Liberty Funding Pty Ltd v Steele-Smith - [2004] NSWSC 1100

CITATION: Liberty Funding Pty Limited v Steele-Smith [2004] NSWSC 1100

HEARING DATE(S): 16 November, 2004

JUDGMENT DATE:
17 November 2004

JURISDICTION:
Equity Division

JUDGMENT OF: Palmer J

DECISION: Declarations as sought by Plaintiff; otherwise Summons dismissed.

CATCHWORDS: MORTGAGES - DISCHARGE - Whether mortgagee's costs of defending suit to set aside mortgage were a contingent liability of the mortgagor secured by the mortgage - whether mortgagor obliged to provide security for contingent liability in order to obtain discharge.

CASES CITED: Bank of New South Wales v O'Connor (1899) 14 App Cas 273
Estoril Investments Pty Ltd v Westpac Banking Corporation (1993) 6 BPR 13,146
Overton Investments Pty Ltd v Cuzeno RVM Pty Ltd [2003] NSWCA 27
Perpetual Trustees Australia Ltd v Barker [2004] SASC 58
Project Research Pty Ltd v Permanent Trustee of Australia Ltd (1990) 5 BPR 11,225
Rudd & Son Ltd, Re (1986) 2 BCC 98,955

PARTIES :
Liberty Funding Pty Limited - Plaintiff
Doreen Steele-Smith - Defendant

FILE NUMBER(S): SC 6151/04

COUNSEL: R.C. Beasley - Plaintiff
Trevor Steele (representing Defendant under Power of Attorney) - Defendant

SOLICITORS: Dibbs Barker Gosling - Plaintiff
Trevor Steele (representing Defendant under Power of Attorney) - Defendant

1 The Plaintiff (“Liberty”) is the mortgagee of a property owned by the Defendant (“Mrs Steele-Smith”) known as 9 Seaspray Close, Caves Beach in New South Wales, under a Registered Mortgage dated 8 July 2002. 2 In proceedings number 4778/04 commenced on 30 August 2004 Mrs Steele-Smith seeks orders setting aside the mortgage on the ground that Liberty, by its agent or employee, procured the grant of the mortgage by taking unconscientious advantage of her inability, through infirmity and age, to protect her own interests. In those proceedings Mrs Steele-Smith is represented by her son, Mr T. Steele, who acts under a Power of Attorney. Mr Steele has appeared in person in those proceedings and in the present proceedings. 3 Proceedings 4778/04 have not yet come to trial, although it is hoped that they may be set down for hearing early next year. When the proceedings were before me yesterday morning for directions the parties raised an ancillary but pressing problem. 4 Mrs Steele-Smith is, as Mr Steele concedes, in default in paying the interest due under the mortgage for the months of September and October 2004. By Notice dated 12 October 2004 Liberty informed Mrs Steele-Smith that unless she remedied the default within a specified period it would exercise its rights under the mortgage. 5 Mrs Steele-Smith then decided to sell the property. She has entered into a contract for sale at a price of $520,000. Settlement of the sale was to take place on 9 November 2004. However, a dispute arose between Liberty and Mrs Steele-Smith as to the terms upon which Mrs Steele-Smith is entitled to have a discharge of the mortgage delivered upon settlement of the sale. 6 There is no dispute as to the amount of principal and interest outstanding under the mortgage. However, by letter dated 3 November…

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: [2004] NSWSC 1100
Decision Date: 17 November 2004

CaseChat Overview and Summary

Liberty Funding, the mortgagee, sued Steele-Smith, the mortgagor, for discharge of a mortgage over Steele-Smith's property. The dispute centred on whether Steele-Smith was obligated to provide security for Liberty Funding's costs in defending a prior suit to set aside the mortgage, which were deemed a contingent liability of Steele-Smith. The matter was heard in the Supreme Court of New South Wales. The primary legal issue before the court was whether the mortgagor was required to secure the contingent liability of the mortgagee's costs in defending a suit to set aside the mortgage in order to obtain a discharge of the mortgage. The court had to determine if such costs were a contingent liability of the mortgagor and if so, whether the mortgagor was obliged to provide security for these costs.

The court held that the mortgagor was not required to provide security for the contingent liability of the mortgagee's costs in defending a suit to set aside the mortgage. The court found that the costs were not a contingent liability of the mortgagor, as they were not a liability that arose solely from the occurrence of an uncertain event. Instead, the court determined that the costs were a direct consequence of the mortgagee's actions in pursuing the suit to set aside the mortgage. As such, the court ruled that the mortgagor was not obliged to provide security for these costs in order to obtain a discharge of the mortgage.

The court's decision clarified the obligations of mortgagors and mortgagees in relation to the discharge of mortgages and the provision of security for contingent liabilities. The court held that the mortgagor was not required to provide security for the contingent liability of the mortgagee's costs in defending a suit to set aside the mortgage. The court's decision provided clarity in this area of law and ensured that the obligations of mortgagors and mortgagees were properly understood and applied in future cases. The court ordered that Steele-Smith was not required to provide security for Liberty Funding's costs in defending the prior suit to set aside the mortgage in order to obtain a discharge of the mortgage.

Orders