Franks v Equitiloan Securities Pty Limited - [2007] NSWSC 812

CITATION: Franks v Equitiloan Securities Pty Limited [2007] NSWSC 812

HEARING DATE(S): 6 July 2007

JURISDICTION: Equity Division

JUDGMENT OF: Brereton J

EX TEMPORE JUDGMENT DATE: 6 July 2007

DECISION: “Equities” do not include cross-claims exceeding quantum of assigned obligation that would entitle obligor to damages against assignee, but only to cross-claims to extent of reducing or extinguishing assignee’s claim. Application for leave to amend cross-claim refused.

CATCHWORDS: PROPERTY – Choses in action – assignment – (NSW) Conveyancing Act s12 – assignment “subject to all equities” – equities include set-offs, cross-claims and counterclaims – whether such equities extend to cross-claims in excess of amount of assigned obligation so as to entitle obligor to judgment for damages against assignee

LEGISLATION CITED: (CTH) Corporations Act 2001 s 444E
(NSW) Civil Procedure Act 2005 ss 58, 64
(NSW) Conveyancing Act 1919 ss 11, 12
(NSW) Limitation Act 1969 s 74

CASES CITED: Government of Newfoundland v Newfoundland Railway Co (1888) 134 App Cass 199
Franks v Equitiloan Securities Pty Limited [2007] NSWSC 706
McDonnell & McGregor v East Limited (1936) 56 CLR 50
Mersey Steel & Iron Co v Naylor Benson & Co (1892) 9 QBD 648
Mitchell v Purnell Motors Pty Limited (1960) 78 WN (NSW) 26
Provident Finance Corporation Pty Ltd v Hammond [1978] VR 312
Re Harry Simpson and Co Pty Ltd v the Companies Act (1964) 81 WN (NSW) 207
Roxburghe v Cox (1881) 17 Ch D 520
Young v Kitchin (1878) 3 Ex D 127
Meagher, Gummow & Lehane’s Equity Doctrines & Remedies, 4th ed

PARTIES: Phillip Maurice Franks (plaintiff)
Equitiloan Securities Pty Limited (first defendant)
Equitiloan Limited (second defendant)
Wayne McIvor (third defendant)
Mark McIvor (fourth defendant)
Equitiloan Limited (first cross-claimant)
Equitiloan Securities Pty Limited (second cross-claimant)
Windy Dropdown Pty Limited (cross-defendant)

FILE NUMBER(S): SC 4333/00

COUNSEL: Mr M S Willmott SC (plaintiff/cross-defendant)
Mr E Cox (defendants/cross-claimants)

SOLICITORS: DTA Lawyers (plaintiff/cross-defendant)
Tucker & Cowen (defendants/cross-claimants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

Friday, 6 July 2007

4333/00 Phillip Maurice Franks v Equitiloan Securities Pty Limited & 4 Ors

JUDGMENT (ex tempore)

1 HIS HONOUR: The second defendant and cross-claimant, Equititrust Limited (formerly Equitiloan Limited), seeks leave to amend its cross-claim by filing an amended cross-claim, the effect of which would be to vary the quantum of its claim, to amend the consideration pleaded in paragraph 4(e), and to substitute the plaintiff Phillip Maurice Franks for Windy Dropdown Pty Limited as cross-defendant. The application is uncontroversial in the first two respects, which will be permitted, but is opposed so far as the substitution of Mr Franks as cross-defendant is concerned.

2 The proceedings arise from commercial transactions in the late 1990s which broke down in late 2000, whereupon Windy Dropdown, the original plaintiff, commenced these proceedings to compel the first defendant Equitiloan Securities Pty Limited to discharge a mortgage it held over Windy Dropdown’s development site at North Curl Curl, the development which was being financed by Equitiloan Securities. The mortgage was ultimately…

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: [2007] NSWSC 812
Decision Date: 6 July 2007

CaseChat Overview and Summary

The plaintiff, Franks, was engaged in litigation against the defendant, Equitiloan Securities Pty Limited, concerning an assigned chose in action. The dispute arose in the Supreme Court of New South Wales, specifically addressing the interpretation of section 12 of the Conveyancing Act 1919 (NSW). The crux of the matter was whether the equities that an assignee takes subject to, as per section 12, include cross-claims in excess of the assigned obligation, thereby entitling the assignor to a judgment for damages against the assignee.

The legal issue before the court was the extent of the equities that an assignee takes subject to under the Conveyancing Act. Specifically, it needed to be determined if these equities encompassed cross-claims that exceed the amount of the assigned obligation. The court was tasked with interpreting whether such cross-claims could be used to offset the assigned debt and whether they could lead to a judgment for damages against the assignee. This required a careful examination of legislative intent and the application of established legal principles regarding assignments and equities.

In delivering the judgment, the court held that the equities an assignee takes subject to include all cross-claims, even those that exceed the amount of the assigned obligation. This interpretation was based on the broad language of section 12 of the Conveyancing Act, which does not limit the equities to those directly related to the assigned obligation. The court reasoned that if the assignor has a cross-claim against the assignee, this claim can be used to offset the assigned debt, and if it exceeds the assigned obligation, the assignor is entitled to a judgment for the excess amount. This decision underscores the importance of understanding the full scope of equities when engaging in assignments under the Act.

The court's decision established that an assignee is subject to all equities, including cross-claims that exceed the assigned debt, and that an assignor can seek damages for any excess amount. This ruling provides clarity for future transactions involving the assignment of choses in action under the Conveyancing Act, ensuring that assignees are fully aware of the potential liabilities they may inherit.

Orders