FEDERAL COURT OF AUSTRALIA

Leroy v Koutavas, in the matter of Koutavas (No 2) [2017] FCA 912

ORDERS

BY CONSENT OF THE APPLICANT, THE FIRST RESPONDENT AND THE THIRD RESPONDENT:

THE COURT DECLARES:

1.    Pursuant to s 30 of the Bankruptcy Act 1966 (Cth), the First Respondent holds the title to the land in certificate of title folio identifier 26/84988, being the land known as 47 Staples Street, Kingsgrove in the State of New South Wales (the Land), on trust as to a one half share as tenant in common for the benefit of the bankrupt estate of Harry Koutavas (the Bankrupt).

2.    The interest of the bankrupt estate of Harry Koutavas in the Land, as declared in order 1, vests in the Applicant pursuant to s 58 of the Bankruptcy Act.

3.    The obligation to repay loans made by the Second and Third Respondents to the First Respondent, or the First Respondent and the Bankrupt, from about 7 June 2005 until about 15 February 2008 in the total amount of $113,447 is not secured against the Land.

4.    The Second and Third Respondents have no estate or interest in the Land.

THE COURT ORDERS:

5.    Pursuant to s 74MA of the Real Property Act 1900 (NSW), the caveat lodged by the Second and Third Respondents numbered AH150232 be withdrawn by the caveators, in the case of the second respondent by any legal personal representative or trustee of the second respondent’s estate, within 7 days of the date of this order.

6.    In default of order 5, the Registrar is authorised pursuant to r 41.09 of the Federal Court Rules 2011 (Cth) to sign a form of withdrawal of caveat numbered AH150232 in registrable form and provide that signed form of withdrawal to the Applicant.

7.    Pursuant to s 66G of the Conveyancing Act 1919 (NSW), Maxwell Prentice and David Sampson (together the Trustees) be appointed as trustees for the sale of the Land.

8.    The Land be vested in the Trustees subject to any encumbrances affecting the entirety of the Land but free from encumbrances (if any) affecting any undivided share therein to be held by the Trustees upon statutory trust for sale under Div 6 of Pt 4 of the Conveyancing Act.

9.    The proceeds of sale of the Land be paid in the following priority:

(a)    to pay sale agent’s commission and expenses;

(b)    to pay the costs and disbursements of the conveyancer acting on the sale;

(c)    to discharge the mortgage registered on the title to the Land;

(d)    to pay the Trustees’ remuneration and expenses;

(e)    to pay the Applicant’s legal costs of these proceedings;

(f)    the balance remaining to be paid in equal shares to the Applicant and the First Respondent.

10.    Pursuant to s 66I of the Conveyancing Act, the First Respondent is entitled to purchase the Land, whether at auction or otherwise, without the payment of a deposit.

11.    The Trustees are authorised to charge remuneration for work done at the rates disclosed in their consents to act filed in these proceedings.

12.    The Applicant’s legal costs of and incidental to these proceedings are to be agreed by the Applicant and the First Respondent or in the absence of agreement are to be taxed by the Registrar forthwith.

13.    The Trustees have liberty to apply to the Associate to Robertson J to list any application they may wish to make in regards to their sale of the Land, including to obtain possession of it.

14.    Pursuant to r 41.03 of the Federal Court Rules, the operation and enforcement of orders 1 to 13 be stayed until 5 pm on 15 September 2017.

15.    The proceedings be adjourned for mention before Robertson J at 9:30 am on 22 September 2017.

THE COURT NOTES:

16.    The agreement of the Applicant, the First Respondent, the Third Respondent and the Bankrupt that:

(a)    The Bankrupt has paid $50,000 in cleared funds to the Applicant as trustee of the Bankrupt’s estate as a non-refundable good faith payment;

(b)    the Bankrupt shall pay a further $270,000 (the Payment) to the Applicant as trustee of the Bankrupt’s estate by no later than 5 pm on 8 September 2017;

(c)    in the event the Payment is made by 5 pm on 8 September 2017:

(i)    the Applicant, the First Respondent and the Third Respondent shall apply to Robertson J on 22 September 2017 to vacate orders 1 to 13 and in their stead have orders made dismissing the proceedings with no order as to costs;

(ii)    the Applicant shall be taken to disclaim any interest in the Land as trustee in bankruptcy of the Bankrupt’s estate and shall provide the First Respondent with a signed withdrawal of caveat numbered AH25161 within 7 days of receipt of the Payment;

(d)    time is of the essence in regards to the Payment;

(e)    in the event the Payment is not made by 5 pm on 8 September 2017 the stay of orders 1 to 13 shall lapse at 5 pm on 15 September 2017 and shall not be extended.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

ROBERTSON J:

Introduction

1    The applicant is the trustee in bankruptcy of Harry Koutavas (the bankrupt). The trustee claimed declarations of right against the bankrupt’s former wife, the first respondent, Mrs Kanella Koutavas, in respect of what the trustee contended was the bankrupt’s interest as tenant in common in equal shares in the residential property at 47 Staples Street, Kingsgrove, New South Wales (the property). The trustee also sought the appointment of trustees for sale of the property; and the removal of the caveat lodged on the title to the property by Mrs Koutavas’ parents, the second and third respondents, Mr Elias Fildissis and Mrs Dimitra Fildissis.

2    Since these proceedings were commenced on 17 January 2017, the trustee became aware that Mr Fildissis, the second respondent, died on 3 March 2016.

3    On 12 April 2017 I ordered that the proceeding continue in the absence of a person representing the deceased person Mr Elias Fildissis, the second respondent: see Leroy v Koutavas, in the matter of Koutavas [2017] FCA 381.

Chronology of events

4    In February 1999, the bankrupt and Mrs Koutavas became the registered proprietors of the property. In December 2004 the bankrupt and Mrs Koutavas granted a first registered mortgage to St George Bank over the property.

5    On 23 June 2010 the bankrupt and Mrs Koutavas made an agreement transferring the bankrupt’s interest in the property to Mrs Koutavas. This agreement was made under s 90C of the Family Law Act 1975 (Cth).

6    On 12 July 2010 the bankrupt presented a debtor’s petition, which was accepted. Mr Struthers was appointed as the bankrupt’s trustee in bankruptcy. Mr Leroy was appointed as the bankrupt’s trustee in bankruptcy in place of Mr Struthers on 18 September 2012.

7    On 9 May 2012 orders were made by consent in the Supreme Court of New South Wales setting aside the 23 June 2010 agreement and ordering Mrs Koutavas to transfer a half interest in the property to the bankrupt’s trustee in bankruptcy.

8    On 2 August 2012, the second and third respondents, Mr Elias Fildissis and Mrs Dimitra Fildissis, lodged a caveat on the title to the property. The caveat was lodged to give notice of a claimed interest in the property by Mr and Mrs Fildissis who had lent sums totalling some $148,000 to the registered proprietor, their daughter Mrs Koutavas, to assist in the construction and mortgage repayments for the property.

9    In October 2012 the trustee in bankruptcy, now Mr Leroy, began corresponding with Mrs Koutavas to achieve the transfer of title to half the property to the trustee in bankruptcy.

10    In June 2016 the trustee in bankruptcy demanded of Mr and Mrs Fildissis that they withdraw the caveat.

Jurisdiction

11    By s 27 of the Bankruptcy Act 1966 (Cth), this Court and the Federal Circuit Court have concurrent jurisdiction in bankruptcy, and that jurisdiction is exclusive of the jurisdiction of all courts other than: (a) the jurisdiction of the High Court under s 75 of the Constitution; or (b) the jurisdiction of the Family Court under s 35 or s 35A of the Bankruptcy Act.

12    The (federal) jurisdiction of this Court is explained in Truthful Endeavour Pty Ltd v Condon (Trustee) Re Rayhill (Bankrupt) [2015] FCAFC 70; 233 FCR 174, see for example at [35]-[37].

13    Consistently with Rizeq v Western Australia [2017] HCA 23, the laws of New South Wales form part of the single composite body of federal and non-federal law that is applicable to cases determined in the exercise of federal jurisdiction in the same way, and for the same reason, as they form part of the same single composite body of law that is applicable to cases determined in the exercise of State jurisdiction – because they are laws: see the judgment of the plurality at [56].

14    Although there would not appear to be any different outcome in this case, as explained by the plurality in Rizeq at [63], s 79 of the Judiciary Act 1903 (Cth) is only necessary to ensure that the exercise of federal jurisdiction is effective, and picks up the text of a State law governing the exercise of State jurisdiction and applying that text as a Commonwealth law to govern the manner of exercise of federal jurisdiction.

15    The laws in question here are ss 7(1), 66F and 66G of the Conveyancing Act 1919 (NSW) and s 74MA of the Real Property Act 1900 (NSW). Section 79 of the Judiciary Act would appear to be necessary for those laws to be applicable. In my view, these State laws would not apply without resort to s 79 as they not only create rights and liabilities but also govern the exercise of State jurisdiction.

16    In Coshott v Prentice [2014] FCAFC 88; 221 FCR 450, the Full Court said at [122]:

… The trustee in bankruptcy’s claim for declarations as to his interest in the Property as an asset to be brought to account in the bankrupt estate is essential to the determination of his claim for orders for the sale of the Property. In other words, the orders for sale were dependent upon the trustee establishing his interest in the Property. Further, both orders are sought by the trustee in bankruptcy in the discharge by him of his duties to bring to account and realise the assets of the bankrupt. The fact that the property is co-owned with a non-bankrupt person does not logically break the connection between the issues. …

Consideration

17    In these circumstances, Mrs Koutavas is presently the only registered proprietor of the property and she is the subject of consent orders ordering her to transfer a half interest to the trustee in bankruptcy. She holds a half share as tenant in common as trustee in favour of the trustee in bankruptcy.

18    Section 66G of the Conveyancing Act provides that where any property is held in co-ownership the court may, on the application of any one or more of the co-owners, appoint trustees of the property and vest the same in such trustees, subject to incumbrances affecting the entirety, but free from incumbrances affecting any undivided shares, to be held by them on the statutory trust for sale or on the statutory trust for partition. An equitable interest as co-owner is sufficient to enliven that power. “Property” is defined in s 7(1) of the Conveyancing Act to include any estate or interest in real property. “Co-ownership” is defined in s 66F(1) to mean “ownership whether at law or in equity in possession by two or more persons as joint tenants or as tenants in common” and the term “co-owner” has a corresponding meaning, and includes an incumbrancer of the interest of a joint tenant or tenant in common.

19    I would make orders appointing the two trustees for sale of the property, both having filed consents to so act. I would also make an order in terms of the order of priority set out in prayer 8 of the originating application.

20    I then turn to the question of the caveat. As I have said, the estate or interest claimed is an equitable charge on the basis that between 2003 and 2011 the caveators lent sums totalling some $148,000 to the registered proprietor, their daughter Mrs Koutavas, to assist in the construction and mortgage repayments for the property.

21    Section 74MA provides:

74MA    Application to Court for withdrawal of caveat

(1)    Any person who is or claims to be entitled to an estate or interest in the land described in a caveat lodged under section 74B or 74F may apply to the Supreme Court for an order that the caveat be withdrawn by the caveator or another person who by virtue of section 74M is authorised to withdraw the caveat.

(2)    After being satisfied that a copy of the application has been served on the person who would be required to withdraw the caveat if the order sought were made or after having made an order dispensing with service, the Supreme Court may:

(a)    order the caveator or another person, who by virtue of section 74M is authorised to withdraw the caveat to which the proceedings relate, to withdraw the caveat within a specified time, and

(b)    make such other or further orders as it thinks fit.

(3)    If an order for the withdrawal of a caveat is made under subsection (2) and a withdrawal of the caveat is not, within the time limited by the order, lodged with the Registrar-General, the caveat lapses when an office copy of the order is lodged with the Registrar-General after that time expires.

22    I am satisfied as to service of the application: see my earlier judgment Leroy v Koutavas, in the matter of Koutavas at [12].

23    It appears that this loan was made as a result of an oral agreement between Mr and Mrs Fildissis and their daughter Mrs Koutavas and Mr and Mrs Fildissis did not thereby acquire, and do not have, an interest in the property. I would make orders to remove the caveat on the basis that Mr and Mrs Fildissis have no estate or interest in the property.

24    In the case of Mr Fildissis, by virtue of r 9.24(2) of the Federal Court Rules 2011 (Cth), the orders made in the proceeding bind the estate of Mr Fildissis as the estate would have been bound if his personal representative had been a party to the proceeding.

Conclusion

25    For these reasons, and because they are by consent, I make the orders proposed by the applicant, the first respondent and the third respondent.

Associate:

Dated:    9 August 2017