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

INTRODUCTION 1 The plaintiff, Moya Pty Ltd ACN 101 067 261, applies under s 568F(1)(a) of the Corporations Act 2001 (Cth) for vesting orders in circumstances where the third defendant, Robyn Duggan as liquidator of Vapula Pty Limited (In Liquidation) ACN 106 275 914 on behalf of the fourth defendant, Vapula Pty Limited (In Liquidation) ACN 106 275 914, has disclaimed Vapula's interest in two properties located within a strata development at 46B Reservoir Road, Mount Pritchard, New South Wales (the properties). At the time the properties were disclaimed, Moya held a registered mortgage over the properties. 2 No other party with an interest, or an arguable interest, in the properties opposes the making of the vesting orders. The plaintiff has for an abundance of caution, for reasons which need not be recited, joined both the State of New South Wales and the Commonwealth of Australia, as defendants. 3 The first defendant, the State, has filed a submitting notice. The second defendant, the Commonwealth, through the Australian Securities and Investments Commission (ASIC), has indicated that, on the basis that no orders are sought against it, it does not oppose the relief sought and does not wish to be heard on the application. 4 The liquidator does not object to the orders sought by Moya, and will submit to any orders that the Court considers reasonable except for orders in relation to costs or any other claim giving rise to liability whatsoever against Vapula or the liquidator. 5 The fifth defendant, the Church of Jesus Christ of Latter-day Saints, occupies one of the properties pursuant to a commercial lease agreement with Moya. Despite initial concerns, the Church has now indicated that it does not oppose the application.

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.

legal principles 10 Section 568F of the Act relevantly provides that: (1) The Court may order that disclaimed property vest in, or be delivered to: (a) a person entitled to the property; or (b) a person in or to whom it seems to the Court appropriate that the property be vested or delivered; or (c) a person as trustee for a person of a kind referred to in paragraph (a) or (b). (2) The Court may make an order under subsection (1): (a) on the application of a person who claims an interest in the property, or is under a liability in respect of the property that this Act has not discharged; and (b) after hearing such persons as it thinks appropriate. … 11 There are three conditions which must be satisfied prior to the making of a vesting order under s 568F of the Act, namely: (1) there must be property that has been disclaimed; (2) there must be an application by a person who, relevantly, claims an interest in the disclaimed property; and (3) the Court must be satisfied it has heard from such persons as it thinks appropriate on the application. 12 If the three statutory conditions to the exercise of the power in s 568F(1) are satisfied, the Court may exercise its discretion in favour of the making of a vesting order.

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.

conclusion 18 Accordingly, I am satisfied that it is appropriate to make orders in the form sought by Moya, with the effect that the properties vest in Moya for the purpose of it exercising its powers as mortgagee, and that Moya provide an account of any sale proceeds and pay any surplus to the liquidator. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman.

Defendants Fourth Defendant: VAPULA PTY LIMITED (IN LIQUIDATION) ACN 106 275 914 Fifth Defendant: THE CHURCH OF JESUS CHRIST OF LATTER-DAY SAINTS