IAC (Finance) Pty Ltd v Courtenay
110 CLR 550(Judgment by: Kitto J)
IAC (Finance) Pty Ltd
vCourtenay
Judges:
Dixon CJ
Kitto JTaylor J
Case References:
Abigail v Lapin - (1934) AC 491; (1934) 51 CLR 58
Baker's Creek Gold Mining Co v Hack - (1894) 15 LR (NSW) Eq 207
Barry v Heider - (1914) 19 CLR 197
Butler v Fairclough - (1917) 23 CLR 78
Cowell v Stacey - (1887) 13 VLR 80
Currey v Federal Building Society - (1929) 42 CLR 421
Dixon v Muckleston - (1872) LR 8 Ch 155
Great West Permanent Loan Co v Friesen - (1925) AC 208
Lapin v Abigail - (1930) 44 CLR 166; (1934) AC 491; (1934) 51 CLR 58
Oertel v Hordern - (1902) 2 SR (NSW) Eq 37
Phillips v Phillips - (1861) 4 De G F
&
J 208
Privy Council in Abigail v Lapin - (1934) AC 491; (1934) 51 CLR 58
Rayner v Preston - (1881) 18 Ch D 1
Ridout v Fowler - (1904) 1 Ch 658
Templeton v Leviathan Pty Ltd - (1921) 30 CLR 34
Wall v Bright - (1820) 1 Jac
&
W 494 (37 ER 456)
Walsh v Alexander - (1913) 16 CLR 293
Judgment date: 20 December 1963
Judgment by:
Kitto J
Three appeals are before us. Each is by one of five defendants to a suit in the quitable jurisdiction of the Supreme Court of New South Wales. The plaintiffs in that suit, who for convenience will be referred to as the Courtenays, sued to establish their right to have registered under the provisions of the Real Property Act, 1900-1956 (NSW) a transfer of certain land which had been executed in their favour by the registered proprietor. The defendants were (1) the registered proprietor, a Miss Austin; (2) a company called Denton Subdivisions Pty Ltd, (I shall refer to it as Denton), which had obtained from Miss Austin a transfer in its favour subsequent in date to the Courtenays' transfer, and asserted a right to registration which, if soundly based, would defeat the Courtenays' claim to registration of their transfer; (3) a company called IAC (Finance) Pty Ltd (to be called IAC), which held a memorandum of mortgage from Denton and claimed a right to have it registered in the event of Denton's transfer being registered; (4) a company called Hermes Trading and Investment Pty Ltd (to be called Hermes) which held a later memorandum of mortgage from Denton and claimed a right to have it registered, subject only to IAC's mortgage, in the event of Denton's transfer being registered; and (5) the Registrar-General. The appellants are the three companies. Miss Austin having died since the date of the Supreme Court's order, a representative of her estate has been made a party to the appeal but has taken no part in the argument. The Registrar-General has appeared before us by counsel who has assisted us with a thoughtful argument, but he properly maintains an attitude of neutrality as between the contending parties.
The Courtenays' transfer from Miss Austin was produced to the Registrar-General for registration on 22nd April 1959, together with a memorandum of mortgage back from the Courtenays to Miss Austin. Denton's memorandum of transfer from Miss Austin and IAC's memorandum of mortgage from Denton were produced for registration some seven months later, on 25th November 1959. Hermes' memorandum of mortgage from Denton was produced later still, on 10th February 1960. None of the five instruments has been registered. Since s 32(2) of the Real Property Act requires the Registrar-General to record (ie to register, see s 35) registrable instruments and s 36(1) provides that every instrument presented for registration shall be registered in the order of time in which the same is produced for that purpose, it would be clear, if there were no other relevant facts than I have stated, that the Courtenays' transfer would have to be registered first; and the result would be that Miss Austin's transfer to Denton, and Denton's mortgages to IAC and Hermes, would all become incapable of registration. The argument for the appellants both at the trial and on appeal revolved around three contentions. The first was that the Courtenays' application of 22nd April 1959 for registration of the transfer to them was withdrawn, in the sense of being terminated, on 16th September 1959; that, as no new application for registration of the instrument was made before Denton and its mortgagees lodged their respective instruments to be registered, s 36(1) works against the Courtenays and not for them; and that by virtue of s 43, or alternatively s 43A, of the Real Property Act the appellants are free to obtain registration of their instruments notwithstanding any notice they may have received at any time of the Courtenays' interest in the land. A second contention was that the Courtenays have resold the subject land to Miss Austin and are no longer entitled to have her transfer to them registered. Finally it is said that the circumstances in which each of the appellants parted with the moneys for which it obtained the instrument it now seeks to have registered were such that as against them the Courtenays are in equity disentitled to insist on their statutory right to priority of registration.
The facts that are relevant to the first contention may be quickly related. The transfer to the Courtenays was taken, and their mortgage back to Miss Austin was given, upon completion of the contract of sale from Miss Austin to the Courtenays. The sale price was £ 15,000. A deposit of £ 3,000 had been paid to Miss Austin at the time of the contract, and the mortgage was given, in accordance with the contract, to secure the balance, viz £ 12,000. Settlement of the transaction took place on 23rd July 1958, the vendor-mortgagee acting through one solicitor and the purchasers-mortgagors acting through another. The memorandum of transfer and the memorandum of mortgage had been executed in anticipation. Miss Austin's signature to each was witnessed by her solicitor, he being described on the face of the mortgage as her solicitor. The Courtenays' signature to the mortgage was witnessed by their solicitor; but they did not sign the transfer at all: their solicitor signed it, with the addition of the words: "solicitor for Transferee(s) whose signatures cannot be obtained without difficulty or delay". (The statutory authority for this is to be found in the Fifth Schedule to the Act.) A procedure for settlement was adopted which, according to the evidence, followed the usual practice. The transfer, duly executed, was produced by Miss Austin's solicitor but retained by him. A representative of the Courtenays' solicitor then handed to Miss Austin's solicitor the mortgage, signed by the Courtenays, together with a cheque for a sum covering usual adjustments and the amount of the registration fee payable in respect of the transfer. The transfer was left with Miss Austin's solicitor for the sole purpose (as the trial Judge expressly found) of its being lodged by him, together with the mortgage, with the Registrar-General for registration.
For some unexplained reason, seven months went by before the instruments were lodged in the Registrar-General's office. The profession had apparently become used to long delays in that office, and the Courtenays' solicitor, having no reason to doubt that the transfer had been lodged with due expedition, made no inquiry as to what had happened. Nothing turns, however, on the delay, for no event occurred in the interval that could affect the relative positions of the parties. It was after the transfer and the mortgage had been lodged, and while they were still awaiting registration, that Miss Austin entered into a contract with Denton to sell the same land to it. Her solicitor was informed by a firm of estate agents on 15th September 1959 that this sale had been agreed upon, and on the next day he uplifted from the Registrar-General's office both the transfer to the Courtenays and their mortgage to Miss Austin. A receipt which he signed for these documents contained the words "dealings withdrawn". A few days later he wrote the Registrar-General a letter confirming that the instruments had been "withdrawn from registration". It may be that he had no dishonest purpose in doing this, and thought that the best way of carrying out a repurchase of the land by his client from the Courtenays would be by cancelling the transfer that had been lodged and giving Denton a direct transfer from Miss Austin. But he did not consult the Courtenays or their solicitor, and he received no authority from either of them to terminate the application which he had initiated on their behalf for registration of their transfer. The appellants contend that he had implied or at least ostensible authority to do so, because he had been authorized to lodge the instruments in the first place, and it was well known at the time that in the Registrar-General's office a practice existed of allowing instruments awaiting registration to be uplifted by the person who lodged them.
On the assumption that this view as to the solicitor's authority should be accepted, the appellants rely on s 36(1) to entitle them to registration ahead of the Courtenays' transfer. To any suggestion that their right is subject to the Courtenays' interest as having been acquired with notice of that interest they make the reply that s 43, or alternatively s 43A, of the Real Property Act exempts them from the effect of any such notice. If the preliminary assumption were sound, I should be of opinion that Denton, if not the other appellants, should succeed by virtue of s 43A, though not of s 43; and as the operation of these sections has been argued at length I shall explain at once why that would be my conclusion, although, for reasons which I shall state subsequently, I think the assumption as to the solicitor's authority is unwarranted.
The purpose and effect of s 43A(1) have been the subject of controversy among legal writers, and they are not apparent until the provision is read, as its numbering suggests that it should be, as a supplement to the preceding provisions, and in particular ss 41, 42 and 43. Until registration, a person who has dealt with a registered proprietor cannot have more than an equitable interest, for until that event even a registrable instrument cannot pass the estate or interest which it specifies: s 41. After registration, he holds, by virtue of s 42, free from all encumbrances, liens, estates or interests not notified on his certificate of title (with immaterial exceptions); but this does not exclude equitable interests: Barry v Heider (1914) 19 CLR 197; Great West Permanent Loan Co v Friesen (1925) AC 208; Abigail v Lapin (1934) AC 491, at p 500; (1934) 51 CLR 58, at pp 64, 65. Even as regards equitable interests he has a degree of immunity by virtue of s 43. But the immunity under that section is limited: it is only such immunity as is created by exonerating him from the effect of notice of any trust or unregistered interest. "Except in the case of fraud," the section says, "no person contracting or dealing with or taking or proposing to take a transfer from the registered proprietor of any registered estate or interest shall be affected by notice, direct or constructive, of any trust or unregistered interest." It is settled law that the immunity thus conferred, upon a purchaser for example, is afforded to him if and when he becomes registered and not before: Templeton v Leviathan Pty Ltd (1921) 30 CLR 34, at pp 54, 55; Lapin v Abigail (1930) 44 CLR 166, at pp 182, 188, 196, 203 (cf (1934) AC, at p 509; (1934) 51 CLR, at p 73). In order to appreciate the nature of the addition which s 43A enacts it is important to have in mind that this conclusion as to the operation of s 43 is not reached by a process of interpretation. It is a conclusion not as to the meaning of the section but as to the way it works. A purchaser, his interest before registration being necessarily equitable only, derives no priority over the holder of a pre-existing equitable interest from absence of notice: Phillips v Phillips (1861) 4 De G F & J 208, at pp 215, 216 (45 ER 1164, at p 1166); Abigail v Lapin (1934) AC, at pp 498, 499, 504; (1934) 51 CLR, at pp 63, 64, 68. Consequently, a provision that a person is not to be affected by notice of prior interests has no application to him so long as he remains unregistered. For the same reason, it has no application even to one who has become registered, if he acquired his estate or interest as a volunteer. It is only a person having a legal estate or legal interest acquired for value whose position is prejudiced by his having received, before paying his money, direct or constructive notice of an outstanding equitable interest. This is so even under the Real Property Act, for a registered interest is not (as was suggested in the course of the appellants' argument) some special kind of statutory interest -- it is a legal interest, acquired by a statutory conveyancing procedure and protected from competition to the extent provided for by the Act, but having, subject to the Act, the nature and incidents provided by the general law. So all that the provision does which I have quoted from s 43 is to protect against notice of any trust or unregistered interest a legal estate acquired for value. The statement that it has no operation in favour of a person before he becomes registered means, simply, before he acquires a legal estate by registration.
It is to this situation, as I understand the matter, that s 43A(1) is addressed. Indeed, the introductory words by which its operation is limited, "For the purpose only of protection against notice", preclude, I think, any other view. Something which is less than a legal estate is to be deemed a legal estate for the purpose of the protection against notice which s 43 provides for a legal estate. What is to receive this protection is the estate or interest in land "taken" by a person under an instrument which either is registrable or, if signed by or on behalf of that person, would be registrable. The word "taken" must be construed having regard to the provision in s 41 that no instrument until registered shall be effectual to pass any estate or interest in land under the Act. The estate or interest "taken" under an unregistered instrument must therefore mean the estate or interest which the instrument on its true construction purports to confer, and upon its being registered will confer. That estate or interest is given by s 43A the same immunity from the effect of notice as s 43 provides for registered estates or interests in virtue of their being legal estates or interests. The result is that (fraud apart) a purchaser may pay his money to the registered proprietor in exchange for a registrable instrument (or one that will be registrable upon his signing it) without troubling about any notice that he may have received of a trust or unregistered interest. Provided that he lodges his instrument for registration before the holder of a competing prior interest renders the purchaser's instrument no longer registrable by lodging a registrable instrument for registration or entering a caveat, s 36(1) will ensure that the purchaser obtains registration and thus obtains the protection of s 43 (see also s 36(3)). This is so because, by reason of a proviso added to s 74 by the amending Act which inserted s 43A, no caveat subsequently entered can defeat him, and the holder of the competing interest will not be entitled to the intervention of a court of equity on the ground that the purchaser acquired his right to registration with notice of that interest.
Accordingly in the present case Denton would be entitled by virtue of s 43A, in my opinion, to have its transfer from Miss Austin registered, notwithstanding that before the settlement of its purchase it had express notice of the Courtenays' interest, if the Courtenays' prior application for registration had been effectually determined by the action that was taken by Miss Austin's solicitor. But Hardie J's conclusion that the application was not so determined seems to me to be plainly correct. It may well be that where a person has lodged an instrument on behalf of another as his solicitor, or in any other capacity which implies an authority to act for him in regard to the matter generally, the Registrar-General and other persons are justified in assuming in the absence of any indication to the contrary that the general authority is undetermined and extends to uplifting the instrument so as to withdraw the application for its registration: cf Barry v Heider (1914) 19 CLR 197, at p 210. But the situation cannot be the same where a memorandum of transfer is lodged by a person who is shown as the solicitor for the transferor only, and whose possession of the instrument -- which normally would be lodged by the transferee's solicitor -- is to be accounted for by the fact that the transferor is taking a mortgage back and requires the transfer in his hands so that he may be in a position to perfect his security by lodging it for registration and lodging the mortgage immediately afterwards. It seems to me that in such a case, even if both solicitors know that the Registrar-General's office follows the loose practice referred to, there is nothing to make it a reasonable inference that the transferee meant to make the transferor's solicitor his agent not only to apply for registration but also to withdraw the application if he should choose to do so. What was said by Isaacs J in relation to a caveat in his dissenting judgment in Barry v Heider (1914) 19 CLR 197 states, I think, what anyone would naturally infer in such a situation: "the authority to lodge (the instrument) is complete in itself, and is exhausted when the (instrument) is lodged . . . The person authorized to lodge the (instrument) is then functus officio" (1914) 19 CLR 197, at pp 220, 221. In my opinion the proper conclusion in the present case is that the purported withdrawal of the transfer by Miss Austin's solicitor, being unauthorized, left the application for registration on foot notwithstanding the physical removal of the document from the Registrar-General's custody. The appellants' first contention, in my opinion, fails.
The contention based on the resale by the Courtenays to Miss Austin ought also, I think, to fail. The contract of resale was entered into on 24th September 1959. The agreed price was £ 22,275, payable by a deposit of ten per cent and a cash payment of the balance on completion. The Courtenays repeatedly pressed for completion of the matter, but in March 1960 Miss Austin's solicitor was found to have misappropriated moneys including the money he had received from the Courtenays on settlement of their purchase from Miss Austin. Having lost this money, Miss Austin was unable to complete the repurchase, and it is still uncompleted. The Courtenays asserted before Hardie J that they had determined the contract by reason of Miss Austin's default; but his Honour found it unnecessary to decide whether or not the contract was still on foot, being of opinion that even if it was the Courtenays were entitled to have their transfer from Miss Austin registered. This conclusion seems clearly correct. The contract of resale did not rescind or discharge the contract of sale from Miss Austin to the Courtenays: it assumed its completion. Each contract contemplated a transfer, the one from Miss Austin to the Courtenays and the other from the Courtenays to Miss Austin, and there was no agreement at any time to obviate the circuity thus involved. A passage from the majority judgment in Currey v Federal Building Society (1929) 42 CLR 421, at pp 433, 434 was relied upon in support of the argument that the contract of resale put an end to the Courtenays' right as against Miss Austin to have their transfer effectuated by registration. The passage shows that a decree for specific performance of both a contract of sale and a contract of resale would not require the parties to go through the steps of transfer and retransfer in a case where no transfer under either transaction has been lodged for registration. But that is only a matter of the machinery by which the Court will give effect to the rights of the parties under both instruments taken together. Where, as in the present case, the contract of sale has been carried out to the extent that a transfer has been lodged for registration, and the original vendor is unwilling or unready to complete his repurchase, there is no ground whatever for holding that the existence of the contract of resale provides a legal obstacle to the registration.
I turn to the appellants' third contention. In relation to each of the appellants, the case is one of competing equitable interests, with the addition that the Courtenays have not only the prior equity but also a statutory right to registration. Neither can be postponed to the interests of the appellants unless the Courtenays have by act or omission made it inequitable that they should be allowed to insist upon the priority which order in time prima facie gives them. The general principle applicable in such a case is thus stated in the judgment of the Privy Council in Abigail v Lapin (1934) AC 491; (1934) 51 CLR 58: "the possessor of the prior equity is not to be postponed to the possessor of a subsequent equity unless the act or omission proved against him has conduced or contributed to a belief on the part of the holder of the subsequent equity, at the time when he acquired it, that the prior equity was not in existence" (1934) AC, at pp 498, 499; (1934) 51 CLR, at p 63.
The facts concerning the appellants' transactions with respect to the land are as follows. It was in September 1959 that Miss Austin agreed to sell to Denton the land she had already sold to the Courtenays. According to the learned trial judge's findings, which must be accepted, the Courtenays had no knowledge until some time in 1960 that Miss Austin contemplated a second sale of the land. However, she had entered into a contract to sell to Denton on 17th September 1959, the price ( £ 26,000) being made payable as to £ 1,500 in cash as a deposit, as to £ 5,000 by second mortgage to the vendor, and as to the balance in cash on completion. It was contemplated that the cash to be paid on completion would be raised partly by a first mortgage, and in fact it was so raised from IAC Settlement took place on 23rd November 1959. By that time Miss Austin had got the Courtenays to agree to resell the land to her for £ 22,275, and a contract was entered into. It had not been completed, however, when the time came for settlement of her sale to Denton. Settlement of that sale took place in the office of Miss Austin's solicitor. Denton's solicitor arrived there before the representative of IAC He had been told by a search clerk of the existence in the Registrar-General's office of certain notations indicating that the land had been the subject of a transfer to the Courtenays and a mortgage to Miss Austin, and that both instruments had been lodged for registration but uplifted. While awaiting the arrival of IAC's representative, Denton's solicitor, who at that stage was under the misapprehension that the transfer and mortgage he had been told about related to other land, mentioned the instruments to Miss Austin's solicitor, and was told that in fact they related to the land his client was buying. He asked what was the nature of the withdrawal of the instruments from the Registrar-General's office, and received the answer that Miss Austin had purchased the land back from the Courtenays. He was shown the contract of sale which the Courtenays had executed, but he did not ask whether it had been completed or whether the purchase money had been paid. Miss Austin's solicitor spoke of having withdrawn the Courtenays' instruments for registration as a way of settling the resale from the Courtenays to Miss Austin; and apparently Denton's solicitor was satisfied to take it, without further inquiry, that the Courtenays' interest in the land as purchasers from Miss Austin had ceased. The representative of IAC's solicitor was not present until after the conversation on this topic had finished. His principal had learned by search that the Courtenays' transfer and mortgage back had been withdrawn and that on the register Miss Austin's title was clear. It was in this situation that the settlement took place. IAC advanced £ 16,000 to Denton and that sum together with about £ 3,000 was paid to Miss Austin's solicitor. A transfer by Miss Austin to Denton and a first mortgage by Denton to IAC were then handed to IAC's solicitor. As to the remaining £ 5,000, promissory notes from Denton were given and accepted in place of the second mortgage for which the contract had provided. On 23rd November 1959 the transfer to Denton and its mortgage to IAC were lodged in the Registrar-General's office for registration, and were still awaiting attention there when the litigation commenced. Finally, there came the Hermes transaction. On 28th January 1960, Hermes advanced £ 5,000 to Denton, receiving as security a memorandum of mortgage in respect of the subject land. It was duly executed by Denton as mortgagor, and it named Hermes as mortgagee in the body of the instrument; but in the testimonium clause it named Challis (Finance) Pty Ltd as mortgagee. The security was expressly subject to IAC's first mortgage. The negotiations for the loan by Hermes had all taken place in January 1960, and Hermes had no notice before parting with its money that the Courtenays had or claimed any interest in the land. Hermes lodged its mortgage on 1st February 1960 for registration, but it was still unregistered when the proceedings began.
Hardie J found as a fact that Denton, before the settlement of its contract of purchase from Miss Austin, received through its solicitor positive and unambiguous notice, by the oral statements made by her solicitor in the conversation which preceded the settlement, that the Courtenays had been the owners (his Honour meant, of course, the beneficial owners) of the subject land at the date of Miss Austin's contract with Denton, and his Honour held that nothing contained in the contract of resale or said in the conversation before the settlement justified the conclusion that the resale agreement had been carried out, or that Miss Austin had been restored to the position of beneficial owner of the land. This is plainly correct. Denton's solicitor took the chance that the Courtenay's rights as purchasers from Miss Austin had ceased. Miss Austin's solicitor no doubt meant him to understand that that was so, and he saw the contract; but he did not trouble to go into the question whether the contract had been completed, and in particular he made no inquiry of the Courtenays or their solicitor. The question, however, is not whether he acted wisely or unwisely, reasonably or unreasonably; and it is not to the point that what he was told gave his client notice of the Courtenay's rights. This is not a case of a competition between a legal interest and an equitable interest. The question is whether Denton is entitled in equity to insist that the Courtenays' statutory right to get a legal title be postponed to its own; and in order to succeed it must show that by "something tangible and distinct having grave and strong effect to accomplish the purpose" (1934) AC, at p 504; (1934) 51 CLR, at p 68 the Courtenays led it to acquire its interest in the belief that the Courtenays' interest did not exist. Denton's solicitor having been told enough to show that the Courtenays' interest existed unless by or under the contract of resale to Miss Austin it had been terminated, what was there to induce the belief that it had been so terminated? Nothing whatever, beyond the statement of Miss Austin's solicitor to that effect; and for that statement the Courtenays neither gave any authority nor can properly be held responsible. The only ground suggested for holding that they should be postponed to Denton because of the representation made by Miss Austin's solicitor is that by letting him lodge their transfer for registration they put him in a position to take advantage of the Registrar-General's practice in the matter of withdrawals, and, having done that, by not entering a caveat to guard against the possibility of an unauthorized withdrawal they provided him with the opportunity of persuading Denton that the Courtenays no longer had any interest in the land. But the question is not whether anything they could possibly have done would have prevented the deception of Denton's solicitor; it is whether their conduct was such that the deception was a natural consequence, so that they may fairly be said to have "armed" Miss Austin's solicitor, as Lord Selborne would have said, "with the power of going into the world under false colours": Dixon v Muckleston (1872) LR 8 Ch 155, at p 160. I am prepared to assume, though I do not say it was established, that all the solicitors concerned were well aware of the Registrar-General's practice. Even so, the answer to the question, in my opinion, is that in the circumstances it was not reasonably to be foreseen by the Courtenays or their solicitor that a third party might, without inquiring of them, part with money on an assumption that, contrary to all ordinary experience, their transferor's solicitor had their authority to withdraw from registration the transfer which to all appearances they were absolutely entitled to have registered. It is true that a caveat would have given notice to the world of the continuing claim of the Courtenays to an interest as purchasers of the land; but the mere lodging of the transfer gave clear notice that the interest had come into existence, and put persons in the position of Denton upon inquiry as to whether the interest had ceased. We have been reminded that in Butler v Fairclough (1917) 23 CLR 78 Griffith CJ said: "If a man having a registrable instrument neither lodges it for registration nor lodges a caveat to protect it, it is clear that a registrable instrument later in date, but lodged before his, will have precedence, notwithstanding notice of the earlier instrument received before lodging his own. That is by reason of the express provisions of the Statute" (1917) 23 CLR, at p 92. But the Courtenays did lodge their transfer for registration, and in my judgment it is not to be laid at their door that Denton's solicitor was deceived by the assurances of a rogue.
In my opinion the appeals fail and should be dismissed.