Blake v Leondiou (No 2) - [2011] SASC 152

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
BLAKE v LEONDIOU & ANOR (No 2)
[2011] SASC 152
Reasons of Judge Lunn a Master of the Supreme Court
22 September 2011
PROCEDURE
Second defendant paid money into Court, with a denial of liability, in satisfaction of plaintiff's claim - such payment not authorised by the applicable 2006 Civil Rules - application by second defendant for payment out to it of monies in Court before trial of the action - held monies under the control of the Court and second defendant had not made out any sufficient ground of mistake or change of position or circumstances to justify an order for payment out - application refused.

EQUITY - TRUSTS AND TRUSTEES
Monies paid into Court by trustee - whether paid in under s 47 Trustee Act 1936 - held not to have been, as proper procedures under s 47 not followed and terms of notice of payment in were inconsistent with s 47 being invoked.

BLAKE v LEONDIOU & ANOR (No 2)
[2011] SASC 152
JUDGE LUNN:
Reasons on second defendant’s application for payment out of monies in Court

In late 2007 there were dealings between the plaintiff and the first defendant which resulted in a property at 13 Bagot Ave, Mile End, (“the property”) being purchased for $470,000. At settlement the property was transferred into the name of the second defendant, which was a company controlled by the first defendant.[1] The plaintiff contributed $94,239 to the monies which were used to effect settlement.[2] The balance of the monies necessary to complete the purchase were partly provided by the first defendant[3]   and the balance was borrowed by the second defendant. The plaintiff now contends that by virtue of their respective contributions to the purchase of the property, she has an 80 per cent beneficial interest in it and the first defendant has a 20 per cent beneficial interest. This is disputed by the defendants. While the defendants do not now deny that the plaintiff has some beneficial interest in the property by virtue of her contributions towards its purchase, they say their contributions to its purchase were far greater than those of the plaintiff. These matters will need to be resolved by a trial Judge.
[1]    There is a dispute about whether the plaintiff was to have some interest or role in that company.
[2]    The defendants allege the plaintiff was not beneficially entitled to all of this money and it is impossible to resolve that question on the affidavit evidence before me.
[3]    He alleges a contribution of $27,599 by himself and another $11,500 from his associate, Helen Bowes. These amounts are in issue.
The parties intended that after its purchase the property should be used for the business of a rooming house. However, the relationship between the plaintiff and the first defendant quickly broke down. The plaintiff was excluded from the conduct of that business and it has been carried on since early 2008 by the defendants who have not accounted to the plaintiff for any profits from it.
On 4 June 2008 the plaintiff, acting in person, instituted this action. Her primary purpose at that time was to seek to reinstate a caveat which she had lodged over the title to the property claiming an undefined equitable interest in it, but which had been removed by the Registrar-General after being warned by the second defendant. On 10 June 2008 she, without legal representation, filed a Statement of Claim (“the first Statement of Claim”). No defence was filed until 2 December 2008, and then only to a subsequent version of the Statement of Claim.
On 4 July 2008 the second defendant paid $94,239 into this Court. The Notice of Payment Into Court filed by its then solicitor stated:
On the 4^th day of July 2008 the Second Defendant, Bagot Avenue Developments Pty Ltd has paid $AUD ninety four thousand two hundred and thirty nine dollars ($94,239) into Court with a denial of liability and says that this sum is sufficient to satisfy the amounts with sworn exhibits to the plaintiff’s claim in this action.[4]
The plaintiff has not attempted to have this money paid out to her and it remains in Court.
[4] No-one can explain what was meant by “the amounts with sworn exhibits to the plaintiff’s claim”. At this time there were affidavits of the plaintiff on the file in support of her application for the reinstatement of the caveat and also the First Statement of Claim.
Since the payment into Court the action has had a long, tortuous interlocutory history, part of which was explicable by the plaintiff being legally unrepresented. However, she now has legal representation and different solicitors act for the defendants from those who lodged the Notice of Payment Into Court.
By paragraph 4 of an interlocutory application of 10 September 2010 (FDN70) the defendants sought an order that the monies standing to the credit of this action be paid out to the defendants. This was opposed by the plaintiff. The application did not come on for hearing until 12 September 2011 because of unsuccessful attempts in the meantime to settle the action.
The defendants’ counsel conceded that the payment into Court was not authorised by any applicable Rule of Court.[5] The only current Rule about such a payment into Court is 6R 187(5) and (6) which provide:
(5)If the defendant makes an offer of settlement for a specified amount, the offer may be accompanied by a payment into Court of the relevant amount.
(6)The amount paid into Court may be increased but cannot be withdrawn in whole or in part unless—
(a)the plaintiff consents; or
(b)the Court permits its withdrawal.
Here the payment in was not accompanied by any offer of settlement made in accordance with 6R 187.
[5] The action is governed by the Supreme Court Civil Rules 2006. The procedure used has some similarity to that which was available under R39 of the repealed Supreme Court Rules 1987, but that Rule does not apply in this action.
I do not accept the plaintiff’s contention that the second defendant paid the $94,239 into Court pursuant to s 47 of the Trustee Act 1936. The relevant parts of that section are:
47—Payment into Court by trustees and mortgagees
(1)     Trustees … having in their hands or under their control money or securities belonging to a trust, or in respect whereof a trust has arisen by implication or construction of law, may, on filing an affidavit shortly describing the instrument under or in consequence of which the trust arises, according to the best of their knowledge and belief, or if there be no such instrument, then shortly setting out the facts of the case, pay the money or securities into the Supreme Court.
(2)     On such payment the money or securities shall, subject to rules of court, be dealt with according to the orders of the Supreme Court, which may also order the administration of the trusts in respect of the money or securities.
(3)     The receipt or certificate of the proper officer shall be a sufficient discharge to trustees for the money or securities so paid into court.
Section 47 is a type of interpleader procedure whereby a trustee can discharge its liability to the beneficiaries of the trust by paying the money into Court where there is some uncertainty or difficulty about the payment of those monies to the rightful beneficiaries.[6]
[6] See Ford and Lee The Law of Trusts Vol 2, paragraph 17,800.
I need not deal with the disputes about whether the $94,239 is properly categorised as trust money. I decide the point on the ground that the second defendant did not invoke s 47 in making its payment into Court. I find this for the following reasons:
·It did not file any affidavit as required by s 47(1).
·A trustee cannot make a payment into Court under s 47 with a denial of liability as was stated in the Notice of Payment Into Court. The trustee must acknowledge its liability under the trust by virtue of s 47(3). The use of the procedure under s 47 is a discharge of that liability.
·It is not proper for a trustee in making a payment into Court under s 47 to assert that the amount is sufficient to satisfy the claim of a particular beneficiary. Under sub-s (2) it is for the Court to determine the entitlement of any beneficiary to the money.
The proper interpretation of the Notice of Payment Into Court is that it is an offer by the second defendant, made with a denial of liability, to satisfy the plaintiff’s claim in the action. What is the legal effect of that offer is not for me to say, but presumably it will be a matter for the trial Judge on the issue of the costs of the action. The procedure adopted by the second defendant is analogous to that under R39 of the Supreme Court Rules 1987. The status of the monies now in Court is to be governed by the authorities under that 87R 39 and its equivalents.
The monies in Court are now under the control of the Court and not of the defendants.[7] Once a party had paid money into Court under 87R 39 it could not resile from that step merely because it no longer thought it to be tactically advantageous or because the action was taking longer to finalise than had been anticipated.[8] Under the authorities under 87R 39 (which would apparently also apply to 6R 187(6)) the Court will usually only exercise its discretion to allow the money to be repaid to the party paying it in where it was either paid in under mistake or there has been a material change in the circumstances or position of the party.[9]
[7]    Singer v Gilchrist Watt & Sanderson Pty Ltd (1950) 67 WN NSW 89 at 91.
[8]    Cumper v Pothecary [1941] 2 KB 58 at 70; W A Sheratt Ltd v John Bromley Ltd [1985] 1 QB 1038 at 1053; Caboolture Park Shopping Centre Pty Ltd v White Industries Qld Pty Ltd (1989) 90 ALR 589.
[9]    Hydronic Industry Pty Ltd v Taylor (1991) 5 ACSR 202; Hixon v Hixon [1988] 2 QdR 553 at 554.
There is no evidence here that the second defendant acted under any mistake of fact when making the payment into Court. Likewise, there is no evidence that it acted under a mistake of law, although I do not understand how its then solicitors came to advise it that it was a proper procedure to adopt.
I also do not find that there has been any material change in the circumstances or position of the defendants since the payment in which would justify an order for now repaying it to the second defendant. In the correspondence from the defendants and their solicitors prior to the payment in, it was alleged that the $94,239 had been a loan by the plaintiff. However, the plaintiff, as evidenced by her caveat and her unsuccessful effort to have it reinstated, was claiming not a loan but an interest in the property. Neither in her affidavits filed before 4 July 2008, nor in the first Statement of Claim, did she plead a claim for the repayment of a loan of the $94,239 or any part of it.
While the way in which the plaintiff has pleaded and particularised her claim in this action has changed substantially in the succession of statements of claim which have been filed since 4 July 2008, the essence of her claim has always been one for an equitable interest in the property by virtue of her contributions to its acquisition by the second defendant. As the defendants’ counsel acknowledged, the central issue in the case is not whether she has some equitable interest in the property, but what is the extent of that interest. There has been no material change in the nature of her claim through the subsequent amendments to her Statement of Claim which supersede the legal basis, whatever it was, under which the second defendant paid the $94,239 into Court. It is not the case that before the payment into Court she was seeking repayment of a loan, but since then she has changed her claim to one for an equitable interest in the property.
The defendants allege that they are being prejudiced by having to continue to pay substantial interest on monies which had been borrowed to pay the $94,239 into Court. However, when the second defendant made the payment into Court it presumably understood that if the plaintiff did not accept that amount in satisfaction of her claim, the money would remain in Court until the action was finalised. As the plaintiff was legally unrepresented at the time of the payment in, and was obviously not in a position to properly or expeditiously pursue her claim, the defendants must have been aware of the risk that it could take a long time to finalise the action. Insofar as the defendants have suffered prejudice by paying interest on the money to their lender, it is a risk which they should have anticipated when the money was paid into Court. It is not such a prejudice to them as justifies an order now being made that the money be paid back to the second defendant.
The defendants’ counsel submitted that it was relevant that the plaintiff had not claimed in her latest Statement of Claim an order for the payment out to her of the monies in Court. I do not agree. She has claimed an account for the profits of the business. If a judgment is given in her favour after the taking of the accounts, it is likely that an order would be made that it be payable out of the monies in Court.
The best person to decide what should happen to the monies in Court is the trial Judge after determining the issues raised on the pleadings. The defendants have not satisfied me that the justice of the case requires that this should be pre‑empted by an interlocutory order now being made for the return of the monies to the second defendant.
I have today made the following orders:
1Paragraph 4 of FDN70 is dismissed.
2Costs of paragraph 4 are to be the plaintiff’s costs against the defendants.
3Fit for counsel.
4Further directions hearing set for Tuesday 11 October 2011 at 9.45am.