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[2017] VSC 499
General information, not legal advice.
Supreme Court of Victoria
2017-09-06
ROBSON J
Original judgment source is linked above.
EQUITABLE CHARGE - Claim that debt was secured by a charge over all assets of debtor - Whether there was an agreement to charge - Whether terms of a guarantee and indemnity are enforceable to give an equitable charge of the chargee's property, or whether terms are ambiguous so as to make the charging clause vague for uncertainty - Consideration of whether the terminology 'will charge' demonstrates an immediate intention to create a charge - Whether future acquired property can be subject to a charging clause - Whether an equitable charge gives chargee a right to vacant possession of real property.
1 Amerind Pty Ltd (receivers and managers appointed) (in liquidation) (Amerind) acted as trustee of the Panel Veneer Processes Trading Trust and as such carried on business manufacturing and distributing decorative and architectural finishes.
2 On 11 March 2014, the sole director of Amerind, Mr Naja David, resolved to appoint administrators to Amerind. Amerind had a number of facilities and accounts with the Bendigo and Adelaide Bank Limited, secured by a range of securities. Also on 11 March 2014, Bendigo and Adelaide Bank Limited appointed receivers and managers of Amerind. Amerind is in liquidation and hopelessly insolvent.
3 The receivers initially continued trading in order to recover debts due to Amerind. The bank has been paid out through the realisation of debts due to Amerind, that had been assigned by Amerind to the bank as security, and the receivers were able to realise a surplus.
4 During the period May 2000 to February 2014, Carter Holt Harvey Woodproducts Australia Pty Ltd (CHH) supplied plywood and other goods to Amerind in the course of its business. At the time Amerind was placed into liquidation, CHH was owed $4,927,452.19 for goods sold and delivered to Amerind.
5 CHH sold goods and services to Amerind pursuant to a Terms of Sale and Security Agreement (supply agreement). Under the supply agreement, Amerind was obliged to pay CHH's legal costs of recovering the indebtedness of Amerind to CHH.
6 On or about 20 June 2003, Mr Naja David (the sole director of Amerind) gave CHH a written guarantee and indemnity in respect of the moneys owed by Amerind to CHH.
7 CHH contends that by executing the written guarantee and indemnity, to secure the amounts owed by Amerind to CHH, Mr David gave a charge in favour of CHH over all of Mr David's interest in land and other assets, which he then held or later acquired, and agreed to execute an instrument of transfer for any such assets by way of security, upon request.
8 Mr David is and was the registered proprietor of real properties located in Victoria. These properties are:
10 The validity of the charge is disputed in three separate proceedings.
11 In proceeding 270 of 2015, CHH is the plaintiff and Mr David is the first defendant, and Australian Securities Limited is the second defendant, who held first secured mortgage over properties (1), (3) and (4). As mentioned, these properties were sold and Australian Securities Limited was paid out. The proceeds of these properties ($941,339.78) is held on trust by Nicholas O'Donohue and Co Solicitors.[1] St George Bank is the third defendant and holds a mortgage over property (2). Mrs Kathryn Elizabeth David is the fourth defendant and ex-wife of Mr David and had an interest in the properties by way of a Family Court order. The Commissioner of Taxation is an intervener, by virtue of a tax debt owed by Mr David. I shall call proceeding 0270 of 2015 the CHH debt recovery proceeding.
12 Under the CHH debt recovery proceeding, CHH claims to be owed some $6 million for moneys owed and interest; seeks to recover the costs of the proceedings on an indemnity basis; seeks orders for the sale of the Florence Street property and for declarations that CHH is entitled to the proceeds of sale, once St George Bank has been paid out and other costs have been met; and for the proceeds of sale of properties (1), (3) and (4), held by Nicholas O'Donohue and Co Solicitors.
13 Mr Andrew David is the disabled son of Mr and Mrs David. He is currently residing at the Florence Street property, which Mr and Mrs David have said was purpose built for his specific needs and which they allege is held on trust by Mr David, for the benefit of Andrew. State Trustees Ltd was appointed as administrator for Andrew on 14 November 2016, and the Office of the Public Advocate Victoria was appointed as his guardian on 15 February 2017.
14 In proceeding 3108 of 2016, Amerind, by its liquidator, (both Amerind and the liquidator are plaintiffs) brings an unfair preference proceeding against CHH. CHH is alleged to have received $10,048,637.19 in respect of unsecured debts owed by Amerind to CHH. The liquidator contends these payments were unfair preferences given by Amerind to CHH. Proceeding 3108 of 2016 is described as the unfair preference proceeding.
15 In the unfair preference proceeding, CHH claims to be a secured creditor and that s 588FA of the Corporations Act 2001 (Cth) (Corporations Act) does not apply to payments received by it. By its defence, CHH relies, inter alia, on the charge given by Mr David under the guarantee and indemnity agreement.
16 In proceeding 418 of 2015, CHH seeks orders that the receivers of Amerind pay the receivership surplus to CHH. CHH alleges rights of marshalling and subrogation to the Bendigo and Adelaide Bank's first securities over the receivership surplus, as the bank sold (and took the proceeds of) property (5) in Toorak, to which CHH claims a (junior) charge, by virtue of the guarantee and indemnity.
17 The liquidator of Amerind is disputing that claim. The receivers are content to allow the issue of the validity of the charge to be resolved in the matter before me as between the liquidator and CHH. Proceeding 418 of 2015 is described as the receivers' proceeding.
18 As the validity of the charge is at issue in each of these three proceedings, after hearing submissions from the relevant parties, I made orders on 27 June 2017 that the common questions be determined as a preliminary question, pursuant to r 47.04 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic), in the three proceedings at the commencement of the trial in the CHH debt recovery proceeding.
19 The common questions to each of the three proceedings were said to be:
(1) is the guarantee referred to in CHH's statement of claim in the debt recovery proceeding valid and enforceable; and
(2) is the charge referred to in clause 2.6A of the guarantee valid and enforceable?
20 At the hearing, I was informed that the scope of the issues for determination had narrowed as the validity of the guarantee (question (1)) was no longer disputed.[2]
21 After hearing submissions on the preliminary question, I reserved my decision. The hearing for the CHH debt recovery proceeding then commenced. These reasons address the preliminary question and the CHH debt recovery proceeding.
22 In the CHH debt recovery proceeding, Mr Gronow of counsel appeared with Mr Costello of counsel for CHH; there were no appearances for Mr David, Australian Securities Limited or St George Bank. Mr Tsalanidis, One of Her Majesty's Counsel, appeared with Mr Kim of counsel for the fourth defendant, Mrs David. Dr Jaques of counsel appeared for the Commissioner of Taxation as an intervenor.
23 In the CHH debt recovery proceeding, CHH claims that by executing the guarantee, in order to secure the amounts owing to CHH under the guarantee, Mr David gave an equitable charge, in favour of CHH, over all of his estates and interest in any land and any other assets, whether tangible or intangible, in which he now has any legal or beneficial interest or in which he later acquires any such interest, with payment of all moneys owed by Amerind, and agreed upon request to execute a registrable instrument transferring to CHH his estate and interest in any such land and assets by way of security.[3]
24 Although Mr David did not appear, his defence disputes the validity and enforceability and effect of the charge clause in the guarantee and indemnity.
25 On the second day of the hearing, Mrs David withdrew her defence in the CHH debt recovery proceeding and the submissions made on her behalf regarding her claim on the proceeds of sale of the relevant properties and on the validity of the charge.
26 Mrs David has been given leave to appear as an interested party in the receivers' proceeding. Mrs David did not make any submissions in the receivers' proceeding.
27 Prior to withdrawing her defence and submissions in the CHH debt recovery proceeding, Mrs David challenged the validity and enforceability of the charge.
28 In the unfair preference proceeding and the receivers' proceeding, Mr Brown appeared as counsel for the liquidator of Amerind and for Amerind. The liquidator challenged the validity of the charge on a number of grounds set out below.
29 In the receivers' proceeding, Ms Borland, solicitor for the receivers, appeared and sought leave to be excused from the further hearing of the preliminary question. As mentioned above, the receivers accepted that the liquidators were actively opposing CHH's application to access the receivership surplus. Leave was so granted.
30 The Commissioner of Taxation was given leave to appear as an intervenor in the CHH debt recovery proceeding. The Commissioner is owed some $105 million by Mr David. The Commissioner has issued garnishee notices giving the Commissioner a right to the proceeds of sale of Mr David's real properties, and on 23 March 2016 issued to Australian Securities Limited a notice, pursuant to ss 260 to 265 of Schedule 1 to the Taxation Administration Act 1953 (Cth), requiring Australian Securities Limited to deduct up to $85,702,574.54 from any money it may from time to time, hold on behalf of or owe to Mr David.
31 The Commissioner is an unsecured creditor in relation to those debts. The statutory garnishee notices give the Commissioner the right to funds from the proceeds of property to which Mr David is entitled. The notices do not give the Commissioner a greater right to the proceeds than any right Mr David has to the proceeds.
32 The Commissioner informed the Court that he will abide by the decision of the Court on the validity and enforceability of the guarantee and indemnity and the charge, and did not make submissions on the preliminary question.
33 The Commissioner accepts that if the charge in favour of CHH is valid and enforceable, that his claim to the proceeds of the properties owned by Mr David will be subject to and follow that of CHH's and, in such event, not require determination of the remaining issues concerning CHH's priority to the proceeds of sale.
34 In the event the charge is not found to be valid and enforceable, the Commissioner seeks orders in the CHH debt recovery proceeding for the proceeds of sale of properties (1), (3) and (4), currently being held in an interest-bearing trust account on behalf of Australian Securities Limited, be paid by Australian Securities Limited to the Commissioner of Taxation of the Commonwealth of Australia, plus any interest earned on those proceeds.
35 Relevant portions of the deed of guarantee and indemnity between CHH and Mr David are set out below.
36 Under the heading 'background', the guarantee and indemnity states:
37 Clause 1.1 includes the following defined terms:
"Guaranteed money" means all money and damages:
(a) which now or in the future are owing (actually or contingently) by the Customer to any CHH Group Member;
(b) which having now or in the future become owing (actually or contingently) by the Customer to any CHH Group Member, cease to be owing under any law and remain unpaid by the Customer and unreleased by the Relevant CHH Group Member; or
(c) that now or in the future there is a prospect may become owing (actually or contingently) by the Customer to any CHH Group Member;
...
"Relevant Guaranteed Money" means that part of the Guaranteed Money that is owed by the Customer to the Relevant CHH Group Member.
38 Clause 2.1, the Guarantee clause, is as follows:
(a) The Guarantor unconditionally and irrevocably guarantees to CHH the punctual payment to it by the Customer of the Guaranteed Money.
(b) The Guarantor unconditionally and irrevocably guarantees to the Relevant CHH Group Member, the punctual payment to it by the Customer of the Relevant Guaranteed Money.
39 The charging clause in issue is clause 2.6A, which under the heading 'Property as Security' states:
The Guarantor will charge in favor of CHH all estates and interest in any land and any other assets whether tangible in [sic] intangible in which they now have any legal or beneficial interest or in which they later acquire any such interest, with payment of all monies owed by the customer and agree upon request, to execute a registrable instrument transferring to CHH the Guarantors estate and interest by way of security.
40 An equitable charge is 'an example of a "pure hypothecation."'[4] The creation of a charge does not require any specific wording. It is sufficient if the grantor of the charge manifests an immediate intention to create a charge by using words that create a present intention to charge land specified as security.[5] The property specified need not be in existence at the time the charge was granted but must be so when the charge is sought to be enforced.[6] Accordingly, the existence of a present intention to create a charge does not require relevant property over which the charge is to be created to be owned by the chargor. The temporal requirement indicated by the word 'present' is of the 'intention' to create a charge not to the 'hypothecation' of the property subject to the charge.
41 There are additional requirements, such as the requirement that where the charge is over land, there is the presence of writing, and that where consideration is necessary, it must be valuable, executed consideration.[7]
43 In Cradock, Romer J concluded that it was not necessary for certain formalities to be present in the creation of a charge in equity if the Court can ascertain an intention on the part of the parties that the relevant property should constitute security.[10]
44 As mentioned above, a valid charge may apply to after-acquired property. In Re Kelcey,[11] Kekewich J found no reason to say that the charge would be vague if it purported to charge subsequently acquired property, so long as the property was identifiable at the time of enforcement of the charge. In Re Clarke, Bowen LJ held:[12]
There is another kind of vagueness which arises from the property not being ascertained at the date of the contract, but if at the time when the contract is sought to be enforced the property has come in esse and is capable of being identified as that to which the contract refers, I cannot see why there is in it any such vagueness as to prevent a court of equity from enforcing the contract.
45 Where consideration is necessary, Professor Sykes says that equity 'holds that consideration must be executed consideration, that is the money must have been actually advanced.'[13]
46 The question of valuable consideration was discussed in Coghlan v SH Loch,[14] where it was held that a promise to enter into a transaction could not itself constitute valuable consideration; however, the actual advance of money pursuant to a request made contemporaneously with or prior to the guarantee could constitute good consideration. Their honours said 'the consideration is not to be found in the making of the request but in the accession to it.'[15]
47 Mrs David reached an agreement with CHH under which Mrs David withdrew her defence and her objections to the validity of the charge. Mrs David informed the Court that she will consent to a declaration being made that CHH is entitled to the net proceeds from the sale of the properties held on trust.[16]
48 Mr David did not make submissions. In his amended defence of 16 December 2016, Mr David did not deny that he signed the guarantee and indemnity. Mr David does not identify any basis upon which the guarantee was invalid.
49 In his amended defence, Mr David raises the following issues.
50 Mr David denies that by executing the guarantee, he thereby gave a charge, as alleged by CHH.
51 Mr David says that the guarantee purports to give a charge in the future, and does not state the date or circumstances upon which the future charge is to be given. He says that insofar as the guarantee purports to create a charge in the future, it is unenforceable by reason of it being vague and uncertain in its terms. Further, or in the alternative, Mr David says that the purported future charge is void and unenforceable by reason that it fails for want of consideration.
52 Mr David says that the purported obligation to execute a registrable instrument is unenforceable by reason of it being vague and uncertain in its terms.
53 As to CHH's claims over the Florence Street property, in addition to the above, Mr David says that the Florence Street Trust, of which he is trustee and a beneficiary, owns the Florence Street dwelling which was purpose built for Mr David's disabled son, Andrew, who is also a beneficiary of the Florence Street Trust. Mr David says that he holds this property on bare trust for his son.
54 Written notice of this proceeding was given to State Trustees Ltd, which was appointed as administrator for Andrew on 14 November 2016 by the Victorian Civil and Administrative Tribunal (VCAT). Ms Antoinette Khalil of the Office of the Public Advocate (Victoria) was appointed as guardian of Andrew on 15 February 2017 by VCAT. Ms Khalil sent a letter, dated 14 July 2017, to the Court in which the Court is urged to consider the needs of Andrew and the hardship that will be caused to Andrew if he must vacate his home at Florence Street.
The liquidator's objections to the charging clause
55 The liquidator takes no position as to the validity of the guarantee. On the other hand, the liquidator disputes the validity and enforceability of the charging clause on the grounds that:
(a) it does not create a present charge; it appears to be an agreement to create a charge by way of executing further documents, or by future act; and that therefore consideration should be present; and
(b) the wording of the charging clause is so uncertain and ambiguous in its terms it ought to be rendered void and unenforceable.
56 The liquidator submits that an intention to create an immediate charge is not created with the word 'will', as that is an agreement to do something in the future (in this case, obligation to charge the relevant assets) and that an agreement to do something in the future does not create a present charge, and does not evidence a clear intention to create a charge.
57 In response, Mr Gronow contends that the clause is similar to that in question in Re Roberts; Ex parte Australian Telecom Employees Credit Cooperative v Taylor,[17] where use of 'shall' was considered sufficient to create a charge. Mr Gronow submits 'shall' is of immaterial difference to 'will', as both are terms of compulsion and are expressions of intention and obligation. Mr Gronow says that 'will' imposes a present and future obligation.
58 Mr Gronow submitted that the present clause is similar to that in Avco v White, where Gillard J held that the contract was sufficient in that it disclosed an intention that the property owned constituted security for the loan and therefore Avco had an equitable charge over the property.
59 In my opinion, 'will charge' conveys the manifestation by Mr David of an immediate intention to charge and does not involve a promise to charge in the future. The fact that the charge may not be enlivened until credit was extended to Mr David by CHH does not mean that Mr David did not manifest the present intention to create a charge.
60 Clause 2.6A provides CHH a right to request a registrable instrument from Mr David. Mr Brown submits that 'will charge' should be read as a reference to the promise to 'execute a registrable interest', 'upon request', which Mr Brown says creates an agreement to enter into future documents or further security at an undefined later date and is thus inconsistent with a present intention to create a charge.
61 Mr Gronow says that the charge created by clause 2.6A is not contingent upon Mr David actually providing a registrable instrument, because the words 'will charge' create a present and unconditional obligation. Contrary to Mr Brown's submission that the charge is dependent, or would come into effect, when the request for a registrable instrument is made (that the request enlivens the charge), Mr Gronow submits that here CHH has two rights, an equitable charge, and a specifically enforceable right to call for a legal mortgage, which Mr Gronow says is a species of equitable mortgage (discussed further below).
62 In any event, Mr Gronow says that CHH so requested that Mr David execute a registrable instrument in 2014. The fact that Mr David did not comply with the request is immaterial as CHH can seek, and is now seeking, an order for specific performance of Mr David's obligation to execute a registrable instrument.
63 In my opinion, the promise to execute a registrable instrument of transfer is a separate and distinct promise made under the clause from Mr David's creating a charge.
64 Mr Brown submits that as the agreement contemplated a future act, even if the requisite intention is found, it should fail for lack of valuable consideration.
65 Mr Gronow says that the guarantee and indemnity is by deed, so consideration is not needed. Nonetheless, Coghlan v SH Lock says that even if there is no promise to supply goods, there is still consideration if goods are supplied on credit. That is so if supply on credit is before or at the time of signing the agreement. Mr Gronow submits that the supply on credit can be after signing the agreement to satisfy the requirement of valuable consideration (if it is required).[18]
66 Mr Gronow says that it is plainly valuable consideration for CHH to provide goods on credit to Amerind, a company then owned and controlled by Mr David, at his request.
67 Mr Brown says that a further complication with the question of consideration is that the supply agreement contained a retention of title clause; as the title does not pass to Amerind, the supply of goods could not be valuable consideration.
68 The retention of title, CHH says, simply provides another way of securing repayment and that CHH has multiple rights: to pursue the guarantor; exercise retention of title rights; and/or any further rights. Mr Gronow submits that having multiple rights cannot mean any of them is necessarily impugned.
70 CHH says that the charge contained in clause 2.6A is an equitable charge and mortgage over all real property of Mr David, including the relevant proceeds of sale.
71 The liquidator questions the certainty of a clause purporting to charge property that is undefined, and unascertainable at the point of executing the supply agreement.
72 It is not disputed that three of the relevant properties were acquired after the guarantee was executed; the Florence Street property was acquired in 2005 and the Safety Beach properties were acquired in 2007. The Sorrento property was acquired in 1993 by Mrs David and Mr David as joint proprietors. Subsequently, as a result of Family Court orders, Mr David became sole proprietor in June 2011.
73 Mr Gronow says that it is clear that the clause is intended to cover future property and existing property. Insofar as it applies to the future, Mr Gronow submits that the clause makes it clear that it applies the moment an interest (in property or any other asset) is acquired.
74 As discussed above, a valid charge may be engaged by the acquisition of property in the future. In my opinion, the deed has immediate operation to charge property that Mr David then held, and/or any property that Mr David may subsequently acquire.
75 A contract or term is uncertain if a court is unable to ascertain the meaning the parties intended, or it is capable of more than one meaning, but it is impossible to determine which of those interpretations represents the intention of the parties.[19]
76 Mr Brown says that the charging clause should be found to be so uncertain and that clause 2.6A is vague because the charge:
(a) says the guarantor 'will charge in favour of CHH ...', thereby making it a future obligation, but does not state when or in what circumstances that is to occur;
(b) it is not clear what the charge is securing; it is unclear whether the charge related to moneys owed but not yet payable, or to moneys owed and due and payable, or to moneys not then owed but became owed in the future;
(c) it is not clear in what circumstances and for what purposes Naja David is 'to execute a registrable instrument ...', other than 'upon request';
(d) it is not clear what system of registration is being referred to by 'registrable interest';
(e) the registrable instrument is sought to transfer 'to CHH the Guarantors estate and interest' which goes beyond a mere charge;
(f) the second use of the term 'estate and interest' is vague and inconsistent with the broad reference to assets earlier in clause 2.6A;
(g) the transferring of Naja David's estate and interest is purported to be by way of security, without stating what it is securing.
77 Mr Brown submits that the uncertainty caused by the listed issues cannot be cured by any rectification. He says that the Court is unable to give meaning to the words of clause 2.6A as to make it effectual; and that a court can find a clause void for uncertainty where the language is so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention.[20]
78 Mr Brown submits that the terms of the charging clause are ambiguous, and as they are contained in a guarantee, should have no effect. He cites Ankar Pty Ltd v National Westminster Finance (Australia) Ltd,[21] which held that 'the traditional view is that the liability of the surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety.'[22] Mr Brown therefore submits that the Court should find the clause so ambiguous so as to have no effect.
79 Reading the relevant clauses/definitions in the context of the agreement, Mr Gronow submits that the charge is clear and valid and that clause 2.6A has the effect of creating both an equitable charge and an equitable mortgage over all of Mr David's present and future property.
80 Mr Gronow says that the obligations that the charge secures are the guarantor's obligations under the guarantee, as set out in the earlier parts of clause 2; it is clear that it is securing Amerind's obligation to pay whatever the guarantee covers, being anything owed by Amerind for any reason.
81 Mr Gronow says that the proper construction is that if goods are supplied in the future, they will be covered by this promise. Goods were supplied on credit from 2000 onwards. There was always money owing by Amerind to CHH. CHH is only suing in respect of goods supplied from November 2013 to February 2014, because they are the goods CHH has not been paid for.
82 The parties have not used the defined term 'Guaranteed Money' in the charging clause. Accordingly, the issue is whether the phrase 'any moneys owed' is uncertain.
83 In my opinion, 'any moneys owed' is not limited to sums that ought to have been paid but extends to all moneys owed whether payable or not. To have any commercial sense, 'moneys owed' must refer to moneys owed from time to time.
84 An equitable charge does not give the holder an automatic remedy. The chargee must seek a court order. Clearly, if the debtor was not in default, the Court would not allow the chargee to realise the security.
85 Mr Brown submits that the provision permitting CHH to request the execution of a registerable interest of transfer is vague and uncertain as the circumstances in which it can be requested are not set out. I reject this submission; it may be requested at the election of CHH. The system or registration depends on the interest sought to be registered. So far as Torrens registered land is concerned, the registrable instrument must be a legal mortgage.
86 Regarding (d), Mr Gronow submits that it is clear that the registrable instrument will have to be registrable according to whatever system of registration is applicable, at the relevant time to the relevant asset.
87 As to (e), Mr Gronow says that he agrees and further says that such a registrable instrument, if provided, would create a legal mortgage because at common law what a mortgage does is it transfers from the mortgagor to the mortgagee the mortgagor's legal estate and then the mortgagor can use that to realise and satisfy the debt subject to an equity of redemption.
88 The guarantor's obligation to execute a registrable instrument upon request, Mr Gronow submits, is a specifically enforceable one, and because the charge in clause 2.6A also contains an obligation to execute a legal mortgage instrument when called upon, the clause constitutes an equitable mortgage as well as an equitable charge (to the extent that the difference is material).[23] (Mr Gronow referred to Young, Croft Smith Book on Equity, which considers the difference between an equitable mortgage and an equitable charge_._)[24]
89 Mr Gronow says that the present clause is stronger than that considered in Troncone v Aliperti, because that only gave a right to lodge a caveat.
90 Regarding (f), in my opinion, the first is a reference to the interest that is subject to the charge; the second reference is to the hypothecation constituted by the charge. The reference in the two instances is a reference to different concepts. I do not see an inconsistency causing any uncertainty.
91 Reference to 'by way of security' in (g), in my opinion, clarifies that the 'registrable instrument transferring' is one transferring security and no more, such as the execution of a legal mortgage as opposed to the transfer of title.
92 In my opinion, the clause states a clear intention to create a charge, defines the ascertainable property including future property over which it is contemplated the charge will exist, and provides valuable consideration for the covenant.
93 I find that the charging clause is valid and enforceable and enlivens the Court's power to make appropriate orders in the realisation of the security.
94 Mr Gronow submits that Mr David has admitted signing the guarantee and says that it is not seriously disputed that Amerind is indebted to CHH in sums exceeding $4.9 million for goods supplied to it in the period November 2013 to February 2014 and not paid for, including interest.[25]
95 No other objections were raised to CHH maintaining that it was a secured creditor over the property referred to in the charge given by Mr David for the sums claimed due by Amerind to CHH, as set out in the further amended statement of claim of CHH in the debt recovery proceeding.
96 CHH has sought to enforce its claimed rights by lodging caveats over the titles of the properties, registering its security interests and requesting Mr David execute mortgages. While CHH does not contend that it has priority over the prior registered mortgagees, it does assert priority over all other creditors of Mr David.
97 As noted above, the Commissioner conceded that if the charge is found to be valid and enforceable, the Commissioner's claim would follow that of CHH's claim. As I have found that the charging clause is valid, certain and effectual, it is not necessary for me to address the claims of the Commissioner.
98 Mr David denies that CHH is entitled to the net proceeds, presumably on the bases on which he denies the enforceability of the charge contained in the guarantee.[26]
99 CHH's claim, as an equitable chargee and mortgagee, are proprietary in nature. CHH's equitable interest created by its charge and mortgage were created in 2003, prior to the events alleged to give rise to the Florence Street Trust in 2008 to 2010, as alleged in Mr David's defence.
101 In such a case, 'the onus rests on the holder of the later equitable interest to demonstrate why the ordinary rule should be displaced and why that interest should prevail over the earlier one.'[29]
102 CHH submits that this is not a case which comes within any of the recognised exceptions to the general rules about priority between competing equitable interests,[30] and that there is nothing in the conduct of CHH to cause its prior equitable interest to be postponed to those equitable interests claimed by CHH.
103 In the list of issues for determination, the following questions were included:
(a) as the trustee of a bare trust on behalf of Andrew David; or
(b) on his own behalf as the legal and beneficial owner?
(i) as the trustee of a bare trust on behalf of Andrew David; or
(ii) on his own behalf as the legal and beneficial owner?
(i) as the trustee of the Florence Street Trust; or
(ii) on his own behalf as the legal and beneficial owner?
Florence Street Trust
104 These issues were not argued before me, and I accordingly make no findings.
105 CHH seeks orders in the three proceedings that their equitable charge and mortgage created by clause 2.6A of the guarantee dated 20 June 2003 are valid and enforceable.
106 I find that the charge in the guarantee and indemnity is a valid and enforceable charge. I will make orders accordingly.
107 The remaining issues in the receivers' proceeding and the unfair preference proceeding remain unheard and undetermined.
108 CHH seeks orders and declarations in the debt recovery proceeding for money judgment against Mr David in the sum of $6,591,325.10 inclusive of interest, and for CHH's costs of and incidental to this proceeding on an indemnity basis; and that CHH is entitled to enforce its charge by foreclosure or sale of Mr David's interest in any real and personal property (whether tangible or intangible). Specifically, CHH seeks:
(a) Declarations that Mr David has charged properties (1)-(4) in favour of CHH.
(b) Orders that Mr David execute a legal registrable mortgage over Florence Street (property (2)) in favour of CHH; or failing such execution the Prothonotary be authorised and directed to execute such mortgage on his behalf.
(c) Declarations that CHH is entitled in priority, to the net proceeds of sale of the Sorrento and Safety Beach properties (properties (1), (3), and (4)), currently held on trust by Nicholas O'Donohue and Co Solicitors.
(d) Orders for the foreclosure and sale of the Florence Street property.
(e) In the alternative to a mortgagee's sale, CHH seeks orders for judicial sale of the Florence Street property, inter alia, through:
(i) The appointment of a receiver and trustee, in whom the Florence Street property vests, to conduct and complete the sale in accordance with a court ordered process.
(f) Orders that the defendants, to the extent any of them is in possession, give vacant possession of the Florence Street property.
109 After the hearing, Mr Gronow referred me to authorities where similar orders had been made in the case of an equitable charge/mortgage.[31]
110 As Andrew may have an interest in the Florence Street property, Andrew, through his trustee, should be provided notice of the orders sought and be provided an opportunity to make submissions.
111 I will hear submissions on the form of the orders to be made, and on costs.
[2] Transcript of hearing, Re Carter Holt Harvey Woodproducts (Australia) Pty Ltd (No 1) (26 July 2017) T19-10.
[4] Young & Ors On Equity, Lawbook Co., Sydney 2009 [9.180] citing Sykes and Walker (1993) p 197; Fisher and Lightwood (2005) [1.36].
[5] Young & Ors On Equity, Lawbook Co., Sydney 2009 [9.190], citing Cradock v Scottish Provident Institution (1893) 69 LT 380 (aff'd (1894) 70 LT 718) ('Cradock'); Evenwood Pty Ltd v Conway (unreported, WASC, 16 December 1997); and Re Bank of Credit & Commerce International SA (No 8) [1998] AC 214, 226 (IIL). See also White v Conroy [1921] NSWStRp 21; (1921) 21 SR (NSW) 257; Southern Wine Corp Pty Ltd (In Liq) v Frankland River Olive Co Ltd [2005] WASCA 236; (2005) 31 WAR 162; C2 Property Investments Pty Ltd v Rational Enterprises Pty Ltd [2011] WASC 280; cited by Derham AsJ in Morris Finance Ltd v Commonwealth Bank of Australia [2017] VSC 260, [31], [32].
[6] Montagu v Earl of Sandwich (1886) 32 Ch D 525.
[7] Morris Finance Ltd v Commonwealth Bank of Australia [2017] VSC 260, [31], [32] (Derham AsJ).
[8] [1924] 1 KB 431, 449-50; see also Cinema Plus Ltd v Australia & New Zealand Banking Group Ltd [2000] NSWCA 195; Dal Pont, Part 1 Equitable Interests [1.65].
[9] See also Montagu v Earl of Sandwich [1885 M. 183], 540; Avco Financial Services Ltd v White [1977] VR 560 ('Avco v White'); Re Roberts [1982] FCA 152; [1982] 84 FLR 88; Troncone v Aliperti (1994) 6 BPR 97, 455 ('Troncone v Aliperti'); Cinema Plus Ltd v Australia & New Zealand Banking Group Ltd [2000] NSWCA 195; McMillan v Dunoon [2005] VSC 440; Porter v Bonarrigo [2009] VSC 500; Evans v Advertising Department [2009] VSC 587 [41] ('Evans Advertising'); Roberts v Investwell Pty Ltd [ 2012] NSWCA 134 (Bathurst CJ (with whom Beazley JA and Tobias AJA agreed)).
[11] [1899] 2 Ch 530, 533.
[12] In re Clarke, Coombe v Carter (1887) 36 Ch. D. 348, 355.
[13] Sykes The Law of Securities (4th ed.) The Law Book Company Limited 1986, 146; citing Rogers v Challis [1859] EngR 879; (1859) 27 Beav. 175; 54 E.R. 68.
[14] Coghlan v SH Loch (Australia) Ltd (1987) 61 ALJR 289 ('Coghlan v SH Loch').
[16] Transcript of hearing, Re Carter Holt Harvey Woodproducts (Australia) Pty Ltd (No 1) (27 July 2017) T127-128.
[17] [1982] FCA 152; (1982) 84 FLR 88. The clause in question contained the words, 'the member shall execute an equitable charge in favour of the society'.
[18] Citing McKay v National Bank as authority, a case that concerned a document not by deed.
[19] OAMPS Insurance Brokers Ltd v Hanna [2010] NSWSC 781 [38] (Hammerschlag J).
[20] Thorby v Goldberg [1964] HCA 41; (1964) 112 CLR 597, 607 [14] (Menzies J); see also Evans v Advertising.
[21] [1987] HCA 15; (1962) 162 CLR 549, 561 ('Ankar').
[22] Ankar [21] (Mason ACJ, Wilson J, Brennan J, Dawson J). Cited in Andar Transport Pty Ltd v Brambles [2004] HCA 28.
[23] Young & Ors On Equity, Lawbook Co, Sydney 2009 [9.180].
[24] Young & Ors On Equity, Lawbook Co, Sydney 2009 [9.160], [9.180], [9.190].
[25] CB 236-246; witness statement of Des Tolan dated 5 July 2016.
[26] Mr David's defence of 16 December 2016 [14] and [18]: CB44.
[27] Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) [1965] HCA 17; (1965) 113 CLR 265 ('Hotel Terrigal').
[28] Hotel Terrigal, 276; see also Meagher et al, Equity: Doctrines and Remedies, 5th ed. 2015 (Butterworths LexisNexis, Australia) [8-015].
[29] Meagher et al, Equity: Doctrines and Remedies, 5th ed. 2015 (Butterworths LexisNexis, Australia) [8-015] citing General Finance Agency & Guarantee Co Ltd v Perpetual Executors & Trustee Corp (NZ) Ltd [1902] VicLawRp 121; (1902) 27 VLR 739, 743; Australian Guarantee Corp (NZ) Ltd v CFC Commercial Finance Ltd [1995] 1 NZLR 129, 137; Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266, 279; Moffett v Dillon [1999] VSCA 32; [1999] 2 VR 480, 501-2, 504; Clark v Raymor (No 2) [1982] Qd R. 790, 797. See also [8-020] and [8-095].
[30] Referring to the categories see out in Meagher, et al, Equity: Doctrines and Remedies, 5th ed. 2015 (Betterworths LexisNexis, Australia) [8-030]-[8-090].
[31] Atkin's Encyclopedia of Court Forms in Civil Proceedings, Mortgages Nuisance, Ombudsman, (2nd ed.) 28, 2008 issue (LexisNexis) 206-11; Thorn v Boyd [2016] NSWSC 1344; Chateau Constructive v Zepinic [2010] NSWSC 265.
(2005) 31 WAR 162
(1987) 61 ALJR 289
(1982) 84 FLR 88
(1964) 112 CLR 597
(1962) 162 CLR 549
(1965) 113 CLR 265