Field (Trustee) v Spencer

COLVIN J: 1 On 15 January 2019, Mr Malcolm Field was appointed as the trustee of the bankrupt estate of Mr Doby Spencer. The statement of affairs indicates that the affairs of Mr Spencer were without complexity. He owned a home in Bassendean which was mortgaged to the ANZ Bank. His only other significant assets were two motor vehicles with a combined resale value that was said to be $43,000. Aside from the ANZ Bank, there were four creditors identified in the statement of affairs; a school as to fees ($17,000), an accounting firm ($2,000), Citibank ($7,000) and the petitioning creditor, Gnangara Developments Pty Ltd ($53,000). There was also a costs order in favour of the petitioning creditor for $6,579.05. 2 In 2020 a notice was served by Mr Field which had the effect of extending the duration of Mr Spencer's bankruptcy until 2027. Some six years after Mr Field's appointment, very little appears to have been done to advance the administration. 3 In September 2024, Mr Field applied for orders for possession and sale of the Bassendean property. Australia and New Zealand Banking Group Ltd and Gnangara Developments Pty Ltd were subsequently joined as respondents to the application. There is an affidavit of service of the application on those parties and the orders joining them as parties. They have not appeared. 4 In response to the application, Mr Spencer appeared on his own behalf. He sought time to try and raise finance to be able to bring his bankruptcy to an end. He also indicated that he had concerns about the amount of fees that Mr Field was proposing to charge and complaints about aspects of the way in which his estate had been administered. 5 After successive adjournments, Mr Field's application was listed for hearing on 20 February 2025. Mr Spencer was directed to file any affidavit in opposition by 13 February 2025. A request was made for pro bono assistance to provide advice to Mr Spencer. 6 The Court was informed that pro bono advice had been provided to Mr Spencer and he had elected not to engage counsel to provide any assistance with the hearing. No affidavit was filed and there was no appearance for Mr Spencer at the hearing on 20 February 2025. 7 Mr Field sought to proceed with the hearing of the application. Affidavits were read and submissions made in support of the application. 8 The affidavits showed that an estimated payout figure had been provided to Mr Spencer on 13 August 2024. It was $309,360.51. 9 The calculation of the payout figure shows that the only claim actually made by creditors is for $31,711 by the Australian Taxation Office. The other estimated total creditor claims of $142,115.05 and estimated interest on those claims of $68,215.22 is based on the statement of affairs. There is also the amount for petitioning creditors costs of $6,579.05. Otherwise, there is an estimated amount for trustee's remuneration of $66,000 and estimated legal fees of $10,000. 10 As at May 2024, the secured claims of the ANZ Bank against the Bassendean property totalled about $420,000. 11 It appears that Mr Spencer and one of his daughters have resided in the Bassendean property since 2019 and still do so, although the evidence as to the daughter doing so is quite scant. On the evidence, Mr Spencer's daughter is an independent adult. There has been no arrangement between Mr Spencer and the trustee concerning his ongoing occupation of the property. It appears that Mr Spencer has continued to make mortgage repayments to the ANZ Bank. 12 As to the steps taken by Mr Field to secure possession of the property, by letters sent in September and October 2019, Mr Field demanded possession. As to what occurred after that, Mr Field has deposed as follows: My staff and I have further engaged with the Bankrupt by telephone and in meetings, in 2019, 2020, 2021 and 2022, in which the Bankrupt was advised that he would need to either propose a solution to pay the debts of the Bankrupt estate, or vacate the Property so it could be sold for the benefit of the Bankrupt's estate's creditors. I have not been able to reach any agreement with Bankrupt and he remains in occupation of the Property. 13 A further formal notice demanding possession was sent before the present application was filed and served. 14 Steps have not been taken to call for proofs of debt. 15 Mr Field's torpid discharge of his duties is unexplained. 16 I turn now to the orders sought on the application. 17 The first order that is sought is a declaration that Mr Field is the beneficial owner of the Bassendean property. There is no evidence of any controversy concerning Mr Field's interest as trustee. Mr Spencer raised no dispute about such matters when appearing at earlier hearings. The proposed order would have no utility and, therefore, should not be made: Lo Pilato (Trustee), in the matter of Ghougassian (Bankrupt) v Ghougassian (No 3) [2022] FCA 1532 at [27]-[28] (Markovic J). 18 The second order sought is an order requiring Mr Spencer to give up vacant possession. On the evidence before me, Mr Spencer remains in possession despite demand having been made for him to vacate the Bassendean property. On the evidence before me, there is no basis to refuse the making of the order which, in the circumstances, is necessary to facilitate the realisation of the principal asset of the estate. I am persuaded that an order in the terms sought is appropriate. The source of the Court's jurisdiction to make orders for possession of property forming part of a bankrupt estate was explained by Button J in Michell (Trustee) v Sinnott, in the matter of Sinnott [2023] FCA 464 at [22]-[31]. 19 The order proposed would allow 30 days to deliver up vacant possession. Having regard to the fact that the Bassendean property is the home of Mr Spencer and there is no suggestion of prejudice to the administration of the estate if there was some further time given, I will allow a period of two months. I propose to specify a date by which vacant possession must be given so the date by which there must be compliance is clear. 20 The third order sought is a property (seizure and delivery) order pursuant to the Civil Judgments Enforcement Act 2004 (WA). By that Act, the writs, warrants and orders that could be issued or made at common law or in equity or under a written law to enforce or execute a judgment of a court were abolished. They were replaced by statutory provisions for the making of enforcement orders of various kinds. However, steps taken under the Bankruptcy Act 1966 (Cth) are not subject to the operation of the Civil Judgments Enforcement Act: see my reasons in CFB18 v Reader Lawyers & Mediators [2018] FCA 611 at [67]. 21 The only instance identified by counsel appearing for Mr Field in which orders of the kind sought had been made was in Petrie, Trustee of the Property of Aitken (Bankrupt) v Aitken [2019] FCCA 1708, a case in which orders were made without consideration of the statutory regime. Reliance was also placed upon the reasoning in Scott as Trustee of the Bankrupt Estate of Williams v State of New South Wales [2022] FedCFamC2G 569 where an order for possession was made under s 66G of the Conveyancing Act 1919 (NSW) on the basis that those laws applied by operation of s 79 of the Judiciary Act 1903 (Cth). Respectfully, I am not persuaded that an order made as to the due administration of a bankrupt estate, particularly as to the possession of the property under administration, might be made pursuant to a state law on the basis that it is applied by s 79 of the Judiciary Act. This Court and the Federal Circuit and Family Court of Australia (Division 2) are given concurrent and exclusive jurisdiction in bankruptcy: s 27 of the Bankruptcy Act. 22 The leading authority of this Court as to the making of orders of possession in the exercise of bankruptcy jurisdiction is Coshott v Prentice [2014] FCAFC 88; (2014) 221 FCR 450 where the Full Court identified the Bankruptcy Act as the source of 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': at [94]. 23 The appropriate order is for a warrant of possession to issue in the event that Mr Spencer does not provide vacant possession and that fact is established by an affidavit filed in these proceedings. 24 The next orders sought concern the authority of Mr Field to arrange sale by private treaty and thereafter by public auction at a reserve price based upon advice and then by private treaty or public tender. Subject to some revisions to the orders as proposed for clarity as to the manner of their operation, I am satisfied that these orders should be made. 25 An order is also sought that would allow Mr Field to give notices to deal with caveats on the property. There is evidence that caveats have been lodged by Gnangara Developments Pty Ltd. I am satisfied that there is a proper basis for an order substantially in the terms sought. 26 Orders are sought as to the manner in which the proceeds of sale may be allocated. They provide for costs of sale and costs of discharging any encumbrances to be met first and then for the remaining proceeds to be paid to Mr Field as trustee in bankruptcy. The only evidence of a party with a secured interest is the evidence concerning the ANZ Bank as registered mortgagee. I consider it appropriate for the orders to reflect that position. If there is some other secured claim that is said to justify payment out of the proceeds then the appropriate course would be for some revision to the orders to be sought based upon evidence. 27 Finally, an order is sought as to the costs of Mr Field in bringing these proceedings to be paid in priority, such costs to be taxed if not agreed. At the hearing I indicated that I would receive submissions as to the appropriate costs order once I had determined the application. 28 I record the following matters that may bear upon the appropriate costs order. At the initial return of the application the matter was not ready to proceed because necessary parties had not been joined. Further, the very considerable unexplained delay in bringing the application was part of the reason why there were adjournments to afford Mr Spencer time to consider his response in circumstances where he had been in possession of the Bassendean property for many years after his bankruptcy. In all the circumstances, my preliminary view is that any order as to legal costs incurred by Mr Field should be confined to the costs of the hearing on 20 February 2025. However, I will hear submissions as to the appropriate order. 29 There remains one further matter to be addressed. It arises because of the unexplained delay in the administration of the estate and the extent of the estimated costs that Mr Field has indicated that he would seek to recover from the estate as matters presently stand. This Court exercises a supervisory jurisdiction over the conduct of trustees. The extent of that power is now expressed in s 90-10 and s 90-15 of Schedule 2 to the Bankruptcy Act which is described as the Insolvency Practice Schedule (Bankruptcy). The Court may exercise the powers there conferred 'on its own initiative, during proceedings before the Court'. As to the exercise of the powers, see, for example, Shaw v The Official Trustee in Bankruptcy of the Australian Financial Security Authority (No 3) [2021] FCA 1569 at [8]-[24] (Wigney J). As to the duties of a trustee, see, for example, Adsett v Berlouis (1992) 37 FCR 201 at 208-209 (Northrop, Wilcox and Cooper JJ). 30 Given the state of the evidence before the Court as to the very considerable unexplained delay in the conduct of the administration to date and the available evidence as to the absence of any complexity in that administration, I will order that the trustee show cause by affidavit and submissions as to why orders to the following effect should not be made: (1) On or before 31 May 2025 and thereafter at three monthly intervals, Mr Field do provide, at his own cost, brief reports verified by affidavit filed in these proceedings and served on Mr Spencer as to the progress of the administration of the estate with copies of the report to be provided to known claiming creditors of the estate. (2) No remuneration shall be paid to Mr Field in respect of the administration of the estate unless and until approval has been obtained from the Court by application in these proceedings, provided that reasonable disbursements may be incurred and reimbursed without approval first being obtained. 31 If no papers are filed, then orders in those terms will take effect. If papers are filed, then the Court will make directions as to the conduct of any further hearing as to whether those or different orders should be made. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Colvin.