FEDERAL COURT OF AUSTRALIA

Nugawela v Dudley [2020] FCA 102

ORDERS

THE COURT ORDERS THAT:

1.    Notwithstanding Federal Court Rule 17.01(2) and pursuant to Federal Court Rule 17.04(c), the Applicant’s interlocutory application filed on 6 February 2020 be heard prior to the service of the application (and supporting affidavit) by reason of its urgency (as outlined in the supporting affidavit).

2.    Until further order, the Commonwealth Bank of Australia (ACN 123 123 124), and its officers, servants or agents be restrained from performing any acts or signing any documents in furtherance of any sale, transfer or dealing with the property located at 126 Coolibah Drive, Greenwood in the State of Western Australia.

3.    The Applicant serve forthwith on the Respondents by email a copy of these orders and the interlocutory application filed on 6 February 2020 (and the supporting affidavit).

4.    The interlocutory application for injunctive relief filed on 6 February 2020 be listed for hearing on 11 February 2020 at 2:15 pm.

5.    Costs be reserved.

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

REASONS FOR JUDGMENT

REVISED FROM TRANSCRIPT

MCKERRACHER J:

1    Dr Nugawela, the applicant, applies today for urgent interim relief in the form of a stay or injunction to prevent the Commonwealth Bank of Australia from taking any further steps towards selling, settling or otherwise dealing with property located at 126 Coolibah Drive, Greenwood, described as the Greenwood property. At this stage, the property is registered in Dr Nugawela’s name, but he is bankrupt and has issued this application for urgent relief in other proceedings commenced in 2017, which is in the docket of another judge, challenging various steps taken by the respondent, who is the Trustee in bankruptcy.

2    The application for urgent relief is supported by an affidavit sworn late in the day two days ago which annexes certain documents but, because of the urgency of the affidavit, could not annex all documents relied upon. Dr Nugawela has produced searches of the Greenwood property title and court orders that were made for the possession of the property by the Bank. In the affidavit in support, Dr Nugawela indicates that although he was made bankrupt as a result of an order made by this Court on 21 February 2017, he believes he still has some residual rights in relation to assets that are now controlled by the Trustee and, in particular, he is concerned about the jeopardy to his professional and business reputation and his future income earning capacity after the discharge of his present bankruptcy resulting from actions or omissions of the Bank and the Trustee.

3    Dr Nugawela attaches copies of two consecutive contracts of sale for the sale and purchase of the Greenwood property by an entity known as City Plus Holdings which he describes as the original purchaser. In relation to that transaction, Dr Nugawela says he was, and remains, fully in agreement with the proposed transfer of the Greenwood property to the original purchaser. Dr Nugawela says it has also been agreed between the director of the original purchaser and himself that the original purchaser would lease the Greenwood property back to Dr Nugawela’s wife and Dr Nugawela so that he could continue to operate his medical practice from the Greenwood property.

4    However the Trustee has now declined to complete the transfer of the Greenwood property to the original purchaser as per the contract of sale. That particular matter has been raised by Dr Nugawela in an application which is listed in another judge’s docket, reviewing the conduct of the Trustee and to which this urgent application is part.

5    The reason for the urgency in obtaining either an injunction or other relief against the Bank is that Dr Nugawela has now become aware of the Bank’s intention to, as he puts it, lapse his wife’s caveat lodged against the Greenwood property and to sell the property to another purchaser. He has also produced copies of letters from solicitors for the Bank in relation to such a sale which make it clear that the sale was to proceed and a subsequent letter of 16 January 2020 from the Bank referring to a lapsing notice in respect of the wife’s caveat.

6    Dr Nugawela says that, as a result of the letter from the Bank’s lawyers, dated 4 December 2019, his wife is also concerned that the imminent sale of the Greenwood property by the Bank will cause her loss of any financial benefit or possible equitable interest that she holds in relation to the Greenwood property and which interest is part of consent orders made by the Family Court of Western Australia in relation to a property settlement between the parties. Those orders have also been produced by Dr Nugawela.

7    Dr Nugawela says that neither he nor his wife have received a copy of any lapsing notice from Landgate in relation to the Greenwood property. However, he has recently contacted Landgate, through their representatives, by phone and was informed by them that the caveat lodged by the wife against the Greenwood property would lapse at midnight, 5 February 2020, being the date on which the affidavit was sworn late in the day and it is now lunchtime on 7 February 2020. At this stage, assuming that the caveat did indeed lapse as foreshadowed, the caveat would no longer be on the Greenwood property and the settlement could proceed at any time from midnight 5 February 2020.

8    Dr Nugawela says that if the Bank is not prevented from selling the Greenwood property to another purchaser pending the outcome of the Trustee’s review, he will suffer serious and irreversible prejudice by being deprived of the opportunity to continue maintaining his medical practice and earning an income on that practice at the Greenwood property whether during the period of bankruptcy or after discharge. If the Greenwood property is sold to another purchaser he will lose any rights or opportunity of the nature earlier described.

9    Dr Nugawela says there are a number of economic advantages to him and consequentially to the administration of the bankruptcy inherent in his being able to continue his medical practice at the Greenwood property, in particular, the licence issued by the local authority for the use of the Greenwood property in operating a medical practice was issued personally to him a number of years ago.  Documentation relating to that licence has been handed up today by Dr Nugawela.

10    He further claims that if he were to relocate to another property, in order to operate a medical practice, he would need to make a fresh application for approval from the local council wherever the property is located for that purpose. That would involve significant cost and delay and such an application could not be assured of success. Additionally, Dr Nugawela says he has developed substantial goodwill from long-standing patients and attendees arising from the practice operating from the Greenwood property.

11    As against these considerations, Dr Nugawela contends that it is unclear that there would be any prejudice to the Bank by delaying progress towards finality of any current contract of sale of the Greenwood property. Dr Nugawela says that, in particular, he is not aware whether the contract for the sale of property is subject to any conditions, for example, whether the sale is conditional on all existing caveats or encumbrances first being discharged.

12    The period of restraint sought in the application is until final orders are made in the proceedings, seeking review of the Trustees conduct in relation to the sale of the property to City Plus Holdings. Dr Nugawela believes that orders which might be made in those proceedings are capable of affecting or varying the Trustee’s former decision to effectively refuse to allow the original sale to be completed.

13    In considering these matters, the first question I must ask myself is whether the Court has jurisdiction. Relief concerning caveats is usually determined by a State Court, as relief involving caveats generally involves State legislation. There is a complicating factor here as the litigation involved clearly relates to a bankrupt estate and the course pursued in the recently delivered decision of the High Court of Australia in Boensch v Pascoe [2019] HCA 49 reveal the approach of proceeding to a State Court, then appealing to the Full Court of the Federal Court of Australia and then to the High Court.

14    But, as indicated, any caveat application involved in this case is in the context of a bankrupt estate. The law governing bankruptcy is contained in the Bankruptcy Act 1966 (Cth) and, as a Commonwealth Act, it applies throughout Australia. The Federal Court of Australia and the Federal Circuit Court of Australia have the power to hear and decide bankruptcy cases as do State Supreme Courts. The Family Court has jurisdiction in any matter related to the bankruptcy of a party in proceedings for property settlement or spousal maintenance. This is further complicated, in this instance, as the property is subject to property settlement orders made by the Family Court of Western Australia.

15    However, clearly, in the present case, the following factors are relevant. First, the relief is linked to actions also taken by the Trustee, who is the trustee in bankruptcy of Dr Nugawela’s estate. Secondly, there are purported complaints against actions taken by or not taken by the Trustee which have already been commenced and are being pursued in this Court. Thirdly, to the extent that the actions of the Trustee may be capable of being reviewed, such review invokes federal jurisdiction. And fourthly, the estate of Dr Nugawela is vested in the Trustee and the property which is sought to be affected by this urgent application is under the control of the Trustee. I am satisfied, having regard to all those factors, that I clearly have jurisdiction to hear this urgent interim application.

16    As to the merits of the application, it is clear, at this early stage, that there appear to be some unanswered questions in relation to a number of matters. The first is whether Dr Nugawela has a right to be heard in a matter of the present nature, given that he is currently bankrupt, that is to say, whether he has standing, given that he is bankrupt. The second is whether Dr Nugawela has standing, in any event, given that it is his wife’s interest under the caveat which appears to be directly affected.

17    The third consideration is whether Dr Nugawela or his wife have acted with sufficient urgency, given that the lapsing notice appears to have been served on the wife, presumably shortly after 16 January 2020, being the date of the letter apparently sent by registered post to the wife. More importantly, from a date perspective, the notification sent by lawyers for the Bank by registered post, shortly after 4 December 2019, was to the effect that the Greenwood property had been sold with settlement expected to occur on about 16 January 2020.

18    All of these matters need to be answered and may pose difficulties for any form of relief that might be sought by either Dr Nugawela or his wife. Nonetheless, given the manifest urgency of the situation, and given that nobody, other than Dr Nugawela , and the Court has necessarily had the opportunity to consider all matters raised by the papers, which were brought before the Court yesterday, I believe that the preservation of the status quo, for a short period of time, at least in the first instance, is necessary to protect everyone’s interests.

19    The preservation of the status quo for such a short period is certainly unlikely to impose prejudice to third parties, including the Bank, other than as to costs. I will order that service of the proceeding be effected on such parties as a matter of urgency, preferably by email, to give them an opportunity to be heard as to whether the urgent interim orders I will make at this point should be extended or discharged.

20    Nothing I have said in relation to this urgent relief should be taken as accepting that Dr Nugawela is necessarily entitled to an extension of the relief, which I will now grant only on an urgent ex parte and interim basis. Therefore, I propose making, as varied in the way I will describe, orders in terms of the interlocutory application, filed by Dr Nugawela effectively yesterday, seeking the following orders which I will modify.

Associate:

Dated:    7 February 2020