Hindle, P.A. v Ex Parte Metropolitan Fire Brigades Board

[1993] FCA 531

JUDGMENT No. ........ ........ .. 531 I ...... .., 93

IN THE FEDERAL COURT OF AUSTRALIA	) )
VICTORIA DISTRICT REGISTRY	) No VB 2392 of 1992
1
BANKRUPTCY DIVISION	1

BETWEEN:  PETER AWLN HINDLE

(Bankrupt)

EX PARTE:  METROPOLITAN FIRE BRIGADES BOARD

(Applicant Creditor)

AND :  ROBERT EASTAUGH RAWSAY

(Respondent Trustee)

Corm:  Ryan J

Place: Melbourne

Date:  26 July 1993

EX TEMPORE REASONS FOR JUDGMENT

RYAN J: By application dated 27 November 1992 the Metropolitan Fire Brigades Board, ("the MFB"), applies for a review of a decision of the trustee of the bankrupt estate of Peter Alan Hindle, ( "the bankrupt"), who was made bankrupt on 20 August 1992. The trustee decided to reject a proof of debt lodged with him by the MFB in respect of the costs of its attendance at various fires at premises known as and situate at 33 Grey Street, St Kilda.

providing fire flghting servlces for him in relation tothat property." to the Board the reasonable costs and expenses incurred by the Board in

The debt of the MFB was said to have arisen under s.66(1), of the Metropolitan Fire Brigades Act 1958 (Vic. ) ("the Act") which provides :

"The owner of any uninsured property situate withln the metropolitan drstrict which is damaged or destroyed by fire shall be Liable to pay

"Owner" is defined in s.3(1) of the Act as meaning:

"the person for the trme being receiving the rack rent of the premrses in connexron with which the word is used either on his own account or as agent or trustee for some other person or who would receive the same if the premises were let at a rack rent."

The evidence discloses that on 5 January 1983 a company, ALS Pty Ltd, ( "ALS" ) , became the registered proprietor of the premises at 33 Grey Street, St Kilda. In December 1984 the bankrupt purchased seven of the eight issued shares in ALS, the other issued share then being transferred to his mother, Edna Hindle. The purchase price paid by the bankrupt for the shares in ALS was $265,000 of which $210,000 was borrowed from what was then the RESI Permanent Building Society, later the Bank of Melbourne, on the security of a first mortgage over the land at 33 Grey Street, St Kilda. The balance of the purchase price was provided from the bankrupt's own funds.

In February 1985 a further 1992 shares in ALS were allotted to the bankrupt. The premises at 33 Grey Street, St Kilda, since the bankrupt effectively acquiredthe whole of the issued capital

of ALS, have consisted of a single Edwardian building at the	front conducted as a boarding house and 12 flats at the rear.
The bankrupt, in an affidavit sworn on 27 January 1993, has given the following account, which has not been challenged and which I accept, of the conduct of those premises. Paragraph 3 of the affidavit relevantly recites:

"Until a date in or about Aprrl 1986 when it was damaged by fire the structure at the front of the property was a registered boardrng house conducted by the company. The 12 flats at the rear were let by the Company on short terms (weekly, fortnightly or monthly) until February 1992 when there were fires at the property and the St Kilda Council removed all occupants. Prior to those fires the Company received Income from boarders and tenants and the Company Incurred and paid expenses wrth respect to the St Kilda property such as rates, SEC, Gas and Fuel, boarding house registratron fees and the lrke. The income was pard into and expenses were p a ~ d out of an account held by the Company with Bank of Melbourne, Chadstone branch. The Company's bank account was closed shortly after the Commonwealth government required banks to record tax file numbers for all accounts. As far as I knew the Company did not have a tax file number and had not filed tax returns s m c e my mother and I had acqurred shares rn and become directors of it. I was concerned that I might stir up trouble if I made rnquiries about the company's tax file number. I decided to bank Company income in my personal passbook account with Bank of Melbourne. Thereafter, I received and banked rnto my own account, on behalf of the Company, all of the Company's income and paid out of my own account all of the company's expenses. I distingu~shed Company funds from my own by banking Company funds as cash and my own funds as cheques. Further I maintained a recelpt book in respect of every flat (the boarding house had by then been closed) as an accurate record of Company receipts and I retained all accounts payable and receipts as an accurate record of Company expenses. The expenses always exceeded income and I supplemented Company income with my own funds to enable the Company to meet its expenses from t ~ m e to time as required. I have never returned income from the St Kilda property a.n my income tax returns or claimed as a deduction for tax purposes any expenses incurred with respect to the St Kilda property."

On 13 December 1988, ALS was deregistered under s.459 of the

Companies (Victoria) Code as a result of failing to file annual returns. Consequently, pursuant to s.461 of that Code, the estate and interest of ALS in the property at 33 Grey Street, St

Kilda, vested in the National Companies and Securities Commission

and by virtue of transitional provisions in subsequent legislation, is now vested in the Australian Securities Commission.

On 26 April 1990 another fire occurred at 33 Grey St, St Kilda.

The structure in which the fire occurred was described by the MFB in its fire report as a "disused hostel." Then, on 5 February

1992, another fire report in respect of the same address described a "fire in bedroom of unoccupied dwelling," and noted

that a portion of the room was severely damaged. Yet another fire occurred on 9 February 1992, in respect of which the relevant fire report described the property use as, "derelict

building" and noted that the building was, "unoccupiedv and had,

"evidence of drug use by squatters. " A description of damage was, "roof, stair and other structural members destroyed by

fire. "

Finally, on 28 May 1992 a fire, again at 33 Grey Street, St Kilda, was reported as occurring in "an unoccupied flat." The same report described the fixed property use for the premises as "idle property. " For its attendance at each of the fires between April 1990 and May 1992, the MFB has claimed from the estate of the bankrupt its costs in an amount of $102,380 made up as follows:

$10,320 being the balance unpaid costs of attending the

fire on 26 April 1990;

$46,629 being the costs of attending the fire on 5 February

1992;

$32,670 being the costs of attending the fire on 9 February

1992; and

$12,771 being the costs of attending the fire on 28 May
1992.

The bankrupt's trustee has rejected in its entirety the claims of the MFB, against the bankrupt's estate in respect of the fires at 33 Grey Street, St Kilda. In my view, the definition of owner in s.3(1), of the Act is erected on two alternative bases: one of them factual; the other hypothetical. The first occurs when the premises, in connection with which an owner postulated by some other section of the Act, are let for the time being at a rack rent. In that event, the owner is the person at that time receiving the rent either on his or her own account or as agent or trustee for some other person.

The second alternative basis occurs when the relevant premises at the time when an owner is required to be postulated are not let at rack rent. In that event, the owner is the person who would be entitled, beneficially, to receive the rack rent on the hypothesis that a rack rent were being charged. It is unnecessary to contemplate the further hypothesis of the receipt of the hypothetical rack rent by an agent or trustee. I accept that rack rent in this context means the full value which could have been obtained under a lease of the subject premises. See, for example, in Re Sawyer & Withal1 (1919) 2 Ch. 333 (citing ex parte Connelly to Sheridan and Russell (1900) 1 IR 1 at 6 per Holmes LJ) and London Corporation v Cusack Smith (1955) AC 337 per Lord Reid at 357.

of any of the relevant fires between April 1990 and May 1992, a	However, I am not able to find on the evidence that, at the time
rack rent was being received in respect of the property damaged or destroyed by the fire. Indeed, it seems that the property damaged in each of the first three fires was the boarding house which was then uninhabited by boarders. Moreover, the relationship of a licensor and licensee which I understand to be created between a boarding house proprietor and a lodger could never be productive of a rack rent in the sense in which that expression is used in s.3(1) of the Act.
By the time of the last fire, none of the 12 flats at the rear of the premises was producing rent. Accordingly, the owner of the premises at the time of the fires was the person who would have received the rent if the premises had been let at a rack rent. I have already ruled that there is no scope in identifying the owner in these hypothetical circumstances for postulating a hypothetical agent or trustee who might receive the rent. In
this sense, the case is analogous with C o u r t n e y Southan v C r a w l e y Urban Dis tr ic t Counc i l (1967) 2 All ER 246 where the Queens Bench
Division was required to apply the following definition of owner in the Town and C o u n t r y P l a n n i n g A c t (1962) of the United Kingdom:

"... A person other than a mortgagee not in possession, who, whether

in his own right or as trustee or agent for any other person, is entltled to receive the rack rent of the land, or, where the land is not let at a rack rent, would be so entitled if it were so let."

In delivering the judgment of the Court, Widgery J, (as he then was), observed at 248:

order to show that the appellant was the owner of Tinslow Farm it was

"In the present case the land was not let at a rack rent so that in

necessary to show that he would have been entitled to receive the rack rent if it had been so let. The justices held that at all material times the appellant's wife allowed the appellant to have such control over the use and management of the land that if, on 26 May 1965, the land had been let at a rack rent he would have been entltled to receive the rack rent as agent or trustee for her. The appellant contends in this court that the justices were not entitled to draw this inference from the primary facts and were Indulging In sheer speculation. We are forced with some reluctance to agree with thls view. To assume that the land is let at a rack rent IS to assume a situat~on wholly different from that which in fact prevailed and the fact that the appellant's wife allowed the appellant to control t h e n loint busrness is no ground for inferring that she would have appointed him as her rent collector ~f she had given up occupation of the land and let it at a rack rent. "

Accordingly, on this hypothetical basis, which is required to be adopted in the absence of actual receipt of a rack rent, the bankrupt was at no time the owner within the meaning of s .66 (l) (d) of the Act. At all times the person presumptively entitled to receive the rack rent was the National Companies and Securities Commission in which the freehold interest of ALS and vested by virtue of s.461(1) of the Companies Victoria Code which provided :

"Whereafter a company has been dissolved t h e r e remains any outstanding property whether wi th in o r ou t s ide t h e S t a t e , but not ~ n c l u d i n g unpaid

c a p i t a l whether c a l l e d o r uncalled, which was vested i n t h e company, t o

which t h e company was e n t i t l e d or over which t h e company had a

drsposlng power	a t t h e t i m e when	it was d ~ s s o l v e d	but which was not g o t
i n ,	r ea l r sed upon	o r otherwise disposed of	o r d e a l t wrth by t h e company
o r i ts l iqu ida to r ,	t h e e s t a t e and	~ n t e r e s t	i n t h e property a t law o r i n
equi ty of	t h e company	o r i ts l iqurda to r a t t h e trme when	t h e company

was d ~ s s o l v e d together with a l l c l a m s r l g h t s and remedies t h a t t h e

company o r r t s l i q u i d a t o r then had i n respect of t h e property v e s t s by

fo rce of t h l s sec t ion i n t h e Commission."

The right that the bankrupt may have had to claim on the consolidated revenue of the State of Victoria to any net surplus after the Commission had exercised its power of sale in respect of the land at 33 Grey Street, St. Kilda, cannot be equated in any way with a right to receive the rack rent of that property

or any part of it, had, on the hypothesis required by s.66(1)	that rack rent been received at the time of any of the relevant
fires. For these reasons the trustee was right in rejecting the MFB's proof of debt and the application must be dismissed.
[His Honour then heard the parties on the question of costs.]
The orders of the Court are:

1.    That the application be dismissed;

2.    That the applicant pay the respondent's taxed costs after 17 February 1993;

3.   That the applicant pay the respondent's taxed costs incurred before 17 February 1993 in respect of the issues on which the respondent has succeeded;

4.   That the respondent pay and retain out of the estate of the bankrupt the applicant's costs incurred before 17 February 1993 and the trustee's own costs in respect of the debt admitted to proof on that day, such costs to be taxed.

I certify that this and the preceding seven (7) pages are a true copy of the ex tempore reasons for judgment of his Honour M r Justice Ryan

Associate :

Date:  -3 L L W p b R .

Counsel for the applicant:	Mr R S Randall
Solicitors for the applicant:	Best Hooper
Counsel for the respondent:	M r J Peters
Solicitors for the respondent:	GadensRidgeway