IMB Limited v Nallathambi - [2009] NSWSC 1387

CITATION: IMB Limited v Nallathambi & Anor [2009] NSWSC 1387
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 8-9 October & 8 December 2009

JURISDICTION: Equity

JUDGMENT OF: Slattery J at 1

EX TEMPORE JUDGMENT DATE: 8 December 2009

DECISION: Order the funds that were paid into court on or about 1 June 2009 and 3 July 2009 totalling the sum of $137,261.27 together with any interest accrued thereon be paid out of court to the applicant Booksan Pty Ltd.

CATCHWORDS: MORTGAGES - mortgages and charges generally - first mortgagee exercises power of sale - pays surplus proceeds into Court - second mortgagee applies for payment of surplus funds out of court - matters to be established - no competing claims - entitlement to funds made out - order for payment out made

LEGISLATION CITED: Real Property Act 1900 (NSW) s 58
Trustee Act 1925 (NSW) ss 95, 98

CATEGORY: Principal judgment

CASES CITED: AVCO Financial Services Limited v Commonwealth Bank of Australia (1989) 17 NSWLR 679

PARTIES: Plaintiff: IMB Limited
First Defendant: Pappathevar Nallathambi
Second Defendant: Parameswari Nallathambi
Applicant on the Motion: Booksan Pty Limited
First Respondent: Australian Securities and Investment Commission
Second Respondent: Perpetual Nominees Ltd
Third Respondent: Vertzayas Lawyers Pty Ltd formerly known as Hellas Income Tax Consulting Services Pty Ltd

FILE NUMBER(S): SC 3044/09

COUNSEL: Applicant: Mr A Chee

SOLICITORS: Applicant: Veritas Legal

- 11 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
DUTY LIST

SLATTERY J

TUESDAY 8 DECEMBER 2009

3044/09 IMB LIMITED v NALLATHAMBI & ANOR

JUDGMENT [Ex Tempore]

1 HIS HONOUR: -

Introduction

2 Until April this year Pappathevar Nallathambi and Parameswari Nallathambi were the registered proprietors of a property in Wentworth Street, Strathfield. They and their family company, PN Associates Pty Limited as trustee for the Thevar Trust, entered financial transactions that resulted in the creation of mortgages and caveatable interests over this Strathfield property. By late 2008 Mr and Mrs Nallathambi were substantially in default on their first mortgage to IMB Limited. IMB exercised its power of sale over the Strathfield property and sold it at auction on 7 March this year. The sale settled on 30 April and IMB collected the sale proceeds. After the deduction of IMB’s mortgage debt, sales expenses and the disbursements chargeable under the IMB mortgage, a surplus of $136,890.28 remained.

3 After the sale IMB corresponded with the second mortgagee, Booksan Pty Limited and several other caveators about their respective entitlements to the surplus. No agreement was reached among the parties who had a potential interest in the surplus. Section 58 (4) of the Real Property Act 1900 (NSW) requires IMB to account for the surplus to subsequent mortgagees and chargees and then to the registered proprietors. Under the general law, as trustee of the surplus, IMB paid the funds into court pursuant to s 95 Trustee Act 1925 (NSW). It did so as plaintiff by summons joining Mr…

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: [2009] NSWSC 1387
Decision Date: 8 December 2009

CaseChat Overview and Summary

IMB Limited, as the first mortgagee of a property, exercised its power of sale and subsequently paid the surplus proceeds into Court. Nallathambi, the second mortgagee, applied for payment of the surplus funds out of Court. The case was heard in the Federal Circuit Court of Australia, where the legal issues were the matters that had to be established by the second mortgagee to be entitled to the funds. Specifically, the court had to determine whether there were any competing claims to the surplus funds and whether Nallathambi was entitled to the funds.

The court found that there were no competing claims to the surplus funds, as the first mortgagee had already exercised its power of sale and paid the surplus into Court. The court also found that Nallathambi was entitled to the funds, as the second mortgagee had established its claim to the surplus funds. The court held that the second mortgagee's claim was not subject to any competing claims and that the funds were to be paid out to the second mortgagee. The court made an order for payment of the surplus funds to Nallathambi, the second mortgagee.

The court's decision was based on the principles of equity and the law of mortgages. The court found that the first mortgagee had acted within its rights in exercising its power of sale and paying the surplus proceeds into Court. The court also found that the second mortgagee had established its claim to the surplus funds and that there were no competing claims to the funds. The court held that the second mortgagee was entitled to the funds and made an order for payment of the surplus funds out of Court to the second mortgagee. This decision provides guidance on the matters that must be established by a second mortgagee to be entitled to surplus funds paid into Court by a first mortgagee.

Orders