Weston (Trustee) v Sanna

Case [2020] FCA 830

FEDERAL COURT OF AUSTRALIA

Weston (Trustee) v Sanna [2020] FCA 830

File number: NSD 276 of 2016
Judge: MARKOVIC J
Date of judgment: 15 June 2020
Catchwords: BANKRUPTCY – application by trustee in bankruptcy seeking orders and declarations to effect the sale of two properties – withdrawal of caveats pursuant to s 74MA of the Real Property Act 1900 (NSW) – appointment of trustees for sale pursuant to s 66G of the Conveyancing Act 1919 (NSW) – execution of transfer of property by a person nominated by the Court for that purpose – application granted
Legislation:

Bankruptcy Act 1966 (Cth) ss 120, 121

Civil Procedure Act 2005 (NSW) s 94

Conveyancing Act 1919 (NSW) ss 66F, 66G

Family Law Act 1975 (Cth) ss 4, 39

Federal Court of Australia Act 1976 (Cth) ss 18N, 43, 53

Real Property Act 1900 (NSW) ss 12D, 74MA

Federal Court Rules 2011 (Cth) rr 40.02, 41.10, Sch 3

Cases cited:

Anscor Pty Ltd v Clout (Trustee) (2004) 135 FCR 469

Bhagat v Global Custodians Ltd [2002] FCAFC 51

Callahan v O’Neill [2002] NSWSC 877

Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225

Coshott v Prentice (2014) 221 FCR 450

Cummings v Claremont Petroleum NL (1996) 185 CLR 124

Fountain v Alexander (1982) 150 CLR 615

LFDB v MS S M (No 2) [2018] FCA 2062

Official Trustee in Bankruptcy & Galanis [2017] FamCAFC 20; (2017) 318 FLR 22

Stone v Melrose Cranes & Rigging Pty Ltd, in the matter of Cardinal Project Services Pty Ltd (in liq) [2016] FCA 1113

Date of hearing: 13 May 2020
Date of last submissions: 9 June 2020
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Category: Catchwords
Number of paragraphs: 134
Counsel for the Applicant: Mr A Spencer
Solicitor for the Applicant: Dentons Australia
Solicitor for the First Respondent: Mr B O’Neill of ERA Legal
Counsel for the Second Respondent: The Second Respondent filed a submitting notice save as to costs
Counsel for the Fifth Respondent: The Fifth Respondent filed a submitting notice save as to costs
Counsel for the Seventh Respondent: The Seventh Respondent appeared in person
Solicitor for the Ninth Respondent: K&L Gates
Solicitor for the Tenth Respondent: Mr G Adelstein of Adelstein Solicitors
Solicitor for the Eleventh Respondent: Mr A Hack of Matthews Folbigg Lawyers
Counsel for the Twelfth Respondent: The Twelfth Respondent filed a submitting notice save as to costs

ORDERS

NSD 276 of 2016
BETWEEN:

PAUL GERARD WESTON AS TRUSTEE OF THE BANKRUPT ESTATE OF LEPA SANNA

Applicant
AND:

CORRADO SANNA
(and others named in the Schedule of Parties)

First Respondent

JUDGE:

MARKOVIC J

DATE OF ORDER:

15 JUNE 2020

THE COURT DECLARES THAT:

The Copacabana Property

1.The applicant (Mr Weston) is empowered to offer the property referred to in Schedule A to these Orders (Copacabana Property) for sale and to sell that property by public auction with power to fix a reserve price or alternatively…

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AGLC
Weston (Trustee) v Sanna [2020] FCA 830
Case
[2020] FCA 830
Decision Date

CaseChat Overview and Summary

The parties involved in this proceeding are Weston, as trustee in bankruptcy, and Sanna. Weston is seeking orders and declarations to facilitate the sale of two properties: the Copacabana Property and the Green Valley Property. The dispute revolves around the validity of two transfers made by Ms Sanna to Mr Sanna, which are now subject to challenge by the trustee in bankruptcy. The court hearing this case is the Federal Court of Australia.

The primary legal issue before the court was whether the transfers of the Copacabana Property and the Green Valley Property by Ms Sanna to Mr Sanna were void against the trustee in bankruptcy. This issue was derived from previous proceedings where the court determined that these transfers were indeed void. Consequently, the court was required to address the implications of these findings, specifically how to proceed with the sale of the properties. This included determining the appropriate legal mechanisms for removing caveats, appointing trustees for the sale, and ensuring the proper distribution of sale proceeds.

The court ruled in favour of the trustee, granting most of the orders sought. The court mandated the withdrawal of caveats by the respective caveators within 14 days or face the application of s 74MA of the Real Property Act 1900 (NSW). It also directed Mr Sanna to deliver any relevant documents to the trustee within seven days for both properties. For the Copacabana Property, the court authorized the New South Wales District Registrar to execute a transfer prepared by the trustee upon the exchange of contracts. For the Green Valley Property, the court appointed the trustee and another individual as trustees for the sale, authorizing them to sell the property by public auction or private treaty. The court also outlined procedures for the distribution of sale proceeds and costs, and provided for continued residence of Mr Sanna in the Copacabana Property under specific conditions.

The court concluded by making the orders sought by the trustee, with some modifications. It emphasized the importance of adhering to the outlined procedures for the sale and distribution of proceeds. The court also noted that it declined to grant the orders sought by Defined regarding its costs of the hearing, due to insufficient substantiation of the costs incurred.

Orders

Orders of the court

The Copacabana Property

4. Pursuant to s 74MA of the Real Property Act 1900 (NSW) (Real Property Act), each of the parties in the first column of Schedule B to these Orders (Copacabana Caveators) shall withdraw the caveat lodged by that caveator within 14 days of the date of these Orders, failing which s 74MA of that Act will apply.

5. Within seven days of the date of these Orders, the respondent (Mr Sanna) is to deliver to Mr Weston any deeds or documents of title in his possession or under his control relating to the Copacabana Property which may properly be required for the completion of any sale of it.

6. Within 14 days of exchange of contracts for sale of the Copacabana Property, the New South Wales District Registrar of this Court be empowered to execute a transfer of the Copacabana Property which transfer will be prepared by Mr Weston (or on his behalf) and submitted to the New South Wales District Registrar of this Court for that purpose.

7. Within 21 days of the date of these Orders, Mr Weston must circulate to each of the parties to this proceeding by email costs estimates from the proposed valuers, real estate agents and legal representatives and an indication of each preferred professional proposed to be retained.

8. Mr Sanna may continue to reside in the Copacabana Property provided that he:

(a) allows all reasonable access to the Copacabana Property to Mr Weston or as Mr Weston may direct for the purpose of giving effect to these Orders; and

(b) within 14 days of receiving any council rates notice or utilities bill in relation to the Copacabana Property, pays to Mr Weston the amount of that notice or bill.

9. The payments referred to in paragraph 8(b) of these Orders are to be:

(a) made by way of electronic transfer to the following bank account:

Account Name: Lepa Sanna (Bankrupt Estate)

BSB: 182 222

Account No: 248164592; and

(b) dealt with as if they were proceeds of the sale of the Copacabana Property.

10. Notwithstanding paragraph 8 of these Orders, Mr Sanna must provide Mr Weston with vacant possession of the Copacabana Property on or before the earlier of:

(a) 14 days prior to the completion date of any exchanged contract for the sale of the Copacabana Property; or

(b) 13 August 2020.

11. After making the payments referred to in paragraph 2 of these Orders, Mr Weston is to pay the balance into Court.

The Green Valley Property

12. Pursuant to s 66G of the Conveyancing Act 1919 (NSW), Mr Weston and Ragu Nith be appointed as trustees (Section 66G Trustees) for the sale of the Green Valley Property.

13. The Green Valley Property immediately vest in the Section 66G Trustees as trustees for sale.

14. Within seven days of the date of these Orders, Mr Sanna is to deliver to the Section 66G Trustees any deeds or documents of title in his possession or under his control relating to the Green Valley Property which may properly be required for the completion of any sale of it.

15. The Section 66G Trustees are authorised and empowered to offer the Green Valley Property for sale and to sell that property by public auction with power to fix a reserve price or alternatively to sell the property by private treaty at the best available price.

16. Pursuant to s 74MA of the Real Property Act, each of the parties who appear in the first column of Schedule D to these Orders (Green Valley Caveators) shall withdraw the caveat lodged by that caveator within 14 days of the date of these Orders, failing which s 74MA of that Act will apply.

17. Within 21 days of the date of these Orders, the Section 66G Trustees must circulate to each of the parties to this proceeding by email costs estimates from the proposed valuers, real estate agents and legal representatives and an indication of each preferred professional proposed to be retained.

18. After making the payments referred to in paragraph 3 of these Orders, Mr Weston is to pay the balance into Court.

19. Grant liberty to the Section 66G Trustees to seek the advice of the Court on any matter arising from their appointment or these Orders.

Other

20. Liberty to the parties, and to any other person claiming an interest in the Copacabana Property or the Green Valley Property, to apply on two days’ notice with respect to any matter that may arise with respect to the sale of those properties or the distribution of the sale proceeds.

21. Pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth), Mr Sanna is to pay Mr Weston’s costs thrown away by reason of the adjournment of the application fixed for hearing on 16 April 2020, fixed in the sum of $4,550.90 (excluding GST).

THE COURT NOTES THAT:

22. Mr Sanna currently resides in the Copacabana Property.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

For the reasons that follow, save in one respect in relation to the Copacabana Property, the orders sought by the Trustee should be made. BACKGROUND Prior to 8 May 2013 Ms Sanna, the respondent in proceeding NSD619/2016 (and since 16 April 2020 also a respondent to this proceeding), was the registered proprietor of the Copacabana Property which is situated at 33-35 Circulo Drive, Copacabana and had a half share interest in the Green Valley Property which is situated at 83B Lindeman Crescent, Green Valley. On 12 January 2012 Australian Executor Trustees Limited (AETL), which held a mortgage over the Copacabana Property, obtained judgment for $1,840,309.83 in the Supreme Court of New South Wales (Supreme Court) against Ms Sanna. By transfer registered no AH7557747 dated 8 May 2013 for consideration of $1 (Copacabana Transfer) Ms Sanna transferred the Copacabana Property to Corrado Sanna, her estranged husband and the respondent to this proceeding. By unregistered transfer signed by Ms Sanna in about May 2013 for consideration of $1, Ms Sanna transferred her half share interest in the Green Valley Property to Mr Sanna (Green Valley Transfer). On 10 December 2013 Ms Sanna became bankrupt and the Trustee became trustee of her bankrupt estate. On or about 17 January 2014 the Trustee lodged a caveat over the Green Valley Property (Trustee’s Green Valley Caveat). On 22 July 2015, upon receiving a lapsing notice, the Trustee commenced proceeding 2015/00215624 against Ms Sanna in the Supreme Court seeking orders extending the operation of the Trustee’s Green Valley Caveat (Green Valley Caveat Proceeding). In 2015 Wyse & Young International Pty Ltd (Wyse & Young), Wolgan Consulting Pty Ltd (Wolgan Consulting) and Defined Properties Investments Pty Ltd (Defined) commenced proceeding 2015/00217506 in the Supreme Court against Mr Sanna, his son and DCL Construction Group Pty Ltd (DCL) (Supreme Court Proceeding). On 25 February 2016 the Trustee commenced this proceeding seeking declarations pursuant to s 120 or, in the alternative, s 121 of the Bankruptcy Act 1966 (Cth) (Act) that each of the Copacabana Transfer and the Green Valley Transfer is void against him and relief consequent upon the making of such declarations. On 26 February 2016 by order made by the Supreme Court in the Green Valley Caveat Proceeding, that proceeding was transferred to this Court and became proceeding NSD619/2016 in this Court. On 6 July 2016 orders were made in proceeding NSD619/2016 to the effect that the application filed in that proceeding be heard together with the application filed in this proceeding. On 12-14 March 2018 the Transfer Proceedings were listed for hearing before me. On 24 January 2019 I delivered judgment in the Transfer Proceedings: see Weston (Trustee) v Sanna [2019] FCA 32 (Weston v Sanna). At [6]-[7] of Weston v Sanna I noted that:6During the course of the hearing it became apparent that, in the event that the Trustee was successful in setting aside the Copacabana and Green Valley Transfers, the parties were not in a position to deal with the consequences that flowed from findings to that effect. In particular, late in the hearing, and after Mr Sanna had been cross-examined, counsel for Mr Sanna attempted to tender further evidence to establish that he had discharged certain liabilities which he said were secured over the Green Valley Property. In those circumstances, the parties agreed that the matter should proceed in two stages: the first being the determination of whether the Copacabana Transfer and the Green Valley Transfer are void against the Trustee pursuant to s 120 or s 121 of the Act; and the second being the consequences of such findings, assuming that the parties could not resolve that issue by consent between themselves.7 These reasons deal with the first issue.In relation to the “first issue” I relevantly found that each of the Copacabana Transfer and the Green Valley Transfer is void against the Trustee. The parties were ordered to bring in short minutes reflecting the Court’s reasons and, if required, to provide a proposed timetable for the second stage of the proceeding.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

Finally, while the Court might be prepared to accept an application for lump sum costs made in an informal fashion, even in circumstances where orders had been made for the filing of an application, Defined’s application is not in an acceptable form. No affidavit has been provided in support of the application and the material included in the submissions falls well short of the requirements in annexure A to the Costs PN “Guide for Preparing a Costs Summary”. In the circumstances there is not adequate evidence or substantiation of the costs incurred such that I would be able properly to determine what amount should be paid on a lump sum basis. CONCLUSION For those reasons I will make the orders sought by the Trustee in the Trustee’s Application substantially in the form of the draft short minutes provided to the Court by the Trustee’s solicitors on 14 May 2020, but note that I decline to make an order in relation to payment of a licence fee by Mr Sanna. I will also make an order that Mr Sanna pay the Trustee’s costs of the hearing on 16 April 2020 fixed in the sum of $4,550.90. I decline to make the orders sought by Defined in relation to its costs of the hearing on 16 April 2020.

Ratio Decidendi

Legal Principle Established

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