Stephen John Michell in His Capacity as trustee of the Bankrupt Estate of Monica Stonehouse v Monica Stonehouse

[2014] FCCA 2364

FEDERAL CIRCUIT COURT OF AUSTRALIA

STEPHEN JOHN MICHELL IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF MONICA STONEHOUSE & ANOR v MONICA STONEHOUSE & ANOR [2014] FCCA 2364

Catchwords:
BANKRUPTCY – Default judgment – undischarged bankrupt for period of five years – real property owned as joint registered proprietor with deceased husband – no application for grant of probate or letters of administration made – no survivorship application filed – application of applicant trustees’ acceded to.

Legislation:

Bankruptcy Act 1966 (Cth), ss.19(1), 30(1), 58, 77(1), 149

Transfer of Land Act 1958 (Vic), ss.27B, 50, 51(1)

First Applicant: STEPHEN JOHN MICHELL IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF MONICA STONEHOUSE

Second Applicant: PHILLIP NEWMAN IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF MONICA STONEHOUSE

First Respondent: MONICA STONEHOUSE

Second Respondent: REGISTRAR OF TITLES

File Number: MLG 1226 of 2014

Judgment of: Judge Hartnett

Hearing date: 2 October 2014

Delivered at: Melbourne

Delivered on: 2 October 2014

REPRESENTATION

Counsel for the Applicant: Mr Kohn

Solicitors for the Applicant: James Partners Lawyers

First Respondent: No Appearance

Second Respondent: No Appearance

ORDERS

1. Within seven days of this date, the First Respondent lodge in relation to Certificate of Title Volume 9801 Folio 432 (‘Okanes Property’) an application in accordance with s.50 of the Transfer of Land Act 1958 (Vic) in the appropriate approved form supported by proof to the satisfaction of the Second Respondent of the death of John Cecil Stonehouse (deceased) (‘Survivorship Application’).

2. Pursuant to s.116(1A) of the Transfer of Land Act 1958 (Vic), the Court orders that the First Respondent produce Certificate of Title Volume 9801 Folio 432 to the solicitors for the applicants within seven days of this date.

3. In the event that the First Respondent fails to comply with order number 2 herein:-

   (a)the Court orders the Registrar of Titles for the State of Victoria to cancel Certificate of Title Volume 9801 Folio 432;

   (b)the Court orders the Registrar of Titles to create a new folio of the Register and Certificate of Title for the land in Certificate of Title Volume 9801 Folio 432 in the names of the applicants; and

   (c)the Court finds and declares for the purposes of s.27B(6) of the Transfer of Land Act 1958 (Vic) that the applicants are the persons entitled to delivery of the Certificate of Title to be created pursuant to these Orders.

4. Pursuant to s.116(1A) of the Transfer of Land Act 1958 (Vic), the Court orders that the First Respondent produce Certificate of Title Volume 10089 Folio 026 (‘Orchard Property’) to the solicitors for the applicants within seven days of this date.

5. In the event that the First Respondent fails to comply with order number 4 herein:-

   (a)the Court orders the Registrar of Titles for the State of Victoria to cancel Certificate of Title Volume 10089 Folio 026;

   (b)the Court orders the Registrar of Titles to create a new folio of the Register and Certificate of Title for the land in Certificate of Title Volume 10089 Folio 026 in the names of the applicants; and

   (c)the Court finds and declares for the purposes of s.27B(6) of the Transfer of Land Act 1958 (Vic) that the applicants are the persons entitled to delivery of the Certificate of Title to be created pursuant to these Orders.

6. The First Respondent pay the applicants’ costs of and incidental to this proceeding to be taxed in default of agreement.

7. There is liberty to apply.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 1226 of 2014

STEPHEN JOHN MICHELL IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF MONICA STONEHOUSE

First Applicant

PHILIP NEWMAN IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF MONICA STONEHOUSE

Second Applicant

And

MONICA STONEHOUSE

First Respondent

REGISTRAR OF TITLES

Second Respondent

REASONS FOR JUDGMENT

(Edited ex tempore reasons)

Procedural

1. These proceedings commenced upon the applicants filing an Application on 20 June 2014 seeking orders which, in slightly amended form, were made on the hearing of the matter.  The orders sought were amended in such manner at the request of the Second Respondent, the Registrar of Titles.  The Second Respondent was joined in the proceedings for procedural reasons, but conveyed by letter of 27 June 2014 to the parties and the Court that he did not intend to appear at the hearing.

2. The First Respondent failed to appear and failed to file any material in the proceedings.  The Court is satisfied as to service of the Application and supporting Affidavit of Stephen John Michell sworn on 19 June 2014 upon the First Respondent, a bankrupt.  Service was effected personally on 1 July 2014.  The Court is also satisfied as to service of the Application and supporting Affidavit upon the Second Respondent.

3. On 1 August 2014, Registrar Luxton made Orders adjourning the proceedings for further directions to 29 August 2014 and requiring the First Respondent to produce to the Court (as set out in order 2 therein):-

   “(a) A copy of any Will made by John Cecil Stonehouse (deceased), the first respondent’s husband;

   (b) Any application for the grant of probate of the estate of John Cecil Stonehouse (deceased); and

   (c) Any application for letters of administration of the estate of John Cecil Stonehouse (deceased),

   on 29 August 2014 at 9:30 am.”

4. Service upon the First Respondent of a sealed copy of the Orders of 1 August 2014 occurred as provided for in those Orders. The matter was next before the Court on 29 August 2014.  As had occurred on the earlier date of 1 August 2014, the First Respondent failed to appear.  Further, the First Respondent failed and continues to fail to comply with order 2 of the Orders of 1 August 2014.

5. On 29 August 2014, the proceedings were listed for final hearing before the Court on 2 October 2014 at 10.00am.  The Court is satisfied the respondents were advised of the making of the Orders of 29 August 2014, as was required pursuant to those Orders.

6. On the hearing of the matter, the applicants relied upon the Affidavit of Stephen John Michell sworn 19 June 2014 and the documents produced by the Registrar of the Victorian Registry of Births, Deaths and Marriages, pursuant to a Subpoena dated 12 August 2014.  That material is as contained in Exhibit 1 on the Court file, being the Death Certificate of John Cecil Stonehouse and the Certificate of Marriage of John Cecil Stonehouse and Monica May Corrigan (as the First Respondent was then known).

7. Before the Court was also an Affidavit sworn 28 August 2014 by Ms Suzana Christina Mutavdzija, which attested as to service by her upon the First Respondent of the Orders made by Registrar Luxton on 1 August 2014. 

8. No affidavit material has been filed by or on behalf of the First Respondent, nor any response to the Application filed by or on behalf of the First Respondent.

Background

1. On 16 January 2009, the Deputy Commissioner of Taxation (‘DCT’) filed a Creditor’s Petition in the Federal Magistrates Court of Australia (as it then was) in proceedings numbered MLG46 of 2009 against the First Respondent, Mrs Stonehouse.

2. On 7 April 2009, Registrar Caporale made the following orders:-

   “1.    A Sequestration Order be made against the estate of MONICA STONEHOUSE.

   “2.    The Applicant’s costs of and incidental to the petition, including reserved costs, be taxed pursuant to Order 62 of the Federal Court Rules  fixed in the sum of $1947.30 and paid in accordance with the statute.”

3. On the same day, the applicants were jointly appointed as trustees of the bankrupt estate of the First Respondent.

4. The First Respondent has never lodged a statement of affairs.  As a consequence and pursuant to s.149 of the Bankruptcy Act 1966 (Cth) (‘the Act’), the First Respondent remains an undischarged bankrupt.

5. The First Respondent’s creditors are owed the total sum of $222,745.12.  The creditors are:-

   a)the Australian Taxation Office in an amount of $217,067.28;

   b)J. Hawkins (Veolia Environmental Services) in the sum of $322.84;  and

   c)Mrs Tracey James in the sum of $5,355.

6. There have been no returns made to the creditors.

7. The First Respondent’s husband was John Cecil Stonehouse (‘Mr Stonehouse’).  He died on 3 September 2000.  The First Respondent has not made any application for the grant of probate or letters of administration in relation to the deceased estate of Mr Stonehouse.

The First Respondent’s property interests

1. The First Respondent and Mr Stonehouse (deceased) are the joint registered proprietors of the property located at 38 O’Kanes Road Numurkah in the State of Victoria, being more particularly described in Certificate of Title Volume 9801 Folio 432 (‘the O’Kanes property’).  The O’Kanes property is mortgaged to the National Australia Bank (‘NAB’) but there is little, if any money, owing to the NAB pursuant to the O’Kanes property mortgage.

2. A Caveat has been lodged on behalf of the applicants on the O’Kanes property. 

3. Mr Stonehouse (deceased) remains the sole registered proprietor of the property located at 33 Orchard Street Numurkah in the State of Victoria, being more particularly described in Certificate of Title Volume 10089, Folio 026 (‘the Orchard property’).  The Orchard property is mortgaged to the NAB, mortgage number VU531664Y. 

4. There is little, if any, money owing to the NAB in relation to the Orchard property mortgage.

Consideration

1. Section 19(1)(f) of the Act provides:-

   “(1) The duties of the trustee of the estate of a bankrupt include the following:

   …

   (f) taking appropriate steps to recover property for the benefit of the estate;”

2. Section 30(1) of the Act provides:-

   “(1) The Court:

   (a) has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court; and

   (b) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.”

3. Section 58 of the Act relevantly provides:-

   “(1) Subject to this Act, where a debtor becomes a bankrupt:

   (a) the property of the bankrupt, not being after-acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and

   …

   (2) Where a law of the Commonwealth or of a State or Territory of the Commonwealth requires the transmission of property to be registered and enables the trustee of the estate of a bankrupt to be registered as the owner of any such property that is part of the property of the bankrupt, that property, notwithstanding that it vests in equity in the trustee by virtue of this section, does not so vest at law until the requirements of that law have been complied with.

   …”

4. Section 27B of the Transfer of Land Act 1958 (Vic) (‘TL Act’):-

   “(1) A certificate of title is a document in writing containing the information, or an extract of the information, on a folio of the Register as at the date of production of the certificate of title.

   (2) A certificate of title—

   (a) must indicate that it is produced by authority of the Registrar, whether by being initialled, signed or sealed by the Registrar, or by bearing a facsimile of those initials or signature or seal, or in any other manner that the Registrar thinks fit; and

   (b) must state—

   (i) the distinctive identifying reference of the folio of the Register to which it relates; and

   (ii) the distinctive identifying reference allocated for that certificate of title; and

   (iii) the date on which it was produced.

   (3) A certificate of title—

   (a) may include any other information that the Registrar considers appropriate, whether in diagramatic form or otherwise; and

   (b) may record information contained in the folio of the Register to which it relates in any form that the Registrar considers appropriate, whether in the form in which the information is recorded on that folio or in some other form; and

   (c) may be in any form that the Registrar considers appropriate; and

   (d) may be produced in any manner that the Registrar considers appropriate.”

5. Section 51(1) of the TL Act:-

   “(1) Upon the bankruptcy of the registered proprietor of any land, or upon any bankrupt before obtaining his discharge or certificate becoming the proprietor of any land, his trustee shall be entitled to be registered as proprietor in respect thereof; and the Registrar, upon the receipt of an office copy of the appointment of the trustee and an application in an appropriate approved form by the trustee to be so registered, shall in any relevant part of the Register make a recording (by the appropriate description whether as trustee assignee or official receiver) of the appointment of such trustee.”

6. Upon the death of an owner of jointly held property, the property automatically reverts to the surviving owner. The surviving owner can then file a survivorship application pursuant to the TL Act for the real property to be officially transferred into his or her name.

7. The O’Kanes property is subject to the TL Act. Section 50 of the TL Act provides:-

   “Subject to this Act upon the death of any person registered with any other person as joint proprietor of any land the Registrar, on application in an appropriate approved form by the survivor and proof to the satisfaction of the Registrar of the death, shall register the applicant as the proprietor thereof, and thereupon such survivor shall become the transferee of such land and be the registered proprietor thereof.”

8. The First Respondent is the only person who can file the survivorship application.  She has currently failed and/or refused to file such application. 

9. Section 77(1) of the Act provides:-

   “(1) A bankrupt shall, unless excused by the trustee or prevented by illness or other sufficient cause:

   (a) forthwith after becoming a bankrupt, give to the trustee:

   (i) all books (including books of an associated entity of the bankrupt) that are in the possession of the bankrupt and relate to any of his or her examinable affairs; and

   (ii) the bankrupt's passport, if any; and

   (b) attend the trustee whenever the trustee reasonably requires; and

   (ba) give such information about any of the bankrupt's conduct and examinable affairs as the trustee requires; and

   (bb) as soon as practicable after becoming a bankrupt, advise the trustee of any material change that occurred between the time the bankrupt lodged his or her statement of affairs and the time the bankrupt became a bankrupt; and

   (bc) if a material change occurred later, advise the trustee of that change as soon as practicable after the change occurs; and

   (c) attend a meeting of creditors whenever the trustee requires; and

   (d) at each meeting of creditors at which the bankrupt is present, give such information about any of the bankrupt's conduct and examinable affairs as the meeting requires; and

   (e) execute such instruments and generally do all such acts and things in relation to his or her property and its realization as are required by this Act or by the trustee or as are ordered by the Court upon the application of the trustee; and

   (f) disclose to the trustee, as soon as practicable, property that is acquired by him or her, or devolves on him or her, before his or her discharge, being property divisible amongst his or her creditors; and

   (g) aid to the utmost of his or her power in the administration of his or her estate.”

10. In light of s.77 of the Act, the applicants submit to the Court that it is appropriate that the Court direct the First Respondent to file a survivorship application in relation to the O’Kanes property and to produce a Certificate of Title to the O’Kanes property. 

11. In the alternative, the applicants submit that the Second Respondent be directed to produce a new Certificate of Title to the applicants, so that a transmission application can be lodged by them.  Once that occurs, the O’Kanes property can be realised in order to make a distribution to the creditors. 

12. In respect of the Orchard property, it is also subject to the TL Act, and in particular to s.51(1) of the TL Act. According to the “approved form” therein referred to, in order for the trustees to lodge the transmission application he or she requires amongst other things, the Certificate of Title. In the present case, the First Respondent has refused or failed to provide the applicants with the Certificate of Title for the Orchard property.

13. If the First Respondent is the beneficiary of Mr Stonehouse’s deceased estate, the Orchard property should be transferred to the applicants.  As probate or letters of administration have not been obtained, the applicants do not have standing to apply to the Supreme Court to administer the deceased estate of Mr Stonehouse.

14. The applicants seek that the Court direct the First Respondent to produce the Certificate of Title to the Orchard property to the applicants.  In the alternative, the applicants seek that the Second Respondent be directed to produce a new Certificate of Title to the applicants, so that a transmission application can be lodged. 

15. This application proceeds on an undefended basis.  The applicants being the trustees of the bankrupt estate of the First Respondent have made numerous attempts to contact the First Respondent.  These attempts have included by way of written correspondence, telephone calls and even personal attendance at the O’Kanes property.  Some limited contact has been made with the First Respondent and her son.  No effective response has been received by them nor has there been any participation by them in the application now before the Court.

16. The Court shall accede to the property application made by the applicants, and make those orders which are sought.  The Court notes that the Second Respondent will abide by any order of the Court and will not make any claim for costs.

I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of Judge Hartnett

Associate: 

Date: 15 October 2014