Federal Court of Australia

ENZED Nominees Pty Ltd v State of Western Australia [2024] FCA 620

ORDERS

THE COURT ORDERS THAT:

1.    ENZED Nominees Pty Ltd ACN 079 813 595 be joined as first applicant to these proceedings.

2.    Mr Nikolajs Zuks be named as second applicant.

3.    Pursuant to s 133(9) of the Bankruptcy Act 1966 (Cth), the estate in fee simple in the land described as Lot 100 on deposited plan 46031 being the whole of the land in Certificate of Title Volume 2626 Folio 879 (Property) presently registered in the name of Nikolajs Zuks do vest in Nikolajs Zuks, subject to any outstanding charges over the Property imposed by statute or otherwise including, but not limited to, any unpaid land tax, body corporate fees, local government rates and water and sewerage or similar charges.

4.    On the basis of the vesting of the Property as provided for in order 3, the caveat (No O933645) lodged by the second respondent against the Certificate of Title to the Property on 8 November 2021 be removed.

5.    There be 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

COLVIN J:

1    On 4 October 2023, the bankruptcy of Mr Nikolajs Zuks was annulled pursuant to s 153A(1) of the Bankruptcy Act 1966 (Cth) on the basis that all his debts and the costs of his estate had been paid in full. However, prior to the annulment, his trustee in bankruptcy had disclaimed his interest in a property in Bedfordale in Western Australia (the Lot). As a result of the disclaimer, the rights of Mr Zuks in the Lot were determined forthwith: s 133(2) of the Bankruptcy Act. Consequently, an absolute caveat was lodged by the Registrar of Titles on behalf of the Crown in right of the State of Western Australia over the Lot.

2    Mr Zuks made application to this Court for an order removing the caveat. However, there was no basis to require the Registrar of Titles to remove the caveat unless and until something had occurred in relation to the disclaimer which was the operative legal event that had determined the rights of Mr Zuks. Conceptually, that was possible to the extent that there was a statutory source of power to do so: National Australia Bank Ltd v State of New South Wales [2009] FCA 1066; (2009) 182 FCR 52 at [23]-[24] (Rares J).

3    The consequences of the annulment of a bankruptcy are set out in s 154 of the Bankruptcy Act. Relevantly for present purposes, all dispositions of property by the trustee before the annulment are taken to have been validly made or done. Further, property still vested in the trustee at the time of the annulment may be applied to meet the costs, charges and expenses of the bankruptcy. The remainder 'reverts' to the bankrupt, subject to any application being made by a person claiming an interest in the property, or order of the Court to the contrary. However, there is no provision within s 154 dealing with property that has been dealt with by disclaimer.

4    More generally, s 133(9) 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.

5    However, as has been explained, Mr Zuks had no interest in the Lot by reason of it having been disclaimed.

6    In Walsh v State of Queensland [2019] FCA 871 at [32], Logan J held that the power conferred by s 133(9) was enlivened if the person applying claimed an interest and it was not necessary to reach a concluded view as to whether the claim was vindicated in order to exercise the power. In his Honour's view, the claim was enough (presumably meaning a bona fide claim with a reasonably arguable legal and factual foundation).

7    In Lucan (Trustee) v State of New South Wales, in the matter of the Bankrupt Estate of Williams [2022] FCA 751, Goodman J considered the operation of s 133(9) in circumstances where a trustee had disclaimed property but a successor trustee sought to reclaim the property after the mortgage on the property had been discharged. His Honour found that the trustee's claim to the property was sufficient, but had it been necessary would have found that the trustee had an interest in the property (at [27]ff).

8    Likewise, in the present case, for the reasons which follow, Mr Zuks had an interest in the Lot and it is not necessary to proceed on the basis that a claim to an interest is enough.

9    Submissions were advanced in support of the application to the effect that the monies that were used to discharge the debts of Mr Zuks were provided by ENZED Nominees Pty Ltd. There was evidence as to how that occurred. Counsel who appeared for Mr Zuks at the hearing of the application also appeared for ENZED. Respectfully, the evidence as to the precise events that occurred was somewhat confused.

10    However, the evidence did show that whatever the source of the funds, those funds had been provided in discharge of orders made in proceedings in which Mr Zuks (by his trustee) sought relief and pursuant to which orders payment had been due to Mr Zuks, to be received by his trustee in bankruptcy. It was those funds, which were funds due to Mr Zuks (and hence to his bankrupt estate), which were used to discharge all of the debts of Mr Zuks. Those debts were principally owed to the Deputy Commissioner of Taxation. They included the debt that was secured by a mortgage in favour of the Commissioner over the Lot. Therefore, the discharge of those debts meant that the liability secured by the mortgage was also discharged.

11    Prior to the discharge of the liability to the Commissioner, lawyers acting for the Commissioner had foreshadowed an application for a vesting order in respect of the Lot. Before the Court on the application by Mr Zuks was a letter from those lawyers to the effect that the Commissioner did not intend to proceed with the bringing of that application because the debt secured by the mortgage had been discharged.

12    Counsel for the State of Western Australia and the Registrar of Titles submitted that it would be open to proceed on the basis that Mr Zuks was the source of the funds that had been used to effect the annulment and had no objection to an order being made vesting the property in the name of Mr Zuks with usual orders directed to the Registrar of Titles.

13    In the above circumstances, I was satisfied Mr Zuks had an interest in the Lot as the party who was the source of the funds that had been used to discharge the mortgage over the Lot. There are many instances where an interest of that kind has been found to be a sufficient basis to invoke the statutory power conferred by s 133(9).

14    Further, based on the submissions that had been advanced it was necessary for ENZED to be joined, effectively as an alternative applicant, noting that ultimately ENZED and Mr Zuks joined in seeking an order in favour of Mr Zuks.

15    The trustee in bankruptcy had no interest in the Lot because of the annulment.

16    Therefore, all interested parties were before the Court on the application.

17    I was also satisfied, for the following reasons, that it was just and equitable that an order be made vesting the Lot in the name of Mr Zuks and for the usual form of order to be made directed to the Registrar of Titles, namely:

(1)    as has been explained, ultimately Mr Zuks was the source of the funds that had discharged the debt which had been secured over the Lot;

(2)    although ENZED may have been the source of the funds that came into the hands of Mr Zuks pursuant to the orders, ENZED supported an order in favour of Mr Zuks;

(3)    the Commissioner no longer made any claim to an interest in the Lot;

(4)    Mr Zuks had been the owner of the Lot before his bankruptcy (and the decision by his trustee to disclaim any interest in the Lot); and

(5)    it would be unfair if Mr Zuks having secured an annulment of his bankruptcy on the basis that all his debts had been paid and being the source of the funds that discharged the mortgage over the Lot was left without title to the Lot.

18    For those reasons, I made orders joining ENZED as an applicant and orders pursuant to s 133(9) of the Bankruptcy Act.

Associate:

Dated:    12 June 2024