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Fordyce v Kordamentha Real Estate Pty Ltd[2017] QSC 289

Fordyce v Kordamentha Real Estate Pty Ltd[2017] QSC 289

SUPREME COURT OF QUEENSLAND

CITATION:

Fordyce & anor v Kordamentha Real Estate Pty Ltd & ors [2017] QSC 289

PARTIES:

ANN FORDYCE

(first applicant)

BRADLEY HELLEN

(second applicant)

v

KORDAMENTHA REAL ESTATE PTY LTD 

ACN 121 326 207

(first respondent)

DIBBSBARKER (A FIRM) 

ABN 84 338 278 574

(second respondent)

TRANSULTIMO PTY LTD 

ACN 007 316 136

(third respondent)

JUDITH DIANE WENBORN

(fourth respondent)

SUSAN NANETTE DRYDEN

(fifth respondent)

WILLIAM JOSEPH BARNETT

(sixth respondent)

MARGARET HELEN WILLIAMS 

(seventh respondent)

HELEN ANN GALEA

(eighth respondent)

KAY MARGARET CREIGHTON

(ninth respondent)

ROBERT JAMES KEENAN

(tenth respondent)

IRIS JOAN KEENEN

(eleventh respondent)

ROBERT LEWIS WILLIAMS

(twelfth respondent)

STEPHEN JAMES PAYTON

(thirteenth respondent)

RODRICK ALEXER PAYNE

(fourteenth respondent)

FREDERICK HENRY GRAU

(fifteenth respondent)

JOAN TREMAYNE 

(sixteenth respondent)

STEPHEN BRUCE GOULD

(seventeenth respondent)

KAREN JUANITA GOULD

(eighteenth respondent)

BRADLEY PENMAN WALKER

(nineteenth respondent)

ROBERTA MARY WALKER 

(twentieth respondent)

LEONIE BIZIOL

(twenty-first respondent)

ROBERT MAXWELL WALTON 

(twenty-second respondent)

DULTCIE WALTON

(twenty-third respondent)

IAN DAVID WALTON AS TRUSTEE UNDER

INSTRUMENT 705656547

(twenty-fourth respondent)

JASON ASHLEY GEDDES

(twenty-fifth respondent)

JOAN MARGARET LONGWORTH

(twenty-sixth respondent)

ANTHONY CECIL LONGWORTH

(twenty-seventh respondent)

GLENN RICHARD RYDER

(twenty-eight respondent)

NEIL JOHN HORNE

(twenty-ninth respondent)

FLORENCE DELL REGLI

(thirtieth respondent)

ERWIN REGLI

(thirty-first respondent)

BARRYJOHN CONROY

(thirty-second respondent)

PETER JOHN POLLARD

(thirty-third respondent)

BERENICE AGNES POLLARD

(thirty-fourth respondent)

ROBERT JOHN TREFFENE

(thirty-fifth respondent)

MARY MARGARET TREFFENE

(thirty-sixth respondent)

CARMELO GALEA

(thirty-seventh respondent)

PHILLIP RODNEY GASSON

(thirty-eighth respondent)

RHONDA JEANETTE GASSON AS PERSONAL REPRESENTATIVE UNDER INSTRUMENT

715569079

(thirty-ninth respondent)

IRENE JOY WHATLEY

(fortieth respondent)

GEOFFREY JOHN WILLIAMS

(forty-first respondent)

MARILYN ANNE WILLIAMS

(forty-second respondent)

LORNA BEVERLEY BUDGEN AS PERSONAL REPRESENTATIVE UNDER INSTRUMENT 712954404

(forty-third respondent)

SCOTT OSBORNE LAWES

(forty-fourth respondent)

ADRIAN HAROLD HAGE

(forty-fifth respondent)

GWEN LYNNETTE HAGE

(forty-sixth respondent)

GRAHAM MAXWELL WALTON

(forty-seventh respondent)

KAYE LORELLE WALTON

(forty-eighth respondent)

RICHARD REW PALMER

(forty-ninth respondent)

JULIE HARRIET ANNE PALMER

(fiftieth respondent)

NEIL RAYMOND DOUGLASS

(fifty-first respondent)

MARJORIE JEAN HAVIL

(fifty-second respondent)

CULBEURT NOMINEES PTY LTD 

ACN 074 748 780

(fifty-third respondent)

STUART MICHAEL PATRICK

(fifty-fourth respondent)

DONALD KETIH BURMAN

(fifty-fifth respondent)

JOHANNA HENDRIKA BURMAN

(fifty-sixth respondent)

ROBERT CAMPBELL

(fifty-seventh respondent)

MARION ANNE CAMPBELL

(fifty-eighth respondent)

DONNA-MAREE UPHILL

(fifty-ninth respondent)

CARA MAREE CAMPBELL

(sixtieth respondent)

BRETT ROBERT CAMPBELL

(sixty-first respondent)

RAYMOND JOHN FOELZ

(sixty-second respondent)

DIANA PATRICIA FOELZ

(sixty-third respondent)

RAYMOND JOSEPH GRIFFITHS

(sixty-fourth respondent)

ANNE CATHERINE GRIFFITHS

(sixty-fifth respondent)

BRONWYN FRANCES BARTAL

(sixty-sixth respondent)

JOHN ROBERTSON MACLAY

(sixty-seventh respondent)

STEVEN PAUL BEAR

(sixty-eighth respondent)

JOSEPH BIZIOL

(sixty-ninth respondent)

CHELENA PTY LTD AS TRUSTEE UNDER

INSTRUMENT 745062060

ACN 149 974 863

(seventieth respondent)

JACK KEENAN

(seventy-first respondent)

MARGARET ANNE BOLAM

(seventy-second respondent)

SUNCORP-METWAY LIMITED 

ACN 010 831 722

(seventy-third respondent)

COTERIE NOMINEES PTY LTD 

ACN 005 106 641

(seventy-fourth respondent)

AUSTRALIA NEW ZEAL BANKING GROUP

LIMITED 

ACN 005 357 522

(seventy-fifth respondent)

NATIONAL AUSTRALIA BANK LIMITED 

ACN 004 044 937

(seventy-sixth respondent)

WESTPAC BANKING CORPORATION 

ACN 007 457 141

(seventy-seventh respondent)

COMMONWEALTH BANK OF AUSTRALIA 

ACN 123 123 124

(seventy-eighth respondent)

RATE BUSTERS FUNDING PTY LTD 

ACN 111 029 488

(seventy-ninth respondent)

BENDIGO  ADELAIDE BANK LIMITED 

ACN 068 049 178

(eightieth respondent)

FILE NO/S:

SC No 11953 of 2017

DIVISION:

Trial Division

PROCEEDING:

Application

DELIVERED ON:

4 December 2017

DELIVERED AT:

Brisbane

HEARING DATE:

27 November 2017

JUDGE:

Bond J

ORDER:

The Court will hear the parties on the form of the orders which should be made to give effect to these reasons.

CATCHWORDS:

EQUITY – TRUSTS AND TRUSTEES – APPLICATIONS TO COURT FOR ADVICE AND AUTHORITY – PETITION OR SUMMONS FOR ADVICE – GENERALLY – where a community titles scheme was terminated, and the land vested in statutory trustees for sale, by order of the District Court – where the statutory trustees apply for directions and ancillary orders in relation to the paying out of the proceeds of sale, in relation to remuneration, and in relation to claims of unsecured creditors – whether the directions and orders should be made

PROCEDURE – STATE AND TERRITORY COURTS: JURISDICTION, POWERS AND GENERALLY – JURISDICTION – GENERALLY – where the District Court purported, by consent order, to appoint statutory trustees for sale of the land pursuant to s 38 of the Property Law Act 1974 (Qld) – where that Act only allows the Supreme Court to appoint statutory trustees for sale – where the land was of a greater value than the monetary limit of the District Court – where the parties consented to the District Court exercising jurisdiction but did not follow the procedure set out in s 72 of the District Court of Queensland Act 1967 (Qld) – where the land was not held in co-ownership at the time of the consent order – where the consent order did not follow the form authorised by s 38 – whether the District Court had jurisdiction to make the consent order

REAL PROPERTY – TORRENS TITLE – MORTGAGES, CHARGES AND ENCUMBRANCES – TRANSFER OF MORTGAGE – where some of the lots in the community titles scheme were the subject of registered mortgages – where the mortgages applied to the undivided shares of the former lot owners once the scheme was terminated – where the District Court consent order vested the land in the statutory trustees subject to registered mortgages affecting the undivided shares of the former lot owners’ interests in the land as tenants in common – where the freehold land register records the relevant mortgages as encumbering the trustees’ title to the land – whether a declaration should be made that the registered mortgagees are entitled to be paid no more than the former owners’ respective shares of the proceeds of sale

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – SERVICE – GENERALLY – where there are eighty respondents to the application – where service was effected on the natural person respondents by email and on the corporate respondents by post – whether the time for entering an appearance should be abridged – whether substituted service should be ordered

Body Corporate and Community Management Act 1997 (Qld) Corporations Act 2001 (Cth)

District Court of Queensland Act 1967 (Qld)

Land Title Act 1994 (Qld)

Property Law Act 1974 (Qld)

Service and Execution of Process Act 1992 (Cth) Supreme Court Act 1991 (Qld)

Trusts Act 1973 (Qld)

Bunnings Group Ltd v Asden Developments Pty Ltd [2014] 1 Qd R 493, cited

Crocombe v Pine Forests of Australia Pty Ltd (No 3) (2005) 219 ALR 692, cited

Eyres v Butt [1986] 2 Qd R 243, cited

Giacci v Giacci Holdings Pty Ltd [2010] WASC 349, cited

HIH Casualty & General Insurance Ltd v Building Insurers' Guarantee Corporation [2004] NSWSC 910, cited

Kordamentha Pty Ltd & Calibre Capital Ltd v LM Investment Management Ltd (in liq) [2015] QSC 4, cited

Moreton Bay Regional Council v Mekpine Pty Ltd (2016) 256 CLR 437, cited

Rambaldi (The Trustees of the Estate of John Edward Atkinson, a Bankrupt) v Woodward [2012] NSWSC 434, cited

COUNSEL:

G Handran for the applicants

M Stunden for the first and second respondents

J Hastie for the third, tenth and eleventh respondents

P Hack QC for the fifteenth respondent

B Bartal appeared on her own behalf

SOLICITORS:

Mahoneys for the applicants

Dibbs Barker Lawyers for the first and second respondents

Hynes Legal for the third, tenth and eleventh respondents

Jeff Thomas & Associates for the fifteenth respondent

B Bartal appeared on her own behalf

Background

  1. [1]
    Body Corporate for Nobby’s Outlook Community Titles Scheme 14822 (the body corporate) was the body corporate for a community titles scheme (the scheme) under the Body Corporate and Community Management Act 1997 (Qld) (the BCCM Act).  The scheme land was situated at 122 Marine Parade, Miami, on the Gold Coast.   
  2. [2]
    In the usual way, the scheme land consisted of individual lots held by particular lot owners and other land, referred to as the “common property” of the scheme, which was regarded as owned by the owners of the lots, as tenants-in-common, in shares proportionate to the “interest schedule lot entitlement”[1] for their respective lots.  The body corporate had control of the common property and any “body corporate assets”, a term defined to mean real or personal property acquired by the body corporate not incorporated into the common property.
  3. [3]
    The freehold land register (kept under the Land Title Act 1994 (Qld)) reflected this ownership.  The scheme was a “basic scheme” such that all of the lots of the scheme were lots under the Land Title Act.  The register recorded a single “community management statement”.  That statement identified that the lots comprising the scheme were:
    1. (a)
      a lot described as “Common Property of Nobby’s Outlook Community Titles Scheme”; and 
    2. (b)
      46 separate lots described as “Lot 1 in BUP234” through to “Lot 46 in BUP234”.
  4. [4]
    Part 9 of Chapter 2 of the BCCM Act provides a mechanism by which a community titles scheme may be terminated and the relevant body corporate dissolved.  It provides for two alternative paths, namely termination by resolution without dissent and termination by order of the District Court.  Whichever way one gets there, the end result is the same.  Section 79 of the BCCM Act provides that termination of the scheme must be recorded under ss 115U and 115V of the Land Title Act, and that termination takes effect under s 115V of that Act.  
  5. [5]
    Where termination is by order of the District Court, s 115U provides for the lodgment with the registrar of titles of (1) a plan cancelling the lots in the scheme, and (2) a copy of the court order.  The process is as follows:
    1. (a)
      The registrar is obliged to record the cancellation of the community management statement in respect of the scheme, and cancel the particulars recorded in the register about the scheme land: s 115V(1).
    2. (b)
      When that is done, the termination takes effect: s 115V(2).  
    3. (c)
      The registrar must then create one or more indefeasible titles for all land that, immediately before the termination, was scheme land: s 115V(3).  
    4. (d)
      The registered owners of the title or titles so created are the former lot owners of the former scheme, who must be recorded as tenants in common in the shares proportionate to their respective interest schedule lot entitlements immediately before the termination: s 115V(4).
    5. (e)
      If the former lot was subject to a mortgage immediately before the scheme was terminated, the former owner’s interest in the land as tenant in common is subject to the mortgage: s 115V(5).
  6. [6]
    Section 81 of the BCCM Act provides for what happens when termination of a scheme takes effect.  When the scheme is terminated the body corporate is dissolved: s 81(1).  On dissolution:
    1. (a)
      The body corporate assets which were formerly held by the body corporate become held by the former lot owners in shares proportionate to the respective interest schedule lot entitlements of their lots immediately before the termination, and may be dealt with by them: ss 81(2)(a) and 81(3).  The District Court is empowered to make an order for the custody, management and distribution of such assets: s 81(5).  
    2. (b)
      The liabilities of the body corporate are vested jointly and severally in the former owners, but they are entitled to contribution against one another in proportion to their respective interest schedule lot entitlements immediately before the termination: s 81(2)(b).
  7. [7]
    By consent order made on 23 September 2015, the District Court ordered that the scheme be terminated.  The consent order also provided that, upon termination of the scheme and dissolution of the body corporate: 
    1. (a)
      two chartered accountants (the trustees) would be “appointed statutory trustees for the sale … pursuant to s 38 of the Property Law Act 1974” of the land that, immediately before the termination of the scheme had been scheme land (the land);
    2. (b)
      the land would vest in the trustees subject to:
      1. encumbrances affecting the entirety of the land; and
      2. registered mortgages affecting the undivided share of the former lot owners’ interests in the land as tenants in common;
  1. (c)
    the trustees would take various steps with a view to selling the land by public auction as a redevelopment site, including engaging a valuer and real estate agent and advertising;
  2. (d)
    the trustees would sell by public auction within specified constraints; and
  3. (e)
    the trustees would distribute the proceeds of sale after payment of “all costs and expenses of the statutory trust for sale” to each former lot owner in accordance with the interest schedule lot entitlement of the owner. 
  1. [8]
    The consent order specified a similar mechanism in relation to “body corporate assets”.
  2. [9]
    The consent order also dealt with the liabilities of the scheme immediately before its termination, by requiring that the body corporate:
    1. (a)
      prepare a list of such liabilities;
    2. (b)
      use any funds held by it to discharge liabilities either in full, or, if funds were insufficient, pro rata to the extent of available funds; and
    3. (c)
      account to the trustees for what they had done, including by remitting any surplus funds to the trustees, such that they would vest in the trustees to be accounted for in the statutory trust for sale.
  3. [10]
    Since the making of the consent order, steps were taken as contemplated by the consent order.
  4. [11]
    First, a plan cancelling the lots of the scheme and the District Court order were lodged with the registrar of titles, as contemplated by s 115U of the Land Title Act.  
  5. [12]
    Second, the steps contemplated by s 115V of the Land Title Act occurred, with the result that the scheme was terminated.  The registrar created a single indefeasible title for all of the land which, immediately before the termination, had been scheme land, namely “lot 122 on survey plan 284713”.  All of the former lot owners were recorded as tenants in common of an estate in fee simple in lot 122, in shares proportionate to their respective interest schedule lot entitlements immediately before the termination. The estate in fee simple was recorded as subject to the mortgages to which the former lot owners’ respective interests in the land had been subject.  
  6. [13]
    Third, steps occurred which were not contemplated by s 115V, but which plainly were contemplated by the District Court order which was lodged in compliance with s 115U.  On 11 May 2017, the trustees were recorded as registered proprietors of an estate in fee simple in the land, being described on the freehold land register:
    1. (a)
      as “statutory trustee for sale”; and
    2. (b)
      subject to certain specified encumbrances and interests, including in particular the mortgages to which the former lot owners’ respective interests in the land had been subject.   
  7. [14]
    Fourth, the termination of the scheme meant that, by operation of s 81 of the BCCM Act, the body corporate has been dissolved and:
    1. (a)
      the former lot owners have become entitled to the body corporate assets in shares proportionate to the respective interest schedule lot entitlements of their lots immediately before the termination; and
    2. (b)
      the liabilities of the body corporate have been vested jointly and severally in the former lot owners, subject to their entitlement to contribution against one another in proportion to their respective interest schedule lot entitlements immediately before the termination.
  8. [15]
    Finally, the trustees offered the land for sale at auction on 6 September 2017, the land sold at auction for $23,750,000, and the contract of sale is due to settle on 5 December 2017.
  9. [16]
    The matter has come before me only a week before settlement to resolve a number of issues concerning the operation of the consent order which affect how the trustees are to distribute the proceeds of sale.  The matter is urgent because, understandably, the trustees want to have clarity as to their obligations in relation to the settlement on 5 December 2017, and the former lot owners want access to their share of the proceeds as soon as they can.  The contract of sale does, however, contain a special condition which permits the trustees unilaterally to extend the settlement date in certain specified circumstances.
  10. [17]
    There are three applications before me:
    1. (a)
      an originating application filed by the trustees seeking directions pursuant to s 96 of the Trusts Act 1973 (Qld) and ancillary orders (including pursuant to s 94 of that Act if necessary);
    2. (b)
      an application filed by two unsecured creditors of the (now dissolved) body corporate seeking, inter alia, directions requiring the trustees to apply the proceeds of sale from the sale of the land to discharge their claims; and
    3. (c)
      an application filed by two former lot owners seeking orders pursuant to s 94 of the Trusts Act to empower the trustees to adjudicate, determine and discharge the claims of unsecured creditors (and in particular a further unsecured creditor with whom they were connected) from the proceeds of sale of the land.
  11. [18]
    Annexure A to this judgment is a form of order which contains a proposal formulated by the active parties before me as a form of order which would be appropriate if I was minded to accept the submissions advanced before me.  It was not put forward as a consent order.
  12. [19]
    Based on the argument before me, the following matters arise as issues to be resolved:  
    1. (a)
      First, may I proceed to deal with the issues which arise on the applications in light of the service irregularities revealed by the evidence?
    2. (b)
      Second, what if any significance to the present applications is the fact that it now appears that the District Court did not have jurisdiction to make the orders appointing statutory trustees for sale?
    3. (c)
      Third, what, if any, direction should I make to the trustees in relation to the amounts which should be paid to the registered mortgagees?
    4. (d)
      Fourth, how should I respond to the fact that the consent order did not expressly empower the trustees to provide for their own professional remuneration out of the proceeds of sale?
    5. (e)
      Fifth, what, if any, provision should be made out of the proceeds of sale of the land in respect of three particular unsecured creditors of the (now dissolved) body corporate?
  13. [20]
    I will deal with each of those issues under separate headings below.  

Service irregularities

  1. [21]
    The 80 respondents to these applications are:
    1. (a)
      the three unsecured creditors to which I have referred;
    2. (b)
      the former lot owners; and
    3. (c)
      all of the registered mortgagees.
  2. [22]
    The three unsecured creditors of the now dissolved body corporate were represented before me.  So were three former lot owners.  All other respondents were called and there were only appearances for two former lot owners, one of whom appeared on her own behalf to make submissions.  It follows that there were no appearances from quite a number of former lot owners.  There were no appearances on behalf of any registered mortgagees.  
  3. [23]
    Some former owners are situated interstate. They must accordingly be served with the originating application in accordance with the Service and Execution of Process Act 1992 (Cth).  By that Act the interstate respondents have 21 days, or such shorter period as this Court permits, to enter an appearance.  In light of the urgency of the present circumstances, I would abridge the time sufficient to permit the hearing before me to take place.  I would make the order identified in Annexure A at [3].
  4. [24]
    The material before me reveals that service was effected as follows:
    1. (a)
      for the corporate respondents, by service under s 109X of the Corporations Act 2001 (Cth) by post sent to their registered offices on 14 November 2017; and 
    2. (b)
      for the natural person respondents, by email on 14 November 2017.
  1. [25]
    In relation to the email service, I make the following observations:
    1. (a)
      The email addresses were the addresses used by the trustees to communicate with the former lot owners during the period since their appointment.
    2. (b)
      In early November 2017, each former owner was sent a circular, enclosing a report prepared for the Court setting out, inter alia, the basis and amount of the applicants’ remuneration, their interpretation of the consent order and their intention to bring these proceedings.  
    3. (c)
      All of the former owners indicated that they had received the circular, except perhaps Mr and Mrs Gould. 
    4. (d)
      In respect of all but two of the natural person respondents (namely Mr and Mrs Foelz, although they had earlier received the circular), either:
  1. they sent a reply or delivered a read receipt; or 
  2. their email server delivered a receipt acknowledgment.
  1. [26]
    Having regard to the responses forwarded in relation to the documents served (at least being a server notification of successful delivery) and the history of communications and interaction by email between the applicants and the former lot owners described before me, I would make the orders identified in Annexure A at [2].   
  2. [27]
    Annexure A also sets out a proposed abridgment order in respect of the time for service of the application referred to at [17](c): see Annexure A at [4].  I received no submissions why that abridgement was appropriate or addressing the likelihood that the respondents would actually have received the material and had a fair opportunity to consider it.  I decline to make that order.  The issues raised by the application were nevertheless canvassed as part of the issues raised by the other two applications.

The jurisdictional problem

  1. [28]
    The first jurisdictional problem was not identified by any of the parties, but was instead raised by me at the outset of the hearing.  
  2. [29]
    The consent order plainly stated that the appointment of the trustees was as statutory trustees for sale pursuant to s 38 of the Property Law Act 1974 (Qld).
  3. [30]
    However, the Court which has jurisdiction under that Act to make such an order is the Supreme Court, not the District Court.[2]  An exception to that proposition is that s 68(1)(b)(vi) of the District Court of Queensland Act 1967 (Qld) confers jurisdiction on the District Court to make an order pursuant to s 38 of the Property Law Act, but only where the property does not exceed in amount or value the monetary limit of $750,000.  It was common ground before me that the value of the land at the time of the order well exceeded that limit.  And as to the possibility of the consent jurisdiction referred to in s 72 of the District Court of Queensland Act, it was common ground before me that there had been no signed memorandum as contemplated by that section.
  4. [31]
    At the time of the argument before me, none of the applicants was able to develop any submission to the contrary of the conclusion that the District Court had no jurisdiction to appoint statutory trustees for sale pursuant to s 38 of the Property Law Act.  
  5. [32]
    I have since identified Eyres v Butt [1986] 2 Qd R 243.  In that case the parties consented to the Court exercising jurisdiction over a suit in which the claim was for damages beyond the jurisdiction of the Court.  However, the provisions of the then equivalent of s 72 were not complied with.  On appeal, the Full Court held that, the parties having consented and the action having been tried to judgment on the basis of that consent, the lack of the signed memorandum was an irregularity which had been waived.  
  6. [33]
    The reasoning in Eyres v Butt suggests that an application to the District Court to exercise the jurisdiction conferred by s 68(1)(b)(vi) in a case where the value of the property exceeded the money limit, in circumstances where the parties omitted to follow the s 72 procedure, could be dealt with in the same way.  The reference to “action” in s 72 is now to be regarded as a reference to “proceeding” (see s 93 of the Supreme Court Act 1991 (Qld)) with the consequence that s 72 is capable of encompassing jurisdiction to try a proceeding in the Supreme Court seeking the appointment of statutory trustees for sale.  The parties in this case plainly consented to the jurisdiction.  The fact that they did not follow the signed memorandum procedure is an irregularity which may be regarded as waived.
  1. [34]
    The result is that I think that the obstacle to jurisdiction posed by the value of the scheme land is overcome.
  2. [35]
    A second jurisdictional problem on which I have not yet had the benefit of submissions is whether, at the time the order was made, the scheme land could have been regarded as held in co-ownership.  The s 38 jurisdiction is only enlivened where property is held in coownership and on the application of one or more of the co-owners.  In this case, the order plainly sought to deal with all the land the subject of the scheme, and there is a real difficulty in regarding that as held in co-ownership as at the time the order was made.  Under the BCCM Act each lot owner holds his or her own lot.  One could not describe the 46 separate lots described as “Lot 1 in BUP234” through to “Lot 46 in BUP234” as being held in coownership.    
  3. [36]
    The wording of the consent order is such that the order pursuant to s 38 would only take effect once the scheme had terminated and s 115V had operated.  At that time it would be correct to regard the single title created by the registrar as held in co-ownership: see [5](d) above.  At that time, an application could have been made pursuant to s 38.  When the consent order was originally made, an administrator could have been appointed pursuant to s 78(5) of the BCCM Act and authorized to bring such an application when the title had changes so that it could be regarded as held in co-ownership, but that was not how the consent order was structured.    
  4. [37]
    That brings me to the third jurisdictional problem.  The jurisdiction conferred by s 38(1) – which was the jurisdiction purportedly exercised in the consent order – is to appoint trustees and vest property in them “subject to encumbrances affecting the entirety, but free from encumbrances affecting any undivided shares”.  That was not done.  The consent order expressly vested the property in the manner described in [7](b) above.  That creates a further problem, which I will deal with under the next heading.
  5. [38]
    The result is that I do not think that the District Court had jurisdiction to make the form of vesting order that it made.  
  6. [39]
    However, that conclusion does not affect the question of whether I can make directions of the nature sought before me.  The trustees are in fact registered under the Land Title Act as the registered proprietors of an estate in fee simple of the land.  They have an indefeasible legal title to that interest by force of the Act.  Even if the process by which they became registered in that way was by an order made by the District Court without jurisdiction, there is no analysis of the events which permits of the conclusion that (i) they do not hold the fee simple, and (ii) they do not hold the fee simple on trust for the former lot owners.  It is inevitable that their legal title must be regarded as held by them on trust for the former lot owners.  
  7. [40]
    If property is vested in a trustee, then I can exercise the powers conferred on me under ss 94 and 96 of the Trusts Act, provided that the other pre-requisites to the Court’s jurisdiction to exercise those powers are satisfied.  

Entitlement of the registered mortgagees

  1. [41]
    As I have mentioned, the scheme terminated upon documents being registered under s 115U of the Land Title Act, pursuant to the consent order. The registrar created a single indefeasible title, namely “lot 122 on survey plan 284713”.  All of the former lot owners were recorded as tenants in common of an estate in fee simple in lot 122, in shares proportionate to their respective interest schedule lot entitlements immediately before the termination. The estate in fee simple was recorded as subject to the mortgages to which the former lot owners’ respective interests in the land had been subject. 
  2. [42]
    The way the freehold land register under the Land Titles Act recorded the latter proposition was that each of the 16 relevant mortgages was listed by reference to its number, the date and time on which it had originally been registered over the former scheme land, the mortgagee concerned, and the particular lot owner’s interest.  By way of example, the mortgage in respect of Mr and Mrs Keenan was recorded in this way:
  1. Mortgage No 712745280 22/09/2009 at 13:33

Bendigo and Adelaide Bank Limited ACN 068 049 178

Interest of Robert James Keenan and Iris Joan Keenan.

  1. [43]
    But that was not the end of what happened to the freehold land register.  The events referred to at [13] above occurred, namely the two trustees were recorded as registered proprietors of an estate in fee simple in lot 122, being described on the register as “statutory trustee for sale” and subject to certain specified encumbrances and interests, including in particular the mortgages to which the former lot owners’ respective interests in the land had been subject.  Each of the 16 relevant mortgages continued to be recorded in the way described in the previous paragraph.  What is notable, however, is that on the face of the register:
    1. (a)
      the legal interest which is recorded as subject to the mortgages so described is the legal interest held by the trustees (which is, necessarily, the entirety of lot 122); and
    2. (b)
      the various references for each of the mortgages in respect of former lot owners to “Interest of [the name of the former lot owners]” are not capable of being construed as a reference to any legal interest in the land held by the former lot owners, because that legal interest in land no longer exists.
  2. [44]
    The trustees drew my attention to the fact that one registered mortgagee had refused to release its security to allow settlement to occur unless it received all of the money which its mortgagor (namely the former lot owner) owed to it.  The problem from the trustees’ point of view was that the total amount which the former lot owner owed the mortgagee was more than that former lot owner’s potential proportionate interest in the proceeds of sale according to the former lot owner’s interest schedule lot entitlement.
  3. [45]
    The trustees sought to persuade me that the most any of the registered mortgagees could insist on in exchange for a release was payment of the amount to which its mortgagor was entitled by way of distribution of the proceeds of sale, regardless of the state of the account as between mortgagor and mortgagee.  But those submissions proceeded by way of assertion rather than appropriately detailed analysis.  The question is more complex than has been appreciated.
  4. [46]
    Although I have not been provided with any copies of any of the mortgages, it is appropriate to infer that they reveal that particular lot owners mortgaged their particular interests in their particular lots in such a manner that their respective mortgagees were contractually entitled to insist upon full payment of the respective amount secured before being required to release the particular lot constituting the secured property. 
  5. [47]
    By registration under the Land Title Act, each of the mortgagees secured for themselves the benefit of indefeasibility in respect of their security interest.  If a former lot owner had sought to sell their interest, each registered mortgagee would have had a legal right to insist upon full payment of the money secured before being required to release the secured property.  
  1. [48]
    How is it that the registered mortgagees’ legal rights have been validly affected by what has occurred thus far, such that that legal right no longer exists?  The registered mortgagees were not parties to the District Court proceeding, so they could not be regarded as bound by the consent order, and I have no evidence before me that they have consented to what has occurred, or otherwise conducted themselves in such a way as to give rise to an equity affecting their legal rights.
  2. [49]
    The problem would not arise if statutory trustees for sale had been appointed by an exercise of jurisdiction pursuant to s 38(1) of the Property Law Act, because orders under that section vest the property in the trustees “subject to encumbrances affecting the entirety, but free from encumbrances affecting any undivided shares”.  
  3. [50]
    Once the property is placed on statutory trust for sale, the interests which any former tenant in common (and any mortgagee in respect of that tenant in common’s share) had in the land cease to exist and are converted into claims against (or equitable interests in) the proceeds of sale payable by the trustee to that particular co-owner.  Thus, in Bunnings Group Ltd v Asden Developments Pty Ltd [2014] 1 Qd R 493, Margaret Wilson J (with whom Muir and Gotterson JJA agreed) held (emphasis added, citations omitted):
  1. [44]
    Upon the appointment of statutory trustees for sale of land held in co-ownership, the legal and beneficial ownership of the land is vested in the statutory trustees, and the co-owners’ interests in the land are converted into interests in the proceeds of its sale. The trustees hold the land on the statutory trust in s 37A – that is, upon trust to sell the land and to stand possessed of the net proceeds of sale “upon such trusts, and subject to such powers and provisions as maybe requisite for giving effect to the rights of the co-owners”.
  1. [45]
    The statutory scheme for the appointment of statutory trustees for sale reflects the commercial reality that it is generally easier to sell the entirety than it is to sell a fractional interest, let alone a fractional interest that is encumbered. By s 38 the land vests in the statutory trustees “subject to encumbrances affecting the entirety, but free from encumbrances affecting any undivided shares”. They can, and must, deal with the entirety free from any charge affecting an undivided share, as opposed to a charge over the entirety. Neither a former tenant in common nor an encumbrancee of a tenant in common’s undivided share has any ongoing interest in the land which would sustain a caveat, whether lodged before or after the appointment of the statutory trustees.
  1. [46]
    Sections 37A and 38 must be read together. The entirety is to be sold, and the net proceeds are to be held to give effect to the rights of its former co-owners.
  1. [47]
    There is nothing to suggest that the Legislature intended that the interests of an encumbrancee of an undivided share should be defeated by the appointment of statutory trustees for sale. Indeed, such an encumbrancee’s position is expressly protected by the definition of “coowner” in s 37: a co-owner includes an encumbrancee of the interest of a tenant in common. In its report which recommended the introduction of the Property Law Act, the Queensland Law Reform Commission described the purpose of this inclusive definition as being “to enable a mortgagee of the interest of a co- owner to apply for an order which will result in sale of the property and the realisation of his security”.
  1. [48]
    Thus, the statutory trustees are to hold the net proceeds of sale not only to give effect to the rights of a former tenant-in-common, but also to give effect to the rights of an encumbrancee of that tenant-in-common’s undivided share in the land.
  1. [49]
    This statutory scheme is consistent with the principle that, subject to the proper construction of a particular charge, a security interest is generally a single continuous interest which moves from the original asset to the proceeds of its sale. A mortgagee is entitled to a security interest in the fruits of mortgaged property. Thus, a mortgagee may claim a security interest in money paid in compensation for compulsory acquisition of property, even where the interest is not expressed in the deed.

Similarly, where a mortgagee exercises its power of sale over land subject to an equitable charge, the equitable charge attaches to any surplus proceeds of sale even though the chargee no longer has an interest in the land itself.

  1. [51]
    The rights of the former mortgagee are limited to the share of the proceeds of sale which would otherwise pass to the mortgagor, and the mortgagee has a charge over that share: Crocombe v Pine Forests of Australia Pty Ltd (No 3) (2005) 219 ALR 692 at [76]; Giacci v Giacci Holdings Pty Ltd [2010] WASC 349 at [48].
  2. [52]
    But that has not happened here. 
  3. [53]
    Even if there had been no jurisdictional problems with the District Court consent order and even if the registered mortgagees had been bound by it, the fact is that, for some reason not explained to me, the consent order was not an order which was authorized by s 38(1) of the Property Law Act because it expressly vested the land in the trustees subject to (not free from) “registered mortgages affecting the undivided share of the former lot owner’s interest in the land as tenants in common.”
  4. [54]
    The 16 relevant mortgages are still recorded on the title held by the trustees.  The current position is that described at [43] above.  On the face of the register, those mortgages encumber the entirety of the legal title held by the trustees. In order to determine the precise present entitlement of the registered mortgagees it is necessary to track through the nature of the interest which they held under the Land Title Act from time to time. 
  5. [55]
    First, it is appropriate to consider the interest created when the relevant mortgages were originally granted and registered over the particular lots held by former lot holders in the scheme.  As to this:
    1. (a)
      The Land Title Act provides for the registration of a mortgage over “a lot or an interest in a lot”: s 72. The instrument which is registered (that is, the mortgage) must be in the approved form, and must include a description of the lot and a description of the interest in the land which is to be mortgaged: s 73.  The registration of such a mortgage “operates only as a charge on the lot or interest for the debt or liability secured by the mortgage”: s 74. These provisions contemplate that an interest in a lot less than the entirety of the lot may be mortgaged.
    2. (b)
      Once a mortgage has been validly executed, the registrar then registers it by recording in the register the particulars necessary to identify the instrument: ss 173 and 174. On registration of the mortgage, the interest which the mortgage is expressed to create is (i) created, (ii) registered, and (iii) vests in the mortgagee: s 182. The mortgage does not create any legal interest in the lot until it is registered: s 181. The registered mortgage takes effect as a deed: s 176. The mortgage itself forms part of the register: s 31. 
    3. (c)
      Once the mortgage is registered, the mortgagee (being the registered proprietor of an interest in a lot) holds the interest subject to other registered interests affecting the lot but free from all other interests, subject to the exceptions recorded in s 185: s 184. 
    4. (d)
      The result is that each of the registered mortgagees must have held a charge over the lot held by the former lot owner for the debt or liability secured by the mortgage.
  6. [56]
    Next, it is appropriate to consider the change to the registered mortgagees’ interests when the scheme was terminated.  As to this:
    1. (a)
      The scheme under the BCCM was terminated when the registrar completed the actions provided for in s 115V(1): see s 115V(2).
    2. (b)
      The registrar then created one indefeasible title for the former land (s 115V(3)), which recorded all of the former mortgagors (namely the former lot owners) as tenants in common in that one indefeasible title: s 115V(4).  This was lot 122 and each of the former lot owners had an interest in that lot.
    3. (c)
      There was no doubt that the mortgages which had previously attached to the former lot owners’ lots, became attached to the former lot owners’ new interests as tenants in common in the new lot, because that outcome is specifically stated in s 115V(5): “the former lot owner’s interest in the land as tenant in common is subject to the mortgage”.  
    4. (d)
      Again, each of the registered mortgagees held a charge over a particular interest in land, for the debt or liability secured by the mortgage.  That conclusion is consistent with the register.
  7. [57]
    Finally, it is appropriate to consider the change to the registered mortgagees’ interests when the land became vested in the trustees as registered proprietors.  As to this:
    1. (a)
      When the estate in fee simple in the land was vested in the two trustees, the undivided shares of each of the former lot owners in lot 122 ceased to exist. 
    2. (b)
      Had that been regularly done by an order under s 38(1) by a Court with jurisdiction to make it, the outcome would have been that described at [50] and [51] above.  It would have been the case that the mortgagees could have no entitlement to the proceeds of sale greater than the entitlement of their respective mortgagors.
    3. (c)
      But, as I have said, that was not done, and, from the terms of the order, intentionally so on the part of the parties before the District Court. 
    4. (d)
      And quite apart from their intention, the register reveals that the lot held by the trustees is still subject to the registered mortgages.
    5. (e)
      In Moreton Bay Regional Council v Mekpine Pty Ltd (2016) 256 CLR 437, the High Court considered a situation where a lease had been registered over a “lot 6”, and then the former lot 6 had been amalgamated with a former lot 1 to become a new “lot 1”.   The lease was identified as an encumbrance on the title of the new lot 1.
    6. (f)
      The High Court held (footnotes omitted)

[45]When former Lot 6 was later amalgamated with former Lot 1 resulting in the creation of new Lot 1, former Lot 6 ceased to exist as a “lot” and therefore as “a separate, distinct parcel of land”. Hence, upon registration of the Plan of Subdivision, a single indefeasible title issued for new Lot 1. If the Lease had not been registered at that point, it would have followed under s 184(1) that the registered proprietor of new Lot 1 took the  proprietorship interest in new Lot 1 freed and discharged of Mekpine’s interest as lessee (subject only to the fraud exception provided for in s 184(3)(b) and possibly some other personal equities). But, because the Lease was registered at that point, the lessor took its proprietorship interest in new Lot 1 subject to Mekpine’s registered  interest as lessee.

  1. (g)
    The Court concluded that the registered interest in the new lot 1 held by the registered lessee was a registered interest as lessee corresponding in the interest which had been created in accordance with the registered lease: see at [46].  The Court accepted that the terms of the registered lease, even though they referred to an interest which no longer existed, were still capable of revealing the intention that an interest still existed in so much of the new lot 1 as had previously been comprised by the former lot 6: see at [46] and [2]-[8]. 
  1. (h)
    By analogy with Mekpine, the present case involves mortgagees who had a security interest in former lots which no longer exist as separate distinct parcels of land, but it seems to me to be distinctly possible that the fact that the present lot 122 is still registered as subject to the security interests, means that the security interests still exist in so much of lot 122 as had previously been comprised in the lots which had been held by the former lot owners and mortgaged by them.    
  2. (i)
    All of this suggests that the registered mortgagees still continue to have charges over the land held by trustees, which operate as charges for the debt or liability secured by the mortgages.
  3. (j)
    I cannot be certain of the conclusion which I have reached because I have not been provided with the relevant registered mortgages and, in any event, the submissions before me did not address the issues I have identified.  The important consideration is that, as presently informed, I do not see any basis on which the full extent of the registered mortgagees’ legal rights have been altered lawfully by anything which has happened.
  1. [58]
    The originating application filed by the trustees sought to deal with the issue described at [44] above by asking me to declare that the proper construction of the consent order was that a registered mortgagee of a former lot owner was entitled to be paid no more than the former owner’s share of the proceeds of sale.  That would have been appropriate to do if an order had been made within jurisdiction which vested the land in the trustees free of the registered mortgages.  But that did not happen.  I decline to make that declaration.  The order was made without jurisdiction, and, in any event, the mortgagees were not bound by it.  Further, I am not presently persuaded that the declaration is consistent with what is the proper analysis of the registered mortgagees’ present entitlements, given the current state of the register.
  2. [59]
    The proposed form of order in Annexure A, so far as it touches upon the issue of the amount which should be paid to the registered mortgagees on settlement, seeks a direction pursuant to s 96 of the Trusts Act that at settlement the trustees “(iii) … pay registered mortgagees of any Beneficiary over an undivided share of the Property the amount owed by that Beneficiary up to, but not exceeding, the amount of that Beneficiary’s entitlement calculated in accordance with these directions.”  I decline to make any such direction for the same reasons as above.
  3. [60]
    The problems I have identified could have been avoided if an order had been made under s 38(1) of the Property Law Act in the terms required by that section, namely that the land be vested in the trustees free from encumbrances affecting any undivided shares.  Why that happened is unexplained.  In oral argument, mention was made of the possibility that I might now make such an order under s 38(1), or possibly to vary the trusts under s 38(6).  No such order has been sought by any of the applications before me.  In light of the potential impact on the registered mortgagees’ rights I would not entertain such an application unless they had been given specific notice of it.  The trustees presently hold the land in co-ownership because they must be taken to hold as joint tenants, so the pre-condition of property being held in co-ownership is met.  A problem which would have to be grappled with, however, is that any order made under s 38 could only vest the land in the trustees “subject to encumbrances affecting the entirety”.  On the face of the register, it may be that the present registered mortgages are to be so regarded, with the result that that course is no longer open, unless some process is undergone to rectify the register.  I express no view on these issues.
  4. [61]
    I recognize that the result which obtains from this analysis is unsatisfactory.  Presently I cannot see any reason why, if a s 38(1) order had been sought from a Court with jurisdiction to make it at a time when the land was held in co-ownership, an order would not have been made which would have vested the land in the trustees free from encumbrances affecting any undivided shares.  The fact that the sale might not result in a distribution to a co-owner because the full proceeds attributable to that co-owner were required to discharge the security which affected that co-owner’s share of the proceeds is generally not a good reason for refusing an order for sale (see Rambaldi (The Trustees of the Estate of John Edward Atkinson, a Bankrupt) v Woodward [2012] NSWSC 434).  And the mortgagee would not be worse off if such an order was made, because it would get the full amount attributable to its mortgagor.
  5. [62]
    No party before me considered the possibility whether the Court could, in effect, do now that which perhaps should have been done, by making a vesting order pursuant to the power conferred on the court by s 82 and 83(3) of the Trusts Act, with the effect provided for by s 90 of the Trusts Act.  Perhaps orders under that course could be formulated to create now the outcome which would have been obtained if a vesting order had been made in accordance with s 38(1).  I would not entertain an application to make such orders unless appropriate respondents had been given specific notice of it.  No submissions having been made in respect of it, I express no view as to whether it would be an appropriate solution.  

The trustees’ remuneration

  1. [63]
    An issue is thought to have arisen because the terms of the consent order specifically obliged the trustees to distribute the proceeds of sale after payment of “all costs and expenses of the statutory trust for sale” to each former lot owner in accordance with the interest schedule lot entitlement of the owner, and did so without making express provision for the trustees to pay proper remuneration to themselves.
  2. [64]
    I would not construe that provision in the consent order as evincing any intention that the trustees, who were at the time of the appointment, and are now, professional chartered accountants, should not be paid an appropriate remuneration.  The result is that pursuant to s 101(2) of the Trusts Act, the trustees are “entitled to charge and be paid out of the trust property all usual professional or business charges for business transacted, time expended, and acts done by the person or the person’s firm in connection with the trust”.
  3. [65]
    If there were any remaining doubt, for example because of concerns as to the validity of the District Court order, this is plainly a case where it would be appropriate to exercise the jurisdiction conferred by s 101(1) to authorize remuneration in a way consistent with the entitlement referred to in s 101(2).  The material before me reveals that the trustees have performed considerable work with a view to selling the land to obtain a return for the former lot owners.  Some of the work was done at a time before their appointment took effect, but remuneration in relation to that work should also be authorized.
  4. [66]
    The trustees also sought an order that their remuneration to 20 October 2017 be approved in the sum contained in paragraph 5(a) of the originating application (which has been calculated by reference to their firm’s usual rates), and that their future remuneration be at their usual rates.  There was no opposition to such an order.  I agree that such an order is warranted by Ms Fordyce’s affidavit at [48]-[52].

Unsecured creditors’ claims

  1. [67]
    In or about February 2014, the committee of the body corporate retained the second respondent (Dibbs Barker) to provide legal services associated with the proposed redevelopment of the scheme.  
  2. [68]
    In or about May 2014, some members of the committee of the former body corporate executed a Form 22a and attachment appointing the first respondent (Korda Mentha) to provide certain services in conjunction with Dibbs Barker in relation to the prospective redevelopment of the scheme land.  
  3. [69]
    In each case, it was a term of the retainer that:  
    1. (a)
      the liability for fees was a liability of the body corporate, which would, on termination of the scheme, vest jointly and severally in all lot owners in accordance with their respective interest schedule lot entitlements immediately before termination; and 
    2. (b)
      if a “statutory trustee is appointed” to sell the property”, the respective fee was payable at settlement of the property.
  4. [70]
    Dibbs Barker and Korda Mentha claim to be creditors of the former body corporate at termination in the respective amounts of $134,440.49 and $163,905.38.  They placed material before me which supports that proposition.  One of the former lot owners appeared before me to dispute that proposition, but the argument was only faintly put, and not supported by any evidence.  On the other hand, the trustees, who have reviewed the material, suggest that at least the Dibbs Barker claim cannot be resolved.  
  5. [71]
    The third respondent (Transultimo) claims unliquidated damages for breach of service contracts. Prior to termination, in exchange for providing caretaking duties, it was entitled to be remunerated and reimbursed for certain costs and expenses by the body corporate until 15 December 2033.  Transultimo was also permitted to carry on a letting business during that term.  In each case, Transultimo could terminate upon written notice, but the body corporate could only terminate for cause.  Transultimo’s claim has not yet been precisely formulated, but presently it contends that it is owed $830,000 for lost remuneration.  That calculation may not be accurate because it appears that it is a claim for gross fees rather than lost profits.  The best which can presently be said is that there is a claim for unliquidated damages, the merits or quantum of which cannot presently be assessed.
  6. [72]
    All of these liabilities are liabilities which must be regarded as having been dealt with by s 81(2)(b) of the BCCM Act.  They were liabilities of the body corporate which upon its dissolution became vested jointly and severally in the former lot owners, but they are entitled to contribution against one another in proportion to their respective interest schedule lot entitlements immediately before the termination.
  7. [73]
    Absent my making an order changing the position, the liabilities of the former lot owners have nothing to do with the trustees’ task.  
  8. [74]
    However, all parties supported the proposal advanced by the 15th respondent before me.  Senior Counsel on his behalf contended that I should use the power in s 94 of the Trusts Act to confer on the trustees:
    1. (a)
      power to pay the claims of Korda Mentha and Dibbs Barker;
    2. (b)
      power to retain from funds in their hands or the net proceeds of sale sufficient funds to resolve, by compromise or by litigation, the claim of Transultimo and to have the conduct of the defence of the claim of Transultimo on behalf of all of the 46 lot owners, perhaps with the obligation to seek the sanction of the court before compromising the claim.
  9. [75]
    It will be noted that Annexure A contains orders which take that course and also that it contains directions under s 96 dealing with the same subject matter.
  10. [76]
    Section 94(1) is in these terms:

Where in the opinion of the court any sale, lease, mortgage, surrender, release or other disposition, or any purchase, investment, acquisition, retention, expenditure or other transaction is expedient in the management or administration of any property vested in a trustee, or would be in the best interests of the persons, or the majority of the persons, beneficially interested under the trust, but it is inexpedient or difficult or impracticable to effect the disposition or transaction without the assistance of the court, or it or they can not be effected by reason of the absence of any power for that purpose vested in the trustee by the trust instrument (if any) or by law, the court may by order confer upon the trustee, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions (if any) as the court may think fit, and may direct in what manner any money authorised to be expended, and the costs of any transaction, are to be paid or borne, and as to the incidence thereof between capital and income.

  1. [77]
    Reformatting that dense passage in a way which makes identification of the pre-requisites more obvious, the section would read in this way:

Where in the opinion of the court any sale, lease, mortgage, surrender, release or other disposition, or any purchase, investment, acquisition, retention, expenditure or other transaction is:

  1. (a)
    expedient in the management or administration of any property vested in a trustee, or 
  2. (b)
    would be in the best interests of the persons, or the majority of the persons, beneficially interested under the trust, 

but:

  1. (c)
    it is inexpedient or difficult or impracticable to effect the disposition or transaction without the assistance of the court, or 
  2. (d)
    it or they cannot be effected by reason of the absence of any power for that purpose vested in the trustee by the trust instrument (if any) or by law, 

the court:

  1. (e)
    may by order confer upon the trustee, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions (if any) as the court may think fit, and 
  2. (f)
    may direct in what manner any money authorised to be expended, and the costs of any transaction, are to be paid or borne, and as to the incidence thereof between capital and income.
  1. [78]
    I am persuaded that there is merit in authorizing the trustees to deal with these three creditors.   It would be in the best interests of at least the majority of the former lot owners that the procedural outcome be avoided that the creditors sue one or more of the former lot owners, thereby requiring claims for contribution to be made.  But that cannot happen absent my clothing the present trustees with appropriate power.
  2. [79]
    I am not in a position to form a view on the merits any of the three claims.  Especially is that so when the trustees, who have looked at the claims, are thus far unprepared themselves to express a view.  
  3. [80]
    So far as Dibbs Barker and Korda Mentha are concerned, it would be appropriate to empower the trustees by order under s 94:
    1. (a)
      to retain from the proceeds of the sale the amounts claimed by Dibbs Barker and Korda Mentha;
    2. (b)
      to pay or compromise the claims; and
    3. (c)
      for that purpose to enter into appropriate agreements.
  4. [81]
    Some variation of the language in s 44 of the Trusts Act would be appropriate for this course.
  5. [82]
    I would not be willing at this juncture to give the trustees any direction pursuant to s 96 as to whether they should exercise the power so conferred to pay Dibbs Barker and Korda Mentha.  If a direction is sought in the future, regard should be paid to the observations I will shortly make about the s 96 jurisdiction. 
  6. [83]
    So far as Transultimo is concerned, the position is similar, but an estimate would have to be made about the amount to be withheld from the proceeds of sale.  It would be appropriate to empower the trustees by order under s 94:
    1. (a)
      to retain from the proceeds of the sale an estimate made by them made on such evidence as they think fit;
    2. (b)
      with sufficient power to litigate the claim;
    3. (c)
      to pay or compromise the claim; and
    4. (d)
      for that purpose to enter into appropriate agreements.
  7. [84]
    I would not be willing at this juncture to give the trustees any direction pursuant to s 96 as to whether they should exercise the power in a particular way.
  8. [85]
    I should say that one difficulty I have with the proposed directions pursuant to s 96 of the Trusts Act is that the application has not been made in accordance with the procedure contemplated by s 96.  There has been no written statement as contemplated (as to the significance of which, and for a general discussion of the nature of the jurisdiction, see Kordamentha Pty Ltd & Calibre Capital Ltd v LM Investment Management Ltd (in liq) [2015] QSC 4), no clear connection between particular facts so stated and any particular direction sought, and no identification by the trustees as to the reasons why particular directions are proposed, or even necessary.  The statement of facts should identify the situation in which the trustees are placed with respect to the exercise of their power and specify a proposed action which they have in mind to take in that factual situation: cf remarks made by Barrett J in HIH Casualty & General Insurance Ltd v Building Insurers' Guarantee Corporation [2004] NSWSC 910 at [19] in respect of the analogous jurisdiction to give directions to a liquidator.  I expect that to be remedied if the trustees do seek particular directions from the Court in the future in exercise of the s 96 procedure.  

Conclusions

  1. [86]
    The view I have taken in relation to the question of the registered mortgagees and s 96 of the Trusts Act means that the order proposed in Annexure A will have to be substantially reformulated.  It may mean that settlement cannot take place tomorrow.  I will hear the parties on a form of order which gives effect to these reasons.

Annexure “A”

 

SUPREME COURT OF QUEENSLAND

REGISTRY: BRISBANE

NUMBER: BS11953/17

First Applicant:

ANN FORDYCE

AND

Second Applicant:

BRADLEY HELLEN

AND

First Respondent:

KORDAMENTHA REAL ESTATE PTY LTD ACN 121 326 207

AND

Second Respondent:

DIBBSBARKER (A FIRM) ABN 84 338 278 574

AND

Third Respondent:

TRANSULTIMO PTY LTD ACN 007 316 136

AND

Fourth Respondent:

JUDITH DIANE WENBORN

AND

Fifth Respondent:

SUSAN NANETTE DRYDEN

AND

Sixth Respondent:

WILLIAM JOSEPH BARNETT

AND

Seventh Respondent:

MARGARET HELEN WILLIAMS

AND

Eighth Respondent:

HELEN ANN GALEA

AND

Ninth Respondent:

KAY MARGARET CREIGHTON

AND

Tenth Respondent:

ROBERT JAMES KEENAN

AND

Eleventh Respondent:

IRIS JOAN KEENEN

AND

Twelfth Respondent:

ROBERT LEWIS WILLIAMS

AND

Thirteenth Respondent:

STEPHEN JAMES PAYTON

AND

Fourteenth Respondent:

RODRICK ALEXANDER PAYNE

AND

Fifteenth Respondent:

FREDERICK HENRY GRAU

AND

Sixteenth Respondent:

JOAN TREMAYNE

AND

Seventeenth Respondent:

STEPHEN BRUCE GOULD

AND

Eighteenth Respondent:

KAREN JUANITA GOULD

AND

Nineteenth Respondent:

BRADLEY PENMAN WALKER

AND

Twentieth Respondent:

ROBERTA MARY WALKER 

AND

Twenty-first Respondent:

LEONIE BANDIZIOL

AND

Twenty-second Respondent:

ROBERT MAXWELL WALTON

AND

Twenty-third Respondent:

DULTCIE WALTON

AND

Twenty-fourth Respondent:

IAN DAVID WALTON AS TRUSTEE UNDER INSTRUMENT 705656547

AND

Twenty-fifth Respondent:

JASON ASHLEY GEDDES

AND

Twenty-sixth Respondent:

JOAN MARGARET LONGWORTH

AND

Twenty-seventh Respondent:

ANTHONY CECIL LONGWORTH

AND

Twenty-eight Respondent:

GLENN RICHARD RYDER

AND

Twenty-ninth Respondent:

NEIL JOHN HORNE

AND

Thirtieth Respondent:

FLORENCE DELL REGLI

AND

Thirty-first Respondent:

ERWIN REGLI

AND

Thirty-second Respondent:

BARRYJOHN CONROY

AND

Thirty-third Respondent:

PETER JOHN POLLARD

AND

Thirty-fourth Respondent:

BERENICE AGNES POLLARD

AND

Thirty-fifth Respondent:

ROBERT JOHN TREFFENE

AND

Thirty-sixth Respondent:

MARY MARGARET TREFFENE

AND

Thirty-seventh Respondent:

CARMELO GALEA

AND

Thirty-eighth Respondent:

PHILLIP RODNEY GASSON

AND

Thirty-ninth Respondent:

RHONDA JEANETTE GASSON AS PERSONAL

REPRESENTATIVE UNDER INSTRUMENT 715569079

AND

Fortieth Respondent:

IRENE JOY WHATLEY

AND

Forty-first Respondent:

GEOFFREY JOHN WILLIAMS

AND

Forty-second Respondent:

MARILYN ANNE WILLIAMS

AND

Forty-third Respondent:

LORNA BEVERLEY BUDGEN AS PERSONAL

REPRESENTATIVE UNDER INSTRUMENT 712954404

AND

Forty-fourth Respondent:

SCOTT OSBORNE LAWES

AND

Forty-fifth Respondent:

ADRIAN HAROLD HAGE

AND

Forty-sixth Respondent:

GWEN LYNNETTE HAGE

AND

Forty-seventh Respondent:

GRAHAM MAXWELL WALTON

AND

Forty-eighth Respondent:

KAYE LORELLE WALTON

AND

Forty-ninth Respondent:

RICHARD ANDREW PALMER

AND

Fiftieth Respondent:

JULIE HARRIET ANNE PALMER

AND

Fifty-first Respondent:

NEIL RAYMOND DOUGLASS

AND

Fifty-second Respondent:

MARJORIE JEAN HAVILAND

AND

Fifty-third Respondent:

CULBEURT NOMINEES PTY LTD ACN 074 748 780

AND

Fifty-fourth Respondent:

STUART MICHAEL PATRICK

AND

Fifty-fifth Respondent:

DONALD KETIH BURMAN

AND

Fifty-sixth Respondent:

JOHANNA HENDRIKA BURMAN

AND

Fifty-seventh Respondent:

ROBERT CAMPBELL

AND

Fifty-eighth Respondent:

MARION ANNE CAMPBELL

AND

Fifty-ninth Respondent:

DONNA-MAREE UPHILL

AND

Sixtieth Respondent:

CARA MAREE CAMPBELL

AND

Sixty-first Respondent:

BRETT ROBERT CAMPBELL

AND

Sixty-second Respondent:

RAYMOND JOHN FOELZ

AND

Sixty-third Respondent:

DIANA PATRICIA FOELZ

AND

Sixty-fourth Respondent:

RAYMOND JOSEPH GRIFFITHS

AND

Sixty-fifth Respondent:

ANNE CATHERINE GRIFFITHS

AND

Sixty-sixth Respondent:

BRONWYN FRANCES BARTAL

AND

Sixty-seventh Respondent:

JOHN ROBERTSON MACLAY

AND

Sixty-eighth Respondent:

STEVEN PAUL BEAR

AND

Sixty-ninth Respondent:

JOSEPH BANDIZIOL

AND

Seventieth Respondent:

CHELENA PTY LTD ACN 149 974 863 AS TRUSTEE UNDER

INSTRUMENT 745062060

AND

Seventy-first Respondent: JACK KEENAN

AND

Seventy-second Respondent:  MARGARET ANNE BOLAM

AND

Seventy-third Respondent:  SUNCORP-METWAY LIMITED ACN 010 831 722

AND

Seventy-fourth Respondent:  COTERIE NOMINEES PTY LTD ACN 005 106 641

AND

Seventy-fifth Respondent:  AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

ACN 005 357 522

AND

Seventy-sixth Respondent:  NATIONAL AUSTRALIA BANK LIMITED ACN 004 044 937

AND

Seventy-seventh Respondent:  WESTPAC BANKING CORPORATION ACN 007 457 141

AND

Seventy-eighth Respondent:  COMMONWEALTH BANK OF AUSTRALIA ACN 123 123 124

AND

Seventy-ninth Respondent:  RATE BUSTERS FUNDING PTY LTD ACN 111 029 488

AND

Eightieth Respondent:  BENDIGO AND ADELAIDE BANK LIMITED ACN 068 049 178

ORDER

Before:  Justice Bond

Date:  27 November 2017

Initiating document:  Amended Originating Application filed on 27 November 2017; Amended Application filed

by the First and Second Respondents on 22 November 2017; Application filed by the Third Respondent on 23 November 2017

THE COURT NOTES

  1. That the Applicants were appointed jointly and severally to be the statutory trustees for sale of land that, immediately before the termination of Nobby’s Outlook Community Title Scheme14822, was that Scheme’s land.
  2. There is some doubt whether that appointment was valid when made.
  3. It is desirable to make orders and give directions to the Applicants to remove that doubt.   

THE ORDER OF THE COURT IS THAT:

  1. Pursuant to r. 377 of the Uniform Civil Procedure Rules 1999, the Applicants have leave to file the Amended Originating Application.
  2. Pursuant to r. 116 of the Uniform Civil Procedure Rules 1999:

Fordyce v Kordamentha Real Estate Pty Ltd [2017] QSC 289

ORDER

Filed on behalf of the Applicants

Form 59, Version 1

Uniform Civil Procedure Rules 1999 Rule 661

Mahoneys

Level 18, 167 Eagle Street

Brisbane Qld 4000

Tel:  07 3007 3777

Fax: 07 3007 3778

Ref: 20704

981913_1.docx

  1. (a)
    The requirement for personal service upon each of the Fourth to Fifty-Second Respondents, Fifty-Fourth to Sixty-Ninth Respondents, and Seventy-First to Seventy-Second Respondents (the individual former owners), be dispensed with.
  2. (b)
    Service on each individual former owner is deemed to have been effected by email on 14 November 2017 in accordance with paragraph 4 of the affidavit of Mitchell James Downes sworn 23 November 2017.
  1. Pursuant to s. 17(1)(b) of the Service and Execution of Processes Act 1992 (Cth), abridge the time within which any Respondent must under that Act enter an appearance to the Originating Application filed on 14 November 2017 to 24 November 2017.
  2. Pursuant to r. 7 of the Uniform Civil Procedure Rules 1999, the time for service of the Application filed by the Tenth and Eleventh Respondents and the Affidavit of Robert James Keenan by abridged to 24 November 2017. 
  3. Pursuant to s 94 of the Trusts Act 1973 (Qld), the Court confers on the Applicants the following powers:
    1. (a)
      to complete the sale of the real property held by them as trustee and now described as Lot 122 on Survey Plan 284713, Title Reference 51092572 (the Property);
    2. (b)
      to pay their costs, expenses and outlays (including any legal costs) of the sale, together with their remuneration, incurred up to and including the settlement date;
    3. (c)
      to calculate, in accordance with the directions below, the individual entitlements of the former lot owners of Nobby’s Outlook CTS 14822 (the Beneficiaries);
    4. (d)
      to discharge, to the extent of each Beneficiary’s individual entitlement, the sum of $163,905.38 claimed to be owed to the First Respondent and the sum of $134,440.49 claimed to be owed to the Second Respondent, in respect of claims by those entities against the former Body Corporate of Nobby’s Outlook CTS 14822;
    5. (e)
      to undertake, on behalf of all Beneficiaries, except the Tenth Respondent and the Eleventh Respondent, the defence of the claim which the Third Respondent has foreshadowed against the Beneficiaries (the Transultimo Claim), or bring any counterclaim by the Beneficiaries against the Third Respondent (the Counterclaim), and, if the Court so directs, to compromise, whether before or after the commencement of any proceedings, the claim or counterclaim; 
    6. (f)
      to pay the amount of any judgment or compromise, whether reached before or after the commencement of proceedings, in respect of the Transultimo Claim to the Third Respondent;
    7. (g)
      to retain, and pay, from the funds presently held or that become available to them on settlement of the contract, sufficient funds:
      1. to pay their costs, expenses and outlays (including any legal costs) and their remuneration of the defence or compromise of the Transultimo Claim, together with an amount equal to their estimate of the likely quantum of the amount required to satisfy the Transultimo Claim; and
      2. to pay their costs, expenses and outlays (including any legal costs) and their remuneration likely to be incurred otherwise until the termination of the trust, including the costs associated with any counterclaim against the Third Respondent;
    8. (h)
      to make an estimate, informed as they see fit, of the likely quantum of the amount required to satisfy the Transultimo Claim;
    9. (i)
      thereafter, to make an interim distribution to the Beneficiaries;
    10. (j)
      to make a final distribution to Beneficiaries and to bring the trust to an end after resolution, by judgment or compromise, of the Transultimo Claim; and
    11. (k)
      to avoid doubt, the Applicants are not authorised by this order to undertake the conduct of any appeal arising from any judgment given in respect of the Transultimo Claim.  
  4. Pursuant to s 96 of the Trusts Act 1973 (Qld), the Court directs the Applicants:
    1. (a)
      At settlement of the contract of sale:
      1. to discharge all liabilities affecting the whole of the Property;
      2. to pay their costs, expenses and outlays (including any legal costs) of the sale, together with their remuneration, incurred up to and including the settlement date and the costs ordered in paragraph 8 below;
      3. to pay registered mortgagees of any Beneficiary over an undivided share of the Property the amount owed by that Beneficiary up to, but not exceeding, the amount of that Beneficiary’s entitlement calculated in accordance with these directions;
    2. (b)
      Following settlement of the contract of sale, to calculate the entitlement of each Beneficiary in accordance with the following steps:
      1. first, calculate each Beneficiary’s entitlement to the gross proceeds of sale in shares proportionate to the respective interest schedule lot entitlements of the lots immediately before termination of CTS 14822;
      2. next, and in each case, add to that sum, in shares proportionate to the respective interest schedule lot entitlements of the lots immediately before termination of CTS 14822, amounts already held by the Applicants on behalf of the Beneficiaries; 
      3. next, and where necessary, adjust that entitlement by amounts: 
        1. paid or withheld at settlement attributable to any Beneficiary;
        2. owing by any Beneficiary for body corporate levies;
  1. (iv)
    next, and in each case, reduce that entitlement, in shares proportionate to the respective interest schedule lot entitlements of the lots immediately before termination of CTS 14822, by the amounts paid,
  1. (A)
    to discharge all liabilities affecting the whole of the Property attributable to all Beneficiaries; 
  1. (B)
    to pay their costs, expenses and outlays (including any legal costs) of the sale, together with their remuneration, incurred up to and including the settlement date and the costs ordered in paragraph 8 below;
  1. (v)
    next, and where necessary, reduce that entitlement by the amount paid to registered mortgagees of any Beneficiary over an undivided share of the Property;
  2. (vi)
    next, and in each case, reduce that entitlement in shares proportionate to the respective interest schedule lot entitlements of the lots immediately before termination of CTS 14822, by the amounts paid by the Applicants to the First Respondent and the Second Respondent in respect of their claims against the former Body Corporate of Nobby’s Outlook CTS 14822;
  3. (vii)
    next, distribute to the Tenth Respondent and the Eleventh Respondent the entitlement, if any, they have;
  4. (viii)
    next, and in respect of the remaining Beneficiaries, reduce that entitlement in shares proportionate to the respective interest schedule lot entitlements of the lots immediately before termination of CTS 14822, by the amounts retained to pay the Transultimo Claim, including the Applicants’ costs, expenses and outlays (including any legal costs) of the defence, settlement or compromise of the Transultimo Claim and the Applicants’ likely future costs until termination, including their remuneration;
  5. (ix)
    thereafter, pay to the remaining Beneficiaries the amounts so calculated;
  1. (c)
    Following final judgment or any compromise (whether before or after the proceedings are commenced) of the Transultimo Claim: 
  1. (i)
    next, to pay the amount of any judgment or compromise to the Third Respondent;
  2. (ii)
    next, and in each case, reduce each remaining Beneficiary’s residual entitlement, in shares proportionate to the respective interest schedule lot entitlements of the lots immediately before termination of CTS 14822, but adjusted to exclude the lot entitlements of the lot owned by the Tenth Respondent and the Eleventh Respondent, by any amounts paid to the Third Respondent;
  3. (iii)
    next, and in each case, reduce each remaining Beneficiary’s entitlement, in shares proportionate to the respective interest schedule lot entitlements of the lots immediately before termination of CTS 14822, but adjusted to exclude the lot entitlements of the lot owned by the Tenth Respondent and the Eleventh Respondent, amounts remaining in the Applicant’s hands from the amounts retained to pay the Applicant’s costs, expenses and outlays (including any legal costs), and any remuneration due to them;
  4. (iv)
    thereafter, to pay to the remaining Beneficiaries the amounts so calculated and bring the trust to an end.
  1. All parties have liberty to apply by giving three (3) day’ notice by email, facsimile or ordinary mail, to all other parties interested in the relief to be sought.
  2. Pursuant to s 101 of the Trusts Act 1973, the Applicants be remunerated:
    1. (a)
      in the sum of $276,436.06 to 20 October 2017; and
    2. (b)
      thereafter, at the usual rates appearing at page 306 of exhibit AF-1 of the Affidavit of Ann Fordyce filed herein.
  3. The Applicants' costs of this application be assessed on the indemnity basis and paid out of, or retained from, the proceeds of sale at settlement.
  4. Otherwise, there be no order as to costs.

Signed:

Footnotes

[1] The “interest schedule lot entitlement” is the number which is allocated for each respective lot in the interest schedule in the community management statement.  

[2] See the definition of “court” in schedule 6.

Close

Editorial Notes

  • Published Case Name:

    Fordyce & anor v Kordamentha Real Estate Pty Ltd & ors

  • Shortened Case Name:

    Fordyce v Kordamentha Real Estate Pty Ltd

  • MNC:

    [2017] QSC 289

  • Court:

    QSC

  • Judge(s):

    Bond J

  • Date:

    04 Dec 2017

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Bunnings Group Ltd v Asden Developments Pty Ltd[2014] 1 Qd R 493; [2013] QCA 347
2 citations
Jump To
Cite 1 - [2014] 1 Qd R 493
Cite 2 - [2014] 1 Qd R 493
Crocombe v Pine Forests of Australia Pty Ltd (2005) 219 ALR 692
2 citations
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Cite 1 - (2005) 219 ALR 692
Cite 2 - (2005) 219 ALR 692
Eyres v Butt [1986] 2 Qd R 243
2 citations
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Cite 1 - [1986] 2 Qd R 243
Cite 2 - [1986] 2 Qd R 243
Giacci v Giacci Holdings Pty Ltd [2010] WASC 349
2 citations
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Cite 1 - [2010] WASC 349
Cite 2 - [2010] WASC 349
HIH Casualty & General Insurance Ltd v Building Insurers' Guarantee Corporation [2004] NSWSC 910
2 citations
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Cite 1 - [2004] NSWSC 910
Cite 2 - [2004] NSWSC 910
Kordamentha Pty Ltd v LM Investment Management Ltd (in liq) [2015] QSC 4
2 citations
Jump To
Cite 1 - [2015] QSC 4
Cite 2 - [2015] QSC 4
Moreton Bay Regional Council v Mekpine Pty Ltd (2016) 256 CLR 437
2 citations
Jump To
Cite 1 - (2016) 256 CLR 437
Cite 2 - (2016) 256 CLR 437
Rambaldi (The Trustees of the Estate of John Edward Atkinson, a Bankrupt) v Woodward [2012] NSWSC 434
2 citations
Jump To
Cite 1 - [2012] NSWSC 434
Cite 2 - [2012] NSWSC 434

Cases Citing

Case NameFull CitationFrequency
Perpetual Trustees Victoria Limited v Mason [2022] QDC 2461 citation
The Jurisdiction Of The District Court In Trust And Succession (2024) 1 QLJ 73 1 citation
1

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