National Australia Bank Ltd v Blacker

[2000] FCA 1458

FEDERAL COURT OF AUSTRALIA

National Australia Bank Limited v Blacker [2000] FCA 1458

FIXTURES – Default by mortgagor – mortgagee enters into possession to sell property – certain items of plant and equipment are removed by mortgagor – mortgagee seeks mareva orders to restrain mortgagee from dealing with, depleting or disposing of those items of plant and equipment – Annexation to freehold – electric pumps connected to steel skids rest on own weight – sprinkler heads connected to hosing rest on own weight – special valves connected to underground piping – principles for determining whether chattels or part of freehold – intention – degree and purpose of annexation – importance of examining all the circumstances of the case – burden of proof – nature of the land – nature of the equipment.

MILK QUOTA – Operation of Irrevocable Authority – Deregulation of dairy industry – whether payments under Dairy Industry Adjustment Act (Cth) are outside scope of Irrevocable Authority in respect of dairy farmers exposure to deregulation. – Dairy Industry Act 1979 (NSW) ss7(I), 9(1)(g) – Dairy Industry Act 2000 (NSW) ss14(2)(b), 24 – Dairy Industry Adjustment Act 2000 (Cth).

MAREVA ORDERS – orders sought against entitlement to dairy quota payments – where opposing party is not a defendant prior to a trial but an appellant against a judgment delivered against him – entitlement to ordinary living expenses, payment of debts and legal expenses – availability of recovery procedures – where no undertaking not to oppose recovery procedures – where no stay pending appeal – order granted.

Dairy Industry Act 1979 (NSW) ss7(I), 9(1)(g)
Dairy Industry Act 2000 (NSW) ss14, 14(2)(b), 24
Dairy Industry Adjustment Act 2000 (Cth)
Farm Household Support Act 1992 (Cth)

Commissioner for Railways v Valuer-General [1974] AC 328
Holland v Hodgson (1872) LR 7 CP 328
Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700
Hobson v Gorringe [1897] 1 Ch 782
Melluish v BMI (No 3) [1996] AC 454
Elitestone Ltd v Morris [1997] 1 WLR 687
Re May Bros Ltd [1929] SASR 508
Metal Manufacturers Ltd v FCT (1999) 43 ATR 375
NH Dunn Pty Ltd v LM Ericsson Pty Ltd (1979) 2 BPR 9241
Reid v Smith (1905) 3 CLR 656
Anthony v The Commonwealth (1973) 47 ALJR 83
Ball-Guymer v Livantes (1990) 102 FLR 327
Leigh v Taylor [1902] AC 157
Litz v National Australia Bank Ltd (1986) Qld Conv R 54-229
AG (Cth) v RT Co Pty Ltd (No. 2) (1957) 97 CLR 146
Hellawell v Eastwood (1851) 6 Ex 295
Adams v Medhurst & Sons Pty Ltd (1929) 24 Tas LR 48
Spyer v Phillipson [1931] 2 Ch 183
Boyd v Shorrock (1867) LR 5 Eq 72
McIntosh v Goulburn City Council (1985) 3 BPR 9374
Australian Joint Stock Bank v Colonial Finance Mortgage Investment and Guarantee Corporation (1894) 15 LR (NSW) 464
Monti v Barnes [1901] 1 QB 205
Eon Metals NZ v Commissioner of State Taxation (WA) (1991) 22 ATR 601
Ex parte Astbury (1869) LR 4 Ch 630
Craven v Geal [1932] VLR 172
Bank of Melbourne Ltd v CBFC Leasing Pty Ltd (1991) ANZ Conv R 561
Sheffield and South Yorkshire etc. Building Society v Harrison (1884) 15 QBD 358
Jackson v Sterling Industries Limited (1987) 162 CLR 612
Cardile v LED Builders Pty Ltd (1999) 162 ALR 294
Frigo v Culhaci (NSWCA, 17 July 1998, unreported)
Clark Equipment Credit of Australia Ltd v Como Factors Pty Ltd (1989) 14 NSWLR 552
Camdex v Bank of Zambia [1997] 1 All ER 728
Deutshe Schahtbau v Shell International Trading Co [1990] 1 AC 295

NATIONAL AUSTRALIA BANK LIMITED v PETER RAYMOND BLACKER & CHRISTINE BLACKER

NG997 of 1997

CONTI J
16 OCTOBER 2000
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG997 OF 1997

BETWEEN:	NATIONAL AUSTRALIA BANK LIMITED ACN 004 044 937 APPLICANT ON THE MOTION
AND:	PETER RAYMOND BLACKER AND CHRISTINE BLACKER RESPONDENTS ON THE MOTION
JUDGE:	CONTI J
DATE OF ORDER:	16 OCTOBER 2000
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.        Proceedings be adjourned for finalisation of Orders.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG997 OF 1997

BETWEEN:

NATIONAL AUSTRALIA BANK LIMITED ACN 004 044 937

APPLICANT ON THE MOTION

AND:

PETER RAYMOND BLACKER AND CHRISTINE BLACKER
RESPONDENTS ON THE MOTION

JUDGE:	CONTI J
DATE:	16 OCTOBER 2000
PLACE:	SYDNEY

REASONS FOR JUDGMENT

Preliminary

1. The interlocutory proceedings the subject of these Reasons for Judgment have their origin in the judgment of this Court (Katz J) delivered on 25 May 2000, which is now the subject of an appeal to the Full Court to be heard on 22 November 2000. The proceedings which culminated in such judgment involved claims for damages by Mr and Mrs Blacker based upon alleged misrepresentations on the part of the Bank within subs 52(1) of the Trade Practices Act 1974 (Cth) and breach of the Bank’s duty of care under the general law. The proceedings also involved cross-claims by the Bank for all moneys outstanding in respect of lendings made by the Bank to the Blackers secured over the assets of Blackers’ dairy farm near Bega, and for possession of such farm and for the dairy cattle herd of the Blackers. His Honour entered judgment in favour of the Blackers in the sum of $152,968.15 together with costs in relation to their claims against the Bank up to and including 3 November 1998, and made orders accordingly. In relation to the Bank’s cross claims, His Honour entered judgment against the Blackers in favour of the Bank in the sum of $1,551,475.68 for principal and interest accrued up to the time of judgment, and for possession of such assets.

2. The Bank’s Real Property Mortgages bearing date 10 September 1993 pursuant to which such loans were made contained the following definition of “mortgaged property”:

   “(a)the land described in or indicated as such in each mortgage which refers to or incorporates this Memorandum; and

   (b)all plant machinery and other improvements affixed thereto or made at the date of the Mortgage or subsequently affixed thereto or made; and

   (c)all rights and privileges of the Mortgagor in respect of those lands plant machinery and improvements or any part thereof;

   (d)all rights and privileges of the Mortgagor entitling him to use or enjoy any common property or any part thereof.”

   In addition the Bank held a Stock Mortgage dated 2 November 1995 from the Blackers by way of collateral security, and certain Chattel Leasehold interests relating to certain farming equipment not here relevant. The “Fixtures Issue” which these Reasons first address below relates to the descriptions contained in paragraphs (b) and (c) of the Real Property Mortgages reproduced above, which the parties have characterised as synonymous fixtures in the technical meaning of that legal expression.

3. By way of further collateral security, the Blackers provided to the Bank an Irrevocable Order upon the NSW Diary Corporation bearing date 7 September 1993 in the following terms:

   “I hereby direct and authorise you to forward to National Australia Bank Limited, 183 Carp Street, Bega NSW, monies which you may receive on our behalf, being proceeds of surrender of all or any portion of our milk Quota. This order is given for valuable consideration, is irrevocable and may not be cancelled without consent of the said Bank in writing.”

   Though expressed in the singular, the document was signed by both Mr and Mrs Blacker.

   The Fixtures Issue

4. By letter dated 23 June 2000, the Blackers’ Solicitors wrote to the Bank’s Solicitors as follows (inter alia):

   “Finally we are instructed by our clients that they are preparing to vacate the property. They are keen to effect an orderly transfer of possession of the property to your client. They instruct us that they are currently using the irrigation plant and equipment including pumps and sprinklers.

   We have advised our clients that those items are not fixtures and therefore that they are entitled to remove them when they vacate the property. Our clients, however, do not wish to interrupt the continued operation of the property once your client takes possession of it. To that end we are instructed to enquire whether:

   ·Your client wishes to purchase the irrigation plant and equipment from our client; or alternatively

   ·Can your client make arrangements to acquire sprinklers and pumps so that it can operate the irrigation system and water the pasture when it takes possession of the property.”

   The Blackers thereafter vacated the dairy farm property and now reside in Bega.

5. The Bank’s response by letter of 30 June 2000 to the Blackers’ Solicitors was as follows:

   “The bank has appointed receivers Prentice Parbery Barilla. They are currently assessing the situation (including the irrigation system on the property) and once they have formed a view, we will respond to your letter.”

6. According to affidavit evidence of Mr Blacker, as at 30 June 2000 all irrigation equipment was still located on the mortgaged land, being the Blackers’ dairy farm as above stated, except for one electric pump removed during the preceding month of May. On 1 July 2000, Mr Blacker removed the sprinkler heads comprising 200 in number and certain L-shaped special valves of the same number, and on 2 July 2000 he removed the remaining electric pump. Mr Blacker has provided to the Court photographs of these two pumps which he has removed and which remain in his possession. Mr Blacker has photographed samples of the said sprinkler heads and valve fittings which he has also provided to the Court. Mr Blacker has offered to sell to the Bank the irrigation equipment so removed for $18,250.00. The cost of reinstallation of such irrigation equipment would be $960.00, according to the quotation of a former employee of Mr Blacker who has spoken to the Receiver. The Receiver estimates the replacement cost of this removed equipment to be $31,172.00.

7. A description of the irrigation equipment so removed, and in addition of such irrigation equipment as presently remains which the Blackers have conceded from the outset to be fixtures and which have not been removed, was given by Mr Blacker in evidence as follows:

   “(a)Each pump is mounted on a steel skid and bolted to the skid’s rails with the assistance of cross bars; there are hooks and towing points at each end of the skids so that each pump can be towed and/or pulled; each of the pumps are electrically driven using a large cord with a three-phase plug; the steel skids rest on the ground and are towed and/or pulled by a tractor.

   (b)The said pumps are used to pump water from the Bega river and thereafter to irrigate pastures on the diary farm, and to supply some stock with water; pumping of water from the river occurred by means of a steel pipe secured by bolts to each pump, each of which pipes ran down to the river from the pumps; one pipe was 10 inches in diameter and weighed about 500kg, and the other pipe five inches in diameter and was lighter, each pump had approximately 8 bolts on its suction end and four bolts on its delivery line end; each of the pumps could be moved and disconnection of the bolts from each pump would take about twenty-four minutes.

   (c)The delivery line from each of the pumps ran up to two houses on the property where there were two further pumps described as booster pumps; one of such latter pumps was bolted to the concrete floor and the other was placed on a similar style of flat skid structure as the pumps located near the river; each of these latter two pumps are directly wired into the electrical system and remain on the property; from these booster pumps, delivery lines travel out to various paddocks and ancillary to such delivery lines are so-called lateral lines; all such delivery lines and lateral lines have remained on the property.

   (d)On or from the lateral lines there is placed a special valve which allow soft polythene pipe to lock in, and from the soft polythene pipe such valve travelled out to sprinkler heads mounted on little skids; a distance of between thirty to thirty-three metres of soft polythene pipe separated each sprinkler head; the special valve attached to the lateral line allowed the soft polythene pipe to rotate without kinking, and so that it could be moved easily; there was approximately 6.5 kilometres of soft polythene pipe that remained on the property when the Blackers vacated the same.”

   The special valves above referred to comprised 200 in number, and took the shape of an L. There were also 200 of such sprinkler heads. The two booster pumps also referred to above were not of course the same as the two pumps installed on the skids which are the subject of dispute.

8. There are some matters of detail upon which there is disagreement on the part of the Receiver’s representative concerning Mr Blacker’s description of the irrigation equipment, but not to any material extent which requires resolution. The issue therefore arises as to whether the equipment which Mr Blacker removed as described in [7] above, namely the two electric pumps installed on the skids and the 200 special valves and 200 sprinkler heads, fell within that part of the description of “mortgaged property” as appears in paragraphs (b) and (c) contained in [2] above. As I have already pointed out, such documentary description is sufficiently synonymous with the expression “fixtures” as used in the law of property. The Blackers contend that the said pumps, valves and sprinkler heads are chattels, and the Bank contends that the same are fixtures.

   The Law With Respect to Fixtures

9. Unfortunately it is not possible to discuss applicable legal principles briefly. At the risk of excessive citation of authorities, it is proposed to digest such principles in some detail below. As will be seen, it is one thing to articulate such principles, but another and more difficult matter to apply the same.

   A convenient starting point is Mr Butt’s Land Law, 3^rded (LBC 1996) para 221, where the learned author observes generally as follows:

   “Fixtures are items that have been attached to land in such a way as to become, in law, part of the land: ‘quicquid plantatus solo, solo credit’ – ‘whatever is affixed to the soil becomes part of the soil’.”

   The author then proceeds to point out that this maxim, whilst being a useful starting point, ought not attract any decisive significance: see Commissioner for Railways v Valuer-General [1974] AC 328 at 351.

10. There are a variety of general principles which should be considered in assessing whether an item of personal property has become attached to land in a manner designed to achieve a specific objective or a variety of objectives, such as to become a part of the realty and therefore, a fixture. Whether an item has become a fixture depends essentially upon the objective intention with which the item was put in place. The two considerations which are commonly regarded as relevant to determining the intention with which an item has been fixed to the land are first, the degree of annexation, and secondly, the object of annexation.

    Perhaps the most classic early statement of the law in this regard can be found in the judgment of Blackburn J in Holland v Hodgson (1872) LR 7 CP 328. At 334-5 the following appears:

    “There is no doubt that the general maxim of the law is that what is annexed to the land becomes part of the land; but it is very difficult, if not impossible, to say with precision what constitutes an annexation sufficient for this purpose. It is a question which must depend on the circumstances of each case, and mainly on two circumstances, as indicating the intention, viz, the degree of annexation and the object of the annexation. When the article in question is no further attached to the land than by its own weight it is generally to be considered a mere chattel. But even in such a case, if the intention is apparent to make the articles part of the land, they do become part of the land. …On the other hand, an article may be very firmly fixed to the land, and yet the circumstances may be such as to shew that it is never intended to be part of the land, and then it does not become part of the land. … Perhaps the true rule is, that articles not otherwise attached to the land than by their own weight are not to be considered as part of the land, unless the circumstances are such as to shew that they were intended to be part of the land, the onus of shewing that they were so intended lying on those who assert that they have ceased to be chattels, and that, on the contrary, an article which is affixed to the land even slightly is to be considered as part of the land, unless the circumstances are such as to shew that it was intended all along to continue a chattel, the onus lying on those who contend that it is a chattel.”

11. In Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700 at 712, Sir Frederick Jordan, after referring to the above statement of principle formulated by Blackburn J, observed that:

    “The test if whether a chattel which has been to some extent fixed to land is a fixture is whether it has been fixed with the intention that it shall remain in position permanently or for an indefinite or substantial period, or whether it has been fixed with the intent that it shall remain in position only for some temporary purpose. In the former case, it is a fixture, whether it has been fixed for the better enjoyment of and land or building, or fixed merely to steady the thing itself, for the better use or enjoyment of the thing fixed. If it is proved to have been fixed merely for a temporary purpose it is not a fixture. The intention of the person fixing it must be gathered from the purpose for which and the time during which the user in the fixed positions contemplated. If a thing has been securely fixed, and in particular if it has been so fixed that it cannot be detached without substantial injury to the thing itself or to that to which it is attached, this supplies strong but not necessarily conclusive evidence that a permanent fixing was intended. On the other hand, the fact that the fixing is very slight helps to support an inference that it was not intended to be permanent. But each case depends on its own facts.”

    There is an abundance of authorities generally to the effect that the relevant intention is to be determined objectively from such facts and circumstances that are “patent for all to see”, and not by reference to subjective intention: see for instance Hobson v Gorringe [1897] 1 Ch 182 at 193; Melluish v BMI (No 3) [1996] AC 454; Elitestone Ltd v Morris [1997] 1 WLR 687 at 693, 698; Love v Bloomfield [1906] VLR 723 at 729; Re May Bros Ltd [1929] SASR 508 at 513 and Metal Manufacturers Ltd v FCT (1999) 43 ATR 375 at 411.

12. Despite this, there are some modern authorities which would leave room for recourse to actual and hence subjective intention. This may be more accurately limited to the extent that it would assist the Court to determine the level of permanence or temporariness for which the item is intended to remain in position and the purpose to be served by its affixation or annexation: see N.H. Dunn Pty Ltd v L.M. Ericsson Pty Ltd (1979) 2 BPR 9241 at 9244-5 where Mahoney J.A. referred to the observations of O’Connor J in Reid v Smith (1905) 3 CLR 656 at 680-1 and Walsh J in Anthony v The Commonwealth (1973) 47 ALJR 83 at 89; see also Ball-Guymer v Livantes (1990) 102 FLR 327 and Land Law, supra para 227. Indeed Professor Butt in his article ““Near enough is not good enough” or “We know what you mean”” (1997) 71 ALJ 816 at 821 has commented that:

    “While private agreements concerning the intended status of an item as chattel or fixture are not permitted to prejudice the interests of third parties, it is difficult to see why the courts should discount the parties’ actual intentions where no third parties are involved.”

    Whilst I need not express a view in this case on what Professor Butt has said so comparatively recently, it may well be that there will be some scope in future litigious disputes which will require a closer examination of the learned author’s argument.

    Purpose of Annexation.

1. In determining the purpose or object of annexation, a variety of considerations may be taken into account. The Court ought as a general rule to have regard to:

   ·    Whether the attachment was for the better enjoyment of the property generally or for the better enjoyment of the land and/or buildings to which it was attached: see Hobson v Gorringe, supra at 190; Leigh v Taylor [1902] AC 157 at 158; Reid v Smith, supra at 680-1; Litz v National Australia Bank Ltd (1986) Qld Conv R 54-229 at 57,550.

   ·    The nature of the property the subject of affixation: Metal Manufacturers Ltd v FCT, supra at 411.

   ·    Whether the item was to be in position either permanently or temporarily: Australian Provincial Assurance Co Ltd v Coroneo, supra at 712-3.

   ·    The function to be served by the annexation of the item: see for example A-G (Cth) v R.T. Co Pty Ltd (No. 2) (1957) 97 CLR 146 at 156-7 where printing presses were secured to a concrete foundation by nuts and bolts in order to keep the printing presses steady when in operation.

   The Degree of Annexation

2. In determining the degree of annexation, the Court may consider the following:

   ·    Whether removal would cause damage to the land or buildings to which the item is attached: see Hellawell v Eastwood (1851) 6 Ex 295 at 312; 155 ER 554 at 561; Adams v Medhurst & Sons Pty Ltd (1929) 24 Tas LR 48 at 49; Spyer v Phillipson [1931] 2 Ch 183 at 209-210.

   ·    The mode and structure of annexation: Leigh v Taylor, supra at 162; Teaff v Hewitt 1 Ohio St., 511 referred to by Griffith C.J. in Reid v Smith, supra at 667; Boyd v Shorrock (1867) LR 5 Eq 72 at 78.

   ·    Whether removal would destroy or damage the attached item of property: Litz v National Australia Bank Ltd, supra at 57,549.

   ·    Whether the cost of renewal would exceed the value of the attached property: Metal Manufactures Ltd v FCT, supra at 411.

   The Impact of N.H. Dunn Pty Ltdv L.M. Ericsson Pty Ltd

3. The New South Wales Court of Appeal has emphasised in more recent years that there is no single principle or test which is adequate to determine whether an item of personal property is a fixture or a chattel. Certainly the purpose of annexation and the degree of annexation will remain important considerations. However, the Court should have regard to all the facts and circumstances: see N.H. Dunn Pty Ltd v L.M. Ericsson Pty Ltd, supra at 9244-5 per Mahoney JA and at 9246-7 per Glass JA; McIntosh v Goulburn City Council (1985) 3 BPR 97197 at 9374.4 per Mahoney JA with whom Priestley and McHugh JJA agreed. The principal reason behind this relatively slight shift in focus is that in certain circumstances a chattel which is securely annexed to realty may remain a chattel: A-G (Cth) v RT Co Pty Limited, supra at 156-7; Anthony v The Commonwealth, supra at 89; Australian Provincial Assurance Co Ltd v Coroneo, supra at 712. On the other hand, it has been accepted that occasions may arise where a chattel merely resting on its own weight has become a fixture: Reid v Smith, supra at 668-9, 679; Australian Joint Stock Bank v Colonial Finance Mortgage Investment and Guarantee Corporation (1894) 15 LR (NSW) 464 at 474; Monti v Barnes [1901] 1 QB 205 at 207, 209-210. In McIntosh v Goulburn City Council, supra at 9374.4, Mahoney JA, with whom Priestley and McHugh JJA agreed, observed that:

   “… the law of fixtures is not now so simple: at least, it is not open to this court to see it as so. Thus, a chattel may be a fixture even though it is not affixed to the land; and whether it may be removed depends upon rules more complicated than those to which I there referred.

   In my judgment, I there referred to certain tests which have been proposed or adopted for determining whether a chattel accrues to the owner of the land and/or whether it may be removed. I suggested that each of these tests is less than fully satisfactory in that it has in its difficulties in form which affect its application in the determination of particular cases. I referred in this regard to tests of whether property is a fixture or is removable from land which have been stated variously as: “the purpose and object of affixing the chattel to the land”; “the intention of the parties when it was affixed”; and “whether the chattel was affixed for the better enjoyment of the land or the chattel”. None of these, I suggested, is a test which, by application of it to the facts, will produce a decision as to whether the chattel is owned by the landowner. It may be that the law in this regard, and the factual circumstances with which it must cope, are such that no single principle will alone be adequate. But, however this be, this is a branch of the law which, I think, is open to judicial reconsideration.”

4. I would respectfully adopt his Honour’s proposition that there is no single test which is sufficient to determine whether an item of property is a chattel or a fixture. It is clear that the Court ought to have regard to all the circumstances of the case in making its determination: see N.H. Dunn Pty Ltd v L.M. Ericsson Pty Ltd, supra at 9246 per Glass JA. No particular factor has primacy and each case depends on its own facts: see Eon Metals NL v Commissioner of State Taxation (WA) (1991) 22 ATR 601 at 606 per Ipp J. Thus the approach of the New South Wales Court of Appeal in N.H. Dunn Pty Ltd v L.M. Ericsson Pty Ltd has marked a realistic response which may continue to restate the general law in this otherwise inherently undefinable area.

   Burden of Proof

5. Where an item of property is affixed to the land to any extent, aside from resting on its own weight, it is presumed to be a fixture, and the burden of proof lies upon the party asserting that it is not a fixture. Conversely, where an item of property is not affixed to the land but merely rests on its own weight, it is presumed to be a chattel and the party asserting that it is instead a fixture bears the onus of proof: see Holland v Hodgson, supra at 334-5; Re May Bros Ltd, supra at 513; Australian Provincial Assurance Co Ltd v Coroneo, supra at 712. In the present case, the relevant items comprising of the two electric pumps appear to rest on their own weight on the skids, which in turn rest on their own weight on the ground. The sprinkler heads also rest on their own weight. Consequently, the NAB bear the onus of proving that these items of personal property are not chattels. The contrary would be the situation in relation to the L-shaped special valves.

   Application of the Law to the Facts

6. I will first address the fixture issue so far as concerns the two electric pumps, which as indicated at [7] above, were bolted to rails which are connected to steel skids. Such pumps were located adjacently to the river from which water was drawn to irrigate the pastures. The steel skids rested on the ground on their own weight, and were not embedded in the soil, and attached at each end of the skids were hooks and towing points so that the same can be towed by tractors. Consequently the burden of establishing that such pumps constituted fixtures lies upon the Bank.

7. The Bank submitted that the irrigation system needed to be addressed as a whole, and that the entire irrigation system depended upon the placement and function of the two electric pumps. The Bank further submitted that there was no evidence that such pumps were moved around different paddocks adjacent to the adjoining river, and that indeed there was no evidence of other sources of electrical supply in other paddocks. Thus the Bank concluded, without the two electric pumps, the underground pipes and the remaining infrastructure of the entire irrigation system would have been without utility, and accordingly it should be inferred that the pumps were intended to remain in the same position permanently.

8. The Bank sought to draw an analogy between the circumstances here and those in Litz v National Australia Bank Ltd, supra where a not dissimilar factual matrix was involved. Reliance was placed upon the following findings and reasons therefor appearing on pages 57,448 and 57,550 respectively:

   “… As each area was to have its own irrigator, the equipment was not designed to be towed around the property from one location to another although, to a limited extent, they can be moved.

   The critical features, as it seem to me, are on the one hand that the equipment is affixed to the land at one point and at one point only while, on the other, each irrigator was designed to be installed and to operate in a specific area and to remain there as a permanent feature.

   … Much of the evidence was directed to the question whether the irrigators are towable or not and to the time required for disconnection and dismantling of the equipment. I am satisfied and I find that the system was intended, as I have said, to be a permanent feature of the farm and in particular that each irrigator was intended to be a permanent feature of the areas in which it was installed. It was not intended that the centre pivot and its associated spans should be moved from location to location on the farm although theoretically this was possible in one direction at least. …

   …It must be remembered however that there is no point in such a movement unless the pivot can be towed direct to another pad at which electricity and water connections are available. …”

   …

   “… So far as the five irrigators aboveground are concerned I have no doubt that they too and every part of them was intended to be a permanent feature of the property. I find further that the intention with which they are affixed to the land is for the irrigation of the circular parcel at the centre of which their pivot or tower is secured. It is a convenient point at which to say that in determining that this equipment was affixed as it is with the intention that it remain in position permanently. …

   … There was really no point in these irrigators being placed on this land except for the improvement of its utility as land. Their central pivots are not secured so that they may be used for some purpose which is independent of the cultivation of the land. They are in truth installed as a feature which is intended to enhance the productivity of the land as a subject of cultivation.”

9. However in Litz, although as above appears, the irrigators were found to be fixtures, a contrary finding was made in relation to a 15hp pump. The Bank sought to distinguish such pump in Litz from the larger, heavier and more powerful pumps of the Blackers.

10. The Blackers for their part emphasised two factors, first, that the two electric pumps were designed to be towed around the paddocks and for that purpose could be readily disconnected from the steel skid rails. Moreover it was submitted that the pumps could be readily removed in the case of flooding, or the purpose of maintenance, and could be readily replaced. The Blackers compared the subject electric pumps to the pump in Litz, which was held to be a chattel and not a fixture. It was also argued that the other irrigation equipment in Litz which were found to be fixtures were vastly different to such equipment in the present case. They pointed to the mine pumping equipment in Eon Metals NL v Commissioner of State Taxation (WA), supra, which was lightly attached and could be removed without causing damage, and was economically worth moving. Other factors pointed more in favour of characterisation of the two electric pumps as chattels were that the irrigation system was widely disbursed throughout the pasture areas of the dairy, and could be readily replaced without adversely affecting the working utility of the remainder of the irrigation system or otherwise causing the replacement of any equipment forming part of such remainder. Disconnection of each pump from the remainder of the irrigation system apparently occurred at least on the occasion when maintenance work on each such pump was needed or when the Bega river flooded. Whilst it appears otherwise that the subject pumps were operated in essentially the same paddock areas, the fact remains that the same could be towed by tractor in whatever area and direction might be required for the purposes of the dairy farm operations.

11. Before resolving the electric pumps’ issue, it is appropriate that I next consider the remaining plant the subject of dispute, namely the 200 sprinkler heads and the 200 L shaped special valves. In relation to such equipment the Bank contended that here again the decisive point should be that the same constituted part of the irrigation system as a whole, and should not be viewed in isolation, since the fragmentation of the system by removal of the sprinkler heads and valves, as in the case of the two electric pumps, would effectively render the system inoperable. One end of the L-shaped special valves connects to underground piping. The other end of the valves connects to soft polythene pipe, which lies above the ground. The polythene pipe is locked into the sprinkler heads by a James Hardie type garden connection. The sprinkler heads appear from the photographs in evidence to be typically those commonly to be seen on farming properties and golf links. Though larger in size than normal home garden sprinklers, they resemble the same in appearance as well as utility, and thus rest on their own weight, are not embedded in the soil and can be readily detached. As in the case of garden sprinklers, the same can be moved around where appropriate without occasioning damage: Metal Manufacturers Ltd v FCT, supra at 411. The L-shaped special valves are more potentially controversial, since the same connect to underground pipes, when in use, and to that extent are located below ground level when in use. Such valves can however be readily connected and disconnected without difficulty and without causing damage. There is no suggestion that their design is unique, such that removal thereof would render the underground piping of no utility. Moreover they are not intended for use and operation necessarily in any particular area but are interchangeable.

12. An important question that arises is whether such equipment retains significant indicia of personality, or are they such significant integers of the irrigation system, that the court cannot characterise the same as separate parts ignoring the function of the system as whole? See Craven v Geal [1932] VLR 172 at 176-7; Re May Bros [1929] SASR 508 at 513; Bank of Melbourne Ltd v CBFC Leasing Pty Ltd (1991) A&NZ Conv R 561.

    In Craven v Geal [1932] VLR 172, Sir Leo Cussen, ACJ said the tile manufacturing equipment in question, consisting of articles arranged in the usual manner and in the usual sequence, be looked at as a whole. In my view, the two pumps, the sprinkler heads and the L-shaped special valves can be characterised separately. Certainly, there are cases where the parts of a machine (which is a fixture) should not be treated independently from the machine: as for example, a driving-belt attached to an engine or to the shafting in a factory (Sheffield and South Yorkshire etc Building Society v Harrison (1884) 15 QBD 358, or different sizes of rolls for a fixed rolling-machine, or duplicate rolls for such a machine, provided they have been completely made and fitted to the machine (Ex parte Astbury (1869) LR 4 Ch 630 at 635-6). In my view, those cases are distinguishable from the present case. Those cases related to items of property which formed part of large machines which weighed several tonnes. This is different to the present case where the irrigation system is more spread out. The pumps only weigh half a tonne each (approximately). Furthermore, there is nothing to suggest that the pipes connected to the two pumps were especially designed for the pumps concerned. The pumps are not so unique that as a consequence of their removal, the delivery lines which connect to it would be useless and that a substantial amount of piping or hosing would need to be replaced. Similarly, there is no evidence to suggest that removal of the sprinkler heads and L-shaped special valves would mean that the equipment and undergrond piping that remains would have to be removed.

13. In all the facts and circumstances I have reached the conclusion that the two electric pumps the subject of controversy bear the characterisation of chattels according to law, and that the Bank has not discharged the burden of proof to which I have earlier referred at [17] above. I would not infer the existence of any objective intention to make any of the pumps part of the land. The pumps have rested on the land on their own weight for all operational purposes (see Re May Bros, supra at 513) and were not so relatively heavy in weight as to have yielded any inference of intended permanency of physical location. It is true that the pumps were held in the same ownership as the land, but it is equally true that upon the sale of farming property, it is a well known practice for the farm lands to be sold separately from plant equipment and stock.

14. Whilst the two pumps, alike the irrigation equipment in Litz v NAB Ltd, supra at 57,548, tended to be operated in a specific area, there are a number of distinguishing features about that case here relevant. First, the irrigation equipment in that case was affixed to the land. Secondly, the irrigators in Litz could only move at right angles, whereas the two pumps here involved can be towed in any direction that a tractor may pull the same. Thirdly, unlike the present case, structural adjustments were necessary to change the method of attachment of the wheels. Furthermore, in the present case no damage would be done to the pumps nor the realty (see Hellawell v Eastwood, supra at 312 and Eon Metals NL v Commissioner of State Taxation (WA), supra at 609) and it would cost far less to remove the pumps than what they are worth (Metal Manufacturers Ltd v FCT, supra at 411). By way of contrast in Litz, Connolly J found that the irrigators would cost tens of thousands of dollars and that some damage would be done to the equipment.

15. It is true that the nature of the land is potentially relevant to the general inquiry which has to be undertaken in accordance with the ordinary principles referred above: Eon Metal NL v Commissioner of State Taxation (WA), supra at 608. The Springbrook property by its very nature, would require the two pumps to enable the irrigation system to cultivate the land: see Litz, supra at 57,550. Having regard to the degree of annexation and the place where the two pumps are positioned (ie by the river), the pumps were designed by virtue of its towing gear to be able to be towed around without any real difficulty. What if the river was flooded for a significant period of time? Surely the pumps could be moved to a more suitable location by the swollen river. The nature of a river and a river bank can change by reason of flood, drought or erosion. I find that the design of the pumps and their placement were intended to be able to adapt to any such variations.

16. The L-shaped valves may be distinguished from the two pumps by reason that the same were attached to the underground system when in use, with the consequence that the onus of proof would be the reverse to that appertaining to the two pumps [17]. However the operational features of such valves [23] were such as to deny to them the character of fixtures, notwithstanding that when installed, they functioned as part of an underground irrigation system. They could be readily and conveniently be removed and replaced by the same or similar items without causing damages or inconvenience, they were comparatively inexpensive as items of plant, and would have been readily replaceable if lost or damaged: see Metal Manufacturers Ltd v FCT, supra at 411. The sprinkler heads can similarly be removed without difficulty. They rested on their own weight and the Bank failed to meet the onus required to prove that they are not chattels.

17. I therefore find that all of the above described plant and equipment in issue bore the character in law of chattels, and I would therefore dismiss the Bank’s cause of action for return and delivery up of the same.

    Security Over Milk Quota

1. The next issue arising relates to the scope of operation of the Irrevocable Authority set out in [3], having regard to the recent events which have subsequently happened in relation to the NSW dairy industry which I will summarise below.

2. Until the deregulation of the Australian dairy industry on 1 July 2000, there existed in the State of New South Wales the so-called NSW Dairy Industry Quota System, which was administered by the New South Wales Dairy Corporation, the corporate creature of the Dairy Industry Act 1979 (NSW): see s7(I). The preamble to that Act stated the purposes of the Corporation to be “to provide for the regulation of the supply… of milk…”. S9(1)(g) of that Act provided for the following authority to be exercisable by the Corporation:

   “prepare and implement a scheme or schemes and, from time to time, vary, replace or cancel any scheme prepared or implemented by it, for the purpose of determining the quantities of milk that may be delivered to or will be accepted by the Corporation at any particular price and, for the purposes of any such scheme, allocate quotas to any person producing milk for delivery to the Corporation.”

3. Prior to 1 July 2000, the Quota scheme had not materially changed, at least since the time the Blackers provided to the Bank the said Irrevocable Authority of 7 September 1993. The scheme implemented pursuant to s9(1)(g) of the 1979 Act was formulated in a so-called Quota Document which has remained in force at least since the time of provision of the Irrevocable Authority in 1993 without material alteration. Clause 1 of the Quota Document has provided the following form of description of a Quota:

   “a quantity of milk that has been determined by the [Dairy] Corporation and allocated against the name of a registered dairy farmer in respect of a particular dairy farm. It is merely a figure to which regard is had by the [Dairy] Corporation in determining the quantity of milk the [Dairy] Corporation accepts from a dairy farmer.”

   As part of the Quota system implemented by the Corporation, a quota exchange was established, which enabled dairy farmers through the Corporation to buy or sell for four weekly periods, and for further periods up to thirteen multiples of such four weekly periods, at any one quota exchange. Clause 6(vi) of the Quota Document described how a market clearing price was to be set by matching sell and buy orders, the same stipulating that “All successful applicants pay or are paid at this common price (less any commission applicable to those disposing of quota). Clause 6(vii) of the Quota Document stated as follows:

   “The [Dairy] Corporation will collect the payment from dairy farmers allocated quota and forward it, less commission, to those dairy farmers successful in disposing of quota. The commission will be charged against those disposing of quota to cover administrative and associated costs of running the scheme.”

   The Australia milk market broadly consists of two types of milk, namely market milk (that is, milk for drinking), and manufacture milk (that is, milk for dairy products such as butter and cheese). It was market milk which was subject to regulation by the Corporation.

4. Thus it will be seen what was the intended purpose and scope of operation of the Irrevocable Authority in issue. Prior to the deregulation of the Australian dairy industry on 1 July 2000, the Blackers held a Milk Quota in relation to part of the output of this dairy farm (ie market milk), such part representing about 53% or 54% of their total production at the time of deregulation.

5. On the abovementioned date 1 July 2000, when the Quota system was abandoned, the Australian Dairy Industry was simultaneously deregulated. Such deregulation was effected by the Dairy Industry Act 2000 (NSW) (“The Act of 2000”). The preamble stated the purpose of the Act of 2000 to be to “repeal the Dairy Industry Act 1979 in connection with the deregulation of the dairy industry”. S24 effected such repeal on and from 1 January 2001, and from that date the Dairy Corporation will cease to exist. Pursuant to Clause 7 of Schedule 2 to the Act of 2000, any scheme established under s9(1)(g) of the Dairy Industry Act 1979 was cancelled on and from 1 July 2000, and pursuant to s14 of the Act of 2000, no compensation is payable by the Crown by reason of the cancellation of the Quota system (see in particular s14(2)(b)).

6. As the submissions made on behalf of the Blackers correctly state, it was into this void created by the cancellation of the Quota system that the Federal Government stepped in with the Dairy Industry Adjustment Act 2000 (“the Adjustment Act”), which established the Dairy Adjustment Authority (“the Authority”) to administer the Dairy Structural Adjustment Program (“DSAP”). The objectives and principles of the DSAP are set out in Clause 1 of Schedule 2 to the Adjustment Act, and are to the effect of assisting the dairy industry to adjust to deregulation by the provision of two types of grants, the first being DSAP Payments made pursuant to Schedule 2, and the second being Dairy exit payments made pursuant to Part 9C of the Farm Household Support Act 1992 (Cth).

7. The DSAP payments are to be calculated by reference to 1998-1999 milk deliveries by dairy farmers at a rate of 46.23 cents per litre for market milk and a national average rate of 8.96 cents per litre for manufacturing milk. The Dairy exit payments are to be made available for farmers who choose to leave agriculture, such payments being non-divisible income for the purposes of the Bankruptcy Act (Clause 1 of the Schedule 2 – Amendment of Other Acts). The Authority is to administer DSAP payment rights, such payments to be funded by a dairy adjustment levy on milk products. The levy is to be paid into a Dairy Structural Adjustment Fund, and the DSAP payment and Dairy exit payments will be made out of such fund. The DSAP Payments Scheme provides for payments to be made by thirty-two (32) quarterly instalments over eight years commencing on 1 July 2000. Eligibility for payments is based essentially on whether an applicant held an eligible interest in a dairy farm enterprise at 6:30pm on 28 September 1999 and delivered milk during the base year 1998-1999.

8. The Blackers have made application for DSAP payment. Section 6 of that application refers to the milk delivered for the 1998-1999 year and provides a partition or breakdown between market milk delivered pursuant to a quota or non quota on the one hand, and manufacturing milk on the other. No other reference to the quota system appears in the form of application. The outcome of the application is not the subject of evidence.

9. It is against the complexity of the foregoing materials that the Blackers submit that whatever DSAP payments they shall receive pursuant to this Commonwealth legislative scheme are outside the scope or reach of the Irrevocable Authority, because no monies are or shall be payable to them by the NSW Dairy Corporation, to whom such Irrevocable Authority was addressed, and in any event the Irrevocable Authority only relates to the proceeds of surrender of all or any portion of their Quota held pursuant to the scheme formulated under the NSW Dairy Industry Act 1979. Initially the Bank sought to contend that in substance and reality, the Irrevocable Authority extended to such DSAP Payment entitlements because the compensation scheme must necessarily have been introduced to compensate or partly compensate dairy farmers for the loss of a unique form of statutory franchise or chose obtained by virtue of their participation in a regulated or protected industry. There is commercially moral justification for this stance on the Bank’s part, since it may reasonably be inferred that were it not for the provision of the Irrevocable Authority, the Bank would not have provided loan moneys to the Blackers, at least to the extent which it did, and it is to be readily inferred that the Blackers’ entitlements to Commonwealth compensation are commercially albeit indirectly referrable at least in substantial part for the elimination of their Quota. However the Blackers are correct in their contention that there DSAP payments to be made by the Commonwealth are expressed to be compensatory in respect of dairy farmers exposure to deregulation generally, and are not expressed in terms co-relative to the abolition by State Parliaments of milk quotas, so that no correspondence or sufficient correspondence to milk quotas can be demonstrated. The Bank has subsequently not pursued further argument for entitlement based upon the Irrevocable Authority, and has confined the relief it presently seeks to the monetary value of the Blackers’ entitlements to DSAP payment in context to quantification of the mareva injunction which it seeks pending the outcome of the Blackers’ appeal to the Full Court. That is in my opinion the sensible approach which I will now address.

   Mareva Injunction

10. The Blackers have opposed the grant of any Mareva injunction. They contend that since completion of the proceedings at first instance, they have not engaged in any conduct by way of disposition or removal of assets which could be characterised as underhand, or otherwise designed to deprive the Bank of the fruits of its existing judgment at first instance. They point to the purpose of such an injunction as not being to create security for a plaintiff, or to require a defendant to provide security as a condition of being allowed to defend, but rather to prevent a defendant from disposing of his or her actual assets (including claims and expectancies) pending trial so as to frustrate the process of the court by depriving the plaintiff of the fruits of any future judgment obtained in the action: Jackson v Sterling Industries Limited (1987) 162 CLR 612 at 623 and 625; Cardile v LED Builders Pty Ltd (1999) 162 ALR 294 at 302-3. The Blackers point to the well established principles that a Mareva injunction is a drastic remedy which should not be granted lightly since it imposes a severe restriction upon a defendant’s right to deal with his or her assets, that it is granted at the suit of a plaintiff whose status as a creditor is in dispute, and that its purpose is to preserve the status quo and not to change the same in favour of a plaintiff or to improve a plaintiff’s position in the event of the defendant’s insolvency (Cardile, supra at 311).

11. The situation here is different from the circumstances which have underpinned the above principles. The Bank has already obtained a judgment in its favour for a substantial sum, and there is a likelihood of a substantial shortfall between the judgment debt and interest on the one hand and the proceeds of sale of the Blackers’ dairy farm which will be sold by the Bank’s Receiver if the Bank’s judgment against the Blackers is not reversed on appeal. As earlier stated, the Bank no longer has the benefit of the Irrevocable Authority by reason of the structural changes which have been involved in the rationalisation of the dairy industry. It is true that as the evidence in the interlocutory proceedings before me has unfolded over time, the Blackers have demonstrated to the Court that they have not, since the conclusion of the litigation at first instance, engaged in any underhand or questionable conduct designed to prejudice such of the rights as the Bank possesses by virtue of the existing judgment in its favour. Moreover the weight of authority would I think justify me in the exercise of discretion to adopt the approach that the Blackers should be entitled in principle to retain such funds as are necessary to pay their outstanding legal costs of the proceedings at first instance, and of the subsequent interlocutory proceedings before me, and of the anticipated costs of the pending appeal, provided the same are fair and reasonable. Additionally the Blackers should not in principle be left without reasonable living expenses pending the outcome of the appeal, and should be able in principle to satisfy any other bona fide unsecured creditors. They have estimated their living expenses at $850.00 per week, though Mrs Blacker had subsequently obtained employment and Mr Blacker may well have done so since the proceedings were last before me. That a Mareva injunction should usually allow a defendant to have access to his or her own assets for living expenses, payment of debts and legal expenses free of Mareva injunctions has been recognised by authority (see Frigo v Culhaci, NSW Court of Appeal, 17 July 1998, unreported at 13; Clark Equipment Credit of Australia Limited v Como Factors Pty Ltd (1988-1989) 14 NSWLR 552 at 569), though again, care needs to be exercised in applying established authority in circumstances where the opposing party is not a defendant before hearing but an appellant in relation to a judgment already obtained against him or her.

12. The Blackers have sought to diminish the significance of the existing judgment at first instance against them in favour of the Bank by the contention that a Mareva injunction should not lie against an appellant such as in their present position because recovery procedures are now available to the Bank as respondent to the appeal based on the judgment in relation to which no stay order has been made: Camdex v Bank of Zambia (1997) 1 All ER 728 and Deutsche Schahtbau v Shell International Trading Co [1990] 1 AC 295. However the Blackers have not undertaken that they would not oppose any such recovery procedures if so taken by the Bank against them. They have submitted that in any event the court has no jurisdiction to grant a Mareva injunction in the present circumstances but it suffices to cite from Mareva Injunctions and Anton Pillar Relief (4^thed) by Steven Gee as follows:

    “If there is no stay pending appeal, the purpose of an injunction is as an aid to enforcement of the judgment, by preventing dissipation of assets available for execution or which can be taken to satisfy the judgment.”

    The Bank has recently submitted that “Justice requires that there be mareva orders in respect of the Blackers entitlements to payments under the DSAP and this is conceded by the Blackers”. What however the Blackers have recently submitted is somewhat unclear:

    “21.Consistently with the observations of the court made on 15 September 2000, the Mareva order should be discharged in relation to all of the Blackers’ assets other than the proposed payment to be made under the DSAP system. The juridical basis for restraining the prospective payments under the DSAP system must depend upon something other than the prospective payments under the DSAP system representing some form of compensation for the cancellation of the Blackers’ rights under the quota system.”

    I propose in principle to make Mareva orders to the effect now sought by the Bank in relation to the Blackers’ entitlements to DSAP payments. If the consequences of such orders would be that the Blackers would have insufficient funds to meet outstanding legal costs and costs of the pending appeal, and to meet their reasonable living expenses and other debts, then it will be necessary for their present financial situation to be up-dated by affidavit for further consideration. Such updated material should also address the circumstances of the status quo of their DSAP entitlements to the extent that the same have crystallised to date. I also need to hear final arguments as to costs of the interlocutory proceedings in the light of the Reasons
    for Judgment which I have now reduced to writing. My tentative view is that the parties

    should bear their own respective costs of the interlocutory proceedings before me, as each has succeeded on issue of approximately equal importance.

I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti.

Associate:

Dated:             16 October 2000

Counsel for the Applicant:	Mr P Graham QC
Solicitor for the Applicant:	Dibbs Crowther & Osborne
Counsel for the Respondent:	Mr D McGovern & Mr A Fernon
Solicitor for the Respondent:	Commins Hendriks
Date of Hearing:	13 September 2000
Date of Judgment:	16 October 2000