Charan v Commonwealth Bank of Australia

Charan v Commonwealth Bank of Australia - [2015] NSWCA 364 - NSWCA 2015 case summary — Zoe

Judgment

BASTEN JA: The applicants, Prabhakar Charan and Usha Wati Charan, are husband and wife. They have an adult son, Prashant Prashikar Charan.
In 1999 the applicants purchased a property at Holsworthy, in their joint names. They built a house on the land.
In 2003, a property was purchased at Casula, in the names of Usha Wati Charan and Prashant Charan. The property was owned as tenants in common, in unequal shares, 13/20 being the share of Usha Wati Charan and 7/20 being the share of her son. The first respondent in the proceedings, the Commonwealth Bank of Australia ("the Bank") was the mortgagee of both properties.
Soon thereafter the Charan family faced financial difficulties. In November 2006, the second respondent (Bruce Gleeson) was appointed as trustee in bankruptcy of Prashant Charan's estate. He has since been discharged from bankruptcy. In June 2012 the third respondents (Scott Pascoe and Andrew Scott) were appointed joint trustees in bankruptcy of the estate of Usha Wati Charan. She remains an undischarged bankrupt. In oral submissions, she asserted that she was pursuing a claim for personal injury or wrong within the scope of s 116(2)(g) of the Bankruptcy Act 1966 (Cth). The entitlement to bring such proceedings in her own name is disputed by the trustee, but the Court has, in any event, heard from her speaking for herself and (with leave) for her husband. It is not necessary to determine her standing to bring these proceedings.
Upon default occurring under the respective mortgages, possession proceedings were taken by the Bank, in respect of both properties, in November 2012. In February 2013 the Bank obtained default judgment in the absence of any defence being filed and in April 2013 the Bank obtained possession of the properties. The Casula property was sold in July 2013 and the Holsworthy property in October 2013.
On 3 July 2014, Prabhakar Charan (the first applicant) commenced proceedings against the respondents. Those proceedings involved claims for compensation against the Bank and the trustees in bankruptcy, together with a claim for return of the properties. The latter claim was appropriately abandoned and, when the proceedings came before White J in October 2014, the primary issue was whether the plaintiff should be allowed leave to re-plead.
White J delivered judgment on 8 October 2014 ordering that the proceedings be dismissed, but without prejudice to the right of the plaintiff to claim an account or equitable damages against the Bank in respect of its conduct as mortgagee in possession of the properties, or in respect of its power of sale, or in respect of the net proceeds of sale that were held on trust by the Bank for the mortgagors, including Prabhakar Charan and the respective trustees in bankruptcy. [1] The plaintiff was ordered to pay costs in a specified sum.
On 9 December 2014, two months after the judgment given by White J, the present proceedings were commenced in the Equity Division. They were heard and disposed of by McDougall J on 27 March 2015. The plaintiffs appeared before him unrepresented. McDougall J ordered that the statements of claim be dismissed and ordered the plaintiffs to pay the defendants' costs. [2]
Now before this Court is an application for leave to appeal from the judgment of McDougall J. In a summary of argument stating the nature of the case, the questions raised for determination were broadly identified in the following terms: (a) whether the properties were the bankrupts' divisible properties that vested in the trustees pursuant to ss 58 and 116 of the Bankruptcy Act; (b) whether the trustees were entitled to transfer legal title with the knowledge of the beneficiary's ownership entitlement pursuant to s 90 of the Real Property Act 1900 (NSW), and (c) whether the mortgagee improperly exercised its power of sale by "wilfully and recklessly sacrificing the mortgagor's interest in the properties" pursuant to s 420A of the Corporations Act 2001 (Cth).
Although the draft notice of appeal expressed the grounds in more detail, by specific reference to passages in the judgment of the primary judge, it is sufficient for present purposes to address the three matters of principle said to be raised. This was the course taken by Mrs Charan in her oral submissions.
In respect of the question of divisible property, the issue appeared to be, not that the interests in land registered in the names of the bankrupt owners would not have vested in their trustees in bankruptcy if they were beneficial owners, but rather that Mr Charan was, in some degree (or, as he apparently asserts, in whole) the beneficial owner of both properties. However, the trial judge noted at [10]: "He may wish to assert that … he had some equitable interest in the Casula land. However, he does not seek any relief directed to vindicating that equitable interest. Nor has he ever commenced proceedings against Mr Gleeson or against Messrs Pascoe and Scott asserting an equitable interest in the Casula land, let alone an equitable interest that would be excluded from the divisible property of the two bankrupts under s 116(2)(a) of the Bankruptcy Act 1966 (Cth)."
No doubt has been cast on the correctness of those statements.
So far as the second matter is concerned, the argument concerned a caveat which had been lodged over the Casula property by the trustee, which had been allowed to lapse, following which the trustee arranged for Mrs Charan's interest in that property to be transferred into his own name, pursuant to s 90 of the Real Property Act.
The question as to the effect of the caveat lapsing was raised before White J and should not, properly, have been raised for a second time in these proceedings. White J dealt with the effect of a caveat lapsing in entirely conventional terms, which were repeated by McDougall J. White J said: [3] "The lapsing or removal of a caveat does not deprive a caveator of any estate or interest he may have in the lands. It only removes the statutory protection afforded by a caveat against the Registrar General's registering a dealing which might defeat or adversely affect the interest of the caveator."
The third issue, being the allegation of an improper exercise of the power of sale, by reference to s 420A of the Corporations Act, the complaint was, as McDougall J noted, based on a misconception of the operation of that provision. Section 420A deals with a controller exercising a power of sale with respect to the property of a corporation. McDougall J stated: "[44] … The properties in question were not properties of a corporation. … [45] … Section 420A relates to the duty of care of 'a controller'. That expression is defined, in relation to property of a corporation, to mean a receiver or manager of that property or anyone else who is in possession or control of that property for the purpose of enforcing some charge. [46] There is not any 'property of a corporation' in respect of which it could be said that anyone was a controller for the purposes of that definition."
Although Mrs Charan submitted that a "controller" may include an agent and is not limited to a receiver or manager, [4] it is unnecessary to explore in any further detail the nature of the claims raised before McDougall J or his reasons for dismissing them: it remains true that the properties in question were not in the relevant sense properties of a corporation.
The proceedings before McDougall J were not tenable: no error has been identified in the manner in which they were disposed of. Accordingly, the application for leave to appeal must be dismissed. The first applicant must pay the respondents' costs of the application.
TOBIAS AJA: I agree.

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