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Burness v Hill

Burness v Hill

Case [2019] VSCA 94 1 May 2019

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SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2018 0043

PAUL ANDREW BURNESS and MATTHEW JAMES JESS (in their capacity as trustees of the bankrupt estate of THOMAS JAMES LOVE)	Applicants
v
ANTONY CHRISTOPHER HILL	Respondent

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JUDGES:	KAYE, McLEISH and HARGRAVE JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	19 March 2019
DATE OF JUDGMENT:	1 May 2019
MEDIUM NEUTRAL CITATION:	[2019] VSCA 94
JUDGMENT APPEALED FROM:	[2018] VSC 29 (Sifris J)

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EQUITY – Marshalling – Whether there was a secured debt to second mortgagee which attracted operation of marshalling doctrine – Effect of settlement of earlier County Court proceeding on nature of debt – Principles of merger considered – Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507 considered – Secured debt existed.

EQUITY – Marshalling – Whether non-binding arrangement between debtor and first mortgagee as to order of sale of secured properties avoided operation of marshalling doctrine – Where first mortgagee accommodated preference of debtor to sell commonly mortgaged property first – National Crime Agency v Szepietowski [2014] AC 338 applied – Binding agreement required to exclude operation of marshalling doctrine.

CONTRACT – Release – Construction – Whether marshalling claim released by terms of settlement from earlier proceeding relating to debt owed – Where both parties were unaware of marshalling right – Where issues of security of debt had not yet arisen – Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112 applied – Marshalling claim not released.

EQUITY – Anshun estoppel – Abuse of process – Whether unreasonable for applicant not to make marshalling claim in earlier County Court proceeding – Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 applied, UBS AG v Tyne (as trustee of the Argot Trust) (2018) 360 ALR 184 considered – Not unreasonable for applicant not to raise marshalling claim in earlier proceeding – No estoppel or abuse of process – Appeal dismissed.

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APPEARANCES:	Counsel	Solicitors
For the Applicants	Mr J Delany QC with Ms C van Proctor	Cornwall Stodart
For the Respondent	Mr D G Robertson QC with Mr D C Morgan	Earl & Associates

KAYE JA

McLEISH JA
HARGRAVE JA:

This case concerns the equitable doctrine of marshalling of mortgages, which allows a second mortgagee whose debt has not been paid from the sale of the mortgaged property to access the proceeds of sale of another property mortgaged by the same debtor to the same first mortgagee, even though the second mortgagee has no security over the other property. Marshalling rights are primarily relevant where the debtor is insolvent; as marshalling gives the second mortgagee priority over unsecured creditors.

This case also concerns whether the second mortgagee lost any marshalling right by various defences raised on behalf of the unsecured creditors by the trustees of the bankrupt estate of the debtor, including a defence concerning the effect of a release given by the second mortgagee to the debtor.

Background facts

Between about June 2004 and January 2011, Thomas…

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.

Continue reading Burness v Hill

Details

AGLC: Burness v Hill [2019] VSCA 94
Case: [2019] VSCA 94
Decision Date: 1 May 2019

CaseChat Overview and Summary

Burness v Hill was a case before the Australian court, where the dispute centred around the equitable principles of marshalling, the existence of a secured debt, the effect of a settlement agreement, and the doctrine of Anshun estoppel. The appellant sought to marshal a secured debt held by the second mortgagee against the debtor, arguing that the first mortgagee should pay the debt in full before the second mortgagee. The first mortgagee contended that the settlement of an earlier County Court proceeding, which the parties entered into without knowledge of the marshalling right, released any marshalling claim, and that any agreement between the parties regarding the order of sale of secured properties should exclude the operation of the marshalling doctrine. Additionally, the first mortgagee argued that the appellant was estopped from making a marshalling claim in the current proceeding due to not raising the claim in the earlier County Court proceeding.

The court was required to determine several legal issues, including whether a secured debt existed which attracted the operation of the marshalling doctrine, whether the settlement agreement released the marshalling claim, and whether the doctrine of Anshun estoppel applied, barring the appellant from making a marshalling claim in the current proceeding. The court considered the principles of merger, the effect of the settlement agreement, and the nature of the non-binding arrangement between the debtor and the first mortgagee.

The court found that a secured debt existed, attracting the operation of the marshalling doctrine, as established in Tomlinson v Ramsey Food Processing Pty Ltd. The settlement agreement did not release the marshalling claim, as both parties were unaware of the marshalling right and the issues of security of the debt had not arisen at the time of the settlement, as per Grant v John Grant & Sons Pty Ltd. The non-binding arrangement between the debtor and the first mortgagee did not exclude the operation of the marshalling doctrine, as a binding agreement was required, following National Crime Agency v Szepietowski. Lastly, the court held that it was not unreasonable for the appellant not to raise the marshalling claim in the earlier proceeding, and therefore no Anshun estoppel or abuse of process applied. Consequently, the appeal was dismissed.

The court did not make any specific final orders in the text provided, but the dismissal of the appeal suggests that the appellant's claims were not successful.

Orders