Payment Out of Court Funds Decision - NSW Supreme Court

The court granted an application for payment out of moneys held in court, finding that the applicant and the first respondent had established a proprietary interest and had adequately notified other potential claimants.

Supreme Court New South Wales

Medium Neutral Citation: [COMPANY] v [COMPANY] [2016] NSWSC 1902 Hearing dates: 20 December 2016 Date of orders: 20 December 2016 Decision date: 20 December 2016 Jurisdiction: Common Law Before: Campbell J Decision: I direct counsel to bring in short minutes of order giving effect to my reasons by 22 December 2016 Catchwords: PROCEDURE – Supreme Court procedure - Uniform Civil Procedure Rules – equity - [NAME] exercised power of sale - surplus proceeds of sale paid into Court – motion for payment out of court – matters to be established - whether applicant entitled to funds - whether any competing claimants - order for payment made out Cases Cited: In the matter of Concrete Injector Bolts Pty Limited [2012] NSWSC 820 [NAME] v Orix Australia Corp [2006] NSWSC 1208 Category: Procedural and other rulings Parties: [COMPANY] (Plaintiff) [COMPANY] (Applicant) Representation: Counsel: [redacted] Mr LT [NAME] (Respondent) File Number(s): 2013/137413

ex tempore judgment (rEVISED)

1. This is an application by [COMPANY] for a direction for payment out of moneys held in court. The present proceedings were brought by the [COMPANY] as [NAME] for possession and sale of property of which [NAME] was the registered proprietor. He defaulted on the mortgage and subsequently went bankrupt.

2. I do not currently have a certificate of the amount of money held in the court but the original deposit was in the order of $32,400 being the surplus, or the net proceeds of the sale.

3. The matter was before me when I was duty judge on the 9 November 2016 and I adjourned it for hearing today because I was not satisfied that another possibly interested party, a [NAME], had received sufficient notice of the proceedings. I was concerned that the letters that had been sent to him about these proceedings did not make it clear to an unrepresented layperson that the interest claimed by [NAME] was adverse to an interest he may have. My concern about that is that, at one stage anyway, he claimed the benefit of a charge over the real property in relation to moneys he had advanced to [NAME].

4. There are other possible interested parties, of whom only one has shown any interest in the proceedings, and that is the first respondent to the application, [COMPANY], represented by [NAME] of counsel.

5. So far as [NAME]'s potential interest is concerned I am satisfied that he has received more than adequate notice of these proceedings, of the nature of the claim made and of the possibility that he may too have an interest. By his non-appearance I am satisfied that he is forsaking any claim he may have to the moneys in court. 6. [NAME], the original registered proprietor, has also in my view received adequate notice of the same matters and he too has failed to appear at any time during the proceedings. As I have said, he did go into bankruptcy. He is now discharged and his trustee in bankruptcy, [NAME], has informed the solicitors instructing [NAME] of counsel by letter dated 26 August 2016 that he claims no interest in the funds held by the court following the discharge.

7. The applicant and the first respondent both claim an equitable interest in the proceeds of the sale arising under the terms of their commercial arrangements with the trading entity through which [NAME] carried on his trade as a plumber. Credit was extended to that entity supported by the guarantee of [NAME]. That guarantee in its terms in each case included a clause creating in favour of the creditor a charge over all of Mr [NAME]'s estate and interest in any land which Mr [NAME] had at the time of signing the guarantee or later acquired. He owned the property, the subject of these proceedings, at the time of the guarantee. It's unnecessary to go into much more detail about that matter.

8. Another trade creditor, [COMPANY], was named as fourth respondent to the motion. By letter dated 23 June 2016 its solicitors informed [NAME]'s solicitors that it effectively claimed no interest in the funds and consented to a distribution of the moneys held in court as agreed between the applicant and the first respondent. As things stand I am satisfied that only the applicant and the first respondent assert any interest in the money. In In the matter of Concrete Injector Bolts Pty Limited [2012] NSWSC 820, Justice Slattery said at [5]-[8]: "The principles that apply on applications such as this are well established. The application is brought pursuant to Uniform Civil Procedure Rules 2005, r 55.11… [There are] three elements usually necessary to be proved in a case such as this. First, the registered proprietor must be properly identified… Secondly, it is necessary for an applicant to prove that the claimant is not merely an unsecured creditor in respect of the fund but has a proprietary interest in it. It is well established that surplus funds arising after sale by a [NAME] are held on trust by the [NAME] for the registered proprietor… Thirdly, it is necessary for an applicant to prove who are the other potential claimants against the fund in court and to prove that those persons have been notified of the claim. It is necessary to have evidence: as to what has happened to those claims; whether they have been settled; whether they have been withdrawn; or whether they are going to be contested." [Citations omitted]

1. In [NAME] v Orix Australia Corp [2006] NSWSC 1208 Justice Brereton was prepared to accept that an interest in the nature of a charge under a finance lease facility was more than a mere unsecured debt.

2. Applying these principles it is clearly established that [NAME] is the registered proprietor. I am also satisfied from the evidence read in the case, which is summarised in the helpful written submission of [NAME], that he does not wish to contest the claim of the applicant and the first respondent 3. I am also satisfied that each of the applicant and the first defendant have proved something in the nature of a proprietary interest in the land by way of the charge created by the guarantees each of them obtained. For what it is worth, that interest was relevantly protected by caveat.

4. I am also satisfied that the applicant has proved who the other potential claimants are, as I have identified during the course of these reasons. Insofar as the trustee in bankruptcy and [NAME] are concerned it can be said their claims have been withdrawn. So far as [NAME] and [NAME] are concerned, assuming the latter has an interest which survived his bankruptcy, I am satisfied from their steadfast refusal to take any part in the proceedings that they are not going to contest the application before me today.

5. In the circumstances and applying those principles I am satisfied that I should make orders of payment out under r 55.11 as sought by the applicant. As the applicant and the first respondent are the only contestants still standing I think it appropriate to give effect to their agreement that the money be distributed to in the orders they have agreed.

6. There is no certificate in relation to the final amount held by the Court. It is of course possible that during the time that these proceedings have been pending there is some amount of interest earned on the sum and I think it best, to finalise this matter, that I give the parties an opportunity to obtain a certificate of moneys from the Registry and to prepare short minutes of order specifying the amount to which each of them is entitled.

7. I direct counsel to bring in short minutes of order giving effect to my reasons by Thursday afternoon.

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