Marcel Esber v Kimberley Securities Limited - [2009] NSWSC 1422

CITATION: Marcel Esber v Kimberley Securities Limited [2009] NSWSC 1422
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 3 & 7 December 2009

JUDGMENT DATE :
16 December 2009

JUDGMENT OF: Hammerschlag J

DECISION: Judgment for the first and third plaintiffs against the second defendant [see paragraphs 63-64 of the judgment]

CATCHWORDS: REAL PROPERTY – Real Property Act 1900 (NSW), s 58(3)– construction – whether reference to subsequent mortgages is restricted to subsequent registered mortgages – whether “in payment of subsequent mortgages” means in payment of moneys actually owing – EQUITY – nature of obligations of mortgagee holding a surplus after property sold –second mortgagee held surplus after mortgaged property was sold – unregistered third mortgagee claimed entitlement to surplus but in fact was owed nothing – mortgagors too claimed entitlement to surplus – second mortgagee paid surplus to third mortgagee under indemnity – held payment was not in payment of a subsequent mortgage and third mortgagee had no equitable interest in the surplus – mortgagors entitled to equitable compensation from the second mortgagee

LEGISLATION CITED: Real Property Act 1900 (NSW)
Duties Act 1997 (NSW)
Transfer of Land Act 1954 (Vic)
Property Law Act 1974 – 1976
Conveyancing Act 1919 (NSW)

CATEGORY: Principal judgment

CASES CITED: Re S & D International Pty Ltd (in liq) [2009] VSC 225
Ex parte Australian Co-operative Development Society Limited (In liquidation) [1978] Qd.R. 395
Avco Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679
Fraser v Australian Securities & Investment Commission, In the Matter of Lanepoint Enterprises Pty Ltd [2007] FCAFC 85
Chan v Cresdon Pty Ltd (1989) 168 CLR 242
Barry v Heider (1914) 19 CLR 197
Australian Alliance Assurance Co Ltd v Attorney General (Qld) [1916] St R Qd 135
Director of Public Prosecutions v Turner [1974] AC 357
Re Murrell; Ex parte Official Trustee in Bankruptcy (1984) 57 ALR 85
Keech v Sandford (1926) Sel Cas t King 61
Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134
Boardman v Phipps [1967] 2 AC 46
Maguire v Makaronis (1996) 188 CLR 449
Adams v Bank of New South Wales [1984] 1 NSWLR 285
Bofinger v Kingsway Group Limited [2009] HCA 44
Charles v Jones (1887) 35 Ch D 544

TEXTS CITED: C Croft & J Johannsson, The Mortgagee’s Power of Sale, 2nd ed (2004)
Peter Butt, Land Law, 5th ed (2006) at [18174]
CCH, New South Wales Conveyancing Law and Practice, vol 2
R Meagher, D Heydon, M Leeming, Meagher, Gummow and Lehane’s Equity Doctrines and Remedies, 4th ed (2002)

PARTIES: Marcel Esber - First Plaintiff
Joseph Esber - Second Plaintiff
Casanda Pty Limited - Third Plaintiff
Kimberley Securities Limited - First Defendant
Residential Housing Corporation Pty Ltd - Second Defendant

FILE NUMBER(S): SC 50110/2006

COUNSEL: T.G.R. Parker SC with S. Fendekian [Plaintiffs]
J.A. Levingston with L. Innes [Second Defendants]

SOLICITORS: Sachs Gerace Lawyers [Plaintiffs]
Bolzan & Dimitri [Second Defendants]

- 1 -

IN THE SUPREME…

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 1422
Decision Date: 16 December 2009

CaseChat Overview and Summary

In this case, Marcel Esber sought to determine the correct allocation of surplus funds after the sale of a mortgaged property, where multiple mortgages existed. The dispute involved Esber, the original mortgagor, and Kimberley Securities Limited, the second mortgagee. The case was heard in the Supreme Court of New South Wales, with the focus on statutory interpretation and equitable principles.

The primary legal issue was whether the reference to subsequent mortgages in the Real Property Act 1900 (NSW) section 58(3) was limited to registered mortgages, and whether the phrase "in payment of subsequent mortgages" implied that the payment must be made towards moneys that were actually owed. The court was also required to consider the equitable obligations of a mortgagee holding a surplus after the sale of the mortgaged property. A further issue was whether an unregistered third mortgagee, who claimed entitlement to the surplus, had any equitable interest, given they were not owed any money.

The court held that the term "subsequent mortgages" in section 58(3) of the Real Property Act 1900 (NSW) referred only to registered mortgages. The court reasoned that the phrase "in payment of subsequent mortgages" meant payment of moneys that were actually owing at the time. Consequently, the second mortgagee was not required to pay the surplus to the third mortgagee, as the third mortgagee had no entitlement to the surplus. The court determined that the second mortgagee's payment of the surplus to the third mortgagee under an indemnity did not constitute payment in respect of a subsequent mortgage, and therefore, the third mortgagee did not acquire an equitable interest in the surplus. The court concluded that the mortgagors were entitled to equitable compensation from the second mortgagee.

The final orders of the court provided that the second mortgagee was liable to compensate the mortgagors for the amount paid to the third mortgagee under the indemnity, and that the third mortgagee had no equitable interest in the surplus funds from the sale of the mortgaged property. The court's decision clarified the scope of the statutory provisions and the equitable obligations of mortgagees in similar situations.

Orders