Westpac Banking Corporation v State of New South Wales

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1181 of 2014

BETWEEN: WESTPAC BANKING CORPORATION ACN 007 457 141

OFFICIAL TRUSTEE IN BANKRUPTCY AS TRUSTEE FOR THE BANKRUPT ESTATE OF LISA YAACOUB

JUDGE: ROBERTSON J DATE: 12 DECEMBER 2014 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 This is an application, filed on 17 November 2014, for an order under s 133(9) of the Bankruptcy Act 1966 (Cth) for the vesting of property in the applicant, Westpac Banking Corporation (Westpac), subject to certain conditions. 2 The property is the land comprised in folio identifier 176/234436, being 54 Azalea Street, Greystanes in the State of New South Wales (the Property). 3 Lisa Yaacoub was registered as the proprietor of the Property by transfer registered on 18 March 2010. 4 On the same date, Westpac's mortgage was registered. The mortgage related to a loan of $403,000 under a loan agreement made on 29 October 2009 between Westpac and Lisa Yaacoub. 5 On or about 18 August 2011, Lisa Yaacoub defaulted on the loan and the mortgage by failing to pay instalments. On or about the same day, Westpac served a default notice on Lisa Yaacoub, that default notice also being a notice pursuant to s 57(2)(b) of the Real Property Act 1900 (NSW) and s 88 of the National Credit Code, being sch 1 to the National Consumer Credit Protection Act 2009 (Cth). 6 Lisa Yaacoub failed to comply with the default notice. 7 Between 18 August 2011 and 20 August 2012, Lisa Yaacoub defaulted further such that by 20 August 2012 the arrears were in the sum of $37,233.67. 8 On 21 May 2012, Lisa Yaacoub became bankrupt pursuant to a debtor's petition. As at that date, the balance of the loan was $427,026.94. 9 On or about 15 April 2013, the Official Trustee in Bankruptcy, the trustee of the estate of Lisa Yaacoub, disclaimed any right, title or interest in the Property pursuant to s 133 of the Bankruptcy Act. 10 As a result of the disclaimer, on 14 May 2013 the Registrar-General registered the State of New South Wales as the registered proprietor of the Property. The current registered proprietor is the State of New South Wales. 11 On or about 9 May 2014, Westpac took possession of the Property by reason of Lisa Yaacoub's default. 12 On or about 14 May 2014, Westpac served on Lisa Yaacoub a further default notice dated 5 May 2014. 13 On or about 5 July 2014, Westpac exchanged a contract for the sale of land for the sale of the Property. Westpac wishes to sell the Property. 14 A current search shows that there are no other interests in the Property. 15 By notice dated 9 December 2014, the State of New South Wales submitted to any order the Court may make in the proceedings, save as to costs. By email dated 10 December 2014, a Senior Solicitor for the Crown Solicitor stated to the solicitors for Westpac that the State of New South Wales would only want to be heard on costs if an application for costs was made against it. 16 The Official Trustee in Bankruptcy, as trustee for the bankrupt estate of Lisa Yaacoub, was served with the proceedings on 18 November 2014. The Official Trustee has not entered an appearance in the proceedings. There is, however, before the Court a letter dated 20 November 2014 from the Official Trustee: stating that the Official Trustee has disclaimed any interest in the Property; stating that it makes no claim in any surplus funds from the sale of the Property; and confirming that it did not intend to participate in the proceedings. It had no objections to the orders sought by Westpac, save as to costs against the Official Trustee. 17 Lisa Yaacoub is the bankrupt whose estate is being administered by the Official Trustee. Since her rights in the Property vested in the Official Trustee pursuant to s 58 of the Bankruptcy Act, she should be removed as a party to the proceedings under r 9.08 of the Federal Court Rules 2011 (Cth). 18 The relevant provision of the Bankruptcy Act is as follows: 133 Disclaimer of onerous property … (9) 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. … 19 In these circumstances, Westpac submits that the effect of the disclaimer was that the Property escheated to the State of New South Wales, with the immediate consequence that Westpac does not have the rights it would have against Lisa Yaacoub but for the bankruptcy and it has no right to enforce the mortgage against the State of New South Wales. The effect of the disclaimer, Westpac submits, is to preclude it from taking action to realise the Property: see National Australia Bank Ltd v State of New South Wales [2014] FCA 298 at [9] per Perram J. 20 Following National Australia Bank Ltd v State of New South Wales at [11], on this application Westpac will be entitled to a vesting order if it is shown: (a) that a disclaimer to relevant property has occurred within the meaning of s 133; (b) that the applicant has an interest in the disclaimed property within the meaning of s 133(9); and (c) that the applicant is entitled to the disclaimed property or that the Court considers it to be just and equitable that the property should be so vested. 21 As to these matters: (a) a disclaimer occurred on 15 April 2013; (b) Westpac as registered mortgagee has an interest in the disclaimed property within the meaning of s 133(9); and (c) it is just and equitable that the Property be vested in Westpac because unless the vesting order is made Westpac will be deprived of the benefit of the mortgage where it has a secured debt in excess of $400,000. 22 Reference was made to Residential Housing Corp v Esber [2011] NSWCA 25; (2011) 80 NSWLR 69 and to the discussion at [109]-[119] of payment into court. On this application it is not necessary or desirable for me to express a view in the abstract in relation to events which have not arisen and may not arise. 23 There being no other interests in the property I make the following orders:

1. Pursuant to r 9.08 of the Federal Court Rules 2011 (Cth), Lisa Yaacoub cease to be a party to the proceedings.
2. Pursuant to s 133(9) of the Bankruptcy Act 1966 (Cth), the interest held by the State of New South Wales, formerly held by Lisa Yaacoub, in the land comprised in Certificate of Title Folio Identifier 176/234436 (the Property) vests in Westpac Banking Corporation, subject to the conditions referred to in order 3 below.
3. Upon the vesting of the Property in Westpac Banking Corporation pursuant to order 2: (a) Westpac Banking Corporation may only deal with the Property pursuant to its powers as mortgagee under the Real Property Act 1900 (NSW) and under its registered mortgage affecting the Property as if there had been no disclaimer of the Property by the Official Trustee in Bankruptcy as trustee for the bankrupt estate of Lisa Yaacoub, except that Westpac Banking Corporation is not required to serve a default notice under s 88 of the National Credit Code, being sch 1 to the National Consumer Credit Protection Act 2009 (Cth) and is not required to serve a notice of default under s 57(2)(b) of the Real Property Act; (b) after the sale of the Property, Westpac Banking Corporation must deal with the proceeds of sale in accordance with s 58(3) of the Real Property Act; (c) after the sale of the Property, Westpac Banking Corporation must deliver to the Official Trustee in Bankruptcy as trustee for the bankrupt estate of Lisa Yaacoub accounts of how the proceeds of sale have been dealt with.
4. Westpac Banking Corporation's costs of and incidental to these proceedings are to be treated as enforcement expenses under its mortgage over the Property.
5. In respect of the costs of this application, there be no costs order against either the first respondent or the second respondent. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.