Callisi Pty Ltd v Sterling & Freeman Advisory Pty Ltd - [2023] VSC 300

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST

S ECI 2021 04840

CALLISI PTY LTD (ACN 077 538 106)	Plaintiff
and
STERLING & FREEMAN ADVISORY PTY LTD (ACN 606 745 340) & ANOR	Defendants

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JUDGE:	M Osborne J
WHERE HELD:	Melbourne
DATE OF HEARING:	2 February 2023
DATE OF JUDGMENT:	6 June 2023
CASE MAY BE CITED AS:	Callisi Pty Ltd v Sterling & Freeman Advisory Pty Ltd
MEDIUM NEUTRAL CITATION:	[2023] VSC 300

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EQUITY & SECURITIES – Marshalling – Apportionment – Whether second mortgagee has equity to require marshalling or apportionment – Whether fact that second mortgagee also has interest in the second property bars claim – Whether fact that first mortgagee has discharged the mortgage over second property bars claim – Whether second mortgagee over second property is prejudiced such that neither marshalling nor apportionment is available – National Bank of New Zealand Ltd v Caldesia Promotions Ltd (1996) 3 NZLR 467 – Commonwealth Trading Bank v Colonial Mutual Life Assurance Society Ltd (1970) 26 FLR 338 – Mir Bros Projects Pty Ltd v Lyons [1977] 2 NSWLR 192 – Barnes v Racster (1842) 17 CCL 40 – Bancorp Investments (Fund 2) Ltd v Bhugra Holdings Ltd [2006] BCFC 893 – Burgess v Hill [2019] VSCA 94 – Chase Corporation (Australia) Pty Ltd v North Sydney Brick and Tile Co Ltd (1994) 35 NSWLR 1.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	D Williams KC	Davies Moloney
For the First Defendant	A Kirby	Coterminous Legal

HIS HONOUR:

Introduction

This case requires consideration of the equitable doctrine or principles of ‘marshalling’ and ‘apportionment’, or as it is sometimes referred, ‘marshalling by apportionment’. In Across Australia Finance Pty Ltd v Kalls (‘Across Australia Finance’) Bryson AJ observed that ‘the law of marshalling is not highly defined or clearly stated’.[1] To similar effect, the current authors of Meagher, Gummow and Lehane’s Equity: Doctrine and Remedies (‘Equity: Doctrine and Remedies’) note that ‘various authorities including recent English appellate authorities display a measure of ambivalence as to the underlying nature of the doctrine’.[2] In a helpful article published in Butterworth’s Conveyancing Bulletin, entitled ‘Marshalling’, the author, Tony Schumacher observed that the textbooks on equity ‘state bare principle and are notable for their lack of exposition on the practical application of the principles’.[3] Moreover, often the facts of relevantly decided cases are complicated with many of the key authorities decided centuries ago. As a result, the necessary analysis is not free of complexity. It is useful at the outset to set out some simple examples which illustrate the application of the principles.
[1]Across Australia Finance Pty Ltd v Kalls (2008) 14 BPR 26, [22] (Bryson AJ) (‘Across Australia Finance’).
[2]JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow and Lehane’s Equity: Doctrine and Remedies (LexisNexis, 5^th ed, 2015) [11.010] (‘Equity: Doctrines and Remedies’).
[3]Tony Schumacher, ‘Marshalling’ (1989) 5(8) Butterworths Conveyancing Bulletin 89.

A owns…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] VSC 300
Decision Date: 6 June 2023

CaseChat Overview and Summary

Callisi Pty Ltd brought an action against Sterling & Freeman Advisory Pty Ltd in the Supreme Court of Victoria. The dispute concerns the application of the equitable principles of marshalling and apportionment in the context of multiple mortgages and secured interests. The central issue was whether the second mortgagee had sufficient equity to compel either marshalling or apportionment, and if certain factors precluded such remedies.

The court had to determine whether the second mortgagee's concurrent interest in a second property, along with the first mortgagee's discharge of the mortgage over that property, constituted a bar to the second mortgagee's claim for marshalling or apportionment. Additionally, the court needed to assess whether the second mortgagee over the second property had been prejudiced to the extent that neither marshalling nor apportionment could be applied. The legal principles explored included the precedents from National Bank of New Zealand Ltd v Caldesia Promotions Ltd, Commonwealth Trading Bank v Colonial Mutual Life Assurance Society Ltd, Mir Bros Projects Pty Ltd v Lyons, Barnes v Racster, Bancorp Investments (Fund 2) Ltd v Bhugra Holdings Ltd, Burgess v Hill, and Chase Corporation (Australia) Pty Ltd v North Sydney Brick and Tile Co Ltd.

The Supreme Court found that the second mortgagee did not have the requisite equity to enforce either marshalling or apportionment. The concurrent interest in the second property and the discharge of the first mortgage over that property did constitute a bar to the second mortgagee's claim. Furthermore, the court determined that the second mortgagee over the second property had been prejudiced, precluding any application of marshalling or apportionment. Consequently, the court dismissed the claim.

The court ordered that Callisi Pty Ltd pay the costs of the proceeding. The judgment provides a clear delineation of the circumstances under which equitable remedies such as marshalling and apportionment may be denied, reinforcing the importance of equity in the context of multiple secured interests.

Orders