AMP Bank Limited v State of New South Wales

REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) 1 Evan Paul Muirhead presented a debtor's petition on 26 March 2014 and thereby became a bankrupt. On 3 June 2014, his trustee in bankruptcy, Chris Chamberlain, disclaimed his interest in the property at 19 East Street, Dubbo of which Mr Muirhead was registered proprietor. 2 In May 2009, Mr Muirhead entered into a loan agreement with AMP Bank Limited, the applicant in these proceedings, in order to borrow about $181,000 so as to settle the purchase of the property. That occurred on 15 June 2009, at which point Mr Muirhead became registered proprietor. The bank took a first mortgage over the property to secure all moneys due to it. That mortgage was registered under the Real Property Act 1900 (NSW). 3 Mr Muirhead appears to have made the monthly then weekly repayments of moneys due under the mortgage until 21 March 2014, following which his loan account went into default and has remained there since. On 3 June 2014, the bank issued a notice pursuant to both s 88 of the National Credit Code, being sch 1 to the National Consumer Credit Protection Act 2009 (Cth), and s 57(2)(b) of the Real Property Act to Mr Muirhead noting that he was in default of his obligations, being in arrears of $1,741.92. 4 That action no doubt prompted the trustee's decision on the same day to disclaim his interest under s 133(1) of the Bankruptcy Act 1966 (Cth). Following the disclaimer, as appears to have continued to be the custom, the State of New South Wales became registered as proprietor on 19 June 2014, as recorded in a real property search dated 11 November 2014. 5 The bank now seeks an order under s 133(9) of the Bankruptcy Act vesting the property in it so that it may exercise its power of sale and recoup so much of the moneys secured by the mortgage as are owing. The register continues to record the bank's interest as first mortgagee. 6 The bank seeks another order that, upon the property vesting in it, as registered proprietor, it will be authorised to deal with it only pursuant to its powers as a registered mortgagee under the Real Property Act, and that after the sale of the property, it should account to the State for the whole of the balance of proceeds of sale remaining, if any, after deducting from those proceeds all moneys due to the bank as mortgagee, including the costs of and incidental to its sale. 7 In the course of argument this morning, I was informed that it is not anticipated that there will be any, or any substantive, surplus, from the sale of the property. I observed that if there were a surplus, it would be more appropriate for any such surplus to be paid, in the first instance, to the trustee for distribution to the bankrupt's creditors, as I suggested be done in National Australia Bank Limited v New South Wales (2009) 182 FCR 52 at 61 [30], conformably with the provisions of s 58(3) of the Real Property Act. Thus, if there were any surplus, it might ultimately go to the bankrupt's estate for distribution to his creditors or other persons entitled, as was intended in the mortgage originally. 8 The State has submitted to any order that the Court might make except as to costs. However, I do not think it was informed of the possibility that I might make an order of the kind I have previously made and which its own legislation contemplates would be the ordinary course of events. Lest it feel prejudiced, I will give it leave to apply to vary the order I propose to make for the distribution of any surplus of the proceeds to go to the bankrupt's estate in the same way as would occur without a disclaimer. 9 I am satisfied that the bank is entitled to orders in the nature that it seeks on the basis of the authorities that I referred to in National Australia Bank 182 FCR 52; see also Westpac Banking Corporation v State of New South Wales [2014] FCA 1368 per Robertson J. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.