Cottrell v Nicholls (Trustee) [2004] FCA 613

FEDERAL COURT OF AUSTRALIA

Cottrell v Nicholls (Trustee) [2004] FCA 613 Bankruptcy Act 1966 (Cth) ss 139ZQ, 139ZR and 139ZS Real Property Act 1900 (NSW) s 41 Cottrell v Nicholls (Trustee) in the matter of Cottrell (Bankrupt) [2004] FCA 358 cited Cottrell v Nicholls (Trustee) in the matter of Cottrell (Bankrupt) [2004] FCA 102 cited Hannon, Re; Official Receiver, Ex p (1945) 13 ABC 218 approved In the matter of DAVID MERVYN COTTRELL DAVID MERVYN COTTRELL v ALAN NICHOLLS (TRUSTEE) N 399 of 2004 TAMBERLIN J SYDNEY 14 MAY 2004

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 399 OF 2004

In the matter of DAVID MERVYN COTTRELL

BETWEEN: DAVID MERVYN COTTRELL

APPLICANT

AND: ALAN NICHOLLS (TRUSTEE)

RESPONDENT

JUDGE: TAMBERLIN J

DATE OF ORDER: 14 MAY 2004

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: The application be dismissed with costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 399 OF 2004

In the matter of DAVID MERVYN COTTRELL

BETWEEN: DAVID MERVYN COTTRELL

APPLICANT

AND: ALAN NICHOLLS (TRUSTEE)

RESPONDENT

JUDGE: TAMBERLIN J

DATE: 14 MAY 2004

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 This is an application by Mr Cottrell, filed on 22 March 2004, which seeks orders in the following terms: "1. I DAVID COTTRELL MAKE THIS URGENT APPLICATION TO THIS COURT. I HEREIN APPLY FOR 'A STAY OF ALL PROCEEDINGS' IN THIS MATTER AS ABOVE. I DAVID COTTRELL HAVE 'A SERIES OF PROCEEDINGS' BEFORE THIS COURT No N76/2004 WHICH ARE LISTED FOR HEARING ON A DATE TO BE FIXED OWING TO THE SERIOUS NATURE OF THESE MATTERS AND THE IRREVERSABLE [SIC] ACTION PLANNED BY THE TRUSTEE. I DAVID COTTRELL REQUEST THAT THIS COURT TAKE INTO CONSIDERATION THE CONTENT AND STRENGTH OF MY APPLICATION AND GRANT 'A STAY OF PROCEEDINGS' UNTIL THESE MATTERS CAN BE BROUGHT BEFORE A JUSTICE AND BE RESOLVED IN PARTICULAR THE PROCEDURAL ERRORS MADE BY THE COURT IN N 7880 AND N76 OF 2004. THIS APPLICATION IS MADE UNDER SECTION 178 OF THE BANKRUPTCY ACT 1966 & SECTION 52(3) OF THE BANKRUPTCY ACT 1966. …" 2 Mr Cottrell also sought interlocutory relief by way of an order that the Trustee cease advertising the property known as "Calatoota" at Boree Creek Road, Urana, New South Wales ("the property"); an order that the Trustee remove the property from sale; and an order that the auctioneer not proceed with the auction of the property, which was listed for auction on 26 March 2004 at 4.00 pm. The application for interlocutory relief was heard by Allsop J and was dismissed with costs. See his Honour's judgment in Cottrell v Nicholls (Trustee) in the matter of Cottrell (Bankrupt) [2004] FCA 358. As his Honour noted, when the matter came on for hearing before him on 25 March 2004, Mr Cottrell was unable to come to Court and had conducted his case over the telephone with facsimile documents before the Court. This was also the position when the matter was heard by me via telephone link with Mr Cottrell on 4 May 2004. Mr Cottrell has been involved in a number of applications to this Court and other courts, including the Supreme Court of New South Wales. After Allsop J had made his orders, the property was sold for $120,000 by the Trustee on 26 March 2004, and a copy of the front page of the contract of sale is in evidence before me. Settlement is scheduled on the forty-second day after the date of sale. There is a caveat on the title, which was lodged by Mr Cottrell, and when this matter was heard by me, there were concurrent proceedings before Hamilton J of the Supreme Court of New South Wales, concerning the removal of the caveat. 3 A substantial part of the history of Mr Cottrell's proceedings in relation to the property is set out in an earlier judgment of Allsop J, delivered on 27 February 2004: see Cottrell v Nicholls (Trustee) in the matter of Cottrell (Bankrupt) [2004] FCA 102. I will not repeat that history in these reasons, due to the need for a speedy decision. 4 On the hearing before me Mr Cottrell was not represented. However, I have the benefit of a written submission formulated by a former solicitor for Mr Cottrell, Ms Reid of Lethbridge & McGowan Pty Lawyers, solicitors of Corowa, New South Wales, in the form of a letter dated 4 May 2004. The letter recounts, and I accept, that due to Mr Cottrell's financial position he was not able to fund the solicitors to arrange an appearance, nor to formally retain them. I also accept that Mr Cottrell is not well enough to attend at court on his own behalf. The letter states that Lethbridge & McGowan are instructed by Mr Cottrell to seek an adjournment of the hearing until he recovered sufficiently to appear on his own behalf. 5 Given the history of this matter, and the view I have taken in relation to the merits of Mr Cottrell's claim, I do not consider it is appropriate to grant an adjournment. 6 In her letter of 4 May 2004, Ms Reid made the following submission on behalf of Mr Cottrell: "We are instructed by Mr Cottrell that he claims an interest in the property as a life tenant. Mr Cottrell asserts that his interest as life tenant did not automatically vest in his trustee upon him becoming bankrupt. He asserts that in order for his interest as life tenant to vest in his trustee, the trustee must first apply for registration in the approved form to obtain a registered estate, which he has not done. Mr Cottrell respectfully refers the Court to the commentary at page 10194 of the text, 'the Torrens System in New South Wales', 2nd edition by P Butt and F Ticehurst and to the decisions referred to in the third paragraph on that page. A copy of the relevant page is enclosed. Mr Cottrell asserts that while the steps taken by his trustee pursuant to section 139ZR of the Bankruptcy Act may result in a charge over the registered proprietor's interest in the property, that interest is subject to the life interest previously granted by the registered proprietor in favour of Mr Cottrell and, accordingly, Mr Cottrell continues to hold a life interest in the property owned by his sister. Mr Cottrell asserts that by reason of his life interest he is entitled to possession of the property and that the property can be sold subject to his life tenancy. Accordingly he seeks a declaration that he holds a life interest in the property and that any sale of the property by his Trustee is subject to his life interest. He also seeks an order restraining his trustee from selling the property other than subject to his interest. We are instructed that Mr Cottrell was not able to comply with the directions made by this honourable Court previously by reason of his ill health. …" 7 When the matter came on for hearing before me, Mr Cottrell made a number of oral submissions based on the claim that he has a life estate in the property, and that the Trustee was not entitled to dispose of the property in such a way as to terminate his life estate. 8 The Trustee strenuously opposes this application on the basis that applications of a similar type had not been granted by the Court. I was taken to the decision of Clyne J in Hannon, Re; Official Receiver, Ex p (1945) 13 ABC 218. In that case, Clyne J determined that the bankrupt took a life estate in land and premises that had been bequeathed to him by his mother, and that the life estate vested in the Official Receiver upon his bankruptcy. Clyne J did not determine whether the bankrupt's interest in the property was legal or equitable as, in either scenario, it vested in the Official Receiver as property of the bankrupt that was divided among his creditors. In my opinion, In re Hannan, is still good law. It follows that any life estate that Mr Cottrell could claim in the property vests in the Trustee upon his bankruptcy. 9 In the present case, I am not satisfied on the evidence before me that Mr Cottrell has any life estate as asserted by him. He relies on affidavits which only make a passing reference, in support of his application, to the existence of a life tenancy. He states that: "I, David Cottrell, respectfully request a stay of proceedings in this matter. It is my home for life that is at stake (life tenancy)." Under the circumstances, I do not consider it appropriate, as a matter of discretion, that an injunction, or any other interlocutory relief, should be granted. 10 The Trustee also opposed this application on the basis that Mr Cottrell does not have any grounds to challenge the notice that was issued pursuant to s139ZQ of the Bankruptcy Act 1966 (Cth) ("the Act") because he is not an "interested person" within the meaning of s 139ZS of the Act. 11 Section 139ZR of the Act provides, in effect, that where notice is given under s 139ZQ to a person in respect of property, such property is charged with the liability of the person to make payments to the trustee as required by the notice: s 139ZR(1). In the present case, pursuant to that section, the Official Receiver certified by signed writing that the land was subject to a charge under s 139ZR, and lodged that certificate with the Registrar-General. This certificate was registered in the way in which mortgages over land are registered in New South Wales. Section 139ZQ(6) provides that the Trustee has power to sell any property over which a charge exists under subsection (1), and where such property is sold, the proceeds of sale are to the extent of the charge to be applied towards the discharge of the liability. 12 In the present case the notice under s 139ZQ was given to the sister of the bankrupt, Mrs Grant. In the letter of 4 May 2004 from Ms Reid, reference is made to s 41 of the Real Property Act 1900 (NSW) and to decisions cited to the effect that the person in whom the land vests must still apply the approved forms to obtain the registered estate and until then such person cannot sue as owner of the registered estate. 13 I do not accept the Trustee's submission that Mr Cottrell does not have standing to make this application under s 139ZQ of the Act. I think Mr Cottrell has on his allegation a claim to be an interested person for the purposes of that section. However, in my opinion, having regard to the lack of substantiating evidence before me regarding the life tenancy, I am not prepared to grant any relief pending proceedings involving Mr Cottrell, or to restrain completion of the sale which has been made. 14 I accept that Mr Cottrell has had difficulties in presenting his case and obtaining legal representation due to his illness and lack of funds, but unfortunately, on the material before me, I cannot see that his case has any reasonable prospect of success. Accordingly, as a matter of discretion, I refuse the application. I can see no reason why the applicant should not pay the costs of the Trustee and I order that the applicant pay the Trustee's costs in relation to this application before me. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.