Dixon as Trustee of the Bankrupt Estate of Badillo-Watiwat v Watiwat

EX TEMPORE Judgment 1I have before me an application under s 66G of the Conveyancing Act 1919. 2As is often the case in these kinds of applications, behind the technical formality of the matter before the Court, is a human family story and possible hardship. However, I must decide the case based upon the legal principles which are relevant to the application that is being brought. 3The application is made by Stephen Robert Dixon who is the trustee of the bankrupt estate of Bernadita Badillo-Watiwat (the Bankrupt). Mr Parsons of Counsel appears for Mr Dixon. The Bankrupt's husband, Mr Bienvenido Watiwat is the defendant and appears for himself. 4Prior to 3 November 2010, the Bankrupt and the defendant were the registered proprietors of the land contained in folio identifier xxxxxxxx being the land known as xxxx xxxxxxx xxxxx xxxx, Carlingford (the Property) as joint tenants. 5The Bankrupt and the defendant purchased the Property in around May 1989 for $169,000. At that time, and at all relevant times since, the Bankrupt and the defendant were husband and wife. The Bankrupt and the defendant (and later their children) have lived at the Property since it was purchased. 6The Bankrupt and the defendant borrowed funds from Westpac Banking Corporation ("Westpac") to purchase the Property. The Bankrupt and defendant gave Westpac a mortgage over the Property. 7On 3 November 2010 a sequestration order was made in respect of the Bankrupt's estate. Mr Dixon was appointed the trustee of the Bankrupt's estate on that date. As trustee in bankruptcy, Mr Dixon's interest in the Property has been registered by a lodgement with the Land and Property Information department of the appropriate applications under the bankruptcy regulations. Mr Dixon has now applied for the severance of the joint tenancy that previously existed between the Bankrupt and the defendant. 8As a result of the combined effect of s 58 of the Bankruptcy Act 1966 and s 90 of the Real Property Act 1900, Mr Dixon and the defendant are now the registered proprietors of the Property as tenants in common. 9The Property is the substantial asset of the Bankrupt's estate. In Mr Dixon's opinion, the realisation of what is now his interest in the Property will result in all creditors of the bankrupt's estate being paid in full. 10The petitioning creditor of the bankrupt estate was Lion Finance Pty Limited, the assignee of a number of debts owed by the Bankrupt to the Australian and New Zealand Banking Group Limited, GE Money, Westpac and American Express. 11After his appointment, the plaintiff had numerous communications with the defendant with a view to coming to an arrangement that would avoid the need for the plaintiff to bring this application and thereby force a sale of the Property. For reasons that I do not need to set out, it has not been possible for the plaintiff and the defendant to come to an arrangement suitable to the defendant. I should say, however, that the evidence reveals that the plaintiff has gone to considerable efforts to come to an arrangement that would have avoided the making of this application. 12I am satisfied that the plaintiff has behaved entirely reasonably in this regard. 13In result, the plaintiff seeks an order under s 66G of the Conveyancing Act appointing Mr Paul Gerard Weston and Mr Anthony Elkerton to be trustees for sale of the Property, and for the usual consequential orders. 14Messrs Weston and Elkerton consent to their appointment as trustees for sale. There is also before me evidence attesting to the fitness, integrity and competence of the proposed trustees. 15 Section 66G of the Conveyancing Act is in the following terms: - "66G (1) Where any property (other than chattels) is held in co-ownership the court may, on the application of any one or more of the co-owners, appoint trustees of the property and vest the same in such trustees, subject to incumbrances affecting the entirety, but free from incumbrances affecting any undivided shares, to be held by them on the statutory trust for sale or on the statutory trust for partition." 16The definition of "co-ownership" for the purposes of s 66G is set out in s 66F of the Conveyancing Act to mean "ownership whether at law or in equity in possession by two or more persons as joint tenants or as tenants in common". 17I am satisfied that Mr Dixon is a co-owner of the Property. 18Under s 66G, I have a discretion as to whether I accede to Mr Dixon's application as co-owner for an order for sale. However, the authorities reveal that my discretion is very limited and must be exercised in accordance with principles which are well established. 19Mr Parsons draws attention, for example, to what White J said in Tory v Tory [2007] NSWSC 1078. At paragraph 42, his Honour stated that an order under the section is granted almost as of right unless, on settled principles, it would be inequitable to allow the application. 20Very recently, Black J considered the principles which must guide me in exercising the limited discretion I have under the section: Pascoe v Dyason [2011] NSWSC 1217. With great respect and gratitude I will adopt his Honour's summary of the relevant principles contained in [5] to [8] of that judgment: - "5. The purpose of this section is 'to provide a mechanism for terminating the co-ownership [of property] where the co-owners themselves cannot agree on how the co-ownership should be determined': P Butt, Land Law , 6 th ed, 2010 at 265. In Callahan v O'Neill [2002] NSWSC 877, Young CJ in Eq observed: 'It is fairly clear that, as a general rule, any co-owner holding at least 50% of a parcel of real property is entitled almost as of right to an order for partition or sale under s 66G of the Conveyancing Act. It is only in situations where it would, under settled principles, be inequitable to permit such an application, including cases where there has been a contract not to make an application that the order may be refused. This appears from cases such as Ngatoa v Ford (1990) 19 NSWLR 72 and Williams v Legg (1993) 29 NSWLR 687.' 6. Although the Court has a discretion whether or not to make an order under this section, the grounds on which the Court will ordinarily refuse to make it are limited. For example, if it is inconsistent with a proprietary right or a contractual or fiduciary obligation, and there is no general jurisdiction to refuse to grant such an order on the basis of hardship or unfairness: Stephens v Debney (1960) 60 SR (NSW) 468; Re McNamara and the Conveyancing Act (1961) 78 WN (NSW) 1068; Ngatoa & Anor v Ford & Anor (1990) 19 NSWLR 72; Williams v Legg (1993) 29 NSWLR 687; Westpac Banking Corporation v Sansom (1994) 6 BPR 13,790; Woodson (Sales) Pty Ltd v Woodson (Aust) Pty Ltd (1996) 7 BPR 14,685. In Hogan v Baseden (1997) 8 BPR 15,723 at 15,723, Mason P observed that it 'would not be a proper exercise of discretion of the power to decline relief under s 66G ... to refuse an application on grounds of hardship or general unfairness.' His Honour also noted that: '[I]n the unhappy event that the parties are unable to settle their differences then the making of an order appointing trustees for sale seems inevitable unless the respondent could establish a legally binding agreement not to put her out of occupation of her home, or circumstances that would ground some estoppel to similar effect.' (at [59]). 7. In Chalhoub v Chalhoub [2005] NSWSC 572 at [17]-[18], McLaughlin AsJ observed that, where a plaintiff and defendant are registered as tenants in common in equal shares, then prima facie the plaintiff is entitled to relief by way of an order under s 66G of the Conveyancing Act for sale of the relevant property and for the division of the net proceeds of such sale between the plaintiff and the defendant in equal shares. It was for the defendant, who denied the plaintiff's entitlement to such relief, to establish that the legal rights of the parties consequent upon their status as registered proprietors as tenants in common in equal shares were in some way altered by the invocation of equitable rights recognised by a Court of Equity or that there was some other reason why the Court should, in the exercise of the limited discretion reposed in it by s 66G of the Conveyancing Act, decline to make an appointment of statutory trustees or sale of the subject property. 8. In Cain v Cain [2007] NSWSC 623 at [9]-[10], Young CJ in Eq noted that the Court will usually consider it appropriate to make an order under s 66G of the Conveyancing Act unless persuaded by cogent arguments from those who oppose. His Honour then noted Counsel's summary of the categories of cases in which the Court has declined to grant such an order as including: where the legal title is held by trustees and the trust instrument contains its own procedure for sale; where the plaintiff's conduct rates as an estoppel against the sale; and where an order would be incompatible with a contractual or equitable duty binding the applicant. In Tory v Tory [2007] NSWSC 1078 at [42], White J noted that an order under s 66G of the Conveyancing Act 'is almost as of right unless on settled principles it would be inequitable to allow the application', and observed that an application would be refused if making the order would be inconsistent with a proprietary right or contractual or fiduciary obligation or on the basis of conventional estoppel or equitable estoppel. In Spathis v Nanos [2008] NSWSC 418 at [19]-[20], Jagot AJ observed that the discretion was not at large and is not to be exercised by reference to personal views about hardship or unfairness. The Court of Appeal also noted that the discretion to refuse relief under s 66G of the Conveyancing Act was a 'limited one' in Ross v Ross [2010] NSWCA 301 at [36]; see also National Australia Bank Ltd v Pasupati [2011] NSWSC 540 at [20]." 21In the light of these principles, on the face of it Mr Dixon is entitled to a favourable exercise by me under the discretion of s 66G. 22The defendant seeks to resist the making of an order under the section on the bases set out in paragraphs 20 to 27 of his affidavit affirmed on 19 March 2012. 23I admitted those paragraphs as evidence of Mr Watitwat's contentions. The paragraphs are in the following terms: - "20 I request that my property, my family home, be exonerated from this bankruptcy. 21 I believe it is unconscionable for BDO to put me under economic duress to extract payment of more than $40K out of an initial court judgement [sic] of $ 12,973.73. 22 I believe that the purchase of another 2 of my wife's unsecured debts is executed in bad faith. 23 I also believe that it is also unconscionable for Lion Finance to purchase these 2 unsecured debts after they have successfully forced my wife into bankruptcy through the Parramatta Courts. 24 I declare that I did not get any financial benefit from the proceeds of my wife's unsecured borrowings. 25 I also declare that all the monies that went into this property came from the fruits of my own labour, and also my superannuation savings over the years and my wife does not have any monetary contribution towards the purchase of the property. 26 I declare that to date, I do not have any superannuation savings left, the last $8,000.00+ having been withdrawn to again cover the mortgage repayment with Westpac when BDO put a hold on my savings account. 27 I declare that in 2001, I burrowed [sic] monies to payout the bankrupt's 11 credit card accounts and the bankrupt has not participated in the repayments of this debt to date. (Ref: BSW # 27)". 24First, Mr Watiwat requests that the Property, which he points out is his family home, be "exonerated from this bankruptcy" upon the basis of Mr Watiwat's contention that it would be "unconscionable" for Mr Dixon's firm to place him under what he describes as "economic duress". The basis for this claim appears to be linked in some way to what the defendant sees as the unconscionability of Lion Finance Pty Limited purchasing the debts that have led to the Bankrupt's bankruptcy. 25There is no evidence that Mr Dixon or any member of his firm, including Ms Leung who has given evidence before me, have behaved in a manner that would possibly give rise to that conclusion. 26The evidence shows that the plaintiff has gone to great lengths to endeavour to finalise the administration of this bankrupt estate without forcing a sale of the Property. Despite those endeavours it has not been possible for the plaintiff to come to any arrangements with, the defendant, (for example, an arrangement whereby he might purchase the bankrupt's interest in the Property from Mr Dixon as trustee) which could enable the plaintiff to have avoided the making of this application. 27There is no evidence of any "bad faith" or "unconscionability" associated with any conduct of Lion Finance Pty Limited. 28Another matter that the defendant relies upon is his contention that he did not receive what he describes as "any financial benefit from the proceeds of my wife's unsecured borrowings". That may well be true, but it is not relevant to whether an order should be made under this section. 29The defendant also contends that "all the money that went into this property came from the fruits of my own labour" and that the Bankrupt made no "monetary contribution towards the purchase of the property". 30There is little evidence before me as to the circumstances that existed between the defendant and the Bankrupt when the Property was purchased. 31What is clear is that the Bankrupt and the defendant were husband and wife at the time. The defendant gave evidence that he felt it was his obligation to put his wife on the title of the Property. He also gave evidence that, as must be obvious, he intended that his wife be on the title of the Property. Further, Mr Parsons pointed out in argument that the defendant and the Bankrupt were and are joint mortgagors to Westpac. 32Accordingly, in accordance with the principles enunciated in the High Court in Calverley v Green (1984) 155 CLR 242 and summarised more recently by Palmer J in Buffrey v Buffrey [2006] NSWSC 1349; (2006) 12 BPR 23,619, no equitable presumptions arise in the defendant's favour in relation to the title of the Property. 33On the contrary, the presumption of advancement would apply as discussed in the High Court in Calverley v Green and by Palmer J in Buffrey v Buffrey. Equity thus presumes that the defendant intended that the Bankrupt have a beneficial interest in the Property. 34To that can be added the direct evidence I have from the defendant that he intended, and felt it was his obligation, that his wife have a legal interest in the Property. 35It follows that even if, as the defendant contends, he provided the entire purchase price of the Property, the fact remains that his wife, the Bankrupt, had (and thus the plaintiff, as her trustee in bankruptcy, now has) both legal and equitable title in the Property. For that reason it appears to me that this matter raised by the defendant provides no basis to resist the orders being made. 36Finally, the defendant asserts that he has no "superannuation savings left." He states that he has borrowed money to "pay out the bankrupt's 11 credit card accounts", and says "the bankrupt has not participated in the repayments to date". Again, this may well be true but it provides no reason why orders should not be made as the plaintiff seeks. 37Accordingly, although I do accept that the making of these orders will cause the defendant, and perhaps the Bankrupt some hardship, I am of the opinion I have no choice but to make the orders in favour of the plaintiff. 38As, Black J said in Pascoe v Dyason: - "It is, of course, always regrettable if a family home needs to be sold as a consequence of bankruptcy. However, the case law makes clear that this does not provide a basis declining to make orders under s 66G of the Conveyancing Act." 39I propose to make the orders set forth in paragraphs 1, 2, 3 and 4 of the Summons. 40In paragraph 5 an order is sought that the trustees be entitled to charge out at a particular hourly rate. There is in evidence, as expected in these cases, evidence of the hourly rate the proposed trustees in the normal course do charge. For that reason I am also proposing to make an order in accordance with paragraph 5 of the Summons.