Re Bankrupt Estate of Zofia Rzepa; Ex Parte Lamb, Kenneth Wayne [1997] FCA 1433

FEDERAL COURT OF AUSTRALIA

BANKRUPTCY - voidable preference - informal second mortgage entered into by person without legal interest in the property - purported mortgagor becomes registered proprietor - later registrable mortgage executed within relation back period - registrable mortgage in different terms from informal mortgage - whether informal mortgage can be given effect in equity - whether registrable mortgage voidable preference. Bankruptcy Act 1966 (Cth) s 122 RE: BANKRUPT ESTATE OF ZOFIA RZEPA EX PARTE: KENNETH WAYNE LAMB AND: VALARIE RZEPA VG 7316 of 1997 MURPHY JR MELBOURNE 16 DECEMBER 1997

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VG 7316 of 1997

RE: BANKRUPT ESTATE OF ZOFIA RZEPA

EX PARTE: KENNETH WAYNE LAMB

and applicant

valarie rzepa

respondent

JUDGE: MURPHY JR

DATE OF ORDER: 16 DECEMBER 1997

WHERE MADE: MELBOURNE

THE COURT ORDERS and declares THAT: 1. The claim of the respondent as mortgagee under a mortgage dated 11 March 1996 over the land being Certificate of Title Volume 9659 Folio 707 and claimed in caveat No U130074T lodged in the Land Titles Office on 14 March 1996 is void against the applicant. Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VG 7316 of 1997

RE: BANKRUPT ESTATE OF ZOFIA RZEPA

EX PARTE: KENNETH WAYNE LAMB

and applicant

valarie rzepa

respondent

JUDGE: MURPHY JR

DATE: 16 DECEMBER 1997

PLACE: MELBOURNE

REASONS FOR JUDGMENT The applicant is the trustee of the bankrupt estate of Zofia Rzepa ("the debtor"). The respondent is the mother-in-law of the debtor. The respondent's son Wieslaw Zbigniew Rzepa ("Mr Rzepa") is married to the debtor. By application dated 15 May 1997 the applicant seeks a declaration under s 122 of the Bankruptcy Act 1966 (Cth) ("the Act") "that the claim of (the respondent) as mortgagee under a mortgage created 11 March 1996 is void against the applicant". By Notice of Intention to Appear filed 25 August 1997 the respondent opposes the application on the grounds that the mortgage is not void against the applicant as it "was given for valuable consideration, in good faith and without notice of insolvency". BACKGROUND The proceedings are concerned with establishing whether the respondent has any security interest in a property known as 80 Bellbrook Drive North Dandenong ("the property"). Mr Rzepa became the registered proprietor of the property on 29 September 1987. By a transfer registered on 26 April 1994 he transferred it to the debtor. On 14 March 1996 the respondent lodged in the Land Titles Office a caveat No U130074T on the title of the property. The caveat refers to the respondent's grounds of claim as "Mortgagee under an instrument of Mortgage from [Mr Rzepa] and [the debtor] .... dated 11 March 1996". Although in the mortgage the mortgagors are named as Mr Rzepa and the debtor, it was only signed by the debtor. The mortgage is in the sum of $41,000. The property has been sold. After the discharge of the first mortgage to a bank the applicant's solicitors hold the sum of $13,247.97, pending the outcome of these proceedings. The applicant seeks to disburse those funds to the debtor's creditors. He submits that the mortgage is void under s 122 of the Act as it was executed within the six month relation back period prior to the debtor becoming bankrupt, and confers a "preference, priority or advantage over other creditors". Further background is that on 17 August 1994 proceedings were issued against Mr Rzepa and the debtor in the Melbourne Magistrates Court. Judgment was entered against them on 20 February 1996 for the sum of $24,166 plus interest of $4,597.24 and costs of $5,099.20. The judgment remains unpaid. The debtor and Mr Rzepa were made bankrupt on 30 July 1996.