Federal Court of Australia

Dudley (Trustee) v Zarb [2024] FCA 108

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 19(1)(f), s 30(1)(b), s 77(e), s 77(g) and s 134(1)(a) of the Bankruptcy Act 1966 (Cth):

(a)    within 90 days -

(i)    the respondent deliver up to the applicant vacant possession of the property located at 11 Rollo Court, Kinross, Western Australia, being Lot 2092 on Deposited Plan 26722 and being the whole of the land described in Certificate of Title Volume 2213 Folio 877 (Property);

(ii)    the respondent deliver up to the applicant all keys to the building and improvements on the Property;

(iii)    the respondent deliver up to the applicant all manuals, instructions and warranty documents relating to improvements on the Property; and

(iv)    the respondent remove from the Property all vehicles, rubbish, and chattels which have not vested in the applicant (personal property).

(b)    In the event that the respondent fails to comply with order 1(a)(iv), the applicant is empowered to remove and dispose of the personal property as he sees fit.

2.    The applicant is appointed as trustee for the sale of the Property.

3.    The proceeds of sale of the Property be paid to the applicant and applied:

(a)    first, in payment of the costs and expenses incidental to the sale of the Property;

(b)    second, to discharge an encumbrance according to its priority; and

(c)    third, to the bankrupt estate of the respondent.

4.    The applicant undertakes that he will not enforce orders 1 to 3 for a period of at least 3 months from the date of these orders.

5.    The respondent is to pay the applicant's costs of the 14 December 2023 hearing fixed at $500.

6.    The applicant's costs of this application be paid out of the bankrupt estate of the respondent.

7.    The parties have liberty to apply.

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

REASONS FOR JUDGMENT

BANKS-SMITH J:

1    On 20 February 2024 I made certain orders in relation to property that has vested in a trustee in bankruptcy. The bankrupt was represented at the hearing and some of the orders were ultimately made by consent. However, having regard to the manner in which the application has proceeded, I consider it appropriate to provide these short reasons for the benefit of the parties.

2    The applicant, Gregory Dudley, is the Trustee in bankruptcy of the estate of the respondent, Andrew Zarb. A sequestration order of Mr Zarb's estate was made on 21 November 2022.

3    The Trustee seeks relatively standard orders to facilitate the delivery up and sale of real property registered in Mr Zarb's name, being the land referred to in Certificate of Title Volume 2213 Folio 877, situated in Kinross (Property).

4    Under s 58(1)(a) of the Bankruptcy Act 1966 (Cth), all property of Mr Zarb vested in the Trustee upon the making of the sequestration order, including the Property.

5    Although in Western Australia it is necessary for a trustee in bankruptcy to be registered and secure legal title to a bankrupt's interest in land under s 234(1) of the Transfer of Land Act 1893 (WA) in order to affect a transfer, this does not affect the vesting of property.

6    The application was first listed for hearing on 5 December 2023. Affidavit evidence provided by a process server and filed on behalf of the Trustee established to my satisfaction that Mr Zarb had been served with all relevant court documents. However, I was not satisfied on that occasion that Mr Zarb was given sufficient notice of the time and place of the hearing by the Trustee. Although Mr Zarb did not attend the hearing, he indicated by email that he wished to have the hearing adjourned. I adjourned it to 14 December 2023.

7    Mr Zarb emailed my chambers on the morning of 14 December 2023 seeking a further adjournment. Although no affidavit was filed in support of the adjournment application, there was reference to a serious personal matter relating to Mr Zarb's family and I was persuaded that, in the absence of any real prejudice to the Trustee, a further adjournment should be granted.

8    Accordingly, I directed that Mr Zarb file any affidavit evidence upon which he would seek to rely by 13 February 2024 and listed the hearing for 20 February 2024.

9    Mr Zarb was informed of those orders by email from my Chambers.

10    On 15 February 2024 an affidavit of Ms Kelly Graham was received on behalf of Mr Zarb. It is not necessary to address its contents, in light of subsequent developments.

11    At the hearing, Ms Parker appeared as counsel for Mr Zarb, having been instructed only the day before. Ms Parker sought a further adjournment so that she could generally take instructions from Mr Zarb. Ms Parker had also sworn an affidavit attaching an email exchange between her client and the Trustee. Reading between the lines of the email, I assume that Mr Zarb has been the subject of proceedings involving a company known as Iber Pty Ltd, of which he was at some point a director, and that somehow that is related to his bankruptcy. He is aggrieved by the outcome of those proceedings.

12    Despite having been made bankrupt some 15 months ago, Mr Zarb has not brought any application to set aside the sequestration order of 21 November 2022. For all intents and purposes the Trustee was duly appointed and is entitled to seek the relief sought by the application. Mr Zarb has had a significant period of time during which he could have sought to challenge the sequestration order if that was his desired course, or otherwise put on evidence that provided a foundation for an argument that the Trustee should not be granted the relief sought by the application.

13    However, shortly prior to the hearing the Trustee proposed to Mr Zarb that the orders the Trustee sought be granted, but that he would undertake not to enforce those orders for a period of at least three months. The Trustee also indicated in correspondence that he might consider a further extension of the period, subject to receiving information from Mr Zarb.

14    I adjourned the hearing for a short period so that Ms Parker could take instructions.

15    Following the adjournment I was informed that in light of the offered undertaking, Ms Parker had instructions to consent to the orders sought by the Trustee. I observed that the time period would permit Ms Parker to undertake relevant inquiries and provide advice to her client, and that the undertaking might be revisited by the Trustee (and, potentially, by the Court), depending on the outcome of the inquires and advice.

16    I had reviewed the evidence provided by the Trustee in which he addressed the rationale for seeking the relevant orders. The Trustee has obtained a drive-by appraisal of the value of the Property from Harcourts. He has ascertained the likely amount to be paid to the registered mortgagee, the Commonwealth Bank of Australia (CBA), in order to facilitate a sale of the Property. Taking into account the appraisal and the amount due to CBA and having regard to likely sale costs and disbursements, it is apparent that there is significant equity in the Property (approximately $470k to $500k).

17    There are unsecured creditors of the estate. Although Mr Zarb has not completed his statement of affairs as required, the Trustee's inquiries to date indicate significant unsecured debts are apparently owing to, relevantly, Automotive Holdings Group Limited (which has lodged a caveat on the title), the Deputy Commissioner of Taxation and Iber. According to the Trustee, there are no other assets available from which unsecured creditors may be paid.

18    Accordingly, there is a need to realise the Property as soon as is practicable in the interests of the creditors. The Trustee has informed both Automotive Holdings Group Limited and CBA of this proceeding and the relief sought. Neither sought to be heard on the application.

19    I am satisfied that the Trustee has also sought to engage with Mr Zarb to discuss the sale of the property and has attempted to secure his cooperation so that Court orders might not be required. By letter dated 18 April 2023 the Trustee informed Mr Zarb that his interest in property, including the Property, had vested in the Trustee pursuant to s 58 of the Bankruptcy Act. On 16 June 2023 the Trustee informed Mr Zarb of his intention to realise any value in the Property either by way of sale to a third party or public sale. For a period communications ensued between the Trustee's office and Ms Graham, who appears to have had (at least) some preliminary instructions on behalf of Mr Zarb. None of those communications brought about any agreement from Mr Zarb. Mr Zarb did not reply to various communications made by or on behalf of the Trustee requesting vacant possession.

20    The Trustee relevantly seeks orders that:

1.    Pursuant to sections 19(1)(f), 30(1)(b) and 134(1)(a) of the Bankruptcy Act 1966 (Cth):

(a)    within 90 days -

(i)    the respondent delivers up to the applicant vacant possession of the [Property];

(ii)    the respondent delivers up to the applicant all keys to the buildings and improvements on the Property;

(iii)    the respondent delivers up to the applicant all manuals, instructions and warranty documents relating to improvements on the Property; and

(iv)    the respondent remove from the Property all vehicles, rubbish and chattels which have not vested in the applicant (the personal property).

(b)    In the event that the respondent fails to comply with order 1(a)(iv), the applicant is empowered to remove and dispose of the personal property as he sees fit.

2.    The applicant is appointed as trustee for the sale of the Property.

3.    The proceeds of sale of the Property be paid to the applicant and applied:

(a)    first, in payment of the costs and expenses incidental to the sale of the Property; and

(b)    second, to discharge any encumbrance according to its priority; and

(c)    third to the bankrupt estate of the respondent.

4.    The applicant's costs of this application be paid out of the bankrupt estate of the respondent.

21    It is well established that s 30(1)(b) of the Bankruptcy Act is of sufficient breadth to enable the Court to make the orders sought for the delivery up of vacant possession of the Property: Coshott v Prentice [2014] FCAFC 88; (2014) 221 FCR 450 at [92]-[94] (Siopis, Katzmann and Perry JJ).

22    Under s 19 of the Bankruptcy Act the Trustee has obligations to take appropriate steps to recover property for the benefit of the estate.

23    Under s 77 of the Bankruptcy Act a bankrupt is obliged, among other things, to assist their trustee in relation to the identification and realisation of their property.

24    Under s 134 of the Bankruptcy Act the Trustee has a broad range of discretionary powers relevant to the sale of the Property and the ancillary relief sought - including the power to sell property, a power that may be exercised with respect to property left or otherwise not removed from the Property.

25    Although the Trustee did not expressly refer to s 77(1)(e) or (g) in his application, I have proceeded on the basis that those provisions are also relied upon. Together, it is clear that s 19, s 77(1)(e), s 77(1)(g) and s 134 are of sufficient breadth to justify making the ancillary orders sought by the Trustee.

26    For a relatively recent example where orders similar to those now sought by the Trustee were made, including as to the removal of personal property, see Lo Pilato (Trustee), in the matter of Ghougassian (Bankrupt) v Ghougassian (No 3) [2022] FCA 1532 (Markovic J). Although orders under the relevant provisions must be made for the purpose of giving effect to the Bankruptcy Act, it is clear that such purpose is satisfied in this case.

27    I was therefore satisfied that the Court has power to make the orders sought by the Trustee, and that it was appropriate in the circumstances of this case to grant relief to the effect of that sought in the originating application. However, I also took into account the fact that the Trustee volunteered to provide an undertaking to defer enforcement. The undertaking has the effect of providing to Mr Zarb a window of opportunity to further consider his position before the orders take effect.

28    For those reasons, and noting the conditional consent of Mr Zarb, I was satisfied that it was appropriate to make the orders sought by the Trustee, noting that the undertaking offered by the Trustee is also reflected in the orders.

Associate:

Dated:    20 February 2024