Australia and New Zealand Banking Group Limited, in the matter of Halliwell (bankrupt) v State of Queensland

Introduction 1 By an application lodged with the Court on 3 July 2020, the applicant (ANZ) applied for orders pursuant to s 133(9) of the Bankruptcy Act 1966 (Cth) in relation to properties known as 18 Wistari Street, Gladstone in the State of Queensland (first property) and 56 Sandpiper Avenue, New Auckland in the State of Queensland (second property), together referred to as the properties. The effect of the orders, if made, would be to vest the properties in ANZ. 2 Exhibit 1 in these proceedings are land title searches conducted on 26 August 2020 (searches) which indicate that the registered proprietors of the first property are Tennille Joyce Halliwell (formerly known as Tennille Joyce Jones) and Luke Desmond Halliwell (together the Halliwells) as joint tenants and that Ms and Mr Halliwell are the registered proprietors of the second property as tenants in common. 3 The searches also indicate that ANZ was registered as the holder of mortgage no 714244383 at 4.23 pm on 3 January 2012 in relation to the first property (first mortgage) and ANZ was registered as the holder of mortgage no 714264670 at 3.32 pm on 16 January 2012 in relation to the second property (second mortgage). Both mortgages incorporated the provisions of Mortgage Memorandum of Common Provisions with document number 707489998. 4 The first mortgage secured the Halliwells' obligations under an ANZ Home Loan signed on 15 December 2011 for $260,000 (first loan agreement). The first mortgage also secured the Halliwells' obligations under an ANZ Supplementary Loan signed on 22 December 2011 for $70,000 (second loan agreement). The second mortgage secured the Halliwells' obligations under an ANZ Residential Investment Loan signed on 22 December 2011 for $334,758.78 (third loan agreement). The first and second mortgages were granted on 22 December 2011. 5 On 28 December 2011, ANZ advanced $260,000 under the first loan agreement. On 11 January 2012, ANZ advanced $70,000 under the second loan agreement and $334,758.78 under the third loan agreement. 6 Morgan Gerard James Lane was appointed as Ms Halliwell's trustee in bankruptcy on 1 November 2019 and as Mr Halliwell's trustee in bankruptcy on 31 October 2019. On 4 December 2019, Mr Lane disclaimed any interest in the first and second properties and sent letters of that date to the Queensland Land Titles Office notifying of the disclaimers. 7 Around 16 July 2020, ANZ conducted desktop valuations of the first and second properties which indicate that: (a) The value of the first property was $180,595.84; and (b) The value of the second property was $188,590.27. 8 On 11 October 2019, Thomson Geer (on behalf of ANZ) sent default notices to the Halliwells in respect of the first loan agreement, the second loan agreement and the third loan agreement pursuant to s 88 of the National Credit Code, contained in Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth), and s 84 of the Property Law Act 1974 (Qld). 9 The Halliwells' indebtedness to ANZ, under the first loan agreement ($229,784.90), the second loan agreement ($65,647.41) and the third loan agreement ($354,928.37), as well as the first mortgage and second mortgage, totalled $650,360.68 as at 31 July 2020, and remains unpaid. 10 ANZ has entered into possession of both properties.

section 133 of the bankruptcy act and relevant principles 11 Section 133 of the Bankruptcy Act relevantly provides as follows: 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 of the Commonwealth 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. (3) If a trustee disclaims property whose transfer must be registered under a law of the Commonwealth or of a State or Territory of the Commonwealth, the trustee must give notice of the disclaimer as soon as practicable to the officer who has the function of registering the transfer. … (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. (10) Subject to subsection (11), where an order vesting property in a person is made under subsection (9), the property to which it relates vests forthwith in the person named in the order for that purpose without any conveyance, transfer or assignment. (11) Where: (a) the property to which such an order relates is property the transfer of which is required by a law of the Commonwealth or of a State or Territory of the Commonwealth to be registered; and (b) that law enables the registration of such an order; the property, notwithstanding that it vests in equity in the person named in the order, does not vest in that person at law until the requirements of that law have been complied with. 12 In Australia and New Zealand Banking Group Limited, in the matter of Hawks (bankrupts) v State of Queensland [2018] FCA 1982 (ANZ, in the matter of Hawks (bankrupts)) at [10]-[11], Griffiths J stated that the immediate consequence of a disclaimer of real property by a trustee in bankruptcy is that the property is escheated to the Crown of the relevant State and noted that, accordingly, a mortgagee does not have rights it otherwise would have against a bankrupt, but for their bankruptcy, and it has no right to enforce its security against the relevant State. His Honour relied on the statements of principles outlined in National Australia Bank Limited v State of New South Wales [2014] FCA 298 (Perram J) (NAB v NSW) and National Australia Bank Limited v State of South Australia (No 2) [2015] FCA 240 (Griffiths J). 13 Having regard to the relevance of the Land Title Act 1994 (Qld) and the Property Law Act 1974 (Qld), in ANZ, in the matter of Hawks (bankrupts) at [11], Griffiths J relied on National Australia Bank Limited v State of Queensland [2018] FCA 1624 (Logan J) at [6] to [10]. It is useful to note the following comments of Logan J at [4]-[10]: 4 On or about 8 August 2017, that bankruptcy trustee disclaimed the property, acting under s 133(1) of the Bankruptcy Act. The bankruptcy trustee has been given notice of the present application by the Bank's solicitors. She has informed those solicitors that she does not seek to be joined in her capacity as bankruptcy trustee as a party to this proceeding and does not contest the orders sought in the application. The State has been joined as a respondent and has appeared by a solicitor, submitting to such orders as the Court may make, save in respect of costs. Given the State's position, the Bank seeks no order in respect of costs against the State. 5 On any view of the effect of a disclaimer of a fee simple interest, pursuant to s 133 of the Bankruptcy Act, the State was a necessary party. Other cases in respect of applications of the present kind do not exhibit a uniform practice as to whether or not, additionally, the bankruptcy trustee must be joined as a respondent. Given the disclaimer, it is difficult to see why the bankruptcy trustee must be joined as a party, as opposed, prudently, to being given notice of an application by a mortgagee lender. However this may be, I am quite satisfied that each person who may have an interest in the application has either been served with it as a respondent party or given due notice of the application. The case is therefore one which is apt for determination at the first case management hearing. 6 The root authority in respect of applications of this kind is Re Tulloch Limited (In Liquidation) (1978) 3 ACLR 808 (Re Tulloch). The views expressed by Needham J in that case have been applied by analogy on numerous occasions in relation to s 133 of the Bankruptcy Act. I am one of those who has applied his Honour's views in that way, see Australia and New Zealand Banking Group Limited v The State of Queensland [2018] FCA 464 (ANZ Bank v The State of Queensland). I reviewed the authorities in which Needham J's views had been applied for the purposes of the Bankruptcy Act in that case. I shall not repeat what is there stated. To the authorities mentioned by me might be added Australia and New Zealand Banking Group Limited v State of Queensland, in the matter of McFarlane (a Bankrupt) [2017] FCA 696 (Derrington J), and Australia and New Zealand Banking Group Limited v State of Queensland [2016] FCA 1221 (Rangiah J). 7 The total amount owed under the loans to the bank as at 5 October 2018 was $475,289.14. The Bank is presently in possession of the property. It is vacant. Interest continues to accrue on the amounts owing under the loans, and will do so until the debt is paid in full. 8 The case is one where, as at the time of disclaimer, the effect of default having occurred was that, before disclaimer, the Bank had particular contractual rights, including rights under the mortgage, by way of realising its security, so as to recoup some, at least, of what it was owed. The effect of the authorities, commencing with Re Tulloch, is that a person, such as the Bank, who holds, as mortgagee, an interest in Torrens system land, is a person with an interest in the disclaimed property. In ANZ Bank v the State of Queensland, at [14], I adopted this observation made by Rares J in National Australia Bank v State of New South Wales [2009] FCA 1066, at [29]: 29. Here, by force of s 133(2) the effect of the trustee's disclaimer on 29 October 2008 appears to have determined any ongoing charge on the land for subsequent liabilities that would otherwise have continued to accrue, such as future (unpaid) interest on the debt secured by the mortgage. I agree with Needham J's conclusion that a mortgagee of Torrens title land is entitled to be granted a vesting order: Re Tulloch. I am of opinion that the land should be vested under s 133(9) in the bank for the purpose for which it originally was mortgaged, namely to secure payment to the bank of all principal, interest and other moneys due to it notwithstanding the effect of the disclaimer. If, after a sale, there is a shortfall the bank will be able to prove for it as an unsecured creditor in the bankrupts' estate. 9 Those observation are pertinent in the present case. The Bank, in my view, meets the criteria in s 133(9) of the Bankruptcy Act for a vesting order in respect of the property. Absent the making of such an order, it would be unable, notably, to sell that property. I consider that it is just and equitable, in the circumstances, that a vesting order should be made. 10 In earlier cases which have arisen in Queensland, the vesting order has been made on conditions, which include that for the purpose of dealing with the property, a mortgagee, such as the Bank, may, but is not bound to, act as if it were exercising powers as mortgagee under the Land Act 1994 (Qld); the Property Law Act (Qld); and under the mortgage, save that it is not required to serve notices of default under s 88 of the National Credit Code, or the Property Law Act 1974 (Qld); or, were it applicable, a notice to vacate under the Residential Tenancies and Rooming Accommodation Act 2008 (Qld) (RTRAA). The draft order proposed takes up those sentiments, save, because it is not material, any reference to the RTRAA. 14 ANZ will be entitled to a vesting order if it is shown that: (a) A disclaimer to each of the properties has occurred within the meaning of s 133 of the Bankruptcy Act; (b) ANZ has an interest in the disclaimed property within the meaning of s 133(9) of the Bankruptcy Act; and (c) ANZ is entitled to the disclaimed property or that the Court considers it to be just and equitable that it should be so vested or delivered. See National Australian Bank Ltd v State of South Australia (No 2) [2015] FCA 240 at [19]; NAB v NSW at [10]-[11]. 15 The Court is satisfied that: (a) The first property and the second property have been disclaimed under s 133 of the Bankruptcy Act having regard to the forms of disclaimer executed by Mr Lane on 4 December 2019 which indicated that those properties were disclaimed on the basis set out in s 133(1AA) of the Bankruptcy Act, that is, that the properties were "burdened with onerous covenants". Those disclaimers were provided to the Titles Registry Office in Brisbane under cover of letters dated the same date. (b) ANZ has a requisite interest in the properties within the meaning of s 133(1) of the Bankruptcy Act as the first (and only) registered mortgagee. A mortgagee of Torrens title land is a person "claiming an interest in" disclaimed property within the meaning of s 133(9): see NAB v NSW at [10] and the cases there cited. (c) ANZ is entitled to the disclaimed properties pursuant to its registered mortgages and it is just and equitable for the properties to vest in ANZ. Unless the vesting order is made, ANZ will be deprived of the benefit of its security. While the valuation relied on by ANZ is only a "desktop" valuation, the aggregate amount of the estimated value of the properties is only $357,220.49 while the total secured indebtedness of the Halliwells to ANZ as at 31 July 2020 was $650,360.68 which substantially exceeds that valuation. (d) In those circumstances, it is unlikely that there will be any surplus from the sale of the properties but if there is a surplus, the orders proposed by ANZ would see any surplus paid into Court for the benefit of the Halliwells' trustee in bankruptcy or the State of Queensland to the extent they claim any interest in the surplus. Therefore there is no injustice that would be occasioned to any other party by reason of the properties vesting in ANZ. (e) Both the State of Queensland and Mr Lane are aware of the proceedings. Mr Lane has confirmed that he would not file written material or make submissions or appear at the hearing of ANZ's application and that he will abide by any order of the Court. The State of Queensland advised that it would not file any material or make any submissions. Its solicitor attended the hearing of ANZ's application. (f) There is no other person with a known interest in the properties.

Conclusion 16 Having regard to the matters set out at [15], it is appropriate to make the orders sought by ANZ. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Farrell.