Ambrose (Trustee) in the matter of Poumako (Bankrupt) v Poumako

THE COURT DECLARES THAT:

The transfer by the First Respondent of his 50% interest in the property at 41 Crittenden Road Smithfield Plains South Australia comprised in Certificate of Title Register Book Volume 5583 Folio 557 (the Crittenden Road property) to the Second Respondent by a Memorandum of Transfer dated 9 August 2005 registration number 10281359 is void as against the Applicant as trustee of the bankrupt estate of the First Respondent pursuant to s 120 of the Bankruptcy Act 1966 (Cth). THE COURT ORDERS THAT:
In the event that the Applicant and the Second Respondent do not enter into a legally binding agreement for the sale of the Applicant's 50% interest in the Crittenden Road property to the Second Respondent within fourteen days of the date of these orders, then: (a) the Crittenden Road property is to be sold in accordance with the timetable and terms set out in this order; (b) any occupants of the Crittenden Road property including the First and Fourth Respondent are to vacate the Crittenden Road property within 45 days of the date of this order; (c) the sale of the Crittenden Road property is to take place through a licensed land agent who shall be appointed by written agreement between the Applicant and the Second Respondent, or in default of agreement, each of the Applicant and the Second Respondent shall nominate two licensed land agents in writing in a letter to a Deputy Registrar of the Court, with a reference to this proceeding, accompanied by a letter from each nominated licensed land agent setting out the recommendation for the means of selling the said property, and the fees of the licensed land agent and any other anticipated costs for doing so, and indicating whether that licensed land agent has had the opportunity of inspecting the said property, and setting out any recommendations of that licensed land agent for any work to be carried out to the said property for the purpose of securing the best price reasonably obtainable for the said property and a rough estimate of the cost of having such work carried out and the time it is anticipated for such work to be carried out; (d) for the purposes of Order 2(c), the First, Second and Fourth respondents shall provide reasonable access to the said property during normal business hours upon two days written notice so that each of the two licensed land agents proposed to be nominated by the Applicant may inspect the Crittenden Road property and, following such inspection, each of them may revise any letter referred to in Order 2(c) following such inspection; (e) the nominations and letters referred to in Order 2(c) hereof shall be provided to a Deputy Registrar of the Court, who shall then make a recommendation (the recommendation) to the Court about the appointment of a licensed land agent to sell the Crittenden Road property and the terms of the sale (including as to any work to be done to the said property before the sale) and shall by letter send the recommendation to the Applicant and the Second Respondent, and unless either of them indicates within four days of the date of that letter by letter to the Deputy Registrar that they do not accept the recommendation, the recommendation shall become a direction of the Court appointing the licensed land agent in terms of the recommendation and if either of them gives such notice the Deputy Registrar shall arrange a directions hearing for the purpose of hearing the parties before the appointment of a licensed land agent to sell the Crittenden Road property; (f) the First, Second and Fourth respondents shall grant to the licensed land agent so appointed access to the Crittenden Road property upon the provision of reasonable notice and during normal working hours for the purpose of inspecting and photographing the Crittenden Road property in preparation for its listing, marketing and sale; (g) if the licensed land agent recommends the expending of any monies towards the repair, cleaning, landscaping, painting or general maintenance of the Crittenden Road property (the works) in preparation for its listing, marketing and sale (the maintenance works), or if any repairs, demolitions and or modifications are required in order for any improvements or part thereof on the Crittenden Road property to comply with any laws including local council planning requirements (the structural repairs), then the Applicant and the Second Respondent shall provide notice to the other of the details of the works and shall retain and provide to the other party copies of all invoices and receipts in connection with the works undertaken by either of them; (h) the Crittenden Road property is to be offered for sale by public auction or as the licensed land agent has recommended, to be effected no later than four weeks after the appointment of the licensed land agent or, in the event that the works are undertaken, within four weeks from the completion of the works; (i) the advertising budget for the marketing of the Crittenden Road property shall be the sum of $1500 plus GST or such greater amount as agreed between the parties; (j) the reserve price shall be the sum as agreed to in writing by the Applicant and the Second Respondent; or in default of agreement, the sum which is 10% less than the anticipated selling price of the Crittenden Road property as nominated by the selected selling agent; (k) if the Crittenden Road property is to be offered for sale by public auction, and in the event that the Crittenden Road property is not sold within 40 days of the last date of the four week period fixed under Order 2(h) hereof, it may be sold for 10% less than the agreed reserve price or such other sum as agreed to in writing by the Applicant and the Second Respondent; (l) in the event that the Crittenden Road property is not sold within 75 days of the said date then either the Applicant or the Second Respondent may re-list the matter for further directions; (m) in the event that the Crittenden Road property is sold, the net proceeds of sale shall be applied as follows: (i) the agreed commission to the licensed land agent; (ii) the reasonable disbursements of the licensed land agent including any advertising and marketing costs and the reasonable fees and disbursements of any conveyancer duly appointed, in accordance with the recommendation; (iii) the amount necessary to discharge the existing mortgage registration number 10877990 over the said property; (iv) a sum of money to the Applicant or to the Second Respondent by way of a full reimbursement of the cost of the maintenance works; (v) a sum of money to the Applicant by way of a full reimbursement of the cost of the structural repairs; (vi) as to 50% of the balance of the sale proceeds, to "Colin Louis Ambrose as trustee of the bankrupt estate of Brian Robin Poumako"; and (vii) as to 50% of the balance of the sale proceeds, to the Second Respondent less any outstanding rates and or taxes on the property incurred during the period of the Second Respondent's control and or occupation of the Crittenden Road property; (n) the stamp duty and other costs normally borne by a purchaser or vendor on the transfers referred to in this Order be borne in accordance with law and with normal conveyancing practice; (o) the Applicant shall pay to the Second Respondent from his 50% share of the net proceeds of sale, the sum of $3500 by way of consideration pursuant to s 120(4) of the Bankruptcy Act 1966 (Cth) and subject to any right of set off the Applicant may have as against the Second Respondent by virtue of any agreed or taxed costs arising in favour of the Applicant against the Second Respondent by virtue of these orders, or any other orders of this Court arising from these proceedings; (p) the Second Respondent shall pay to the Applicant from her 50% share of the net proceeds of sale one half of any amount by which the principal owing on the mortgage registration number 10877990 exceeds the sum of $92,278 as and from the date the property was vacated. To the extent that mortgage principal and interest is not paid on the aforesaid mortgage from the date of the vacation of the property until its sale and settlement, then the Applicant and the Second Respondent shall be equally liable to meet the increased liability under the aforesaid mortgage; and (q) the Second Respondent and the First Respondent shall pay to the Applicant on a joint and several basis 30% of the costs of the proceedings. THE COURT DECLARES THAT:

REASONS FOR JUDGMENT 1 Judgment in this matter was given on 21 August 2012: Ambrose (Trustee) in the matter of Poumako (Bankrupt) v Poumako [2012] FCA 889 (the primary judgment). Formal orders were not then made, but were deferred pending receipt of further submissions from the parties. Those submissions were duly received, albeit a little belatedly on the part of the respondents due to a bereavement in the family. The written submissions led to a further hearing of the matter when Mr Ambrose sought, and was granted, leave to re-open his case for a limited purpose discussed below. 2 This judgment now addresses the issue as to the orders which should be made in the light of the primary judgment, and the costs of the proceedings. It should therefore be read with the primary judgment. I shall use the same abbreviations as in the primary judgment. 3 By the primary judgment, I found in relation to the Crittenden Road property that: (a) at 9 August 2005, the Crittenden Road property was held jointly by Mr Poumako and his wife, Janice Poumako; (b) on that date, it was transferred by them to their daughter, Jacqueline Poumako; (c) the then equity in that property was jointly owned by Mr Poumako and Janice Poumako; (d) the transfer was at a proper value of the property, namely $146,000, and that the transfer was effected by Jacqueline Poumako's paying part only of the value of the property, namely that amount which was the net amount she had raised by way of mortgaged funds sufficient to discharge the existing mortgage over the property, namely $92,278 and the further sum of $7000 which Jacqueline Poumako received as a first home owner's grant; (e) the unpaid balance of $46,722 was gifted to Jacqueline Poumako by her parents; (f) by reason of s 120(1) of the Bankruptcy Act 1966 (Cth) (the Act), the transfer of Mr Poumako's half share in that property was void against Mr Ambrose as the trustee of his bankrupt estate. 4 In relation to the Crafter Street property, I found that: (a) at 28 June 2005, Mr Poumako was the registered owner of that land; (b) on that date he agreed to transfer it to Mrs Cassidy for a nominated and realistic value of $180,000 and on 22 July 2005 that transfer was registered; (c) Mrs Cassidy paid $103,460 for that transfer, rather than the full value of the property, from mortgage funds raised by her over that property, being sufficient to discharge the existing mortgage granted by Mr Poumako over the property, leaving an unpaid balance of $76,540; (d) the unpaid balance was in fact gifted by Mr Poumako to Mrs Cassidy; (e) by reason of s 120(1) of the Act, the transfer of that property was void against Mr Ambrose as the trustee of the bankrupt estate of Mr Poumako. 5 Mr Ambrose accepted that the mortgages granted by Jacqueline Poumako and by Mrs Cassidy on the Crittenden Road property and the Crafter Street property respectively were valid, and that despite those two transfers being void as against him, he will have to assume the responsibilities of Jacqueline Poumako and Mrs Cassidy respectively under the mortgages which they granted: s 120(6) of the Act. 6 As noted in the primary judgment, s 120(4) of the Act has the effect that Mr Ambrose must pay to Jacqueline Poumako and to Mrs Cassidy respectively the amount equal to the consideration which they paid for the transfer that is void against him. As noted above, those amounts in respect of the Crittenden Road property are one half of $99,278, namely $49,639, because only the transfer of Mr Poumako's half-interest in the property to Jacqueline Poumako is void as against Mr Ambrose, and in respect of the Crafter Street property is $103,460. That position was explained in the primary judgment at [98] and [112]. (I note that the numbers are slightly different in the primary judgment in respect of the Crittenden Road property, but counsel for Mr Ambrose has properly pointed out the arithmetical errors in the primary judgment). 7 As I then noted, there is an apparent unfairness because s 120(4) of the Act obliges Mr Ambrose to repay those amounts respectively to Jacqueline Poumako and to Mrs Cassidy while at the same time he is also obliged to assume their liabilities to repay capital and interest on the mortgages over the two properties. Put another way, at first glance, both the transferees, Jacqueline Poumako and Mrs Cassidy, appear to have the benefit of the use of the mortgaged funds for their own purposes, as well as the benefit of the reimbursement of the substantial part of the mortgaged funds which they paid to Mr Poumako as part payment for the two respective properties. 8 That is a matter upon which I sought further submissions. 9 In addition, in relation to the Crittenden Road property, there was an issue as to what order or orders ought to be made having regard to the ongoing validity of Janice Poumako's transfer of one half of the interest in that property to Jacqueline Poumako, which was not challenged, so Jacqueline Poumako in any event remained entitled to one half of the interest in that property. It was difficult to formulate an appropriate order declaring invalid the transfer to Jacqueline Poumako only to the extent to which her father, as distinct from her mother, had transferred that property. Obviously, in the circumstances which have arisen, the joint tenancy would have become a several tenancy so that Jacqueline Poumako might be declared to hold one half of the property (received from her mother Janice Poumako) but have to transfer the other half to Mr Ambrose as trustee for the bankrupt estate of her father Mr Poumako. 10 That is a matter upon which I sought further submissions. As it happens, I have not been called upon to address any complexities arising from that situation because the parties are agreed that, if they cannot negotiate for Jacqueline Poumako to buy from Mr Ambrose in his capacity as trustee the one half share in that property the transfer of which is void against Mr Ambrose, the property should be sold and a separate accounting for the net proceeds of sale effected. Such a course would have been open to me in any event: cf Sheahan (Trustee) in the matter of Frost (Bankrupt) v Frost (No 2) [2011] FCA 686. See also on appeal Frost v Sheahan as Trustee of the Bankrupt Estate of Allan Gordon Frost [2012] FCAFC 46. An application for special leave to appeal to the High Court of Australia was dismissed on 12 December 2012: Frost v Sheahan as Trustee of the Bankrupt Estate of Allan Gordon Frost [2012] HCASL 196. There is agreement, as I have noted, that that is an appropriate order to make in the absence of some private treaty between Jacqueline Poumako and Mr Ambrose. 11 Thirdly, there was an issue in relation to the Crittenden Road property arising from the fact that Jacqueline Poumako gave evidence about, and was found to have carried out, some improvements to the Crittenden Road property at a cost of some $15,000. It was asserted, although there was no evidence to that effect, that that expenditure had increased the market value of the property and that Jacqueline Poumako should therefore be given credit for that increment in value. That is a matter different from a person such as Jacqueline Poumako simply having properly maintained the property over a period of years before a court determines that the transfer to that person was void. As I noted in the primary judgment at [100], Allsop J in Trustee of the Property of O'Halloran; in the matter of O'Halloran v O'Halloran [2002] FCA 1305 at [83]-[84] adverted to that more general issue. In this matter there was no evidence to suggest that the passage of time and the quality of maintenance of either the Crittenden Road property or the Crafter Street property had led to any material increase in value by reason of the effort and commitment of either Jacqueline Poumako or Mrs Cassidy respectively other than by the particular improvement expenditure to which I have referred. Consequently, I was not called upon to address that issue further. (I note that the further evidence called by Mr Ambrose on re-opening his case concerned the nature and lawfulness of those improvements, and the possible need for them in part to be dismantled. Incidentally, he referred to recent valuations of the Crittenden Road and Crafter Street properties, but no party made any particular submission about their significance for the purposes of the third issue, and I have not had regard to them for those purposes.) 12 However, Mr Ambrose in the light of the evidence as to those improvements, which came out only belatedly in the course of the first hearing, has now established to my satisfaction that they were effected without Council approval and apparently not in a manner or form which routinely would lead to the granting of Council approval. At the resumed hearing, there was no suggestion on the part of Jacqueline Poumako or Mr Poumako that such approval had been given. In those circumstances, I am not satisfied that, despite her expenditure on those improvements, that expenditure has led to any increment in the value of the Crittenden Road property. It is possible that, at least in part, the improvements or additions so made may need to be partly rectified or pulled down. I do not think the additional evidence establishes that that is likely to occur, although that remains a possibility. I am not critical of the quality of the evidence, but it is somewhat speculative. Obviously, a decision must be made as to how much evidence to produce in the light of the relatively small amounts involved. However, the situation is that on the one hand I do not accept now that that expenditure has led to an increase in the value of the Crittenden Road property but, on the other hand, I am not satisfied that that expenditure is all of such inappropriate nature that the cost of rectification or part demolition (if that becomes necessary) will ultimately lead to a dilution in the value of the property even after such expenditure, if any necessary, is incurred to rectify what has been done. I propose to proceed, therefore, on the basis simply that there is no need for any adjustment in respect of those improvements or that expenditure or any action which may be necessary as a result of that expenditure having not been properly approved by the relevant local government authority, save for allowing any cost of rectification to be taken into account as a cost of sale. 13 Before addressing those remaining issues and so determining the appropriate orders to be made, there are two additional matters which I mention. 14 As appears from the primary judgment, at [106]-[107], I considered it appropriate to give the parties the opportunity to see whether they could make some arrangement about dealing with the two properties or either of them in a way which would obviate the necessity to make formal orders, or which could be built into orders to be made, to provide a satisfactory economic outcome for them all. That has not come to pass. 15 In the course of oral submissions on the supplementary hearing, Mr Poumako for the respondents suggested that one obstacle to any such agreed outcome is that the respondents take the view that Mr Ambrose as trustee of the bankrupt estate of Mr Poumako, and so acting in the interests of the creditors of that estate, is obliged to deal with the properties (in the sense of giving the respondents the opportunity to acquire them) at their value at the time of the impugned transfers and not at their present value. Strictly speaking, I am not called upon to decide that issue. However, I indicate my view that the position taken by the respondent is not correct. How Mr Ambrose deals with his interests in the two properties (that is in the Crafter Street property and his half interest in the Crittenden Road property) is a matter for him. He holds those properties as trustee, and owes a duty as trustee to secure an appropriate price for them. He is not obliged to offer to sell them at their value as at 2005 (that is, the time of the impugned transfer). 16 Secondly, although I raised the prospect of a private transaction which might accommodate the respective interests of Mr Ambrose as trustee on the one hand and Jacqueline Poumako and Mrs Cassidy on the other, I did not decide in the primary judgment that the Court had power to make such an order, although there are two cases referred to in the primary judgment at [107] in which the Federal Magistrates Court of Australia has made such orders. The decision in Tyler v Thomas [2006] FCAFC 6 indicates that such orders may not be made by the Court in the face of the operation of s 120(1) of the Act. The parties have had a sufficient opportunity to reach such private arrangement or arrangements as they wish. I do not propose to extend those opportunities beyond the present time, although, of course, there is no obstacle to them continuing to negotiate as they may be advised. 17 I revert to the principal issue as to the operation of s 120(4) and the potential unfairness that may produce. In my view, the order that Mr Ambrose reimburse Jacqueline Poumako and Mrs Cassidy pursuant to s 120(4) can be supplemented by an order that that obligation be discharged by Mr Ambrose making the payment to reduce the capital indebtedness owing under the respective mortgages. 18 In other words, in respect of the Crittenden Road property, as one half of the consideration paid by Jacqueline Poumako, namely $49,639, is to be repaid to her, that liability may be discharged by paying that sum on her behalf to reduce the amount owing under the mortgage itself. It must be recalled that although the mortgage liability is secured over the subject property, the indebtedness is primarily that of Jacqueline Poumako. It was a matter of her choice as to how she applied those mortgaged funds. As that property is to be sold in the relatively near future in any event, there will be a ready accounting between Jacqueline Poumako and Mr Ambrose then to lead to the discharge of the mortgage. In the meantime, s 120(4) is satisfied on the part of Jacqueline Poumako by her recovering that sum, but by Mr Ambrose being authorised to pay that sum on her behalf to partly discharge her indebtedness secured by the mortgage. 19 In relation to the Crafter Street property, similarly, I will order that pursuant to s 120(4) of the Act that Mr Ambrose must repay to Ms Cassidy the sum of $103,460, but that he is entitled to effect that repayment by paying that sum direct to the present mortgagee of that property on her behalf. That will reduce her indebtedness secured by that mortgage. It will reduce it by the extent to which she applied those mortgage funds to the settlement payment to Mr Poumako. 20 In my view, the jurisdictional foundation for the making of such orders rests in s 30 of the Act. It is beyond doubt and it is well established that equity may be used to assist to give a trustee, and the creditors, of a bankrupt equitable remedies which support the enforcement of legal remedies prescribed under legislation: In Re Mouat; Kingston Cotton Mills Co v Mouat [1899] 1 Ch 831. In Verge v Devere Holdings Pty Ltd (No 5) [2010] FCA 1452 at [43], it was said that a court of equity will assist a trustee in bankruptcy to obtain an effective remedy following the avoidance of a disposition. Thus, eg, in Official Trustee in Bankruptcy v Alvaro (1996) 66 FCR 372 the Court ordered that a charge be placed on some real estate acquired as a result of a disposition of money from a bankrupt to a transferee which had been declared void, when it was shown that the money had been spent by the transferee to acquire that real estate. See also Lumsden v Snelson [2001] FCA 83. 21 There are some older examples of similar principles in operation. In Johnson v Royal Mail Steam Packet Company (1867) LR 3 CP 38, a ship had been mortgaged by the owner to a third party, which subsequently took possession of the ship under the terms of the mortgage. The mortgagee was then obliged to meet the indebtedness of a charterer of the ship owner to members of the charterer's crew for unpaid wages, so as to maintain his title to the ship under the mortgage. The mortgagee then successfully sued to recover from the charterer the money the mortgagee had paid to the crew. See also Noyes v Ellis (1877) 3 VLR (L) 307. 22 Such cases are described in Mason Carter and Tolhurst's "Restitution Law in Australia" Lexis Nexis Australia, 2008 at [626]-[629] as falling within the restitutionary concept of recoupment. At [632] the general requirements of a recoupment claim are set out. To paraphrase those requirements, and to apply them to the present circumstances in respect of the matters discussed above, in my view the liability of Mr Ambrose to repay the mortgages granted by Jacqueline Poumako and Mrs Cassidy respectively falls upon him by reason of s 120(6) of the Act once the transfers of those properties to them became void as against Mr Ambrose as the trustee in bankruptcy of Mr Poumako; secondly, Mr Ambrose's payment of those amounts then to reduce their indebtedness secured by the respective mortgages will benefit Jacqueline Poumako and Mrs Cassidy respectively by reducing their respective indebtedness in respect of the loans secured by the mortgages; and thirdly, Mr Ambrose's assumption of the liability under those mortgages was not due to "officiousness" on his part but due to his claim properly made under s 120(1) of the Act, pursuant to the duty which he had as trustee of the bankrupt estate of Mr Poumako to pursue those assets reasonably available to him for the benefit of the creditors of the bankrupt estate: see s 19(1)(f) of the Act. 23 Lest it be asserted that such orders would be anticipatory, and that the appropriate orders are that the moneys payable under s 120(4) be paid direct to Jacqueline Poumako and to Mrs Cassidy, and that then some order should be made directing them to apply those moneys in reduction of their indebtedness, I indicate that the anticipatory character of the proposed orders would not be inappropriate for that reason. The right under s 120(4) to receive the consideration paid and the entitlement to recoupment arise in effect all at the same time. In my view, the approach of the Full Court in Abigroup Ltd v Abignano (1992) 39 FCR 74 illustrates that when the obligation has accrued and the right to recoup has accrued, it is appropriate to make orders which have the effect which the orders I am proposing to make will achieve. In Mahoney v McManus (1981) 180 CLR 370, Gibbs CJ at 76 indicated that a right of recoupment which may be enforced by a surety before the repayment is made and may be enforced as soon as the creditor has acquired a right to immediate payment from him. 24 I do not need to consider further the second and third matters concerning the Crittenden Road property which previously were thought to arise for the reasons referred to above. I have concluded that the expenditure by Jacqueline Poumako on improvements is not shown to have increased the value of the Crittenden Road property. And it is agreed that, subject to any private arrangement, the Crittenden Road property should be sold, so any complications arising from Jacqueline Poumako's interest in that property reflecting her mother's half interest do not need to be further addressed. 25 In the case of the Crafter Street property, as the property is to be retransferred to Mr Ambrose, and will remain subject to the existing mortgage, I have included an order under s 120(4) of the Act that Mr Ambrose pay to Mrs Cassidy the consideration she paid of $103,460 but that that liability may be discharged by Mr Ambrose applying that sum to the reduction of the debt of Mrs Cassidy secured by the mortgage. As that is an entitlement of Mrs Cassidy under s 120(4), I have specified a period of 45 days within which that payment should be made. Depending on the circumstances, it would not be inappropriate for Mr Ambrose to arrange with the mortgagee to refinance that debt so that it becomes a debt owing by Mr Ambrose. Whilst the mortgagee maintains the security, the liability to satisfy the debt secured by the mortgage would then pass to Mr Ambrose exclusively. Mr Ambrose has anticipated this by proposing that he will have a right of indemnity from Mrs Cassidy for the excess of the secured debt beyond $140,000. I assume that is because that was the current level of the secured debt, as he was last informed of it. In my view, as the surplus funds borrowed by Mrs Cassidy have been secured by her interest in the property, which interest is now declared to be void, his right to indemnity from her should extend to any amount owing by her at present exceeding $103,460 as that is the limit of her entitlement under s 120(4) of the Act. In other words, he will be accountable for the full debt secured by the mortgage and he will be personally liable for the first $103,460 without recourse from her (as she gets credit for that sum as between himself and Mrs Cassidy), but he will have personal recourse to her to recover the balance. 26 As the Crittenden Road property is to be sold, and the existing mortgage will have to be discharged to give a clear title to the purchase, the adjustment between Mr Ambrose and Jacqueline Poumako may be made from the net proceeds of sale. She will be entitled under s 120(4) of the Act to be repaid half of the consideration she paid (half of $92,278 and half of $7000) and Mr Ambrose will be entitled to credit for that half of $92,278 but on the other hand will be liable to pay that sum to the mortgagee by reason of s 120(6). If the debt secured by the mortgage has increased, he will be entitled to indemnity for one half of the increase from Jacqueline Poumako as she has had the benefit of those moneys but Mr Ambrose is liable for them by reason of s 120(6). I have considered whether Mr Ambrose is entitled to the full amount of any such increase. I do not think he is. It is a practical consideration that to transfer the property requires the discharge of the mortgage. But underlying that is the more formal assumed process of a partition order, so he and Jacqueline Poumako would hold 50% each of the property and his half would be charged with one half of the mortgage debt. 27 I will delay the formal sale order for a period of 14 days, or in the case of the Crafter Street property, the transfer order for a period of 14 days, so the respondents may have one final opportunity to agree privately with Mr Ambrose about the sale and purchase of the Crittenden Road property. Thereafter, whilst of course they may continue to negotiate with Mr Ambrose and, if agreement is reached, the orders to be made may be varied by consent, Mr Ambrose will be entitled to enforce the orders made. The orders made encompass the more detailed matters relating to the sale of the Crittenden Road property, including ensuring (in the interests of all parties) securing the best price reasonably obtainable. 28 The parties' proposed orders also address the issue of stamp duty on any re-transfer. It is not clear to me, and the submissions are not sufficiently developed to indicate, that upon re-transfer by reason of the voidness of a transfer in the first place, stamp duty will be payable. I propose simply to leave that matter as it stands. 29 There remains the issue of costs. 30 Mr Ambrose has largely succeeded in his claims. He failed, in essence, on only one issue: whether the equity in the Crittenden Road property at the time of its transfer to Jacqueline Poumako was held only by Mr Poumako or was jointly held with his wife Janice Poumako. The evidence on that topic was relatively short. The orders give effect to the finding on that issue, and Jacqueline Poumako continues to benefit from that part of her interest in the property that constituted her mother's share of that property before the transfer. The sum involved is not inconsiderable in the overall picture. 31 Mr Ambrose has proposed separate orders for costs relating to the two properties. That is a sensible solution, as it may be unfair to make one costs order which, for example, affects Mrs Cassidy when she was involved in only one of the properties. He has also proposed that a practical assessment is that the separate orders for costs concerning the two properties should be equally divided. Mr Poumako should be accountable for costs in relation to both properties. 32 In the case of the Crittenden Road property, I think the proper order for costs is that Mr Poumako and Jacqueline Poumako should pay to Mr Ambrose 25% of the costs of the application. That percentage is determined to reflect the outcome on that issue, in essence to the advantage of both Janice Poumako and Jacqueline Poumako. It also takes account of the fact that Janice Poumako, despite my assessment of her evidence, has succeeded on the one issue which directly concerned her. 33 In the case of the Crafter Street property, Mr Poumako and Mrs Cassidy should bear 50% of the costs of the proceedings. 34 Accordingly, for those reasons, I make the following declarations and orders: THE COURT DECLARES THAT:

The transfer by Mr Poumako of his 50% interest in the Crittenden Road property to Jacqueline Poumako by a Memorandum of Transfer dated 9 August 2005 registration number 10281359 is void as against Mr Ambrose as trustee of the bankrupt estate of Mr Poumako pursuant to s 120 of the Act. THE COURT ORDERS THAT:
In the event that Mr Ambrose and Jacqueline Poumako do not enter into a legally binding agreement for the sale of Mr Ambrose's 50% interest in the Crittenden Road property to Jacqueline Poumako within fourteen days of the date of these orders, then: (a) the Crittenden Road property is to be sold in accordance with the timetable and terms set out in this order; (b) any occupants of the Crittenden Road property including Mr Poumako and Janice Poumako are to vacate the Crittenden Road property within 45 days of the date of this order; (c) the sale of the Crittenden Road property is to take place through a licensed land agent who shall be appointed by written agreement between Mr Ambrose and Jacqueline Poumako, or in default of agreement, each of Mr Ambrose and Jacqueline Poumako shall nominate two licensed land agents in writing in a letter to a Deputy Registrar of the Court, with a reference to this proceeding, accompanied by a letter from each nominated licensed land agent setting out the recommendation for the means of selling the said property, and the fees of the licensed land agent and any other anticipated costs for doing so, and indicating whether that licensed land agent has had the opportunity of inspecting the said property, and setting out any recommendations of that licensed land agent for any work to be carried out to the said property for the purpose of securing the best price reasonably obtainable for the said property and a rough estimate of the cost of having such work carried out and the time it is anticipated for such work to be carried out; (d) for the purposes of Order 2(c), Mr Poumako, Jacqueline Poumako and Janice Poumako shall provide reasonable access to the said property during normal business hours upon two days written notice so that each of the two licensed land agents proposed to be nominated by Mr Ambrose may inspect the Crittenden Road property and, following such inspection, each of them may revise any letter referred to in Order 2(c) following such inspection; (e) the nominations and letters referred to in Order 2(c) hereof shall be provided to a Deputy Registrar of the Court, who shall then make a recommendation (the recommendation) to the Court about the appointment of a licensed land agent to sell the Crittenden Road property and the terms of the sale (including as to any work to be done to the said property before the sale) and shall by letter send the recommendation to Mr Ambrose and Jacqueline Poumako, and unless either of them indicates within four days of the date of that letter by letter to the Deputy Registrar that they do not accept the recommendation, the recommendation shall become a direction of the Court appointing the licensed land agent in terms of the recommendation and if either of them gives such notice the Deputy Registrar shall arrange a directions hearing for the purpose of hearing the parties before the appointment of a licensed land agent to sell the Crittenden Road property; (f) Mr Poumako, Jacqueline Poumako and Janice Poumako shall grant to the licensed land agent so appointed access to the Crittenden Road property upon the provision of reasonable notice and during normal working hours for the purpose of inspecting and photographing the Crittenden Road property in preparation for its listing, marketing and sale; (g) if the licensed land agent recommends the expending of any monies towards the repair, cleaning, landscaping, painting or general maintenance of the Crittenden Road property (the works) in preparation for its listing, marketing and sale (the maintenance works), or if any repairs, demolitions and or modifications are required in order for any improvements or part thereof on the Crittenden Road property to comply with any laws including local council planning requirements (the structural repairs), then Mr Ambrose and Jacqueline Poumako shall provide notice to the other of the details of the works and shall retain and provide to the other party copies of all invoices and receipts in connection with the works undertaken by either of them; (h) the Crittenden Road property is to be offered for sale by public auction or as the licensed land agent has recommended, to be effected no later than four weeks after the appointment of the licensed land agent or, in the event that the works are undertaken, within four weeks from the completion of the works; (i) the advertising budget for the marketing of the Crittenden Road property shall be the sum of $1500 plus GST or such greater amount as agreed between the parties; (j) the reserve price shall be the sum as agreed to in writing by Mr Ambrose and Jacqueline Poumako; or in default of agreement, the sum which is 10% less than the anticipated selling price of the Crittenden Road property as nominated by the selected selling agent; (k) if the Crittenden Road property is to be offered for sale by public auction, and in the event that the Crittenden Road property is not sold within 40 days of the last date of the four week period fixed under Order 2(h) hereof, it may be sold for 10% less than the agreed reserve price or such other sum as agreed to in writing by Mr Ambrose and Jacqueline Poumako; (l) in the event that the Crittenden Road property is not sold within 75 days of the said date then either Mr Ambrose or Jacqueline Poumako may re-list the matter for further directions; (m) in the event that the Crittenden Road property is sold, the net proceeds of sale shall be applied as follows: (i) the agreed commission to the licensed land agent; (ii) the reasonable disbursements of the licensed land agent including any advertising and marketing costs and the reasonable fees and disbursements of any conveyancer duly appointed, in accordance with the recommendation; (iii) the amount necessary to discharge the existing mortgage registration number 10877990 over the said property; (iv) a sum of money to Mr Ambrose or to Jacqueline Poumako by way of a full reimbursement of the cost of the maintenance works; (v) a sum of money to Mr Ambrose by way of a full reimbursement of the cost of the structural repairs; (vi) as to 50% of the balance of the sale proceeds, to "Colin Louis Ambrose as trustee of the bankrupt estate of Brian Robin Poumako"; and (vii) as to 50% of the balance of the sale proceeds to Jacqueline Poumako less any outstanding rates and or taxes on the property incurred during the period of Jacqueline Poumako's control and or occupation of the Crittenden Road property, (n) the stamp duty and other costs normally borne by a purchaser or vendor on the transfers referred to in this Order above be borne in accordance with law and with normal conveyancing practice; (o) Mr Ambrose shall pay to Jacqueline Poumako from his 50% share of the net proceeds of sale, the sum of $3500 by way of consideration pursuant to s 120(4) of the Act and subject to any right of set off Mr Ambrose may have as against Jacqueline Poumako by virtue of any agreed or taxed costs arising in favour of Mr Ambrose against Jacqueline Poumako by virtue of these orders, or any other orders of this Court arising from these proceedings; (p) Jacqueline Poumako shall pay to Mr Ambrose from her 50% share of the net proceeds of sale one half of any amount by which the principal owing on the mortgage registration number 10877990 exceeds the sum of $92,278 as and from the date the property was vacated. To the extent that mortgage principal and interest is not paid on the aforesaid mortgage from the date of the vacation of the property until its sale and settlement, then Mr Ambrose and Jacqueline Poumako shall be equally liable to meet the increased liability under the aforesaid mortgage; and (q) Jacqueline Poumako and Mr Poumako shall pay to Mr Ambrose on a joint and several basis 25% of the costs of the proceedings. THE COURT DECLARES THAT:

At a glance

Court

Decision date

Before

Source

Judgment (5 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (11)

Cited By (1)