Re: Application of Ellis and Lucey

[2020] NSWSC 567

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Re: Application of Ellis and Lucey [2020] NSWSC 567
Hearing dates:	21 April 2020, 12 May & 15 May 2020
Date of orders:	15 May 2020
Decision date:	15 May 2020
Jurisdiction:	Equity - Duty List
Before:	Slattery J
Decision:	Orders made, permitting $75,000 of the funds in Court to be paid out to the first and second applicants. Directions made for the amendment of the first and second applicants’ motion for a former registered proprietor of the property to be added as a third applicant and seek payment out of the balance of the funds in Court to her. The Court notes that the applicants do not seek any interest on the funds in Court.
Catchwords:	CIVIL PROCEDURE – payment out of court – a fund, being the proceeds of sale of certain real property is paid into Court – claim made against the funds where a property that was held by tenants in common is auctioned by a mortgagee in possession – where the first and second applicants for the funds had paid $75,000 directly to the vendor as a deposit for a half-share in the real property – where the whereabouts of the tenant in common who defaulted on the mortgage over the real property is unknown. EQUITY –Trusts and trustees — Bare trusts - Trustee Act 1925, s 95 – payment into Court – application to pay funds out of Court under Uniform Civil Procedure Rules 2005, r 55.11 – bank exercises its mortgagee’s power of sale of a property and after deduction of the first mortgage amount pays the balance of the proceeds of sale into Court – the registered proprietors of the property have not applied for the payment out-of-court – two applicants for payment of $75,000 out-of-court claim this sum is a deposit on a failed contract to purchase the subject property – one of the registered proprietors agrees with the applicants’ claim – the other cannot be found – whether the monies should be paid out of Court – no other evidence of other claimants to the funds in Court.
Legislation Cited:	Trustee Act 1925, s 95 Uniform Civil Procedure Rules 2005, r 55.11
Cases Cited:	Commonwealth Bank of Australia v The Estate of the Late Mahmoud Slieman [2010] NSWSC 661 Hewett v Court (1983) 149 CLR 639 Re La Trobe Capital [2009] NSWSC 1118 Re Salomons [1920] 1 Ch 290 Westpac Banking Corporation v Morris [2014] NSWSC 332 Whitbread & Co Ltd v Watt [1902] 1 Ch 835
Category:	Procedural rulings
Parties:	First applicant: Jeffrey Norm Ellis Second applicant: Craig Stuart Lucey Third applicant: Penelope Champion
Representation:	First applicant: Jeffrey Norm Ellis in person Second applicant: Craig Stuart Lucey in person Third applicant: Penelope Champion in person
File Number(s):	2018/00335070
Publication restriction:	No

Judgment

1. In November 2018, the Commonwealth Bank of Australia (“CBA”) paid into Court the sum of $174,249.93 being the net proceeds of the mortgagee sale of a property in Rampion Hills Road, Carrick New South Wales (“the Carrick property”) which is in the Goulburn Mulwaree Council Area. The monies were paid into Court pursuant to Trustee Act 1925, s 95, which reflects an ancient jurisdiction available to trustees to pay the Court trust monies where there is a dispute about who is the correct beneficiary: Re Salomons [1920] 1 Ch 290. Upon payment into Court, orders were made that the funds were not to be disbursed without further order of the Court.

2. By motion filed 24 March 2020, Mr Jeffrey Ellis and Mr Craig Lucey have applied for payment out of court from the total funds in Court of the sum of $75,000 to which they say they are entitled as to $37,500 each. They claim that this sum represents the deposit upon a contract for sale which they made with the registered proprietors of the Carrick property, Ms Penelope Champion and Mr David Kersten, before the Carrick property was sold by the CBA exercise of its mortgagee’s power of sale.

3. Uniform Civil Procedure Rules 2005 (“UCPR”), r 55.11 provides that money paid into Court may only be paid out of court pursuant to further directions of the Court and that those directions should be sought by Notice of Motion in the proceedings in which the funds were paid into Court. Mr Ellis and Mr Lucey have complied with the requirement for the filing of a motion, and have filed in support an affidavit of 18 August 2019.

4. What must be established before the Court will make a direction paying money out of court are well established. An applicant must first establish that the applicant is entitled to the funds paid into Court or a part of them; secondly whether there are other persons who may be entitled to the funds in Court; and thirdly, whether notice has been given to any other person who may be entitled to make an application to the Court for the funds: Re La Trobe Capital [2009] NSWSC 1118; Commonwealth Bank of Australia v The Estate of the Late Mahmoud Slieman [2010] NSWSC 661 and Westpac Banking Corporation v Morris [2014] NSWSC 332.

5. This matter came into the Duty List on 21 April 2020. Mr Ellis and Mr Lucey appeared in person.

6. The Court has decided that the monies can be paid out of Court to Mr Ellis and Mr Lucey as they request, but the factual and legal basis for this requires some explanation.

Mr Ellis, Mr Lucey and the Registered Proprietors of the Carrick Property

7. This application by Mr Ellis and Mr Lucey arises out of a family favour that they did for the registered proprietors of the property, Ms Champion and Mr Kersten in 2015. As earlier indicated, before it was sold by the CBA the Carrick property was held by Ms Champion and Mr David Kersten as registered proprietors. The applicant, Mr Ellis, is Mr Kersten's cousin and Ms Champion is Mr David Kersten's sister in law. She was once married to Mr David Kersten’s brother, Mr Richard Kersten.

8. Mr David Kersten and Ms Champion purchased the Carrick property together in 2012 but by early 2015, Ms Champion decided that she wanted to sell the property as she was having financial difficulties. Mr David Kersten had defaulted on the mortgage to the CBA, and he was not in a position to buy out Ms Champion. But Mr Ellis and Mr Lucey commenced negotiations to acquire Ms Champion’s interests in the property. Ms Champion agreed.

9. Ultimately, the arrangement was varied so that Mr Ellis, on behalf of himself and Mr Lucey paid $75,000 as a deposit on the property with a view to its purchase by both of them from Mr David Kersten and Ms Champion. Due to various delays in coordinating this transaction, Mr Ellis decided to pay $75,000 from his bank account directly to Ms Champion, in part performance of Mr Ellis’ and Mr Lucey’s promise to acquire the property for $150,000 each.

10. The Court is satisfied by the records in evidence that Mr Ellis did pay the $75,000 to Ms Champion as he alleges, by six payments of $10,000 and one payment of $5,000 between 21 July 2015 and 25 August 2015. The monies were paid out of an account operated by Mr Ellis and his wife Mrs Brenda Ellis.

11. Conveyancers were engaged to acquire the property with a view to a settlement on 14 June 2016. The Court does not have the actual Contract for Sale of the property. But the indirect evidence of certificates of title, retainers of the conveyancers and the settlement adjustment sheet strongly indicates that the Contract for Sale was in the form in which Mr Ellis and Mr Lucey say that it was and that they were its joint purchasers from Ms Champion and Mr David Kersten.

12. But the sale did not proceed. Mr David Kersten, who had for many years been living with Mr Ellis, moved out of the house and became uncontactable. He was not in a position to sign any documentation as vendor. Ms Champion could not find him, nor could Mr Ellis or Mr Lucey. Not only that, he stopped paying his share of the mortgage. The CBA took possession of the property. In exercise of the mortgagee’s power of sale, the property was sold. At the time of sale, Mr Ellis and Mr Lucey had a caveat on the title to the Carrick property claiming the $75,000 under a purchaser’s equitable lien. The money was paid into Court because the CBA could not contact Mr David Kersten and could not resolve issues of entitlement between these parties. The sum paid was $174,149.93, being net proceeds of $185,838.38 less mortgagee’s legal and other expenses of $11,688.45.

13. The correct construction of these arrangements is that Mr Ellis paid the deposit on behalf of himself and Mr Lucey but they each agree that the deposit was on behalf of both of them and that Mr Lucey arranged to fund Mr Ellis for Mr Lucey's half share of the deposit.

14. When the matter came before the Court in the duty list on 21 April 2020 the applicants’ evidence was deficient. The Court outlined the nature of the evidence that it expected to see before it was prepared to make an order under UCPR, r 55.11. That hearing was conducted in a virtual court room on Tuesday 12 May, and Friday, 15 May 2020.

Authorising Payment Out of Court

15. Nothing on the title of the property at the time the CBA sold it indicates that there are any claimants to the proceeds of sale other than the registered proprietors and the caveators, Mr Lucey and Mr Ellis. And the circumstances known to the Court and to the CBA, as deposed in an affidavit, sworn on behalf of the CBA do not indicate that any other claimants are likely to exist.

16. But the registered proprietors, Mr David Kersten and Ms Champion are prima facie entitled to the funds in Court and it is as against them that Mr Ellis and Mr Lucey must make their claim. Mr David Kersten after reasonable enquiries cannot be found. And Ms Champion consents to the orders that are sought. She appeared on 15 May and confirms the facts as described by Mr Lucey and Mr Ellis. The Court will deal with the position of Ms Champion and Mr David Kersten later in a separate judgment.

17. Mr Ellis has given extensive evidence about his difficulties in contacting Mr David Kersten. Mr Ellis described his inability to contact Mr David Kersten despite many attempts to serve process and to find him. But a close blood relation to Mr Kersten, Mr Michael Kersten, has provided a Statutory Declaration to the Court in which he declares his brother to be "uncontactable" and someone who has not wanted to be contacted for the last seven or eight years, much to the disappointment of his brother and other family members. Mr Michael Kersten says of his brother, "David wants nothing to do with his family and has avoided all contact be it personally or by phone. He has no fixed address". The Court is satisfied that all reasonable attempts to contact Mr David Kersten have been made by Mr Ellis and Mr Lucey and have been unsuccessful.

18. Mr Ellis and Mr Lucey prima facie have an equitable lien in respect of the deposit and have priority to the extent of the land to the proceeds of sale. The applicable law in relation to purchaser’s liens may be shortly stated. Where a purchaser has paid money prior to completion of a contract for the sale of land by way of deposit or part payment of the purchase price the purchaser has an equitable lien over the land co-extensive with the amount paid that is enforceable by sale under order of the Court in the event of the contract “going off for some reason other than his the purchaser’s default”: Whitbread & Co Ltd v Watt [1902] 1 Ch 835. The purchaser’s lien is available to a purchaser whether or not the contract is specifically enforceable: Hewett v Court (1983) 149 CLR 639; [1983] HCA 7.

19. In this case, it is apparent on the evidence that the contract did not proceed because of the continuing default of Mr David Kersten, one of the vendors, due to his inability to be located and his failure to pay mortgage payments to the CBA. When the Carrick property was acquired Ms Champion paid her half share of the purchase up front and Mr David Kersten was primarily responsible for the mortgage payments to the CBA. Mr Ellis and Mr Lucey prima facie have an equitable lien in respect of the deposit and have priority to the extent of the land to the proceeds of sale.

20. The Court will accordingly order the payment of the $75,000 out of Court. It should be noted that Mr Ellis and Mr Lucey said that given the family nature of these arrangements that they did not seek interest in addition to the $75,000, a gesture which indicates the genuineness of their application and the truly family nature of these arrangements.

21. But once these monies are paid out of Court in accordance with the Court’s order, there will still be an amount of approximately $100,000 in Court to which Ms Champion and Mr David Kersten are prima facie entitled. To facilitate Ms Champion pursuing her claim for the payment of this money out of Court, the Court will permit the amendment of Mr Ellis and Mr Lucey's motion to join her as a co-applicant, a course to which they consent. She will be required to file any evidence in support of her application which the Court will then hear and determine. She should give a short account of her dealings with Mr David Kersten and her own attempts to find him.

Conclusion and Orders

22. Accordingly, the Court makes the following orders, notations and directions:

Upon the Notice of Motion filed on 24 March 2020 (“the Motion”):

1. Order from the funds paid into Court in these proceedings the sum of $37,500 be paid out to Jeffrey Norm Ellis of 7 Dawes Ave, Lindon NSW 2778.

2. Order from the funds paid into Court in these proceedings the sum of $37,500 be paid out to Craig Stuart Lucey of 3 Jacinta Place, Picton NSW 2571.

3. Note that Penelope Champion seeks leave to be joined as a co-applicant on the Motion and that Mr Ellis and Mr Lucey consent for her joinder as co-applicant.

4. Order that the Motion be amended to join Penelope Champion as the Third Applicant on the Motion; and that the Motion be amended by adding prayer 3, “that the balance of the funds in Court be paid out to the Third Applicant”.

5. Direct that the Third Applicant, Penelope Champion, file and serve an Amended Notice of Motion with the Court by Friday, 29 May 2020.

6. Direct that the Third Applicant file any evidence in support of the Motion by Friday 12 June 2020.

7. The First and Second Applicants are at liberty to approach the Registry with their necessary bank and identity details to arrange the payment of funds out-of-court to them.

8. Further note that the payment of the sum of $37,500 to each of the First and Second Applicants is exclusive of interest and that neither the First nor Second Applicant make any claim for interest from the fund.

9. Adjourn these proceedings before me at 9.30am on Friday, 3 July 2020 for further directions.

10. The Court notes that the email addresses of the applicants are:

1. First Applicant:      [personal email address redacted];

2. Second Applicant:      [personal email address redacted];

3. Third Applicant:      [personal email address redacted].

11. These orders may be taken out forthwith.

**********

Amendments

21 October 2021 - Order (10) - Redaction

Decision last updated: 21 October 2021