Dudley (Trustee) v Pope

Introduction 1 The applicant is the trustee of the bankrupt estate of Nigel Pope, the second respondent in these proceedings. Mr Pope was declared bankrupt on 8 March 2016. The first respondent is his wife, Abigail Pope. Ms Pope is not bankrupt. 2 At the time of the trustee's appointment, the respondents were the registered proprietors as joint tenants of a residence in Western Australia, more particularly described as Lot 279 on Deposited Plan 44803, on Certificate of Title Volume 2600 Folio 446 (Property). 3 Expressed generally, pursuant to s 58(1) of the Bankruptcy Act 1966 (Cth), property of a bankrupt vests in the trustee upon bankruptcy. Where a bankrupt and another are registered as joint tenants of land, the vesting of the property under s 58 effects a severance of the joint tenancy so that the interests are then held as tenants in common. 4 In Western Australia, in order for a trustee in bankruptcy to secure legal title to a bankrupt's interest in land, it is necessary to cause the land to be registered in their own name. This is provided for by s 234(1) of the Transfer of Land Act 1893 (WA). A trustee may then seek orders as to partition of land or sale under s 126(1) of the Property Law Act 1969 (WA). 5 In this case the trustee was registered as the proprietor of Mr Pope's bankrupt estate as to his one-half share as tenant in common on 29 May 2018. He now seeks an order for sale of the Property and other ancillary relief. The intention of the orders is that Ms Pope will be paid one half of the net proceeds of sale. 6 The following matters arise from an affidavit filed in support of this application and affirmed by the trustee.

There is likely to be net equity 7 The trustee obtained a valuation of the Property in 2016 of $540,000. At that time, the amount secured against the Property was $396,477. On that basis, the trustee has determined that the likely net equity from a sale of the Property is at least $132,723, and the portion of the likely net equity from the sale of the Property which could be realised to pay a dividend to creditors is at least $66,361. 8 The trustee has not been able to obtain a current valuation of the Property or negotiate a sale of the trustee's one-half share of the Property to Ms Pope. 9 The trustee, his employees and his solicitors have corresponded off and on with Ms Pope over the course of the last six years in an effort to agree terms on which Ms Pope might buy out the trustee's half interest. The communications included requests for a valuer to be granted access to the Property. Ms Pope's responses to the communications included certain offers of monetary sums but no agreement was reached as to access for a valuer or as to the terms of any overarching settlement. There has not been any correspondence from Ms Pope since 8 March 2022. In the circumstances the trustee has not been able to sell the half interest to Ms Pope to date. 10 I am satisfied that Ms Pope was served with all of the papers relevant to this application and was informed of the date of the hearing. She did not communicate with the Court or the trustee's solicitors about the hearing, or attend.

Power to order sale 11 This Court has the power to order the sale of the Property: Coshott v Prentice [2014] FCAFC 88; (2014) 221 FCR 450. 12 Section 126(1) of the Property Law Act provides: Where in an action for partition the party or parties interested, individually or collectively, to the extent of a half share or upwards in the land to which the action relates request the Court to direct a sale of the land and a distribution of the proceeds, instead of a division of the land between or among the parties interested, the Court shall, unless it sees good reason to the contrary, direct a sale accordingly. 13 The trustee requests the Court direct the sale of the Property rather than any partition. 14 In H v D [2012] WASC 291 at [23]-[24] Pritchard J said: [23] The purpose of s 126(1) (and of the legislation which preceded it) is to provide a remedy for a joint tenant or tenant in common, who, in the event of a dispute with another cotenant, may otherwise be without an adequate remedy to protect his share or interest in the land: Nullagine Investments Pty Ltd v Western Australian Club Inc (1992) 177 CLR 635, 650 (Brennan J), 656 - 657 (Deane, Dawson & Gaudron JJ). [24] Once the requirements of s 126(1) are established, the court is required to order the sale of a property unless there is good reason not to do so, in which case partition will be ordered instead. The only discretion is to refuse sale and to order partition 'for good reason': Nullagine Investments Pty Ltd v Western Australian Club Inc (666) (Toohey J); Bray v Bray (1926) 38 CLR 542, 545 (Knox CJ), 546 (Higgins J); Martin-Smith v Woodhead [1990] WAR 62, 69 - 70 (Kennedy J) See also generally Trainor v Trainor [2021] WASC 40 at [1]-[10] (Master Sanderson). 15 There is no evidence from Ms Pope of any objection to the sale of the Property by the trustee. 16 Although the Property is encumbered by mortgages, it is well established that mortgagees are not necessary, or, indeed, appropriate, parties to applications under s 126(1), although the position of mortgagees must be considered in connection with the form of any order which may be made: Martin-Smith v Woodhead [1990] WAR 62 at 66 (Kennedy J). The orders sought by the trustee seek to protect the interests of the mortgagees by ensuring that they are paid according to their priorities any amounts due to them under their security from the proceeds of sale. 17 I am not persuaded that there is any good reason not to order the sale of the Property. To the contrary, a sale by the trustee is the appropriate course in the circumstances, including having regard to the trustee's duties to realise the assets of the bankrupt estate for the benefit of the creditors. 18 The trustee accepted through his counsel that he would not seek to satisfy his professional fees from any proceeds of sale that would otherwise be payable to Ms Pope, having regard to Coshott v Prentice at [133]. 19 There will be orders accordingly. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Banks-Smith.