Weston (Trustee) v Sanna (No 7)

Weston (Trustee) v Sanna (No 7) [2025] FCA 1205 is a Federal Court decision about how the remaining proceeds of sale of two NSW properties should be distributed after years of connected bankruptcy, debt and security litigation. By the time this judgment was delivered, the properties had already been sold. The live issue was who should receive the money still held in the trustee's solicitors' trust account.

The court approved a mediated distribution reached by most active claimants, authorised liquidators of two companies in liquidation to enter the settlement documents under s 477 of the Corporations Act 2001 (Cth), and made costs orders against the seventh respondent in relation to an abandoned interim application and the distribution application. The judgment also shows that objections based on the nature of the alleged debts were rejected by reference to earlier judicial findings.

The dispute grew out of three related proceedings. The first was a transfer proceeding in the Federal Court. In that case, the trustee of Lepa Sanna's bankrupt estate challenged transfers by Ms Sanna to Corrado Sanna of her interests in the Copacabana and Green Valley properties. In 2019, the court held those transfers were void against the trustee under s 121(1) of the Bankruptcy Act 1966 (Cth).

The second was a Supreme Court proceeding brought by Wyse & Young, Defined and another plaintiff to enforce agreements against Mr Sanna and related parties. The claims included debts under two costs agreements and a deed of loan and general security agreement. Mr and Ms Sanna denied signing various documents and denied executing mortgages, but Brereton J found that they had in fact executed the relevant documents and were bound by them. Monetary judgments were entered, while the remaining mortgage-related issues were transferred to the Federal Court because of the bankruptcy dimension.

The third proceeding concerned the trustee's caveat over the Green Valley property. These matters were then case managed together. Over time, a number of parties claiming caveats, security interests or other rights over the properties were joined to the transfer proceeding. The judgment names creditors and claimants including Boral Construction, E&B Pastoral, Westpac, Bluescope, Defined and Wyse & Young.

The Federal Court later made orders empowering sale of the Copacabana property and appointing trustees for sale of the Green Valley property under s 66G of the Conveyancing Act 1919 (NSW). The properties were sold, and the sales completed on 8 July 2021. The court then supervised the process for quantifying sale-related amounts and for parties wishing to be heard on distribution to file points of claim.

By 2025, after deductions and mediation fees, $598,385.50 remained for distribution. The judgment records that this consisted of $133,305.38 from the Copacabana property and $465,080.52 from the Green Valley property. At a mediation on 12 May 2025, the active parties other than Mr and Ms Sanna agreed to resolve the proceedings by accepting a consensual distribution instead of running a full priority contest.

That settlement was first recorded in heads of agreement signed at the mediation and later incorporated into a deed of settlement. However, the settlement could not simply be implemented without court involvement. Ms Sanna and Mr Sanna did not agree to the disbursement, and the liquidators of Defined Properties Investment Pty Ltd (in liquidation) and ACN 146 329 008 Pty Ltd (in liquidation) needed approval to enter the settlement documents. That is what brought the matter back before Markovic J.

The judgment gives a useful picture of the kinds of documents that can matter when sale proceeds are contested. Bluescope claimed more than $118,000 plus interest, said to be secured over Mr Sanna's interest in the properties through a charging clause in a guarantee signed by him in connection with a commercial credit account application. Defined claimed more than $855,000 as at 18 October 2022, said to be secured by an equitable charge over the properties and protected by caveats on title.

Wyse & Young claimed more than $186,000 under the Supreme Court orders, said to be secured by an equitable charge over the Green Valley property and the second Copacabana lot. E&B Pastoral and Mr Horne claimed more than $251,000, said to be secured by unregistered mortgages over part of the Green Valley property, and E&B Pastoral had obtained default judgment against Mr Sanna in the District Court of New South Wales.

The trustee also claimed an amount said to reflect 50% of debts owed to Westpac, Permanent Mortgages Pty Limited and Boral that had been paid out from the proceeds of sale of the first Copacabana lot in 2016. The judgment records the trustee's claim at $152,562.58. This is important because it shows that a trustee's claim to sale proceeds may be tied to earlier transactions and payments, not just to the formal setting aside of transfers.

On the other side, both Ms Sanna and Mr Sanna had filed or provided points of claim. Ms Sanna's points of claim, as quoted in the judgment, sought any surplus after the petitioning creditor and referred to reinstatement of the non-bankrupt spouse's entitlement and a family law property settlement. Mr Sanna's points of claim sought, among other things, 50% of the Green Valley sale proceeds, 100% of the Copacabana sale proceeds, payment of $818,000 said to arise from the 2019 orders, and disclosure of proof of debt material from Defined and Wyse & Young.

The immediate issue was whether the court should approve disbursement of the remaining sale proceeds in accordance with the mediated settlement and proposed consent orders. The judgment frames the question as whether Ms Sanna or Mr Sanna had articulated a claim entitling either of them to a share in the net proceeds of sale of the properties. The court noted that any claim by either of them to residual equity would fail at a practical level if the net proceeds were insufficient to satisfy established secured creditor claims.

A second issue was whether the liquidators of Defined Properties Investment Pty Ltd (in liquidation) and ACN 146 329 008 Pty Ltd (in liquidation) should be authorised, nunc pro tunc, under s 477(2A) and s 477(2B) of the Corporations Act to enter the heads of agreement and deed of settlement. The catchwords show the court approached this by asking whether the compromise of debt and entry into the settlement documents were a proper exercise of the liquidators' powers.

The judgment also dealt with a costs issue arising from an interim application filed by Ms Sanna on 16 June 2025. That application was dismissed at the commencement of the hearing on her application, with costs reserved. The court then had to decide whether there was any reason to depart from the ordinary position that costs follow the event.

There was also a procedural point concerning Mr Sanna's attempted appearance. The judgment records that he had provided points of claim but did not appear when the applications were called on for hearing. He later attempted to appear near the conclusion of the hearing while represented parties were addressing costs. The court refused that late attempt because he had not filed written submissions in accordance with directions, had been present throughout the hearing, and it was too late and inconsistent with the overarching purpose in s 37M of the Federal Court of Australia Act 1976 (Cth).

The court allowed the applications. It authorised Frank Lo Pilato, in his capacity as liquidator of ACN 146 329 008 Pty Ltd (in liquidation), and that company, nunc pro tunc, to enter the heads of agreement dated 12 May 2025 and the deed of settlement dated 15 July 2025 under s 477(2A) and s 477(2B) of the Corporations Act. It also authorised Joanne Monica Keating, in her capacity as liquidator of Defined Properties Investment Pty Ltd (in liquidation), and that company, nunc pro tunc, to enter the same settlement documents.

The court further authorised the trustee and his solicitors, Dentons Australia Limited, to deduct and pay specified amounts from the Copacabana and Green Valley sale proceeds. The orders directed payment of $215,000 to the trustee of the bankrupt estate of Lepa Sanna, $60,000 to Bluescope Steel Ltd, $80,000 to Defined Properties Investments Pty Ltd (in liquidation), $80,000 to ACN 146 329 008 Pty Ltd (in liquidation), and $80,000 to E&B Pastoral Pty Ltd.

The balance of the proceeds, recorded as $83,385.90, was ordered to be paid to Dentons Australia to be applied first to the applicant's costs and remuneration of obtaining the orders giving effect to the agreed distribution, and then any remaining amount was to be paid in equal shares to Bluescope, Defined, ACN 146 329 008 Pty Ltd and E&B Pastoral.

The court also ordered the seventh respondent to pay the applicant's costs of the interim application filed on 16 June 2025 and of the application for approval of the distribution. The proceedings were otherwise dismissed. The catchwords and the visible parts of the reasons indicate that opposition concerning the nature of the alleged debts was dismissed by reference to established judicial findings. The extract also makes clear that the court treated earlier findings as limiting what could still be contested in this later stage of the litigation.

This case shows how commercial recovery disputes often evolve. A business may think it is dealing with a straightforward debt or property issue, but once bankruptcy, family dealings, caveats, mortgages, guarantees and multiple creditors are involved, the final contest may be over a limited fund held after sale. At that point, the practical questions become: what documents support your claim, has a court already ruled on them, and is there enough money left after prior deductions to make your claim commercially worthwhile?

The judgment is also a reminder that earlier findings can be decisive. Here, the court expressly noted that, given the findings in the Supreme Court proceeding, it was not open to Mr Sanna or Ms Sanna to contest the validity of the mortgages or the debts the subject of the judgments delivered there. For a business owner, that means a later hearing about distribution is usually not the place to retry issues already decided elsewhere.

Another practical lesson is the value of settlement. The active parties other than Mr and Ms Sanna agreed to a consensual distribution instead of spending more of the fund on a full priority contest. Courts are often willing to approve that kind of compromise where it is within power, commercially sensible and properly supported, especially when liquidators seek approval to settle. If your business is one of several claimants to sale proceeds, a negotiated outcome may preserve value that would otherwise be consumed by legal costs.

Finally, the case underlines the importance of procedure. A claim to sale proceeds is not preserved by general dissatisfaction or late intervention. The court's treatment of Mr Sanna's attempted late appearance shows that parties need to comply with directions, file material on time and present a coherent case. Businesses should assume that once a court-supervised distribution process is underway, unsupported or delayed objections may carry little weight.

The judgment is dated 1 October 2025. It refers back to important earlier milestones, including the 2019 Federal Court decision voiding the transfers against the trustee, the 2019 Supreme Court decisions on the debt and security documents, the 2020 sale-related orders, the 2021 completion of the property sales, the 2023 adoption of the referee's report, the 2025 mediation, and the 2025 settlement documents.

The reasons available here are truncated before the end. Even so, the orders and the visible parts of the reasons are sufficient to state the outcome with confidence: the court approved the mediated distribution, approved the liquidators' entry into the settlement documents, made costs orders, and otherwise dismissed the proceedings. The missing part mainly limits how far one can go in describing every step of the court's reasoning.