Johnson v Synnex Australia Pty Ltd; Johnson v Leader Computers Pty Ltd (No 2)

The appeal concerned the priority of equitable charges held by Synnex Australia Pty Ltd and Leader Australia Pty Ltd over the proceeds of sale of a property. Mr Johnson had granted both companies equitable charges over his interest in the property to secure his liabilities under guarantees provided for his company, Arcom. Following Mr Johnson's bankruptcy and the sale of the property, disputes arose regarding how the proceeds of sale should be distributed between Synnex, Leader, and Mrs Johnson, who also held an interest in the property.

The central legal issues before the Full Court of the Supreme Court of South Australia were whether the trial judge's orders had created new charges that merged with the original equitable charges, thereby ranking equally, or whether the original equitable charges were intended to rank equally. Further, the court considered whether, upon payment of the net proceeds into a suitors fund, the charges were converted into beneficial ownership of the proceeds in satisfaction of the underlying debts, or if seeking payment from the fund constituted an election to enforce the charge and obtain equitable ownership of a portion of the monies.

The Full Court dismissed the appeal, upholding the Master's interpretation of the trial judge's orders. The court reasoned that the trial judge's order for sale was made pursuant to Part 8 of the Law of Property Act 1936, and the payment into court was a payment envisaged by that Act. The Master had concluded that the orders did not create new charges or alter the nature of the existing equitable charges, nor did they automatically effect payment in equity. Instead, the equitable charges attached to the fund produced by the sale, and the plaintiffs retained an inchoate right to seek payment out of those monies, subject to further orders. The court also rejected Mrs Johnson's contention regarding exoneration, finding that she had not advanced the necessary arguments regarding contribution rights or priority of charges.