Application of the Trust Company (Australia) Limited (formerly known as Permanent Trustee Company Limited and formerly known as Trust Company Fiduciary Services Limited) [2015] NSWSC 927

Supreme Court New South Wales

Medium Neutral Citation: Application of the Trust Company (Australia) Limited (formerly known as Permanent Trustee Company Limited and formerly known as Trust Company Fiduciary Services Limited) [2015] NSWSC 927 Hearing dates: 13 July 2015 Date of orders: 13 July 2015 Decision date: 13 July 2015 Jurisdiction: Equity Division Before: Kunc J Decision: Funds to be paid out to OIC Nominees Limited Catchwords: PRACTICE – Claimants to surplus funds paid into Court by registered mortgagee – No issue of principle – UCPR Pt 55 r 55.11 Legislation Cited: Uniform Civil Procedure Rules Pt 55 r 55.11 Cases Cited: Commonwealth Bank of Australia v The Estate of Late Mahmoud Slieman [2010] NSW SC 661 Category: Principal judgment Parties: Trust Company (Australia) Limited (formerly known as Permanent Trustee Company Limited and formerly known as Trust Company Fiduciary Services Limited) (Plaintiff) OIC Nominees Limited (Applicant) Representation: Counsel: M. Klooster (Applicant)

Solicitors: Swaab Attorneys (Applicant) File Number(s): 2015/24968 Publication restriction: No

EX TEMPORE Judgment 1. HIS HONOUR: This is an application by OIC Nominees Limited ("OIC") by notice of motion filed on 31 March 2015 under UCPR Pt 55, r 55.11 that the amount of $95,599.75 (the "Fund") paid in Court be paid out to OIC. For the reasons which I will now set out, that order will be made. 2. OIC lent money to Mr Kenneth O'Brien. Mr O'Brien's wife is Ms Anna-Maria Fioretti. Mr O'Brien and Ms Fioretti were the registered proprietors as joint tenants of a property at Caringbah (the "Property"). 3. As part of the arrangements between OIC and Mr O'Brien, Mr O'Brien and Ms Fioretti granted OIC a charge over the Property which was effected by an unregistered mortgage and the registration of a caveat in favour of OIC over the Property. 4. The Trust Company (Australia) Limited (the "Trust Company") had a registered mortgage over the Property. The Trust Company exercised its power of sale over the Property to satisfy an indebtedness owed to it by Mr O'Brien and Ms Fioretti. After the exercise of that power of sale there was a surplus of just under $200,000. 5. Two other relevant matters occurred. First, Mr O'Brien was made bankrupt. Second, OIC obtained a judgment in the District Court to recover sums payable under the arrangements between it and Mr O'Brien and Ms Fioretti. That judgment was for $380,708. As at today's date Mr O'Brien and Ms Fioretti have paid nothing towards that judgment. 6. Mr O'Brien's trustees in bankruptcy recognised that they had no claim to so much of the surplus proceeds of sale of the Property as related to Mr O'Brien's interest in the Property. Therefore, half of that surplus representing Mr O'Brien's interest of $97,759.60 was paid by the Trust Company to OIC. 7. These proceedings concern the Fund, which is the balance of the proceeds of the sale of the Property which the Trust Company paid into Court under the provisions of UCPR Pt 55, r 55.11. Mr O'Brien's trustees in bankruptcy have indicated that they do not press any claim in relation to the Fund. The only other person who may have an interest in the Fund is Ms Fioretti. 8. In Commonwealth Bank of Australia v The Estate of Late Mahmoud Slieman [2010] NSWSC 661, Slattery J dealt with UCPR pt 55, r 55.11 and the matters which needed to be established by a claimant such as OIC: 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. 1. Taking each of the three matters identified by his Honour in turn, the Court is satisfied that: 1. Ms Fioretti is primarily entitled to the Fund being her half of the surplus sale proceeds of the Property. 2. OIC is not merely an unsecured creditor of Ms Fioretti but is a person who has a beneficial interest in the very fund that has been paid into Court because it was the equitable mortgagee of the Property. Accordingly, after satisfaction of the interest of the registered mortgagee, in this case the Trust Company, on the basis that there were no other secured interests OIC was next in line to whatever was left of the proceeds. Its entitlement to those proceeds is good as against both Mr O'Brien and Ms Fioretti by reason of the documents evidencing the charge which both of them gave over the Property in favour of OIC (see paragraph [3] above) as well as the guarantee which Ms Fioretti gave of Mr O'Brien's obligations to OIC as the principal debtor. 3. Ms Fioretti is the only other potential claimant to the Fund. There is evidence that she was served with the notice of motion upon which OIC moves and knew its first return date. However, there is no evidence (in strict form or otherwise) that she knows of today's hearing. 1. The Court received viva voce evidence from the solicitor for OIC that she had a conversation with Mr O'Brien in which Mr O'Brien told the solicitor that Ms Fioretti did not have any interest or desire to contest OIC's claim to the Fund. As Slattery J observed in paragraph [11] of Slieman (see paragraph [8] above), one of the matters of which the Court requires strict proof is that all potential claimants to the Fund have been properly notified. While there is strict proof that Ms Fioretti was notified of the first return date of the motion, there is no such proof that she was notified of today's hearing. It is the same requirement of strict proof which means that the Court, in these circumstances, needs to make some provision for the possibility - admittedly remote on the hearsay evidence of OIC's solicitor - that Ms Fioretti may in fact, for example, have changed her mind and might have wished to attend today to contest OIC's claim. The Court will deal with that possibility by staying the orders that I will shortly make for a relatively short period of time so that Ms Fioretti can be formally notified of what has occurred and given one last opportunity to assert a claim to the Fund if she wishes to do so. 2. But for this question of notice of today not having been given to Ms Fioretti, the Court is satisfied that OIC has established the matters referred to in Slieman and is entitled to the Fund. 3. Accordingly, the Court orders that: 1. The amount of $95,599.75 deposited into Court by The Trust Company (Australia) Limited (formerly known as Permanent Trustee Company Limited and formerly known as Trust Company Fiduciary Services Limited) pursuant to Part 4 of the Trustee Act 1925 (NSW) be paid out to OIC Nominees Limited. 2. The funds referred to in Order 1 may be paid to the solicitors of OIC Nominees Limited, being Swaab Attorneys, if at the time of payment the Registry is provided with a direction apparently signed by an officer of OIC Nominees Limited authorising payment of that amount by the Court to Swaab Attorneys. 3. Orders 1 and 2 are stayed up to the first to occur of the filing of a Notice of Motion by Ms Anna Maria Fioretti seeking to set aside orders 1 and 2 or 7 August 2015 and, if such a motion is filed on or before 6 August 2015, the stay shall continue until determination of that motion or further order. 4. OIC Nominees Limited is directed to inform Ms Fioretti by letter, such letter to be personally served upon her within 7 days, setting out the effect of these orders and informing her of her right to file a Notice of Motion seeking to set aside orders 1 and 2, such Notice of Motion to be filed on or before 6 August 2015. 5. The balance of the Notice of Motion filed by OIC Nominees Limited on 31 March 2015 be dismissed. 6. These Orders be taken out forthwith.