Michell (Trustee), in the matter of Pace (Bankrupt) v Pace
[2022] FedCFamC2G 382
•19 May 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Michell (Trustee), in the matter of Pace (Bankrupt) v Pace [2022] FedCFamC2G 382
File number(s): MLG 2182 of 2020 Judgment of: JUDGE MANSINI Date of judgment: 19 May 2022 Catchwords: BANKRUPTCY – where respondent bankrupt failed to comply with orders of the court – failed to deliver up certificate of title – interim application – further orders made. Legislation: Bankruptcy Act 1966 (Cth) ss 19, 27(1), 30, 58, 77, 115, 116, 132.
Judiciary Act 1903 (Cth) s 79.
Transfer of Land Act 1958 (Vic) ss 116A, 103(1).
Cases cited: Carrafa v Chaplin [2019] FCA 415
Coshott v Prentice (2014) 221 FCR 405; [2014] FCAFC 88
Marchesi v Registrar of Titles [2010] VSC 524
Division: Division 2 General Federal Law Number of paragraphs: 27 Date of last submission/s: 9 May 2022 Date of hearing: 16 May 2022 Place: Melbourne Counsel for the Applicant: Mr B Fry Solicitor for the Applicant: Shine Lawyers The Respondent: No appearance by or on behalf of the Respondent ORDERS
MLG 2182 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: STEPHEN MICHELL AND PHILIP NEWMAN IN THEIR CAPACITY AS THE JOINT AND SEVERAL TRUSTEE OF THE BANKRUPT ESTATE OF JOHN PACE
Applicant
AND: JOHN PACE
Respondent
ORDER MADE BY:
JUDGE MANSINI
DATE OF ORDER:
19 MAY 2022
THE COURT ORDERS THAT:
1.Pursuant to sections 103(1) and 116A(3) of the Transfer of Land Act 1958 (Vic), the Registrar of Titles is directed to:
(a)cancel the folio of the register for the property known as 32 Ward Street, St Leonards, Victoria 3223, more particularly described at volume 08184 folio 437 (the Land);
(b)create a new folio for the register for the Land;
(c)record Stephen Michell and Philip Newman (in their capacity as trustees of the Bankrupt Estate of John Pace) as the registered proprietors of the Land in the new folio; and
(d)produce a Certificate of Title with the new folio and deliver it to Stephen Michell and Philip Newman (in their capacity as trustees of the bankrupt estate of John Pace).
2.The Applicants serve a copy of this order on the Registrar of Titles forthwith.
3.The Registrar of Titles have leave to make any application in this proceeding concerning the orders made within 28 days of service of the order.
4.The Applicant’s costs of this application be paid from the bankrupt estate of John Pace.
AND THE COURT NOTES THAT:
A.Pursuant to rule 17.05 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021, the Respondent may seek leave to set aside these orders within 28 days upon him filing an application and affidavit setting out his failure to participate in this proceeding and attend Court this day, and why these orders should be set aside.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
Judge Mansini
INTRODUCTION
On 14 June 2012, a sequestration order was made against the estate of John Pace (Bankrupt) and joint and several trustees of his bankrupt estate were appointed (Applicant).
On 25 June 2020, the Applicant commenced proceedings in this Court against the Bankrupt pursuant to s.30 of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) and the provisions which regulate the vesting of property in the trustee as a result of bankruptcy. The subject of the proceeding is the Applicant’s interest in the land known as 32 Ward Street, St Leonards, Victoria 3223 being the whole of the land in the certificate of title volume 08184 folio 437 (Land).
By this interim application, the Applicant seeks orders pursuant to the Transfer of Land Act 1958 (Vic) (TLA) that the Registrar of Titles cancel the current folio of the register for the Land, create a new folio, record the Applicant as the registered proprietors of the Land in the new folio and issue a new certificate of title and deliver it to the Applicant.
CONTEXT
Pursuant to s.30 and the vesting of property provisions in the Bankruptcy Act, on 9 September 2020, this Court as constituted by His Honour Judge McNab (as he then was) declared that the Applicant is the beneficial owner of the Land and ordered (among other things) that:
(a)the Bankrupt deliver up to the Applicant the original Certificate of Title to the Land (Order 2(a));
(b)the Bankrupt give vacant possession of the Land (Order 2(b));
(c)the Bankrupt remove from the land all vehicles chattels and personal possessions which have not vested in the applicants and any rubbish (Order 3); and
(d)the Trustees were authorised to sell the Land (Order 6).
Orders were also made in the event that the Bankrupt failed to comply with orders 2 and 3 (orders 4 and 5, respectively), including that the Applicant be at liberty to make application to a Court of competent jurisdiction for orders pursuant to s.116A(3)(c) of the TLA (order 4(b)).
On 28 February 2022, this interim application was made for relief of the kind described at order 4(b) of the 9 September 2020 orders and further orders were made for final hearing. The Applicant filed two affidavits in support including evidence that the Bankrupt has failed to deliver up the original certificate of title to the Land. There is also evidence that the Bankrupt was served with the 9 September 2020 orders and this interim application. The Bankrupt did not appear in the interim application (nor had he appeared in the earlier proceedings).
In all of the circumstances, the Court as presently constituted determined it appropriate to proceed in the absence of the Bankrupt.
CONSIDERATION
The primary relief sought in the proceeding was pursuant to the Bankruptcy Act. The interim relief now sought by the Applicant is in the event of non-compliance with the earlier orders of the Court – specifically, orders to give effect to the completion of the vesting of the Land.
The purpose of the Bankruptcy Act relates to the appropriation and equitable distribution of the assets comprising the bankrupt estate and consequent relief from ongoing liability of the bankrupt for debts existing at the time of the bankruptcy.[1]
[1] Carrafa v Chaplin [2019] FCA 415 at [10].
Section 27(1) confers exclusive jurisdiction of matters ‘in bankruptcy’ on the Federal Court of Australia and the Federal Circuit and Family Court of Australia.
Section 79 of the Judiciary Act 1903 (Cth) relevantly provides:
State or Territory laws to govern where applicable
(1)The laws of each State or Territory, including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable.
(1A)For the purposes of subsection (1), a Court exercising federal jurisdiction in a proceeding is taken to be exercising federal jurisdiction in:
(a)if the laws of a State or Territory apply to part of the proceeding because of subsection 68(C)(5) – that State or Territory; or
(b)otherwise – the State or Territory in which the proceeding is commenced;
except as otherwise provided by the Constitution or the laws of the Commonwealth.
The Full Court in Coshott v Prentice[2] identified that s.79 of the Judiciary Act operates to “pick up” and apply State laws in the exercise of federal jurisdiction:
111.The High Court has held that s 79 operates to pick up and apply both procedural and substantive State law as a surrogate of federal law, thereby enabling courts exercising federal jurisdiction to provide remedies afforded otherwise only under State law in the exercise of State jurisdiction…
…
113.Thus, while s 79 of the Judiciary Act does not enlarge the reach of State laws as a matter of construction of the State law, the fact that the State law provides only for State courts to enforce its provisions is no impediment to the operation of s 79…
[2](2014) 221 FCR 450; [2014] FCAFC 88 at [106]-[114].
Section 30(1) of the Bankruptcy Act provides that the Court has full power to decide all questions, whether of law or fact, in any case of bankruptcy and that it may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as it considers necessary for the purposes of carrying out or giving effect to the Bankruptcy Act in any such case. The Full Court in Coshott v Prentice[3] acknowledged that, having regard to the purposes of modern bankruptcy to provide for the appropriation and equitable distribution of assets of an insolvent debtor and the breadth of the language in s.30, it should not be construed narrowly.
[3]Ibid at [91]-[93].
Section 132 of the Bankruptcy Act deals with “vesting and transfer of property”. Subsection 132(3) provides:
Where a law of the Commonwealth or of a State or Territory requires the transmission of property to be registered, and enables the trustee 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 vest in the trustee at law until the requirements of that law have been complied with.
This is a case where orders have previously been made for the vesting and sale of the Land, and for consequential steps including that the Bankrupt deliver up the certificate of title to facilitate transfer to the Applicant pursuant to s.58 (Div 4 of Pt IV) and ss.115 and 116 (Div 3 of Pt VI) of the Bankruptcy Act. The effect of s.132(3) of the Bankruptcy Act is to delay the vesting at law of the Land until registration is effected pursuant to the TLA.
Section 103(1) of the TLA relevantly provides that the Court (defined at s.4 as a Court of competent jurisdiction) may direct a Registrar to to make any amendments to the Register or otherwise to do any act or make any recordings necessary to give effect to any judgment decree or order of the Court (who shall obey such direction but can only make such amendments on application in the appropriate approved form).
Section 116A relevantly provides:
Application to Court for order requiring production of document
(1)The Registrar may apply to a court by summons or, in case of land or any instrument or dealing with respect to land which is the subject of an order by VCAT, to VCAT, for an order directing a person to produce a certificate of title or document if –
(a)the Registrar has made a request under section 104(3) for the production of a certificate of title or document; and
(b)the person of whom the request was made has failed to comply with the request.
(1A)An interested person may apply to the court by summons or, in case of land or any instrument or dealing with respect to land which is the subject of an order by VCAT, to VCAT, for an order directing another person to produce a certificate of title or document for the reasons stated in the application.
(2)The court or VCAT, as the case requires, may –
(a)if the person of whom the requisition was made appears – examine him upon oath or by affirmation and receive other evidence; or
(b)if he does not appear after being duly served with the summons – receive evidence in his absence.
(3) The court of VCAT, as the case requires may-
(a)order the person to produce the document upon such terms or conditions as the court or VCAT, as the case requires, thinks fit;
(b)direct the Registrar to proceed with any dealing or make any entry without requiring the production of the document; or
(c)where the document is a certificate of title, direct the Registrar to take such action (whether by way of deleting the folio of the Register to which the certificate relates and creating a new folio of the Register in the name of such person as the court or VCAT, as the case requires, directs or otherwise) as the court or VCAT, as the case requires, directs –
and make such order as to the costs of the summons and the proceedings thereon as the court or VCAT, as the case requires thinks fit.
I am satisfied that s.30 of the Bankruptcy Act may be called to aid in the present circumstances.
I am also satisfied that recourse may be had to the state based property laws having regard to the powers conferred on this Court by s.79 of the Judiciary Act 1903 (Cth) and in the absence of any identifiable inconsistency with the Constitution and the laws of the Commonwealth.
The power to make such orders is not exercised lightly. In Marchesi v Registrar of Titles [2010] VSC 524, Ferguson J of the Victorian Supreme Court considered a similar factual circumstance and weighed the relevant factors in exercising the discretion as to whether or not to make orders under s.103 of the TLA. Those considerations are apt in the present case.[4]
[4] See, in particular, at [48].
Contrary to the Bankrupt’s obligations at s.77 of the Bankruptcy Act and notwithstanding personal service of the 9 September 2020 orders and this interim application, and the various efforts of the Applicant, the Bankrupt has not taken the ordered steps which would have facilitated the registration of the Land (to give effect to the orders of beneficial ownership and sale) without need for the present application.
The Applicant has duties at s.19 of the Bankruptcy Act including to take appropriate steps to recover property for the benefit of the estate, to administer the estate as efficiently as possible by avoiding unnecessary expense and in a commercially sound way. The Applicant gave evidence of having explored other, practical alternatives to no avail. It otherwise contended – with regard to the history of the Bankrupt’s approach to date - that other steps such as enforcement of the order to deliver up the title or contempt orders are unlikely to get the Bankrupt to deliver up the certificate of title.
The Court has previously determined that beneficial ownership vest in the Applicant and made orders for the sale and consequential to the sale of the Land. The Bankrupt’s failure to act is prohibiting the ultimate sale of the Land for the benefit of the creditors of the Bankrupt Estate. If the orders are not made, additional costs will be incurred and there will be further delay in administration and finalisation of the Bankrupt Estate which began some time ago. I accept that available alternatives would not practically assist in advancing the registration of the Applicant on title of the Land and the purpose of the Bankruptcy Act.
For completeness there was no suggestion of detriment to the Bankrupt on account of the Applicant’s delay in bringing this interim application or any other factor the Court ought consider in favour of the Bankrupt.
I am satisfied that the Applicant has acted reasonably in commencing this interim application and the orders sought are appropriate. It is noted that the form of orders would effectively deal with the difficulties of the possible existence of two certificates of title. The non-party not having had sufficient opportunity to oppose shall be granted a further 28 days to make application to oppose or seek to be heard.
The Applicant has sought costs paid from the bankrupt estate.[5] The Respondent has not appeared or presented any argument in defence but is not due for discharge from bankruptcy until 18 May 2023. I am satisfied this is an appropriate order.
[5] Oral submission at Hearing of 16 May 2022.
CONCLUSION
For the above reasons and in all of the circumstances, it is appropriate to make the orders effectively as sought.
I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Mansini. Associate:
Dated: 19 May 2022
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