Bofinger v Kingsway Group Limited [2009] HCA 44

Bofinger v Kingsway Group Limited [2009] HCA 44

On 8 February 2006, Kingsway Group Limited (first mortgagee), after its debt was paid in full owing to appellants’ payments as sureties, was obliged in equity to account to the appellants for surplus monies and securities as constructive trustee, unless appellants' rights were excluded by prior consent or contractual terms. There was no exclusion by the guarantee to the second mortgagee; consequently, the first mortgagee’s dealing with surplus in favor of second mortgagee gave rise to liability to account and equitable compensation in favor of appellants.

Parties
Appellants: Ronald John Bofinger & Anor; First Respondent: Kingsway Group Limited (formerly Willis & Bowring Mortgage Investments Limited); Second Respondent: Rekley Pty Limited; Third Respondent: John Edward Skehan; Fourth Respondent: Joint liquidators of B & B Holdings Pty Ltd; Fifth, Sixth, Seventh Respondents: Willis and Bowring Solicitors; Eighth Respondent: Officer of Kingsway Group Limited
Jurisdiction
Australia
Judgment Date
13 October 2009
Procedural Posture
Appeal / Final Appellate Stage High Court Judgment
Outcome
Appeal allowed
Legal Topics
Guarantee and Indemnity, Right to Subrogation, Constructive Trust, Remedial Equity, Priority Between Mortgagees
Equity Mortgage Law Remedies Guarantee and Indemnity Right to Subrogation Constructive Trust Remedial Equity Priority Between Mortgagees

Case Brief

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Parties

Ronald John Bofinger & Anor

Appellants

Kingsway Group Limited (formerly Willis & Bowring Mortgage Investments Limited)

First Respondent

Rekley Pty Limited

Second Respondent

John Edward Skehan

Third Respondent

Joint liquidators of B & B Holdings Pty Ltd

Fourth Respondent

Willis and Bowring Solicitors

Fifth, Sixth, Seventh Respondents

Officer of Kingsway Group Limited

Eighth Respondent

Procedural Posture

Appeal / Final Appellate Stage High Court Judgment

Legal Issues

  1. 1 Whether appellants as sureties have a right to subrogation to securities in priority to puisne mortgagees
  2. 2 Whether appellants' right to subrogation excluded by the terms of their guarantees to second and third mortgagees
  3. 3 Whether transfer of surplus sale proceeds to the second mortgagee required to be unconscionable for subrogation doctrine to apply

Ratio Decidendi

On 8 February 2006, Kingsway Group Limited (first mortgagee), after its debt was paid in full owing to appellants’ payments as sureties, was obliged in equity to account to the appellants for surplus monies and securities as constructive trustee, unless appellants' rights were excluded by prior consent or contractual terms. There was no exclusion by the guarantee to the second mortgagee; consequently, the first mortgagee’s dealing with surplus in favor of second mortgagee gave rise to liability to account and equitable compensation in favor of appellants.

Court Disposition

Appeal allowed

Orders

  • Set aside Order 1 of the Court of Appeal of the Supreme Court of New South Wales entered 29 December 2008 and orders entered 8 July 2009
  • In place thereof: appeal allowed; orders 1 and 2 of the orders made by Young CJ in Eq entered 18 February 2008 be set aside