Caboolture Park Shopping Centre Pty Ltd v White Industries (Qld) Pty Ltd

[1989] FCA 733

Re: CABOOLTURE PARK SHOPPING CENTRE PTY LTD
And: WHITE INDUSTRIES (QLD) PTY LTD
No. QLD G198 of 1986
FED No. 733
Mortgages - Practice
90 ALR 589

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Pincus J.(1)

CATCHWORDS

Mortgages - payment into court - whether holder of mortgage debenture given by payer has interest in money in court - priorities.

Practice - payment of money into court - application for withdrawal of money paid in - secured creditor of respondent (to cross claim) claims charge over the money - whether question of priorities arises - nature of interest in money paid into court.

Federal Court Rules, 0.23 r.9(1)

HEARING

BRISBANE

#DATE 10:11:1989

Counsel for the applicant: Mr P. Dutney

Solicitors for the applicant: Blakes

Counsel for the respondent: Mr H. Fraser

Solicitors for the respondent: Morris Fletcher & Cross

ORDER

The notice of motion filed on 22 October 1989 be dismissed.

The orders of the Honourable Mr Justice Burchett dated 23 March 1989 be varied by replacing paragraph 1(c) thereof with the following:

"(c) that interest accruing on the moneys deposited be retained by the Registrar of the Federal Court of Australia (Sydney), and be deposited by him on the same terms as are set out in paragraph 1(a) of this order";

The notice of motion with respect to withdrawal of money in court filed on 3 November 1989 be dismissed.

The costs of and incidental to all three notices of motion be taxed and paid by Caboolture Park Shopping Centre Pty Ltd, Mr John Dures Anderson and Australia and New Zealand Banking Group Limited.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

I have before me three notices of motion in this proceeding. I shall deal with them in the order in which they were heard.

Withdrawal of Money in Court

1. By notice of motion filed on 3 November 1989, the applicant in the principal proceedings ("Caboolture Park") a Mr J.D. Anderson and Australia and New Zealand Banking Group Limited ("the Bank") sought orders that Caboolture Park be at liberty to withdraw money which was paid into court on 14 July 1988. The application relates to proceedings in this Court which have been heard but only partially disposed of.

2. Mr Anderson was appointed receiver and manager of Caboolture Park on 14 August 1989 pursuant to a certain mortgage debenture dated 10 August 1988. Although one of the applicants in this notice of motion is Caboolture Park, I assume (this not being expressly stated) that Caboolture Park's name appears as an applicant only because it has been used by the receiver, claiming the right to do so under the mortgage debenture. In substance, the application is by the Bank and interests representative of the Bank.

3. The principal proceeding was begun by Caboolture Park in December 1986 when it sued the respondent, White Industries (Qld) Pty Ltd ("White Industries") for misleading conduct and in respect of other causes of action relating to the construction of a shopping centre. White Industries defended and cross-claimed for money said to be due to it for building the centre. The matter was tried before Ryan J., with certain breaks, from June 1988 to August 1989 and on 17 August 1989 his Honour dismissed Caboolture Park's claim with costs. No judgment has yet been delivered in respect of White Industries' cross-claim.

4. According to the material, parts of the cross-claim amounting to a sum in excess of that which is paid into Court are not "the subject of any plea by the applicant" - i.e. there is no defence to those parts.

5. Mr Hugh Fraser for White Industries submitted, in effect, that I should proceed on the assumption that White Industries would be likely to obtain a judgment against Caboolture Park in excess of the amount paid in and I will do so. The amount due to the Bank also exceeds that paid into Court.

6. I will not state the amount paid in, for obvious reasons.

7. In essence, then, the dispute is between the Bank as secured creditor and White Industries (which is secured in a certain sense discussed below) in respect of a sum paid in.

8. The Court's power to grant the application is set out in 0.23 r.9 sub-r.(1) of which reads as follows:
   

"(1) Subject to sub-rule (2), where -

(a) money brought into Court by a respondent is not accepted in accordance with rule 10; and

(b) leave of the Court is obtained, the respondent may withdraw the whole or any part of money paid into Court or any security filed by him under this Order."

Sub-rule (2) does not apply. The money was not accepted in accordance with r.10. White Industries does not apply to have the money paid out to it now, but is content to wait for judgment.

1. According to the note in Williams' Supreme Court Practice (Victoria) 2nd Edition, the Court has a complete discretion either to make or refuse an order for payment out of money which has not been accepted: p 1365. The authors go on to say that in most cases "the only question would be whether the plaintiff should pay the costs incurred between the expiration of (the time for acceptance) and the date of the application". The rule (now superseded) being discussed in Williams does not correspond precisely with that I am considering, but in my view the differences in expression are not significant for present purposes.

2. If there be such a complete discretion as just mentioned, then the simple ground upon which an order for payment out might be made is that, treating the payment in as an offer of settlement, it has not been accepted. However, Mr Dutney (for the Bank) does not put his case on that ground; he says that although White Industries are in some sense secured, the Bank has a superior security. The Bank has a charge, he submits, whereas White Industries only has a lien on the money, the latter expression being appropriate because judgment has not yet been given in favour of White Industries.

3. It is convenient to look first at a group of the older cases. In Ex parte Banner, In Re Keyworth (1874) 9 ChApp 379, in an action for defamation, money was paid into Court and then the defendants became insolvent. As here, there was no judgment in favour of the plaintiff. It was held that the plaintiff was, at the commencement of the insolvency, a secured creditor and that an inquiry must be directed to ascertain how much of the sum paid in the plaintiff was entitled to.

4. The report sets out the reasons given below, which include the following:
   

"... the pounds 880 paid into Court ceased, upon its being paid into Court, to be the property of the debtors; it was no longer part of their estate. If the action had gone on to judgment, and the judgment had been for the Plaintiff for pounds 880, the matter would have been quite clear and plain; the money would have belonged to the plaintiff."

1. On the appeal, a similar view was taken.

2. In Ex parte Bouchard; In Re Moojen (1879) 12 ChD 26, the same doctrine was applied, but there was a peculiarity in that the money was paid into Court in answer to a bankruptcy petition. It was said that "the equitable title of the petitioning creditor to the money was complete when it was paid into Court to abide the event of the action". Also, the following explanation was given:
   

"... the payment of the money into Court under the order of the Court was equivalent to a conditional payment to the creditor. If the money had actually been paid to him under the order of the Court he would have been entitled to keep it, and I think the payment into Court was, when his debt was established, equivalent to a payment to him as of the date when the payment into Court was made."

These cases were followed in In Re Gordon; Ex parte Navalchand (1897) 2 QB 516 where the plaintiff was described as a "secured creditor by reason of the payment into court".

1. There was some discussion of this line of authority in the Full Court of the Supreme Court of Victoria in Commercial Banking Co of Sydney Ltd v. Colonial Financiers of Australia Pty. Ltd. (1972) 20 FLR 220. There the defendant company paid money into Court and was subsequently wound up. The money was ordered to be paid out to the liquidator and that was upheld on appeal. Smith J. said that the payment in was a preference within s.122 of the Bankruptcy Act 1966, and the Chief Justice agreed with him. The Court was invited not to follow the line of authority I have mentioned, but thought it unnecessary to reach a conclusion about that, because it thought there was, on any view, a preference. Lush J. gave some consideration to the nature of the right created, saying that the payment in -
   

"involved an appropriation by the defendant of part of its property and the setting aside of that part specifically to answer the plaintiff's claim if that claim was made good. I think that such an arrangement may described as the giving in favour of the plaintiff of a charge on property ..." (pp 225, 226).

He went on to say that the word "charge" in the Bankruptcy Act should not be used in any narrow or technical sense. It is clear that, in the payment-in cases, the word "charge" is not so used. For one thing, the Court has a discretion to let the money to be paid out again to the party which paid it in; it is an unusual sort of "charge" which can be put an end to at the discretion of the Court.

1. In Peal Furniture Co Ltd v. Adrian Share (Interiors) Ltd (1977) 1 WLR 464, an action was brought for a debt, a defence and counterclaim were filed and the defendants paid into court, but the money was not taken out. The defendants then (having become insolvent) reassessed the matter and decided that too much had been paid in. The counterclaim was increased and leave was given to withdraw the payment in. That was upheld in the Court of Appeal, but the decision of the Court of Appeal was disapproved in W.A. Sherratt Ltd. v. John Bromley (Church Stretton) Ltd (1985) 1 QB 1038. One of the reasons for the disapproval of the Peal Furniture case was that it was thought to be based upon a view that there was "something inequitable or unfair in a plaintiff achieving a preference in the event of his obtaining judgment" ((1985) 1 QB at 1056). In W.A. Sherratt, the Court of Appeal thought this to be incorrect and reaffirmed the older line of authority. Oliver L.J. said the defendant paying into Court -
   

"... parts outright with his money. ... The money becomes subject entirely to whatever order the Court may see fit to make and to treat it as the defendant's property available for distribution in his bankruptcy is to assume, for the purposes of exercising the Court's discretion, the very situation which will only arise if the Court exercises its discretion in a particular way."

1. This Court is bound by neither of the two recent Court of Appeal decisions, but it seems plain that prima facie the later should be followed, as being consistent with a fairly well established doctrine. The mode of treatment of payments into Court which emerges from the cases is as follows: Whereas the rules appear to give an unfettered discretion to the Court (as the passage in Williams suggests) it is not truly unfettered; the discretion is exercised on the basis that the payment will not be allowed to be withdrawn (even if it is too late, under the rules, for the other side to accept it) unless it is seen that the payment in was made by mistake, or that circumstances have changed in some significant way or other matters of that kind; the unsecured creditors are, however, protected to a degree because the payment in may be treated as a preference; ordinarily, once the money is paid in the plaintiff or applicant is entitled to have it kept there until liability is established.

2. On the view of the law which I take, the Bank's application cannot succeed. It claims as a secured creditor the interest which Caboolture Park has in the money in Court, but that interest is only a right to ask the Court for an exercise of discretion. There is not (as Mr Dutney suggested there was) a contest between a superior and an inferior class of security, because the money in Court is not subject to the Bank's security.

3. It follows that the first notice of motion filed on 3 November 1989 will be dismissed with costs.
   Treatment of Interest

4. There are cross-applications with respect to the interest on the money, which may be briefly disposed of. After the payment in, it was agreed that the money in question be specially invested so as to attract high interest and Burchett J. (on 23 March 1989) ordered that Caboolture Park have the interest; it was ordered to be paid to solicitors then acting for them. Now Caboolture Park, having changed its solicitors, wants the order varied to have the interest paid to the new solicitors. White Industries say the money should be simply left to accumulate.

5. The significant point is the date of the order of Burchett J.: it was made months before Ryan J. (on 17 August 1989), dismissed the claim by Caboolture Park. It has now become clear, as it was not when Burchett J. made his order, that Caboolture Park has no claim, but only a defence to the cross-claim by White Industries. As explained above, the evidence is that Caboolture Park has not pleaded in answer to much of the claim by White Industries. In those circumstances, it seems entirely inappropriate that the interest should continue to go to Caboolture Park and that part of the order of Burchett J. can no longer operate.

6. I direct that the three notices of motion be dealt with by a single order and that only one order need be taken out. That order will be as follows:
   

(1) that the notice of motion filed on 24 October 1989 be dismissed;

(2) that the orders of Burchett J. dated 23 March 1989 be varied by replacing paragraph 1(c) thereof with the following:

"that interest accruing on the moneys deposited be retained by the registrar of the Federal Court of Australia (Sydney) and be deposited by him on the same terms as are set out in paragraph 1(a) of this order";

(3) that the notice of motion with respect to withdrawal of money in court filed on 3 November 1989 be dismissed;

(4) that the costs of and incidental to all three notices of motion be taxed and paid by Caboolture Park Shopping Centre Pty Ltd, Mr J.D. Anderson and Australia and New Zealand Banking Group Limited.