Moya Pty Ltd v State of New South Wales, in the matter of Vapula Pty Limited

Judgment (7 paragraphs)

[1]

The estates in fee simple in the land in folio identifiers 6/SP85572 and 8/SP85572 the subject of the disclaimer of onerous property executed on 22 March 2022 by or on behalf of Robyn Duggan as liquidator of Vapula Pty Limited (in liquidation) vest pursuant to s 568F(1)(a) of the Corporations Act 2001 (Cth), in the plaintiff, Moya Pty Ltd, subject to the following conditions: (a) the plaintiff holds and deals with the estates as registered proprietor of the estates in fee simple; (b) for the purpose of any dealings with the land the plaintiff may, (but is not bound) to act as if it were exercising its powers as mortgagee in possession, with the right to sell the estates in fee simple of the land in exercise of its power of sale and all its other rights under registered mortgage AE458004J; (c) the plaintiff be entitled to calculate the amount secured by registered mortgage AE458004J on and after 22 March 2022 as including all moneys that would have been secured by that mortgage had the disclaimer not occurred and to deduct and retain for its own absolute use and property such amount from any proceeds of sale of the estates in fee simple as if it were money secured by the mortgage; (d) the plaintiff after any sale of the estates in fee simple in the land provide an account of its payments and receipts to: (i) the liquidator; (ii) Vapula; (iii) the first defendant, the State of New South Wales; (iv) the second defendant, the Commonwealth of Australia; (v) the fifth defendant, the Church of Jesus Christ of Latter-day Saints; (vi) Senior National Judicial Registrar Paul Farrell, and pay to the liquidator any surplus in accordance with s 58(3) of the Real Property Act 1900 (NSW) as if it had exercised a power of sale in accordance with registered mortgage AE458004J. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

[2]

background 6 Vapula carried on business as a property developer. It was the registered proprietor of Lots 1, 2, 3, 4, 5, 6 and 7 in DP 224868. Those lots were consolidated to become Lot 1 in DP 1166123. That lot was subsequently the subject of a strata plan and became known by the reference CP/SP85572. The properties are two lots in that strata plan - Lot 6 being 6/SP85572 and Lot 8 being 8/SP85572. Vapula remains the registered proprietor of the properties, albeit that its interest in the land has been extinguished by disclaimer. 7 On 19 December 2008, Moya and Vapula entered into a loan facility agreement. The loan was secured by charge and was also secured by registered mortgage over Lots 1, 2, 3, 4, 5, 6 and 7 in DP 224868. After those properties were consolidated and then became subject to the strata plan, the mortgage was registered over the properties. 8 Vapula was wound up in insolvency on 29 May 2019 and the liquidator was appointed. The appointment of a liquidator was an event of default under the loan facility agreement. Upon an event of default occurring, Moya was entitled under the mortgage to, inter alia, take possession of the properties, appoint a receiver, subdivide the properties, and sell the properties. Moya took possession of the properties and has exerted practical control over them since that time. However, despite the event of default, Moya did not formally give notice to ASIC that it was exercising a right of possession, nor has it exercised a power of sale under the mortgage. On 22 March 2022, the liquidator gave notice of disclaimer of the properties. The loan from Moya to Vapula has not been repaid. As at 31 May 2022, the amount of $3,076,141.72 remained outstanding. Senior counsel appearing on the application confirmed that the amount due to Moya remained unpaid as at the date of the hearing. The liquidator has indicated that if the properties are sold, there is unlikely to be any surplus available for distribution to the general pool of creditors. 9 In relation to the occupation of Lot 8 by the Church, which is regulated by a commercial lease agreement due to expire on 11 April 2024, Moya has undertaken to continue to recognise that lease upon becoming the registered proprietor of the properties if the vesting orders sought are made.

consideration 13 I am satisfied for the reasons that follow that the conditions in s 568F are met and that it is appropriate to make orders substantially in the form sought by Moya. 14 Firstly, the properties have been disclaimed by the liquidator pursuant to a notice of disclaimer dated 22 March 2022: s 568F(1)(a). By letter dated 21 February 2022, lawyers for the plaintiff provided the liquidator with income and expenditure statements for Lot 8, and copies of sales advices for Lot 6. Based on the information provided to her, the liquidator formed the view that the costs and expenses of realising the properties would likely exceed the proceeds of realising the properties and that there is no prospect of any funds becoming available for any other creditors of Vapula following the sale of the properties. Accordingly, the liquidator decided to disclaim the properties and has proceeded to do so. 15 Secondly, Moya, the applicant, has an interest in the properties as the holder of a registered mortgage: s 568F(2)(a). That interest survives the disclaimer, even though it cannot be enforced against the State as the State has given no covenant to repay the money loaned: see Stacks Managed Investments Limited v State of New South Wales [2016] NSWSC 1349 at [11]-[12]; Commonwealth Bank of Australia v State of Queensland [2021] FCA 22 at [15(4)-(6)]. 16 Thirdly, all parties with an interest, or an arguable interest, have been served, and none object to the orders sought nor sought to be heard in the proceedings. 17 Being satisfied that the statutory conditions are met, I consider it appropriate to exercise the Court's discretion in favour of making a vesting order in accordance with the orders sought. A vesting order will serve to remove any doubt as to Moya's capacity to exercise its rights as secured creditor under the mortgage, including the right to subdivide and sell the properties. In the absence of any higher-ranking interest, it is appropriate that Moya be permitted to exercise its rights as mortgagee, including its right to sell the properties and apply any sale proceeds against the outstanding loan. I note that the evidence before me indicates that there is unlikely to be a surplus available for distribution to other creditors. In case this proves to be unduly pessimistic, I will make orders to safeguard the interests of the liquidator and creditors by requiring Moya to provide an account of any sale proceeds to the defendants and a Registrar of this Court, and to pay any surplus to the liquidator.

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Judgment (7 paragraphs)

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