed the Proceedings pursuant to orders made by consent of the parties;

(b)    as a result of that consent order, restraining orders made by the Supreme Court in respect of property of Mr and Mrs Upson (including the Timor Avenue properties) were released. Forfeiture proceedings brought by the State against Mr and Mrs Upson and their applications for exclusion were dismissed;

(c)    the control of bank accounts in the names of Mr and Mrs Upson passed to the trustee;

(d)    the trustee received the funds held in the Bank Accounts;

(e)    the trustee realised shares held in the bankrupt’s name and received the proceeds thereof;

(f)    title to real properties was transmitted to Mr Ramsay as trustee of the bankrupt’s estates;

(g)    Mr Upson provided a release and discharge in the following terms:

(i)    subject to the terms of this Deed, Mr Upson releases and discharges the State, the Trustee, and Mrs Upson from any Claim of whatsoever nature he has or may have against any of them in respect of, or connection with the matters of and incidental to the Proceeding, the Recitals and the Property of Trustee, the Estate of Mr Upson, the Estate of Mrs Upson, Mr Upson and Mrs Upson whether arising at common law, in equity, or under statute or otherwise;

(h)    Mrs Upson provided a release and discharge in the following terms:

(i)    subject to the terms of this Deed, Mrs Upson releases and discharges the State, the Trustee, and Mr Upson from any Claim of whatsoever nature she has or may have against any of them in respect of, or connection with the matters of and incidental to the Proceeding, the Recitals and the Property of Trustee, the Estate of Mr Upson, the Estate of Mrs Upson, Mr Upson and Mrs Upson whether arising at common law, in equity, or under statute or otherwise.

29    Mr Ramsay deposed that following the execution of the deed of settlement he became registered on the title of each of the four real properties of the bankrupts, as a consequence of which:

    he sold bankruptcy property at Ivory Crescent, Tweed Heads; and

    at least as at 6 July 2016, the bankruptcy property at Mount Mulgowie Road, Buaraba was subject to a contract of sale;

    the unsold properties were the Timor Avenue properties which were subject to registered mortgages in favour of Heritage Bank;

    following the sale of the Ivory Crescent property the debt owed by the bankrupts to Heritage Bank was paid in full and the trustee was entitled to seek a release of the mortgages registered over the Timor Avenue properties.

30    Mr Ramsay gave evidence that until August 2016, neither Mr Upson nor Mrs Upson had made any complaint to him about the deed of settlement, nor suggested that they had entered into it under duress. Mr Ramsay denied that he had had a telephone conversation with Mr Upson pressuring Mr Upson to sign, and was unaware of any factual circumstances to which Mr Upson or Mrs Upson could reasonably point as leading them to execute the deed of settlement under duress or any undue influence.

31    In his affidavit of 6 September 2016 Mr Ramsay gave evidence that he met Mr and Mrs Upson on 25 February 2015:

10.    I recall the following from the meeting:

(a)    Mr and Mrs Upson were referred to HDR by Mr Gavin Morton, Registered Liquidator of Mortons Solvency Accountants, Brisbane;

(b)    Mr and Mrs Upson introduced themselves and opened the discussion by explaining their current position with the Department of Public Prosecutions regarding a proceeds of crime Proceeds Assessment Order (PAO) for $954,450.73 taken out against Robert Upson.

(c)    Mr Upson explained the DPP also have a restraining order against all of the Upson’s assets. Mr Upson tabled a bundle of Court orders to evidence the PAO and the restraining orders. Mr Upson explained the actions by the DPP were as a consequence of past drug dealings for which he spent some time in jail;

(d)    Mr Upson went on to explain that the ATO had issued income tax assessments against himself for $2m plus and against his wife for $3m plus. Mr Upson then explained his predicament in that as all of their assets, including bank accounts, were frozen he could not make any payment towards these tax debts. Mr Upson explained he was trying to negotiate with the ATO;

(e)    Mr Upson explained the circumstances of a work related accident he had in New Zealand in 1978. He further explained that he received a compensation payout and to this day still receives a pension. Mr Upson explained he had done some research regarding the acquisition of property at 71-73 Timor Ave, Loganholme. Qld - his research told him this property was exempt from a trustee in the event of bankruptcy as it was acquired with funds received from a personal injury payout.

32    Mr Ramsay deposed that he wrote to Mr and Mrs Upson on 27 February 2015 after their meeting, in the following terms:

Re: Proposed Bankruptcies

Thank you for your instructions to finalise and lodge the petitions for your voluntary bankruptcies.

Since conferring with you I have thoroughly researched the Bankruptcy Act as it relates to the trustee’s rights and obligations regarding the disposal of properties and other assets which are restrained under a Proceeds of Crime order.

Section 58A(1) of the Act states, in effect, that if a restraining order is made under a Proceeds of Crime law which covers the property of a bankrupt and was made before the date of bankruptcy then the property that is covered by the order whilst it is so covered does not vest in the trustee.

Section 58A(3) of the Act notes that if these circumstances change and as a result of which Section 58A(1) (above) no longer applies to the property of the bankrupt the Director of Public Prosecutions must, as soon as possible, give the trustee notice of the existence of the changed circumstances.

In general terms this means that all assets covered by the order can only be sold by the Director of Public Prosecutions. I, as trustee, am therefore prevented from having any involvement in the sale of the assets. This of course will include any sale action the DPP may take in selling the property at 73 Timor Avenue, Loganholme.

Section 58A(3) means in general terms that after the DPP have sold sufficient assets to satisfy the $954,450.73 order they must provide me, as trustee, with written notice. It is at that time that any assets which are surplus will vest in the trustee. The trustee will then be responsible for the realising of these surplus assets and accounting to your creditors accordingly.

CONSIDERATION

33    The trustee sought summary judgment pursuant to r 26.01 of the Federal Court Rules 2011 (Cth) (the Rules). Specifically, the trustee claimed that he was entitled to judgment summarily because Mr and Mrs Upson had no reasonable prospect of successfully defending the proceeding (r 26.01(1)(e)). I note that r 26.01(1)(e) of the Rules replicates a similar ground in s 31A of the Federal Court of Australia Act 1976 (Cth) (the Act), and in that respect the Court is empowered by both s 31A of the Act and r 26.01(1)(e) of the Rules to make the order sought by the trustee if the trustee substantiates his case.

34    In circumstances where an applicant claims that the respondent has no reasonable prospect of successfully defending the application, the onus on the applicant is heavy: Spiteri v Nine Network Australia [2008] FCA 905 at [10]. However once a moving party has established a prima facie case that the opponent has no reasonable prospect of success, the opposing party must respond by pointing to specific factual or evidentiary disputes that make a trial necessary: Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372 at [127].

35    As a general proposition Courts are cautious in approaching applications for summary judgment: SZWBH v Minister for Immigration and Border Protection (2015) 229 FCR 317 at [24]; Spencer v The Commonwealth (2010) 241 CLR 118 at 131. If a respondent demonstrates that there is a triable issue constituting a defence to an applicant’s claim before the Court, it cannot be said that the respondent has no reasonable prospects of defending the case: Jefferson Ford 167 FCR 372 at [130]; Unpaid Systems Ltd v Telstra Corporation Limited [2016] FCAFC 158 at [68]-[69].

36    In determining whether the respondent has a “real” prospect of successfully defending the proceeding it is appropriate for the Court to consider whether there is a “real” as distinct from a “merely arguable” or “fanciful” prospect: White Industries Australia Ltd v Commissioner of Taxation (2007) 160 FCR 298 at [59]; Rogers v Asset Loan Co Pty Ltd [2008] FCA 1304 at [23].

37    In considering whether Mr and Mrs Upson have a reasonable prospect of defending the trustee’s originating application, I take into account the following matters.

Entitlement to vacant possession

38    First, where a person becomes bankrupt pursuant to the Bankruptcy Act, as a general proposition the trustee in bankruptcy is entitled to an order that he or she be registered as the owner of real property in the bankruptcy, and thereafter the trustee is legally entitled to vacant possession of that property: s 30 and s 77(1)(e) and (g) Bankruptcy Act.

Protected money

39    Second, however, Mr Upson claims that the Timor Avenue properties were purchased using monies from compensation he received arising from personal injuries in New Zealand in 1978. Section 116(2)(g) of the Bankruptcy Act excludes from property divisible among creditors of the bankrupt:

(g)    any right of the bankrupt to recover damages or compensation:

(i)    for personal injury or wrong done to the bankrupt, the spouse or de facto partner of the bankrupt or a member of the family of the bankrupt; or

40    Where, at any time, the whole, or substantially the whole, of the money paid for the purchase, or used in the acquisition, of particular property was protected money within the meaning of s 116(2)(g) of the Bankruptcy Act, that property is similarly excluded from property divisible among the bankruptcy’s creditors: s 116(2)(n) and s 116(3) Bankruptcy Act. Mr Upson relies on these provisions to claim that the Timor Avenue properties are similarly protected assets in his bankruptcy.

41    The trustee submits that fundamentally there is no documentary evidence in support of Mr Upson’s assertions, that the Court should not accept Mr Upson’s testimony without evidence corroborating that testimony (given Mr upson’s interest in the outcome of the proceeding), and Mr Upson has failed to discharge the onus of demonstrating the existence of a real factual controversy requiring a trial.

42    Contrary to the submissions of the trustee, I consider that Mr Upson has presented documentary evidence to the Court supporting his claim that the Timor Avenue properties were purchased with accident compensation monies. Mr Upson is a litigant in person, and it may be that his evidence is incomplete. However such material as there is indicates that:

    From his first interactions with the trustee, Mr Upson has maintained that the Timor Avenue properties were purchased with accident compensation monies. The evidence of the trustee is consistent with this position. This is not a new claim made in Court by Mr Upson for the purposes of this litigation.

    Mr Upson has received compensation payments since 1978 and apparently continues to receive them.

    In his affidavits he has given a relatively detailed explanation of the manner in which he paid for the Timor Avenue properties, referable to those compensation payments.

    Mr Upson has provided the Court with records of automatic teller machine withdrawals supportive of his testimony, bank statements, statements from the New Zealand Accident Compensation Corporation, and correspondence from the Heritage Bank and the ASB Bank.

43    Notwithstanding this however, the circumstances are further complicated by the evidence before the Court that the Timor Avenue properties were purchased jointly in the names of Mr and Mrs Upson.

44    A similar factual scenario to that claimed by Mr and Mrs Upson was considered by Emmett J in Stankovic v Van der Velde [2012] FCA 1436. At [11] of the judgment his Honour said:

However, there is no evidence or suggestion that Iron Base engaged in any other activity other than the purchase, holding and sale of 79 Terry Road. Absent such evidence, I consider that the appropriate conclusion to be drawn is that the proceeds of realising 79 Terry Road can fairly be attributed to the funds that were provided to Iron Base by Mr Stankovic from the Compensation Moneys. However, one half of the amount provided should be presumed to have been the subject of a gift by way of advancement to Mr Stankovic’s wife. The part of the proceeds of the sale of 79 Terry Road attributable to that half cannot be treated as attributable to the Compensation Moneys. The part of the proceeds of that sale that can be attributed to the funds that were provided to Iron Base that were not the subject of the presumption of advancement to Mr Stankovic’s wife, on the other hand, can fairly be attributed to the Compensation Moneys. It follows that, in so far as the proceeds of the realisation of 79 Terry Road were applied in the acquisition of the Kellyville Property, part of the proceeds of the realisation of the Kellyville Property can fairly be attributed to the Compensation Moneys.

(emphasis added.)

45    In another case – Vrsecky v Reaper [2015] FCCA 32 – Judge Burchardt considered facts where compensation money payable to the bankrupt was used to purchase real property for the bankrupt and his wife. His Honour observed:

62.    The observations of Emmett J are clearly therefore directly applicable here. Mr Reaper and Ms Fisher own the property jointly. Accepting as I do that all payments made in respect of the mortgage since 2007 were made from protected funds accruing to Mr Reaper it necessarily follows that half any accrual in the overall value of the property in that time must devolve to Ms Fisher.

63.    Counsel submitted that following the appointment of the trustee on 7 March 2013 it followed as a matter of law that the interest of Mr Reaper vested in the trustee. It was therefore submitted that all payments thereafter should be credited to the wife. While this is probably correct as a matter of law, it ignores the fact that the funds remain those of Mr Reaper personally. I would take him to be applying them to his own interests. In any event the amounts by which these payments may have diminished the mortgage in the last 18 months would, on any view, be small. The mortgage has a very long time still to go. In all the circumstances, while acknowledging the force of the submission, I am not prepared to make an adjustment in that regard.

46    His Honour concluded:

73.    The next step in the methodology is to ascertain the value of the property now and the value of the mortgage. Half of the increase from 2007 until 2014 (or early 2015 as I suspect will be the case) is plainly directly attributable to Mr Reaper’s protected payments. The other half, adopting the reasoning of Emmett J in Stankovic v Van Der Velde is clearly attributable to Ms Fisher.

47    On the evidence before me the obvious conclusion is that, like in Stankovic v Van der Velde [2012] FCA 1436, one half of the amount of compensation money received by Mr Upson and used to purchase the Timor Avenue properties for himself and Mrs Upson should be presumed to have been the subject of a gift by way of advancement to Mrs Upson. There is no suggestion by Mr Upson of any other legal relationship between himself and Mrs Upson in relation to the Timor Avenue properties or money used to purchase those properties.

48    In these circumstances, again like in Stankovic v Van der Velde [2012] FCA 1436, the evidence before the Court clearly indicates that the Timor Avenue properties were only partly purchased with protected money, and s 116(4) of the Bankruptcy Act applies, namely:

Where, as at the time when the trustee realises particular property to which paragraph (2)(n) does not apply, the outlay in relation to the property is in part protected money and in part other money, the trustee shall pay to the bankrupt so much of the proceeds of realising the property as can fairly be attributed to that protected money.

49    Section 116(4) contemplates that property partly purchased with protected money vests in the trustee, however the trustee is required to account to the bankrupt for such part of the proceeds as can fairly be attributed to the protected money.

50    It follows that, even if the Court accepted Mr Upson’s claim that the Timor Avenue properties were purchased with accident compensation money, at best his position in circumstances where he has clearly gifted half of those monies to Mrs Upson is that the trustee is entitled to sell the properties and account to Mr Upson for that proportion of the proceeds of sale which relate to protected money under the Bankruptcy Act.

Duress

51    Third, it is not in doubt that Mr and Mrs Upson signed the deed of settlement. However, they claimed to have done so under duress.

52    “Duress” at common law was explained by the Privy Council in Pao On v Lau Yiu Long [1980] AC 614 at 635-636:

… At common law money paid under economic compulsion could be recovered in an action for money had and received Astley v. Reynolds (1731) 2 Str. 915. The compulsion had to be such that the party was deprived of ‘his freedom of exercising his will’ (see p. 916). It is doubtful, however, whether at common law any duress other than duress to the person sufficed to render a contract voidable: sec Blackstone’s Commentaries, Book 1, 12th ed. pp. 130-131 and Skeate v. Beale (1841) 11 Ad. & E. 983. American law (Williston on Contracts, 3rd ed.) now recognises that a contract may be avoided on the ground of economic duress. The commercial pressure alleged to constitute such duress must, however, be such that the victim must have entered the contract against his will, must have had no alternative course open to him, and must have been confronted with coercive acts by the party exerting the pressure: Williston on Contracts, 3rd ed., vol. 13 (1970), section 1603. American judges pay great attention to such evidential matters as the effectiveness of the alternative remedy available, the fact or absence of protest, the availability of independent advice, the benefit received, and the speed with which the victim has sought to avoid the contract. Recently two English judges have recognised that commercial pressure may constitute duress the pressure of which can render a contract voidable: Kerr J. in Occidental Worldwide Investment Corporation v. Skibs A/S Avanti [1976] 1 Lloyd’s Rep. 293 and Mocatta J. in North Ocean Shipping Co. Ltd. v. Hyundai Construction Co. Ltd. [1979] Q.B. 705 . Both stressed that the pressure must be such that the victim’s consent to the contract was not a voluntary act on his part. In their Lordships’ view, there is nothing contrary to principle in recognising economic duress as a factor which may render a contract voidable, provided always that the basis of such recognition is that it must amount to a coercion of will, which vitiates consent. It must be shown that the payment made or the contract entered into was not a voluntary act.

(emphasis added.)

53    On the material before me no real evidence is advanced to support a claim that either Mr or Mrs Upson signed the deed of settlement under duress. At most, it appears from the material before the Court that the trustee urged Mr and Mrs Upson to sign the document without delay in light of the absence of the DPP over the Christmas period 2015-2016. It is equally clear that the trustee urged Mr and Mrs Upson to obtain independent legal advice before signing. Further, there is evidence before the Court that Mr and Mrs Upson were actually eager to sign the deed of settlement without incurring the cost of further legal advice, and to resolve the proceedings involving the State.

54    I note the potential practical difficulties experienced by bankrupts in finding the funds to pay for independent legal advice. I query however whether there is an obligation on the trustee to make those funds available. No submissions one way or another addressed these issues.

55    Finally in this respect, there is authority that the Court may refuse discretionary relief for economic duress in circumstances where the party alleging the duress does not take steps to repudiate the relevant instrument in a timely way: Gotterson JA in Bustfree Pty Ltd v Llewellyn [2013] QCA 103. The deed of settlement was signed in January 2016. Events resulting from that deed include the discontinuance of forfeiture proceedings by the State, and the sale by the trustee of two real properties to third parties.

56    The originating application brought by the trustee seeking orders that Mr and Mrs Upson vacate the property was filed in July 2016 when it appears the trustee turned his attention to the Timor Avenue properties. Orders for substituted service of that application on Mrs Upson were made by me in circumstances where the trustee was unable to effect personal service on her. (I note in passing that despite Mrs Upson’s unavailability in respect of service, Mrs Upson appeared at the hearing of the interlocutory application for summary dismissal.) Indeed, the conduct of Mr and Mrs Upson has been that of avoidance of the effect of the deed of settlement rather than repudiation, until now.

57    To adopt the words of Gotterson JA in Bustfree [2013] QCA 103, the failure of Mr and Mrs Upson to repudiate the deed promptly for duress:

… has given rise to virtually insuperable difficulties in restoring the parties substantially to the status quo which prevailed immediately prior to the Deed of Settlement.

Provisions of the deed of settlement

58    Fourth, relevantly the deed of settlement provides as follows:

    “Restrained Property” means Mr Upson’s interest in all the Property covered by the Restraining Orders, and listed in Schedule 1 of this Deed, and for the avoidance of any doubt includes any Property of Mrs Upson subject to the Effective Control of Mr Upson (clause 1.1).

    “Real Property” means the real property listed in Part A of Schedule 1 of this Deed (clause 1.1).

The real property listed in Part A of Schedule 1 included the Timor Avenue properties.

59    Clause 6.2 of the deed of settlement provided:

From Proceeds of Sale

The Parties acknowledge that:

(a)    The Trustee will, in the usual course of his administration of the Estates, realise the Real Property;

(b)    …

60    Clause 8.3 of the deed of settlement provided:

Release by Mr Upson

Subject to the terms of this Deed, Mr Upson releases and discharges the State, the Trustee, and Mrs Upson from any Claim of whatsoever nature he has or may have against any of them in respect of, or connection with the matters of and incidental to the Proceeding, the Recitals and the Property of Trustee, the Estate of Mr Upson, the Estate of Mrs Upson, Mr Upson and Mrs Upson whether arising at common law, inequity, or under statute or otherwise.

61    Clause 8.4 of the deed of settlement provided:

Release by Mrs Upson

Subject to the terms of this Deed, Mrs Upson releases and discharges the State, the Trustee, and Mr Upson from any Claim of whatsoever nature she has or may have against any of them in respect of, or connection with the matters of and incidental to the Proceeding, the Recitals and the Property of Trustee, the Estate of Mr Upson, the Estate of Mrs Upson, Mr Upson and Mrs Upson whether arising at common law, inequity, or under statute or otherwise.

62    The trustee submitted that the claims made by Mr Upson against the trustee fell within the release and discharge in the deed, and the respondents cannot now pursue those claims.

63    I am not convinced that Mr Upson does not have a claim to that portion of the future proceeds of sale of the Timor Avenue properties representing protected money received by Mr Upson way of compensation for personal injury (and which was not gifted to Mrs Upson). Further, I am not convinced at this stage that the terms of the release and discharge given by Mr Upson in the deed necessarily excludes such a claim.

64    That, however, is not the matter before the Court. The originating application before the Court, in respect of which the trustee seeks summary judgment, concerns the trustee’s entitlement to vacant possession of the Timor Avenue properties. Any claim of Mr Upson to the proceeds of the sale of those properties does not, in my view, constitute an obstacle to the trustee exercising his powers to realise them pursuant to his powers under the Bankruptcy Act.

CONCLUSION

65    For the reasons I have given, the arguments put forward by Mr and Mrs Upson to defend this claim and resist giving vacant possession of the Timor Avenue properties to enable the trustee to exercise his powers in respect of those properties appear to have no substance, much less reasonable prospects of success. Mr and Mrs Upson have not demonstrated that there is a triable issue constituting a defence to the trustee’s claim against them before the Court.

66    It follows that the trustee is entitled to summary judgment for the whole of his claim against both respondents.

67    I note that, in the applications filed in this Court, the trustee referred to himself as “the first applicant”. I will make orders describing the trustee in those terms.

68    Finally, no reason has been put to me why costs should not follow the event. I make orders accordingly.

Associate:

Dated:    19 December 2016