Secure Loan Solutions v Smith (No 2) - [2017] VSC 217

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST

S CI 2016 02912

SECURE LOAN SOLUTIONS PTY LTD (ACN 165 272 659)	Appellant
v
DERICK AUBREY SMITH	Respondent

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JUDGE:	Bell J
WHERE HELD:	Melbourne
DATE OF HEARING:	6 April 2017
DATE OF JUDGMENT:	10 May 2017
CASE MAY BE CITED AS:	Secure Loan Solutions v Smith (No 2)
MEDIUM NEUTRAL CITATION:	[2017] VSC 217

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APPEAL – application by second mortgagee/guarantee for payment of funds out of court in part satisfaction of alleged debt owing as shortfall due under loan agreement – objection by mortgagor/guarantor otherwise entitled to residue – whether mortgagor/guarantor indebted to second mortgagee/guarantee as guarantor of defaulting borrower under agreement – order for payment of funds to mortgagor/guarantor by associate justice – whether in error – whether finding that second mortgagee/guarantee had failed to prove its debt involved error of law – whether onus lay on mortgagor/guarantor to prove discharge of debt – whether onus discharged – Supreme Court (General Civil Procedure) Rules 2015 (Vic) O 77, Transfer of Land Act 1958 (Vic) s 77(3(d).

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APPEARANCES:	Counsel	Solicitors
For the appellant	Mr M Ravech	Boris Pogoriller
For the respondent	Mr J Gray	Just Law

HIS HONOUR:

This is an appeal under O 77 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) against orders made by Ierodiaconou AsJ on 21 December 2016.

Such an appeal is conducted by way of a rehearing in which the appellant must demonstrate error on the part of the associate justice.[1] If error is established, the judge must determine the issues in the proceeding on the merits.
[1]Neely v Southern Cross Feeds Pty Ltd (No 2) [2013] VSC 238 (14 May 2013) [5] (Hargrave J); Schreuders v Grandiflora Nominees Pty Ltd (2014) 14 ASTLR 50, 62 [30] (Garde J); Glass v Chief Examiner [2015] VSC 29 (30 January 2015) [2] (Garde J); Re Ascot Vale Self-Storage Centre Pty Ltd (in liq) (2014) 98 ACSR 243, 247–9 [10]–[15] (Robson J).

The proceeding before the associate justice was one in which the appellant, a lender under a loan agreement secured by a second mortgage, made application for payment of funds (approximately $40,543.73) out of court. It claimed to be owed a much greater amount ($121,500) by the respondent as the guarantor of the loan, which was made to his family companies. The funds were paid into court by a bank, as a first mortgagee under unrelated transactions, by way of surplus funds from a mortgagee sale of real property belonging to the respondent. As the mortgagor otherwise entitled to the residue, the respondent objected to the payment of the funds to the appellant. The key figures in the transaction were David Graer on behalf of the appellant and Derick Smith on behalf of himself, the respondent. The associate justice had to determine whether the appellant as the second mortgagee and the guaranteed party or the respondent as the mortgagor and guarantor should…

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: [2017] VSC 217
Decision Date: 10 May 2017

CaseChat Overview and Summary

Secure Loan Solutions sought payment from Mr Smith of funds held in court, which were the proceeds of a sale of a property that had been subject to two mortgages. Secure Loan Solutions was the first mortgagee and held a guarantee from Mr Smith as the guarantor of the borrower's obligations. The second mortgagee objected to the payment on the grounds that it was not owed any money by Mr Smith. The parties disputed whether Mr Smith was indebted to Secure Loan Solutions as a guarantor. An associate justice of the Supreme Court ordered the funds be paid to Mr Smith. Secure Loan Solutions appealed against the associate justice's order, arguing it was made in error and that the onus was on Mr Smith to prove he was not indebted to Secure Loan Solutions. The appeal focused on whether the associate justice erred in finding Secure Loan Solutions failed to prove its debt and whether the onus was on Mr Smith to prove the discharge of the debt. The court considered relevant statutory provisions, including the Supreme Court (General Civil Procedure) Rules 2015 (Vic) O 77 and the Transfer of Land Act 1958 (Vic) s 77(3(d). The court held that the associate justice's order was not in error, and the onus did not lie on Mr Smith to prove the discharge of the debt. The appeal was dismissed. The court ordered that the proceeds of the sale be paid to Mr Smith.

Orders