Federal Court of Australia

Gosling v State of New South Wales [2023] FCA 1213

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 133(9) of the Bankruptcy Act 1966 (Cth), the one half share as tenant in common of the Estate in Fee Simple of the real property described in Lot 10 in Deposited Plan 246789 situated at 1 Anderson Avenue, Bullaburra, in the State of New South Wales (property), disclaimed by the Trustee in Bankruptcy of Rowena Dorraine Howell, and currently registered in the name of the State of New South Wales, vest in the applicant, Michael Gosling, subject to:

(a)    any charges relating to the property imposed by Statute or otherwise including, but not limited to, any unpaid land tax, Local Government rates and water and sewerage or similar charges; and

(b)    the mortgage to the second respondent (RHG Mortgage Corporation Limited) registered with dealing number AC844339X.

2.    Notice of these Orders is to be given by the applicant to each respondent and interested party.

3.    No order as to costs.

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

REASONS FOR JUDGMENT

BURLEY J:

1.    INTRODUCTION

1    The applicant, Michael Gosling, seeks orders in relation to a property located at 1 Anderson Avenue, Bullaburra, in New South Wales (property) pursuant to s 133(9) of the Bankruptcy Act, 1966 (Cth) that the property vest in him, subject to any charges relating to the property and subject to a mortgage to the second respondent, RHG Mortgage Corporation Limited.

2    The first respondent is the State of New South Wales. The third respondent is Rowena Dorraine Howell, Mr Gosling’s former de facto partner. Ms Howell filed a debtor’s petition and was made bankrupt on 2 February 2010 and Nicholas Craig Malanos of Worrells was made the trustee of her bankrupt estate. On 3 February 2013, Ms Howell was discharged from her bankruptcy.

3    Mr Gosling relies on four affidavits of service and a substantive affidavit that he has affirmed.

4    On the basis of the affidavits of service, I am satisfied that each of the respondents has been properly served. The State of New South Wales has filed a submitting appearance. RHG Mortgage has been served but has not sought to appear. Documents tendered further confirm that RHG Mortgage is aware of the application. The Official Trustee in Bankruptcy has also been served, as Mr Malanos has passed away and the bankrupt estate was not transferred to another private trustee. The Official Trustee has indicated that it does not wish to become involved in the proceeding.

5    Ms Howell was represented by a solicitor, Ashley Dewell of McPhee Kelshaw Solicitors and Conveyancers, who did not file a notice of appearance but sought and obtained leave to be excused from participation in the proceedings. At the time that leave was obtained, Ms Howell indicated that whilst she disputed the accuracy of some matters set out in the affidavit of Mr Gosling, she did not seek to challenge them in court.

2.    BACKGROUND

6    In his affidavit, Mr Gosling set out the following matters relevant to the current application.

7    Mr Gosling and Ms Howell commenced a de facto relationship in about 1999. They lived together with Mr Gosling’s mother at her home until mid-2006 when they decided to acquire a place of their own. At the time, Ms Howell was on a disability pension and Mr Gosling had supported her financially throughout their relationship.

8    They decided to buy the property and Mr Gosling sought finance with the assistance of a mortgage broker who informed him that his income was insufficient to borrow the final $20,000 needed to buy the house. He was informed that if Ms Howell was included in the loan application and included her pension in the assets, the loan would be granted. Ms Howell agreed, and the property was purchased for $355,000. Ms Howell contributed $1,000 towards the deposit with the balance being provided by Mr Gosling from his savings and by a home loan advanced by RAMS Mortgage Corporation Limited, which is now RHG Mortgage, the second respondent.

9    The sale was completed on 4 January 2007 and Mr Gosling and Ms Howell moved in together. However, by March 2008 their relationship failed and in November 2008 Ms Howell moved out in apparently acrimonious circumstances. At the time, Ms Howell indicated in a conversation with Mr Gosling that she would “get her name off the loan”, after which Mr Gosling noticed that separate statements regarding the loan were no longer addressed to Ms Howell at the property.

10    When they acquired the property, Mr Gosling set up a direct debit to pay the mortgage payments. He did so continuously throughout their relationship and has continued to do so up until now. He gives evidence that the $1,000 that Ms Howell contributed to the deposit was the only financial contribution that she made to the property.

11    Ms Howell did not inform Mr Gosling of her debtor’s petition or that she had been declared bankrupt. He gives evidence that he did not receive notice of the appointment of the trustee. However, in about September 2019, Mr Gosling moved to northern New South Wales and intended to sell the property. It was then that a conveyancer who he had engaged to assist in the sale informed him of the bankruptcy. Mr Gosling withdrew the sale and rented out the property.

12    Later, he caused further investigations to be conducted whereupon during the course of 2021 he learnt that the State of New South Wales was recorded as being a tenant in common with him in respect of the property. A current land title search records that this is so.

13    Furthermore, annexed to Mr Gosling’s affidavit is Departmental Dealing AG443719X, which records that the State of New South Wales was recorded as co-registered proprietor of the property as a result of “Disclaimer of Property relating to it by the trustee in bankruptcy of the co-registered proprietor”. Mr Gosling does not recall receiving any correspondence either from the State of New South Wales or the trustee in bankruptcy in relation to these matters.

14    On 8 November 2022, a real estate agent provided Mr Gosling with an estimate of the value of the property of between $725,000 and $750,000.

15    Mr Gosling gives evidence that he does not presently intend to sell the property but that he would like to rectify the title to enable him to do so. He also gives evidence that apart from the present parties, he is not aware of any other person who has or could have an interest in the proceeds of the sale of the property.

3.    CONSIDERATION

16    Section 133 of the Act relevantly provides:

133    Disclaimer of onerous property

(1AA)    Where any part of the property of the bankrupt consists of:

(a)    land of any tenure burdened with onerous covenants; or

(b)    property (including land) that is unsaleable or is not readily saleable;

subsection (1) applies.

…

(1)    Subject to this section, the trustee may, notwithstanding that he or she has endeavoured to sell or has taken possession of the property or exercised any act of ownership in relation to it and notwithstanding, in the case of property the transfer of which is required by a law of the Commonwealth or of a State or Territory to be registered, that he or she has not become the registered owner of that property, by writing signed by him or her, at any time disclaim the property.

…

(2)    A disclaimer under subsection (1) or (1A) operates to determine forthwith the rights, interests and liabilities of the bankrupt and his or her property in or in respect of the property disclaimed, and discharges the trustee from all personal liability in respect of the property disclaimed as from the date when the property vested in him or her, but does not, except so far as is necessary for the purpose of releasing the bankrupt and his or her property and the trustee from liability, affect the rights or liabilities of any other person.

…

(9)    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.

…

17    Section 133(9) provides that a person either claiming an interest in, or being under a liability not discharged by the Act in respect of, “disclaimed property” may bring an application that the land be vested in that person.

18    It is apparent that the property has been disclaimed by the trustee, as recorded in Departmental Dealing AG443719X, which is exhibited to Mr Gosling’s affidavit. A disclaimer operates immediately to terminate the rights, interests and liabilities of the bankrupt and their trustee in respect of the property, but does not, except so far as is necessary for the purpose of releasing the bankrupt and his or her property and the trustee from liability, affect the rights or liabilities of any other person; s 133(2) of the Act. As a consequence of the disclaimer, Ms Howell’s interest in the land as a tenant in common (as held by the trustee) vested in the State of New South Wales.

19    Mr Gosling is recorded on the certificate of title for the land as the registered proprietor as a tenant in common with the State of New South Wales. Accordingly, I am satisfied that Mr Gosling has standing to bring the present application as a person with an interest in the property which has been disclaimed.

20    In Commonwealth Bank of Australia v Queensland, in the matter of Hewton [2021] FCA 22 (Derrington J), the Court summarised matters relevant to such applications:

[20]    Applications for the vesting of property under s 133(9) of the Bankruptcy Act ought to be regarded as somewhat commonplace. Usually, they are unlikely to involve any difficult question of fact or law and are unopposed by any party. That being so, one might expect that such applications can and should be disposed of by the giving of judgment on the first return date. In order to ensure the granting of relief on that occasion an applicant should demonstrate:

(a)    the making of a valid application which has been brought against and served upon the relevant Crown entity and any other person with a relevant interest in the proceedings…;

(b)    the giving of notice to the trustee in bankruptcy…;

(c)    on the substantive application for the making of an order pursuant to s 133(9):

(i)    the existence of the land;

(ii)    the security holder’s interest in the land and its entitlement to enforce its security, if any;

(iii)    the bankruptcy of the registered owner or owners of the land;

(iv)    that the trustee in bankruptcy has disclaimed of the relevant property pursuant to s 133(1) of the Bankruptcy Act and has given notice of it to the registrar of titles as required by s 133(3);

(v)    that the circumstances render it just and equitable that an order be made vesting the land in the security holder, and:

(vi)    there are no unusual circumstances which might militate against the making of the orders…

21    On the basis of the affidavit of Mr Gosling, I am satisfied that all persons with an interest in the property, or a potential interest in the property, have been properly notified of the application. In this regard, those notified include the Official Trustee. Otherwise, the formal matters set out in Hewton at (c)(i) to (iv) are established in the present application.

22    The remaining question is whether it is just and equitable that title to the disclaimed land vest in Mr Gosling. The circumstances of the present case are similar to those set out by Derrington J in Aprile v State of Queensland, in the matter of Leftwich [2021] FCA 471 and Halley J in Makhoul v State of New South Wales [2022] FCA 731. Having regard to the considerations taken into account in those cases (Aprile at [19], Makhoul at [35]–[43]) and in the circumstances of this particular case, I am satisfied that it is just and equitable to make the orders sought for the following reasons:

(a)    Mr Gosling has paid the mortgage on the property since it was entered into in 2007 and, leaving aside a relatively trivial contribution, neither Ms Howell nor anyone else relevantly contributed to payments;

(b)    Mr Gosling continues to bear the burden of the mortgage and has the obligation of doing so until it is discharged;

(c)    Despite these matters, Mr Gosling is listed on the certificate of title for the property as a tenant in common with the State of New South Wales;

(d)    The State of New South Wales has no interest in the property and does not contest the making of the orders;

(e)    RHG Mortgage does not oppose the making of the orders and has the continuing benefit of the mortgage over the property;

(f)    There are no other apparent competing interests which might affect the making of the orders or security interests in respect of the property; and

(g)    The effect of the orders will be to permit Mr Gosling to sell or refinance the property if he chooses to do so.

23    Accordingly, I will make the orders as sought.

Associate:

Dated:    11 October 2023