Plaintiff v Defendants

1 This proceeding concerns a dispute as to the priority of several claimants to monies paid into Court in Account No. 79413 ('the Fund') arising from the sale of the property at 136 Lisbon Road, Fairfield East, New South Wales ('the Property').

2 The application arose in unusual circumstances. The plaintiff ('Morris') commenced the proceeding against Gadens, the Commonwealth Bank of Australia's ('CBA') solicitors. Morris sought orders that the surplus monies from the sale of the Property be paid into Funds in Court of the Supreme Court of Victoria.[1] The registered proprietor of the Property was Susan Alameddine ('Ms Alameddine').

3 Gadens and CBA raised jurisdictional issues, because the sale proceeds arose from the sale of a NSW property. Ultimately, all parties accepted this Court's jurisdiction arising from the payment of the proceeds into Court by the CBA.[2] This payment occurred after a somewhat faltering start and following changes to the identity of the first defendant from Gadens to CBA and the addition of other persons interested in the Fund as defendants.

4 The essential contest is between Morris and the fourth defendant ('GoGetta'). They each claim to have valid and enforceable equitable charges over the Property which they can trace into the Fund.

5 The evidence at the trial of the proceeding was by affidavit.[3] Morris' affidavits included those of by Rebecca Fahey,[4] Christopher Yam,[5] Glyn Sadler[6] and Matthew Luehman.[7] GoGetta's affidavits were of Courtney Elise Craig,[8] Shanel Pam Lambert,[9] Brooke Nicole Milligan[10] and Murray Badger.[11] The affidavits filed on behalf of the other parties are the affidavits of the second defendant, Erhan Uyanik ('Uyanik'),[12] and Mohamad Kabita ('Kabita')[13] on behalf of Uyanik.

6 Ms Alameddine was the registered proprietor of the Property. On 28 August 2015, she became bankrupt. Around 6 July 2015, CBA (who had a registered mortgage over the Property) sold the Property as mortgagee in possession. After payment of its mortgage debt and costs, on 9 March 2016 CBA paid $367,892.80 into Court, that sum is now in the Fund. In consequence of the payment into Court, CBA has been excused from further attendance or involvement in the proceeding.[14]

7 Morris lodged caveat AH675284M on the title to the Property claiming a 'charge over the interest of the registered proprietor in the land pursuant to a Guarantee of a Commercial Lease Agreement in the amount of $77,222.40 as of 8/03/2013'.[15] The caveat was registered on 18 April 2013.

8 Uyanik, the second defendant, lodged caveat AH646536A over the Property, registered on 5 April 2013, claiming an interest 'By Deed of Loan dated 1 October 2011'.[16]

9 The Official Trustee in Bankruptcy is the third defendant ('Official Trustee'). He is the Trustee of Ms Alameddine's Bankrupt estate under a sequestration order[17] and claims her estate in fee simple pursuant to s 58(1) of the Bankruptcy Act 1966 (Cth) ('Bankruptcy Act'). He lodged caveat A18799997K on the title to the Property which was registered on 10 September 2014[18] and has notified the Court that he will not advance evidence and is content to be bound by this judgment.

10 GoGetta, the fourth defendant, lodged caveat AH733675A, registered on 15 May 2013, claiming 'an equitable interest in an estate in fee simple pursuant to a charge. By written agreement signed by the Registered Proprietor Susan Alameddine as chargor, charged with payment of all monies owing from time to time to GoGetta Equipment Funding Pty Ltd, an equitable interest in her interest in fee simple described in Item (A) above'. [19]

11 In summary, therefore, the order of registration of the caveats and the date of the deed or agreement supporting the claimed interest is as follows:

(a) Uyanik, caveat AH646536A registered on 5 April 2013, arising (if at all) under a Deed dated 1 October 2011;

(b) Morris, caveat AH675284M registered on 18 April 2013, arising under Guarantee of a Commercial Lease Agreement dated 8 March 2013;

(c) GoGetta, caveat AH733675A registered on 15 May 2013, arising under a rental agreement dated 13 March 2013 between it and KE Demo Pty Ltd ('KE Demo')[20] and Susan Alameddine; and

(d) the Official Trustee, caveat A1879997K registered on 10 September 2014 arising under a sequestration order made on 28 August 2014, pursuant to s 58(1) of the Bankruptcy Act.

12 On 19 April 2013, KE Demo passed a resolution that it be wound up voluntarily.[21]

13 Uyanik is a director of Gatekeeper Project Pty Ltd and owner of X-Dem Group. Both companies engage in excavation and demolition in the construction industry.[22] In and around 2009, Uyanik met Kabita, the former manager of the KE Demo. Kabita engaged Uyanik's companies as a subcontractor to perform excavation and earth moving works.[23] Uyanik and Kabita developed a friendship between 2009 and 2010.[24] Uyanik expressed concern that the KE Demo owed him around $170,000.00 in unpaid work. In around July 2011, he was given assurances that Ms Alameddine would secure her Property for the debt to assuage Uyanik's concerns.[25] Ms Alameddine subsequently executed a Deed prepared by Uyanik's accountant.[26] Ms Alameddine also provided Uyanik with the details of the Property for him to lodge a caveat.[27] She mentioned two properties during her conversation with Uyanik, one was the property over which the caveat could be lodged, the other was Ms Alameddine's mother's residential address. Uyanik did not immediately lodge a caveat over the Property as he did not consider this step to be necessary due to the numerous assurances offered by KE Demo.[28] In about March 2013, Uyanik became aware that KE Demo was in serious financial troubles, and this prompted him to lodge a caveat. He instructed his lawyer to arrange for the caveat to be lodged as a matter of urgency.[29] The caveat was erroneously lodged against the incorrect property, Ms Alameddine's mother's property and this error was not discovered until much later.

14 At the trial on 26 April 2016, Uyanik represented himself in Court,[30] and applied for an adjournment because his barrister was not available. The application for an adjournment was refused and reasons given ex tempore as follows:

(a) Uyanik was ordered to be added as a defendant on 24 November 2015 and was required by that order to file his appearance within 21 days of receiving the plaintiff's amended originating motion. The amended originating motion, affidavits in support and a copy of the order of 24 November 2015 were served personally on Uyanik;[31]

(b) Uyanik neither filed an appearance as ordered nor took any other step until his solicitor appeared at the hearing on 18 February 2016;

(c) the application had been fixed to be heard on 18 February 2016,[32] and the plaintiff and fourth defendant were ready to proceed. It was not heard on that day as Uyanik's solicitor applied for an adjournment to file material claiming an interest in the Fund. The adjournment was granted and Uyanik was required to pay the plaintiff and fourth defendant's costs. Orders were also made for the filing of an appearance and affidavits by certain dates so that a mediation could be held and, if that failed, the trial could proceed on 26 April 2016;

(d) Uyanik did not comply with orders made on 18 February 2016;[33]

(e) Uyanik gave no notice of his inability to obtain representation on 26 April 2016 and the other participating parties were ready and sought to proceed with the hearing; and

(f) a further adjournment and the resultant costs thrown away by the parties was out of proportion to the amount in dispute and the strength of Uyanik's claimed interest.

15 Further, GoGetta applied[34] for Uyanik's claim in the proceeding to be summarily dismissed due to his non-compliance with the orders of the Court[35] and pursuant to s 29 of the Civil Procedure Act 2010 ('the CPA') and the inherent jurisdiction of the Court in consequence of his breach of the CPA's overarching obligations. That application was granted and reasons were given ex tempore (which included the reasons for refusing the adjournment) as follows:

(a) Uyanik's affidavits reveal that his claimed interest in the Property arises from a Deed of Debt dated 1 October 2011 between him, KE Demo and Ms Alameddine. Under the Deed, Ms Alameddine, as debtor and guarantor, charged her interest in a property at 113 John Street, Lidcombe, NSW with repayment of the debt rather than the Property;

(b) Uyanik's affidavits also revealed that he may have a claim to rectify the Deed because the parties may have intended that the Property be charged with repayment of the debt; and

(c) the rectification claim amounts to a 'mere equity'.[36] As between that 'mere equity' and the equitable interests arising under the subsequent charges given to Morris and GoGetta, it will be postponed to those subsequent equitable interests.[37] For that reason, there was no real prospect of Uyanik succeeding in any claim to an interest in the Fund. There is insufficient money in the Fund to satisfy Morris Finance, GoGetta and Uyanik.

16 The trial had been fixed for a full day, but at the lunch break, Morris' solicitor indicated that he was unable to attend Court in the afternoon. In an attempt to avoid a further hearing and further waste of legal costs, it was ordered that Morris file short written submissions addressing the points raised by Counsel for GoGetta[38] and for GoGetta to respond.

17 On 8 March 2013, Morris and KE Demo entered into a written Commercial Lease Agreement ('Morris Lease').[39] Ms Alameddine entered into a Guarantee and indemnity of KE Demo's obligations under the Morris Lease and was named as a Guarantor in the Schedule to the Morris Lease.

THIS DEED made on the day last hereunder referred to BETWEEN the person or persons named and described in the schedule hereto (hereinafter called "the Guarantor") of the one part and MORRIS FINANCE LTD ... the within named lessor (hereinafter called "the Lessor") of the other part.

... in consideration of the Lessor entering into the Lease with the Lessee the Guarantor hereby guarantees to the Lessor the due-and punctual payment by the Lessee of the rent and every other sum payable by the Lessee under the Lease and the due performance and observance by the Lessee of all and every the terms, conditions and provisions thereof, ... the Guarantor hereby further indemnifies the Lessor in respect of every failure of the Lessee to observe and perform the terms and conditions contained in the Lease... As security for the performance of the terms hereof by the Guarantor the Guarantor ... hereby charges in favour of the Lessor all of the interest of the Guarantor in any freehold land in Australia and agrees to deliver to the Lessor within seven days of a request from the Lessor written memorandum of mortgage in registerable from (sic) providing for payment on demand of the monies secured by that mortgage and otherwise incorporating the covenants contained in the memorandum of common provisions filed by the Law Institute or Law Society of the relevant State with the Land Titles Office in that State. [emphasis added]

19 Under the Morris Lease, the plaintiff leased a three axle 4A Tipping Dog Trailer to the KE Demo for 48 months. Rent was payable by monthly instalments of $1,608.80 (including GST).[40] Under the Morris Lease, the 'rent' is defined as the total rent payable thereunder and the 'Recoverable amount' is defined as:

(a) the amount of any rental, stamp duty and other money (including any costs for repossession, storage, maintenance and sale of the goods and any legal costs) payable under the Lease;

(b) the residual value of the goods (which by the schedule was specified to be $1.00 plus GST);

(c) all rental that would have been payable during the period of the Lease but for the termination;

(d) in calculating the 'Recoverable amount' the plaintiff must take into account the proceeds received by it following any sale of the goods; and

(e) in the case of a termination following a breach of the Lease the Recoverable amount will be liquidated damages.

20 By clause 4.3 of the Morris Lease it was provided that KE Demo agrees:

To pay interest to the lessor at the rate of 40% per annum on all monies owing by the lessee under this agreement including the rent and the lessee agrees and acknowledges that the rent and the instalments as specified in item 3 of the schedule are calculated by reference to a discounted rate of interest and that such a discount from the standard rate of 40% per annum is only extended to a lessee in the event that the lessee pays each instalment as and when it falls due in accordance with sub-clause 4.1 hereof.

21 By clause 8 of the Morris Lease, certain events of default are specified; including:

(a) a failure by KE Demo to pay any instalment or any other monies payable under the Lease within seven days of the due date for such payment; and

(b) a resolution is passed for the winding up of KE Demo or it is deregistered.

If during the continuance of this Lease there is an event of default, the lessor may forfeit and become entitled without notice to the Lessee to terminate this Lease and, at the Lessor's option, to retake possession of the goods. Upon termination in the event of default, or by effluxion of time, the lessor may recover forthwith from the Lessee the recoverable amount as defined in clause 1.1 and retake possession of the goods.

23 Provisions in the Morris Lease provide for the Lessee to:

(a) pay the costs and expenses of the enforcement under it, including all legal costs and expenses as between solicitor and own client which the Lessor shall pay or be liable to pay; and

(b) indemnify and keep indemnified the Lessor in respect of, amongst other things, any loss and damage of whatsoever kind and howsoever incurred arising from or as a result of the early termination of the Lease Agreement.[41]

24 The Lease Agreement was signed by Ms Alameddine pursuant to s 127 of the Corporations Act 2001 (Cth) ('the Corporations Act') and there was evidence that at the time she was the sole director and secretary of KE Demo.[42]

25 GoGetta is a company that provides plant and equipment finance to entities.[43] It effectively purchases specific equipment that is required by its clients and then enters a rental agreement and provides the equipment to their customers pursuant to a bailment.[44]

26 GoGetta entered into a rental agreement with KE Demo ('GoGetta Agreement'). Ms Alameddine executed a personal guarantee and indemnity in this respect and was charged with payment of all monies owed under the rental agreement with her interests in real and personal property.[45]

27 On 15 June 2013, a caveat was registered on the Property pursuant to the charging clause contained in the rental agreement. GoGetta asserts that its interest in the fund is $261,503.42 (not including any costs incurred in the Supreme Court of Victoria proceeding).[46] Proceedings were initially commenced in the Queensland District Court where no defence was filed and default judgment was granted.[47]

28 In an affidavit sworn shortly before the trial, Mr Murray Badger, the Group Risk Manager of the Silver Chef Group[48] (of which GoGetta is a subsidiary) calculated the debt, including interest and legal costs, in the sum of $387,131.03.[49]

29 Ms Alameddine became bankrupt on 28 August 2014 pursuant to the provisions of the Bankruptcy Act. The Official Trustee is the trustee of the bankrupt's estate and claimed the interest in fee simple of Ms Alameddine, as registered proprietor of that interest, pursuant to the provisions of s 58(1) of the Bankruptcy Act. It is clear that pursuant to s 58 of the Bankruptcy Act, the property of the Bankrupt vested in the trustee in equity and but for the sale of the Property by the first mortgagee, the Official Trustee would have been entitled to be registered as proprietor of the Property in accordance with the NSW equivalent of s 51 of the Transfer of Land Act 1958 (Vic), but subject to all equities upon which the Bankrupt held the Property.

30 Under the Torrens System, on the sale of a mortgaged property, the mortgagee holds the surplus on trust for the subsequent unregistered mortgagees and chargees, and the beneficiaries of that trust (being the chargees in this case) can follow the monies and uphold an equitable interest in them.[50]

31 A charge is a security whereby real or personal property is appropriated for the discharge of a debt or other obligation, but which does not pass either an absolute or a special property in the subject of the security to the creditor, nor any right of possession, but only a right of realisation by judicial process in the case of non-payment of the debt.[51]

32 The requirements for the creation of an equitable charge are:

(a) an intention to create a charge;[52]

(b) if over land, the presence of writing;[53]

(c) the existence of definite ascertainable property, including future property, over which it is contemplated that the charge will exist;[54] and

(d) where consideration is necessary, consideration.[55]

33 The general rule on the question of priority as between two equitable interests in land is that the first in time, all other things being equal, is entitled to priority. The claimant who is first in time may lose their priority by any act or omission which had or might have had the effect of inducing a claimant later in time to act to their prejudice.[56]

34 The holder of the earlier equitable interest can be postponed only if, for some special reason arising out of the relationship of the parties or their conduct, the equities are not equal. Where the equities are equal, the time factor is dominant. The court seeks the best equity, but in the absence of special circumstances, holds that the best equity is in the person whose interest was first created.[57]

35 The dispute is between Morris and GoGetta. Uyanik's claim is dismissed and the rights of the Trustee in Bankruptcy in the Property and its proceeds is subject to the prior equitable claims.

(a) by KE Demo passing the resolution on 19 April 2013 that it be voluntarily wound up, it committed an event of default under the Morris Lease;[58]

(b) by reason of the event of default, the Morris Lease was terminated;[59]

(c) under the Morris Lease, the amount that KE Demo was liable to pay as at 14 October 2014 was $78,865.67. This sum is the recoverable amount as defined in clause 1.1(i) of the Lease Agreement;[60]

(d) under the Guarantee, Ms Alameddine is liable to pay to Morris $78,865.67 together with interest and costs on a full indemnity basis, and has charged in favour of Morris all of her interest in any freehold land in Australia as security for her performance of the terms of the Guarantee;

(e) the terms of the Guarantee reveal Ms Alameddine's intention to grant a charge over the Property, so that an equitable charge in favour of Morris was created by the Guarantee;[61]

(f) Morris's equitable charge over the Property converts on the sale of the Property to an equitable charge over the Fund;[62]

(g) as at 17 February 2016, Ms Alameddine is liable to pay to the Plaintiff pursuant to the Guarantee is $150,489.20 (including interest and costs on a full indemnity basis);[63]

(h) the equitable interest of Morris as chargee of the Property was created on 8 March 2013;[64]

(i) the equitable interest of GoGetta as chargee of the Property was created on unknown date, or if the evidence of GoGetta is accepted, on 13 March 2013, that is after the Morris Lease;[65] and

(j) the equitable interest of Morris - being first in time - all other things being equal, is entitled to priority over the interest of GoGetta.

37 GoGetta accepted that Morris' charge was first in time and entitled to priority over the GoGetta charge. GoGetta's Counsel attacked the Morris Lease root and branch, claiming:

(b) the Morris Lease was not proved to have been stamped under the Duties Act 1997 (NSW) so that the Court cannot receive it into evidence;

(c) the Morris Lease was not properly executed by KE Demo in accordance with the Corporations Act;

(d) the Morris Lease is unenforceable because it imposed a penalty; and

(e) the Guarantee is uncertain and invalid and does not give rise to the charge claimed.

38 Morris met these submissions by reference to its own evidence and the filing of a further affidavit after the trial to which objection was taken,[66] and by its further submissions.[67] Having regard to the somewhat disjointed hearing of the application,[68] the early conclusion of the trial, the leave granted for Morris to file answering submissions following the trial and the nature of the supplementary evidence, I will allow the further affidavit to be filed and relied upon by Morris.

39 The Morris affidavits, including the late filed material, and the Morris' submissions[69] establish:

(a) that the Morris Lease was duly stamped under the Duties Act 1997 (NSW);[70]

(b) there is no need for this Court to consider whether the interest provision of the Morris Lease is a penalty because:

(i) Morris relies upon a default judgment given on 23 August 2013 (well before any bankruptcy of Ms Alameddine) in the Local Court of NSW by which Ms Alameddine was ordered to pay Morris $78,389.72 inclusive of costs ('the Judgment');[71]

(ii) the Judgment remains unsatisfied and interest runs on it under s 101 of the Civil Procedure Act 2005 (NSW) ('NSW CPA') at the rate prescribed by r 36.7 of the Uniform Civil Procedure Rules 2005 (NSW) ('NSW Rules'), being, broadly speaking, 6% above the cash rate last published by the Reserve Bank of Australia;

(c) Ms Alameddine is the sole director and the sole company secretary of KE Demo.[72] The Morris Lease was signed by Ms Alameddine in accordance with section 127(1)(c) of the Corporations Act;[73] and

(d) under the Guarantee, Ms Alameddine is liable to pay the amount of the Judgment and interest thereon pursuant to the provisions of the NSW CPA and the NSW Rules, together with costs on an indemnity basis. The guarantee aptly appropriates the Property for the discharge of the obligations of Ms Alameddine under the Guarantee. GoGetta's submissions that the words of the Guarantee do not evince a clear intention of the parties to charge the land with a debt are, in my view, incorrect. The critical words are set out above at paragraph [18]. GoGetta submitted that it is not clear whether the words of the Guarantee include amounts payable upon termination, but referred to the following words out of their context to make this submission:

In consideration of the Lessor entering into the Lease with the Lessee the Guarantor hereby guarantees to the Lessor the due and punctual payment by the Lessee of the rent and every other sum payable under the lease...

The Guarantee continues after that quoted passage to include in the obligations guaranteed 'and every other sum payable by the Lessee under the Lease and the due performance and observance by the Lessee of all and every the terms, conditions and provisions thereof'. In my view, the terms of the Guarantee are perfectly plain and support the charging of the Property with repayment of every sum payable by Ms Alameddine under the Morris Lease.

40 The Guarantee's terms reveal an intention on the part of Ms Alameddine to grant Morris an equitable charge over the Property which, on the sale of the Property, converts to an equitable charge over the net proceeds paid into Court.

41 Morris claims that at 2 May 2016, the amount outstanding under the Judgment was $162,134.73. That amount includes billed and unbilled legal costs calculated on an indemnity basis and interest accrued daily on that sum at the rate of $17.13 per day.[74]

42 By the GoGettta rental agreement dated 13 March 2013, KE Demo (as Hirer) rented a truck[75] from GoGetta. Pursuant to clause 13 of the rental agreement, Ms Alameddine guaranteed the due and punctual payment by KE Demo of the rent payable under the agreement and every other sum payable thereunder, together with the performance and observance by KE Demo of all the terms, conditions and provisions of the agreement.

43 Clause 6.8 of the Gogetta rental agreement provides:

(a) The Hirer...and each and every Guarantor ...charges as a fixed and floating charge all their property, both real and personal, with payment of all moneys now or in the future owing under this Agreement.

(b) if requested under this clause by the Owner, the Hirer and each and every Guarantor ...will, at their own expense execute -

(i) a consent to caveat or other like instrument under the Real Property Legislation of any jurisdiction in the form prepared by the Owner...over any or all the Hirer's and Guarantor's property;

(ii) a mortgage or charge or other like instrument under the Real Property Legislation of any jurisdiction over any or all of the Hirer's and Guarantor's property...

44 KE Demo defaulted in payments of rent under the agreement on about 4 April 2013. The truck was never repossessed and the rental agreement was terminated on 23 May 2013. Proceedings were commenced against Ms Alameddine in the District Court of Queensland on 19 May 2014 and default judgment was entered by GoGetta against Ms Alameddine on 24 June 2014 in the sum of $230,343.76, including interest of $1,771.90 to that day and costs of $2,437.60.[76] No payment has been received in reduction of this judgment debt.

45 Morris disputed the GoGetta claim and contended that the GoGetta Agreement is not dated. That, however, does not undermine the evidence that the agreement was entered into on that date. Moreover, the date on which the agreement was signed by Ms Alameddine appears on the Debit Request Authority page included in the agreement as produced to the Court.[77] Morris also disputed the quantum of the sum claimed, and the judgment entered in default, on the basis that the amount included a penalty because:

(a) the amounts that KE Demo is liable to pay pursuant to clause 7(e) of the GoGetta Agreement is not a genuine pre-estimate of the loss or damage suffered as a result of KE Demo's failure to pay the weekly rent of $1,616.38;

(b) the amount that KE Demo is liable to pay pursuant to clause 7(f) of the GoGetta Agreement is not a genuine pre-estimate of the loss or damage suffered as a result of KE Demo's failure to comply with a Notice of Intention to Repossess;

(c) the effect of clauses 7(e) and 7(f) of the GoGetta Agreement is that GoGetta would receive not only the 12 months rental but also the value of the truck[78] which greatly exceeds the loss or damage suffered by the fourth defendant as a result of KE Demo's failure to pay the weekly rent of $1,616.38 and comply with a Notice of Intention to Repossess; and

(d) GoGetta did not reduce the amount of its claim in the sum of $226,134.26 by the amount of the Security Bond in the sum of $6,461.52.[79]

46 In answer, GoGetta pointed out that there is no penalty as the GoGetta Agreement is a basic lease agreement rather than a hire-purchase. The truck rented remained GoGetta's property and the rental payment is calculated on that basis. The rental payment does not include any amount for the value of the truck itself.[80]

47 In any event, the sum claimed by GoGetta is the subject of a judgment of the District Court of Queensland, as the claim by Morris is now based on the Judgment in the NSW Local Court. The proceedings brought by Morris and GoGetta are to recover, pursuant to their respective charges on the Property, the proceeds of the sale of the Property to the extent that they establish a liability chargeable on the Fund. Although there may be no res judicata or issue estoppel as between Morris and GoGetta (so that there is no merger of the causes of action under the Morris Lease or the GoGetta rental agreement in the respective judgments obtained) nevertheless, the claims put by each claimant plainly now turn on their judgments and not proof of the indebtedness arising under the underlying agreements, the Morris Lease and the GoGetta rental agreement. It is not appropriate to go behind the judgments in either case.

48 Morris had relied in establishing its claim and quantum, solely on the terms of the Morris Lease and its affidavit evidence as to the 'recoverable amount ' under it and interest at the rate of 40% plus costs incurred and to be incurred. It was not until the Luehman Affidavit that the Judgment was revealed and then relied on. Not only has Morris gone to the expense of several apparently unnecessary affidavits (an expense it claims against the Fund in priority to the claim of GoGetta) it has caused GoGetta to raise issues that, as matters now turn out, are themselves unnecessary.

49 I have accepted Morris' late filed affidavit evidence for the reasons expressed above and because failing to do so would be contrary to the proper administration of justice. If this evidence is ignored, it would bring the Court's decision into disrepute. But Morris' change of position in tendering the Luehman Affidavit has two significant consequences: first, a significant part of its proofs by affidavit have been rendered unnecessary; second, it has caused GoGetta to incur costs and expense it would not, or at least might not, have incurred:

(a) at the outset, and until after the conclusion of the hearing on 26 April 2016, Morris claimed interest pursuant to clause 4.3 of the Morris Lease at the rate of 40% per annum.[81] This gave rise to a challenge to the enforceability of that clause on the basis that it gave rise to an unenforceable penalty.[82] Faced with a difficult argument regarding whether the interest rate of 40% gave rise to a penalty, Morris abandoned that claim and sought only to recover the amount under the Judgment in the NSW Local Court proceedings and interest pursuant to statute. This was an entirely new basis from that previously advanced and put GoGetta to considerable time, trouble and expense;

(b) the evidence of the Morris Lease initially advanced did not properly show the stamping of the Lease under the Duties Act 1997 (NSW). It was only by the Luehman Affidavit that it was made clear that the applicable duty payable on the Lease had been paid and that the stamping was properly and adequately proved. This also put GoGetta to expense that was not necessary; and

(c) the method of calculating the recoverable amount under the Morris Lease gave rise to GoGetta contesting the liability of the Guarantor to this amount.

50 It seems to me that most of these arguments were unlikely to be raised had Morris come forward with the evidence in the Luehman Affidavit in the first place.

51 Further, there was a significant waste of time and legal costs by Morris bringing this proceeding in the Supreme Court of Victoria rather than under the equivalent procedure in NSW. Initially, GoGetta objected to the jurisdiction and there was the potential for a much greater waste of costs than there has been. The parties have ultimately taken the practical course of accepting that the payment into Court by the CBA gave this Court jurisdiction.

52 It is not in the interests of the parties to have a costly enquiry into the costs that have been wasted by the conduct of Morris referred to above. The Sadler Affidavit includes Morris' solicitors tax invoices from October 2015 to January 2016. The Luehman Affidavit includes the February and March 2016 tax invoices, as well as the unbilled work from 1 April to 29 April 2016. This evidence was given for the purpose of claiming indemnity costs as a part of the money due under the Morris Lease.[83] These invoices have attached to them a reasonably detailed account of the work undertaken by Morris' solicitors. The total for professional fees, excluding disbursements and GST, work performed amounts to:

53 I consider that a good proportion of the work was required to be undertaken regardless of Morris' change of position.[84] Such matters as preparing for and attending the mediation (ordered to be held at the hearing on 18 February 2016) communications with the Court between the parties and with the client, and preparing for and attending the directions hearing and the trial. But a good part of the work performed in drafting the Fahey October and February affidavits and the Sadler Affidavit was unnecessary. Using a broad brush, it seems to me that 25% of the professional costs ought not to have been incurred - approximately $13,000.00. That does not affect the disbursements incurred.

54 Morris has established its judgment debt of $78,389.72, plus interest to 29 April 2016 in the sum of $17,646.55, legal costs of $66,098.46,[85] less $13,000.00 making a total of $149,134.73. In addition, there should be interest on that sum since approximately 29 April 2016 to the date of payment.[86]

55 Morris has the prior equity in the Fund and has proven its claim to the judgment debt of $149,134.73, plus interest since 29 April 2016. I will permit the parties to make short written submissions as to the appropriate order as to that interest. It is likely that the Fund will be sufficient to satisfy Morris' claim and leave some funds available for GoGetta. As at the time of these reasons, the Fund (Account No. 79413 in Funds in Court) amounted to $368,108.22. The Fund cannot be paid out until 1 June 2017 (for accounting reasons) and after that date will be increased by a further sum for interest, less tax.

56 I am satisfied that GoGetta has established its claim to the judgment sum of $230,343.76, including interest of $1,771.90 to the date of judgment[87] and costs of $2,437.60, a total of $232,781.36, plus interest and costs. As the Fund is not capable of satisfying even the GoGetta judgment after payment to Morris, it is not necessary to calculate the interest and the legal costs for which Ms Alameddine would be liable.

57 Because the solicitor and counsel for Morris and GoGetta are interstate, after publication of these reasons, I will allow short written submissions to be made by each of them as to the appropriate final orders.

OFFICIAL TRUSTEE IN BANKRUPTCY AS TRUSTEE OF THE BANKRUPT ESTATE OF SUSAN ALAMEDDINE

[1] Originating Motion filed 27 October 2015.

[2] Pursuant to an order made on 18 February 2016.

[3] The parties filed numerous affidavits, both with leave and without leave, so as to deal with factual and legal points taken by Morris or GoGetta.

[4] 27 October 2015 ('Fahey October Affidavit'), and 18 February 2016 ('Fahey February Affidavit').

[5] 20 November 2015 and 17 February 2016.

[6] 17 February 2016 ('Sadler Affidavit').

[7] 29 April 2016 ('Luehman Affidavit').

[8] 19 November 2015 ('Craig November Affidavit'), 5 April ('Craig April 5 Affidavit'), 19 April ('Craig April 19 Affidavit') and 22 April 2016 ('Craig April 22 Affidavit').

[9] 21 January 2016 ('Lambert Affidavit').

[10] 17 February 2016 ('Milligan Affidavit').

[11] 21 April 2016 ('Badger Affidavit').

[12] 18 March 2016 ('Uyanik Affidavit').

[13] 18 March 2016 ('Kabita Affidavit').

[15] Fahey October Affidavit, [14], exhibit RF-5.

[16] Fahey October Affidavit, [16], exhibit RF-6.

[18] Fahey October Affidavit, [18] exhibit RF-8.

[19] Fahey October Affidavit, [17] exhibit RF-7.

[21] Sadler Affidavit, [7], exhibit B, pages 9-11.

[23] Kabita Affidavit [2] and [3]; Uyanik Affidavit [2].

[24] Kabita Affidavit [3]; Uyanik Affidavit [3].

[25] Kabita Affidavit [4]; Uyanik Affidavit [3]-[6].

[30] Notwithstanding that an appearance was filed for him on 30 March 2016 by Allied Lawyers, of 1/115 Auburn Road, Auburn NSW, 2144, through their Victorian Agents, Kenneth Tullberg, Solicitors, of Level 5, 459 Collins Street, Melbourne, Victoria.

[31] On 9 December 2015. Affidavit of service of Fabiana Paula Manni affirmed on 10 December 2015.

[33] He failed to file his appearance within the time ordered, he failed to pay the costs ordered on 18 February 2016 within the time allowed or at all (in full) and he failed to file his affidavits within the time ordered.

[35] Dated 24 November 2015 and 18 February 2016.

[36] National Provincial Bank v Ainsworth [1965] UKHL 1; [1965] AC 1175; Meagher, Gummow & Lehane, Equity, Doctrines & Remedies, 5th Ed, [4-165]-[4-175].

[37] Latec Investments Ltd v Hotel Terrigal Pty Ltd (In Liq) [1965] HCA 17; (1965) 113 CLR 265.

[38] Counsel for GoGetta had filed extensive written submissions prior to the trial.

[39] Sadler Affidavit, [4] and exhibit A; Fahey October Affidavit, p.4.

[42] Fahey February Affidavit, [23], Exhibit RF-19.

[45] Craig November Affidavit, p 2; Lambert Affidavit, exhibit SL-1.

[46] This figure was revised to $300,935.64 in the affidavit of Brooke Milligan sworn 17 February 2016, being the judgment debt including interest up to the date of the affidavit and legal costs claimable under the rental agreement.

[47] On 24 June 2014. Affidavit of Courtney Craig sworn 20 November 2015, pg 2; Affidavit of Shanel Lambert sworn 21 January 2015, [16] and exhibit SL-3.

[48] The holding company of which is Silver Chef Limited.

[49] Affidavit of Murray Badger sworn 21 April 2016, [12].

[50] Beeby v Official Assignee of Pickering and Pickering [1953] NZLR 832; Re Morrison; Bennell v Smith [1962] Tas R 337; Hope v Hope [1977] 1 NZLR 582; Ex parte Australian Cooperative Development Society Ltd [1978] Qd R 395; Melbourne Property Group Pty Ltd v SC Australia Pty Ltd & Ors [2013] VSC 701 [50].

[51] Stainbank v Fenning [1851] EngR 532; (1851) 11 CB 51; 138 ER 389; Stainbank v Shepard [1853] EngR 258; (1853) 13 CB 418; 138 ER 1262; Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584 at 595; Carreras Rothmans Ltd v Freeman Matthews Treasure Ltd [1985] Ch 207 at 227; United Travel Agencies Pty Ltd v Cain (1990) 20 NSWLR 566 at 570; Tyler, Young and Croft, Fisher and Lightwood's Law of Mortgage, 3rd Aust Ed (2014) at [2.2].

[52] White v Conroy [1921] NSWStRp 21; (1921) 21 SR (NSW) 257; 38 WN (NSW) 63; Southern Wine Corp Pty Ltd (In Liq) v Frankland River Olive Co Ltd (2005) 31 WAR 162; [2005] WASCA 236; C2 Property Investments Pty Ltd v Rational Enterprises Pty Ltd [2011] WASC 280.

[53] Section 23C(1)(a) of the Conveyancing Act 1919 (NSW).

[54] Montagu v Earl of Sandwich (1886) 32 Ch D 525.

[55] Sykes and Walker, The Law of Securities, 5th Ed (1993), p 196.

[56] Butler v Fairclough, [1917] HCA 9; (1917) 23 CLR 78 at 91 (per Griffith CJ).

[57] Lapin v Abigail [1930] HCA 6; (1930) 44 CLR 166 at 185 to 186 and cases cited at 185.

[58] Sadler Affidavit, exhibit A, clause 8.7.

[59] Sadler Affidavit, exhibit A, clause 9; Fahey February Affidavit, [11]-[15], exhibits RF-16 and RF-17.

[60] Sadler Affidavit, [10] - [14], exhibits C and D, p. 12 - 30.

[61] Champion Homes Sales Pty Ltd v JKAM Investments Pty Ltd, Hotray Pty Ltd v JKAM Investments Pty Ltd [2014] NSWSC 952 at [71]; Melbourne Property Group Pty Ltd v SC Australia Pty Ltd [2013] VSC 701 [67]-[68]; Avco Financial Service Ltd v White [1977] VicRp 62; [1977] VR 561 at 565; Clark v Raymor (Brisbane) Pty Ltd (No. 2) [1982] Qd R 790 at 795.

[62] 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 [101]. These cases were cited in Pepper Finance Corporation Limited v Maloney [2013] NSWSC 890 [52] and in Application by Perpetual Limited; C & L Cameron Pty Limited & Singh [2010] NSWSC 1340 [33].

[63] Sadler Affidavit, [22], exhibit G, p. 38.

[64] Sadler Affidavit, exhibit A, p. 4.

[67] Submissions on behalf of the plaintiff in response to fourth defendant's contentions, 2 May 2016 ('Morris' May Submissions').

[68] Before and after the initial trial date of 18 February 2016 was 'thrown away' by the adjournment sought by Uyanik, GoGetta itself filed affidavits in support of its claimed interest in the Fund otherwise than as ordered by the Court: the Milligan and Badger Affidavits.

[69] Submissions on behalf of the plaintiff dated 5 April 2016 and the Morris' May Submissions.

[70] Luehman Affidavit, [7-10], exhibit A.

[71] Luehman Affidavit, [12 - 13], exhibit D, p. 16.

[72] Fahey February Affidavit, exhibit RF-19.

[73] Sadler Affidavit, exhibit A, p. 1 - 8. Under s 127(1)(c) of the Corporations Act a company may execute a document without using a common seal if the document is signed, where the company is a proprietary company with a sole director who is also the sole company secretary, by that director.

[76] Lambert Affidavit, [15]-[17], exhibit SL-3.

[78] Lambert Affidavit, exhibit SL3, paragraph 19 of the statement of claim.

[81] Fahey October Affidavit, [8]; Sadler Affidavit.

[82] GoGetta submissions filed 21 April 2016.

[83] Luehman Affidavit, exhibits F and G.

[84] From my perusal of the description of the work.

[86] Assuming that interest still runs at about $17 per day, there will be 386 days at $17 per day = $6,562.00, making a total of $155,696.73 up to 21 May 2017.