Supreme Court New South Wales Medium Neutral Citation: Tompkins v Gorton [2024] NSWSC 716 Hearing dates: 12 June 2024 Decision date: 12 June 2024 Jurisdiction: Equity - Real Property List Before: Peden J Decision: See [20] Catchwords: LAND LAW — Co-ownership — Statutory trust for sale — Appointment of trustees — Where first defendant not active in proceedings — Where active parties agree plaintiff has a beneficial interest Legislation Cited: Bankruptcy Act 1966 s 58 Conveyancing Act 1919 (NSW) s 66G Jurisdiction of Court (Cross-vesting) Act 1987 (Qld) s 4 Jurisdiction of Court (Cross-vesting) Act 1987 (NSW) s 9 Property Law Act 1974 (Qld) s 38 Uniform Civil Procedure Rules 2005 (NSW) r 29.7 Trustee Act 1925 (NSW) s 71 Trustee Act 1973 (Qld) s 82 Cases Cited: Elite Realty Development Pty Ltd v Sadek [2022] NSWSC 1333 Re Central Management (NSW) Pty Ltd (in liq) [2017] NSWSC 1258 Foundas v Arambatzis [2020] NSWCA 47 Crocombe v Pine Forests of Australia Pty Ltd [2005] NSWSC 151 Category: Principal judgment Parties: Clive Lindsay Tompkins (Plaintiff) John Damien Gorton (First Defendant) Cindy Melissa Robson (Second Defendant) Westpac Banking Corporation (Third Defendant) Representation: Counsel: T Rollo (Plaintiff) C Hamilton-Jewell (Third Defendant) Solicitor Advocates: J Wilburn (Second Defendant) P Ram (Bankruptcy Trustee) Solicitors: Carroll & O'Dea Lawyers (Plaintiff) Financial Rights Legal Centre (Second Defendant) Minter Ellison (Third Defendant) SLF Lawyers (Bankruptcy Trustee) File Number(s): 2022/00375819 Publication restriction: Nil ex tempore JUDGMENT (Revised) 1. The active parties in this litigation seek final resolution of the proceedings by way of consent orders. They have provided detailed evidence and submissions in order to satisfy the Court that the consent orders, making declarations and appointing trustees for the sale of land, are appropriate. 2. The salient facts can be briefly stated. As at 15 December 2016, the plaintiff, Mr Clive Lindsay Tompkins, owned two properties, one in New South Wales and the other in Queensland. He transferred the title to those properties to the first and second defendants, Damien John Gorton and Melissa Cindy Robson, as joint tenants, without consideration. I accept on the evidence that Mr Tompkins intended those defendants to use the properties as security to raise money for the advancement of a franchise business. 3. In February 2017, Mr Gorton and Ms Robson guaranteed a loan from the third defendant, Westpac, to Mr Gorton's company. The loan was also secured with a mortgage over both the properties. Since 30 January 2020, no loan repayments have been made. On 20 October 2021, Mr Gorton's company went into liquidation. Westpac filed a cross-claim in these proceedings in relation to its security over the properties. 4. Mr Tompkins, Ms Robson and Westpac have reached a confidential settlement to resolve the proceedings. 5. Mr Gorton has not been an active party in the proceedings. On 8 November 2023, a sequestration order was made against Mr Gorton and a trustee in bankruptcy was appointed. The trustee appeared at the hearing today and, while not formally a party, consents to the proposed consent orders. 6. I am satisfied that Mr Gorton has been served in accordance with the Court's orders and has been notified of the hearing today. At the commencement of the hearing, the matter was called outside, and no appearance was made for Mr Gorton. Rule 29.7 Uniform Civil Procedure Rules 2005 (NSW) sets out the procedure to be followed in these circumstances. In Elite Realty Development Pty Ltd v Sadek [2022] NSWSC 1333 at [25], I noted that the effect of this rule is "to provide power to the Court to either adjourn or proceed where a party is absent at the hearing". 7. In circumstances where Mr Gorton has failed to participate in the proceedings, and no explanation has been offered for his absence at the hearing, I have not considered any adjournment is justified. As Black J noted in Re Central Management (NSW) Pty Ltd (in liq) [2017] NSWSC 1258 at [2], while a defendant of course has a right to be heard, this is "not a right to frustrate the hearing of proceedings by not attending them". As such, I consider the proceedings should be finally determined, despite Mr Gorton's absence. 8. In any event, Mr Gorton is an undischarged bankrupt and would not be entitled to make any claim in relation to the properties, as any interest he has, has vested in his trustee in bankruptcy: s 58(1) Bankruptcy Act 1966. Consideration 1. I am prepared to make the consent orders sought by the parties. In doing so, I accept the submissions of the parties. The effect of the orders generally is that: 1. Mr Tompkins will be entitled to 50% of each property and the net proceeds of sale. 2. Westpac will be entitled to 50% of each property and the net proceeds of sale. However, I note it is anticipated that the net proceeds will be insufficient to discharge Westpac's mortgage. 3. The properties will be sold by trustees appointed by the Court and the net proceeds divided 50/50 between Mr Tompkins and Westpac. 4. Ms Robson and Mr Gorton will receive nothing from the sale proceeds. 1. I accept on the uncontested evidence that Mr Tompkins always intended to retain beneficial ownership of the properties. Based on the agreement between the parties, I am prepared to make a declaration that Ms Robson holds her interest in the properties on trust for Mr Tompkins, noting that this is a compromise on Mr Tompkins' pleaded position. 2. The parties accept that Mr Gorton's trustee in bankruptcy is vested with Mr Gordon's interest in the properties, but also that his bankruptcy does not prevent Westpac enforcing its security over the properties. 3. As a "co-owner", Westpac seeks orders for trustee sales of the properties pursuant to s 66G Conveyancing Act 1919 (NSW) and s 38 Property Law Act 1974 (Qld). There is no dispute that this Court has jurisdiction to make orders concerning the Queensland property under the Queensland legislation by reason of s 4(1) Jurisdiction of Court (Cross-vesting) Act 1987 (Qld) and s 9 Jurisdiction of Court (Cross-vesting) Act 1987 (NSW). 4. As a mortgagee, Westpac is a "co-owner" for the purposes of the Conveyancing Act and Property Law Act, because the meaning of "co-owner" includes "an incumbrancer of the interest of a joint tenant or tenant in common", and "an encumbrancee of the interest of a joint tenant or tenant in common". "Incumbrance" and "encumbrance" are defined in the legislation to include mortgages. In any event, all the active parties seek the appointment of trustees for the sale of the properties. 5. The principles which apply on an application for the appointment for trustees for sale under s 66G Conveyancing Act and s 38 Property Law Act are well established. As explained by White JA (Bell P and Basten JA agreeing) in Foundas v Arambatzis [2020] NSWCA 47 at [63]: Although an order under s 66G is discretionary, such an order is almost as of right, unless on settled principles it would be inequitable to make the order. An order may be refused if the appointment of trustees for sale would be inconsistent with a proprietary right, or the applicant for the order is acting in breach of contract or fiduciary duty, or is estopped from seeking or obtaining the order (Re McNamara and the Conveyancing Act (1961) 78 WN (NSW) 1068 at 1068; Ngatoa v Ford (1990) 19 NSWLR 72 at 77; Williams v Legg (1993) 29 NSWLR 687 at 693; Hogan v Baseden (1997) 8 BPR 15,723 at 15,726-15,727; Tory v Tory at [42]). Hardship or general unfairness is not a sufficient ground for declining relief under s 66G (Hogan v Baseden (1997) 8 BPR 15,723 at 723; Ferella v Official Trustee in Bankruptcy at [36]-[40]). 1. There is obviously no resistance to the trustees being appointed here. 2. Westpac has nominated two trustees, namely, Mr Marsden and Mr Sallway, both chartered accountants and registered liquidators with previous experience in appointments as trustees for the sale of land. 3. The appointment of trustees for the purposes of s 66G or s 38 is a matter for the Court's discretion: Crocombe v Pine Forests of Australia Pty Ltd [2005] NSWSC 151 at [88] (Young CJ in Eq). 4. Both trustees have consented to their appointment. There is no suggestion they are anything other than fit and proper. No challenge has been taken to their experience and I consider they are appropriately qualified to conduct the sales. I will therefore make the appointment sought. 5. The Court will have regard to fees to be charged by trustees. However, here, Westpac has agreed to pay the trustees' professional fees in relation to their appointment. Orders 1. For those reasons, I make the following orders: Declarations as to trust 1. The Court declares that the Plaintiff is and has at all times been the beneficial owner of the interests of the Second Defendant in the following real properties (the Properties): 1. the land known as 370 South Arm Road SOUTH ARM NSW 2460 and comprised in: 1. Lot 2 in DP1204357; 2. Lot 1 in DP1204357; 3. Lot 1 in DP784583; 4. Lot 237 in DP751392; 5. Lot 269 in DP751392 6. (New South Wales Property). 1. the land known as 222 Adelaide Street MARYBOROUGH QLD 4650 and comprised in: 1. Lot 2 in RP45982; and 2. Lot 1 in RP49418 3. (Queensland Property). 1. The Court orders that the Second Defendant holds her interests in the Properties on trust for the Plaintiff. 2. The Court orders that: 1. pursuant to section 71 of the Trustee Act 1925 (NSW) and section 82 of the Trustee Act 1973 (Qld), the interests of the Second Defendant in the Properties be vested in the Plaintiff, to the intent that the vesting will give to the Plaintiff an interest as tenants in common with the First Defendant's bankrupt estate in equal shares; and 2. the interests vested in the Plaintiff pursuant to sub-paragraph (a) above be vested free of the mortgages to the Third Defendant. Appointment of statutory trustees - New South Wales Property 1. Order that pursuant to section 66G of the Conveyancing Act 1919 (NSW) Andrew Sallway and Jeffrey Marsden, of BDO Australia be appointed, on the applicable trust provided for in these orders, as trustees (Trustees) for the sale of the New South Wales Property. Appointment of statutory trustees - Queensland Property 1. Order that pursuant to section 38 of the Property Law Act 1974 (Qld) Andrew Sallway and Jeffrey Marsden, of BDO Australia be appointed, on the applicable trust provided for in these orders, as Trustees for the sale of the Queensland Property. 2. Subject to the prior registration of the applicable vestings as per order 3, pursuant to section 66G of the Conveyancing Act 1919 (NSW) and section 38 of the Property Law Act 1974 (Qld) respectively, the New South Wales Property and the Queensland Property are to be vested in the Trustees to be held by the Trustees upon the applicable statutory trust for sale, subject to these orders, and on the basis that the trusts are two separate trusts, one for the New South Wales Property and the other for the Queensland Property. 3. In relation to each trust, the Trustees will pay the proceeds of sale of each of the Properties (and any income received from the Properties from the date their appointment) (Sale Proceeds), in the following order: 1. land tax, council rates, water rates, any statutory duties and charges (other than stamp duty); 2. sale costs incurred by the statutory trustees (excluding statutory trustees' professional fees) including marketing costs, agent's commission, insurance, property maintenance, statutory trustees' legal costs (excluding any costs of the proceedings, any application in the proceedings or any duties that may be payable in relation to vesting title of any interest in the properties in Mr Tompkins' name); 3. 50% of the balance of the Sale Proceeds from the sale of each of the New South Wales Property and the Queensland Property to each of: 1. Mr Tompkins; and 2. Westpac, in exchange for a release of its mortgage, but subject to the payment to the Trustees of their professional fees, which will be met solely by Westpac; Other orders 1. No order as to costs in respect of the claim or the cross claim. 2. Liberty to the parties and the Trustees to apply on 3 days' notice setting out the relief or the reasons for relief, in connection with the carrying out of the steps contemplated by these orders. 3. Save for directions pursuant to order 9, the proceedings: 1. in respect of the claim, are otherwise dismissed as between the Plaintiff and the Second and Third Defendants; 2. in respect of the cross claim, are otherwise dismissed. 1. The Plaintiff has leave to discontinue his claim against the First Defendant, without liability for costs, and is directed to file his notice of discontinuance within 3 days of this order. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 June 2024