Federal Court of Australia

Shire of Goomalling v State of Western Australia [2026] FCA 762

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 133(9) of the Bankruptcy Act 1966 (Cth), Maureen Jean Hartzer’s interest in land described as Lot 5 on plan 3066 Title Number Volume 1108, Folio  482 (Land) located at 9 Lockyer Street, Goomalling 6460 in the State of Western Australia, as disclaimed by the third respondent (Property), be vested in the applicant for the purposes of the applicant exercising its powers of sale of the Land, including the Property, under the Local Government Act 1995 (WA), subject to the following conditions:

(a)    the applicant can, but is not bound to, deal with the Land as if it were exercising its powers of sale pursuant to s 6.64(1)(b) of the Local Government Act;

(b)    the applicant is not required to attempt, under s 6.56 of the Local Government Act, to recover money due to it; and

(c)    the applicant is not required to comply with the notice requirements contained in s 6.64(2) of the Local Government Act.

2.    Pursuant to s 133(9) of the Bankruptcy Act, any money received on the sale of the Property is to be applied by the applicant as follows:

(a)    first – in payment of all costs and expenses properly incurred by the applicant in selling the Property;

(b)    second – in payment of any statutory charges affecting the Property (apart from local government rates and any other sums owed to the applicant);

(c)    third – in discharging any liabilities to the applicant;

(d)    fourth – in discharging any other mortgages, encumbrances and charges of which the applicant has notice;

(e)    the residue (if any) of the proceeds so received must be paid into the Court; and

(f)    if the Court holds any surplus proceeds two years after receipt by it of those proceeds, they shall be paid to the Crown in right of the State of Western Australia.

3.    Pursuant to s 133(9) of the Bankruptcy Act, the second respondent must give effect to the vesting of the Property under order 1 by removing Registrar’s Caveat numbered O523360 from the Certificate of Title for the Land.

4.    The costs of this application be recovered out of the proceeds of any sale of the Property.

5.    There otherwise 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

BANKS SMITH J:

1    This proceeding concerns land located within the Shire of Goomalling in Western Australia.

2    The applicant, the Shire of Goomalling, applies for an order under s 133(9) of the Bankruptcy Act 1966 (Cth) vesting the property in it, so that it may sell the property to recover outstanding rates.

3    The registered proprietor of the land, Ms Maureen Jean Hartzer, was made bankrupt in July 2017. The Official Trustee in Bankruptcy was appointed as the trustee.

4    Pursuant to s 58(1)(a) of the Bankruptcy Act, all of the right, title and interest in Ms Hartzer’s estate relevantly vested in the trustee. However, the effect of s 58(2) of the Bankruptcy Act is that legal title to a fee simple interest in land does not vest in the trustee on the making of the bankruptcy orders. In order for a trustee in bankruptcy to secure legal title to those interests, it is necessary to cause the land to be registered in their own name. In Western Australia, such an application is made under s 234 of the Transfer of Land Act 1893 (WA).

5    In this case, the trustee did not apply to become the registered proprietor of the land but instead by notice in writing dated 12 October 2020 disclaimed its interest in the property pursuant to s 133(1) of the Bankruptcy Act. The disclaimer was on the grounds that the property was unsaleable in its current condition, having been declared unfit for human habitation (with the presence of asbestos) and was subject to a demolition order.

6    The Registrar of Titles lodged a Registrar’s caveat on the title of the property on 13 October 2020, giving notice of both the interest of the trustee and the notice of disclaimer.

7    Upon the disclaimer, Ms Hartzer’s interest in the land vested in the State of Western Australia by the doctrine of escheat: see generally Australia and New Zealand Banking Group Limited v State of Queensland, in the matter of McFarlane (a Bankrupt) [2017] FCA 696 at [17] (Derrington J); Geronimo v State of Western Australia [2024] FCA 196 at [7].

8    However, evidence was adduced by Mr Samuel Bryce, the chief executive officer of the Shire, as to its interest in the land. The evidence reveals that the outstanding rates owed to the Shire in respect of the land total approximately $47,000. Leaving aside deferred arrears (some of which date back to 2007), arrears due to the Shire date back to 2015.

Principles

9    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.

10    In Australia and New Zealand Banking Group Limited v State of Queensland [2018] FCA 464, Logan J (at [13]) summarised the criteria to be established on an application for orders under s 133(9):

In order for the court to vest the property in the bank under s 133, the following, on the authorities, needs to be established:

(1)    that a disclaimer of the property concerned occurred within the meaning of s  133;

(2)    that the applicant, in this case, the bank, has an interest in the disclaimed property, within the meaning of s 133(9); and

(3)    that the applicant is entitled to the disclaimed property, or that this court considers it just and equitable, and it should be so vested.

11    The Court has cited and applied Australia and New Zealand Banking Group on a number of occasions: Australia and New Zealand Banking Group Limited v State of South Australia [2021] FCA 609 at [8] (Charlesworth J); Shire of Carnarvon v State of Western Australia [2024] FCA 1064 at [17] (Jackson J).

12    It is not contested that the trustee has disclaimed Ms Hartzer’s interest in the land. What remains to be considered is whether the Shire has sufficient interest in the property to apply for orders under s 133(9), and whether it is just and equitable that the interest should vest in the Shire.

Does the Shire have a sufficient interest?

13    In Shire of Carnarvon, Jackson J summarised the principles relevant to determining what interest is sufficient to satisfy s 133(9) of the Bankruptcy Act:

[21]    Although applications for vesting orders under s 133(9) are most often brought by mortgagees, other interests in the property can be sufficient: see e.g. Kellendonk v State of Western Australia, in the matter of Jasienska-Dudek (a Bankrupt) [2021] FCA 418 at [23].

[22]    Section 6.64(1) of the LGA provides:

If any rates or service charges which are due to a local government in respect of any rateable land have been unpaid for at least 3 years the local government may, in accordance with the appropriate provisions of this Subdivision take possession of the land and hold the land as against a person having an estate or interest in the land and -

(a)    from time to time lease the land; or

(b)    sell the land; or

(c)    cause the land to be transferred to the Crown; or

(d)    cause the land to be transferred to itself.

[23]    Subject to an irrelevant exception, s 6.43 of the LGA provides that rates and service charges imposed under the LGA, together with the costs of any recovery proceedings, are a charge on the land.

[24]    The phrase 'interest in … disclaimed property' in s 133(9) of the Bankruptcy Act should not be given a narrow construction: see Lucan (Trustee) v State of New South Wales, in the matter of the Bankrupt Estate of Williams [2022] FCA 751 at [28]-[29] (Goodman J). It seems to me that a party with a statutory charge over land, on whom a statutory power of sale is conferred, is in substance in the same position as a mortgagee with a contractually conferred security interest in the land. So in my view, the Shire claims an interest in the disclaimed property for the purposes of s 133(9).

14    In other words, what might have otherwise been considered an unsecured debt due by Ms Hartzer to the Shire has the status by legislation of a statutory charge with a concomitant power of sale. Consistent with Shire of Carnarvon, I accept that the Shire therefore has an interest in the disclaimed property for the purposes of s 133(9).

‘Just and equitable’

15    The Court may therefore make an order for the vesting of the property in the Shire if it seems to the Court to be ‘just and equitable’ that it should be vested.

16    The Court has wide powers to do what is just and equitable: Shire of Carnarvon at [38].

17    Generally an applicant for vesting orders under s 133(9) should demonstrate that the application has been brought and served upon the relevant Crown entity and any other person with a relevant interest in the proceeding, and that the parties have indicated they do not seek to appear in the proceeding, or that they do not oppose the vesting orders: Commonwealth Bank of Australia v State of Queensland, in the matter of Hewton [2021] FCA 22 at [20(a)] (Derrington J); Australia and New Zealand Banking Group Limited v State of Western Australia, in the matter of Aman [2022] FCA 191 at [47]; Australia and New Zealand Banking Group Limited v State of Western Australia, in the matter of Raleigh [2022] FCA 639 at [25].

18    The State has participated in the proceeding and provided written and oral submissions, and did not oppose the vesting orders sought.

19    I am satisfied that all those persons with a relevant interest in the vesting application have had an opportunity to be heard. In saying this, I am aware that there is some question as to whether the trustee was formally served with notice of this application. There is no doubt that various emails were sent to the trustee (care of the Australian Financial Security Authority) but no response acknowledging the hearing was received. I do not consider this question prevents relief being granted in circumstances where the trustee has disclaimed the property and it would seem AFSA has, one way or another, received copies of the application by email.

20    In my view, it is just and equitable for the property to be vested in the Shire because but for the disclaimer, it would be open to it to comply with the statutory preconditions and exercise its power of sale under s 6.64(1)(b) of the Local Government Act 1995 (WA) to recover the outstanding rates. The vesting process provides a practical solution to difficulties that might attach to the process otherwise involved in the exercise of the statutory power of sale.

Allocation of any surplus

21    Mr Bryce deposed that he did not expect the sale of the property to yield any surplus once the costs of the sale and outstanding rates were deducted from the sale price, as the dwelling on the land has been deemed unfit for human habitation. The State submitted that it may also be unlikely that there will be a surplus but sought orders as to its application in any event.

22    There a number of authorities that indicate contrasting approaches to the allocation of any surplus: see, for example, Westpac Banking Corporation v State of Western Australia [2021] FCA 1097 at order 2(e)(v), [28]-[30] (Jackson J); Bank of Queensland Limited v State of Western Australia [2020] FCA 442 at order 2(d)(v), [45]-[49] (McKerracher J).

23    As I observed in Raleigh at [35], the object of direction of the surplus is sometimes the State, sometimes the trustee and sometimes the registrar of this Court. I collected various authorities and principles in Aman at [83]-[87] and do not need to repeat them.

24    The State in other cases has submitted that surplus funds ought to be paid to the Crown because the property would have remained vested in the Crown had the application not been made. An argument to this effect was made but rejected by Jackson J in Westpac at [29]. However, in this case, the State qualifies the approach considered by Jackson J. It seeks an order that the surplus (if any) be paid into Court, and that if the Court holds any surplus after a period of two years, such surplus be paid to the State.

25    This approach to orders, which was adopted in the more recent decisions of AFSH Nominees Pty Ltd v State of Western Australia [2022] FCA 1168 (Colvin J) and Australia and New Zealand Banking Group Limited v State of Western Australia [2023] WASC 409 (Solomon J), is a suitable and practical approach to adopt, allowing for a level of supervision by the Court, in circumstances where there may be other parties who potentially lay claim to any surplus, but also providing certainty going forward.

Orders

26    I provide some short observations on the orders.

27    Aspects of orders 1(a) to (c) operate to relieve the Shire of obligations to comply with various requirements of the Local Government Act when selling the land: Shire of Carnarvon at [31].

28    Order 1(b) operates to relieve the Shire from obligations under s 6.68(1) of the Local Government Act: Shire of Carnarvon at [32]. Pursuant to s 6.68(1) of the Local Government Act a local government is not to exercise its power under s 6.64(1)(b) unless within the period of three years prior to the exercise of the power of sale, the local government has at least once attempted under s 6.56 (rates or service charges recoverable in court) to recover money due to it. The evidence does not establish there has been any attempt to recover the outstanding rates in accordance with s 6.56. However, the Court’s power under s 133(9) of the Bankruptcy Act is broadly expressed, and in any event, I do not consider a failure to comply with s 6.68(1) prevents the Court from exercising the discretion. The inquiry is framed in the terms of what is just and equitable.

29    Order 1(c) operates to relieve the Shire from compliance with the notice requirements in s 6.64(2) of the Local Government Act. In Shire of Carnarvon (at [40]), an order in similar terms was made in circumstances where the applicant had already complied with a series of notice requirements, and it may have been unnecessarily repetitive if it were required to take them again in any further sale process. Although the circumstances are somewhat different, there was evidence adduced in this case that the Shire had previously issued notices to the registered proprietor in accordance with the requirements of the Local Government Act as to the potential exercise of the right to take possession and sell the property, based on arrears being outstanding for more than the statutory pre-condition period of three years. I consider it appropriate to waive any further applicable notice requirements under this provision.

30    Otherwise, the orders are self-explanatory.

31    I made orders accordingly immediately after the hearing.

Associate:

Dated:    16 June 2026