Commonwealth Bank of Australia v State of Queensland

RANGIAH J: 1 This is an application for orders vesting in the applicant a property situated at 13 Caspian Court, Kelso, in Queensland (the property) for the purpose of the applicant exercising its power of sale as mortgagee. 2 The property was owned by Robert William Nivin (the bankrupt). On 3 March 2010, the bankrupt executed a mortgage over the property in favour of the applicant, which was registered on 25 March 2010. The mortgage secured amounts advanced under loan agreements by the applicant to the bankrupt in the sum of $728,873. 3 The bankrupt has been in default under the mortgage since at least 19 October 2016, when he ceased making scheduled repayments in accordance with the terms of the loan agreements and the mortgage. On 15 February 2017, the bankrupt presented a debtors' petition and a trustee, Moira Carter (the trustee), was appointed to administer the estate of the bankrupt. 4 On about 9 June 2017, the trustee disclaimed the property pursuant to s 133(1) of the Bankruptcy Act 1966 (Cth). The effect of a disclaimer of onerous property is that: (a) A bankrupt's rights, interests and liabilities in respect of property are taken to have been terminated, but the disclaimer does not extend to affecting any other person's rights or liabilities, except so far as necessary in order to release the bankrupt, the bankrupt's property and the trustees from liability: s 133(2) of the Bankruptcy Act. (b) The bankrupt's fee simple estate escheats, but not absolutely, to the Crown in the right of the State, subject to any mortgages or charges: Re Tulloch Ltd (in liq) and the Companies Act (1978) 3 ACLR 808 at 813; National Australia Bank Ltd v New South Wales (2009) 260 ALR 115 at [23], [27]- [28]. (c) The Crown holds the disclaimed property in fee simple and only the interest of the registered owner (now bankrupt) goes out of existence in the escheat: National Australia Bank Limited v New South Wales at [8]- [9]. (d) The immediate consequence of a disclaimer of property, in the absence of a vesting order, is that a mortgagee is precluded from taking action to realise the property the subject of its security, and does not presently have the rights it would have had against the bankrupt registered owner and, further, presently has no right to enforce its security against the Crown: National Australia Bank Limited v New South Wales at [9]. 5 The applicant, in its capacity as mortgagee of the property, is required, following the disclaimer, to obtain a vesting order in order to exercise its right to realise its security. 6 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. 7 The trustee has been served with the application, and has indicated that she does not wish to participate in the proceeding. The State of Queensland appeared at the hearing and its representative indicated that the State neither consents to, nor opposes, the application. 8 In order to obtain a vesting order, it is necessary to establish that: (a) A disclaimer of the property has occurred, within the meaning of s 133 of the Bankruptcy Act. (b) The applicant has an interest in the disclaimed property, within the meaning of s 133(9) of the Bankruptcy Act. (c) The applicant is entitled to the disclaimed property, or the Court considers it just and equitable that it should be so vested. [See National Australia Bank Limited v State of South Australia (No 2) [2015] FCA 240 at [19]]. 9 I am satisfied that there has been a disclaimer of the property by the trustee, within the meaning of s 133 of the Bankruptcy Act. The applicant is the first and only registered mortgagee of the property. There are no registered caveats or other interests registered. 10 The total amount owing to the applicant as at 3 May 2018 was $736,576.38. The bankrupt is in default of the loan and agreements as secured by the mortgage as a result of his failure to make scheduled repayments. 11 In the absence of any other party with a registered interest in the property, the applicant, as the sole registered mortgagee, has an interest in the property within the meaning of s 133(9) of the Bankruptcy Act: Re Tulloch Ltd (in liq) and the Companies Act at 813; National Australia Bank Ltd (ACN 004 044 937) v Victoria (2010) 118 ALD 527 at [12]; National Australia Bank Ltd v State of New South Wales at [10]. 12 It is well-established that a mortgagee of disclaimed Torrens system land is entitled to receive a vesting order: see, for example, Re Tulloch Ltd (in liq) and the Companies Act at 814; National Australia Bank Ltd v New South Wales at [29]; ING Bank (Australia) Limited v State of Queensland, in the matter of Watson [2017] FCA 411 at [28]; Australia and New Zealand Banking Group Limited v State of Queensland, in the matter of McFarlane (a Bankrupt) [2017] FCA 696 at [27]. 13 It appropriate to make orders vesting the property in the applicant, as well as the ancillary orders sought by the applicant. I will make orders in accordance with the draft. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rangiah.