FEDERAL COURT OF AUSTRALIA

Commonwealth Bank of Australia v State of Queensland [2018] FCA 1041

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to section 133(9) of the Bankruptcy Act 1966 (Cth), that the estate in fee simple in the property described as Lot 35 on Survey Plan 174351, Title Reference 50521946 being the land situated as 13 Caspian Court, Kelso in the State of Queensland (Property) vest in the Applicant for the purpose of the Applicant exercising its powers as mortgagee under the Land Title Act 1994 (Qld), the Property Law Act 1974 (Qld) and registered mortgage number 713140638 (Mortgage).

2.    On the vesting of the Property in the Applicant pursuant to section 133(9) of the Bankruptcy Act 1966 (Cth) the Applicant:

(a)    may, but is not bound to, deal with the Property as if it were exercising its powers as mortgagee in possession under the Land Title Act 1994 (Qld), the Property Law Act 1974 (Qld) and the Mortgage, including exercising the right to sell the estate in fee simple of the Property in exercise of its power of sale and all its other rights under the Mortgage;

(b)    for the purpose of selling the estate in fee simple of the Property in exercise of its power of sale, is not required to serve:

(i)    a notice of default or demand whether under section 88 of the National Credit Code, being Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth) or otherwise; and

(ii)    a notice pursuant to section 84 of the Property Law Act 1974 (Qld);

(c)    is entitled to calculate the entirety of the debt secured and owing pursuant to the Mortgage as including all monies that would have been secured by the Mortgage had the Trustee of the bankrupt estate of Robert William Niven (Mr Niven) not disclaimed the Property, and to deduct and retain for its own absolute use and property such amount for any proceeds of sale of the Property as if it were money secured by the Mortgage (including costs of this application and all costs properly incurred in selling, and incidental to the sale of, the Property);

(d)    will apply the proceeds of sale from the Property as follows:

(i)    firstly, in payment of any statutory charges affecting the Property, which the relevant statute provides are payable in priority to the Applicant;

(ii)    secondly, in payment of all costs, charges and expenses properly incurred by the Applicant as incidental to the sale, or any attempted sale, or otherwise;

(iii)    thirdly, in discharge of the debt owed to the Applicant by Mr Niven as secured by the Mortgage; and

(iv)    fourthly, in payment of any subsequent mortgages (if any), and the residue (if any) of the proceeds so received shall be paid into Court in this proceeding;

(e)    must, after any sale of the Property, provide an account of its payments and receipts to:

(i)    the Trustee of the bankrupt estate of Mr Niven;

(ii)    Mr Niven; and

(iii)    the Registrar of the Court;

(f)    the Applicant must pay into Court the surplus, if any, arising from the sale of the Property.

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

EX TEMPORE REASONS FOR JUDGMENT

RANGIAH J:

1    This is an application for orders vesting in the applicant a property situated at 13 Caspian Court, Kelso, in Queensland (the property) for the purpose of the applicant exercising its power of sale as mortgagee.

2    The property was owned by Robert William Nivin (the bankrupt). On 3 March 2010, the bankrupt executed a mortgage over the property in favour of the applicant, which was registered on 25 March 2010. The mortgage secured amounts advanced under loan agreements by the applicant to the bankrupt in the sum of $728,873.

3    The bankrupt has been in default under the mortgage since at least 19 October 2016, when he ceased making scheduled repayments in accordance with the terms of the loan agreements and the mortgage. On 15 February 2017, the bankrupt presented a debtors’ petition and a trustee, Moira Carter (the trustee), was appointed to administer the estate of the bankrupt.

4    On about 9 June 2017, the trustee disclaimed the property pursuant to s 133(1) of the Bankruptcy Act 1966 (Cth). The effect of a disclaimer of onerous property is that:

(a)    A bankrupt’s rights, interests and liabilities in respect of property are taken to have been terminated, but the disclaimer does not extend to affecting any other person’s rights or liabilities, except so far as necessary in order to release the bankrupt, the bankrupt’s property and the trustees from liability: s 133(2) of the Bankruptcy Act.

(b)    The bankrupt’s fee simple estate escheats, but not absolutely, to the Crown in the right of the State, subject to any mortgages or charges: Re Tulloch Ltd (in liq) and the Companies Act (1978) 3 ACLR 808 at 813; National Australia Bank Ltd v New South Wales (2009) 260 ALR 115 at [23], [27]- [28].

(c)    The Crown holds the disclaimed property in fee simple and only the interest of the registered owner (now bankrupt) goes out of existence in the escheat: National Australia Bank Limited v New South Wales at [8]- [9].

(d)    The immediate consequence of a disclaimer of property, in the absence of a vesting order, is that a mortgagee is precluded from taking action to realise the property the subject of its security, and does not presently have the rights it would have had against the bankrupt registered owner and, further, presently has no right to enforce its security against the Crown: National Australia Bank Limited v New South Wales at [9].

5    The applicant, in its capacity as mortgagee of the property, is required, following the disclaimer, to obtain a vesting order in order to exercise its right to realise its security.

6    Section 133(9) of the Bankruptcy Act provides:

The Court may, on application by a person either claiming an interest in, or being under a liability not discharged by this Act in respect of, disclaimed property, and after hearing such persons as it thinks fit, make an order, on such terms as the Court considers just and equitable, for the vesting of the property in, or delivery of the property to, a person entitled to it or a person in whom, or to whom, it seems to the Court to be just and equitable that it should be vested or delivered, or a trustee for that person.

7    The trustee has been served with the application, and has indicated that she does not wish to participate in the proceeding. The State of Queensland appeared at the hearing and its representative indicated that the State neither consents to, nor opposes, the application.

8    In order to obtain a vesting order, it is necessary to establish that:

(a)    A disclaimer of the property has occurred, within the meaning of s 133 of the Bankruptcy Act.

(b)    The applicant has an interest in the disclaimed property, within the meaning of s 133(9) of the Bankruptcy Act.

(c)    The applicant is entitled to the disclaimed property, or the Court considers it just and equitable that it should be so vested.

[See National Australia Bank Limited v State of South Australia (No 2) [2015] FCA 240 at [19]].

9    I am satisfied that there has been a disclaimer of the property by the trustee, within the meaning of s 133 of the Bankruptcy Act. The applicant is the first and only registered mortgagee of the property. There are no registered caveats or other interests registered.

10    The total amount owing to the applicant as at 3 May 2018 was $736,576.38. The bankrupt is in default of the loan and agreements as secured by the mortgage as a result of his failure to make scheduled repayments.

11    In the absence of any other party with a registered interest in the property, the applicant, as the sole registered mortgagee, has an interest in the property within the meaning of s 133(9) of the Bankruptcy Act: Re Tulloch Ltd (in liq) and the Companies Act at 813; National Australia Bank Ltd (ACN 004 044 937) v Victoria (2010) 118 ALD 527 at [12]; National Australia Bank Ltd v State of New South Wales at [10].

12    It is well-established that a mortgagee of disclaimed Torrens system land is entitled to receive a vesting order: see, for example, Re Tulloch Ltd (in liq) and the Companies Act at 814; National Australia Bank Ltd v New South Wales at [29]; ING Bank (Australia) Limited v State of Queensland, in the matter of Watson [2017] FCA 411 at [28]; Australia and New Zealand Banking Group Limited v State of Queensland, in the matter of McFarlane (a Bankrupt) [2017] FCA 696 at [27].

13    It appropriate to make orders vesting the property in the applicant, as well as the ancillary orders sought by the applicant. I will make orders in accordance with the draft.

Associate:    

Dated:    13 July 2018