FEDERAL COURT OF AUSTRALIA

White v Lynn [1999] FCA 841

BANKRUPTCY – partition proceedings – order for sale – the official trustee seeking possession of the property for purposes of sale – whether power to order the stay of the order for sale

CLYDE PETER WHITE V THOMAS LYNN

NO VG 7301 OF 1999

JUDGE:          FINKELSTEIN J

PLACE:          MELBOURNE

DATE:            3 JUNE 1999

UPON:

1.         The respondent undertaking to the Court not to interfere with, disrupt or obstruct –

(a)        the auction sale of the property at 9 Lower Dandenong Road, Mentone (“the property”) by the Official Trustee, or any agent appointed by the Official Trustee;

(b)        the inspection of the property by the Official Trustee, any agent appointed by the Official Trustee and any prospective purchaser of the property;

2.         The first respondent undertaking to the Court not to damage the property, including the dwelling, vegetation and fencing on the property, in any way whatsoever –

THE COURT ORDERS THAT:

1.                  Kathleen Fay Lynn be added as respondent to the application and that the title be amended accordingly.

2.                  The Official Trustee, his servants or agents be entitled to inspect the property on 2 August 1999 between 1.00 pm and 3.00 pm and on 2 September 1999 between 1.00 pm and 3.00 pm.

3.                  The property be sold by public auction, such auction not to be held before 19 November 1999

4.                  The contract note or contract of sale be in the form published by the Law Institute of Victoria, and the terms of the sale include –

(i)         that the deposit be for a sum equivalent to not less than 10 per cent of the total sale price;

(ii)        that the balance of the purchase price be paid not less than 90 days after the date upon which the contract is signed.

5.                  Each of Mr Thomas Lynn and the bankrupt have the right to bid at the auction.

6.                  The reserve price for the sale of the property be set by the Official Trustee.

7.                  The Official Trustee be authorised to sign the contract of sale on behalf of the registered proprietors of the property.

8.                  The property be available for inspection between 1.00 pm and 3.00 pm on Tuesdays, Thursdays and Saturdays (except public holidays) commencing on 12 October 1999 until the property is sold.

9.                  The respondent Thomas Lynn and the bankrupt give possession of the property to the Official Trustee by no later than 4.00 pm on the seventh day prior to the settlement of the sale of the property.

10.              Liberty to apply be reserved.

11.              That until further order, the bankrupt Kathleen Fay Lynn, her servants or agents be restrained from interfering with, disrupting or obstructing –

(a)        the auction sale of the property by the applicant, or any agent appointed by the applicant;

(b)        the inspection of the property by the applicant, any agent appointed by the applicant and any prospective purchaser of the property.

12.              That until further order, the bankrupt Kathleen Fay Lynn, her servants or agents be restrained from deliberately damaging the property, including the dwelling, vegetation and fencing on the property, in any way whatsoever.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     I have before me two motions, each arising from orders made by Heerey J on 15 July 1998 and amended on 16 March 1999.  The orders were made upon the application of the trustee of the estate of Kathleen Fay Lynn, a bankrupt. They relate to a property at 9 Lower Dandenong Road, Mentone that was registered in the name of Mrs Lynn and her husband Thomas.

2                     In substance the orders directed there to be a sale of the property; that the Official Trustee be the trustee for the sale; that the net proceeds of sale, after the deduction of certain costs and expenses, be paid to the trustee of the bankrupt’s estate and Mr Lynn, and that there be a stay of six months before the sale order takes effect.  The orders were made under s 222 of the Property Law Act 1958 (Vic).  By that section, a joint owner of property is entitled to an order for the sale of jointly owned property or a partition of that property, that is to say, a physical division of the property which is jointly owned.  The property the subject of the orders is the matrimonial home of Mrs Lynn and her husband.

3                     Of the two applications that are presently before the Court, one is brought by the Official Trustee and the substance of that application is that he seeks an order for possession of the property to enable the sale to take place.  That is to say, the Official Trustee seeks possession of the property so that it can be put into a suitable condition for sale, so that it can be properly advertised and inspected by potential purchasers and then put up for sale by public auction and sold with vacant possession.  As Mrs Lynn was not a party to this application, I granted leave for her to be added as a second respondent.  The second application is brought by Mr Lynn.  He asks for an order that the order for sale made by Heerey J on 15 July 1998 be stayed until 3 June 2004 or some other time.

4                     The reasons why the stay is sought are as follows.  Mr and Mrs Lynn have occupied the property as their family home for many years.  If required to vacate the property, as they must do, either now or in due course, in consequence of the orders made in 1998, they have nowhere to live.  They are an elderly couple.  Their only significant asset is the matrimonial home.  As a result of the sale of the property one half of the net proceeds of sale will go to the trustee in bankruptcy for the benefit of the creditors of the bankrupt estate.  The other half of the net proceeds will go to Mr Lynn, but it is not anticipated that those proceeds will be sufficient to enable him to purchase alternative accommodation.  Indeed I was told by counsel for the Official Trustee that there will only be a small sum of money available to Mr Lynn, because of the costs and expenses he has incurred in litigation concerning the property.

5                     Further, with the consent of the parties, I have been provided with a medical report by Dr Timothy Entwisle who has examined Mr and Mrs Lynn.  In that report Dr Entwisle says that the litigation which led Mrs Lynn to becoming a bankrupt (I should mention that it was on her own petition), has caused her and her husband considerable distress.  He says they are an elderly couple and that the prospect of them losing their home is “devastating” and “will have a deleterious effect upon their emotional and intellectual well-being and functioning”.  The views expressed by the doctor come as no surprise to me.  On the contrary, I would be surprised if it was the case that they would not be devastated by the prospect of losing their home.

6                     Under the rules of the Court there is a general power to order the stay of the execution of a judgment of the Court including a final judgment.  Although the rules imply that the Court has a wide, even an unlimited, discretion in granting a stay in the operation of a judgment, I rather doubt that that could be so in the case of a final judgment, in particular one in respect of which no appeal has been brought.  In my view, statutory provisions apart, the power to grant a stay of a final order in respect of which there is to be no appeal is only to be exercised in limited circumstances.  Usually the power will only be exercised in that class of case, where some step is needed to be taken to enable the party bound by the order to be able to comply with it and that party needs some time to take that step.  For example, it would not be unusual in the case of an order to pay a large money sum to grant a stay of a month or so to enable the defendant to put his affairs in order so as to discharge the obligation imposed by the order.  In the case of an order for possession of land, I suppose it would be proper to grant a stay on the operation of the order to enable the person in possession to find alternative accommodation.  In such a case, a stay of a month or so would be a proper remedy to grant. 

7                     However, I doubt whether the Court has a general discretion to stay the operation of any order where the practical effect of the stay would be to negate the effect of the order.  For example, in the case of a judgment for a debt, I doubt whether the Court, statutory provisions apart, can stay the operation of that judgment for five or ten years or so, in order to give the defendant time to earn the money to pay the judgment debt. 

8                     Quite apart from the question whether the Court has power to stay the operation of a final order for a long period, there is in this case the question whether such an order should be made.  Assuming that I did have the discretion to stay the operation of the order for sale for an extended period, I would not exercise that discretion here.

9                     This case is unfortunate in the sense that whatever position I take it is going to disadvantage someone and potentially operate to disadvantage that person in a serious way.  I cannot think of a more difficult decision that I have had to make.  What I have, in effect, is a competition between, on the one hand, Mr and Mrs Lynn who have their house and want to live in it for the rest of their days, and on the other hand I have the creditors of the bankrupt estate who have a legal, that is to say statutory, right to have the property sold on their behalf and receive a distribution out of the proceeds of sale.  Further I have been told, that at least one of those creditors may also be significantly disadvantaged if I grant a further stay on the operation of Heerey J’s orders for the length of time that is sought.

10                  Doing the best I can, in what I regard as an exceedingly difficult case, I propose to stay the operation of the order, but not for the period of time that Mr and Mrs Lynn would wish.  I will only do so on terms, whether by order or an undertaking, that they will look after the property in the meantime and that they will not interfere with the conduct of any sale. What I have in mind, is to make an order that will prevent the property being sold until November 1999.  Moreover, when the property is sold it should be on 90 day terms.  This will have the practical effect of allowing Mr and Mrs Lynn to remain in the property until early next year, provided they maintain the property in the meantime.  If they do not leave the property in good order, although I am not presently minded to grant the application for possession that the Official Trustee seeks, I would make such an order.

11                  In relation to the Official Trustee’s application, that is that the part of the application which is not connected with immediate possession, I am prepared to make an order that the Official Trustee be given vacant possession of the property shortly before the time for the settlement of any contract of sale that he may enter into.  The reason for making that order is that I would rather deal with the matter now, than have the Official Trustee incur the expense of making a further application to the Court.

12                  Mr Lynn, by his counsel, has proffered the following undertakings:

1.         Not to interfere with, disrupt or obstruct –

(a)        the auction sale of the property at 9 Lower Dandenong Road, Mentone (“the property”) by the Official Trustee, or any agent appointed by the Official Trustee;

(b)        the inspection of the property by the Official Trustee, any agent appointed by the Official Trustee and any prospective purchaser of the property; and

2.                  Not to damage the property, including the dwelling, vegetation and fencing on the property, in any way whatsoever.

13                  His wife has not offered similar undertakings, but I am satisfied that orders to the effect of those undertaking should be made against her so that she can continue to live in the property until it is sold.  On the evidence filed, those orders should be made protect the property and ensure our orders of sale.  Accordingly, I will make orders, not specifically on the motions, but by way of addition to those made by Heerey J on 15 July 1998 and 16 March 1999.  Those orders will include appropriate directions necessary to give further effect to the partition order.  The orders will be:

1.                       The Official Trustee, his servants or agents be entitled to inspect the property on 2 August 1999 between 1.00 pm and 3.00 pm and on 2 September 1999 between 1.00 pm and 3.00 pm.

2.                       The property be sold by public auction, such auction not to be held before 19 November 1999.

3.                       The contract note or contract of sale be in the form published by the Law Institute of Victoria, and the terms of the sale include –

(i)      that the deposit be for a sum equivalent to not less than 10 per cent of the total sale price;

(ii)      that the balance of the purchase price be paid not less than 90 days after the date upon which the contract is signed.

4.                       Each of Mr Thomas Lynn and the bankrupt have the right to bid at the auction.

5.                       The reserve price for the sale of the property be set by the Official Trustee.

6.                       The Official Trustee be authorised to sign the contract of sale on behalf of the registered proprietors of the property.

7.                       The property be available for inspection between 1.00 pm and 3.00 pm on Tuesdays, Thursdays and Saturdays (except public holidays) commencing on 12 October 1999 until the property is sold.

8.                       The respondent Thomas Lynn and the bankrupt give possession of the property to the Official Trustee by no later than 4.00 pm on the seventh day prior to the settlement of the sale of the property.

9.                       Liberty to apply be reserved.

10.                   The bankrupt Kathleen Fay Lynn, her servants or agents be restrained from interfering with, disrupting or obstructing –

(a)     the auction sale of the property by the applicant, or any agent appointed by the applicant;

(b)          the inspection of the property by the applicant, any agent appointed by the applicant and any prospective purchaser of the property.

11.                   The bankrupt Kathleen Fay Lynn, her servants or agents be restrained from deliberately damaging the property, including the dwelling, vegetation and fencing on the property, in any way whatsoever.

Associate:

Dated:              3 June 1999