The Trial
6 On 2 April 2019, the matter was listed for hearing in September 2019. For reasons I need not canvass in this judgment, on 6 September 2019, I ordered that this matter be fixed for trial at 9.30 am on 9 October 2019. That order was served upon the first and second respondents, together with a covering letter explaining to each of them of the need to attend court for that hearing. The letter was written in both English and Vietnamese. The respondents were not at this time represented.
7 At trial, Ms Gobbo of Counsel appeared for the applicant. Neither the first nor second respondent appeared. Ms Gobbo assured the Court that her written submissions had been previously couriered to the Property. The failure of the respondents to make any appearance supports the conclusion I have reached. It would have been a very simple matter for them to have appeared with the alleged brother to prove their contention.
8 An affidavit sworn on 8 October 2019 by Mr Florian Ammer was read by the applicant. It confirmed that the first respondent remains indebted to an unsecured creditor (in the sum of $62,688) and that the applicant holds no funds for or on behalf of the bankrupt estate. The market value of the Property remains at about $850,000. The applicant has incurred remuneration costs of approximately $56,620 and legal costs of approximately $40,000.
9 It follows that I am satisfied that the first respondent is the joint owner of the Property and that his interest has vested in the applicant as trustee pursuant to s 58(1) of the Bankruptcy Act 1966 (Cth) (the "Act"). I am also satisfied that the Court can make orders against the first respondent for vacant possession; that the applicant should be appointed as trustee for the sale of the Property; and that the other consequential orders set out below should be made: ss 30, 77 and 129 of the Act.
10 However, different considerations arise in relation to the second respondent. She is not a bankrupt. I was referred to the decision of Tracey J in Pekar v Holden (Trustee) [2017] FCA 596 where a similar issue arose. At [42]-[47], his Honour said:
42. In Coshott, the Full Court held that, in a case in which an undivided one half interest in a property had vested in the bankrupt's trustee pursuant to s 58 of the Act and the remaining half interest was held by a non-bankrupt (as a tenant in common with the trustee), an order for sale of the property could be made under State legislation (picked up through s 79 of the Judiciary Act 1903 (Cth)): see at 476 [116]. The Full Court also held that the order for sale comprised part of the "matter" before the Court for the purposes of Chapter III of the Constitution, namely the question of ownership of the bankrupt's interest in the property: at 476-477 [119]-[122]. The State legislation there considered was s 66G of the Conveyancing Act 1919 (NSW). That section provided that, where property was held in co-ownership, the Supreme Court could, on application by one or more of the co-owners, appoint trustees of the property and vest it in them to be held by them on trust for sale or for partition. Co-ownership was defined to mean "ownership whether at law or in equity in possession by two or more persons as joint tenants and tenants in common": s 66F(1). The Full Court held that this Court could order that the trustee was empowered to sell the property pursuant to these provisions.
43. Similarly, the sale of the property presently under consideration, and the distribution of the proceeds, could be effected pursuant to various provisions of Part IV of the Property Law Act 1958 (Vic) ("the Property Law Act"). Under s 225, a co-owner of land may apply to the Victorian Civil and Administrative Tribunal ("VCAT") for orders including the sale of land and the division of the proceeds among co-owners. Section 228(1) provides that the VCAT may make any order it thinks fit in order to ensure that a just and fair sale or division of land occurs. Among the orders which it can make, are orders that the land be sold and the proceeds of the sale be divided among the co-owners (s 228(2)(a)). As was the case with s 66G of the Conveyancing Act 1919 (NSW), "co-owner" in the relevant part of the Property Law Act means "a person who has an interest in land or goods with one or more other persons as - (a) joint tenants; or (b) tenants in common": s 222.
44. The reference to "an interest" in s 222 appears sufficiently broad to encompass equitable as well as legal interests: cf Krsteski v Jovanoski [2011] VSC 166 at [42]-[44] (Macaulay J). Thus, it appears that a trustee in bankruptcy is able to apply for an order under Part IV of the Property Law Act at the point that the bankrupt's property vests in equity, even if legal title has not yet vested because registration in accordance with s 51 of the Transfer of Land Act 1958 (Vic) is still outstanding. As to the nature of the trustee's equitable interest, this Court has held that, where a transfer which caused a wife to become the sole proprietor of a property (where previously she held her interest as a joint tenant with her husband) was avoided under s 120, upon the husband becoming a bankrupt, the trustee became entitled in equity to an interest in the property as a tenant in common in equal shares with the wife: see Re Lucera; Ex parte Official Trustee in Bankruptcy v Lucera [1994] FCA 1380; (1994) 53 FCR 329 at 337; [1994] FCA 715 at pp 13-14 (Olney J). Other authority supports the view that, where such a transfer is void pursuant to s 120, from the date of the bankruptcy, the wife as owner will hold half of the interest in the property on trust for the trustee in bankruptcy: see Anscor Pty Ltd v Clout [2004] FCAFC 71; (2004) 135 FCR 469 at 482; [2004] FCAFC 71 at [43(h)] (Lindgren J).
45. By s 231, the VCAT is empowered to appoint trustees for the purposes of the sale of land. By s 232, the VCAT may order that land be sold by private sale or at auction (s 232(a)), that an independent valuation of the land be undertaken (s 232(e)) and that the proceeds of the sale be divided (s 232(h)). A number of other potentially relevant orders are provided for in that section. They include orders that fair market and reserve prices be fixed (ss 232(c) and (d)), that the sale be completed within a specified time (s 232(f)) and that the costs of the sale be met by one or more of the co-owners or from the proceeds of the sale (s 232(g)).
46. A State court has jurisdiction to hear an application under Part IV of the Property Law Act in proceedings commenced in such a court if the issue of co-ownership of land arises in the course of that proceeding (s 234C(4)(a)), or if, in the court's opinion, special circumstances exist which justify that court hearing the application (s 234C(4)(b)). "Special circumstances" is defined to mean circumstances in which the matter that is the subject of an application is complex (s 234C(5)(a)) or where that matter, or a substantial part of that matter, does not fall within the jurisdiction of the VCAT (s 234(5)(b)). Section 234D of the Property Law Act provides that, in any proceeding in relation to the co-ownership of land, a State court may make any order which the VCAT could make under Part IV of the Act (in which ss 228, 231 and 232 appear).
47. Sections 234C(4) and 234D and the associated provisions in Part IV, when picked up pursuant to s 79 of the Judiciary Act 1903 (Cth), empower this Court to make orders which the VCAT is empowered to make under the Property Law Act. I am also satisfied that such orders form part of the "matter" before this Court, namely the question of the ownership of the interest in the property which Mr Pekar transferred to Mrs Pekar. Any order for sale is dependent upon it being established that the transfer is void against the trustee and that Mr Pekar's interest vests in the trustee: cf Coshott at 476-477 [119]-[122].
11 I respectfully agree with and adopt Tracey J's reasons. I also note that, in late 2015 and in early 2016, the applicant invited the second respondent to: (i) make an offer based on the market value of the Property to purchase the bankrupt estate's share of the Property; or (ii) join him in a sale of the Property. The second respondent did not take up that invitation or propose an alternative course to deal with the Property. It follows that orders can be made against the second respondent for the vacant possession of the Property and its sale.
12 The orders sought by the applicant as trustee and which I will make are as follows:
- There be a declaration that the First Respondent was, at the date of his bankruptcy, a joint registered and beneficial owner in fee simple of a one half share in the property situated at 23 The Avenue, Sunshine West, Victoria, more particularly described in certificate of title volume 10153 folio 183 (Property), which rights vested in the Applicant upon the bankruptcy of the First Respondent.
- The First Respondent and the Second Respondent give vacant possession of the Property to the Applicant within 30 days of this order.
- The Trustee be appointed trustee for the sale of the Property, which is to be sold for such price and in such manner and on such terms as the Trustee may in his absolute discretion determine.
- The Trustee be appointed as attorney for the Second Respondent for the purposes of effecting the sale of the Property in accordance with the orders including (without limiting the generality of the foregoing) the contract of sale, vendor's statement, appointment of selling agent and any declaration under the Duties Act 2000 (Vic) and is granted a power of attorney for that purpose.
- The Registrar of Titles be directed to accept the orders as evidence of the Trustee's appointment as attorney.
- The Trustee apply the proceeds of the sale of the Property in the following manner:
(a) first, in payment of all costs, charges and expenses in selling the Property;
(b) second, in payment of any mortgage or encumbrance over or in respect of the title to the Property together with any outstanding rates, taxes, charges or other similar outgoings affecting the Property;
(c) third, one half of the net balance to the Trustee; and
(d) fourth, and subject to Order (9), the remainder of the net balance to the Second Respondent.
- The Trustee be empowered to execute a "T1" Transfer of Land on behalf of the Second Respondent.
- The Registrar of Titles be directed to accept the proper execution by the Applicant of the T1 transfer of land on behalf of the Second Respondent as being sufficiently executed by the Second Respondent.
- The Applicant's costs of the application are proper costs of the bankruptcy of the First Respondent.
I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Steward.