Official Trustee in Bankruptcy v Shaw
[2019] VSC 681
•14 October 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2019 04538
| OFFICIAL TRUSTEE IN BANKRUPTCY AS TRUSTEE OF THE PROPERTY OF JOHN RASHLEIGH SHAW, A BANKRUPT | Plaintiff |
| v | |
| JOHN RASHLEIGH SHAW | First Defendant |
| - and - | |
| REGISTRAR OF TITLES | Second Defendant |
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JUDGE: | John Dixon J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 7 October 2019 |
DATE OF JUDGMENT: | 14 October 2019 |
CASE MAY BE CITED AS: | Official Trustee in Bankruptcy v Shaw & Anor |
MEDIUM NEUTRAL CITATION: | [2019] VSC 681 |
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REAL PROPERTY – Caveat – Ground of claim in caveat described as ‘estoppel’ – No evidentiary basis to suggest caveatable interest – Order that caveat be removed – Transfer of Land Act 1958 (Vic), s 90(3)
PRACTICE AND PROCEDURE – Application for recusal of judicial officer – Apprehended bias – Judicial officer previously heard and determined matter involving applicant – Application refused
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | C Moller | Harris Carlson Lawyers |
| For the First Defendant | No appearance | |
| For the Second Defendant | No appearance |
HIS HONOUR:
Summary of matters giving rise to the proceeding
John Rashleigh Shaw was, until 1 August 2019, registered as the sole proprietor of an estate in fee simple in a residential unit and an associated car parking space, being lots 5 and 19 on registered plan 016333, being the land more particularly described in certificates of title volume 9420 folio 449 and 9420 folio 463 (Property).
On 11 June 2014, the Federal Court of Australia made a sequestration order against Mr Shaw and the Official Trustee was appointed as trustee of his bankrupt estate. There is a history of legal challenges following that order and other matters, but it is not necessary for present purposes that I set out the full history of the litigation.
On 6 July 2019, the Official Trustee entered into a contract to sell the Property to purchasers for $363,000, with settlement due to take place on 4 October 2019.
It is unclear precisely when Mr Shaw became aware of that sale (which I note was at public auction), although it is probable that he was informed of an intention to sell the Property or knew that he was no longer the registered proprietor of it from an earlier point in time.
It is sufficient to note that in one of the extant proceedings, being Federal Court of Australia proceeding number VID778 of 2019, Mr Shaw applied for review of the decision made by the Official Trustee to partially admit a proof of debt advanced in the bankruptcy under the Bankruptcy Act 1966 (Cth). Included in that application was a claim for interlocutory injunctive relief, directed at a related decision made by the Official Trustee to sell the Property.
In reasons for the judgment,[1] Snaden J recorded that:
The interlocutory relief that Mr Shaw sought was the subject of discussion at a case management conference that took place on 9 August 2019.
At my invitation, the parties there agreed that the court should hear and determine the substantive application in advance of the settlement of the sale. Doing so obviated the need for a separate hearing and directed to Mr Shaw's application for interlocutory relief.[2]
[1]Shaw v The Official Trustee in Bankruptcy [2019] FCA 1574.
[2]Ibid [3].
That substantive application was heard on 13 September 2019 and judgment was delivered on 26 September 2019. The court confirmed the Official Trustee's decision to admit the contested proof of debt and Mr Shaw's application was otherwise dismissed. The material presently before me, however, does not disclose the basis of Mr Shaw’s application for interlocutory injunctive relief directed to the Official Trustee's decision to sell the Property.
On 3 October 2019, Mr Shaw lodged a caveat on each of the two titles in question. Settlement of the contract has been deferred and I was informed that it is now scheduled to take place on 8 October 2019.
The caveats were lodged on Mr Shaw's behalf by David-Jon Robert Dawn of Victorian Property Settlements, which is apparently a conveyancing practice. Mr Dawn certified that he had taken reasonable steps to ensure that the instrument was correct and complied with relevant legislation and that he retained the evidence supporting the caveat. The caveat also recorded that notices in respect of it were to be directed to Emma O'Callaghan of 355 North Rocks Road, North Rocks New South Wales.
The caveat nominated Mr Shaw as caveator, claiming a freehold estate in the land with an absolute prohibition on dealings. The grounds of the claim were described as ‘estoppel’.
On notification of the caveat, the Official Trustee's solicitors wrote to both Mr Dawn and Ms O'Callaghan about the caveat and the impact that its lodgement would have on the imminent settlement of the contract of sale for the Property. The solicitors also contended that Mr Shaw could not have a basis to assert a caveatable interest, whether on the ground of estoppel or otherwise, in the circumstances of his bankruptcy. Mr Dawn and Ms O'Callaghan were invited to provide evidence in relation to the caveatable interest being claimed.
Mr Shaw responded by email stating:
Further to below, please note that Mr Dawn and Ms O'Callaghan did not have instructions to act for me beyond the lodging of the caveat. Please refer future correspondence to me at my address for service [address omitted] or this email if urgent.
It would seem that the caveator was seeking to vary the address for service of notices that had been noted in the caveat, although his actions in doing so were ineffectual, and the registered proprietor was entitled to address notices to the address stated in the caveat.
Mr Shaw’s correspondence
On 7 October 2019, the return day for the summons, Mr Shaw sent a letter by email to the Official Trustee’s solicitors and the court. Mr Shaw requested that the hearing be adjourned for a period of not less than three weeks.
In support of his application for an adjournment, Mr Shaw suggested, firstly, that he was only served on Friday 4 October at around 5:40pm.
Secondly, he stated that:
I live in NSW (as the applicants know) & notice is too short and I need time to get legal advice and check what has been sent to me so I can properly respond to the application.
Thirdly, he stated that Snaden J's judgment, to which I have already referred, is subject to appeal, and suggested that being asked to appear on Monday with almost no notice was unreasonable and oppressive.
There was some merit in each of these contentions.
Fourthly, he suggested that the hearing should not be deemed as urgent, as:
[I]t’s a commercial transaction and I haven’t seen any evidence regarding what disadvantage the Trustee or purchaser would suffer if the settlement was delayed to enable a fair hearing to take place.
Fifthly, Mr Shaw suggested that the Official Trustee had the power to delay settlement in its discretion, and that as the matter ‘was not one of personal hardship, catastrophe, life or liberty’ and it was appropriate to suggest that the timing of the application was ‘more about coercion and intimidation than necessity’. He continued:
It beggars belief that the solicitors can genuinely expect me to attend without a chance to obtain advice or prepare.
Mr Shaw did not appear when the summons was called for hearing.
In addition to the adjournment application, Mr Shaw raised a second issue. He requested that I recuse myself from hearing the summons.
Mr Shaw was previously a litigant before me on 11 April 2013, when I dismissed an appeal from an associate judge and further concluded that any application to set aside a damages assessment made by another associate judge on 7 March 2008 had no real prospect of success.[3] Later, the Court of Appeal granted Mr Shaw leave to appeal against that decision, and set aside my orders.[4] It then treated the appeal as having been heard instanter and made an order dismissing the appeal from the associate judge with costs.
[3]Shaw v Yarranova Pty Ltd& Anor [2013] VSC 200.
[4]Shaw v Yarranova Pty Ltd & Anor [2014] VSCA 48.
Mr Shaw contended that, by virtue of my decision, he was prevented from filing a revised writ before the sequestration order was made and was therefore unable to show that he had an offsetting proceeding on foot, which may have resulted in the sequestration order not being made. Mr Shaw’s letter goes on to state that he does not blame me for this ‘unfortunate situation’ it was nonetheless, in his view, a ‘decisive factor’ in his bankruptcy.
Recusal application
The test to be applied in determining whether a judicial officer is disqualified because of a reasonable apprehension of bias involves two elements. There is a substantive standard identified, albeit one requiring an evaluative judgement. It is necessary to ask whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide.[5]
[5]Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337, 344 [6].
It may be noted that the test for determining whether there is a reasonable apprehension of bias is not necessarily easy to apply. It is expressed at a high level of generality and there are numerous differing circumstances which can fall within the ambit of possible bias.
It is unclear precisely how Mr Shaw seeks to express the reasonable apprehension of bias. He makes a broad generalisation that, ‘given the comments made in the reasons’, he considers there is a possibility of a perception of conflict, prejudging, or bias.
For my part, I can see no possibility of conflict. Secondly, treating Mr Shaw's letter in its most favourable light, it would seem that he is suggesting that I may be biased towards him because of what is recorded in my earlier judgment and because that judgment was overturned by the Court of Appeal. Alternatively, I may have prejudged the matter that has come before me. It would seem that apprehended prejudgment is essentially what concerns Mr Shaw.
There is no basis for Mr Shaw to be concerned that there is any bias towards him in the determination of this matter, simply because he appealed against a decision that I made while sitting in the Practice Court some six years ago.
Importantly, it is the fair-minded lay observer's assessment of the capability of the judge to determine the matter according to law, which is to be assessed on the basis of the evidence admitted at the relevant hearing and after hearing submissions from the parties, rather than the actual state of mind of the judge, either when the impugned conduct occurs or at the later time when the trial is listed. It is necessary to first identify what it is said might lead the judge to decide the case other than on its legal or factual merits. Having done that, it is then necessary to articulate the logical connection between that matter and the feared deviation from the course of deciding the case on its merits.
For my part, I can see nothing in the material provided by Mr Shaw that warrants deciding either of these questions in his favour. In particular, I cannot see how any logical connection can arise between the matters occurring back in April 2013 to which he referred, and his fear that I might deviate from deciding this application on its merits. Why that view can be firmly held will be clear when I come to discuss the merits of this application.
The application made by Mr Shaw that I recuse myself from dealing with this matter is refused.
Adjournment application
Mr Shaw seeks an adjournment of not less than three weeks and that I make directions for the hearing to be set down for further directions, for the filing of affidavits and case management.
This application seems to misconceive the nature of an application for the summary removal of a caveat under s 90(3) of the Transfer of Land Act 1958 (Vic).
It also seems to be based upon the presence of Special Condition 2.5 of the contract of sale, which provides that the Official Trustee may postpone or delay a settlement under the contract for up to 30 days if:
(a) a court order or decree is made that prevents or delays the completion of the sale of the Property in accordance with the contract;
(b) a caveat is registered against the title to the Property; or
(c) any other impediment to the sale or transfer of the Property exists which, in the opinion of the Official Trustee, is beyond the reasonable control of the Official Trustee.
This provision is not one that may be exercised at the insistence of the bankrupt, who is not a party to this contract.
Leaving aside that the Official Trustee may have acted pursuant to that clause when deferring the settlement of the contract beyond 4 October 2019, given that the caveat was lodged on 3 October 2019, there is no indication in the material that the Official Trustee either has or intends to act pursuant to this clause to substantially delay the settlement. Neither is any basis disclosed that would suggest that it was desirable for the Official Trustee to do so.
In my view, it is not appropriate to grant Mr Shaw the adjournment that he seeks and to best explain my reasons for this conclusion, I turn to the substantive basis of the application that the Official Trustee makes.
Application for removal of caveat
The application is for the removal of the caveat under s 90(3) of the Transfer of Land Act 1958.
The relevant principles on such an application were succinctly stated by Macaulay J in Percy & Michele Pty Ltd v Gangemi.[6] In that decision, His Honour made a particular reference to other authorities including Goldstraw v Goldstraw[7] and Piroshenko v Grojsman.[8] Osborn J (as he then was) in Kearsley & Anor v Robson & Anor[9] agreed that the statements of principle in Percy & Michele Pty Ltd are succinctly and carefully summarised.
[6][2010] VSC 530.
[7](2006) V ConvR 54-712.
[8](2010) 27 VR 489.
[9][2011] VSC 50.
What the statute requires is that the caveator show that:
(a) there is at least some probability, on the evidence before the court, that they will be found to have the equitable rights or interest in the land asserted by them in the caveat; and
(b) that probability is sufficient to justify the practical effect which the caveat has on the ability of the registered proprietor to deal with the property in question, in accordance with its normal proprietary rights.
If a prima facie case in this sense is not made out, the question of the balance of convenience never arises. If it does, when considering the balance of convenience, the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been wrong; in the sense of declining to order summary removal of the caveat, where the caveator fails to establish his right at trial, or in failing to order summary removal of the caveat where the registered proprietor succeeds at trial.
The first question then is whether it is possible for Mr Shaw, as caveator, to demonstrate that he can enjoy a caveatable interest in the Property.
The caveat identifies the grounds of claim as ‘estoppel’. Can any form of proprietary claim based upon the principles of estoppel operate in the present circumstances? The resolution of that preliminary question can avoid having to deal with the uncertainty associated with the generality of simply stating the grounds of claim as ‘estoppel’. In my view, it cannot be tenably suggested that any proprietary claim could be arguable.
Section 58(1) of the Bankruptcy Act1966 provides that:
Subject to this Act, where a debtor becomes a bankrupt:
(a)the property of the bankrupt, not being after‑acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and
(b)after‑acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee.
When Mr Shaw became a bankrupt, all of his right, title and interest in the Property vested in the Official Trustee. It is inconceivable that circumstances that would give rise to Mr Shaw's estoppel extend prior to the time when he ceased to be the registered proprietor because it is nonsensical to suggest that the registered proprietor has a claim against himself for an estate or interest in land pursuant to an estoppel.
Mr Shaw must want to assert that his caveatable interest was created by an estoppel arising after his bankruptcy, but such an interest would also vest in his trustee as after-acquired property.
In short, no serious question for trial that principles of estoppel give Mr Shaw a claim to an interest in the land that is enforceable against the Official Trustee in bankruptcy can arise.
It is pertinent to observe that, first, as I have already noted, Mr Shaw contended in the Federal Court proceeding set out above that he was entitled to interlocutory injunctive relief to prevent this sale. That application has been refused. Although the precise grounds for the claim being made in that proceeding are not clear from the reasons for judgment, no basis for the estoppel claim was either revealed or accepted. The late caveat is essentially an inappropriate second bite of the cherry.
Secondly, as I noted, neither the conveyancing agent who certified the caveat nor the conveyancing agent nominated as the address for services of notices has provided a statement of the basis for the caveat in response to correspondence from the Official Trustee, particularly in the context where the Official Trustee has asserted that there could not be a basis for this caveat.
Thirdly, Mr Shaw has not, either in his correspondence with solicitors or in his letter to the court, addressed the question of the basis for his caveat and, in particular, the question of how he is able to maintain that claim in the context of s 58(1) of the Bankruptcy Act. The correspondence, in fact, goes further. While Mr Shaw declines to explain the basis of the estoppel claim, he does state a desire to preserve the Property and to deny the Official Trustee the right to sell it while he appeals the recent Federal Court decision. So much is evident from his email of 30 September 2019 at 12:00:39am; and, from his statement in an email of 3 October 2019 at 03:04:58 pm directed to the solicitors for the vendor and the purchaser in the conveyance stating that he had lodged the caveat ‘[a]s I believe the sale should not settle until my dispute with the Official Trustee is finally determined’.
The letter from the Official Trustee's solicitors directed to the conveyancers following the lodgement of the caveat obviously came to Mr Shaw's attention. When he responded that neither of the conveyancers have instructions to act for him beyond the lodging of the caveat, he did not choose to respond to any of the issues that had been raised by the Official Trustee. This correspondence is consistent with the purpose of the caveat being to defer the settlement of the sale until such time as Mr Shaw's appeal from the Federal Court decision has been heard and determined.
That, of course, is not a proper purpose for filing a caveat. The only purpose for which a caveat can be lodged against the title to property is to prevent dealings with that property because of a claimed interest in it by the caveator. In the ordinary course of events, the caveator is quickly called on to commence proceedings to justify the interest that is being claimed.
Such a proceeding was before the Federal Court and Mr Shaw was unsuccessful in that application. That consequence would appear to reinforce the conclusion that it was not open for Mr Shaw to assert any interest in the property.
For all of these reasons, I am satisfied that Mr Shaw could never show a prima facie case to the estate or interest in the land that is claimed by the caveat. That conclusion is a sufficient basis to dismiss this application. But, in case it be necessary, I would go on to say that the balance of convenience clearly weighs against maintaining the caveat.
Firstly, it is frustrating the settlement of a contract of sale which affects the interests of a third party purchaser adversely. In addition, if the sale was to be terminated, which would likely be the consequence of any significant delay, there is the prospect of prejudice to the caveator's creditors.
Secondly, Mr Shaw could not proffer an undertaking as to damages to permit the caveat to be maintained until he proves his claim.
The third reason affecting the balance of convenience is that of timing. There is no explanation from Mr Shaw as to why this caveat has been lodged so close to settlement. The caveat could have been lodged when he first became aware of the contract of sale and its impact upon his assumed entitlement on the grounds of estoppel, yet that course has not been adopted. It remains open to Mr Shaw, in the context of further proceedings in the Federal Court, to seek relief from that court, if he be advised to do so, that might affect the future conduct of the Official Trustee in relation to the proceeds of sale. Such a claim would directly raise for substantive resolution the point of legal principle about Mr Shaw's entitlement to the land against the Official Trustee that I earlier referred to.
Accordingly, I will order that:
(a) Mr Shaw's application that I recuse myself from dealing with this application, be refused;
(b) Mr Shaw's application that the hearing and determination of the s 90(3) summons be adjourned be refused; and
(c) the caveat be forthwith removed by the second defendant.[10]
[10]The second defendant did not appear in the action, informing the court that he had written to the plaintiff's solicitors with his comments on the form of the orders proposed.
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