Baulkham Hills Shire Council v Stankovic & Anor

Bankruptcy Act 1966 (Cth), s 5, s 58, s 60(2), s 116 LEGISLATION CITED: Environmental Planning and Assessment Act 1979, s 76B, s 124 Uniform Civil Procedure Rules 2005, r 25.3

Baulkham Hills Shire Council v Stankovic & Anor [2005] NSWLEC 110 Baulkham Hills Shire Council v Stankovic (No 3) [2008] NSWLEC 266 CASES CITED: Bendigo Bank Ltd v Demaria [2001] VSC 218 Cummings v Claremont Petroleum [1996] HCA 19; (1996) 185 CLR 124 Farrow Mortgage Services Pty Ltd v Winfield (1992) 2 QdR 282 Re-Engine Pty Ltd v Fergusson [2007] VSC 57

Baulkham Hills Shire Council (Appellant) PARTIES: Milovan Stankovic (First Respondent) Milka Stankovic (Second Respondent)

A Galasso SC; G Newport (Appellant) COUNSEL: I Davidson; C Ireland (First Respondent) K Gourlie (Solicitor) (Trustee in Bankruptcy)

SOLICITORS: Baulkham Hills Shire Council (Appellant)

LOWER COURT JURISDICTION: Land & Environment Court

LOWER COURT DATE OF DECISION: 24 September 2008

LOWER COURT MEDIUM NEUTRAL CITATION: Baulkham Hills ShireCouncil v Stankovic (No 4) [2008] NSWLEC 273

• 8 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40446/08 CA 40447/08

10 September 2009 Baulkham Hills Shire Council v Milovan Stankovic & Anor Judgment 1 BEAZLEY JA: The appellant, Baulkham Hills Shire Council (the Council), by notice of motion dated 18 August 2009, supported by an affidavit of the same date of Matthew Pearce, sought an order that the hearing of the appeal, which was listed for hearing on 26 August 2009 be vacated. The essential basis for the adjournment was that there were settlement negotiations in train, which were likely to succeed. 2 Those settlement negotiations were being conducted between the Council, the second respondent Milka Stankovic, who is the wife of the first respondent Milovan Stankovic (it would seem, however, that they are separated), and Milovan Stankovic's Trustee in Bankruptcy, a sequestration order having been made against Mr Stankovic's estate on 13 May 2009. 3 The settlement negotiations had only commenced on 13 August, although the Council had sought to have discussions in late July. It appears that the solicitor for Mrs Stankovic was not available to meet until mid-August. The adjournment was opposed by Mr Stankovic. I granted the adjournment. However, a question of Mr Stankovic's costs thrown away by the adjournment then arose. The Council contended Mr Stankovic had no entitlement to costs because, being a bankrupt, he had no entitlement to appear on the hearing, or at the most, could only appear with the leave of the Court. The question whether Mr Stankovic had an entitlement to appear depended very much upon the characterisation of the subject matter of the appeal and the provisions of the Bankruptcy Act 1966 (Cth). 4 Mr and Mrs Stankovic are the registered proprietors of premises at Kellyville. The Council brought proceedings against them for unlawful use of the premises. In March 2005, Pain J held that the premises were being used as a junkyard contrary to the Environmental Planning and Assessment Act 1979, s 76B and inter alia made the following orders: "4. An Order that [Mr Stankovic] neatly stack all timber located on the property as at the date of these Orders into stacks at the locations marked 'X' identified on the plan at Annexure A to these Orders within two months of the date of these Orders;

5. An Order that [Mr Stankovic] remove from the property all second hand and unused items such as old cars, white goods, general rubbish and accumulated used building material (with the exception of bricks located on the property as at the date of these Orders and timber identified in locations marked 'X' identified on the plan at Annexure A to these Orders) within six months of the date of these Orders …"

(See Baulkham Hills Shire Council v Stankovic & Anor [2005] NSWLEC 110.) 5 The Council alleged that there had been non-compliance with the orders and by notice of motion (later amended) in the Land and Environment Court sought, relevantly, the following orders under the Environmental Planning and Assessment Act, s 124 that: "3. An Order that [the Council] by its servants or agents enter the property and remove from the property all secondhand and unused items such as old cars, white goods, general rubbish and accumulated building material by 1 November 2008.

4a. In the event [Mr Stankovic] fails to comply with Order 4, and Order that [the Council] by its servants or agents remove from the property all timber and bricks by 1 November 2008.

6. An Order that [the Council] may sell materials removed pursuant to Orders 3 and 4a above by whatever means it deems appropriate or in the event that such materials cannot be sold with a reasonable time, dispose of such materials.

7. An Order that [Mr Stankovic] pay to [the Council] the costs and expenses of removal of materials as provided in Orders 3 and 4a, the disposal of such materials (if disposal takes place) pursuant to Order 6 less the proceeds of sale of materials referred to in Order 6, in such total amount as determined by this Court.

…" 6 The Environmental Planning and Assessment Act, s 124 provides: " 124 Orders of the Court

(1) Where the Court is satisfied that a breach of this Act has been committed or that a breach of this Act will, unless restrained by order of the Court, be committed, it may make such order as it thinks fit to remedy or restrain the breach.

(2) Without limiting the powers of the Court under subsection (1), an order made under that subsection may: (a) where the breach of this Act comprises a use of any building, work or land - restrain that use, (b) where the breach of this Act comprises the erection of a building or the carrying out of a work - require the demolition or removal of that building or work, or (c) where the breach of this Act has the effect of altering the condition or state of any building, work or land - require the reinstatement, so far as is practicable, of that building, work or land to the condition or state the building, work or land was in immediately before the breach was committed.

(3) Where a breach of this Act would not have been committed but for the failure to obtain a consent under Part 4, the Court, upon application being made by the defendant, may: (a) adjourn the proceedings to enable a development application to be made under Part 4 to obtain that consent, and (b) in its discretion, by interlocutory order, restrain the continuance of the commission of the breach while the proceedings are adjourned.

(4) The functions of the Court under this Division are in addition to and not in derogation from any other functions of the Court.

(5) Nothing in this section affects the provisions of Division 3 of Part 3 of the Land and Environment Court Act 1979 ." 7 Pain J refused to make the orders sought in paras (3), (4(a)), (6) and (7) of the notice of motion, first, on the basis that s 124 did not provide for the making of such orders and alternatively, if such orders could be made, then she would refuse to do so in the exercise of her discretion: Baulkham Hills Shire Council v Stankovic (No 3) [2008] NSWLEC 266. 8 The present appeal is against her Honour orders. It was instituted prior to Mr Stankovic's bankruptcy, which was made on the Council's petition based upon the non-payment of the costs that he was ordered to pay in the Council's favour in the Land and Environment Court proceedings. Those costs have now been paid and Mr Stankovic has applied for the annulment of the bankruptcy. It appears there is at least one other creditor. The value of Mr and Mrs Stankovic's property is substantial and it appears that Mr Stankovic's assets exceed his liabilities to a significant extent. What relevance that has to his application to annul the bankruptcy is not for this Court to determine. 9 Upon becoming bankrupt, a bankrupt's property vests in the bankrupt's Trustee in Bankruptcy: see the Bankruptcy Act, s 5, s 58 and s 116. Mr Stankovic accepts that his interest in the land and most, if not all the goods on the land, have vested in his Trustee. 10 The Bankruptcy Act, s 60(2) provides that proceedings commenced by a person who subsequently becomes a bankrupt are stayed. This does not apply to the appeal, as Mr Stankovic is a respondent to the appeal (and was a respondent in the Land and Environment Court). The Council contended, however, that Mr Stankovic has no interest in the proceedings, because he has no interest in the land and goods that are the subject of the proceedings. Having no interest in the proceedings, the Council contended that Mr Stankovic had no right to appear on the hearing of the appeal: see Farrow Mortgage Services Pty Ltd v Winfield (1992) 2 QdR 282; Re-Engine Pty Ltd v Fergusson [2007] VSC 57; and Bendigo Bank Ltd v Demaria [2001] VSC 218. 11 However, Farrow Mortgage Services and Bendigo Bank v Demaria were both possession cases and the land in both was, therefore, the subject matter of the proceedings. In this case, the subject matter of the appeal is not the land, nor was the land the subject matter of the s 124 proceedings or the earlier unlawful use proceedings. In the earlier proceedings, the matter in issue was whether Mr Stankovic was using the land in breach of the Environmental Planning and Assessment Act. The orders made were personal to him. The s 124 proceedings were directed to enforcing the orders made by the Court against Mr and Mrs Stankovic. 12 Re Engine involved a claim for breach of fiduciary duty. After a review of the authorities, including Cummings v Claremont Petroleum [1996] HCA 19; (1996) 185 CLR 124 to which I refer below, Dodd-Stretton J granted leave for the bankrupt defendants to appear. I do not propose to deal with the reasoning of his Honour in that case, but rather will consider the principles stated by the High Court in Cummings. 13 Senior counsel for the Council submitted that Cummings was authority for the proposition that Mr Stankovic had no right to appear. Cummings does not stand for that proposition. Rather, it is authority for the proposition that insofar as a judgment against a bankrupt results in a judgment debt provable in the bankruptcy, the bankrupt does not have a financial interest in the appeal so as to confer locus standi to appeal in his or her own name against the judgment. The majority, Brennan CJ, Gaudron and McHugh JJ, rejected the proposition that a right to appeal was property of the bankrupt so as itself to be vested in the trustee. 14 The orders sought under s 124 had a connection with the land and goods, as the Council sought orders permitting it to enter the land and remove the goods. However, the land and goods did not thereby become the subject matter of the appeal. The subject matter of the appeal is the Council's entitlement to orders under s 124. The Land and Environment Court proceedings, properly classified, were enforcement proceedings. It cannot be said that the property of the bankrupt, now vested in the Trustee, was the subject matter of the proceedings. 15 Further, Mr Stankovic is a respondent to the appeal. He has not brought the appeal. He does not need the leave of the court administering the Bankruptcy Act to stay in the litigation. There is no suggestion that his Trustee proposes to defend his interests on the appeal, or even that the Trustee would have any such right to do so. Contrary to the Council's contention, Mr Stankovic has an interest in the proceedings and is the proper contradictor to the Council's contention that it could use the processes specified under s 124 to, in effect, enforce orders made by the Land and Environment Court personally against Mr Stankovic. Even if Mr Stankovic is not entitled as of right to appear as a party in the appeal, I would grant him leave to do so for the reason that he is a proper contradictor to the appeal. 16 The Council's application to adjourn the proceedings was made late. It did not commence to seek a resolution of the appeal until late July, more than two months after the bankruptcy and only approximately a month before the appeal. The first meeting of the Council, the Trustee and Mrs Stankovic did not take place until a fortnight before the date set for the hearing of the appeal. 17 Mr Stankovic was not included in those discussions. Notwithstanding that the Council contended that Mr Stankovic has no right to appear on the appeal or no interest such that he should not be given leave to appear, it took no action to remove him from the proceedings or have his appearance made subject to any terms, such as that he bear his own costs. In any event, for the reasons I have given, I consider that Mr Stankovic has a right to appear on the appeal. He should, therefore, have the costs thrown away by the adjournment including the costs of the notice of motion and the costs of the written submissions relating to the issues subject of this judgment. 18 Mr Stankovic submitted that if an adjournment was granted, it should be on terms that the Council be restrained from removing and selling chattels on the land and be restrained from removing or selling chattels on the land during the continuation of the adjournment and without further order of the Court: see the Uniform Civil Procedure Rules 2005, r 25.3. 19 I would not make that order. The property and goods on it are vested in the Trustee. The Trustee has power to deal with those assets under the Bankruptcy Act. I have no evidence or even information as to what matters are presently under negotiation amongst the Council, the Trustee and Mrs Stankovic. However, I consider that I should proceed on the assumption that whatever is being negotiated, the intended outcome is one in which the Trustee is authorised to engage. 20 The orders of the Court are:

1. Confirm the orders made on 24 August 2009 as follows:

(a) Vacate the hearing date set for Wednesday, 26 August 2009; (b) The matter is stood over to the Registrar's list on 7 December 2009;

(c) The parties have liberty to apply in respect of that date.

2. Order that the appellant pay the first respondent's costs thrown away by the adjournment;

3. Order that the appellant pay the first respondent's costs of the notice of motion dated 18 August 2009 including the first respondent's costs of the written submissions ordered by this Court on 24 August 2009. **********

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