Eldsure Pty Limited v Sheridan Legal Pty Ltd

By notice of motion filed on 29 July 2020, the plaintiff applicant (“Eldsure”) seeks these orders:

Mr N Condylis of Counsel appeared for Eldsure. The first respondent is Sheridan Legal Pty Ltd (“Sheridan Legal”), which was represented by its principal, Mr P Sheridan, solicitor. For reasons which will shortly become apparent, Mr Sheridan took no active role in the proceedings beyond indicating that, to the extent necessary, his firm consented to the orders sought by Eldsure. The second respondent is Mr John Theodore Duyker, who appeared for himself.

For the reasons which follow, the Court will grant the relief sought by Eldsure, but will stay those orders to give Mr Duyker an opportunity to appeal.

The factual background to the application may be shortly stated.

Mr Duyker was the registered proprietor of a property at Banora Point (the “Property”).

Eldsure became involved because at one point Mr Duyker had been evicted from the Property. That eviction was carried out pursuant to orders made by this Court and Eldsure was the property manager instructed to take possession of the Property.

Mr Duyker took proceedings in the District Court in Lismore against Eldsure for damages. He alleged that Eldsure had negligently failed to secure the Property properly, as a result of which a number of his possessions had been stolen.

Mr Duyker's proceedings against Eldsure were listed for a two week hearing commencing on 29 May 2017 in the District Court at Lismore. For reasons which it is not necessary for me to set out - but which, importantly, in no way were the fault of Eldsure - Mr Duyker did not appear at the hearing and his Honour Judge Neilson DCJ made these orders on 29 May 2017:

On 21 May 2018, the Property was ultimately sold by its mortgagees, Mr and Mrs Butterfield. Sheridan Legal were their solicitors.

On 3 July 2018, Eldsure filed a costs assessment claiming costs pursuant to the order of Judge Neilson in the sum of $180,986.50.

After payment of all costs and expenses, and paying out the Butterfields as mortgagees, Sheridan Legal was left with a surplus from the sale proceeds of $27,300.47 (the “Surplus”). Pursuant to orders made by Pembroke J, the Surplus was paid into Court on 14 November 2018.

On 22 July 2019, a costs assessor issued a costs determination certificate awarding Eldsure costs of $174,791.58 in respect of the District Court proceedings.

On 8 February 2020, Registrar Walton ordered registration of the costs certificate with the result that it took effect as a judgment of this Court (the “Costs Judgment”).

Eldsure now seeks payment out of the Surplus by way of partial enforcement of the Costs Judgment. Mr Duyker opposed the application and asked that he be paid the Surplus.

Before turning to the submissions put on behalf of Eldsure, it is necessary to begin with a fundamental proposition. That is that, in the absence of the present claim by Eldsure and in the ordinary course, the Surplus would be payable to Mr Duyker. As the former registered proprietor of the Property, he is prima facie beneficially entitled to any surplus of the proceeds of sale after payment out of the mortgagees and all related costs and expenses. Insofar as Eldsure asserts any right to the Surplus, it does so as a judgment creditor. It does not have a beneficial entitlement to the Surplus. Mr Condylis quite properly acknowledged that his client did not have and did not assert a proprietary claim.

Nevertheless, Mr Condylis submitted that the Court had jurisdiction to make an order for the payment out of the Surplus in accordance with a line of cases that rely upon an analogy with the process of garnishment under the Uniform Civil Procedure Rules (“UCPR”).

Those authorities begin with the decision of Hodgson CJ in Eq (as his Honour then was) in Westpac Banking Corporation v Morris [1998] NSWSC 666 (2 December 1998). There are then three decisions of Slattery J which deal with similar questions: Westpac Banking Corporation v Arthur James Morris & Ors [2014] NSWSC 332; Reozone Pty Ltd v Rene Santoro & Ors [2018] NSWSC 650 (“Reozone”); and La Trobe Capital [2009] NSWSC 1118.

Mr Condylis helpfully took me to this summary of principle by Slattery J in Reozone which I respectfully adopt:

Relying on those principles, Mr Condylis submitted that, either by analogy with the garnishee process or pursuant to UCPR Part 55 r 11, the Court had power to make an order of the kind sought by Eldsure. UCPR Part 55 r 11 provides:

The Court accepts Mr Condylis' submissions. In my respectful view, there are at least two clear bases upon which the Court can make an order of the kind sought in this case. The first is pursuant to UCPR Part 55 r 11. While applications under that rule are commonly made to resolve a dispute between claimants who are beneficially entitled to a fund, I respectfully agree with Slattery J's analysis that the power to make directions conferred on the Court under the rule is relevantly unconfined. It is certainly not confined to cases where each of the competing claimants to a fund that has been paid into Court has a beneficial interest in that fund.

Alternatively, I respectfully apply the analogy with garnishee proceedings which has its origins in the judgment of Hodgson CJ in Eq referred to in paragraph [17] above. It is an analogy because, as his Honour observed, the money has already been paid into Court so that, in that sense, the Court has become the garnishee.

It is for that reason that I identify a more fundamental jurisdictional basis which, in my respectful opinion, is the source of the power exercised by analogy with the garnishee provisions. That fundamental basis is an inherent power of the Court to make orders to enforce its own judgments. In this case, Eldsure is the beneficiary of the Costs Judgment and I have no doubt that, if otherwise satisfied as a matter of discretion that it should be done, the Court has power to assist in the enforcement of that judgment by ordering payment out of the Surplus which has come into the control of the Court.

In dealing with applications of this kind, the Court is concerned to ensure that other potential claimants to the fund in Court have been notified and given an opportunity to approach the Court if they wish. In this case, Eldsure has tendered evidence of searches concerning Mr Duyker's circumstances including that he is not a bankrupt and does not appear to own personal or real property (so does not have any mortgage or other security obligations). Given that evidence, and where Mr Duyker (perhaps unsurprisingly) has not himself suggested that there are any other potential claimants, the Court is satisfied that there are no potential claimants to the Surplus other than Eldsure and Mr Duyker. As a matter of proportionality, because the Surplus is not large, I would not have required general advertising of the availability of the Surplus, as has sometimes been done in other cases.

I therefore accept Mr Condylis' submissions that it is appropriate, in the discretionary exercise of the inherent power of the Court or pursuant to its power under UCPR Part 55 r 11, to order the payment of the Surplus to Eldsure in partial satisfaction of the Costs Judgment. In doing so, I have taken careful account of the submissions that were put by Mr Duyker. I do not intend any disrespect by seeking to summarise those submissions as being to the effect that he was very concerned about various irregularities which he alleged had occurred that had led ultimately to the sale of the Property and also in relation to how the Surplus had come to be paid into Court. He alleged, in a way that I did not completely understand notwithstanding my inquiries of him, that Sheridan Legal had somehow provided false evidence in the District Court and in this Court. I hasten to add that there was nothing in the material before me that would support that conclusion.

There can be no doubt that Mr Duyker has suffered much misfortune and now finds himself in very straitened circumstances. That misfortune includes the loss of the Property that was his home. However, importantly for present purposes, Mr Duyker was unable to point to anything at all which would have suggested that Eldsure was in any way responsible for any of the matters about which he made complaint. When I put that to Mr Duyker, he accepted that was the case.

The fact therefore remains that Eldsure is a judgment creditor for a significant sum against Mr Duyker. That judgment is a judgment of this Court which should be enforced to the extent it can be. The Surplus should be paid out to Eldsure in partial enforcement of that judgment debt.

Eldsure's motion sought an order for costs against Mr Duyker on the indemnity basis. The application for indemnity costs was based upon a submission recorded by Hodgson CJ that had been made by Mr Rares SC (as his Honour then was) that his client in that case was seeking payment out and sought costs on an indemnity basis. However, it is by no means clear that Hodgson CJ acceded to that application. The record of the judgment with which I was provided from AustLII simply records his Honour as making a costs order.

I am, with great respect, inclined to the view that a judge as careful as Hodgson CJ in Eq would have expressly referred to indemnity costs if that is what he was ordering. But in fairness to Mr Condylis, it must be acknowledged that the matter is not entirely clear because his Honour does not in terms reject Mr Rares SC's submission. In relation to the matters before Slattery J, none of the orders that were made by his Honour for costs in those cases appear to have been on the indemnity basis.

In considering the question of costs, the most important consideration to my mind is that, prima facie, Mr Duyker was beneficially entitled to the Surplus. In those circumstances, he did not, in my view, bear any onus on an application of this kind beyond asserting his clear beneficial entitlement. For anything other than that to happen, it was a matter for Eldsure to make out its case to defeat the rights of the beneficial owner.

I certainly do not think that anything Mr Duyker has said or done would justify, on the usual principles relating to such applications, an order against him for indemnity costs. Moreover, that same consideration informs my conclusion that in this case there should be no order as to costs at all in relation to Eldsure's application. It had to come to Court to make its claim. It has done so and it has succeeded. But given his prima facie entitlement to the Surplus, I am unpersuaded that Mr Duyker should have any costs liability to Eldsure for what has occurred. Quite properly, no application for costs of Eldsure’s motion was made by Sheridan Legal.

Finally, before he went off the line due to his mobile telephone running out of battery power, Mr Duyker indicated that he wished to appeal against this decision. I asked him whether he wanted a stay of the orders to enable him to do so. He said he did. In opposition, Mr Condylis argued that this matter had been going on for some time and that his client should be entitled to the Surplus immediately.

It is no criticism of anyone to note that the Court had no evidence before it of Eldsure's capacity to repay the Surplus if Mr Duyker is successful on appeal. In those circumstances, I propose to take a precautionary approach and proceed on the basis that to allow the Surplus to be paid out would create a risk, at least from Mr Duyker's point of view, that it would not be able to be repaid if he does appeal and is successful.

I will therefore accede to the application for a stay but on terms that Mr Duyker must, within 28 days, seek leave to appeal (the amount of the Surplus being less than $100,000). I made it expressly clear to him that it will not be sufficient for him to file only a notice of intention to appeal within that time.

The orders of the Court are: