Supreme Court New South Wales Medium Neutral Citation: The application of Permanent Custodians Limited [2013] NSWSC 1030 Hearing dates: 30 July 2013 Decision date: 30 July 2013 Jurisdiction: Equity Division Before: Kunc J Decision: Directions given Catchwords: MORTGAGES - Sale under power - Proceeds of sale - Surplus paid into Court - Directions for payment out Legislation Cited: Trustee Act 1925 (NSW) Category: Principal judgment Parties: Permanent Custodians Limited (Plaintiff) North Group (NSW) Pty Ltd (In liq) (1st Applicant) Tamaya Pty Limited (2nd Applicant) Caveat Lenders Pty Ltd (3rd Applicant) Representation: Counsel: D. Rayment (1st applicant) N. Neggo (2nd applicant) J. Lucas (3rd applicant) File Number(s): 2012/00137757 Publication restriction: No EX TEMPORE Judgment 1HIS HONOUR: The Court has before it three motions for directions pursuant to UCPR part 55, rule 55.11. That rule provides: (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. 2Mr Michael Slavko Bradvica was the registered proprietor of land at Penshurst (the "Property"). The Property was subject to several interests. The first was a mortgage to the plaintiff, Permanent Custodians Limited. There was also a mortgage to Caveat Lenders Pty Limited ("Caveat Lenders") and interests evidenced by caveats lodged by North Group (NSW) Pty Limited ("North Group") (which is now in liquidation), Boral Limited ("Boral") and Tamaya Pty Limited ("Tamaya"). 3Permanent Custodians took possession of the Property and sold it as mortgagee. After the payment of Permanent Custodians' debt, costs and expenses, it paid an amount of $147,909.36 into court pursuant to Part 4 of the Trustee Act 1925 (NSW), being the surplus funds from the sale of the Property (the "Surplus Funds"). That process accorded with UCPR Part 55, rule 55.9. 4The various parties before me today claim directions for payment out of the Surplus Funds in amounts which they have agreed between themselves as a commercial settlement in respect of the amounts owing to them and having regard to their respective priorities. Given the relatively small amount of the Surplus Funds, those parties are to be commended for having adopted a sensible, commercial approach to the problem. 5The first question I need to deal with is whether or not proper notice of today's proceedings has been given to all of the relevant parties. In the affidavit of Michael Collins affirmed 27 April 2012 on behalf of Permanent Custodians, Mr Collins deposed that so far as Permanent Custodians was aware the following parties may have an interest in the Surplus Funds: Mr Bradvica, Caveat Lenders, North Group, Boral and Tamaya. I have evidence before me that Permanent Custodians wishes to play no further part in the proceedings and sought to be excused, leaving it to the claimants for the Surplus Funds to take the matter further. Accordingly, no further consideration is required in relation to the position of Permanent Custodians. 6On an earlier occasion, and in anticipation of these applications being made, Registrar Musgrave made orders for substituted service against Mr Bradvica in relation to the process and evidence to be relied upon today. Those orders were made for the benefit of North Group and Tamaya and I am satisfied that the Registrar's orders have been satisfied in relation to giving Mr Bradvica (and incidentally Boral) notice of today's proceedings. 7Caveat Lenders falls into a slightly different category. Caveat Lenders did not have the benefit of Registrar Musgrave's orders because its notice of motion for directions was filed somewhat later than those of the other parties. However, Caveat Lenders adopted the form of service authorised by Registrar Musgrave's orders and acted accordingly. I am satisfied that it has complied with a procedure which precisely reflects that ordered by Registrar Musgrave. As part of the orders which I will make at the conclusion of this judgment I will make an order pursuant to UCPR Part 10, rule 10.14 that Caveat Lenders' application and the material relied upon in support of it will be taken to have been served on Mr Bradvica on 24 July 2013. 8The remaining party which must be considered on the question of notice of today is Boral. I am satisfied from the evidence which the three applicants have filed that Boral is on notice of today's applications. I had some concern that it may not have been on notice that the hearing would in fact be proceeding today, but I am satisfied that the notices of motion served on Boral by both Caveat Lenders and Tamaya bore a return date of today. 9In addition, I asked the legal representatives for North Group to telephone the relevant person at Boral to ensure that he or she was in fact on notice of today's hearing. I was informed from the bar table and accept that contact was made with a Mr Marsh, a credit officer at Boral, who informed the solicitors for North Group that, while he did not think anything was owing to Boral, he was not conscious that the matter was on for hearing today and would need to consult with other people in the credit section to confirm whether or not any amount was owing to Boral. 10I am satisfied that the strict legal position is that Boral are on notice both of these proceedings and of the fact that they are being heard today. Nevertheless, I propose to stay the payment out orders which I will make at the conclusion of these reasons for seven days and direct the solicitors for North Group to draw those orders to the attention of Boral. If Boral wishes to take any action within those seven days that will be a matter for Boral. 11Having dealt with the question of notice to relevant parties of today's application I can turn to the substance of the matter. In an application of this kind it is necessary for the applicants to identify who the parties are who may have an interest in the actual fund which has been paid into Court; second, to satisfy the Court that any relevant party has a beneficial interest in the fund that has been paid into Court; and, third, that all appropriate parties have been notified. The third of these elements is satisfied for the reasons I have given above. 12I am also satisfied on the basis of the evidence before me that the list of persons potentially entitled to the Surplus Funds was accurately set out in Mr Collins' affidavit, to which I referred above. As matters stand, therefore, the Court proceeds on the basis that neither Mr Bradvica nor Boral wishes to assert a beneficial entitlement to the Surplus Funds. 13That leaves the question, in relation to each of the three applicants, as to whether they are themselves beneficially entitled to the Surplus Funds. Those funds are, of course, the balance of proceeds of sale of the Property. Therefore, each of the three applicants must satisfy the Court that they have a beneficial interest in the Surplus Funds by reason of an interest which they had in the Property. 14I am satisfied that each of the applicants had an interest in the Property as follows: (1)Caveat Lenders had such an interest by reason of registered mortgage AD923843 over the Property; (2)North Group had such an interest by reason of a charge over the Property which was given by Mr Bradvica as the guarantor pursuant to an arrangement whereby North Group provided goods to Mr Bradvica's company; (3)Tamaya had such an interest pursuant to a charge conferred by Mr Bradvica over the Property as guarantor in connection with a supply agreement and commercial credit facility which Tamaya extended to Mr Bradvica's company. 15The three applicants have filed evidence indicating the amounts owed to them by Mr Bradvica which were secured by their respective interests over the Property. The parties have agreed between themselves how the Surplus Funds are to be divided. It is not necessary, in those circumstances, for me to say any more than I am satisfied that the amounts which the parties have each agreed should be allocated to them out of the Surplus Funds are amounts at least owed to them by Mr Bradvica and that were secured by their respective interests in the Property. 16For these reasons I will make the orders in the short minutes of order which I have initialled and dated today and placed with the papers. 17I make the following further orders and directions: (i)I order that the operation of orders 2 and 3 in the short minutes of order be stayed up to and including 6 August 2013. (ii)I direct that North Group, by its solicitors, notify Boral of the orders which I have made today by communicating with Mr Marsh, such notification to be provided by 5pm today. (iii)I direct that the orders that I have just pronounced may be taken out forthwith. ********** 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: 02 August 2013