NWC Finance Pty Ltd v Borsellino (No. 2)

NWC Finance Pty Ltd sought a declaration and orders against Borsellino, the Trustee in Bankruptcy for the bankrupt, and the wife of the bankrupt, regarding a dispute over surplus funds from the sale of mortgaged property. The dispute centred on the priority of interests between the bankrupt, who had mortgaged the property to NWC Finance, and the Trustee in Bankruptcy, who claimed a right to the surplus funds after the property was sold. The property was registered in the names of both the bankrupt and his wife, but the mortgage was never registered. The bankrupt subsequently went into bankruptcy, and NWC Finance sold the property under a power of sale, retaining surplus funds.

The court had to determine the priority of interests between NWC Finance and the Trustee in Bankruptcy in relation to the surplus funds. The issues included whether the Trustee's failure to lodge a caveat promptly after the bankruptcy order constituted disentitling conduct, and whether the bankrupt's failure to list the property on his Statement of Affairs or the Trustee's failure to discover the property during searches affected the priority of interests.

The court found that the bankrupt's interest in the property was severed by the sequestration order, creating a tenancy in common between the Trustee and the bankrupt's wife, with the bankrupt acting as a bare trustee. The court held that the bankrupt had no equitable interest in the property, and the mortgage was not effectively created due to its non-registration. The Trustee's failure to promptly lodge a caveat did not amount to disentitling conduct, and the priority of interests was determined by the date of creation of the interests. The court held that NWC Finance's interest took priority over the Trustee's interest, and the Trustee was not entitled to the surplus funds.

The court declared that NWC Finance was entitled to retain the surplus funds from the sale of the property, and dismissed the Trustee's claim for those funds. The court also found that the mortgage was not effectively created due to its non-registration, and the bankrupt had no equitable interest in the property.