Wily v Jacobs

REASONS FOR JUDGMENT 1 This is an application by Mr Andrew Hugh Jenner Wily, as the trustee in bankruptcy for Mr Kevin Roy Jacobs, for declarations and orders set out in the originating application filed on 13 February 2013. Mr Wily seeks declarations that items of household and personal property and other items referred to as extraneous items of Mr Jacobs, situated at 9/17 Lorraine Street, Peakhurst, be declared property of the bankrupt, divisible amongst creditors, pursuant to, in particular, ss 58 and 116(1) of the Bankruptcy Act 1966 (Cth). Mr Wily seeks a similar declaration in relation to property of Mr Jacobs, situated at 75 Clarke Street, Peakhurst. He also seeks orders that he be permitted to remove immediately the extraneous items situated at both of those properties. 2 When the matter was called for hearing this morning, there was no appearance by Mr Jacobs. I am satisfied that he was aware of today's hearing. This is because he was present in court on 28 March 2013, when I listed the matter for hearing today. Also, I received from the Registry this morning a notification that Mr Jacobs had contacted the Registry to say that he would not be appearing today, because of ill health. 3 Notwithstanding the fact that Mr Jacobs says he is unable to appear for the reasons stated, it seems to me to be appropriate, as requested by Mr Wily's counsel, to deal with the matter in Mr Jacobs' absence. Mr Wily was appointed as trustee in bankruptcy for Mr Jacobs, pursuant to a sequestration order made by Edmonds J, on 22 February 2012. The matter is an unusual one, because as appears from Mr Wily's affidavit of 6 February 2013, there is likely to be a substantial surplus of assets in the bankrupt estate. Notwithstanding that fact, it is plain enough that Edmonds J was satisfied that Mr Jacobs was insolvent when he made the sequestration order. 4 The matter is also unusual for other reasons which are fully explained in Mr Wily's affidavit of 6 February 2013. In his statement of affairs the bankrupt declared that he was the registered proprietor of the properties at Lorraine Street, Peakhurst and Clarke Street, Peakhurst, referred to in the originating application. Mr Wily has undertaken a review of the property market for both of those properties, which indicates that there is likely to be a net equity in respect of Lorraine Street property of approximately $290,000 and approximately $715,000 in respect of the Clarke Street property. The position is not entirely clear, because of the state of the properties. 5 The amount of secured and unsecured creditors estimated by Mr Wiley as creditors of Mr Jacobs, as at 6 December 2012, is approximately $215,000. However, this figure does not include allowances for unpaid interest in respect of the debts as well as costs and disbursements payable to Mr Wily as trustee. Mr Wily deposes that depending upon the time that it takes to realise the assets of the bankrupt he may only be required to sell the Lorraine Street property to pay all of the creditors and cover the costs and disbursements. However, in the event of a shortfall he believes it would then be necessary for him to sell the Clarke Street property. 6 The circumstances and history of the litigation and disputes which led to Mr Wily's appointment as trustee in bankruptcy are set out in some detail commencing at paragraph [8] of Mr Wily's affidavit. The litigation arose out of a claim by the Hurstville City Council, pursuant to a notice issued by the Council under s 124 of the Local Government Act 1993 (NSW), as then in force, requiring Mr Jacobs to remove miscellaneous refuse and extraneous items from the premises of the Clarke Street property and to cut back and remove vegetation on that property. Mr Jacobs did not comply with the notice and the Council commenced proceedings against him in the Land and Environment Court. Subsequently there were appeals taken to the New South Wales Supreme Court and an application was made for special leave to appeal to the High Court. The litigation continued over a period of some five years. 7 The bankruptcy notice that gave rise to the application for the sequestration order was founded upon a certificate of taxation issued by the Taxing Officer of the High Court of Australia, in proceedings number S102/2009, on 23 March 2011, in the sum of $3392.70, and a judgment obtained in proceedings in the District Court number 2011/204497, on 23 June 2011, in the amount of $12,794.28, and a judgment obtained in District Court proceedings number 2011/204484, on 23 June 2011, in the amount of $107,072.28. It appears that the District Court proceedings are a part of the chronology of extensive litigation undertaken between the Council and Mr Jacobs. 8 Mr Wily received a marketing proposal on about 13 August 2012 and a sales inspection report from a company called Commercial Property Group. The sales report contained an agent's opinion that the Lorraine Street property would have a sale price in the range of $300,000 to $330,000. However, subsequently Mr Wily received an email from CPG advising that that firm could not obtain access to the Lorraine Street property, as the doors were blocked by two abandoned and unregistered vehicles. Mr Wily notified Mr Jacobs of his efforts to sell the Lorraine Street property and requested him to make arrangements for the removal of the vehicles. 9 Mr Wily did not receive a reply and was able to arrange, in September 2012, for the abandoned motor vehicles to be removed. Mr Wily then received complaints, from Mr Jacobs, about damage which Mr Jacobs alleged to have been caused to the abandoned vehicles whilst they were being removed from the property. Mr Wily refers, in paragraph 38 of his affidavit, to a constant stream of emails from Mr Jacobs about a wide variety of issues. Ultimately, he was able to gain access to the property and discovered that it was full of a wide range of assorted bric-a-brac, including old doors, old bikes, parts of bikes and parts of old appliances, as well as other matters referred to in the affidavit. 10 Mr Wily received a quotation for the cost of removal of the contents. In November 2012, Mr Wily arranged for a member of his staff to attend the Clarke Street property; he discovered that the garden was completely overgrown, a rusted car sat in the yard and the inside of the house was full of extraneous items of much the same nature as the items found at the Lorraine Street property. Mr Wily received a letter from CPG, dated 10 December 2012, advising him that, in CPGs opinion, if the Lorraine Street property were to be sold in its present state, the expected sale price could be reduced from as much as $330,000 to as low as $225,000. Mr Wily has a number of concerns in relation to the matters outlined above and it is these concerns which have caused him to bring the present application. 11 Mr Wily identifies the concerns in some detail in paragraph [47] of his affidavit. I do not need to set them out in detail. It is sufficient to say that Mr Jacobs acknowledges that he is being treated for depression with a medication. Mr Wily has made investigations of the particular medication and believes that it is most commonly used for treatment for an obsessive compulsive disorder known as hoarding. Another of Mr Wily's concerns is that it appears, from the history of litigation, commencing with the notice served by the Hurstville Council in November 2004, that Mr Jacobs appears to be either unable or unwilling to comply with his obligations, at least insofar as they relate to the ordinary requirements of local authorities. 12 It appears from the evidence to which I have been taken that the matter to which Mr Wily refers, at paragraph [42(j)] of his affidavit, is correct, that is to say if Mr Jacobs continues with his present attitude, which appears to be to refuse to acknowledge and accept his obligations, the costs of the proceedings will continue to rise and there may be no surplus in the estate. Clearly enough, that would be a situation which should be avoided if it can be. Mr Wily has formed the view that the extraneous items located at both the Lorraine Street and Clarke Street properties are properly divisible amongst the creditors of the bankrupt estate pursuant to s 116(1) of the Bankruptcy Act. He is also satisfied that the extraneous items are not excluded property within the meaning of s 116(2) of the Act. 13 That position seems to me to be plainly correct, in light of the provisions of s 116 and I am satisfied that the property is not excluded under s 116(2), in particular, I have looked at ss 116(2)(b) and 116(2)(ba), as well as the relevant regulations. Mr Wily is conscious of the history of the matter and is anxious to avoid future litigation with Mr Jacobs, which would result in further diminution of the bankrupt estate as a result of rising costs to the detriment of creditors and to Mr Jacobs' own detriment. For these reasons, I am satisfied that I should make the declarations and orders set out in the originating application. I will also order that the costs of this application be costs in the bankruptcy. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.