THE AUSTRALIAN STEEL COMPANY (OPERATIONS) PTY LTD v MORGAN JAMES CHUBB AS TRUSTEE OF THE BANKRUPT ESTATE OF DAVID JOHN ALLUM AND KYLIE SHERIE ALLUM

[2012] FMCA 866

FEDERAL MAGISTRATES COURT OF AUSTRALIA

THE AUSTRALIAN STEEL COMPANY (OPERATIONS) PTY LTD v MORGAN JAMES CHUBB AS TRUSTEE OF THE BANKRUPT ESTATE OF DAVID JOHN ALLUM AND KYLIE SHERIE ALLUM [2012] FMCA 866

BANKRUPTCY – Leave to proceed – application for declaratory relief in respect of equitable charge – order for sale to enforce charge – whether jurisdiction to order sale – no jurisdiction under Bankruptcy Act1966 – no jurisdiction under Conveyancing Act1919 (NSW) – power to order judicial sale – terms upon which sale to be ordered.

Bankruptcy Act 1966 (Cth), ss.27(1), 30, 31(1)(f), 58(3)(b), 58(5)
Federal Magistrates Act 1999, ss.16, 18
Conveyancing Act 1919 (NSW), ss.66G, 66F 103(2), 109, 111
Federal Magistrates Court Rules 2001, r.16.01

ANZ v Scott (1993) NSWConvR 55-675
BBC Hardware Pty Ltd v GT Homes Pty Ltd [1997] 2QdR 123
Broadway Credit Union v Bellamy [2000] NSWSC 778
Chateau Constructions (Aust) Ltd v Zepinic (No 5) [2010] NSWSC 265
Clarke v Raymor Brisbane Pty Ltd (No.2) [1982] QdR 790
Fraser v Commissioner of Taxation (1996) FCR 99
Hall v Warner [2006] FCA 852
King Investment Solutions Pty Ltd v Hussain [2005] NSWSC 1076
Mango Media Pty Ltd v Velingos [2008] NSWSC 202
National Bank v Hedley (1984) NSW ConvR 55-211
Phillips v Hogg [2001] QSC 390
Re Veghelyi: Smith & Ors v Official Trustee in Bankruptcy (1993) 45 FCR 413
Scott v Bagshaw (2000) 99 FCR 573
Singh v Official Trustee in Bankruptcy [2007] FMCA 1367
Westpac Banking Corporation v Ollis [2007] FCA 1194
Westpac v Samson and Anor (1995) NSW ConvR 55-733
Worrell v Issitch [2001] 1QdR 570

Applicant: THE AUSTRALIAN STEEL COMPANY (OPERATIONS) PTY LTD

Respondent: MORGAN JAMES CHUBB AS TRUSTEE OF THE BANKRUPT ESTATE OF DAVID JOHN ALLUM AND KYLIE SHERIE ALLUM

First Respondent: DAVID JOHN ALLUM

Second Respondent: KYLIE SHERIE ALLUM

File Number: BRG 1 of 2012

Judgment of: Jarrett FM

Hearing dates: 9 & 16 February 2012

Date of Last Submission: 29 February, 2012

Delivered at: Brisbane

Delivered on: 18 September 2012

REPRESENTATION

Solicitors for the Applicant: Patane Lawyers

No appearance for the First Respondent

No appearance for the Second Respondent

No appearance for the Third Respondent

ORDERS

1. The Applicant have leave to commence this proceeding pursuant to s.58(3)(b) of the Bankruptcy Act1966 (Cth).

THE COURT DECLARES THAT

1. By a written Credit Agreement made between the Applicant and the Second and Third  Respondents on or about 17 August 2010 the Second and Third Respondents granted an equitable charge to the Applicant in respect of their  interest in the estate in fee simple in the land described as Lot 117 in Deposited Plan 1150004, Parish of Lismore, County of Rous, being the whole of the Land contained in  Folio 117/1150004 (“the Land”);

2. The equitable charge charges the Second and Third Respondents’ interest in the Land  with the payment of all monies due and owing by the Second and Third Defendants to the Plaintiff on any account whatsoever (including claims for interest and legal costs on a  solicitor and own client basis) associated with a credit facility held in the name of the  Second and Third Respondents, trading under the business name and/or style of Vision Designer Homes BN98286404 all of which sums are due and owing by the Second and Third Respondents to the Applicant under the Credit Account;

THE COURT DIRECTS THAT

1. No later than 4.00pm on 2 October, 2012 the applicant bring a minute of such further directions as are necessary to give effect to these reasons for judgment.

2. The application be adjourned for directions to 9.30am on 18 October 2012 in the Federal Magistrates Court sitting in Brisbane.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT BRISBANE

BRG 1 of 2012

THE AUSTRALIAN STEEL COMAPNY (OPERATIONS) PTY LTD

Applicant

And

MORGAN JAMES CHUBB AS TRUSTEE OF THE BANKRUPT ESTATE OF DAVID JOHN ALLUM AND KYLIE SHERIE ALLUM

First Respondent

And

DAVID JOHN ALLUM

Second Respondent

And

KYLIE SHERIE ALLUM

Third Respondent

REASONS FOR JUDGMENT

1. This is an application by The Australian Steel Company (Operations) Pty Ltd for the following orders:

   1. That the Applicant be given leave to commence this proceeding pursuant to s.58(3)(b) of the Bankruptcy Act 1966 (Cth).

   2. Pursuant to ss30 and 31(1)(f) of Bankruptcy Act 1966 (Cth), Declarations that:

   (a)    By a written Credit Agreement made between the Applicant and the Second and Third  Respondents on or about 17 August 2010 ("the Credit Account") and further, and/or  in the alternative, by a written guarantee made between the Applicant and the Second and Third Respondents on or about 17 August 2008 ("the Guarantee"), the Second and Third Respondents granted an equitable mortgage to the Plaintiff in respect of their  interest in the estate in fee simple in the Land described as Lot 117 in Deposited Plan  1150004, Parish of Lismore, County of Rous, being the whole of the Land contained in  Folio 117/1150004 ("the Land");

   (b)    The equitable mortgage charges the Second and Third Respondents' interest in the Land  with the payment of all monies due and owing by the Second and Third Defendants to the Plaintiff on any account whatsoever (including claims for interest and legal costs on a  solicitor and own client basis) associated with a credit facility held in the name of the  Second and Third Respondents, trading under the business name and/or style of Vision Designer Homes BN98286404 all of which sums are due and owing by the Second and  Third Respondents to the Applicant under the Credit Account and the Guarantee;

   (c)     The sum of $2,890.71 plus costs and interest incurred in the exercise of the Applicant’s powers and remedies is owing by the Second and Third Respondents to the Applicant and that the Land be charged with payment of that sum.

   3. Pursuant to Federal Magistrates Court Rules 2001, Rule 16.01, the Land be sold.

   4. A Statutory Trustee be appointed pursuant to s.66G of the Conveyancing Act 1919 (NSW) to conduct the sale of the Land and to convey the Land upon the sale, and that the Land vest in that Trustee for the purposes of the sale.

   5.  The Trustee recover against the Second and Third Respondents possession of the Land.

   6.  The Trustee sell the Land in a way he or she considers appropriate.

   7.  The Trustee be entitled to incur and charge reasonable fees for his time and outlays in conducting the sale of the Land and that those fees and outlays be deemed part of the cost of the sale of the Land.

   8.  The Trustee be entitled to deduct the costs of the sale of the Land referred to in paragraph 7  hereof from the proceeds of sale of the Land prior to paying any proceeds to the registered  mortgagee or the Applicant, in discharge of those parties' securities.

   9.  That the Trustee be entitled to pay the Applicant from the proceeds of the sale of the Land after deduction of the costs pursuant to paragraph 8, and after deduction of any monies due to the registered mortgagee, funds sufficient to discharge the sum owed to the Applicant being $2,890.71, together with costs incurred in the exercise of its powers and remedies and interest.

   10.    That the Second and Third Respondents pay the Applicant's costs of the Application (including reserved costs, if any) on the indemnity basis.

2. The First, Second and Third Respondents have each been served with a copy of the application and supporting affidavit relied upon by the applicant.  No notice of opposition or other response has been made to the application, or any of the claims in it.  A letter has been received from the Trustee in Bankruptcy for the Second and Third Respondents stating that the Trustee neither consents to, nor opposes, the application.

The facts

1. The Second and Third Respondents are the registered proprietors as joint tenants of certain land situated at 154 Cameron Road, McLeans Ridges, New South Wales (“the Land”).

2. The Applicant carries on business as a supplier of steel products and materials. In the course of carrying on that business the Applicant supplies some of its customers with products on credit.

3. The Second and Third Respondents, trading in partnership under the name or style of Vision Designer Homes, entered into a credit trading agreement with the Applicant on 17 August, 2010 (the Credit Account as defined above).

4. In March, 2011 the Applicant sold and delivered products and materials to the Second and Third Respondents pursuant to the Credit Account. The price of the products and materials was $2,890.71.  That amount was not, and has never been, paid.  

5. The Applicant lodged a caveat over the Second and Third Respondents’ interest in the Land. That caveat was registered over the Land on 1 June, 2011.

The applications

1. The Second and Third Respondents are bankrupts having become so upon the presentation of their own petitions in May, 2011.  The first respondent is the Trustee of the estate in bankruptcy of each of the second and third respondents.

2. Relevantly, s.58 of the Act provides:

   ...

   (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.

3. In the present case, the leave to proceed that is sought relates to the relief sought in the very same proceedings brought to secure that leave.  There are no other proceedings on foot or proposed in respect of which leave is sought.  Thus, to the extent that leave is sought to commence these proceedings, the claim has been overtaken by the circumstance that the proceedings have already been commenced.  In that event, leave must be sought nunc pro tunc and in cases where the proceedings have been commenced or a fresh step taken in ignorance of the bankruptcy, the Court has power to grant the necessary leave nunc pro tunc: Re Veghelyi: Smith & Ors v Official Trustee in Bankruptcy (1993) 45 FCR 413. It may also be granted where the proceedings have been commenced or a fresh step taken with knowledge of the bankruptcy: Scott v Bagshaw (2000) 99 FCR 573 at 578, Singh v Official Trustee in Bankruptcy [2007] FMCA 1367 at [17].

4. Leaving aside the application for leave to commence the proceedings, the principal relief sought by the applicant is declaratory relief in respect of its equitable charge and an order for sale of the relevant real property. The power to grant declaratory relief is conferred by both s.30 of the Bankruptcy Act1966 and more explicitly by s.16 of the Federal Magistrates Act 1999 in respect of matters within the Court’s original jurisdiction.

5. Although the applicant in its application and submissions relies upon s.31(1)(f) of the Bankruptcy Act1966 as a source of power for the declarations sought, it is clear from Scott v Bagshaw (above) that s.31(1)(f) confers neither jurisdiction nor power upon the Court, but merely prescribes those matters within the Court’s jurisdiction in bankruptcy which must be exercised in open Court.

6. The applicant establishes by the evidence that it holds an equitable charge given by the Second and Third Respondents over their interests in the Land.  Clause 6.7 of the Credit Agreement provides that:

   The Purchaser as beneficial owner charges in favour of the Supplier all of its interest in  all of the present and future real property of the Purchaser as security for the due and punctual payment of all debts and monetary liabilities owed by the Purchaser to the Supplier pursuant to contract on or including the terms of these Conditions. The Purchaser consents to the Supplier lodging a caveat to note its interest..

7. I accept that this clause is apt to, and does, create an equitable general charge securing a contingent debt that is capable of attaching to property in land: Clarke v Raymor Brisbane Pty Ltd (No.2) [1982] QdR 790 at 795 ad BBC Hardware Pty Ltd v GT Homes Pty Ltd [1997] 2QdR 123 at p125.

8. This Court clearly has power to grant the claimed declaratory relief as an exercise of its jurisdiction in bankruptcy.  In Scott v Bagshaw (at 577) the Full Court explained how such claims are within that jurisdiction:

   On the face of the pleadings, the claim is one to realise an equitable charge. The pleadings make no reference of any section of the Act and the matter may be capable of reaching judgment without reference to any such section.

   However, the undoubted effect of an order being made in the terms sought by the appellant would be that a declaration would be made against the title of the third respondents. Upon the third respondents' becoming trustees, the title to the properties (and subsequently to the money representing part of the properties) became vested in them: subs 58(1) and s 132 of the Act. The consequence of any such order must therefore be that it would have a necessary adverse effect on the title of the third respondents to the extent that it established title in the appellant. That is a matter that falls within the jurisdiction in bankruptcy.

9. For the reasons given by the Full Court in Scott v Bagshaw I accept that such a claim is within this Court’s jurisdiction in bankruptcy as conferred by s.27(1) of the Bankruptcy Act1966.   

10. Despite the terms of s.58(5) of the Act it seems that leave to commence these proceedings is required: Scott v Bagshaw (above) at 578; Mango Media Pty Ltd v Velingos [2008] NSWSC 202. That appears so notwithstanding that the Applicant does not seek to pursue relief in respect of the applicant’s debt, but rather is designed to realise the security for that debt.

11. In Scott v Bagshaw the applicant sought declarations that certain parcels of real property were charged with the repayment of a certain loan between the applicant and the first respondent.  The first respondent owned two of the parcels of land jointly with the second respondent.  The applicant also sought orders for the appointment of receivers for the sale of the properties and an accounting of the sale proceeds.  Although the pleading in the claim made no mention of the provable debt that was at the heart of the matter, the Full Court determined that the claims were, nonetheless, “in respect of” the provable debt so as to engage the operation of s.58(3)(b) of the Act. The Full Court determined that leave to commence the proceedings ought to be granted nunc pro tunc. No mention, however, was made of s.58(5) and the effect of that section upon the necessity for leave under s.58(3)(b) of the Act.

12. I accept that Scott v Bagshaw binds me, but its authority is lessened by the absence of any direct reference to s.58(5) of the Act. In the present case, the equitable charge the existence of which is sought to be confirmed exists because there is a provable debt. Without such, the equitable charge would not exist. In that sense then it can be said that the proceeding is “in respect of” a provable debt: cf. Fraser v Commissioner of Taxation (1996) FCR 99 at 115; Westpac Banking Corporation v Ollis [2007] FCA 1194 at [14].

Leave to proceed

1. The relevant principles to be applied when considering leave to proceed are set out in Hall v Warner [2006] FCA 852. The Court is required to determine whether the issues are complex and able to be resolved more expeditiously and thoroughly in the proceeding in respect of which leave is sought, than under the proof of debt procedure.

2. The present applicant argues that leave to proceed ought to be granted because:

   (a)    the relief sought by the Applicant is as a secured creditor and not a money claim, therefore the proof of debt process is not available to deal with the claim.  Whether the relief sought is declaratory or injunctive is a factor in the granting of leave.

   (b)    the First Respondent Trustee has not opposed leave being granted and is not disadvantaged by the making of the orders sought.

3. I agree with the submission that given the nature of the relief sought by the applicant in this case, a grant of leave may be appropriate.  The proceeding is to enforce what is claimed to be a security interest, rather than to litigate about the existence of, or to establish, an otherwise provable debt.

4. In those circumstances, however, it is appropriate to consider the proceedings in respect of which leave is sought as the nature of those proceedings will inform, in part, the exercise of the relevant discretion.

5. The declarations sought by the applicant go to establishing its title.  In my view it is appropriate to make the declarations sought in respect of the equitable charge that arises from the credit agreement.  Because the credit agreement was entered into by the second and third respondents personally, the guarantees that they executed (as part of a pre-printed application) add nothing.  I do not intend to make the declarations in respect of the charges said to arise from the terms of the guarantees.

6. In addition to declaratory relief, the applicant seeks an order that the land be sold “Pursuant to Federal Magistrates Court Rules 2001, Rule 16.01”.  That rule is in the following terms:

   16.01 Court may make any judgment or order

   The Court may, at any stage in a proceeding on the application of a party, give any judgment or make any order even if the claim was not made in an originating process.

7. Although it seems that the applicant suggested that FMCR16.01 was sufficient of itself to empower the Court to make the order for sale that it sought, the rule cannot give the Court either jurisdiction or power to make an order or give a judgment that it does not otherwise possess.  The power to make the order sought must exist and be exercisable in proceedings that are properly within the jurisdiction of the Court.

8. The applicant seeks an order that “A Statutory Trustee be appointed pursuant to s.66G of the Conveyancing Act 1919 (NSW) to conduct the sale of the Land”.  Relevantly, that section is in the following terms:

   66G   Statutory trusts for sale or partition of property held in co-ownership

   (1)  Where any property (other than chattels) is held in co-ownership the court may, on the application of any one or more of the co-owners, appoint trustees of the property and vest the same in such trustees, subject to incumbrances affecting the entirety, but free from incumbrances affecting any undivided shares, to be held by them on the statutory trust for sale or on the statutory trust for partition.

9. The definition of co-owner is important. It is found in s.66F and is as follows:

   66F   Definitions

   In this Division:

   (1)  Co-ownership means ownership whether at law or in equity in possession by two or more persons as joint tenants or as tenants in common; and co-owner has a corresponding meaning and includes an incumbrancer of the interest of a joint tenant or tenant in common.

10. In ANZ v Scott (1993) NSWConvR 55-675 Bryson J held that the word incumbrancer in s.66F means mortgagee, or a party in a similar position to a mortgagee. It is apt to include the holder of an equitable charge. That approach was adopted and followed in Westpac v Samson and Anor (1995) NSW ConvR 55-733 and National Bank v Hedley (1984) NSW ConvR 55-211.

11. In Westpac v Scott the Court refused to grant relief under s.66G of the Conveyancing Act 1910 (NSW) because Westpac was an incumbrancer of the whole of the land and as mortgagee of the whole, it did not fall within the meaning of co-owner as set out in s.66F of the Act. That was so notwithstanding that the mortgagors held their title to the relevant land as co-owners.

12. Similarly, in Broadway Credit Union v Bellamy [2000] NSWSC 778 the plaintiff was the mortgagee of the whole of the land. The Court refused to grant relief under s.66G of the Conveyancing Act 1910 (NSW) on the basis that Broadway was an encumbrancer of the entire fee simple and therefore was not a co-owner.

1. Despite bringing the above authorities to the attention of the applicant’s solicitors and seeking further submissions on the point, no further submissions of any substance have been made.  It remains the applicant’s “primary submission that a statutory trustee be appointed pursuant to s.66G of the Conveyancing Act 1919 (NSW)”.

2. In the present case the Land is owned by the second and third respondents as joint tenants.  Both have granted equitable charges over the whole of their interests.  The applicant is an incumbrancer of the entire fee simple and not a co-owner for the purposes of s.66G of the Conveyancing Act1919 (NSW). The application to appoint a statutory trustee for sale under the Conveyancing Act 1919 (NSW) cannot succeed.

3. As an alternative, the applicant points to s.109 of the Conveyancing Act 1910 (NSW) to provide the jurisdiction and power to appoint a statutory trustee for, or otherwise order, a sale.  That section is in the following terms:

   109   Powers of mortgagees and certain chargees

   (1)  A mortgagee and a chargee shall by virtue of this Act have the following powers to the like extent as if they had been in terms conferred by the instrument creating the mortgage or the covenant under which the charge arose but not further, namely:

   (a)  A power to sell or to concur with any other person in selling the mortgaged or charged property, or any part thereof, either subject to prior charges or not, and either together or in lots, in subdivision or otherwise, by public auction or by private contract, subject to such conditions respecting title or evidence of title or other matter as the mortgagee or chargee thinks fit, with power to vary any contract for sale, and to buy in at an auction or to rescind any contract for sale, and to resell without being answerable for any loss occasioned thereby.

   (b)  A power at any time after the date of the instrument to insure and keep insured against loss or damage by fire any building or any effects or property of an insurable nature whether affixed to the freehold or not being or forming part of the mortgaged or charged property, and the premiums paid for any such insurance shall be a charge on the mortgaged or charged property in addition to the money secured by the mortgage or charge, and with the same priority and with interest at the same rate as that money.

   (c)  A power to appoint a receiver of the income of the mortgaged or charged property or of any part thereof.

   (d)  A power, while the mortgagee or chargee is in possession, to cut and sell timber except trees planted or left standing for shelter or ornament, or to contract for any such cutting and sale, to be completed within any time not exceeding twelve months from the making of the contract.

   (e)  A power to sever and sell fixtures apart from the balance of the mortgaged or charged property.

   (f)  A power to sell any easement, profit à prendre, right, or privilege of any kind over or in relation to the mortgaged or charged property.

   (2)  The provisions of this Act (except s.111(5) and the provisions of s.111 relating to notice or lapse of time where default is made in the payment, in accordance with the terms of the instrument creating the mortgage or the covenant under which the charge arose, of any principal, interest or other money) relating to the foregoing powers comprised either in this section or in any subsequent section regulating the exercise of those powers may be varied or extended by the instrument, and as so varied or extended shall, as far as may be, operate in the like manner and with all the like incidents, effects, and consequences as if such variations or extensions were contained in this Act.

   (3)  Subs.(1) applies only if and as far as a contrary intention is not expressed in the instrument, and shall have effect subject to the terms of the instrument and to the provisions therein contained.

   (4) This section applies to mortgages executed before, and to mortgages executed after, the commencement of Schedule 3 to the Conveyancing (Amendment) Act 1976.

   (5) This section applies to mortgages and charges under the Real Property Act 1900.

4. The effect of s.109 of the Conveyancing Act 1910 (NSW) is to give to mortgagees and chargees certain rights and powers.  It does not empower a Court, let alone this Court, to do anything.  Moreover, exercise of the power of sale set out in s.109 of the Conveyancing Act 1910 (NSW) is regulated by s.111 of that Act.  Amongst other matters, notice is required to be given to the defaulting chargor.  There is no evidence that the applicant is in a position to properly invoke the powers set out in s.109 of the Conveyancing Act 1910 (NSW).  The claim for relief under this section cannot succeed.

5. I accept that the remedy for enforcement of an equitable charge is a judicial or statutory sale of the property as appropriate: Worrell v Issitch [2001] 1QdR 570; Phillips v Hogg [2001] QSC 390; BBC Hardware Pty Ltd v GT Homes Pty Ltd [1997] 2QdR 123.

6. The law relating to an order for a judicial sale at the instance of an equitable chargee or mortgagee of land subject to the Real Property Act 1900(NSW) was comprehensively reviewed by Campbell J in King Investment Solutions Pty Ltd v Hussain[2005] NSWSC 1076.  In that case, his Honour concluded:

   a)Where there is a charge simpliciter, and not a mortgage, or an agreement for a mortgage, the right of the party having such a charge is a sale, and not foreclosure: Tennant v Trenchard (1869) LR 4 Ch App 537 at 542 per Lord Hatherley LC; In re Owen [1894] 3 Ch 220. (at [51]);

   b)Under the general law a charge can be enforced only by application to the Court for an order for the sale of the charged property, not by the chargee taking unilateral action out of court: Melbourne Tramways Trust v Melbourne Tramway & Omnibus Co Ltd (1887) 13 VLR 487 at 490. (also at [51]);

   c)Section 103(2) of the Conveyancing Act 1919 (NSW) applied to an equitable chargee of property so as to enliven a jurisdiction and power to order a sale of the charged land (at [67] – [71]), but only if that land was not land to which the Real Property Act 1900 (NSW) applied: at [72] – [77];

   d)The Supreme Court of New South Wales exercising its jurisdiction in equity had a general law power to order a sale of charged property: at [78] – [82];

   e)Where the whole of the chargor’s interest in the property is sought to be sold under order of the Court, any prior encumbrancer is a necessary party to those proceedings, particularly where the order sought is for the sale of the property by public auction or private treaty on such terms as the applicant for the order thinks fit (as is the case here): at [86] – [93];

   f)Evidence of value of the land sought to be sold is generally seen as essential, especially where there is a prior mortgage.  Evidence of the amount owed to the prior mortgagee is also required: at [100] – [102];

   g)The Court will in most cases be concerned to set a reserve price for the property to be sold: at [104] – [105];

   h)It is usual for the Court to give consideration to what security a person seeking an order for sale should be required to provide: at [106];

   i)Before the court can order a sale of mortgaged property consideration must be given to who is to have the conduct of the sale: at [120].

7. His Honour’s decision was followed in Chateau Constructions (Aust) Ltd v Zepinic (No 5) [2010] NSWSC 265. In that case Slattery J pointed out that a sale could be carried out “in court” by a trustee appointed for that purpose, or “out of court” by one of the parties (at 87).

Consideration

1. For the reasons set out above, the application for leave to proceed and the declaratory relief sought by the applicant is within the jurisdiction of this Court under the Bankruptcy Act1966. 

2. I am not satisfied, however, that this Court has any original jurisdiction to make the orders for sale sought by the applicant.  Specifically, I am not satisfied that the Court’s jurisdiction in bankruptcy extends to an order for the sale of property by way of enforcement of an equitable charge over that property.  The remedy sought by the applicant is a general law remedy available to an equitable chargee.

3. Nonetheless, I am satisfied that this Court has jurisdiction to order a sale of the Land as an exercise of this Court’s associated jurisdiction conferred by s.18 of the Federal Magistrates Act1999.  There is a federal matter properly before the Court, namely the claim for declaratory relief as an exercise of the Court’s jurisdiction in bankruptcy.  The applicant’s claim to an order for sale by way of enforcement of its charge is sufficiently connected, both legally and factually, to the federal matter as to come within the Court’s associated jurisdiction.

4. I am prepared to infer from the evidence (and in particular annexures “SG-5” and “SG-6”to the affidavit of Sue Greiner filed on 4 January, 2012) that the Land is land which is subject to the operation of the Real Property Act 1900 (NSW). That being so, the power of sale conferred by s.103(2) of the Conveyancing Act1919 (NSW) is not available and cannot be a source of jurisdiction or power to order a sale of the Land.

5. However, an order for judicial sale is, as the authorities referred to above demonstrate, available as a matter of general law.  Such an order is discretionary.  Many of the matters that will inform the exercise of the discretion remain unaddressed in the evidence before the court.

6. The orders sought by the applicant might be apposite if a trustee for sale was to be appointed pursuant to s.66G of the Conveyancing Act 1910 (NSW), but as King Investment Solutions Pty Ltd v Hussain (above) and Chateau Constructions (Aust) Ltd v Zepinic (No 5) (above) demonstrate, the orders for a judicial sale to enforce an equitable charge need to regulate that sale in a more detailed fashion. 

7. In those circumstances I consider it appropriate to adjourn the present application so that the applicant may bring in minutes of proposed directions addressing the deficiencies outlined above.

I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for judgment of Jarrett FM

Date:  18 September 2012