HER HONOUR: This is an application by notice of motion dated 15 May 2019 filed by Ankat Investments Pty Ltd (the applicant) seeking payment out of Court to it of proceeds that were paid into Court by Perpetual Trustee Company Limited, being surplus proceeds from the sale of land comprised in Certificate of Title Folio Identifier 189 of SP66339 and located in Chiswick, New South Wales (the Chiswick property). The moneys that were paid into Court pursuant to Pt 4 of the Trustee Act 1925 (NSW) amounted to the sum of $8,539.75. Perpetual Trustee Company Limited (the plaintiff) was the registered mortgagee in respect of the property and exercised its power of sale in the circumstances outlined below. The applicant did not press prayer 1 of its notice of motion.
On this application, the applicant read two affidavits of Erin Felthouse, a solicitor employed by the solicitor on the record for the applicant those being affidavits affirmed 15 May 2019 and 26 June 2019, and an affidavit sworn 13 November 2018 of Cindy Shum, a solicitor employed by the solicitor for the plaintiff.
The background to the present application may be summarised by reference to the material before me and the submissions that have been filed by the applicant as follows. The land in question is land formerly owned by Joseph Joukhador (Mr Joukhador). On 21 February 2018, Mr Joukhador mortgaged and/or charged his interests in the land for repayment of debts owed to the applicant pursuant to a loan agreement. That loan agreement was an agreement between the applicant (as the lender), Joe's Enterprise Corp Pty Ltd (Joe's Enterprise) (as the borrower), and Joseph and Elias Joukhador (as the guarantors). Mr Joukhador executed that loan agreement in his capacity as a director of Joe's Enterprise.
On 10 May 2019, Mr Joukhador was made bankrupt by sequestration order in the Federal Circuit Court of Australia. The applicant commenced proceedings in this Court by statement of claim following default by Joe's Enterprise, Mr Joukhador and Elias Joukhador under the loan agreement seeking to enforce the applicant's rights pursuant to the loan agreement including possession of the security property.
On 26 October 2018, Darke J in the Real Property List made orders including an order for judgment for the applicant against Joe's Enterprise and Mr Joukhador and Elias Joukhador for the amount of $250,000 (proceedings 2018/00177762). His Honour also made an order for interest on the amount of $250,000 at the rate of 7.5%per month, compounding monthly from 23 March 2018 to the date of judgment.
His Honour further made a declaration that on 21 February 2018, Mr Joukhador charged a number of properties with the repayment of all moneys owing to the applicant pursuant to the loan agreement including the Chiswick property, the subject of the present application. The evidence before me from Ms Felthouse, see [8] of her 26 June 2019 affidavit and Annexure B, is that the secured debt owing to the applicant is now in excess of $453,000.
On 3 October 2017, the plaintiff as the registered mortgagee of the Chiswick property, commenced proceedings against Mr Joukhador seeking, amongst other things, orders for possession of the land (proceedings 2017/00297947). That relief was granted. The land was subsequently sold by the plaintiff. The expenses occasioned by the sale and the mortgage in favour of the plaintiff were discharged from the sale funds (see Ms Shum's affidavit at [11], [16]-[17]). The funds paid into Court are, as I have indicated earlier, the surplus proceeds of sale of the Chiswick property by the plaintiff as mortgagee.
The current application is for payment out of Court of the surplus proceeds from the sale of the land to the applicant. It is made pursuant to r 55.11 of Uniform Civil Procedure Rules 2005 (NSW) (UCPR). The applicant submits that, on the evidence, it has the benefit of the charge over the land (that charge being the subject of the declaration made by Darke J to which I have referred above) and that, on the sale of the land, the applicant's equitable charge was converted to an equitable charge over the relevant funds (see Pepper Finance Corporation Limited v Maloney [2013] NSWSC 890 at [52] per Hallen J). Thus, it is submitted that the applicant is entitled to the funds and has a beneficial interest in the specific funds and is not merely an unsecured creditor.
It is submitted that Mr Joukhador's bankruptcy did not interfere with the applicant's secured interests or its ability to enforce its secured interests, reference there being made to s 58(5) of the Bankruptcy Act 1966 (Cth) and to the decisions in Morris Finance Ltd v Brown [2017] FCAFC 97 and Morris Finance Ltd v Free [2017] NSWSC 1417.
Exhibited to Ms Felthouse's affidavit affirmed 15 May 2019 is the title search for the land undertaken on 3 July 2018 which disclosed various dealings including: the mortgage to the plaintiff; a caveat lodged by the applicant; the order of the Court; and a caveat lodged by the trustee in bankruptcy.
It is noted that there is no entry recorded on the title in priority to the applicant other than the mortgage to the plaintiff, which has now been discharged. The applicant has made enquiries with the trustee in bankruptcy of Mr Joukhador's bankrupt estate in relation to the summons in these proceedings and the trustee in bankruptcy has informed the applicant's solicitors that he will not be submitting an appearance in these proceedings (see Ms Felthouse's affidavit affirmed 15 May 2019 at [15]-[18]).
Ms Felthouse has deposed that the trustee in bankruptcy was served with the applicant's notice of motion on 24 May 2019 (see Ms Felthouse's affidavit affirmed 26 June 2019 at [10]). (I interpose here to note, there has been no appearance by the trustee in bankruptcy in the proceedings to date or at this hearing.)
The applicant by its solicitors has also made enquiries in relation to the order of the Court that appears on the title (see Annexure F to Ms Shum's affidavit). Ms Felthouse in her 15 May 2019 affidavit at [20] noted on the dealing relates to a freezing order that I made in other proceedings on the application of Toyota Finance Australia Limited (Toyota Finance) on 1 May 2018. The applicant submits that Toyota Finance has not asserted any interest in the surplus funds or any interest in priority to the applicant's (see Ms Felthouse's affidavit affirmed 15 May 2019 at [22]-[26]).
The applicant submits that the freezing order operated in personam against Mr Joukhador and did not confer any proprietary interest in the land to Toyota Finance, referring in this regard to the authority that the purpose of a freezing order is not to provide the plaintiff with security nor to improve his position in the event of the defendant's insolvency (referring to Cardile v Led Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18 at [51]).
As adverted to above, Ms Felthouse has deposed that Toyota Finance was served with a copy of the applicant's notice of motion on 24 May 2019. There has been no appearance by Toyota Finance on this application nor has Toyota Finance indicated any interest in opposing the application.
Ms Shum has deposed at [21] of her affidavit to the effect that a copy of the summons and the affidavit in support has been served on all parties that the applicant has identified may have an interest in the application. Ms Felthouse has deposed in her 26 June 2019 affidavit at [10] that the applicant has served its application on all parties identified in the affidavit of Ms Shum. At [27[ of her affidavit affirmed 15 May 2019, Ms Felthouse notes that she is informed from the affidavit for the plaintiff that the summons was served on Lion Finance Pty Ltd, Westpac Banking Corporation and Commonwealth Bank of Australia.
The applicant has not been notified, nor has the applicant identified any interests over the surplus funds in priority to its own, and in those circumstances the applicant seeks: payment of the surplus funds inclusive of accrued interests; and, pursuant to its notice of motion, an order that the surplus funds and interests be paid into the trust account of Kekatos Lawyers Pty Ltd as the solicitors for the applicant who is the defendant in these proceedings. I am satisfied that it is appropriate to make such an order. Accordingly, I order that surplus proceeds in the sum of $8,539.75 from the sale of the land comprised in certificate of title folio identifier 189 of SP66339, and known as the Chiswick Property, be paid out of Court into the trust account of Kekatos Lawyers Pty Ltd as the solicitors for the applicant.
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Decision last updated: 05 July 2019