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  4. Ramsay as Trustee of the Bankrupt Estate of Katherine Ann Brown (A Bankrupt) v Brown - [2018] QDC 187

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Ramsay as Trustee of the Bankrupt Estate of Katherine Ann Brown (A Bankrupt) v Brown[2018] QDC 187

Ramsay as Trustee of the Bankrupt Estate of Katherine Ann Brown (A Bankrupt) v Brown[2018] QDC 187

DISTRICT COURT OF QUEENSLAND

CITATION:

Ramsay as Trustee of the Bankrupt Estate of Katherine Ann Brown (A Bankrupt) v Brown [2018] QDC 187

PARTIES:

HUGH DAVID RAMSAY as Trustee of THE BANKRUPT ESTATE OF KATHERINE ANN BROWN (A BANKRUPT)
(Applicant)

v

(ex parte) KEITH DESMOND BROWN
(Respondent)

FILE NO/S:

2104/18

DIVISION:

Civil

PROCEEDING:

Application

ORIGINATING COURT:

District Court, Brisbane

DELIVERED ON:

14 September 2018

DELIVERED AT:

Brisbane

HEARING DATE:

7 September 2018

JUDGE:

Butler AM SC DCJ

ORDER:

  1. Kyle James Kimball and Timothy Borham be appointed trustees of the Property, to hold it on the statutory trust for sale.
  2. The Property be vested in the Trustees subject to any encumbrances affecting the entirety but free from all encumbrances affecting any undivided shares of the Property.
  3. Upon any sale by the Trustees, the respondent is at liberty to purchase the Property upon terms that he shall not be required to pay any deposit and that he may set off against the purchase price the value of the whole of his share in the Property.
  4. Upon the sale of the Property, the Trustees:
  1. (a)
    firstly pay to themselves their reasonable costs and expenses of and incidental to the sale of the Property, calculated in accordance with their schedule of fees;
  2. (b)
    secondly pay all costs and expenses of the sale as provided for by section 37A of the Property Law Act 1974 (Qld), including those of any appointed real estate agent and that agent’s commission;
  3. (c)
    thirdly pay to any encumbrancees of the Property the amount due and owing to them in full discharge of their encumbrances;
  4. (d)
    fourthly pay to the Applicant its costs of these proceedings (including reserved costs); and
  5. (e)
    fifthly pay to the Applicant and the Respondent the remaining proceeds of sale in equal shares.

CATCHWORDS:

REAL PROPERTY – PARTITION OF LAND – STATUTORY TRUST FOR SALE OR PARTITION – TRUSTEES – CO-OWNERSHIP – where the applicant seeks the sale of real property belonging to the respondent co-owner 

Property Law Act 1974 (Qld) s 38

Bankruptcy Act 1966 (Cth)

Hayward v Skinner (1981) 1 NSWLR 590

Ranger v Ranger [2009] QCA 226

Ex parte Einbart Pty Ltd [1982] Qd R 398

Re Permanent Trustee Nominees (Canberra) Ltd [1989] 1 Qd R 314

Williams v Legg (1993) 29 NSWLR 687

Callahan v O-Neill [2002] NSWSC 877

COUNSEL:

GW Dietz for the applicant.

No appearance by the respondent.

SOLICITORS:

Sciacca & Associates for the applicant.

  1. [1]
    This is an application for the appointment of trustees pursuant to s 38 of the Property Law Act 1974 (Qld) (the Act) to sell a property at 1505 Upper Widgee Road, Widgee.
  1. [2]
    The applicant is the sole trustee of the estate of Mrs Katherine Ann Brown following an order of the Federal Circuit Court of Australia sequestering that estate under the Bankruptcy Act 1966 (Cth). The respondent, Mr Brown is the husband of Mrs Brown. Mr and Mrs Brown reside at the property.
  1. [3]
    By virtue of a transfer of Mrs Brown’s interest to the applicant on 14 December 2017, he is now a registered co-owner of the property. The applicant and the respondent are now tenants in common with each having a one half interest. The applicant has instituted these proceedings against the respondent so that the property may be sold and the proceeds of sale distributed to the applicant and respondent according to their entitlements.
  1. [4]
    The applicant’s ultimate purpose is to enable him to make a distribution to the creditors of Mrs Brown’s estate. There appear to be six known creditors of Mrs Brown, whose claims total approximately $437,000.00.

The respondent’s position

  1. [5]
    The respondent did not appear before me on the application, nor did he file any material in the proceedings.
  1. [6]
    The applicant disclosed, pursuant to his duty to the court, a matter Mrs Brown had raised in a telephone conversation with him on 15 February 2018. She said that:

“Mr Brown will attempt to claim full ownership of the property and thereby deny the trustee any interest in it. Mr Brown will put forward the argument that in 1993 his mother had gifted him a property in Brisbane. Sometime in 2017 he sold the Brisbane property and purchased the Widgee property on 24 Oct 2017. When he purchased the Widgee property he put it in joint names.”

No steps have been taken by Mr Brown to advance such a claim. The applicant has been registered as co-owner. It has not been raised by Mrs Brown in any of her correspondence or submissions before the court. In the circumstance that there is no evidence before the court that would support the claim that was foreshadowed, it’s not a matter that this court should or can take into account.

  1. [7]
    An email was received from Mrs Brown purporting to be an outline of submissions by the respondent. It states that Mr Brown does not have the capacity to secure legal representation and requested the court accept the submissions on his behalf in lieu of his appearance. In circumstances where there is nothing formally before the court establishing that the submissions are indeed those of the respondent himself, they cannot be received as submissions by a party to the proceedings. Furthermore, assertions of fact in the document do not comprise evidence in the proceeding. Nevertheless, Mr Dietz, counsel for the applicant, consented to the submissions being received and marked for identification on the basis that issues raised in them would be addressed and responded to in the applicant’s submissions. The court received them on that basis. Matters raised in those submissions will be addressed in this decision.

Applicant’s submissions

  1. [8]
    The applicant contends, correctly in my view, that the respondent has placed no evidence in the proceedings as to any proprietary right, or contractual or fiduciary obligation that is inconsistent with the applicant’s right to seek an order pursuant to s 38(1) of the Act.
  1. [9]
    The applicant submits that as the duly appointed trustee of the bankrupt estate of Mrs Brown and as a person holding registration on the title as a co-owner, that he has standing to bring the application. He asserts that the value of the property is less than the jurisdictional limit of the District Court.
  1. [10]
    The affidavit material establishes that the respondent has been served with all the necessary material. The applicant has proposed two trustees, each of whom has stated they are willing to accept appointment and have no conflict of interest preventing them acting.
  1. [11]
    The applicant submits that he seeks the orders for a legitimate purpose, which is to enable him to provide a distribution to the creditors of Mrs Brown’s estate.
  1. [12]
    The applicant submits that orders should be made in the terms set out in the originating application.

Powers of the court

  1. [13]
    The court’s powers to determine this application are to be found in s 38 (1) of the Act:

“Where any property (other than chattels personal) is held in co-ownership the court may, on the application of any 1 or more of the co-owners, and despite any other Act, appoint trustees of the property and vest the same in such trustees, subject to encumbrances affecting the entirety, but free from encumbrances affecting any undivided shares, to be held by them on the statutory trust for sale or on the statutory trust for partition.”

  1. [14]
    Cases support the contention that the right to sale is generally seen as “an incident of the property of a co-owner”.[1]The limited scope of the discretion provided in s 38 was the subject of the following statement by MacPherson J in Ex parte Einbart Pty Ltd:

“In such cases [where co-ownership of land subsists in law], where there is no trust or perhaps other fiduciary obligation, it is difficult to conceive of circumstances in which the discretion, if any, conferred by the word ‘may’ in s 38(1) of the Property Law Act or its New South Wales equivalent would ever be exercised against the appointment of statutory trustees.”[2]

  1. [15]
    Confirmation of that principle is to be found in the words of Connolly J in Re Permanent Trustee Nominees (Canberra) Ltd:

“It may be seen therefore that in modern times there are few defences to partition proceedings based merely on the circumstances of the parties. To say therefore that the exercise of the jurisdiction is virtually mandatory is an adequate statement for most cases but it is, in my opinion, not strictly the law and should be avoided.”[3]

  1. [16]
    Nevertheless, it remains clear that the court retains a discretion to refuse relief in appropriate but constrained circumstances. For example, an order for sale may be refused where the order “would be inconsistent with some proprietary right, or some contractual or fiduciary obligation”.[4]The respondent bears a forensic onus to show why the order should be refused.[5]
  1. [17]
    Here there has been no appearance by the respondent. However, the court must exercise its discretion judicially and in circumstances where the matter is to be determined without input from the respondent, it is incumbent upon the court to carefully scrutinise the application to determine if any basis exists for exercise of the discretion in favour of not making the orders sought.

Matters for consideration

  1. [18]
    The affidavit material of the applicant discloses that over a period of time Mrs Brown has corresponded with him, stating opposition to the sale of the property. In addition the submissions forwarded to the court under cover of email from Mrs Brown advance reasons why the court should make an order dismissing the application. Mrs Brown expressed concern in her correspondence about the cost of this application and that the appointment of trustees will result in further expense. She argues that this will serve only to further erode funds available to the creditors of the estate.
  1. [19]
    Mrs Brown sought and secured a conditional approval for finance, to be secured against the property at 1505 Upper Widgee Road, in the sum of $235,000. Of that sum she contends that $220,000 would be available for payment of her creditors.
  1. [20]
    Mrs Brown argues that as the sale price of the property is expected to not exceed $450,000 and only half of that sum would be available to the trustee in bankruptcy to distribute, then the sum available through the proposed loan would exceed any sum available through the sale.
  1. [21]
    Mrs Brown submits that the applicant in seeking to proceed by way of this application has failed to comply with the provisions of the Insolvency Practice Rules (Bankruptcy) 2016 (Cth).  She relies upon s 42-60 of those rules that reads as follows:

“In conducting an administration, a registered trustee must:

  1. (a)
    incur only those costs that are necessary and reasonable; and
  1. (b)
    before deciding whether it is appropriate to incur a cost, compare the amount of the cost likely to be incurred with the value and complexity of the administration.”
  1. [22]
    In addition Mrs Brown submits that this court should make orders pursuant to the Bankruptcy Act 1966 (Cth). However, as the District Court has no jurisdiction in these proceedings to make orders under the Bankruptcy Act that submission is misguided. Nevertheless, it is appropriate in my view, for the court in exercising its discretion under s 38 of the Act to have regard to whether the interests of the creditors may be better served by taking a course other than sale of the property.

Primary issue

  1. [23]
    On 4 October 2017 the applicant became the sole trustee of the bankrupt estate of Mrs Katherine Ann Brown when by order of the Federal Circuit Court her estate was sequestrated under the Bankruptcy Act 1966 (Cth). The applicant now has a registered half interest on the title to the property at Upper Widgee Road, which was previously held as joint tenants by Mr and Mrs Brown. Mrs Brown has a number of creditors. It is entirely understandable that the applicant as trustee of her estate seeks to realise the value of his interest in the Upper Widgee Road property in order to meet his obligation to make a distribution to the creditors of Mrs Brown’s estate.
  1. [24]
    The issue that has been raised for consideration is whether sale of the property is necessary to achieve that purpose. Mrs Brown argues that the interest of the creditors would be better served by allowing her to obtain a loan.
  1. [25]
    The affidavit of the applicant, Hugh David Ramsay outlines the creditors’ claims.[6]The claims of unsecured creditors total approximately $90,000. In addition a claim has been filed in the District Court against the estate of Mrs Brown for damages of $333,999.17 for breach of contract and negligence.[7]
  1. [26]
    The applicant moved quickly to inform Mrs Brown’s professional indemnity insurance of the claim.[8]In response the insurer advised they have appointed a solicitor to investigate and defend the claim on behalf of both the insurer and the estate of Mrs Brown.[9]The insurer will in due course make a decision with regards to indemnity. Should it decide to decline indemnity, the appointed solicitors will cease to act for the estate.[10]
  1. [27]
    Should the claim against the estate of Mrs Brown succeed and the insurer declines to grant indemnity the estate may be liable for an additional debt of over $333,000 (the “worst-case scenario”). At present the applicant is unable to know how long it might take for the litigation to resolve and how long it might be before the insurer makes a decision on the grant of indemnity.
  1. [28]
    Mrs Brown submits the prospective loan of $235,000 is a viable alternative to sale. Obviously, a loan of that value will fall short of being able to satisfy all creditors’ claims in the worst-case scenario. Mrs Brown argues that as sale of the property will only make available to the estate a similar sum (one half of about $450,000) the course proposed by the applicant has no advantage over that proposed by her.
  1. [29]
    The obtaining of a loan by an undischarged bankrupt such as Mrs Brown can only occur with the consent of the trustee in bankruptcy. When considering such a request the trustee obviously has to have regard to the interests of the creditors of the estate.
  1. [30]
    The applicant points to a difficulty in the course proposed by Mrs Brown which makes proceeding with the loan application untenable. Mrs Brown’s application was made to Easy Settle Finance. Mr Peter Holland, Director of Easy Settle Finance advised in correspondence to the applicant:

“We have stated that we can probably assist her if we take a mortgage over her unencumbered home and that on the basis that any credit contemplated would only be on the basis the bankruptcy is reversed on settlement of the loan and at such time she is no longer bankrupt. We have assisted several bankrupts in the past on this basis and will be pleased if you could confirm we can work with Mrs Brown on the same tactic.”

  1. [31]
    The conditional approval obtained by Mrs Brown was subject to provision of the trustee in bankruptcy’s consent to the transaction and copies of proposed deeds and transaction documents to be entered into.[11]
  1. [32]
    In response to a query by Mrs Brown the applicant explained with reference to the loan term that credit would only be on the basis the bankruptcy is reversed on settlement:

“With Easy Settle Finance’s terms in mind I have chosen to continue with the application for the sale of the property as if Lexon Insurance, for whatever reason, deny cover of Kiora Pty Ltd’s claim for damages in the sum of $333,999.17 then you would not have the capacity to borrow sufficient funds through Easy Settle Finance to pay 100 cents to existing creditors and Kiora Pty Ltd.”[12]

  1. [33]
    In the submissions Mrs Brown forwarded to the court, she has not responded to this obvious difficulty. As the sum available from the loan could not satisfy all potential debts, it is obvious that the trustee could not agree to discharge of the bankruptcy. Therefore the financier’s precondition for grant of the loan cannot be met. It is apparent the loan cannot proceed while uncertainty exists as to the outcome of the litigation and as to the decision to be taken by the professional indemnity insurer.

Disposition

  1. [34]
    While the court may in appropriate circumstances exercise its discretion to refuse relief, the discretion is a limited one and I am satisfied that the objections raised here do not justify refusal of the application. It is understandable that Mr and Mrs Brown would wish to retain the property but in the circumstances of this case the propriety interest of the co-owner should take precedence. The fact that there will be costs involved in the appointment of trustees and sale of the property is not a sufficient basis to refuse the remedy. As outlined above the option of obtaining a loan in lieu of sale is not feasible. Awaiting the outcome of the litigation against the estate is likely to involve considerable delay. That should not prevent the timely realisation of the property in the interests of the creditors of the estate of Mrs Brown.
  1. [35]
    I am satisfied that the property should be sold and the proceeds lawfully distributed. It is appropriate that the applicant’s costs should be paid from the proceeds of the sale. There will be an order as per draft.

Footnotes

[1] Hayward v Skinner (1981) 1 NSWLR 590; per Kearney J; Ranger v Ranger [2009] QCA 226.

[2]  [1982] Qd R 398 at 402.

[3]  [1989] 1 Qd R 314 at 321.

[4] Williams v Legg (1993) 29 NSWLR 687 at 693.

[5] Callahan v O-Neill [2002] NSWSC 877 at [9].

[6]  Second affidavit of Ramsay para 10, Exhibit “HDR – 12”.

[7]  Second affidavit of Ramsay para 5 Exhibit “HDR – 7”.

[8]  Second affidavit of Ramsay paras 6-7.

[9]  Second affidavit of Ramsay para 8.

[10]  Second affidavit of Ramsay Exhibit “HDR – 10”.

[11]  Second affidavit of Ramsay Exhibit “HDR – 6” page 5 of 23.

[12]  Second affidavit of Ramsay Exhibit “HDR – 14” p 1 of 3.

Close

Editorial Notes

  • Published Case Name:

    Ramsay as Trustee of the Bankrupt Estate of Katherine Ann Brown (A Bankrupt) v Brown

  • Shortened Case Name:

    Ramsay as Trustee of the Bankrupt Estate of Katherine Ann Brown (A Bankrupt) v Brown

  • MNC:

    [2018] QDC 187

  • Court:

    QDC

  • Judge(s):

    Butler DCJ

  • Date:

    14 Sep 2018

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Callahan v O'Neill (2002) NSWSC 877
2 citations
Jump To
Cite 1 - (2002) NSWSC 877
Cite 2 - (2002) NSWSC 877
Ex parte Eimbart Pty Ltd [1982] Qd R 398
2 citations
Jump To
Cite 1 - [1982] Qd R 398
Cite 2 - [1982] Qd R 398
Hayward v Skinner (1981) 1 NSWLR 590
2 citations
Jump To
Cite 1 - (1981) 1 NSWLR 590
Cite 2 - (1981) 1 NSWLR 590
Ranger v Ranger [2009] QCA 226
2 citations
Jump To
Cite 1 - [2009] QCA 226
Cite 2 - [2009] QCA 226
Re Permanent Trustee Nominees (Canberra) Ltd [1989] 1 Qd R 314
2 citations
Jump To
Cite 1 - [1989] 1 Qd R 314
Cite 2 - [1989] 1 Qd R 314
Williams v Legg (1993) 29 NSWLR 687
2 citations
Jump To
Cite 1 - (1993) 29 NSWLR 687
Cite 2 - (1993) 29 NSWLR 687

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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