Queensland Judgments
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Bunnings Group Ltd v Asden Developments Pty Ltd & Ors

Unreported Citation:

[2013] QCA 347


The issue before the Court of Appeal in this matter concerned the rights of an equitable chargee of an interest in land to the proceeds of sale of that land which had been made the subject of a statutory trust for sale under the Property Law Act.  The charge had been granted to the appellant by a co-owner (tenant in common) of the property over their own interest in the land.  The co-owners of the land had sought and obtained consent orders from the registrar of the Supreme Court vesting the land in one of the co-owners as a trustee for the sale of the land free from encumbrances affecting any undivided shares.  The appellant was not a party to that proceeding and was unaware of it.  The co-owners were aware of the appellant’s interest but had not made the appellant a party nor given notice of the application.  After the making of the registrar’s order an amount equal to the appellant’s claim was paid into a solicitor’s trust account.  The judge at first instance determined that the appellant, as chargee, had lost its interest upon the making of the orders of the registrar.  The Court of Appeal allowed the appeal holding that the appellant’s interest in the charge over the co-owner’s interest in the land was converted to a charge over a proportion of the proceeds of sale.  The Court (Margaret Wilson J with whom Muir and Gotterson JJA agreed) held that the effect of the Property Law Act was to vest title to co-owned land in the trustees for sale free of the encumbrances affecting individual interests.  That reflected the commercial reality of the difficulty in selling part interests in land and, indeed, part interests which were encumbered.  However, the scheme of the Act was that the entire parcel of land was to be sold and the proceeds were to be held to give effect to the rights of the former co-owners.  There was nothing to suggest that the legislation intended to destroy the rights of an encumbrancee of one of the co-owners interest in the land.  On the contrary, it was part of the intention of the Act that mortgagees of one co-owner’s interest might apply for and obtain an order for sale of the land.  Margaret Wilson J identified that the scheme of the the Act was consistent with the usual principles concerning the preservation of security interests:

“[49]This statutory scheme is consistent with the principle that, subject to the proper construction of a particular charge, a security interest is generally a single continuous interest which moves from the original asset to the proceeds of its sale.  A mortgagee is entitled to a security interest in the fruits of mortgaged property.  Thus, a mortgagee may claim a security interest in money paid in compensation for compulsory acquisition of property, even where the interest is not expressed in the deed.  Similarly, where a mortgagee exercises its power of sale over land subject to an equitable charge, the equitable charge attaches to any surplus proceeds of sale even though the chargee no longer has an interest in the land itself.”

Consequently, the appellant’s charge extended to the proceeds of the sale of the land.  The Court also held that the appellant was not bound by the order appointing statutory trustees for sale given that it was not a party to those proceedings.

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