Finnie v Day

[2021] NSWSC 276

Supreme Court

New South Wales

Medium Neutral Citation:

Finnie v Day [2021] NSWSC 276

Hearing dates:

23 March 2021

Date of orders:

23 March 2021

Decision date:

24 March 2021

Jurisdiction:

Common Law

Before:

Payne JA

Decision:

See [21] and [30].

Catchwords:

LAND LAW – Torrens title – the register – correction of the register – where land transferred and caveat lodged pursuant to a fraudulent scheme – declaration of constructive trust – orders to remove caveat and restore title – Real Property Act 1900 (NSW), ss 74MA, 138

CIVIL PROCEDURE – settlement of dispute – satisfaction of Court to make proposed consent orders disposing of proceedings

Legislation Cited:

Real Property Act 1900 (NSW), s 74MA(3)

Category:

Principal judgment

Parties:

Scott Warner Finnie (Plaintiff; Third Cross-Defendant on First Cross-Claim)
Darren Keith Day (Defendant; Cross-Claimant on First Cross-Claim; Second Cross-Defendant on Second Cross-Claim)
Sydney Thomas Finnie (Second Cross-Defendant on First Cross-Claim; Third Cross-Defendant on Second Cross-Claim)
Spencer Lawyers (Fourth Cross-Defendant on First Cross-Claim)
Westpac Banking Corporation (Fifth Cross-Defendant on First Cross-Claim; Cross-Claimant on Second Cross-Claim)
Paul William Kay (First Cross-Defendant on First Cross-Claim; First Cross-Defendant on Second Cross-Claim)
Registrar General of NSW (Sixth Cross-Defendant on First Cross-Claim)
Pepper Finance Corporation Ltd (Fourth Cross-Defendant on Second Cross-Claim)

Representation:

Counsel:
J Kelly SC (Darren Keith Day)
D Hand (Spencer Lawyers)
S Docker (Westpac Banking Corporation)
Submitting Appearance (Paul William Kay)
Submitting Appearance (Registrar General of NSW)
Submitting Appearance (Pepper Finance Corporation Ltd)

Solicitors:
Financial Rights Legal Centre (Darren Keith Day)
Mullane & Lindsay (Spencer Lawyers)
Thomson Geer (Westpac Banking Corporation)

File Number(s):

2019/67340

Publication restriction:

Nil.

Judgment

1. On 23 March 2021, I was satisfied on the evidence before me that the orders set out at [21] and [30] below should be made and I made those orders. Given the history of this matter, I informed the active parties that I would provide brief reasons for making those orders shortly. These are those reasons.

2. These proceedings relate to a parcel of land at Wyee. Mr Paul Kay is the registered proprietor of the land. Mr Darren Day is the former registered proprietor of the land, although he still resides at the property. These proceedings arise out of an attempt by Mr Day to refinance his interest in the Wyee property in 2013, which led to Mr Kay becoming the registered proprietor of the land and Westpac Banking Corporation (Westpac) becoming the holder of a registered mortgage securing repayment of a sum it believed it had advanced to Mr Kay.

3. In April 2013, Mr Day was the registered proprietor of the land. He had borrowed money to purchase his interest in the property from Pepper Finance Corporation Ltd (Pepper Finance) and granted a mortgage to that company, which was registered on the title. Mr Day sought to refinance that borrowing.

4. In April 2013, for the purpose of seeking refinance, Mr Day retained Mr Sydney Finnie (also known as Mr Thomas James Clinton) to act as his finance broker. Mr Finnie/Clinton is not the holder of an Australian Financial Services Licence and had at that time, unknown to Mr Day, an extensive criminal record for fraud offences.

5. Mr Sydney Finnie/Clinton did not effect a refinance of the Pepper Finance borrowing but instead put in place a scheme by which the land was allegedly transferred by Mr Day to a Mr Paul Kay. Westpac was induced to lend a sum of money, purportedly to Mr Kay, which was used, in large part, to discharge the mortgage held by Pepper Finance. The remaining funds were paid to interests associated with Mr Finnie/Clinton. Westpac took a mortgage over the Wyee property, which was subsequently registered.

6. Mr Day continued to live at the Wyee property. The loan by Westpac to Mr Kay fell into arrears and Westpac began to take steps preparatory to enforcing its mortgage. Mr Kay says, and I accept, that he did not borrow money from Westpac, has no knowledge about any transfer of an interest in the Wyee property to him and that he has co-operated with Mr Day to restore his title to the property. Mr Kay filed a submitting appearance in the litigation.

7. On 27 June 2018, Mr Finnie/Clinton lodged a caveat on the register in relation to the Wyee property. The estate or interest claimed is said to be “Equitable interest. Caveat pursuant to Deed of Agreement dated 21^st May 2013 to secure funds to purchase property”. No evidence has been served or led before me by Mr Finnie/Clinton to prove either the alleged “Deed of Agreement” or its relationship, if any, to an interest in the land. In his affidavit of 17 March 2021, Mr Kay denies that he was ever a party to such a deed. In his statutory declaration of 27 June 2019, Mr Kay denies that he took part in any transaction concerning the property; in particular, he did not purchase the property or have anything to do with the property. I accept that evidence.

8. On 1 March 2019, Mr Scott Finnie, the son of Mr Finnie/Clinton, commenced proceedings in Gosford Local Court seeking possession of the Wyee land from Mr Day (the Claim). The proceedings were later transferred to this Court and an amended statement of claim filed on 27 September 2019. The nature of any interest allegedly claimed by Mr Scott Finnie or Mr Finnie/Clinton in the Wyee property was never satisfactorily explained. I am comfortably satisfied on the evidence before me that Mr Scott Finnie, Mr Finnie/Clinton and any entity associated with either of them has no interest whatever in the Wyee property.

9. On 23 October 2019, Mr Day brought a cross-claim (the First cross-claim). Mr Day sought (among other things) an order that the title be rectified so as to record Mr Day as the registered proprietor of the Wyee land. Mr Day pleaded that Mr Finnie/Clinton and Mr Scott Finnie had put in place a fraudulent scheme with the intention of cheating Mr Day out of his interest in the land by transferring ownership of the land to Mr Kay and obtaining a financial benefit for themselves. Mr Day also sought damages in negligence from Mr Spencer, the solicitor who acted for Mr Day in relation to the purported transaction.

10. On 11 December 2019, Westpac, the fifth cross-defendant in the First cross-claim, brought a cross-claim (the Second cross-claim). Westpac sought possession of the land. Westpac pleaded that on 31 July 2013, Westpac advanced Mr Kay a loan in the amount of $236,000 pursuant to a loan agreement entered into on 17 June 2013. On 31 July 2013, Mr Kay gave Westpac a mortgage which secured all monies owed. On 13 August 2013, Pepper Finance was repaid and a discharge of the Pepper Finance mortgage was registered. Mr Kay became the registered proprietor of the land. Westpac’s mortgage was registered on the title.

11. In August 2020, the Claim and the First and Second cross-claims were fixed for hearing between 23-26 March 2021. In February 2021 the hearing was allocated to me.

12. On 10 February 2021, the solicitors who had acted for the Finnie parties at the time the matter was fixed for hearing filed a notice of intention of ceasing to act. On 11 March 2021, those solicitors filed a notice of ceasing to act. Despite being given clear notice of the relevant dates, Mr Finnie/Clinton and Mr Scott Finnie did not appear at directions hearings before me on 16 February 2021 or 18 March 2021, although the solicitor who eventually filed a notice of ceasing to act appeared for them on 16 February 2021 and provided what limited assistance he could.

13. Mr Finnie/Clinton and Mr Scott Finnie did not appear at the hearing yesterday, which had been fixed last August at a time when they were legally represented. I am comfortably satisfied on all of the evidence that Mr Finnie/Clinton and Mr Scott Finnie were aware of the date of the hearing, the nature of the allegations made against them and the evidence that was to be led in support of those allegations. They nevertheless chose not to appear.

14. In this regard I note that Mr Sydney Finnie has served on his opponents, and purported to file, a notice of discontinuance about the Claim said to be in relation to “the whole of the proceedings”. The document purports to be filed on behalf of himself and Mr Scott Finnie. That document has not been filed with the court. It appears that Mr Sydney Finnie attempted to email the document to the court’s registry but used the incorrect email address.

15. By email dated 22 March 2021, Mr Kelly SC informed the Court that the active parties (not including Mr Finnie/Clinton and Mr Scott Finnie) had arrived at a settlement agreement. Each of the parties, including Mr Finnie/Clinton and Mr Scott Finnie, were copied into that communication. That same day, the Court wrote to the parties as follows:

“Dear parties

Tomorrow’s hearing in this matter has been triaged by the Chief Justice to be in person and to commence at 9:30am in court 9A for no more than 2 hours. His Honour is to be invited to make orders at 9:30am tomorrow morning disposing of all proceedings between the parties. Any party wishing to make submissions about any orders must appear either in person or via a legal representative at 9:30am tomorrow morning.”

16. As I have said, Mr Finnie/Clinton and Mr Scott Finnie failed to appear at the hearing, despite having received clear notice of the allegations against them, the evidence in support of those allegations and that their interests may be affected by the orders I would be asked to make.

17. At the hearing on 23 March 2021, the following affidavits were read:

1. Affidavit of Darren Keith Day sworn 21 June 2019, save for [10] which was not read;

2. Affidavit of Darren Keith Day sworn 11 May 2020;

3. Affidavit of Glenn Sievier sworn 25 June 2020;

4. Affidavit of Paul William Kay affirmed 17 March 2021;

5. Affidavit of Alexandra Marsden Kelly affirmed 19 March 2021;

6. Extracts from the affidavit of Zenvern Vern Loong Yap sworn 16 June 2020, being paragraphs [1]-[6], [40]-[41] (save for the words “signed by Mr Kay” in [40] and “was signed by Mr Kay” in [41]), [46], [48]-[52]; and

7. Affidavit of Pip Ashleigh Nagam sworn 19 March 2021.

18. A bundle of documents tendered on behalf of Mr Day and marked as “Exhibit A” comprised:

1. Statutory declaration of Paul William Kay made 27 June 2019;

2. Exhibit “DD-1” to the affidavit of Darren Keith Day sworn 5 November 2020;

3. A file note of Spencer Lawyers dated 30 May 2013 which appears in the court book at C209 and a document labelled “Effective Business Solutions” which appears in the court book at C210-211; and

4. Documents which appear in the court book at D774 and C676.

19. The following evidence was tendered on behalf of Westpac and marked as “Exhibit 1”:

1. A RAMS fixed rate home loan agreement which appears at C511-523 of the court book;

2. Registered mortgage AH929956A and memorandum AF645292H which appear at C566-575 of the court book;

3. Documents showing the advance and direction for the advance which appear at C584-588 of the court book;

4. The registered discharge of the Pepper Finance mortgage to mortgagor Darren Keith Day which appears at C688 of the court book;

5. The loan between Mr Day and Pepper Finance which appears at C698-718 of the court book;

6. The Pepper Finance mortgage which appears at C720-746 of the court book;

7. The loan account between Mr Day and Pepper Finance which appears at C748-776 of the court book; and

8. The Deed of Settlement between Westpac and Darren Keith Day.

20. It is unnecessary for the purposes of these reasons to describe the content of that evidence in any detail. Having considered the content of that evidence, which was uncontested, I accept it.

Consideration

21. Mr Day, Westpac and Mr Kay sought the following orders:

“The Court:

1.   Declares that Darren Keith Day is the beneficial owner of the land in Certificate of Title Folio Identifier 40/7539 being the land and improvements situate at and known as XXX Road, Wyee in the State of New South Wales (Land) free of any estate or interest in favour of Paul William Kay, Scott Warner Finnie and Sydney Thomas Finnie (also known as Thomas James Clinton).

2.   Declares that Paul William Kay holds the title to the Land upon a constructive trust for Darren Keith Day.

3.   Declares that Darren Keith Day's rights and interests in the Land are charged with his obligations to pay to Westpac Banking Corporation the amount of $312,000 in accordance with order 6 below and to give Westpac Banking Corporation a mortgage of the Land in registrable form incorporating memorandum AF645292H in accordance with order 7 below.

4.   Orders that caveat number AN454622 lodged by Thomas James Clinton (also known as Sydney Thomas Finnie) be withdrawn by 4pm on Wednesday 24 March 2021.

5.   Orders that the register of land titles maintained by the Registrar General for New South Wales be rectified so as to remove Paul William Kay as registered proprietor of the Land and record Darren Keith Day as the registered proprietor of the Land, but not so as to disturb or affect registered mortgage number AH929956.

6.   Orders that Darren Keith Day is to pay Westpac Banking Corporation the amount of $312,000 on or before 24 September 2021.

7.   Orders that Darren Keith Day is to forthwith give Westpac Banking Corporation a mortgage of the Land in registerable form incorporating memorandum AF645292H to secure the obligation on order 6 above.

8.   Orders that, upon the registration the mortgage referred to in order 6 above, Westpac Banking Corporation is to discharge registered mortgage number AH929956.

9.   Orders that the claims of Scott Warner Finnie and Sydney Thomas Finnie (also known as Thomas James Clinton) are dismissed.

10.   Orders that Scott Warner Finnie and Sydney Thomas Finnie (also known as Thomas James Clinton) pay the costs of Darren Keith Day of the proceedings.

11.   Orders that the first cross claim and the second cross claim are otherwise dismissed.

12.   Makes no other order as to costs with the intent that, as between Darren Keith Day, Paul William Kay and Westpac Banking Corporation, each party is to pay its or his own costs.

13.   Grants liberty to apply on 24 hours’ notice to the chambers of Payne JA for the working out or enforcement of these orders.”

22. I made those orders yesterday morning. My reasons for doing so may be expressed shortly.

23. As for orders 1-3, I was satisfied on the evidence before me that the Court should make the declarations about the relevant parties’ rights and interests in relation to the land. I am satisfied that the evidence establishes that Mr Day, Mr Kay and Westpac were victims of a fraudulent scheme, under which the identity of Mr Kay was used without his knowledge to borrow money from Westpac, pay out the existing mortgage to Pepper Finance and effect a transfer of the land to Mr Kay in order to obtain a financial benefit for the Messrs Finnie. Mr Day is entitled to declarations about his interest in the land. I am comfortably satisfied that Mr Kay, Mr Scott Finnie and Mr Finnie/Clinton have no interest whatever in the property. The most important evidence I took into account comprises:

1. the statutory declaration of Paul William Kay made on 27 June 2019;

2. the affidavits of Darren Keith Day sworn on 21 June 2019 and 11 May 2020;

3. exhibit “DD-1” to the affidavit of Darren Keith Day sworn 5 November 2020;

4. the affidavit of Glenn Sievier sworn 25 June 2020;

5. the file note of Spencer Lawyers dated 30 May 2013 and instructions from “Effective Business Solutions” dated 30 May 2013;

6. the title search showing Darren Keith Day as the registered proprietor of the land, subject to the mortgage to Pepper Finance; and

7. the historical title search for the land.

24. As for order 4, as I was satisfied that Mr Finnie/Clinton and Mr Scott Finnie have no interest in the Wyee land capable of protection by caveat, I have ordered Mr Finnie/Clinton to remove the caveat placed by him on the Wyee property by 4pm on 24 March 2021. Failing that removal, by operation of s 74MA(3) of the Real Property Act 1900 (NSW) a copy of my order may be lodged with the Registrar General. The caveat lodged by Mr Finnie/Clinton with registration number AN454622 will be removed by operation of law at that point.

25. As for order 5, I concluded that it has been demonstrated that Mr Day was entitled to be returned to registration as the proprietor of the Wyee property, subject to protecting Westpac’s interests by not disturbing or affecting the registered mortgage. The order is appropriate because it has the effect of restoring Mr Day’s title while at the same time recognising that the Westpac mortgage was registered without knowledge of any fraud or participation in any fraud on the part of Westpac.

26. I was satisfied that order 6 involved a genuine compromise between the relevant parties and that it was appropriate I should make it. Without rehearsing all of the arguments in the very helpful submissions filed before the hearing by the parties, it is significant that, even if he achieved complete success, Mr Kelly SC for Mr Day accepted that Westpac would be entitled to orders protecting its interests. The amount agreed in order 6 is less than what Westpac argued it was entitled to and more than what Mr Day accepted he must pay.

27. As for orders 7 and 8, it is obviously appropriate in light of the interests I have recognised in the Wyee property and the arrangement between Mr Day and Westpac effected by other orders they have agreed as part of the settlement that a new mortgage be executed and registered and Westpac’s existing mortgage discharged.

28. As for order 9, I was satisfied on the material before me that the claims of Mr Scott Finnie and Mr Sydney Finnie/Clinton should be dismissed, with prejudice. I do not accept that the Claim was ever validly discontinued. Yesterday was the day long fixed for hearing of the Finnies’ claims to some sort of interest in the Wyee property. Uncontested evidence was led demonstrating that they had no such interest. Mr Finnie/Clinton and Mr Scott Finnie chose not to appear and, as a result, no evidence was presented on their behalf of any interest. There has been an opportunity afforded for a hearing on the merits of the claim to an interest in the land on the part of Mr Finnie/Clinton and Mr Scott Finnie and their claims have been dismissed.

29. As for order 10, in the circumstances Mr Finnie/Clinton and Mr Scott Finnie should be ordered to pay Mr Day’s costs of the proceedings. I was also content to make orders 11, 12 and 13 which were essentially facultative.

30. Mr Day and Mr Spencer sought the following orders in relation the First cross-claim:

“In the proceedings against the fourth cross-defendant to the first cross-claim (Spencer Lawyers), by consent the Court orders:

A.   The proceedings against the fourth cross defendant be dismissed.

B.   No order as to costs.”

31. I was satisfied that I should make those orders sought by consent and accordingly I did so.

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Decision last updated: 24 March 2021