Federal Court of Australia Geronimo v State of Western Australia [2024] FCA 196 File number: WAD 308 of 2023 Judgment of: BANKS-SMITH J Date of judgment: 5 March 2024 Date of publication of reasons: 6 March 2024 Catchwords: BANKRUPTCY - disclaimer by trustee of bankrupt's interest as tenant in common in real property - where Registrar of Titles placed caveat on title notifying disclaimer - where bankrupt's interest vested in the State - where applicant as purchaser purported to buy the property from the bankrupt and the co-owner as vendors - where purchaser and vendors represented by settlement agents for purpose of conveyance - Registrar's caveat not addressed or removed at purported settlement - where Registrar issued requisition notifying parties of issue arising from disclaimer - application made under s 133(9) of Bankruptcy Act 1966 (Cth) for bankrupt's former interest to vest in the applicant - where purchaser had acted to his detriment in entering into mortgage and incurring other expenses - no opposition from State - just and equitable to make vesting order Legislation: Bankruptcy Act 1966 (Cth) ss 58, 133 Property Law Act 1969 (WA) s 126 Transfer of Land Act 1893 (WA) s 234 Cases cited: Australia and New Zealand Banking Group Limited v State of Queensland, in the matter of McFarlane (a Bankrupt) [2017] FCA 696 Re Francis, Ex parte Official Trustee in Bankruptcy (1988) 19 FCR 149 Walsh v State of Queensland [2019] FCA 871 Division: General Division Registry: Western Australia National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 20 Date of hearing: 5 March 2024 Counsel for the Applicant: Mr RJ Squires Solicitor for the Applicant: Seymour Legal Counsel for the First Respondent: Mr DJ Hargreaves Solicitor for the First Respondent: State Solicitor's Office Counsel for the Second Respondent: The second respondent is self-represented Counsel for the Third Respondent: The third respondent did not appear Counsel for the Fourth Respondent: The fourth respondent did not appear ORDERS WAD 308 of 2023 BETWEEN: EDGARDO GERONIMO Applicant AND: STATE OF WESTERN AUSTRALIA First Respondent DANNY JOHN ELLEFSEN Second Respondent BETTINA GAYLE ELLEFSEN Third Respondent REGISTRAR OF TITLES Fourth Respondent order made by: BANKS-SMITH J DATE OF ORDER: 5 March 2024 THE COURT ORDERS THAT: 1. Pursuant to s 133(9) of the Bankruptcy Act 1966 (Cth) the second respondent's disclaimed interest in the property located at 27 Donald Drive, McKail, Western Australia being the whole of the land comprised and described in Certificate of Title Volume 2717 Folio 74, Lot 284 on Deposited Plan 61739, vest in the applicant. 2. The Registrar of Titles (fourth respondent) may give effect to the vesting of the property under order 1 by registration of the following documents lodged at Landgate, subject to the Registrar's usual examination process: (a) Discharge of Mortgage P585283 by Commonwealth Bank of Australia. (b) Transfer P585284 by the first and second respondents to the applicant. (c) Mortgage P585285 to Westpac Banking Corporation. 3. Parties have liberty to apply. 4. There be no order as to the costs of this application. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT BANKS-SMITH J: 1 What should have been a relatively routine purchase of a property by the applicant, Edgardo Geronimo, has been tainted by an unfortunate series of oversights on the part of others, requiring him to bring this application for orders to finally bring about registration of the property in his name. 2 The property is located on Donald Drive, McKail in Western Australia. 3 The former co-owner of the property, Danny Ellefsen, was made bankrupt in September 2017. At that time he owned the property as joint tenant with Bettina Gayle Ellefsen, as she was then known. The bankruptcy severed the joint tenancy: see generally Re Francis, Ex parte Official Trustee in Bankruptcy (1988) 19 FCR 149. 4 Pursuant to s 58(1)(a) of the Bankruptcy Act 1966 (Cth) the effect of the making of the bankruptcy order with respect to Mr Ellefsen's estate was that all of the right, title and interest in his estate relevantly vested in his trustee in bankruptcy. However, the effect of s 58(2) of the Bankruptcy Act is that legal title to a fee simple interest in land does not vest in the trustee on the making of the bankruptcy orders. In order for a trustee in bankruptcy to secure legal title to those interests, it is necessary to cause the land to be registered in their own name. In Western Australia, such an application is made under s 234 of the Transfer of Land Act 1893 (WA). 5 In this case, the trustee did not apply to become the registered proprietor but instead disclaimed her interest in the property under s 133(1) of the Bankruptcy Act on the ground it was not readily saleable. The Trustee informed Landgate of that disclaimer by letter dated 11 December 2017. 6 The Registrar of Titles lodged a Registrar's caveat on the title of the property on 18 December 2017 that referred to the trustee's letter of 11 December 2017 giving notice of the disclaimer. 7 It followed upon the disclaimer that Mr Ellefsen's interest became vested in the State of Western Australia, by the doctrine of escheat: see generally Australia and New Zealand Banking Group Limited v State of Queensland, in the matter of McFarlane (a Bankrupt) [2017] FCA 696 at [17]. Mr Ellefsen no longer had any interest in the property that he was capable of conveying. The fact that his bankruptcy presumably came to an end in September 2020 made no difference to this position. 8 In January 2023 the Supreme Court of Western Australia made partitioning orders under s 126 of the Property Law Act 1969 (WA) for the sale of the property, with the net proceeds to be paid in equal shares to Danny Ellefsen and Bettina Ellefsen (by this time known as Bettina Archer). Mr Ellefsen was authorised by the orders to sell the property and to sign any transfer on behalf of Ms Archer. It is unclear whether the Supreme Court was informed at the time of making the orders of Mr Ellefsen's bankruptcy or the disclaimer by the trustee. Although questions might arise as to whether the Supreme Court's orders had any effect with respect to authorising Mr Ellefsen to sell his former interest in the property, it is not necessary to resolve any questions arising out of the Supreme Court's orders in order to resolve this application. 9 The property was then marketed for sale. Mr Geronimo entered into a contract for its purchase in April 2023. The sellers were described in the contract as Danny John Ellefsen and Bettina Gayle Ellefsen (Archer) as joint tenants. 10 Mr Geronimo was represented by Amity Settlements for the purpose of his purchase. Mr Ellefsen was represented at the time by Haynes Robinson. 11 During the settlement process Mr Geronimo was provided with a copy of the certificate of title, which disclosed that the Registrar's caveat. Mr Geronimo in his affidavit evidence in support of the application disclosed that he did not understand the significance of the caveat. So much can readily be accepted. Of more concern is the fact that neither Amity Settlements nor Haynes Robinson appeared to appreciate the significance of the Registrar's caveat and the underlying disclaimer. Amity Settlements made inquiries of Haynes Robinson about the caveat and were told it would be removed at settlement. 12 As events played out, the sale and purchase proceeded to settlement. In the transfer form, the transferors were described as Danny John Ellefsen and Bettina Gayle Ellefsen as joint tenants. Mr Geronimo obtained finance through Westpac Banking Corporation and assumed all the usual legal responsibilities of a mortgagor. He expended funds on a range of disbursements such as search fees, settlement fees and title insurance. He utilised the first home owner grant. He moved into the home on the day of settlement. He has paid the mortgage ever since. 13 On 22 August 2023 Mr Geronimo was informed by an email from Amity that a requisition had been issued by Landgate in relation to the Registrar's caveat. As a result of the requisition, the transfer had not been registered. Mr Geronimo took legal advice from Seymour Legal. His lawyers properly recognised a number of issues with respect to the disclaimer and the settlement. They made inquiries of Haynes Robinson, who indicated they no longer acted for Mr Ellefsen and said that they had no wish to comment further. 14 Mr Geronimo's lawyers recognised that in circumstances where Mr Ellefsen had no vested interest in the property, it was necessary to bring an application under s 133(9) of the Bankruptcy Act, which provides: The Court may, on application by a person either claiming an interest in, or being under a liability not discharged by this Act in respect of, disclaimed property, and after hearing such persons as it thinks fit, make an order, on such terms as the Court considers just and equitable, for the vesting of the property in, or delivery of the property to, a person entitled to it or a person in whom, or to whom, it seems to the Court to be just and equitable that it should be vested or delivered, or a trustee for that person. 15 The application was supported by five affidavits made by or on behalf of Mr Geronimo. The State was served with the application and attended the hearing. The State did not oppose the orders that were sought. Mr Ellefsen also appeared, representing himself, and did not oppose the orders. He explained that he always thought he was doing things properly, that he did not understand that there were issues, and that he considered it was appropriate that the vesting order be made. Mr Ellefsen also explained that to the extent he had received money by way of the sale of the property, he had been in discussions with the State. Counsel for the State confirmed that was the case, and also confirmed that there was no issue that I needed to address in that regard. I am grateful to the State for its obvious cooperation in relation to these unfortunate circumstances. 16 I am satisfied that the former trustee in bankruptcy and Ms Archer were informed of the application. Neither sought to be heard. I was also informed by counsel for Mr Geronimo that the Registrar had indicated he had no issue with the form of the proposed orders. 17 This is a clear case where it is just and equitable that the interest formerly held by Mr Ellefsen should vest in Mr Geronimo. Whilst Mr Geronimo may technically have causes of action against third parties arising out of the circumstances of the sale, that may be of little comfort to him and, in any event, does not deny him the relief he seeks from this Court. It is just and equitable that orders be made in circumstances where Mr Geronimo has done nothing wrong; he has expended money and incurred a significant liability to Westpac Banking Corporation; and he has moved into the property on the assumption that the transfer had been completed in the ordinary manner. 18 In analogous circumstances of an application by a purchaser of property in Walsh v State of Queensland [2019] FCA 871, Logan J similarly made vesting orders on the basis that it was just and equitable to do so. 19 The orders will vest Mr Ellefsen's former interest in Mr Geronimo, but will also entitle the Registrar to register each of the discharge of a previous mortgage in favour of the Commonwealth Bank of Australia (granted by the vendors), the transfer in favour of Mr Geronimo and the mortgage in favour of Westpac Banking Corporation. Mr Geronimo will then be the registered owner of his property. 20 In case other issues arise, there will be liberty to apply. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Banks-Smith. Associate: Dated: 6 March 2024