[1915] 23 CLR 78
Commonwealth Bank of Australia v The Estate of the Late Mahmoud Slieman [2010] NSWSC 661
Haiqin Lu v Qindi Shen
Weiren Jin v Qindi Shen [2018] NSWSC 560
J & H Just (Holdings) Pty Limited v The Bank of New South Wales (1971) 125 CLR 546
[1971] HCA 57
Re C & L Cameron Pty Limited [2012] NSWSC 676
Residential Housing Corporation v Esber (2011) 80 NSWLR 69
Source
Original judgment source is linked above.
Catchwords
[1915] 23 CLR 78
Commonwealth Bank of Australia v The Estate of the Late Mahmoud Slieman [2010] NSWSC 661
Haiqin Lu v Qindi ShenWeiren Jin v Qindi Shen [2018] NSWSC 560
J & H Just (Holdings) Pty Limited v The Bank of New South Wales (1971) 125 CLR 546[1971] HCA 57
Re C & L Cameron Pty Limited [2012] NSWSC 676
Residential Housing Corporation v Esber (2011) 80 NSWLR 69
Judgment (3 paragraphs)
[1]
Judgment
HER HONOUR: This is an application by two notices of motion, each filed on 27 August 2020, by the applicants (Weiren Jin and his sister-in-law, Haiqin Lu) seeking payment out of Court of funds paid into Court by Westpac Banking Corporation (Westpac) and interest earned on them pursuant to r 55.11 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). The funds in question are the balance of the proceeds of sale following the exercise of a power of sale held by Westpac Banking Corporation (in its capacity as registered mortgagee) of land at 201B Midson Road, Epping, New South Wales (the Property).
The applicants hold unregistered charges over the land to secure debts owing under separate deeds of loan entered into by the applicants on 27 July 2005 (the Deeds). The former registered proprietors of the Property, Linfa Jin and Qindi Shen, who are now bankrupt, were the guarantors of those loans. The applicants have deposed to the amounts remaining outstanding in respect of the loans (and interest thereon).
The applicants have relied on the present application on an affidavit affirmed by each of them, together with affidavits affirmed by their solicitor, Ms Siyu Zhang, and affidavits of service in relation to service of the relevant court documents on other caveators. These proceedings were initially commenced by way of summons filed by Westpac on 5 December 2019. Westpac sought (and obtained) an order for payment into Court, pursuant to s 95 of the Trustee Act 1925 (NSW) and r 55.9 of the UCPR, in the amount of $652,776.86. In support of that motion, an affidavit was filed of an officer of Westpac (being an affidavit sworn 26 November 2019 by Mr Mitchell James Byram), deposing to the money being the net proceeds of sale of the Property that was formerly owned by Linfa Jin and Qindi Shen (who were made bankrupt on 7 February 2019), after the sale by exercise of power under Westpac's first registered mortgage.
Each of the Deeds entered into (by each of Weiren Jin and Haiqin Lu respectively) was dated 27 July 2005. The borrower in each case was a company by the name of Australian Golden Way Pty Limited, which is now de-registered. Each of Linfa Jin and Qindi Shen (the then registered proprietors of the Property), together with a third person, Huiju Kim, was a guarantor named in Schedule 1 to the respective Deeds.
Weiren Jin lent the principal sum of $232,000. Security for that sum included the property at "201 Midson Road, Epping, NSW" (which subsequently, as I understand it, has been subdivided), as well as various other properties (not relevant to the current application). The relevant property sold by Westpac, and the subject of this application, is 201B Midson Road, Epping. The Deed entered into by Haiqin Lu with Australian Golden Way Pty Limited was for the principal sum of $500,600, also secured by the same properties.
Both Deeds, in cl 11, provided that, as security for the performance of the guarantors' obligation in the Deed, the guarantors agreed to grant to the lender a legal right to the guarantors' properties, including but not limited to, the properties as set out in item 7 of Schedule 1, and permitted the lender to place a caveat over any or all of each of the properties. That is sufficient in my opinion in the circumstances to give rise to an equitable interest in the properties; and, indeed, an equitable interest in the properties is what was claimed in a caveat lodged by Weiren Jin in June 2006. (I interpose here to refer to the discussion in Bondi Beach Astra Retirement Village Pty Ltd v Hohman [2010] NSWSC 260 at [118] and Westpac Banking Corporation [2015] NSWSC 869; and add that in the present case, I was satisfied that in the context where what was being provided was security for the performance of the guarantors' obligations the intention here to be presumed was that an equitable charge was thereby being granted.) In that caveat, Weiren Jin claimed an equitable charge on the interest of Linfa Jin and Qindi Shen in the Property arising out of the Deed.
No caveat was initially lodged by Haiqin Lu at the time, but Haiqin Lu, in her affidavit on the present application, deposed that the reason that she did not lodge a caveat at the time was due to reliance on legal advice that it was not necessary for her to do so in circumstances where Weiren Jin had lodged a caveat (Ms Lu's affidavit affirmed 25 August 2020, at [15]-[16]).
At some point, a withdrawal of caveat was lodged, purportedly in the name of Weiren Jin. However, Weiren Jin deposed that he did not execute that withdrawal of caveat; and his evidence is that, at the time that the withdrawal of caveat was purportedly signed in his name, he was in China (and Linfa Jin, who was the named witness on the caveat, was in Australia) (see Mr Jin's affidavit affirmed 14 August 2020, at [12]).
In the period after the withdrawal of caveat, and before Weiren Jin discovered that the caveat had been withdrawn and lodged a fresh caveat, there was at least one other caveat registered against the title to the Property. Relevantly, there was a caveat lodged by a Mr Pan Heung on 27 April 2015. That caveat claimed an interest being an equitable interest by virtue of a loan agreement dated 22 December 2014, the parties to which were said to be Pan Heung, Linfa Jin, and Qindi Shen.
The matter came before McDougall J. His Honour gave judgment in 2018 (Haiqin Lu v Qindi Shen; Weiren Jin v Qindi Shen [2018] NSWSC 560). His Honour concluded that the plaintiffs should have judgments for the amounts claimed, with simple interest at the contractual default rate up to judgment, and that the plaintiffs were entitled in principle to orders for judicial sale of the real estate owned by the defendants.
The orders that were entered on 21 May 2018 in the respective proceedings were for judgment in favour of Haiqin Lu in the sum of $1,556,715.13, and judgment for Weiren Jin in the sum of $721,793.31. His Honour declared that, as between Ms Lu and the defendants, Ms Lu has (and has had since the defendants became the registered proprietors of the properties) an equitable interest in land pursuant to the Deed dated 27 July 2005 secured together with all reasonable costs and expenses incurred in enforcing it, including the costs above ordered to be paid. That land included the Property. A similar declaration was made in favour of Weiren Jin.
Turning then to Mr Heung's loan agreement made by deed dated 20 December 2014, the loan agreement purports to acknowledge a loan of $500,000 to Linfa Jin repayable within three years with interest of another $500,000 (see cl 3.1), which was guaranteed by Qindi Shen and Jin Hi Ju, each noted to be of 201B Midson Road Epping (that being the property in which McDougall J has declared the applicants have an equitable interest). The loan agreement, however, nominated the security property as 201 Midson Road, Epping.
There have been communications with Mr Heung through his solicitors, and Mr Heung's solicitors were on notice of, and as I understand it, were present when, the applicants' notice of motion was before the Registrar on 21 September 2020 and orders were made for any competing claimant to file a notice of motion in relation to that person's interest. It is submitted for the applicants that Mr Heung has never had an interest in the Property, or the proceeds of sale of the Property (i.e., 201B Midson Road), and that his caveat was filed against the wrong title. He has not made any claim in the present proceedings to the moneys paid into Court.
Of the other interested persons that were identified by Westpac at the time the proceedings were commenced, two were the registered proprietors of the Property. As noted, they have become bankrupt. Their respective trustees in bankruptcy, Antony de Vries and David Solomons, have notified the applicants' solicitor on 2 September 2020 that they do not seek to become involved in these proceedings.
There were other caveats filed after the applicants' caveats subsisting at the time of the mortgagee sale by various entities. One was filed by ACapital Finance Pty Limited (ACapital Finance) on 27 February 2017, claiming an equitable interest pursuant to an unregistered mortgage of 11 January 2017. Westpac informed ACapital Finance of its intention to pay moneys into Court by letter dated 25 October 2019, and the company has been served with the applicants' solicitor's advice of their claim to the funds in court and was served at its registered office with copies of the applicant's notices of motion.
Another company, MG & Apsaras Pty Limited (MG & Apsaras), lodged a caveat on 20 March 2017 claiming an equitable interest pursuant to a loan agreement dated 23 November 2016, and subsequent deed of amendment dated 9 March 2017. The interest was alleged to arise in 2017, after the interests of the applicants and their latest caveats. The solicitors for MG & Asparas in 2019 advised Westpac that they did not object to the proceeds of sale of the land being paid the registered proprietors' trustee in bankruptcy. They have been informed that the moneys would be paid into Court and advised of the claim. The company has since been deregistered. ASIC has been advised of the present application and has advised the solicitors for the applicants that ASIC has no intention to assert any rights in the company's behalf and does not oppose the orders sought for distribution of the funds held in Court to the applicants.
A third entity, Golden Stone Property Group Pty Limited (Golden Stone Property), registered a caveat on 6 September 2017 claiming an interest from one of the proprietors pursuant to a guarantee under an agreement dated 30 December 2014 for a loan of unspecified amount, of which the borrower is said to be in default. It is noted that any interest in this company arose after the applicants' interests, and that the caveat post-dates the filing of the last of the latest caveats. Westpac's solicitors informed Golden Stone Property's solicitors of the surplus funds by letter of 25 September 2019, and of the intention to pay them into Court. The applicants' solicitors have advised Golden Stone Property's solicitors of their claim to the funds in Court. Golden Stone Property has since been deregistered. ASIC has again indicated that it has no intention to assert any rights on Golden Stone Property's behalf, and does not oppose the orders sought from distribution of the funds in Court to the applicants.
Finally, there was a caveat lodged by Xiangya Li on 13 August 2018 claiming an interest arising under a deed of loan dated 25 January 2017, for the sum of $434,555.56. This was after both the applicants' interests and their latest caveats had been filed. Again, there is evidence of the informing of the solicitor for Ms Li by Westpac in October 2019 of the proposal to pay the money into Court, and of the attempts to notify Ms Li of the present application, including the return date for the notice of motion.
[2]
Determination
I summarised the relevant principles applicable on an application for payment out of funds paid into Court in Re C & L Cameron Pty Limited [2012] NSWSC 676 (Re C & L Cameron). I there noted, referring to the decision of Slattery J in Commonwealth Bank of Australia v The Estate of the Late Mahmoud Slieman [2010] NSWSC 661 [8]-[10], that what must be established for a payment out of Court is: first, the identity of the person "primarily entitled to any funds paid into Court and the basis of that entitlement ... from the best evidence available", so that "the Court can be sure that the person has been given appropriate notice and can if necessary contest it"; second, that the applicant has a "beneficial interest in the very fund that has been paid into Court'"; and, third, "the identity of the other potential claimants to the fund in Court and to prove that those persons were notified of [the application]", or, that those others consent to the applications, or, do not have valid claims or do not have priority over the applicant.
The applicants note that this process may involve determining the validity of competing claims, and not merely whether they are arguable or reasonably arguable; but that there may be no utility in determining the ability of claims which could not have relevant priority (citing Re C & L Cameron at [127]).
Reference is made to Residential Housing Corporation v Esber (2011) 80 NSWLR 69; [2011] NSWCA 25 where Campbell JA, with whom Macfarlan JA and Sackville AJA agreed, said at [71]:
71. The way in which the situation of the unregistered mortgagee is accommodated is ... by equitable principle operating to modify the operation of section 58(3) [of the Real Property Act 1900] to prevent it being used to produce inequitable results.
Reference is also made to the cases on priorities of equitable interests such as Butler v Fairclough (1917) 23 CLR 78; [1915] 23 CLR 78; and J & H Just (Holdings) Pty Limited v The Bank of New South Wales (1971) 125 CLR 546 at 554-555, per Barwick CJ; [1971] HCA 57.
I am satisfied in the present case that the applicants' loan agreements gave them equitable interests in the Property; and, hence, in the balance of the proceeds of the Property.
McDougall J's judgment to which I have referred above confirmed the applicants' beneficial interest in the Property; and, therefore, now, in the very fund that has been paid into Court. None of the interested persons have shown a competing interest in the Property in priority to the applicants.
Even if the loan by Mr Heung validly created a charge over the Property by the caveat which was lodged at that time, I note that because at that time Weiren Jin's caveat had been fraudulently withdrawn, it would be a case where it would be not be inequitable for Weiren Jin to be able to rely on his earlier priority in taking an interest in the Property.
I am satisfied that neither Mr Heung, nor any of the other caveators has proven that, at the time of taking his or its alleged interests, he or it relied on the absence of a caveat on the register, or took reasonable steps to ascertain whether there was any prior interest, or whether he or it was unaware of the applicant's interest in the Property. I also note that there has been no application by any of the interested persons who have been identified (a number of whom are now deregistered) claiming an entitlement to in interest in the funds paid from the Property.
It is submitted, in relation to Haiqin Lu that, if the interest of Weiren Jin is not postponed, it would consume the whole of the moneys in Court but, in any event, that Ms Lu did not act unreasonably in not filing her own caveat where she understood Weiren Jin's caveat to be validly on foot.
I am satisfied that all other potential claimants to the funds in Court have been given adequate notice of the present notices of motion, and that none have shown an interest in opposing the relief sought, nor has any other claimant established a valid claim to priority over the applicants in relation to the funds in Court.
I note that the applicants are brother and sister-in-law and that, between them, they do not contest their respective claims seeking payment out to each other in proportion to the debts owed to them respectively. Each has waived any conflict of interest and duty in being represented by the same legal representatives in these proceedings. The orders sought in the notices of motion is for the funds in Court to be paid out to each of the applicants are orders for the payment out in proportion to his or her entitlements under the respective loan agreements.
There is evidence that has been tendered from the Supreme Court accountant certifying the amount standing to the credit of the proceedings as of 14 October 2020. That has been updated as at 9 November 2020, and there has been confirmation that there are no stop orders in this case.
Accordingly, I am satisfied that it is appropriate to make orders in the form of the short minutes of order that have been provided, which I will initial and date, and which will have the effect that the moneys paid into Court by Westpac in respect of the surplus the of the sale of the land known as 201B Midson Road, Epping and interest earnt thereon, be paid out in the proportion of 32% to Weiren Jin and 68% to Haiqin Lu; and that these orders should be entered forthwith.
[3]
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Decision last updated: 17 November 2020