ACN 062 895 774 Pty Ltd v Tyndall
[2007] NSWCA 64
•27 March 2007
Appeal Outcome: Special leave application deemed abandoned - 22 October 2007
New South Wales
Court of Appeal
CITATION: ACN 062 895 774 PTY LTD v TYNDALL [2007] NSWCA 64 HEARING DATE(S): 20 February 2007
JUDGMENT DATE:
27 March 2007JUDGMENT OF: Mason P at 1; Beazley JA at 64; Ipp JA at 65 DECISION: Appeal allowed CATCHWORDS: EQUITY – General principles – equitable liens – against a third party – arising from unexpressed or implied terms of an arrangement or agreement - unconscientious conduct - EVIDENCE – General matters – objection taken at trial – deferring a ruling as to the objection - practice deprecated LEGISLATION CITED: Contracts Review Act 1980
Property Relationships Act 1984CASES CITED: Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502
Deane-Willcocks v Nothintoohard Pty Ltd (in liq) [2006] NSWCA 311
Hewett v Court (1983) 149 CLR 639
Kwan v Kang [2003] NSWCA 336PARTIES: ACN 062 895 774 PTY LTD
Diane TYNDALLFILE NUMBER(S): CA 40095/2006 COUNSEL: Appellant: B R McClintock SC/ D J Durston
Respondent: M SahadeSOLICITORS: Appellant: Searle & Associates Lawyers
Respondent: Comino PrassasLOWER COURT JURISDICTION: Supreme Court - Common Law Division LOWER COURT FILE NUMBER(S): SC 1110/2004 LOWER COURT JUDICIAL OFFICER: Sully J LOWER COURT DATE OF DECISION: 7 December 2005 LOWER COURT MEDIUM NEUTRAL CITATION: NSWSC 1124
CA 40095/06
Tuesday 27 March 2007MASON P
BEAZLEY JA
IPP JA
The appellant company was an entity registered in 1993 by Mr Clee, the respondent’s former defacto partner, and was the corporate entity through which Mr Clee conducted a debt-collecting business. The appellant also operated as trustee of Mr Clee’s property/superannuation fund.
In 1994 the respondent and Mr Clee, while in a defacto cohabitation relationship, selected a property in Killarney Heights as their home. The appellant company (of which Mr Clee was the managing director) purchased the property, but it was subject to a mortgage from ANZ Bank for approximately its entire sum. Mr Clee paid the mortgage instalments.
On 21 March 1996 the respondent and Mr Clee entered into a cohabitation agreement in the form of a deed under the De Facto Relationships Act 1984. Under the Deed Mr Clee agreed to have the home in Killarney Heights released from any mortgages and do all things necessary to have the home transferred to the respondent by 1 November 1997 or within three months of the date of their separation, whichever came first. In the agreement Mr Clee warranted that he had the power and/or control to require the appellant company to comply with his directions in accordance with the agreement. The agreement also stated that if the respondent and Mr Clee were to cease to cohabit as man and wife then the minimum amount to which the respondent would be entitled under the De Facto Relationships Act 1984 would be the amount of the unencumbered home at Killarney Heights.
Mr Clee moved out of the home in March 1998. The respondent commenced proceedings in the Equity Division to enforce the Deed by an order for specific performance, or alternatively damages, alternative to relief under the Property (Relationships) Act 1984 (as the De Facto Relationships Act 1984 had been renamed). Mr Clee contested the claim, alleging among other things that he did not have the funds to perform the Deed. He also sought orders by cross-claim to have the 1996 Deed set aside.
The parties entered into consent orders in June 2002 whereby judgment was entered for the respondent against Mr Clee in the sum of $750,000, with an order for costs. Mr Clee’s cross-claim was dismissed.
The respondent remained in undisturbed occupation of the home until the appellant made a demand for her to surrender possession of the property two years later.
Some time after consenting to the judgment, Mr Clee declared himself bankrupt.
At first instance the judge held that the respondent had a valid lien over the property in respect of the judgment debt, the lien entitling her to remain in possession until the debt was discharged.
HELD:
(1) (Per Mason P, Beazley and Ipp JJA agreeing) The respondent did not acquire any right, either under equitable principles of unconscientious conduct or under an implied term of contract, against the appellant arising out of or in connection with the settlement of the proceedings as between the respondent and Mr Clee, including one secured by way of a lien. (at [42] – [43])
(2) It is unnecessary to decide whether the case is analogous with any existing category of equitable lien, but it is unlikely that equitable principles will support a lien whose incident is no more than the right to stay in possession until a debt owing by a third party is paid. (at [43])
Hewett v Court (1983) 149 CLR 639 at 645, 649, 658, 663, 668, approved. Deane-Willcocks v Nothintoohard Pty Ltd (in liq) [2006] NSWCA 311 and Tyler, Young and Croft, Fisher and Lightwood’s Law of Mortgage, 2nd Aust ed, referred to.
ORDERS: Appeal allowed.
IN THE SUPREME COURT
CA 40095/06
Tuesday 27 March 2007MASON P
BEAZLEY JA
IPP JA
1 MASON P: The appellant owns a house at Killarney Heights. It commenced proceedings against the respondent in the Common Law Division for possession and other relief. The respondent pleaded by way of defence and cross-claim facts that were said to establish a "lien in respect of her continued possession" until a particular judgment debt owed by a third-party was satisfied in her favour.
2 At the hearing, Sully J was informed that the appellant had complied with all technical steps necessary to obtain possession and that the only issue was whether the respondent’s claim for an equitable lien was made out. This indicated that if the asserted lien was established, then judgment for possession was to be refused and a declaration made in the respondent’s favour as to the lien she claimed; whereas if the lien was not established, the appellant was entitled to judgment for possession. The appellant abandoned its claim for mesne profits early in the proceedings before Sully J.
3 Only the respondent led evidence at the trial, in the form of her affidavit, certain documentary evidence and matters deemed admitted following service of a notice to admit facts. There was limited cross-examination. Most of the narrative that follows comes from the undisputed portions of the evidence.
4 The respondent and Mr T J Clee cohabited in a de facto relationship between 1992 and 1998. The respondent was born in 1961 and had not previously been married. Mr Clee was born in 1942 and he had a wife and two children from a former marriage.
5 In 1993 Mr Clee registered the appellant, then with the name of Commercial Debt Collection Services Pty Ltd. It became the corporate entity through which he conducted a debt-collecting business as well as the trustee of his property/superannuation fund known as TJC Property Trust. The evidence does not disclose the terms of the Property Trust or its beneficiaries. Sully J was informed that Mr Clee was a beneficiary although it was not know if he was the only beneficiary.
6 In 1994 the couple selected the Killarney Heights residence as their home and took up occupation in mid-1994. The property was acquired by the appellant for $455,000 approximately all of which was borrowed from the ANZ Bank subject to a mortgage. Mr Clee paid the mortgage instalments.
7 On 21 March 1996 the couple entered into their second cohabitation agreement under the De Facto Relationships Act 1984. It was in the form of a deed that recited, among other things, that:
I. Terry [Mr Clee] is a director and shareholder in various companies including ... Commercial Debt Collection Services Pty Ltd and controls those companies.
J. The companies own various real estate which has an estimated value of about $8.5 million subject to various mortgages amounting to about $4 million.
K. The company, Commercial Debt Collection Services Pty Ltd, has purchased the property known as and situate at 4 Carlow Crescent, Killarney Heights (hereinafter referred to as "the home").
L. The home was acquired at a cost of $455,000.00 approximately all of which moneys are secured on mortgage to the ANZ Bank Limited.
...
O. It is Terry's intention to:
- (a) To do all things necessary to pay out the mortgage on the home as soon as possible but in any event before November 1997.
(b) To have the home released from any mortgages for which it may be security in relation to any borrowings of his or any company in which he may be a director or shareholder.
(c) To effect the transfer of the home with renovations contemplated unencumbered to Diane [the respondent] within three months of the date of separation of Terry and Diane or on or before the 1st November 1997 which ever shall first occur.
8 The operative clauses included undertakings by Mr Clee that he would confer certain benefits upon the respondent and make or continue various payments directly or indirectly for her benefit. As regards the residence, and consistent with Recital O, Mr Clee promised:
4. Terry shall do all things necessary to cause the mortgage secured on the home to be discharged no later than the 1st November 1997 or within three months of the date of separation of the parties which ever shall first occur and shall upon discharge, do all acts and things as for [sic, “and sign”] all documents hold all meetings necessary to cause the home to be transferred to Diane unencumbered.
5. Terry shall do all things necessary in relation to any mortgage on the home to see that payments are made as and when they fall due and shall indemnify Diane in relation thereto.
6. Terry shall in his capacity as director and/or trustee of the company which is the registered proprietor of the home not permit the registration of any further charge or encumbrance on the home or allow the amounts due in relation to any present charge or encumbrance to increase and shall indemnify Diane in relation thereto.
7. Terry warrants to Diane that the home has been purchased by Commercial Debt Collection Services Pty Ltd as trustee for his property/superannuation fund known as TJC Property Trust.
8. Terry will not alter or remove the present trustee of his property/superannuation fund pending transfer of the home to Diane and further warrants that he has the power and/or control to require the trustee to comply with the direction from Terry pursuant to this Deed to do all acts and things to transfer the said home to Diane.
...
14. If the parties cease to cohabit as man and wife then...it is agreed that the minimum amount to which [the respondent] is entitled under the [ De Facto Relationships Act ] shall be the unencumbered home at 4 Carlow Crescent, Killarney Heights.
9 Mr Clee moved out of the home on about 5 March 1998.
10 At about the same time the respondent commenced proceedings (“the Equity proceedings”) in the Equity Division to enforce the Deed and obtain, in the alternative, relief under the Property (Relationships) Act 1984 (as the De Facto Relationships Act had become known). The claims based on the Deed sought orders in the nature of specific performance, alternatively damages.
11 These Equity proceedings were strenuously contested on both sides. Detailed pleadings were exchanged. There was discovery. Many directions hearings took place. The respondent's primary claim as pleaded was that Mr Clee was in breach of the 1996 Deed in that he had not, by 1 November 1997, procured the discharge of the ANZ mortgage, nor had he caused the home to be transferred to the respondent within a reasonable time thereafter. The pleadings as amended showed that the mortgage was still outstanding in October 2001.
12 The Equity proceedings were not confined to the home. There was also a claim based on the Deed that Mr Clee provide the respondent with a motor vehicle to the value of $80,000 and pay all insurance and registration costs associated with it.
13 The appellant was not a party to the Equity proceedings, nor was it alleged that the respondent had any interest in the home other than those stemming from her rights under the Deed against Mr Clee personally.
14 Mr Clee's pleadings in the Equity Division disputed the claims in considerable detail. As regards the home, he pleaded (CB 92-3) that Commercial Debt Collection Services Pty Ltd (ie the present appellant under its former name) was removed as trustee of the TJC Property Trust in 2000, that another company was appointed trustee and that the other company had been placed in liquidation in 2001. He further pleaded that the home remained an asset of the TJC Property Trust, that it remained subject to the mortgage to the ANZ Bank and that it was liable to meet the debts of the TJC Property Trust. Mr Clee further pleaded that he no longer had any right, power or authority to transfer the property to the respondent and that the debts secured against the property exceeded its value by a considerable sum.
15 Mr Clee also sought by way of cross-claim orders and declarations setting aside the 1996 deed. He invoked s49 of the Property Relationships Act 1984 and s7 of the Contracts Review Act 1980.
16 The respondent’s affidavit in the present proceedings established, by reference to records of the Supreme Court, that the Equity proceedings were finally disposed of by consent orders made on 5 June 2002 and entered shortly thereafter. There was judgment for the plaintiff against Mr Clee in the sum of $750,000, with an order for costs. Mr Clee’s cross-claim was dismissed.
17 Very little additional information is provided about what passed between the respondent and Mr Clee (and their respective legal advisers) leading to the consent orders made on 5 June 2002. On 4 June 2002 Windeyer J made an order, undoubtedly by consent, recorded in the following terms:
- It is agreed that on the pleadings on the Statement of Claim and Defence the pltf would be entitled to judgment for damages for breach of contract. It is accepted that the matters relied on in the Cross Claim, [namely] s49 of the Property Relationships Act and s7 of the Contracts Review Act may bear on that. Note that it is also agreed that if the pltf’s contractual claim succeeds [and is] not affected by the matters raised by way of Cross Claim under s49 of the Property Relationships Act and s7 of the Contracts Review Act [then] the pltf will be entitled to Judgment in the sum of $830,000 being the agreed value of the Killarney Heights House and $50,000 being the agreed vehicle of the motor car the subject of the claim pleaded in paras 17 and 23 of the Statement of Claim. ORDER that the parties agree on the value of the assets and advise the Court of this figure tomorrow.
18 The respondent states in her affidavit that she and Mr Clee, through their legal advisers, reached agreement that the value of the Killarney Heights house was $750,000 and that became the amount of the agreed judgment entered against Mr Clee on 5 June 2002. This does not fit easily with the terms of the order made on the preceding day in that it makes no allowance for the cross-claim or the agreed $50,000 as the value of the motor car. But nothing turns on this, because the end product of the entire proceedings was the money judgment against Mr Clee personally.
19 The respondent remained in undisturbed occupation of the home, rent free, but paying electricity, gas and telephone bills, until about two years later when, for the first time, the appellant made demand on her to surrender possession. (The respondent submits that some favourable inference should be drawn in her favour from this delay. I do not agree. Nothing about the circumstances of the delay bespeaks any common assumption that the respondent had anything more than a continuing licence terminable on notice.)
20 In the meantime the respondent was unable to obtain satisfaction of the judgment against Mr Clee. He appears to have voluntarily declared himself bankrupt some time after consenting to the judgment.
Evidentiary issues
21 Paragraph 18 of the respondent’s affidavit stated:
- Up until the time of the hearing and the entering of the judgment, I was still residing in the Killarney Heights House. Mr Clee still appeared to be in control of the company, the plaintiff in these proceedings, who was the registered owner of the said house. I had always understood and agreed that I would surrender possession of that property when Mr Clee or some other entity satisfied the judgment of $750,000 being the agreed value of the Killarney Heights House.
22 When this paragraph of the affidavit was read, objection was taken to the portion in which the respondent stated that Mr Clee “appeared to be in control of the company” (para 18). The ruling was deferred without the judge returning to the matter.
23 I cannot endorse the practice of deferring indefinitely a ruling as to an objection taken at trial (see Kwan v Kang [2003] NSWCA 336 at [113]-[114]). But I do not see that any substantial wrong or miscarriage occurred in relation to the statement that Mr Clee appeared to be in control of the company. It was the admitted fact that Mr Clee was the managing director of the company at the relevant time and Recital I of the 1996 deed said he controlled the company. Furthermore, I see no reason why a person dealing with him cannot give evidence as to her perception if that is part, and I emphasise part, of an argument that invokes principles of ostensible authority.
24 In the present case, the respondent’s difficulties in establishing the lien are unrelated to proving Mr Clee’s authority to act on behalf of the appellant company. The real difficulty (among others) is that he did not purport to do so when he consented to the orders against himself in the Equity proceedings.
25 Objection was also taken to the third sentence in para 18 of the affidavit about the respondent always having understood and agreed that she would surrender possession when the judgment debt was paid. Counsel for the plaintiff at trial accepted that the statement was admissible as to the deponent’s state of mind but not as an assertion of fact.
26 The learned trial judge also deferred ruling upon this matter. Regrettably, his Honour appears to have overlooked this, because his judgment records (at [32](12)) that the evidence was not tested in cross-examination. The judge saw no reason not to accept it although he added that it seemed that Mr Clee’s action in settling the Equity proceedings tended to strengthen the probative value of what was deposed in para 18.
27 The respondent does not indicate with whom she “agreed”, as stated in the third sentence. And it is difficult to see how she could have “always” had an understanding and agreement to the effect deposed to if the $750,000 consent judgment was only agreed upon between 4 and 5 June 2002. In any event, evidence in that form was clearly objectionable as evidence of the fact. The respondent did not submit otherwise (see CA Tr pp40, 42).
The reasons of Sully J
28 Sully J recognised that the “contractual engagement” relied upon by the respondent as the basis of the equitable lien was not one of the recognised categories of equitable lien discussed in Sykes and Walker, The Law of Securities, 5th ed, 1993, pp199-206. His Honour reminded himself (at [30]) that the respondent was asserting the lien against the company, not against Mr Clee, and that the company was never a party to the 1996 agreement.
29 At [32] of his reasons Sully J collected the various “fragments of evidence” relevant to the matter at hand. He referred to the circumstances under which the home was acquired, the close relationship between Mr Clee and the appellant, the terms of the 1996 Deed and the principal allegations pleaded between the respondent and Mr Clee in the Equity proceedings.
30 His Honour drew particular attention to para 6 of Mr Clee’s Amended Defence where he had pleaded that the company’s financial position had collapsed and that neither he nor the company had the means to discharge the ANZ mortgage, a prerequisite to his capacity to transfer the subject property to the respondent under the Deed. It was in this context that Sully J made reference to para 18 of the respondent’s affidavit filed in these proceedings (set out above). As indicated, his Honour accepted the evidence contained in that affidavit. I have already explained why, in my opinion, the learned judge erred in paying any regard to the third sentence in which the respondent referred in the most general terms to her understanding and agreement that possession was not to be surrendered until the $750,000 judgment debt was satisfied.
31 Sully J found that Mr Clee was the directing mind and will of the appellant and that he controlled its affairs in such a way that he had the capacity to treat its property as if it were his own (see [32](13), [34]-[35]).
32 The conclusion upholding the respondent’s claim to an equitable lien was stated in the following terms (at [36]):
- Do all the foregoing findings bring the present defendant’s claim within the principles noted in [Sykes and Walker, The Law of Securities, 5th ed, at 199]? I am of the opinion that they do. It is, no doubt, no longer apposite to equate, as an old saying once did, the reach of equity with the length of the Lord Chancellor’s foot; but equity is still founded upon what a reasonable mind would think conscionable in the particular case. That the plaintiff in the present proceedings should now be allowed to distance itself, wrapped, so to speak, in a cloak of convenient technicality, from the actions of the man who was, and clearly so in my view on the whole of the available evidence, “the directing mind of the company” at the various material times, would be in my opinion both distinctly unconscionable and contrary to proper principle.
33 As I shall endeavour to show, neither this reasoning nor the facts sustain the orders under appeal.
34 Sully J made the following orders:
[1] Declare that the cross-claimant, Dyane Tyndall, has a valid lien over the property being Lot 42 in Deposited Plan 215008 known as 4 Carlow Crescent, Killarney Heights, NSW in respect of a debt owed to her in connection with that property as represented by the judgment of this Court in her favour in proceedings numbers 1594 of 1998.
[2] Declare that the cross-claimant, Diane Tyndall, is entitled to continue in possession of the aforesaid property until the debt, the subject of the lien referred to in Order 1 above, has been satisfied.
[3] Order that the plaintiff’s claim for possession of the said property be dismissed.
[4] Order that the plaintiff pay the costs of the defendant in the original claim and that the cross-defendant pay the cross-claimant’s costs of the cross-claim.
The basis of the asserted lien[5] Order that the exhibits be returned.
35 A common law lien can arise out of possession. But the respondent asserts an equitable lien, a condition of which is said to be that she may remain in possession until she receives satisfaction of Mr Clee’s judgment debt. This is a novel form of equitable lien stemming, as it is said to do, from unexpressed terms of the arrangement surrounding the settlement of the Equity proceedings.
36 At first instance, the respondent outlined the basis of her right in her Amended Defence and in the written and oral submissions of her counsel. Counsel, Mr Sahade, advanced the case in similar terms in this Court.
37 It was submitted that the appellant, by its agent Mr Clee, had notice of the respondent’s possession of the premises, of the claim advanced in the Equity proceedings and of the settlement of those proceedings on the terms indicated. Mr Clee had or was held out to have authority on behalf of the appellant in relation to dealings with the property. These propositions may be accepted or assumed. Whether Mr Clee was agent for the appellant in relation to the transaction at hand depends, of course, on whether he purported to represent the appellant in this matter, as well as other factors.
38 An equitable lien arises by implication of law in certain circumstances. In Hewett v Court (1983) 149 CLR 639, Gibbs CJ said (at 645, 649):
- Equitable lien does not depend either upon contract or upon possession. It arises by operation of law, under a doctrine of equity “as part of a scheme of equitable adjustment of mutual rights and obligations”; those words of Isaacs J were used in Davies v Littlejohn [(1923) 34 CLR 174 at 185], in relation to the doctrine of vendor’s lien, but they have a general application.
- …
- The rules of equity are not so rigid and inflexible that it is necessary to discover precise authority in favour of the existence of a lien before one can be held to have been created. I do not of course intend to suggest that the courts may proceed on general notions of justice without regard to settled principles.
See also per Deane J at 663.
39 Ashburner’s Concise Treatise on Mortgages, Pledges & Liens, 2nd ed, 1911, lists in its chapter on Equitable Liens, vendor’s lien, purchaser’s lien, partner’s lien and similar liens, lien of beneficiaries under a trust, liens arising from right of indemnity and liens for expenditure on another’s property.
40 The respondent accepts that the lien she asserts bears little or no analogy to well-known categories. She points out that liens are not confined to the outworking of contractual relationships. A lien may also arise to secure rights that have their origins in the principles of equity and unjust enrichment, for example, where the lien secures the right to money stemming from the operation of the principles of subrogation or where money is expended on another person’s property (see generally Tyler, Young and Croft, Fisher and Lightwood’s Law of Mortgage, 2nd Aust ed, pp58-66).
41 The respondent submits that it was an implied term of the contract embodied in the consent order that possession was not to be surrendered unless and until the judgment sum was paid. Alternatively, it was unconscionable for the appellant to have stood by allowing the proceedings in which it had an indirect interest to be settled on those terms and then to assert an unqualified right as owner to possession of the premises.
42 In my view, neither proposition is established in the present case. The respondent did not acquire any right against the appellant arising out of or in connection with the settlement of the Equity proceedings, let alone one secured by way of lien over the property. The only right acquired from the proceedings was the money judgment against Mr Clee.
43 It is, in my view, unnecessary to decide whether the case is analogous with any existing category of equitable lien or such as to engage the principles lying behind those categories. My strong feeling is that there is no such analogy and that equitable principles do not support a lien whose incident is no more than the right to stay in possession until a debt owing by a third party is paid. But, as indicated, the respondent’s case fails at a prior stage. The common law principles as to implied terms in contracts and the equitable principles as to unconscionable conduct are simply not engaged on the facts.
44 In the Equity proceedings the respondent claimed rights against Mr Clee arising under the 1996 cohabitation agreement and under the Property Relationships Act. She did not assert any present interest in the subject property. At its highest, she sought an order in the nature of specific performance designed to compel Mr Clee to do what he promised under the Deed. This was to spend money and exercise powers said to stem from his control of the appellant the effect of which would have been to procure the transfer of the property to the respondent (presumably consistently with the law of trusts). The respondent also claimed damages in the alternative.
45 Mr Clee strongly resisted these claims. He sought to have the Deed set aside on various grounds. He claimed to be destitute. The respondent says that at the time of consenting to the judgment she did not know his financial status (CB 47). It was common ground on the pleadings in the Equity proceedings that the subject property was mortgaged to the hilt.
46 I have indicated my reservations about the assertion that quantification of the judgment sum ($750,000) was the product of valuing the property and no more. The agreement noted by Windeyer J on the previous day suggests otherwise. There was a live claim on the pleadings (based on a clause in the deed) for a valuable motor vehicle and that matter is referred to by Windeyer J in his notes of 4 June 2002.
47 It is not known whether there was an imminent threat to evict the respondent from the former matrimonial home. It may well have been implicit. It is, however, clear that the Equity proceedings were prosecuted by the respondent with the aim of obtaining ownership of the home. The respondent however elected to take a money judgment against Mr Clee along with the dismissal of his cross-claim. All of the asserted rights passed into the judgment (Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 at 507-8, 512).
48 There is no evidence of anything being communicated between the present parties or even between the respondent and Mr Clee to the effect that the respondent would remain in possession until the money was paid. That may have been her intention or hope, but nothing was said on the topic. The respondent’s affidavit is silent as to what she and her legal advisers really thought about her prospects of obtaining an order against Mr Clee compelling the transfer of the house in the Equity litigation. The ANZ mortgage was a present reality and Mr Clee was crying poor in his vigorous defence of the proceedings. The failure to discuss any arrangement along the lines of the asserted lien could have been due to oversight or the realisation that Mr Clee was not in a position to compel the transfer of the property at that stage.
49 The respondent felt betrayed when Mr Clee subsequently defaulted and went bankrupt. If the agreement with Mr Clee was a sham or device then the respondent has rights under the law of bankruptcy. She does not appear to have pursued them.
50 The suggested implied term fails for at least three reasons. First, the appellant was not a party to the agreement negotiated and entered into between the respondent and Mr Clee. Secondly, the term is not necessary to give business efficacy to the contract embodied in the consent orders. It would be a pleasant beneficial extra, but that is not the same thing. Thirdly, the term is not something that the officious bystander would be told that it went without saying.
51 The hypothetical bystander would have observed that the appellant was not a party to the proceedings or the consent order. If officious interrogation had commenced, he or she might well have asked embarrassing questions about how the asserted lien could operate consistently with the prior rights of the ANZ Bank as the registered mortgagee.
52 No claim based on unconscionable or unconscientious conduct was pleaded in the Amended Defence, a point squarely taken at trial (CB 30-1).
53 In Hewett , Deane J said (at 668, citations omitted):
- [It] is difficult, if not impossible, to formulate any satisfactory statement of the necessary or sufficient circumstances for the implication of an equitable lien which is applicable to any relationship at all (eg the trustee’s lien over trust assets; the solicitor’s lien over the proceeds of an action). I do not propose to essay that task here. It is adequate for present purposes that I identify what I consider to be the circumstances which are sufficient for the implication, independently of agreement, of an equitable lien between parties in a contractual relationship. Those circumstances have, to some extent, been indicated in what has been said above. They are: (i) that there be an actual or potential indebtedness on the part of the party who is the owner of the property to the other party arising from a payment or promise of payment either of consideration in relation to the acquisition of the property or of an expense incurred in relation to it; (ii) that that property (or arguably property including that property) be specifically identified and appropriated to the performance of the contract; and (iii) that the relationship between the actual or potential indebtedness and the identified and appropriated property be such that the owner would be acting unconscientiously or unfairly if he were to dispose of the property (or, if it be appropriate, more than a particular portion thereof) to a stranger without the consent of the other party or without the actual or potential liability having been discharged.
See also Deane-Willcocks v Nothintoohard Pty Ltd(in liq) [2006] NSWCA 311.
54 The facts of this case do not satisfy Deane J’s second and third prerequisites. The property was not specifically identified or appropriated to the performance of the contract embodied in the consent orders. Nor could the owner be said to act unconscientiously or unfairly if it were to dispose of the property to a stranger without the consent of the respondent.
55 The appellant’s financial difficulty is not a reason in itself for placing the respondent in a secured position so as to achieve some advantage over other creditors (Hewett at 658).
56 Nothing was said or done on behalf of the appellant that made it unconscionable for the appellant to assert its legal rights as owner.
57 The evidence showed that Mr Clee was in effect the managing director of the appellant when the consent orders were made. But his capacity to deal with the property at that point of time was extremely limited. I pass over any limitations stemming from the law of trusts in its application to the unelaborated fact that the appellant “held the property on Trust for Clee’s Property/Superannuation Fund known as TJC Property Trust”. The more pertinent limitation stemmed from Mr Clee’s and the appellant’s incapacity to deal with the property unless and until the ANZ mortgage was discharged.
58 Mr Clee had pleaded in the Equity proceedings that his financial circumstances precluded him from procuring the discharge of the mortgage. The respondent admits in her affidavit in these proceedings that she did not know Mr Clee’s financial status at the time she consented to the judgment in her favour. What is known for certain is that she elected to take a money judgment, in lieu of her claim for an order in the nature of specific performance. Her rights asserted in the proceedings had passed into judgment, so that they merged and no longer had any independent existence.
59 A third party may offer its property as security for the performance of a primary agreement between two other persons. Furthermore, an equitable lien may arise by implication of law out of a non-contractual situation, the implication of law being designed to preclude unjust enrichment and/or unconscionable assertion of legal rights.
60 However, in the present case, the respondent never had nor claimed a legal or equitable interest in the property. Her asserted rights to have the property transferred arose out of co-habitation with Mr Clee and the terms of the 1996 Deed. They were rights against Mr Clee and not the company.
61 Assuming for sake of argument that the appellant was deemed to know everything that Mr Clee knew when he consented to the judgment, the fact remains that the company’s situation did not change in any legal or practical way in consequence of the settlement of the Equity proceedings. In the language of restitution law, the appellant was not enriched (let alone unjustly) by the settlement of the Equity proceedings.
62 By parity of reasoning, nothing was done as between the appellant and the respondent at the time when the Equity proceedings were settled that could possibly amount to unconscionable or unconscientious behaviour on the part of the appellant.
Disposition
63 For these reasons I propose the following orders:
1. Appeal allowed.
2. Set aside the declarations and orders made by Sully J on 2 February 2006.
3. In lieu, enter judgment in favour of the appellant against the respondent for possession of the premises 4 Carlow Crescent, Killarney Heights.
5. Respondent to pay appellant’s costs of the proceedings in the Common Law Division and in this Court and have a certificate under the Suitors’ Fund Act 1951, if qualified.4. Dismiss respondent’s cross-claim of 4 February 2006.
64 BEAZLEY JA: I agree with Mason P.
65 IPP JA: I agree with Mason P.
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