Westpac Banking Corporation v Arthur James Morris & Ors

EX TEMPORE Judgment 1Dina Johnson applies by motion filed in Court on 10 February 2014 for an order pursuant to UCPR, r 55.11 for the payment of $107,221.62 out of funds in Court in that amount in these proceedings as at 20 January 2014. She also seeks any interest accrued thereon since that date. 2On the basis of the evidence advanced in the presentation of this application today, I will make the orders that she seeks. Despite the apparent simplicity of the order sought, its background is reasonably complex. 3Dina Johnson was once married to Mr Con Morris. Their marriage ended in divorce and in a dispute in the Family Court of Australia. The defendants in the Family Court proceedings included not only her ex husband, Con, but other members of his family, his parents James and Voula Morris, and a family company, James and Voula Morris Pty Ltd. 4The proceedings commenced in the Family Court in April 1994. By December 1996 the Honourable Justice O'Ryan had made orders in Dina Johnson's favour including costs orders in the sum of $132,226.26 against Con Morris, James Morris, Voula Morris and the company James and Voula Morris Pty Ltd. 5These other family members and the family company were joined to the Family Court proceedings because there were disputes about whether certain assets were assets of the marriage or were assets of these other members of the Morris family. But Dina Johnson was successful in the proceedings, as evidenced by the costs order in her favour. 6The conclusion of the Family Court proceedings provides the foundation for the present proceedings which were commenced in this Court in 1998. One of the assets of the Morris family was a shopping centre which had been mortgaged to Westpac. Separately from the Family Court proceedings, Westpac brought proceedings under its mortgage over that commercial property, to take possession of it and exercise its power of sale. That was all done, and Westpac sold the property. But there was a surplus of funds. 7The surplus was paid into Court by Westpac pursuant to its obligation as a bare trustee in respect of the surplus, to hold it for the next person in priority entitled to the fund after the first mortgagee. 8The disposition of the surplus fund in Court itself became a matter of dispute. The issue came before Hodgson CJ in Eq, who decided upon the disposition of the fund: Westpac Banking Corporation v Morris and Others [1998] NSWSC 666. It is not necessary to recount the rest of the background to the present proceedings which for convenience I will call "the Westpac proceedings". They are fully set out in Hodgson CJ in Eq's judgment. 9There were contests between the eight parties to the Westpac proceedings, four of whom were parties in common with the Family Court proceedings. Apart from Dina Johnson, who was the fifth defendant, the defendants to the Westpac proceedings are: (1) James Morris; (2) Voula Morris; (3) J & V Morris Pty Ltd; (4) Con Morris; (5) Arthur Morris; (6) Lista Morris; (7) James & Voula Morris Pty Ltd; and (8) John Morris. Thus the new parties to the Westpac proceedings who were not parties to the Family Court proceedings are J & V Morris Pty Ltd, Arthur Morris, Lista Morris and John Morris. 10It is clear from Hodgson CJ in Eq's judgment there were three main disputes within the Morris family about what would be done with the surplus Westpac had paid into Court. 11First there was an issue concerning a claim by Arthur for subrogation over some of the funds. Secondly, there were claims to an entitlement to some of those funds by family members, who said they had paid more than their equal share of the liabilities to Westpac, and should now be re-couped from the surplus funds. But most importantly, the third issue was that Dina Johnson applied to have any money that would otherwise be allocated from the funds in Court to James and Voula Morris Pty Ltd, or to James Morris, so that those funds should be used to satisfy the debts due by those two parties to her under the judgment for costs in the Family Court. 12In substance, as Hodgson CJ in Eq explained, and accepting the argument of Dina's counsel, Mr Rares SC (as his Honour then was), Dina's application was by analogy for a garnishee order in respect of the judgment for costs in the Family Court of Australia: Re Combined Weighing and Advertising Machine Co (1889) 43 ChD 99, Blacktown Concrete Services v Ultra Refurbishing & Construction (1998) 28 ACSR 759, and Bridgewater v Leahy (1998) HCA 66, 23rd October 1998. Because the money had been paid into Court by Westpac in the Westpac proceedings, his Honour observed that this Court was in a position of a garnishee and the Court was itself unaware of any rival claims to the money at the time his Honour gave judgment in December 1998. 13To overcome the problem of creditors having insufficient opportunity to make claims on the fund his Honour made orders that greatly simplify the course which the Court should now take. His Honour found that James and the Company James and Voula Morris Pty Ltd had entitlements to the funds in Court but that Dina Johnson had superior rights over their entitlements to the fund. The orders which his Honour made in the Westpac proceedings were as follows: "8. The Registrar in Equity set aside 76.83% (in respect of the second defendant's entitlement) and 7.98% (in respect of the sixth defendant's entitlement) to: (a) the balance of the surplus moneys paid into Court by the first plaintiff totalling $72,636.93 (including all interest accrued thereon), after deduction of the sum of $30,000.00 in accordance with order 6 herein; (b) the surplus moneys paid into Court by the second plaintiff totalling $104,005.54 (including all interest accrued thereon); (c) the retention moneys held by the second plaintiff (including all interest accrued thereon) upon them being paid into Court; and such amounts shall: (d) stand as if garnished by the fifth defendant in accordance with SCR Part 46 and be applied in respect of the costs order in the sum of $132,226.26 obtained by the fifth defendant in Family Court of Australia, Sydney Registry, proceedings number SY 4092/94 and all interest accrued on that sum since 13 December, 1996 at the rates prescribed by the Family Court Rules which interest totalled $34,386.07 as at 4 December, 1998 and continuing at the daily rate of $50.72 until payment; (e) be paid to the fifth defendant." 14Between 1998 and 2002 very little happened in relation to the funds in Court, either with respect to the present application Dina Johnson or anyone else. As order 8C contemplated, further monies were paid into Court in 2002 by Westpac, being moneys that had been retained on account of its potential future costs as mortgagee. Those further moneys of approximately $70,000 were paid into Court in 2002. The only other application for payment out of funds in Court was from Con's trustee in bankruptcy who in 2002 was paid a further approximately $6,000. 15The Court records show that there is now in Court only the sum of $107,228.62. The precise accounting of what Westpac paid into Court, and what was taken out, is not entirely clear. But what is clear is all that is left now is that amount. 16The amount left is substantially less than the amount of the "garnishee" order which Hodgson CJ in Eq made in Dina Johnson's favour. As indicated above, order 8(d) has the amount paid into Court to "stand as if garnished" by Dina Johnson for a sum of $132,226.26 by way of costs, plus $44,286 in interest and that this sum be paid to the fifth defendant, Dina Johnson. 17I am satisfied on the evidence that none of those sums have been paid to Dina Johnson. The reason for this, as she explains in her affidavit, is that she was so traumatised by the Family Court of Australia proceedings and by dealing with members of the Morris family during these proceedings in 1998 that she wanted to have nothing to do with legal proceedings, Courts or any of the funds if she ever had to fight for them again. 18I am satisfied that the evidence well explains why she did not make the application between Hodgson CJ in Eq's judgment in 1998 and the present time. Given the aggressive nature of these two sets of proceedings, her desire to distance herself from them is understandable. Indeed, she says at one stage she left Sydney and settled in Melbourne to get away from members of the Morris family. 19Ordinarily in a case such as this, an applicant for funds out of Court under UCPR, r 55.11 must establish a number of matters: (1) that the plaintiff is entitled to the funds paid into Court; (2) whether there are any other persons who may be entitled to funds in Court; and, (3) whether notice has been given to all other persons who are entitled to funds in the Court, so they have an opportunity to make a competing application. I discussed these general principles in La Trobe Capital & Mortgage Corp Ltd; Re [2009] NSWSC 1118. For two reasons the Court can be very confident here that all the claimants to these funds have been appropriately notified and that the order of priority of claims upon the funds has been worked out. 20First, in 1998 an active contest took place between all the parties to the Westpac proceedings about the relative priority to the funds in Court. The kind of priorities fight or contest which can sometimes take place on an application under UCPR, r 55.11 action in this case, took place some 15 years ago before Hodgson CJ in Eq in the Westpac proceedings, who considered and determined that contest. 21All the potential claimants upon the funds in Court were actively fighting at that time for their appropriate share. Hodgson CJ in Eq's judgment resolves those disputes. But his Honour was mindful of the possibility that there might be other creditors, including secured creditors, of those defendants who might have wished to make claims upon the funds. I can be satisfied now, 15 years later, that the interests of those persons have been addressed by the form in which Hodgson J made his orders: he stayed the orders for a period of time to allow the creditors of the corporate entities and a number of other parties to intervene if necessary for the purposes of seeking to advance their claims over the funds in Court. No claim from any such creditor emerged. 22The issue of notice to creditors is further addressed by an event some four years after Hodgson CJ in Eq's judgment. In 2002 Henry Davis York who were the solicitors for Westpac, wrote to the then solicitors for Dina Johnson, Messrs Slade Mannering & Co indicating that the additional amount of money contemplated by clause 8(c) of the Court's orders had then recently been paid into Court. 23Henry Davis York gave Dina Johnson information about this. But after explaining that the additional $71,317.35 had been sent to the Registrar in Equity, with a covering letter, Henry Davis York advised her: "You should now contact the Registrar to assert any entitlement your clients have to the funds under order of the Supreme Court in 7 December 1998. We have sent a similar letter to each of the defendants' solicitors". 24Thus it is evident that at this time in 2002 all the defendants would have been reminded through their solicitors of their entitlement to claim any of these funds in Court. The evidence makes clear that no claim has been made on the funds following upon that correspondence. 25But the solicitors now acting for Dina Johnson have gone even further to try and track down the current whereabouts of the defendants to the Westpac proceedings. The short result of their thorough inquiries is to show that James and Voula Morris are both deceased, J & V Morris Pty Ltd has been deregistered, as has the other family company, James & Voula Morris Pty Ltd. Despite extensive searches, Con, Arthur, Lista and John Morris cannot be located. The evidence also shows that Lista Morris divorced Arthur, to whom she was married, since that time. 26It seems that there is no realistic prospect of any other claimants emerging in relation to these funds. And the evidence shows that the claims of all relevant claimants have already been dealt with. 27The amount in Court is considerably less than the priority that was given to Dina Johnson's claim back in 1998. And order 8(d) and 8(e) of Hodgson CJ in Eq's orders provided for the priority of her claim over all other persons found to be entitled to the funds in Court: namely James, and the company, James & Voula Morris Pty Ltd. 28In those circumstances, I will make the orders for the payment of funds out of Court. And I will make orders in accordance with the short minutes of order initialled by me and dated today which will be placed with the Court papers.