Wu v Roufeil as Trustee of the Bankrupt Estate of Yan Wu

RARES J: 1 This is an application to remove Mark Roufeil as the trustee of the bankrupt estate of Yan Wu. On 23 January 2019, Ms Wu, when represented by lawyers, filed a notice of grounds to remove Mr Roufeil as her trustee in bankruptcy. In essence, those grounds asserted two bases on which the removal should take place.

The alleged grounds for removal 2 The first ground was that Mr Roufeil had entered into a funding agreement with the principal creditor of the bankrupt estate, Albert Ling, who had previously had a personal romantic relationship with Ms Wu. That relationship ended unhappily and Mr Ling succeeded subsequently in the Supreme Court of New South Wales, and in the Court of Appeal of that Court to enforce his claim that Ms Wu owed him a substantial sum of money with a very substantial interest rate. Ms Wu complained that, in effect, Mr Roufeil is in some form of inappropriate relationship with Mr Ling in relation to the funding needed by the estate to enable it to recover all of the assets of the bankrupt so that they may be distributed to her creditors in accordance with the Bankruptcy Act 1966 (Cth), with any surplus being made over to her. 3 The second ground in Ms Wu's notice in support of Mr Roufeil's removal, asserted that he was in a conflict of interest and or duties in his capacities, first, as Ms Wu's trustee and, secondly, as the then provisional liquidator of Pan Pac Investment Pty Ltd (in prov liq), which, in the past, had acted as a trustee of Ms Wu's family trust. Ms Wu asserts that a new trustee of the family trust had been appointed into Pan Pac's place. 4 Mr Ling commenced proceedings in the Supreme Court against Pan Pac, seeking to enforce an equitable charge over a property in Croydon that he claimed it had given him as security for Ms Wu's debt due to him. That matter had been set down for hearing before Robb J for two days commencing on 24 September 2018. However, earlier in September 2018, Jagot J appointed Mr Roufeil as provisional liquidator of Pan Pac, as a result of which the hearing before the Supreme Court had to be adjourned. The Supreme Court cross-vested that proceeding into this Court and it is now set down for hearing for four days before me (NSD2271/2018) (the Ling proceeding), together with a proceeding brought by Mr Roufeil in his capacity as Ms Wu's trustee in bankruptcy against Pan Pac, Ms Wu and her sister, Bing Wu (NSD1640/2018) (the Roufeil proceeding), commencing on 2 December 2019.

Background 5 Ms Wu has made a number of attempts to have me adjourn today's hearing, which I had fixed for today on 8 March 2019. On that day, I ordered that: on or before 28 March 2019, Ms Wu file and serve all affidavits in chief on which she intended to rely; on or before 5 April 2019, Mr Roufeil file and serve all affidavits on which he intended to rely; on or before 12 April 2019, the parties exchange submissions; and the hearing be fixed for 14 June 2019, being today. 6 Ms Wu represented herself at an interlocutory hearing of the Roufeil proceeding on 1 May 2019. She sought then to have today's hearing adjourned and the hearing fixed for 2 December 2019 brought forward. I had made clear to Ms Wu during the interlocutory hearing that I was not prepared to adjourn today's hearing, and that it would go ahead. I also told her then that I was not prepared to change the dates fixed for the hearing of the Ling and Roufeil proceedings starting on 2 December 2019. Accordingly, I refused both of those requests and confirmed today as the hearing date for the present application. 7 I appreciate the difficulties Ms Wu has in representing herself and the fact that English is not her first language, although she has a very good working ability to express herself in English and to understand matters. She does not need an interpreter. I also appreciate that it is difficult for a person in Ms Wu's position to understand the legal issues, that are necessary to be addressed in preparing for and dealing with a claim, such as the present one, in which she seeks the removal of her trustee in bankruptcy. As she has told me, she works full-time and is the carer of her child, as well as having a father who is over 80 years old. 8 This morning, Ms Wu has attended Court and handed up a set of submissions explaining her circumstances. She again asked me to adjourn the hearing today so that she could have new lawyers, whom she said she had engaged yesterday, brief counsel and prepare her claim to have Mr Roufeil removed. I refused that application. 9 Ms Wu told me today that she still had hoped that I would change my mind about vacating the hearing today and bringing forward the December 2019 hearing and, therefore, she had not prepared or filed any evidence for today, despite the orders made on 8 March 2019 when she was still represented by her then lawyers. She said that, because hope was a powerful motivator, she thought that she might have been able to persuade me, once again, to change my mind. I did not regard those assertions as sufficient to warrant adjourning the hearing today. 10 The present problem with the second ground for removal was that it had, as its basis, the conflict of interest and or duties that Mr Roufeil had as trustee with those of his previous capacity, as provisional liquidator. That conflict had ceased to exist when, at his request on 1 May 2019, I appointed Michael Smith in Mr Roufeil's place as provisional liquidator of Pan Pac and, in that capacity, substituted Mr Smith as plaintiff (in lieu of Mr Roufeil in his capacity as trustee of Ms Wu's bankrupt estate) in the Roufeil proceeding. 11 That conflict arose because Mr Roufeil had sold a property in Strathfield previously held in Ms Wu's name (before the sequestration order), that she had mortgaged to the Commonwealth Bank of Australia to support Pan Pac's activities as trustee. Mr Roufeil completed the sale on 25 February 2019. It realised over $1.45 million and discharged the whole sum due to the Bank. Mr Roufeil perceived that Ms Wu, in her personal capacity, may well have a claim for contribution against Pan Pac in respect of the complete discharge of Pan Pac's mortgage debt from the proceeds of sale of the Strathfield property. Mr Roufeil, at that point, became entitled to exercise the Bank's further security of a mortgage in respect of the same debt over another property at Turramurra of which Pan Pac is the registered proprietor. Ms Wu's liability appeared to be joint and several with that of Pan Pac. The third property, at Croydon, is also registered in the name of Pan Pac. 12 On about 19 March 2019, Mr Roufeil formed the view that an actual conflict of interest and or duties in his positions as trustee and provisional liquidator, arose when he became registered proprietor of the Bank's mortgage over the Turramurra property. That was because he then considered that he had to bring proceedings against Pan Pac on behalf of the bankrupt to exercise her rights of contribution. However, he could not do so immediately as he was, at the same time, provisional liquidator of Pan Pac and had just become, in his capacity as trustee, entitled to exercise the rights of a secured creditor against it.

Ms Wu's submissions 13 Ms Wu explained that she had not filed any affidavit evidence in support of her application for Mr Roufeil's removal. 14 Ms Castle, counsel for Mr Roufeil, pointed out to Ms Wu, in case she had overlooked this, that, on 10 April 2019, in the Roufeil proceeding between Mr Roufeil, as trustee, and Pan Pac, Ms Wu had sworn an affidavit shortly after her then solicitors had given her notice of their intention to cease to act, that set out, in pars 37 to 50, her potential evidence that might bear on this proceeding. However, over the luncheon adjournment today, Ms Wu considered her position and expressly disavowed any reliance on that affidavit or its contents to support her application that Mr Roufeil be removed as her trustee in bankruptcy. 15 In her written submissions handed up today, Ms Wu complained that Mr Roufeil had instructed the Bank to freeze her personal account and the trust account in Pan Pac's name, causing each of them difficulty in servicing their commitments to the Bank and others. She said that Mr Roufeil had falsely represented to the Bank that he had rights in respect of the monies in Pan Pac's trust account, even though that appears to have been held in its name. She asserted that Mr Roufeil had an interest in generating fees to increase his income, both in the conduct of the trusteeship and the provisional liquidation, that he had orchestrated the adjournment of the proceedings in the Supreme Court that had been fixed for hearing before Robb J for 24 September 2018 so that Mr Roufeil could put another case "to confuse the court", which would now take four, instead of two, days. She claimed that Mr Roufeil had caused her to be removed from occupation and possession of her home in Strathfield, frozen the use of the trust properties, had failed to rent them out, wrongly accused Pan Pac of not paying its debts or keeping proper books, and made demands that she, her parents and sister complete "company documents in 24hrs". I assume the latter demand concerned the preparation of a statement of affairs by the directors, which she said was an impossible task in the time given. She asserted that Mr Roufeil was on the payroll of Mr Ling, as her former romantic partner, and that he was doing everything other than acting as an independent trustee, including not even calling for proofs of debt. She claimed that the relationship between her and Mr Roufeil had broken down irretrievably, she could not work with him anymore, and wanted someone else to do the work as trustee.

Consideration 16 As I have noted, there is no evidence to support any of Ms Wu's above allegations against Mr Roufeil. 17 On Mr Roufeil's evidence before me, which I accept, he has met Ms Wu only once on 26 June 2018, when he interviewed her shortly after his appointment as trustee in bankruptcy. In submissions today, Ms Castle also said that Mr Roufeil had met Ms Wu again on 8 February 2019, when he attended a mediation at which both they and Mr Ling, together with Ms Wu's sister, Bing Wu, also attended. 18 Mr Roufeil has undertaken a considerable amount of work in seeking to realise the trust estate as well as, until his removal, the affairs of Pan Pac. Ms Wu has given no evidence and pointed to no objective facts to support her assertion that the relationship between herself and Mr Roufeil was so broken that they could not work together. 19 I think it is fair to infer, from what I have seen over the months that I have been managing these cases, that Ms Wu no doubt finds it difficult to have lost control over her own financial affairs, those of Pan Pac over which she appeared to have had significant control, and the properties at Strathfield, Croydon and Turramurra. However, there does not appear to be any objective, or other, evidence that Mr Roufeil has acted in a way that is improper in his role as trustee. Once he perceived the existence of a conflict of interest and or duties in March 2019, he appears to have acted with reasonable promptitude in seeking to have Mr Smith replace him as provisional liquidator so that Mr Roufeil could pursue rights on behalf of Ms Wu's estate against Pan Pac. 20 It may well be that Ms Wu does not feel the relationship with Mr Roufeil to be one that she wishes to be in at all, or that it is easy to accept her loss of control and autonomy over her estate. No doubt, having a trustee in bankruptcy appointed to one's affairs is a confronting and challenging occasion, but it is one imposed by law because the bankrupt has become unable to pay his or her debts as and when they fall due. The Parliament has enacted the Bankruptcy Act to regulate the affairs of a bankrupt by placing them in the hands of an independent third party, being a trustee in bankruptcy, whose statutory role is to take control of the bankrupt's affairs, to realise the bankrupt's assets and distribute them among creditors in accordance with, and consistently with the priorities set out in, the Act. I infer that it is this involuntary state of affairs which has most upset Ms Wu. That is because she has come face to face with the fact that her estate, and the properties, which she no doubt values as important personal and trust assets built up over considerable years of effort, have been taken out of her hands and have been, or are about to be, realised and applied for the statutory purposes. 21 But I am not satisfied that anything Mr Roufeil has done merits the characterisation that which Ms Wu perceives, namely that Mr Roufeil supposedly acted in any way that he was not entitled to do, or that in some way any of his acts was wrongful. There is nothing to suggest that either of those assertions by Ms Wu has any foundation. 22 Moreover, with full knowledge that today's hearing was fixed on 8 March 2019 and that on 1 May 2019 I refused to adjourn it, Ms Wu has chosen not to put any affidavit evidence before the Court in support of her claims, which raised serious allegations. She must have understood that it would have been necessary to establish them by evidence to justify an order removing Mr Roufeil as her trustee in bankruptcy. 23 In those circumstances, I am unable to see any basis upon which it would be appropriate or proper to give effect to Ms Wu's application to remove Mr Roufeil as her trustee.

Conclusion 24 Accordingly, the application must be dismissed. Mr Roufeil's costs will be part of the costs of the administration of the estate. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.