Westpac Banking Corporation v State of Queensland

Federal Court of Australia|2019-08-26|Before: Bromwich J

Pursuant to section 133(9) of the Bankruptcy Act 1966 (Cth), the estate in fee simple in the property described as Lot 79 on Crown Plan C44 in the Local Government of Toowoomba, being all of the land contained in Title Reference 15481165 and situated at 25 Creek Street, Cambooya in the State of Queensland (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 710997782 (Mortgage).
On the vesting of the Property in the applicant in accordance with order 1, the applicant: (a) may, but is not bound to, deal with the 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 Mortgage, including exercising the right to sell the estate in fee simple of the Property in exercise of its power of sale and all its other rights under the Mortgage; (b) for the purpose of selling the estate in fee simple of the 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 the occupant(s) (if any) of the Property; (c) is entitled to calculate the entirety of the debt secured and owing (Debt) pursuant to the Mortgage as including all monies that would have been secured by the Mortgage had the Second Respondents not disclaimed the 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 Property as if it were money secured by the Mortgage (including all reasonable costs of this application and all costs properly incurred in selling, and incidental to the sale of, the Property); (d) is to apply the proceeds of any sale of the Property as follows: (i) first, in payment of any statutory charges affecting the 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 Mortgage; and (iv) fourthly, in payment of any subsequent mortgages or caveats (if any); (e) must, after any sale of the Property, and within a reasonable time, provide an account of its payments and receipts to: (i) the second respondents; (ii) Chad Bryan Lawrence; and (iii) The Sydney Registry of the Federal Court of Australia; (f) is to pay into the Court the surplus, if any, arising from any sale of the Property.

BROMWICH J: 1 The applicant in this matter is Westpac Banking Corporation. The first respondent is the State of Queensland, and the remaining respondents are the trustees in bankruptcy of the property of Mr Chad Bryan Lawrence. Westpac entered into a loan agreement for $246,000 with Mr Lawrence, now an undischarged bankrupt, on 3 September 2007. Under the loan agreement, Westpac extended credit to Mr Lawrence, and he gave a registered mortgage to Westpac numbered 710997782 over the property situated at 25 Creek Street, Cambooya in the State of Queensland (described as Lot 79 on Crown Plan C44 in the Local Government of Toowoomba, with the Title Reference 15481165). On 10 September 2007, $246,000 was advanced by Westpac to Mr Lawrence. 2 On 23 March 2016, Mr Lawrence was declared bankrupt, and the trustees were appointed over his estate. On 31 August 2016, the trustees disclaimed any interest in the property. Westpac, in its capacity as first registered mortgagee, seeks orders under s 133(9) of the Bankruptcy Act 1966 (Cth) for the property to be vested in it, so that it can exercise a power of sale. None of the respondents participated in the final hearing, filing submitting notices in the proceeding save as to costs. I note that Westpac does not seek its costs from any of the respondents. The reasons for that will become apparent shortly. 3 Westpac relies on the following affidavits, all of which were read at the hearing: (1) an affidavit of Amanda Payne sworn 30 May 2019; (2) affidavits of service of Paul Buxton sworn 4 July 2019; and (3) an affidavit of Lauren Hatton sworn 31 July 2019. 4 The following chronology of key events is drawn from a table helpfully prepared by Westpac's lawyers from the above affidavit evidence: Date Event 3.9.2007 Westpac and Mr Lawrence enter into loan agreement for $246,000 3.9.2007 Mr Lawrence gives Westpac a mortgage over the Property (710997782) 10.9.2007 $246,000 advanced per Loan Agreement 23.3.2016 Bankruptcy of Mr Lawrence 26.3.2016 Bankruptcy trustees appointed (Michael Griffin and Rajendra Khatri) 11.4.2016 Registered caveat (717179877) 31.8.2016 Trustees disclaim interest in Property 6.9.2016 Disclaimer is registered 25.5.2018 Default notice (and preceding notices from November 2010) 29.5.2018 Letter from Westpac to Trustees enclosing copy of Default Notice 10.1.2019 Property valuation 12.04.2019 Search of NPIS [National Personal Insolvency Index] regarding Mr Lawrence 12.4.2019 Title search of Property 9.5.2019 Mr Lawrence indebted for the sum of $228,586.24 30.05.2019 Affidavit of Amanda Payne 14.6.2019 Application filed 4.7.2019 Affidavits of Service (Paul Buxton) 30.7.2019 Property valuation 31.7.2019 Affidavit of Lauren Hatton 2.8.2019 Mr Lawrence indebted for the sum of $238,613.03

5 On 6 September 2016, the disclaimer was registered. 6 On 25 May 2018, Westpac issued a default notice. 7 Mr Lawrence continues to be in default. 8 As at 2 August 2019, Mr Lawrence was indebted to Westpac in the sum of approximately $238,613.03, with notional arrears outstanding in the sum of $30,688.52. That will have increased somewhat since then, but not to any great degree. 9 Subsection 133(9) of the Bankruptcy Act provides: 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. 10 The disclaimer by the trustees caused all title in the property to escheat to the Crown: Re Tulloch Ltd (In Liquidation) (1978) 3 ACLR 808; National Australia Bank Ltd v Leroy & Ors, in the matter of Woo & Ors [2003] FCA 862 per Madgwick J at [5]. The consequence of the escheatment is that Westpac does not presently have the right to enforce its security against the State of Queensland. 11 The State of Queensland has been served by a process server on behalf of Westpac and, as noted above, has filed a submitting appearance save as to costs. 12 A fee simple interest remains subject to a charge even after disclaimer and escheat: Commonwealth Bank of Australia v State of Queensland, in the matter of Ginn [2016] FCA 1337 per Edelman J at [16]; Rams Mortgage Corporation Ltd v Skipworth (No 2) [2007] WASC 75; 210 FLR 11; National Australia Bank Limited v State of New South Wales [2014] FCA 298 per Perram J at [8]. 13 It has been held in several cases that a mortgagee of Torrens land, such as Westpac in respect of the facts in this case, is a person "claiming an interest in" disclaimed property within the meaning of s 133(9) of the Bankruptcy Act: Re Hopgood; ex parte Coveney (1957) 18 ABC 133 at 139-41; Re Tulloch at 814; Leroy at [7]. 14 In National Australia Bank v New South Wales [2009] FCA 1066; 182 FCR 52, Rares J made the following statement at [29]: '[b]y force of s 133(2) the effect of the trustee's disclaimer ... 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.' 15 In applications such as the present, an applicant for a vesting order will be so entitled if the following is shown (as summarised by Perram J in National Australia Bank Limited [2014] FCA 298 at [11]): (1) a disclaimer to relevant property has occurred within the meaning of s 133 of the Bankruptcy Act; (2) the applicant has an interest in the disclaimed property within the meaning of s 133(9) of the Bankruptcy Act; and (3) the applicant is entitled to the disclaimed property or the Court considers it to be just and equitable that it should be so vested or delivered. 16 In the same case, Perram J stated at [12]: 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 ... There are no further steps which the Bank can take apart from the present application, to make good its security position. 17 The evidence before the Court demonstrates that Westpac satisfies the legal obligation brought about by s 133(9) of the Bankruptcy Act. Namely: (1) the property has been disclaimed; (2) Westpac has an interest in the property by virtue of its mortgage over that property; and (3) Westpac is entitled to the disclaimed property by virtue of it being the registered mortgagee, or, alternatively, if needed, it is just and equitable that it should be so vested. 18 Westpac is therefore a person claiming an interest in respect of disclaimed property. Its interest as registered mortgagee endures, notwithstanding the disclaimer: see Australia and New Zealand Banking Group Limited v State of Queensland [2016] FCA 1566 per Logan J at [17]; see also National Australia Bank Limited [2014] FCA 298 per Perram J at [10], and the authorities that his Honour cites. Westpac therefore has a right of sale. 19 In light of all of the above, the court is satisfied that it is appropriate to make the orders sought, with some slight modification. The effect of those orders will vest the property in Westpac to enable it to realise the debt secured by the mortgage over the property and account for any monies left over after that sale process has been completed. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bromwich.

Land Title Act 1944(Qld)

(Qld), the Property Law Act 1974(Qld)

Bankruptcy Act 1966(Cth)s 133(9)

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