St George Bank v Perpetual Nominees


Until the recent case of St George Bank v Perpetual Nominees [2010] QSC 57, the position in relation to a first ranking chargee’s sale of personal property where subsequent chargees withhold their consent has not been clear. Subsequent security holders have historically been able to withhold release of their securities so that purchasers have been blocked or delayed from receiving title to personalty.

St George Bank v Perpetual Nominees [2010] QSC 57

On 27 June 2006, St George loaned money to enable the purchase and refurbishment of the Sheraton Mirage Hotel Gold Coast. The St George facility was secured by first registered mortgages and a first registered fixed and floating charge.

Perpetual Securities and LJK Securities held second and third ranking mortgages and fixed floating charges respectively. On 9 December 2009, following the default of the borrower, St George contracted to sell land as well as the assets and undertakings of the hotel. St George assured the purchaser that the subsequent charges would be released. After St George exercised its power of sale, second and third ranking mortgagees refused to release their charges.

St George sought a declaration to the effect that the purchasers should receive clear title to the personalty. The question for the court was whether title to personal property, such as plant and equipment, should pass in a similar manner as real property in those circumstances.

The finding

Wilson J held that title to the personalty was transferred to the purchaser. The court considered the property (to which St George’s charge related) included ‘all of the hotel’s rights, property and undertaking of whatever kind’. Wilson J accepted the submission that the charge was an ‘instrument of mortgage’ and applied to the power of sale under section 83(1)(a) of the Property Law Act 1974 (Qld).

As no statutory provisions consider the effect of title to personalty (as opposed to land) when a prior chargee exercises its power of sale, Wilson J turned to the general law from the UK. In South Eastern Railway Company v Jortin the Lord Chancellor stated that:

‘When a mortgagee sells under a power, the sale defeats the rights of all subsequent incumbrances, whose remedy then is only against the money in the hands of the vendors.’

Wilson J considered that this statement in relation to mortgagees is no different in principle for chargees. Accordingly, Wilson J held that the purchaser was entitled to the assets and undertakings of the hotel free from the encumbrances of Perpetual and LJK Securities.

Subsequent chargees: implications and relief

Subsequent chargees and mortgagees are now in an even weaker position against first ranking chargees and mortgagees. Charged personal property can be sold by first ranking chargees free of subsequent charges by applying the principle in St George v Perpetual Nominees, while mortgaged land can be sold by first ranking mortgagees by applying the relevant statutory provisions.

However, subsequent chargees and mortgagees may have rights if any procedural or statutory requirements have not been met. For example, a sale may be restrained if reasonable care is not exercised by the first chargee in relation to obtaining market value for the secured property.


Mezzanine finance on the security of subsequent charges was popular prior to the GFC. As markets have since declined, this decision will be significant for subsequent chargees who are confronted by first ranking chargees exercising their power of sale.  Absent a breach of statutory or common law obligations on the part of the first ranking chargee, subsequent chargees will have little chance of preventing a sale of all secured property, including personalty.

For further information please contact partner Alison Robertson on (08) 9288 6872 /

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.