Sheahan, John as Trustee of the Bankrupt Estates of Jillian Helen Marshall, Richard John Cooper and Simon Vincent Cooper v Cooper, Noelene Michelle

[1998] FCA 1531

FEDERAL COURT OF AUSTRALIA

REAL PROPERTY – power to order partition or sale instead of partition – principles governing discretion to order sale – farming property comprising separate titles – different considerations applying to some titles where interest is less than one moiety – whether opportunity should be offered to other landowner to purchase property.

Law of Property Act1936 (SA) ss 69, 70 and 72(1)
Jurisdiction of Courts (Cross Vesting) Act 1987
Heritage Act 1978 (SA)
Partition Act1900 (NSW) ss 4(1)(a) and 4(1)(b)
Bankruptcy Act1966 (Cth) s 519

Bray v Bray (1926) 38 CLR 543, considered
Joyce v Joyce (1963) Qd R 139, approved
Pitt v Jones [1880] 5 App Cas 651, followed
Perman v Maloney [1939] VLR 376, followed
Anderson v Anderson [1957] VR 317, followed
Schnytzer v Wielunski [1978] VR 418, followed
Porter v Lopes [1877] 7 Ch D 358, considered

JOHN SHEAHAN (Trustee of the Bankrupt Estate of Jillian Helen Marshall and the Bankrupt Estates of Richard John Cooper and Simon Vincent Cooper) v NOELENE MICHELLE COOPER, JANET ETHEL COOPER, MARTIN JAMES COOPER, ANDREW CHARLES COOPER and ROTHMORE PTY LTD (ACN 007 956 327)
SG 112 of 1998

MANSFIELD J
ADELAIDE
1 DECEMBER 1998

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SG 112 of 1998

BETWEEN:

JOHN SHEAHAN,
Trustee of the Bankrupt Estate of Jillian Helen Marshall
and the Bankrupt Estates of Richard John Cooper
and Simon Vincent Cooper
APPLICANT

AND:

NOELENE MICHELLE COOPER
FIRST RESPONDENT

JANET ETHEL COOPER
SECOND RESPONDENT

MARTIN JAMES COOPER
THIRD RESPONDENT

ANDREW CHARLES COOPER
FOURTH RESPONDENT

ROTHMORE PTY LTD ACN 007 956 327
FIFTH RESPONDENT

JUDGE:	MANSFIELD J
DATE:	1 DECEMBER 1998
PLACE:	ADELAIDE

REASONS FOR JUDGMENT

This is an application under ss 69 and 70 of the Law of Property Act 1936 (SA) (“the Act”). The application is formally for partition.  It is in reality for orders for the sale of certain property generally called Rothmore Farm and for the sale of two residential properties, and for orders as to the application of the proceeds of those sales.

John Sheahan (“the Trustee”) is the trustee of the estates of Jillian Helen Marshall (“JHM”) and the joint estates of Richard John Cooper (“RJC”) and Simon Vincent Cooper (“SVC”)  This Court made sequestration orders against the estates of JHM and of RJC and SVC, and made the orders appointing the Trustee.  In those circumstances, the Trustee asks the Court to entertain the application under the Jurisdiction of Courts (Cross Vesting) Act 1987.  No submission has been put that that course of action is inappropriate, or that there are any considerations which militate against the Court so proceeding.

THE PROPERTY IN ISSUE

The property known collectively as Rothmore Farm comprises the following:

(a)the land in Certificate of Title Register Books Volume 4384 folio 117, Volume 4214 folio 545 and Volume 3322 Folio 200 and Crown Lease Register Books Volume 544 Folio 90, Volume 545 Folio 9 and Volume 658 Folio 95 (“the first part”)

(b)the land in Certificate of Title Register Book Volume 3323 Folio 1 and in Crown Lease Register Book Volume 543 Folio 89 (“the second part”)

It is necessary to distinguish between the first part and the second part as the Trustee’s interest differs.  The first part is registered:

(a)as to one undivided moiety, in the name of JHM for life and then for RJC, SVC, the fourth respondent Andrew Charles Cooper (“ACC”) and the third respondent Martin James Cooper (“MJC”); and

(b)as to the other undivided moiety in the name of JHM absolutely.

The second part is registered

(a)as to one undivided moiety in the name of the fifth respondent Rothmore Pty Ltd (“Rothmore”); and

(b)as to the other undivided moiety, in the name of JHM for life and then for RJC, SVC, ACC and MJC.

In the case of each of the first part and the second part, the undivided moiety respectively in the names of JHM and Rothmore absolutely is subject to mortgages to the Commonwealth Bank of Australia and to the Commonwealth Development Bank of Australia. Each of those entities has been given notice of the application: s 72(1) of the Law of Property Act 1936. Each has indicated that it does not wish to attend the proceedings, and has no objection to the orders sought by the Trustee. The Trustee has become the registered proprietor of the interests of JHM, RJC and SVC in each of the first part and of the second part. After the hearing, the Trustee brought to the Court’s attention that some records of Rothmore indicate that on 9 November 1983 its interest in the second part was mortgaged to Elsie May Cooper (“EMC”), from whom Rothmore acquired its interest on 10 August 1981.  That putative mortgage was to secure an advance made on 1 July 1981.  It has not been registered.  Notice of this application has been given to EMC.  That information was only recently acquired  by the Trustee, and EMC has not had the opportunity to appear on the application.  Her interest, if any, will probably only affect any orders made in respect of the disposition of the proceeds of any sale, rather than the question of whether there should be a sale at all.  However, before finally deciding that, I will give her the opportunity of being heard.  These reasons will be given as provisional reasons for decision only, subject to any matters she may put on whether there should be a sale of Rothmore Farm.

I have excluded from the property described by the Trustee as part of Rothmore Farm the land in Crown Lease Register Book Volume 498 Folio 76.  The material indicates that the land is entirely separate, and is a substantial area dedicated to native flora and fauna, and is subject to a Heritage Agreement under the Heritage Act 1993 (SA).  It is a considerable distance from Rothmore Farm.  It may be in the name of JHM only.

The two residential properties are the land in Certificate of Title Register Book Volume 4257 Folio 921 in the name of RJC and the first respondent Noelene Michelle Cooper (“NMC”) as joint tenants (“the 77 Bay Road Moonta property”) and the land in Certificate of Title Register Book Volume 5439 Folio 585 in the name of SVC and the second respondent Janet Ethel Cooper (“JEC”) as joint tenants (“the 48 Bay Road Moonta property”).  The 77 Bay Road Moonta property is subject to a mortgage to the Commonwealth Savings Bank of Australia.  It is the family home of RJC and NMC and their young family.  The 49 Bay Road Moonta property is subject to a mortgage to the State Bank of South Australia.  It is the family home of SVC and JEC and their young family.

This judgment only deals with the land comprising Rothmore Farm.  It is not presently necessary to address further any issues concerning the 48 Bay Road Moonta property or the 77 Bay Road Moonta property.

ROTHMORE FARM

The first part and the second part comprise the land known as Rothmore Farm. 

There is an additional piece of land comprised in Section 540, being the land in Crown Lease Register Book Volume 1203 Folio 12, which abuts the first part and the second part.  That separate piece of land is in the name of Rothmore only.  It comprises 121.1 hectares of arable land and 8 hectares of scrub.  The material indicates that that land is not farmed as part of Rothmore Farm.  It will not be affected by any order made in this application.

Rothmore Farm is metered at one point only. There are twelve main paddocks on the Rothmore Farm, but the major portion of fences have been removed.  It comprises some 1711.1. hectares of arable land of varying quality and 182 hectares of scrub, a total 1893.1 hectares.  The Trustee has produced evidence of an expert valuer that the sale of Rothmore Farm by different sections would be difficult, because it would require each section to be surveyed, and arrangements to be made for separate water metering to be in place, and for fence lines on the boundaries of each title to be established.  The value has been reduced by $75,000 to account for those arrangements.  That evidence also indicates that the value of Rothmore Farm is in the order of $1,193,373, and that that value would be more likely to be realised if Rothmore Farm is sold as a single entity, than if it is sold as individual sections or titles.  The improvements on Rothmore Farm include a large house, two rainwater tanks, and a double garage, an old implement shed, and a separate shed and workshop all with a total value $32,400, and an old shed and “storage” dwelling with a value of about $1,000.

THE APPLICATION: LIMITATION OF THE ISSUES

The matter was first listed for hearing on 16 October 1998. 

On that occasion, the respondents other than NMC did not appear.  She sought an adjournment of the application generally, although the hearing date had been fixed on 23 September 1998.  She asserted, that the respondents wished to have more time to prepare material in opposition to the application.  Affidavits of ACC, NMC, JEC, MJC and by Hilda Saunders had been filed and served on 15 October 1998.  Despite opposition from the applicant, and the fact that the respondents other than NMC had elected not to appear on the hearing either on their own behalf or represented by a legal practitioner, although an appearance had been filed on their behalf by a legal practitioner, the Court acceded to that application to ensure that the respondents did have a further opportunity to present their position in relation to the application.

On the same occasion, Tennyson Turner (“Mr Turner”) applied to be joined as a respondent.  That application was made orally, and was not supported by any affidavit material.  Mr Turner asserted that he was a person entitled to access to Rothmore Farm to farm the crops presently growing and to harvest them, and to retain the benefit of those crops.  That claim by Mr Turner is in issue in separate proceedings before the Court.  The Trustee undertook by his counsel that, if the Court were to order sale of Rothmore Farm, any sale would exclude the current crop growing on Rothmore Farm, and would reserve to Mr Turner and to Agri-Steel Pty Ltd (a company in which Mr Turner claims an interest) a right of access to Rothmore Farm for maintaining and harvesting the current crop and removing it from the farm.  The undertaking was given subject to any determination in the separate proceedings that Mr Turner had no such right.  In my judgment, the undertaking is sufficient to protect Mr Turner’s claimed interest.  In addition, as a practical matter, any sale of Rothmore Farm is most unlikely to be settled before the present crop has been harvested by about 1999 and dealt with.  In those circumstances, I declined Mr Turner’s application.  He was nevertheless given the opportunity to renew his application at the adjourned hearing, if then made formally.  He did not then renew his application, nor file any affidavit in relation to it.

The application was adjourned to 29 October 1998.  On that occasion, the respondents appeared by counsel.  In addition to the affidavits filed and served on 15 October 1998, a further affidavit of ACC sworn on 23 October 1998 and an affidavit of Gerald William Dee (“Mr Dee”) also sworn on 23 October 1998 were sought to be relied upon.  As it appeared from that later affidavit of ACC that it may have been relevant to the orders as to the distribution of proceeds (if a sale were ordered), in particular that it might affect the entitlement of the Commonwealth Bank of Australia and the Commonwealth Development Bank of Australia to the first call upon the proceeds of any sale to the full amount of the secured debts, I considered those entities should be given notice of the contents of that affidavit so that they might have an opportunity to determine, in the light of its contents, whether they wished to have a more active role in the application.

I accordingly ordered that the hearing proceed to hear and determine separately whether an order should be made under s 70 of the Act for the sale of Rothmore Farm or any part of it, and that that issue be determined before any hearing as to the distribution of the proceeds of any such sale. Separately, I ruled that I would not receive on that separate question the two affidavits referred to, and gave reasons for that ruling.

SHOULD THERE BE A SALE?

Sections 69 and 70 of the Act provide:

“69.(1)       On any application for partition the court may order a partition of the said land or other property, and may give all necessary or proper consequential directions.

(2)On any such application if it appears to the court that, by reason of the nature of the property, or of the number of the parties interested or presumptively interested therein, or of the absence or disability of some of those parties, or of any other circumstances, a sale of the property and a distribution of the proceeds would be more beneficial for the parties interested than a division of the property between or among them, the court may, if it thinks fit, on the request of any of the parties interested, and notwithstanding the absence, dissent or disability of any others of them, direct a sale of the property accordingly, and may give all necessary or proper consequential directions.

70.On any application for partition, if the party or parties interested individually or collectively, to the extent of one moiety or upwards in the property, request the court to direct a sale of the property and a distribution of the proceeds, instead of a division of the property between or among the parties interested, the court shall, unless it sees good reason to the contrary, direct a sale of the property accordingly, and shall give all necessary or proper consequential directions.”

The difference between ss 69 and 70 appears to be that s 69 applies to an application by a part owner (or part owners together) with one half or more of the interest in the property in issue. In that event, the court is to make the order for sale sought unless it sees good reason to the contrary. If the applying party (or parties) seeking sale has less than a one half interest in the property in issue, the court has a general discretion as to whether to direct sale of the property in all the circumstances.

In Bray v Bray (1926) 38 CLR 542, the interrelationships of ss 4(1)(a) and 4(1)(b) of the Partition Act 1900 (NSW) was addressed by the Court. Those provisions were effectively in the same terms as ss 69 and 70 of the Act. Knox CJ with whom Isaacs, Higgins, Powers and Rich JJ agreed, said at 545:

“So far as I can see, the object of the Act was to provide an alternative remedy to partition. Recognizing the absolute right of a tenant to partition, and seeing that it might be disastrous for all parties to have a partition, Parliament provided by sec. 4(1)(a) that if any person interested requested a sale instead of a partition and if it appeared to the Court that a sale would be more beneficial than a partition the Court might order a sale accordingly. By sec. 4(1)(b) it was provided that if parties interested to the extent of a moiety or upwards should request the Court to direct a sale instead of a division of the property, the Court should, unless it saw good reason to the contrary, order a sale accordingly. Another provision was made by sec. 4(1)(c) for buying out the interest of a person who requested a sale. I think that it is clear that under sec. 4(1)(b) what the Court has to consider is which is the better course for all parties between two alternatives, namely, is it better that there should be a partition or that there should be a sale, and the onus of showing that partition is better, where the owners of more than one half of the property desire a sale, is upon the person opposing a sale.”

Jeffries J in Joyce v Joyce (1963) Qd R 139 reached the same conclusion (at 151, 154), after considering the English authorities on analogous legislative provisions. It does not appear that his Honour’s attention was drawn to Bray, but his conclusions are entirely consistent with that decision.  He indicated that the sort of considerations which might constitute “good reasons” not to direct a sale if s 70 applied included that a proper price might not be realised so that the property would be sacrificed. His Honour added at 155:

“Sentiment, according to that case, does not enter into the matter and I cannot use as a good reason the fact that the defendant and his brother carried on a grazing business on the property for many years and that it had been agreed between them that the survivor had the right to buy the share of the deceased partner at a valuation.”

In respect of the first part of Rothmore Farm, the Trustee through the estates of JHM, RJC and SVC has an interest in excess of one undivided moiety.  In respect of the second part, the interest of the Trustee through these estates is less than one undivided moiety.  Rothmore holds one undivided moiety, and the other moiety is held by JHM for and life and then equally between RJC, SVC and ACC and MJC.  The Trustee has not sought to quantify his interest but accepts that it is less than one undivided moiety.

Consequently, the first part of Rothmore Farm attracts the operation of s 70 of the Act and the second part attracts the operation of s 69(2) of the Act.

The respondents assert that the affidavit of ACC of 23 October 1998, if received would disclose that on 15 February 1993 JHM granted to Belgravia Pty Ltd (“Belgravia”) an interest in Rothmore Farm described as a licence to enter upon the land, to cultivate crops, to perform engineering and other works, and to erect buildings, sheds and other improvements.  The consideration is said to be the promise to maintain JHM for her life.  It is then said that the evidence would show that in May 1998 Belgravia transferred that interest to ACC, who on 7 August 1998 transferred that interest to Mr Turner.  As noted above, Mr Turner claims no more than a right to enter on the land to maintain and harvest the current crop on Rothmore Farm and to retain the proceeds of that crop.  That claimed interest is unregistered.  As noted above I declined to receive that affidavit of ACC on this part of the application.  I will not repeal the reasons for that ruling.  In addition, I am of the view that that affidavit, even if received, and if the facts asserted in it were ultimately to be accepted, would make no difference to the outcome of the present issue.

Subject to the claimed but limited interest of Mr Turner, the Trustee’s interest in respect of the first part and the second part taken together represents in dollar terms, according to the valuation material, $583,545 of the total value of $1,193,373 or marginally under 50 per cent, and in hectares represents 958.2 hectares (including 182 hectares of scrub) of a total of 1893.1 hectares or marginally over 50 per cent.

Rather than endeavour to determine which of ss 69(2) and s 70 be the master in the present circumstances, or to address separately the appropriate order in respect of the first part and the second part, I have approached the matter initially on the basis that I should first apply s 69(2) generally to Rothmore Farm. If the Trustee is entitled to an order for sale by overcoming the hurdle which s 69(2) imposes, then it will not be necessary to address the lower hurdle which s 70 imposes but only in respect of part of Rothmore Farm.

If, as a result of that consideration, I determine that Rothmore Farm should be sold, then it will not be necessary to consider those issues.

The respondents did not dispute that Rothmore Farm sold as a whole would realise a significantly greater amount than if sold in separate parcels, and a fortiori if each of those separate parcels were to be individually partitioned.  There would need to be separate arrangements for access, watering, and fencing.  There is nothing to indicate that partitioning could be done effectively to preserve any particular working entity.  The plan of the Hundred of Tiparra County of Daly in which the several pieces of land exist shows that the partitioning of the individual allotments would probably lead to a series of separate and physically unconnected allotments. 

In fact, no party contends that partition should be ordered. The respondents real position was that no order for sale should be made for the time being, whilst they explored the prospect of purchasing the Trustee’s interest under s 71 of the Act.

In my judgment, the desire of ACC or others of the respondents or Mr Turner to purchase Rothmore Farm under s 71 of the Act is not a reason to decline to make that order. It has been long decided that ss 69, 70 and 71 of the Act are independent provisions, and in particular that s 71 is not a proviso to ss 69 and 70: Pitt v Jones [1880] 5 App Cas 651; Perman v Maloney [1939] VLR 376; Anderson v Anderson [1957] VR 317; Schnytzer v Wielunski [1978] VR 418. No argument to the contrary was presented on this application. In a practical way, the desire of ACC or other respondents to make such an offer will be able to be explored as I have indicated that these reasons are provisional only to enable EMC to be heard. As I indicated, I also proposed in any event that any order for sale should lie in the Registry for one month whilst any formal proposal under s 71 was developed and put forward.

The terms of s 69(2) are set out above. I am satisfied that a sale of the properties comprising Rothmore Farm, and ultimately a distribution of the proceeds of that sale, would be more beneficial for the parties interested in the properties than a division of the property between or among them. That is a provisional conclusion, subject to EMC’s position being fully considered. I propose therefore to direct a sale of the properties comprising Rothmore Farm. I also propose to direct that my order lie in the Registry and not be sealed for a period of one month to give the respondents or Mr Turner the opportunity to undertake to purchase the Trustee’s share in the properties. It is, in those circumstances, unnecessary to attribute to the Trustee the “preponderating voice” which s 70 would dictate if it were applicable: per Jessel MR in Porter v Lopes [1877] 7 Ch D 358, or to decide the correct interrelationship of ss 69 and 70 in circumstances such as the present.

In my judgment, s 69 gives to the Court a discretion whether to order a partition of the land, or, if it appears that a sale of the property and a distribution of the proceeds would be more beneficial for the parties interested, to order that sale. I have noted the nature of the pieces of land together comprising Rothmore Farm above. There are significant disadvantages to any party with an interest in any of those several pieces in partition of any one of those pieces rather than it being sold. There is, on the other hand, clear evidence that all interested parties would recover more if the several pieces of land were to be sold. The evidence is uncontroverted that the several pieces, if sold together, would also be sold at a significantly greater price than if the several pieces of land were sold separately. That is so both because of the additional costs of procuring water, fencing and surveying of the several pieces and because Rothmore Farms as one going concern is likely to produce a greater price. No evidence has been adduced by the respondents to suggest otherwise. There is nothing to indicate that Rothmore Farms, if the several pieces were partitioned, would enable for example two or more separate and adequate self supporting working units to be created, even if partitioning could somehow effectively create an adequate geographical juxtaposition of several partitioned portions of the several pieces of land.

The material before me, and the submissions, tended to focus on the several pieces of land comprising Rothmore Farm rather than on those individual “pieces” of land.  I have had regard to each of those individual “pieces” of land separately comprised within the Certificates of Title to which I was referred.  The conclusion which I reach is strengthened by that consideration.  As noted earlier, if the land in each separate title is addressed, a fortiori there will be a significant cost in arranging for water access, fencing and surveying.  Each partitioned allotment, sold separately, would be relatively smaller and much less likely to be available as part of a coherent economic whole.  I infer from the valuation material that its realisable value proportionately  would be measurably less than selling the land in each title separately, and be measurably less than selling the several titles together.  I noted above that no party has urged partition as an appropriate course of action, or suggested that partitioning the land in each separate title would be of benefit to any interested person or would create any separate economically viable working unit.

I have also had regard to the parties interested in the several pieces of land. Apart from Mr Turner, whose claimed interests will be reflected in the undertaking referred to, it is common ground that Rothmore Farm operates as one farming entity. It is also important to have regard to the obligations upon the Trustee under s 19 of the Bankruptcy Act 1966 (Cth) to get in the estates of the three bankrupts in a timely manner and to account for those proceeds to the creditors in those entities. If the order sought is not made, the matter might simply languish.

On the resumed hearing, on 1 December 1998, EMC appeared by counsel.  She did not oppose the proposed sale of Rothmore Farm.  It is therefore appropriate to convert my provisional decision into a final decision.  She will of course have the opportunity to be heard when the issues as to the disposition of the proceeds of sale are addressed.

Accordingly, I am of the view that a sale of the property known as Rothmore Farm and a distribution of the proceeds would be more beneficial for the parties interested than a division of the property between or among them.  I propose to direct a sale of the property comprising Rothmore Farm.  I will hear the parties as to the appropriate form of order, and as to the directions which should be given for determining the distribution of the proceeds of the sale.

I certify that this and the preceding ten (10) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield

Associate:

Dated:            1 December 1998

Counsel for the Applicant:	Mr R J Whitington QC & Mr G Davis
Solicitor for the Applicant:	Piper Alderman
Counsel for the Respondent:	Mr D C Kennelly
Solicitor for the Respondent:	Alderman Consultant Solicitors
Date of Hearing:	29 October 1998
Date of Judgment:	1 December 1998