IWC Industries Pty Ltd v Sergienko

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.