Hewett v Court

[1983] HCA 7

HIGH COURT OF AUSTRALIA

Gibbs C.J., Murphy, Wilson, Deane and Dawson JJ.

HEWITT v. COURT

(1983) 149 CLR 639

15 March 1983

Lien—Contract—Bankruptcy

Lien—Equitable—Contract for provision of work, labour and materials—Progress payments—Whether lien obtained over unfinished object—Whether dependent upon right to specific enforcement of contract. Contract—Character—Work, labour and materials or sale of goods. Bankruptcy—Preference—Contract for prefabrication of house—Risk with builder until practical completion—Property not to pass until full payment of price—Progress payments—Builder placed in liquidation before completion—Prior agreement for purchaser to pay for work done after last progress payment and take unfinished house—Whether preference—Companies Act 1961 (W.A.), s. 293—Bankruptcy Act 1966 (Cth), s. 122.

Decisions

1983, March 15.
The following written judgments were delivered: -
GIBBS C.J. This is an appeal from a judgment of the Full Court of the Supreme Court of Western Australia, which, reversing the decision of Wickham J., held that a transaction entered into between the appellants and T. &M. Ogilby Pty. Ltd. ("the company") on or about 1 June 1976, whereby the appellants obtained possession, and intended to acquire ownership, of a partly completed dwelling houe, amounted to a preference to the extent of $20,469 and was void against the respondents, who are the liquidators of the company. (at p643)

2. The company carried on the business of constructing transportable houses. Its practice was to construct the houses at its premises at Kewdale and then, when each house had been practically completed, to deliver it to the site nominated by the person for whom the work of construction had been carried out. The appellants, who were partners, on or about 21 January 1976 entered into a written contract with the company under which the company agreed to "construct a transportable home" at its premises at Kewdale "in accordance with the plans and specifications together with any modifications agreed between the parties hereto" and on practical completion of the home to transport it and place it on stumps at the site specified by the contract (cl. 2). The total price payable by the appellants was $34,116 which, under cl. 3 and the schedule to the contract, was to be paid as follows:
"Twenty per cent deposit on execution
of contract $6,823 On pitching of roof 13,646 Seven days prior to delivery 12,647 Practical completion on site - ready for occupation 1,000

------ $34,116" ------

The company agreed that it would construct the home in accordance with the plans and specifications and any agreed modifications in a proper and workmanlike manner, that it would conclude the construction within sixty working days of the date of commencement and that on conclusion it would transport the home and stump it in accordance with the plans and specifications on the site (cl. 4). The contract entitled the company to suspend construction of the home in the event that the appellants should fail to pay by the due dates any instalments of the contract price or the cost of agreed extras, or should commit any act of bankruptcy or execute a Deed of Assignment or Deed of Arrangement or enter into a composition or other arrangement with their creditors (cl. 6(b)). Provision was made for extension of time for completion in certain circumstances (cl. 6(c)). Paragraphs (e) and (f) of cl. 6 provided as follows:

"(e) The home shall be at the risk of the Builder in all respects from commencement to practical completion of construction on site and shall be at the risk of the Purchaser in all respects thereafter. (f) The Builder shall insure the home at the Builder's expense while in transit from the place of construction to the site against such contingencies as are normal in policies of insurance of that nature."

In the contract "the Builder" of course refers to the company and "the Purchaser" to the appellants. Clause 8 provided:

"The home shall remain the property of the Builder until such time as the Purchaser has paid the whole of the Contract price and the price of any modifications."

By cl. 10 it was provided that if the Purchaser purported to terminate, repudiate or cancel the contract, "the Builder shall be entitled to recover from the Purchaser such proportion of the total contract price as shall be equivalent to the proportion of labour, skill and materials used by the Builder in his performance of the contract of the total of such labour, skill and materials required to complete the contract and a margin for overhead and profit". (at p644)

3. The words "plans and specifications" which appear in the contract in a number of places are not defined, but they can refer only to plans and specifications agreed between the parties. In fact the uncontradicted evidence of one of the appellants was that "the design for the transportable home was to our specifications". (at p644)

4. The payments of $6,823 and $13,646 specified in the contract were duly made. During the course of the work the appellants inspected the home which was under construction, which was identified as their home, and in April 1976 chose tiles for it. (at p644)

5. Early in May 1976 it appeared that the company was insolvent. Towards the end of May a director of the company met with a number of the persons who had entered into contracts to acquire transportable homes, and it was suggested that they should be permitted to take away the partially completed transportable homes and (subject to an adjustment being made to allow for the cost of completing any uncompleted items) should pay the balance of the contract price. The result was intended to be that each purchaser, instead of becoming an unsecured creditor for the amount paid to the company under his contract, would be permitted to take away and complete for himself the partially completed home. This suggestion was adopted, and on 28 May 1976 the company and the appellants signed what was described as a variation order, which varied the contract by deleting the unfinished work, the cost of which was valued at $7,236. When this amount was deducted from the amount of $13,647, which was the balance of the purchase price payable under the original contract, a "revised balance" of $6,411 was reached. On or about 1 June 1976 the appellants paid this amount and removed the home from the company's premises at Kewdale. On 1 June 1976 the respondents were appointed liquidators of the company. (at p645)

6. The total payments made by the appellants ($26,880) represented the full value of the house at the time they took delivery of it. But it was contended on behalf of the respondents that the appellants had no proprietary interest in the house, and, unless the contract had been validly varied on 28 May 1976, had no rights against the company other than those of an unsecured creditor. By obtaining a house worth $26,880 on payment of $6,411 they therefore obtained, it was said, a preference to the extent of $20,469. In reply to this submission it was contended on behalf of the appellants that in the circumstances they were entitled to an equitable lien upon the house to secure payment of the amount of money which they had paid under the contract. If this was so there was of course no preference. The sole question which was presented for our determination was whether or not in the circumstances the appellants did have an equitable lien upon the house. (at p645)

7. 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 p 185 , in relation to the doctrine of vendor's lien, but they have a general application. It would be difficult, if not impossible, to state a general principle which would cover the diversity of cases in which an equitable lien has been held to be created. A vendor's lien for unpaid purchase money has been said to be founded on the principle that "a person, having got the estate of another, shall not, as between them, keep it, and not pay the consideration": Mackreth v. Symmons (1808) 15 Ves 329, at p 340 (33 ER 778, at p 782) . The lien of a purchaser for the purchase money that he has paid to the vendor on a sale that has gone off through no fault of the purchaser may perhaps rest on the converse principle that he who has agreed to convey property in return for a purchase price will not be allowed to keep the price if he fails to make the conveyance. At all events, the rule has been said to be founded on "solid and substantial justice": Rose v. Watson (1864) 10 HLC 672, at p 684 (11 ER 1187, at p 1192) . In each of these cases the vendor or the purchaser, as the case may be, is treated as a secured creditor (cf. Combe v. Lord Swaythling (1947) Ch 625, at p 628 ) - the lien is the security for the money which is justly due. In other circumstances an equitable lien may arise because of the relationship that exists between the parties (e.g., that of partnership, or trustee and beneficiary or solicitor and client) or by reason of subrogation or estoppel. Cases of this kind, which will be found discussed in the textbooks (see Sykes, Law of Securities, 3rd ed. (1978), pp. 164-167; Ashburner on Mortgages, 2nd ed. (1911), pp. 112-125; and Halsbury's Laws of England, 4th ed., vol. 28, pars. 566-573), do not closely resemble the present, but their existence shows that the rules governing the circumstances in which equity has considered that justice requires the recognition of the existence of a lien are not confined to one narrow category. Indeed, as Professor Sykes suggests (op. cit., p. 164), the list may not be a closed one. (at p646)

8. In the present case the appellants naturally sought to draw an analogy with those cases in which property in the hands of a vendor has been held to be subject to an equitable lien in favour of the purchaser for the amount paid by way of deposit and purchase money. The right to a lien in such a case is not limited to the sale of land; it extends also to the sale of personal property: Barker v. Cox (1876) 4 Ch D 464 ; Imperial Ottoman Bank v. Trustees, Executors and Securities Insurance Corporation (1895) 13 R 287 ; Levy v. Stogdon (1898) 1 Ch 478; affd (1899) 1 Ch 5 ; Hannam v. Lamney (1926) 43 WN (NSW) 68 . However, it is a question whether the legislation which in Western Australia takes the form of the Sale of Goods Act 1895 (W.A.) is such a complete code that there is no room for the creation of equitable liens by operation of law in respect of goods whose sale is governed by that legislation. That is a question which, in Australia, remains an open one, but for reasons which will appear it is unnecessary to express any views upon it in the present case. (at p646)

9. The distinction between a contract for the sale of goods and a contract for the provision of work and materials is frequently a fine one and the tests for distinguishing the one from the other are unsatisfactory and imprecise; cf. Young &Marten Ltd. v. McManus Childs Ltd. (1969) 1 AC 454, at pp 473, 476 . However, the present contract, which required the company to construct a house, and then to place it on stumps on the site, could not in my opinion be regarded as a contract for the sale of goods. Although it does not appear from the contract itself in what manner the house was to be placed on the stumps, the fact that it was intended to be a home leads to the inference, in the absence of evidence to the contrary, that it was intended to be annexed to the land in which the stumps stood, irrespective of the manner of its annexation: see Reid v. Smith (1905) 3 CLR 656 . A contract to construct a house and erect it on the land which is intended to be its site is not a contract for the sale of goods. Authority supports this view: Brooks Robinson Pty. Ltd. v. Rothfield (1951) VLR 405 ; Aristoc Industries Pty. Ltd. v. R. A. Wenham (Builders) Pty. Ltd. (1965) NSWR 581 ; Young &Marten Ltd. v. McManus Childs Ltd. It is for this reason that the question whether an equitable lien can arise on the sale of goods under the Sale of Goods Act does not fall for decision in the present case. (at p647)

10. It was submitted on behalf of the respondents that the fact that the contract was one for work and labour meant that the appellants are not entitled to an equitable lien. It is no doubt right to say that as a general rule no lien will arise from a building contract. Indeed, when the work is done on the land, the landowner needs no lien to protect him once the work for which he pays has become a fixture. However, the question in the present case is not to be decided according to whether one label or another can be placed on the contract between the parties. What is necessary is to consider the rights and obligations for which the contract provides, with a view to determining whether a lien must be implied for the protection of those rights or the enforcement of those obligations. (at p647)

11. The contract recognizes that the home which will be constructed and placed on the site will be a particular building which will be ascertained and identified at latest by the time when the first instalment of the purchase price, other than the deposit, is paid. That instalment is to be paid on the pitching of the roof, and that of course means that it is necessary to identify the particular house on which the roof is pitched. Moreover, the construction of the house, once commenced, is to be concluded within sixty working days, unless time can be extended under the contract. The contract did not simply require that a house which conformed to the appellants' plans and specifications should be completed within sixty working days. What it required was that the company should construct, and conclude the construction of, "the home"; in other words, the company was obliged to conclude the construction of the particular home which it commenced to build to the appellants' plans and specifications and it could only suspend the construction of that home in the circumstances permitted by cl. 6(b). It was that home which, when completed, it was obliged to transport to the site and place on stumps there, having first insured it while in transit. I cannot, with all respect, agree that the company could, consistently with the contract, have sold to somebody else the home which was being constructed for the appellants, once it had been identified, and then satisfy its contractual obligations by building another house. (at p648)

12. Moreover, although the contract stated (in cl. 8) that the property in the home was to remain in the company until the whole of the price had been paid, that does not mean that the intention of the parties was that the appellants could acquire no interest in the house until payment had been made in full. That this is so is shown by cl. 10 which, (albeit with a disregard for grammar) entitled the company to recover from the appellants a proportion of the purchase price if the appellants should terminate the contract. It cannot be supposed that it was intended that the company, having obtained the requisite proportion of the price from the appellants, would be entitled to keep the home as well, thus keeping both the product of the work and the payment for it. The necessary implication is that in such a case the appellants would be entitled to the benefit of the work for which they paid. (at p648)

13. The contract required the appellants to pay all but $1,000 of the price of $34,116 before obtaining property in the home. The payment (other than the deposit) was to be made in respect of an identified building which the company was bound to complete and set up on the appellants' land. The contract impliedly recognized that if the appellants terminated the contract they should be entitled to the product of the work for which they were required to pay. In these circumstances it seems to me that the appellants were entitled to a lien for the amount of the purchase money paid when the contract could not be completed through no fault of theirs. The case is so closely analogous to that of a sale that the principles which entitle the purchaser to a lien are in my opinion applicable. No doubt if the construction of the building had never been commenced there could have been no lien for the deposit, but it does not follow that once the construction had been commenced to the stage of pitching the roof there could be no lien in respect of all moneys paid, including the deposit. Further, it is immaterial whether the moneys paid were in fact used by the company in the construction of the building. A purchaser's lien does not depend on the ability to trace the purchase moneys into the property over which the lien is created. (at p648)

14. Although there is no authority which precisely governs the present case, the facts bear a strong resemblance to those of Swainston v. Clay (1863) 4 Giff 187 (66 ER 672); 3 De GJ &S 558 (46 ER 752) . The facts of that case were stated, in my opinion accurately, in Ashburner on Mortgages, 2nd ed. (1911), p. 112, as follows:

"The purchaser of an unfinished ship, to be completed by the vendor under a contract by which an advance made to the vendor was to be taken as part payment of the purchase-money, was given a lien for the advance as against the trustee in bankruptcy of the vendor."

At first instance, Stuart V.C. based his decision on the existence of an express contract for a lien (1863) 4 Giff, at pp 196-197 (66 ER, at pp 676-677)9 . However, on appeal, the Lords Justices held that the plaintiff had no title to relief under the agreement which expressly created a lien because it had merged in a later agreement, and it appears to have been held that there was a lien by operation of law (1863) 3 De G J &S, at p 569 (46 ER, at p 757) . It is true that in that case the hull of the vessel was in existence when the contract was made, whereas no house was in existence when the contract was made in the present case. The decision in Swainston v. Clay did not in my opinion turn on that circumstance, and I can see no reason in logic to distinguish between a case in which the construction had commenced at the date of the contract, although it had not then been completed, and one in which no construction was commenced until after the contract was made but the subject of the contract was subsequently identified. (at p649)

15. The fact that there is no authority precisely in point does not mean that in the present circumstances no lien can arise. 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. But the present case seems to me to fall within the principles which govern the creation of a purchaser's lien. It is true that technically the contract is not one for sale and purchase. That is important in relation to the question whether the Sale of Goods Act would prevent the creation of a lien, but not in considering whether a lien arises under the doctrines of equity, which attach more importance to substance than to technicalities. (at p649)

16. It was further submitted by the respondent that no lien could arise in the present case because the contract was not specifically enforceable. It seems to be established that a vendor's lien will not arise unless the contract for sale is specifically enforceable: Capital Finance Co. Ltd. v. Stokes (1969) 1 Ch 261, at p 278 ; London and Cheshire Insurance Co. Ltd. v. Laplagrene Property Co. Ltd. (1971) Ch 499, at p 514 ; In re Bond Worth Ltd. (1980) Ch 228, at p 251 . Although the principles which apply to a purchaser's lien are related to those which apply to a vendor's lien, in my opinion a lien is available to a purchaser although the contract is not specifically enforceable. Indeed it may be because the contract cannot be specifically enforced (e.g. by reason of want of title) that the purchaser wishes to assert a lien for the purchase price which he has paid. It has been consistently held that a purchaser may have a lien although the contract is not specifically enforceable; see Middleton v. Magnay (1864) 2 H &M 233 (71 ER 452) ; Barker v. Cox (1876) 4 Ch D 464 ; Levy v. Stogdon (1898) 1 Ch 478; (1899) 1 Ch 5 . Those decisions should in my opinion be followed. I therefore need not decide whether the contract in the present case was specifically enforceable, since a lien was in any case created. (at p650)

17. For the reasons that I have given I consider that the appellants were entitled to an equitable lien in respect of the moneys which they paid under the contract and it follows that in the circumstances of the case they received no preference when they obtained the house. (at p650)

18. I would allow the appeal and would restore the judgment of Wickham J. (at p650)

MURPHY J. The contract is one for work and materials, and not for sale of goods (see Aristoc Industries Pty. Ltd. v. R. A. Wenham (Builders) Pty. Ltd. (1965) NSWR 581, at p 587 ). Hence the Sale of Goods Act 1895 (W.A.) is not applicable. (at p650)

2. In the circumstances, by implication of law, an equitable charge or lien arose over the uncompleted home when the appellants paid the first instalment of $13,646.00 on the pitching of the roof. At this stage the particular home was appropriated to the contract. In equity, the appellants had a charge on that home for the amount so far paid (by way of deposit and part payment) and that charge would extend to any further payment by the appellants (Halsbury's Laws of England, 4th ed., vol. 28, pp. 250-251; American Jurisprudence, 2nd ed., vol. 51, pp. 160-174; Sykes, Law of Securities, 3rd ed. (1978), pp. 163-167; "The lien which a purchaser has for his deposit is not the result of any express contract; it is a right which may be said to have been invented for the purpose of doing justice" (Whitbread and Co. Ltd. v. Watt (1902) 1 Ch 835, at p 838 )). In reaching my conclusion I place no reliance on the old case of Swainston v. Clay (1863) 4 Giff 187 (66 ER 672) . A charge such as this will often be necessary to protect consumers, who, unlike traders, cannot be expected to inquire into the solvency of the person with whom they are dealing. (at p651)

3. The creation of such an equitable charge does not depend on the availability of specific performance. The equitable considerations which give rise to the charge will often occur when specific performance is impossible. (at p651)

4. As so often happens in commercial and conveyancing cases, the court was not assisted by any "commercial impact statement", that is, of what would be the effect in commerce generally, of charges arising in such circumstances. (at p651)

5. The conclusion is that there was no preference. The appeal should be allowed with costs. (at p651)

WILSON AND DAWSON JJ. This is an appeal from a decision of the Full Court of the Supreme Court of Western Australia which held that the transfer of a partially completed dwelling from T. &M. Ogilby Pty. Ltd. ("the company") to the appellants constituted a preference over other creditors of the company and was, for that reason, void against the respondents who are the liquidators of the company. (at p651)

2. The company carried on business as a builder, specializing in the construction of transportable houses. These houses were constructed to the point of practical completion at the company's premises at Kewdale in Western Australia after which they were delivered to the sites nominated by their purchasers. On 21 January 1976 the company entered into a contract in standard terms with the appellants to construct a transportable house at the company's premises in accordance with plans and specifications, together with any agreed modifications, and on practical completion of the house to transport it and place it on stumps on a nominated site. The construction of the house was to be concluded within sixty working days of the date of commencement. The contract price of $34,116 was payable as follows:
"Twenty per cent deposit on execution
of contract $6,823 On pitching roof 13,646 Seven days prior to delivery 12,647 Practical completion on site - ready for occupation 1,000

------- $34,116" -------

It was a term of the contract that the house should remain the property of the company until such time as the appellants had paid the whole of the contract price and the price of any modifications. (at p652)

3. Early in May 1976 it became apparent that the company was insolvent. On 19 May 1976 notices were sent out convening a meeting of the company's creditors with a view to placing the company in liquidation. The meeting took place on 1 June 1976 and by resolution of members and creditors it was resolved that the company be wound up voluntarily. The respondents were appointed liquidators of the company. (at p652)

4. At the time notices of the creditors' meeting were sent out the company had a number of partially completed transportable houses at its premises at Kewdale. One of these was a house being constructed pursuant to the contract between the company and the appellants in respect of which the appellants had paid an amount of $20,469, being the sum of the first two instalments of the purchase price. The work which had been done on the house had been in accordance with a design to the appellants' specifications and it was identifiable as the house being constructed for the appellants. They had in April 1976 chosen tiles for the house. (at p652)

5. On 24 May 1976 an arrangement was made between the company and the purchasers of the partially completed houses pursuant to which the appellants gave to the company a variation order varying the original contract by deleting certain items which had been provided, including transport and stumping, and deducting from the contract price the sum of $7,236 in respect of those items. With this deduction and the amount of $20,469 already paid by the appellants there was a balance of $6,411 payable by the appellants to complete the payment of the contract price. The appellants paid this balance and on 1 June 1976 took the partially completed house from the company's premises at Kewdale. There is no dispute that the total amount paid by the appellants, namely, $26,880, represented the value of the house at the time they took it. (at p652)

6. The respondents claim that the variation order, which was dated 28 May 1976, and the taking of the partially completed dwelling constituted a preference over other creditors of the company to the extent of $20,469 which is void against them. They claim that the partially completed house should have been an asset available for the benefit of all unsecured creditors. (at p652)

7. It is common ground that the sum of $20,469, which represents the two instalments of the contract price paid by the appellants before the variation order was given, was paid into the company's funds and formed part of its ordinary revenues. The respondents contend that the appellants became unsecured creditors of the company for that amount but the appellants contend that they became secured creditors of the company in that they had an equitable lien over the partially completed house to secure the payment of the instalments in the event that the company failed to carry out its contract with them. Consequently, the appellants claim, the transaction whereby the contract price was varied and the balance outstanding of $6,411 was paid by them in exchange for the delivery of the partially completed house did not constitute a preference. (at p653)

8. A preference given by a company to a particular creditor over the general body of creditors is void against the liquidator of the company in the like manner as it is void against the trustee in bankruptcy in the case of an individual. See Companies Act 1961 (W.A.), s. 293; Bankruptcy Act 1966 (Cth), s. 122. The sole question which arises in this case is whether the appellants, who were creditors of the company for the amounts which they had paid to it, were entitled to take possession of the partially completed dwelling in the exercise of an equitable lien over it or whether they were required to rank with other unsecured creditors in the winding up. In other words, the question is whether the appellants were secured or unsecured creditors of the company. If they were unsecured creditors, there is no dispute that there was a preference. (at p653)

9. At common law a lien, which may be particular or general, consists of the right of one person to retain possession of goods of another until his claims are satisfied. See Hammonds v. Barclay (1802) 2 East 227, at p 235 (102 ER 356, at p 359) . No lien arose in favour of the appellants at common law. An equitable lien is, however, different. It exists independently of possession and arises by operation of equity from the relationship of the parties, rather than being created by the act of the parties as in the case of an equitable charge. An equitable lien is exercisable, in the case at least of land, by a purchaser for his deposit and any amounts paid by way of purchase price if the contract goes off otherwise than through the purchaser's default. In Rose v. Watson (1864) 10 HLC 672, at pp 683-684 (11 ER 1187, at p 1192) , Lord Cranworth, concurring in the judgment of Lord Westbury L.C., said:
"There can be no doubt, I apprehend, that when a purchaser has paid his purchase-money, though he has got no conveyance, the vendor becomes a trustee for him of the legal estate, and he is, in equity, considered as the owner of the estate. When, instead of paying the whole of his purchase-money, he pays a part of it, it would seem to follow, as a necessary corollary, that, to the extent to which he has paid his purchase-money, to that extent the vendor is a trustee for him; in other words, that he acquires a lien, exactly in the same way as if upon the payment of part of the purchase-money the vendor had executed a mortgage to him of the estate to that extent."
See also Middleton v. Magnay (1864) 2 H &M 233 (71 ER 452) ; Whitbread &Co. Ltd. v. Watt (1901) 1 Ch 911; (1902) 1 Ch 835 ; Kitton v. Hewett (1904) WN 21 . The underlying principle of these cases is that, in respect of that part of the purchase price which has been paid, the purchaser is regarded by equity as a secured creditor, the security being a lien over the property purchased. See Combe v. Lord Swaythling (1947) 1 Ch 625, at p 628 . Such a lien extends, of course, beyond the beneficial ownership of the purchaser under a contract for the sale of land where the contract is enforceable by a decree of specific performance. If the contract is rescinded for want of title or other default on the part of the vendor, or under a condition enabling the purchaser to rescind, or for any other reason not involving default on the part of the purchaser, a lien over the property continues to secure the repayment of any part of the purchase money which has been paid. See Rose v. Watson (1864) 10 HLC 672 (11 ER 1187) . (at p654)

10. There is authority for the proposition that a purchaser's equitable lien is not confined to land but may also apply to personal property in the same way as it applies to land. In Barker v. Cox (1876) 4 Ch D 464 and Levy v. Stogdon (1898) 1 Ch 478 it was applied to personalty in the form of stock and in Imperial Ottoman Bank v. Trustees, Executors and Securities Insurance Corporation (1895) 13 R 287 it was applied to debentures, but it is unsettled whether there can be an equitable lien arising out of some contracts for the sale of goods. The cases which consider that question are concerned with whether an equitable lien may arise under a contract for the sale of future or unascertained goods and also examine the question whether a codification of the relevant law is effected by the Sale of Goods Act (in Western Australia the Sale of Goods Act 1895) so as to exclude equitable principles otherwise applicable. See Hoare v. Dresser (1859) 7 HLC 290 (11 ER 116) ; Holroyd v. Marshall (1862) 10 HLC 191 (11 ER 999) ; In re Wait (1927) 1 Ch 606 ; King v. Greig (1931) VLR 413 ; F. Pollock, "Re Wait", Law Quarterly Review, vol. 43 (1927), p. 293; Dean, "Equitable Assignments of Chattels", Australian Law Journal, vol. 5 (1932), p. 289. (at p654)

11. It is, however, unnecessary for the purposes of this case to embark upon an examination of these authorities unless it appears that the contract between the company and the appellants was a contract for the sale of goods rather than a contract for the performance of work and labour and the supply of materials for, as will appear later, if the latter is the case, there can be no equitable lien for any part of the purchase price paid. (at p655)

12. The ordinary tests which are applied to distinguish a contract for the sale of goods from a contract for work and labour draw a distinction between the degree to which emphasis is placed by the contract upon the exercise of skill in producing the end product and the end product itself. The distinction is often artifical and difficult to draw. But there is a line of authority which establishes that where a contract is not only to supply an article but to erect or install it so that it becomes a fixture or part of the land, the contract is for work done and materials supplied. See Clark v. Bulmer (1843) 11 M &W 243 (152 ER 793) ; Brooks Robinson Pty. Ltd. v. Rothfield (1951) VLR 405 ; Aristoc Industries Pty. Ltd. v. R. A. Wenham (Builders) Pty. Ltd. (1965) NSWR 581 ; Harvey v. MacDonald (1927) QSR 50 ; Benjamin's Sale of Goods, 2nd ed. (1981), par. 42. (at p655)

13. The dwelling house which was the subject of the contract between the company and the appellants was transportable and was to be constructed at the company's premises. But it was part of the contract that it should be transported by the company and placed upon stumps on the appellants' site. The whole of the contract price was not payable until practical completion on the site and the house was ready for occupation. Had the contract been for construction of the house on the stumps at the appellants' site there could be no doubt that it would have been a contract for work and labour and the supply of materials. See Webb and Sons v. Williams (1907) 27 NZLR 456 ; Reid v. Smith (1905) 3 CLR 656 . (at p655)

14. The fact that the house was constructed away from its eventual site and was transported to that site where it was placed in position does not suggest a contract of a different kind. No doubt it involved a degree of prefabrication which may have been unusual even in modern times but the obligation undertaken by the company was nevertheless to provide a house on the appellants' site whatever the process in getting it there. The standard terms of the company's contract contemplated the transport in two or more sections of a house constructed by the company (although it does not appear that the house in question was to be so transported). All indications are that the site for the house was to be a permanent or, at all events, not a temporary one. Having regard to the method by which the house was constructed it may be assumed that, if at some future time its owners wished to move it to another site, it would be easier to do so than with a conventionally constructed house. But the house was to be stumped on the site and, although it does not appear in what manner, if any, the house was to be affixed to the stumps, having regard to the contract price and its proposed use as a dwelling on the appellants' own site, it should be regarded when completed and on site as annexed to the land. See Reid v. Smith. Even if it were not correct to view the contract as being one for the construction of a dwelling house upon a site provided by the appellants, it could only be viewed as a contract to construct an article and then to install it in such a way that the installation involved annexation to the land. If that were the appropriate way in which to regard the contract, it would still be a contract for work and materials and not for the sale of goods, for a contract to manufacture an article and install it in such a manner that it becomes a fixture is ordinarily to be regarded as being for work, labour and materials. See the cases already cited. (at p656)

15. If, as in our view it was, the contract between the company and the appellants was for work, labour and materials rather than for the sale of goods, the appellants nevertheless contend that they were entitled to possession of the partially completed dwelling house in the exercise of a lien which they had over it. They base their contention upon the sole authority of Swainston v. Clay (1863) 3 De G J &S 558 (46 ER 752) . In that case a firm of shipbuilders, Brown and Briggs, agreed to build a vessel for a man named Fisher. The plaintiff, who was a shipbroker, negotiated the agreement between Fisher and Brown and Briggs, and during the negotiations advanced a sum of 400 pounds to Brown and Briggs who had already commenced to build the vessel. Later an agreement was executed between the plaintiff and Brown and Briggs to secure the repayment of this amount together with a further sum of 100 pounds which was advanced at the time of the execution of the agreement. Under this agreement the benefit of the ship building agreement was assigned to the plaintiff and he was expressly given a lien over the partially completed vessel. Subsequently, differences arose between Brown and Briggs and Fisher and the ship building agreement was cancelled. The plaintiff then agreed to purchase the hull of the new vessel which was to be completed by Brown and Briggs for the price of 1150 pounds, the sum of 500 pounds advanced by the plaintiff being deemed to be part payment of the purchase money. No further work was done on the vessel. The question arose upon the bankruptcy of Brown and Briggs whether the plaintiff was entitled to a lien or charge over the partially completed vessel to secure the repayment of the 500 pounds. It was held that the earlier agreement between the plaintiff and Brown and Briggs was ". . . merged into and taken as part payment of the purchase-money payable under . . . " the later agreement (1863) 3 De G J &S, at p 568 (46 ER, at p 757) . The later agreement was such that the plaintiff . . . had a lien for the purchase-money which he had paid, and was entitled to a sale by virtue of that lien" (1863) 3 De G J &S, at p 569 (46 ER, at p 757) . (at p657)

16. Although the reports of the case are not entirely satisfactory (see also (1863) 32 L.J. Ch. 388), what is clear is that at the time the plaintiff entered into the later agreement with Brown and Briggs the hull of the vessel was in existence and the plaintiff expressly agreed to purchase it at the same time as it was agreed that the vessel should be completed. In those circumstances there was an agreement for the sale of specific goods in respect of which the purchase price was paid or partly paid and the case cannot stand as authority for the proposition that an equitable lien arises over the product of a contract for work and labour done and materials supplied. It is unnecessary to consider whether in fact the lien which was held to exist in that case could, and did, arise out of the sale of goods in the form of the hull or whether it owed its existence to the earlier agreement, notwithstanding, or because of, the merger of that agreement in the later agreement. On any view, the case did not decide that a lien arose by operation of equity out of an agreement, without more, to provide the work, labour and materials in the further construction of the vessel. (at p657)

17. In considering, although not deciding, the effect of the earlier agreement in so far as it purported to grant to the plaintiff a lien over the vessel, Turner L.J. was not satisfied that it was of significance if, as was argued, at the date of the agreement there was no vessel which was appropriated to Fisher. He pointed out that ". . . it does not follow that because no property passed at law in the ship to be built there might not be a perfectly good and valid contract affecting it in equity" (1863) 3 De G J &S, at pp 568-569 (46 ER, at p 757) . But that is, of course, a reference to a charge created by act of the parties to the agreement and sheds no light upon the circumstances in which a lien arises by the operation of equity rather than by express creation. (at p657)

18. Apart from the absence of authority there are obvious difficulties which suggest that an equitable lien cannot arise in the case of a contract such as this. At the time when the deposit was paid there was nothing to which a lien could attach. Even as the construction of the house proceeded and it became identifiable as a house being constructed for the appellants, no property in it passed to the appellants and there was no obligation on the part of the company to transfer that particular house to the appellants; they might have constructed an identical house to fulfil their contractual obligations to the appellants. When the contract was completed the house was to become annexed to and form part of the land comprising the site. (at p658)

19. Nor does principle suggest that any equity arises in favour of the appellants. The insolvency of the company is no reason of itself for placing the appellants in a secured position so as to achieve an advantage over other creditors. The other creditors may have included persons who paid moneys by way of deposit or otherwise for transportable houses but who were unable to identify, or sufficiently identify, a particular house as the one which was being constructed pursuant to the contract between them and the company. No equity dictates that those whose houses had reached a particular point of construction, such as the pitching of the roof, should be preferred in the realization and distribution of the company's assets, to those whose contracts with the company had been performed to a lesser extent. It is necessary to look at the appellants' position, disregarding the financial position of the company, and to look at it before the events took place which are said to constitute the preference. The contract between the appellants and the company was not of a type which equity would specifically enforce. It was a contract for the construction of a house and its erection. As Mellish L.J. remarked in Wilkinson v. Clements (1872) 8 Ch App 96, at p 112 : "Now it is settled that, as a general rule, the Court will not compel the building of houses." There are exceptions to that rule where the work to be done is sufficiently defined, damages are an inadequate remedy, and the builder has obtained possession of the site pursuant to a contract. See Fry on Specific Performance, 6th ed. (1921), p. 48; Wolverhampton Corporation v. Emmons (1901) 1 KB 515 ; York House Pty. Ltd. v. Federal Commissioner of Taxation (1930) 43 CLR 427, at pp 437, 439 . Whether or not the work to be done on the house in this case was sufficiently defined, there is no reason to suppose that damages would not be an adequate remedy and it is clear that the company did not have possession of the site. Moreover, the considerations which have led equity to regard the vendor of land as being under an obligation to hold it for the benefit of the purchaser in the case of a contract which would be specifically enforced are similar to those which give rise to an equitable lien in favour of the purchaser when he has paid part of the purchase money. See Rose v. Watson (1864) 10 HLC 672 (11 ER 1187) . Those considerations are absent in the case of a contract for work and labour and the supply of materials the very nature of which makes any attempt to apply the suggested equitable principles difficult and unpredictable in result. It is hardly surprising that equity has not extended those principles so far. To do so in this case would, in our view, introduce unnecessary complexity into the ascertainment of the rights of the parties and would be destructive of that certainty which is the basis of sound commercial practice. (at p659)

20. In our view the appellants had no equitable lien over the house which the company was constructing for them and they must rank with the other unsecured creditors of the company in respect of the sums paid by them to it. We would dismiss the appeal. (at p659)

DEANE J. The respondents are the liquidators of T. &M. Ogilby Pty. Ltd. ("the company") which, before its liquidation, carried on business in the Perth suburb of Kewdale as a builder of transportable homes. On 21 January 1976, in the course of its business, the company entered into a written contract ("the contract") with the appellants under which it agreed to construct a moveable home at its Kewdale premises and to transport the home to, and instal it upon, land of the appellants at York (W.A.). The total contract price was $34,116 payable by progress payments: $6,823 by way of deposit on execution of the contract; $13,646 on pitching of the roof; $12,647 seven days prior to delivery; and $1,000 when the home was installed on stumps ready for occupation. (at p659)

2. In early May 1976, when the home was approximately 85 per cent completed, it became apparent that the company was insolvent. At that time, the appellants had paid the deposit and the progress payment which became due on pitching of the roof. These two payments totalled $20,469. A meeting of the company's creditors to consider voluntary liquidation was called for 1 June 1976. A few days before the meeting, the appellants and the company agreed to vary the contract by reducing the contract price by $7,236 and by deleting the uncompleted items from the contract. These included, amongst other things, the balance of painting, floor coverings, airconditioning, transport and stumping. The respondents concede that the reduced contract price of $26,880 accurately reflected the true value of the home at its then stage of completion. The appellants paid to the company $6,411 representing the balance outstanding of the adjusted purchase price. On 1 June 1976, the appellants took possession of the home and removed it from the company's premises. On that day, the meeting of creditors resolved that the company be placed in voluntary liquidation and appointed the respondents as its liquidators. (at p660)

3. The present proceedings were instituted by the respondents, as liquidators, against the appellants in the Supreme Court of Western Australia. The respondents assert that the acquisition by the appellants of the home constituted a preference of the appellants over the company's other creditors to the extent of $20,469, that being the excess of its value over the amount of the appellants' final payment. They claim that, to the extent that it constituted such a preference, the acquisition of the home was void against them (Companies Act 1961 (W.A.), s. 293; Bankruptcy Act 1966 (Cth), s. 122). The matter was heard at first instance by Wickham J. who dismissed the respondents' claim. The respondents appealed to the Full Court of the Supreme Court which upheld the appeal and ordered that judgment be entered for the respondents in the amount of $20,469 together with interest from the date on which payment of that amount had been demanded. The appellants appeal to this Court from that decision of the Full Court. (at p660)

4. Before the Full Court of the Supreme Court, the appellants argued that the acquisition by them of the home could not constitute a preference for the reason that they were not, at any relevant time, creditors of the company for the purposes of s. 122 of the Bankruptcy Act 1966. That argument was rejected in the Full Court and has not been advanced on the appeal to this Court. The only question which has been argued on the appeal is whether, at the time of the variation of the agreement, the appellants had an equitable lien over the partly completed home to secure any future entitlement to repayment of the deposit and first instalment of purchase price. If they had such an equitable lien, it is common ground that the acquisition of the partly completed home did not constitute a preference. If they had no such lien, it is common ground that it did. (at p660)

5. Clause 8 of the contract provided that the home would remain the property of the company until such time as the appellants paid the whole of the contract price and the price of any modifications. In my view, it is implicit in that clause that the legal property in the home would pass to the appellants as soon as they paid the whole of the price payable under the contract regardless of whether the home was, at that time, completed or partly completed. If the home were partly completed when the property passed, subsequent additions to it would become the property of the appellants "accessione" (see per Lord Watson, Seath v. Moore (1886) 11 App Cas 350, at p 380 ). In that event and notwithstanding that property had passed, the home would, as between the parties, remain at the risk of the company for so long as it was in the company's actual possession or control, that is, until practical completion on site (cl. 6(1)). There is, however, nothing unusual in that (see Benjamin's Sale of Goods, 2nd ed. (1981), par. 292). The significance of the fact that the property in the partly completed home would have passed to the appellants under the unvaried contract upon payment of the last two instalments of purchase price (totalling $13,647) to the finding that the alleged preference was to the extent of $20,469 was not canvassed in the judgments below or in argument before this Court. (at p661)

6. Specific reference should also be made to the provisions of the contract dealing with rescission. Clause 6(b) provided that, in certain circumstances involving default in payment of an instalment of purchase price or potential insolvency, the company "may without prejudice to (its) other rights or remedies rescind the contract by notice in writing" to the appellants. Clause 10 provided:
"If at any time the Purchaser purports to terminate and/or repudiate or cancel the contract then, and without prejudice to any other rights or remedies which the Builder may have, the Builder shall be entitled to recover from the Purchaser such proportion of the total contract price as shall be equivalent to the proportion of labour, skill and materials used by the Builder in his performance of the contract of the total of such labour, skill and materials required to complete the contract and a margin for overhead and profit."
This clause is plainly based upon mutual recognition that circumstances could arise in which, upon rescission or termination of the contract by the appellants, they would be entitled to the partly completed house. (at p661)

7. It was a fundamental assumption of the contract that, from the time construction commenced, a particular home in the course of construction would be identified as the home being constructed for installation on the appellants' land. Thus, the company covenanted that it would complete the construction of "the home" in accordance with identified plans and specifications "within 60 working days of the date of commencement" and, as has been mentioned, payment of the main instalment of purchase price became due when the construction of that particular home reached the stage where the roof had been pitched. Other provisions of the contract referred to "the stage of construction" of the home (cll. 5(a), 6(a)), the suspension of "construction of the home" (cl. 6(b)) and delay in "the construction of the home" (cl. 6(h)). When construction of the home commenced, it was identified by the company and accepted by the appellants as the home to which the contract applied. The design of the home accorded with the plans and specifications which had been agreed between the company and the appellants and which, to some extent, were the product of their joint intellectual activity. The appellants inspected the home from time to time in the course of its construction. When the roof of that particular home had been pitched, the appellants, as required by the contract, paid the main instalment of the purchase price. (at p662)

8. Of its nature, the contract was of the type to which Jacobs J. referred in Aristoc Industries Pty. Ltd. v. R. A. Wenham (Builders) Pty. Ltd. (1965) NSWR 581, at p 586 , a case concerning a contract for the manufacture, transportation and installation of some fixed seating, when he said:
"It is necessary to construe the agreement between the original building company and the plaintiff. I have already set this out in full above and its words make quite clear to me that what was intended was not the supply of goods with a collateral or subordinate agreement for their installation, but a single agreement to supply, deliver and install the materials in question. It is not without significance that the materials required installation in order to be usable for the purpose for which they were designed. It was no mere matter of bringing them upon the premises. However, apart from this there is the language of the deed itself. It is an agreement to do the work of first-class materials. There is provision for progress payments calculated in proportion to the whole contract price."
As Jacobs J. concluded (1965) NSWR, at pp 586-587 , such a contract is a contract for work and materials and not for the sale of goods (see, also, Tripp v. Armitage (1839) 4 M &W 687, at pp 698-699 (150 ER 1597, at p 1602) ; Clark v. Bulmer (1843) 11 M &W 243, at p 250 (152 ER 793, at p 796) ). That being the case, the provisions of the Sale of Goods Act 1895 (W.A.) were not applicable in respect of the contract and it is unnecessary to consider whether the provisions of that Act should be regarded as a comprehensive legislative code which precludes the implication of an equitable lien to secure payment or repayment of purchase price under a contract for the sale of goods (see In re Wait (1927) 1 Ch 606, at p 639 ; Transport and General Credit Corporation v. Morgan (1939) Ch 531, at p 546 ; Re C.A. Macdonald &Co. (1959) 18 DLR (2d) 731, at pp 737-738 ; but cf. Pollock, "Re Wait", Law Quarterly Review, vol. 43 (1927), p. 293). The question whether the appellants had, at the relevant time, an equitable lien over the partly completed home falls to be determined by reference to the circumstances, including the provisions of the contract, and to general equitable principles. (at p663)

9. An equitable lien is a right against property which arises automatically by implication of equity to secure the discharge of an actual or potential indebtedness (see In re Beirnstein (1925) Ch 12, at pp 17-18 ; In re Bond Worth Ltd. (1980) Ch 228, at 251 ; Snell's Principles of Equity, 28th ed. (1982), pp. 450-451). Though called a lien, it is, in truth, a form of equitable charge over the subject property (see Landowners West of England and South Wales Land Drainage and Inclosure Co. v. Ashford (1880) 16 Ch D 411 ) in that it does not depend upon possession and may, in general, be enforced in the same way as any other equitable charge, namely, by sale in pursuance of court order or, where the lien is over a fund, by an order for payment thereout (Bowles v. Rogers (1800) 6 Ves 95 n (31 ER 957) ; In re Stucley (1906) 1 Ch 67, at pp 76-77, 80 ; Davies v. Littlejohn (1923) 34 CLR 174, at p 184 ; Seton's Judgments and Orders, 7th ed. (1912), vol. 3, pp. 2220-2225). Equitable lien differs from traditional mortgage in that it does not transfer any title to the property and therefore cannot be enforced by foreclosure. While it arises by implication of some equitable doctrine applicable to the circumstances, its implication can be precluded or qualified by express or implied agreement of the parties (Davies v. Littlejohn (1923) 34 CLR, at pp 195-196 ; In re Bond Worth (1980) Ch, at p 251 . It can exist over land or personalty or both (Davies v. Thomas (1900) 2 Ch 462, at p 468 ; In re Stucley (1906) 1 Ch at pp 75-76, 79-80 ). (at p663)

10. Generally speaking, the established examples of equitable lien are between parties in a contractual or quasi-contractual relationship. The best known are the liens which equity recognizes as arising to secure the actual or potential rights of a vendor and purchaser under a contract for the sale of real estate to payment or the balance of purchase price (vendor's lien) or to repayment of instalments of purchase price (purchaser's lien) (see, generally, Rose v. Watson (1864) 10 HLC 672, at pp 682, 683-684 (11 ER 1187, at pp 1191, 1192) ; Middleton v. Magnay (1864) 2 H &M 233, at p 237 (71 ER 452, at p 453) ). If, under such a contract, the property has passed and the whole or part of the purchase price remains unpaid, the vendor will, in the absence of express or implied agreement to the contrary, enjoy the benefit of an equitable lien over the land sold to secure the payment to him of the unpaid purchase price. If the property has not passed to the purchaser and the purchaser has paid the whole or part of the purchase price, the purchaser will, in the absence of express or implied agreement to the contrary, enjoy the benefit of an equitable lien over the subject land to secure the repayment to him of any part of the purchase price which may become repayable to him upon default by the vendor in the performance of the contract. (at p664)

11. One finds in some reported cases statements to the effect that an equitable lien can only arise under a contract of which equity would grant specific performance (see, e.g., In re Bond Worth (1980) Ch, at p 251 ). There is, however, no actual decision binding on this Court which establishes that proposition and, in my view, it should not be accepted. The word "lien" is used somewhat imprecisely in the phrase "equitable lien" to describe not a negative right of retention of some legal or equitable interest but what is essentially a positive right to obtain, in certain circumstances, an order for the sale of the subject property or for actual payment from the subject fund. The peculiar and sometimes discretionary grounds for resisting a decree of specific performance are simply not appropriate to be indiscriminately applied as criteria of exclusion of an equitable interest in the nature of a lien. It could, for example, be distinctly inequitable if a decision that a contract for the sale of land should not be specifically enforced on the ground that specific performance would involve undue hardship being imposed on the vendor (see, e.g., Dowsett v. Reid (1912) 15 CLR 695 ) automatically meant that the purchaser was also deprived of the benefit of an equitable lien to secure the repayment of instalments of purchase price. Moreover, if, as would seem to be the case, the question whether, as a matter of discretion, a decree of specific performance of an executory contract should be refused on the grounds of undue hardship or injustice (see Norton v. Angus (1926) 38 CLR 523, at pp 529, 534 ) falls to be answered as at the time when the decree would otherwise be made (see the cases referred to in Spry, Equitable Remedies, 2nd ed. (1980), pp. 186ff; and note, to the contrary, Fry on Specific Performance, 6th ed. (1921), p. 199), the test of whether a particular contract is one of which specific performance would be decreed is liable to give different answers from time to time by reason of intervening events which may well have no rational relevance to the question whether a party to the contract should have the benefit of an equitable lien. (at p665)

12. Nor, in my view, is there any valid reason in principle why the mere existence of any one of the recognized grounds for refusing specific performance of, for example, a contract for the sale of land should automatically preclude a lien arising over that land to secure the purchaser's right to be paid instalments of the purchase price of that property. The basis of specific performance lies in the equitable doctrine that personal obligations under a contract should be enforced where damages would be an inadequate remedy. The basis of equitable lien between parties to a contract lies in an equitable doctrine that the circumstances are such that the subject property is bound by the contract so that a sale may be ordered not in performance of the contract but to secure the payment or repayment of money. In the ordinary case of a purchaser who desires the actual performance of his contract with a defaulting vendor, an equitable lien to secure payment of instalments of purchase price is only of real value if specific performance of the contract would not be decreed. (at p665)

13. The suggested requirement that equity would grant specific performance of the contract is usually propounded as being derived from the principle that an agreement for valuable consideration for the present assignment of property operates to transfer the equitable estate in the property if equity would, in all the circumstances, grant specific performance of the agreement (see, e.g., Howard v. Miller (1915) AC 318, at p 326 ; Central Trust and Safe Deposit Co. v. Snider (1916) 1 AC 266, at pp 271-272 ). In the statement of that principle however, the reference to specific performance must be understood as meaning not merely specific performance in the primary sense of the enforcing of an executory contract by compelling the execution of an assurance to complete it but also the protection by injunction or otherwise of rights acquired under a contract (see Tailby v. Official Receiver (1888) 13 App Cas 523, at pp 546-548 ; Redman v. Permanent Trustee Co. of New South Wales Ltd. (1916) 22 CLR 84, at p 96 ; Jordan, Chapters on Equity, 6th ed. (Stephen) (1945), p. 52 n. (e)). So understood, the test of availability of specific performance of the contract to determine whether an equitable estate has passed amounts to little more than an assertion that equitable rights are commensurate with the protection which equity will afford them (see Hoysted v. Federal Commissioner of Taxation (1920) 27 CLR 400, at p 423 ; Currey v. Federal Building Society (1929) 42 CLR 421, at pp 448-449 ). That assertion, if applied to equitable lien, would involve not a requirement that specific performance be available of some associated contract but the uncontroversial - and unhelpful - proposition that an equitable lien will only exist to the extent that it will be enforceable in equity (see King v. Greig (1931) VLR 413, at p 435 ; Palmer v. Carey (1926) AC 703, at pp 706-707 ; but cf. Dean, "Equitable Assignments of Chattels", Australian Law Journal, vol. 5 (1932), 289, at p. 292). There are, however, two objections against attempting to convert the principle that an equitable estate will pass under an agreement for present transfer only to the extent that equity would grant specific performance of the agreement into a general proposition that no equitable interest (including an equitable lien) can be assigned or can arise as a consequence of an agreement and acts done in pursuance of it unless equity would grant specific performance of the agreement. First, an equitable lien is quite different in character from the equitable estate or interest which passes in anticipation of the performance of a promise for valuable consideration to make a present transfer of property by way of sale or mortgage. The maxim that equity regards as done that which ought to be done combined with the availability of specific performance of the contractual promise provides a rational basis for the passing of the equitable estate or interest in property in anticipation of the performance of a promise to assign it or, for that matter, of the performance of a promise to grant a charge over it (see Palmer v. Carey); the combination of that maxim and the availability of specific performance of a promise to do something other than grant an equitable lien does not provide the basis for the implication of an equitable lien which, as has been said, arises independently of any express or implied promise to grant it. Second, the weight of authority is against any proposition that no equitable interest at all in property can arise between parties in a contractual relationship unless specific performance of the contract itself could be decreed. Thus, in Metcalfe v. Archbishop of York (1836) 1 My &Cr 547, at p 557 (40 ER 485, at p 489) , Lord Cottenham L.C. expressly rejected a submission that all equitable charges rest upon specific performance and the right to have a legal charge. In Western Wagon and Property Co. v. West (1892) 1 Ch 271, at p 275 , Chitty J. cited Lord Cottenham's decision as "an authority for the proposition, that property may be bound by a contract for valuable consideration, although specific performance of the contract itself is impossible". That statement is, in my view, correct. It is in point here. (at p667)

14. The conclusion that the availability of specific performance is neither a condition precedent nor a test of the implication of an equitable lien makes it unnecessary to consider whether such a condition or test would, in any event, have been satisfied in the present case. The resolution of that question would involve examination of three matters which are not devoid of all difficulty, namely, whether it would suffice that specific performance would, as a matter of principle, have been available at some future stage of performance of the contract (e.g. when construction of the home had been completed or had reached the stage where a decree of specific performance would not involve continual supervision); whether the third requirement of specific performance of a building contract (i.e. that the defendant has by the contract obtained possession of land upon which the work is contracted to be done) enunciated by Romer L.J. in Wolverhampton Corporation v. Emmons (1901) 1 KB 515, at p 525 should be accepted as a requirement rather than an indication; and whether the ordinary principle that "when the Court cannot compel specific performance of the contract as a whole, it will not interfere to compel specific performance of part of a contract" (per Lord Esher M.R., Ryan v. Mutual Tontine Westminster Chambers Association (1893) 1 Ch 116, at p 123 ) would have prevented the moulding of a limited order for specific performance requiring that the home be handed over in its partly completed state upon compliance by the appellants with cl. 10 of the contract (see above). There being no proper basis for precluding the implication of an equitable lien by reason of the suggested unavailability of specific performance, I turn to consider whether such a lien over the partly completed home actually arose in the circumstances of the present case. (at p667)

15. It has been said that the doctrine of equitable lien "was introduced for the sole purpose of furnishing a ground for the specific remedies which equity confers, operating upon particular identified property, instead of the general pecuniary recoveries granted by courts of law" (Pomeroy's Equity Jurisprudence, 5th ed. (Symons) (1941), pars. 166 and 1234). In Whitbread &Co. Ltd. v. Watt (1902) 1 Ch 835, at p 838 , Vaughan Williams L.J. referred to the purchaser's lien for his deposit as "a right which may be said to have been invented for the purpose of doing justice. It is a fiction of a kind which is sometimes resorted to at law as well as in equity". General statements of this type lend some support for the approach that one should seek to identify a comprehensive principle covering the implication of any type of equitable lien. Apart from broad generalizations such as "the phrase equitable lien may not . . . do much more than express the opinion of the court that the facts give a priority to the party said to have it" (Sexton v. Kessler (1912) 225 US 90, at pp 98-99 (56 Law Ed 995 at p 1000) ) however, 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 (e.g. 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 (see Middleton v. Magnay (1864) 2 H &M, at p 237 (71 ER, at p 453) ; Whitbread &Co. Ltd. v. Watt (1901) 1 Ch 911 ; Combe v. Lord Swaythling (1947) Ch 625 ); (ii) that that property (or arguably property including that property: see Pollock, loc. cit.) be specifically identified and appropriated to the performance of the contract (see per Lord Hanworth M.R., In re Wait (1927) 1 Ch, at pp 622-625 ); 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. It may be that the above circumstances or tests, particularly (i), would be unduly restrictive if propounded as a statement of exclusion. As has been said however, they are formulated as a statement of what is sufficient rather than what is essential. Whether or not they exist or are satisfied in a particular case should, like most questions involved in the application of equitable doctrines, be determined by reference to the substance of the transaction rather than its form: "the general principle of disregarding the letter for the substance" (Jamshed Khodaram Irani v. Burjorji Dhunjibhai (1915) LR 43 Ind App 26, at p 33 ; and see Hurley v. Atchison, Topeka &Santa Fe Ry. (1909) 213 US 126, at p 134 (53 Law Ed 729, at p 734) ; Gage Lumber Co. v. McEldowney (1913) 207 Fed Rep 255, at p 259 ). (at p669)

16. In the instant case, the company was the legal owner of the partly completed home. It was a potential debtor of the appellants in that, in the event that it repudiated the contract and the appellants accepted the repudiation, it would be liable to repay the deposit and the first instalment which the appellants had paid to it. That deposit and instalment were paid as part of the price of the work and materials necessary to construct the home and represented consideration in relation to the acquisition by the appellants of the home. The first of the above tests was therefore satisfied. The question whether the home in its partly completed state had been appropriated to the performance of the contract is considered below. Otherwise, the second test was satisfied in that, from the time construction commenced, the home had been specifically identified as the home being built for the appellants. The relationship between the potential debt and the partly completed home was plain. The potential debt was the potential liability to repay the deposit and the instalment of purchase price which had been paid as the price of work and materials for the construction of that particular home and, in the case of the instalment, on the basis that that particular home had reached the stage where the roof had been pitched. In those circumstances, the company would, adapting the words of the third of the above tests, be acting unconscientiously and unfairly if it were to dispose of that partly completed home to another without the consent of the appellants and without, at the least, repaying to the appellants the money which it had received on the basis that that home would eventually be theirs. Subject to the question whether the partly completed home had been appropriated to the performance of the contract, the circumstances were such that an equitable lien arose in favour of the appellants. (at p669)

17. As has been demonstrated, it was a fundamental assumption of the contract that, from the time construction commenced, a particular home in the course of construction would be identified as the home being constructed for installation on the appellants' land. There is much to be said for the view that the particular home, in its varying stages of construction, was appropriated to the contract from the time it was identified by the company as the home being built for the appellants in the same way as a contract by an owner of property to sell that specific property will ordinarily itself operate as an appropriation of the property to the contract. It is, however, unnecessary to determine whether that was so since it is plain that the home was so appropriated, at the latest, at the time the company obtained payment of the first instalment. Under the contract, the payment of that instalment was obtained by the company on the basis that the home being built for the appellants had reached a particular stage of construction. If appropriation had not already occurred, the claiming and receipt of the instalment involved an unequivocal and irrevocable appropriation by the company of the particular home to the performance of its obligations under the contract. If authority be needed to support that conclusion, it is to be found in clear words in the speech of Lord Watson in Seath v. Moore (1886) 11 App Cas 350 . In his judgment in that case, Lord Watson referred to a number of cases in which it had been held that the legal property in a ship under construction had passed at the time when the partly completed ship had been appropriated to performance of the contract (see Woods v. Russell (1822) 5 B &Ald 942 (106 ER 1436) ; Clarke v. Spence (1836) 4 Ad &E 448 (111 ER 855) ; Wood v. Bell (1856) 5 El &Bl 772 (119 ER 669) ). His Lordship concluded (1886) 11 App Cas, at p380 that those cases established that an intention that a particular partly completed ship should be so appropriated

". . . ought (in the absence of any circumstances pointing to a different conclusion) to be inferred from a provision in the contract to the effect that an instalment of the price shall be paid at a particular stage, coupled with the fact that the instalment has been duly paid, and that until the vessel reached that stage the execution of the work was regularly inspected by the purchaser, or some one on his behalf".

He had already commented:

"But I see no reason why the principles applicable to the sale of part of a ship should not equally apply to the sale of part of a marine engine, or other corpus manufactum in course of construction."

Bayley J. had similarly referred to Woods v. Russell in Atkinson v. Bell (1828) 8 B &C 277, at p 282 (108 ER 1046, at p 1048) :
"The foundation of that decision was, that as by the contract given portions of the price were to be paid according to the progress of the work, by the payment of those portions of the price the ship was irrevocably appropriated to the person paying the money." (at p670)

18. In the result, I am of the view that the appellants were, at relevant times, entitled to the benefit of an equitable lien over the partly completed home to secure the repayment to them of the deposit and instalment of purchase price in the event that they became repayable. I am fortified in that conclusion by the judgment of Turner L.J. (with whom Knight Bruce L.J. agreed) in Swainston v. Clay (1863) 3 De GJ &S 558 (46 ER 752) . That case concerned a ship in the course of construction. On 20 May 1862, the plaintiff and the ship builders had entered into an agreement which provided that the plaintiff would purchase the hull of the schooner or vessel then in course of building "to be built and completed fully in accordance with" the specifications annexed thereto. The facts were complicated and, as Burt C.J. pointed out in his judgment in the Full Court of the Supreme Court in the present case, permit of a conclusion that an equitable lien arose under the express terms of a previous agreement. Turner L.J. did not however dispose of the case on that ground. His Lordship referred to the agreement of 20 May 1862 and, having concluded that that agreement was a valid agreement, added (1863) 3 De GJ &S, at p 569 (46 ER, at p 757) ) "and this being the case, and it having become impossible that the agreement could be performed, I think the Plaintiff had a lien for the purchase-money which he had paid, and was entitled to a sale by virtue of that lien" (underlining added). Regardless of what other basis may be found in the evidence for a finding of express equitable charge, it appears to me that Turner L.J. decided the case on the basis that an equitable lien arose by implication of law. (at p671)

19. It follows that the acquisition of the home by the appellants did not constitute a preference of them over the company's other creditors and that the appeal should be allowed with costs. The order of the Full Court of the Supreme Court of Western Australia should be set aside and in lieu thereof it should be ordered that the appeal to that Court be dismissed with costs. (at p671)

Orders

Appeal allowed with costs.

Order of the Full Court of the Supreme Court of Western Australia set aside and in lieu thereof order that the appeal to that Court be dismissed with costs.