Federal Court of Australia

Trustee of the Property of Brian John Byrne, a Bankrupt v Byrne [2020] FCA 1532

ORDERS

THE COURT DECLARES THAT:

1.    The respondent’s interest in the real property located at 12 Kelso Close, Yamanto Queensland 4305 and recorded as Lot 98 on Registered Plan 849045, being the land comprised in Certificate of Title 18410009 (Property):

(a)    vested in the respondent’s trustee in bankruptcy, on and from the respondent becoming bankrupt on 16 June 2015, pursuant to ss 58(1)(a) and 132(1) of the Bankruptcy Act 1966 (Cth); and

(b)    vested in the applicant upon him becoming the respondent’s trustee in bankruptcy on 14 February 2018, pursuant to s 132(2) of the Bankruptcy Act.

THE COURT ORDERS THAT:

2.    An enforcement warrant for possession of the Property in favour of the applicant under r 915 of the Uniform Civil Procedure Rules 1999 (Qld) be issued, subject to the following two orders.

3.    The preceding order for an enforcement warrant for possession to be issued be stayed for 12 weeks from the date of making these orders (that is, until 12 January 2021) to give the respondent an opportunity to:

(a)    deliver up vacant possession of the Property to the applicant or to an agent of the applicant notified in writing to the respondent (which may include notification by email);

(b)    deliver up all keys for all building and improvements of the Property to the applicant or to an agent of the applicant notified in writing to the respondent (which may include notification by email).

4.    The preceding order for the stay of the issue of an enforcement warrant for possession of the Property be conditional upon the respondent:

(a)    granting reasonable access to the Property to the applicant or to an agent of the applicant notified to the respondent (which may include notification by email or telephone) for purposes associated with the sale of the Property, including any necessary repairs and maintenance;

(b)    executing all documents and doing all things reasonably necessary to enable the applicant to effect the sale of the Property;

(c)    removing from the Property all household property (as prescribed by reg 6.03 of the Bankruptcy Regulations 1996 (Cth)), including rubbish and other chattels which are not vested in the applicant (personal property).

5.    Upon obtaining vacant possession and access to the Property, the applicant be empowered to remove and dispose of all and any remaining personal property which has been left at the Property, with the costs of doing so being deductable from the proceeds of sale.

6.    The respondent pay the applicant’s costs of these proceedings.

7.    The applicant have leave to approach the associate to Justice Bromwich by email, copy to the respondent, for any further orders that may be required, and to file and serve any affidavit in support of any such orders.

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

REASONS FOR JUDGMENT

BROMWICH J

1    The applicant, who is the trustee of the bankrupt estate of the respondent, Mr Brian John Byrne (Trustee), by an originating application seeks a declaration as to the vesting in him, under ss 58 and 132 of Bankruptcy Act 1966 (Cth), of the interest of Mr Byrne in certain real estate. As well as costs, the Trustee also seeks related orders for:

(1)    vacant possession and delivery up of keys for the certain real property, or in default of that taking place an enforcement warrant for possession of the Property under r 915 of the Uniform Civil Procedure Rules 1999 (Qld), being surrogate federal law in proceedings in this Court by virtue of s 79 of the Judiciary Act 1903 (Cth);

(2)    removal of household and other personal property, or in default, an order enabling him to remove and dispose of personal property as he sees fit.

2    The property to which the interest relates is a house and land occupied by Mr Byrne in Ipswich southwest of Brisbane, at 12 Kelso Close, Yamanto, Queensland, which is recorded on the certificate of title as Lot 98 on Registered Plan 849045, being the land comprised in Certificate of Title 18410009 (the Property). The registered proprietor of the property is the State of Queensland represented by the Department of Housing and Public Works.

3    In about 1993, Mr Byrne and his former wife bought a 38% share of the Property as joint tenants. That joint tenancy was severed upon Mr Byrne becoming bankrupt: see Re Francis; Ex Parte Official Trustee (1988) 19 FCR 149 at 153-4. That severance brought about two equal shares of 19% held by each of the Trustee and Mr Byrne’s former wife as tenants in common. The Trustee has paid $30,000 for and had vested in him the former wife’s 19% share, as part of the settlement of family law proceedings brought by her in the Federal Circuit Court of Australia by way of consent orders signed by the Trustee, Mr Byrne and Mr Byrne’s former wife, apparently on 6 December 2019. The Department has consented to the conditional sale of the Property, which would result in the Trustee realising 38% of the net sale price. The estimated value of that 38% share is some $129,000 based upon a valuation obtained on 9 August 2019 of about $340,000.

4    Mr Byrne does not oppose the making of a declaration, but does oppose any of the related orders, or like orders, being made. These reasons are therefore largely concerned with the disputed question of whether additional orders of the kind sought by the Trustee should be made so as to facilitate the Property being sold with vacant possession.

5    Rather than giving vacant possession or the execution of an enforcement warrant for possession, and thereupon the sale of the Property without him being a tenant, Mr Byrne wishes to remain in possession and continue to live there. He asserts that his creditors should be paid out of inheritance moneys from his late mother’s estate that he asserts are available to the Trustee. Mr Byrne asserts that he is entitled to that outcome because of that alternative source of funds being available to the Trustee, and because he asserts that the Trustee has mismanaged his bankrupt estate. He asserts that the Trustee bears an onus to allay concerns he maintains this Court should have before proceeding to cause him to be evicted from the house he has lived in for the past 30 years. He also suggests that the Trustee was not entitled to receive money from his share of the deceased estate as after acquired property: cf s 58(1)(b) of the Bankruptcy Act.

6    Both the Trustee and Mr Byrne have filed and relied upon detailed affidavit evidence. Most of Mr Byrne’s evidence was ultimately irrelevant to the determinative issues before the Court. Much of the evidence of the Trustee was of a necessary background nature to explain the history of what has happened, and how the present situation was arrived at. Not all of that evidence ended up being relevant to the resolution of this dispute. It is not necessary to detail much of that evidence beyond what is set out above, and what follows. The Trustee pointed to a range of other facts and circumstances that supported his application, but it is not necessary to detail those matters, nor resolve some of the disputes that emerge from them. What really matters is that the evidence has satisfied me that:

(1)    Mr Byrne clearly has no intention of voluntarily giving vacant possession of the Property to the Trustee, and has resisted repeated requests for him to do so, for reasons that are understandable at a human level given his age and circumstances; and

(2)    as at the date of the Trustee swearing his second affidavit on 2 September 2020, Mr Byrne’s bankrupt estate has assets of about $380,000 based in part upon a valuation of the 38% share of the Property, and liabilities either crystallised or estimated totalling over $466,000 (including Trustee remuneration and expenses of over $263,000), leaving a substantial shortfall of over $86,000, without allowing for expenses to sell the Property or interest due to creditors.

7    The Trustee submits that in all the circumstances summarised in his written submissions, the central parts of which are adverted to above, the Court should exercise its undoubted power to make orders to enforce vacant possession so as to facilitate the sale of the Property, citing the Bankruptcy Act as to the broad powers vested in the Court by s 30, the obligations of a bankrupt in s 77 to which the powers in s 30 may be directed, and the power of the Court in s 129(2) to make orders on the application of a trustee to enforce the obligation in s 129(1) to take possession of the property of a bankrupt. The Trustee also relies upon Coshott v Prentice [2014] FCAFC 88; 221 FCR 450 at [94] and [111] as to the nature and exercise of such powers. At [94], the Full Court observed:

Thus [s 30 of the Bankruptcy Act] has been held to provide sufficient power to make orders against a bankrupt for the vacation of property, issuing a warrant of possession and for the sale of a property in circumstances where the bankrupt is not complying with his or her obligations under the Act: see, eg, Vince (trustee) v Sopikiotis (No 2) [2012] FCA 1298 at [4] (Bromberg J); Pattison v McKinnon [2008] FCA 1624 at [2] (Jessup J); Offıcial Receiver v Fall (2008) 5 ABC(NS) 772 at [10]-[12] (Lucev FM (as his Honour then was)). It also expressly extends to ancillary relief such as injunctions and other equitable remedies to prevent the scheme of the Act from being defeated. Such ancillary orders are, as the Full Court observed in Talacko at [17], “neither novel or unusual”: see also Storey at 557 (Gibbs CJ).

8    Mr Byrne’s position is to question whether the Court should exercise a discretion which he does not dispute is available to grant the relief sought. He points to the following reasons, adverted to above, as to why he contends that discretion should not be exercised (not all asserted reasons are reproduced):

(1)    He has lived in the property for 30 years and asserts that there is no evidence that giving possession will benefit the creditors of his bankrupt estate and no evidence to allay concerns he raises that this may be to the detriment to those creditors.

(2)    There may be more lucrative ways to benefit the creditors including what he asserts to be substantial assets in the estate of his deceased mother, such that he contends that the Trustee should first be looking at forcing the administration of the deceased estate before attempting to quantify the benefits to the creditors of the sale of the Property, with the former promising more certainty and a better result for creditors (noting that Mr Byrne elsewhere asserts that the Trustee has no right to receive or to use money received from that deceased estate).

(3)    There is an onus on the Trustee to demonstrate that evicting him is more likely to benefit the creditors than devoting the same energy and resources to force the administration of the estate of his late mother.

(4)    Taking vacant possession of the Property will not put a cent into the bankrupt estate until it is sold, however long that may take.

(5)    The valuations of the property relied upon by the Trustee are not reliable indicators of the likely sale price in the present market as they are based on historical data that may have been true in August 2019, but circumstances have changed dramatically since then (presumably a reference to the present pandemic), and a more accurate guide should be obtained from a real estate agent working in the area which can be obtained at no cost and within a few hours.

(6)    Such an appraisal will provide a better idea of the likely price the Property will sell for.

(7)    The advantages of vacant possession are outweighed by the property continuing to be occupied and looked after.

(8)    Until the Property is sold the Trustee will have the responsibility and expense of meeting outgoings and will be responsible for the cost of maintaining the property to maximise its appeal to potential buyers, with there being no way of knowing how long those costs will be a burden on the bankrupt estate.

(9)    There is no evidence of the condition of the property or whether it is ready to be listed for sale, pointing to possible expenses needing to be incurred.

(10)    There is no evidence of a marketing plan or discussions with a real estate agent about such things as advertising and related matters.

(11)    Mr Byrne has been living in the house and paying all the outgoings, with the references to recent hardship-based default in payment obligations to be considered against the absence of default over the past 30 years.

(12)    It is the Trustee’s mismanagement of his estate that has brought the current state of affairs into being.

9    It is ultimately not necessary or appropriate to adjudicate upon most of the above assertions. That does not mean that any of them are accepted as being necessarily factually or legally valid, but rather that they cannot be determinative.

10    Mr Byrne also makes various submissions as to the state of play with his deceased mother’s estate. He raises a doubt about the right of the Trustee to use funds received in the administration of the estate to pay for his former wife’s interest in the Property, asserting that the executors of his deceased mother’s estate, being him and his brother, should be afforded procedural fairness and given the chance to be heard as to the appropriateness of that payment as that may undermine the Trustee’s right to sell the Property. This part of his submissions undermines his submissions to the effect that the Trustee should look to that estate to satisfy his creditors, rather than seek vacant possession so as to sell the Property.

11    Mr Byrne also takes issue with the remuneration and expenses incurred by the Trustee and relies upon what he said took place leading up to and during the proceeding brought by his ex-wife in the Federal Circuit Court.

12    Mr Byrne in part, and in effect if not intent, seeks to have this Court adopt a role that is properly for the Inspector General in Bankruptcy in overseeing the performance by the Trustee of his powers, duties and functions, including in the assessment of how and why that that should be carried out. That is not within the proper ambit of this proceeding. It also entails engaging in a form of merits review of those activities. This would be problematic enough in a general setting. However it is wholly inappropriate in the setting of this proceeding. In circumstances in which it is not in doubt or even disputed that the Property was vested in his trustee at the time of his bankruptcy, and that the vesting has passed to the present Trustee upon his appointment, it is wholly inappropriate for this Court to consider withholding the ordinary sort of relief that would flow from such vesting having taken place. That is especially so when it is clear that Mr Byrne has resisted giving voluntary vacant possession, necessitating this proceeding being brought, and costs being incurred.

13    I am not satisfied that there is any proper basis not to exercise the discretion to grant the substance of the relief sought. To the contrary, I am satisfied that it is wholly appropriate to grant such relief. I see no reason why Mr Byrne should not be ordered to pay the Trustee’s costs.

14    With some variation on what was sought in the originating application, but in substance to the same effect, I make the declaration and orders orally which make the provision for Mr Byrne to remain in the property pending ultimate vacation and sale for as long as I could, in conscience, allow. That period is 12 weeks, rather than the 28 days sought by the Trustee.

Associate:

Dated:    23 October 2020