Secure Loan Solutions Pty Ltd v Smith - [2016] VSC 794

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST

S CI 2016 02912

IN THE MATTER of an application for the payment of monies from funds in Court held by the Senior Master in Common Fund No 1 that were paid into Court pursuant to a power of sale under a mortgage or charge and the provisions of s 77(3) of the Transfer of Land Act 1958 (Vic) and s 69 of the Trustee Act 1958 (Vic)

BETWEEN:

SECURE LOAN SOLUTIONS PTY LTD (ACN 165 272 659)	Plaintiff
v
DERICK AUBREY SMITH	Defendant

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JUDGE:	Ierodiaconou AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	21 November 2016
DATE OF JUDGMENT:	16 December 2016
CASE MAY BE CITED AS:	Secure Loan Solutions Pty Ltd v Smith
MEDIUM NEUTRAL CITATION:	[2016] VSC 794 (First Revision 22 December 2016)

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FUNDS IN COURT – Surplus proceeds from sale of land by mortgagee paid into court –Application for payment out – Plaintiff second mortgagee – Application opposed by mortgagor – Transfer of Land Act1958, s 77(3)(d) – Trustee Act 1958, s 69 – Melbourne Property Group Pty Ltd v SC Australia Pty Ltd and Ors applied – Plaintiff failed to prove debt – Application refused – Defendant entitled to surplus funds.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M Ravech	Boris Pogoriller
For the Defendant	Mr J Gray, solicitor	Just Law

HER HONOUR:

Introduction

This judgment arises from an application for payment of funds out of Court. The funds were paid into Court as surplus funds from a mortgagee sale. The issue for determination is who should be paid out. The plaintiff is the second mortgagee and the defendant is the mortgagor.

The funds are held in Common Fund No.1, account 79754 (‘the Account’). As at 9 May 2016, the funds amounted to $40,543.73.

For the reasons below, the Court will make orders that the defendant be paid out the funds held in the Account.

Evidence

The following evidence was before the Court.

(a) affidavits of David Graer, director of the plaintiff, sworn 21 July 2016 (‘the first Graer affidavit’), and 26 October 2016 (‘the second Graer affidavit’);

(b) the affidavit of Boris Pogoriller, solicitor for the plaintiff, sworn 24 August 2016;

(c) the affidavit of the defendant affirmed 28 September 2016 (‘the defendant’s affidavit’); and

(d) the affidavit of William Wade affirmed 18 November 2016 (‘the Wade affidavit’).

The following factual background is discernible from the affidavit material filed.

On 10 June 2008, the defendant became the registered proprietor of 8 Dallas Court, Hallam in the State of Victoria, more particularly described in Certificate of Title Volume 10889 Folio 905 (‘the Property’).[1]
[1]Exhibit ‘DAG-3’ to the affidavit of David Graer, director of the plaintiff, sworn 21 July 2016 (‘the first Graer affidavit’).

On 18 January 2002, the defendant became the sole director of Independent Civil Contractors Pty Ltd (‘ICC’).[2] On 26 April 2003, the defendant became the…

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: [2016] VSC 794
Decision Date: 16 December 2016

CaseChat Overview and Summary

Secure Loan Solutions Pty Ltd, a second mortgagee, sought the payment of surplus funds held in court following the sale of mortgaged land. The mortgagor, Smith, opposed the application, claiming the funds should be returned to him. The dispute was heard in the Supreme Court of Victoria. The court had to determine whether the plaintiff could prove the existence of a debt entitling it to the surplus funds, and if not, whether the funds should be returned to the mortgagor in accordance with the Transfer of Land Act 1958 and the Trustee Act 1958.

The legal issue before the court was whether the plaintiff could substantiate the debt it claimed against the mortgagor. The court referred to the precedent set in Melbourne Property Group Pty Ltd v SC Australia Pty Ltd and Ors, which held that a plaintiff must prove the existence of a debt before being entitled to surplus funds from the sale of mortgaged land. The plaintiff argued that it was owed money under a loan agreement, but the court found that the plaintiff had not provided sufficient evidence to prove the existence of the debt. The court emphasised that the onus of proof lay with the plaintiff, and in this case, the plaintiff had failed to discharge that burden.

As the plaintiff could not prove the debt it claimed against the mortgagor, the court ruled in favour of the mortgagor, Smith. The court found that the surplus funds from the sale of the mortgaged land should be returned to Smith, in line with the statutory provisions and the established legal principles. The court considered the provisions of the Transfer of Land Act 1958, s 77(3)(d) and the Trustee Act 1958, s 69, which support the return of surplus funds to the mortgagor when the creditor cannot prove a debt. Accordingly, the application for payment out by the plaintiff was refused.

The court ordered that the surplus funds held in court be paid to the defendant, Smith. This decision highlights the importance of creditors providing clear and convincing evidence to substantiate their claims, especially in proceedings concerning the distribution of surplus funds from the sale of mortgaged land.

Orders