White, Clyde Peter (as Trustee of the Bankrupt Estate of Kathleen Fay Lynn) v Lynn, Thomas & Anor [1998] FCA 875

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VG 7301 of 1998

BETWEEN: CLYDE PETER WHITE (as Trustee of the Bankrupt Estate of KATHLEEN FAY LYNN)

Applicant

AND: THOMAS LYNN

FIRST RESPONDENT

tHE REGISTRAR OF TITLES

SECOND Respondent

JUDGE: heerey j

DATE OF ORDER:

WHERE MADE: MELBOURNE

THE COURT ORDERS THAT:

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VG 7301 of 1998

BETWEEN: CLYDE PETER WHITE (as Trustee of the Bankrupt Estate of KATHLEEN FAY LYNN)

Applicant

AND: THOMAS LYNN

first respondent

THE REGISTRAR OF TITLES

second Respondent

JUDGE: HEEREY J

DATE: 15 JULY 1998

PLACE: MELBOURNE

REASONS FOR JUDGMENT The trustee of the bankrupt estate of Mrs Kathleen Fay Lynn seeks certain orders in relation to a property at 9 Lower Dandenong Road, Mentone, the matrimonial home of Mrs Lynn and her husband, the first respondent, Mr Thomas Lynn. Effectively, the trustee seeks orders which will vest in him the share in the property previously held by Mrs Lynn and an order for sale under s 223 of the Property Law Act 1958 (Vic). The background to the case is that Mrs Lynn, who is now aged 72 and an aged pensioner, invested in 1979 some $30,000 with a Mr John Newson, who conducted an accounting practice under the entity Newson Associates Pty Ltd. Mr Newson subsequently died. In October 1993 Mrs Lynn commenced proceedings in the County Court of Victoria to recover this investment, together with interest, from Mr Newson's estate and from his widow, Mrs G L Newson. The matter was heard before her Honour Judge Harbison who on 10 May 1996 dismissed the claim and ordered that Mrs Lynn pay Mrs Newson's costs. On 29 April 1996 Mrs Lynn executed a transfer of her interest in the property, together with that of her husband, in favour of Mr Lynn alone. On 24 June 1996 Mrs Lynn presented a debtor's petition under s 55 of the Bankruptcy Act 1966 (Cth). The petition was accepted by the Registrar on the same day and accordingly, Mrs Lynn became a bankrupt. On 24 June 1996 Mrs Lynn completed and verified a statement of affairs which disclosed no assets and no ability to contribute to any of the debts of her estate. The trustee applied to set aside the transfer. On 28 May 1997, Marshall J declared that the transfer was void as against the trustee pursuant to s 120 of the Act. His Honour further declared that the trustee was entitled to be registered as the proprietor of the one-half interest as tenant in common with Mr Lynn in the property. An appeal against those orders was dismissed by the Full Court on 1 October 1997. Turning to the present application, I shall deal first with the orders sought in relation to the title of the property. They take the form proposed by the Registrar of Titles. In substance, they will order the Registrar to cancel the folio of the register book and create a new folio and certificate of title for the property and record the trustee and Mr Lynn as tenants in common in equal shares of the fee simple for the property. Further, the new certificate of title is to be issued to the trustee's solicitor. Counsel for Mr Lynn argued against the making of this order, relying on the principle in Port of Melbourne Authority v Anshun Pty Ltd (No. 2) (1981) 147 CLR 589. He said that the principle applied because the trustee at the hearing before Marshall J could have applied then for orders requiring delivery up of the title and had only sought declarations. I do not accept this argument. Anshun says in substance that a party will not be allowed to raise a claim or defence which could reasonably have been raised in earlier proceedings between the same parties. Here it was not unreasonable for the trustee to proceed on the basis that declarations of the Court in the form sought would be obeyed. As to the second part of this application, which seeks an order for sale, counsel for Mr Lynn relied on a number of what are said to be discretionary matters. The first of these, as appears from the affidavit of Mrs Lynn, is that the claim against Mrs Newson was unsuccessful due to the negligence of her solicitors. Mrs Lynn says she has attempted to prove their negligence before the Legal Professional Tribunal but failed on the grounds that she had no standing because she was a bankrupt. For the same reason she has been unable to appeal the decision of Judge Harbison. She further alleges that the trustee, in breach of his duty, has failed to pursue these negligence claims. Secondly, there are the personal circumstances of Mr Lynn and Mrs Lynn. They are aged respectively 79 and 72 years. Each is in receipt of an aged pension of approximately $280 per fortnight. They have no other source of income and no other assets other than the property, which is unencumbered. They have three sons, one of whom lives in Perth and the other two in Melbourne. Unfortunately the sons in Melbourne are not on speaking terms with their parents and Mr and Mrs Lynn have no other family support. Mr Lynn deposes in an affidavit: "I do not consent to the sale of our house as sought by the trustee Mr White. I would be extremely prejudiced by any sale of our house and oppose the proposed sale. If we are forced to sell our home we will have to seek government assistance in obtaining alternative accommodation. We cannot afford to rent a house and will have insufficient money left to purchase even a unit. This contrasts to our position some 10 - 15 years ago when we had some savings, which we invested with Mr Newson." According to documents submitted on behalf of the trustee, unsecured creditors that are known to the trustee at the moment are Coadys, solicitors, $27,999.35; Mr I Andolfatto, solicitor, $9,814.49; Mr R Moore, barrister, $9,500; Mrs G Newson (estimated) $30,000; total, $77,313.84. In addition, there are the following costs: costs before Marshall J, $5,762; costs of the Full Court appeal, $7,785. The trustee's costs of administration, including legal costs, are said to be $35,476.34. None of the above figures include interest. It was put on behalf of Mr Lynn that relevant to my discretion was the fact that most of the debts claimed were for legal fees. I do not see that the character of the debts as legal fees is relevant. Nor is it relevant that there are unsubstantiated allegations of negligence or a claim that the judgment was wrong. The judgment of the County Court is of course a judgment of a court of competent jurisdiction and stands until set aside. More importantly, however, it is clear that a tenant in common has a right to either an order for partition or sale under s 223 of the Property Law Act and the only discretion in the court is as to whether to order partition rather than sale: see Bray v Bray (1926) 38 CLR 542, Schnytzer v Wielunski [1978] VR 418 at 422. I should add as a third matter of discretion that there was some evidence of ill health on behalf of Mr and Mrs Lynn. There was a medical certificate saying that last month and this month, Mrs Lynn had a headache and appeared stressed about the case. The doctor thought that her blood pressure may well be related to the stress of the court case. Mr Lynn's general health is good in relation to his age. However, stress at this age, his doctor says, is not well tolerated. The sadness of this case is self-evident, but a sequestration order having been made against Mrs Lynn and the transfer of her interest in the house having been set aside by a Judge of this Court and affirmed on appeal, the trustee has no alternative but to pursue the collection of the assets of the estate, an obligation which is imposed on him by the statute. The most I can do, to leave open the possibility of some negotiated arrangement, is to grant a stay of the orders. I propose to do that and I will make the orders sought in the minutes. I will grant a stay of six months in relation to items 5 and 6, that is, the actual sale itself. There will be an order in terms of para 7 that the first respondent pay the applicant's costs of the application. I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey