Supreme Court New South Wales Medium Neutral Citation: Yuan v Xie [2015] NSWSC 492 Hearing dates: 24 April 2015 Decision date: 01 May 2015 Jurisdiction: Equity Division Before: Stevenson J Decision: Monies in Court be paid out to the plaintiff Catchwords: PROCEDURE – net proceeds of sale of property paid into Court by mortgagee – application for payment out of Court – whether plaintiff is the person primarily entitled to the funds held in Court on the basis that she has an equitable charge over the property arising out of a Loan Agreement – whether plaintiff has an interest in the very funds paid into Court – whether all interested parties are on notice of the application Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Commonwealth Bank of Australia v The Estate of the Late Mahmoud Slieman [2010] NSWSC 661 In the matter of C & L Cameron Pty Ltd - GB Gazzana v Nadalan Enterprises Pty Ltd; AF Gazzana v Nadalan Enterprises Pty Ltd [2012] NSWSC 676 Pepper Finance Corporation Limited v Maloney [2013] NSWSC 890 Category: Procedural and other rulings Parties: Xue Qin Yuan (Plaintiff/Applicant) Stanley Xie (First Defendant/Respondent) (no appearance) Li Xie (Second Defendant/Respondent) (no appearance) Representation: Counsel: J C Lee (Plaintiff) Solicitors: Ren Zhou Lawyers (Plaintiff) File Number(s): SC 2014/89791 Judgment 1. These proceedings commenced by summons filed 25 March 2014. The plaintiff claims to have an equitable charge over property owned by the first defendant in Bathurst Street, Sydney. 2. The claim arises from a document called "Loan Agreement" pursuant to which the plaintiff agreed to lend to the second defendant an amount of $250,000. 3. The first defendant signed that document as "guarantor". 4. The Loan Agreement is written in Mandarin. A translation into English of the relevant part is as follows: "Through fair and sincere negotiations, [the plaintiff] agrees to lend two hundred and fifty thousand Australian dollars to [the second defendant] for a term of three years. [The second defendant] uses the Guarantor's [that is, the first defendant's] two Sydney properties at…Bathurst Street, Sydney NSW and…Panania NSW as mortgage security for the loan for a period of three years." 1. The second defendant has repaid the plaintiff $80,000 of the $250,000 advanced. An amount of $170,000 is outstanding. 2. The first defendant has not filed a notice of appearance and has taken no active part in these proceedings. 3. Since the commencement of these proceedings, the mortgagee of the Bathurst Street property, the Commonwealth Bank of Australia trading as Bankwest, took possession of that property and exercised its power of sale. That sale settled on 27 January 2015. The net proceeds of sale were $24,036.03. The bank paid those funds into Court pursuant to leave granted by Bergin CJ in Eq on 12 February 2015. 4. By notice of motion filed on 14 April 2015, the plaintiff now seeks an order pursuant to Uniform Civil Procedure Rules r 55.11 that those monies be paid out to her upon the basis that, by reason of the terms of the Loan Agreement, she holds an equitable charge over the Bathurst Street property to the value of the outstanding debt of $170,000. 5. I have been greatly assisted by the concise submissions of Mr Lee of counsel, who appeared for the plaintiff. Much of what follows is drawn from those submissions. 6. For the plaintiff to obtain an order that the funds in Court be paid out to her, she must satisfy the three stage test set out in Commonwealth Bank of Australia v The Estate of the Late Mahmoud Slieman [2010] NSWSC 661 at [8] to [10] per Slattery J. She must show that: 1. she is the person primarily entitled to the funds and the basis of that entitlement; 2. she has a beneficial interest in the very funds paid into Court; and 3. all other interested parties are on notice of the application. 1. Whether the plaintiff is able to satisfy these requirements requires consideration of the merits of her underlying claim against the first defendant. 2. That is a matter which would normally be determined at a final hearing of these proceedings. The matter before me is a notice of motion in the Applications List. Nonetheless, I am satisfied that all relevant parties, including the first defendant, have notice of this application. As all of the evidence upon which the plaintiff would rely at a final hearing is before me on the application, the statutory mandate for the just, quick and cheap resolution of the real issues in dispute support the conclusion that I should deal with the matter now. 3. Ward J (as her Honour then was) came to the same conclusion in a similar matter in In the matter of C & L Cameron Pty Ltd - GB Gazzana v Nadalan Enterprises Pty Ltd; AF Gazzana v Nadalan Enterprises Pty Ltd [2012] NSWSC 676 at [128]. 4. The basis for the plaintiff's contention that she is the person primarily entitled to the funds in Court is the equitable charge that she contends the first defendant gave her over the Bathurst Street property in the Loan Agreement that I have set out above. 5. The wording of that document is informal, and not as precise as would be expected were the document prepared by legally qualified persons. However, I am satisfied that, on its proper construction, it bespeaks an intention by the first defendant to charge the Bathurst Street property as security for his obligations as guarantor of the loan made by the plaintiff to the second defendant. 6. I am thus satisfied that the plaintiff has established her primary entitlement, and the basis of that entitlement, to the monies paid into Court. 7. I am also satisfied that the plaintiff has an interest in the very funds that have been paid into Court. 8. An unregistered security interest over the property retains its force even after the sale of the property and is converted to an equitable charge over the relevant funds; for example Pepper Finance Corporation Limited v Maloney [2013] NSWSC 890 at [52] per Hallen J. 9. Accordingly, I make the following orders: 1. Order pursuant to UCPR r 55.11 that the monies paid into Court pursuant to the sale of the property situated in and known as suite 703, Sovereign Centre, 97-99 Bathurst Street, Sydney 2000 be paid out to the plaintiff. 2. Order that the first defendant pay the plaintiff's costs of the plaintiff's notice of motion of 14 April 2015. 3. Stand the matter over for further directions, or final disposal of the proceedings, on 15 May 2015 before the Equity Registrar. ********** 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: 01 May 2015