Textbook recalcitrance on display for aspiring trustees

Bankruptcy trustees and those aspiring to be such take heed. What follows is a cautionary tale about a trustee impelled by statutory obligation and the bankrupt who resisted, or at least appeared to.

The practitioner in question is PKF’s Petr Vrsecky. His nemesis is Ms Beiji Xu, who was bankrupted in November 2022 after failing to pay the lawyers who’d represented her in family court proceedings.

“In the 12 months prior to the date of making his affidavit, the applicant gives evidence that the first respondent had failed to complete a Statement of Affairs, failed to produce the original Certificate of Title to the Property, failed to deliver motor vehicles which were owned by her, failed to provide documents such as insurance policies, failed to disclose particulars of income or expected income and had failed to attend his office for an interview.” Judge Jonathan Forbes.

But that failure was just the start. Since being appointed Vrsecky has been trying to prise out of the bankrupt a Certificate of Title to an unencumbered free standing residence Xu owns in the Melbourne suburb Bayswater.

Eventually Vrsecky went to court, seeking orders for the cancellation of the elusive certificate and the issue of a replacement certificate of title to him in his capacity as Xu’s trustee.

Xu, who by the date of the final hearing had finally provided an incomplete statement of affairs and certain particulars of her past and expected income, turned up too to explain that her father, who occupies the Bayswater property rent free, had the Certificate and she didn’t feel she had a right to ask him for it.

She also asked the court for time to present a payment option to the trustee, saying it would be only fair.

In deciding that fairness would be best served by approving the trustee’s application, the judge provided helpful insights into what the PKF Melbourne partner had had to deal with. See: Vrsecky (Trustee), in the matter of Xu (Bankrupt) v Xu [2024] FedCFamC2G 272.

“In the 12 months prior to the date of making his affidavit, the applicant gives evidence that the first respondent had failed to complete a Statement of Affairs, failed to produce the original Certificate of Title to the Property, failed to deliver motor vehicles which were owned by her, failed to provide documents such as insurance policies, failed to disclose particulars of income or expected income and had failed to attend his office for an interview,” Federal Circuit Court judge Jonathan Forbes said.

Despite this litany of seeming intransigence, the judge said Vrsecky wasn’t suggesting that Xu was intentionally withholding the certificate. That would require him to prove intent, which would be difficult, and more to the point unnecessary.

“The applicant submits that the major stumbling block preventing the realisation of funds for secured creditors has been the first respondent’s failure to produce the original Certificate of Title”, the judge said.

There is however some discussion in the judgment about the paths Vrsecky had open to him.

An alternative to seeking orders to have the original certificate, issued in 2003, cancelled, would have been for Vrsecky to apply for a court order requiring Xu to produce the document.

Failure to do so would comprise a contempt of court which if not rectified could lead to Xu being imprisoned.

But that option required Vrsecky to gamble that old man Xu would be sufficiently moved to trade his domestic arrangements for his daughter’s freedom.

All this over a debt which at sequestration seems modest – a default judgment for less than $25,000 was obtained by the petitioning creditor yet the failure to produce the certificate has heaped costs upon costs upon costs.

Vrsecky told the judge he needs more than $160,000 to pay creditors and cover costs, expenses and his remuneration, with the court hearing that the trustee had even gone to the trouble and expense of issuing correspondence in Mandarin.