Application by Perpetual Limited ACN 000 431 827; C & L Cameron Pty Limited ACN 001 263 458 & Singh

[2010] NSWSC 1340

CITATION:	Application by Perpetual Limited ACN 000 431 827; C & L Cameron Pty Limited ACN 001 263 458 & Singh [2010] NSWSC 1340
HEARING DATE(S):	18 November 2010 29 November 2010
JUDGMENT DATE :	1 December 2010
JUDGMENT OF:	Hallen AsJ
DECISION:	1. I order that: (a) the amount paid into Court by the Plaintiff, together with the interest accrued thereon up to and including the date of the payment out, shall be paid out to C & L Cameron Pty Limited. (b) Mrs Singh should pay one half of the Applicant’s costs, of the application; she should pay all the Applicant’s costs of 29 November 2010. Otherwise, and to the extent that those costs are not paid by her, they may be paid out of the Funds paid into Court.
CATCHWORDS:	PROCEDURE - Miscellaneous procedural matters - Funds paid into Court under Trustee Act Part IV - Application for payment out of court - Matters to be established - Held: matters required are established - Order for payment made out.
LEGISLATION CITED:	Real Property Act 1900 Trustee Act 1925 Uniform Civil Procedure Rules 2005
CATEGORY:	Procedural and other rulings
CASES CITED:	Adams v Bank of NSW [1984] 1 NSWLR 285 Avco Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679 Bank of NSW v Adams [1982] 2 NSWLR 659 and on appeal [1984] 1 NSWLR 285 Bofinger & Anor v Kingsway Group Limited & Ors [2009] HCA 44 Commonwealth Bank of Australia v The Estate of the Late Mahmoud Slieman [2010] NSWSC 661 Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210 Ginelle Pty Limited v Singh & Anor [2010] NSWSC 1166 Harmer v Federal Commissioner of Taxation [1991] HCA 51 Hope v Hope [1977] 1 NZLR 582 In Re Gordon; Ex Parte Navalchand [1897] 2 QB 516 Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222 La Trobe Capital and Mortgage Corporation Ltd [No 2] [2009] NSWSC 1372 Marcel Esber v Kimberley Securities Ltd [2009] NSWSC 1922 Re Murrell; ex parte Official Trustee in Bankruptcy [1984] FCA 314; (1984) 57 ALR 85 Re S & D International Pty Ltd (in liq) (rec & mgr apptd) [2009] VSC 225 Re Thompson’s Mortgage Trusts [1920] 1 Ch 508
TEXTS CITED:	The Mortgagee’s Power of Sale 2nd edition (2004), Croft C and J Johansson
PARTIES:	Perpetual Trustees Company Limited ACN 000 431 827 (Plaintiff) C & L Cameron Pty Limited ACN 001 263 458 (Applicant) Prem Jeet Kaur Singh (Respondent)
FILE NUMBER(S):	SC 2010/274150
COUNSEL:	No appearance by Plaintiff Mr M W Young (Applicant) Mr A Kumar (Respondent)
SOLICITORS:	Dibbs Barker Lawyers (Plaintiff) Nugent Wallman Carter (Applicant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HALLEN AsJ

1 December 2010

2010/274150 APPLICATION BY PERPETUAL LIMITED ACN 000 431 827; C&L CAMERON PTY LIMITED ACN 001 263 458 & SINGH

JUDGMENT

1 HIS HONOUR: Perpetual Trustees Company Limited, the Plaintiff in these proceedings, was the first mortgagee of a property in Green Valley (“the Green Valley property”). The mortgagor and registered proprietor, of the Green Valley property was Prem Jeet Kaur Singh (“Mrs Singh”). She had become registered on title in January 1996. The Green Valley property was land under the provisions of the Real Property Act 1900 and was vacant land.

2 The mortgage to the Plaintiff, which was dated 10 October 2002, was registered on the title to the Green Valley property on 26 November 2002. There is no dispute that by reason of Mrs Singh’s default in repayment of the loan secured by the mortgage, the Plaintiff entered into possession of the Green Valley property; that it sold the Green Valley property, as mortgagee in possession, by public auction, in May 2010; that settlement occurred on 18 June 2010; and that the sale price received by the Plaintiff was $326,000.

3 Following the repayment of the expenses occasioned by such sale, the moneys which were then due or owing to the Plaintiff and the costs and the enforcement expenses of the Plaintiff, there were surplus proceeds amounting to $90,867.48 (“the Proceeds”), which amount the Plaintiff paid into Court pursuant to Part IV Trustee Act 1925 in about August 2010.

4 The payment of the Proceeds into Court was made following the filing by the Plaintiff, of a Summons, on 18 August 2010, pursuant to the liberty provided under s 95 Trustee Act to a trustee to make such payment into Court.

5 On 6 September 2010, the Applicant, C & L Cameron Pty Limited (“the Applicant”) filed a notice of motion in the proceedings, in which it sought an order that the Proceeds be paid to it and costs. It named Mrs Singh as the Respondent to the notice of motion.

6 A copy of the Plaintiff’s Summons, the notice of motion and two affidavits filed in support of the Applicant’s notice of motion were forwarded to Mrs Singh. A further affidavit was served upon her subsequently.

7 On 22 September 2010, the matter was referred to me. Both the Applicant and Mrs Singh appeared, the latter by her daughter, Ms Jasvinder Singh. I made directions requiring Mrs Singh to serve any evidence upon which it was intended to rely by 15 October 2010; the Applicant to serve evidence upon which it was intended to rely by 22 October 2010; and I stood the matter into the Registrar’s List on 25 October 2010.

8 On 15 October 2010, an affidavit affirmed by Balbir Singh (“Mr Singh”), the husband of Mrs Singh, was filed. In that affidavit, Mr Singh asserted that Mrs Singh opposed the Applicant’s application and that an order that the Proceeds be paid to her was sought.

9 On 25 October 2010, the matter was stood over, for hearing, before me on 18 November 2010.

10 One further affidavit was filed by, or on behalf of, the Applicant, being an affidavit of debt to which I shall return. It was served on Mrs Singh prior to the hearing.

11 On, or about, 15 November 2010, there was received, in my Chambers, a notice of motion, dated 12 November 2010, naming Mrs Singh and Mr Singh as Defendants, and Mr Singh as the party seeking the orders sought in the notice of motion. Mr Singh was identified, in the notice of motion, as “party to Mortgage, husband to Respondent”. There were 16 prayers for relief, one of which (paragraph 9) sought an order that the Applicant’s notice of motion be dismissed with costs, and another (paragraph 10) sought an order that the Proceeds “be paid to the Defendents (sic) forthwith”. Mr Singh’s notice of motion was not filed.

12 It seems likely that a legal practitioner did not draft the notice of motion. It is far from precise in the relief that is claimed and quite clearly makes an unjustified and unsupported assertion as to the entitlement of Mr Singh to any share of the Proceeds.

13 At the hearing of the Applicant’s notice of motion, Mr A Kumar, counsel for Mrs Singh, accepted that the notice of motion delivered to the court by Mr Singh could not be relied upon, as Mr Singh was not a party to the proceedings, and because there was no basis upon which any part of the Proceeds should be paid to him. In those circumstances, counsel for Mrs Singh did not rely upon the notice of motion, other than to found a submission that the relief claimed in the notice of motion was relevant to the court’s determination of the question whether the Proceeds should be paid to the Applicant.

14 Mr M W Young of counsel, for the Applicant, did not require a notice of motion to be filed on behalf of Mrs Singh in order for her to assert that she was the person to whom the Proceeds should be paid. He accepted that the matter should proceed upon the basis that Mrs Singh was a claimant to the Proceeds. The Plaintiff had nominated each of Mrs Singh and the Applicant as a party who, or which, had, or may have had, an interest in the Proceeds.

15 On 12 November 2010, an affidavit of Mr Singh, affirmed on 12 November 2010, was filed. Exhibited to that affidavit (as “BS-1”) was a folder of documents, consisting of 290 paragraphs and over 300 pages of annexures. Whilst the affidavit of 12 November 2010 was read on the hearing, counsel for the Applicant objected to the tender of the exhibit and to those parts of the affidavit that referred to it.

16 Following an opportunity being given to counsel for Mrs Singh to consider the relevance of the exhibit, its tender was withdrawn, and, by consent, I directed that it be returned to counsel for Mrs Singh.

17 The final affidavit filed and read was one by Charles Cameron, a director of the Applicant. He deposed that the amount owing to the Applicant, as at 18 November 2010, exclusive of the Applicant’s solicitor’s costs to that date, was $104,715.89. A schedule showing how the deponent had calculated the amount said to be owed was annexed to the affidavit. Mr Cameron was present in court, but was not cross-examined on the contents of the affidavit.

18 In the schedule to Mr Cameron’s affidavit, there is an amount claimed as reimbursement of various costs and disbursements, plus GST, relating to discontinued proceedings (to which I shall refer). Whilst the precise amount claimed in respect of those proceedings is not entirely clear, it appears to be no less than about $2,000, and no more than about $15,000. This is a matter about which a “complaint” was made by counsel for Mrs Singh during submissions. However, counsel for Mrs Singh did not make a submission that any of the individual amounts stated were unreasonable, or should, otherwise, be disallowed.

19 There is said to be a dispute about the amount that is owed to the Applicant, although the nature of that dispute could not be identified with any degree of precision, or in fact, other than in respect of the last matter, at all. I shall return to this aspect later.

20 No certificate from the A/Court Revenue and Trust Co-ordinator, Supreme Court of NSW, disclosing the amount deposited with the Supreme Court and invested with the NSW Trustee & Guardian, or the amount of interest or whether there were any stop orders in place has been filed. In relation to stop orders, neither party submitted that a claim could be made by any other party.

Background Facts

21 It is next necessary to set out some of the other background facts about which there appear to be no dispute:

(a) The mortgage granted to the Plaintiff was one dated 10 October 2002, and was registered and given dealing number 9161140E.

(b) On 12 June 2007, Lawteal Seconds Pty Limited (“Lawteal”) lodged a caveat, with an allocated number AD 182518. The caveat was dated 8 June 2007 and was recorded on title to the Green Valley property on 12 June 2007.

(c) On 25 September 2008, the solicitors acting for the Applicant, lodged for registration, a withdrawal of the caveat over the Green Valley property from Lawteal, as well as a caveat over the title to the Green Valley property by the Applicant. The Applicant’s caveat had an allocated number AE 233774. Registration of the withdrawal of caveat and the Applicant’s caveat occurred on 9 October 2008.

(d) The caveat lodged by the Applicant referred to a mortgage dated 24 September 2008 between Mrs Singh as mortgagor, and the Applicant as mortgagee. The mortgage was not registered.

(e) The mortgage between Mrs Singh and the Applicant referred to the mortgage as a “second mortgage”, and that the principal amount advanced by the Applicant was $150,000.

(f) A copy of a bank cheque for $150,000, dated 24 September 2008, apparently paid on Mrs Singh’s behalf, forms part of the evidence in the case of the Applicant.

(g) On 15 February 2010, the Applicant commenced proceedings, by statement of claim, seeking an order for judicial sale of the Green Valley property and other orders. In those proceedings, Mrs Singh, Mr Singh and the Plaintiff, was each named as a Defendant.

(h) Following service of the statement of claim, the Plaintiff, through its solicitors, advised the Applicant’s solicitors, in a letter dated 15 March 2010, that it already had taken possession of the Green Valley property and that it intended to exercise its power of sale.

(i) A Notice of Discontinuance of the proceedings by the Applicant, as against Ms Singh and Mr Singh, was filed, in Court, on 17 March 2010. They were advised that the Applicant had discontinued the proceedings against them by letter dated 29 March 2010.

(j) A Notice of Discontinuance of the proceedings by the Applicant, as against the Plaintiff, was filed, in Court, on 20 March 2010.

(k) On 16 July 2010, the solicitors for the Plaintiff (Messrs Dibbs Barker) wrote to the solicitors for Mrs Singh (Messrs Marsdens) informing her that the Green Valley property was sold for $326,000; that surplus sale proceeds of $91,509.58 (less the Plaintiff’s further legal costs) were currently held in their trust account; identifying the Applicant’s caveat; asking whether agreement had been reached by Mrs Singh and the Applicant as to the disbursement of the Proceeds; and advising that if no agreement was reached, the Proceeds would be paid into the Supreme Court.

(l) On 21 July 2010, the solicitors acting for Mrs Singh, wrote to the solicitors acting for the Applicant (Nugent Wallman Carter) requesting the “payout figures due to any creditors”.

(m) The Applicant’s solicitors sent “a schedule of indebtedness of Mr Cameron’s mortgage as at 23 July 2010” under cover of a letter of that date. In the letter, it was written that “[O]n our calculations the amount outstanding is far greater than the proceeds of sale of the Green Valley property and accordingly [we] have written to the solicitors for the first mortgagee requiring that they pay the balance proceeds of sale of the Green Valley property into Court and we will in due course make an application to the Court to have those monies paid out to our client”. (There is no suggestion that the mortgage referred to was not the Applicant’s mortgage.)

(n) In a letter dated 23 July 2010, the solicitors for the Applicant enclosed “a schedule of what our clients believes are payments received under the mortgage since its commencement and [we would] appreciate your confirmation that your client has made no other payments and [that] the payments that we have allocated to your client are correct.” The letter continued “If on the other hand your client is agreeable to the solicitors for the first mortgagee paying the balance proceeds of sale to our client, costs of our application to have the monies paid out of Court would not be incurred.”

(o) In a letter dated 2 August 2010, the Applicant’s solicitors advised Mrs Singh’s solicitors that an error had been made in the previous schedule of payments and that the correct amount as at 28 July 2010 was $132,250.23.

(p) Upon lodgement of withdrawal of caveat allocated number AE693978 on 16 August 2010, the Applicant’s caveat was withdrawn.

(q) On 16 August 2010, there was lodged a Transfer under Power of Sale, allocated number AF693979W, from the Plaintiff, as mortgagee, which Transfer stated the consideration of $326,000.

(r) In a letter dated 17 August 2010, the Applicant’s solicitors informed Mrs Singh’s solicitors of a number of events that had transpired and enclosed an amended schedule of indebtedness showing the amount outstanding under the mortgage of $130,180.62.

(s) There was no evidence of a response to any of the correspondence forwarded by the Applicant’s solicitors to Mrs Singh’s solicitors.

(t) There were no proceedings commenced by, or on behalf of, Mrs Singh, in regard to the mortgage given to the Applicant. There have, however, been other proceedings commenced by Mrs Singh and Mr Singh in relation to the Plaintiff’s mortgage (see, for example, Ginelle Pty Limited v Singh & Anor [2010] NSWSC 1166).

(u) In the proceedings cited, there was a reference made to the Applicant’s mortgage: see, for example, [35] and [36].

22 Counsel for Mrs Singh referred to a matter in the Court of Appeal in which Mrs Singh and Mr Singh were involved. I was informed from the bar table that judgment was to be delivered, on 19 November 2010, by the Court of Appeal and that the judgment may be of relevance in these proceedings.

23 In the circumstances, I informed the parties that if it was thought that the judgment was relevant, either party could request the matter to be re-listed for further argument and that I would consider the request and inform the parties whether the matter would be re-listed or whether written submissions were required. I directed that in the event that neither party made such a request, I would continue with the preparation of the reasons for Judgment.

24 On 22 November 2010, my Associate received an email from Mr Singh requesting that the matter be re-listed for further argument. With some hesitation, I acceded to the request and the matter was re-listed on 29 November 2010.

25 On 29 November 2010, Ms Jasvinder Singh, the daughter of Mrs Singh, sought leave to again appear for Mrs Singh, which leave was not opposed, and Mr M W Young of counsel again appeared for the Applicant.

26 I made it clear to Ms Singh that I had listed the matter, at the request of Mr Singh, but only for the purpose of further argument being limited to the relevance of the judgment of the Court of Appeal. I stated that I would not permit the argument to be at large.

27 Ms Singh did not know why the matter had been re-listed by her father. She accepted that there was no reference to the Applicant’s mortgage, or to the Green Valley property, in the Court of Appeal judgment. She stated that she thought it had been listed to provide advice about the notice of motion provided to the Court on 12 November 2010. I informed her that the notice of motion had been referred to, and dealt with, at the hearing on 18 November 2010.

28 Mr Young submitted that the Court of Appeal judgment was irrelevant to any issue being determined by me.

29 The citation of the Court of Appeal judgment is Singh v Ginelle Pty Ltd [2010] NSWCA 310. I have read the judgment that is said to have arisen from a joint hearing of two separate applications for leave to appeal from a decision of a single judge of the Supreme Court. One application concerned a decision given by Latham J on 9 March 2010, the other a decision of Palmer J, given on 5 May 2010. The applicants in each application were Mr Singh and Mrs Singh. The respondent in each case is Ginelle Pty Limited and the land the subject of the mortgage the subject of dispute was land at Londonderry.

30 I accept Mr Young’s submission that there is nothing in the reasons of the Court of Appeal that is relevant to the matters in dispute in the present proceedings. The mortgage the subject of the dispute in that case was a different one; the mortgagee was different, as were the mortgagors, only one of whom was Mrs Singh.

The Procedure to be followed in respect of the claim for payment out

31 Section 58(3) of the Real Property Act dictates how the proceeds of the sale of the Green Valley property were to be applied, at least in the absence of some different agreement of all interested parties. (There is no suggestion of a different agreement in the present case.)

32 The section provides:

“(3) The purchase money to arise from the sale of any such land, estate, or interest, shall be applied, first, in payment of the expenses occasioned by such sale; secondly, in payment of the moneys which may then be due or owing to the mortgagee, chargee or covenant chargee; thirdly, in payment of subsequent mortgages, charges or covenant charges (if any) in the order of their priority; and the surplus (if any) shall be paid to the mortgagor, charger or covenant charger, as the case may be.”

33 Section 58 operates to make a first mortgagee a trustee for any purchase money in excess of that required to pay out the first mortgage and the expenses of the sale: Bank of NSW v Adams (1982) 2 NSWLR 659 and on appeal (1984) 1 NSWLR 285 at 299; Avco Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679, at 681. Any subsequent mortgage, or charge, over the land, converts on the sale of the property to an equitable charge over the moneys: Re Murrell; ex parte Official Trustee in Bankruptcy [1984] FCA 314; (1984) 57 ALR 85; Hope v Hope [1977] 1 NZLR 582; Re S & D International Pty Ltd (in liq) (rec & mgr apptd) [2009] VSC 225 at [101].

34 The reference to subsequent mortgages, charges, or covenant charges in s 58(3) includes unregistered mortgages and charges: Avco Financial Services Ltd v Commonwealth Bank of Australia; La Trobe Capital and Mortgage Corporation Ltd (No 2) [2009] NSWSC 1372 at [33]; Re S & D International Pty Ltd (in liq); Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210 at [33]; cf Marcel Esber v Kimberley Securities Ltd (2009) 14 BPR 27,433; [2009] NSWSC 1422, at [32]-[46].

35 In Bofinger & Anor v Kingsway Group Limited & Ors [2009] HCA 44; (2009) 239 CLR 269, at [35] the High Court said:

“[35] Adams v Bank of New South Wales [[1984] 1 NSWLR 285 at 299, 302] is authority that s 58 [of the Real Property Act 1900 (NSW)] is to be read in a manner consistent with the equitable duty of the first mortgagee to account to puisne mortgagees as a trustee for any surplus. The position in equity was described as follows by Kay J in Charles v Jones [(1887) 35 Ch D 544 at 549-550] as follows:

I have never heard it doubted that where a mortgagee sells, and has a balance in his hands, he is a trustee of that balance for the persons beneficially interested. He takes his mortgage as a security for his debt, but, so soon as he has paid himself what is due, he has no right to be in possession of the estate, or of the balance of the purchase-money. He then holds them, to say the least, for the benefit of somebody else, of a second mortgagee, if there be one, or, if not, of the mortgagor. What, then, is he to do? Surely he has a duty cast upon him. His duty is to say, ‘I have paid my debt: this property which is pledged to me, and in respect of which I now hold this surplus in my hands, is not my property. I desire to get rid of this surplus, and hand it back to the person to whom it belongs.’ ... The duty of this mortgagee was at least to set this money apart in such a way as to be fruitful for the benefit of the persons beneficially entitled to it. To that extent and in that manner he was, according to my understanding of the law, in a fiduciary relation to the persons entitled to the money. It was so held in the case of Quarrell v Beckford [(1816); [1816] EngR 319; 1 Madd 269 [56 ER 100]], and so far as I know has always been so held, and although I quite agree that the Court is very reluctant to treat a mortgagee as being a trustee in any sense while any money is due to him, still when he has paid himself, and has money remaining in his hands which is no longer his property, how can he be treated as other than a trustee of such money?”

36 Part 4 of the Trustee Act 1925, relevantly, provides:

“(1) Where trustees, or the majority of trustees, have in their hands or under their control money or securities belonging to a trust, they may pay the same into court.”

37 Once moneys are paid into court under Part 4 of the Trustee Act, those moneys become subject to the Uniform Civil Procedure Rules 2005 (“UCPR”) (s 98 of the Trustee Act). The moneys are to be dealt with by the Registrar in accordance with the rules of court and in accordance with any order of the court. The party who pays money into court does not retain any legal, or equitable, interest in the money: In Re Gordon; Ex Parte Navalchand [1897] 2 QB 516. The money is invested by the Court and is disbursed in accordance with the directions of the Court.

38 In Harmer v Federal Commissioner of Taxation [1991] HCA 51; (1991) 173 CLR 264, an interpleader case, moneys were paid into court by a company, which had no claim to it, pending the resolution of the competing claims by others. The Court held, at 272, that upon payment into court, the money became "trust moneys" in the broad sense that the holder of the money (in the present case that person is the Registrar of the Court) was not beneficially entitled to the money as they were received by the court pursuant to the statutory provisions and rules of court under which they were paid in.

39 Division 3 of Part 55 UCPR applies to the payment of funds into Court under Part 4 of the Trustee Act and to proceedings arising out of payment into Court under that Part. So far as is materially relevant, UCPR 55.11 provides:

“Proceedings for directions as to payment out of court

(1) Funds that have been paid into court may only be paid out of court pursuant to the directions of the Supreme Court.

(2) An application for such directions is to be made by filing a notice of motion in the proceedings in which the funds were paid into court.”

The Claims

40 In Commonwealth Bank of Australia v The Estate of the Late Mahmoud Slieman [2010] NSWSC 661, Slattery J dealt with UCPR 55.11 and, helpfully, stated what needed to be established by a claimant. He said:

“[8] An applicant under UCPR r 55.11 must establish three matters to justify an order for the payment of money out of Court. The first is to identify the person who is primarily entitled to any funds paid into Court and the basis of that entitlement. It is fundamental that the person be identified from the best evidence available, so that the Court can be sure that the person has been given appropriate notice of the application and can if necessary contest it.

[9] The second matter that needs to be proved by a claimant is that he or she is not merely an unsecured creditor against the person primarily entitled to the fund but is a person who has an beneficial interest in the very fund that has been paid into Court. The same evidence that demonstrates a person’s primary entitlement to the funds in Court often establishes this second matter.

[10] Thirdly, it is necessary for an applicant to identify the other potential claimants to the fund in Court and to prove that those persons were notified of its claim. Those persons may consent to the claim. Alternatively, the applicant may prove that those persons either do not have valid claims against the fund or that their claims do not have priority over the applicant’s claims.

[11] The Court requires strict proof as to who has the entitlement to the funds in Court. There is a heavy burden placed on a party seeking payment of money out of court under Trustee Act s 98 and UCPR r 55.11. It is necessary for that party not only to prove his or her entitlement to the funds but also to prove that all other potential claimants to the funds in Court have been properly notified. Otherwise there is a risk of incorrect payments being made.”

41 Mr Young, on behalf of the Applicant, submitted that the Applicant had discharged its onus by establishing that it was the second mortgagee and the amount that was owed under the Applicant’s mortgage. He submitted that, despite the assertions made in the affidavits read on behalf of Mrs Singh, there was no evidence to demonstrate the nature of her claim against the Proceeds.

42 Mr Young also submitted that, in effect, to succeed in preventing the Proceeds being paid to the Applicant, Mrs Singh had to demonstrate that “there was a serious question to be tried” and that she had a “good arguable case”.

43 Mr Kumar did not agree with the submission made by counsel for the Applicant. He disputed that there was any obligation upon Mrs Singh to establish either a serious question to be tried or a good arguable case. He submitted that it was for the Applicant to establish an entitlement to the Proceeds.

Determination

44 As she was represented at the hearing of the Applicant’s notice of motion, Mrs Singh had been given appropriate notice of the application and was contesting it. There appears to be no dispute that the relevant parties to the contest have appeared and have contested the entitlement to the Proceeds. I am, therefore, satisfied, that the first requirement prescribed by Slattery J, has been satisfied.

45 The Applicant must next establish a proprietary interest in the Proceeds. The Applicant had an unregistered second mortgage over the Green Valley property, securing the obligations between the Applicant and Mrs Singh. Counsel for Mrs Singh accepted that, as the second mortgagee, the Applicant, prima facie, was entitled to the surplus proceeds of sale after the payment of all amounts due to the first mortgagee.

46 Counsel for the Applicant accepted that Mrs Singh, as the registered proprietor of the Green Valley property, in the absence of another claimant, with priority, would be entitled to the Proceeds. (There are, in fact, no other claimants.)

47 There was no submission made by counsel for Mrs Singh, to the effect that the reference to “subsequent mortgages” in s 58(3) of the Real Property Act means only subsequent registered mortgages. It may be he did not do so because the intention of Mrs Singh to make the Green Valley property act as security was clear.

48 In Croft C and J Johansson, The Mortgagee’s Power of Sale 2nd edition (2004), the authors state that, although the matter is not free from doubt, it appears that where there are subsequent encumbrances, the whole of the surplus should be paid to the encumbrancer next in point of priority: at 186; citing as authority Re Thompson’s Mortgage Trusts [1920] 1 Ch 508.

49 In Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222, Holland J, in dealing with the rights of a caveator, referred to the obligation of the first mortgagee who sells the mortgaged property to account to the holder of a subsequent encumbrancer. He said (at 228):

“As well as being required by s 58(3) [of the Real Property Act 1900 (NSW)] to apply surplus proceeds in payment of subsequent mortgages, the first mortgagee is liable by the general law to account to the holder of a subsequent encumbrance of which he has notice: West London Commercial Bank v Reliance Permanent Building Society .”

50 In Bank of New South Wales v Adams at 665, Helsham CJ in Eq held that where a mortgagee of land under the provision of the Real Property Act sells pursuant to the power conferred by s 58, he held any purchase money in excess of that required to pay the expenses occasioned by the sale and that due and owing to him, in trust for subsequent mortgagees of whose interest he has notice.

51 On appeal [1984] 1 NSWLR 285, Hutley JA expressly stated that the surplus, if any, would be held by the first mortgagee on trust for the second mortgagee as Helsham CJ had also found.

52 I respectfully agree with the view expressed by Slattery J in La Trobe Capital & Mortgage Corporation Limited [No 2], in relation to s 58 Real Property Act, at [33], that:

“The section does not abrogate the rights of mortgagees under unregistered mortgages but merely postpones them to those of mortgagees under registered mortgages and it does not vest the surplus from the mortgagee sale in the mortgagor free from all equity but is subject to them: Hope v Hope (1937) 1 NZLR 582 per Wilson J, considering the New Zealand Land Transfer Act 1952 s 104 which is in terms similar to s 58(3).”

53 In all the circumstances, I am satisfied that the second requirement prescribed by Slattery J, has been satisfied.

54 The Applicant also has an obligation to show that there is an amount outstanding in respect of an obligation that is secured by the mortgage. This has been done by Mr Carter’s evidence, which was not the subject of challenge by cross-examination.

55 The real question, in the present case, is whether, in circumstances where Mrs Singh has not consented, the Applicant has proved that she either does not have valid claim against the Proceeds, or that her claim does not have priority over the Applicant’s claim.

56 I do not think that there is any utility in using the type of description used by counsel for the Applicant to describe what a person in the position of Mrs Singh is required to do as a competing claimant to the Proceeds. I agree with the submission made on behalf of Mrs Singh that it is for the Applicant to demonstrate that any other claimant, either does not have valid claim against the funds paid into court, or that his, her or its, claim does not have priority over the Applicant’s claim.

57 Despite that conclusion, I do not think it is enough for Mrs Singh to merely rely on the fact that she is the registered proprietor. More is required. As I have attempted to demonstrate above, s 58(3) provides for an order of priority of payment of the Proceeds and without more, the Applicant is entitled to the proceeds in accordance with that priority.

58 In this case, Mr Kumar accepted that he could not point to any evidence that demonstrated the nature of Mrs Singh’s claim, other than that she was the registered proprietor. He pointed to the relief that had been sought in Mr Singh’s proposed notice of motion, but was unable to take me to any evidence that gave substance to those claims for relief. Mr Kumar accepted that the evidence was simply not there.

59 If that were not enough, I note that the claim of the Applicant was raised about 4 months ago in correspondence sent to Mrs Singh’s solicitors. Those solicitors appear not to have responded to any of that correspondence. Furthermore, Mrs Singh, at no time, commenced any proceedings claiming the type of relief that was sought in the notice of motion proposed by Mr Singh.

60 It will be also be appreciated that the matter was before me over 2 months ago and that directions for filing the evidence to be relied upon were made. Other than filing some affidavits, in which general assertions were made, there was no evidence to provide a basis for concluding that any of the alleged claims had any prospect of succeeding.

61 I raised with counsel for the Applicant the question of the amounts, included in the schedule of costs, relating to the proceedings commenced by the Applicant that had been discontinued. I referred him to r 42.19 UCPR, which provides:

“Unless the court orders otherwise, or the notice referred to in rule 12.1 (2) otherwise provides, the plaintiff must pay such of the defendant’s costs as, at the date on which the notice of discontinuance was filed, had been incurred by the defendant in relation to each claim in respect of which the proceedings have been discontinued.”

62 Mr Young submitted that there was no evidence of any costs incurred by Mrs Singh. That is undoubtedly true. In relation to the Applicant’s costs that had been included in the schedule, to make up the total amount owed, he submitted that the Applicant was entitled to include those costs and disbursements, as they were costs and expenses incurred by the Applicant “in consequence, or on account, of a default of the Mortgagor” (see, Clauses 16 and 18 of the mortgage between Mrs Singh and the Applicant).

63 As I have noted previously, counsel for Mrs Singh did not make any submissions that the amounts claimed for such costs and/or disbursements were unreasonable or otherwise should not be allowed.

64 I am satisfied, in the circumstances, that the Applicant is entitled to recover the costs and expenses under the mortgage, as these were costs and expenses incurred in consequence of the default of Mrs Singh.

65 Even if that conclusion were wrong, it seems to be clear that the amount owed to the Applicant without those costs, and taking into account the legal costs not otherwise included, will exceed the Proceeds.

66 In all the circumstances, the Applicant has satisfied me that if Mrs Singh has any claim (which is far from clear), it does not take priority over the claim of the Applicant.

67 Mr Young, on behalf of the Applicant, sought an order for costs, such costs to include the mention of the matter on 29 November 2010. When I pointed out that it was unusual to make an order for costs on such an application, Mr Young submitted that an order could be made on the basis that Mrs Singh was named as a respondent to the Applicant’s notice of motion, that she had appeared as such to the application, and had contested the Applicant’s entitlement to be paid the Proceeds. In the alternative, he submitted that the costs of 29 November 2010 should be ordered to be paid as the Applicant had been brought back to Court for no valid forensic reason.

68 Section 98 of the Civil Procedure Act 2005, relevantly, provides that subject to rules of court and to this or any other Act:

(a) costs are in the discretion of the court, and

(b) the court has full power to determine by whom, to whom, and to what extent costs are to be paid.

69 Rule 42.25 UCPR provides:

“(1) Subject to subrule (2), a person who is or has been a party to any proceedings in the capacity of trustee or mortgagee is entitled to be paid his or her costs in the proceedings, in so far as they are not paid by any other person, out of the fund held by the trustee or out of the mortgaged property, as the case may be.

(2) The court may order that the person’s costs not be so paid if:

(a) the trustee or mortgagee has acted unreasonably, or

(b) in the case of a trustee, the trustee has in substance acted for his or her own benefit rather than for the benefit of the fund.”

70 However, r 42.1 UCPR provides:

“Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.”

71 In this case, the “event” appears to be the application for payment out of the funds paid into court, to which application Mrs Singh was named as the respondent, and to which notice of motion she appeared, initially, by her daughter, then by counsel, and then again, by her daughter.

72 In my view, had there been no appearance by, or on behalf of, Mrs Singh, it would not have been necessary to have the matter mentioned on 29 November 2010. However, it would have still been necessary for there to have been a hearing of the application. In my view, the duration of the application was extended only by a little time because of the appearance on behalf of Mrs Singh.

73 Doing the best I can, I am of the view, that Mrs Singh should pay one half of the Applicant’s costs of the proceedings. She should pay all the Applicant’s costs of 29 November 2010. Otherwise, and to the extent that those costs are not paid, they may be paid out of the Proceeds.

74 I order that

(a) the amount paid into Court by the Plaintiff, together with the interest accrued thereon up to and including the date of the payment out, shall be paid out to C & L Cameron Pty Limited.

(b) Mrs Singh should pay one half of the Applicant’s costs, of the application; she should pay all the Applicant’s costs of 29 November 2010. Otherwise, and to the extent that those costs are not paid by her, they may be paid out of the Proceeds.



**********