Gunnersens P/L v Harding - [2000] NSWSC 385

CITATION: GUNNERSENS P/L v. HARDING & ANOR [2000] NSWSC 385

CURRENT JURISDICTION: Equity

FILE NUMBER(S): SC 1235/00

HEARING DATE(S): 8 & 9/5/00

JUDGMENT DATE: 12 May 2000

PARTIES :

Gunnersens Pty Ltd - Plaintiff
Paul Harding - First Defendant
Patricia Dengate - Second Defendant

JUDGMENT OF: Bryson J at 1

COUNSEL : G. Burton for Plaintiff
J. Needham for Second Defendant

SOLICITORS: Ledlin Partners for Plaintiff
Messrs White & Downey for First Defendant
Legal Aid Commission for Second Defendant

CATCHWORDS: REAL PROPERTY - Torrens system - equitable interest - whether oral express trust existed - whether equitable charge over property under commercial credit guarantee - decision on facts and construction of documents - plaintiff’s alleged charged was not made out - second defendant’s informally created trust was enforceable on estoppel principles - GUARANTEES - commercial credit guarantee - incomplete form - whether guarantee binding - whether signature of debtor and guarantor required for formation of contract of guarantee - decision on effect of document.

LEGISLATION CITED: Bankruptcy Act 1966 (Cth) Pt X
Conveyancing Act 1919 ss 23C, 66GT
Real Property Act 1900 s 57(2)(b)

CASES CITED: Bleyer v Neville Jeffress Advertising Pty Ltd (unreported, CA (NSW) 15 December 1987)
Bridge Wholesale Acceptance Corp (Australia) Ltd v Burnard (1992) 27 NSWLR 415
Pan Food Co Importers & Distributors Pty Ltd v Australia and New Zealand Banking Group Ltd [2000] HCA 20
Prosilis v Double Bay Newspapers Pty Ltd [2000] NSWCA 30

DECISION: See para 25

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON J.

Friday 12 May 2000

1235/00 Gunnersens Pty Ltd v. Paul G. Harding
& Patricia Dengate.
JUDGMENT

1 HIS HONOUR: The title to the house property at 1 Johnston Street Mylestom, in the Bellingen Shire, is Certificate Title Auto Consol 3794/13, and the defendants Paul Geoffrey Harding and Patricia Dengate are the registered proprietors as tenants in common in equal shares. Australia and New Zealand Banking Group Limited has a registered first mortgage. The defendants bought the house for $112,000 in or about February 1992, and to complete the purchase they borrowed $85,000 which the Bank advanced on 6 April 1992. The Bank is not a party to this litigation, which has been conducted on the basis that the Bank’s priority is acknowledged. According to the Bank’s records in Exhibit A the amount due on 15 March 2000 was $58,080.13. The Bank has asserted that there have been defaults and arrears, and as long ago as 27 May 1999 was threatening recovery action (Exhibit J). On 24 March 2000 the Bank directed a notice under s 57(2)(b) of the Real Property Act 1900 to the defendants, demanding payment of $57,953.84 and indicating that the Bank was putting itself into a position to exercise its power of sale. Of several expressions of opinion the view which is most reliable is that of Mr Valuer Cardow who valued the property at $148,000. That suggests that the interest of the registered proprietors is worth in the order of…

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: [2000] NSWSC 385
Decision Date: 12 May 2000

CaseChat Overview and Summary

The matter of Gunnersens P/L v Harding was before the court to determine the existence of an equitable interest in property and the enforceability of a commercial credit guarantee. The plaintiff, Gunnersens P/L, sought to establish an equitable interest in a property owned by the second defendant, arguing that an oral express trust existed, as well as an equitable charge under a commercial credit guarantee. The second defendant contested the existence of both the trust and the charge, arguing that the commercial credit guarantee was not properly executed and therefore not binding.

The primary legal issues before the court were whether an oral express trust could be established, whether an equitable charge over property existed under the commercial credit guarantee, and whether the guarantee itself was valid and enforceable. The court had to consider the principles of equity, the construction of the documents, and the requirements for the formation of a contract of guarantee. Specifically, the court needed to determine if the signature of both the debtor and the guarantor was necessary for the guarantee to be binding, and whether an incomplete form could still give rise to a binding agreement.

The court found that the plaintiff's claim for an equitable interest based on an oral express trust was not substantiated. The court held that the second defendant's informally created trust was enforceable based on estoppel principles. Regarding the commercial credit guarantee, the court held that the guarantee was not binding as it was incomplete and did not meet the necessary formalities. The court concluded that the signature of both the debtor and the guarantor was required for the formation of a contract of guarantee and that the incomplete form did not satisfy this requirement. As a result, the plaintiff's claim for an equitable charge under the guarantee was dismissed.

The court ordered that the equitable trust created by the second defendant was enforceable, but no equitable charge existed under the commercial credit guarantee. The plaintiff's claim for an equitable interest in the property was dismissed. The second defendant's trust was recognised and enforceable against the plaintiff.

Orders