Giorgio & Giorgio v Commonwealth Bank of Australia

[1998] QCA 270

COURT OF APPEAL	[1998] QCA 270
McPHERSON JA THOMAS J DERRINGTON J
Appeal No 5646 of 1998
NICOLA GIORGIO and
ROSWITA MARIA GIORGIO	Appellants (Defendants)
and
COMMONWEALTH BANK OF AUSTRALIA	Respondent (Plaintiff)
BRISBANE
..DATE 28/07/98 280798 T6/YA/19 M/T COA170/98

McPHERSON JA: This is an application for a stay of execution pending appeal against a judgment given in the District Court for possession of mortgaged premises.

The judgment was obtained, I will say, summarily, in the District Court by the plaintiff Commonwealth Bank against the two defendants, who are applicants for the stay of execution, which is proposed to take place by warrant of possession. The bank is the mortgagee and the defendants are the mortgagors of registered land on which there is a house, which the defendants occupy as their home.

The difficulty, as it seems to me, that confronts the defendants, as applicants in this Court, is that
they both became bankrupt in 1996. The bank's plaint, claiming recovery of possession, issued in
May 1997 and a defence of sorts was filed in June of that year. Judgment was not given until 26
May 1998 and the appeal followed within the month thereafter.

There is, it seems, no dispute that the mortgage debt on which the plaintiff bank's claim is ultimately based, is in arrear. The bankruptcies of two defendants raise difficulties for two reasons, which either independently or cumulatively, appear to me to be fatal to this application.

In Cummings v. Claremont Petroleum N.L. (1996) 185 C.L.R. 124, at 135-136, Sir Gerard Brennan C.J. and Justices Gaudron and McHugh, said that "a bankrupt has no right to bring or prosecute proceedings to protect, enhance or add to the property of which he has been divested on bankruptcy".

Here the property in question is the equity of redemption, as it is commonly called, of the defendants as mortgagors in their registered land.

The land being registered, it has the consequence that the legal title, of course, remains in the defence and, by virtue of s.58(2) of the Bankruptcy Act 1966, it continues to rest there until a transmission is entered up in favour of the trustee in bankruptcy. So far as it appears, that step has not yet been taken by the trustee in this case.

Nevertheless, as s.58(2) itself acknowledges, the whole of the equitable interest in that equity of redemption has now passed to and devolved upon the trustee in bankruptcy. The defendants are left, at most, with only the bare legal title. It is said that a bare legal title is sufficient to support this application; but, on an application for a stay like this, we are bound to look at more than simply the form of the matter and to consider the substance.

The substance is that if any beneficial interest in the land survives at all at this juncture, then it is vested in the trustee in bankruptcy and not in the defendants. If, therefore, there is a beneficial right to possession of the land and premises, then it is the trustee and not the defendants who are entitled to it.

The defendants, consequently, have no right of property sufficient to support this application or to invoke the intervention of this Court to protect it pending appeal. Indeed, if what is said in Cummings v. Claremont is applied here as it must be, the defendants do not have, it may be, even a right to appeal because the property they seek to protect was divested from them on their bankruptcy.

What I have said appears to accord with the decision of Master White, as she then was, in Farrow Mortgage Services Pty Ltd v. Winfield [1992] 2 Qd R 282, which, it was forecast before us, it was the intention of the defendants to challenge on appeal. However that may be, I personally am

280798 D.1 T7/KG23 M/T COA170/98

persuaded that there is no right to a stay of the proceedings to enforce possession in this case,
irrespective of whether or not Farrow Mortgage Services, or the decision in that case, is capable of

challenge in the way suggested.

I would therefore dismiss the application with costs.

THOMAS J: I agree. The applicants who are both bankrupt remained in occupation of a property which they mortgaged to the bank. They defaulted. Since their bankruptcy, they no longer own the property or the equity of redemption. Such rights and any rights to bring or prosecute proceedings to protect or enhance the property have passed to the trustee.

They continue to reside there with the permission of the trustee which in terms of property law is
probably a personal licence. But when the mortgagee establishes its rights under the mortgage so
that these prima facie overcome those that have passed to the trustee, and the trustee is not
interested in asserting any rights of action that the bankrupt may have to set aside the mortgage or to
defend the bank's claim, the bankrupts have no right or power independently to assert such claims
or to offer them as a defence to the bank's claim for possession.

The defence which was foreshadowed depends on the assertion of rights that they say have accrued under the Trade Practices Act and the Fair Trading Act. Such claims fall within the description of proceedings to protect, enhance or add to the property of which he has been divested in bankruptcy, and are not maintainable by the bankrupt (Cummings v. Claremont Petroleum N.L. (1996) 185 C.L.R. 124 at 136).

I would add that, not surprisingly, the applicants have not brought into Court the unpaid moneys or even the arrears payable under the alleged arrangement for reduced payment let alone the amount prima facie payable under the mortgage. Were the appeal that the appellants wish to bring otherwise tenable, I consider that the stay would be refused on discretionary grounds.

To the above reasons, I would refuse the application.

DERRINGTON J: I agree.

McPHERSON JA: The order is that the application for stay of the proceedings in execution is refused.

MR FLANAGON: I'd ask for costs.

McPHERSON JA: Yes. Anything to say on that Mr Francis?

The application is refused with costs.

-----