Bellin v Pattison

REASONS FOR JUDGMENT

1. CIRCUMSTANCES IN WHICH THE APPLICATIONS ARE MADE 1 The applicant has made application under s 178 of the Bankruptcy Act 1966 (Cth) ("the Act") for review of what she has described as the decision of the Respondent not to issue a Certificate of Annulment pursuant to s 153A(2) in relation to the Applicant by reason only of the Applicant's refusal to release the Respondent from any proposed legal action relating to Lot 1, Sneydes Road, Werribee South. 2 She has also applied for an extension of time to permit her to make application to the Registrar for taxation of the respondent's remuneration as trustee of her estate. Alternative and ancillary relief is also sought by her, but it is unnecessary to say more of that in these reasons. 3 At the hearing, the applicant sought to rely on a number of affidavits, namely, her own affidavit sworn 5 May 1998 and affidavits of Elizabeth Davis sworn 7 May 1998, John Boyle sworn 3 September 1998 and Robert Fabretto sworn 7 August 1998. In reply, the respondent relied on his own affidavit sworn on 10 July 1998. The respondent was subject to cross-examination. 4 Objection was taken by the respondent to the admissibility of parts of the applicant's affidavit (namely, paragraphs 5, 6 and 7) and to the whole of the affidavit of Robert Fabretto. In relation to the applicant's affidavit, it suffices to say that, save for one matter, the facts on which she relies appear from the course of correspondence which passed between the parties and their representatives. That correspondence is exhibited to the affidavits sworn by the applicant and the respondent respectively. The affidavit of John Boyle, solicitor, establishes the other matter upon which the applicant's case depends, namely, that the applicant was not advised by him in September 1997 that she might challenge the trustee's remuneration. 5 The uncontested facts are as follows. The applicant became bankrupt on 10 October 1996 and, on that date, the respondent was appointed trustee of her estate. The applicant's estate included property situated at Lot 1, Sneydes Road, Werribee South. The property, comprising about 130.1 hectares of broadacre grazing land, was subject to a first registered mortgage to the National Australia Bank Limited ("the NAB"). By a letter dated 10 February 1997, the respondent, in his capacity as trustee, informed the applicant that, following discussions with the NAB, he had formed the intention of selling two properties forming part of her estate, including the property at Sneydes Road. A copy of that letter was forwarded to the applicant's then solicitor, Mr John Boyle of Boyle and Telfer. With the NAB's consent, the respondent, as trustee, sold the Sneydes Road property on 22 May 1997 for the sum of $1,225,000. 6 Prior to selling the property in May 1997, the respondent had obtained and considered a number of valuations and reports concerning the property. They were as follows: (a) a valuation and report from Sam Paton and Associates Pty Ltd, dated May 1996 and prepared for the NAB, indicating that, as at 24 May 1996, the property had a current market value of $400,000 and a forced sale value of $340,000. (b) a consultancy report from Colliers Jardine dated September 1996, also prepared for the NAB, stating, in part, that "[t]he market for properties of this nature is relatively shallow with few obvious potential purchasers although it should be commented that most properties which have been actively marketed in the general location have been sold". (c) a marketing submission dated March 1997 prepared by Colliers Jardine for the NAB, which valued the property at between $520,000 to $650,000 and stated "in the case of Sneydes Road, where an individual purchaser can be identified as willing to pay a higher than normal price, a tender would then be the best means of sale". (d) a valuation report dated April 1997 prepared by Russell A Mark, valuer, of Brian Mark Real Estate Pty Ltd, Werribee, for the respondent, estimating the current market value of the property, as at 16 April 1997, to be $640,000. 7 The property at Sneydes Road was not advertised for sale, locally or otherwise, prior to the sale on 22 May 1997. No signs were placed on the property to indicate that it was for sale. Towards the end of April 1997, however, the respondent received an offer to purchase the property for $1,000,000, an offer which at that time was considered to be in excess of valuation. In cross-examination, the respondent said: … we were of the view that we would be able to get the prospective purchaser up, which we did. There was quite a lot of horse trading which occurred for three to four days. A number of other offers were rejected. I think I rejected an offer of 1.1 from the same person on the basis that I was confident that I would be able to get that person up higher, and eventually we got to the stage where we believed that the purchaser would walk, had we not received the $1,225,000. At the same time I was in possession of correspondence from my agent saying that even if the property was put to auction under the current climate a figure of 1.225 million would not have been achieved by private sale. 8 When a revised offer of $1,150,000 was increased to $1,225,000 on 21 May, the respondent had discussions with the NAB and decided to accept the offer. 9 The respondent wrote to Boyle and Telfer, the then solicitors for the applicant, advising them that (1) the property had been sold; (2) sufficient funds would be realised to repay the NAB in full; and (3) vacant possession was to be given by 31 August 1997. The applicant and the purchaser were left to make arrangements for the lease back of the property. Settlement of the sale of the property was effected on 1 October 1997. The respondent, as trustee of the applicant's estate, received the balance of $184,680.02 after paying out the NAB mortgage and associated costs. 10 By a letter dated 28 October 1997, Boyle and Telfer requested payment to the applicant of some of the surplus funds. The respondent subsequently forwarded a cheque for $75,000 on account of the bankrupt's entitlement to the surplus in the estate and, at the applicant's request, a cheque for $9521.60 to meet the applicant's bill from Boyle and Telfer. 11 In December 1997 the respondent was notified, by a letter dated 11 December from the applicant's newly appointed solicitors, Barbour Arnold and Cousins, that the applicant was alleging that he had sold the property at Sneydes Road for less than its market value and that she was intending to take legal action against him. By a letter dated 22 December 1997, the respondent advised the applicant that he would be unable to give a certificate of annulment until all debts had been paid out in full, including the petitioning creditor's costs which had yet to be taxed. The respondent subsequently advised the applicant's solicitors, by a letter dated 16 February 1998, that he had received and paid the petitioning creditor's taxed bill. By a letter dated 6 January 1998, the respondent again wrote to Barbour Arnold and Cousins, setting out in some detail the steps which he had taken before selling the property by private treaty and adding that he would be unable to give a certificate of annulment "until such time I am advised by [the applicant] that I have been released by your client from any proposed legal actions in the matter". 12 By a letter dated 20 February 1998, the respondent was notified that the applicant had again changed her solicitors, the newly-engaged firm being the firm of Irlicht and Broberg. That letter further stated: I have advised [the applicant] that once all the debts of the estate, costs of the administration and the like have all been paid, she is entitled to obtain an annulment certificate. Please note that unless within 14 days you lodge with the Registrar (with a copy to this office) an annulment certificate, my instructions are to institute appropriate proceedings. … I am instructed that my client had been negotiating to sell the property for a substantially higher price and also there is a valuation of the property for a substantially higher price. The last matter which is of concern is the question of your fees. 13 The respondent replied to Irlicht and Broberg by letter dated 26 February 1998. He substantially repeated his letter of 6 January to Barbour Arnold and Cousins. He stated, amongst other things, that: In summary, as at 16 February 1998 I was able to issue [the applicant's] Certificate of Annulment, subject to [the applicant's] … statement of release confirming that any proposed legal actions against me would be abandoned. … I advise that in relation to my remuneration, I stated in my report dated 20 August 1997 to creditors that my fees and expenses to 31 July 1997 were $8,916.49 and that at the meeting of creditors which was held on 2 September 1997, the creditors were required to approve my fees and expenses to 31 July calculated on a time basis in accordance with scale of rates recommended by the Insolvency Practitioners Association of Australia and to approve any future fees and expenses to finalization to $20,000 before further authorisation from creditors was required. 14 By a letter dated 4 March 1998, Irlicht and Broberg sought, amongst other things, an extension of time in which to make application for a taxation of the trustee's costs. Cornwall Stodart, the solicitors for the respondent, responded by a letter dated 3 April 1998: no extension of time was forthcoming. 15 The circumstances relevant to the respondent's remuneration as trustee can be briefly stated. In a report to creditors dated 20 August 1997, the respondent stated that his remuneration and expenses were $8,916.49 for the period to 31 July 1997. At a meeting of creditors held on 2 September 1997 which was attended by the applicant and her then solicitor, Mr John Boyle, the creditors passed a resolution in the following terms: That the remuneration of the trustee be fixed on the hourly rate system at the rates laid down or recommended from time to time for bankruptcy work by the Insolvency Practitioners Association of Australia for the Melbourne District together with out of pocket expenses necessary and reasonably incurred to 31 July 1997 in the sum of $8,916.49 and that the trustee can draw the remuneration and expenses on a monthly basis or as required and that future remuneration to finalisation of the administration be limited to $20,000 before further authorisation from creditors was required. 16 At the meeting of creditors no opposition was expressed or objection taken by the applicant or her solicitor (who was also a creditor) to the passage of the resolution. In an affidavit sworn 3 September 1998, however, John Boyle, the applicant's then solicitor, deposed that: I was not aware that there was any method of challenging the remuneration of a trustee and consequently I did not advise [the applicant] that she had any rights in relation to the resolution of the meeting of creditors of [the respondent] in relation to his remuneration.