McVey v State of New South Wales, in the matter of McVey

REASONS FOR JUDGMENT 1 The applicant, Mrs McVey, is seeking an order under s 133(9) of the Bankruptcy Act 1966 (Cth) (the Act) that certain property that has been the subject of a disclaimer by a trustee in bankruptcy be vested in her. Section 133(9) provides that the Court may make an order on such terms as it considers just and equitable for the vesting of disclaimed property in, or delivery of the property to, a person entitled to it or to a person where it seems just and equitable to do so. The person who may bring such an application is a person either claiming an interest in, or being under a liability not discharged by the Act in respect of, the disclaimed property. 2 Mrs McVey is the co-registered proprietor of the property, which is situated in North Nowra. The property is her home and only significant asset. The bankrupt, Mr Geoff McVey, is Mrs McVey's husband. They have been married for 39 years and purchased the property in 1993. Mr and Mrs McVey contributed joint funds to the purchase of approximately $90,000.00, the remaining funds being obtained by way of a loan from the Australia and New Zealand Banking Group Limited (the Bank). This loan was secured by a registered mortgage over the property, under which Mr and Mrs McVey were jointly and severally liable. After the purchase of the property in 1993, Mr and Mrs McVey jointly made payments of principal and interest to the bank pursuant to the mortgage. Mrs McVey's evidence is that the payments were directly debited from their joint savings account held with the Bank. 3 Mr McVey was declared bankrupt on a Debtor's Petition filed on 21 August 2008 and a trustee was appointed. On 27 July 2011, the then trustee in bankruptcy disclaimed Mr McVey's interest in the property upon the basis that it was 'burdened with onerous covenants and/or is unsaleable or is not readily saleable'. 4 Upon that disclaimer, the Registrar General registered the State of New South Wales as the co-registered proprietor of the property. The action of the State of New South Wales was taken because Mr McVey's interest escheats to the Crown upon the disclaimer by the trustee of the bankrupt estate. Mr McVey was discharged from bankruptcy on 22 August 2011. 5 Since Mr McVey's bankruptcy in August 2008, Mrs McVey has continued to make payments of interest and principal to the Bank out of her own income and savings from working as a clerk and from funds that she had accessed from her superannuation. Further payments in reduction of the mortgage have been directly debited from a bank account held with the Bank in her name. Since Mrs McVey has been making these payments, the principal owing to the bank has been reduced. She remains liable to the Bank for the further repayment of the loan and her evidence is that she intends to continue to meet payments of interest and principal due to the Bank from her income and savings. 6 That is, Mrs McVey is under a liability in respect of the disclaimed property that is not discharged by the Act, by reason of the mortgage over the property in favour of the Bank. Mrs McVey submits that it is just and equitable that the disclaimed property be vested in her because: she is now solely liable under the mortgage; the property is her home and the only significant asset and she contributed to the purchase price of that asset; and Mrs McVey has, since her husband was declared bankrupt, been meeting all of the obligations under the mortgage and intends to continue to do so. 7 The State of New South Wales and the Bank have each consented to the orders proposed to be made pursuant to this application brought by Mrs McVey. 8 The authorities in relation to s 133(9) of the Act mostly arise from applications by a mortgagee of the disclaimed property. Counsel for Mrs McVey has brought to my attention the decision of Paine J in Re Lasscock, ex parte Lasscock (1961) 18 ABC 263, in which an application was similarly brought by a wife of a bankrupt for the transfer of the matrimonial home to her after a disclaimer. In that case, the applicant was not jointly liable under a mortgage, but had contributed to the purchase price, continued to make payments in respect of the property and continued to reside in it. His Honour said at page 271 that he considered that there was: … no ground to warrant the court in depriving this applicant of a benefit which by her own efforts, she has brought about. 9 His Honour also noted the relevance of the fact that the mortgagees were satisfied to allow the applicant to build up an equity in the property. His Honour found that the applicant had an interest in the property and ordered that the property vest in the applicant. 10 This case, it seems to me, is a stronger one than that of applicant in Lasscock, as Mrs McVey remains liable under the mortgage and thereby has established, in my view, that she is under a liability not discharged by the Act with respect to the disclaimed property. It is therefore not necessary to consider further the matter discussed in Lasscock as to whether she also has an interest in the property by reason of the payments that she has made in respect of the whole of the mortgage obligation. 11 It is, in my view, just and equitable that the property that was the subject of the disclaimer by the trustee in bankruptcy be vested in Mrs McVey. I am satisfied that it is appropriate to make the proposed orders, which have been consented to by Mrs McVey, the State of New South Wales and the ANZ Banking Corporation. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bennett.