Kay's Leasing Corporation Pty Ltd v. CSR Provident Fund Nominees Pty Ltd

[1962] VR 429

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(Decision by: Adam J)

Between: Kay's Leasing Corporation Pty Ltd
And: CSR Provident Fund Nominees Pty Ltd

Court:

Judge:
Adam J

Subject References:
Mortgage
Mortgagee in possession
Power to sell land "or any part thereof"
Power to sell fixtures separately from land
Test as to fixtures
Owner of chattels on hire
Equitable rights of owner after annexing of chattels to land
Priority of rights of legal mortgage

Legislative References:
Transfer of Land Act 1958 (No. 6399) - s 76; s 77

Hearing date: 23-27 March 1962
Judgment date: 10 April 1962

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Decision by:
Adam J

These two actions were, by consent, heard together. In both actions the plaintiffs, who had let on hire certain manufacturing plant and machinery to Burgess Wood and Co. Pty. Ltd. to be used by it at its plaster factory in Epping Road, Thomastown, claim injunctions restraining the defendant, CSR Provident Fund Nominees Pty. Ltd. as mortgagee of such plaster factory and the holder of a debenture, and the defendant Hall as receiver appointed under such debenture, from selling or otherwise disposing of such plant and machinery, and a declaration that the same are the property of one or other of the plaintiffs.

In the course of the trial it became apparent that the main issues between the parties in both actions were whether the plant and machinery or any of it had become fixtures; and if so, whether the defendants should, at the suit of the plaintiffs, be restrained by injunction from selling them as threatened.

By orders made by Smith, J, on 11 and 13 December 1961 injunctions restraining the defendants from selling the items in dispute were granted until the trials of these actions. The material facts, as proved to my satisfaction in evidence, including a view which, by consent, I was entitled to treat as evidence in the case, are as follows: -- The defendant, Burgess Wood and Co. Pty. Ltd. (hereafter called the hirer) was at all material times the owner and registered proprietor of the land on which the said plaster factory was erected. The factory which had been erected shortly prior to the installation therein of the plant and machinery in question was specifically designed by the hirer as a plaster factory for the manufacture of fibro plaster boards. It was of steel construction with concrete floor and appropriate accommodation for the manufacturing and office requirements.

The hirer, being minded to equip its factory with necessary plant and machinery for the purposes of plaster manufacture, sought quotations from Jacmor Engineering Pty. Ltd. (hereafter called Jacmor) for the manufacture, supply and erection thereof. Over a period from March 1960 items of such plant and machinery were supplied to the premises and there installed by Jacmor. The supply and erection of such plant and machinery was financed as to some items by Kay's Leasing Corporation Pty. Ltd., or Alex Kay Pty. Ltd., and as to other items by Associated Securities Ltd. No importance was attached by the parties to any distinction between Kay's Leasing Corporation Pty. Ltd. and Alex Kay Pty. Ltd., which were presumably associated companies, and I will refer to both hereafter indiscriminately as Kay's.

The items of plant and machinery, the purchase of which was financed by Kay's, as set out in paragraph 5 of the statement of claim in action No. 4397/1961 (hereafter called Kay's action) are as follows:

(a)

mono-rail,

(b)

benches,

(c)

plaster bulk bin,

(d)

hydraulic hoisting equipment,

(e)

scales,

(f)

electrix mixer,

(g)

cutting saw,

(h)

stainless steel bucket.

The electrix mixer has ceased to be the subject of any dispute between the parties; the remaining items are hereafter referred to as the Kay items.

The method of financing the Kay items was for Kay's to pay Jacmor the cost of their manufacture, supply and erection at the factory premises and then to lease or hire the same to the hirer. A number of such hiring agreements and amended hiring agreements were put in evidence covering different ones of the Kay items. It appears that initially the agreements provided for a hiring for a period of five years with separate agreements giving the hirer an option of purchase, but that by further agreements made on 14 May 1960 there were substituted for the original agreements hiring agreement for a period of six years.

It was not contended that anything turned on the precise terms of the hiring agreements. By each of the agreements the hirer acknowledged that the equipment leased was the property of Kay's, and it was provided that the owner, upon hirer's default, had the right to enter upon the premises to seize and take away the equipment.

The items of plant and machinery, the purchase of which was financed by Associated Securities Ltd., are set out in paragraph 3 of the statement of claim in action No. 4323/1961 (hereafter called the Associated Securities action) and thus described: One only Major Scroll-type air heater; One only limit load type fan, 30,000 c.f.m.; One steel mixing chamber; One only taper connecting air duct; One only sheet cutting saw; One only stainless steel bucket; Extra 5 x 2 1/2 r.s.j. switch and mono-rail. These items are hereafter referred to as the Associated Securities items.

The method of financing the Associated Securities items was similar to the Kay items. The purchase money was provided by Associated Securities which by an agreement dated 5 August 1960 leased them to the hirer for a term of five years with an option of extension of such term. By the agreement the hirer acknowledged that the equipment was the property of Associated Securities Pty. Ltd., and the like powers were given to the owner to retake possession for the hirer's default.

For the most part these items of machinery and equipment, all of them required for the proper and efficient conduct of the plaster manufacturing business in the factory premises, were fixed to the concrete floor or to structural members of the building by bolting or welding. I defer until later a more detailed description of the methods of fixing the several items.

In the meantime, I must briefly recount the transactions by which the defendant, CSR Provident Fund Nominees Pty. Ltd. (hereafter called the mortgagee), acquired security over the factory premises and other property of the hirer. Prior to the date of the securities given to the mortgagee, the factory premises were mortgaged by first mortgage to City Mutual Assurance Society Ltd. This mortgage was duly registered and, as I understand it, is still in force. On 30 March 1960 the hirer gave a second mortgage to the mortgagee to secure repayment of the sum of 25,000 pounds, being money lent. The principal moneys were expressed to be repayable on 30 March 1967, with interest in the meantime payable quarterly at the rate of nine per cent reducible to seven per cent on punctual payment. The principal moneys also became payable on demand should the mortgagor make default, inter alia, in payment of interest. It is admitted that this mortgage was later registered in the Office of Titles in September 1960.

As additional security for repayment of this sum of 25,000 pounds, the hirer by debenture dated 29 March 1960 charged its undertaking and all its property in favour of the mortgagee. This was a floating charge. This debenture was duly registered under the Companies Act 1958 on 6 April 1960.

The hirer having made default under this debenture, the mortgagee on 31 July 1961, pursuant to powers therein contained, appointed the defendant Hall as receiver and manager of the hirer. As the hirer was in default to a considerable amount under the second mortgage above referred to, the mortgagee on 26 November 1961 by its solicitors signed the following notice in writing, addressed to the hirer: "Whereas default has been made in the due payment of interest to CSR Provident Fund Nominees Pty. Ltd., the mortgagee, under a registered second mortgage of the land...[describing it]. Take notice that if the said default continues for a period of fourteen days from the date of service of this notice the said mortgagee intends to exercise the powers of sale conferred on it by s77 of the Transfer of Land Act 1958". This notice was on 26 November 1961 served on the receiver, the defendant Hall. Later, on 8 December 1961, it was received by Burgess, the governing director of the hirer, at his private address by registered post.

In the meantime, the mortgagee had resolved to put up for sale by auction on 11 December 1961 the plant and machinery, being the Kay items and the Associated Securities items, apart from the factory premises. Instructions had been given to the auctioneers, J W Styles and Son, to this end and that firm had, as from 25 November 1960, advertised the sale in the newspapers.

By letters of 23 November 1961 the solicitors for the mortgagee advised Kay's and Associated Securities of the proposed sale, claiming that the items of plant and machinery had adhered to the freehold under the second registered mortgage to CSR Provident Fund Nominees Pty. Ltd.

The writ in the Associated Securities action was issued on 1 December 1961, and that in Kay's action on 7 December 1961.

In consequence, no doubt, of the interlocutory injunctions granted by Smith, J, the proposed sale on 11 December was cancelled. The defendants, however, maintain their right to proceed with such sale.

The first question for determination is whether any, and if so, which of the Kay items or the Associated Securities items are fixtures. As to any which may not have become fixtures, it was not disputed that the title thereto continues in one or other of the plaintiffs, and any sale by the defendants would amount to conversion. As to any which may have become fixtures--and whether this may have occurred before or after the giving of the mortgage in question--it is not disputed that they became part of the mortgagee's security as forming part of the mortgaged land. I refer to Hobson v Gorringe, [1897] 1 CH 182; Reynolds v Ashby and Son, [1904] AC 466; Ellis v Glover and Hobson Ltd, [1903] 1 KB 388. The question whether such rights as Kay's or Associated Securities might have with respect to items of plant and machinery which had become fixtures entitled them to an injunction against the mortgagee or its receiver selling the same as proposed, merits further and separate consideration.

The question, fixture or no fixture, has to be determined by the application of certain tests, which, since the leading case of Holland v Hodgson (1872) LR 7 CP 328, have proved easier to state than to apply. One of the fullest and, to my mind, most satisfying expositions of the relevant tests is to be found in the judgment of Jordan, CJ, in Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700, at pp. 712-3. His Honour said:

"A fixture is a thing once a chattel which has become in law land through having been fixed to land. The question whether a chattel has become a fixture depends upon whether it has been fixed to land, and if so for what purpose. If a chattel is actually fixed to land to any extent, by any means other than its own weight, then prima facie it is a fixture; and the burden of proof is upon anyone who asserts that it is not: if it is not otherwise fixed but is kept in position by its own weight, then prima facie it is not a fixture; and the burden of proof is on anyone who asserts that it is: Holland v Hodgson (1872) LR 7 CP 328, at p. 335. The tests of whether a chattel which has been to some extent fixed to land is a fixture is whether it has been fixed with the intention that it shall remain in position permanently or for an indefinite or substantial period: Holland v Hodgson, supra, at p. 336, or whether it has been fixed with the intent that it shall remain in position only for some temporary purpose: Vaudeville Electric Cinema Ltd v Muriset, [1923] 2 CH 74, at p. 87. In the former case, it is a fixture, whether it has been fixed for the better enjoyment of the land or building, or fixed merely to steady the thing fixed: Holland v Hodgson; Reynolds v Ashby and Son, [1904] AC 466; College v H C Curlett Construction Co Ltd, [1932] NZLR 1060; Benger v Quartermaine, [1934] NZLR, s13. If it has been proved to have been fixed merely for a temporary purpose it is not a fixture: Holland v Hodgson, supra, at p. 337; Vaudeville Cinema v Muriset, supra. The intention of the person fixing it must be gathered from the purpose for which and the time during which user in the fixed position is contemplated: Hobson v Gorringe, [1897] 1 CH 182; Pukuweka Sawmills Ltd v Winger, [1917] NZLR 81. If a thing has been securely fixed, and in particular it has been so fixed that it cannot be detached without substantial injury to the thing itself or that to which it is attached, this supplies strong but not necessarily conclusive evidence that a permanent fixing was intended: Holland v Hodgson; Spyer v Phillipson, [1931] 2 CH 183, at pp. 209-10; [1930] All ER Rep 457. On the other hand, the fact that the fixing is very slight helps to support an inference that it was not intended to be permanent. But each case depends on its own facts."

The foregoing exposition of the law emphasizes that the relevant intention is to be gathered from the circumstances which show the degree and the object of annexation, which are patent for all to see, and not, to quote the judgment of the court in Hobson v Gorringe, [1897] 1 CH 182, at p. 193, "the circumstances of a chance agreement that might or might not exist between an owner of a chattel and a hirer thereof" (viz. Craven v Geal, [1932] VLR 172; [1932] ALR 95; cf Austral Otis Elevator and Engineering Co Ltd v Andrew Kerr and Co Ltd (1890) 16 VLR 744).

In argument before me, other tests were suggested as to whether chattels had become fixtures or remained chattels. Thus, on the one hand, it was suggested that without regard to the question whether they had been affixed to premises in any proper sense, articles which were necessary for the proper carrying on of a manufacturing or other business on factory premises were fixtures. This argument went the length of asserting, in answer to a question of mine, that the stock of bowls in an indoor bowling alley were fixtures; this contention which was not supported by citation of authority ignores the proposition that to be a fixture, an article must to some extent, even if only by reason of its weight, be fixed to premises of which it is deemed to form part.

On the other hand, it was suggested that notwithstanding the extent to which a chattel is fixed to premises, it retains its chattel character if the proper inference is that it had been so fixed for its better use as a chattel, whether intended to remain in position permanently or not.

In support of this proposition, the decision of Fullagar, J, in Attorney-General for the Commonwealth v R T Co Pty Ltd (No 2) (1957) 31 ALJ 504, was relied upon: see, too, the cases therein cited. My reading of the authorities has not satisfied me that this provides an independent test, although I concede that the very nature of a chattel and its contemplated use may well assist to a conclusion that the purpose of its annexation to premises is for some temporary purpose merely, so that it should not be considered to form part of the premises. The contrast is thus stated by Macgregor, J, in Johnston v International Harvester Co of New Zealand, [1925] NZLR 529, at p. 539: was the purpose of the annexation "for the permanent and substantial improvement of the building, or merely for a temporary purpose and the more complete enjoyment of it as a chattel"?: see, too, Holland v Hodgson, supra, at p. 337.

With these preliminary and general observations, I turn to the several items of plant and machinery claimed, on the one hand to be fixtures, on the other to remain chattels.

[His Honour then dealt with the several items in dispute in both actions and found that all the articles except the stainless steel buckets had become fixtures. His Honour continued:--]

In the result then I hold that all the items of plant and machinery in dispute, except the stell buckets, have become fixtures, and therefore for the purposes of the securities in question--the second mortgage and the debenture--must be treated as part of the land and premises, the subject of those securities. Notwithstanding this finding, Mr. Brooking, who appeared for the plaintiffs, contended that his clients were entitled to an injunction restraining the defendants from enforcing their securities by selling such fixtures. His submission fell broadly into two parts: first, that the mortgagee's powers, whether as second mortgagee or as debenture holder, did not authorize the proposed sale of the fixtures, apart form the premises. Secondly, that the plaintiff's proprietary interests in the fixtures or, more precisely, in the land to which the fixtures were annexed, sufficed to entitle him to an injunction restraining such unauthorized sale.

It is not made clear from the correspondence between the parties prior to the time of the proposed sale, nor from the pleadings, whether the mortgagee proposed to sell pursuant to its rights as second mortgagee or as debenture holder. However, it seems proper to proceed on the basis alleged in the defence that it relied on its powers under both securities. On the first branch of his argument, Mr. Brooking was concerned to deny any authority under either security for the proposed sale. His substantial argument was directed to denying that the sale was authorized by the second mortgage. Of his three main grounds of attack, two had reference to the non-compliance with s76 of the Transfer of Land Act 1958, and the third was an alleged lack of power in the mortgagee to sell the fixtures separately from the mortgaged land. As a condition precedent to the exercise of the statutory power of sale conferred on a mortgagee by s77 of the Transfer of Land Act, it is required by s76 and s77 that default in payment of principal or interest should have continued for one month, or such other period as is fixed in the mortgage (14 days was fixed by the subject mortgage), and thereafter the mortgagee should have served on the mortgagor notice in writing to pay the money owing. Only if this notice were not complied with within one month after the service of such notice, or such other period as is fixed in such mortgage (14 days was fixed by the subject mortgage) is the statutory power of sale exercisable.

Mr. Brooking contended that the notice given on behalf of the mortgagee (the terms of which were stated earlier in this judgment) was not a notice in writing to pay the money owing within the meaning of s76. I reject this contention: the notice clearly recited the default in payment of interest and by notifying that the power of sale under s77 would be exercised if such default continued, it sufficiently complied, in my opinion, with the statutory requirement. The further objection was taken that this notice was not served on the mortgagor. In so far as service on the receiver on 22 November 1961 was relied on, I agree. Although for some purposes, no doubt, a receiver appointed under a mortgage or debenture is to be deemed the agent of the mortgagor and not the mortgagee, no authority was cited to indicate that he was such an agent for the purpose of receiving notices in general, and I would think it contrary to principle to so hold. The notice to pay was in fact received by Burgess, the governing director of the hirer, by post at his private address on or about 8 December. As the company had by that time ceased to carry on business at the factory premises, and had no representatives there, I am disposed to think this amounted to service on the company. This service was, of course, too late to justify the particular sale by auction advertised for 11 December, but appears to me to be sufficient to warrant the exercise of the statutory power of sale at any time after the expiration of 14 days thereafter.

The main challenge, however, to the proposed sale by the mortgagee was that what was proposed to be sold was not the premises together with the fixtures thereon, but the fixtures apart from the premises. Such a sale, it was contended, went beyond any powers conferred on the mortgagee by statute, or by the terms of the mortgage itself. The statutory power of sale is to sell "the mortgaged land or any part thereof": see s77 of the Transfer of Land Act. By the mortgage itself it is provided that the mortgagee may exercise the powers of sale conferred upon a mortgagee by the Transfer of Land Act 1958, and without prejudice to the generality of the said power of sale and merely by way of example and extension thereto may sell the said land or any part or parts thereof for cash, etc. Where land, the subject-matter of a mortgage, includes fixtures, does a power to sell "the land or any part thereof" give power to sell the fixtures apart from the land itself? On the one hand, it may be argued that as fixtures form part of the land, "the sale of part of the land" necessarily authorizes the sale of fixtures alone.

On the other hand, it may be contended that, as fixtures are land only by virtue of their annexation to it, a sale of fixtures severed or to be severed from the land is not within the meaning of s77, a sale of land or a part thereof. Support for this conclusion might be found in such cases as Lee v Gaskell (1876) 1 QBD 700, which treated a sale of fixtures even while still unsevered, as not a sale of an interest in land; see too Voumard on Sale of Land, at pp. 49-50.

But whatever doubts there might otherwise have been on this matter appear to have been laid to rest by a number of authorities to which Mr. Brooking referred me. See, for example, Ex parte Barclay (1874) 9 Ch App 576, Re Yates (1888) 38 Ch D 112; Re Brooke, [1894] 2 CH 600, at pp. 612-13; Re Rogerstone Brick and Stone Co Ltd, [1919] 1 CH 110; [1918-19] All ER Rep 644, and Hunter v Hunter, [1936] AC 222, at pp. 248-9. In Yates' Case, at pp. 125-6, Lindley, LJ, said of a mortgagee's power to sell

"the mortgaged property or any part thereof": "What is the mortgaged property? It is land. 'Any part thereof' is, any part of the mortgaged property which is land, and it appears to me we should be forcing this language if we held that a mortgagee of land could sell, not part of the land, but a chattel affixed to the land as distinct from the land".

And at pp. 128-9, Bowen, LJ, said of the above expression, which appeared in s19 of the Conveyancing Act 1881:

"I cannot think that this was the intention of the section. I think the framers intended that what was sold should be a separable part of the mortgaged property in the state in which it was subjected to the mortgage. I cannot believe for a moment that the mortgagee of a house could sell the chimneys of the house without selling the rest of the house, or could sell the fixtures or mantelpieces in the house and say they were part of the house. They are part of the house in the sense that they follow the house as a necessary concomitant of it in the conveyance of the house, but they are not separable parts of the house for the purposes of this section."

See Halsbury, 3rd ed., vol. 27, at p. 305.

For these reasons, I agree with Mr. Brooking that the intended sale of the fixtures separately from the land at premises was not authorized by the mortgage. I agree also with his submission that the debenture did not authorize such a sale. By the debenture, power is conferred on a receiver and manager appointed thereunder "to sell...at such price and upon such terms, and conditions in all respects as he thinks expedient any of the property hereby charged, after giving the company at least seven days' notice of his intention to sell".

The reason for not treating a power to sell land or any part thereof in a mortgage as authorizing a sale of fixtures separately would seem to apply a fortiori to a power which in terms is limited to "any of the property hereby charged", without express reference to "any part" of any such property.

It remains, therefore, to consider whether the plaintiffs possess such an interest in the fixtures as entitled them to an injunction against the mortgagee's selling them separately from the land.

Where chattels are hired on terms that they may be repossessed by the owner on the hirer's default in payment of hire, it is clearly established that the owner does not lose all interest in the chattels merely by reason of the hirer attaching them to land so as to make them fixtures. In law, no doubt, fixtures become part of the freehold while they remain annexed thereto and the legal title to them belongs to him who owns the freehold. But the contractual right, which the owner has against the hirer, to repossess on default confers on him a species of equitable interest which entitles him, as against the hirer, to enter upon the premises and sever and remove the chattels which have become fixtures. As against the hirer and those claiming through him in circumstances which have not destroyed this equitable interest, this right to enter and repossess remains. The existence of such an equitable interest was hinted at in Hobson v Gorringe, [1897] 1 CH 182, where at p. 192 the court said:

"It seems to us that the true view of the hiring and purchase agreement, coupled with the annexation of the engine to the soil which took place in this case, is that the engine became a fixture--i.e. part of the soil--when it was annexed to the soil by screws and bolts, subject as between Hobson and King to this, that Hobson had the right by contract to unfix it and take possession of it if King failed to pay him the stipulated monthly instalments. In my opinion, the engine became a fixture--i.e. part of the soil--subject to this right of Hobson's which was given him by contract. But this right was not an easement created by deed, nor was it conferred by covenant running with the land. The right, therefore, to remove the fixture imposed no legal obligation on any grantee from King of the land. Neither could the right be enforced in equity against any purchaser of the land without notice of the right, and the defendant Gorringe is such a purchaser. The plaintiff's right to remove the chattel if not paid for cannot be enforced against the defendant, who is not bound either at law or in equity by King's contract. The plaintiff's remedy for the price or for damages for the loss of the chattel is by action against King, or, he being bankrupt, by proof against his estate".

In Re Samuel Allen and Sons Ltd, [1907] 1 CH 575, and Re Morrison, James and Taylor Ltd, [1914] 1 C 50, full recognition was accorded to such an equitable interest. In the former case, the right of the hirer to repossess on default his chattels, which had become fixtures, was held to prevail against a subsequent equitable mortgagee of the land. Parker, J ([1907] 1 CH 575, at p. 581), after reviewing the authorities, including Hobson v Gorringe, supra, said:

"Now I do not think I should be right if I were to hold that an agreement of this sort was of a purely personal nature. These agreements are very common and very useful and, of course, it is open to a mortgagee, when he takes his mortgage, to make what enquiries he likes as to whether there are any agreements affecting the fixtures upon the property. If he does not do so, and is a mere equitable mortgagee, in my opinion he must be held to take subject to those agreements, and I think that those agreements, if they are in the form which has been used in this case, do create an equitable interest by which a subsequent mortgagee who does not get the legal estate is bound, and that, applying the ordinary principles of priority as between the interests of the hirer under the hiring agreement and the interest created by the equitable mortgage, the interest created by the hiring agreement takes precedence".

In Re Morrison, Jones and Taylor Ltd, [1914] 1 CH 50, the Court of Appeal approved the decision of Parker, J, in Re Samuel Allen and Sons Ltd; see, too, Craven v Geal, [1932] VLR 172; [1932] ALR 95. In each of the English cases, the hiring agreement in express terms conferred on the owner a power to enter the land to which his chattels were affixed and remove them upon default. It is unnecessary for me to consider in this case whether the existence of this equity depended upon such an express provision, as the various hiring agreements in the present case also contain similar powers of entry on the land, and removal of the plant and machinery, the subject of such hiring agreement. But I am not to be taken as deciding that this feature is essential.

I see no reason to doubt that the equitable interests of the plaintiffs created in the land under the hiring agreements by reason of the annexing of their plant and machinery thereto bound such interests in the land as the mortgagor had by reason of his being registered proprietor subject to encumbrances and any interests acquired by others in the land in so far as these by principles recognized by equity did not give priority.

The substantial question for determination is whether the rights acquired by the mortgagee as second mortgagee, or as debenture holder, had priority over the equitable interests of the plaintiffs, and if so, whether such rights as the mortgagee had by virtue of either of its securities entitled it to disregard the plaintiffs' rights. The debenture created a floating charge over the undertaking and assets of the mortgagor, which became a fixed charge on the appointment of the receiver. It operated to create an equitable interest only over the land thereby charged. In so far as the debenture operated to charge the factory premises in favour of the mortgagee, it would, in my opinion, include within the mortgagee's security all fixtures whether annexed before or after its date. As to fixtures annexed prior to this date under circumstances creating an equitable interest in favour of an owner under a hiring agreement, I would think it clear, on the equitable rule that as between equities the first in time prevails, that the equitable rights of the owner prevailed over those of the debenture holder: see Re Samuel Allen and Sons Ltd., supra. As to any fixtures annexed after the debenture was given and before the floating charge crystallized, a more difficult question arises whether from the nature of the floating security the equity of the owner under the hiring agreement might not, although rising later in point of time, be held to prevail over that of the mortgagee. However, I have not considered it necessary to pursue this question for the reason that for present purposes the rights conferred on the mortgagee by the debenture of 29 March 1960 are no greater than those conferred by the second mortgage of 30 March 1960, which later was duly registered as a fixed legal security over the subject land. This provides the stronger grounds for the mortgagee's claim to prevail over the plaintiffs' interests. If the mortgagee cannot succeed on the strength of his title to the land and fixtures as a registered mortgagee of the subject land, I consider it clear it could not succeed by virtue of its equitable rights as a debenture holder.

Fraud on the part of the mortgagee not being suggested, it seems clear that the mortgagee upon registration of its mortgage became entitled to treat as part of the mortgaged property any fixtures annexed thereto by the hirer, whether before or after the giving of the mortgage. Accordingly, as between such equitable interests as the plaintiffs had in the mortgaged land by reason of the annexation of plant and machinery thereto, and the mortgagee's powers and rights as registered mortgagee, the latter were paramount. This means that in exercise of such powers over the mortgaged property as are conferred by the mortgage the mortgagee could override the plaintiffs' interests. In particular, it could exercise its powers of sale in compliance with s76 and s77 of the Transfer of Land Act so as to confer on a purchaser title to the land with fixtures free from any rights of the plaintiffs. So also I consider the mortgagee's power to enter into possession of the mortgaged property (including the fixtures), or to proceed for an order for foreclosure, and so acquire title as owner to the land and fixtures, prevails over any rights of the plaintiffs. But does the power of the mortgagee to destroy any equitable interests of the plaintiffs in the land mean that pending the exercise of such powers, these equitable interests have ceased to exist? No authority was cited to me why this should be so, and on principle, I see no reason for it. The rule that an equitable interest in land is extinguished in favour of the subsequent purchaser of the legal estate for value without notice assumes that a continued existence of the equity would be inconsistent with the legal and equitable rights acquired by the purchaser. Where, as in the case of a mortgage of land, the mortgagee does not acquire absolute title, but certain limited powers and rights over the mortgaged property by way of security, I see no reason for treating equitable interests of others in the land as extinguished unless and until by exercise of the mortgagee's powers in a manner inconsistent with the continued existence of the equitable interests, they must be regarded as extinguished.

The conclusion I have reached, then, is that the equitable rights of the plaintiffs upon default under their hiring agreements to enter and remove the hired plant and machinery which have become fixtures are not affected by the registered second mortgage in favour of the mortgagee, save in so far as their exercise may be inconsistent with the powers and rights conferred on the mortgagee by his second mortgage. Such rights may be considered while the mortgage subsists as dormant or suspended, and liable at any time to be extinguished by a proper exercise of the mortgagee's powers, but they cannot be disregarded as non-existent.

This being so, the final question is whether the plaintiffs are entitled to relief by way of an injunction restraining the mortgagee from selling the fixtures separately from the land, this being, as I have held, a sale not authorized by the mortgage. Had the mortgagor itself claimed such an injunction, it would clearly have been entitled to it on the ground that the threatened sale of the fixtures apart from the land was not authorized by the mortgage. The equitable rule by which relief might be refused to a mortgagor who was not offering to redeem would not, I consider, have any application to such a case. As I understand it, that rule applied where a mortgagor sought on equitable grounds to restrain a mortgagee exercising his legal power of sale. The position is different here, where the mortgagor would be seeking to restrain a sale which the mortgagee has neither legal nor equitable power to effect: see Coote on Mortgages, 9th ed., at p. 733, and the cases there cited; Harvey v Inglis (1868) 5 WW and A'B (Eq) 125; and cf Gill v Newton (1866) 14 WR 490; Willett v Birt, [1921] VLR 115.

If the mortgagor, that is the hirer, would have been entitled to the injunction now claimed by the plaintiffs, I can see no sound ground for denying such relief to the plaintiffs in aid of their equitable interests in the mortgaged property. The fact that the hirer might have been required to join as a plaintiff, but instead has been joined as one of the defendants, appears to me not to affect the substance of the matter; what is more important is that the hirer is a party to the proceedings and bound by them. Interesting questions might arise if the intended sale were proceeded with, both with regard to the title, if any, taken by the purchaser to the fixtures, and to the rights of the plaintiffs upon the fixtures being severed either by the mortgagee or the purchaser, to seize them in exercise of their equitable rights; but as this matter does not arise for decision, I forbear to express any views on it.

In the result, then, in the Kay action, an injunction will be granted restraining the defendants and each of them their, its, or his servants and agents, from selling the items referred to in paragraph 5 of the amended statement of claim other than that lettered (F); and a declaration will be made that item (H), that is the steel bucket, is the property of the plaintiff, Kay's Leasing Corporation Pty. Ltd., but no further declarations will be made as asked.

And in the Associated Securities action, an injunction will be granted restraining the defendants and each of them from selling the items referred to in paragraph 3 of the amended statement of claim, but save that a declaration will be made that the plaintiff is the beneficial owner and entitled to possession of the stainless steel bucket referred to in paragraph 3, no further declaration will be made as asked.

Declarations accordingly.