Boral Resources (Qld) Pty Ltd v Andrews & Anor [2010] QSC 491

1-1 SUPREME COURT OF QUEENSLAND CITATION: Boral Resources (Qld) Pty Ltd v Andrews & Anor [2010] QSC 491 PARTIES: BORAL RESOURCES (QLD) PTY LIMITED ACN 009 671 809 (Plaintiff/Applicant) v BRIAN PETER ANDREWS (First Defendant) LYNDA SUSAN ANDREWS (Second Defendant) FILE NO/S: 13787/09 DIVISION: Trial Division PROCEEDING: Application ORIGINATING COURT: Supreme Court DELIVERED ON: 2 March 2010 (extemporaneous) DELIVERED AT: Brisbane HEARING DATE: 2 March 2010 JUDGE: Philippides J ORDER: Order in terms of the amended draft. CATCHWORDS: EQUITY – EQUITABLE CHARGES AND LIENS – where defendants entered into a guarantee and indemnity agreement in the context of a credit application agreement with the plaintiff and its related bodies corporate – where defendants are registered owners as joint tenants of real property – where terms of the guarantee charged “all their equitable interest in freehold or leasehold property” – where respondent third party asserted that there was no separate equitable interest in the property – whether the defendants could create an equitable interest in favour of the plaintiff in the property Allen’s Asphalt v SPM Group [2009] QCA 134, considered DKLR Holding Co. (No. 2) Proprietary Limited v The Commissioner of Stamp Duties (New South Wales) (1982) 149 CLR 431, considered Suncorp Insurance and Finance v Commissioner of Stamp Duties [1998] 2 Qd R 285, considered -- 1 of 8 -- 1-2 JUDGMENT 1 10 20 30 40 50 60 COUNSEL: A Lyons for the applicant M Luchich for the respondent SOLICITORS: James Conomos Lawyers for the applicant Patane Laywers for the respondent -- 2 of 8 -- 1-3 JUDGMENT 1 10 20 30 40 50 60 HER HONOUR: The plaintiff, Boral Resources (Qld) Pty Ltd, seeks judgment on its claim filed on 7 December 2009 in the sum of $7,902.16, inclusive of interest, for unpaid goods, legal costs and interest. Additionally a claim is brought for a declaration that the plaintiff holds an equitable interest as chargee in land situated at 7 Morris Street, Flinders View, in the State of Queensland pursuant to a guarantee and indemnity agreement dated 12 July 2006 between Boral Limited and its related bodies corporate on the one hand and the first and second defendants on the other. Orders are also sought for the sale of the property with the proceeds being applied to pay the expenses associated with the sale thereafter in discharge of any prior registered mortgagee and thereafter in payment of the amount due to the plaintiff with the balance being paid into Court, if any. The plaintiff is the supplier of concrete and the defendants are the registered owners as joint tenants of the Flinders View property. As mentioned, the relevant guarantee and indemnity agreement was entered into on 12 July 2006. It was entered into in the context of a credit application agreement entered into by B & L Andrews Proprietary Limited and Boral Limited and its related bodies corporate. The plaintiff has served the claim upon the defendants who have not entered a notice of intention to defend. The time for doing so has now expired. -- 3 of 8 -- 1-4 JUDGMENT 1 10 20 30 40 50 60 It should be noted that B & L Andrews Proprietary Limited made applications to a number of trade suppliers for credit in relation to the supply of goods, some of which have lodged caveats over the land in question claiming interests pursuant to charging clauses in guarantees provided to them by the defendants. The respondent, Stoddart (S.E. Queensland) Proprietary Limited is one such supplier. It has issued proceedings in support of the interest it maintains in the property. It is the only respondent who opposes the order sought by the plaintiff. There is no dispute as to the plaintiff's claim that its equitable charge has priority over those of the respondent Stoddart or other trade suppliers by reason of the fact that the plaintiff’s charge was created first in time. The area of dispute is as to whether the charge relied upon by the plaintiff attaches to the interest that the defendants hold in the land. The relevant principles concerning the creation of an equitable charge are well settled. To constitute a charge in equity, it is not necessary that any general words of charge be used. It is sufficient if the Court can fairly gather from the language of the instrument that the intention of the parties is to constitute the property referred to as a security (Craddock v Scottish Provident Institution (1893) 69 LT 380, 382; Allen’s Asphalt P/L v SPM Group Ltd [2009] QCA 134, [47]). -- 4 of 8 -- 1-5 JUDGMENT 1 10 20 30 40 50 60 The charge asserted and relied upon by the plaintiff arises from clause 9 of the guarantee given by the defendants and is relevantly in the following terms: "The guarantor hereby agrees to charge all their equitable interest in freehold or leasehold property." It is said that the effect of that charging clause is to create an equitable charge in favour of the plaintiff in the Flinders View property. However, the submission made by Stoddart is that the charge asserted by the plaintiff does not extend to the legal interest currently held by the defendants in the Flinders View property. The argument raised by Stoddart is that, as the defendants are the registered proprietors of the fee simple in land and hold a single and absolute legal estate in the land, there is no separately existing equitable interest to which the charge of the plaintiff can attach. In making this submission reliance is placed on DKLR Holding Co (No.2) Proprietary Limited v. The Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431. That case concerned a declaration of trust whereby the proposed trustee (DKLR Holding) was to hold only the legal estate in the land in question and the transferor (29 Macquarie) would not part with the beneficial ownership. The directors of 29 Macquarie resolved accordingly. An argument was advanced on behalf of DKLR that the transfer of the land to it by 29 Macquarie was effective to transfer only the bare legal estate and to leave remaining in 29 Macquarie the entire beneficial interest. -- 5 of 8 -- 1-6 JUDGMENT 1 10 20 30 40 50 60 However, as Aickin J observed (at 463): “If one person has both the legal estate and the entire beneficial interest in the land he holds an entire and unqualified legal interest and not two separate estates, one legal and the other equitable. If he first holds the legal estate upon trust for some other person and thereafter that person transfers to him the entire equitable interest, then again the first-named person does not hold two separate interests, one the legal and the other equitable estate; he holds a single entire estate – he is the absolute owner of an estate in fee simple in the land. The equitable interest merges into the legal interest to comprise a single absolute interest in the land. It is a fundamental principle of both the common law and of equity that the holder of an estate in fee simple cannot be a trustee of that fee simple for himself for what he holds is a single estate, being the largest estate in land known to the law.” Similarly, Brennan J noted (at 474): “A transferee does not become a trustee by failing to acquire an interest in the property transferred; a trustee holds on trust only such interest as he acquires. An equitable interest is not carved out of a legal estate but impressed upon it.” In the present case, however, the interest charged is the equitable interest in respect of which the chargors held the legal estate. In my view, the respondents reliance on DKLR -- 6 of 8 -- 1-7 JUDGMENT 1 10 20 30 40 50 60 Holding and Suncorp Insurance and Finance v. Commission of Stamp Duties [1988] 2 Qd R 285 (where DKLR Holding was discussed) is misconceived. The present case is unlike the situation in DKLR Holding, where the legal estate was sought to be transferred, without the equitable estate which had merged with the larger legal estate. As the High Court there held, in transferring the legal estate, the equitable estate could not be “carved out” of the legal estate. I do not consider that DKLR Holding precludes the defendants from “impressing” on their legal estate in the Flinders View property an equitable interest in favour of the plaintiff. A consideration of the principles set out in Allens Asphalt v. SPM Group [2009] QCA 134 to which I have already referred indicates an intention on the part of the parties that the Flinders View property be provided as security in the nature of an equitable charge. In this regard, I note that the circumstances surrounding the entry into the guarantee document make it abundantly clear that the plaintiff was concerned to obtain security in respect of the application by B & L Andrews Proprietary Limited for credit in respect of a substantial amount of up to $100,000. At the time of the entry into the credit application and guarantee the land was the subject of a registered mortgage. The parties to the credit application and guarantee understood that the defendants owned the land in question and there is no -- 7 of 8 -- 1-8 JUDGMENT 1 10 20 30 40 50 60 evidence to suggest that the security was not intended to cover that land. The effect of the respondent's contentions would be to render the charging clause nugatory. It would achieve a result inconsistent with the accepted approach to the construction of commercial documents so as to make commercial sense of them and avoid a capricious and unreasonable result. In the circumstances, these are strong arguments against the construction contended for by the respondent, but additionally the respondent’s primary submission misunderstands the propositions of law outlined in authorities such as DKLR Holding. In the circumstances the plaintiff is entitled to the judgment and declarations sought in the draft order. I make an order in terms of the draft order, as amended. ----- -- 8 of 8 --