IWC Industries Pty Ltd v Sergienko [2021] NSWCA 292
Hearing dates:
4 August 2021
Date of orders:
1 December 2021
Decision date:
01 December 2021
Before:
Bathurst CJ at [1] Ward JA at [2] Gleeson JA at [3]
Decision:
(1) Appeal dismissed.
(2) Appellants to pay the first respondent’s costs of the appeal.
Catchwords:
EQUITY – equitable interests in real property – priorities – where property purchased by trustee on trust for sole unitholder – competing claims of beneficiary under trust and equitable mortgagee – where beneficiary did not pay any monies towards purchase price of property or “fully paid” units in unit trust – where beneficiary’s solicitor advised trustee was untrustworthy – where trust deed conferred wide powers on trustee, including power to mortgage trust assets for any contractual obligation – where trust deed precluded unitholder from lodging caveat against any trust property and no caveat was lodged – where equitable mortgage granted over property to respondent in breach of trust – whether merits of competing equities unequal – whether beneficiary’s prior interest postponed to subsequent interest of equitable mortgagee
EQUITY – equitable interests in real property – priorities – where unitholder issued “fully paid” units but no monies paid for units in trust or towards purchase of property – whether evidence that trustee borrowed funds for purchase of property – whether beneficiary has liability to trustee for units issued to it – whether beneficiary was a volunteer
Legislation Cited:
Merchant Shipping Act 1894, 57 & 58 Vic, c 60, s 56
[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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AGLC
IWC Industries Pty Ltd v Sergienko [2021] NSWCA 292
Case
[2021] NSWCA 292
Decision Date
CaseChat Overview and Summary
The appeal in *IWC Industries Pty Ltd v Sergienko* concerned competing equitable interests in real property. The appellant, IWC Industries Pty Ltd, claimed an equitable interest as the sole unitholder of a trust that had purchased the property. The respondent, Mr. Sergienko, held an equitable mortgage over the same property, granted by the trustee of the trust. The central dispute revolved around the priority of these competing equitable interests.
The primary legal issue before the Court of Appeal was whether the appellant's prior equitable interest as beneficiary under the trust should be postponed to the respondent's subsequent equitable mortgage. This required the court to determine if the merits of the competing equities were unequal, considering factors such as the appellant's lack of contribution to the purchase price, the trustee's broad powers to mortgage trust assets, and the appellant's failure to lodge a caveat despite being advised of the trustee's untrustworthiness. The court also considered whether the appellant, having been issued "fully paid" units without making any payment, could be considered a volunteer.
The Court of Appeal reasoned that while the appellant held a prior equitable interest, its conduct and the circumstances surrounding the creation of the mortgage warranted postponing its interest. The court noted that the appellant had not contributed to the purchase price and had not lodged a caveat, despite being aware of potential issues with the trustee. Furthermore, the trust deed granted the trustee extensive powers, including the ability to mortgage trust assets. The court found that the appellant's failure to take steps to protect its interest, coupled with the trustee's actions in breach of trust but within the apparent scope of its powers, meant that the merits of the respondent's subsequent equitable mortgage were superior. The appellant was effectively treated as a volunteer, and its inaction meant its prior equity was postponed to the respondent's later, bona fide equitable mortgage.
The appeal was dismissed, and the appellants were ordered to pay the first respondent’s costs of the appeal.
Orders
Orders of the court
(1) Appeal dismissed.
(2) Appellants to pay the first respondent’s costs of the appeal.