Marcucci Bros v Subert and Tomlinson
[2020] VSC 33
•10 February 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
GENERAL LIST
S ECI 2019 05236
IN THE MATTER of an application by the Plaintiff, Marcucci Bros Pty Ltd ACN 121 350 829 for orders for payment of residue of purchase money paid into Court by Mortgagee who exercised its power of sale under provisions so far as they are applicable under s 77 of the Transfer of Land Act 1958 and s 69 of the Trustee Act 1958. The plaintiff had Warrant of Seizure and Sale registration dealing number AS363407N recorded on title on 18 July 2019 as a process of execution under s 52 of the Transfer of Land Act 1958.
BETWEEN:
| MARCUCCI BROS PTY LTD (ACN 121 350 829) | Plaintiff |
| v | |
| JOSIP SUBERT and DELIA LOUISE TOMLINSON | Defendant |
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JUDGE: | Caporale JR |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 19 December 2019; 28 January 2020 |
DATE OF JUDGMENT: | 10 February 2020 |
CASE MAY BE CITED AS: | Marcucci Bros v Subert & Tomlinson |
MEDIUM NEUTRAL CITATION: | [2020] VSC 33 |
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APPLICATION FOR FUNDS IN COURT – Allocation of surplus funds paid into Court following mortgagee sale – House belonged to joint proprietors and debt to judgment creditor exceeds amounts held in Court – Re Commonwealth Bank of Australia [2009] NSWSC 81; Pepper Finance Corporation Limited v Maloney [2013] NSWSC 890 considered – Transfer of Land Act 1958; Trustee Act 1958; Supreme Court (General Civil Procedure) Rules 2015 applied – held lodging a writ as an ordinary unsecured creditor is insufficient – Need for judgment creditor to possess a beneficial interest in the fund – Money in control of the Court may be the subject of execution – Plaintiff entitled to levy execution on funds held in Court – Joint tenant with no judgment debt against her entitled to half of monies paid into Court.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Sanger | MacRae Lawyers |
| For the first named Defendant Mr Subert | No appearance | |
| For the second named Defendant Mr Tomlinson | In person (on 28 January 2020 only) |
JUDICIAL REGISTRAR:
Background
On 29 October 2015 the plaintiff obtained a judgment debt from the Magistrates’ Court of Victoria against Josip Subert. The order was subsequently registered in this Court and on 26 June 2019 the Court issued a Warrant of Seizure and Sale (Warrant). The Warrant directed that the Sheriff levy on the property of Mr Subert and recorded that his last known address, and at which it is believed the property of Mr Subert may be found, is 16 Old Warburton Highway, Seville East, Victoria (the Property).
The Warrant was lodged on the title of the Property as is required under s 52 of the Transfer of Land Act 1958 (the TL Act).
The Property was owned by Mr Subert and Delia Louise Tomlinson as joint proprietors.
As at 26 June 2019, the Commonwealth Bank of Australia (CBA) was in possession of the Property as mortgagee. The mortgagors were Mr Subert and Ms Tomlinson. On 23 July 2019 the Property was sold. To enable settlement of the Property to occur, CBA undertook to the plaintiff to pay at least one half of the full net surplus proceeds of sale into Court under the provisions so far as they are applicable of s 69 of the Trustee Act 1958.
Settlement of the Property occurred on 19 August 2019. For a short period, CBA held the surplus funds to enable efforts to be made to reach agreement with Mr Subert and/or Ms Tomlinson with respect to the surplus. No agreement was reached because, it would appear, no contact was made between the plaintiff and the mortgagors, despite the efforts of the plaintiff to do so.
Because no agreement was reached, the CBA paid the full net surplus proceeds of sale into Court on 12 September 2019. It did so under s 77 of the TL Act, which provides for the power of sale under a mortgage. Sub-section 77(3) provides that the purchase money received arising from the sale be applied in a certain order, with ss 77(3)(d) providing that any residue be paid to the ‘mortgagor or into the Supreme Court under the provisions so far as they are applicable of section sixty-nine of the Trustee Act 1958…’.
Sub-section 69(1) of the Trustee Act 1958 provides as follows:
Trustees or the majority of trustees having in their hands or under their control money or securities subject to a trust may pay the same into court; and the same shall, subject to the rules of court, be dealt with according to the orders of the Court.
The plaintiff’s application appears to have been made under rule 79.02 of the Supreme Court (General Civil Procedure) Rules 2015 (the Rules). Rule 79.02 provides that money paid into Court under an order of the Court, or under specified legislation named in the rule, cannot be paid out except by order of the Court. None of the preconditions for the operation of rule 79.02 are present in this matter. Therefore, I will treat the plaintiff’s application as an application for an order under s 69(1) of the Trustee Act 1958.
As at 20 November 2019, the outstanding judgment sum and interest was $138,667.56. The amount paid into Court is $120,353.30.
Both Mr Subert and Ms Tomlinson were given notice of the plaintiff’s application. Mr Subert did not appear at either of the hearing dates and did not file any material. Ms Tomlinson appeared at the hearing on 28 January 2020 but did not file any material.
Submissions
The plaintiff submitted that the Court should make an order that all of the money paid into Court be paid to the plaintiff. As I understood it, the plaintiff made that submission on the basis that as the surplus funds were held as joint proprietors (and therefore indivisible) the whole of the surplus funds should be paid to the plaintiff as a judgment creditor with a debt more than the amount of held funds.
A number of decisions were referred to in support of that submission. However, the plaintiff conceded that some of those decisions (being, in my view, the most relevant ones) did not support that submission. I will return to those decisions later on in these reasons.
Ms Tomlinson submitted that as she held the Property jointly with Mr Subert, and she was not a judgment debtor, half of the held funds should be paid to her.
A very similar situation presented itself in Re Commonwealth Bank of Australia[1], a decision of Young CJ and referred to in the plaintiff’s submissions. In that matter, BMW Australia Finance Limited (BMW) had judgment debts against two of the three joint tenants of a property and no claim against the third. BMW issued a writ of execution and the writ was recorded against the title. The CBA sold the property under its power as a mortgagee and paid the surplus, after satisfying its mortgage, into Court.
[1][2009] NSWSC 81 (‘Re Commonwealth Bank of Australia’).
The joint tenants were involved in a family dispute that ended up in the Federal Magistrates Court (now the Federal Circuit Court). In that dispute, the Court made orders by consent including an order that the proceeds of sale of the property were to be applied, amongst other things, to discharge BMW’s writs. Young CJ felt constrained by that order, seeing it as a direction that the whole of the monies should be paid first to BMW and then to another creditor and then to the mortgage on other property. However, his Honour was of the view that ‘were it not for orders consented in the Federal Magistrates Court I would have thought that BMW’s remedies are limited to obtaining two–thirds of the amount in Court from [the judgment debtors] and [the remaining joint debtor] is entitled to the other third’.[2] Importantly, Young CJ decided that money in the control of the Court may be the subject of execution.[3]
[2]Ibid [20].
[3]Ibid [19].
The plaintiff also referred to the decision of Hallen J in Pepper Finance Corporation Limited v Maloney.[4] That decision dealt with competing claims of surplus funds after the sale of a property held by proprietors as joint tenants. Although somewhat different from the factual scenario of the present matter, that decision is important, as it sets out what needs to be established by a claimant to funds in court, including the requirement that the claimant must prove that he or she is not merely an unsecured creditor against the person primarily entitled to the fund but is a person who has a beneficial interest in the very fund that has been paid into Court.[5]
[4][2013] NSWSC 890 (‘Pepper Finance Corporation Limited v Maloney’).
[5] Ibid [59].
Wright v Gibbons[6] was a decision that dealt with the severance of a joint tenancy. In discussing the interests of joint tenants, Dixon J said that for the purposes of alienation each joint tenant is conceived as entitled to dispose of an aliquot share and that ‘[e]xecution on a judgment for debt against one joint tenant bound his aliquot share and continued to do so in the hands of the survivor if the execution debtor afterwards died’.[7]
[6][1949] 78 CLR 313.
[7]Ibid 331.
Consideration
Given the almost identical factual background, I have decided to approach this matter in the same way that Young CJ did in Re Commonwealth Bank of Australia.
Firstly, the sale by the mortgagee has not destroyed the joint proprietorship and the surplus is held as joint tenants.[8]
[8]Re Commonwealth Bank of Australia (n 1), [13]–[14].
Secondly, the plaintiff gets no security over the funds held in Court simply because it lodged a writ against the title to the property. As Young CJ said, the lodging of such a writ ‘does not create any interest in land’ and ‘there is no charge over the land because of the recording of the writs’.[9] Those conclusions were based on s 105(1) of the Real Property Act 1900 (NSW). I could not see any provision in the TL Act that would make the position in Victoria any different to that in NSW and the plaintiff did not submit that any such interest in land had been created in favour of the plaintiff.
[9]Ibid [3], [9].
Therefore, the plaintiff, like BMW in Re Commonwealth Bank of Australia, is to be considered as an ordinary unsecured creditor of Mr Subert.
However, in observing that BMW was an unsecured creditor, Young CJ went on to say as follows:
The rule in England as set out on p 199 of Anderson on Execution (Butterworths, London, 1889) is that money in the control of the Court may be the subject of execution with the leave of the Court. This appears to be one of the things decided by the English Court of Appeal in Brereton v Edwards (1888) 21 QBD 488.
As Anderson makes clear, the process formerly involved some technicalities. However, nowadays, in the light of statutory strictures to minimise technicalities, the Court will rarely order execution. Indeed, the Court may even order that money be paid out of court to the person who is entitled to levy execution even though, strictly speaking, there should be a charging order and then a consequential order made.[10]
[10]Ibid [18]–[19].
Such a charging order could have been made on application under rule 73.11 of the Rules which provides as follows:
(1)Subject to Rule 15.09, for the purpose of securing the payment of a judgment debt, the Court, may, by order, impose a charge on the beneficial interest of the judgment debtor in any funds in court.
A charging order secures the judgement debt and protects the interests of the judgment creditor to the extent necessary to satisfy the judgment.[11]
[11]Galbally & O’Bryan v Easton [2016] NSWSC 77, [62].
However, Young CJ was of the view that such an order is unnecessary and the court in which the funds are held can order that the money be paid out to the person who is entitled to levy execution without any other preliminary orders.
The plaintiff is entitled to levy execution on the funds held in Court. I am of the view that it therefore has sufficient interest in the ‘very fund that has been paid into court’.[12]
[12]Pepper Finance Corporation Limited v Maloney (n 4), [59].
Thirdly, it is clear that if not for the order of the Federal Magistrates Court, Young CJ was of the view that the share of the third joint tenant who was not a judgment debtor could not be attached to the debt.[13] If not for the order of the Federal Magistrates Court, Young CJ would have ordered that one-third of the funds in Court be paid to the third joint tenant who was not a debtor. I am of the view that the position of Ms Tomlinson is the same as the position of the third joint tenant in Re Commonwealth Bank of Australia.
[13]Re Commonwealth Bank of Australia (n 1), [20]–[22].
Indeed, in this proceeding, the plaintiff accepted an undertaking from the CBA that it pay not the full amount of the surplus but only at least one half of the full net surplus proceeds of sale into Court.
In this proceeding there are no orders like the ones in Re Commonwealth Bank of Australia that constrained Young CJ from making the order that in his view was appropriate.
Fourthly, notice has properly been given to Mr Subert and Ms Tomlinson. The evidence does not establish that there are other possible claimants to the funds held in Court — however, there is no evidence that enquiries have been made to determine if there are any other possible claimants. However, one would have thought that any other possible claimants would have come out of ‘the woodwork’ by now. It would appear that Mr Subert and Ms Tomlinson have been the registered proprietors of the property for some time, information publicly available to any potential creditors. It is now over 18 months since the Property was sold. Given the amount of the debt owed to the plaintiff on a judgment debt made over 4 years ago, and given the conclusion I have reached in relation to the amount that should be paid to Ms Tomlinson, I do not feel that further notice of this application need be given.
Conclusion and orders
For the reasons set out above, I will make an order that of the monies paid into Court and any interest that has accrued, half of that total amount be paid to Ms Tomlinson and half be paid to the plaintiff.
I note that in both Re Commonwealth Bank of Australia and Pepper Finance Corporation Limited v Maloney the competing claimants were named as defendants/respondents to the application. In my view, both Mr Subert and Ms Tomlinson should be added as parties. I will make an order under rule 9.06(b) of the Rules adding both Mr Subert and Ms Tomlinson as parties. It will be recorded on the Court file that Mr Subert did not appear.
I will make the following orders:
(i) Under r 9.06(b) of the Supreme Court (General Civil Procedure) Rules 2015 Josip Subert and Delia Louise Tomlinson be added as parties to the proceeding.
(ii) The following sum be paid from Common Fund 1 and debited to Account No. 83791:
To the plaintiff Marcucci Bros Pty Ltd and Delia Louise Tomlinson, or their legal representatives, in equal shares, an amount equal to the balance of the said Account, but subject to the retention of a sum sufficient to cover any taxation liability.
(iii) Upon payment of a sum equivalent to the balance of the said Account, in accordance with the preceding paragraph, there also be paid to the plaintiff Marcucci Bros Pty Ltd and Delia Louise Tomlinson, or their legal representatives, in equal shares, from Common Fund No. 1 and debited to Account No. 10, an amount equivalent to interest accrued on the balance of Account No. 83791 from 12 September 2019 at the rate last fixed in respect of Common Fund No. 1.
I will hear the parties on the question of costs.
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