Dean-Willcocks v Nothintoohard (In Liquidation) [2006] NSWCA 311

The property was ultimately sold by our client with very little surplus available. The receiver claimed priority over our client’s debt and the matter went all the way to the Court of Appeal. The Court of Appeal found:

1. There was no element of unconscientiousness in the first mortgagee asserting its legal right, and in the circumstances no equitable lien arose.
2. Equitable liens have been held to exist in a variety of circumstances to ensure that the costs of realisation are borne by the realised fund before any distribution to those otherwise entitled to it. An equitable lien arose in favour of the receivers for the costs of realisation of the land, however the lien did not constitute a charge on the fund in priority to the first mortgagee's legal rights where the receivers did not effect the realisation of the asset.
3. The conduct of the receivers did not create the fund from which they sought reimbursement, nor did the costs they incurred protect, preserve or enhance the value of the property in a way that produced incontrovertible benefit to the advantage of the first mortgagee. Therefore the circumstances which might give rise to an equitable lien were not present.
4. There was no subsequent equity created by the first mortgagee by some assurance, declaration of trust or agreement such as to postpone their legal interest to the equitable interest of the receivers. Our client did not consent to the appointment of the receivers and thus did not cede priority.
5. A wider basis for recovery of costs incurred may be appropriate where an “incontrovertible benefit” has been conferred on the party that takes the benefit of the fund and where it is unconscientious for that party to keep the benefit without payment. However the costs incurred by the receivers in their attempts to realise the land did not protect, preserve or enhance the value of the land such as to confer an incontrovertible benefit on our client.
6. The conduct of the receivers did not create the fund from which they sought reimbursement, nor did the costs they incurred protect, preserve or enhance the value of the property in a way that produced incontrovertible benefit to the advantage of Sovereign. Therefore the circumstances which might give rise to the doctrine of salvage were not present.

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