Rams Mortgage Corporation Ltd v Skipworth (No 2)

[2007] WASC 75

RAMS MORTGAGE CORPORATION LTD -v- SKIPWORTH & ANOR (NO 2) [2007] WASC 75

Link to Appeal :

[2008] WASCA 148

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2007] WASC 75
Case No:	CIV:1509/2006	Heard:	1 MARCH 2007
Coram:	EM HEENAN J	Delivered:	29/03/07
No of pages:	15	Judgment Part:	1 of 1
Result:	Stay of execution extended
Category:	A
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Parties:	RAMS MORTGAGE CORPORATION LTD JEFFREY DONALD SKIPWORTH JANET-JANE TURNBULL SKIPWORTH
Catchwords:	Stay of execution Judgment for possession of land Mortgagee's action Joint tenancy One of two joint tenants bankrupt Disclaimer of bankrupt's interest by trustee in bankruptcy Effect of disclaimer Need for vesting order under s 133(9) of Bankruptcy Act 1966 (Cth)
Legislation:	Adminstration Act 1903 (WA) Bankruptcy Act 1966 (Cth) Civil Judgments Enforcement Act 2004 (WA) Companies (Co-operative) Act 1943 (WA) Companies Act 1961 (NSW) [now repealed] Companies Act 1961 (WA) [now repealed] Corporations Act 2001 (Cth) Criminal Code (WA) Escheat (Procedure) Act 1940 (WA) Family Law Act 1975 (Cth) Rules of Supreme Court 1971 (WA) Transfer of Land Act 1893 (WA)
Case References:	Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400 Attorney-General (Ontario) v Mercer (1883) 8 App Cas 767 Attorney-General v Brown (1847) 2 SCR (NSW) App 30 Brighton & Shoreham Building Society v Hollingdale [1965] 1 WLR 376 Burke v Dawes (1938) 59 CLR 1 Hastings & Thanet Building Society v Goddard [1970] 1 WLR 1544 Leicester Permanent Building Society v Shearley [1951] Ch 90 Mabo v Queensland [No 2] (1992) 175 CLR 1 Minet v Johnson (1890) 63 LT 507 RAMS Mortgage Corporation Ltd v Skipworth [2007] WASC 24 Re Carter and Ellis [1905] 1 KB 735 Re Condobolin Bila CDEP Ltd (deregistered) (2006) 59 ACSR 682 Re Hopgood (1957) 18 ABC 133 Re Hosking (1932) 6 ABC 44 Re Lasscock (1961) 18 ABC 263 Re Levy (1881) 17 Ch D 746 Re Mercer and Moore (1880) 14 Ch D 287 Re Middle Harbour Investments Ltd (In Liq) [1977] 2 NSWLR 652 Re Tulloch Ltd (In Liq) (1978) 3 ACLR 808 Re Wakefield (1989) Q Conv R 54-328 Re Weiland (Dec) (1945) 13 ABC 220 Re Williams (1931) 3 ABC 157 Re Woo [2003] FCA 862 Sandhurst Trustees Ltd v 72 Seventh Street Nominees Pty Ltd (In Liq) (1998) 45 NSWLR 556 Thompson v Slade (1856) 25 LJ Ex 306 Williams & Glyn's Bank Ltd v Boland [1980] 2 All ER 408

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION : RAMS MORTGAGE CORPORATION LTD -v- SKIPWORTH & ANOR (NO 2) [2007] WASC 75 CORAM : EM HEENAN J HEARD : 1 MARCH 2007 DELIVERED : 29 MARCH 2007 FILE NO/S : CIV 1509 of 2006 BETWEEN : RAMS MORTGAGE CORPORATION LTD

Plaintiff

AND

JEFFREY DONALD SKIPWORTH
JANET-JANE TURNBULL SKIPWORTH
Defendants

Catchwords:

Stay of execution - Judgment for possession of land - Mortgagee's action - Joint tenancy - One of two joint tenants bankrupt - Disclaimer of bankrupt's interest by trustee in bankruptcy - Effect of disclaimer - Need for vesting order under s 133(9) of Bankruptcy Act 1966 (Cth)

Legislation:

Adminstration Act 1903 (WA)

Bankruptcy Act 1966 (Cth)
Civil Judgments Enforcement Act 2004 (WA)
Companies (Co-operative) Act 1943 (WA)
Companies Act 1961 (NSW) [now repealed]
Companies Act 1961 (WA) [now repealed]

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Corporations Act 2001 (Cth)
Criminal Code (WA)
Escheat (Procedure) Act 1940 (WA)
Family Law Act 1975 (Cth)
Rules of Supreme Court 1971 (WA)
Transfer of Land Act 1893 (WA)

Result:

Stay of execution extended

Category: A

Representation:

Counsel:

Plaintiff : Mr D H Solomon
First-named defendant : No appearance
Second-named defendant : Mr M D Cuerden

Solicitors:

Plaintiff : Solomon Brothers
First-named defendant : No appearance
Second-named defendant : Fiocco's Lawyers

Case(s) referred to in judgment(s):

Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400
Attorney-General (Ontario) v Mercer (1883) 8 App Cas 767
Attorney-General v Brown (1847) 2 SCR (NSW) App 30
Brighton & Shoreham Building Society v Hollingdale [1965] 1 WLR 376
Burke v Dawes (1938) 59 CLR 1
Hastings & Thanet Building Society v Goddard [1970] 1 WLR 1544
Leicester Permanent Building Society v Shearley [1951] Ch 90
Mabo v Queensland [No 2] (1992) 175 CLR 1
Minet v Johnson (1890) 63 LT 507
RAMS Mortgage Corporation Ltd v Skipworth [2007] WASC 24
Re Carter and Ellis [1905] 1 KB 735

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Re Condobolin Bila CDEP Ltd (deregistered) (2006) 59 ACSR 682
Re Hopgood (1957) 18 ABC 133
Re Hosking (1932) 6 ABC 44
Re Lasscock (1961) 18 ABC 263
Re Levy (1881) 17 Ch D 746
Re Mercer and Moore (1880) 14 Ch D 287
Re Middle Harbour Investments Ltd (In Liq) [1977] 2 NSWLR 652
Re Tulloch Ltd (In Liq) (1978) 3 ACLR 808
Re Wakefield (1989) Q Conv R 54-328
Re Weiland (Dec) (1945) 13 ABC 220
Re Williams (1931) 3 ABC 157
Re Woo [2003] FCA 862
Sandhurst Trustees Ltd v 72 Seventh Street Nominees Pty Ltd (In Liq) (1998) 45 NSWLR 556
Thompson v Slade (1856) 25 LJ Ex 306
Williams & Glyn's Bank Ltd v Boland [1980] 2 All ER 408


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1 EM HEENAN J: Following my earlier reasons for decision ([2007] WASC 24), delivered on 8 February 2007, when granting a temporary stay of execution of the judgment and order for possession, making other directions and giving liberty to apply, I ordered, among other things, that the parties should make further submissions as to the effect, if any, which Mr Skipworth's trustee's disclaimer of the mortgaged property has on the plaintiff's ability to proceed with this action or effect any sale of the mortgaged property without a vesting order being made, under s 133(9) of the Bankruptcy Act 1966 (Cth), of the bankrupt's former interest in that land.

2 Since then solicitors have gone on the record for the second-named defendant and, by her counsel, Mrs Skipworth has filed and served written submissions on this and related issues. Written submissions have also been filed by counsel for the plaintiff and the matter was relisted for hearing before me on this and related points on 1 March 2007.

3 I also ordered that the second-named defendant should, within a specified time, file an affidavit deposing to the progress, if any, which she was making in relation to the proposals to remove the caveats over the subject land and whether or not she intended to make any application in a federal court for a vesting order under s 133(9) of the Bankruptcy Act. Also, on the application of the plaintiff, I extended the period for compliance with my earlier direction for the removal from the record of proceedings of affidavits comprising part of the record of the proceedings before the Magistrate under the Family Law Act 1975 (Cth) referred to in my earlier reasons, and gave liberty to apply to the plaintiff to make further submissions in relation to that matter, should it wish to do so. At the hearing on 1 March 2007 I was informed that Mrs Skipworth had, by then, obtained approval for a loan to repay the existing mortgage and was, through her solicitors, pursuing the question of the potential removal of the caveats over the land.

4 These reasons deal with the question of whether the plaintiff, or any other person, need seek and obtain a vesting order under s 133(9) of the Bankruptcy Act before proceeding to enforce the judgment in this action or, for that matter, to allow the plaintiff mortgagee to sell the secured property to satisfy its mortgage debt pursuant to the powers contained in s 108 of the Transfer of Land Act 1893 (WA). Should such a vesting order be necessary, then the absence of such an order at present would constitute a significant additional, but independent, reason for extending the order staying execution of this judgment for recovery of the land.

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5 On this issue I have had the benefit of thorough and helpful written and oral submissions from counsel, which demonstrate that it is necessary to address the following four issues in the context of bankruptcy:

(a) escheat and disclaimer;

(b) the effect of disclaimer on the rights of a mortgagee over disclaimed land;

(c) other persons affected; and

(d) vesting orders.

Escheat and disclaimer

6 Grantees of land in this State hold their land "of the Crown" in accordance with the feudal doctrine of tenure: Attorney-General v Brown (1847) 2 SCR (NSW) App 30; Mabo v Queensland [No 2] (1992) 175 CLR 1 per Brennan J at 45; per Deane and Gaudron JJ at 80 - 81; per Dawson J at 122; per Toohey J at 180. The term "tenure" signifies the relationship between the Crown and the holder of a Crown grant (or between tenant and mesne lord; not between tenant and land): Attorney-General (Ontario) v Mercer (1883) 8 App Cas 767 per Selborne LC at 771 - 772. An incident of the doctrine of tenure is that land may escheat to the Crown (or to the mesne lord of whom the tenant held) if a tenancy in fee simple comes to an end: "Halsbury's Laws of England", vol 39(2) at [254]. The most common instances of escheat were:

(i) escheat for want of heirs, where the tenant in fee simple died intestate without leaving an heir. (Abolished in all Australian jurisdictions except Western Australia: "Halsbury's Laws of Australia", vol 22 at [355-75]. In this State, where a person dies intestate "leaving no husband, or wife and no issue, parent, brother, sister, child of a brother or sister, grandparent, uncle, aunt or child of an uncle or aunt", and no de facto partner, "the whole of the intestate property passes to the Crown by way of escheat": Administration Act 1903 (WA), s 14, s 15. Despite this statutory language, it is more correct to speak of such transmission of personal property (including leases) to the Crown, on death, as transmission of "bona vacantia".); and

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(ii) escheat on conviction of a felony (also abolished, see, for example, Criminal Code (WA), s 730).

7 According to Butt P, "Land Law", 5th ed (2006) at 77, the only remnants of the doctrine of escheat now appear to be, first, where a land owner's trustee in bankruptcy exercises the statutory power to disclaim land that is subject to onerous covenants or is difficult to sell (Bankruptcy Act, s 133; see also s 104 of its previous incarnations), and secondly, where a liquidator exercises a similar power to disclaim land of a company (Corporations Act 2001 (Cth), s 568; see also equivalent provisions in State company legislation, for example the Companies (Co-operative) Act 1943 (WA), s 276 and the uniform Companies Act 1961 (WA), s 296).

8 In these instances of statutory disclaimer, it is accepted that disclaimed land escheats to the Crown: Re Mercer and Moore (1880) 14 Ch D 287, per Jessel MR at 295 - 296; Re Levy (1881) 17 Ch D 746, per Jessel MR at 753; Attorney-General (Ontario) v Mercer (supra) per Selborne LC at 772; Re Middle Harbour Investments Ltd (In Liq) [1977] 2 NSWLR 652 per Bowen CJ in Eq at 662; Re Tulloch Ltd (In Liq) (1978) 3 ACLR 808 per Needham J at 812 - 813; Re Weiland (Dec) (1945) 13 ABC 220 per Clyne J at 225; cf. Re Lasscock (1961) 18 ABC 263 per Paine J at 271. This overlooks the possibility of land reverting to a mesne lord if it were held of a mesne lord: Williams T C, "The Fundamental Principles of the Present Law of Ownership of Land" (1931) 75 The Solicitors' Journal 843 at 846; however, since the process of subinfeudation was abolished prior to settlement, this apparent oversight is of no consequence in any of the Australian States or Territories: Re Middle Harbour Investments Ltd (In Liq) (supra) per Bowen CJ in Eq at 662. In Australia, disclaimed land will escheat to the Crown in right of the State which originally granted the land. For this reason, in both Sandhurst Trustees Ltd v 72 Seventh Street Nominees Pty Ltd (In Liq) (1998) 45 NSWLR 556 at 561 and Re Condobolin Bila CDEP Ltd (deregistered) (2006) 59 ACSR 682 at 684, the State of New South Wales was made a party to the actions on the basis that it had an interest in the land upon escheat. Such an escheat occurs automatically upon the occurrence of the event which causes it (for example, the disclaimer). Thus an order for escheat made under s 7 of the Escheat (Procedure) Act 1940 (WA) is declaratory in effect, and confirms rather than brings about the particular escheat.

9 Where land escheats to the Crown, the Crown becomes the "absolute owner" of that land; it does not succeed to the tenant's rights, nor hold an

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estate in that land. Rather, the Crown takes back because of its own title paramount which is again assertable (see Butt (supra) at 77). Thus,

"[i]t is historically inaccurate to speak of the Crown's ownership of land as freehold or as fee simple; those terms refer to the relationship between the landowner and the feudal lord [citations omitted]": Sandhurst Trustees Ltd v 72 Seventh Street Nominees Pty Ltd (In Liq) (supra) per Bryson J at 563.

Even so, it has been said that "[d]istinctions between the Crown's ownership of land and the ownership of any other person are almost untraceable and do not seem to have any continuing practical importance": Sandhurst Trustees Ltd v 72 Seventh Street Nominees Pty Ltd (In Liq) (supra) per Bryson J at 563; Re Middle Harbour Investments Ltd (In Liq) (supra) per Bowen CJ in Eq at 663.

10 Under a statutory escheat, such as the one arising in the present case from the disclaimer of land by a trustee in bankruptcy, the Crown takes back the land subject to previous existing charges:

"It is established in the modern law [whether under the Torrens System or according to general law] that it is only the interest of the fee simple owner which goes out of existence on an escheat, charges over the land do not go out of existence and the land reverts to the Crown subject to those charges": Sandhurst Trustees Ltd v 72 Seventh Street Nominees Pty Ltd(In Liq) (supra) per Bryson J at 564.

See also Attorney-General (Ontario) v Mercer (supra) per Selborne LC at 772; Re Middle Harbour Investments Ltd (In Liq) (supra) per Bowen CJ in Eq at 664; Re Condobolin Bila CDEP Ltd (deregistered) (supra) per Gyles J at 684; and Re Woo [2003] FCA 862 per Madgwick J at [5].

11 Some commentators, including Professor Butt (supra at 77, footnote 58), have noted that, in principle, it is difficult to see why previously created charges should subsist, given the cessation of the underlying estate in fee simple over which the charges are given. Bryson J, in Sandhurst Trustees Ltd v 72 Seventh Street Nominees Pty Ltd (In Liq) (supra) at 565, also recognised this difficulty:

"Disclaimer under modern legislation does not relate well to the theoretical foundations of land law, and the modern legislation has not characteristically spelt out what is to happen to the

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disclaimed property, although it has often empowered the court to designate what is to happen."

Nevertheless, it is clear from the language of the relevant statutory provisions (for example, s 133(2) of the Bankruptcy Act) that certain rights and liabilities of other persons continue to subsist following the disclaimer of land. Despite this apparent theoretical anomaly, the continuation of interests in the land by persons other than the bankrupt has been recognised both by statute and in the cases cited.

The rights of a mortgagee in respect of disclaimed land

12 Disclaimer will not affect the rights of third parties, save insofar as may be necessary to release the bankrupt, his property, and the trustee from liability - see "Williams and Muir Hunter on Bankruptcy", 19th ed (1979). Property, in this context, refers to the property of the bankrupt other than the disclaimed property:

"There could be no legislative purpose to release the disclaimer property from any other person's rights, and if the provision operated to do so it would be absurd.": Sandhurst Trustees v 72 Seventh Street Nominees (In Liq) (supra) per Bryson J at 561.

See also Re Tulloch Ltd (In Liq) (supra) per Needham J at 813.

13 The following cases consider the position and rights of a mortgagee in respect of disclaimed land. Re Middle Harbour Investments Ltd (In Liq) [1977] 2 NSWLR 652 concerned s 196(2) of the Companies Act 1961 (NSW), a provision substantially similar to s 133(2) of the Bankruptcy Act except for the fact that where a liquidator disclaims he is not, as is a trustee in bankruptcy who makes a similar disclaimer, disclaiming personally; it is the company which is disclaiming in the first instance. In that case, Bowen CJ in Eq held, at 660 - 661, that the consequences of a disclaimer for a mortgagee are that: "the mortgagee will retain its rights in respect of principal, interest and charges which have become due at the date of disclaimer". Since "the company's liability upon its covenants in the mortgagee is brought to an end", after the disclaimer, interest does not continue to run in favour of the mortgagee, and subsequent charges may not be met by the mortgagee and added to the security. (See also Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400 at 415, where Basten JA held that a "disclaimer only has effect in the future and does not have an effect on any accrued rights or liabilities so that, for instance, the bankrupt is still
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liable for the calls on shares made before the disclaimer [citation omitted]".)

14 Finally, his Honour commented, at 662 - 663, that, at least in circumstances where the mortgagor remains registered upon the register book as the proprietor of an estate in fee simple, "it seems that the rights of the mortgagee under its security would not be destroyed or substantially impaired", and that if a mortgagee were to then exercise a power of sale, the mortgagee could "presumably give title to the purchaser".

15 In Re Tulloch Ltd (In Liq) (supra) at 813, Needham J dealt more specifically with the rights of the mortgagee and concluded that only those rights which vest in the mortgagee as a result of default occurring prior to bankruptcy ("accrued rights") survive the disclaimer of the property. Since the contractual covenants in the mortgage ceased to apply upon the disclaimer of the property, such rights could not arise following the disclaimer since there can be no default in complying with contractual obligations which no longer exist.

16 Counsel for the plaintiff, in the present case, submitted that this conclusion of Needham J should not be followed because it was contrary to the indefeasible interest which a registered mortgagee obtained under the Transfer of Land Act which, in counsel's submission, took effect not merely because of the contractual obligation but because of the statutory effect given to such obligations by the Torrens legislation itself (for example, by s 58 of the Transfer of Land Act). It is apparent that the observations of Needham J might not entirely account for all the incidents of a registered mortgage. Such a mortgage contains both a contractual covenant to repay as well as a security by way of charge "enabling recourse to the specific property to satisfy the debt" (see Butt (supra) at 552). The right of recourse to the secured property arises upon default; that is, from the breach of the contractual covenant. While it is correct to say, as does Needham J, that the contractual covenant is destroyed by the disclaimer and therefore may not be relied upon, that does not appear to give sufficient regard to the statutory effect given to such covenants by the Torrens legislation, nor to the preservation of the rights of third parties such as mortgagees by s 133(2) of the Bankruptcy Act itself nor, for that matter, by s 58 of that Act. However, if one adopts the analysis undertaken in Re Tulloch Ltd (In Liq) (supra), even though the security (or charge) survives the disclaimer, the implication is that the right of access to the property which it entails could not, without more, be immediately vindicated.

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17 The analysis of Needham J gives rise to a distinction based on the timing of the default in relation to the disclaimer by the trustee in bankruptcy. Where the mortgagors' default under the mortgage occurs prior to the trustee's disclaimer, as in the present case (see also Sandhurst Trustees v 72 Seventh Street Nominees (In Liq) (supra)), the resulting "accrued rights" may be asserted and vindicated, according to the reasoning in Re Tulloch Ltd (In Liq). However, events that occur after the disclaimer may not be relied upon to constitute a default or permit other action to be taken because, by the disclaimer, the underlying obligation has been terminated.

18 This approach may be acceptable enough, even if counsel's criticisms of the reasoning were to be accepted, because it will probably be rare that a situation arises where a mortgagor becomes bankrupt without first defaulting on the mortgage. Moreover, the occurrence of the bankruptcy will not constitute an event of default under the mortgage, even in the face of a covenant to that effect in the security document, because of the operation of s 302 of the Bankruptcy Act which renders any such provision void. The submissions of counsel and my own research have not succeeded in discovering any reported cases involving the disclaimer of mortgaged property where the disclaimer occurred prior to default by the mortgagor. Presumably, if that were to occur and the correctness of Re Tulloch Ltd(In Liq) were to be accepted, the appropriate course for the mortgagee would be to apply under s 133(9) for a vesting order to be granted on conditions which would permit it to enforce its security as if a default had occurred. However, the fact that mortgagees have applied for vesting orders in cases where the default had preceded the disclaimer, as occurred in Re Tulloch Ltd (In Liq) (supra), Re Woo (supra), and in Re Middle Harbour Investments Ltd (In Liq) (supra), strongly suggests that vesting orders were necessary, even in those instances. In any case, a vesting order would appear to be preferable to accepting relegation to the status of unsecured creditor by proving the loss suffered by reason of the disclaimer as a debt in the bankruptcy under s 133(12) of the Bankruptcy Act.

19 However, with respect, it seems to me that the conclusions of Needham J in Re Tulloch Ltd (In Liq) (supra) can be reconciled with the statutory force given in covenants in a registered mortgage by the Torrens legislation, and the provisions of s 133 of the Bankruptcy Act, if the view taken is that the termination of the mortgagee's rights, except for rights which have accrued prior to the disclaimer, are not necessarily final because they are capable of being, in effect, reinstated on a successful application by the mortgagee (or by others) for a vesting order under

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s 133(9) of the Bankruptcy Act. The application for the vesting order, which may be granted on terms, is the occasion where these rights can be adjusted and preserved in a manner which, as the Bankruptcy Act itself directs, is conformable to the interests of third persons including the mortgagee (see s 133(2) of the Bankruptcy Act). Perhaps it is too much to say that the rights of the mortgagee in such an interest are terminated (except for accrued rights) but are capable of reinstatement, because of the statutory directives that it is only the rights, interests and the liabilities of the bankrupt which are affected by the disclaimer. The problem, however, is that it is difficult to reconcile in principle how the rights of third parties, which are dependent upon or derive from the existence of property or obligations by the bankrupt, can endure when the bankrupt's interest in that property or those obligations is itself terminated. However, it is clear that it is the policy of the statute to ensure, so far as possible, that that occurs. The answer seems to be that the entity, which takes or receives the former property of the bankrupt in the disclaimed asset, takes that property subject to obligations which the bankrupt had to third parties and this is, of course, consonant with the principles of escheat which have already been discussed.

Persons affected by an action for possession of land

20 It is established that in an action by a mortgagee for possession, as well as the individual mortgagors, persons who have an independent right to remain in occupation should be made defendants: Brighton & Shoreham Building Society v Hollingdale [1965] 1 WLR 376; Thompson v Slade (1856) 25 LJ Ex 306. Thus, a spouse who asserts that she is entitled to take over the obligations of the mortgage and who shows that there is a real prospect in the near future of being able to redeem the mortgage should also be made a defendant: Hastings & Thanet Building Society v Goddard [1970] 1 WLR 1544 and "Halsbury's Laws of England" vol 32, at [748]. Further, if there is another person in occupation, that occupier should be made a defendant: Leicester Permanent Building Society v Shearley [1951] Ch 90, a decision applying Minet v Johnson (1890) 63 LT 507 which has been referred to with approval and applied by Dixon J in Burke v Dawes (1938) 59 CLR 1 at 16.

21 More recent authorities suggest that the trend is towards greater care and attention being given to ensure the persons affected by such proceedings are joined or given notice of them: Williams & Glyn's Bank Ltd v Boland [1980] 2 All ER 408 per Lord Wilberforce at 415 - 416. This principle finds its recognition in this jurisdiction in RSC O 62A r 3(5)

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which requires, in actions for the recovery of possession by an originating summons issued by a mortgagee, that the applicant give particulars of every person who to the best of the plaintiff's knowledge is in possession of the mortgaged property. It is not clear why a similar obligation is not expressly required under RSC O 62A r 4, but the explanation may lie in the need for the plaintiff who has obtained judgment to seek the leave of the court before issuing a writ of execution pursuant to RSC O 47 r 2.

22 Another specific statutory recognition of the rights of persons in possession appears by RSC O 18 r 10 where, at any stage of the proceedings (even after judgment), any person not a party to the action who is in possession of the land (whether in actual possession or by a tenant) may seek to be added as a defendant. The application of an equivalent rule and the procedure to be followed was discussed by Dixon J in Burke v Dawes (supra) at 16.

23 An example of the situation in which effect may be given to that rule is where an action for possession by an owner has been brought against a sub lessee or sub tenant without the lessee or head tenant being named. In such a case, the landlord or lessee would not be entitled to defend the action, either alone or in the tenant's name, but might apply to be joined and to defend the action - see "Halsbury's Laws of England" 4th ed, reissue, vol 39(2). In such cases the tenant or sub lessee would be expected to give notice of the action for possession to the landlord or head lessee, unless the proceedings would otherwise come to the notice of such a person. RSC O 18 r 10 provides a mechanism for the person who has such a possessory interest to be joined in and to defend the action for possession and, therefore, may be seen as an illustration of the principle that to the extent that he or she may be materially affected, a person with a possessory right to the land has an interest in defending such proceedings.

24 These rules and practices appear to concentrate on persons with possessory rights to the subject property because it can generally be expected that a judgment or order for possession of the subject land will not affect or disturb proprietary interests in the land of persons who are not in actual possession, such as, for example, a registered proprietor or registered mortgagee. If, however, the effect of the action for possession, or the execution of any judgment for possession, can be seen as having a prejudicial effect upon such a person with a proprietary interest in the land, who is not in possession, then these principles strongly suggest that such a person should also be given notice of the proceedings, or should be permitted to be joined as a defendant to oppose them, because of the reality of the interest which they affect.

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25 In the present case, if one poses the question - is there any person or entity, besides the two named defendants, who have an interest in or right to possession of the land which the plaintiff is seeking to recover? - it is clear that there is. Mr Skipworth's interest in the land has escheated to the Crown which, from the date of the disclaimer, has had a proprietary interest as a tenant in common in one undivided half share of the property, and there has been no suggestion, nor could there be any, that Mrs Skipworth has an exclusive right of possession of the land. It follows that under ordinary principles, notice of the intention to enforce this judgment against the land should have been given to the Crown in the right of the State and, having regard to the particular effects brought about by the notice of disclaimer, this could be best achieved by requiring that any person affected by the developments make an application to seek a vesting order (see, for example, Re Woo (supra)) so that on that application the court can give such orders and directions as are necessary to protect these and other possible interests in the land.

Vesting orders

26 Section 133(9) of the Bankruptcy Act provides that:

"The Court may, on application by a person either claiming an interest in, or being under a liability not discharged by this Act in respect of, disclaimed property ... make an order, on such terms as the Court considers just and equitable, for the vesting of the property in ... a person entitled to it or a person in whom, or to whom, it seems to the Court to be just and equitable that it should be vested ... "

More than one person may be entitled to a vesting order (in Re Condobolin Bila CDEP Ltd (deregistered) (supra) the land was held to vest in the Commonwealth as Gyles J could "discern no other competing claimant"), including a mortgagee of Torrens land: Re Tulloch Ltd (In Liq) (supra) per Needham J at 814; Re Hopgood (1957) 18 ABC 133 per Paine J at 141 - 142; Re Woo (supra) at [10]; but cf. Re Williams (1931) 3 ABC 157 per Clark J at 164 - 165 and Re Weiland (Dec) (1945) 13 ABC 220 per Clyne J at 225 - 226. Thus, in Re Woo (supra), Madgwick J ordered, pursuant to s 133(9) of the Bankruptcy Act, that disclaimed property should vest in the applicant mortgagee as tenant in common in equal shares with the third respondent, who, prior to the disclaimer, was a registered proprietor of the property in joint tenancy with the bankrupt.

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27 A vesting order may be granted upon such terms so as to ensure no injustice is done to a third party as a result of the disclaimer: Robertson DC and Tate JB, "Federal Bankruptcy Law and Practice" (1928) at 299; and Re Hosking (1932) 6 ABC 44 per Paine J at 47. Further, a vesting order will be granted upon terms to avoid, if possible, giving profit or advantage to a mortgagee: Re Carter and Ellis [1905] 1 KB 735 per Vaughan-Williams LJ at 746 - 747; Re Hosking (supra) per Paine J at 47. Accordingly, it may be just and equitable to make a vesting order in favour of the mortgagee, subject to certain conditions. Thus, in Re Wakefield (1989) Q Conv R 54-328, a case which concerned an application by an equitable mortgagee for a vesting order, pursuant to s 133(9) of the Bankruptcy Act, Pincus J made a vesting order, "on the condition that [the land] be sold within 12 months and any money in excess of the debt due to the [mortgagee] (plus costs properly incurred in relation to the sale) be paid to the trustee".

28 These considerations are of greater pertinence when one considers the contingencies which are likely to arise upon the execution of a power of sale by a mortgagee of disclaimed property, formerly of a bankrupt, where co-owners or other third parties also have an interest in the land. This present case provides such an example because Mrs Skipworth, the second-named defendant, is now, by reason of the bankruptcy of her husband, a tenant in common as to one undivided half share in the mortgaged land, notwithstanding that on the register book she and her husband remain proprietors as joint tenants. Moreover, there are caveators subsequent to the mortgage asserting the existence of unregistered charges over the subject land which, as set out in my earlier reasons, are asserted to be void and unenforceable by Mrs Skipworth due to her husband forging her signature on the instruments alleged to have created the charges. Furthermore, there is reason to believe that the market value of the mortgaged property significantly exceeds the mortgage debt so that, in the event of a sale, there will be a substantial surplus available for distribution to Mrs Skipworth, the Crown or to other persons entitled. The protection of those other interests and any principled decision as to the distribution of the surplus are bound to require attention. The present proceedings do not go as far as effecting any sale of the property by the mortgagee but, because the plaintiff is seeking vacant possession of the property, the rights of all those persons who claim any interest in the land are also affected, even if to a smaller degree. This is consistent with RSC O 62A r 3(5) which, as discussed above, requires notice to be given to persons having an interest in land

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which is the subject of an action for the recovery of possession by a mortgagee.

29 Both the course of established authority dealing with the position of mortgagees of land which has been disclaimed by a trustee of bankruptcy, or a liquidator of an insolvent company, and these considerations of principle, point to the need for a mortgagee seeking to exercise its powers in respect of property over which it has security, but where one or more of the mortgagors has become bankrupt and his or her trustee has disclaimed the property, to obtain a vesting order under s 133(9) of the Bankruptcy Act, or await the vesting of the property in some other person who can then be joined in the enforcement proceedings, before steps can be taken to obtain possession of the property, or to sell it under the provisions of the mortgage or, where action for the possession of a sale has already been commenced, before that can be continued.

30 Consequently, the absence of any such vesting order of the mortgaged property in favour of the plaintiff, or any other person such as Mrs Skipworth, or some other person having or claiming an interest in the land, means that in my view the plaintiff is presently unable to proceed to enforce this judgment for recovery and possession of the land. This is another, and more considerable, reason for staying execution of that judgment and I will order that the present stay of execution should be extended until further order, with liberty for any affected parties to apply.