ANZ Banking Group Limited v Trustee of the Property of Maunder

St George's claim to payment out of Court 14The matters which must be established to support a payment out of Court under Div 3 of Pt 55 of the Uniform Civil Procedure Rules were summarised by Slattery J in ANZ Banking Group Limited v Trustee of the Property of Maunder (a bankrupt) [2009] NSWSC 1356 at [8], where his Honour said that: "First the applicant must demonstrate an entitlement to the funds. Second, the applicant must show that there are no competing claimants to the funds which would prevent payment out to the applicant. Third, where other claimants may be affected, the applicant must show that he has notified those other claimants. Finally, the applicant must calculate or provide a formula for the calculation of the amount to be paid out of Court." 15The first issue to be addressed is whether St George can demonstrate an entitlement to the Surplus Funds. The starting point for a determination as to dispersal of surplus funds arising from a sale by a mortgagee is s 58(3) of the Real Property Act 1900 which provides: "(3) The purchase money to arise from the sale of any such land, estate, or interest, shall be applied, first, in payment of the expenses occasioned by such sale; secondly in payment of the moneys which may then be due or owing to the mortgagee, chargee or covenant chargee; thirdly, in payment of subsequent mortgages, charges or covenant charges (if any) in the order of their priority; and the surplus (if any) shall be paid to the mortgagor, charger or covenant charger, as the case may be." 16The first and second priority payments referred to in Real Property Act s 58(3) were here made by Westpac on the sale of the Mosman Property. The third priority payment referred to under s 58(3) is not applicable since the reference to a subsequent mortgage in s 58(3) is concerned only with registered mortgages: Residential Housing Corporation Ltd v Esber [2011] NSWCA 25 at [53] ff. On its face, the fourth limb of s 58(3) contemplates that any surplus arising on the sale of the Mosman Property is to be paid to the mortgagor, Ms Murray. However, the operation of that limb of s 58(3) can be modified by the intervention of equity so that the section does not vest the surplus from a mortgagee's sale in a mortgagor free from all equities but subject to them: Avco Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679 at 683; Residential Housing Corporation Ltd v Esber above at [166]-[168]. 17St George seeks to demonstrate an entitlement to the Surplus Funds on two alternative bases. First, St George contends that the Portfolio Loan Agreement between St George and Ms Murray required her to give a mortgage over the Mosman Property as security for the Portfolio Loan. I have referred to the terms of the Portfolio Loan Agreement Offer and the associated General Terms and Conditions in paragraphs 7-8 above. In my view, although the Portfolio Loan Agreement Offer and the General Terms and Conditions contemplated that a mortgage over the Mosman Property had been or was to be taken by St George prior to Mr Murray drawing down the credit limit under that facility, it did not impose an obligation on Ms Murray to provide that mortgage. Rather, the Portfolio Loan Agreement Offer and General Terms and Conditions provided that St George was not obliged to make funds available unless and until that mortgage had been granted so that, if Ms Murray chose not to provide that mortgage, the relevant funds would not be advanced. 18In my view, an equitable mortgage over the Mosman Property was not created in the absence of an obligation upon Ms Murray to grant that mortgage: Swiss Bank Corporation v Lloyds Bank Ltd [1982] AC 584, at 594-595; Westfield Holdings Ltd v Australian Capital Television Pty Ltd (1992) 32 NSWLR 194, at 200; Theodore v Mistford Pty Ltd (2005) 221 CLR 612, at 622; [2005] HCA 45. 19Alternatively, St George argues that it can establish its entitlement to the Surplus Funds by reason of an in personam right against Ms Murray, on the basis that any attempt on her part to assert a right to the Surplus Funds would take unconscionable advantage of two errors of St George, namely that: (a) on 20 December 2004, St George gave Ms Murray the certificate of title, mortgage and discharge of mortgage over the Mosman Property by mistake, notwithstanding the loans then secured by the mortgage had not been repaid; or (b) alternatively, on 12 January 2005, St George advanced the Portfolio Loan to Ms Murray without obtaining a further mortgage over the Mosman Property under a mistaken belief that it had already obtained such a mortgage. 20St George characterises its mistake as a unilateral mistake and it acknowledges that it is necessary for it to establish that Ms Murray knew or had reason to know of its mistake in order to obtain relief on that basis: Taylor v Johnson (1983) 151 CLR 422; Tutt v Doyle (1997) 42 NSWLR 10, at 15A. St George submits that Ms Murray must have known of the first mistake on which St George relies, either on the date on which it occurred or shortly thereafter, or alternately at least by 4 February 2005 when she lodged the discharge of mortgage and it was registered. St George submits that Ms Murray must have known of St George's second mistake at least by 15 October 2005 when Westpac registered its mortgage over the Mosman Property. Ms Murray, who appeared in person on the Motion, has not sought to contest those submissions and I find that she knew or had reason to know of these mistakes at least by those dates. 21In these circumstances, I find that it would be unconscionable for Ms Murray to assert unencumbered title to the Mosman Property in circumstances where she knew or had reason to know of these mistakes; and s 58(3) of the Real Property Act would in turn operate inequitably if the funds in Court and interest thereon were paid out to Ms Murray as mortgagor rather than to St George. 22Counsel for St George drew my attention to the decision in State Bank of NSW v Berowra Waters Holdings Pty Ltd (1986) 4 NSWLR 398, where the plaintiff sought orders that the discharge of a mortgage, which had been discharged in error, was invalid and that the recording of that discharge in the register kept pursuant to the Real Property Act 1900 was made in error. Justice Needham declined to grant the orders sought on the ground that the claim was for recovery of land and was barred by s 24 (now s 118) of the Real Property Act . In my view, that decision is not authority that a mortgagee cannot bring a personal claim in equity against a mortgagor where a mortgage is discharged by mistake - indeed, Needham J expressly left open the possibility of alternative claims in observing that "[n]o questions arose of any other action open to the plaintiff, and, accordingly, I make no comment on the matter" (at 404). 23In my opinion, St George's in personam claim against Ms Murray arising from the matters to which I have referred in paragraph 19 above is sufficient to support an entitlement to payment of the Surplus Funds. 24I now turn to the question whether St George has shown that there are no competing claimants to the Surplus Funds which would prevent payment out to St George and, if other claimants may be affected, has shown that it has notified such other claimants. 25The certificate of title for the Mosman Property suggests that, at the time Westpac exercised its power of sale, the potential claimants to the Surplus Funds were two caveators, St George and Mr Mukhi, and Ms Murray as the registered proprietor of the Mosman Property. The Notices of Motion filed by Mr Mukhi and St George seeking access to the Surplus Funds were advertised on 17 May 2011 by Mr Mukhi's solicitors and the evidence establishes that neither Mr Mukhi's solicitors nor St George's solicitors have been advised of any other competing claims to the Surplus Funds. Mr Mukhi's solicitors have advised the Court that Mr Mukhi does not press his claim for the funds in Court and does not oppose the orders sought by St George. By letter dated 16 June 2011 Ms Murray consented to St George receiving the Surplus Funds and she joins in the Consent Order to which I referred in paragraph 2 above. 26In these circumstances, I am satisfied that St George has shown that potentially competing claimants to the funds have had appropriate notice of St George's application. 27I am also satisfied that St George has established, by the default judgment in the District Court proceedings for $602,757.48 inclusive of costs, that its claim substantially exceeds the amount held in Court of $349,821.12 plus any interest earned thereon. 28On the basis of these findings, I am satisfied that St George has established each of the matters necessary to support its application for payment to it of the Surplus Funds and interest thereon under Div 3 of Pt 55 of the Uniform Civil Procedure Rules. 29In its Motion initially filed in these proceedings, St George alternatively sought orders for the transfer of its proceedings in the District Court against Ms Murray to this Court and a charging order over the funds in this Court. In oral submissions, Counsel for St George indicated that the application for this relief would not be pressed if St George were otherwise successful in establishing its claims as equitable mortgagee or based on mistake. Since I have found in favour of St George in respect of its claim as equitable mortgagee, and would alternatively have found in its favour in respect of its claim based on mistake, it is not necessary for such orders to be made. 30I make an order in the form of paragraph 1 of the Consent Order agreed between St George and Ms Murray, namely that all of the funds in Court plus any interest earned thereon be paid out to the Applicant, St George Bank Limited - a Division of Westpac Banking Corporation. 31The Court was also asked to note certain matters which had been agreed between St George and Ms Murray as part of the same agreement as the Consent Order noted above. I do not need to note the matters referred to in paragraphs 2 and 3 of that Consent Order which do not arise having regard to the order which I have made above. I note the matters referred to in paragraph 4 of the Consent Order.

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