Szepesvary v Weston

Federal Court of Australia|2017-04-04|Before: Moshinsky J

The separate question whether there should be an inquiry under s 179 of the Bankruptcy Act 1966 (Cth) be answered "No".
By 4.00 pm on 11 April 2017, the first respondent provide to the first applicant the information and documents referred to in paragraph 24 of the affidavit of the first applicant dated 26 August 2016, if that information or those documents are in the first respondent's possession, power or control.
The application otherwise be dismissed.
By 4.00 pm on 11 April 2017, each party file and serve an outline of submissions (of no more than two pages) on costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 The first applicant (Mr Szepesvary) was declared bankrupt on 4 February 2014 and the second applicant (Ms Ozdil), who is Mr Szepesvary's partner, was declared bankrupt on 5 August 2014. (Ms Ozdil's bankruptcy was subsequently annulled, on 5 August 2016.) Their trustees in bankruptcy are or were, respectively, the first respondent (Mr Weston) and the second respondent (Mr Vrsecky). I will refer to them together as the Trustees in Bankruptcy. 2 On 21 December 2015, the Federal Circuit Court of Australia, on the application of the Trustees in Bankruptcy, declared that the applicants' home at 44B Woodland Street, Strathmore, Victoria (the Property) vested in the Trustees in Bankruptcy and made an order requiring Mr Szepesvary and Ms Ozdil to deliver up vacant possession of the Property within 14 days of the order. They did not do so. 3 On 25 January 2016, the Federal Circuit Court, on the application of the Trustees in Bankruptcy, issued a warrant of possession directed to the Sheriff in relation to the Property (the Warrant of Possession). 4 On 23 February 2016, six representatives of the Sheriff's Office of Victoria together with four officers of Victoria Police took possession of the Property. Ms Ozdil was home at the time and was forcibly removed. Neither Mr Szepesvary, nor the applicants' two children, were home at the time. 5 Central to the applicants' case in this proceeding is the proposition that the representatives of the Sheriff's Office of Victoria who took possession of the Property on 23 February 2016 did not serve the Warrant of Possession on Ms Ozdil but rather served a Seven Day Notice for the payment of outstanding fines totalling $512.10 (the Seven Day Notice). On this basis, Mr Szepesvary and Ms Ozdil contend, in summary, that the taking of possession of the Property was unlawful and that the Trustees in Bankruptcy are responsible for this. 6 For the reasons set out below, it is established by the evidence, in particular by a video recording taken by Ms Ozdil on her mobile phone during the taking of possession, that the representatives of the Sheriff's Office of Victoria did act under the Warrant of Possession (and presented the Warrant of Possession to Ms Ozdil) when they took possession of the Property. It follows that the representatives of the Sherriff's Office of Victoria were authorised to take possession of the Property. 7 The hearing of this proceeding comprised: (a) the hearing of a separate question, namely the question whether there should be an inquiry under s 179 of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act); and (b) the final hearing of Mr Szepesvary's and Ms Ozdil's claims based on s 178 of the Bankruptcy Act and ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) (Federal Court of Australia Act). 8 It follows from the conclusion in [6] above, and the other matters discussed below, that the separate question whether there should be an inquiry under s 179 of the Bankruptcy Act should be answered "No". 9 Subject to one matter, Mr Szepesvary's and Ms Ozdil's claims based on s 178 of the Bankruptcy Act and ss 37M and 37N of the Federal Court of Australia Act should be dismissed. The one matter is that Mr Szepesvary sought from Mr Weston certain information and documents relating to the debt claimed by the petitioning creditor in respect of his bankruptcy. Mr Szepesvary gave evidence that the information and documents have not been provided. Mr Weston did not file any evidence in response. In the circumstances, I will order Mr Weston to provide this information and these documents, if they are in his possession, power or control.

The hearing 10 The applicants relied on an affidavit of Ms Ozdil dated 17 May 2016 and an affidavit of Mr Szepesvary dated 26 August 2016. They tendered three video recordings which were recorded at or about the time when the representatives of the Sheriff's Office of Victoria took possession of the Property; one of the videos was taken inside the house; the other two were taken outside the house. I have watched the videos. 11 The respondents relied on two affidavits of Lisa McNicholas, an employee solicitor at Smith Leonard Fahey Lawyers, the solicitors for the Trustees in Bankruptcy. Both Ms Ozdil and Mr Szepesvary were cross-examined by the respondents' counsel. Ms McNicholas was cross-examined by Mr Szepesvary. (Mr Szepesvary and Ms Ozdil did not have legal representation and appeared for themselves at the hearing.)

Background facts and matters 12 The following facts are based on the affidavit evidence, the evidence given during cross-examination and the video recordings. 13 On 4 February 2014, Mr Szepesvary was declared bankrupt. Messrs Weston and Porter were appointed trustees of the bankrupt estate of Mr Szepesvary. Mr Porter was subsequently removed as a trustee on 3 September 2015 by an order of the Federal Circuit Court (see [57] below). 14 On 5 August 2014, Ms Ozdil was declared bankrupt. Mr Vrsecky was appointed trustee of the bankrupt estate of Ms Ozdil. 15 As at the time of their bankruptcies, Mr Szepesvary and Ms Ozdil were the joint registered proprietors of the Property. 16 On 20 August 2014, Messrs Weston and Porter successfully registered a transmission application in respect of Mr Szepesvary's share in the Property, and thus became the proprietors of one of two equal undivided shares in the Property. 17 On 7 October 2014, Mr Vrsecky successfully registered a transmission application in respect of Ms Ozdil's share in the Property, and thus became the proprietor of the remaining one of two equal undivided shares in the Property. 18 On 11 May 2015, the Trustees in Bankruptcy filed proceeding No. MLG 1036/2015 in the Federal Circuit Court seeking (among other things): (a) a declaration that the Trustees in Bankruptcy were the beneficial owners of the Property; (b) vacant possession of the Property; and (c) an order empowering the Trustees in Bankruptcy to sell the Property. 19 On 21 December 2015, a judge of the Federal Circuit Court made the following declaration and orders: THE COURT DECLARES THAT: 1. The land described as Lot 2 on Plan of Subdivision 324371G being the whole of the land in Certificate of Title Volume 10101 Folio 392 (the Land) being the land known as 44B Woodland Street, Strathmore, in the State of Victoria vests in the applicants pursuant to ss.58, 115(1) and 116(1) of the Bankruptcy Act 1966 (Cth) as tenants in common in equal shares. THE COURT ORDERS THAT: 2. The respondents deliver up to the applicants vacant possession of the Land within 14 days of this order. 3. Pursuant to s.234D of the Property Law Act 1958 (Vic) as applied by s.79(1) of the Judiciary Act 1903, the land and buildings comprising the property be sold by the applicants. 4. The applicants have the sole conduct and control of the sale of the Land, and are authorised to make all decisions with regard to the sale including appointing a real estate agent, appointing solicitors to undertake the necessary conveyance, choosing the method of sale and setting the reserve price (if any) for the sale. 5. In the event that the respondents fail to deliver up vacant possession of the Land in accordance with the order 2 above, a warrant of possession shall issue forthwith in favour of the applicants. 6. The respondents at their own cost and expense must remove from the Land all vehicles, chattels and personal possessions on the Land and any rubbish on the Land which has not vested in the applicants (the personal property) within 14 days of the date of this order. 7. In the event that the respondents fail to comply with order 6 above, the applicants are empowered to remove and dispose of the personal property as they see fit after 14 days have passed from the making of this order. 8. The respondents have liberty to bid at any auction sale of the Land on the condition that they have demonstrated, prior to any auction, the financial means to purchase the Land. 9. The proceeds of the sale of the Land be disbursed as follows: (a) first, in payment of all selling costs including agent's commissions, advertising and marketing expenses and all conveyancing and legal costs associated with the sale and the applicants' realisation costs; (b) secondly, in payment of the amount owing (if any) to the encumbrancer (if any); and (c) thirdly, the then available proceeds to be divided equally between the first and second applicant. 10. The applicants' costs of this application be paid by the respondents, to be taxed in default of agreement. 20 Mr Szepesvary and Ms Ozdil did not provide vacant possession of the Property. 21 On or about 23 December 2015, the Trustees in Bankruptcy applied to the Federal Circuit Court for the issue of warrant of possession of the Property. The application was supported by an affidavit of Ms McNicholas dated 23 December 2015 (a copy of which was annexed to Ms Ozdil's affidavit). Although Ms McNicholas's affidavit relies on r 25B.22 of the Federal Circuit Court Rules 2001 (Cth), that does not appear to be the correct rule, as it relates to enforcement in relation to family law and child support proceedings (see r 25B.05). The correct rule would appear to be r 29.11(1), which provides that a party "may apply to the [Federal Circuit] Court to issue a writ, order or any other means of enforcement of a judgment or order that can be issued or taken in the Supreme Court of the State or Territory in which the judgment or order has been made, as if it were a judgment or order of that Supreme Court". (This rule is supported by and reflects the provisions of s 78(2) of the Federal Circuit Court of Australia Act 1999 (Cth).) The Supreme Court (General Civil Procedure) Rules 2015 (Vic) relevantly provide, in r 66.03, for possession of land to be obtained by a "warrant of possession". 22 On 25 January 2016, the Warrant of Possession was issued by the Federal Circuit Court. The Warrant of Possession was addressed to the Sheriff and directed him or her, in respect of the orders made by the Federal Circuit Court on 21 December 2015, to: Enter the [Property] and cause [the Trustees in Bankruptcy] to have possession of it and Indorse on this warrant immediately after you have performed all your obligations under it a statement of the date, time and place at which you have executed or attempted to execute the warrant and the results of the execution and send a copy of the statement to the [Trustees in Bankruptcy], care of [their] solicitors. The Warrant of Possession was addressed to "the Sheriff". I take this to be a reference to the Sheriff of the Federal Circuit Court, in circumstances where the document was issued by the Federal Circuit Court and the Federal Circuit Court of Australia Act provides (in s 99(1)(b)) for there to be such an officer (see also s 106). Section 108 of that Act provides that the Sheriff may authorise persons to assist him or her in the exercise of any of his or her powers or the performance of any of his or her functions. It is to be inferred that the Sheriff of the Federal Circuit Court authorised the relevant representatives of the Sheriff's Office of Victoria to assist with the execution of the Warrant of Possession. 23 On or about 11 February 2016, Mr Szepesvary and Ms Ozdil received a Final Notice to Vacate Property (the Final Notice to Vacate). The document was prepared by the Sheriff's Office of Victoria. A copy of this notice was attached to an email sent by Ms Ozdil to the Department of Justice of Victoria on 11 February 2016. This email establishes that Mr Szepesvary and Ms Ozdil received the notice. 24 On 12 February 2016, proceeding No. VID 961 of 2015 came before a judge of this Court. By this proceeding, Mr Szepesvary and Ms Ozdil were appealing the orders of the Federal Circuit Court made on 21 December 2015. At the hearing on 12 February 2016, Mr Szepesvary and Ms Ozdil sought a stay of the orders made by the Federal Circuit Court. That application was dismissed: Szepsevary [sic] v Weston [2016] FCA 91. Ms Ozdil appeared in person at the hearing of the application for a stay. As recorded in the reasons for judgment on the stay application (at [2]), on 5 January 2016, another judge of this Court had granted a conditional stay of the 21 December 2015 orders, but the condition (being payment of $5,000 to the National Australia Bank on or before 7 January 2016) had not been satisfied. 25 The reasons for judgment on the stay application state at [3]: "The [Trustees in Bankruptcy] have caused a warrant of possession to issue conformably with order 5 made by the Federal Circuit Court on 21 December 2015. The sheriff was proposing to enter into possession of the property this morning, at which stage [Mr Szepesvary and Ms Ozdil] made the application which comes before me today." This indicates that Mr Szepesvary and Ms Ozdil were aware of the issue of the Warrant of Possession and the intention to take possession of the Property. That was the context in which, and the reason why, they were seeking a stay of the orders made on 21 December 2015. 26 On 23 February 2016, six representatives of the Sheriff's Office of Victoria, together with four officers of Victoria Police, attended and took possession of the Property. (I note that Ms McNicholas's affidavit of 28 October 2016 incorrectly referred to the date as 29 February 2016, but this was corrected in oral evidence.) As noted above, Ms Ozdil was home at the time and was forcibly removed; Mr Szepesvary was not home at the time; nor their two children. 27 Ms Ozdil gave evidence in her affidavit that she was served with the document which is annexure "BCO1" to her affidavit (ie, the Seven Day Notice) and that no other warrant was served on her. On the basis of this evidence, Mr Szepesvary and Ms Ozdil submit that they were not served with the Warrant of Possession by the Sheriff's Office of Victoria when the representatives of that office took possession of the Property. 28 Before addressing factual issues relating to the Warrant of Possession, I will describe the Seven Day Notice. The Seven Day Notice was issued by the Sheriff's Office of Victoria and dated 23 February 2016 (the same date as the day on which possession of the Property was taken). It stated that infringement warrants had been issued against "you" (apparently, Ms Ozdil) and that she had seven days from the date of the notice to pay the amounts outstanding before the warrants could be executed. The total amount unpaid was stated to be $512.10. 29 Returning, now, to the Warrant of Possession, it is clear from the first of the three video recordings that the representatives of the Sherriff's Office of Victoria were acting under, and presented Ms Ozdil with, the Warrant of Possession, when they took possession of the Property. The video shows the representatives of the Sheriff's Office of Victoria showing Ms Ozdil a document and then reading from it. Ms Ozdil then said (at about 25 seconds into the video) "date of issue 25th of the first". I take this to be a reference to the 25th of January, which was the date of issue of the Warrant of Possession (and which does not appear on, or in relation to, the Seven Day Notice). Ms Ozdil also said, "that is the same one you tried to serve me again". In the context of what had gone before, I take this to indicate that the document was the Warrant of Possession. These statements, as recorded on the video, establish that the representatives were acting under the Warrant of Possession and presented this document to Ms Ozdil. 30 The first video recording lasts about 17 minutes. Apart from the first few minutes, there is no visual recording but only audio recording (it would seem that the mobile phone was put down). The video records Ms Ozdil's protests about being evicted from her home and the efforts of the representatives of the Sheriff's Office of Victoria to do so peacefully. On several occasions, the representatives made statements to the effect that Ms Ozdil had the opportunity to collect medications and any things she needed for the next few hours. 31 Subsequently, at about 9 minutes, 16 seconds into the video recording, the representatives referred to outstanding infringement warrants for $512.10. Ms Ozdil was given the Seven Day Notice at this time. Ms Ozdil said that she had made a payment arrangement and showed them documents evidencing a payment plan. 32 Ultimately, at about 12 minutes, 30 seconds into the video recording, Ms Ozdil was forcibly removed from the Property. 33 It is convenient to note at this point that, on 6 May 2016, in response to correspondence from Mr Szepesvary and Ms Ozdil, the solicitors for the Trustees in Bankruptcy sent them a letter attaching a copy of the Warrant of Possession. The copy attached to the letter does not contain an indorsement by the Sheriff of the date, time and place at which the Sheriff executed the warrant. Some reliance was placed by Mr Szepesvary and Ms Ozdil in their submissions on the absence of such an indorsement. It seems surprising that the solicitors for the Trustees in Bankruptcy have not been able to produce an indorsed form of the Warrant of Possession, given that (as indicated above) the indorsed form of the warrant was to be sent to them. But, even if it be assumed that the Sheriff failed to indorse the Warrant of Possession, I do not think any failure to do so would affect the validity of the taking of possession. The requirement to indorse the warrant was a formal requirement to be completed after the taking of possession had been effected. A failure to comply with that requirement would not affect the validity of the taking of possession which had already occurred. 34 Following the taking of possession of the Property, the Trustees in Bankruptcy arranged for Mr Szepesvary's and Ms Ozdil's personal items which remained at the Property to be packed, relocated and stored at a commercial storage facility. The only items that were not moved to the storage facility were goods that could not be stored, including food, gas bottles, paint cans, pot plants and marijuana. (Despite order 6 of the 21 December 2015 orders, Mr Szepesvary and Ms Ozdil had not removed their personal belongings from the Property before the Warrant of Possession was executed on 23 February 2016.) 35 On 7 March 2016, the solicitors for the Trustees in Bankruptcy sent an email to Mr Szepesvary and Ms Ozdil attaching a letter setting out the location of their personal belongings and providing them with access to the storage location. Although the Trustees in Bankruptcy, through their solicitors, had earlier sought a release and indemnity from Mr Szepesvary and Ms Ozdil before providing the location, ultimately the Trustees in Bankruptcy provided the location and access without requiring the release and indemnity. 36 In early April 2016, Mr Szepesvary and Ms Ozdil broke into the Property (the locks having been changed on or about 23 February 2016) and brought back some of their belongings. On 12 April 2016, officers of Victoria Police attended the Property and evicted Mr Szepesvary. No notice of eviction or warrant of possession was served or relied upon on this occasion. However, it does not appear to me that it was necessary to serve or rely upon such documents in circumstances where the Trustees in Bankruptcy were in possession of the Property pursuant to the orders of 21 December 2015. The Trustees in Bankruptcy arranged for Mr Szepesvary's and Ms Ozdil's personal items which were at the Property to be packed, relocated and stored at a commercial storage facility. 37 On 20 April 2016, the solicitors for the Trustees in Bankruptcy sent an email to Mr Szepesvary and Ms Ozdil informing them of the location of their personal belongings. 38 In May 2016, there was correspondence between the parties about an inventory and photographs, prepared or taken on behalf of the Trustees in Bankruptcy, of the personal belongings taken into possession on and after 23 February 2016. Mr Szepesvary and Ms Ozdil sought copies of the inventory and photographs but the Trustees refused to provide this. In a letter dated 6 May 2016, the solicitors for the Trustees in Bankruptcy stated that they had been instructed not to provide the photographs and inventory of items removed from the Property on the basis that they were obtained and paid for by the Trustees in Bankruptcy and it was in their discretion whether or not to provide them. 39 On 10 May 2016, proceeding No. VID 961 of 2015 (being Mr Szepesvary's and Ms Ozdil's appeal against the orders made by the Federal Circuit Court on 21 December 2015) came on for hearing. Mr Szepesvary and Ms Ozdil appeared in person, but made no submission in support of their appeal. In these circumstances, the appeal was dismissed: Szepesvary v Weston (No 2) [2016] FCA 535. 40 On 14 May 2016, the Property was sold at public auction for $630,000. Settlement of the sale took place on 19 July 2016. 41 The solicitors for the Trustees in Bankruptcy sent several letters to Mr Szepesvary and Ms Ozdil in the period June to September 2016 urging them to collect their personal possessions, failing which the items would be disposed of. 42 On 5 August 2016, Ms Ozdil's bankruptcy was annulled by this Court: Ozdil v Vrsecky (Trustee) [2016] FCA 881. The basis for the decision to annul the bankruptcy was that notice had not been given to Ms Ozdil of the assignment of her credit card debt (of approximately $16,000) from Westpac Banking Corporation to Baycorp Collections PDL (Australia) Pty Ltd (Baycorp), the petitioning creditor. Accordingly, no debt was owed to Baycorp at the time of making the sequestration order. As explained at [14] of those reasons, at the time of the making of the sequestration order, had the Court been apprised of the fact that notice of assignment of the debt had not been given to Ms Ozdil, such an order would not have been made. 43 On 11 August 2016, the solicitors for the Trustees in Bankruptcy wrote to Mr Szepesvary and Ms Ozdil. The letter stated that the letter was an attempt to resolve "all of the outstanding issues regarding your respective Bankrupt Estates". The letter set out details of the sale of the Property. After deduction of costs relating to the sale, adjustments and discharge of the mortgage, there was a balance of approximately $253,000. The letter stated that significant additional costs had been incurred in the administration of the estates as a result of (among other issues) Mr Szepesvary's and Ms Ozdil's applications to the Federal Circuit Court and this Court. The letter stated that these matters, "together with your near constant email communication with the Trustees and their solicitors has incurred significant expenses to your respective Bankrupt Estates" and that, as a result, there was no money remaining in either of the bankrupt estates. The letter then set out, at a high level, the amounts that had been billed (and received) for disbursements and remuneration. It is beyond the scope of this proceeding to consider, as a general matter, the reasonableness of the amounts incurred by the Trustees in Bankruptcy, whether in respect of their own remuneration or legal fees. The net effect of the matters set out in the letter was that the entire balance of approximately $253,000 from the sale of the Property was used up in disbursements, legal fees and trustee's remuneration. 44 On or about 11 October 2016, in circumstances where the solicitors for the Trustees in Bankruptcy had received no response from Mr Szepesvary and Ms Ozdil, Mr Szepesvary and Ms Ozdil had not collected their goods, and there were no funds remaining in the respective bankrupt estates to meet the ongoing storage costs, the Trustees in Bankruptcy disposed of the personal items being held in storage.

Section 179 of the Bankruptcy Act 45 Although s 179 of the Bankruptcy Act has been repealed (with effect from 1 March 2017) by the Insolvency Law Reform Act 2016 (Cth), proceedings already begun in the Court before the commencement of the amendments continue under the Bankruptcy Act as it stood before the amendments: see Insolvency Law Reform Act, Sch 1, Pt 3, items 101, 164. As this proceeding was commenced in 2016, former s 179 continues to apply. Both sides proceeded on this basis. 46 Section 179 provided as follows: (1) The Court may, on the application of the Inspector-General, a creditor or the bankrupt, inquire into the conduct of a trustee in relation to a bankruptcy and may do one or both of the following: (a) remove the trustee from office; and (b) make such order as it thinks proper. (2) The Inspector-General or a creditor may at any time require a trustee to answer an inquiry in relation to the bankrupt's estate or affairs. 47 The principles applicable to s 179 were discussed by French J (as his Honour then was) in Macchia v Nilant (2001) 110 FCR 101 at [47]-[51]. At [49], his Honour stated that, as appears from the language of s 179, the provision invites, first, a consideration of whether the Court should inquire into the conduct of the trustee; if an inquiry is undertaken, the next question is whether the trustee should be removed from office and/or any other order made. French J stated that the first question requires the Court to consider whether, on the grounds and facts before it, a case has been made for an inquiry, citing Re Alafaci; Registrar in Bankruptcy v Hardwick (1976) 9 ALR 262 at 268. His Honour then stated that the application of s 179 to that first step involves a broad discretion as to whether or not there are sufficient grounds to make an inquiry appropriate, citing Turner v Official Trustee in Bankruptcy [1998] FCA 1558. 48 At [50], French J stated that s 179 operates in aid of the Court's supervision of trustees who are its officers; that operation, however, is subject to restraint against undue interference and to discretionary considerations including the practical benefit likely to be derived from the conduct of any inquiry. His Honour stated that the section is not a vehicle for pressing claims for common law damages, that being a matter for a court of appropriate jurisdiction. 49 French J noted further, at [51], that s 179 may be invoked by a person who has been discharged from bankruptcy, as such a person is still a bankrupt for the purposes of the section. See also Ferella v Official Trustee in Bankruptcy (2010) 188 FCR 68 at [22] per Yates J. I will proceed on the basis that the section may also be invoked by a person whose bankruptcy has been annulled: see Official Receiver v Todd (1986) 14 FCR 177 at 183 per Lockhart J, cited in Ferella at [16]. The respondents did not suggest otherwise. 50 Applying these principles to the present case, in my opinion, a case has not been made for an inquiry into the conduct of the Trustees in Bankruptcy in relation to the bankruptcies of Mr Szepesvary and Ms Ozdil. 51 One of the main contentions in Mr Szepesvary's and Ms Ozdil's outline of submissions was that they were not served with the Warrant of Possession when the representatives of the Sheriff's Office of Victoria took possession of the Property. The Warrant of Possession is a document directed to the Sheriff authorising him or her to enter the Property and cause the Trustees in Bankruptcy to have possession of the Property. As set out in [29] above, it is clear from the first of the three video recordings that the representatives of the Sherriff's Office of Victoria were acting under, and presented Ms Ozdil with, the Warrant of Possession when they took possession of the Property. It follows that the contention of Mr Szepesvary and Ms Ozdil does not provide a basis for an inquiry. 52 Another point raised by Mr Szepesvary and Ms Ozdil in their outline of submissions is that the Warrant of Possession was not indorsed by the Sheriff's Office of Victoria. But, as stated above, I do not think any failure to indorse the warrant would affect the validity of the taking of possession of the Property. It follows that this does not provide a basis for an inquiry. 53 Mr Szepesvary and Ms Ozdil also contend in their outline of submissions that they were not served with a notice to vacate the Property prior to being evicted. But, as set out in [23] above, on or about 11 February 2016, they received the Final Notice to Vacate. Moreover, as discussed above, on 12 February 2016, this Court heard and determined an application for a stay of the orders dated 21 December 2015 in the context of the Sheriff's Office of Victoria seeking to take possession of the Property. In these circumstances, it is not tenable to suggest that Mr Szepesvary and Ms Ozdil were not on notice of the intention to take possession. 54 Mr Szepesvary's and Ms Ozdil's outline of submissions contains criticisms of the affidavits of Ms McNicholas. In substance, Mr Szepesvary and Ms Ozdil disagree with some of the factual matters dealt with in Ms McNicholas's affidavits. I have dealt with these factual matters above. These submissions do not provide a basis for inquiring into the conduct of the Trustees in Bankruptcy. Mr Szepesvary's affidavit contains evidence to the effect that some of the personal belongings taken into possession by the Trustees in Bankruptcy on and after 23 February 2016 were damaged or infested with fleas. However, it is unclear whether any such damage or infestation was the responsibility of the Trustees in Bankruptcy. It is also important to note that Mr Szepesvary and Mr Ozdil were required by the 21 December 2015 orders to remove such belongings themselves, but did not do so. I do not think this evidence provides a sufficient basis for an inquiry. 55 In addition to the above contentions, in Mr Szepesvary's and Ms Ozdil's statement of claim they allege (albeit in the context of s 178 of the Bankruptcy Act, but also relied upon in relation to s 179) that: (a) Mr Vrsecky sold the Property while Ms Ozdil's bankruptcy annulment application was before the Court; (b) Mr Vrsecky failed to act ethically and impartially by not extending or postponing settlement of the Property until Ms Ozdil's annulment application had been determined; (c) Mr Vrsecky divided the proceeds of Ms Ozdil's estate prior to determination of the annulment application and to Ms Ozdil's detriment; and (d) Mr Vrsecky failed to verify whether the assignment of the debt (alleged by Baycorp to be due and owing by Ms Ozdil) was effective. 56 In circumstances where Mr Szepesvary and Ms Ozdil had applied for a stay of the 21 December 2015 orders, this had been refused, and no stay had been sought or obtained pending determination of Ms Ozdil's annulment application, I do not think it was incumbent upon Mr Vrsecky to postpone the sale of the Property and I do not think a case has been made for an inquiry into the failure to postpone the sale. I note also that, notwithstanding an annulment, the trustee may apply the property of the former bankrupt still vested in the trustee in payment of the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee: Bankruptcy Act, s 154(1)(b). Given the amount of the costs, charges and expenses of the administration of Ms Ozdil's estate, even if sale of the Property had been postponed, it is likely to have been necessary in any event to apply the Property to payment of the costs, charges and expenses of the administration of the bankruptcy. For the same reason, the allegation that Mr Vrsecky divided the proceeds of Ms Ozdil's estate prior to the determination of the annulment application does not provide sufficient grounds for an inquiry. As for the allegation that Mr Vrsecky failed to verify whether the assignment of the debt was effective, I do not think it was incumbent on Mr Vrsecky to verify the basis upon which the sequestration order was made (if this is the basis for this contention). In any event, the matter having now been examined and determined by this Court (see [42] above), there is no sufficient basis for an inquiry. 57 The statement of claim also includes an allegation that Mr Szepesvary's position has been adversely altered because of certain acts, omissions or decisions of Mr Weston. These allegations refer to the removal of James Lloyd Porter as a trustee in bankruptcy. (Mr Porter had been appointed as joint and several trustee with Mr Weston, but Mr Porter was removed as trustee on 3 September 2015 pursuant to an order of the Federal Circuit Court. It seems that this followed his resignation from Mr Weston's firm.) The statement of claim alleges that Mr Weston did not have power to act as sole trustee after Mr Porter's removal. There does not appear to be any substance to this allegation. 58 It is also alleged in the statement of claim that Mr Weston is withholding information sought by Mr Szepesvary. I will deal with this allegation below, in the context of s 178 of the Bankruptcy Act. In light of my conclusions in relation to this matter in the context of s 178, it does not provide the basis for an inquiry. The statement of claim also includes an allegation that Mr Weston has "decelerated" the timely lodgement of Mr Szepesvary's annulment application. I note that Mr Szepesvary has an annulment application on foot (see Szepesvary v Weston (Trustee), in the matter of Szepesvary (Bankrupt) [2016] FCA 1464, which dealt with a recusal application in the context of that application). The affidavit of Mr Szepesvary does not deal with how it is said Mr Weston may have delayed the lodgement of the annulment application. In these circumstances, there does not appear to be any substance to this allegation. 59 For these reasons, the separate question whether there should be an inquiry under s 179 of the Bankruptcy Act should be answered "No".

Section 178 of the Bankruptcy Act 60 Section 178 was also repealed by the Insolvency Law Reform Act but, by virtue of the same transitional provisions as applicable to s 179, continues to apply to this proceeding. 61 Section 178 provided as follows: (1) If the bankrupt, a creditor or any other person is affected by an act, omission or decision of the trustee, he or she may apply to the Court, and the Court may make such an order in the matter as it thinks just and equitable. (2) The application must be made not later than 60 days after the day on which the person became aware of the trustee's act, omission or decision. 62 The principles applicable to s 178 were also discussed by French J in Macchia v Nilant (see [30]-[46]). In particular, his Honour said at [38]: Section 178 confers a "supervisory jurisdiction over the conduct of the trustee": Cummings v Claremont Petroleum NL (1996) 185 CLR 124 at 133 (Brennan CJ, Gaudron and McHugh JJ). It confers a power to "in substance" review the decision of the trustee: McGoldrick at 556. The power is necessarily judicial: Re Wheeler; Ex parte Wheeler v Halse (1994) 54 FCR 166 at 170 (Lee J). In the latter case Lee J said that the Court could not, in an application under s 178, be asked to perform the administrative function of a trustee administering an estate in bankruptcy. It is given original jurisdiction, the exercise of which might entail "orders of a supervisory character in so far as the determination of questions of law raised by the application require those orders to be made" (169). The applicant "must show a ground on which the trustee's administration of the affairs of the bankrupt is to be reviewed". That proposition must be read with the generic concept of review in the original jurisdiction of the Court as one which can, according to context, enliven "the jurisdiction of the court in respect of the whole matter" raising issues of either or both law and fact: Western Australia v Strickland (2000) 99 FCR 33 at 49-50, citing inter alia, Re Tyndall. Some functions which are administrative in character when exercised by an administrator have the chameleon quality of becoming judicial when exercised by a court: Commissioner of Taxation (Cth) v Munro (1926) 38 CLR 153 at 175-179 (Isaacs J); R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1971) 123 CLR 361 at 363 (Kitto J); Cominos v Cominos (1972) 127 CLR 588 at 606 (Mason J). In relation to s 178 it is unnecessary, for the purpose of enlivening the court's jurisdiction, to find that the trustee has done anything wrong. His decision may, on the material before him, have been quite correct and reasonable: Gray v Clout (1990) 27 FCR 141 at 144 (Pincus J). On the other hand, it is not to the point that the judge who hears a review application might have acted differently: Healey v Prentice (No 2) [2000] FCA 1598 (Madgwick J). It is not necessary here to discern the outer limits of s 178 but rather to emphasise its importance in providing for wide ranging supervision by the Court of trustees who are appointed to administer the interests of bankrupts in the interests of creditors and, in so doing, to have regard also to the interests of the bankrupts: Haskins v Insolvency and Trustee Service Australia (unreported, Federal Court, Full Court, No V6 194, V6 238 and V6 400 of 1996, 3 October 1996). 63 With one exception, Mr Szepesvary's and Ms Ozdil's claims based on s 178 of the Bankruptcy Act should be dismissed. 64 Most of the allegations made by Mr Szepesvary and Ms Ozdil in the relevant section of the statement of claim are premised on the proposition that the Trustees in Bankruptcy acted "under an unrelated warrant wrongfully executed". This is a reference to their contention that the representatives of the Sherriff's Office of Victoria did not serve the Warrant of Possession, but rather the Seven Day Notice, when they took possession of the Property on 23 February 2016. But, for the reasons given above, the representatives were acting under the Warrant of Possession, and presented this document to Ms Ozdil, when they took possession. In light of this, the allegations premised on the Trustees having acted "under an unrelated warrant wrongfully executed" cannot be sustained. 65 Mr Szepesvary and Ms Ozdil also make allegations which depend upon the proposition that they were not served with a seven day notice to vacate the Property, prior to possession being taken on 23 February 2016. However, for the reasons given above, they received the Final Notice to Vacate on or about 11 February 2016. Accordingly, these allegations cannot be sustained. 66 The allegations in relation to Mr Vrsecky discussed in [55]-[56] above should be dismissed for the same reasons given in those paragraphs. 67 The allegations in relation to Mr Weston (other than the withholding of information allegation) discussed in [57]-[58] above should be dismissed for the same reasons given in those paragraphs. 68 One of the allegations in the statement of claim (at paragraph 24(d)) is that Mr Weston is withholding information sought by Mr Szepesvary. The allegation is denied in the defence. In Mr Szepesvary's affidavit, he provided further details (at paragraphs 24-28). In these paragraphs, Mr Szepesvary set out information he had sought from Westpac Banking Corporation (Westpac) and ACM Group Ltd (ACM) (the petitioning creditor in relation to his bankruptcy). The information he sought, as set out in paragraph 24 of the affidavit, was: (a) a copy of the contract for the debt; (b) a copy of the credit card application form; (c) a copy of the terms and conditions of the credit card; (d) the agreement referred to in the notice of assignment; (e) proof the debt was transferrable from Westpac to ACM; (f) proof that the assignment was effective; (g) a document that establishes the true contractual liability and consequent indebtedness in respect of the debt that Westpac assigned to ACM. 69 Mr Szepesvary stated that, having failed to obtain this information from Westpac and ACM, he sought the information from Mr Weston and his legal representatives. Mr Szepesvary stated that he has not received this information. 70 Mr Weston has not filed an affidavit in response to Mr Szepesvary's affidavit. The second affidavit of Ms McNicholas, which generally contains reply evidence, did not respond to the relevant paragraphs of Mr Szepesvary's affidavit. In these circumstances, I accept that Mr Szepesvary sought the information from Mr Weston and he failed to provide it. Given the nature of the information and documents sought, and their connection with Mr Szepesvary's bankruptcy, it would seem to be appropriate for the information and documents to be provided. No explanation has been provided by Mr Weston as to why he did not do so. It may be that the information was not in his possession, but I am unable to ascertain this based on the evidence before me. In these circumstances, I will order Mr Weston to provide the information or documents sought by Mr Szepesvary as set out in paragraph 24 of his affidavit, if that information or those documents are in Mr Weston's possession, power or control. 71 Mr Szepesvary's affidavit also referred, in paragraph 28, to the failure of the Trustees in Bankruptcy to provide the information referred to in paragraph 4(i) of his affidavit. That paragraph refers to the inventory and photographs discussed in [38] above and a copy of the Warrant of Possession indorsed by the Sheriff. It was for the Trustees in Bankruptcy to determine, in the exercise of their discretion, whether to provide the inventory and photographs. These documents, and any indorsed copy of the Warrant of Possession, are not of such a nature that it appears that they should have been provided. Accordingly, I will not make an order requiring the Trustees in Bankruptcy to provide this information or these documents. 72 I note for completeness that the respondents submit that Mr Szepesvary and Ms Ozdil "do not assert any specific act, omission or decision of the Respondents within 60 days of the application". However, it appears to me that the failure by Mr Weston to provide the information referred to in paragraph 24 of Mr Szepesvary's affidavit took place during the period April and May 2016. On this basis, the proceeding (which was filed on 20 May 2016) was commenced not later than 60 days after the day on which Mr Szepesvary became aware of Mr Weston's omission. 73 For these reasons, I will make an order requiring Mr Weston to provide certain information and documents as discussed above. Otherwise, the claims based on s 178 of the Bankruptcy Act are to be dismissed.

Sections 37M and 37N of the Federal Court of Australia Act 74 Sections 37M and 37N of the Federal Court of Australia Act provide as follows: 37M The overarching purpose of civil practice and procedure provisions (1) The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes: (a) according to law; and (b) as quickly, inexpensively and efficiently as possible. (2) Without limiting the generality of subsection (1), the overarching purpose includes the following objectives: (a) the just determination of all proceedings before the Court; (b) the efficient use of the judicial and administrative resources available for the purposes of the Court; (c) the efficient disposal of the Court's overall caseload; (d) the disposal of all proceedings in a timely manner; (e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute. (3) The civil practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose. (4) The civil practice and procedure provisions are the following, so far as they apply in relation to civil proceedings: (a) the Rules of Court made under this Act; (b) any other provision made by or under this Act or any other Act with respect to the practice and procedure of the Court. 37N Parties to act consistently with the overarching purpose (1) The parties to a civil proceeding before the Court must conduct the proceeding (including negotiations for settlement of the dispute to which the proceeding relates) in a way that is consistent with the overarching purpose. (2) A party's lawyer must, in the conduct of a civil proceeding before the Court (including negotiations for settlement) on the party's behalf: (a) take account of the duty imposed on the party by subsection (1); and (b) assist the party to comply with the duty. (3) The Court or a Judge may, for the purpose of enabling a party to comply with the duty imposed by subsection (1), require the party's lawyer to give the party an estimate of: (a) the likely duration of the proceeding or part of the proceeding; and (b) the likely amount of costs that the party will have to pay in connection with the proceeding or part of the proceeding, including: (i) the costs that the lawyer will charge to the party; and (ii) any other costs that the party will have to pay in the event that the party is unsuccessful in the proceeding or part of the proceeding. (4) In exercising the discretion to award costs in a civil proceeding, the Court or a Judge must take account of any failure to comply with the duty imposed by subsection (1) or (2). (5) If the Court or a Judge orders a lawyer to bear costs personally because of a failure to comply with the duty imposed by subsection (2), the lawyer must not recover the costs from his or her client. 75 In their statement of claim, Mr Szepesvary and Ms Ozdil allege that Ms McNicholas failed to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible; and that her care and conduct of the matters set out in the statement of claim caused unfairness and detriment to Mr Szepesvary and Ms Ozdil and incurred undue costs against their estates. No particulars are provided in relation to these paragraphs. I therefore take them to relate to the matters which are the subject of complaint elsewhere in the statement of claim. For the reasons given above, with one exception, the complaints set out elsewhere in the statement of claim are to be rejected. The one exception (being the failure to provide the information referred to in paragraph 24 of Mr Szepesvary's affidavit) does not provide a basis for a claim against the Trustees in Bankruptcy under ss 37M and 37N of the Federal Court of Australia Act. 76 Further, Mr Szepesvary and Ms Ozdil have not established, by their evidence in the proceeding that the Trustees in Bankruptcy or their solicitors contravened their obligations under ss 37M and 37N. In paragraphs 20-23 of Mr Szepesvary's affidavit, under the heading "Unconscionable Costs", Mr Szepesvary referred to costs associated with the taking of possession of the Property and the removal and storage of personal property. In paragraph 20, Mr Szepesvary stated: [The Trustees in Bankruptcy] in acting under an unrelated warrant wrongfully executed, incurred against [Mr Szepesvary's and Ms Ozdil's] estates undue costs and expenses including: (a) removalist and storage costs; (b) security guard and locksmith costs; (c) administration and legal costs; (d) public service costs. Paragraphs 21-23 of the affidavit refer to the same costs. It appears from the reference to "in acting under an unrelated warrant wrongfully executed" that the complaint about these costs is largely, if not entirely, based on the proposition that possession of the Property was not properly taken by the Sheriff's Office of Victoria. For the reasons given above, that proposition is rejected. Apart from that proposition, the evidence does not provide a basis to question the costs incurred by the Trustees in Bankruptcy in connection with the taking of possession of the Property and the removal and storage of the personal property. 77 Accordingly, the claims based on ss 37M and s 37N are to be dismissed. I certify that the preceding seventy-seven (77) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moshinsky.

Supreme Court (General Civil Procedure) Rules 2015(Vic)

(This rule is supported by and reflects the provisions of s 78(2) of the Federal Circuit Court of Australia Act 1999 (Cth).) The Supreme Court (General Civil Procedure) Rules 2015(Vic)

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