Westpac Banking Corporation v Nolan

The law

1. UCPR 14.28 reads: "14.28 Circumstances in which court may strike out pleadings (1) The court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading: (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or (b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or (c) is otherwise an abuse of the process of the court. (2) The court may receive evidence on the hearing of an application for an order under subrule (1)."
2. UCPR 16.4 reads: "16.4 Default judgment on claim for possession of land (1) Subject to rule 36.8, if the plaintiff's claim against a defendant in default is for possession of land only, judgment may be given for the plaintiff for possession of land, as against the defendant, and for costs. (2) … (3) The relevant affidavit in support: (a) must identify any persons (other than parties to the proceedings) who were in occupation of the whole or any part of the land: (i) as at the time the originating process was filed … (ii) … and, if any such person was in occupation of the land pursuant to a right of occupation under a residential tenancy agreement within the meaning of the Residential Tenancies Act 1987, must contain a statement to that effect, and (b) in relation to each such person: (i) must state that the person's occupation of the land is not to be disturbed, or (ii) must state that the person is no longer in occupation of any part of the land, or (iii) must state that the person has been served with a notice pursuant to rule 6.8 and that the time allowed for the person to apply to the court to be joined as a defendant has now passed, as the case requires, and (c) if the claim for possession of the land arises from a default in the payment of money, must give particulars of the default, and (d) must state the source of the deponent's knowledge of the matters stated in the affidavit concerning the occupation of the land and any default in the payment of money referred to in paragraph (c), and (e) …"

The bankruptcy

1. In 2015, a creditor of Ms Nolan, Holcim (Australia) Pty Ltd, filed a creditor's petition seeking a sequestration order in respect of Ms Nolan in the Federal Circuit Court.
2. On 2 March 2016, the Federal Circuit Court granted that order and Mr Woodgate was appointed as trustee ("the trustee") of Ms Nolan's bankrupt estate.
3. Under s 58(1) of the Bankruptcy Act 1966 (Cth), the property of Ms Nolan (including the property and defensive rights and claims against Westpac) vested in the trustee.
4. By letter dated 3 March 2016, the trustee notified Westpac of his appointment. Westpac informed the trustee of the existence of these proceedings and provided him with information in respect of it, including copies of all of the pleadings and the affidavits served in the action by both parties.
5. By letter dated 11 April 2016, the trustee advised Westpac that pursuant to s 60(2) of the Bankruptcy Act he did not propose to prosecute Ms Nolan's cross claim nor her defence to Westpac's amended statement of claim.

Ms Nolan's notice of motion

1. By notice of motion filed 19 April 2016, the defendant seeks a declaration that Catherine Nolan, despite a sequestration order under the Bankruptcy Act having been made against her estate by the Federal Circuit Court on 2 March 2016, continues to have in these proceedings a right to appear and standing to defend the plaintiff's claims against her; and, in the alternative, an order granting Catherine Nolan leave to continue to be heard and/or appear in these proceedings.
2. At the outset of this hearing before me, counsel for Ms Nolan conceded that Ms Nolan does not have standing as of right. I heard oral submissions as to why leave should be granted for Ms Nolan to continue to be heard and/or appear in these proceedings. Briefly, the reasons were firstly, that on a legal analysis of the loan and security documents, Westpac is not a secured creditor; secondly, that Ms Nolan has a bona fide defence and cross claim that should be permitted to go to trial; and finally, it is the residential home of Mr and Ms Nolan.
3. Westpac submitted that Ms Nolan does not have standing or a right to appear on the motion or otherwise pursue the defence or cross claim. Westpac submitted that this is because the property and any rights in question are not hers to deal with as they are the property of the bankrupt estate and it is for the trustee to decide how they, and claims in respect of them, are to be addressed: Bankruptcy Act s 58; Cummings v Claremont Petroleum [1996] HCA 19; 185 CLR 124; NAB v Strik [2009] NSWSC 184; NAB v Darroch [2010] NSWSC 1202. The trustee has now elected not to pursue or defend any claims in relation to the property.
4. Westpac also says that the order that Ms Nolan seeks does not accord with established principles governing these circumstances for the following reasons: (a) the property, Ms Nolan's rights under and in respect of the relevant loan agreements and security documents, and any cause of action that she has against the defendant by way of cross claim, are all property of Ms Nolan which has now vested in the trustee: s 58(1) of the Bankruptcy Act; (b) upon Ms Nolan's bankruptcy, her action by way of cross claim was automatically stayed until the trustee made an election to prosecute or discontinue the action: s 60(2) of the Bankruptcy Act; (c) with the property having vested in the trustee, it was for the trustee, not Ms Nolan to decide what to do with that property; and (d) the trustee has, in fact, decided that Westpac's claim is not to be defended, and that the cross claim is to be discontinued. The bankrupt estate is being administered on that basis.
5. It is well settled that, under the Bankruptcy Act, the bankrupt (who has been divested of her property) has: (a) no interest in a proceeding brought for possession of the property; (b) no standing to be heard in defence of a secured creditor's claim to possession of the property; and (c) no right to bring or prosecute proceedings to protect, enhance or add to the value of the property of which the bankrupt has been divested: see National Australia Bank v Strik at [9]; National Australia Bank Ltd v Darroch at [31]; Farrow Mortgage Services Pty Ltd v Winfield (1992) 2 Qd R 282 at 285; Bendigo Bank Ltd v Demaria [2001] VSC 218 at [18]; Cummings v Claremont Petroleum NL at [12]-[13].
6. The starting point is Bendigo Bank Ltd v Demaria, where McDonald J stated: "[18] Section 58(1)(a) and (2) of the Bankruptcy Act 1966 (Cth) provides: '(1) Subject to this Act, where a debtor becomes bankrupt; (a) The property of the bankrupt, not being after-acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of s.156A, in that registered trustee; and (2) Where a law of the Commonwealth or a State or Territory of the Commonwealth requires the transmission of property to be registered and enables the trustee of the estate of a bankrupt to be registered as the owner of any such property that is part of the property of the bankrupt, that property notwithstanding that it vests in equity in the trustee by virtue of this section, does not vest in law until the requirements of that law have been complied with.'"
7. In National Australia Bank v Strik, Johnson J stated: "[9] I am satisfied that the Defendant has no more than a bare legal interest in the Wollongong property which he holds for the benefit of the Official Trustee, and that he has no interest in the proceedings brought against him for possession of the property and has no standing to be heard in defence of the Plaintiff's claim: Farrow Mortgage Services Pty Ltd v Winfield (1992) 2 QdR 282 at 285; Bendigo Bank Ltd v Demaria [2001] VSC 218 at [18]. Mr White has drawn the Court's attention, appropriately, to the decision of Dodds-Streeton J of the Victorian Supreme Court in Re-Engine Pty Ltd v Fergusson (2007) 209 FLR 1 at 9-12 [50]-[68], where reference was made to a number of decisions, including Farrow Mortgage Services Pty Ltd v Winfield and Bendigo Bank Ltd v Demaria. Dodds-Streeton J observed at 12 [67]-[68] that, although the authorities indicate that a bankrupt does not have locus standi or an entitlement to be heard, the Court has a discretion to permit a person to give evidence in answer to allegations of personal misconduct and that, in the unusual circumstances of that case, it would promote the due administration of justice to permit the person to be heard. Nothing said by her Honour undermines the principle concerning standing expressed in Farrow Mortgage Services Pty Ltd v Winfield and Bendigo Bank Ltd v Demaria. [10] The appropriate conclusion is that the Defendant has no standing to appear and make submissions and to tender evidence on the application. The Official Trustee has made clear its view that it does not wish to be heard and that the orders to be made are a matter for the Court."
8. In National Bank Limited v Darroch at [7], Harrison J adopted Johnson J's reasoning in Strik.
9. Ms Nolan has become divested by reason of her bankruptcy of both her interest in the property and the liability for her provable debts. As a bankrupt she has no right to bring or to prosecute proceedings to protect, enhance or add to the value of the property of which she has been divested: Cummings v Claremont Petroleum NL at 135-6. Ms Nolan has no standing to appear or to make submissions or to tender evidence on the plaintiff's application. The Official Trustee has made it clear that he does not wish to be heard.
10. Both legal representatives were unable to locate any authority where leave had been granted for possession cases where the defendant was bankrupt. This is not surprising. It is rare for leave to be granted to a bankrupt to appear. One circumstance that has been identified as a possible basis upon which leave maybe granted involves allegations of serious personal misconduct on the part of the bankrupt. Courts have considered that leave to appear may be granted in such a case so as to enable the bankrupt individual to respond directly to those allegations: see Strik at [9] and Re-Engine Pty Ltd (in liq) v Fergusson [2007] VSC 57.
11. Westpac does not allege that Ms Nolan engaged in any species of deliberate misconduct such that there is a risk that this Court would publish a judgment in which findings of that kind were made against her.
12. In these circumstances, it is my view that leave should not be granted to Ms Nolan to appear, either on Westpac's motion and to prosecute her defence and cross claim.
13. So far as the relief sought pursuant to UCPR 14.28 is concerned, it is noted that the plaintiff does not contend that Ms Nolan's defence and cross claim are untenable. However, as stated in Durroch, the continued existence of a defence that operates as an impediment to the entry of judgment for possession in favour of Westpac, where neither Ms Nolan nor the Official Trustee on her behalf is respectively able or willing to promote it, is in a different category and has a clear tendency to cause prejudice, embarrassment or delay in the proceedings and is an abuse of the process of the Court. It should be struck out pursuant to UCPR 14.28. If it were otherwise, the defence would continue as a clog preventing Westpac from disposing of the proceedings. It is also my view that Ms Nolan's cross claim that seeks relief in relation to the mortgage over the property where she has no interest in that property will also cause prejudice, embarrassment or delay and is an abuse of process of the Court and should also be struck out.
14. In these circumstances, I dismiss the defence and cross claim pursuant to UCPR 14.28(1)(b) and (c).

Default judgment

1. So far as default judgment is concerned, I have read the affidavits of Naomi Greer, Renee Ashton, Karena Milios, Guy Charles Howes and Montgomery Loughlin. I am satisfied that Westpac has satisfied the requirements of UCPR 16.4 and is entitled to possession of the property. I will enter judgment for possession. Costs are reserved.

The Court orders that: (1) Ms Nolan's notice of motion filed 19 April 2016 is dismissed. (2) The defence and cross claim are struck out.

Judgment It is adjudged that the plaintiff be granted possession of the property described in paragraph 1 of the amended statement of claim.

The Court further orders that: (3) Costs are reserved.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 June 2016