"yi fat Be foo SEF/ CATCHWORODS BANKRUPTCY - deed of assignment - Torrens land - whether trustee has legal title without registration. Bankruptcy Act, 1966 ss.178, 229 Janes_Shakespeare npillip cames Shax.y sare & Ure. 2. 10D of 1926 wr IN_THE FEDERAL COURT OF AUSTRALIA ) GENERAL DIVISION ~ QLD Part X No. 102 of BANKRUPTCY DISTRICT OF THE SOUTHERN DISTRICT OF THE STATE OF QUEENSLAND ~~ RE: PHILLIP JAMES SHAKESPEARS (A Debtor) EX PAFTE: PHILLIP JAMES SHAKESPEARE and KAREN (Applicants) AND: DESMOND WILLIAM KNIGHT? (Trustee! MINUTES OF OPDER SUDGE MAKIN ORDER: PINCUS J. DATE OF ORDEE 27 NOVEMEER 1986 WHERE MADE: UPISBANE T-2_COURT ORDER? THAT 1. The arplication be dismissed. Z. The applicants say tne respondent's costs of and incidenta? ta tne preceedings, ta be taxed. NOTE: Settlement and entry of orders is deait with in Rule 124 of the Bankruptcy Rules. ~ IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION ) QLD Part X No. 102 BANKRUPTCY DISTRICT OF THE SOUTHERN ) DISTRICT OF THE STATE OF QUEENSLAND ~ RE: PHILLIP JAMES SHAKESPEARE (A Debtor) EX PARTE: PHILLIP JAMES SHAKESPEARE and KAREN CAROLYN SHAKESPEARE (Applicants) AND: DESMOND WILLIAM KNIGHT (Trustee) PINCUS J. 27 NOVEMBER 1986 EX_TEMPGRE REASONS FOR CUDGMENT Tnhi3 25 an application made by PP." and bk. 7, "akespeare for an order that the court review a decision of Mr. D.W. Knight as the trustee under a deea of assiaqnment executed sy P.J. Snakespeare om 1h March 1986. The surisdiction sought to be invoked arises under s.178 of the Banruptcy Act which apriies to persons in the position of Mr. Knight, and as Mr. Douglas on behalf of the applicant says, gives the court a wide ciscretion. The dispute relates to a contract for sale of a house which is registered under the Real Property Act 1n the names of Mr. and Mrs. Shakespeare, the contract having been entered into on 29 October 1986. It contemplates the sale of the house at a price of $150,000 ona i small deposit, completion to take place on 29 November 1986. of The case for the applicants essentially 1s that there was a considerable amount of discussion between them and the trustee, Mr. Knight, in relation to the house, and it was discussed that perhaps the interest of Mr. Shakespeare, the assignor under the deed of assignment, might be transferred to his wife. Eventually the applicant, Mr. Shakespeare, says he obtained an oral consent to the agreement to sell the house which I have mentioned, to R.A. and J.A. Meir. The material before me discloses that Mr. Shakespeare, who 1S a solicitor, 18 connected with a trust company and apparently liabilities of the trust company have been secured on the house, the name of that company being Karja Proprietary Limited. Mr. Sofrconoff, wno has appeared for the rvrespondect trustee, points to the fact that the statement of affairs shows the amount of the debt as beirg $150,009 secured on mortgaces on the house and says that that 15 inconsistent with the present case of the applicants. it may be, however, that the discrepancy is explained on the basis that tne statement of affa:rs 15 drawn up on the assumption that liabilities as guarantor ar? not covered. It seems that substantiai liabilities as guarantor then existed and they are, indeed, disclosed in para.4 of the general part of the form. However that may be, I do not see that the alleged discrepancy or any other circumstances placed before me enables me to determine merely on the papers who 1s right about the critical factual question, which is whether or not Mr. Knight did, as is alleged and as he denies, consent to the transaction. It seems to me that, as was implied in the address of Mr. Douglas, I have to look elsewhere to determine whether I should exercise the discretion which I have under s.178. Mr. Douglas contended that the legal title to the land is presently in Mr. and Mrs. Shakespeare. The material which was tendered by Mr. Sofronoff included 10 documents, one of which is the certificate of title. I reserved the question whether that Material should be admitted, and I have decided te admit it. Those 10 documents will be admitted as exhibits 1 to 10. The certificate of titie, volume 4480 folio 98, discioses as th (h) registered propr:retors, by transfer ain 1976, Mr. and Mrs. Shaxespeare, and also, of course, discloses the rortgages. Debate took place as to the effect of s 224 "7 the Bankruptcy Act subs.(i) of which reads as follows. "Subject to this section, th due execution ky debtor of a deed of assignment that 1s entered int in accordance with this Part and complies with the requirements of this Part operates to vest in the trustee forthwith, upon the trusts and for the purposes of the deed, all the divisible property 27f the debtor." vw @ Subsection (3) says: "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 a deed of assignment to be registered as the owner of any such property that is part of the divisible property of the debtor, that property, notwithstanding that it vests in equity in the trustee by virtue of this section, does not vest at lawin the trustee until the requirements of that law have been complied with." Section 229(1) directly vests the legal estate in the trustee, subject only to the exception in subs.(3). I have not been referred to any law of the Commonwealth or of the State which fulfils the description in subs.(3). In particular, it seems to me that the principal transmission provision, in s.86 of the Real Property Act 1861 of this State, does not fulfil that description. It does not deal at all with deeds of assignment, and it may be that there is a gap which needs to be filled. However that may be, my present view is that Mr. Shakespeare's interest an the real property is vested legally in Mr. Knight, the trustee. The Real Property Act, of course, cannot override the provisions of the Bankruptcy Act, because of s.1°93 of tne Constitution. I therefore start from the proposition that $.229(1) has operated to vest the legal estate im Mr. Knight. He was the appropriate vendor. The contract for sale, insofar as 1t treats Mr. Shakespeare as the registered proprietor, seems to me incorrect. Of course, a person may agree to sell land which he does not own and it 1s a matter for him to acquire title and fulfil his contract. The basis upon which the contract was entered into by Mr. Shakespeare, however, was that he himself was the registered proprietor and had, at law, a right to sell. A submission made by Mr. Sofronoff is that I should be influenced by a conversation to which Mr. Knight deposes in an affidavit filed today. The conversation was with one Mr. Hatch, said to be a branch manager of Westpac Banking Corporation, the branch not being identified. Mr. Knight says he had a conversation with Mr. Hatch on 7 November 1986 and discussed the contract which had been entered into with him. "Mr. Hatch said to me," says Mr. Knight, "words to the effect, "Oh, you mean the swap?" Mr. Knight goes on, "I pursued that line of discussion with him and he told me that Mr. and Mrs. Meir had arranged a 'swap' transaction with Mr. and Mrs. Shakespeare such that Karja Pty. Ltd. would acquire Mr. and Mrs. Meir's property." Mr. Hatch Said that the "real price of both properties was well above $150,000". The matter has come before me in an urgent way because the partzes want to xnow where they stand, and it 1s c#sired to resolve tne matter quickly. Nevertheless, I have tc tace irt0 account againt the applicants the fact that tne trustee was rot cross-examined on that conversation, nor was any attempt mace to adduce evidence, by hearsay or otherwise, to suggest that the conversation was not had. As against that, Mr. Douglas voints out that there seem to be two valuations supporting the sale ac $150,000. I should have thought, however, that there would be some attempt to explain the allegation, which on the face of 1t there 15 no reason to doubt, that Mr. Hatch, the Westpac branch manager, had the impression that there was more to the transaction than was disclosed to Mr. Knight by Mr. Shakespeare. Mr. Shakespeare's account of the matter includes a conversation with Mr. Knight about the then proposed transaction on 27 October 1986 in which he told Mr. Knight that he hada purchaser for the house at $150,000. Mr. Knight replied, "Are they arm's length purchasers?" and Mr. Shakespeare said, "Yes. I did not know the purchasers." That 1s the closest one gets to anything in the material inconsistent with the curlous conversation with Mr. Hatch. The principal contentions put forward by Mr. Douglas in support of the application or rather, the ones which have weighed most neavily with me are these. One 1s that Mrs. Shakespeare, who has an interest in the transaction, may be damaged if the sale does not proceed. There may be a sale, for example by a mortgagee, at an under-value; the Meirs may iose interest and be unwilling to extend the time for completion. A second factor which has been urged upon me by Mr. Douglas 1s that 1+ seems cl2 fo "NS that the idea of this saie did not come "out of the blue', as he put 1¢, and I have no reason to doubt that there was consideransle discussion about it. Mr. Shakespeare may weli nave had the impression, and I suspect that he did, that he had at ieast the acquiescence of Mr. Knight in his efforts to sell. All that having been said, it seems to me plair that 1t would be an improper exercise of the discretion to interfere with Mr. Knight's functions as trustee at this stage. The sale is not suggested to be a particularly advantageous one; 1t is not suggested that Mr. Knight is acting from any improper motive. He says, in effect, that he wants to know more about what is going on, and he has drawn attention to a number of matters which seem to require investigation. It is true, as Mr. Douglas says, that some of those matters have nothing to do with the house, but I am satisfied that Mr. Knight has not yet a sufficient picture of the of the house itself, in the web of Mr. Shakespeare's place, even exercise his discretion in financial affairs to enable him to respect of the sale; nor have I. The application will be dismissed with costs. t certify that this and the 6 preceding nares are a true copy of the reasons for j) dament herein of His Honour Mr Justice Pincus Gbhey Rowen ei. Assaciate Dated 27 Plecenrtler. 966