Supreme Court New South Wales Medium Neutral Citation: Citigroup Pty Ltd; ex parte Circuit Finance Australia Pty Ltd [2013] NSWSC 526 Hearing dates: 8 May 2013 Decision date: 08 May 2013 Jurisdiction: Common Law Before: Adamson J Decision: 1. The funds which have been paid into Court by the plaintiff, Citigroup Pty Ltd be dispersed as follows: 1.1 70% to Circuit Finance Australia ACN 112 117 898 (Receivers and Managers appointed) (In Liquidation); and 1.2 30% to Sukhdev Singh. 2. Make no order as to costs. Catchwords: PROCEDURE-payment of funds out of court under r 55.11 Uniform Civil Procedure Rules Legislation Cited: Uniform Civil Procedure Rules, r 55.11 Cases Cited: Rice v Rice (1853) 61 ER 646 Category: Interlocutory applications Parties: Citigroup P/L (Plaintiff) Circuit Finance Aust Limited (First Applicant) Sukhdev Singh (Second Applicant) Representation: Counsel: S Balafoutis (First Applicant) J Jordan (Solicitor) (Second Applicant) Solicitors: Piper Alderman (First Applicant) Jordan Djundja Lawyers (Second Applicant) File Number(s): 2013/21071 Publication restriction: Nil Judgment Introduction 1By amended summons filed on 5 February 2013 Citigroup Pty Ltd (Citigroup), as plaintiff, sought an order that it pay into Court an amount being the net surplus proceeds of the sale of certain property owned by Mr Pham located at 107 Hughes Street, Cabramatta (the Property). Since there was no order to the contrary, there was no defendant named in the proceedings. The order sought was made by Harrison AsJ on that date and the moneys were paid into Court. 2Notice was given to the persons potentially entitled to the money and, relevantly, notices of motion were filed by Circuit Finance Australia Ltd (Circuit Finance) and Sukhdev Singh for payment out of the moneys which had been paid into Court by Citigroup. 3The priority between the applicants of the respective notices of motion has been agreed between the parties but, in any event, has been amply established by the evidence, as set out in the following reasons. The Facts 4On 20 November 2007 Cao Quang Pham granted a mortgage over the Property to Citigroup, which was registered. On 4 April 2008 Mr Pham entered into a lease agreement with Circuit Finance. Mr Pham, who was one of three lessees, granted a charge to Circuit Finance over all his property including any real property. By cl 17.1 of the lease agreement, Mr Pham agreed to permit Circuit Finance to lodge a caveat over any real property in which he had a right to title and interest, which, necessarily, includes the Property. 5In mid June 2008, Mr Pham defaulted on his obligation to make periodic payments under the lease agreement. On 17 June 2008 Circuit Finance lodged a caveat on the title to the Property to protect its equitable interest. 6Subsequently, on 18 July 2008, Mr Pham entered into a deed with Mr Singh pursuant to which Mr Singh advanced funds to Mr Pham amounting to some $220,000. 7Clause 6 of the loan agreement between Mr Pham and Mr Singh provided as follows: "Until the outstanding principal sum is fully paid on or before the due date, the Borrower agrees to execute or allow execution of any documents, forms or papers to enable the Lender to register Caveat on the property owned by the Borrower, either jointly or severally." Reasons 8It is necessary for the applicants to establish the following matters. The identity of the person primarily entitled to the funds paid into Court 9The first matter to be established is the identity of the person who was primarily entitled to the funds paid into Court and the basis of that entitlement. 10Mr Pham, as the former registered proprietor of the Property, prior to Citigroup's exercise of its power of sale, was primarily entitled to the funds paid into Court. However, his interest in the funds was subject to the interests of his secured creditors. He has since been made bankrupt. I am satisfied, on the basis of the evidence adduced, that Mr Wiley, his trustee in bankruptcy, has been informed of the proceedings and does not wish to take part in them. Whether the claimants have a beneficial interest in the funds paid into Court and if so, the priority of such interests 11For the reasons given above, I am satisfied that Circuit Finance has a beneficial interest in the monies paid into Court since they are the proceeds of the Property in respect of which Circuit Finance had an equitable charge. 12Mr Singh submitted that cl 6 of his loan agreement with Mr Pham, which is set out above, had the effect of creating an equitable charge in his favour over the Property. Since caveats are only available to protect equitable interests in land, I consider that the wording of cl 6 is sufficiently clear to indicate that the parties intended that Mr Pham's property would be charged to secure any monies owing to Mr Singh. Accordingly cl 6 is effective to create an equitable interest in favour of Mr Singh over the Property and accordingly the proceeds of its sale. 13The priority between Circuit Finance, on the one hand, and Mr Singh, on the other, is to be determined by the time at which the equitable interests were created, there being no evidence of any disentitling conduct. The applicable priority rule is that, in respect of two otherwise equal equitable interests in property, the earlier in time prevails: Rice v Rice (1853) 61 ER 646 at 648. This order of priority can be disturbed where there is disentitling conduct, but there is neither evidence, nor suggestion, of any such conduct in the instant case. Accordingly, Circuit Finance has a "better equity" than does Mr Singh because its interest was created before Mr Singh's. The identity of other claimants 14Apart from Mr Pham, four potential claimants have been identified. The first two, Circuit Finance and Mr Singh, have already been referred to above. I am required to be satisfied that any other potential claimants to the funds have been duly notified of the application for payment. This matter has been established by the affidavit of Lisa Michele Chapman sworn 3 May 2013 which was filed on behalf of Circuit Finance and which annexes relevant correspondence between Circuit Finance's solicitor and other potential applicants. 15The evidence reveals two other potential claimants: C & D Trading Co Pty Limited (C & D) and Duong Ngoc Linh Au. C & D was notified of the application by Circuit Finance and kept informed of what had occurred when the matter was before Court from time to time. C & D has not, however, filed an application that payment be made to it. I am satisfied that it has been notified and does not wish to contest the orders sought by the applicants or seek that any payment be made to it from the monies paid into Court. 16Although Ms Au filed a notice of motion seeking payment of monies out of Court she has subsequently filed a notice of discontinuance. Accordingly I am satisfied that she has been notified and does not wish to contest the orders sought by the applicants or seek that any payment be made to her from the monies paid into Court. The priority of the claimant or, if there is more than one claimant, the priority between them 17Before making an order for payment out of monies paid into Court I must be satisfied that the claimant has priority over other potentially entitled persons or that such persons consent to the payment. 18As referred to above, each of the applicants, Mr Singh and Circuit Finance, have priority over other potentially entitled persons and the priority between them arises from the time of creation of their respective equitable interests. 19The parties have agreed as between themselves that of the moneys in Court, Circuit Finance is entitled to 70% of those funds, with the remaining 30% to be paid to Mr Singh. 20Because I am satisfied as to the identity of the persons entitled to the funds and because both claimants are legally represented, I do not consider there to be any reason to disturb the agreement made by the parties as to the apportionment. Indeed, short minutes of order expressed as consent orders were filed in Court yesterday to that effect. However, the orders cannot be made by consent. The Court is required to be satisfied of the matters referred to above before it can make an order under UCPR 55.11. Orders 21Accordingly, I make the following orders: (1) The funds which have been paid into Court by the plaintiff, Citigroup Pty Ltd, be dispersed as follows: 1.1 70% to Circuit Finance Australia ACN 112 117 898 (Receivers and Managers appointed) (In Liquidation); and 1.2 30% to Sukhdev Singh (2) I make no order as to costs. ********** 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: 09 May 2013