Supreme Court New South Wales Medium Neutral Citation: Wei v Chen [2012] NSWSC 751 Hearing dates: 4 & 5 April, 4 May, 15 June 2012 Decision date: 06 July 2012 Jurisdiction: Equity Division Before: Hallen AsJ Decision: 1.Note that the documents identified in Order 1(i) - (viii) be regarded as having been served upon the first Defendant. 2.Note the undertaking of the second Defendant's solicitor to pay the filing fee in respect of the notice of motion dated 14 June 2012 and the Cross-Claim filed in court on 15 June 2012. 3.Declare that the amount payable by the Plaintiff and the first Defendant to the second Defendant is $317,005.46. 4.Order that the amount paid into court in proceedings 2012/99648, together with any additional interest accrued thereon, until the date of payment, be paid to the second Defendant in part satisfaction of the amount payable referred to in order (3): (a) as to one half of the amount held and interest no earlier than 21 days from the making of these orders; (b) as to the other half of the amount held and interest no earlier than 49 days from the making of these orders. 5.Direct that, within 7 days of the date of the reasons for judgment being published, the first Defendant be advised, in writing, of these orders and be provided with a copy of the reasons for judgment in the same manner as previous documents have been served upon him. 6.Order that there be a verdict and judgment for the second Defendant against the Plaintiff and the first Defendant in the amount of $118,044.67. 7.Order that the balance of the Statement of Claim and the Cross-Claim be dismissed. 8.Order that the Plaintiff and the first Defendant pay the second Defendant's costs of preparing the Cross-Claim and her affidavits in support thereof, and of her appearance on 5 April 2012 and 15 June 2012. 9.Order that the second Defendant pay the Plaintiff's costs of preparing the affidavits and submissions relied upon by the second Defendant, but that the first Defendant indemnify her for those costs. 10.Otherwise make no order in favour of the Plaintiff for her costs of the proceedings. 11. Order that the Exhibits should be dealt with in accordance with the Uniform Civil Procedure Rules 2005 Catchwords: Application by Plaintiff for payment of moneys out of Court to second Defendant - Initially no claim by second Defendant for moneys - Cross-Claim later filed by second Defendant for payment of moneys out of Court - No appearance by first Defendant who may have right to claim part of funds paid into Court - Court satisfied that first Defendant properly served with Statement of Claim and other documents - Plaintiff agrees that amount owed to second Defendant by Plaintiff and first Defendant is greater than amount paid into Court - Order that moneys be paid out of Court to second Defendant - Judgment for second Defendant for balance owed to her by Plaintiff and first defendant Legislation Cited: Civil Procedure Act 2005 Conveyancing Act 1919 Uniform Civil Procedure Rules 2005 Trustee Act 1925 Cases Cited: Austar Finance Group Pty Ltd v Campbell [2007] NSWSC 1493; (2007) 215 FLR 464 Cameron Pty Ltd, In the matter of C & L - GB Gazzana v Nadalan Enterprises Pty Ltd; AF Gazzana v Nadalan Enterprises Pty Ltd [2012] NSWSC 676 Chong v Super Equity Invests Pty Ltd [2012] NSWSC 27 Evergreen Tours Pty Ltd v Mclaren [2010] NSWSC 1362 Foxe v Brown [1984] HCA 69; (1984) 58 ALR 542 Harmer v FCT [1991] HCA 51; (1991) 173 CLR 264 Perpetual Trustees Company Ltd; Application of Chen [2010] NSWSC 808; (2010) 15 BPR 28,845 Category: Principal judgment Parties: Qifeng Wei (Plaintiff) Yang Chen (first Defendant) Huijuan Zhou (second Defendant) Representation: Mr I G A Archibald (Plaintiff) No appearance by the first Defendant Mr B Jacobs (second Defendant) HU Solicitors (Plaintiff) No appearance by the first Defendant Ren Zhou Lawyers (second Defendant) File Number(s): 2011/217999 Judgment The Claim 1HIS HONOUR: These proceedings, now, concern whether judgment should be entered against the Plaintiff and the first Defendant, in favour of the second Defendant, and whether the balance of the proceeds of sale of a property situated at Denistone East ("the Property"), formerly registered in the name of the Plaintiff and the first Defendant, which proceeds have been paid into court, should be disbursed to the second Defendant, to satisfy, in part, the claimed debt. In the event that the proceeds paid into court are paid to the second Defendant (which the Plaintiff accepts should occur), the amount of the judgment given in favour of the second Defendant will be reduced accordingly. 2The Plaintiff is the daughter of the second Defendant. At relevant times, the Plaintiff was in a relationship (but not a de facto relationship) with the first Defendant. 3It has taken a relatively long time to ascertain the real issues for determination by the Court. The procedural history to which I shall next refer will demonstrate the circuitous route travelled by the Plaintiff and the second Defendant to arrive at what is now being sought. The History of the Proceedings 4The Plaintiff commenced the proceedings by Statement of Claim filed on 5 July 2011. 5Her claim, as framed, sought the appointment of trustees for sale of the Property, acknowledged a joint debt owed to the second Defendant and sought a judgment in favour of the second Defendant for an amount that she had advanced to the Plaintiff and the first Defendant. The Plaintiff conceded that the amount advanced to her and the first Defendant by the second Defendant was $315,236.05. (In fact, other evidence read made clear that the amount admitted was $317,005.46.) 6The first Defendant did not file an Appearance or a defence to the Statement of Claim within the time required by the Uniform Civil Procedure Rules 2005 ("the UCPR") or at all. Thus, he remains a "person who is in default of appearance". 7The second Defendant filed a submitting appearance to the Plaintiff's Statement of Claim, and no Cross-Claim. 8On 12 October 2011, in these proceedings, Macready AsJ, appointed two trustees for sale under section 66G of the Conveyancing Act 1919. Subsequently, the two trustees were able to sell the property for $846,000, at auction on 26 November 2011. The evidence of the trustees' solicitor, Ms Lisa King, reveals that the amount of $198,960.79 remained after payment of, at least, the amount due under the mortgage ($607,262.31), outstanding land tax ($1,543.15), adjustment of council and water rates ($3,113.50), agents commission on sale ($25,304) and legal and associated costs ($9,254.80). That amount was paid into court on 29 March 2012. 9The Plaintiff filed a notice of motion in court on 11 November 2011 seeking various orders, some of which were to the effect of summary judgment against the Plaintiff and the first Defendant and in favour of the second Defendant. 10Because I was not satisfied that notice had been given to either Defendant, I stood the matter over to the Registrar's List at 9:00 a.m. on Wednesday, 16 November 2011 for the purposes of obtaining a hearing date of a notice of motion. 11The Registrar set the matter down for hearing before me on 4 April 2012. 12On 4 April 2012, the matter came before me, once again, when Mr I G A Archibald of counsel appeared for the Plaintiff. As there was still no appearance by, or on behalf of, the first, or (at least initially), the second, Defendant; secondly, because the Plaintiff sought to file an amended Notice of Motion on the morning of the hearing; and thirdly, because there was no evidence of any claim, by the second Defendant, for repayment of the moneys, acknowledged by the Plaintiff to have been advanced to her and to the first Defendant, it was necessary to adjourn the proceedings, when some of these matters were raised with counsel for the Plaintiff after the evidence then available was read. 13Upon the Plaintiff's application, I granted a short adjournment to 5 April 2012, so that a copy of the amended notice of motion could be sent to the first Defendant and so that an affidavit could be obtained from the second Defendant. 14Since the first Defendant had not filed an Appearance or a defence; he had not appeared on any occasion that this matter was listed previously before the Registrar, or otherwise; and he did not appear at the hearing before me, despite the matter being called; and for other reasons to which I shall refer later, which reasons relate to the documents relied upon being brought to his attention, I was satisfied that he would suffer no prejudice if I adjourned the matter to the day following the hearing for that purpose. I directed that notice of the adjourned date be forwarded to the first Defendant, by email, sent as soon as reasonably possible. 15On 5 April 2012, Mr Archibald again appeared for the Plaintiff. Again, the matter was called and there was no appearance by, or on behalf of, the first Defendant. On this occasion, the second Defendant, however, sought leave to appear by a solicitor, Mr Lu, and to read an affidavit. 16It was necessary for leave to be sought because of UCPR rule 6.11(2), which provides that except by leave of the court, a defendant who has filed a notice of appearance containing a statement to the effect that the defendant submits to the making of all orders sought and the giving or entry of judgment in respect of all claims made may not file a defence or affidavit or take any other step in the proceedings. (The second Defendant's Appearance had contained a statement that she consented to any order of the court save as to costs.) 17The second Defendant also sought leave to withdraw the submitting appearance. I was satisfied that I could grant leave under UCPR, rule 12.5, which provides that an active party may withdraw an appearance by leave of the court: Evergreen Tours Pty Ltd v Mclaren [2010] NSWSC 1362, per Tamberlin AJ, at [18]. In the circumstances, I ordered that such leave should be granted. I also granted leave to file a copy of an affidavit of the second Defendant in which she detailed what she had paid to the Plaintiff and first Defendant and said that she sought the repayment of that amount from them. 18I also granted leave to the Plaintiff to file in court a further affidavit of the Plaintiff referring to matters going to her knowledge of the first Defendant's email address and an affidavit of her solicitor stating that the first Defendant had not only been advised in the same manner as shall be referred to later in these reasons of the adjourned date, but had also been provided with a copy of each of the affidavits to which I have just referred. 19I took the view that the matter could proceed in this way because of the overriding purpose described in s 56 of the Civil Procedure Act 2005 (the "just, quick and cheap resolution of the real issues in the ... proceedings") and the powers in the UCPR, including rule 6.7(b) (making such order or giving such judgment as the nature of the case requires), UCPR rule 16.2, which provides that a defendant is "in default" for the purposes of that Part if he, she or it, fails to file a defence within the time limited by UCPR rule 14.3 (1) or within such further time as the court allows, and because of UCPR rule 16.10, which provides that whatever the plaintiff's claims for relief against a defendant in default, the court may, on application by the plaintiff, give such judgment against the defendant as the plaintiff appears to be entitled to on his, or her, statement of claim. 20The additional affidavit was read and then some submissions were made. Mr Archibald sought a further opportunity to make additional submissions and there was some suggestion that the second Defendant might seek leave to file a Cross-Claim. 21In the events that then occurred, the matter did not conclude and to enable the Plaintiff to provide further submissions, and to enable the second Defendant to take such steps as she thought advisable, I again adjourned the matter until 4 May 2012. 22On 4 May 2012, the matter did not proceed once again. Mr Archibald appeared for the Plaintiff and mentioned the appearance for the second Defendant. Mr Archibald indicated that the second Defendant wished to make a claim for an order that all of the funds held in court be paid to her. Bearing in mind the relief sought by her, it was unlikely that the Plaintiff would oppose such a claim, if made. 23In the circumstances, it seemed to me that the second Defendant should be allowed an opportunity to seek leave to file a Cross-Claim that could be heard promptly. It seemed that much of the same evidence already filed and read would be relevant to the proposed Cross-Claim. 24In the proposed Cross-Claim, the second Defendant sought: (a)A declaration that the first Defendant and the Plaintiff hold/held their interest in: (i)the Property, (ii)the proceeds of sale of the Property, (iii)the net proceeds of sale of the property being the $198,960.79 paid into Court, as to a capital sum of $317,005.46 on trust for the second Defendant. (b)An order that the net proceeds of sale of $198,960.79 paid into court be paid to her. (c)An order that in the event the Court granted the relief sought in Order (a) and (b), a verdict for the second Defendant against the first Defendant and the Plaintiff in the sum of $118,044.67. 25The amount of $118,044.67 was calculated as the net amount of the capital sum said to be the subject of the alleged trust ($317,005.46) less the amount paid into Court ($198,960.79) sought to be paid out to the second Defendant. 26The Plaintiff consented to the filing of the Cross-Claim and to the Orders sought and in particular consented to the verdict against her and the first Defendant in the sum of $118,044.67. 27I adjourned the matter to 15 June 2012 and directed that the first Defendant be informed of the adjourned date, the directions and the orders that had been made. 28The matter proceeded to completion on 15 June 2012. The second Defendant sought leave to file a notice of motion and a Cross-Claim, each of which would be returnable instanter. I granted that leave upon the usual basis (as to the payment of any filing fee). 29An affidavit sworn by Mr Lu, solicitor, on 14 June 2012 in which he deposed to having sent an email, on 31 May 2012, together with attachments, being a copy of the proposed Cross-Claim as well as an affidavit affirmed by the second Defendant on 31 May 2012, to the first Defendant, that he had not had any response from the first Defendant and that he had not received any notice of delivery failure of the email and the attachments. 30Having read the evidence of the Plaintiff and the attempts made to ascertain the whereabouts of the first Defendant, I am satisfied that it was impracticable to serve the documents upon him in accordance with the UCPR rule 10.14. 31I was also satisfied that the method of substituted service which was adopted was reasonably likely to have brought the proceedings to the notice of the first Defendant: see, Foxe v Brown [1984] HCA 69; (1984) 58 ALR 542, at 546. 32The evidence reveals that all of the documents relied upon at the hearing (with the exception of the second Defendant's affidavit to which I shall refer separately), were provided, at least once, and sometimes more than once, by electronic mail transmission (email), to the first, and to the second, Defendant. In the case of the first Defendant, the evidence reveals that, in all probability, the email address, to which the documents were forwarded, was the current email address of the first Defendant. 33The evidence also revealed that, on each occasion, when there has been an email transmission of documents, there had been no reply from the first Defendant. The sender of the email did not receive any failure message stating an error in forwarding, or failure to forward, or to deliver, the email and the attachments to the email address of the first Defendant; and there had been no message stating that each email and the attachments had not been retrieved by the recipient, namely, the first Defendant. Using jargon, delivery was "complete", even though there was no formal receipt notification by the first Defendant. Service by email is now relatively common and in this case I am satisfied of such service upon the first Defendant. 34I have read the Plaintiff's affidavit of 4 April 2012 relating to her knowledge of the use of emails. I have no reason to doubt her evidence on the topic. Other evidence that I have read relating to the fact that the sender of the email received no failure message stating an error in forwarding, or failure to forward, or to deliver, the email and the attachments to the email address of the first Defendant, taken with her evidence that she is able to access the hotmail profile of the first Defendant using the email address to which the documents have been sent satisfies me that the email address of the first Defendant is current. 35There is nothing to suggest that each of the documents attached to each email was other than in readable form: Austar Finance Group Pty Ltd v Campbell [2007] NSWSC 1493; (2007) 215 FLR 464 at [49] and [55]. 36In all the circumstances, I am satisfied that there has been effective service of all of the relevant documents upon the first Defendant and that the steps have been taken for the purpose of bringing the documents to the notice of the first Defendant. 37Finally, on the issue of service of documents, since the Statement of Claim was filed, Macready AsJ, on 12 October 2011, made the following orders: "1. Order that Fenglin Zhu and Fei Ya Cheng ("the trustees") be appointed trustees of the property situate at and known as xxxx Blaxland Road, Denistone East, being Lot B in Deposited Plan xxxx and being the whole of the land contained in Certificate of Title Folio Identifier Bxxxxx ("the Property"). 2. Order that the Property vest in the trustees subject to any encumbrances affecting the entirety of the Property, but free from encumbrances, if any, affecting any undivided share or shares therein, to be held by the trustees upon the statutory trust for sale under Division 6 of Part IV of the Conveyancing Act, 1919 ("the statutory trust for sale"). 3. Order that the net proceeds of sale after payment of costs and expenses of sale, and the net income of the Property if any until sale after payment of costs, expenses, and outgoings, and in the case of land of rates, taxes, costs of insurance, repairs properly payable out of income, and other outgoings shall be paid by the trustees into Court pending further Order of the Court. 4. The Plaintiff be at liberty to purchase the Property whether at auction or by private treaty. 5. Order that the costs of the plaintiff's interlocutory application be reserved." 38The making of these orders demonstrates that his Honour was also satisfied that there had been effective service of the relevant documents upon the first Defendant. He specifically recorded this in his earlier orders made on 7 October 2011. Those documents, too, were sent by email to the first Defendant. 39In relation to the affidavit of the second Defendant filed in court on 5 April 2012, I was satisfied that a précis of its contents, as well as a copy of the affidavit itself, together with a letter informing him of the adjourned date, was sent, by email, to the first Defendant on 4 April 2012. 40In addition, it is clear from the Statement of Claim, as well as from the Plaintiff's evidence to which I shall refer, and a copy of which was provided to the first Defendant, that he was, or ought to have been, aware that the Plaintiff was seeking to obtain the payment out of the funds in court to enable the repayment of moneys advanced by the second Defendant to the Plaintiff and to the first Defendant so that they could complete the purchase of the Property. 41In all the circumstances, I was satisfied that leave should be granted to the second Defendant to file the Cross-Claim and that the hearing should proceed even though there was no appearance by, or on behalf of, first Defendant. 42In this regard, I note that Uniform Civil Procedure Rules, rule 29.7(2)(a) provide that If any party is absent, the court may proceed with the trial generally, or so far as concerns any claim for relief in the proceedings. 43This complicated procedural history, at least in part, could have been avoided if consideration had been given, at the outset, by the second Defendant, to commencing the proceedings in which she sought such relief as she was advised and if the Plaintiff had considered the precise relief to which she was entitled, if any. 44I propose to remedy these failures by making no order as to the costs of the Plaintiff (other than in respect of the affidavits and submissions that have been relied upon by the second Defendant), and by making no order as to costs of the second Defendant on 4 April 2012 and 4 May 2012 (when the Plaintiff mentioned her appearance). Background Facts 45I have taken the following facts from the Statement of Claim filed by the Plaintiff on 5 July 2011 and from other evidence that I have read: (a)The Plaintiff was born in December 1981, in Shanghai, China. (b)The first Defendant was born in April 1978; (c)The second Defendant was born in August 1953, in Changzhou, China. (d)The Plaintiff and the second Defendant immigrated to Australia in April 2008 and March 2010 respectively. (e)The first Defendant's occupation was that of a Strata Manager. (f)The Plaintiff's occupation was that of an office clerk. (g)The second Defendant was not employed outside the home. (h)The Plaintiff first met the first Defendant in about June 2009. (i)From about February to early June 2010, the first Defendant gave advice to the Plaintiff concerning the possible acquisition by the Plaintiff and/or the second Defendant of a residential property in Sydney. (j)In early March 2010, the Plaintiff and the first Defendant together began to inspect a number of residential premises in Sydney with a view to purchase by the Plaintiff and/or the second Defendant. (k)On or about 17 April 2010, the Plaintiff and the first Defendant commenced a personal relationship, although they were not in a de facto relationship or married to each other. They would see each other once or twice a week and would communicate, at other times, on the internet. (l)On or about 14 May 2010, the Plaintiff and the first Defendant executed a Contract to purchase the Property for $880,000. Shortly before that date, the second Defendant inspected the Property with the Plaintiff. (m)The Plaintiff and the first Defendant borrowed $600,000 from St George Bank Limited, secured by registered first mortgage, over the Property in order to pay part of the purchase price. (n)The net amount provided, or advanced, by the second Defendant to the Plaintiff and the first Defendant to enable the purchase of the Property, after some adjustments, was $317,005.46. (o)In early July 2010, the contract for the purchase of the Property by the Plaintiff and the first Defendant was completed. (p)The relationship of the Plaintiff and first Defendant appears to have ended at, or about, the time the Property was purchased. They have never lived in the Property together. (q)The Plaintiff's solicitor subsequently contacted a person who identified himself as the first Defendant's father. That person told the solicitor that the first Defendant was then in Shenzen, China. 46Relevantly, on the question of the moneys advanced by the second Defendant, the Plaintiff's evidence, which I set out verbatim, is as follows: "I had a conversation with Huijuan Zhou in words to the following effect: ... Huijuan Zhou said:OK. How much do you think you two could borrow from the Bank? I said:I don't know. Yang still has the Home Loan on his apartment. Huijuan Zhou said:Then let me know. I will see how much I could help you. However, the money is lent to you two. You two need to pay me back later. I said:Alright. I will let Yang know. ... On the evening of 7 May 2010, Yang drove me home to Rockdale from the City at about 5:30 pm. During the drive we had a conversation in words to the following effect: Yang said:You don't need to worry about the mortgage re-payment. Are you sure that your mom can help to pay for the initial deposit I said:She should be ok with $300,000. But she said the money is only lent to us. We need to pay her back later.. Yang said:It is no big deal. Certainly, the initial deposit could be the money we borrow from your mum and we will pay her back afterwards. You know I am planning to open my own business. We will be able to pay back your mum. You had better talk to another Bank to find out the best Home Loan rate these days during your lunch break. I said:OK, no problem. I will let you know. Later that evening at about 9.00 pm Yang came to my apartment in Rockdale. My mother was present. A conversation took place in words to the following effect: Huijuan Zhou said:Do your parents know that you will be buying the property with Minmin? Yang said:Yes, I have told them already. They really appreciate your help. Also, I really appreciate it that you can lend us the money. Huijuan Zhou said:Minmin's Dad and I both hope that you will be able to take care of Minmin. I think you are a trustworthy person who can take care of her for a life long time. Regarding the money I am lending, I think that Minmin has already told you that you two will need to pay me back later. Did she tell you that? Yang said:Yes she told me. I will re-pay it. I really like the property. It is great that you can lend the money so that I can buy it with Minmin. I can use the basement as my office to start my own business. ... Yang said:Don't worry. I will pay for the mortgage on my own. My income can fully cover it. Minmin's income can be living expenses or whatever. I am planning to set up my own business. So the mortgage repayments are not a big issue. And later, we certainly will pay back the money you are lending to us. Huijuan Zhou said:The total price is $900,000? Yang said:Yes. But I am confident of negotiating it lower. Huijuan Zhou said:All right. I will lend you the money. Let me know the last price. ... After the purchase of the property was settled on 1 July 2010 Yang invited me for dinner in a French style restaurant in Chatswood on 2 July 2010. I was not living with Yang at that time, and we never lived together. At this meal Yang said: We should toast the settlement of the property. I said:Yes. But there is also a big burden. The home loan, the money we shall have to pay back to my mother. Yang said:Don't worry. The property belongs to us now. I feel very proud. I told my parents that I would buy a house sooner or later. I have achieved that. Don't you feel proud of me? I am even greater than your father. Your father did not have a house at this young age, did he? I said:You haven't paid for anything yet. You had better say that after you pay back the mortgage and the money my mother lent to us." 47The second Defendant's affidavit corroborates the conversations referred to in the affidavit of the Plaintiff. In addition, the second Defendant says that she "made the advances on the basis that after the Property had been purchased, the Plaintiff and the first Defendant would set up home in the Property" and that the Plaintiff and the first Defendant would live in the Property. 48The second Defendant also says that she has not received any repayment of the amount advanced and wishes the court to give judgment for that amount, or if the balance of the proceeds of sale are paid out of court to her, judgment for one half of the balance against each of the Plaintiff and the first Defendant. 49I note that in the letter addressed to the first Defendant sent by email on 4 April 2012, the Plaintiff's solicitor states that the second Defendant claims an amount of $317,005.46, and that if she receives the amount paid into court ($198,960.79), she will seek a judgment against each of the Plaintiff and the first Defendant of $59,022.34 (being one half of the difference between the amount advanced and the amount recovered). 50No response from the first Defendant to any of the documents forwarded to him has been received. There were no reasons advanced why the first Defendant had done nothing, since the service of the Statement of Claim upon him. 51In all the circumstances, I am prepared to accept the evidence of the Plaintiff and the second Defendant, which is unchallenged. The Submissions 52There was one set of written submissions relied upon by both the Plaintiff and the second Defendant. 53Those written submissions included a submission that the second Defendant had asserted in the Cross-Claim that the first Defendant had told her, in May 2010, that the Property would belong to her, the second Defendant, until the Plaintiff and the first Defendant had paid out the moneys advanced by her. However, I have found no evidence in the affidavits to justify this allegation and even though a defence to the Cross-Claim has not been filed, I do not accept the submission or the allegation made. 54The written submissions will remain with the court papers. Relevant Principles 55Section 95, of the Trustee Act 1925, relevantly, provides: "(1) Where trustees, or the majority of trustees, have in their hands or under their control money or securities belonging to a trust, they may pay the same into court." 56In this case, I note that Macready AsJ ordered that the net proceeds of sale, after payment of costs and expenses of sale, and the net income of the Property if any until sale after payment of costs, expenses, and outgoings, and in the case of land rates, taxes, costs of insurance, repairs properly payable out of income, and other outgoings shall be paid by the trustees into Court pending further order of the court. 57In Harmer v FCT [1991] HCA 51; (1991) 173 CLR 264, an interpleader case, moneys were paid into court by a company, which had no claim to them, pending the resolution of the competing claims by others. The court held, at 272, that upon payment into court, the money became "trust moneys" in the broad sense that the holder of the money (in the present case that person is the Registrar of the court) was not beneficially entitled to the moneys as they were received by the court pursuant to the statutory provisions and rules of court under which they were paid in. 58In Perpetual Trustees Company Ltd; Application of Chen [2010] NSWSC 808; (2010) 15 BPR 28,845, I dealt with the payment out of court, of moneys paid into court by a trustee. I said: "22 Once moneys are paid into court under Part 4 of the Trustee Act 1925, those moneys become subject to the Uniform Civil Procedure Rules 2005 ("UCPR"): s 98 of the Trustee Act. The party who pays money into court does not retain any legal, or equitable, interest in the money. The money is invested by the Court and is disbursed in accordance with the directions of the court. Division 3 of Part 55 of the UCPR applies to the payment of funds into court under Part 4 of the Trustee Act and to proceedings arising out of payment into court under that Part. 23 So far as is materially relevant, rule 55.11 of the UCPR provides: Proceedings for directions as to payment out of court (1) Funds that have been paid into court may only be paid out of court pursuant to the directions of the Supreme Court. (2) An application for such directions is to be made by filing a notice of motion in the proceedings in which the funds were paid into court. 24 In La Trobe Capital [2009] NSWSC 1118, Slattery J, discussed the rule and noted (at [7]) that the claim for payment out was to be by Notice of Motion. In this case, the claim by Mr Chen was commenced by Notice of Motion. The Claims 25 In Commonwealth Bank of Australia v The Estate of the Late Mahmoud Slieman [2010] NSWSC 661, Slattery J, again, dealt with rule 55.11 of the UCPR and, helpfully, stated what needed to be established by a claimant. His Honour said: [8] An applicant under UCPR r 55.11 must establish three matters to justify an order for the payment of money out of Court. The first is to identify the person who is primarily entitled to any funds paid into Court and the basis of that entitlement. It is fundamental that the person be identified from the best evidence available, so that the Court can be sure that the person has been given appropriate notice of the application and can if necessary contest it. [9] The second matter that needs to be proved by a claimant is that he or she is not merely an unsecured creditor against the person primarily entitled to the fund but is a person who has an beneficial interest in the very fund that has been paid into Court. The same evidence that demonstrates a person's primary entitlement to the funds in Court often establishes this second matter. [10] Thirdly, it is necessary for an applicant to identify the other potential claimants to the fund in Court and to prove that those persons were notified of its claim. Those persons may consent to the claim. Alternatively, the applicant may prove that those persons either do not have valid claims against the fund or that their claims do not have priority over the applicant's claims. [11] The Court requires strict proof as to who has the entitlement to the funds in Court. There is a heavy burden placed on a party seeking payment of money out of court under Trustee Act s 98 and UCPR r 55.11. It is necessary for that party not only to prove his or her entitlement to the funds but also to prove that all other potential claimants to the funds in Court have been properly notified. Otherwise there is a risk of incorrect payments being made. 26 In the present case, dealing with the third matter first, I am satisfied that the identity of potential claimants of the Proceeds has been identified. I am also satisfied that notice of Mr Chen's claim has been given to Ms Li and to ASIC. In this regard, there can be no doubt that Ms Li, as co-owner of the Lugarno property, prior to its sale, could be a claimant on, at least, part of the Proceeds. 27 ASIC, in view of the asset freezing order that it had obtained in respect of Ms Li's property, was entitled to, and was, in fact, given, notice of Mr Chen's claim. 28 To obtain an order for payment out of court, the claimant must also establish a proprietary interest in the funds in court. I am satisfied that there is evidence identifying the registered proprietors of the Lugarno property, one of whom was Mr Chen. The copy of the title search of the property identifies him as one of the joint tenants. 29 The evidence also establishes that the Lugarno property was sold by a mortgagee and after deducting the costs and expenses of sale and enforcement costs, there was a surplus available for distribution (the Proceeds). Without more, as the mortgagors, Mr Chen and Ms Li would have been entitled to the Proceeds. A mortgagee holds surplus proceeds of sale, after satisfaction of the mortgage debt, on trust for the registered proprietors, but subject to any other secured interests: s58(3) of the Real Property Act and Bank of New South Wales v Adams at 663-665; Adams v Bank of New South Wales [1984] 1 NSWLR 285, at 295F and 299B per Hutley JA. In this case, I am satisfied that there are no other secured interests. Accordingly, Mr Chen has a proprietary interest in the Proceeds." (Mr Chen in that case was not connected, so far as I am aware, with the first Defendant in these proceedings.) 59In Chong v Super Equity Invests Pty Ltd [2012] NSWSC 27, at [12], Slattery J, after referring to UCPR rule 55.11 said: "[12] It is noteworthy that UCPR, Pt 55 r 11(2) simply requires, before payment out, that there be a motion filed for directions, which then provides a platform for the court's analysis of the competing priorities, followed by payment out." 60In Re C & L Cameron Pty Ltd - GB Gazzana v Nadalan Enterprises Pty Ltd; AF Gazzana v Nadalan Enterprises Pty Ltd [2012] NSWSC 676, at [128], Ward J said: "In my view, what Rule 55.11 requires is a consideration of whether there are other competing claims and, if there are, then as Slattery J pointed out in Ruth Chong, it is a matter for the Court to determine their validity and the competing priorities between any valid claims. Thus, I do not accept that the present enquiry necessarily stops at the point at which an arguable claim has been established though it may, depending on the issue, be necessary or appropriate to defer a final determination of the validity of that claim to another forum. If the evidence before the Court is such that the validity of the claim can be determined on the very payment out application, then the statutory mandate for the just, quick and cheap resolution of the real issues in dispute would support the conclusion that a final determination as to that claim should then be made. ..." 61Respectfully, I agree with her Honour's statement and intend to follow it in the present case. Determination 62Dealing then with the matters referred to, firstly, an application for directions had been made by the filing of an amended notice of motion in the proceedings in which the funds were paid into court. (Although the trustees commenced other proceedings, it does not seem to me that they needed to because of the order to which I have referred made by Macready AsJ.) 63Next, the Plaintiff has identified the persons who are primarily entitled to any funds paid into Court and the basis of that entitlement. The two persons who appear to be primarily entitled to the funds are the Plaintiff and the first Defendant, as they were the registered proprietors of the Property sold which yielded those funds. 64The second Defendant has now made a claim also, as she advanced to the Plaintiff and the first Defendant the funds that were used, in part, to purchase the Property, and, it would appear, she is entitled to the return of those funds in the circumstances that occurred, since the Property was never used by the Plaintiff and the first Defendant as it was intended to be. 65Accordingly, all relevant persons who have a claim on the funds paid into court have been identified and notice has been given to each of them. 66Now, the Plaintiff and the second Defendant agree that the moneys paid into court should be paid to the second Defendant. I do not know the attitude of the first Defendant, but, there is no evidence that, since the Property was sold, he has made any claim for any part of the funds in court, or otherwise signified any opposition to the amount in court being paid to the second Defendant in light of the advances made to him and the Plaintiff, which advances enabled the Property to be purchased by them. 67The basis of the second Defendant's entitlement appears to be, and I accept: (a)That there was a joint relationship or endeavour between the Plaintiff and the first Defendant in relation to the purchase of the Property, which Property was to be used as their home; the second Defendant was aware of the joint relationship or endeavour and she advanced the funds to them on the basis, and for the purposes, of that relationship or endeavour; it was not specifically intended, or specially provided, that the Plaintiff or the first Defendant should, otherwise, enjoy the funds advanced to them by the second Defendant for the purchase of the Property; in all the circumstances, it would be unconscionable for the Plaintiff and the first Defendant to retain the benefit of the funds advanced by the second Defendant; the balance of the proceeds of sale, being less than the amount advanced, should be repaid to the second Defendant and the balance outstanding to her should constitute a debt owed to her by the Plaintiff and the first Defendant. (b)Alternatively, the funds advanced by the second Defendant were advanced under an agreement to repay, with the implied term that if the relationship between the Plaintiff and the first Defendant did not continue, and if they did not use the Property as their home, and if the Property was then sold, the funds advanced would be repaid out of the proceeds of sale of the Property and the balance outstanding to the second Defendant would constitute a debt owed to her by the Plaintiff and the first Defendant. 68Because of the relationship of the second Defendant and the Plaintiff, I have considered the presumption of advancement. However, in my view, the presumption does not apply, because it is clear that the funds were advanced to the Plaintiff and to the first Defendant together and not to the Plaintiff alone. In any event, it is clear that the presumption, if applicable, would be rebutted since the second Defendant always intended that the funds advanced would be repaid to her. 69In the circumstances, and bearing in mind s 56 of the Civil Procedure Act, I am of the view that the amount paid into Court, together with any interest accrued thereon, should be paid out to the second Defendant. In addition, there should be a judgment, in her favour, for the difference between the principal amount paid to her and the amount she advanced. 70The written submissions also refer to how the burden of costs should be borne, it being submitted that the Plaintiff does not oppose an order for the second Defendant's costs of the Cross-Claim. It is also submitted that the Plaintiff's claim was properly made. 71I do not accept the last submission. I am of the view that the proceedings ought to have been commenced by the second Defendant and should have named the Plaintiff and the first Defendant as defendants. If this had been done, subject to evidence of service of the documents upon the first Defendant, the matter could have probably been completed within two to three hours. This did not occur and there were several attempts at getting the procedural difficulties resolved. 72The second Defendant should have her costs of preparing the Cross-Claim and the affidavits in support thereof, and of her appearance on 5 April 2012 and 15 June 2012 and there should be an order against both the Plaintiff and the first Defendant for those costs. Since the second Defendant used affidavits prepared as part of the Plaintiff's case and relied upon submissions made by the Plaintiff's counsel, the second Defendant should pay the Plaintiff's costs of preparing those affidavits and submissions. However, the first Defendant should indemnify her for those costs, since there was no dispute by the Plaintiff as to the entitlement of the second Defendant. Otherwise, as stated previously, I do not propose to make an order in favour of the Plaintiff for her costs of the proceedings. 73Having read the evidence relied upon in support of the Cross-Claim and the other evidence read in the proceedings, the notation, directions and orders I make are: 1.Note that a copy of the following documents be regarded as having been served on the first Defendant: (i)On 4 October 2011: (a)Statement of Claim filed 5 July 2011; (b)Affidavit of Qifeng Wei affirmed 22 August 2011; (c)The affidavit of Qifeng Wei affirmed 4 October 2011; (d)Annexure "B" to the Affidavit of Yuan Hao Hu affirmed 6 October 2011, being e-mail advising of the Directions Hearing on 7 October 2011. (ii)On 10 November 2011: (a)The Plaintiff's Notice of Motion filed 11 November 2011; (b)The affidavit of Qifeng Wei affirmed 10 November 2011; (c)Annexure "A" to the Affidavit of Yuan Hao Hu affirmed 10 November 2011, being e-mail advising of the orders made on 27 October 2011. (iii)On 22 November 2011: (a)Annexure "C" to Affidavit of Yuan Hao Hu affirmed 28 February 2012, being e-mail advising of the orders made on 16 November 2011. (iv)On 19 March 2012: (a)The Statement of Claim filed 5 July 2011; (b)The submitting Appearance of the second Defendant filed 28 September 2011; (c)Affidavit of Yuan Hao Hu affirmed 22 August 2011; (d)Affidavit of Yuan Hao Hu affirmed 9 September 2011; (e)Affidavit of Yuan Hao Hu affirmed 21 September 2011; (f)Affidavit of Yuan Hao Hu affirmed 4 October 2011; (g)Affidavit of Yuan Hao Hu affirmed 6 October 2011; (h)Affidavit of Yuan Hao Hu affirmed 11 October 2011; (i)Affidavit of Yuan Hao Hu affirmed 10 November 2011; (j)Affidavit of Yuan Hao Hu affirmed 28 February 2012; (k)Orders made by the Court on 12 October 2011 and on 29 February 2012. (v)On 29 March 2012: (a)Sealed copy of Summons filed by Fenglin Zhu and Fei Ya Chen on 29 March 2012 in proceedings 2012/99648; (b)Copy of Affidavit of Lisa King affirmed 29 March 2012 in proceedings 2012/99648. (vi)On 2 April 2012: (a)Copy of Amended Notice of Motion filed 4 April 2012; (b)Copy of Affidavit of Yuan Hao Hu affirmed 2 April 2012. (vii)On 4 April 2012: (a)Copy of Affidavit of Qifeng Wei affirmed 4 April 2012; (b)Copy of Affidavit of Huijuan Zhou affirmed 4 April 2012; (c)Copy letter dated 4 April 2012 from Yuan Hao Hu to the first Defendant. (viii)On 31 May 2012: (a)a copy of the proposed notice of motion, which was filed in court on 15 June 2012; (b)a copy of the proposed Cross-Claim, which was filed in court on 15 June 2012; (c)a copy of the affidavit of Huijuan Zhou affirmed 31 May 2012. 2. Note the undertaking of the second Defendant's solicitor to pay the filing fee in respect of the notice of motion dated 14 June 2012 and the Cross-Claim filed in court on 15 June 2012. 3. Declare that the amount payable by the Plaintiff and the first Defendant to the second Defendant is $317,005.46. 4. Order that the amount paid into court in proceedings 2012/99648, together with any additional interest accrued thereon, until the date of payment, be paid to the second Defendant in part satisfaction of the amount payable referred to in order (3): (a) as to one half of the amount held and interest within 21 days from the making of these orders; (b) as to the other half of the amount held and interest no earlier than 49 days from the making of these orders. 5. Direct that, within 7 days of the date of the reasons for judgment being published, the first Defendant be advised, in writing, of these orders and be provided with a copy of the reasons for judgment in the same manner as previous as previous documents have been served upon him. 6. Order that there be a verdict and judgment for the second Defendant against the Plaintiff and the first Defendant in the amount of $118,044.67. 7. Order that the balance of the Statement of Claim and the Cross-Claim be dismissed. 8. Order that the Plaintiff and the first Defendant pay the second Defendant's costs of preparing the Cross-Claim and her most recent affidavit in support thereof, and of her appearance on 5 April 2012 and 15 June 2012. 9. Order that the second Defendant pay the Plaintiff's costs of preparing the affidavits and submissions relied upon by the second Defendant, but that the first Defendant indemnify her for those costs. 10. Otherwise make no order in favour of the Plaintiff for her costs of the proceedings. 11.Order that the Exhibits should be dealt with in accordance with the Uniform Civil Procedure Rules 2005. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 July 2012