Supreme Court New South Wales Medium Neutral Citation: Abdallah v Baygan (No. 3) [2020] NSWSC 680 Hearing dates: 1 June 2020 Date of orders: 01 June 2020 Decision date: 01 June 2020 Jurisdiction: Equity Before: Henry J Decision: See paragraph [14] Catchwords: LAND LAW – equitable charge over sale proceeds – priority dispute resolved by consent – declaratory relief appropriate – no issue of principle Legislation Cited: Nil Cases Cited: Abdallah v Baygan [2019] NSWSC 1507 Texts Cited: Nil Category: Principal judgment Parties: Brian Abdallah (First Plaintiff) Karli Anderson (Second Plaintiff) Ali Baygan (First Defendant) Samanch Ghabelzadeh (Second Defendant) Westpac Banking Corporation ACN 007 457 141) (Third Defendant) ACN 601 158 507 Pty Ltd (ACN 072 705 241) (Fifth Defendant) Impero Pacific Group Pty Ltd (ACN 139 610 441) (Sixth Defendant) Representation: Counsel: Anthony Rogers (Plaintiffs) Solicitors: John B Hajje and Co Solicitors (Plaintiffs) McLaughlin Lawyers (Fourth Defendant) KB Legals (Fifth Defendant) Clyde & Co (Sixth Defendant) No appearance for the First, Second and Third Defendants File Number(s): 2019/242734 Publication restriction: Nil Judgment Ex TEMPORE (revised) 1. In these proceedings, the plaintiffs seek, amongst other orders, judgment against the first and second defendants for amounts outstanding under a loan agreement dated 6 May 2019, pursuant to which the plaintiffs advanced sums totalling $600,000 to the first defendant. 2. By a guarantee and indemnity also dated 6 May 2019, the second defendant (who is the wife of the first defendant) guaranteed payments of all monies owing by the first defendant under the loan agreement. The second defendant also granted a mortgage over a house she owns in Walker Avenue, St Ives (Property) to secure her obligations under the guarantee. The mortgage is unregistered and the subject of a caveat lodged by the plaintiffs in respect of the Property. 3. On 4 November 2019, when the proceedings were before Ball J, his Honour determined that the plaintiffs' unregistered mortgage took effect as an equitable charge over the Property. His Honour also made orders for the judicial sale and possession of the Property: Abdallah v Baygan [2019] NSWSC 1507 at [16] and [18]. 4. The Property was the subject of a sale earlier this year. Completion of the sale contract was effected on 11 May 2020. After payment of the registered mortgage in favour of the third defendant, Westpac Banking Corporation, and the costs associated with the sale, a sum of $413,783.20 (net sale proceeds) remains for distribution to secured creditors. The net sale proceeds are currently held in the trust account of the plaintiffs' solicitor, John Hajje. 5. The plaintiffs claim to be entitled to the net sale proceeds as a secured creditor. They assert that their equitable charge takes priority over any claims by the fourth, fifth and sixth defendants (other defendants), who were joined as parties to the proceedings last year as they claimed some security interest in the Property. 6. The proceedings were listed for hearing before me today to determine the issue of the competing claims to the net sale proceeds by the plaintiffs and the other defendants. 7. Prior to the hearing, I was informed that the dispute regarding the priority of the interests held by the plaintiffs and the other defendants had been resolved between the parties in favour of the plaintiffs. Accordingly, the plaintiffs now seek the Court to make declarations regarding its priority and entitlement to the net sale proceeds, as well as orders relating to the conduct of the proceedings, by consent. 8. As counsel for the plaintiffs noted, it is not the practice of this Court to make declarations by consent without a hearing on the merits or in the absence of facts that support the granting of declaratory relief. 9. In this case, I am satisfied, having regard to the evidence before me and the matters referred to above, that declaratory relief of the nature sought by the plaintiffs is appropriate in this case. 10. According to an affidavit of Stephanie Anne Hajje sworn 5 May 2020, the first and second defendants have not made any payments to the plaintiffs under the loan agreement and guarantee and their indebtedness now stands at $754,000 (outstanding sum), being the amount of the initial loan of $600,000 plus interest, which has been running at $14,000 per month. The outstanding sum is secured by the plaintiffs' unregistered mortgage over the Property and is greater than the amount of the net sale proceeds. Subject to any interest claimed by the other defendants, the plaintiffs are, therefore, entitled to have the net sale proceeds released to them. 11. The fourth defendant's solicitor, who appeared at today's hearing, informed the Court that his client consents to the plaintiffs receiving the net sale proceeds and to declaratory relief that the net sale proceeds are charged in favour of the plaintiffs in priority to any claim by his client. There is also evidence before the Court of communications received by the plaintiffs' solicitors from the solicitors for the fifth and sixth defendants consenting to declaratory relief of the nature sought by the plaintiffs. Implicit in this, is an acceptance by the fourth, fifth and sixth defendants that they do not assert priority to the net sale proceeds ahead of the plaintiffs' claim. 12. The first and second defendants have not been involved in the litigation and have taken no steps to defend the claims. 13. It follows, in my view, that there is a proper basis and no impediment to granting the orders and declaratory relief sought by the plaintiffs. In that regard, I note that the third defendant's interests have been protected, as it has already been paid out from the sale proceeds of the Property. 14. For those reasons, I make the following orders and declarations: 1. Declare that the proceeds of sale of the land contained in Certificate of Title Folio Identifier 27/226211 and known as 21 Walker Avenue, St Ives, New South Wales (Property) in the sum of $413,783.20 (the charged moneys) is charged in favour of the plaintiffs in priority to any claims by the fourth defendant, the fifth defendant and the sixth defendant upon the charged moneys. 2. Declare that the plaintiffs are entitled to have the charged moneys, which are currently held in the trust account of John B Hajje & Associates, released to them forthwith. 3. Order that the proceedings against the fourth, fifth and sixth defendants be otherwise dismissed. 4. Subject to order 5, order that as the between the plaintiffs, the fourth defendant, the fifth defendant and the sixth defendant, that there be no order as to the costs of the proceedings, to the intent that each party shall pay their own costs. 5. Order that order 4 be made without prejudice to the rights of any party to make claims for costs against the first and/or second defendant. 6. Order that the dismissal of the proceedings against the fourth, fifth and sixth defendants are made without prejudice to any rights which the fourth, fifth and sixth defendants may have against the first defendant or against the second defendant. 7. Direct that the plaintiffs' claims against the first and second defendants be stood over to the Commercial List for directions at 9.45am on 31 July 2020, noting that the plaintiffs intend to seek default judgment for the balance of the outstanding sum. ********** Amendments 02 June 2020 - Typographical errors. 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