Re Commonwealth Bank of Australia [2009] NSWSC 81 (25 February 2009)

Last Updated: 27 February 2009

NEW SOUTH WALES SUPREME COURT

CITATION:
Re Commonwealth Bank of Australia [2009] NSWSC 81


JURISDICTION:
Equity Division

FILE NUMBER(S):
5073/08

HEARING DATE(S):
18/02/09

JUDGMENT DATE:
25 February 2009

PARTIES:
Commonwealth Bank of Australia (P)
BMW Australia Finance Limited (Applicant)
Tamiano Sessamoni Finau (First Respondent)
Cindy Louise Finau (Second Respondent)
Frances Mary Willott (Third Respondent)

JUDGMENT OF:
Young CJ in Eq

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
Ms C Homer (S) (Applicant)
No appearance for the Respondents

SOLICITORS:
Bartier Perry (Applicant)


CATCHWORDS:
PROFESSIONS AND TRADES [168]- Lawyers- Costs- How far secured- Whether an unsecured creditor with a judgment debt can have monies owed to it paid out of court. REAL PROPERTY [18]- Joint tenancy- Severance- Where there is a surplus on the sale by a mortgagee of property held under joint tenancy, that surplus is held under joint tenancy.

LEGISLATION CITED:
Real Property Act 1900, ss 58(3), 105(1)


CASES CITED:
Brereton v Edwards (1888) 21 QBD 488
Stephens v Debney (1959) 60 SR (NSW) 468

TEXTS CITED:


DECISION:
Order that monies paid into court be paid out to an unsecured creditor with a judgment debt.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION


YOUNG CJ in EQ


Wednesday 25 February 2009


5073/08 – RE COMMONWEALTH BANK OF AUSTRALIA

JUDGMENT

1 HIS HONOUR: The Commonwealth Bank of Australia, as mortgagee, paid into Court the surplus after satisfying its mortgage over property in Orange. The amount paid in was $6,595.62.

2 The registered proprietors of the land appear to be all respondents to the present motion.

3 The applicant, BMW Australia Finance Limited (BMW), obtained a judgment in the local court against the first of the respondents. It issued a writ of execution on 7 February 2008 and had that writ recorded against the title. Under s 105(1) of the Real Property Act 1900, that recording does not create any interest in land.

4 The Commonwealth Bank, as I have said, sold the property under its powers as a mortgagee. Accordingly, the recorded writ became of no value to anybody.

5 The first two respondents, two of the former registered proprietors, Mr and Mrs Finau appear to be husband and wife and the third, Mrs Willott, is Mrs Finau’s mother. Mrs Finau has now “absconded” and cannot be served.

6 There was a family dispute amongst the respondents which ended up in the Federal Magistrates Court at Parramatta. Terms of settlement were handed up and the Federal Magistrate made orders that the proceeds of sale of the property were to be applied: (a) in payment of the costs of sale; (b) to discharge the Commonwealth Bank’s mortgage; (c) to discharge BMW’s writs; (d) to pay out money to GE Finance; and (e) to pay Permanent Custodians which was the mortgagee of certain land at Bathurst.

7 BMW is currently owed about $21,000, much more than the amount in Court.

8 However, BMW only has judgments against two of the three registered proprietors and no claim at all against the third, Mrs Willott.

9 As I have said before, there is no charge over the land because of the recording of the writs: BMW is an unsecured creditor.

10 Section 58(3) of the Real Property Act 1900 requires the mortgagee to account first in payment of the costs of sale, then to satisfy its own debts and thirdly “in payment of subsequent mortgages, charges or covenant charges (if any) in the order of their priority, and the surplus (if any) shall be paid to the mortgagor, charger or covenant charger, as the case may be.”

11 Accordingly, the monies in Court must be treated as being the monies of the mortgagors and BMW is an unsecured creditor with a judgment debt (with a right to obtain execution) and we know of at least one other unsecured creditor, namely GE.

12 Four matters need to be considered, namely:

(a) what is the situation where a mortgagee sells property owned by more than one person? If there was a joint tenancy is it severed so that one-third of the monies belong to each of the former registered proprietors or does the joint tenancy still subsist in the money in Court?

(b) can one execute against money held in Court?

(c) because the only debtors are the first two respondents, can Mrs Willott’s share be attached? and

(d) should notice be given to other possible claimants?

13 The material before the Court does not conclusively show that the Orange land was held as joint tenants, but there is sufficient material there to infer that is the situation. In particular, one of the co-owners purported to transfer his share to another co-owner, but the mortgagee’s sale took place before that dealing was registered.

14 (a) It would not appear that the sale by a mortgagee would of itself destroy a joint tenancy. It would seem that the surplus is to be in the same plight as the original land and this is the flavour that comes through in s 58 of the Real Property Act. Analyses such as that of Myers J in Stephens v Debney (1959) 60 SR (NSW) 468 seem to me to confirm this.

15 Although there is no actual decision on the point, it seems to me that where there is a surplus on the sale by a mortgagee of property held under joint tenancy the surplus is held as joint tenants. This is thus the status of the fund in Court.

16 (b) As I have indicated, BMW gets no security over the fund merely because it had lodged a writ against the title.

17 BMW is thus to be considered as an ordinary unsecured creditor of the first two defendants.

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.

19 As Anderson makes clear, the process formerly involved some technicalities. However, nowadays, in the light of statutory strictures to minimise technicalities, the Court will rarely order execution. Indeed, the Court may even order that money be paid out of Court to the person who is entitled to levy execution even though, strictly speaking, there should be a charging order and then a consequential order made.

20 (c) Were it not for orders consented in the Federal Magistrates Court I would have thought that BMW’s remedies are limited to obtaining two-thirds of the amount in Court from the Finaus and Mrs Willott is entitled to the other third.

21 Indeed, BMW wrote to the solicitor for the Commonwealth Bank suggesting that two-thirds be paid to BMW and the other third to Mrs Willott. The Bank did not do this because, it would seem the Bank did not receive sufficient documentation from the mortgagors for it to consider itself safe to do so.

22 In the Federal Magistrates Court Mrs Willott was joined as a party. The parties agreed, and the Magistrate so ordered, that upon completion of the sale, the BMW writs would be discharged and after that monies should be paid to GE Finance Company. Ms Homer for BMW says that this amounts to an acknowledgement by Mrs Willott that the monies in the surplus should go to BMW rather than to her and that the BMW monies should be paid out before any monies to GE. I had some difficulty with this submission when it was made. However, in view of the small amount I do not believe that the Court should be over-technical.

23 The consent orders filed before the Magistrate should be construed as a direction that the whole of the monies should be paid first to BMW and then to GE and then to the mortgagee on other property.

24 (d) In view of the small amount involved, the fact that BMW has a judgment and is entitled to proceed to execution, I do not feel constrained to give further notice of this application.

25 Accordingly, I make an order that the monies paid into Court be paid out to BMW.

26 I should note that the practice of the Court in the time that I was a the Bar was that a person seeking an order such as the present obtained a certificate on the day of hearing from the Court’s accountant on level 5 as to how much was in Court. The reason for this is that the money is usually invested with the Public Trustee’s common fund or other interest producing account and may perhaps be subject to deduction of some administrative fee so that the amount which is paid into Court is not necessarily the amount that should be paid out. I believe this practice is still the practice of the Court: if it is not, it should be.

27 I will merely order that the applicant is entitled to be paid the money in Court, but just how much this is will remain to be determined by the administrative officers of the Court. There may be liberty to apply if there is any problem.

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LAST UPDATED:
26 February 2009