Latec Investments Ltd v Hotel Terigal Pty Ltd (in liq) Case Brief PDF

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Case Brief...

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CASE BRIEF TEMPLATE Name of Case

Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq)

Citation and Court

(1965) 113 CLR 265 High Court of Australia

Material Facts

Hotel Terrigal, which was the owner of a hotel which was mortgaged to Latec Investments, defaulted on its mortgage obligations.  Latec Investments exercised its power of sale under the mortgage and sold the property to Southern Hotels, which was a totally-owned subsidiary of Latec Investments.  The mortgagee sale was thus fraudulent.  A year later, Southern Hotels gave MLC Nominees, as trustees for debenture holders, a security by way of a floating charge ocer the hotel property.  Following the default of Southern Hotels the floating charge crystallized. Hotel Terrigal subsequently sought to have the fraudulent mortgagee sale to Southern Hotels set aside.  In effect, Hotel Terrigal was asserting the priority of its right to set aside the fraudulent mortgagee sale of the hotel over MLC Nominees’ equitable proprietary interes in the hotel pursuant to the floating charge. The issue before the High Court was a priority dispute over which of Hotel Terrigal and MLC Nominees had the better claim to first exercise their rights over the Hotel.

Legal Issue



Relevant Law

Rice v Rice (1853) 61 ER 646 at 648 Phillips v Phillips (1861) 45 ER 1164 at 1167

Application of Law to the Facts

Rice – the true meaning of the maxim qui prior est tempore potior est jure is that in all cases where a claim to enforce and equitable interest in property is opposed on the ground that after the interest is said to have arisen a third party innocently acquired an equitable interest in the same property, the problem, if the facts relied upon as having given rise to the interests be established, is to determine where the better equity lies. If the merits are equal, priority in time of creation is considered to give the better equity. Phillips – the legal estate is not required in order that a defense of purchase for value without notice may succeed. Where there are circumstances that give rise to an equity as distinguished from an equitable estate – as, for example, an equity to set aside a deed of fraud, or to correct if for mistake.  The High Court (Kitto, Taylor, and Menzies JJ) unanimously ruled in favour of MLC Nominees.  Kitto and Menzies JJ ruled that Hotel Terrigal’s right was a mere equity only and, as such, gave way to MLC Nominees’ equitable proprietary interest.  Taylor J ruled that Hotel Terrigal’s right was an equitable interest, although one with an impediment that meant it had to give way to MLC Nominees’ equitable interest.  Arguably, his Honour’s view is in substance the same as that of Kitto and Menzies JJ.

Conclusion...