Fingal Developments Pty Ltd v Nom De Plume Nominees Pty Ltd - [2015] VSC 44

IN THE SUPREME COURT OF VICTORIA Not Restricted
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
LIST E
S CI 2012 1299
BETWEEN

FINGAL DEVELOPMENTS PTY LTD (ACN 071 927 225) Plaintiff

and

NOM DE PLUME NOMINEES PTY LTD (ACN 006 750 090) First Defendant

and

ASCOT VALE SELF STORAGE CENTRE PTY LTD (ACN 092 643 939) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) Second Defendant
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JUDGE:

SIFRIS J

WHERE HELD:

Melbourne

DATE OF HEARING:

1-4 and 8-9 September 2014, 13 October 2014

DATE OF JUDGMENT:

20 February 2015

CASE MAY BE CITED AS:

Fingal Developments Pty Ltd v Nom De Plume Nominees Pty Ltd & Anor

MEDIUM NEUTRAL CITATION:

[2015] VSC 44

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MORTGAGES — Whether holder of second ranking mortgage debenture has standing to sue holder of first ranking mortgage debenture for amounts recovered in excess of the amount owing to first ranking mortgage debenture holder.
MORTGAGES ‑ Whether holder of first ranking mortgage debenture recovered amounts in excess of amount owing pursuant to its charge — Accounts between mortgager and mortgagee.
MORTGAGE AND MORTGAGEE in possession — Whether holder of first ranking mortgage debenture is liable to the holder of a second ranking mortgage debenture for wasting assets of chargor company where such assets would have been available to other creditors.
MORTGAGES —Whether second ranking mortgage debenture is valid and enforceable.
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APPEARANCES:
Counsel Solicitors

For the Plaintiff Mr D J Williams QC with Mr N McAteer
Jane Underwood Lawyers

For the First Defendant Mr P J Bick QC with Mr B Gibson
SBA Law

For the Second Defendant Mr M N C Harvey Piper Alderman
TABLE OF CONTENTS
A...... Introduction.......................................................................................................................... 1
B...... Relevant background.......................................................................................................... 3
(a)....... Holdings in the AVSS Trust................................................................................... 3
(b)...... Richard Leggo becomes a unitholder in AVSS Trust........................................ 4
(c)....... Property converted into self-storage facility....................................................... 4
(d)...... Robert McNab becomes a unitholder................................................................... 4
(e)....... Unit holding equity and loan position at December 2001................................ 5
(f)....... $20,000 funds advanced by Leggo in 2002.......................................................... 6
(g)...... Decision to convert property into residential apartments................................ 6
(h)...... Funds required for residential conversion.......................................................... 7
(i)....... Structure established for new investors............................................................... 7
(j)........ Albury Investors...................................................................................................... 8
(k)...... Events during 2004-2006......................................................................................... 9
(l)....... Changes to structure of Paringa Loans to AVSS............................................... 12
(m)..... Albury Investors position in 2006....................................................................... 12
(n)...... Construction finance............................................................................................. 14
(o)...... Fingal Charge......................................................................................................... 15
(p)...... Events from October 2007 to March 2008........................................................... 17
(q)...... Financiers suspend funding facilities................................................................ 19
(r)....... April 2008 Agreement........................................................................................... 21
(s)....... Dispute regarding April 2008 Agreement......................................................... 23
(t)....... Settlement negotiations in early 2009................................................................. 24
(u)...... Priority deed prepared by Leggo....................................................................... 26
(v)...... Deed of Settlement – Executed 23 March 2009.................................................. 27
(w)..... The Deed of Settlement......................................................................................... 28
(x)....... From the Deed of Settlement (23 March 2009) to the appointment of Receivers and Managers (21 June 2010)....................................................................................... 29

C...... The issues in the case........................................................................................................ 29
D...... Validity of the Fingal Charge.......................................................................................... 30
E...... The amount secured by the NDP Charge...................................................................... 35
(a)....... The Rebate Payments of $487,000 to Hughes Kennedy.................................. 36
(b)...... The Ferguson…

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: [2015] VSC 44
Decision Date: 20 February 2015

CaseChat Overview and Summary

Fingal Developments Pty Ltd took legal action against Nom De Plume Nominees Pty Ltd, the holders of a second ranking mortgage, regarding the enforcement and validity of the mortgage instruments. The case was heard in the Supreme Court of New South Wales. Fingal Developments, as the holder of a first ranking mortgage, sought to recover funds from the mortgaged property and claimed that Nom De Plume had no standing to contest these actions. Nom De Plume, in turn, argued that the first ranking mortgage had been improperly administered, claiming that it had recovered sums beyond what was due and that the first ranking mortgagee was liable for wasting assets that should have been available to other creditors.

The legal issues at the core of this case revolved around the standing of Nom De Plume to challenge the actions of Fingal Developments as the first ranking mortgagee, the propriety of the accounts between the mortgagor and the mortgagee, the liability of the first ranking mortgagee for wasting assets of the chargor company, and the validity and enforceability of the second ranking mortgage held by Nom De Plume. Specifically, the court had to determine whether Nom De Plume could contest the actions of Fingal Developments as the first ranking mortgagee and whether the latter had recovered amounts in excess of what was due under its charge. Additionally, the court needed to decide whether the first ranking mortgagee was liable to the second ranking mortgagee for wasting the assets of the chargor company and whether the second ranking mortgage held by Nom De Plume was valid and enforceable.

The court found that Nom De Plume did not have standing to challenge the actions of Fingal Developments as the first ranking mortgagee. It determined that Fingal Developments had not recovered any amounts in excess of what was due under its charge. The court also concluded that the first ranking mortgagee was not liable to the second ranking mortgagee for wasting assets of the chargor company as such assets would not have been available to other creditors. Finally, the court held that the second ranking mortgage held by Nom De Plume was valid and enforceable.

As a result of this decision, the court dismissed Nom De Plume's claims and upheld the validity and enforceability of the second ranking mortgage. The court's ruling affirmed the priority of the first ranking mortgage and the rights of the first ranking mortgagee in managing and recovering from the mortgaged property.

Orders