Bunny Industries v FSW Enterprises

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Citation: Bunny Industries Ltd v FSW Enterprises Pty Ltd (1982) Qd R 712.

This information can be found in the Textbook: Edgeworth et all, Sackville and Neave's Property Law Cases and Materials, 8th edition, Lexis Nexis, 2008, pp. 297-300 [4.17].

Contents

Background Facts

  • The Plaintiff entered a contract for sale of land to buy a property off the Defendant.
  • Before the land was registered, the Defendant sold it to a third party (Second Defendant) at a higher price.
  • The Second Defendant registered the property before the Plaintiff did, and so gained an indefeasible title.
  • The Plaintiff sued.

Argument

  • The Plaintiff argues that the profits made by the Defendant were held for his (Plaintiff's) benefit on a constructive trust, since equitable title has already passed to him.

Legal issues

Judgment

  • Once a contract for sale of land is entered into, the purchaser acquires an equitable fee simple. The vendor still has the legal fee simple title, but it is held on a constructive trust for the purchaser.
    • For this to apply, the contract must be capable of specific performance (ie, if a court may grant specific performance in such a case).
  • The trust is 'in progress towards' a bare trust.[1] With every payment, the purchaser acquires more equitable interest in the land. Once money has been transferred completely, the trust become a bare trust and the trustee (vendor) must transfer the land.
  • In this case, a construction trust was indeed formed.
  • However, since the title passed to a third party, the court did not grant specific performance (ie the property), but rather ruled that all profits made by the Defendant were held on trust for the Plaintiff and are therefore awarded to the Plaintiff.

References

  1. A bare trust is a simple trust, where the beneficiary has the right to receive the income and capital instantly rather than under certain conditions (such as reaching a certain age).
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