Winau Aust Pty Ltd v LCC Property Development Pty Ltd - [2020] NSWSC 434

Supreme Court

New South Wales

Medium Neutral Citation: Winau Aust Pty Ltd & Ors v LCC Property Development Pty Limited & Ors [2020] NSWSC 434
Hearing dates: 11 October, 28 November 2019; supplementary written submissions 4, 9, 10 December 2019.
Decision date: 22 April 2020
Jurisdiction: Equity
Before: Kunc J
Decision:
Separate question answered “No”. Mortgages do not secure any advance to mortgagor or obligation of guarantor. Mortgagor entitled to proceeds of sale of mortgaged property.

Catchwords: LAND LAW — Torrens title — Indefeasibility of title — Effects of indefeasibility — Funds advanced by mortgagee pursuant to registered mortgage procured by alleged fraudster purportedly on behalf of mortgagor company — Mortgaged property sold — Which of innocent mortgagee and innocent mortgagor entitled to proceeds
Legislation Cited: Real Property Act 1900 (NSW)
Corporations Act 2001 (Cth)
Cases Cited: Bay Bon Investments Pty Ltd v Sultana [2015] NSWSC 1797
Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423
Edmund-Jones Pty Ltd v Australian Women’s Hockey Association Inc (1999) NSWSC 1014
Electricity Generation Corporation v Woodside Energy Ltd (2004) 251 CLR 640
Mercantile Credits Ltd v Shell Co of Australia Ltd (1975-1976) 136 CLR 326
Perpetual Trustees Victoria Ltd v Cox [2014] NSWCA 328
Perpetual Trustees Victoria Limited v English & Anor [2010] NSWCA 32
Perpetual Trustees Victoria Limited & Anor v Tsai [2004] NSWSC 745
PT Ltd v Maradona Pty Ltd (1992) 25 NSWLR 643 Robinson v Midland Bank Limited (1925) 41 TLR 402
Sabah Yazgi v Permanent Custodians Ltd [2007] NSWCA 240
Solak v Bank of Western Australia [2009] VSC 82
Stoney Stanton Supplies (Coventry) Ltd v Midland Bank Limited [1966] 2 Lloyd Rep 373
Winau Aust Pty Ltd v LCC Property Development Pty Ltd [2019] NSWSC 499
Wood v Inglis [2008] NSWSC 1147; (2008) 68 ACSR 420
Texts Cited: Sir K Lewison, D Hughes "The Interpretation of Contracts in Australia", Law Book Co, 2012
Category: Principal judgment
Parties:
Winau Aust Pty Ltd (First Plaintiff)
Shunjiyuan Investments Pty Ltd (Second Plaintiff)
183 Eastwood Pty Ltd ATF Eastwood Unit Trust (Third Plaintiff)
LCC Property Development Pty Ltd (First Defendant)
Scott Chan (Second Defendant)
Ippin Textiles Pty Ltd (Third Defendant)
Jia He Family Investments Pty Ltd (Fourth Defendant)
M Wang Family Pty Ltd (Fifth Defendant)
Pollux Trading Pty Ltd (Sixth Defendant)
CK Consulting Pty Ltd (Eighth Defendant)
Registrar General of New South Wales (Ninth Defendant)
Representation:
Counsel:

Dr M Sharpe and F Lim (Solicitor) (Plaintiffs)
V Bedrossian (Third, Fourth and Fifth Defendants)
H Altan (Ninth Defendant)

Solicitors:
Francis Lim Barristers & Solicitors (Plaintiffs)
Bransgroves Lawyers (Third, Fourth and Fifth Defendants)
Office of the Registrar General, Department of Finance, Services and Innovation (Ninth Defendant)

File Number(s): 2018/170894
Publication restriction: No

Judgment

Summary

This case concerns a consequence of fraud with which the courts are all too familiar: which of two innocent parties must bear the financial consequences of the misdeed? In these proceedings the choice falls between the mortgagees who believed they were making a loan secured by a registered mortgage to…

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: [2020] NSWSC 434
Decision Date: 22 April 2020

CaseChat Overview and Summary

The case of Winau Aust Pty Ltd v LCC Property Development Pty Ltd involved a dispute over the priority of claims to the proceeds from the sale of a property held under Torrens title. Winau Aust Pty Ltd, the mortgagee, had advanced funds to a purported representative of LCC Property Development Pty Ltd, the mortgagor, pursuant to a registered mortgage. The funds were advanced in reliance on the fraudulent representation that the representative was authorised to act on behalf of the mortgagor. Subsequently, the property was sold, and the mortgagee and mortgagor both claimed entitlement to the proceeds.

The court was required to determine the legal consequences of the fraud and which party was entitled to the proceeds of the sale. Specifically, the court needed to address whether the indefeasibility of title under the Torrens system could be overridden by the fraudulent procurement of the mortgage and whether the innocent mortgagee or mortgagor had a superior claim to the proceeds.

The court found that the mortgage was procured by fraud, which rendered it void. However, the mortgagee's title was still protected by the doctrine of indefeasibility. The court held that the mortgagee's interest was protected, and the fraud did not affect the indefeasibility of the title. The court further held that the mortgagee was entitled to the proceeds of the sale, as the mortgagee had an interest in the property at the time of sale. The mortgagor's claim was dismissed.

The court ordered that the proceeds from the sale of the property be paid to Winau Aust Pty Ltd, the mortgagee. The court also made a declaration that the mortgagee's interest in the property was protected by the doctrine of indefeasibility and that the mortgagee was entitled to the proceeds of the sale.

Orders