Pepper Finance Corporation Limited v Maloney

The Background Facts 20I am satisfied that the following facts are established by the evidence, or are not seriously in dispute, in relation to the notice of motion filed by Ms Maloney: (a) Ms Maloney was born in 1970. (b) Mr McKane was born in August 1969. (c) Ms Maloney and Mr McKane commenced a relationship in 1997 and commenced cohabitation in April 2004. They separated, finally, in May 2005. (d) There were three children of their relationship. (e) As at 11 March 2010, Mr McKane's child support debt was $15,591.38. (f) On 16 March 2010, Ms Maloney filed a Child Support Enforcement Summons. (g) On 16 June 2010, Federal Magistrate Spelleken made the following interim orders: "[Mr McKane] is restrained from selling, transferring and further encumbering or in any way dealing with his interests in the real property situate at Goulbourn [sic] and Moss Value. If [Mr McKane] deals with the interests in the abovementioned properties [his] interest in the Moss Value property and Goulburn property be charged in favour of [Ms Maloney] for the full amount of the child support debt and [her] costs." (h) On 7 July 2010, pursuant to s 116(2) of the Child Support (Registration and Collection) Act 1988 (Cth), the Child Support Agency certified that the amount of $17,375.14 was then due and payable by Mr McKane to Ms Maloney. (i) The application by Ms Maloney for enforcement came before Federal Magistrate Hartnett on 28 July 2010. Mr McKane made an application for an adjournment of the proceedings that was refused. Ultimately, the parties agreed upon the disposition of the matter and the following orders, by consent, were made: "IT IS DECLARED: That as at 28 July 2010 the child support debt owing by [Mr McKane] to [Ms Maloney] in relation to the children [A], [B] and [C] stands in the sum of $17,375.14. "BY CONSENT IT IS ORDERED: DECLARATION OF COURT: That on or before the 29 November 2010 [Mr McKane] pay [Ms Maloney] the sum of $17,375.14 by way of child support arrears. That on or before the 29 November 2010 [Mr McKane] pay [Ms Maloney] the costs of this application fixed in the sum of $4,624.86. That upon such and simultaneous with, payment [Ms Maloney] provide [Mr McKane] with removal of the caveats lodged in the real property situate at Goulbourn [sic] and Moss Vale. That, at the same time, [Mr McKane] reimburse [Ms Maloney] for the cost of removing the caveats. That upon completion of the exchange, paragraphs 3 and 4 of the orders made at the Federal Magistrates Court at Melbourne on 16 June 2010 shall be discharged. There is liberty to [Ms Maloney] to seek to list this matter on short notice with respect to any further enforcement application and penalty interest will accrue on sums remaining unpaid. Such listing is to be before Ms Hartnett FM." (j) The land at Goulburn referred to in the orders is the Goulburn property. (k) On 17 November 2010, Strickland J, in the Appellate Jurisdiction of the Family Court of Australia at Melbourne, dealt with an application for leave to appeal and an appeal, filed on 23 August 2010, by Mr McKane, in respect of the declaration and consent orders. (l) It is unnecessary to deal with the grounds of the application for leave to appeal or the grounds of appeal. It is only necessary to note that in reasons for judgment, his Honour concluded: "... nothing from these cases or the quotations from them relied upon by [Mr McKane] provides a basis for finding error on the part of the Federal Magistrate here. Indeed, I find that her Honour afforded [Mr McKane] procedural fairness in the circumstances of this case. Thus, [Mr McKane] has not established a basis for obtaining leave to appeal, and the application should be dismissed. There is no error of principle made by the Federal Magistrate which has affected [Mr McKane's] substantive rights, and I am not persuaded that the order will result in substantial injustice. I observe that even if leave to appeal was granted, given the grounds of appeal raise the same issues as the application for leave, on the basis of the conclusions that I have reached the appeal would not be successful either." (The reasons for judgment were published under a pseudonym. To preserve the anonymity of the parties, I shall not provide the medium neutral citation of his Honour's judgment.) (m) On the question of costs, his Honour made an order for costs, "calculated on the party/party basis" in favour of Ms Maloney. (n) In 2011, Ms Maloney made an application in relation to parenting issues, which application came before Cronin J on 12 September 2011. Mr McKane appeared, in person, and sought an adjournment. Some orders were made but "all outstanding applications are adjourned until 18 November 2011 ...". On the application made for costs, his Honour ordered that Mr McKane "pay [Ms Maloney's] costs thrown away this day including the preparation costs for this trial including the attendance of counsel and the preparation by counsel for trial such costs to be by agreement and in default of agreement, such costs shall be assessed". (o) In a letter dated 20 February 2012 to Mr McKane, Ms Maloney wrote: "Re Costs Awarded by Family Court of Australia Child Enforcement Arrears - Appeal by you - Order dated 21 June 2010 (No. 76) of Strickland J. states you are to pay the costs. These total $9191.00. Resident and Variation of Final Orders - Order dated 21 September (No. 6) of Cronin J. states you are to pay the costs. These total $13,427.00. I am enclosing the following:

• Itemised accounts from my solicitor/barrister in both matters
• Summary of itemised accounts in both matters
• Family Court Chapter 19 Costs Notice The only response received in relation to the Child Enforcement Arrears Appeal was you had a firm in Geelong acting for you, which wasn't the case (see letter to you dated 21 July 2011). By this time you had been placed in custody where I believe you still are. Please advise within 14 days of you [sic] intention in relation to what you intend to do to remedy these costs. If not, I will seek an assessment through the court and other means of recovery. I am prepared to negotiate this with you." (p) There was another letter, said by Ms Maloney to have been sent to Mr McKane by Ms Maloney's then legal representative, but at the hearing before me, Mr McKane denied having received the letter, so I have ignored it. It matters little, in any event, because Ms Maloney and Mr McKane, at the hearing, each accepted that no agreement had been reached about the quantum of costs, in either case. In addition, Ms Maloney accepted, during the hearing, that she has not had either bill of costs assessed. 21I am satisfied that the following facts are established by the evidence in relation to the notice of motion filed by Ms Wells: (a) Ms Wells was born in June 1974. (b) Mr McKane and Ms Wells commenced cohabitation in February 2008. (c) In July 2008, Ms Wells (who was then known as Theresa Marie Parker) and Mr McKane purchased the Goulburn property. (d) Mr McKane and Mr Wells married in November 2008. (e) A divorce order was made on 14 December 2011, to take effect, and thereby terminate their marriage, on 15 January 2012. (f) Final Consent Orders, signed by Ms Wells and Mr McKane on 20 December 2010, were made in the Family Court of Australia at Sydney, on 12 January 2011. One of the orders made was "For Therese Marie McKane to receive the sum of $40,000 as property settlement within 3 months of the date of the sealed orders". (g) On 29 June 2012, upon the application of Ms Wells, Federal Magistrate Foster, relevantly, made the following orders on an undefended basis in the following terms: "... 6. This order is made in the absence of [Mr McKane] and should he seek to set aside or vary orders made today pursuant to rule 16.05 of the Federal Magistrates Court Rules then he must within one month of being served with a copy of these orders make application to the Court by application in a case supported by affidavit supporting the orders sought and setting out reasons for failing to appear. 7. The Solicitor for [Ms wells] forward a sealed copy of these orders to [Mr McKane's] address for service by pre-paid costs upon [Mr McKane] within 7 days of receiving same from the Court. 8. Within 7 days from this date [Mr McKane] is to do all things necessary, and sign all necessary documents to authorise and direct that the sum of $30,524.80 be released from the Supreme Court and paid to [Ms Wells]. 9. In default of [Mr McKane] signing all necessary documents as provided for in preceding order, [Ms Wells] do all necessary things and sign all necessary documents on behalf of [Mr McKane] so as to authorise and direct the payment of the sum of $30,524.80 to her." (h) Mr McKane applied for these (and other) orders to be set aside under Rule 16.05 Federal Circuit Court Rules 2001 by application made on a date not disclosed in the evidence, but, presumably, within the time prescribed by the order. He also sought "to in effect re-open the proceedings as to parenting and property and seeking orders as to spousal maintenance". (i) On 25 January 2013, in the District Court of New South Wales at Sydney, Mr McKane was sentenced to 18 years with a non-parole period of 13 years. He advised that he proposed to make application by way of appeal as to the severity of the sentence. (j) Mr McKane's application to set aside the orders of Federal Magistrate Foster came before the Federal Circuit Court on 31 January 2013. He was then a prisoner, but appeared by telephone. He consented to the dismissal of the application. (k) Mr McKane filed an appeal to the Family Court on 27 February 2013 against the orders made, by consent, on 31 January 2013. The appeal is listed for hearing on 18 November 2013. 22There was no evidence given by Mr McKane in these proceedings of the grounds of his appeal; no summary of argument; or any other documents relating to the nature, or strength, of the appeal. I know nothing about whether the grounds he advances are arguable. From what evidence was available at the hearing, it is not obvious that the Federal Magistrate erred in making the consent orders. Nor is there any evidence of any stay of the execution of the orders made by Federal Magistrate Foster on 29 June 2012. 23Although she has not filed a notice of motion, I am satisfied that the following facts are established by the evidence in relation to the notice of motion filed by Ms Margaret McKane: (a) She is the mother of Mr McKane. (b) In the proceedings between Ms Wells and Mr McKane, she filed an Application in a Case on 24 February 2012 seeking the following orders: "1. For Margret McKane born 24th October 1933 to be included as a third party to these Family proceedings in the matter of Therese Marie McKane v Jeffrey Alan McKane, File number ###.

2. For the outstanding loan that was entered into on the 17th June 2005 to be paid including the interest incurred of the loan, total $54,000." (c) She relied upon a document, apparently dated 17 June 2005, a copy of which was annexed to her affidavit in support of the application, which is in the following terms: "Contract Between Jeffrey Alan Mckane, born 9/8/1969 currently residing at xxxxxx Two Wells South Australia And Margaret Mckane born 24/10/1933, currently residing at xxxxxx Two Wells South Australia
3. I Jeffrey Alan Mckane hereby agree to the following conditions of this contract, on this day 17th June 2005 Agreement
4. I Margaret Mckane agree to lend to Jeffrey Mckane the sum of $40,000 for a deposit on property located at xx xxxxx, Mumno Para, South Australia.
5. Jeffrey Mckane agrees to repay the loan in monthly instalments of $400 per month and continue to do so until the loan is paid in full including interest.
6. Jeffrey Mckane also agrees to pay interest on the loan at a rate of 5% per annum.
7. It is agreed between the parties that if Jeffrey Mckane fails to repay the loan in full including interest that Margaret Mckane may take legal action to recover the money owing." 24Ms Margaret McKane did not annex to her affidavit, or otherwise produce, in these proceedings, any documents showing the payment of $40,000 to Mr McKane.

Mr McKane's Application for an Adjournment 25In the affidavit upon which he relied, Mr McKane sought an adjournment of the proceedings until after his appeal is heard on 18 November 2013. 26I have earlier referred to the affidavit, affirmed by Mr McKane, in which he referred to an appeal to be heard in November 2013. As I also stated, the precise basis of the appeal has not been identified and there is no evidence of its prospects of success. 27However, I note that it appears that Mr McKane appeals in respect of orders to which he consented. He appears to have been present, by telephone, when those orders were made. 28(I have ignored some of the submissions made on behalf of Ms Wells relating to the nature of the appeal since there is no evidence supporting the submissions.) 29There has been no appeal, so far as I am aware, in respect of the property order made that founded Ms Well's claim. (There was a suggestion made by Mr McKane, during submissions, that it was, in fact, Ms Wells who sought to set aside the property orders, but there is no evidence of this at all. To the contrary, she has been seeking to enforce the orders.) 30Two of the three claimants to the surplus were present and prepared to proceed to hearing. The amount in issue is tiny. Registrar Musgrave listed the matters before me on 17 April 2013. 31Section 66 of the Civil Procedure Act 2005 ("the Act") gives the Court a wide power to adjourn proceedings. However, in considering whether to grant an adjournment, the overriding purpose of the Act and of rules of court, in their application to civil proceedings, to facilitate the just, quick and cheap resolution of the real issues in the proceedings, must be remembered. As well, s 57 of the Act requires proceedings to be managed, and the practice and the procedure of the courts are to be so regulated, as best to ensure (a) the just determination of the proceedings, (b) the efficient disposal of the business of the court, (c) the efficient use of available judicial and administrative resources, and (d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties. 32I have also considered the delay to other parties in obtaining a hearing if the proceedings were to be adjourned. 33I formed the view that there could be a just resolution of the proceedings even if an adjournment were not granted. I considered that the refusal to grant the adjournment would not result in any injustice to Mr McKane. 34With all these considerations in mind, I refused the application.

The Submissions 35In relation to Ms Maloney's claim, it is submitted that she is entitled to the share of the surplus that would, prima facie, pass to Mr McKane, as one of the registered proprietors of the Goulburn property. 36Ms Maloney did not oppose an order being made that one half of the surplus should be paid to Ms Wells as she was a registered proprietor, with Mr McKane, of the Goulburn property. Ms Maloney limited her claim to the share of the surplus that Mr McKane, as one of two registered proprietors, was, prima facie, entitled. 37There is no evidence that Mr McKane dealt with the Goulburn property. To the contrary, the evidence is that it was the Plaintiff, as mortgagee, which sold it. Thus, the order that might be relied upon to give rise to a charge on the Goulburn property does not apply. 38In addition, as I have said, Ms Maloney accepted that no agreement had been made with Mr McKane about the quantum of the costs that he had been ordered to pay on each occasion that the Court made a costs order in her favour. She also accepted that she had not had assessed the quantum of the costs sought to be recovered from him. 39(Ms Maloney sought to rely upon a paragraph that was contained in a Memorandum from Mr D Laidlaw of counsel, to his instructing solicitors, following his appearance before Cronin J in September 2011. Even if admissible, the Memorandum, which formed part of the Court Book, which had not been served, would not establish the truth of what was asserted as to costs. In all the circumstances, I have ignored it.) 40Ms Maloney also sought to rely upon the fact that she had lodged a caveat on title to the Goulburn property, to which caveat I have earlier referred. However, a copy of the caveat was not in evidence and the interest in the Goulburn property stated in the caveat was not disclosed. Nor did Ms Maloney submit how her interest in the Goulburn property arose. 41On behalf of Ms Wells, it was submitted that she was entitled to the whole of the surplus upon the basis of the orders made by the Federal Circuit Court on 29 June 2012. She opposed any amount from the surplus being paid to Ms Maloney, to Mr McKane, or to Ms Margaret McKane. 42Mr McKane, also, did not oppose an order being made that one half of the surplus should be paid to Ms Wells as she was a registered proprietor, with him, of the Goulburn property. 43The concession made by each of Ms Maloney and by Mr McKane followed me referring each of them to s 58(3) of the Real Property Act 1900, to which I shall refer in more detail shortly. Although neither had referred to the sub-section, when it was read to them, each said that her, and his claim, respectively, was not one that interfered with the entitlement of Ms Wells to one half of the surplus. 44There were no submissions made by, or on behalf of, Ms Margaret McKane. (I am satisfied that by making application for the audio-link, she was aware of the hearing date). However, Ms Maloney submitted that Ms Margaret McKane's claim was subject of dispute. Ms Wells submitted that the claim, if any, that Ms McKane had was a personal claim against Mr McKane and not one that enabled her to receive any share of the surplus. 45For his part, Mr McKane did not seek an order that one half of the surplus should be paid to him, but opposed more than one half of the surplus being paid to Ms Wells. He seemed to submit that if his appeal was unsuccessful, the balance of the surplus could be paid to Ms Wells, but he did not go so far as consenting to such an order. He opposed any amount being paid to Ms Maloney. He was prepared for some part of the share to which, prima facie, he was entitled to be paid to Ms Margaret McKane. 46None of the parties referred to any authorities that guide the determination of the present proceedings.

The Real Property Act 1900 47Section 57(2) of the Real Property Act authorises a registered mortgagee, chargee or covenant chargee of Torrens Title land, on default by the mortgagor, charger or covenant charger and subject to certain pre-conditions, to exercise a power to sell the land. 48Section 58 of the Real Property Act operates to make a first mortgagee a trustee for any purchase money in excess of that required to pay out the first mortgage and the expenses of the sale: Bank of NSW v Adams (1982) 2 NSWLR 659 and on appeal, Adams v Bank of NSW (1984) 1 NSWLR 285 at 299; Avco Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679, at 681. 49In Bofinger v Kingsway Group Limited [2009] HCA 44; (2009) 239 CLR 269, at [35], the High Court wrote: "Adams v Bank of New South Wales [[1984] 1 NSWLR 285 at 299, 302] is authority that s 58 [of the Real Property Act 1900 (NSW)] is to be read in a manner consistent with the equitable duty of the first mortgagee to account to puisne mortgagees as a trustee for any surplus. The position in equity was described as follows by Kay J in Charles v Jones [(1887) 35 Ch D 544 at 549-550] as follows: I have never heard it doubted that where a mortgagee sells, and has a balance in his hands, he is a trustee of that balance for the persons beneficially interested. He takes his mortgage as a security for his debt, but, so soon as he has paid himself what is due, he has no right to be in possession of the estate, or of the balance of the purchase-money. He then holds them, to say the least, for the benefit of somebody else, of a second mortgagee, if there be one, or, if not, of the mortgagor. What, then, is he to do? Surely he has a duty cast upon him. His duty is to say, 'I have paid my debt: this property which is pledged to me, and in respect of which I now hold this surplus in my hands, is not my property. I desire to get rid of this surplus, and hand it back to the person to whom it belongs.' ... The duty of this mortgagee was at least to set this money apart in such a way as to be fruitful for the benefit of the persons beneficially entitled to it. To that extent and in that manner he was, according to my understanding of the law, in a fiduciary relation to the persons entitled to the money. It was so held in the case of Quarrell v Beckford [(1816); [1816] EngR 319; 1 Madd 269 [56 ER 100]], and so far as I know has always been so held, and although I quite agree that the Court is very reluctant to treat a mortgagee as being a trustee in any sense while any money is due to him, still when he has paid himself, and has money remaining in his hands which is no longer his property, how can he be treated as other than a trustee of such money?" 50Section 58(3) of the Real Property Act provides that the purchase money from the sale of any 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. 51In Provident Capital Ltd v Printy [2008] NSWCA 131 Basten JA (with whom Tobias and McColl JJA agreed), at [30], referred to section 58(3) as effecting a "statutory allocation of the proceeds". It has been said that the sub-section "regulates the application of proceeds of sale amongst persons holding charges over property inter se, and between each of them and the mortgagor. The section, on its face, confers no interest on other persons": Naxatu Pty Limited v Perpetual Trustee Company Limited [2012] FCAFC 163; (2012) 207 FCR 502, per Dowsett J, at [59]. 52Any subsequent mortgage, or charge, over the land, converts on the sale of the land to an equitable charge over the moneys: Re Murrell; Ex parte Official Trustee in Bankruptcy [1984] FCA 314; (1984) 57 ALR 85; Hope v Hope [1977] 1 NZLR 582; Re S & D International Pty Ltd (in liq) (rec & mgr apptd) [2009] VSC 225 at [101]. 53However, as Black J noted in Re St George Bank - A Division of Westpac Banking Corporation [2011] NSWSC 730, at [16]: "On its face, the fourth limb of s 58(3) contemplates that any surplus arising on the sale of the ... Property is to be paid to the mortgagor.... 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]."

The Procedure to be followed for payment out of Court 54Section 95 of the Trustee Act empowers trustees to pay trust moneys into court. Section 99 of the Trustee Act provides that, for the Part within which s 95 falls, "trustee includes every implied or constructive trustee without any exception". 55As stated, it is clearly established that a mortgagee holding surplus funds following exercise of the power of sale is a trustee of those funds. Thus, a mortgagee holding surplus proceeds of sale can pay into Court under this section, without the need to establish that it is being sued or expects to be sued. 56Once moneys are paid into court under Part 4 of the Trustee Act, those moneys become subject to the Uniform Civil Procedure Rules 2005 ("UCPR") (s 98 of the Trustee Act). The party who pays money into court does not retain any legal, or equitable, interest in the money. The money is invested by the Court and is disbursed in accordance with the directions of the Court. As Lindsay J said in JKB Holdings Pty Ltd v de la Vega [2013] NSWSC 501, at [8]: "Once moneys are paid into court they come under the general control of the court and are liable to be dealt with, in the ordinary course of the business of the court, subject to such orders as may be made by the court from time to time." 57Division 3 of UCPR Part 55 applies to the payment of funds into Court under Part 4 of the Trustee Act and to proceedings arising out of payment into Court under that Part. 58So far as is materially relevant, UCPR rule 55.11 provides: "Proceedings for directions as to payment out of court (1) Funds that have been paid into court may only be paid out of court pursuant to the directions of the Supreme Court. (2) An application for such directions is to be made by filing a notice of motion in the proceedings in which the funds were paid into court." 59In Commonwealth Bank of Australia v The Estate of the Late Mahmoud Slieman [2010] NSWSC 661, Slattery J dealt with UCPR 55.11 and, helpfully, stated what needed to be established by a claimant. He said: "[8] An applicant under UCPR r 55.11 must establish three matters to justify an order for the payment of money out of Court. The first is to identify the person who is primarily entitled to any funds paid into Court and the basis of that entitlement. It is fundamental that the person be identified from the best evidence available, so that the Court can be sure that the person has been given appropriate notice of the application and can if necessary contest it. [9] The second matter that needs to be proved by a claimant is that he or she is not merely an unsecured creditor against the person primarily entitled to the fund but is a person who has an beneficial interest in the very fund that has been paid into Court. The same evidence that demonstrates a person's primary entitlement to the funds in Court often establishes this second matter. [10] Thirdly, it is necessary for an applicant to identify the other potential claimants to the fund in Court and to prove that those persons were notified of its claim. Those persons may consent to the claim. Alternatively, the applicant may prove that those persons either do not have valid claims against the fund or that their claims do not have priority over the applicant's claims. [11] The Court requires strict proof as to who has the entitlement to the funds in Court. There is a heavy burden placed on a party seeking payment of money out of court under Trustee Act s 98 and UCPR r 55.11. It is necessary for that party not only to prove his or her entitlement to the funds but also to prove that all other potential claimants to the funds in Court have been properly notified. Otherwise there is a risk of incorrect payments being made." 60In Ruth Chong v Super Equity Invests Pty Ltd [2012] NSWSC 27, (also a case in which consideration was given to the procedure for dealing with surplus funds that had been paid into Court by a mortgagee), his Honour noted, (at [12]), that what the procedure provided for under UCPR rule 55.11 requires (before payment out) is simply "that there be a motion filed for directions, which then provides a platform for the court's analysis of the competing priorities, followed by payment out". 61To obtain an order for payment out of court, in a case such as this one, the claimant must establish a proprietary interest in the funds in Court: IMB Limited v Nallathambi [2009] NSWSC 1387, per Slattery J, at [8]. 62In a case where a competing claimant does, or claimants do, not consent to the payment out, his Honour stated that it was for the applicant then to prove that the claimant did not have a valid claim against the fund. Slattery J emphasised that strict proof would be required, having regard to the Court's concern about the risk of an incorrect payment being made. 63Ward J (as her Honour then was) cited Slattery J's statement in both cases in In the matter of C & L Cameron Pty Ltd - GB Gazzana v Nadalan Enterprises Pty Ltd; AF Gazzana v Nadalan Enterprises Pty Ltd [2012] NSWSC 676 at [120] - [121]. 64Ward J continued, at [127] - [128]: "Rule 55 uses the terminology of a "valid claim". In other parts of the Rules (see for example Rule 13.4(1)(b)), different language is used when describing the foundation for relief (in that there is reference to there being no "reasonable cause of action" or (in Rule 13.1), in the context of an application for summary judgment, to there being no defence to the claim. It seems to me that some meaning must be given to the difference in formulation in Rule 55, which refers to a "valid" claim. Had what was there contemplated been that the payment out should depend on whether there was "no arguable claim" or "no reasonably arguable claim", then there is no reason why that formulation could not have been adopted in the Rules. (In a different context, Hammerschlag J, in Simmons v Perpetual Trustee, recently noted the difference in formulation between the two parts of Rule 13 and, in obiter, expressed the view that a reasonable cause of action was one giving rise to real issues requiring resolution by the court (such that proceedings need not be hopeless or bound to fail in order to be struck out as disclosing no reasonable cause of action, adopting the approach in Spencer v Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118).) The concept of no "valid claim" seems to me to require consideration of the validity of the claim, not simply whether it is or is not arguable or reasonably arguable. In my view, what Rule 55.11 requires is a consideration of whether there are other competing claims and, if there are, then as Slattery J pointed out in Ruth Chong, it is a matter for the Court to determine their validity and the competing priorities between any valid claims. Thus, I do not accept that the present enquiry necessarily stops at the point at which an arguable claim has been established though it may, depending on the issue, be necessary or appropriate to defer a final determination of the validity of that claim to another forum. If the evidence before the Court is such that the validity of the claim can be determined on the very payment out application, then the statutory mandate for the just, quick and cheap resolution of the real issues in dispute would support the conclusion that a final determination as to that claim should then be made. I consider below the practical import of this in the context of the existing District Court proceedings (in which, I note, at this stage no defence has yet been filed so that the matter is at an early stage)." 65Respectfully, I agree with her Honour's statement, and I intend to follow it in the present case. 66Finally, I should refer to one other passage of the reasons for judgment of Lindsay J in JKB Holdings Pty Limited v de la Vega at [112]: "Whether or not a party has a 'security interest' in funds in court may depend on the character of payments into court and the purposes for which the payments were made. To speak of such an interest is to speak of the rights of the parties as between themselves, not of a private property right vis à vis the Court. Any obligation on the part of the court to recognise, or give effect to, such interested parties may have inter se arises not from the law of property, but from the obligation of the Court to administer justice and discharge of its judicial functions."

Determination 67Ms Maloney and Ms Wells each make application pursuant to UCPR rule 55.11(2). 68In the present case, dealing with the third matter referred to by Slattery J, I am satisfied that the identity of each of the potential claimants of the surplus has been identified. 69I am also satisfied that notice of the claims has been given to all potential claimants. In fact, all of them, except Ms Margaret McKane, has taken part in the proceedings by being present at the hearing by counsel, or personally, by way of audio link. 70I am also satisfied that there is evidence identifying the registered proprietors of the Goulburn property, one of whom is Ms Wells. The other, of course, is Mr McKane. The copy of the title search of the Goulburn property identifies them both as registered proprietors. 71 In this case, it appears that the Plaintiff, as mortgagee which exercised its power of sale, paid, from the proceeds of sale, the first and second priority payments referred to in s 58(3) of the Real Property Act. There were no third priority payments as there were no other registered mortgages: Residential Housing Corporation Ltd v Esber [2011] NSWCA 25 at [53]. There was a surplus available for distribution. Then, as stated, the fourth payment to be made under the section, is, prima facie, to the mortgagors. 72As stated, there was no opposition by Ms Maloney and Mr McKane to an order being made for Ms Wells to receive the one half of the surplus to which she is entitled as an owner of the Goulburn property. Although Ms Margaret McKane did not appear, I cannot see how she could have any claim at all upon that share. Accordingly, I propose to make such an order. 73The question then becomes whether any other claimant is entitled to the share of the surplus to which Mr McKane is, prima facie, entitled. 74As has been stated above, a claimant must strictly prove that he, she, or it, is not merely an unsecured creditor against the person primarily entitled to the fund but is a person who has a beneficial interest in the very fund that has been paid into court. There is a heavy burden placed on a party seeking payment of money out of court under s 98 of the Act and UCPR rule 55.11. 75In my view, Ms Maloney has not strictly proved her entitlement to the surplus that she claims. She acknowledges that the costs to which she is entitled have not been agreed; nor have they been assessed. She has simply asserted the amount that, in each case, to which she says she is entitled 76Furthermore, she has not established any beneficial interest in the very fund that has been paid into Court. She did not specifically seek to rely on orders made on 16 June 2010, as being relevant, but as I have said, Mr McKane did not deal with his interest in the Goulburn property. In any event, the quantum of those costs has not been assessed or agreed. 77Accordingly, Ms Maloney's claim to the surplus must fail. 78Because of the conclusion to which I have come regarding her purported claim, Ms Margaret McKane, even though she has not filed a notice of motion, has not established her entitlement to any of the surplus that she claims. Even if I were to accept that there was an agreement to lend Mr McKane money, she has not established that she did, in fact, pay any money to him. 79Even if I am wrong and she had established that matter, she is merely an unsecured creditor and not a person with an equitable interest in the surplus. The contract of loan relied upon states that she may bring proceedings to recover the loan moneys if they are not repaid. She may do so if she wishes. 80Accordingly, Ms Margaret McKane's claim to the surplus must fail. 81This then leaves the application of Ms Wells. She has the benefit of orders of the Federal Circuit Court, initially made in the absence of Mr McKane, but to which he appears, subsequently, to have consented, which bears upon the payment out of the balance of the surplus. The amount of one half of that surplus is insufficient to satisfy the property order of $40,000, which amount Mr McKane had agreed to pay to her in settlement of their property proceedings. There has been no appeal in respect of that property order. 82It appears that Mr McKane's only basis for opposing the payment to her of the share to which he would, prima facie be entitled, is that he has an appeal to be heard in November 2013 which may result in those orders be set aside or varied. If the balance of the surplus is paid to her and his appeal is successful, Ms Wells would have no ability to repay the amount to which, prima facie, he is entitled. Thus, it is submitted that the Court should not immediately order the payment out so long as Mr McKane has an interest in the surplus. 83Following the submissions, I asked counsel appearing for Ms Wells whether Ms Wells could provide any security pending the hearing of the appeal in the Family Court. Upon instructions from Ms Wells, the Court was informed that she could not provide any security. 84It was not submitted that there was no threat of dissipation of the surplus if it was received. It was not submitted that she would have the capacity to repay the amount if Mr McKane's appeal were successful. (There was evidence, from Ms Wells, of a number of debts that are pressing.) It follows that there is some risk that the balance of the surplus, if paid, might not be recoverable in the event that the appeal is successful. It also follows that the appeal would, in those circumstances, be rendered nugatory. 85Whilst I consider there is merit in the submissions made on behalf of Ms Wells about the prospects of success of the appeal in the Family Court, and notwithstanding my own reservations, I do not think that I should speculate on Mr McKane's prospects of success. 86Furthermore, there was no submission that the Family Court does not have power to set aside the orders, even though they were made by consent. 87Bearing in mind the appeal is to be heard in a few months, I consider that the appropriate course is to make orders, but, in respect of one half of the surplus, stay any order for payment out to Ms Wells pending the determination of Mr McKane's appeal in the Family Court. In this way, further costs in this matter would be avoided, and Mr McKane would be satisfied that the surplus to which, prima facie, he is entitled, has been paid to Ms Wells, each Court having considered his rights to receipt of that surplus. The only disadvantage to Ms Wells is that she would not have immediate access to the whole of the surplus, but only to half of it. 88The stay on payment out would be lifted upon production to the Registrar of an affidavit stating that Mr McKane's appeal has been unsuccessful, and annexing a copy of the orders made in the Family Court confirming that matter. 89Accordingly, the orders I make are that: (a) One half of the surplus fund, including any interest accrued thereon until the date of payment, paid into Court, by Pepper Finance Corporation Limited following the sale of the Goulburn property of which Theresa Marie Parker and Jeffrey Alan McKane were the named registered proprietors, be paid to Theresa Marie Wells, or as she may direct in writing. (b) The balance of the surplus fund, including any interest accrued thereon until the date of payment, paid into Court, by Pepper Finance Corporation Limited, following the sale of the Goulburn property of which Theresa Marie Parker and Jeffrey Alan McKane were the named registered proprietors, be paid to Theresa Marie Wells upon production to the Registrar of an affidavit sworn by, or on behalf of, Theresa Marie Wells, stating that the appeal commenced by Jeffrey Alan McKane to be heard in the Family Court of Australia on 18 November 2013, has been unsuccessful and annexing a copy of the orders made in the appeal. (c) Liberty is granted to either of Theresa Marie Wells or Jeffrey Alan McKane to approach my Associate for the purpose of seeking a date for the making of any application for further orders to implement or give effect to these orders. (d) The notice of motion filed on 20 February 2013 by Kristine Frances Maloney is dismissed. (e) To the extent that Margaret McKane applies for payment to her of the surplus fund paid into Court, by Pepper Finance Corporation Limited following the sale of the Goulburn property of which Theresa Marie Parker and Jeffrey Alan McKane were the registered proprietors, that application is dismissed. (f) There be no order as to costs of the notice of motion filed by Kristine Frances Maloney, or on the application of Margaret McKane, each of which has been dismissed. (g) Otherwise, there be no order as to costs to the intent that each applicant and Jeffrey Alan McKane will pay her, or his, own costs.

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