Moya Pty Ltd v State of NSW, in the matter of Vapula Pty Ltd (in liquidation) [2022] FCA 1217

By Alicia Hill, Principal and Cherry Mitry, Law Clerk

Introduction:

On 12 October 2022, in the Federal Court of Australia, Justice Cheeseman delivered a judgement on the case of Moya Pty Ltd v State of New South Wales.[1] This case concerned itself with an application made by Moya Pty Ltd (Moya) for vesting orders in respect of two properties disclaimed by a liquidator. The effect of the vesting order would be to transfer the disclaimed properties to Moya in the absence of any registration of a transfer of legal title (Vesting Order).

Background

Vapula was a property developer and owned multiple lots of land, two of which were the subject of this dispute. Vapula entered into a loan agreement in December 2008, which was secured by a registered mortgage and a charge over the two properties, in Moya’s favour.

Vapula became insolvent on 29 May 2019 and a liquidator was appointed. The appointment of a liquidator was taken to be a default under the loan agreement that had been entered into by Vapula, which would entitle Moya to take possession of the properties among other rights. Nonetheless, Moya did not provide formal notice to ASIC about the exercise of these rights.

On 22 March 2022, the liquidator provided a notice of disclaimer in respect of the properties. The effect of this notice was to convey an intention by the liquidator to rid itself of the interest that Vapula had in the lots, as they were burdened by the mortgage in Moya’s favour.

The unpaid mortgage owing to Moya amounted to approximately $3.1 million as at 31 May 2022. At the time, one of the lots had also been commercially leased to a third party by way of an agreement expiring in 2024.

It was submitted by the liquidator that it would be unlikely for Moya to recover any of the unpaid mortgage amount given the existing pool of creditors, even if Vapula’s interest in the lots had been retained.

Issues

At issue was whether the Court would grant a Vesting Order in respect of the disclaimed properties pursuant to section 568F(1) of the Corporations Act 2001 (Cth) (the Act). This required an examination of whether the three conditions under section 568F of the Act had been satisfied.

The three conditions were:

• That property has been disclaimed
• That Moya had made an application as a person who claims an interest in the disclaimed property
• That the Court is satisfied prior to making the Vesting Order that it has heard from Moya or other persons as it thinks appropriate on the application

Decision

Their Honour exercised the discretionary power to grant the Vesting Order sought by Moya. This vested the estates in Moya pursuant to section 568F(1) of the Act.

Reason for judgement

The properties were disclaimed by the liquidator pursuant to the notice of disclaimer, plainly satisfying the first condition of section 568F(1) of the Act.

Moya was an applicant that claimed a relevant interest in the disclaimed property, this being a registered mortgage. This satisfied the second condition of s 568F(1) of the Act.

Finally, the Court considered it appropriate to exercise the discretion to make a Vesting Order. The rationale for this was that such a Vesting Order would provide certainty to Moya as a secured creditor. This would allow Moya to preserve its rights to exercise the power of sale and the ability to subdivide property.

Their Honour also sought to safeguard the interests of creditors and the liquidator. To this end, they made an order that Moya was to pay any surplus amount from the exercise of its power of sale to the liquidator.

Key Takeaway

This case highlights the possibility of claiming disclaimed properties by parties who do not provide notice to ASIC about exercising rights arising from an interest in property. Upon application, the Court is prepared to exercise its discretion to make Vesting Orders, especially where this provides preserves the rights of a secured creditor.

Implicit in their Honours decision to grant the Vesting Order was Moya’s undertaking to uphold the lease agreement with the third party until its expiry.  Indeed, as the power to grant a Vesting Order under section 568F(1) of the Act is discretionary, an applicant’s preparedness to recognise the interests of other interest-holders in the property is likely to be an important discretionary consideration.

[1] Moya Pty Ltd v State of New South Wales, in the matter of Vapula Pty Ltd (in liquidation) [2022] FCA 1217.