White v Bendigo Bank Ltd
[2004] VSC 259
•23 July 2004
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 4409 of 2003
| CLYDE PETER WHITE AND PHILIP NEWMAN (AS TRUSTEES AND LIQUIDATORS OF THE FAITHFUL STREET (WANGARATTA) PROPERTY TRUST AND THE FYANS STREET (GEELONG) PROPERTY TRUST) | Plaintiffs |
| v | |
| BENDIGO BANK LTD (ACN 068 049 178) | First Defendant |
| J.E. CURTIS HOLDINGS PTY LTD (ACN 004 136 592) | Second Defendant |
---
JUDGE: | HARPER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 18 MAY 2004 | |
DATE OF JUDGMENT: | 23 JULY 2004 | |
CASE MAY BE CITED AS: | WHITE & ANOR v BENDIGO BANK LTD & ANOR | |
MEDIUM NEUTRAL CITATION: | [2004] VSC 259 | |
---
MORTGAGES – Two separate parcels of land, each held in trust by the same trustee, but under separate unit property trusts - Separate first mortgages granted over both properties by trustee – Cross collateralisation agreement taken by first mortgagee – Second mortgage of one property only – First mortgagee’s sale of both – First mortgagee paid out, having first retained the surplus from the first sale against a possible loss on the second – Balance of sale proceeds sufficient to satisfy second mortgagee partially but not wholly– Claim by both trustee and second mortgagee to the surplus from the first sale.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr G. Bigmore QC with Mr M. Harvey | McDonald & Associates |
| For the First Defendant | No appearance | |
| For the Second Defendant | Mr R. Randall | Strongman & Crouch |
HIS HONOUR:
On 2 February 2002, Finkelstein J in the Federal Court of Australia ordered that a company called Terra Firma Project Management Pty Ltd be removed as trustee of two separate trusts. They were known, respectively, as the Faithful Street (Wangaratta) Property Trust and the Fyans Street (Geelong) Property Trust. At the same time, the plaintiffs were by his Honour appointed as the new trustees in each case; and his Honour ordered that all property held by the company upon trust for the two sets of beneficiaries be vested in the plaintiffs.
That property consisted, in part at least, of several parcels of land. One of these, which was held for the beneficiaries of the Wangaratta Trust, had as its address 23-25 Faithful Street, Wangaratta. The address of the other presently relevant parcel, which was held for the beneficiaries of the Geelong Trust, was 180 Fyans Street, Geelong.
Both the Wangaratta Trust and the Geelong Trust were unit trusts. The unit holders of each were substantially different.
Each of the properties was mortgaged to the Bendigo Bank Ltd as mortgagee. Each mortgage was registered; and in or about 5 February 2001, to further protect the bank, mortgager and mortgagee entered into a deed known as a "Deed of Cross Collateralisation and Default". The effect was to give the bank access to either property, or both, and a further parcel of land situated in Donvale, as security for the money lent pursuant to either mortgage. The deed also gave the bank a fixed and floating charge over all the assets and undertaking of the trustee. The charge was registered on 7 January 2002.
Both the Wangaratta and the Geelong properties have since been sold. Settlement of the Wangaratta sale took place on 12 June 2002; that of Geelong, on 12 February 2003. The proceeds of the first sale, that at Wangaratta, were sufficient to enable the bank to recover not only all that which was owing under the Wangaratta mortgage, and other associated expenses, but also to leave a surplus of $125,000, or thereabouts. This was, in accordance with the rights given to the bank by the Deed of Cross Collateralisation and Default, then appropriated by the bank towards the amount owing to it under the Geelong mortgage.
In addition to the first mortgage, the Geelong property also secured, by way of a second mortgage, a loan granted to the company by the second defendant, J.E. Curtis Holdings Pty Ltd. That loan was in the sum of $840,000. It was provided to the then trustee on 6 December 2001. There is evidence before me, which I have no reason to doubt, that the second defendant expected to be granted a first mortgage as security. Unbeknown to it, the bank had got in first. The second mortgage was registered nevertheless.
The Geelong venture was not a success. The income generated by it was insufficient to service the loan through which the Fyans Street land was purchased. The bank accordingly exercised its power of sale. The results were disappointing. The funds received at settlement were sufficient to pay out the bank, but the second defendant received only $568,265,40. This fell $292,515.43 below that which, as at 12 February 2003, was owed to it.
The amount paid to the second defendant did not include the $125,000 held by the bank as the surplus which remained after the sale of the Wangaratta land. Nor was that sum required by the bank to satisfy its Geelong claim. The plaintiffs now contend that the relevant funds should be paid to them as the trustees of the Wangaratta Trust. The second defendant argues that it is the rightful recipient. For its part, the bank makes no claim for itself. It is content to abide the decision of the Court, and will accordingly pay the relevant amount to either the plaintiffs or the second defendant, as directed.
On 12 July 2002, Finkelstein J made further orders in relation to the Trusts. So far as is presently relevant, his Honour ordered that both be wound up. The removal of Terra Firma Project Management Pty Ltd as trustee, and its replacement by the plaintiffs, was confirmed. His Honour also ordered that all property held by the company upon trust for the beneficiaries of the Wangaratta Trust be vested in the plaintiffs, who were appointed joint and several liquidators for the purposes of the winding up. Similar orders were made in relation to the Geelong Trust.
On the evidence before me, it is clear that the second defendant remains as an unsatisfied creditor of the original trustee. It is equally clear, however, that that defendant is not a creditor of the bank. Indeed, the second defendant does not assert that it is. But the position of the plaintiffs is very different. As the successors of Terra Firma Project Management Pty Ltd, which was before the relevant sales the registered proprietor of both the Wangaratta and the Geelong properties, the plaintiffs are, as between themselves and the bank, entitled to the balance remaining after the bank has recouped all that was owing to it as first mortgagee. That balance has, with interest, increased from $125,000 to something in excess of $128,000.
Much of the argument before me concerned rights under the doctrine of subrogation. These, it was put, were relevant to issues of priority as between the plaintiffs on the one hand and the second defendant on the other. It seems to me, however, that this is to complicate an essentially straightforward claim. The present proceeding is not one in which one debtor looks to another to recoup monies expended by the first to discharge the indebtedness of the second. Nor is it one that raises, in any justiciable sense, competing claims to priority over the balance presently held by the bank. It is a proceeding brought by the successors in title to the legal owner of the relevant properties. Their claim is against the first mortgagee for the balance of the moneys remaining after that mortgagee has been repaid. The bank is that mortgagee. It holds that surplus; but, having been repaid, it has itself no right to the relevant funds. As between the bank and the second defendant, the second defendant has no claim either. No relationship of debtor and creditor exists between them. Moreover, the latter’s second mortgage security has been exhausted. J.E. Curtis Holdings Pty Ltd is therefore, in relation to the balance owing to it, no more than an unsecured creditor of the original trustee, and perhaps of the plaintiffs. But it has instituted no proceedings against the plaintiffs for the recovery of its debt.
Were the second defendant to take such proceedings, it might or might not succeed. In the meantime, the plaintiffs are entitled to the relief against the bank which, by their statement of claim, they seek: namely, a declaration that they are entitled to a transfer to them by the bank of whatever sum the Wangaratta surplus now represents. I will hear the parties on any additional or consequential orders that should be made.
---
0
0
0