Savieri v Brown

[2008] NSWSC 1210

CITATION:	Savieri v Brown [2008] NSWSC 1210
HEARING DATE(S):	8 May 2008
JUDGMENT DATE :	20 November 2008
JURISDICTION:	Equity
JUDGMENT OF:	White J
DECISION:	Refer to para 53 of judgment.
CATCHWORDS:	BANKRUPTCY – effect of bankruptcy on property and proceedings – whether proceedings were in respect of a provable debt – plaintiff alleged to have forfeited his equitable interest in the property prior to bankruptcy – defendant the legal owner then asserted his right to possession – proceedings not in respect of a provable debt - REAL PROPERTY – equitable co-ownership – each co-owner entitled to occupy the whole property – whether plaintiff’s equitable interest forfeited – whether defendant entitled to judgment for possession
LEGISLATION CITED:	Bankruptcy Act 1966 (Cth) Bankruptcy Act 1914 (UK)
CASES CITED:	Ezekiel v Orakpo [1977] QB 260 Thrift v Thrift (1975) 10 ALR 332
TEXTS CITED:	Fisher & Lightwood’s Law of Mortgage, 2nd Aust ed (2006) Peter Butt, Land Law, 5th ed Lawbook Co (2006) McDonald, Henry & Meek: Australian Bankruptcy Law & Practice (looseleaf), Lawbook Co
PARTIES:	David Julian Savieri v Colin Raymond Brown
FILE NUMBER(S):	SC 6482/06
COUNSEL:	Plaintiff: In person Defendant: M P Cleary
SOLICITORS:	Plaintiff: n/a Defendant: Stacks, The Law Firm

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WHITE J

Thursday, 20 November 2008

6482/06 David Julian Savieri v Colin Raymond Brown

JUDGMENT

1 HIS HONOUR: The defendant and cross-claimant, Mr Brown, seeks a judgment for possession of a property located at 560 Crowdy Head Road, Crowdy Head (“the Crowdy Head property”). The plaintiff and cross-defendant, Mr Savieri, is in occupation of part of the property.

2 The plaintiff and defendant are brothers. In 2001, they purchased the Crowdy Head property in equal shares as tenants in common. The property consists of two separate titles of approximately one acre each. On one block of land, two units are constructed. The plaintiff and his son occupy one unit. The defendant and his wife occupy the other. The property was purchased for $379,000. Part of the purchase price was advanced by the Commonwealth Bank on first mortgage security. The plaintiff and the defendant were joint borrowers.

3 It was agreed between the plaintiff and the defendant that they would make equal contributions to the purchase price and the repayment of the Commonwealth Bank loan.

4 The plaintiff and defendant funded the balance of the purchase price either from their own resources or by borrowing as individuals. The plaintiff borrowed $11,000 from Citibank Pty Ltd (“Citibank”). It was common ground that, at least initially, as between the plaintiff and the defendant, the defendant would be responsible for paying moneys due to Citibank.

5 The plaintiff moved into one of the units in January 2002. Until about the end of 2004, the defendant made his contribution to the Commonwealth Bank mortgage by paying his share of the repayments to the plaintiff directly or into the plaintiff’s bank account. Following the breakdown of the plaintiff’s domestic relationship with his de facto partner, the plaintiff failed to make the payments due on the Commonwealth Bank loan for a period of about eight months. That loan went into default and the Commonwealth Bank threatened to exercise its power of sale. In November 2005, the Commonwealth Bank served a statement of claim seeking a writ of possession.

6 Following a settlement conference in September 2005, the defendant arranged a loan which he applied to pay the arrears owing to the Commonwealth Bank.

7 Both the plaintiff and the defendant signed an agreement dated 4 May 2006. There is a complication flowing from the fact that prior to returning his signed counterpart of the agreement, the defendant made alterations to the typewritten text to the disadvantage of the plaintiff. However, the agreement has been partly performed and neither party contends that no binding agreement was entered into by reason of the changes the defendant made.

8 After reciting that the parties were the registered proprietors of the Crowdy Head property which was mortgaged to the Commonwealth Bank to secure repayment of a loan of approximately $288,000, and after reciting that the mortgage had fallen into arrears and that the defendant had paid the arrears, the agreement recited that consequent upon the plaintiff’s financial difficulties, the plaintiff was unable at that time to secure a loan in his name to refinance the Commonwealth Bank mortgage and that the parties were desirous of retaining the property for their mutual benefit and to avoid its falling into the hands of the mortgagee. The agreement provided that the plaintiff would transfer to the defendant his registered interest in the property. Contemporaneously with that transfer the defendant was to obtain a new mortgage in his sole name. Clause 5 provided that the defendant “shall hold the property on trust for himself and [the plaintiff] as Tenants in Common in equal shares”.

9 The agreement signed by the plaintiff provided that the new mortgage to be taken out by the defendant would be in the sum of $437,000; that the plaintiff would be responsible to meet repayments on $300,000 of the principal sum plus interest; and that the defendant would be responsible to meet repayments on $137,000 plus interest. Clause 6(iii) provided that the plaintiff agreed to make monthly repayments to the defendant so that the defendant did not fall into default under the terms of the new mortgage, and that each monthly payment was to be made no later than the tenth day of each month.

10 The defendant agreed to transfer 50 percent of the property back to the plaintiff within three months of the plaintiff’s giving notice of his ability to secure a loan in his name and to refinance his share of the new mortgage.

11 In the agreement the plaintiff was called “David” and the defendant “Colin”.

12 Clause 1 provided:

“ 1. In this Deed default includes:-
(i) David failing to pay to Colin any of his share of the new Mortgage, rates, insurance premium and other outgoing in respect of the property when it falls due;
(ii) Either party doing something he agrees not to do;
(iii) Either party not doing something which he agrees he will do;
(iv) Either party dies or becomes bankrupt or an order is made pursuant to any law relating to mental health for the management of that party’s affairs. ”

13 Clause 7 provided:

“ 7.
(i) The parties hereby expressly agree that it is a fundamental condition of this Agreement that in the event of David becoming in default under this Deed and failing to remedy such default within a period of two (2) months or, such earlier time as Colin may reasonably consider the default is not capable of remedy, then Colin may terminate this Deed and David’s interest in the property shall by reason of the default vest in Colin and David’s interest in the property shall thereupon be and become extinguished.
(ii) David agrees to waive any rights he may have for relief against forfeiture should Colin validly terminate this Agreement and thereby David’s interest in the property be extinguished.
(iii) The parties agree that should David’s interest in the property be extinguished in accordance with this Deed, he will not be entitled to any reimbursements of the monies that he had paid into Colin’s account pursuant to this Deed. ”

14 Clause 13 provided:

“ 13. Upon settlement of the refinance referred to clause 4 hereon Colin shall ensure that all arrears of rates are paid and the rates and charges on the property are brought up to date and David shall (with the exception of his liability in relation to the new Mortgage secured against the property pursuant to this Deed) provide Colin with all details so that settlement cheques can be drawn and forwarded to creditors to pay out all of his liabilities standing as at the date of settlement of the refinance, which as at the date of the deed are acknowledged and estimated as follows: ... ”

There then followed a list of liabilities. These included estimated liabilities to the plaintiff described as follows:

“ Colin Brown $ 6,000.00
Colin Brown re arrears $13,000.00
Colin Brown re roof repairs $ 1,100.00
Colin Brown re hot water system ... $ 650.00
Colin Brown re electrician $ 390.00
...
Colin Brown re Stack Taree $ 3,300.00
Colin Brown re loan break cost, loan application, and
associated financing fees and expenses (est. only) $ 3,000.00 ”

15 Pursuant to this agreement the plaintiff executed a memorandum of transfer in registrable form of his half interest in the property in favour of the defendant. The defendant is now the sole registered proprietor.

16 Settlement took place on 4 May 2006. The plaintiff’s solicitors, Stacks, The Law Firm, provided a settlement statement which showed an amount received of $446,857.75.

17 On 10 May 2006, the defendant’s solicitors sent to the plaintiff’s solicitors the counterpart of the deed of agreement signed by the defendant. The defendant had altered the figures in clauses 4 and 6 and in the recitals to provide that the mortgage should be in the sum of $450,000, and that the plaintiff was to be responsible for repaying $315,000 and the defendant responsible for $135,000.

18 There was subsequent correspondence between the solicitors in relation to the application of the moneys borrowed from the Commonwealth Bank and other matters of accounting between the parties. It was contended for the plaintiff that he was owed $17,986.43.

19 In June 2006, a process server delivered a statement of claim to the defendant at the Crowdy Head property and asked him to give it to the plaintiff. It was not received by the plaintiff until 27 July 2006. In the statement of claim, Citibank sued the plaintiff claiming it was owed $14,868.68 plus interest of $106.32 from 12 April 2006.

20 The defendant claims that the plaintiff was in breach of clause 13 of the agreement of 4 May 2006 by not having provided the defendant with details of the debt owed to Citibank on or prior to settlement of the refinance so that a cheque could be drawn to pay out that liability.

21 On 27 July 2006, the defendant purportedly terminated the agreement. He served a notice of termination. It stated:

“ You, David Julian Savieri, are in breach of clause 13 of the Deed in that prior to settlement of the refinancing arrangement which took place on or about 4 May, 2006 you were required to provide Colin Raymond Brown with all details so that settlement cheques could be drawn and forwarded to creditors to pay out all of your liabilities standing as at the date of settlement of the refinancing arrangement and you failed to do so.

Particulars

(a) You have received service of a Statement of Claim in the Local Court ... issued on behalf of Citibank Pty. Limited to recover an outstanding debt from you ... which was a liability incurred by you prior to 4 May, 2006 and for which you were liable as at the settlement of the refinancing arrangement on 4 May, 2006.

(b) Pursuant to clause 1 (iii) a default includes either party not doing something which he agrees he will do.

(c) Pursuant to clause 7 (i) the parties agreed that it was a fundamental condition of the Deed of Agreement/Deed of Trust that in the event of you becoming in default under the Deed and failing to remedy such default within a period of 2 months then Colin Raymond Brown may terminate the Deed and your interest in the property shall be [sic] reason of the default vest in Colin Raymond Brown and your interest in the property shall thereupon be and become extinguished.

(d) I, Colin Raymond Brown hereby terminate the Deed of Agreement/Deed of Trust dated 4 May 2006 require [sic] that you vacate the property and remove all personal chattels and other non fixtures from the property by 4.30 p.m. on Friday, 25 August, 2006 . ”

22 On 26 August 2006, the defendant took physical possession of the unit occupied by the plaintiff by removing his furniture and personal items and placing them in a garage and changing the locks.

23 The plaintiff did not accept the validity of the purported termination. On or about 1 September 2006, he retook possession of the unit.

24 The plaintiff lodged a caveat claiming to be an equitable co-owner pursuant to the agreement of 4 May 2006. On 28 December 2006, the plaintiff commenced proceedings seeking, amongst other orders, a declaration that he has an interest in the land by virtue of the agreement of 4 May 2006.

25 On 20 March 2007, the defendant filed a cross–claim seeking a declaration that the agreement had been validly terminated and a declaration that the plaintiff has no legal or equitable interest in the property. He sought judgment for possession and leave to issue a writ of possession forthwith.

26 On 8 April 2008, a sequestration order was made against the plaintiff’s estate. The plaintiff thereupon became a bankrupt. On 10 April 2008, the defendant gave notice pursuant to s 60(3) of the Bankruptcy Act 1966 (Cth) requiring the trustee in bankruptcy to elect within 28 days whether to abandon the action commenced by the plaintiff. On 1 May 2008, the trustee advised that he would not be electing to continue the proceedings. The plaintiff’s action is therefore deemed to have been abandoned (Bankruptcy Act, s 60(3)).

27 Subsections 58(3) and (5) of the Bankruptcy Act provide:

“58 Vesting of property upon bankruptcy—general rule

...
(3) Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:
(a) to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or
(b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.
...
(5) Nothing in this section affects the right of a secured creditor to realize or otherwise deal with his or her security. ”

28 The defendant did not press all of the claims for relief in the cross-claim. The relief sought was judgment for possession and leave to issue a writ of possession. Counsel for the defendant submitted that in moving for that relief the defendant was not seeking to enforce a remedy against “the property of the bankrupt in respect of a provable debt”, and was not taking a fresh step in a proceeding “in respect of a provable debt”.

29 No application was made to the “Court” (viz the Federal Court or the Federal Magistrates Court (Bankruptcy Act, ss 5 and 27) for leave under s 58(3)(b)). However, I accept that s 58(3) is not a bar to the defendant’s application for orders for possession. The basis of the defendant’s claim for possession is that he is the legal owner of the property and that the plaintiff ceased to be a co-owner of the property in equity when notice of termination of the agreement was given. The plaintiff had no right to occupy the property, except as an incident of his beneficial co-ownership. According to the defendant, that right ceased on 25 July 2006. Whilst the defendant is seeking a remedy in respect of property of the bankrupt (or according to the defendant in respect of what was property of the bankrupt), the remedy is not sought “in respect of a provable debt”.

30 The defendant says that the ground upon which he was entitled to terminate the agreement was that the plaintiff had failed to notify him of the debt owed to Citibank, and that the remedy was not being sought “in respect of” that debt. I agree. On the defendant’s case, he is simply entitled to possession because the plaintiff forfeited his interest in the property on termination of the agreement and that occurred prior to the making of the sequestration order. The defendant’s right to possession is analogous to the right of a landlord to take possession under a lease which has been forfeited before the lessee becomes bankrupt. In Ezekiel v Orakpo [1977] QB 260, the English Court of Appeal held that the equivalent provision (s 7(1) of the Bankruptcy Act 1914 (UK)) did not preclude or inhibit a lessor from taking possession or taking legal proceedings to recover possession, where the lease had been forfeited before the lessee became bankrupt. That was so whether the lease was forfeited for non-payment of rent or for breach of other covenants (at 267, 268).

31 In any event, I consider that s 58(5) applies. In my view, the defendant is a “secured creditor” of the plaintiff within the meaning of s 5 of the Bankruptcy Act being a person holding a “mortgage, charge or lien on property of the debtor as a security for a debt due to him or her from the debtor”. The agreement of 4 May 2006 is not expressed to be a mortgage, but in substance that is what it is. The agreement provides for the plaintiff to transfer his interest in the property to the defendant, contains a promise by the plaintiff to make monthly loan repayments to the defendant, and further provides for the defendant to transfer the plaintiff’s interest back to him upon the plaintiff’s refinancing his share of the mortgage debt. In the meantime, and unless the agreement is terminated for the plaintiff’s default, the defendant holds a half-share of the property on trust for the plaintiff. The conveyance of the plaintiff’s half-share of the property to the defendant was thus not an absolute conveyance, but a conveyance as security for the debt by which the plaintiff was required to make monthly payments to the defendant of instalments of principal and interest. As the learned authors of Fisher & Lightwood’s Law of Mortgage, 2nd Aust ed (2006) say (at 26-27 [1.19]-[1.20]):

“ When a legal mortgage might be made in the form of an absolute conveyance of the property, it was sometimes doubtful on the terms of the instrument whether it really was a mortgage or an absolute conveyance. While the courts protect a bona fide purchaser ... and will not lightly infer an intention to make a mere security, if none is expressed ...they will give effect to an intention, if proved to create a security. ...
An instrument which purports to be an absolute conveyance may therefore be construed as a mortgage, where, according to the true intention of the parties, it was intended to be regarded as such....
...
The court will also hold that there is a mere mortgage if a separate defeasance or agreement for a right of redemption has been made by the mortgagee or a duly authorised agent of the mortgagee either in writing or orally, or if it appears from recitals in, or by inference drawn from, the contents of other instruments, or from the payment of interest or other circumstances, that the conveyance was intended to be redeemable. ” (Citation of authorities omitted.)

32 The plaintiff is seeking to enforce a remedy, namely the alleged right to possession, which is a dealing with his security within the meaning of s 58(5).

33 For these reasons s 58(3) is not a bar to the defendant’s proceeding with the claim for possession in his cross-claim.

34 The principal issue is whether the notice of termination was effective.

35 Clause 13 required the plaintiff to provide details to enable cheques to be drawn to pay out all his liabilities at the date of settlement. Whilst it is clear that the plaintiff had a liability to Citibank because he borrowed moneys from Citibank, as between him and the defendant it was not a liability the plaintiff was required to discharge. On the proper construction of clause 13, it was only those liabilities which, as between the plaintiff and the defendant, were the plaintiff’s responsibility to pay that needed to be notified. That this is so is clear from the list of liabilities in clause 13. They included the plaintiff’s share of the existing mortgage principal debt, even though the plaintiff was liable (along with the defendant) for the whole of the mortgage debt. There would be no need for a cheque to be drawn to discharge the plaintiff’s liability to Citibank if the defendant was responsible to make the payments due to Citibank.

36 The arrangements for repayment of the Citibank loan were not documented. However, as noted above, the defendant accepted that at the time the loan was taken out, it was agreed between him and the plaintiff that he would be responsible for keeping up the payments to Citibank. The defendant deposed that he and his wife paid the interest on the Citibank debt directly to Citibank and between November 2002 and November 2003, made 13 payments in cash of $325 to the plaintiff to reduce the principal.

37 The defendant said that on about 27 November 2004, he and the plaintiff had a discussion in which he asked how much was owing on the Citibank debt and was told that the amount owing was about $8,000. The defendant said:

“ I then replied that seeing as when he first turned out I had accrued a bill to the amount of $8,000 or above, because he had no work or anything like that for the time being, when he first started for 3 months, I looked after him for that time, and I said ‘Well if it’s $8,000; that bill is $8,000; it’s back to you now’”.

He said that the plaintiff agreed.

38 The plaintiff denied having had a conversation with his brother in 2004 about the Citibank debt. He denied that the defendant had made payments on his behalf or that he had otherwise incurred debts to the plaintiff of around $8,000. He agreed that the plaintiff had provided him with some monetary assistance to buy food, but denied having received money from the defendant for petrol or towards making payments on the plaintiff’s truck, or that he was indebted to the defendant for repairs carried out to a gearbox on the defendant’s utility vehicle which needed repairs following the plaintiff’s use of that vehicle. The plaintiff said that the defendant may have paid a fee for the hire of a trailer.

39 There was no satisfactory evidence to show that the plaintiff was indebted to the defendant in December 2004 for an amount of approximately $8,000. Nor am I satisfied that a conversation occurred to the effect deposed to by the defendant that the plaintiff would resume responsibility for the Citibank debt. There was no objective corroboration of such an agreement. The defendant’s evidence as to the payments he made to reduce the Citibank debt did not demonstrate that he ceased making such payments in about November 2004, being the time of the alleged agreement. Rather, the defendant said that he paid interest, but did not say when he ceased to pay interest. He said that he paid cash to the plaintiff so that the plaintiff would meet the payments of principal, but his evidence was that those payments ceased in November 2003, that is, a year before the alleged agreement.

40 The defendant claimed corroboration for the arrangement in a note signed by the plaintiff and dated 15 December 2004, which specified an amount of $850 for mortgage and insurance and stated “ea 2nd pay f/nite”. According to the defendant this was an acknowledgment that the amounts the plaintiff expected the defendant to pay from December 2004 was $850 per fortnight for mortgage and insurance payments. The plaintiff denied this interpretation and said that the page was only one of about six pages. The document is cryptic and I am not persuaded that it is an acknowledgment that the defendant was no longer responsible for the Citibank debt.

41 There is some objective corroboration of the plaintiff’s version of events. If it had been agreed that the defendant would no longer be responsible for payment of the Citibank debt, there would be no rational reason for the plaintiff not to have included that as one of the debts to be repaid from the refinancing in May 2006 if the refinance extended so far. It is clear from clause 13 that there had been discussions between the parties in November 2005 as to the identity of the plaintiff’s debts. Given the plaintiff’s financial circumstances, it must have been apparent to the defendant in November 2005 that it was likely that some moneys remained owing to Citibank. After all, the plaintiff had not kept up the mortgage payments to the Commonwealth Bank. There was no explanation as to why the Citibank debt would have been omitted from the list of the plaintiff’s liabilities in clause 13 unless it were because the defendant was responsible to the plaintiff to pay that debt.

42 A further unsatisfactory aspect of the defendant’s evidence in this respect is that on settlement there was paid from an amount of $313,333.97 (described as the defendant’s loan to the plaintiff) an amount of $23,872.69 as reimbursement of a “pre-existing debt” owed by the plaintiff to the defendant. It is unclear how this sum was made up except that the deed acknowledged that the plaintiff was liable to the defendant in amounts set out at para [14] above. How those amounts arose is unclear. The defendant did not demonstrate that the debts which the plaintiff allegedly incurred to him prior to November 2004, which he says, in effect, were forgiven in return for his being forgiven from his liability to indemnify the plaintiff against the plaintiff’s liability to Citibank, were excluded from the payment made on settlement.

43 In short, I am not satisfied that an agreement was made between the defendant and the plaintiff that the defendant would cease to be responsible for meeting the Citibank debt. Accordingly, the plaintiff was not required to notify that debt.

44 Moreover, the purpose of clause 13 was that all of the plaintiff’s liabilities could be paid out from the moneys to be raised on the refinancing. On the proper construction of the clause, the plaintiff’s obligation was to provide the defendant with details so that settlement cheques could be drawn and forwarded to creditors to pay out all of his liabilities as at the date of settlement of the refinance, so far as the refinancing extended. On the agreement as altered by the defendant, the refinancing was to be in a sum of $450,000, and of that amount the plaintiff was to be responsible for meeting repayments of $315,000 of the principal sum which was borrowed plus interest. There is an ambiguity in that sums of both $313,000 and $315,000 are stated, but reading the clause (as amended) as a whole, the plaintiff was to be responsible for $315,000 of the mortgage debt of $450,000. The defendant borrowed $450,000 from an entity calling itself Central Coast Home Loans. $446,857.75 was paid into the trust account of the defendant’s solicitors. $2,000 was held in trust, the defendant asserting that he was required to pay other creditors of the plaintiff. Apart from the moneys used to discharge the mortgage debt to the Commonwealth Bank, the whole of the rest of the funds was, according to the defendant, applied in discharge of debts for which the plaintiff was responsible. In other words, on the defendant’s accounting, it would not have been possible to draw a settlement cheque to pay out the Citibank debt from the refinancing. There was thus no breach of clause 13 even if the defendant were not responsible for paying the Citibank debt, or even if the clause applied to debts for which the plaintiff was liable, even though the defendant had agreed with the plaintiff to discharge the liability or indemnify the plaintiff against it.

45 A further reason the notice of termination was ineffective is that the plaintiff was not given an opportunity to remedy the default. Clause 7 provided for the termination of the deed after default by the plaintiff and the plaintiff’s “failing to remedy such default within a period of two (2) months or, such earlier time as Colin may reasonably consider the default is not capable of remedy [sic]”. The default would have been committed once and for all at the time of settlement. The settlement appears to have taken place contemporaneously with entry into the agreement. But it does not follow that because it would not be possible for the plaintiff to rectify the default in providing the details at settlement, that the defendant was entitled to terminate the agreement forthwith. Clause 7 only confers on the defendant the right to terminate the agreement after the plaintiff failed to remedy a default within a period of two months or such earlier time as the defendant might consider reasonable. No such time was specified. The alleged default was not one for which there was a right of termination.

46 For these reasons the agreement was not terminated. The plaintiff remained the equitable co-owner of the land. It is therefore unnecessary to explore the other questions which would arise if there were a contractual right to terminate. It is sufficient to say that it would in any event be seriously arguable that because the agreement operates in substance as a mortgage, the plaintiff retained an equity of redemption. Prima facie, that equity of redemption could not be displaced by the contractual term that the plaintiff waived any rights to seek relief against forfeiture (Fisher & Lightwood’s Law of Mortgage at 23-24 [1.14]). It is unnecessary to pursue these questions.

47 Because the defendant continued to hold the property on trust for himself and the plaintiff as tenants in common in equal shares, the plaintiff continued to enjoy a right of occupation. As Professor Butt notes (Peter Butt, Land Law, 5th ed Lawbook Co (2006) at 228-229 [1435]:

“ Unless the co-owners have agreed otherwise, each co-owner is entitled to occupy the whole property, along with any other co-owner who chooses to do so. “

48 It appears that the parties had made an agreement otherwise, in that they had agreed as to which parts of the property each should occupy. By virtue of his beneficial co-ownership the plaintiff remained entitled to occupy his unit.

49 On his becoming bankrupt, the plaintiff’s equitable ownership of the property vested in his trustee in bankruptcy. It was submitted for the plaintiff that by having elected not to continue the plaintiff’s action, the trustee had abandoned his claim to equitable co-ownership. I do not agree. All that was abandoned was the plaintiff’s action. That could not be an abandonment of property which vested in the trustee in bankruptcy, even if it were possible for the trustee to divest himself of such property by “abandonment”. As the learned authors of McDonald, Henry & Meek: Australian Bankruptcy Law & Practice (looseleaf), Lawbook Co say (at [60.3.20]), the weight of authority favours the view that abandonment of an action under s 60(3) does not destroy the underlying right of action which is retained in the trustee, and can be the subject of a future proceeding by the trustee.

50 The plaintiff’s becoming bankrupt was a default under clause 1(iv). However, the defendant did not thereby hold the property free from the plaintiff’s equitable interest as co-owner. That interest passed to the plaintiff’s trustee in bankruptcy. It was too late for the defendant to attempt to give a notice of termination by reason of that default. Nor did the defendant give any such notice of termination.

51 A co-owner is entitled to allow others to occupy the property, although he will be liable if he purports to exclude the other co-owner (Thrift v Thrift (1975) 10 ALR 332 at 338-339). Accordingly, if the plaintiff is in occupation under licence from his trustee in bankruptcy, the plaintiff cannot complain.

52 The defendant did not put his case on the basis that the plaintiff had no such licence. I have rejected the grounds upon which the defendant contended that the plaintiff had lost his right of occupancy.

53 For these reasons, I order that paragraphs 2 and 3 of the cross-claim be dismissed. The defendant will be liable to pay the plaintiff’s costs in respect of that part of the cross-claim. I will hear the parties on what costs orders should be made in relation to the balance of the proceedings which are either stayed or abandoned.

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