Official Trustee in Bankruptcy as trustee of the Bankrupt Estate of Andrew Ley Jordan v Maria Lucia Jordan - [2004] SASC 173

SUPREME COURT OF SOUTH AUSTRALIA
(Land and Valuation Division: Civil)
OFFICIAL TRUSTEE IN BANKRUPTCY AS TRUSTEE OF THE BANKRUPT ESTATE OF ANDREW LEY JORDAN v MARIA LUCIA JORDAN
Judgment of The Honourable Justice Debelle
11 June 2004
BANKRUPTCY - ADMINISTRATION OF PROPERTY - REALISATION OF PROPERTY - POWERS OF TRUSTEE TO DEAL WITH PROPERTY
Powers of trustee - bankrupt held joint interest with wife in crown lease - whether Official Trustee able to sell interest to parties other than bankrupt's wife - Minister not prepared to consent unless land connected to an effluent scheme - wife not willing to consent to connection - whether Official Trustee entitled to order requiring wife to do so - application dismissed

EQUITY - EQUITABLE REMEDIES - INJUNCTIONS
Application for injunction - bankrupt estate - bankrupt held a crown lease jointly with his wife - Official Trustee seeks to sell interest to persons other than wife - sale of leasehold interest not permitted by Minister for Environment and Heritage unless land connected to effluent scheme - Official Trustee applies for injunction to compel wife to consent to conversion - application dismissed.
Law of Property Act Part 8, s 69, s 70, s71; Bankruptcy Act 1966 (Cth) s 5, s 27, s 134.4; Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) s 4; Jurisdiction of Courts (Cross-vesting) Act 1987 (SA) s 9, referred to.
Cardile v Led Builders Pty Ltd (1999) 198 CLR 380 at 395-396; Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 216, 231-232, 241, applied.
Re Holland (1985) 5 FCR 164; Bray v Bray (1926) 38 CLR 542, 545, considered.

OFFICIAL TRUSTEE IN BANKRUPTCY AS TRUSTEE OF THE BANKRUPT ESTATE OF ANDREW LEY JORDAN v MARIA LUCIA JORDAN
[2004] SASC 173
Civil

DEBELLE J The Official Trustee in Bankruptcy is administering the bankrupt estate of Mr A L Jordan (“the bankrupt”). The bankrupt and his wife (“Mrs Jordan”) occupied land at Hardwicke Bay. They held the land as joint tenants pursuant to a Crown lease. The Crown lease is a miscellaneous purpose lease for holiday accommodation purposes. The term of the lease commenced on 1 July 1992 and continues for the joint lives of Mr and Mrs Jordan and the survivor of them. A shack has been erected upon the land.
The Official Trustee has applied for leave to take all necessary steps to enable the conversion of the leasehold interest to a freehold title and then to purchase the freehold title for himself and on trust for Mrs Jordan with a view thereafter to selling the land, accounting to Mrs Jordan for one half of the proceeds of the sale.
On 23 June 2003 I expressed the view that the Court could not make the orders sought by the Official Trustee. I gave some brief reasons and said that I would later publish more detailed reasons for the decision. No order was made on 23 June 2003 other than to adjourn the application by Official Trustee. These are the reasons.
The order sequestrating the estate of the bankrupt Mr Jordan was made on 30 October 1998. On the same day the Official Trustee in Bankruptcy was appointed trustee of the bankrupt’s estate.
The bankrupt and Mrs Jordan have held the miscellaneous purposes lease in respect of the land at Hardwicke Bay since 1 July 1992. As mentioned earlier the lease is for the term of their joint lives and the survivor of them. A beach shack is erected on the land. The sequestration order severed the joint tenancy: Re Holland (1985) 5 FCR 165. The Official Trustee, therefore, has a moiety interest in the lease. A sale is a more appropriate remedy than partition. Unless there is good reason to the contrary, the Court should order a sale: Bray v Bray (1926) 38 CLR 542, 545. Thus, there is no bar to the Official Trustee selling the bankrupt’s interest provided he obtains the consent of the relevant Minister on behalf of the Crown, in this case the Minister for Environment and Heritage. However, for the reasons which follow, there are some limitations upon the Official Trustee’s capacity to sell the bankrupt’s interest in the lease which have the consequence that it is not possible to make the orders the Official Trustee seeks.
In about 1999 an effluent scheme had been established to service 50 shacks in the area of Hardwicke Bay. There is no direct evidence but it appears that most or all of these 50 shacks are erected on parcels of land held pursuant to a miscellaneous purposes lease from the Crown. The land owned by the bankrupt and Mrs Jordan is eligible to be connected to that scheme, and the bankrupt has made a small payment to that end, but has not made any further payments as required. One of the purposes in establishing the effluent scheme is to enable those holding Crown leases to obtain a freehold title to the land.
The Minister for Transport and Urban Planning has approved a proposed land division to enable land at Hardwicke Bay to be held by a freehold title. This includes the land leased by the bankrupt and Mrs Jordan. On 21 July 2000 the Minister for Environment and Heritage offered to sell the land to the bankrupt and Mrs Jordan for $25,000. The offer was subject to certain conditions. As an order had been made sequestrating his estate, the bankrupt was plainly not in a position to accept the offer.
On 20 April 1999 the bankrupt’s sister-in-law offered to purchase the interest of the bankrupt and Mrs Jordan in the land as well as an aluminium dinghy and outboard motor and a trailer for $7,500. The Official Trustee did not accept the offer.
In January 2000 the Valuer-General valued the leasehold interest in the land at Hardwicke Bay in the sum of $63,000.
On 15 September 2000 Mrs Jordan offered to purchase the Official Trustee’s interest in the Crown lease for $10,000. The price had been determined after taking into account and deducting from the value of the lease, the costs associated with converting the property to freehold and the amounts remaining unpaid in respect of the common effluent scheme. The Official Trustee obtained a valuation and on 3 November 2000 rejected the offer. In May 2002 the Official Trustee secured a further valuation of the subject land. According to that valuation, the property was then worth $125,000 as leasehold land and $230,000 as freehold land. The cost of converting the leasehold interest to a freehold interest was estimated to be $43,275 as at December 2002.
On 23 May 2002 the solicitor for the Official Trustee wrote to the Department of Environment and Heritage setting out his difficulties in selling the bankrupt’s interest in the land and indicating an intention to apply to this court for orders under Pt 8 of the Law of Property Act 1936 that the land be sold. The letter sought the consent of the Minister to transfer the bankrupt’s interest. On 10 June 2002 the solicitor for the Official Trustee wrote to Mrs Jordan informing her of the intended application for the Minister’s consent and of his intention to make an application to this Court.
On 15 July 2002 the Department for Environment and Heritage wrote to the Official Trustee’s solicitor informing him that the Minister would have no objection to a transfer of the bankrupt’s interest in the property to Mrs Jordan. The letter went on to state that different considerations applied if the leasehold interest was to be sold to a third party. In that case, the Minister would consider consenting to the transfer only if the property had first been connected to the effluent scheme. The Department’s letter explained that lessees who hold for life are not required to connect to the scheme and that on their death the shack on the land must be removed and the land rehabilitated. The Department added that, if an order was sought from the Court to enable the transfer to a third party, the property had to be connected to the effluent scheme. The Department’s letter canvassed another option but it is unnecessary to refer to it.
The Official Trustee’s solicitor did not inform Mrs Jordan of the terms of the letter from the Department until 19 February 2003 when he sent a letter to her summarising its effect and asking her to purchase the Official Trustee’s interest in the lease at market value. That letter was sent some eight months after he had received the letter from the Department. The letter from the solicitor for the Official Trustee informed Mrs Jordan that, if she did not purchase the Official Trustee’s interest at market value, an application would be made to this Court. Mrs Jordan has not agreed to purchase the interest of the Official Trustee. Her position is that she is content to continue to occupy the shack unconnected to the effluent scheme. She states that she has no desire to obtain a freehold title.
The position which obtained at the time when the application was made by Public Trustee might be summarised in this way:
(a) The Official Trustee held the bankrupt’s interest in the Crown Lease.
(b)The Minister was prepared to consent to a transfer of the bankrupt’s interest in the lease to Mrs Jordan. The Official Trustee and Mrs Jordan had negotiated on the sale of the bankrupt’s interest in the lease but had not been able to agree a price.
(c)The Minister would not consent to a transfer of the bankrupt’s interest in the Crown Lease to a person other than Mrs Jordan unless the property was connected to the effluent scheme.
(d)It is not possible to acquire a freehold interest in the land unless the property is first connected to the effluent scheme.
(e)The Official Trustee had sought the consent of Mrs Jordan to connect the property to the effluent scheme but she had refused consent.
(f)There is no obligation on Mrs Jordan to connect the property to the effluent scheme unless she wishes to sell her interest in the lease or wishes to acquire a freehold interest.
In short, the connection of the property to the effluent scheme is a pre-requisite for any step other than a sale of the bankrupt’s interest to Mrs Jordan. The Official Trustee is not able to sell the bankrupt’s interest in the lease to any person other than Mrs Jordan or to seek to convert the holding of the land to freehold unless the property is first connected to the effluent scheme.
It was against that background that Official Trustee applied for an extensive number of orders. Shortly stated they are to the following effect:
1.That the Official Trustee be granted leave to take all necessary steps to connect the land to the effluent scheme.
2.Subject to the consent of the Minister to become registered as the holder of the bankrupt’s interest in the lease.
3.An order for the sale and transfer of the freehold interest or alternatively an order for the sale of the leasehold interest.
Although one of the orders sought by the Official Trustee is to sell the leasehold interest, his primary purpose is to acquire in conjunction with Mrs Jordan a freehold title and sell that title, accounting to Mrs Jordan for her interests in the proceeds of sale. The sale of the lease to a third party is not the preferred position of the Official Trustee.
The property cannot be connected to the effluent scheme unless and until fees are paid to the persons developing that scheme. The Official Trustee proposes that he pay those fees and deduct them from the proceeds once he has sold either the bankrupt’s interest in the leasehold or in the freehold title.
It is readily apparent that the Official Trustee cannot proceed unless he obtains an order compelling Mrs Jordan to join him in completing payment of the necessary fees for the connection of the property to the effluent scheme, arranging a plumber to connect the property to the scheme, and paying the fees of that plumber. In substance, he seeks a mandatory injunction to compel her to take these steps which require her to incur expenditure and, in addition, a mandatory injunction to compel Mrs Jordan to join him in the application for a freehold title.
An order in the nature of an injunction cannot be made unless the person seeking the injunction can point to a legal or an equitable right which the injunction protects: Cardile v Led Builders Pty Ltd (1999) 198 CLR 380 at 395 – 396: Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 216, 231 – 232, 241. There is no legal or equitable right which entitles the Official Trustee to an order compelling Mrs Jordan either to have the property connected to the effluent scheme or to apply for a freehold title. It follows that this application must fail.
The Official Trustee sought to rely on the power of the Court to “give all necessary or proper consequential directions” for an order for sale of land made pursuant to s 69 of the Law of Property Act (the same expression appears also in s 70 and s 71 of the Act). The power to give directions comes into operation once it has been decided to order a sale. That conclusion is apparent from the purpose of s 69 and is reinforced by the fact that the power to give directions is expressed as being a power to give consequential directions. In no sense does that power authorise a mandatory order of the kind sought by the Official Trustee.
The Official Trustee also sought to rely on the powers vested in a trustee by s 30 and s 134 (4) of the Bankruptcy Act 1966 (Cth). It was submitted that those powers could be exercised by this Court by virtue of the combined operation of s 4 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) and s 9 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (SA), both of which sections I will call “the cross-vesting legislation”. I doubt whether the cross-vesting legislation has the effect for which the Official Trustee contends. Section 30 lists a number of powers of “the Court” and s 134 (4) provides that a trustee may at any time apply to “the Court” for directions in respect of a matter arising in connection with the administration of a bankrupt estate. The expression “the Court” is defined by s 5 of the Bankruptcy Act to mean “a Court having jurisdiction in bankruptcy under this Act”. Section 27 of the Act vests concurrent jurisdiction in bankruptcy in the Federal Court and in the Federal Magistrates Court and declares that jurisdiction to be exclusive of the jurisdiction of all courts other than the High Court. The cross-vesting legislation does not I think authorise this Court to exercise the exclusive powers of either the Federal Court or the Federal Magistrates Court However, it is unnecessary to determine that question. Even if the Court could exercise the powers in s 30 and in s 134 (4), those powers do not in any respect authorise the kind of orders which the Official Trustee seeks. In particular, for the reasons already expressed, the power in s 30 (1) to order injunctions does not assist. Similarly, the power in s 134 (4) which authorises the Official Trustee to apply for directions requires the existence of some legal or equitable right which will provide the grounds to obtain the mandatory orders the Official Trustee seeks. As there are no such grounds, s 134 (4) does not assist.
For these reasons I dismiss the application.