Bunnings Group Ltd v Hanson Construction Materials Pty Ltd - [2017] WASC 132

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: BUNNINGS GROUP LTD -v- HANSON CONSTRUCTION MATERIALS PTY LTD & ANOR [2017] WASC 132

CORAM: CHANEY J

HEARD: 22 DECEMBER 2016

DELIVERED : 18 MAY 2017

FILE NO/S: CIV 2287 of 2016

BETWEEN: BUNNINGS GROUP LTD
Plaintiff
AND
HANSON CONSTRUCTION MATERIALS PTY LTD
First Defendant
CAPITAL WORKS CONSTRUCTIONS PTY LTD (IN LIQ)
Second Defendant

Catchwords:

Real property - Caveats - Unregistered charge - Priority of competing unregistered charges - Whether order of registration determines priority - Postponing conduct - Creator of charge - Operation of charge

Legislation:

Transfer of Land Act 1893 (WA)

Result:

Application for declaration dismissed

Category: B

Representation:

Counsel:

Plaintiff:     Mr A J N Aristei
First Defendant            :     Mr C C K Ko
Second Defendant        :     No appearance

Solicitors:

Plaintiff:     Carlo Primerano & Associates
First Defendant            :     Trinix Lawyers
Second Defendant        :     HWL Ebsworth Lawyers

Case(s) referred to in judgment(s):

Black v Garnock (2007) 237 ALR 1
Butler v Fairclough (1917) 23 CLR 78
Elderly Citizens Homes of SA v Balnaves (1998) 72 SASR 210
Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326
Hopkinson v Rolt (1861) 9 HL Cas 514
J&H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546
Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265
Palmer v Carey [1928] AC 703
R&I Bank v Cash Resources Pty Ltd (1993) 11 WAR 536
Re Charge Card Services Ltd [1987] Ch 150
Rice v Rice (1854) 2 Drew 73; (1854) 61 ER 646
Sibbles v Highfern Pty Ltd (1987) 164 CLR 214

CHANEY J: The plaintiff (Bunnings) and the first defendant (Hanson) are each in the business of supplying building materials. Each of them supplied materials to the second defendant (Capital Works) prior to Capital Works' liquidation by means of a creditors' voluntary winding up on 12 June 2015. The supply of goods by each of Bunnings and Hanson was made pursuant to the terms set out in credit applications which, in each case, contained a charge granted by Capital Works over any land then or subsequently held by Capital Works to secure repayment of monies owing by Capital Works in respect of the supply of building materials. Some years later, each of Bunnings and Hanson lodged a caveat on the basis of their respective charge over three properties owned by Capital Works. The eventual sale of those properties by the liquidator of Capital Works realised, after payment out of a first mortgage and the liquidator's expenses, an amount which was insufficient to meet the whole of Capital Works' liabilities to either Bunnings or Hanson. The question which arises in these proceedings is, as between Bunnings and Hanson, whose interest in the proceeds should take priority.

Background facts

Capital Works applied for credit with Hanson by a credit application dated 16 June 2010. The credit application contained terms and conditions upon which the credit was granted, which included a charge…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2017] WASC 132
Decision Date: 18 MAY 2017

CaseChat Overview and Summary

Bunnings Group Ltd initiated legal proceedings against Hanson Construction Materials Pty Ltd, seeking to resolve a dispute concerning the priority of competing unregistered charges over real property. The case was heard in the Federal Court of Australia. The central issue was whether the order of registration of the charges should determine their priority, or if other factors, such as postponing conduct by the parties, should be considered.

The court examined the principles governing the priority of competing unregistered charges, as outlined in Heid v Reliance Finance Corporation Pty Ltd. It was determined that the question of priority should not rely solely on the doctrine of estoppel but rather on a more general and flexible principle that considers which party has the better equity. This involves examining the conduct of both parties, any negligence, and the effect of any representations made. The court held that fairness and justice demand that the primary inquiry be concerned with acts during which it is reasonably foreseeable that a later equitable interest will be created and that the whole of that later interest will assume the non-existence of the earlier interest.

Debelle J found that Bunnings had not made any inquiries about other credit arrangements or charges before accepting Capital Works' credit application in 2010. There was no evidence that Hanson misled Bunnings in any way, nor had Bunnings carried out any title searches. The belief that the absence of other caveats by other suppliers gave Bunnings priority was deemed misconceived and could not deprive a prior interest holder of its priority.

The court ruled in favour of Hanson Construction Materials Pty Ltd, determining that the order of registration did not determine the priority of the charges and that Bunnings did not have the better equity. Consequently, Hanson's charge took precedence over Bunnings' charge. The court's decision underscored the importance of examining the relevant circumstances to determine which party has the better equity, rather than solely relying on the order of registration.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

Debelle J continued:The principles to be applied were also examined by Mason and Deane JJ in Heid v Reliance Finance Corporation Pty Ltd (at 339 ‑ 342). They concluded (at 342 ‑ 343):1.It is preferable to avoid a reliance solely on the doctrine of estoppel and to accept a more general and flexible principle that preference should be given to what is the better equity in an examination of the relevant circumstances.2.The question is whether, in fairness and in justice, the earlier interest should be postponed to the later interest.3.In whatever form the relevant test be stated, the overriding question is "... whose is the better equity, bearing in mind the conduct of both parties, the question of any negligence on the part of the prior claimant, the effect of any representation as possibly raising an estoppel and whether it can be said that the conduct of the first or prior owner has enabled such a representation to be made..." See Sykes, Law of Securities, 3rd ed, (1978) p336; see also Dixon v Muckleston (1872) LR 8 Ch App 155 at 160 and Latec Investments (at 276).4.Thus, regard must be had to both negligence and estoppel.5.Fairness and justice demand that the primary enquiry be concerned with those acts during the carrying out of which it is reasonably foreseeable that a later equitable interest will be created and that the whole of that later interest will assume the non-existence of the earlier interest.That principle was expressed in these terms (at 342):"It may be that an equitable interest will not be postponed to an equitable interest created later in time merely because there is a causal nexus between an act or omission on the part of the prior equitable owner and an assumption on the part of the later equitable owner as to the non-existence of the prior equity. Fairness and justice demand that we be primarily concerned with acts of a certain kind - those acts during the carrying out of which it is reasonably foreseeable that a later equitable interest will be created and that the whole of that later interest will assume the non-existence of the earlier interest" (225). There is no evidence, that prior to the creation of the charge in favour of Bunnings in August 2010, Bunnings made any inquiry of Capital Works as to the existence of other credit arrangements or other charges granted by Capital Works over existing or future land holdings. It cannot be said that Hanson in any way led Bunnings to acquire its interest, which it did by accepting Capital Works' credit application in 2010. Bunnings carried out no title searches at that time, but in any event Capital Works did not own the three properties the subject of the caveat until 2013. Mr Godden's belief that the absence of any other caveats lodged by other suppliers of Capital Works, of itself, had the effect of giving Bunnings priority over any other unregistered charge was misconceived. That misconceived view cannot have the effect of depriving a prior interest holder of its priority.