Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Hammond v JP Morgan Trust Australia Limited [2012] NSWCA 261
• Hearing dates: 13 August 2012
• Decision date: 23 August 2012
• Before: Beazley JA

Decision

Notice of motion dismissed with costs.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: CIVIL PROCEDURE - Joinder of parties - Husband and wife - Wife registered proprietor of land - Land encumbered by registered mortgage - Husband claims land held on resulting trust by wife - Husband not party to possession proceedings on appeal - Whether non-party to appeal proceedings is necessary party and ought to be joined -- Equitable interest does not have priority over first ranking registered mortgage - Husband not necessary party - Application dismissed with costs.
• Cases Cited: Hammond v JP Morgan Trust Australia Limited [2012] NSWCA 188; Hammond v JP Morgan Trust Australia Limited [2012] NSWCA 156; John Alexander's Clubs Pty Ltd & Anor v White City Tennis Club Ltd [2010] HCA 19; 241 CLR 1; JP Morgan Trust Australia Limited v Hammond [2012] NSWSC 213; News Ltd v Australian Rugby Football League Ltd [1996] FCA 870; (1996) 64 FCR 410
• Category: Interlocutory applications
• Parties: Tracie Hammond (Appellant); JP Morgan Trust Australia Limited (Respondent)
• Representation: Counsel: P Hammond (In person); P Newton (Respondent); Solicitors; N/A (Appellant); Kemp Strang (Respondent)
• File Number(s): 2012/124059
• Publication restriction: No

Decision under appeal

• Citation: JP Morgan Trust Australia Limited v Hammond [2012] NSWSC 317
• Date of Decision: 2012-04-03 00:00:00
• Before: Johnson J
• File Number(s): 2008/284105

Judgment

1 HER HONOUR: By notice of motion filed on 7 August 2012, Mr Patrick Hammond sought the following orders:

"1 A declaration that there is a resulting trust in respect of the subject property in these proceedings, being the land contained in Certificate of Title Folio Identifier ***/****** known as ******** Faulconbridge New South Wales ('the Property').

2 A declaration that Tracie Hammond holds her interest in the Property upon a resulting trust for herself and Patrick Hammond as joint beneficiaries.

3 An order that Patrick Hammond be joined to the proceedings as a necessary party."

2 The background to the notice of motion needs to be stated briefly in order to understand the basis upon which it is brought and its proper determination.

3 The respondent to the motion (JP Morgan) brought possession proceedings against Tracie Hammond, Mr Hammond's wife, in respect of the property at Faulconbridge of which she is the registered proprietor. The possession proceedings were based upon an alleged default under a mortgage which JP Morgan claimed secured a sum of $486,000. The amount outstanding on the loan claimed to be secured by the mortgage was approximately $760,000.

4 At an early stage in the possession proceedings, Mr Hammond appeared on behalf of his wife. However, on 9 March 2012, Johnson J refused leave to Mr Hammond to continue to represent Mrs Hammond: JP Morgan Trust Australia Limited v Hammond [2012] NSWSC 213. The matter then proceeded before his Honour with Mrs Hammond being unrepresented. His Honour ordered a verdict for JP Morgan on the statement of claim and ordered that a writ of possession issue: JP Morgan Trust Australia Limited v Hammond [2012] NSWSC 317.

5 Mrs Hammond applied to the Court of Appeal for a stay of execution of the writ of possession. Mr Hammond sought leave to appear on her behalf. That leave was refused by Tobias AJA on 14 May 2012. His Honour also refused the stay: Hammond v JP Morgan Trust Australia Limited [2012] NSWCA 156. A review of the order that Mr Hammond not have leave to appear for his wife was also refused. However, on 28 May 2012, I granted a stay of execution of the writ of possession. The stay was extended by the Court on 15 June 2012 to hearing of the appeal: Hammond v JP Morgan Trust Australia Limited [2012] NSWCA 188. The appeal is listed for hearing on 4 September 2012. Amici curiae have been appointed to assist the Court in respect of the grounds of appeal contained in the notice of appeal filed by Mrs Hammond.

6 On the hearing of the notice of motion on 13 August 2012, I informed the parties that it was only appropriate that I deal with order 3 sought in the notice of motion. However, in order to determine whether to make the orders sought, it was necessary to understand the basis upon which the declarations sought in orders 1 and 2 were advanced. That basis was outlined in Mr Hammond's affidavit of 6 August 2012 affirmed in support of the notice of motion.

7 In brief, Mr Hammond contended that he had an equitable interest in the property in circumstances where he paid the deposit of $54,000 and the purchase costs of approximately $14,000. In addition, the loan repayments were paid either out of a joint account in the names of himself and his wife but to which he was the sole contributor, or from monies transferred from his superannuation account or his trust account.

8 Mr Hammond stated in his affidavit that he never intended to gift the loan repayments to his wife and that it was their joint intention that the property be their matrimonial home as a family asset to be enjoyed together. He said he believed that JP Morgan was aware that he would contribute to the purchase of the property and have an equitable interest in it. Mrs Hammond was not employed at the time that the property was purchased or at any time since. Hence she has not had any monies of her own to contribute to the mortgage.

9 There was no evidence or material before the Court to indicate whether, on an assumed indebtedness of over $750,000, there was any equity in the property. If there was no equity in the property, even if Mr Hammond established that he had an equitable interest therein, it would be worthless. If that were the case, it may be relevant as to whether the Court should make order 3 sought in the notice of motion.

10 Mr Hammond stated in his affidavit, at paras (40) and (41), that he believed the possession proceedings were brought on instructions of a third party who had no rights in respect of the mortgage and further, that the mortgage entered into by Mrs Hammond with JP Morgan secured nothing and there was no money owing to JP Morgan under it. Mr Hammond contended, therefore, that there was utility in his seeking to advance his claims on the appeal.

11 I do not know whether such an argument is available on the facts before the Court on the appeal, although I understand that there is an application to adduce further evidence on the appeal. However, I note that the amici curiae have not provided any submissions to the Court to support this particular contention. The amici curiae have limited the submissions they wish to make to the validity of the notice of default. It should also be noted that JP Morgan has filed a notice of contention in which it seeks to rely upon service of the second notice of default.

12 That then raises the question whether Mr Hammond should be joined as a party to the appeal. The claim Mr Hammond wishes to assert involves factual matters that in the normal course fall to be considered at a trial. Mr Hammond submitted, however, that he was not precluded from raising his equitable interest at this stage of the proceedings: see John Alexander's Clubs Pty Ltd & Anor v White City Tennis Club Ltd [2010] HCA 19; 241 CLR 1.

13 In John Alexander's Clubs, an application by an unregistered mortgagee to be joined in the proceedings for the first time in the Court of Appeal was rejected. The High Court held the Court of Appeal erred in refusing the application. The governing principle upheld by the High Court, at [131], was:

"... that where a court is invited to make, or proposes to make, orders directly affecting the rights or liabilities of a non-party, the non-party is a necessary party and ought to be joined."

See also News Ltd v Australian Rugby Football League Ltd [1996] FCA 870; (1996) 64 FCR 410. In that case, the Full Court of the Federal Court stated, at 524-525:

"Where the orders sought establish or recognise a proprietary or security interest in land ... all persons who have or claim an interest in the subject matter are necessary parties. This is because an order in favour of the claimant will, to a corresponding extent, be detrimental to all others who have or claim an interest."

14 In John Alexander's Clubs the High Court considered, at [133], that the relief claimed by White City Tennis Club, namely, a constructive trust and a transfer of land subject to the trust so as to make that interest indefeasible on registration, directly affected the interests of other persons such as that of the unregistered mortgagee, "because orders in [White City Tennis Club's] favour would, to a corresponding extent, be detrimental to those other persons".

15 However, the High Court noted, at [142]:

"... the well-established principle of practice in probate suits whereby any person having an interest in the estate might intervene as of right and be made a party": see Osborne v Smith [1960] HCA 89; 105 CLR 153 per Kitto J at 158-159.

16 The High Court further noted, at [142], the corollary of that principle was:

"... that if a person with such an interest, knowing of the suit, did not intervene but stood by, that party was bound by the result and not allowed to reopen it by further suit."

17 This principle has been applied as a form of estoppel by conduct: see John Alexander's Clubs at [143]. The High Court found it unnecessary to consider that line of authority, as it was satisfied that a case of estoppel by conduct had not been made out. In particular, the Court observed that White City Tennis Club knew of Walker Corporation's claim to hold an unregistered mortgage over the land, which White City Tennis Club was seeking to overreach by the imposition of a constructive trust.

18 In the present case, JP Morgan submitted that even if Mr Hammond has an interest in the property as he claims, that interest was an equitable interest only and did not have priority over its first ranking registered mortgage. Further, assuming that Mr Hammond had such an interest, that was a matter as between himself and the registered proprietor, Mrs Hammond. Accordingly, such interest as he claimed was not of a nature such as to impact upon the present proceedings.

19 In my opinion, this argument must succeed. JP Morgan is not concerned with the interests of those who stand further down the ladder of claimable interests. It has a first registered mortgage which takes priority over any other interest and it has not, in seeking to enforce its interest, engaged in any conduct that affects any interest of an equitable nature claimed by Mr Hammond. Rather, Mr Hammond is seeking, as against his wife, as registered proprietor, an interest in property. His joinder is not, therefore, necessary in the sense indicated in the authorities. He can bring his claim for an equitable interest at any time.

20 There are other factors which also militate against the making of the order. First, notwithstanding Mr Hammond's belief stated in his affidavit that JP Morgan was aware that either he or his company, Crown Mortgages Pty Limited, had an equitable interest in the property, there is nothing to establish that it was so aware. A mortgagee is not necessarily put on notice of a person's interest in property merely by reference to the source of payment. This must be the more so when repayments are made automatically by direct debits to bank accounts and where the records of payment are computerised.

21 Mr Hammond faces a further difficulty in that he is equivocal in his belief as to whether he has an interest in the property, or whether his company, Crown Mortgages Pty Limited, has an interest. In any event, JP Morgan's first registered mortgage has priority over any equitable interest

22 Next, the claim is one that requires adjudication at first instance and Mr Hammond has been aware of the proceedings since their inception and has been actively engaged in them from that time as an advocate for his wife. He has not advanced any reason for not bringing his claim earlier, other than perhaps that he had not realised he ought to have done so.

23 It might be arguable that a person with a beneficial interest in property could be affected by proceedings brought by a first registered mortgagee such as in this case. That could occur where, for example, the registered proprietor had determined not to defend the proceedings notwithstanding that there may be good grounds upon which to do so. In that circumstance, it is arguable that a person with a beneficial interest ought to be joined so as to protect that beneficial interest. However, that is not this case. Mrs Hammond has brought her appeal and, if she succeeds in proving that JP Morgan is not the lender, or if there is remaining equity in the property, there is no suggestion that any equitable interest to which Mr Hammond may be entitled will not be recognised by her.

24 It is possible that the motivating factor behind Mr Hammond bringing the present notice of motion is to enable him to argue the ground of appeal that there is no debt owing to JP Morgan. Mrs Hammond has not attempted to argue her case herself and she has had significant medical problems in the past. The extent of her present incapacity is unknown except for Mr Hammond's statement in his affidavit that since surgery in 2004 for the removal of most of her oesophagus, his wife has experienced "numerous side effects and difficulties ... going forward".

25 Even if that is the case, the present application must be judged on its merits. For the reasons I have given, I am of the opinion that the notice of motion should be dismissed with costs.

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Decision last updated: 23 August 2012