TAFE Commission v Cordoba

Background

1. Two affidavits of Ms Betty Sarkinssian, solicitor for the plaintiff, were read in support of the notice of motion, sworn 10 September 2019 ("the 2019 Affidavit") and the 31 August 2020 ("the 2020 Affidavit"), respectively. Those affidavits set out the background to this application, to which I now turn.
2. The first defendant defrauded the applicant of approximately $1.2 million. This Court gave judgment in the applicant's favour against the first defendant on 12 October 2016. The Court awarded judgment of $1,234,715.50, pre-judgement interest of $204,892.46 and costs.
3. Freezing orders over the first defendant's property have been in place since 9 September 2015. They have the effect of freezing two properties the first defendant and the proposed second defendant owned jointly: 1. 32 Keighran Mill Drive, Blair Athol ("the Blair Athol Property"); and 2. 5 Pembroke Parade, Wilton ("the Wilton Property").
4. Both of those properties were mortgaged to Commonwealth Bank of Australia Ltd ("CBA"). By agreement with the applicant (who had the benefit of freezing orders), the CBA sold both properties via its mortgagee power of sale and paid the surplus funds into Court.
5. After the initial payment into Court, CBA paid $1,386.00 to the applicant ("the Additional Amount"), which amount the applicant holds pending the determination of this motion.
6. The applicant maintained it had claims against the proposed second defendant for her benefiting from the first defendant's fraudulent conduct: claims including unjust enrichment, restitution and moneys had and received.
7. The applicant and the proposed second defendant agreed by way of Deed of Settlement, and Consent Orders attached to it, to divide the funds, and the Additional Amount on the terms of the relief sought on the notice of motion and set out in the consent order.

Consideration

1. Any deposited funds can only be paid by the authority of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") or by order of the Court: r 41.3 of the UCPR. As Lindsay J said in JKB Holdings Pty Ltd v De La Vega [2013] NSWSC 501 at [8]: [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.
2. At [14], Lindsay J said: The diversity attending payments into court calls attention to the need, on an application for payment out, to inquire as to the nature and purpose of the antecedent payment in. This is necessary to ensure that the Court acts within its mandate, judicially, and in a manner that gives due recognition to the rights and expectations of persons who may claim to be "entitled" to property affected by the exercise of the Court's jurisdiction.
3. The only entities with a claim on the proceeds of the sale of the two properties, which were derived from sale of the two properties, are: 1. CBA, who paid the funds into Court after it had satisfied its claims from the sale proceeds; 2. the registered proprietors, being the first defendant and proposed second defendant as joint tenants; and 3. the applicant, by the judgment of 12 October 2016 in this Court.
4. The Court, therefore, has all of relevant claimants before it.
5. It is also convenient to consider Brereton v Edwards (1888) 21 QBD 488 in which the English Court of Appeal, Lord Esher MR, Lindley and Bowen LJJ, unanimously held that a judgment creditor (whether the judgment was in equity or at common law) was to be paid from the funds there held in court. Various comments there confirm why the circumstances of this case also warrant the proposed orders to be made.
6. Lord Esher MR said (at 493-496): … in order to assist the creditors in obtaining the fruits of their judgment out of that money. If the money had been in the debtor's own drawer it is clear that, by virtue of s. 12 of 1 & 2 Vict. c. 110, the sheriff could have seized it under the fi. fa. Then arises the question, whether Chancery Division will by any, and, if so, by what, process, assist a creditor, who [494] has obtained a judgment in the Queen's Bench Division, to obtain the fruits of his judgment out of money standing to the credit of the debtor in an action in the Chancery Division? … on the principle that, when the Court had in its possession a thing which would otherwise have been liable to seizure under a fi. fa., the Court ought to assist the creditor to obtain the fruits of his judgment by means of it. It appears to me that the same principle applies to money in the hands of the Paymaster-General under the control of the Chancery Division. When the Court of Chancery and the Courts of Common Law were distinct Courts it appears that the Court of Chancery would have given this assistance to the process of a Common Law Court. … there need be no flinching from making a charging order in the Chancery Division with regard to any cash, when a creditor has obtained judgment for his debt, and the order is in the nature of an equitable execution in aid of the judgment.
7. Lord Justice Lindley said (at 497): … After consulting our colleagues in the other division of this Court, we think that there is no reason in principle why cash standing to the credit of a judgment debtor in the Chancery Division should not be handed over to his judgment creditor, there being no authority or practice to the contrary.
8. Lord Justice Bowen said (at 498): I think the broad principle of law which we are now deciding is this - that any judge of the High Court has power, at the instance of a judgment creditor, to make an effectual order charging the judgment debt upon a sum of money standing to the credit of the judgment debtor in the name of the Paymaster-General in an action in the Chancery Division.
9. It is also clear that there is no need to appoint liquidators when the funds are already in Court. Lord Esher MR said (at 494): In my opinion, both those steps would have been a mere waste of time of money. I think the judge had jurisdiction to make the charging order at once.
10. Bowen LJ said (at 499-500): It has been suggested that this can be done only by means of the appointment of a receiver. That would be the merest formality, when such an appointment would be useless or worse than useless. What could be the use of appointing a receiver of money which was already in the hands of the Court? In my opinion a charging order is quite sufficient, without the appointment of a receiver.
11. Brereton v Edwards has been applied in Australia: see Falcone v Mentyn (No 2) (2004) 13 Tas R 384; [2004] TASSC 156 at [7]-[8], [16] and [23]; and Re Kinsela; Ex parte Butterell (1984) 53 ALR 557 at 562-564 (only in relation to the effect of the order).
12. In New South Wales specifically, in Re Commonwealth Bank of Australia [2009] NSWSC 81 at [18], Young CJ in Eq observed: [18] The rule in England as set out on p 199 of Anderson on Execution (Butterworths, London, 1889) is that money in the control of the court may be the subject of execution with the leave of the court. This appears to be one of the things decided by the English Court of Appeal in Brereton v Edwards (1888) 21 QBD 488.
13. In this matter there are no rival claims to the funds; all relevant claimants consent to the relief sought. The funds were paid into Court because the CBA wanted to ensure that it was not liable based on its division of payments as between the first defendant, the proposed second defendant and the applicant. As seen by the Deed of Settlement and the Consent Orders, there is no dispute in this regard.
14. Further, the agreement as to the funds makes commercial sense as: 1. for the first defendant, he is paying his half of the funds where he owes over $1.4 million to the applicant; and 2. for the proposed second defendant, she is paying an amount out of her half of the funds in consideration for the certainty of the release from the applicant bringing further claims against her.
15. There is no specific procedure for how the order is to be made, but an order is required to enable the Court's Registrar to comply with it: Reliance Financial Services Pty Ltd v Lemery Holdings Pty Ltd [2006] NSWSC 1417.

Conclusion

1. For the reasons set out above, I grant the relief sought in the Notice of Motion and make the orders set out in the Consent Order.

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