Plaintiff v First Defendant

Supreme Court of Victoria|2015-04-23|Before: SIFRIS J

PRACTICE AND PROCEDURE - Trial on liability only - Taking of accounts by Associate Judge - Extent and ambit of reference to Associate Judge.

PRACTICE AND PROCEDURE - Orders - Whether payment of sum certain should be ordered prior to the taking of accounts - Whether interest should be ordered.

COSTS - Whether costs should be ordered in favour of successful plaintiff prior to the taking of accounts.

1 On 20 February 2015 I published my reasons for holding that a third ranking mortgagee (Fingal, the plaintiff) was entitled to recover directly from a second ranking mortgagee (NDP, the first defendant): first, amounts recovered by NDP in excess of the amount owing pursuant to its charge ($798,403), and secondly amounts that NDP by its conduct caused to be wasted or not paid in accordance with the relevant priorities ($87,906.50).[1]

2 I will assume familiarity with the Judgment. Defined words and phrases bear the same meaning. The company (AVSS), the grantor of each of the second and third ranking mortgage debentures, was the second defendant but effectively took no part in the proceedings.

3 In the judgment[2] I indicated that I would hear from the parties as to the appropriate form of any order, the further disposition of the matter, costs, and any other relevant matters. Both Fingal and NDP filed written submissions together with proposed orders which were supplemented by oral argument on 13 April 2015.

4 Although NPD is liable, for the reasons given in the Judgment, for the sum of at least $886,309.50[3], the first issue is the amount owing under the Fingal Charge.

5 The balance owing to Fingal by AVSS pursuant to the Fingal Charge will need to be established in the usual way. That is, by the taking of accounts and the making of all necessary enquiries. In this regard I agree with the orders proposed by NDP in paragraph 7(d).[4]

6 However, I would extend the enquiry to include the matters referred to in paragraph 10 of the orders proposed by Fingal ('Further Disgorgement Claim'). Clearly, based on the findings of the Court, NDP may be liable for the further amounts constituting the Further Disgorgement Claim as postulated in paragraph 10.[5] Consequently the enquiry should relate to both the amount owing to Fingal under the Fingal Charge and the further amount, if any, owing by NDP representing the Further Disgorgement Claim.

7 I do not propose to make orders for the taking of accounts and making of enquiries into the amount owing to NDP as contemplated by paragraph 7(a), (b) and (c) of the orders proposed by NDP. The amount has been established and was the basis of the conclusion that NDP had received amounts in excess of the amount owing pursuant to the NDP Charge. It is both unnecessary and undesirable to revisit this issue.

8 Finally, I do not accept given the way in which this case has unfolded, and the factual and legal issues involved, that the amount owing under the Fingal Charge is simply and only a matter between AVSS and Fingal. So far as may be relevant, I consider that NDP has a sufficient interest in this question and should be heard.[6]

9 The second issue relates to the form of declaratory relief. In my opinion declaratory relief is desirable and the parties are largely in agreement with the form of the declarations. I accept the declarations as proposed by Fingal. There are two points of contention. First, whether the declarations should include AVSS. In my opinion they should. The declarations proposed in paragraph 2 (estoppel) and paragraph 5 (duty) must necessarily include AVSS. Although AVSS elected not to take part in the proceeding, it is bound by the result. Secondly, the declarations proposed in paragraph 1(b) (Albury investors and Unitholder Loans Secured) is desirable. It was always a critical part of the case and relevant findings have been made.

10 The third issue relates to whether any order for payment to Fingal should be made now, and if so, whether the amount should include interest. Fingal submitted that even on the available evidence, and bearing in mind the interest rate of at least 15%, it is entitled to at least $886,309.50. Further, it was submitted that NDP should not be permitted to retain these funds based on some hypothetical possibility that no amount is owing. Finally, it was submitted that whatever was owing to Fingal was not relevant because the amount, if not owing to Fingal, was owing to AVSS and NDP should not retain the amount. NDP submitted that as the amount owing to Fingal is yet to be determined, no order should be made until the exact amount is known.

11 In my opinion, the sum of $886,309.50 together with interest from the commencement of the proceeding[7], should be paid into a separate interest bearing account under the control of the solicitors for Fingal. The amount should only be released or dealt with by further order of the Court. I will defer the determination of pre-litigation interest pursuant to s 58 of the Supreme Court Act 1986 until final orders are made after the taking of accounts.

12 Finally, there is no reason why this amount should not be paid directly to Fingal. It is tolerably clear that Fingal is owed something, and in the event that it recovers an amount in excess of the amount owing under the Fingal Charge, it will be obliged to remit the excess to the liquidator of AVSS. It is also not without relevance to note that the liquidator of AVSS agrees with this course of action. In these circumstances, NDP should disgorge this amount certain at the earliest possible opportunity. It is not entitled to retain this amount whatever is owing to Fingal.

13 The final issue relates to costs. There is no reason why an order for costs should not be made at this stage. The plaintiff has been successful and should get its costs of the proceeding to date. The taking of accounts can have no bearing on this issue. First, as pointed out, it is clear that something is owing to Fingal. Secondly, even if nothing is owing to Fingal, it has directly brought about the necessary disgorgement of substantial funds by NDP. It should have its costs on the usual standard basis. I will not at this stage make any cost order in favour of AVSS.

[1] Fingal Developments Pty Ltd v Nom De Plume Nominees Pty Ltd & Anor [2015] 44 VSC ('Judgment').

[3] The amount will almost certainly increase with interest and other consequential and related amounts that NDP is required to disgorge having wrongfully added such amounts to its second ranking charge and further amounts or loss that such conduct may have caused.

[4] Of course the parties should endeavour to agree this amount as contemplated by order 4 of Fingal's proposed orders. However, rather than reserve liberty to apply it is in my view desirable that a specific order be made to such effect.

[5] I do not accept that there were no findings made in relation to these matters. Although it is true that there were no specific findings because quantum was not before the Court, sufficient findings have been made in order to undertake the relevant enquiries.

[6] It is of some relevance to note that AVSS has not made a claim to any surplus owing after payment of the Fingal Charge.

[7] Pursuant to s 60 of the Supreme Court Act 1986.

At a glance

Court

Decision date

Before

Source

Judgment (24 paragraphs)

Parties

Legislation Cited (2)