Westpac Banking Corporation v Nolan

1. [1]

   HER HONOUR: By amended notice of motion filed 9 June 2016, the plaintiff seeks the following orders:

2. [2]

   The plaintiff is Westpac Banking Corporation (“Westpac”). The defendant is Catherine Marie Nolan (“Ms Nolan”). Westpac relied upon the affidavits of Naomi Greer dated 16 November 2014, Renee Ashton dated 9 December 2014, Karena Milios dated 11 May 2016, Guy Charles Howes dated 11 May 2016 and Montgomery Loughlin dated 3 June 2016.

3. [3]

   By amended statement of claim (“ASC”), Westpac seeks an order for possession of the property together with judgment for sums owed to it by the defendant. The ASC pleads that there are two separate facilities: the line of credit facility and the Steve Nolan Constructions facility. So far as the line of credit facility is concerned, it is pleaded that on 18 November 2013, by written agreement, Westpac agreed to lend money to Ms Nolan and her husband, Stephen Michael Nolan (“Mr Nolan”), and they agreed to repay money on the terms and conditions set out in the agreement. This loan was secured with a first registered mortgage (“the mortgage”). It is pleaded that there was default in payment of the loan.

4. [4]

   Until March 2016, Ms Nolan defended the claim and pursued a defence and a cross claim in which she contended that any liability she had to Westpac was caused by Westpac’s alleged misleading and unconscionable conduct.

The law

1. [5]

   UCPR 14.28 reads:

2. [6]

   UCPR 16.4 reads:

The bankruptcy

1. [7]

   In 2015, a creditor of Ms Nolan, Holcim (Australia) Pty Ltd, filed a creditor’s petition seeking a sequestration order in respect of Ms Nolan in the Federal Circuit Court.

2. [8]

   On 2 March 2016, the Federal Circuit Court granted that order and Mr Woodgate was appointed as trustee (“the trustee”) of Ms Nolan’s bankrupt estate.

3. [9]

   Under s 58(1) of the Bankruptcy Act 1966 (Cth), the property of Ms Nolan (including the property and defensive rights and claims against Westpac) vested in the trustee.

4. [10]

   By letter dated 3 March 2016, the trustee notified Westpac of his appointment. Westpac informed the trustee of the existence of these proceedings and provided him with information in respect of it, including copies of all of the pleadings and the affidavits served in the action by both parties.

5. [11]

   By letter dated 11 April 2016, the trustee advised Westpac that pursuant to s 60(2) of the Bankruptcy Act he did not propose to prosecute Ms Nolan’s cross claim nor her defence to Westpac’s amended statement of claim.

Ms Nolan’s notice of motion

1. [12]

   By notice of motion filed 19 April 2016, the defendant seeks a declaration that Catherine Nolan, despite a sequestration order under the Bankruptcy Act having been made against her estate by the Federal Circuit Court on 2 March 2016, continues to have in these proceedings a right to appear and standing to defend the plaintiff’s claims against her; and, in the alternative, an order granting Catherine Nolan leave to continue to be heard and/or appear in these proceedings.

2. [13]

   At the outset of this hearing before me, counsel for Ms Nolan conceded that Ms Nolan does not have standing as of right. I heard oral submissions as to why leave should be granted for Ms Nolan to continue to be heard and/or appear in these proceedings. Briefly, the reasons were firstly, that on a legal analysis of the loan and security documents, Westpac is not a secured creditor; secondly, that Ms Nolan has a bona fide defence and cross claim that should be permitted to go to trial; and finally, it is the residential home of Mr and Ms Nolan.

3. [14]

   Westpac submitted that Ms Nolan does not have standing or a right to appear on the motion or otherwise pursue the defence or cross claim. Westpac submitted that this is because the property and any rights in question are not hers to deal with as they are the property of the bankrupt estate and it is for the trustee to decide how they, and claims in respect of them, are to be addressed: Bankruptcy Act s 58; Cummings v Claremont Petroleum [1996] HCA 19; 185 CLR 124; NAB v Strik [2009] NSWSC 184; NAB v Darroch [2010] NSWSC 1202. The trustee has now elected not to pursue or defend any claims in relation to the property.

4. [15]

   Westpac also says that the order that Ms Nolan seeks does not accord with established principles governing these circumstances for the following reasons:

5. [16]

   It is well settled that, under the Bankruptcy Act, the bankrupt (who has been divested of her property) has:

6. [17]

   The starting point is Bendigo Bank Ltd v Demaria, where McDonald J stated:

7. [18]

   In National Australia Bank v Strik, Johnson J stated:

8. [19]

   In National Bank Limited v Darroch at [7], Harrison J adopted Johnson J’s reasoning in Strik.

9. [20]

   Ms Nolan has become divested by reason of her bankruptcy of both her interest in the property and the liability for her provable debts. As a bankrupt she has no right to bring or to prosecute proceedings to protect, enhance or add to the value of the property of which she has been divested: Cummings v Claremont Petroleum NL at 135-6. Ms Nolan has no standing to appear or to make submissions or to tender evidence on the plaintiff’s application. The Official Trustee has made it clear that he does not wish to be heard.

10. [21]

    Both legal representatives were unable to locate any authority where leave had been granted for possession cases where the defendant was bankrupt. This is not surprising. It is rare for leave to be granted to a bankrupt to appear. One circumstance that has been identified as a possible basis upon which leave maybe granted involves allegations of serious personal misconduct on the part of the bankrupt. Courts have considered that leave to appear may be granted in such a case so as to enable the bankrupt individual to respond directly to those allegations: see Strik at [9] and Re-Engine Pty Ltd (in liq) v Fergusson [2007] VSC 57.

11. [22]

    Westpac does not allege that Ms Nolan engaged in any species of deliberate misconduct such that there is a risk that this Court would publish a judgment in which findings of that kind were made against her.

12. [23]

    In these circumstances, it is my view that leave should not be granted to Ms Nolan to appear, either on Westpac’s motion and to prosecute her defence and cross claim.

13. [24]

    So far as the relief sought pursuant to UCPR 14.28 is concerned, it is noted that the plaintiff does not contend that Ms Nolan’s defence and cross claim are untenable. However, as stated in Durroch, the continued existence of a defence that operates as an impediment to the entry of judgment for possession in favour of Westpac, where neither Ms Nolan nor the Official Trustee on her behalf is respectively able or willing to promote it, is in a different category and has a clear tendency to cause prejudice, embarrassment or delay in the proceedings and is an abuse of the process of the Court. It should be struck out pursuant to UCPR 14.28. If it were otherwise, the defence would continue as a clog preventing Westpac from disposing of the proceedings. It is also my view that Ms Nolan’s cross claim that seeks relief in relation to the mortgage over the property where she has no interest in that property will also cause prejudice, embarrassment or delay and is an abuse of process of the Court and should also be struck out.

14. [25]

    In these circumstances, I dismiss the defence and cross claim pursuant to UCPR 14.28(1)(b) and (c).

Default judgment

1. [26]

   So far as default judgment is concerned, I have read the affidavits of Naomi Greer, Renee Ashton, Karena Milios, Guy Charles Howes and Montgomery Loughlin. I am satisfied that Westpac has satisfied the requirements of UCPR 16.4 and is entitled to possession of the property. I will enter judgment for possession. Costs are reserved.