Draper v Official Receiver
[2004] FMCA 423
•22 July 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DRAPER & ANOR v OFFICIAL RECEIVER & ANOR | [2004] FMCA 423 |
| BANKRUPTCY – Summary dismissal of applications. |
Racial Discrimination Act 1975
Disability Discrimination Act 1992
Federal Magistrates Act 1999
Federal Magistrates Court Rules 2001
Bankruptcy Act 1966
Goode; Ex-parte Mount (1974) 4 ALR 579
Sistrom v Urh (1992) 117ALR 528
Rana v University of South Australia [2004] FCA 559
Wren v Mahony (1972) 126 CLR 212
O’Brien v Sheahan [2002] FCA 1292
Commonwealth v Verwayen (1990) 170 CLR 394
Bigg v Suzi (1998) FLC92-799
| Applicants: | KEITH LAWRENCE DRAPER and BARBARA OLIVE DRAPER |
| Respondents: | PATRICIA TRAGAUER OFFICIAL RECEIVER FOR THE BANKRUPT ESTATE OF KEITH LAWRENCE DRAPER and BRUCE JAMES CARTER AS TRUSTEE OF THE BANKRUPT ESTATE OF KEITH LAWRENCE DRAPER |
| File No: | AZ 260 of 2003 |
| Delivered on: | 22 July 2004 |
| Delivered at: | Adelaide |
| Hearing date: | 7 June 2004 |
| Judgment of: | Lindsay FM |
REPRESENTATION
| Counsel for the Applicants: | Self-represented |
| Counsel for the Respondents: | Mr G. Gretsas |
| Solicitors for the Respondents: | Gretsas Chrzaszcz |
ORDERS
That pursuant to Rule 13.10 the applications set forth in paragraphs 1-5 inclusive, 6-8 inclusive, 10, 11 and 13 of the amended application be and are hereby dismissed.
That paragraphs 1-13 inclusive of the amended application filed on behalf of the applicants on 9th March 2004 be dismissed as disclosing no reasonable cause of action pursuant to provisions of Rule 13.10 of the Federal Magistrates Court Rules.
That the applicants be given leave to further amend their application within 14 days of the date hereof seeking any alternative relief as they may be advised.
FEDERAL MAGISTRATES |
AZ 260 of 2003
| KEITH LAWRENCE DRAPER and BARBARA OLIVE DRAPER |
Applicants
And
| PATRICIA TRAGAUER OFFICIAL RECEIVER FOR THE BANKRUPT ESTATE OF KEITH LAWRENCE DRAPER and BRUCE JAMES CARTER AS TRUSTEE OF THE BANKRUPT ESTATE OF KEITH LAWRENCE DRAPER |
Respondents
REASONS FOR JUDGMENT
This application commenced with an application filed by Mr Draper on the 20th November 2003. In that application he sought the following orders:
a)“The Trustee in Bankruptcy does not have the right of a vesting order on the property situated at Lot 202 Heaslip Road, McDonald Park; and
b)That the Trustee in Bankruptcy has illegally vested his interest on the property”.
On the 15th December 2003 Mead FM made an order requiring Mr Draper to file and serve an amended application detailing the subject matter of the application and the legislative basis of the Court’s jurisdiction to grant the relief sought. Mr Draper was also ordered to file an affidavit in support of his claim. The time for the filing of that amended application was extended on 23rd February 2004 and Mr Draper filed an amended application on 9th March 2004. An affidavit had been filed by him on 14th January 2004.
The Official Receiver was the first trustee of Mr Draper’s bankrupt estate.
The respondent Bruce James Carter was appointed the trustee of the bankrupt estate of the applicant on 18th August 2003.
On the 6th April 2004 the legal representative of the Official Receiver indicated an intention to make application to summarily dismiss the amended application, and that matter eventually came on before me for argument on 7th June 2004.
By that time both the applicant and each of the respondents had filed written submissions and lists of authorities.
Before turning to a consideration of the application for summary dismissal, the following relevant historical matters should be noted:
(1)A sequestration order in relation to Mr Draper’s estate was made on 12th July 1989;
(2)As at the date of that order he held an interest as joint tenant together with his wife in the property situated at Lot 202 Heaslip Road, McDonald Park, South Australia (hereinafter “McDonald Park”);
(3)On the 16th November 1989 the Official Trustee became registered on the title to McDonald Park as a joint registered proprietor of the property with Mrs Draper;
(4)Correspondence then ensued between the representatives of the Official Trustee and Mrs Draper in relation to the consequences of the Official Receiver becoming registered as joint registered proprietor with her;
(5)On 18th August 2003 (as we have noted) Mr Carter became Trustee (I note that the same person appears to have managed the file of both the office of the Official Trustee and that of Mr Carter);
(6)On 25th June 1989 Mr and Mrs Draper obtained a loan of $40,000 [FORTY THOUSAND DOLLARS] from the South Australian Public Service Savings and Loans Society and used those funds to purchase McDonald Park;
(7)As at the date of the sequestration order referred to above, the matrimonial home of Mr and Mrs Draper appears to have been a property at 5 George Street, Marleston, that property having subsequently been sold. Mr and Mrs Draper have been occupying the McDonald Park property for a period of time that is unclear but may be as long as 14 years or more.
Summary dismissal
In Rana v University of South Australia 2004 [FCA 559] Lander J in the Federal Court of Australia dealt with an Appeal from an order for summary dismissal made by a Federal Magistrate in proceedings under the Racial Discrimination Act 1975 and the Disability Discrimination Act 1992. He considered very carefully the provisions of the Federal Magistrates Act 1999 and the Federal Magistrates Court Rules 2001 (subsequently amended but not in any way material to a consideration of summary dismissal applications). His Honour emphasised the need for caution in consideration of summary dismissal applications pursuant to that Act and those Rules on account of the absence of the requirement of the filing of pleadings.
In this case I have had the benefit of Mr Draper’s amended application, his written submissions (some 8 pages in length) and his lengthy affidavits filed on the 9th March 2004 (a joint affidavit of he and his wife) and his affidavit of 14th January 2004 aforesaid.
The application for summary dismissal was brought pursuant to Rule 13.10 of the Federal Magistrates Court Rules. That rule makes provision for the stay or dismissal of any claim for relief if it appears to the Court that no reasonable cause of action is disclosed in relation to the proceeding or claim for relief. It also provides the power of summary dismissal to the Court where the proceedings are frivolous or vexatious or an abuse of process of the Court. Whilst the language of the relevant High Court Rules (Order 26 and Order 63) is not identical to the language of the rule applicable in this Court, the exercise carried out by Courts pursuant to such rules is essentially the same. The authorities relevant to the exercise of the power provided by the High Court Rules are referred to and discussed in the Full Court of the Family Court decision of Bigg v Suzi (1998) FLC 92-799 at 84,974 to 84,975.
An application for summary dismissal is not an application to challenge the factual matters alleged by the applicant to ground his claim. To succeed in an application for summary dismissal of this nature, the respondent must persuade the Court that even if all of the matters alleged by the applicant to be true are accepted at trial, still the claim must fail on account of it not disclosing any reasonable cause of action. It is not enough to find that the applicant’s case is a weak or even very weak claim. I must find that there is in substance no claim at all.
That is the basis upon which I will determine the application for summary dismissal in this case.
Consideration of these matters has not been assisted by the nature of the documentation that has been filed by Mr Draper. Many of the paragraphs of the affidavits referred to and of the summary of argument range over issues that are either wholly or substantially unrelated to the issues he seeks to agitate.
Nevertheless it is plain that the focus of Mr Draper’s agitation of issues in the Court is his desire to have the legal estate of the Trustee in Bankruptcy in McDonald Park extinguished. He has approached the agitation of this issue in a number of ways but the common thread has been his claim that the trustee has had and has no lawful power to deal with the property.
The amended application
It is in respect of the orders sought by him in his amended application that the summary dismissal is brought.
I deal then, with the orders sought by Mr Draper in this Amended Application.
Firstly it is said that paragraphs 1-5 of the final orders sought by the applicant are orders that are beyond the jurisdiction of the Court to make. Those orders sought are as follows:
(1)That the Official Receiver be made liable on the negligence and damages in dealing with the property situated at 5 George Street, Marleston, in South Australia Volume 3606 Folio 1 subject to a Mortgage No. 6402318 in favour of the National Australia Bank Limited and an order of the Federal Court No. 6676698 dated 27th January 1989 which was superseded by a later order inserted thereon the Title Deeds.
(2)That the Official Receiver is personally liable for a $40,000 loss for refusing an offer by the applicants to sell the property and making a counterclaim that he wanted 100% of the proceeds of the sale and thus not being able to get in the assets of the bankrupt to pay off the bankrupts debts.
(3)The Official Receiver is personally liable for a loss of $41,114.75 additional to the above (2 above) because it is alleged that he interfered and conspired with the National Bank of Australia in order that they could put a foreclosure on the property. Before the applicants could sell the property being the amount that was overstated in the Mortgage by the National Australia Bank.
(4)That the Official Receiver did not investigate the assets of the bankrupt concerning the property at 5 George Street, Marleston in South Australia in order to assess the extent of the assets of the Bankrupt in order to pay off the bankrupts debts and should be held personally liable for such negligence.
(5)That the Official Receiver was negligent in not safeguarding B.O. Draper’s share of the property at 5 George Street Marleston in South Australia and should be held personally liable for negligence.
Paragraph 1 seeks orders in relation to a property in which the bankrupt had an interest at some time prior to the sequestration order being made but which interest he transferred to his wife. That transfer was the subject of various proceedings in the Federal Court. These are events that took place some 15 years ago. In any event whatever the subject matter of the dispute, the cause of action is said to be one that makes the Official Receiver liable in negligence. The jurisdiction of this Court is conferred by Section 10 of the Federal Magistrates Act 1999. This application is brought in the exercise of the jurisdiction conferred by Section 27 of the Bankruptcy Act 1966. No Commonwealth legislation gives me the power to determine the cause of action described as negligence. Neither is it contended that my exercising such a jurisdiction is part of a single judiciable controversy relating to a matter that is within the jurisdiction of this Court.
Paragraph 2 of the orders sought again can only be interpreted as a suggestion that the Official Receiver be held liable for losses that are said to arise in relation to the sale of the George Street, Marleston property. The word “negligence” is not used but it is difficult to understand what else can be intended, and in any event it is not for the Court to speculate as to what the cause of action is.
Paragraph 3 is couched in similar terms save that there is a reference to the Official Receiver having conspired suggesting that in addition to a suit relating to negligence damages are sought for the tort of conspiracy. Again I cannot identify any source of my jurisdiction to entertain such a suit.
Paragraph 4 says in straight forward terms that the Official Receiver should be held personally liable for negligence in allegedly not investigating certain matters relating to the George Street, Marleston property.
Paragraph 5 is again expressly couched in terms of negligence.
No reasonable cause of action is disclosed in paragraphs 1-5.
Paragraphs 6-8 agitate matters in relation to the creditor who petitioned for the bankruptcy of Mr Draper, namely the Australian Society of Accountants.
Paragraph 6 contains an assertion that the Registrar should not have accepted the registration of the said petition for bankruptcy because the petitioning creditor was someone who held a secured debt. Paragraph 7 suggested the bankruptcy was “maliciously procured” by the petitioning creditor as they “procured” (I think that should have read “proceeded”) on a secured debt.
Paragraph 8 suggested the Official Receiver condoned the actions of the Australian Society of Accountants and should have refused to register the bankruptcy.
Taking these paragraphs together, it is clear to me that the matter sought to be agitated is that which has already been agitated by Mr Draper in proceedings number P 348 of 1989 in the Federal Court. Von Doussa J delivered a judgment in that matter on 12th July 1989. It was argued on behalf of Mr Draper in those proceedings that because the petitioning creditor had at an earlier time been granted a Mareva injunction by another Judge of the Federal Court, it converted the petitioning creditor from an unsecured creditor to a secured creditor. These matters were carefully considered by his Honour in his judgment and his conclusion was unambiguous. His Honour said at pages 4 and 5 of that judgment:
“In my view the Mareva injunction in the present instance operates in the same way as the caveat was to operate in Hall v Richards (supra). It provided a measure of restraint upon the free dealing with the property by the debtor but it vested no security interest in the creditor.
In my view the debtor’s submission at paragraph 3 of the petition is wrong, is misconceived and I reject that submission.”
I pause to note that the Australian Society of Accountants is not a party to these proceedings. No application is made by Mr Draper pursuant to the provisions of Rule 11 of the Federal Magistrates Court Rules or, if joinder as a party was considered to be inappropriate, pursuant to Rule 29.05 (5) to give the petitioning creditor the opportunity to be heard.
I am bound by the decision of von Doussa J referred to above in finding that the status of the petitioning creditor as having the benefit of an order in the nature of a Mareva injunction did not convert their debt into a secured debt.
That is sufficient in my view to dispose of paragraphs 6-8. No other basis for a suggestion that the bankruptcy was “maliciously procured” is given or suggested.
Paragraph 9 seeks an annulment of the bankruptcy. I will return to a more detailed of that part of the application hereunder.
Paragraph 10 seeks an order:
“That the Trustee in Bankruptcy should be held personally liable for condoning the illegal action on Lot 202 Heaslip Road, McDonald Park in South Australia.”
That is merely a re-statement of the orders sought in paragraphs 1-5 and will fail for the same reason.
Paragraph 11 seeks an order that Mr Draper’s bankrupt estate should be wound up. That is an application not known to the Bankruptcy Act and Mr Draper was unable to give any satisfactory explanation as to what it was he was seeking in that paragraph when he addressed me.
Paragraph 12 seeks the following order:
“That the Official Receiver nor did the Trustee in Bankruptcy ever have the right to a vesting order on the property situated at Lot 202 Heaslip Road McDonald Park in South Australia.”
That is a statement of fact not an application for an order per se, but I take Mr Draper to be seeking that some form of declaratory relief (whether pursuant to Section 30 of the Bankruptcy Act or otherwise) in relation to the suggestion that the vesting of his interest as joint tenant in the McDonald Park property said by the trustee to have occurred upon the making of the sequestration order did not in fact occur.
I will return to this matter in more detail hereunder.
Finally paragraph 13 seeks a declaration pursuant to Section 30 of the Bankruptcy Act that all of the orders sought in paragraphs 1-12 above be made.
I do not take that to be an application for a substantive order. Frankly it is difficult to understand what order is sought at all in that paragraph.
Section 30 of the Bankruptcy Act 1966 provides as follows:
General powers of Courts in bankruptcy
(1)The Court:
(a)has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court; and
(b)may make such orders (including declaratory orders and orders granting inunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter,
(2)The Court may direct such inquiries to be made and accounts to be taken for the purposes of any proceeding before the Court as the Court considers necessary and may, when directing an account to be taken, or subsequently, give special directions as to the manner in which the account is to be taken or vouched.
(3)If in a proceeding before the Federal Court under this Act a question of fact arises that a party desires to have tried before a jury, and the trial may be had accordingly in the same manner as if it were the trial of an issue of fact in an action.
(4)– (repealed)
(5)Where:
(a)a bankrupt, a debtor or any other person has failed to comply with an order or direction of a Registrar, or with a direction or requirement of an Official Receiver or trustee, under this Act; or
(b)a trustee has failed to comply with an order, direction or requirement of a Registrar, or with a requirement or request of the Inspector-General, under this Act;
the Court may, on the application of the Registrar, Official Receiver, trustee or Inspector-General, as the case requires:
(c)order the person who has failed to comply with the order, direction, requirement or request, as the case may be, to comply with it; or
(d)if it thinks fit, make an immediate order for the committal to prison of that person.
(6)The power conferred on the Court by subsection (5) is in addition to, and not in substitution for, any other right or remedy in respect of the failure to comply with the order, direction, requirement or request, as the case may be.
I agree with the submission of Mr Gretsas that it is a section giving facilitative powers to the Court only. To the extent that paragraph 13 constitutes an application, it will be dismissed as disclosing no reasonable cause of action.
I am satisfied then that it is appropriate to make an order, pursuant to Rule 13.10 dismissing the applications set forth in paragraphs 1-5 inclusive, 6-8 inclusive, 10, 11 and 13 of the amended application.
That leaves the questions arising under paragraphs 9 (annulment) and paragraph 12 (allegation that no vesting of the joint tenancy in the trustee occurred on account of an allegation the joint tenant’s interest was held on behalf of the wife of the bankrupt).
Annulment
Firstly it should be noted that the wrong section of the Bankruptcy Act is referred to in the amended application. Section 154(1)(a) of the Act deals with the effect of an annulment order under section 153(A) or 153(B). I will take the application to be one pursuant to section 153(B) and assume that Mr Draper contends that a sequestration order ought not to have been made or that a petition ought not to have been presented or ought not to have been accepted by the Official Receiver. This in fact is the language of paragraph 6 and 8 of the amended application, and I read paragraph 9 as being the culmination of the “orders sought” in paragraph 6-8 inclusive of the amended application. Paragraphs 1-13 of the answering submissions of the applicant deal with the range of issues which he would presumably wish to agitate in respect of his application for an annulment. They are also dealt with under the heading “Background” in the affidavit filed by Mr and Mrs Draper. As discussed in paragraph 27 above, Mr Draper has already unsuccessfully opposed a creditor’s petition on the grounds that the petitioning creditor’s debt was secured. True it is that upon such an application for annulment, the Court can go behind the judgment in which the petitioning creditor’s application was based to see whether there was in truth and in reality a debt (see Wren v Mahony (1972) 126 CLR 212). Mr Draper in the passages I have referred to above goes much further and would invite this Court to allow all of the issues that led to the Australian Society of Accountants obtaining a judgment in the proceedings in the Federal Court being re-litigated. See in particular the first page of the affidavit sworn on 9th March 2004. Significant factual materials are set forth, especially at pages 4-8 inclusive of the affidavit, suggesting that the Official Receiver behaved improperly by placing a caveat on the property at 5 George Street, Marleston. The Australian Society of Accountants obtained a Mareva injunction against both Mr Draper and Mrs Draper. Mrs Draper was restrained from dealing with her interest at the house property at
5 George Street, Marleston. A similar injunction was made in relation to Mr Draper. Apparently a caveat was also lodged by the Official Receiver on Mrs Draper’s interest in that Marleston property. The caveat is said delayed the sale of the Marleston property, and the mortagee of the property, the National Australia Bank, eventually foreclosed. The suggestion appears to be that the Official Receiver in administering the estate in the way that he did to that point acted negligently and caused loss. I have already dealt with the Court’s lack of any jurisdiction to deal with such a claim.
Insofar as the passages of Mr Draper’s documents referred to above would seek to re-agitate the issue as to whether the petitioning creditor was secured on account of the order by way of Mareva injunction (this time under the guise of an annulment application) the same issue in relation to the binding nature of the order made by von Doussa J in the proceedings referred to above arises.
I agree with Mr Gretsas’ contention that the affidavit relied upon by the applicants does not disclose any facts which, even taking them at face value, would permit or cause an annulment.
The joint tenancy/trust issue
Paragraph 12 of the amended application contends that neither the Official Receiver nor the present Trustee ever had the right to a vesting order in the McDonald Park property. These matters are amplified in paragraphs 1-37 commencing at page 9 of the joint affidavit of the parties.
A substantial portion of the submissions filed by the current Trustee deal with this issue (see paragraphs 21-27 thereof).
The fundamental contention which I identify from the relevant passages of the joint affidavit is that a joint tenancy constitutes a trust. This is most explicitly set out at paragraph 4 on page 10 of the affidavit:
“Joint tenancy is a constructive trust in the bankrupt at all times held his legal interest on constructive trust for the other joint tenant his wife, his personal exertion income has paid for their joint interest in the property”.
This is how I read the material filed by Mr Draper and what I understand his submissions to mean. This argument is connected with his other contention that the Official Receiver or Trustee has only a legal interest and not an equitable interest in the property whilst a mortgage is registered, but that once the mortgage is paid off, or the bankrupt is discharged, whichever comes first, the Trustee then has an interest in the property which is subject to the interest of the bankrupt (see paragraph 6 on page 11).
The reference to a trust throughout these submissions goes to Mr Draper’s contention that a joint tenancy constitutes a trust.
Mr and Mrs Draper contend that payments under the original contract (I assume the reference is to vendor finance on the purchase of the property) was paid in full by Mrs Draper. Mr Draper made no contributions to the mortgage payments. It is also said that Mrs Draper paid for improvements on the McDonald Park property totalling $84,000. The “contract of mortgage” it is said was paid out on 28th June 1996 although it is not clear whether this is a reference to the mortgage securing the interests of the vendor but in any event I will take Mr Draper’s contentions to be that Mrs Draper paid all payments due both to the vendor in respect of vendor financing to the mortgagee to whom the funds were borrowed to purchase the property.
The trustee says that there is no evidence that Mrs Draper made these payments and points to the borrowing of the sum of $40,000 from the relevant credit union, but I do not think such a submission is to the point given that we are dealing with an application for summary dismissal which must, I think in these circumstances, proceed on the assumption that Mr and Mrs Draper would make such a contention out on the evidence.
Rather, Mr Draper’s difficulty, it seems to me, arises from his understanding of the operation of Section 58 of the Bankruptcy Act.
That Section provides as follows:
Vesting of property upon bankruptcy – general rule
(1)Subject to this Act, where a debtor becomes a 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 section 156A, in that registered trustee; and
(b)after-acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee.
(2)Where a law of the Commonwealth or of 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 so vest at law until the requirements of that law have been complied with.
(3)Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor.
(a)to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or
(b)except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.
(4)After a debtor has become a bankrupt, distress for rent shall not be levied or proceeded with against the property of the bankrupt, whether or not the bankrupt is a tenant of the landlord by whom the distress is sought to be levied.
(5)Nothing in this section affects the right of a secured creditor to realize or otherwise deal with his or her security.
(5A)Nothing in this section shall be taken to prevent a creditor from enforcing any remedy against a bankrupt, or against any property of a bankrupt that is not vested in the trustee of the bankrupt, in respect of any liability of the bankrupt under:
(a)a maintenance agreement; or
(b)a maintenance order;
whether entered into or made, as the case may be, before or after the commencement of this subsection.
(6)In this section, after-acquired property, in relation to a bankrupt, means property that is acquired by, or devolves on, the bankrupt on or after the date of the bankruptcy, being property that is divisible amongst the creditors of the bankrupt.
In Sistrom v Urh (1992) 117ALR 528 it was held that the joint tenancy of Torrens Title land is severed in equity upon the bankruptcy of one of the joint registered proprietors.
The Trustee in Bankruptcy takes the property which vests in him, of course, subject to such equities as the bankrupt would have been subject to had he not been made bankrupt (see re: Goode; Ex-parte Mount (1974) 4 ALR 579.
Pursuant to section 116(2)(a) property held by the bankrupt in trust by another person is not property divisible among creditors. Mr and Mrs Draper settled on the purchase of the McDonald Park property on 5th July 1989.
The sequestration order in relation to Mr Draper’s estate was made on 12th July 1989.
I cannot identify anywhere in the material filed by Mr Draper or Mr and Mrs Draper jointly any factual allegation which would provide the basis for the creation of any trust prior to the date of sequestration. That the monies were borrowed jointly is not disputed. No express trust was created. No facts and circumstances such as might give rise to a constructive or implied trust or resulting trust are alleged. The payments of mortgage (or “contract” as Mr and Mrs Draper referred to the vendor financed payments) are made after the date of the sequestration order and after the vesting of the interest of Mr Draper as joint tenant in the trustee pursuant to Section 58 of the Act.
Doing the best I can with the contentions of Mr and Mrs Draper
I understand them to be alleging, as indicated above, that it is in the nature of a joint tenancy for each of the registered proprietors to hold their interest on trust for the other. Presumably it is this “trust” which they say grounds the contention that the interest of Mr Draper in the property is not divisible amongst creditors. Further expressed references to their understanding of the nature of joint tenancy are found in paragraph 8 of the affidavit of 9th March 2004, namely:
“a joint tenancy does not conform to this description as the interest in the property may never arise as it is held on the trust for the other joint tenant ….”
The contention that neither the Official Receiver nor the Trustee in Bankruptcy ever have the right to a vesting order in respect of McDonald Park cannot be sustained even if I accepted all of the facts or contentions set forth in the various documents filed by the applicants.
Mr Draper’s interest as joint tenant vested by operation of law as at the date of the sequestration order. The legal state of the Official Trustee was recognised by the registration of him as a joint proprietor on 16th November 1989. Subsequently the existing trustee was registered in lieu of the Official Receiver as the joint registered proprietor.
Paragraph 12 discloses no reasonable cause of action and will be dismissed.
No paragraphs of the amended application remain extant. The application itself is liable to be dismissed.
I bear in mind, however, the decision of Lander J in Rana v University of South Australia (supra) and in particular his Honour’s analysis of the Federal Magistrates Court Act and Rules and the extent to which pleadings have been eschewed and replaced by application and affidavit. I also bear in mind that the written submissions I have from Mr Draper are those made in answer to the written submissions of the respondents. The joint affidavit of the parties raises matters which might (or might not) be augmented with further evidence at trial. As his Honour pointed out in paragraph 41 of Rana v University of South Australia (supra):
“It may be the cause of action cannot be precisely identified until all the evidence is in”.
What this means, I think, is that I must pay careful attention to the contents of the affidavit and the other possible causes of action that arise from a consideration of it even if such matters have not been formally identified either in the application or in the responsive summary of argument.
Having undertaken that process I find that there are a number of references to Mrs Draper, the non-bankrupt spouse, having made payments of mortgage (or “contract” payments). It is alleged Mr Draper did not contribute to the mortgage payments as he was unemployed from 10th October 1991. It is said that Mrs Draper has paid for improvements for the property, making a total investment by her of $84,000 (see paragraph 15 of the affidavit). It is alleged in paragraph 24 that the Trustee in Bankruptcy could have paid out the mortgage and sold the property and that he did not do so because he knew there was no equity in the property. No basis is given for that latter factual assertion. It is also contended that it is improper for the trustee to hold onto the property in “the hope that equity may go up”.
It is contended in paragraph 27 that both trustees “deprived us of equity that we could have gained by building a house on the property”.
An explanation is purportedly given in paragraph 28 as to why these matters have not been raised previously.
Paragraph 29 refers to the fact that it has taken 14 years since the date of the vesting order for the trustee to attempt to realise his interest in the property.
Just what all of these factual assertions amount to is not clear.
The affidavit of Peter Allan Britten-Jones filed on 3rd February 2004 on behalf of the Trustee annexes the relevant correspondence that passed between the first trustee and the applicants and the second trustee and the applicant, and it is clear from that correspondence which is set out as annexure ‘PABJ4’, that the first trustee raises with Mrs Draper on 31st July 1990 alternatives in relation to the realisation of the joint tenants interest. Further correspondence ensues and on 10th February 1994 the Official Receiver writes to Mrs Draper and confirms his intention to realise his interest in the property for the benefit of creditors. The next correspondence is from the second trustee and is dated 29th September 2003.
No explanation is given for the apparent nine year delay in the trustee or either of them agitating the issue of the realisation of the trustee’s interest in the property.
O’Brien v Sheahan [2002] FCA 1292, a decision of Carr J in the Federal Court, was also a case involving delays by the trustee in the attempts to realise his equity in a property of which the two joint registered proprietors were both bankrupt.
The judgment constitutes the decision on appeal from a decision of a Federal Magistrate upon an application by the registered proprietors for transfer of the trustee’s interest in the property to them or alternative orders in the form of declarations that any equity in the property arising after the date upon which they became bankrupt was not property that vested in the trustee and for like orders.
The learned Federal Magistrate considered whether any estoppel arose out of any specific representation that the trustee had made, indicating that the bankrupts could keep the property if there was no equity in it, but did not consider any other further possible basis for estoppel. The learned Judge found a further basis in certain conduct of the trustee which he found induced the bankrupts to assume or expect the trustee was not interested in selling the property and had abandoned it to the appellants. He found that the trustee should not be allowed, after a number of years passing, to step in and then conditionally assert his legal rights. Reliance was placed upon cases such as the Commonwealth v Verwayen (1990) 170 CLR 394.
As carefully as all of the documents filed by the applicants can be scrutinised, I cannot find within them any specific advancement of an argument relating to an assertion that the trustee is estopped from realising his interest in the property on account of the delay. The delay is adverted to in the affidavit. Certain payments by the non-bankrupt spouse are referred to and other disadvantages arising from the alleged conduct of the trustee are mentioned but with no specific linking to any of the sorts of matters which would ground an argument advanced upon the basis of an equitable estoppel. It is not for the Court to crystallise those arguments on behalf of the applicants. They may be arguments which the applicants have no intention to advance. It may be that Mrs Draper intends to seek appropriate relief in relation to her contributions at the time of the taking of any proceedings in relation to partitioning of the title. I have no way of knowing these things.
However, the decision of Lander J in Rana v University of South Australia (supra) persuades me that I should be loathe to strike out the applicant’s application in its entirety even though its constituent parts have been individually dismissed as disclosing no reasonable cause of action. There remains the possibility that within the plethora of assertions and arguments set forth in the joint affidavit is a contention of material facts which will ground an application for relief that is possible in this Court, and I think in those circumstances my formal orders are as set out at the commencement of these reasons for judgment.
I certify that the preceding seventy-eight (78) paragraphs are a true copy of the reasons for judgment of Lindsay FM
Associate:
Date:
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