Toppi v Lavin - [2013] NSWSC 1931

Supreme Court

New South Wales

Medium Neutral Citation: Toppi & Anor v Lavin [2013] NSWSC 1931
Hearing dates: 4 December 2013
Decision date: 20 December 2013
Jurisdiction: Equity Division
Before: White J
Decision:
Refer to para [34] of judgment.

Catchwords: EQUITY - subrogation - plaintiffs and defendant co-sureties - plaintiffs paid more than their share of liability - plaintiffs entitled to contribution from defendant - plaintiffs seek to be subrogated to security given by defendant to creditor - security given by defendant already discharged by settlement between defendant and creditor prior to plaintiffs' payment - whether security kept alive in equity for plaintiffs' benefit - Law Reform (Miscellaneous Provisions) Act 1965 s 3
Legislation Cited: Law Reform (Miscellaneous Provisions) Act 1965
Usury, Bills of Lading & Memoranda Act 1902
Cases Cited: Paola Toppi v Dolores Lavin [2013] NSWSC 1361
Bofinger v Kingway Group Limited [2009] HCA 44; (2009) 239 CLR 269
D & J Fowler (Aust) Ltd v Bank of New South Wales [1982] 2 NSWLR 879
McColl's Wholesale Pty Limited v State Bank of New South Wales [1984] 3 NSWLR 365
State Bank of NSW v Geeport Developments Pty Ltd (1991) 5 BPR 11,947
Yusen Daly Smith International Pty Ltd v Smith [1999] NSWSC 450
Ghana Commercial Bank v Chandiram [1960] AC 732
Cochrane v Cochrane (1985) 3 NSWLR 403
Williams v Frayne (1937) 58 CLR 710
The Bank of Victoria v Smith (1894) 20 VLR 450
Buckeridge v Mercantile Credits Limited (1981) 147 CLR 654
Category: Principal judgment
Parties: Paola Toppi (1st Plaintiff)
Neil Cunningham (2nd Plaintiff)
Dolores Lavin (Defendant
Representation: Counsel:
J T Johnson (Plaintiffs)
S Golledge with H Durack (Defendant)
Solicitors:
Beazley Singleton Lawyers (Plaintiffs)
Websters Solicitors (Defendant)

File Number(s): 2013/303481

Judgment

HIS HONOUR: The question in this case is whether a co-surety who pays more than her share of a guaranteed debt is subrogated to the creditor's security over assets of her co-surety to enforce her right of contribution notwithstanding that the security has been released. The creditor took guarantees from the plaintiffs and the defendant and held mortgages over property of each of them that secured their liabilities under their guarantees. The creditor sued them both, but settled its claim against the defendant. The creditor released its security over the defendant's property on receiving a substantial payment from the defendant, albeit for a sum less than the defendant's share of the guaranteed liability. Some months later the plaintiffs paid out the balance of the guaranteed debt. When the plaintiffs paid off the creditor, it no longer held security over the defendant's assets. It had provided a discharge of mortgage. That discharge had been registered. The question is whether the release of the security is an answer to the plaintiffs' claim to be subrogated to the creditor's security over the defendant's property. I have concluded that it is.

The substantive relief sought in the summons is a declaration that:

"the Caveators, in equity, an estate or interest in the land the subject…

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.

Continue reading Toppi v Lavin

Details

AGLC: Toppi v Lavin [2013] NSWSC 1931
Case: [2013] NSWSC 1931
Decision Date: 20 December 2013

CaseChat Overview and Summary

The plaintiffs, Toppi, brought proceedings against the defendant, Lavin, seeking to be subrogated to a mortgage provided by Lavin to a creditor. The plaintiffs and the defendant were co-sureties for a debt owed by a third party to the creditor. The plaintiffs paid more than their share of the debt, and sought contribution from the defendant. The defendant provided a mortgage to the creditor as security for the debt, which was later discharged by settlement between the defendant and the creditor before the plaintiffs made their payment. The plaintiffs argued that the security should be kept alive in equity for their benefit, and sought to be subrogated to the mortgage.

The legal issue before the court was whether the security could be kept alive in equity for the plaintiffs' benefit, despite it being discharged prior to their payment. The court considered the relevant statutory provision, Law Reform (Miscellaneous Provisions) Act 1965 s 3, which provides that a surety is entitled to the benefit of any security provided by the principal debtor, unless the creditor and the principal debtor have agreed otherwise. The court also considered the principles of equity, particularly the concept of subrogation, which allows a person who has paid a debt to stand in the shoes of the creditor and enforce the security provided by the debtor.

The court held that the security could not be kept alive in equity for the plaintiffs' benefit. The discharge of the mortgage by settlement between the defendant and the creditor prior to the plaintiffs' payment meant that the security was no longer available to the plaintiffs. The court found that the statutory provision did not apply, as the plaintiffs were not seeking to enforce the security against the defendant, but rather to be subrogated to it. The court also noted that the principles of equity did not support the plaintiffs' claim, as there was no agreement between the creditor and the defendant to keep the security alive for the plaintiffs' benefit. The court dismissed the plaintiffs' claim for subrogation.

The court ordered that the plaintiffs' claim be dismissed and that the defendant pay the costs of the proceedings.

Orders