43 In his submissions counsel for Aircon denied that Crane had a secured interest in the property. This contention was based on the copy of the credit application not having been signed by or for Aircon in the space provided in the document, the signatures of the Coombs having been placed, as it appeared, as guarantors. Thus, it was said, Aircon had not signed or bound itself to the document. That seemed to be the argument to be made, but there may come to be other grounds for the contention. I note that Crane's counsel said as to this contention that Crane would rely in answer on s 127(1) of the Corporations Act. I note too that Aircon's counsel did not outline any ground of defence to liability for the price of goods supplied by Crane. Sensibly, as it seemed to me, counsel for Aircon proceeded on the basis that Crane did have an equitable interest in the property. On this basis the existence of the caveatable interest was assumed. On that assumption, and on the property being sold, Crane's secured interest would automatically attach to the proceeds of sale.
44 Lest however that assumption was not correct, the liquidator was prepared to undertake, as he had outlined in his affidavit, to retain in an account whatever amount the court considered appropriate and not deal with it other than in accordance with the decision of the County Court.
45 For these reasons Crane would not be prejudiced if the caveat was removed.
46 It is to be noted that Aircon's counsel did not seek to make any point based on the property being held on trust, doubtless because the issue involved questions of fact that could not be answered on the present summary procedure, and because the issue was appropriate to raise in the County Court proceeding. Nor did counsel say anything as to why the liquidator was selling the property when (allegedly) Aircon held the legal title as trustee for the Fund. In the absence of facts I could not speculate on that matter.
47 It is clear from these submissions, and it was made clear by Crane's counsel in argument, that the central point of Crane's concern, and ground of opposition to removal of the caveat, was that the consequence of removal and completion of the sale of the property would be that Crane lost its status as a secured creditor and would become an unsecured creditor. That this fundamental premise of Crane's submission is wrong is made clear by established authority to which Crane's counsel did not refer and which Aircon's counsel assumed but without making reference to it. I considered that Aircon's counsel was correct but Crane's counsel challenged the proposition.
48 It is sufficient, by way of authority on this point, to refer to the decision of Young J in AVCO Financial Services Ltd v Commonwealth Bank of Australia[6]. In that case a mortgagee of Torrens System Land had sold the land and paid into Court the balance remaining of the sale proceeds after recouping the amount owed to him. On an equitable chargee applying for payment out of the fund in Court it was held, granting the application, that on the land being sold the equitable charge attached to the fund that was produced as a result of there being a surplus on the sale. In so holding, Young J followed the earlier New Zealand decisions of Beeby v Official Assignee of Pickering and Pickering[7] and Hope v Hope[8]. Indeed, even earlier than AVCO, Smithers J had expressed the same view as Young J, and referred with approval to Beeby and Hope, in Re Murrell[9]. And in Nichols v Go-Tell Nominees Ltd[10], JD Phillips JA made observations which reflect this position.
49 In seeking to deal with this point Crane's counsel, in a written submission provided subsequent to the hearing, submitted that the observations of JD Phillips JA in Nichols were made in the context of considering the rights of an equitable chargee under a mortgagee sale and that his conclusion was correct because of the application of s 77(3) of the Transfer of Land Act which provides for the application of purchase monies and in particular for the payment of subsequent mortgages and charges in the order of their respective priorities. It was submitted that as the present case was not a mortgagee sale s 77(3) would not protect an equitable chargee. Accordingly, it was submitted, at the highest Crane would be left with an argument that it has a claim as a secured creditor to the proceeds and priority to other unknown claimants such as the liquidator's own claim, secured creditors, other priority creditors and unsecured creditors.
50 I do not accept this submission. In the first place, the submission sought to confine the observations of JD Phillips JA to a context different from the present and, further, to somehow confine the observations to the context of a case in which s 77(3) was applicable. Secondly, the submission ignored the well-established principle of equity referred to above. Thirdly, in my view, the observations of JD Phillips JA are not properly to be understood as confined as Crane's counsel suggested but is reflective of the more general principle that after sale of the secured property an equitable mortgage is converted to a charge on the proceeds of sale for the interest of the mortgagee.
51 It is thus seen that Crane's submission that removal of the caveat and completion of the sale meant that it would lose the benefit of its security as equitable mortgagee and, indeed, become an unsecured creditor, is wrong.
52 Apart from that erroneous reason Crane opposes the removal of its caveat except on payment of that which it is owed. As to that, it seems barely credible that Crane, a publicly listed company, is litigating over such a small debt, even with senior counsel appearing for it on this application. Doubtless Crane is entitled to be represented as it desires and to seek to gather the fruits obtainable under its commercial terms of trading, but it seemed to defy common sense and rational consideration for a liquidator and Crane to be outlaying thousands in legal costs over such a small sum. Crane's counsel described the situation as "a commercial absurdity" which, it was hoped, would not go any further. The sooner the issue is resolved the better, if only for the sake of those involved manifesting a capacity of a relative degree of mature thought. I mention this as it is part of the context in which the application comes for determination, along with the misconception as to legal principle. Moreover, the sale price of the property well exceeds the amount owing under the orders of the County Court.
53 I can briefly say something about the decisions in Thorncrest and Zombolas that Crane relied on. Neither decision mentioned the principle of equity central to this case. And neither decision is apposite on the facts. In neither case would the caveator have been protected as in this case.
54 It remains to refer to a second undertaking that was proffered by Aircon's counsel in a written submission provided after the hearing. The undertaking is in the form of an undertaking given in Nichols. The undertaking is that Aircon will not hereafter plead or otherwise assert that this proceeding gave rise to an issue estoppel that Crane had no caveatable interest or no equitable interest in the property the subject of the proceeding. That undertaking, as Callaway JA observed in Nichols, will protect Crane from any unfair assertion to the effect that the proceeding gave rise to an issue estoppel.
55 In all the circumstances of the case, accepting that there is a serious question to be tried as to the existence of the caveatable interest, I am of the view that the balance of convenience favours the contract of sale proceeding to completion and, to enable that to occur, the removal of the caveat. The alleged debt is small, Aircon is in liquidation, the interests of the parties and those of the unsecured creditors of Aircon can only be assisted by as speedy a reduction of the issues between them as possible, the sale of the property will produce a fund and Crane's secured interest will continue in the net proceeds of sale which are a number of times greater than could reasonably be expected to be required to discharge such indebtedness as may be found or (hopefully) agreed. Added to this is the protection of the undertakings which I will take from counsel for Aircon. As to the amount to be retained by the liquidator I would stipulate $100,000. Although I consider that amount far in excess of anything that ought be required I consider it prudent to allow that sum. Any greater amount would be so far removed from the basic debt as to have lost touch with reality, something that the parties might consider embracing. I also propose to order the parties to immediate mediation.
56 The disposition of the proceeding will be as follows. On the plaintiff by its counsel undertaking: