National Australia Bank Limited v State of Queensland

Federal Court of Australia|2019-11-01|Before: Robertson J

Pursuant to s133(9) of the Bankruptcy Act 1966 (Cth): (a) the estate in fee simple in the property described as Lot 21 on Survey Plan 246159 in the Local Government of Gladstone, being all of the land contained in Title Reference 50882934 and situated at 7 Wentworth Place, Glen Eden in the State of Queensland (Glen Eden Property) vest in the applicant for the purposes of the applicant exercising its powers as mortgagee under the Land Title Act 1994 (Qld) and Property Law Act 1974 (Qld) and registered mortgage number 715023280 (Glen Eden Property Mortgage). (b) the estate in fee simple in the property described as Lot 105 on Survey Plan 243882 in the Local Government of Central Highlands, being all of the land contained in Title Reference 50895198 and situated at 8 Cordingly Street, Blackwater in the State of Queensland (Blackwater Property) vest in the Applicant for the purposes of the Applicant exercising its powers as mortgagee under the Land Title Act 1994 (Qld) and Property Law Act 1974 (Qld) and registered mortgage number 715106078 (Blackwater Property Mortgage).
On the vesting of the Glen Eden Property and the Blackwater Property in the Applicant pursuant to Order 1, the applicant: (a) may (but is not bound to) deal with the Glen Eden Property and the Blackwater Property as if it were exercising its power as mortgagee in possession under the Land Title Act 1994 (Qld) and Property Law Act 1974 (Qld) and under the Glen Eden Property Mortgage and Blackwater Property Mortgage, including exercising the right to sell the estate in fee simple of the Glen Eden Property and Blackwater Property in exercise of its power of sale and all its other rights under the Glen Eden Property Mortgage and Blackwater Property Mortgage; (b) for the purpose of selling the estate in fee simple of the Glen Eden Property and Blackwater Property in exercise of its power of sale, is not required to serve: (i) a notice of default or demand whether under s 88 of the National Credit Code, being Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth) or otherwise; (ii) a notice pursuant to s 84 of the Property Law Act 1974 (Qld); or (iii) a notice to vacate under s 317 of the Residential Tenancies and Rooming Accommodation Act 2008 (Qld) on the occupant(s) (if any) of the Glen Eden Property and Blackwater Property. (c) is entitled to calculate the entirety of the debt secured and owing (Debt) pursuant to the Glen Eden Mortgage and Blackwater Mortgage as including all monies that would have been secured by the Glen Eden Mortgage and Blackwater Mortgage had the second respondent not disclaimed the Glen Eden Property and Blackwater Property (that Debt including amounts accruing after the disclaimer) and to deduct and retain for its own absolute use and property such amount from any proceeds of sale of the Glen Eden Property and Blackwater Property as if it were money secured by the Glen Eden Property Mortgage and Blackwater Property Mortgage (including costs of this application and all costs properly incurred in selling, and incidental to the sale of, the Glen Eden Property and Blackwater Property); (d) is to apply the proceeds of sale from the Glen Eden Property and Blackwater Property as follows: (i) first, in payment of any statutory charges affecting the Glen Eden Property and the Blackwater Property which the relevant statute provides are payable in priority to the applicant; (ii) secondly, in payment of all costs, charges and expenses properly incurred by the applicant as incidental to the sale, or any attempted sale or otherwise; (iii) thirdly, in discharge of the Debt owed to the applicant as secured by the Glen Eden Property Mortgage and Blackwater Property Mortgage; and (iv) fourthly, in payment of any subsequent mortgages or caveats (if any); (e) is to, after any sale of the Glen Eden Property and Blackwater Property, provide an account of its payments and receipts to: (i) the second respondent; (ii) Jennifer Helen Muller and Peter Mark Muller; and (iii) the District Registrar of the New South Wales Registry of the Federal Court of Australia; (f) is to pay into Court the surplus, if any, arising from the sale of the Glen Eden Property and the Blackwater Property.

Introduction 1 The applicant, National Australia Bank Limited, brings this application, filed on 28 August 2019, under s 133(9) of the Bankruptcy Act 1966 (Cth). It applies for an order that disclaimed properties vest in it, as a party interested in the subject properties as registered mortgagee. Section 133(9) provides as follows: The Court may, on application by a person either claiming an interest in, or being under a liability not discharged by this Act in respect of, disclaimed property, and after hearing such persons as it thinks fit, make an order, on such terms as the Court considers just and equitable, for the vesting of the property in, or delivery of the property to, a person entitled to it or a person in whom, or to whom, it seems to the Court to be just and equitable that it should be vested or delivered, or a trustee for that person. 2 The first respondent is the State of Queensland. The second respondent is the trustee in bankruptcy of Jennifer Helen Muller and of Peter Mark Muller. The trustee has disclaimed, pursuant to s 133 of the Bankruptcy Act, any interest in the two properties next identified, being the Glen Eden Property and the Blackwater Property.

The relief claimed 3 The applicant claims the following relief: 1. Pursuant to section 133(9) of the Bankruptcy Act 1966 (Cth): (a) the estate in fee simple in the property described as Lot 21 on Survey Plan 246159 in the Local Government of Gladstone, being all of the land contained in Title Reference 50882934 and situated at 7 Wentworth Place, Glen Eden in the State of Queensland (Glen Eden Property) vest in the Applicant for the purposes of the Applicant exercising its powers as mortgagee under the Land Title Act 1994 QLD and Property Law Act 1974 QLD and registered mortgage number 715023280 (Glen Eden Property Mortgage). (b) the estate in fee simple in the property described as Lot 105 on Survey Plan 243882 in the Local Government of Central Highlands, being all of the land contained in Title Reference 50895198 and situated at 8 Cordingly Street, Blackwater in the State of Queensland (Blackwater Property) vest in the Applicant for the purposes of the Applicant exercising its powers as mortgagee under the Land Title Act 1994 QLD and Property Law Act 1974 QLD and registered mortgage number 715106078 (Blackwater Property Mortgage). 2. On the vesting of the Glen Eden Property and the Blackwater Property in the Applicant pursuant to section 133(9) of the Bankruptcy Act 1966 (Cth), the Applicant: (a) may (but is not bound to) deal with the Glen Eden Property and the Blackwater Property as if it were exercising its power as mortgagee in possession under the Land Title Act 1944 QLD, the Property Law Act 1974 QLD and under the Glen Eden Property Mortgage and Blackwater Property Mortgage, including exercising the right to sell the estate in fee simple of the Glen Eden Property and Blackwater Property in exercise of its power of sale and all its other rights under the Glen Eden Property Mortgage and Blackwater Property Mortgage; (b) for the purpose of selling the estate in fee simple of the Glen Eden Property and Blackwater Property in exercise of its power of sale, is not required to serve: i. a notice of default or demand whether under section 88 of the National Credit Code, being Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth) or otherwise; ii. a notice pursuant to section 84 of the Property Law Act 1974 QLD; or iii. a notice to vacate under section 317 of the Residential Tenancies and Rooming Accommodation Act 2008 QLD on any occupant(s) (if any) of the Glen Eden Property and Blackwater Property. (c) is entitled to calculate the entirety of the debt secured and owing (Debt) pursuant to the Glen Eden Mortgage and Blackwater Mortgage as including all monies that would have been secured by the Glen Eden Mortgage and Blackwater Mortgage had the Second Respondent not disclaimed the Glen Eden Property and Blackwater Property (that Debt including amounts accruing after the disclaimer) and to deduct and retain for its own absolute use and property such amount from any proceeds of sale of the Glen Eden Property and Blackwater Property as if it were money secured by the Glen Eden Property Mortgage and Blackwater Property Mortgage (including costs of this application and all costs properly incurred in selling, and incidental to the sale of, the Glen Eden Property and Blackwater Property); (d) will apply the proceeds of sale from the Glen Eden Property and Blackwater Property as follows: i. first, in payment of any statutory charges affecting the Glen Eden Property and Blackwater Property which the relevant statute provides are payable in priority to the Applicant; ii. secondly, in payment of all costs, charges and expenses properly incurred by the Applicant as incident to the sale, or any attempted sale or otherwise; iii. thirdly, in discharge of the Debt owed to the Applicant as secured by the Glen Eden Property Mortgage and Blackwater Property Mortgage; and iv. fourthly, in payment of any subsequent mortgages or caveats (if any); (e) must, after any sale of the Glen Eden Property and Blackwater Property, provide an account of its payments and receipts to: i. The Second Respondent; ii. Jennifer Helen Muller and Peter Mark Muller; and iii. The Registrar of the Court; (f) must pay into Court the surplus, if any, arising from the sale of the Glen Eden Property and Blackwater Property. 3. The Applicant's costs of, and incidental to these proceeds are to be treated as reasonable enforcement expenses under the Glen Eden Property Mortgage and Blackwater Property Mortgage and are to be payable from the proceeds of sale of the Glen Eden Property and Blackwater Property pursuant to Clause 13.2 of the Memorandum of Mortgage over the Glen Eden Property and Blackwater Property. 4. No order as to costs. 5. Such further, or other orders as the Court deems fit.

The parties 4 The first respondent, the State of Queensland, has filed a notice submitting to an order of the Court in terms of the orders sought by the applicant. 5 As to the second respondent, the trustee, there is an affidavit of service dated 20 September 2019 sworn by Mr Darren Whelan to the effect that he served the second respondent on 3 September 2019 with the relevant papers. There was no appearance on behalf of the second respondent. I admitted into evidence an email, dated 24 October 2019, from the second respondent to the applicant's solicitors to the effect that he would not be appearing or opposing the orders sought by the applicant.

The evidence 6 The applicant relied on an affidavit sworn by Ms Kanika Batra on 20 August 2019. On the basis of that affidavit, which I accept, I find as follows. 7 On or about 4 March 2013, the applicant and Jennifer Helen Muller (Mrs Muller) and Peter Mark Muller (Mr Muller) entered into a credit contract, account number 15-340-0857 (First Loan Agreement), pursuant to which the applicant offered to extend credit to Mrs Muller and Mr Muller in the amount of $452,000, and Mrs Muller and Mr Muller offered to give a registered mortgage over the Glen Eden Property to the applicant. 8 Also on or about 4 March 2013, the applicant and Mrs Muller and Mr Muller entered into a credit contract, account number 15-340-0902 (Second Loan Agreement), pursuant to which the applicant offered to extend credit to Mrs Muller and Mr Muller in the amount of $83,000, and Mrs Muller and Mr Muller offered to give a registered mortgage over the Glen Eden Property to the applicant. 9 Also on or about 4 March 2013, Mrs Muller and Mr Muller gave the applicant a mortgage over the Glen Eden Property which was registered on or about 9 April 2013 and numbered 715023280 (Glen Eden Property Mortgage). 10 On 22 March 2013, the applicant advanced the amount of $444,288.03, pursuant to the First Loan Agreement, by distributing the net settlement funds as directed by Mrs Muller and Mr Muller. Although Ms Batra referred to an amount of $452,000 having been advanced, the difference between these sums appears to have consisted of various fees charged to Mrs Muller and Mr Muller, rather than an advancement of principal under the Second Loan Agreement. 11 Also on 22 March 2013, the applicant advanced the amount of $10,461.06, pursuant to the Second Loan Agreement, by distributing the net settlement funds as directed by Mrs Muller and Mr Muller. Again, Ms Batra referred to an amount of $10,856.06 having been advanced, the difference being attributable to an "Annual Package Fee" charged to Mrs Muller and Mr Muller. 12 On or about 9 May 2013, the applicant and Mrs Muller and Mr Muller entered into a credit contract, account number 94-144-2070 (Third Loan Agreement), pursuant to which the applicant offered to extend credit to Mrs Muller and Mr Muller in the amount of $366,300, and Mrs Muller and Mr Muller offered to give: (a) a registered mortgage over the Glen Eden Property to the applicant; and (b) a registered mortgage over the Blackwater Property to the applicant. 13 Also on or about 9 May 2013, Mrs Muller and Mr Muller gave the applicant a mortgage over the Blackwater Property which was registered on or about 27 May 2013 and numbered 715106078 (Blackwater Property Mortgage). 14 On 16 May 2013, the applicant advanced a further amount of $52,001.18, pursuant to the Second Loan Agreement, by distributing the net settlement funds as directed by Mrs Muller and Mr Muller. 15 Also on 16 May 2013, the applicant advanced the amount of $78,136.91, pursuant to the Third Loan Agreement, by distributing the net settlement funds as directed by Mrs Muller and Mr Muller. Again, Ms Batra referred to an amount of $86,200.00 having been advanced, the difference being attributable to various fees charged to Mrs Muller and Mr Muller. 16 On 7 November 2013, the applicant advanced a further amount of $70,025.00, pursuant to the Third Loan Agreement, by distributing the net settlement funds as directed by Mrs Muller and Mr Muller. 17 On 13 December 2013, the applicant advanced a further amount of $98,035.00, pursuant to the Third Loan Agreement, by distributing the net settlement funds as directed by Mrs Muller and Mr Muller. 18 On 30 January 2014, the applicant advanced a further amount of $56,020.00, pursuant to the Third Loan Agreement, by distributing the net settlement funds as directed by Mrs Muller and Mr Muller. 19 On 21 March 2014, the applicant advanced a further amount of $55,840.00, pursuant to the Third Loan Agreement, by distributing the net settlement funds as directed by Mrs Muller and Mr Muller. 20 Mrs Muller and Mr Muller defaulted. Mrs Muller's bankruptcy commenced on 2 November 2018. Mr Muller's bankruptcy commenced on 7 November 2018. 21 On 13 December 2018, the trustee disclaimed any interest in the Glen Eden Property and the Blackwater Property. Those disclaimers were registered on 19 December 2018. 22 The applicant's kerbside valuation reports for the Glen Eden Property and Blackwater Property as at 5 November 2018 show that as at that date the Glen Eden Property was appraised at between $266,527 and $317,974 and the Blackwater Property was appraised at $130,000. 23 On 28 May 2019, the applicant sent Default Notices bearing that date in respect of Account Numbers 94-144-2070, 15-340-0857 and 15-340-0902 pursuant to s 88 of the National Credit Code and s 84 of the Property Law Act 1974 (Qld) to Mrs Muller and Mr Muller. 24 On 28 May 2019, the applicant sent a letter to the trustee enclosing copies of the Default Notices. 25 As at 28 May 2019 Mrs Muller and Mr Muller were indebted for the total sum of $902,402.66 under the First Loan Agreement, the Second Loan Agreement and the Third Loan Agreement. 26 The applicant also relied on an affidavit sworn by Ms Khoterra Shaw on 21 October 2019. Apart from correcting an omission in the affidavit of Ms Batra, Ms Shaw stated she had been advised by the applicant that as at 18 October 2019 the loan balances owing under the First Loan Agreement, Second Loan Agreement, Third Loan Agreement and Mortgages totalled $921,497.45, made up of: (a) $478,125.66 in respect of the First Loan Agreement and the Glen Eden Property Mortgage; (b) $87,136.28 in respect of the Second Loan Agreement and the Glen Eden Property Mortgage; and (c) $356,235.51 in respect of the Third Loan Agreement and the Glen Eden Property Mortgage and the Blackwater Property Mortgage. 27 Ms Shaw also deposed that she had been advised by the applicant that desktop valuations were carried out in respect of the Glen Eden Property and the Blackwater Property on 9 October 2019 and 11 October 2019 respectively. She exhibited to her affidavit copies of the desktop valuations for the Glen Eden Property and the Blackwater Property. The indicative market range for the Glen Eden Property was $260,000 to $280,000 and for the Blackwater Property was $180,000 to $200,000. 28 I accept Ms Shaw's evidence.

The applicant's submissions 29 The applicant submitted that the disclaimer by the trustee caused all title in the Glen Eden Property and the Blackwater Property to escheat to the Crown. The consequence of the escheatment was that the applicant did not presently have the right to enforce its securities against the State of Queensland. In any event, a fee simple interest remained subject to a charge even after disclaimer and escheat. 30 The applicant submitted it had been held that a mortgagee of Torrens land, such as the applicant, was a person "claiming an interest in" disclaimed property within the meaning of s 133(9) of the Bankruptcy Act. 31 In National Australia Bank Ltd v State of New South Wales [2009] FCA 1066; 182 FCR 52 at [29] Rares J said: Here, by force of s 133(2) the effect of the trustee's disclaimer on 29 October 2008 appears to have determined any ongoing charge on the land for subsequent liabilities that would otherwise have continued to accrue, such as future (unpaid) interest on the debt secured by the mortgage. I agree with Needham J's conclusion that a mortgagee of Torrens title land is entitled to be granted a vesting order: Re Tulloch 3 ACLR at 814. I am of opinion that the land should be vested under s 133(9) in the bank for the purpose for which it originally was mortgaged, namely to secure payment to the bank of all principal, interest and other moneys due to it notwithstanding the effect of the disclaimer. 32 The applicant submitted it would be entitled to a vesting order if the following was shown, citing the judgment of Perram J in National Australia Bank Ltd v State of New South Wales [2014] FCA 298 at [11]: (a) a disclaimer to relevant property has occurred within the meaning of s 133 of the Bankruptcy Act; (b) the applicant has an interest in the disclaimed property within the meaning of s 133(9) of the Bankruptcy Act; and (c) the applicant was entitled to the disclaimed property or that the Court considered it to be just and equitable that it should be so vested or delivered. 33 In National Australia Bank Ltd v State of New South Wales [2014] FCA 298 at [12] Perram J said: … It is also abundantly apparent that it would be just and equitable for the property to be vested in the Bank. It would be just and equitable because, unless the vesting order is made, the Bank will be deprived of the benefit of its security in circumstances where it has a secured debt in excess of $1 million. There are no further steps which the Bank can take apart from the present application, to make good its security position. 34 The applicant submitted that the evidence before the Court demonstrated that it satisfied the legal obligation brought about by s 133(9) of the Bankruptcy Act. Namely: (a) the Glen Eden Property and the Blackwater Property had been disclaimed; (b) it had an interest in each of the properties by virtue of its mortgages; and (c) the applicant was entitled to the disclaimed properties by virtue of it being the registered mortgagee, or, alternatively, it was just and equitable that it should be so vested. 35 The applicant submitted it was therefore a person claiming an interest in respect of disclaimed properties. Its interest as registered mortgagee endured, notwithstanding the disclaimer. It had a right of sale. That being so, the applicant submitted, the Court ought to be satisfied that it was appropriate to make the orders sought which will vest title to the Glen Eden Property and Blackwater Property in the applicant to enable it to realise the debt secured by the mortgages over the two properties. 36 As will next appear, I accept these submissions.

Consideration 37 The principles have recently been reviewed by Bromwich J in Westpac Banking Corporation v State of Queensland [2019] FCA 1433. I follow his Honour's approach. I note also the very recent decision of Derrington J in National Australia Bank Ltd v State of Queensland [2019] FCA 1780. 38 I find that the disclaimer by the trustee caused all title in the properties to escheat to the Crown, being relevantly the State of Queensland. As a consequence, the applicant does not presently have the right to enforce its securities against the State of Queensland. 39 As I have said, the State of Queensland has filed a submitting appearance, save as to costs. 40 As mortgagee of Torrens title land, the applicant is a person claiming an interest in disclaimed property within the meaning of s 133(9). The rights of mortgagees in the present circumstances continue to have sufficient existence to ground an application such as the present one: National Australia Bank Ltd v State of New South Wales [2014] FCA 298 at [8] per Perram J. 41 Applying what Rares J said as set out at [31] above and applying the summary by Perram J as set out at [32] above, and on the evidence which I have accepted, the applicant satisfies s 133(9) in that the properties have been disclaimed; the applicant has an interest in the properties by virtue of its mortgages; and it is entitled to the disclaimed properties by virtue of it being the registered mortgagee. Alternatively, I find that it is just and equitable that the disclaimed properties should be so vested. 42 The applicant is a person claiming an interest in the disclaimed properties because its interest endures notwithstanding the disclaimer, and it therefore has a right of sale: see Westpac Banking Corporation v State of Queensland [2019] FCA 1433 at [18] per Bromwich J.

Conclusion and orders 43 For these reasons I am satisfied that it is appropriate to make the orders sought. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.

Bankruptcy Act 1966(Cth)s 133(9)

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