Trustees in bankruptcy can takes steps to be appointed trustees for sale of property jointly owned by the bankrupt estates to which they have been appointed. Just how they do it, will depend upon the law in each state or territory.
In the matter of Juratowitch (as Trustee of the Bankrupt Estates of Parolin and Parolin) v Parolin & Ors [2016] FCCA 3439 (“Juratowitch”), the issue regarding the granting of the ‘power of sale’ to a Trustee of a Bankrupt Estate where the property did not entirely vest in the Trustee was considered by the Federal Circuit Court of Australia. The trustee was trustee of 2 bankrupt estates, each of which was a 1/3rd owner of a property in Victoria.
In an ex parte judgment, Harnett J relied on the decision of the Full Federal Court of Australia in Coshott v Prentice [2014] FCAFC 88 (“Coshott”) to order that a property could be sold by the Trustee of the estates of the 2/3rd owners. This was pursuant to the various provisions of Part IV of the Property Law Act 1858 (Vic), picked up through s79 of the Judiciary Act 1903 (Cth).
In Coshott, the Full Court held that an appointment of a trustee in bankruptcy could not be done under the Bankruptcy Act 1966 (Cth) where there was a non-bankrupt co-owner. This was because the rights of the co-owner were being affected. However the Full Court held that an order for sale of the property could nevertheless be made under the relevant NSW State legislation, s66G of the Conveyancing Act 1919 (NSW), picked up through s 79 of the Judiciary Act 1903 (Cth).
While both cases allowed the properties in question to be sold under the relevant State legislation, there are differences as to the individual requirements under each of the State’s legislations in relation to the appointment of the Trustee(s) for Sale. Under the Property Law Act 1958 (Vic), there are no specific provisions which determine how many trustees are to be appointed or who may be appointed as the trustee for sale. In most cases, it is up to the Court (or the Victorian Civil and Administrative Tribunal “VCAT”) to determine who it sees as best fit for the role. In the matter of Pekar v Holden (Trustee) [2017] FCA 596 (“Pekar”) the individual trustee of the bankrupt estate was appointed as sole trustee for sale by the Court. In the matter of Juratowitch, Hartnett J ordered that the Trustee as applicant, as per Pekar, be appointed as the sole trustee for the sale of the property.
However, in New South Wales, s66G(3)(a) of the Conveyancing Act 1919 (NSW) states that “Where the entirety of the property is vested at law in co-owners, the Court may appoint a trust corporation either alone or with one or two individuals (whether or not being co-owners), or two or more individuals, not exceeding four (whether or not including one or more of the co-owners), to be trustees of the property on either of statutory trusts.”
This section was considered in Coshott where the Full Court held that the section required the appointment of at least 2 trustees, and could not be satisfied by appointment of the trustee alone. The Full Court left open the question of whether the trustee in bankruptcy could be one of those two trustees for sale. However there have been a number of previous and subsequent decisions, including Juratowich which have appointed the trustee in bankruptcy and it appears to be reasonably accepted that in the absence of a specific conflict the trustee would be an appropriate appointee. There are obvious costs savings from having the same person appointed, although it is important that a trustee in bankruptcy appointed as trustee for sale is very careful to ensure that they distinguish between the 2 roles at all times.
The matters of Juratowitch and Coshott confirm that trustees of a bankrupt estate can be appointed as trustee for sale of property jointly owned with a non-bankrupt. However, it is worth noting that depending on the State legislation that is applicable, there may be specific requirement that need to be complied with in order for the trustee of a bankrupt estate to be appointed the trustee for sale.
Read the judgment for the Juratowitch matter here and the judgment for the Coshott matter here.
If you would like more information or advice in relation to insolvency, restructuring or debt recovery law, contact a Principal of the Matthews Folbigg Insolvency, Restructuring & Debt Recovery Group:
Jeffrey Brown on (02) 9806 7446 or jeffreyb@matthewsfolbigg.com.au
Stephen Mullette on (02) 9806 7459 or stephenm@matthewsfolbigg.com.au
