The borrower was declared bankrupt and security became vested in his trustee. The trustee in bankruptcy exercised his power to disclaim the property as ‘onerous property’ pursuant to s 133(1) of the Bankruptcy Act, on the basis that the land was subject to a mortgage by the bank and a second unregistered mortgage.
The effect of such a disclaimer is to vest the land in the Crown as the original granter of the land. This left the bank with a mortgage over land belonging to the state in circumstances where the state was not contractually bound to repay the debt.
This process effectively derailed the standard power of sale powers which the bank would otherwise have under the Torrens Act.
Accordingly, the bank brought these proceedings and claimed an interest in the disclaimed property for the indebtness owing under the mortgage, and made an application, pursuant to s 133(9), that it was just and equitable, for the court to make the following orders:
- The land be sold and thereafter an account be given of the proceeds of sale and that any surplus monies be paid to court;
- The land be vested in the bank.