Colbran v Acquaro, in the matter of Acquaro

O'CALLAGHAN J 1 I made the orders set out above this morning in circumstances where Mr Ian Hone, a solicitor who appeared on behalf of the respondent, ultimately conceded that he could not "oppose, in general terms, the thrust of the matter". 2 These are my reasons for making those orders. 3 On 17 February 2022, a sequestration order under the Bankruptcy Act 1966 (Cth) was made against the estate of the respondent, Errico John Acquaro (a bankrupt). The applicant, Mr Colbran, was appointed trustee of the respondent's estate. 4 By an application filed 25 August 2023, the applicant sought orders along the lines of the orders I made. 5 The applicant read the following affidavits: (1) the affidavit of the applicant sworn 25 August 2023; and (2) the affidavits of Renee Christiane Jackson sworn 6 October 2023 and 10 October 2023. 6 On 15 June 2017, the respondent became the sole registered proprietor of the Property. 7 On 15 June 2017, Westpac Banking Corporation Ltd registered a mortgage on the Property. 8 On 25 February 2020, APS Benefits Group Ltd lodged caveat on the Property pursuant to a charge contained in an agreement dated 30 September 2019. 9 On 22 October 2020, Scottish Pacific Business Finance Pty Ltd lodged a caveat on the Property pursuant to a charge contained in an agreement dated 5 March 2020. 10 On 17 February 2022, a sequestration order was made against the respondent's estate. 11 On 23 February 2022, the applicant sent a letter to the respondent and his then solicitor including about his obligation to make and lodge a Statement of Affairs within 14 days and demanding the respondent provide to the applicant all property and documents, books and records regarding the respondent's financial and personal affairs. 12 On 23 February 2022, the applicant sent a further separate letter to the respondent regarding the Property. Relevantly, that letter stated: The Property vested in the Trustee upon your bankruptcy and remains so until one of the following events occur: • The unsecured creditors in your Bankrupt Estate are paid in full, together with the Trustee's fees and costs of the bankruptcy administration • The Estate's interest in the Property is realised by the Trustee; • I disclaim the Estate's interest in the Property; or • The Estate's interest in the property revests with your pursuant to section 129AA of the Act. I inform you that if none of the above events has occurred by the time you are discharged from your bankruptcy, the Estate's interest in the Property will, notwithstanding your discharge from bankruptcy, remain vested with the Trustee until such time as one of those events occur. A caveat will be placed on the Property to protect the Estate's interest in the Property. I will review the value of the net equity in the Property from time to time, and when the net equity is sufficient to provide a benefit to your Bankrupt Estate, I will take action to realise the Estate's interest in the Property. An alternative option to selling the Property is for a third party to pay me the amount of equity in lieu of my interest in the Property. Upon receipt of these funds, I would have no further interest in the Property and subsequently discharge any caveat I have placed on the Property. This option would require the execution of an agreement between us and any stamp duty event or costs or charges that are associated with this arrangement would by the responsibility of the third party. In the meantime, you may continue to occupy the Property, on the clear understanding that you will be required to continue paying the mortgage payments, rates and/or levies plus keeping the Property insured and in a reasonable state of repair. I consider these payments to be a form of an occupation fee. In this circumstance I request that you provide me with a copy of the certificate of currency for the home and contents insurance policy that you will maintain. Conversely, should you not wish to continue occupying the Property, would you please advise me accordingly. Any increase in the value of the Estate's interest in the Property caused by improvements made to the Property and/or market forces will be for the benefit of the unsecured creditors in your Bankrupt Estate. 13 On 19 March 2022, the respondent submitted his Statement of Affairs with the Australian Financial Security Authority. According to the Statement of Affairs: (1) the respondent's home address is the Property. (2) the respondent "Own[s] or buying the home" he lives in. (3) the respondent is "Single / never married". 14 On 19 April 2022, a report was sent to creditors regarding the bankrupt estate of the respondent. 15 On 27 April 2022, the respondent's then solicitor told the applicant that the respondent proposed to annul his bankruptcy by making a contribution of $20,000. 16 On 8 June 2022, the applicant rejected that proposal and told the respondent's solicitor that, failing the provision of a revised annulment proposal commensurate to the equity in the Property, the applicant proposed to sell it. 17 On 20 June 2022, the respondent requested that the applicant provide an annulment figure so he could determine whether it was a feasible option. 18 On 23 June 2022, Mr Alevras, on behalf of the applicant, sent an email to the respondent stating, among other things: Below I provide a current estimate of the funds required to annul your Bankrupt Estate … We are conscious of minimising costs, however our role requires us to undertake certain investigations and reporting functions that we can not avoid and are duty bound to complete. The most cost effective solution will be achieved if you can annul your bankruptcy and minimise the need for us to sell the property. This is why we have sought to engage with your solicitor and yourself to explore every option. As discussed, I will touch base with you about this e-mail and to get your feedback on how you would like to proceed. 19 On 25 June 2022, one Karen Jean Trummer lodged a caveat over the Property, claiming an "implied, resulting or constructive trust". 20 On 27 June 2022, the respondent requested that the applicant provide further evidence regarding the creditors and advised he was making enquiries with a third party to source the necessary funds for an annulment. The respondent also referred to the possibility of his spouse making an equitable contribution claim against the Property. 21 On 16 February 2023, the applicant sent a letter to the respondent regarding the Property. The letter stated relevantly the following: As you are aware, the Property is owned solely by you, and as such, has vested in me as your Trustee. You are also aware that I instructed my solicitors to place a caveat on the Property to protect my interest. As you are aware, there is significant equity in the Property, which ought to be sufficient to pay all the costs of the administration (including the petitioning creditors' taxed costs and my outstanding remuneration), together with your creditors in full. My team has explained that this would result in an annulment of your bankruptcy, meaning your bankruptcy never occurred. As you are aware, my office has communicated at length with yourself and your partner, as well as your various lawyers regarding the position and whilst I accept that you have advised me that you dispute some of your debts, I have not received evidence that your assertions are correct or a proposal to annul your bankruptcy. I believe that I have now afforded you ample time to progress this matter. Accordingly, unless I receive evidence that you (or a third party) are in possession of sufficient funds to annul your bankruptcy (estimated to be approximately $325,000 but subject to confirmation of the final and actual amounts payable to creditors and my adjudication of same, which may include considering additional interest and charges) by close of business on 2 March 2023, I will have no alternative but to instruct my solicitors to commence transmission of your interest in the Property to me immediately. Thereafter, I will also provide instructions to my solicitor to commence proceedings to enter vacant possession and immediately take steps to realise the Property. Further to my letter to you of 23 February 2022, I have allowed you to continue to occupy the Property without payment of rent on the condition that you continue to meet the mortgage repayments, pay the rates and/or levies plus keep the Property insured and in a reasonable state of repair. Accordingly, I request confirmation and evidence that you have continued to adhere to these instructions. To this end, I instruct you to provide this information and evidence to me by 2 March 2023. 22 No annulment application was made by the respondent. 23 On 5 April 2023, the applicant became registered as the sole proprietor of the Property. 24 On 21 April 2023, the applicant's solicitors sent a letter to the respondent requesting that he vacate the Property. 25 On 20 June 2023, the applicant received a letter from Westpac which enclosed a copy of a default notice. According to the default notice, the respondent was in default of the terms of his credit contract and the mortgage in the sum of $95,747.90. 26 The applicant seeks to enforce possession of the Property and principally relies on ss 30, 58, 77 and 134 of the Bankruptcy Act. Section 30(1) provides: (1) The Court: (a) has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court; and (b) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter. 27 When a person becomes a bankrupt, the property of the bankrupt vests in the Official Trustee (s 58). Section 116 provides that all property of the bankrupt (subject to certain exceptions) is property divisible amongst the bankrupt's creditors. 28 Section 77(1) imposes various duties on the respondent as a bankrupt, including the duty to "give such information about any of the bankrupt's conduct and examinable affairs as the trustee requires" (s 77(1)(ba)) and to "aid to the utmost of his or her power in the administration of his or her estate" (s 77(1)(g)). 29 Section 134(1) sets out the powers exercisable at the discretion of the trustee. Those powers include the power to "sell all or any part of the property of the bankrupt" (s 134(1)(a)). 30 Section 19 sets out the duties of trustees which includes the duty to take appropriate steps to recover property for the benefit of the estate (s 19(1)(f)). 31 In my view, it is appropriate to make each of those order sought by the applicant. There is no doubt that the Property has vested in him as trustee, and that it is property divisible amongst the respondent's creditors. 32 Further, the respondent has not sought to annul or set aside the bankruptcy. 33 The applicant said that the title search for the Property recorded a mortgage in favour of Westpac and that APS, Scottish Pacific and Ms Trummer have each lodged caveats on the Property. Given these claimed interests in the Property, the applicant submitted, correctly, that it was appropriate that a copy of the Court's orders be served forthwith on Westpac, APS, Scottish Pacific and Ms Trummer. 34 For those reasons, I made the orders.

Adjournment application 35 I should also mention that Mr Hone sought an adjournment of the application this morning and read an affidavit sworn yesterday by Ms Trummer, who deposed that she is the respondent's wife, which concerned the respondent's state of health. I refused that application for the detailed reasons which are recorded on the transcript of this morning's hearing. I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Callaghan.