Zhong v Lanbo Constructions Pty Ltd; Lanbo Constructions Pty Ltd v Zhong [2023] NSWSC 440

Zhong v Lanbo Constructions Pty Ltd; Lanbo Constructions Pty Ltd v Zhong [2023] NSWSC 440

The third mortgagee bore the burden of proving that the debt secured by the second mortgage had been extinguished. On the available evidence, including equivocal WeChat messages, oral statements, later negotiations, the sale of Lot 25, and the parties' Commercial List pleadings, it did not establish on the balance of probabilities that the second mortgagees had absolutely and unequivocally exercised the option in clause 8 of the deed of guarantee and indemnity. The second mortgage therefore continued to secure an unsatisfied debt exceeding the amount in court, so the registered second mortgagees had priority over the registered third mortgagee and were entitled to payment out of the funds.

Jurisdiction
Australia
Judgment Date
28 April 2023
Procedural Posture
Applications by Second and Third Mortgagees Under Uniform Civil Procedure Rules 2005 (nsw) R 55.11(1) for Money Paid Into Court After a Mortgagee Sale to Be Paid Out to Them / Principal Judgment on Notices of Motion
Outcome
The second mortgagees' application for payment out was granted; Lanbo Constructions Pty Ltd's notice of motion was otherwise dismissed; Lanbo Constructions Pty Ltd was ordered to pay the applicants' costs of the applications for the money to be paid out of court.
Legal Topics
['priorities Between Registered Mortgagees' 'mortgagee Sale Proceeds Paid Into Court' 'payment Out of Court Under UCPR R 55.11(1)' 'exercise of Option to Purchase Property Under Deed of Guarantee and Indemnity' 'merger of Debt in Judgment' 'costs']
['mortgages and Securities' 'equity' 'civil Procedure'] ['priorities Between Registered Mortgagees' 'mortgagee Sale Proceeds Paid Into Court' 'payment Out of Court Under UCPR R 55.11(1)' 'exercise of Option to Purchase Property Under Deed of Guarantee and Indemnity' 'merger of Debt in Judgment' 'costs']

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Procedural Posture

Applications by Second and Third Mortgagees Under Uniform Civil Procedure Rules 2005 (nsw) R 55.11(1) for Money Paid Into Court After a Mortgagee Sale to Be Paid Out to Them / Principal Judgment on Notices of Motion

Legal Issues

  1. 1 ['Whether registered second mortgagees or a registered third mortgagee had priority to the balance of proceeds of sale paid into court by the registered first mortgagee.' 'Whether the debt secured by the second mortgage had been extinguished because the second mortgagees exercised an option to purchase properties under a deed of guarantee and indemnity.' 'Whether any merger of the contractual obligation to repay the first loan in a consent judgment affected the enforceability of the second mortgage.' 'Whether the third mortgagee should pay the second mortgagees the amount of costs deducted by the first mortgagee before paying the balance of sale proceeds into court.']

Ratio Decidendi

The third mortgagee bore the burden of proving that the debt secured by the second mortgage had been extinguished. On the available evidence, including equivocal WeChat messages, oral statements, later negotiations, the sale of Lot 25, and the parties' Commercial List pleadings, it did not establish on the balance of probabilities that the second mortgagees had absolutely and unequivocally exercised the option in clause 8 of the deed of guarantee and indemnity. The second mortgage therefore continued to secure an unsatisfied debt exceeding the amount in court, so the registered second mortgagees had priority over the registered third mortgagee and were entitled to payment out of the funds.

Court Disposition

The second mortgagees' application for payment out was granted; Lanbo Constructions Pty Ltd's notice of motion was otherwise dismissed; Lanbo Constructions Pty Ltd was ordered to pay the applicants' costs of the applications for the money to be paid out of court.

Orders

  • ['Order that Sanchun Zhong and Lingwan Jin (the Applicants), be joined as parties to these proceedings.' 'Order that Lanbo Constructions Pty Ltd be joined as a party to these proceedings.' 'Order that the notice of motion filed by Lanbo Constructions Pty Ltd on 8 November 2022 otherwise be dismissed.' 'Order...