Fisher and Lightwood's law of mortgage [Third Australian edition.] 9780409332599, 0409332593

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Fisher and Lightwood’s

Law of Mortgage Third Australian Edition

E L G Tyler MA (Oxon) Barrister, Lincoln’s Inn and Hong Kong Legal Practitioner of the Supreme Court of Tasmania and the High Court and Federal Courts of Australia formerly a District Judge, Hong Kong, and Professor of Law in the University of Hong Kong and the City University of Hong Kong Senior Assistant Law Officer, Commercial III (Companies Ordinance Rewrite) Department of Justice, HK SARG

The Hon P W Young AO QC LLB (Syd) A former Chief Judge in Equity, Supreme Court of New South Wales formerly Queens Counsel for New South Wales, Victoria, the Australian Capital Territory, the Northern Territory, Papua New Guinea and from time to time admitted as Senior Counsel in Fiji Acting Judge and Acting Judge of Appeal, Supreme Court of New South Wales

The Hon C E Croft BEc LLM (Monash), PhD(Cambridge), LFACICA, LFIAMA, JFAMINZ, FCIArb A Judge of the Supreme Court of Victoria Adjunct Professor of Law, Deakin University

LexisNexis Butterworths Australia 2014

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National Library of Australia Cataloguing-in-Publication entry Author: Title: Edition: ISBN: Notes: Subjects: Other Authors/Contributors: Dewey Number:

Tyler, E. L. G. (Edward Lawson Griffin). Fisher & Lightwood’s law of mortgage. 3rd edition. 9780409332599 (pbk). 9780409332605 (ebk). Includes index. Mortgages — Australia. Young, P. W. (Peter Wolstenholme). Croft, Clyde. 346.9404364

© 2014 Reed International Books Australia Pty Limited trading as LexisNexis. First edition 1995; Second edition 2005. This book is copyright. Except as permitted under the Copyright Act 1968 (Cth), no part of this publication may be reproduced by any process, electronic or otherwise, without the specific written permission of the copyright owner. Neither may information be stored electronically in any form whatsoever without such permission. Inquiries should be addressed to the publishers. Typeset in Plantin. Printed in China. Visit LexisNexis Butterworths at www.lexisnexis.com.au

Preface Up until recently, there were few Australian textbooks covering the law of mortgages. Because of this, there has been more frequent recourse to the standard English works on the subject than is the case with other aspects of the law. When Britain became more and more immersed in the European Union, it seemed probable that Australians would be less and less be able to rely on the latest edition of English textbooks without making significant local adjustments. It was this that caused the authors to approach the publishers with the suggestion of an Australian edition of this standard work As things developed, the Europeans did not agree on a standard form of mortgage and English law still exists in its traditional form. However, the exercise of “Australianizing” the book has still proved that to be the right decision. Even apart from the Common Market, there was the additional problem for Australian lawyers that, for obvious reasons, English works do not deal with the Torrens System. English common law concepts with respect to mortgages are, however, essential to an understanding of that System. Fisher on Mortgages first saw the light of day in 1856. The first four editions were written by the eminent Wiliiam Richard Fisher. A concise biography of Fisher appears in the 13th English edition at pp viiff. The fifth and sixth under the editorship of the famous Sir Arthur Underhill, and the seventh, in 1931, under the respected J M Lightwood. That edition (with a slim supplement issued after the War) lasted until 1969, when Ted Tyler produced the eighth edition. Ted has also edited the ninth and tenth editions. The eleventh English edition was completely rewritten by members of Falcon Chambers, London, and they have also produced the 12th and 13th English editions. This third Australian edition has built on the work of the previous editions and has taken into account both Australian developments and also developments in England including those noted in the 13th English edition. It is mutually beneficial that under the one publisher, the Australian and English editions have been able to feed off each other.

The principal adjustment in this edition has been to accommodate the considerable changes made to personal property securities by the Personal Property Securities Act, 2009 (Cth) (PPSA). However, there has also been a steady flow of cases from the superior courts and a great increase in cases dealing with forgeries. PPSA seems to have complicated rather than simplified work in the area of securities over personally. There are considerable problems as to its reach and questions as to how Australian Courts will apply it. We thought it advisable in this edition both to expound PPSA, but also retain the old law which will still apply to closed transactions for some years to come. We have worked very closely together despite the distance that separated us. Professor Ted Tyler produced his manuscript in Hong Kong. However, Justices Peter Young and Clyde Croft had to prepare their material whilst maintaining their normal output of curial decisions. Chapter 5 on PPSA was drafted by Ms Clare Langford, the NSW Supreme Court Equity Researcher. Chapter 41 on Taxation Considerations has been completely rewritten and we give our special thanks to Mr Michael Flynn, of the Victorian Bar, who extensively rewrote, revised and expanded this chapter. Our thanks go to two groups of people. First, to our own families and personal staff, especially Pam Young, Krystyna Croft, second to those at LexisNexis Butterworths who have made the work such a successful production, particularly Hayley Moore. Ted Tyler Peter Young Clyde Croft October 2013

Table of Cases References are to paragraphs 1253174 Ontario Inc v Tarion Warranty Corp (2010) 17 PPSAC (3d) 373 .… 5.37 518718 Alberta Ltd v Canadian Forest Products Ltd [1993] 3 WWR 672 .… 5.121 674921 BC Ltd v Advanced Wing Technologies Corp (2006) 9 PPSAC (3d) 43; 263 DLR (4th) 290 .… 5.38 695113 Ontario Ltd v Commissioner of Stamps (1990) 53 SASR 274; 20 ATR 1807 .… 9.24 888 Casino & Tavern Pty Ltd v Hurlfobe Pty Ltd (1997) 8 BPR 15,505 .… 1.23 977380 Ontario Inc v Roy’s Towing Co (1997) 13 PPSAC (2d) 201 .… 5.40 994814 Ontario Inc v RSL Canada Inc and En-Plas Inc (2005) 14 CBR (5th) 134 .… 5.15, 5.38 994814 Ontario Inc v RSL Canada Inc (2006) 20 CBR (5th) 163 .… 5.30 A A and M Records Inc v Darakdjian [1975] 3 All ER 983; [1975] 1 WLR 1610 .… 7.5 A Tomlinson (Hauliers) v Hepburn [1966] AC 451 .… 3.20 A v B1 (No 2) (2012) 271 FLR 122 .… 1.55 Abacus (CI) Ltd v Sheikh Fahad (13 June 2003, seemingly unreported) .… 42.22 Abbey National Building Society v Cann [1991] 1 AC 56; [1990] 1 All ER

1085 .… 5.79, 12.21, 24.1 Abbey National Building Society v Maybeech Ltd [1985] Ch 190 .… 37.10 Abbott v Stratton (1846) 3 Jo & Lat .… 1.34, 1.40, 7.8, 24.49 Abenheim, Re; Ex parte Abenheim (1913) 109 LT 219 .… 6.22 Aberamain Ironworks v Wickens (1868) LR 4 Ch App 101 .… 2.15 Aberdeen v Chitty (1839) 3 Y & C Ex 379; 160 ER 749 .… 16.15 Abergavenny’s Case (1607) 6 Co Rep 78b; 77 ER 373 .… 11.4 Abigail v Lapin (1934) 51 CLR 58 .… 1.15, 4.22, 4.24, 4.27, 28.7, 28.14 Abigail v Lapin [1934] AC 491; [1934] All ER Rep 720 .… 4.23, 28.7, 28.11, 28.12, 28.13, 28.16 Abington v Green (1866) 14 WR 852 .… 16.38 Abney v Wordsworth (1701) 9 Sim 317n; 59 ER 380 .… 22.35 Abram v Bank of New Zealand [1996] ATPR 41-507 .… 13.2, 13.35, 19.2, 38.5 Accent Leasing & Sales Ltd v Babic (2007) 12 PPSAC (3d) 1 .… 5.19 Access Advertising Management Inc v Servex Computers Inc (1993) 15 OR (3d) 635 .… 5.1, 5.35 Access Cash International Inc v Elliot Lake & North Shore Corp for Business Development 1 PPSAC (3d) 209 (2000) .… 5.23 Accles Ltd, Re; Hodgson v Accles Ltd (1902) 51 WR 57 .… 8.5 ACN 077 991 890 v National Australia Bank (2007) 13 BPR 24,299 .… 30.9, 30.11 Across Australia Finance v Kalls (2008) 14 BPR 26,265 .… 30.9, 30.10, 30.12, 30.17 Acton v Acton (1704) Prec Ch 237; 24 ER 115 .… 1.27 Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd (1982) 150 CLR 169 .… 5.25 Adam v Newbigging (1888) 13 App Cas 308 .… 6.22

Adams v Angell (1877) 5 Ch D 634 .… 36.7, 36.9, 36.10 Adams v Bank of New South Wales [1984] 1 NSWLR 285 .… 4.25, 10.12, 20.43, 20.44, 20.46, 20.48, 21.20, 24.20, 39.2, 39.21 Adams v Claxton (1801) 6 Ves 226; 31 ER 1024 .… 3.41 Adams v Paynter (1844) 1 Coll 530; 63 ER 530 .… 22.5, 33.14 Adams v Sworder (1863) 2 De G J & Sm 44; 46 ER 291 .… 39.24 Adamse v Broadway Credit Union Ltd [1989] NSW ConvR 55-576 .… 20.30 Adamse v Broadway Credit Union Ltd (1999) NSW ConvR ¶55-976 .… 20.21 Adamson v Halifax plc [2003] 1 WLR 60 .… 39.2 Adcock v Jolly (1893) 19 VLR 609 .… 6.4, 6.9 Addison v Billion [1983] 1 NSWLR 586 .… 4.8, 4.40, 16.19, 16.20, 16.21, 32.1, 32.80, 32.85, 39.15 Addison v Cox (1872) LR 8 Ch App 76 .… 26.15, 40.6 Addison v Cox (1874) 30 LT 253 .… 26.15 Adelaide Bank Ltd v Gibbs [1995] ANZ ConvR 615 .… 40.1, 40.3 Adelaide Building Co Pty Ltd (in liq) v ABC Investments Pty Ltd (1990) 8 ACLC 445 .… 21.1 Adelaide Capital Corporation v Integrated Transportation Financial Incorporated (1994) 111 DLR (4th) 493; 6 PPSAC (2d) 267 .… 5.19 Adelphi Hotel (Brighton) Ltd, Re; District Bank v Adelphi Hotel (Brighton) Ltd [1953] 2 All ER 498; [1953] 1 WLR 955 .… 3.21 Adler v Ferguson [1962] VR 129 .… 21.15 Adriatic Development Ltd v Canada Trust Mortgage Co (1982) 135 DLR (3d) 549 .… 36.3 Aetna Life Insurance Co v Middleport (1887) 124 US 534 .… 42.18 Affinity International Inc v Alliance International Inc (1994) 8 PPSAC (2d) 73; 96 Man R (2d) 200 .… 5.35, 5.38

AG(CQ) Pty Ltd as Trustee for AG(CQ) Family Trust v A & T Promotions Pty Ltd (as trustee for the Toowoomba Unit Trust) [2011] Qd R 306 .… 24.25, 28.15 AG (NSW) v Della Lucia (1983) 1 Butterworths NSW Conveyancing Casenotes [92208] .… 3.40 AG v Cox; Pearce v AG (1850) 3 HLC 240; 10 ER 93 .… 35.2 AG v Crofts (1788) 4 Bro Parl Cas 136; 2 ER 91 .… 1.25 AG v Higham (1843) 2 Y & CCC 634; 63 ER 284 .… 11.14 AG v McMillan and Lockwood Ltd [1991] 1 NZLR 51 .… 24.3 AG v Oldham Corp [1936] 2 All ER 1022 .… 11.46 AGC (Advances) Ltd v Tweed Canal Estates Pty Ltd (1988) 4 BPR 9404 .… 20.15 AGC (Advances) Ltd v West (1984) 5 NSWLR 301 .… 30.2, 40.21 AGC (Advances) Ltd v West (1986) 5 NSWLR 504 .… 40.2 AG-Chem Farm Services Inc v Coberly 733 P (2d) 15 (1987) (NM) .… 3.8 Agip (Africa) Ltd v Jackson [1991] Ch 547; [1992] 4 All ER 385 .… 24.20, 32.35, 32.40 Aglionby v Cohen [1955] 1 QB 558 .… 19.19, 19.20 Agnew v Commissioner of Inland Revenue [2001] 2 AC 710 .… 2.20, 5.118, 8.12, 8.13 Agra Bank Ltd v Barry (1874) LR 7 HL 135 .… 3.31, 24.14, 24.37, 24.39, 27.12 Agricullo v Yorkshire Housing Ltd [2010] L&TR 9 .… 40.2 Agricultural Credit Corporation of Saskatchewan v Pettyjohn (1991) 79 DLR (4th) 22; 1 PPSAC (2d) 273 .… 5.29, 5.82 Ahmed v Kendrick (1987) 56 P & CR 120 .… 3.49 AIB Finance Ltd v Debtors [1997] 4 All ER 677 .… 20.52 AIB Finance Ltd v Debtors [1998] 2 All ER 929 .… 16.1, 19.21

AIB Group (UK) plc v Hennelly Properties Ltd [2000] EGCS 63 .… 3.5 AIB Group (UK) plc v Martin [2002] 1 WLR 94; [2002] 1 All ER 353 .… 3.7, 3.13, 30.7 AIDC v Co-operative Farmers & Graziers Direct Meat Supply Ltd [1978] VR 633 .… 18.14, 18.19, 18.26, 20.6 Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 .… 5.42 Ainsworth v Roe (1850) 14 Jur 874 .… 40.23 Ainsworth v Wilding [1905] 1 Ch 435 .… 39.35 Airservices Australia v Ferrier (1996) 185 CLR 483 .… 32.54 Akron Tyre Co Pty Ltd v Kittson (1951) 82 CLR 477 .… 6.21 Al Wazir v Islamic Press Agency Inc [2001] All ER (D) 437; [2002] 1 Ll Rep 210 .… 39.42 Alabama, New Orleans etc Rly Co, Re [1891] 1 Ch 213 .… 8.2 Alan Estates Ltd v WG Stores Ltd [1982] Ch 511 .… 3.5 Albemarle Supply Co Ltd v Hind & Co [1928] 1 KB 307 .… 2.19, 2.32, 2.37 Albert Del Fabbro Pty Ltd v Wilckens & Burnside Pty Ltd [1970] SASR 121 .… 7.10 Albert v Grosvenor Investment Co (1867) LR 3 QB 123 .… 16.7 Albion Insurance Co Ltd v Government Insurance Office of New South Wales (1969) 121 CLR 342 .… 30.2 Alcock, Re; Prescott v Phipps (1883) 23 Ch D 372 .… 32.36, 39.59 Alcoota Aboriginal Corp v Gray (2002) 170 FLR 29 .… 1.7 Alden v Foster (1842) 5 Beav 592; 49 ER 708 .… 22.29 Alderson v Elgey (1884) 26 Ch D 567 .… 32.56 Alderson v White (1858) 2 De G & J 97; 44 ER 924 .… 1.27, 1.28, 1.29, 3.6, 32.87 Alderton v Prudential Assurance Co Ltd (1993) 41 FCR 435 .… 13.28 Aldrich v Cooper (1803) 8 Ves 382; 32 ER 402 .… 30.2, 30.9, 30.9, 30.10,

30.12, 30.13, 35.11 Aldridge v Forbes (1840) 9 LJ Ch 37 .… 30.13 Aldworth v Robinson (1840) 2 Beav 287; 48 ER 1191 .… 22.22, 31.4, 33.27 Alec Lobb (Garages) Ltd v Total Oil GB Ltd [1983] 1 WLR 87; [1983] 1 All ER 944 .… 1.29, 13.30, 13.39, 32.9, 32.11, 32.18, 32.19 Alec Lobb (Garages) Ltd v Total Oil GB Ltd [1985] 1 WLR 173; [1985] 1 All ER 303 .… 1.29, 32.9, 32.11, 32.13, 32.16, 32.18 Alexander v Simms (1854) 18 Beav 80 .… 9.15 Alexander v Simms (1854) 5 De GM & G 57; 43 ER 791 .… 9.15 Alexanders Securities Ltd (No 2), Re [1983] 1 Qd R 597; (1983) 8 ACLR 434 .… 23.1 Alexandre v New Zealand Breweries Ltd [1974] 1 NZLR 497 .… 20.21, 20.22, 20.31 Alexsen v O’Brien (1949) 80 CLR 219 .… 1.41 Alison, Re; Johnson v Mounsey (1879) 11 Ch D284 .… 22.38 Al-Kandari v J R Brown & Co [1987] QB 514; [1987] 2 All ER 302 .… 32.74 Allcard v Skinner (1887) 36 Ch D 145 .… 13.22, 13.23, 13.24 Allen v Allen (1862) 30 Beav 395 .… 29.3 Allen v Edwards (1873) 42 LJ Ch 455 .… 22.37 Allen v Knight (1847) 11 Jur 527; 16 LJ Ch 370 .… 24.43 Allen v Knight (1847) 5 Hare 272; 67 ER 915 .… 24.45 Allenborough and Inland Revenue Commissioners, Re (1855) 11 Ex 461; 156 ER 912 .… 1.7 Allenby v Dalton (1827) 5 LJ KB (OS) 312 .… 1.25 Allfox Building Pty Ltd v Bank of Melbourne (1992) NSW ConvR 55-634 . … 20.21, 20.38 Alliance Acceptance Co Ltd v Ellison (1986) 5 NSWLR 102 .… 1.18, 12.18

Alliance Acceptance Co Ltd v Graham (1974) 10 SASR 220 .… 20.22 Alliance and Leicester v Slayford [2001] 1 All ER (Comm) 1 .… 16.7, 17.12 Alliance Bank v Broom (1864) 2 Dr & Sim 289; 62 ER 631 .… 3.45 Alliance Bank Ltd v Irving (1865) 4 SCR (NSW) (Eq) 17 .… 18.23 Alliance Perpetual Building Societyv Belrum Investments Ltd [1957] 1 All ER 635; [1957] 1 WLR 720 .… 21.1 Allie v Katah [1963] 1 WLR 202 .… 29.3 Allied Glass Manufacturers Ltd, Re (1936) 36 SR (NSW) 409 .… 2.49, 2.51, 11.35 Allied Mills Ltd v Robinson (1981) 2 BPR 9353 .… 4.18 Allison v Clayhills (1907) 97 LT 709 .… 42.2 Allsop v Marshall (1942) 59 WN (NSW) 159 .… 12.21 Allsop v Marshall (1946) 46 SR (NSW) 274 .… 1.7 Alma Hill Constructions Pty Ltd v Onal (2007) 16 VR 190 .… 26.2 Alston v Mineard (1906) 51 Sol Jo 132 .… 16.33 Altarama Ltd v Camp (1980) 5 ACLR 513 .… 1.51, 1.48, 20.36, 32.44 Alton Corp, Re [1985] BCLC 27 .… 3.40 Alton v Harrison (1869) 4 Ch App 622 .… 13.6 Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 2 All ER 552; [1976] 1 WLR 676 .… 1.5, 1.49 Amalgamated Investment & Property Co Ltd, Re [1985] Ch 349 .… 41.3 Amalgamated Investment & Property Co Ltd v John Walker & Sons Ltd [1977] 1 WLR 164 .… 37.5 Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84 .… 1.4, 3.7 Aman v Southern Rly Co [1926] 1 KB 59 .… 36.14 Ambir Pty Ltd v Paspalis Hotel Investments Pty Ltd (2003) 174 FLR 483 .… 2.32, 7.10

AMC Commercial Cleaning (NSW) Pty Ltd v Coade [2013] NSWSC 192; 16 BPR 28,584 .… 2.48, 2.50 American Express International Banking Corp v Hurley [1985] 3 All ER 564 .… 18.5, 19.36, 20.22 Ames v Trustees of Birkenhead Docks (1855) 20 Beav 332; 52 ER 630 .… 24.49 AMEV Finance Ltd v Auscott Ltd (1988) 5 BPR 11386 .… 4.32, 10.14 Amex-Protein Dev Corp, Re (1974) 504 F 2d 1056 .… 5.36, 5.38 Amner, Re; Ex parte Hunt (1840) 1 Mont D & De G 139 .… 3.42 Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288 .… 32.9, 32.12 Ancaster v Mayer (1785) 1 Bro CC 454; 28 ER 1237 .… 3.13 Anchor Trust Co v Bell [1926] Ch 805 .… 19.21 Andar Transport Pty Ltd v Brambles Ltd (2004) 78 ALJR 907 .… 3.7, 42.12 Anderson, Re; Ex parte Alexander (1927) 28 SR (NSW) 296 .… 3.13, 11.15 Anderson, Re; Ex parte New Zealand Official Assignee [1911] 1 KB 896 .… 26.4 Anderson v Liddell (1968) 117 CLR 36 .… 24.49, 24.51 Anderson v Lockhart [1991] Qd R 501 .… 20.8 Anderson v Pignet (1872) 8 Ch App 180 .… 32.62 Anderson v Radcliffe (1858) EB & E 806; 120 ER 710 .… 42.2 Andersons Seeds Ltd, Re [1971] 2 NSWLR 120 .… 39.42, 39.43 Andrew Garrett Wine Resorts Pty Ltd v National Australia Bank Ltd (2004) 206 ALR 69 .… 19.23 Andrews v ANZ Banking Group Ltd [2012] HCA 30 .… 39.55 Andrews v City Permanent Benefit Building Society (1881) 44 LT 641 .… 31.9 Andrews v Taylor (1869) 6 WW & a’B (L) 223 .… 27.10

Anfield (UK) Ltd v Bank of Scotland plc [2010] EWHC 2374 (Ch); [2010] All ER (D) 119 .… 42.18 Angelkovski v Trans-Canada Foods Ltd (1986) 6 PPSAC 1 .… 5.136 Anglo-Canadian Lands, Re (1912) Ltd [1918] 2 Ch 287 .… 8.5 Anglo-Maltese Hydraulic Dock Co, Re (1885) 54 LJ Ch 730 .… 2.39 Ankar Pty Ltd v National Westminster Finance (Aust) Pty Ltd (1987) 162 CLR 549 .… 3.7, 42.12 Annangel Glory Compania Naviera SA v M Golodetz Ltd [1988] 1 Ll Rep 45 .… 11.39 Anon (1680) 2 Freeman Ch 59; 22 ER 1058;2 Eq Cas Abr 594; 22 ER 499 . … 33.16 Anon (1707) 1 Salk 155; 91 ER 143 .… 39.19 Anon (1719) Bunb 41; 145 ER 588 .… 39.53 Anon (1740) Barn Ch 221 .… 22.30 Anon (1813) 4 Taunt 876; 128 ER 577 .… 3.13 Anon (1844) 1 Coll 273; 63 ER 416 .… 22.47 Ansett Australia Ground Staff Superannuation Plan Pty Ltd v Ansett Australia (2002) 174 FLR 1 .… 1.48 Ansett Transport Industries (Operations) Pty Ltd v Comptroller of Stamps [1985] VR70 .… 3.5 Anstey v Newman (1870) 39 LJ Ch 769 .… 30.13 Anthony, Re; Anthony v Anthony [1892] 1 Ch 450 .… 29.2 Antrim County Land Building and Investment Co v Stewart [1904] 2 IR 357 .… 19.14 ANZ v Evans (1992) 2 Qd R 230 .… 20.45 ANZ Banking Group (NZ) Ltd v Gibson [1981] 2 NZLR 513 .… 3.17, 17.7, 17.9, 19.15, 20.21, 40.2 ANZ Banking Group Ltd and Devine Holdings Pty Ltd and Edwards, Re [1991] ACL Rep 295 QLD 11 .… 32.21, 33.2

ANZ Banking Group Ltd v Pearce [2004] VSC 49 .… 19.22 ANZ Banking Group Ltd v Scott (1993) 6 BPR 13, 217 .… 11.6 ANZ Banking Group Ltd v Wright (SC (NSW), Bryson J, 9 September 1998) .… 19.21 ANZ Executors and Trustee Co Ltd v Qintex Australia Ltd (1990) 2 ACSR 676; 8 ACLC 980 .… 11.33 ANZ Executors and Trustees Ltd v Humes Ltd [1990] VR 615 .… 8.1 Apostolou Corporation Aust Pty Ltd v VA Corporation of Aust Pty Ltd (2010) 77 ACSR 84 .… 20.32 Appeal of Copeland (1976) 531 F 2d 1195 .… 5.41, 5.44 Apple Fields Ltd v Damesh Holdings Ltd [2004] 1 NZLR 721 .… 20.40 Appleby v Duke (1842) 1 Hare 303; 66 ER 1047 .… 33.27 Appleby v Myers (1867) LR 2 CP 651 .… 5.94 Arcade Hotel Pty Ltd, Re [1962] VR 274 .… 25.8 Arcadi v Whittem (1992) 59 SASR 515 .… 4.11, 4.18, 4.21 Archer’s Estate, Re [1914] 1 IR 285 .… 30.12 Arden v Arden (1885) 29 Ch D 702 .… 26.4, 26.11, 26.18, 26.21 Argyle Developments Pty Ltd v Australia and New Zealand Banking Group Ltd (1994) 4 Tas R 172 .… 18.2 Armagh Shoes Ltd, Re [1982] NI 59 .… 8.14 Armitage, Re; Ex parte Good (1877) 5 Ch D 46 .… 35.11 Armor Coatings (Marketing) Pty Ltd v General Credits (Finance) Pty Ltd (1978) 17 SASR 259 .… 3.33, 20.36, 20.37 Armour v Thyssen Edelstahlwerke AG [1991] 2 AC 339 .… 1.49, Armstrong v Dixon [1911] 1 IR 435 .… 3.32, 22.42 Armstrong v Robinson (1882) 2 VLR (L) 17698 .… 32.41, 32.47 Armstrong v Storer (1852) 14 Beav 535; 51 ER 391 .… 40.20 Arnal v Arnal (1969) 6 DLR (3d) 245 .… 1.29

Arnick Holdings & Ankar Pty Ltd v Australian Bank Ltd (SC (NSW), Bryson J, 4 December 1987, unreported) .… 3.40 Arnold v Bainbrigge (1860) 2 De GF & J 92; 45 ER 557 .… 16.7 Arnold v Garner (1847) 2 Ph 231; 41 ER 931 .… 19.41 Arnold v State Bank of South Australia (1992) 38 FCR 484 .… 4.19 Arnold & Co Ltd, Re [1984] BCLC 535 .… 11.43 Arnot v Peterson (1912) 2 WWR 1 (Alberta) .… 4.29 Arthur v Higgs (1856) Seton (7th ed) 1887 .… 22.17 Arthur D Llittle Ltd v Ableco Finance LLC [2003] CH 217 .… 8.13 Artistic Builders Pty Ltd v Elliot & Tuthil (Mortgages) Pty Ltd (2002) 10 BPR 19, 565 .… 18.13 Ascough v Johnson (1688) 2 Vern 66; 23 ER 652 .… 39.19 Ashborder BV v Green Gas Power Ltd [2005] BCC 634 .… 5.104 Ashburton (Lord) v Nocton [1915] 1 Ch 274 .… 12.7 Ashbury Railway Carriage & Iron Co v Riche (1875) LR 7 HL 653 .… 11.33 Ashenhurst v James (1745) 3 Atk 270; 26 ER 958 .… 14.2, 39.53 Ashley Guarantee plc v Zacaria [1993] 1 WLR 62; [1993] 1 All ER 254 .… 1.51, 3.14, 19.15, 19.23 Ashpurton Estates Ltd, Re [1983] Ch 110 .… 11.43 Ashton v Corrigan (1871) LR 13 Eq 76 .… 1.33 Ashton v Dalton (1846) 2 Coll 565; 63 ER 863 .… 3.42 Ashwell v Staunton (1861) 30 Beav 52; 54 ER 808 .… 39.42, 39.57 Ashworth v Lord (1887) 36 Ch D 545 .… 39.40, 39.44, 40.10 Ashworth v Mounsey (1853) 9 Exch 175; 156 ER 75 .… 20.6 Asklepeion Restaurants v 791259 Ontario Ltd (1996) 11 PPSAC (2d) 320 . … 5.29, 5.71, 5.72 Askrigg Pty Ltd v Student Guild of the Curtin University of Technology

(1989) 18 NSWLR 738 .… 6.16 Asphaltic Wood Pavement Co, Re (1883) 30 Ch D 216 .… 2.52 ASRS Establishment Ltd, Re [2000] 2 BCLC 631 .… 1.29, 8.13 Assets Co Ltd v Mere Roihi [1905] AC 176 .… 4.15, 28.2 ASIC v Cyclone Magnetic Engines (2009) 224 FLR 50 .… 5.25 Associated Alloys Pty Ltd v ACN 001 452106 Pty Ltd (2000) 202 CLR 588 . … 1.48, 1.49, 5.20, 8.9 Associated Securities Ltd v Adorjany [1964–5] NSWR 822 .… 3.23, 4.23, 4.25, 19.5 Associated Securities Ltd v Perry [1978] Qd R 13 .… 32.65 Assunzione (The) [1954] P 140 .… 1.43 Assured Funding Pty Ltd v Gentzsch (2007) 247 LSJS 447; [2007] SASC 101 .… 19.8 Astley v Miller (1827) 1 Sim 298; 57 ER 588 .… 36.6 Aston v Aston (1750) 1 Ves Sen 264; 27 ER 1021 .… 39.47 Astor Properties Ltd v Tunbridge Wells Equitable Friendly Society [1936] 1 All ER 531 .… 1.41, 3.45 Astral Communications Inc v 825536 Ontario Inc (Trustee of) (2000) 46 OR (3d) 477 .… 5.39 ATG Aerospace, Inc v High-Line Aviation Ltd 149 BR 730 at 737 (1992) . … 5.23 Athill, Re; Athill v Athill (1880) 16 Ch D 211 .… 29.3, 30.2 Atkin’s Estate, Re [1894] 1 Ir R 225 .… 2.37 Atkins v Mercantile Credits Ltd (1986) 4 ACLR 125 .… 8.11 Atkins v National Australia Bank (SC (NSW), CA, 5 August 1994, unreported) .… 13.16, 13.30 Atkinson v Lohre (1879) 4 App Cas 755 .… 2.17 Atkinson, Re (1852) 2 De GM & G 140; 42 ER 824 .… 26.4

Atlantic 3-Financial (Aust) Pty Ltd v Deskhurst Pty Ltd [2005] 1 Qd R 1 .… 15.1, 15.3 Atlantic Computer Systems plc, Re [1992] Ch 505; [1992] 1 All ER 476 .… 8.14 Atlas Express Ltd v Kafco (Importers and Distributors) Ltd [1989] QB 833 . … 13.38 Atlas Industries Ltd v Federal Business Development Bank (1983) 3 PPSAC 39 .… 5.38, 5.39 Atterbury v Jarvie (1857) 2 H & N 113; 157 ER 47 .… 1.51 Atterbury v Wallis (1856) 2 Jur NS 343; 44 ER 465 .… 42.5 Attorney-General (NSW) v Hill and Halls Ltd (1923) 32 CLR 112 .… 27.15 Auckland Milk Co Ltd v Levy [1934] GLR 798 .… 5.43 Austen v Dodwell Executors (1729) 1 Eq Cas Abr 318 pl 9; 21 ER 1073 .… 32.41, 32.49 Austin Construction Co (Australia) Ltd v Becketts Holdings Pty Ltd (1958) 75 WN (NSW) 444 .… 12.9, 12.21 Austin, Re; Ex parte Sheffield (1879) 10 Ch D 434 .… 22.9 Austin v Royal (1999) 47 NSWLR 27 .… 40.26, 42.18 Austin-Fell v Austin-Fell [1990] Fam 172 .… 7.5 Austral Mining Construction Pty Ltd, Re [1993] 1 Qd R 358 .… 8.1 Australasian Performing Right Association Ltd v Austarama Television Pty Ltd [1972] 2 NSWLR 467 .… 13.42 Australia and New Zealand Banking Group v Barns (1994) 6 BPR 13,739; (1994) 13 ACSR 592; [1995] ANZ ConvR 123 .… 1.58 Australia and New Zealand Bank Ltd v Hathaway [1957] QWN 49 .… 10.8, 19.6, 19.7, 19.23 Australia and New Zealand Bank Ltd v Magarditch (1 April 1997, unreported) .… 30.9 Australia and New Zealand Bank Ltd v Sinclair [1968] 2 NSWR 26 .…

12.13 Australia and New Zealand Bank Ltd v Squires (SC (NSW), Lusher J, 23 August 1982; CA, 6 December 1982, unreported) .… 1.51 Australia and New Zealand Bank Ltd v Strelitz [1964] NSWR 401 .… 12.11 Australia and New Zealand Banking Group Ltd v Barns (1994) 13 ACSR 592 .… 4.12, 4.18 Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195 .… 20.21, 20.22, 20.23, 20.30, 20.33, 20.40 Australia and New Zealand Banking Group Ltd v Comer (1993) 5 BPR 11,748 .… 3.8, 3.14, 4.25, 10.8, 10.9, 19.5, 19.6, 19.7, 19.14, 19.17, 19.22 Australia and New Zealand Banking Group Ltd v Constikidis (SC (Vic), Hansen J, 22 December 1994, unreported) .… 11.10, 35.8 Australia and New Zealand Banking Group Ltd v Curlett, Cannon and Galbell Pty Ltd [1992] 2 VR 647 .… 1.11, 6.16 Australia and New Zealand Banking Group Ltd v Greig (1980) 1 NSWLR 112; 47 FLR 387 .… 24.50, 32.1, 39.15 Australia and New Zealand Banking Group Ltd v Lefkovic (24 June 1992, Tadgell J, unreported) .… 13.31 Australia and New Zealand Banking Group Ltd v National Mutual Life Nominees Ltd (1977) 137 CLR 252 .… 22.3, 25.13 Australia and New Zealand Banking Group Ltd v Petrik [1996] 2 VR 638 .… 13.40 Australia and New Zealand Banking Group Ltd v Widin (1990) 26 FCR 21, 102 ALR 289 .… 1.35 Australian Auxiliary Steam Clipper Co v Mounsey (1858) 4 K & J 733; 70 ER 304 .… 11.7 Australian Barter Currency Exchange Pty Ltd v Uniting Church of NSW Trust Association Limited [2009] NSWSC 607 .… 20.38 Australian Cherry Exports Ltd v Commonwealth Bank of Australia (1996) 39 NSWLR 337 .… 9.12

Australian Co-operative Development Society Ltd, Ex parte [1978] Qd R 395 .… 20.43, 20.45 Australian Deposit and Mortgage Bank v Lord [1876] 2 VLR (L) 31 .… 17.5 Australian Energy Regulator v Stanwell Corporation Ltd (2011) 197 FCR 429 .… 5.121 Australian Express Pty Ltd v Pejovic [1963] NSWR 954 .… 12.11 Australian Guarantee Corp Ltd v Balding (1930) 43 CLR 140 .… 6.20 Australian Guarantee Corp Ltd v De Jager [1984] VR 483 .… 4.19, 4.20, 40.9 Australian Guarantee Corp Ltd v Western Underwriters Insurance Ltd [1988] 2 Qd R 119 .… 2.27 Australian Hi-Fi Publications Pty Ltd v Gehl [1979] 2 NSWLR 618 .… 4.14 Australian Industrial Relations Commission; Ex parte Australian Transport Officers Federation (1990) 171 CLR 216 .… 5.25 Australian Mid-Eastern Club Ltd v Yassim (1989) 1 ACSR 399 .… 32.41 Australian Mutual Provident Society v Allan (1978) 52 ALJR 407 .… 1.28 Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385 .… 1.28 Australian Mutual Provident Society v GeoMyers & Co Ltd (1931) 47 CLR 65 .… 8.19, 18.5 Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700 .… 3.26 Australian Receivables Ltd v Tekitu Pty Ltd (2012) 260 FLR 243; [2012] NSWSC 170 .… 2.50 Australian Regional Credit Pty Ltd v Mula [2009] NSWSC 325;14 BPR 26,779 .… 13.29 Australian Securities and Investments Commission v John McKenny Consulting Pty Ltd (2002) 43 ASCR 458 .… 2.52, 24.29 Australian Securities and Investments Commission v Karl Suleman Enterprises Pty Ltd (2003) 45 ACSR 401 .… 8.1

Australian Securities and Investments Commission v Lawrenson Light Metal Die Casting Pty Ltd (1999) 158 FLR 307; 33 ACSR 288 .… 2.9 Automated Bookbinding Services, Re 471 F 2d 546 (4th Cir 1972) .… 5.87 Automatic Bottle Makers Ltd, Re [1926] Ch 412 .… 8.18, 8.21 Automobile Association (Canterbury) Inc v Australasian Secured Deposits Ltd [1973] 1 NZLR 417 .… 1.29 Avco Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679 .… 1.34, 1.39, 2.7, 4.4, 4.23, 4.25, 20.43, 20.45, 20.45, 37.4 Avco Financial Services Ltd v Fishman [1993] 1 VR 90; (1992) V ConvR 54-442 .… 24.25, 28.15, 28.16 Avco Financial Services Ltd v White [1977] VR 561 .… 1.34, 28.15, 42.3 Averall v Wade; Shalcross v Dixon (1838) 7 LJ NS Ch 180 .… 30.5, 30.6, 30.12 Avon County Council v Howlett [1983] 1 All ER 1073 .… 32.40 Avon Finance Co Ltd v Bridger [1985] 2 All ER 281 .… 13.29, 13.41 AWA Ltd v Exicom Australia Pty Ltd (1990) 19 NSWLR 705 .… 17.7 Ayers v South Australian Banking Co (1871) LR 3 PC 548 .… 1.11, 3.55 Aylward v Lewis [1891] 2 Ch 81 .… 22.46 Ayoub Pty Ltd v Euphoric Pty Ltd [2004] NSWCA 457 .… 3.7, 3.8, 3.9, 42.12 Ayres v South Australian Banking Co (1871) LR 3 PC 548 .… 3.55 B B & B Budget Forklifts Pty Ltd v CBFC Ltd (2008) 216 FLR 294 .… 5.79 B & S Contracts & Design Ltd v Victor Green Publications Ltd [1984] ICR 419 .… 13.38 B Johnson & Co (Builders) Ltd, Re [1955] Ch 634; [1955] 2 All ER 775 .… 18.5 B S Lyle Ltd v Rosher [1959] 1 WLR 8; [1958] 3 All ER 597 .… 26.1

Bacchus Marsh Brick and Pottery Co Ltd (in liq) v Federal Building Society (in liq) (1895) 22 VLR 181 .… 19.4 Bache & Co (London) Ltd v Banque Vernes et Commerciale de Paris SA [1973] 2 Lloyd’s Rep 437 .… 17.7 Bacon v Bacon (1639) Tot 133 .… 32.12 Backhouse v Backhouse [1978] 1 WLR 243; [1978] 1 ALL ER 1158 .… 13.12 Backhouse v Charlton (1878) 8 Ch D 444 .… 3.36 Badeley v Consolidated Bank (1888) 38 Ch D 238 .… 6.22, 20.47 Baden v Sociéte Générale pour Favoriser le Développement du Commerce et de l’Industrie en France SA [1992] 4 All ER 161; [1993] 1 WLR 509 .… 5.109, 24.20 Badger State Agri-Credit & Realty Inc v Lubahn 365 NW (2d) 616 (1985) (Wis) .… 3.8 Baglioni v Cavalli (1901) 49 WR 236 .… 30.12 Bagnall v Villar (1879) 12 Ch D 812 .… 12.4, 12.5, 12.9, 39.16 Bagot v Oughton (1717) 1 P Wms 347; 24 ER 420 .… 30.7 Bahr v Nicolay (No 2) (1988) 164 CLR 604 .… 4.11, 4.12, 4.15, 19.40 Bailes v Sunderland Equitable Industrial Society (1886) 55 LT 808 .… 32.28, 32.33 Bailey v Barnes [1894] 1 Ch 25 .… 20.4, 20.20, 24.14, 24.29 Bailey v NSW Medical Defence Union Ltd [1995] HCA 28: 184 CLR 399; 132 ALR 1 .… 6.3 Bailey v Richardson (1852) 9 Hare 734; 68 ER 711 .… 24.14, 24.21, 36.6 Baille v M’Kewan (1865) 35 Beav 177; 55 ER 862 .… 24.8 Baillie v Irwin [1897] 2 IR 614 .… 16.34 Bainbridge, Re; Ex parte Fletcher (1878) 8 Ch D 218 .… 6.18 Bainbrigge v Blair (1841) 3 Beav 421; 49 ER 165 .… 18.20

Bainbrigge v Browne (1881) 18 Ch D 188 .… 13.2, 13.22 Baker v Biddle (1923) 33 CLR 188 3 .… 32.11, 32.12 Baker v Bradley (1855) 7 De GM & G 597; 44 ER 233 .… 13.23 Baker v Gray (1875) 1 Ch D 491 .… 31.9 Baker v Henderson (1830) 4 Sim 27; 58 ER 11 .… 2.35, 2.43 Baker, Re; Ex parte Bisdee (1840) 1 Mont D & De G 333 .… 3.42 Baker’s Creek Consolidated Gold Mining Co v Hack (1894) 15 LR (NSW) Eq 207 .… 28.7 Bakker v Chambri Pty Ltd (1986) 4 BPR 9234 .… 22.14, 22.15, 22.25, 33.23, 39.50 Balanced Securities Ltd v Bianco [2010] VSC 201; (2010) 27 VR 599 .… 12.18 Balch v Symes (1823) Turn & Russ 87; 37 ER 1028 .… 2.43 Baldwin v Belcher; Re Cornwall (1842) 3 Dr & War 173 .… 30.9, 30.14 Baldwin v Cawthorne (1812) 19 Ves 166; 34 ER 480 .… 1.26 Balen and Shepherd’s Contract, Re [1924] 2 Ch 365 .… 14.8 Balfe v Lord (1842) 2 Dr & War 480 .… 2.7, 33.7 Ball, Re; Commercial Banking Co of Sydney Ltd v Official Receiver (1980) 31 ALR 16 .… 23.10 Ballabil Holdings Pty Ltd v Hospital Products Ltd (1985) 1 NSWLR 155 .… 18.23 Bamford, Re; Ex parte Games (1879) 12 Ch D 314 .… 13.6 Bancorp Leasing and Financial Corp v Stadeli Pump & Construction Inc 303 Or 545, 739 P 2d 548 (1987) .… 5.93 Bando Trading Co v Registrar of Titles [1975] VR 353 .… 4.5, 14.16, 20.31 Banister v Islington London Borough Council (1972) 71 LGR 239 .… 19.39 Bank of Adelaide v Lorden (1970) 127 CLR 185 .… 35.10 Bank of Africa v Salisbury Gold Mining Co [1892] AC 281 .… 2.19

Bank of Baroda v Panessar [1987] Ch 335; [1986] 3 All ER 751 .… 17.9, 18.7 Bank of Baroda v Shah [1988] 3 All ER 24 .… 13.18 Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437 .… 5.109 Bank of Credit and Commerce International SA (No 8), Re [1998] AC 214 . … 6.20, 8.11 Bank of Credit and Commerce International SA v Aboody [1990] 1 QB 923; [1992] 4 All ER 955 .… 13.17, 13.18, 13.20, 13.22, 13.24, 13.25 Bank of Cyprus (London) Ltd v Gill [1980] 2 Lloyd’s Rep 508 .… 20.23, 20.31 Bank of Cyprus (London) Ltd v Gill [1980] 2 Lloyd’s Rep 51 .… 20.28 Bank of Hindustan, China and Japan Ltd, Re; Ex parte Smith (1867) LR 3 Ch App 125 .… 2.49 Bank of India v Transcontinental Commodity Merchants Ltd [1982] 1 Ll Rep 506 .… 3.14 Bank of Ireland v Beresford 6 Dow PC 233; 3 ER 1456 .… 35.8 Bank of Ireland v Feeney [1930] IR 457 .… 19.14 Bank of Ireland Finance Ltd v Daly Ltd [1978] IR 79 .… 2.13 Bank of Montreal v Innovation Credit Union [2010] SCC 47; [2010] 3 SCR 3 .… 5.16, 5.26, 5.41, 5.72, 24.26 Bank of Montreal v iTrade Finance Inc (2009) 17 PPSASC (3d) 250 .… 5.15 Bank of Montreal v iTrade Finance Inc [2011] 2 SCR 360 .… 5.26 Bank of Montreal v Pachrite Inc (2006) 11 PPSAC (3d) 67 .… 5.25 Bank of Montreal v Stuart [1911] AC 120 .… 13.17, 13.20, 13.25 Bank of New South Wales v Adams [1982] 2 NSWLR 659 .… 20.46 Bank of New South Wales v Brown (1983) 151 CLR 514 .… 39.50, 39.51 Bank of New South Wales v Browne (1906) 23 WN (NSW) 24 .… 22.14

Bank of New South Wales v Cadea (No 18) Pty Ltd (1995) 7 BPR 14,301 . … 3.25 Bank of New South Wales v City Mutual Life Assurance Society Ltd [1969] VR 556 .… 30.9 Bank of New South Wales v Hartman (1955) 72 WN (NSW) 382 .… 12.3, 12.18, 19.21 Bank of New South Wales v O’Connor (1889) 14 App Cas 273 .… 3.32, 3.36, 3.38, 22.17, 32.41, 32.82, 34.5, 40.1 Bank of New South Wales v Palmer (1881) 2 LR (NSW) (L) 125 .… 19.5 Bank of New South Wales v Rogers (1921) 65 CLR 42 .… 13.24, 13.29 Bank of New South Wales v Tyson (1871) 11 SCR (NSW) (Eq) 1 .… 20.38 Bank of New Zealand v Assets Realisation Board (1905) 7 GLR 483 .… 1.4 Bank of New Zealand v Development Finance Corp of New Zealand [1988] 1 NZLR 495 .… 4.35, 25.15, 25.16 Bank of New Zealand v Farrier-Waimak Ltd [1964] NZLR 9 .… 3.33 Bank of Nova Scotia v Barnard (1984) 9 DLR (4th) 575 .… 20.21 Bank of Nova Scotia v Royal Bank of Canada (1987) 8 PPSAC 17; 42 DLR (4th) 636 .… 5.42, 5.44, 5.45 Bank of Nova Scotia Hellenic Mutual War Risks Association (Bermuda) [The Good Luck] [1992] 1 AC 233 .… 9.16 Bank of Scotland v Macleod [1914] AC 311 .… 6.23 Bank of South Australia v Ferguson (1995) 66 SASR 77 .… 4.11, 4.19 Bank of Victoria v Looker (1896) 21 VLR 704 .… 36.13 Bank of Victoria v Mueller [1925] VLR 642 .… 13.25, 13.31 Bank of Western Australia v Abdul [2012] VSC 222 .… 17.7, 18.5 Bank of Western Australia v Connell (1996) 16 WAR 483 .… 7.4, 24.51 Bankers Trust Co v Galadari [1987] QB 222; [1986] 3 All ER 794 .… 24.49 Banks v Whittall (1847) 1 De M & G 536; 63 ER 1182 .… 1.40

Banner v Berridge (1881) 18 Ch D 254 .… 10.12, 16.30, 20.43, 20.44, 30.2, 32.36, 39.59, 40.17 Bannerman Brydone Folster & Co v Murray [1972] NZLR 411 .… 32.11 Banning v Wright [1972] 1 WLR 972 .… 35.1 Banning Holdings Pty Ltd v Webster [2001] WASC 12 .… 19.34 Banque Financiere de la Cite v Purc (Battersea) Ltd [1999] 1 AC 221 .… 42.18, 42.19 Baratt v Gough-Thomas [1951] 2 All ER 48 .… 32.41 Barba v Gas and Fuel Corp of Victoria (1976) 136 CLR 120 .… 4.23, 28.6 Barber v Jeckells [1893] WN 91 .… 22.37 Barcelo v Electrolytic Zinc Co of Australasia Ltd (1932) 48 CLR 391 .… 1.7, 5.120, 8.11, 8.13 Barclay v Owen (1889) 60 LT 220 .… 16.33 Barclay v Prospect Mortgages Ltd [1974] 2 All ER 672; [1974] 1 WLR 837 . … 6.17 Barclay & Co Ltd v Poole [1907] 2 Ch 284 .… 9.23 Barclays Bank Ltd v Beck [1952] 2 QB 47; [1952] 1 All ER 549 .… 36.13, 36.16 Barclays Bank Ltd v Bird [1954] Ch 274; [1954] 1 All ER 449 .… 3.36, 10.9, 19.11, 19.14 Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 .… 11.36 Barclays Bank Ltd v Stasek [1957] Ch 28; [1956] 3 All ER 439 .… 12.30 Barclays Bank Ltd v Taylor [1973] Ch 63; [1972] 2 All ER 752 .… 1.33 Barclays Bank Ltd v Taylor [1974] Ch 137 .… 3.43 Barclays Bank Ltd v TOSG Trust Fund Ltd [1984] 1 All ER 628 .… 42.16 Barclays Bank Ltd v W J Simms Son & Cooke (Southern) Ltd [1980] QB 677; [1979] 3 All ER 522 .… 32.40 Barclays Bank plc, Re [2012] NSWSC 1095 .… 5.1, 5.115

Barclays Bank plc v Estates and Commercial Ltd [1997] 1 WLR 415 .… 2.10 Barclays Bank plc v O’Brien [1993] QB 109; [1992] 4 All ER 983 .… 11.2 Barclays Bank plc v O’Brien [1994] 1 AC 180; [1993] 4 All ER 417 .… 13.16, 13.17, 13.18, 13.20, 13.21, 13.22, 13.24, 13.25, 13.26, 13.28, 13.29, 13.31, 13.33, 24.1 Barclays Bank plc v Tennet [1984] CA transcript 242 .… 19.23 Barclays Bank plc v Walters (1988) The Times, 20 October, CA .… 16.29 Barclays Bank plc v Willowbrook International Ltd [1986] BCLC 45 .… 6.14 Barclays Bank plc v Zaroovabli [1997] Ch 321; [1997] 2 All ER 19 .… 12.19 Baring v Nash (1813) 1 V & B 551; 35 ER 214 .… 11.6 Baring Bros & Co Ltd v Hovermarine Ltd (1971) 219 Estates Gazette 1450 . … 12.17, 12.19 Barker, Re; Ex parte Penfold (1851) 4 De G & Sm 282; 64 ER 834 .… 39.61 Barker v Barker [1952] 1 All ER 1128 .… 1.34 Barker v Furlong [1891] 2 Ch 172 .… 3.55 Barker v Illingworth [1908] 2 Ch 20 .… 20.14 Barker v St Quentin (1844) 12 M & W 441; 152 ER 1270 .… 2.49 Barker (George) Transport Ltd v Eynon [1974] 1 All ER 900; [1974] 1 WLR 462 .… 2.27, 8.19 Barne, Re (1890) 62 LT 922 .… 40.20 Barnes v Glenton [1899] 1 QB 885 .… 16.17 Barnes v James (1902) 27 VLR 749 .… 28.16 Barnes v Racster (1842) 1 Y & CCC 401; 62 ER 944 .… 30.12, 30.15, 40.4, 40.18 Barnett v Weston (1806) 12 Ves 130; 33 ER 50 .… 25.4

Barney v Rigby Loan & Investment Co (1972) 344 F Supp 694 .… 5.44 Barnhart v Greenshields (1853) 9 Moo PCC18; 14 ER 204 .… 24.14, 24.21 Barns v Queensland National Bank Ltd (1906) 3 CLR 925 .… 16.7, 20.15, 20.18, 20.21, 20.22, 20.33, 39.51 Baron Kensington, Re; Earl of Longford v Baron Kensington [1902] 1 Ch 203 .… 29.2 Baroness Wenlock v River Dee Co (1883) 36 Ch D 675n .… 11.46 Baroness Wenlock v River Dee Co (1885) 10 App Cas 354 .… 11.33 Barr v Union Trustee Co of Aust Ltd [1923] VLR 236; 29 ALR 67 .… 13.24 Barratt v Gough-Thomas [1945] 2 All ER 65 .… 2.42, 42.7 Barratt v Gough-Thomas [1951] Ch 242 .… 2.33, 2.41 Barrell v Sabine (1684) 1 Vern 268; 23 ER 462 .… 1.27 Barret v Wells (1700) Prec Ch 131; 79 ER 309 .… 35.5 Barrett, Re; Re Whitaker v Barrett (1889) 43 Ch D 70 .… 11.17 Barrister and Solicitor, Re a; Re Legal Practitioners Ordinance 1970 (ACT) (1979) 40 FLR 26 .… 2.33 Barrier Reef Finance and Land Pty Ltd, Re (1988) 13 ACLR 708 .… 7.14 Barron v Willis [1902] AC 271 .… 42.2 Barrow v Smith (1885) 33 WR 743 .… 22.46 Barrow v White (1862) 2 John & H 580; 70 ER 1190 .… 39.21 Barry v Heider (1914) 19 CLR 197 .… 4.2, 4.23, 4.28, 21.9, 24.13, 28.14 Barry v Wrey (1827) 3 Russ 465; 38 ER 650 .… 33.5, 40.15 Barry Plant Real Estate (Doncaster & Templestowe) Pty Ltd v Pamacorp Consulting Services Pty Ltd [1991] ACL Rep 295 Vic 1 .… 18.19 Bartholomew v May (1737) 1 Atk 487; 26 ER 309 .… 30.3 Bartle v Wilkin (1836) 8 Sim 238; 59 ER 95 .… 22.2, 40.15 Bartlett v Barclays Bank Trust Co Ltd (No 1) [1980] Ch 515; [1979] 1 All ER 139 .… 16.36

Bartlett v Bartlett (1857) 1 De G & J 127; 44 ER 671 .… 26.21 Bartlett v Franklin (1867) 36 LJ Ch 671; 15 WR 1077 .… 32.38, 39.59 Bartlett v Rees (1871) LR 12 Eq 395 .… 22.28 Bartlett Estates Pty Ltd, Re (1989) 14 ACLR 512 .… 8.11, 8.16, 8.18 Barton v Armstrong [1976] AC 104; [1975] 2 All ER 465 .… 13.37 Barton v Bank of New South Wales (1890) 15 App Cas 379 .… 1.25 Baskett v Skeel (1863) 11 WR 1019 .… 32.81 Basma v Weekes [1950] AC 441 .… 3.49 Bassard v Smith [1925] AC 371 .… 1.44 Batchelor v Middleton (1848) 6 Hare 75; 67 ER 1088 .… 19.37, 40.4 Batchelor & Co Pty Ltd v Websdale [1962] SR (NSW) 49 .… 1.4, 1.6 Bateman v Hunt [1904] 2 KB 530 .… 6.7, 15.2 Bates v Bonnor (1835) 7 Sim 427; 58 ER 901 .… 22.44 Bates v Hillcoat (1852) 16 Beav 139; 51 ER 730 .… 22.27 Bates v Johnson (1859) John 304; 70 ER 439 .… 25.4 Bateson v Gosling (1841) 41 LJCP 53 .… 34.7 Bateson v Gosling (1871) LR 7 CP 9 .… 35.9 Batten Proffitt and Scott v Dartmouth Harbour Commissioners (1890) 45 Ch D612 .… 40.20 Batten v Wedgwood Coal & Iron Co (1884) 28 Ch D 317 .… 2.16, 40.19 Batthyany v Bouch (1881) 4 Asp MLC 380; 50 LJQB 421 .… 9.16 Bauer Securities Pty Ltd, Re (1990) 4 ACSR 328; 8 ACLC 230 .… 8.1 Bauer v Bank of Montreal (1980) 110 DLR (3d) 424 .… 42.13 Baumgartner v Baumgartner (1985) 2 NSWLR 406 .… 2.16 Baumgartner v Baumgartner (1987) 164 CLR 137 .… 2.16 Bawn v Trade Credits Ltd (1986) NSW ConvR 55-290 .… 13.27

Bayly v Went (1884) 51 LT 764 .… 18.8 Bayly v Wilkins (1846) 3 Jo & Lat 630 .… 39.19 Baynard v Woolley (1855) 20 Beav 583; 52 ER 729 .… 3.49 Baypoint Pty Ltd v Baker (1994) 6 BPR 13, 687 .… 1.7, 3.13, 4.25, 4.28, 17.10 Bazzelgetti v Battine (1821) 2 Swan 156n; 36 ER 576 .… 33.8 BBC Hardware Ltd v GT Homes Pty Ltd (SC (Qld), Thomas J, 17 December 1996, unreported) .… 21.21 Beach Petroleum NL v Johnson (1993) 9 ACSR 404; 11 ACLC 75 .… 18.19 Beachquest Pty Ltd v Interstate Mortgage and Investments Pty Ltd [2001] QSC 512 .… 30.9, 30.11 Beachquest Pty Ltd v Interstate Mortgage and Investments Pty Ltd [2003] 2 Qd R 586 .… 25.7, 25.8, 25.13, 25.14, 25.15, 25.16, 32.54 Beall, Re; Ex parte The Official Receiver [1899] 1 QB 688 .… 26.4, 26.6 Beaman v ARTS Ltd [1949] 1 KB 550; [1949] 1 All ER 465 .… 16.36 Bean v Wade (1885) Cab & El 519 .… 42.4 Beath v Armstrong (1910) 16 ALR 581 .… 21.4, 21.9, 22.12, 22.15, 22.25, 22.52 Beaton v Boulton [1891] WN 30 .… 22.36 Beattie v Jenkinson [1971] 3 All ER 495 .… 1.25 Beatty v Australia and New Zealand Banking Group Ltd [1995] 2 VR 292 . … 4.11, 4.16 Beavan, Re; Ex parte Coombe (1819) 4 Madd 249; 56 ER 698 .… 3.37 Beavan v Cook (1869) 17 WR 872 .… 33.11 Beavan v Dobson (1906) 26 NZLR 69 .… 4.34, 36.17 Beavan v Earl of Oxford (1856) 6 De GM& G 507; 43 ER 1331 .… 24.50, 25.4 Beazley v Soares (1882) 22 Ch D 660 .… 22.42

Bebe v Pickering [1953] NZLR 832 .… 37.4 Bechera v Alie [2005] NSWCA 268 .… 2.33 Becket v Cordley (1784) 1 Bro CC 353; 28 ER 1174 .… 1.40 Beckett v Booth (1708) 2 Eq Cas Abr 595; 22 ER 500 .… 35.4 Beckett v Buckley (1874) LR 17 Eq 435 .… 32.26 Beckett v Micklethwaite (1821) 6 Madd 199; 56 ER 1067 .… 22.22 Beckett v Tower Assets Co [1891] 1 QB 1 .… 1.27 Beckford v Wildman (1810) 16 Ves 438; 33 ER 1050 .… 2.44 Beconwood Securities Pty Ltd v Australia and New Zealand Banking Group Ltd (2008) 246 ALR 361: 66 ACSR 116 .… 1.4 Bedall v Maitland (1881) 17 Ch D 174 .… 19.19 Beddoe, Re; Downes v Cottam [1893] 1 Ch 547 .… 40.6 Beddoes v Shaw [1937] Ch 81; [1936] 2 All ER 1108 .… 24.34 Bedford v Backhouse (1730) 2 Eq Cas Abr 615; 22 ER 516 .… 25.4 Beetham, Re; Ex parte Broderick (1886) 18 QBD 380 .… 3.41, 3.45 Beevor v Luck (1867) LR 4 Eq 537 .… 22.27, 31.4 Behrend’s Trust, Re; Surman v Biddell [1911] 1 Ch 687 .… 26.6 Beirnstein, Re; Barnett v Beirnstein [1925] Ch 12 .… 1.7, 1.9, 2.9, 29.2, 29.3 Belaney v French (1873) LR 8 Ch App 918 .… 2.43 Belbridge Property Trust Ltd, Re [1941] Ch 304; [1941] 2 All ER 48 .… 18.5 Belchier v Renforth (1764) 5 Bro PC 292; 2 ER 686 .… 25.2 Belgravia Insurance Co Ltd v Meah [1964] 1 QB 436 .… 37.9, 37.11 Bell, Ex parte; Re Tunstall & Cash (1847) De Gex 577 .… 2.32 Bell, Re; (1886) 34 Ch D 954 .… 42.9 Bell, Re; Carter v Stadden (1886) 54 LT 370 .… 24.50, 26.23 Bell, Re; Jeffery v Sayles [1896] 1 Ch 1 .… 6.24, 20.46

Bell v Bank of London (1858) 28 LJ Ex 116 .… 9.15 Bell v Banks (1841) 3 Man & G 258 .… 36.15 Bell v Blyth (1868) 4 Ch App 136 .… 9.28 Bell v L & NW Rly Co (1852) 15 Beav 548;51 ER 651 .… 6.12 Bell v Lever Bros Ltd [1932] AC 161 .… 13.41 Bell v London and South Western Bank [1874] WN (Eng) 10 .… 11.45 Bell v Peter Browne & Co [1990] 2 QB 495 .… 11.41 Bell v Sunderland Building Society (1883) 24 Ch D 618 .… 36.12 Bell v Taylor (1836) 8 Sim 216; 59 ER 87 .… 2.35, 2.40 Bellaglade Ltd, Re [1977] 1 All ER 319 .… 8.19 Bellamy v Brickenden (1861) 2 John & H 137;70 ER 1002 .… 39.45, 40.25 Bellamy v Cockle (1854) 18 Jur 465; 2 WR 326 .… 22.43 Bellamy v Davey [1891] 3 Ch 540 .… 2.24 Bellinger, Re; Durrell v Bellinger [1898] 2 Ch 534 .… 11.12 Bell’s Dairy Limited; International Harvester Credit Corporation of Canada Ltd, Re v Touche Ross Limited (1986) 50 Sask R 177; 6 PPSAC 138 .… 5.112 Belmont Finance Corp Ltd v Williams Furniture Ltd [1979] Ch 250; [1979] 1 All ER 118 .… 13.45 Belmont Finance Corp Ltd v Williams Furniture Ltd (No 2) [1980] 1 All ER 393 .… 13.45 Belmore (C J) Pty Ltd v AGC (General Finance) Ltd [1976] 1 NSWLR 507 . … 32.14, 39.50, 39.55, 39.60 Belton v Bass, Ratcliffe and Gretton Ltd [1922] 2 Ch 449 .… 20.6, 20.21 Bench v Shearman [1898] 2 Ch 582 .… 26.8 Bendigo Sandhurst Mutual Permanent Land and Building Society Ltd v Tefeti Pty Ltd (1995) 17 ACSR 463 .… 14.2 Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256 .…

13.35, 13.36 Benham v Keane (1861) 1 John & H 685; 70 ER 919 .… 25.50, 26.17 Benham v Keane 3 De GF & J 318; 45 ER 901 .… 26.17 Benjamin v Ashikian [2007] NSWSC 735 .… 5.10 Benjamin Cope & Sons Ltd, Re [1914] 1 Ch 800 .… 8.18 Bennett v Higgs (1886) 2 TLR 715 .… 12.2 Bennett v Wyndham (1857) 23 Beav 521; 53 ER 205 .… 11.12 Bennett, Re; Clarke v White [1899] 1 Ch 316 .… 1.23 Bennett, Re; Ex parte Official Receiver [1907] 1 KB 149 .… 26.6 Bentham v Haincourt (1691) 1 Eq Cas Abr 320 pl 2; 24 ER 16 .… 39.47 Bentinck v Willink (1842) 2 Hare 1; 67 ER 1 .… 32.81 Benyon v Amphlett (1862) 8 Jur (NS) 759 .… 2.43 Beresford v Royal Insurance Co Ltd [1938] AC 586; [1938] 2 All ER 602 . … 6.15 Berkeley Applegate (Investment Consultants) Ltd, Re [1989] Ch 32; [1989] BCLC 28 .… 2.17, 2.52 Berkeley v King’s College Cambridge (1830) 10 Beav 602; 50 ER 714 .… 13.49 Berkshire Capital Funding Pty Ltd v Street (1999) 78 P & CR 321 .… 12.23, 12.27 Bermingham’s Estate, Re (1870) IR 5 Eq 147 .… 16.31 Bernard v Norton (1864) 3 New Rep 701; 10 LT NS 183; 142 RR 755 .… 22.47, 32.43 Berney v Sewell (1820) 1 Jac & W 647; 37 ER 515 .… 18.22, 39.28 Berridge v Berridge (1890) 44 Ch D 168 .… 42.13 Berrington v Evans (1839) 3 Y & C Ex 384; 160 ER 751 .… 1.34, 2.7 Berry (a bankrupt), Re [1976] 2 NZLR 449 .… 30.7 Berry v Advance Bank Australia Ltd (1995) 6 BPR 14,046 .… 3.15, 32.7,

39.60 Berry v Gibbons (1873) 8 Ch App 747 .… 11.17 Bertlin v Gordon [1886] WN 31 .… 22.28 Berwick & Co v Price [1905] 1 Ch 632 .… 24.10, 24.14, 24.15, 24.37, 32.88 Best, Re; Parker v Best [1924] 1 Ch 42 .… 30.4 Bester v Perpetual Trustee Co Ltd [1970] 3 NSWR 30 .… 13.24 Bethian Pty Ltd v Green (1977) 3 Fam LR 11,579 .… 4.28 Betts, Re; Ex parte Harrison (1881) 18 Ch D 127 .… 39.26 Bevan v Waters (1828) 3 Car & P 520; 172 ER 529 .… 2.22 Bevham Investments Pty Ltd v Belgot Pty Ltd (1982) 149 CLR 494 .… 1.4, 1.7, 3.14, 17.2, 20.6, 32.8 Bew v Bew [1899] 2 Ch 467 .… 40.6 Beynon v Cook (1875) 10 Ch App 389 .… 13.11, 13.14 Bickerton v Walker (1885) 31 Ch D 151 .… 14.1, 39.13 Biddulph v Billiter Street Offices Co (1895) 72 LT 834 .… 22.28 Big River Timbers Pty Ltd v Stewart (1998) 9 BPR 15,599 .… 28.8 Big Rock Pty Ltd v Esanda Finance Corporation Pty Ltd (1992) 10 WAR 259 .… 32.65 Biggerstaff v Rowatt’s Wharf Ltd [1896] 2 Ch 93 .… 2.4, 6.8, 8.19 Biggs v Hoddinott [1898] 2 Ch 307 .… 19.41, 32.8, 32.11, 32.12, 32.14, 32.15 Biggs v McEllister (1880) 14 SALR 86 .… 4.22 Bill Fitts Auto Sales, Inc v Daniels 325 Ark 51(1996) .… 5.133 Billson v Residential Apartments Ltd [1992] 1 AC 494; [1992] 1 All ER 141 .… 37.10 Bingham v King (1866) 14 WR 414 .… 22.20 Binney v Mutrie (1886) 12 App Cas 160 .… 2.18

Binnington v Harwood (1825) Turn & R 477; 37 ER 1184 .… 39.39, 40.10 Birch, Re; Hunt v Thorn [1909] 1 Ch 787 .… 29.3 Birch v Ellames (1794) 2 Anst 427; 145 ER 924 .… 3.37, 21.9, 24.15, 24.36 Birch v Wright (1786) 1 Term Rep 378; 99 ER 1148; [1775–1802] All ER Rep 41 .… 12.9, 12.19, 19.16 Birchall v Pugin (1875) LR 10 CP 397 .… 2.48 Bird v Gandy (1715) 7 Vin Abr 45, pl 20; 22 ER 213 .… 22.35, 39.29 Bird v Philpott [1900] 1 Ch 822 .… 11.22 Bird v Wenn (1886) 33 Ch D 215 .… 31.9, 40.11 Birmingham, Re [1959] Ch 523; [1958] 2 All ER 397 .… 2.10, 29.2 Birmingham Citizens Permanent Building Society v Caunt [1962] Ch 883; [1962] 1 All ER 163 .… 19.12, 19.15 Birt, Re (1883) 22 Ch D 604 .… 2.30 Bishop v Bonham [1988] 1 WLR 742 .… 20.22 Bishop v Church (1751) 2 Ves Sen 371; 28 ER 238 .… 32.41 Bishop v Mantell (1807) 3 Seton’s Judgments and Orders (7th ed) 1886 .… 19.39 Bishop of Winchester v Paine (1805) 11 Ves 194; 32 ER 106 .… 33.5, 33.25 Bismarck Australia, Re (1980) 4 ACLR 962 .… 8.20 Bismark, Re [1981] VR 527 .… 8.19 Biss, Re; Biss v Biss [1905] 2 Ch 40 .… 3.29 Biss, Re; Heasman v Biss [1956] Ch 243 .… 29.3 Bissett v ANZ Bank Ltd [1961] NZLR 687 .… 30.9 Bissill v Bradford Tramway Co [1893] WN (Eng) 44 .… 2.37 Bittar, Re [1964] NSWR 438; 80 WN (NSW) 1597 .… 4.7 Black Uhlans Inc v NSW Crime Commission [2002] NSWSC 1060; (2000) 12 BPR 29 .… 37.14

Blackburn Benefit Building Society v Cunliffe, Brooks & Co (1882) 22 Ch D61 .… 11.9 Blackburn Building Society v Cunliffe, Brooks& Co (1882) 22 Ch D 61 .… 32.53 Blackburn v Caine (1856) 22 Beav 614; 52 ER 1245 .… 22.31 Blackford v Davis (1869) 4 Ch App 304 .… 39.10, 39.37, 40.27, 42.1 Blackpool Motor Car Co Ltd, Re; Hamilton v Blackpool Motor Car Co Ltd [1901] 1 Ch 72 .… 42.16 Blackwood v London Chartered Bank of Australia (1871) 10 SCR (NSW) (Eq) 56 .… 27.13, 27.14 Blackwood v London Chartered Bank of Australia (1874) LR 5 PC 92 .… 24.5, 25.2, 25.4 Blades v Higgs (1861) 10 CB (NS) 713; 142 ER 634 .… 19.20 Blaiberg and Abrahams, Re [1899] 2 Ch 340 .… 14.8 Black v Williams [1895] 1 Ch 408 .… 9.17, 9.23 Blake, Re; Clutterbuck v Bradford [1945] Ch 61 .… 2.48 Blake v Foster (1813) 2 Ball & B 387 .… 33.2 Blake v Nicholson (1814) 3 M & S 167; 105 ER 573 .… 2.22, 2.26 Blakely v Dent (1867) 15 WR 663 .… 16.1 Blakely v Teal Investments Ltd [1982] NZLJ 242 .… 20.18 Blaker v Herts and Essex Waterworks Co (1889) 41 Ch D 399 .… 18.23, 21.14 Blakesley and Beswick, Re (1863) 32 Beav 379; 55 ER 148 .… 40.24 Blanche, The (1887) 58 LT 592 .… 16.1 Blandy v Kimber (1858) 25 Beav 537; 53 ER 742 .… 39.22 Blaxland v Grattan (1887) 8 LR (NSW) L287 .… 27.10 Bleaden v Hancock (1829) 4 Car & P 152; 172 ER 648 .… 2.22, 2.26 Blest v Brown (1862) 4 De G F & J 367; 45 ER 1225 .… 35.7, 35.8

Bligh v Davies (1860) 28 Beav 211; 54 ER 346 .… 2.32 Blomley v Ryan (1956) 99 CLR 362 .… 13.4, 13.30, 13.31, 13.32 Bloodstock Airservices of Australia Pty Ltd v Roadrunner Equipment Pty Ltd (1985) 10 ACLR 36 .… 11.43 Bloomfield v Blake (1833) 6 C & P 75; 172 ER 1152 .… 13.40 Blow v Constable (1886) 3 WN (NSW) 24 .… 7.8 Blue Jeans Sales Ltd, Re [1979] 1 All ER 641 .… 37.9 Blouin, Re; Caisse Populaire Desjardins de Val-Brillant v Métivier & Associés Inc [2003] 1 SCR 666; (2003) 225 DLR (4th) 577 .… 5.42 Blundell v Associated Securities Ltd (1971) 19 FLR 167 .… 20.20 Blundell-Leigh v Attenborough [1921] 1 KB 382 .… 1.11 Blunden v Desart (1842) 2 Dru & War 405 .… 2.37, 2.40 Blythe Green and Jordain Pty Ltd v Sienna Pty Ltd (1986) 82 FLR 291 .… 7.10 Boag v Ross (1922) 22 SR (NSW) 242 .… 11.15 Boaler v Mayor (1865) 19 CB NS 76; 44 ER 714 .… 36.15 Boardman v Phipps [1967] 2 AC 46 .… 42.2 Bobbett’s Estate, Re [1904] 1 IR 461 .… 24.30 Boden v Hensby [1892] 1 Ch 101 .… 2.43 Bodenham v Halle (1456) Select Cases in Chancery 1346–1471 (vol 10 Selden Society Yearbooks) .… 1.14 Boehm v Goodall [1911] 1 Ch 155 .… 18.25 Bofinger v Kingsway Group Ltd [2009] HCA 44; 239 CLR 269; 260 ALR 71 .… 4.25, 10.12, 20.43, 20.45, 36.9, 42.19 Bogdanovic v Koteff (1988) 12 NSWLR 472 .… 4.22, 13.9 Bolckow v Herne Bay Pier Co (1852) 1 E & B 74; 118 ER 364 .… 16.12 Bolingbroke v Hinde (1884) 25 Ch D 795 .… 21.4, 40.25 Bolster v Mc Callum (1966) 85 WN (Pt 1) 281; [1966] 2 NSWR 660 .…

2.33 Bolton Building Society v Cobb [1965] 3 All ER 814; [1966] 1 WLR 1 .… 12.19, 12.24 Bolton v Buckenham [1891] 1 QB 278 .… 17.8, 35.8 Bolton v Darling Downs Building Society [1935] St R Qd 237 .… 18.23 Bolton v Salmon [1891] 2 Ch 48 .… 35.8 Bompas v King (1886) 33 Ch D 279 .… 19.34, 39.33, 42.21 Bonacino, Re; Ex parte Discount Banking Co (1894) 10 R 147; 1 Mans 59 . … 23.10 Bond v McClay [1903] St R Qd 1 .… 7.14, 24.49, 24.51 Bond Brewing Holdings Ltd v National Australia Bank Ltd (1990) 1 ACSR 445; 8 ACLC 330 .… 2.5, 18.19 Bond Worth Ltd, Re [1980] Ch 228; [1979] 3 All ER 919 .… 1.7, 1.9, 1.10, 1.48, 2.9, 2.13, 8.13, 8.14 Bonham v Newcomb (1681) 1 Vern 214; 23 ER 422 .… 1.29 Bonham v Newcomb (1684) 1 Vern 232; 23 ER 435 .… 16.7 Bonham v Newcomb (1726) 2 Vern 364; 86 ER 488 .… 16.5 Bonithon v Hockmore (1685) 1 Vern 316; 23 ER 492 .… 19.41 Bonner v Tottenham & Edmonton Permanent Investment Building Society [1899] 1 Ch 161 .… 3.3 Bonney v Ridgard (1784) 1 Cox Eq Cas 145; 29 ER 1101 .… 11.17, 11.18 Bonnin v Neame [1910] 1 Ch 732 .… 6.18, 11.28 Bonython v Commonwealth [1951] AC 201 .… 1.43 Boodle Hatfield & Co v British Films Ltd [1986] NLJ Rep 117; [1986] PCC 176 .… 2.14 Booth v A’Beckett (1863) 1 Moore NS 201; 15 ER 676 .… 12.24 Booth v Alington (1856) 26 LJ Ch 138 3 .… 39.55 Booth v Booth (1742) 2 Atk 343; 26 ER 609 .… 1.51, 16.10

Booth v Creswicke (1837) 8 Sim 352; 59 ER 139 .… 33.5, 33.21 Booth v Creswicke (1841) Cr & Ph 361; 41 ER 528 .… 22.35 Booth v Creswicke (1844) 8 Jur NS 323; 13 LJ Ch 217 .… 16.37 Booth v Salvation Army Building Association (1897) 14 TLR 3 .… 32.15 Booth v Thomson [1972] SLT 141 .… 2.52 Booth’s Settlement, Re (1853) 1 WR 444 .… 26.20 Borax Co, Re; Foster v Borax Co [1901] Ch 326 .… 8.16 Borell v Dann (1843) 2 Hare 440; 67 ER 181 .… 13.23, 24.18 Born, Re; Curnock v Born [1900] 2 Ch 433 .… 2.48 Boronia Park Properties Pty Ltd v Arramunda Airways Pty Ltd [1995] NTSC 16 .… 19.37 Borrow, Re; Ex parte Broadbent (1834) 1 Mont & A 635 .… 3.38 Boscawen v Bajwa [1995] 4 All ER 769 .… 5.33, 33.7, 33.8, 42.13, 42.19 Bosquet’s Caveat, Re (1883) 17 SALR 173 .… 24.51 Boss v Hopkinson (1870) 18 WR 725 .… 26.1, 26.15 Boughton, Re (1883) 23 Ch D 169 .… 2.43 Boulter, Re; Ex parte National Provincial Bank of England (1876) 4 Ch D 241 .… 3.40 Boulton v Buckingham [1891] 1 QB 298 .… 14.1 Bourke v Beneficial Finance Corp Ltd (1991) ANZ Conv R 473 .… 20.21, 20.28, 20.35 Bourne, Re; Bourne v Bourne [1906] 2 Ch 427 .… 11.26, 11.30, 24.14 Bovey v Skipwich (1671) 1 Cas in Ch 201; 22 ER 762 .… 31.10 Bovill v Endle [1896] 1 Ch 648 .… 32.6, 32.36 Bovy v Smith (1682) 1 Vern 144; 22 ER 877 .… 24.18 Bow McLachlan & Co v Ship Camosun [1909] AC 597 .… 1.48 Bowcock, Re [1968] 2 NSWLR 697 .… 29.2

Bowen v Wakim (SC (NSW), Smart J, 27 August 1990, unreported) .… 2.49, 2.51 Bowerman, Re; Porter v Bowerman [1908] 2 Ch 340 .… 29.2 Bowker v Bull (1850) 1 Sim NS 29; 61 ER 11 .… 31.4, 35.3 Bowkett v Action Finance Ltd [1992] 1 NZLR 449 .… 13.30 Bowles v Rogers (1800) 6 Ves 95n; 31 ER 957 .… 2.9 Bowmaker Ltd v Wycombe Motors Ltd [1946] 2 All ER 113 .… 2.27 Boyce v Beckman (1890) 11 LR (NSW) (L) 139 .… 27.10 Boydell v Manby (1852) 9 Hare App I liii; 68 ER 788 .… 22.15 Bozon v Williams (1829) 3 Y & J 150; 148 ER 1131 .… 3.40, 24.15 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 16 ALR 363; 52 ALJR 20 .… 19.15 Brabon, Re [2001] 1 BCLC 11 .… 13.4 Brace v Duchess of Marlborough (1728) 2 P Wms 491; 24 ER 829 .… 25.2, 25.4, 25.11 Bradbury v Wild [1893] 1 Ch 377 .… 32.32 Bradford Banking Co Ltd v Henry Briggs, Son & Co Ltd (1886) 12 App Cas 29 .… 2.18, 6.8, 6.17, 25.7, 26.12 Bradford Roofing Industries Pty Ltd (in liq) and Companies Act, Re [1966] 1 NSWR 674 .… 5.104 Bradley v Carritt [1903] AC 253 .… 1.29, 32.14 Bradley v Copley (1845) 1 CB 685; 135 ER 711 .… 3.55 Bradley v Riches (1878) 9 Ch D 189 .… 24.23, 24.29, 24.45 Bradshaw v Widdrington [1902] 2 Ch 430 .… 16.33 Brady v Brady (1874) 8 SALR 219 .… 4.18 Brady v Stapleton (1952) 88 CLR 322 .… 5.33, 13.7 Brady, Re [1947] VLR 347 .… 29.3 Bramwell v Eglinton (1864) 5 B & S 39; 122 ER 747 .… 19.12

Brandao v Barnett (1846) 12 Cl & Fin 787; 8 ER 1622 .… 2.33, 2.36 Bradford & Bingley plc v Rashid [2006] 1 WLR 2066 .… 16.34 Brandon v Brandon (1859) 3 De G & J 524; 44 ER 1371 .… 42.13 Brandon v Brandon (1862) 10 WR 287 .… 19.35, 19.39 Branwood Park Pastoral Co Pty Ltd v Willing & Sons Pty Ltd (1977) 1 BPR 9534 .… 3.15 Branwood Park Pastoral Co Pty Ltd v Willing & Sons Pty Ltd [1976] 2 NSWLR 149 .… 32.7, 32.10, 32.36 Brassington v Brassington (1823) 1 Sim & St 455; 57 ER 182 .… 2.44 Brearcliff v Dorrington (1850) 4 De G & Sm 122; 64 ER 762 .… 24.49, 24.50, 26.26 Breathour v Brown (1885) 1 WN (NSW) 140 .… 12.4 Brecon Corporation v Seymour (1859) 26 Beav 548; 53 ER 1010 .… 31.5, 32.55 Bree v Scott (1904) 29 VLR 692 .… 4.38, 10.8 Breech-Loading Armoury Co, Re; Wragge’s Case(1868) LR 5 Eq 284 .… 26.13 Breeds, Re; Ex parte Alsager (1841) 2 Mont D& De G 328 .… 31.8 Brenchley v Higgins (1900) LJ Ch 788 .… 13.14 Brend v Brend (1684) 1 Vern 213; 23 ER 421 .… 32.31 Brennan v Pitt, Son & Badgery Ltd (1899) 20 LR (NSW) (Eq) 179 .… 14.1 Brennan v Pitt, Son & Badgery Ltd (1901) 1 SR (NSW) Eq 92 .… 32.47 Brennand, Re (1843) NSW Sel Cas (Dowling) 619 .… 3.13, 17.10 Brent v Jones (1870) 1 VR(E) 76 .… 29.2 Brereton v Edwards (1888) 21 QBD 488 .… 7.13 Brereton v Nicholls [1993] BCLC 593 .… 2.33

Breskvar v Wall (1971) 126 CLR 376 .… 4.11, 4.12, 4.16, 28.13, 28.16 Brett v Barr Smith (1919) 26 CLR 87 .… 41.3 Brett v Cumberland Properties Pty Ltd [1986] VR 107 .… 37.5 Brettle, Re (1864) 2 De GJ & Sm 244; 46 ER 369 .… 35.5 Brewer v Square [1892] 2 Ch 111 .… 21.14, 21.15, 21.21, 21.23 Brewer’s Settlement, Re; Morton v Blackmore [1896] 2 Ch 503 .… 13.51 Briant v Lightfoot (1837) 1 Jur 20 .… 40.13 Briar Building Holdings Ltd v Bow West Holdings Ltd (1981) 126 DLR (3d) 566 .… 3.15 Brice v Bannister (1878) 3 QBD 569 .… 6.11 Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] 2 VR 279 .… 17.7 Bride v Australian Bank Ltd [2000] WASC116 .… 18.14 Bride v Freehill Hollingdale and Page (1996) ANZ ConvR 593 .… 4.15, 18.5 Bridge Wholesale Acceptance Corp (Aust) Ltd v Burnard (1992) 27 NSWLR 415 .… 1.33, 1.34, 1.39, 1.41, 4.28, 5.38 Bridge Wholesale Acceptance Corp (Australia) Pty Ltd v Fairstar Pty Ltd [1991] ACL Rep 295 NSW 4 .… 1.41 Bridgeman v Green (1757) WIlm 58; 97 ER 22 .… 13.2 Bridgwater v De Winton (1863) 33 LJ Ch 238 .… 33.11 Brien v Dwyer (1979) 141 CLR 378 .… 32.45 Brierley v Kendall (1852) 17 QB 937; 117 ER 1540 .… 3.55 Brigers v Orr (1932) 32 SR (NSW) 634 .… 20.4 Briggs v Harcourt (1911) 31 NZLR 366 .… 37.13 Briggs v Jones (1870) LR 10 Eq 92 .… 24.42 Brigham v Saunders (1880) OB & F (CA) 66 .… 30.13 Bright v Campbell (1885) 54 LJ Ch 1077 .… 39.31

Brightlife Ltd, Re [1987] Ch 200; [1986] 3 All ER 673 .… 5.116, 8.20, 11.39 Brighton and Hove City Council Andus [2009] EWHC 340 (Ch) .… 32.12 Bright’s Trusts, Re (1856) 21 Beav 430; 52 ER 925 .… 24.19, 26.19 Brighty v Norton (1862) 3 B & S 305; 122 ER 116 .… 17.9 Brinkworth v The Commissioners of the Rural and Industries Bank of Western Australia [1990] ANZ ConvR 243 .… 39.50 Briscoe v Kenrick (1832) 1 LJ Ch 116 .… 22.5 Bristol & West of England Bank v Midland Railway Co [1891] 2 QB 653 . … 3.55 Bristol Airport plc v Powdrill [1990] Ch 744; [1990] 2 All ER 493 .… 1.4 Bristol and West Building Society v Henning [1985] 1 WLR 778; [1985] 2 All ER 606 .… 24.1, 24.21 Bristol United Breweries Ltd v Abbot [1908] 1 Ch 279 .… 11.42 Britannia Building Society v Earl [1990] 2 All ER 469 .… 12.17 British American Nickel Corp Ltd v O’Brien Ltd [1927] AC 369 .… 8.2 British Anzani (Felixstowe) Ltd v International Maritime Management (UK) Ltd [1980] 1 QB 137 .… 19.24 British Bank for Foreign Trade Ltd v Russian Commercial and Industrial Bank (No 2) (1921) 38 TLR 65 .… 32.45 British Consolidated Oil Corp Ltd, Re [1919] 2 Ch 81 .… 8.5 British Eagle International Airlines Ltd v Air France [1975] 1 WLR 758; [1975] 2 All ER 390 .… 10.15 British Empire Mutual Life Assurance Co v Sugden (1878) 47 LJ Ch 691 .… 22.48 British Motor Trust Co Ltd v Hyams (1934) 50 TLR 230 .… 35.7 British South Africa Co v De Beers Consolidated Mines Ltd [1912] AC 52 . … 1.35 British South Africa Co v De Beers Consolidated Mines Ltd [1910] 2 Ch 502 .… 1.35

British Union and National Insurance Co v Rawson [1916] 2 Ch 476 .… 17.5 Broad v Commissioner of Stamp Duties [1980] 2 NSWLR 40 .… 1.4, 6.20 Broad v Public Trustee [1939] NZLR 140 .… 17.11 Broad v Selfe (1863) 11 WR 1036; 9 Jur (NS) 885 .… 32.15, 40.9 Broadbank Corp v Mosgiel [1985] 1 NZLR 257 .… 39.43 Broadbent v Barlow (1861) 3 De GF & J 570; 45 ER 999 .… 24.16, 30.13 Broadlands International Finance Ltd v Sly (1987) 4 BPR 9420; ANZ ConvR 329 .… 13.27, 13.41 Brocklesby v Temperance Permanent Building Society [1895] AC 173 .… 11.24, 14.4, 24.42 Brodie Hotel Supply v United States 431 F 2d 1316 (9th Cir 1970) .… 5.87 Bromitt v Moor (1851) 9 Hare 374; 68 ER 552 .… 33.12 Bromley v Bromley 106 Ga App 606 (1962) .… 5.136 Bromley v Rice Marketing Board for the State of New South Wales; Minister for Bromley v Smith (1859) 26 Beav 644; 53 ER 1047 .… 13.11 Brompton Securities Ltd, Re (No 2) [1988] BCLC 616 .… 37.9 Brooke v Haymes (1868) LR 6 Eq 25 .… 17.1 Brooke v Pearson (1859) 27 Beav 181; 54 ER 70 .… 13.51 Brooke v Stone (1865) 34 LJ Ch 251 .… 19.39 Brougham v Cauvin (1868) 16 WR 688 .… 2.44 Broughton, Re (1916) 17 SR (NSW) 29 .… 24.51 Broughton v Rodd (1866) 4 SCR (NSW) Eq 54 .… 17.1 Broughton v Rodd (1867) 6 SCR (NSW) Eq 102 .… 39.50 Broughton v Snook [1938] Ch 505 .… 11.20 Browell v Pledge [1888] WN 166 .… 22.31 Brown, Re (1886) 32 Ch D 597 .… 2.18 Brown, Re (2012) 479 BR 112 .… 5.38

Brown v Abbott (1881) 7 VLR (E) 121 .… 29.3 Brown v Barkham (1720) 1 P Wms 652; 24 ER 555 .… 39.53 Brown v Cole (1845) 14 Sim 427; 60 ER 424 .… 1.14, 1.15, 32.6 Brown v Cork [1985] BCLC 363 .… 30.2 Brown v Peto [1900] 2 QB 653 .… 12.23 Brown v San Luis Obispo National Bank 462 F (2d) 129 (9th Cir) (1972) .… 2.5 Brown v Sewell (1853) 11 Hare 49; 68 ER 1182 .… 32.82 Brown v Stead (1832) 5 Sim 535; 58 ER 439 .… 36.11 Brown v Storey (1840) 1 Man & G 117; 133 ER 270 .… 39.14 Brown v Tanner (1868) 3 Ch App 597 .… 9.16, 9.25 Brown, Shipley & Co v Kough (1885) 29 Ch D 848 .… 1.40, 2.4, 2.6, 6.13 Browne v Carr (1831) 7 Bing 508; 131 ER 197 .… 35.7, 35.8 Browne v Cranfield (1925) 25 SR (NSW) 443 .… 31.1, 31.11 Browne v Lockhart (1840) 10 Sim 420; 59 ER 678 .… 22.2, 32.36, 33.15, 40.13 Browne v London Necropolis and National Mausoleum Co (1857) 6 WR 188 .… 1.41, 16.2 Browne v Price (1858) 4 CBNS 598; 140 ER 1225 .… 17.6 Browne v Ryan [1901] 2 IR 653 .… 19.41, 32.15 Browne v Savage (1859) 4 Drew 635; 62 ER 244 .… 24.8, 26.18 Browning v Handiland Group Ltd (1978) 35 P & CR 345 .… 32.82 Brown’s Estate, Re; Brown v Brown [1893] 2 Ch 300 .… 16.31, 17.8 Brown’s Estate, Re; Lloyds Bank Ltd v Margolis [1954] 1 All ER 734; [1954] 1 WLR 644 .… 17.8 Brown’s Trusts, Re (1867) LR 5 Eq 88 .… 26.3 Brownson v Lawrence (1868) LR 6 Eq 1 .… 30.2

Bruce v Garden (1869) LR 5 Ch App 32 .… 6.15, 32.73 Bruce v Woods [1951] VLR 49 .… 24.49, 24.51 Bruce, Ex parte (1813) 1 Rose 374 .… 3.40 Brunker v Perpetual Trustee Co Ltd (1937) 57 CLR 555 .… 4.37 Brunton v Electrical Engineering Corp [1892] 1 Ch 434 .… 2.40 Brusewitz v Brown [1923] NZLR 1106 .… 13.16, 13.20, 13.22, 13.23, 13.24 Brutan Investments Pty Ltd v Underwriting and Insurance Ltd (1980) 58 FLR 289 .… 20.8, 20.27, 20.34, 20.38 Buchanan Borehole Collieries Pty Ltd v NSW Coal Compensation Review Tribunal (1997) 9 BPR 16,253 .… 36.2 Buchanan v Crown & Gleeson Business Finance Pty Ltd [2006] NSWSC 1465; (2005) 13 BPR 24,513 .… 4.27 Buchanan v Greenway (1849) 12 Beav 355; 50 ER 1097 .… 22.32, 22.37, 39.41 Buchanan v May (1911) 12 SR (NSW) 366 .… 29.2 Buchler v Talbot [2004] 2 AC 298; [2004] 1 All ER 1289 .… 2.52, 8.11, 8.12, 8.21 Buckeridge v Mercantile Credits Ltd (1981) 147 CLR 654 .… 42.15 Buckhurst’s Case (1595) Moore KB 687; 72 ER 713 .… 3.31 Buckley, Re; Ex parte Arkell [1954] QWN 11 .… 7.10 Buckley v Buckley (1887) 19 LR Ir 544 .… 30.10 Bucknell v Bucknell [1969] 2 All ER 998 .… 20.47 Bucknell v Vickery (1891) 64 LT 701 .… 32.15, 39.56 Bufalo Corp Pty Ltd v Leone (2001) 40 ACSR 327 .… 18.9 Bugden v Bignold (1843) 2 Y & C Ch Cas 377; 63 ER 167 .… 30.12 Bulkeyley v Hope (1855) 1 K & J 482; 69 ER 549 .… 36.6 Bull v Faulkner (1847) 1 De G & Sm 685; 63 ER 1251 .… 39.29 Bull v Faulkner (1848) 2 De G & Sm 772; 64 ER 346 .… 2.31

Bullen v a’Beckett (1863) 1 Moo P C (NS) 223; 15 ER 684 .… 27.11 Buller v Plunkett (1860) 1 John & H 441; 70 ER 819 .… 2.7, 26.15 Bullock v Lloyds Bank Ltd [1955] Ch 317; [1954] 3 All ER 726 .… 13.22, 13.24 Bulmer, Re; Ex parte Johnson (1853) 2 De GM & G 218; 43 ER 86 .… 35.7 Bulstrode v Bradley (1747) 3 Ark 582; 26 ER 1136 .… 39.29 Bunbury Foods Pty Ltd, Re; Robertson v Nissho Iwai Australia Ltd (1985) WAR 126; (1985) 2 ACLC 639 .… 32.21 Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 153 CLR 491; 51 ALR 609; (1984) 58 ALJR .… 17.9, 18.7, 19.15, 20.4, 20.15 Bunning Building Supplies Pty Ltd v Sgro (1995) V ConvR 54-535 .… 4.27 Burdick v Sewell (1883) 10 QBD 363 .… 1.11 Burdick v Sewell (1884) 10 App Cas 74 .… 1.11 Burge, Woodall & Co, Re; Ex parte Skyrme[1912] 1 KB 393 .… 30.10 Burger King Corp v Hungry Jack’s Pty Ltd [2001] NSWCA 187 .… 5.121 Burgess, Re; Ex parte Freen (1827) 2 Gl & J 250 .… 23.8 Burgess v Moxon (1856) 2 Jur NS 1059 .… 3.37, 3.40 Burgess v Sturges (1851) 14 Beav 440; 51 ER 356 .… 22.5 Burgess v Wheate (1757) 1 Eden 177; 28 ER 652 .… 2.15 Burgis v Constantine [1908] 2 KB 484 .… 6.17, 9.28 Burke v Dawes (1938) 59 CLR 1 .… 4.23, 11.16, 28.6 Burke v O’Connor (1888) 4 Ir Ch R 418 .… 40.23 Burke v State Bank of NSW Ltd (1994) 37 NSWLR 53; 6 BPR 13,714 .… 3.8, 13.28, 13.29 Burkill, Re; Ex parte Nettleship (1841) 2 Mont D & De G 124 .… 3.43 Burn v Carvalho (1839) 4 My & Cr 690; 41 ER 265 .… 6.11, 6.14 Burne v Robinson (1844) 1 Dr & Wal 688 .… 39.7

Burnes v Trade Credits Ltd [1981] 1 NSWLR 93; [1981] 1 WLR 805; [1981] 2 All ER 122 .… 3.14, 3.33, 35.8 Burnes v Trade Credits Ltd [1981] 1 NSWLR 93; 34 ALR 459 .… 17.2 Burns Philp Trustee Co Ltd v Commissioner of Stamp Duties (NSW) (1983) 14 ATR 482 .… 8.1 Burns Philp Trustee Co Ltd v Ironside Investments Pty Ltd [1984] 2 Qd R 16 .… 1.23 Burrell v Earl of Egremont (1844) 7 Beav 205;49 ER 1043 .… 36.5, 36.8 Burrell v Hope (1871) 2 QSCR 155 .… 4.24 Burrell, Re; Burrell v Smith (1869) LR 7 Eq 399 .… 15.3, 17.10, 22.38, 32.55, 33.16 Burridge v Row (1842) 1 Y & CC 183; 62 ER 846 .… 2.16 Burroughs-Fowler, Re [1916] 2 Ch 251 .… 13.51 Burrowes v Gradin (1843) 1 Dowl & L 213; 12 LJ QB 333 .… 12.14, 19.30 Burrowes v Molloy (1845) 2 Jo & Lat 521; 8 Ir Eq R 482 .… 3.16, 16.5, 16.6, 16.7, 18.21, 19.39, 39.55 Burrows v Crimp (1887) 8 LR (NSW) 198 .… 27.13, 27.12 Burston Finance Ltd v Speirway Ltd [1974] 3 All ER 735 .… 2.14, 42.19 Burt, Boulton and Hayward v Bull [1895] 1 QB 276 .… 19.31 Burton, Re; Ex parte Union Bank of Australia Ltd (1901) 27 VLR 437 .… 14.16, 17.5 Burton Marsden Douglas, Re [2004] 3 All ER 222 .… 11.30 Burton v Arcus (2004) 51 ACSR 683 .… 11.5 Burton v Honan (1952) 86 CLR 169 .… 37.14 Bury v Bury (1748) Sudg V & P (11th ed) App No 25 .… 24.24 Business Australia Capital Mortgage Pty Ltd v Randwick Nominees Pty Ltd [2004] NSWSC 643 .… 4.26 Business Computers Ltd v Anglo-African Leasing Ltd [1977] 2 All ER 741;

[1977] 1 WLR 578 .… 6.6 Busk v Lewis (1821) 6 Madd 29; 56 ER 1000 .… 2.44 Butchart v Dresser (1853) 4 De G M & G 542; 43 ER 619 .… 11.26 Butler Engineering Ltd v First Investors Corp Ltd [1986] 1 WWR 469 .… 30.9, 30.10 Butler Pollnow Pty Ltd v Garden Mews St Leonards Pty Ltd (1988) 13 ACLR 656 .… 18.6 Butler v Fairclough (1917) 23 CLR 78 .… 4.15, 4.23, 4.27, 28.10, 28.12, 28.16 Butler v Rice [1910] 2 Ch 277 .… 14.6, 32.48, 42.18 Byrne v Allied Irish Banks Ltd [1978] IR 446 .… 2.4 C C J Belmore Pty Ltd v AGC (General Finance) Ltd [1976] 1 NSWLR 507 . … 3.15, 32.15 C L Nye Ltd, Re [1971] Ch 442 .… 11.39 C R Sawyer & Whithall, Solicitors, Re [1919] 2 Ch 333 .… 12.23 C2C Developments Pty Ltd v Commonwealth Bank of Australia [2012] NSWSC 1162; 16 BPR [98586] .… 39.1, 39.21 Cachalot Nominees Ltd Pty v Prime Nominees Pty Ltd [1984] WAR 380 .… 20.21 Caddick v Cook (1863) 32 Beav 70; 55 ER 27 .… 22.7, 33.2 Cadogan v Kennett (1776) 2 Cowp 432; 98 ER 1171 .… 13.7 Cadogan v Lyric Theatre Ltd [1894] 3 Ch 338 .… 18.21 Cadorange Pty Ltd v Tangea Holdings Pty Ltd (1990) 20 NSWLR 26 .… 2.52 Cairney v Back [1906] 2 KB 746 .… 8.19 Caldwell v Bridge Wholesale Acceptance Corp (Aust) Pty Ltd (1993) 6 BPR 13,539 .… 11.2, 30.4, 30.7, 30.8

Caldwell v Matthews (1890) 62 LT 799 .… 32.81, 32.82 Caldwell v Sumpters [1972] 1 Ch 478 .… 2.37 Caldy Manor Estate Ltd v Farrell [1974] 3 All ER 753 .… 13.50 Caleo Bros Pty Ltd v Lyons Bros (Aust) Pty Ltd (1980) 1 BPR 9496 .… 4.13 Calisher v Forbes (1871) 7 Ch App 109 .… 25.7, 25.13, 26.1 Callachor v Moses (1931) 31 SR (NSW) 424 .… 3.13 Caltex Oil (Aust) Pty Ltd v Feenan [1981] 1 NSWLR 169 .… 13.35 Calverley v Green (1984) 155 CLR 242 .… 2.9, 2.16 Calwell, Ex parte (1828) 1 Mol 259 .… 39.14 Cambrian Mining Co Ltd, Re; Ex parte Fell(1881) 50 LJ Ch 836 .… 20.36 Cambridge Acceptance Pty Ltd v Fetherston [1965] NSWR 1513 .… 12.13 Cambridge Credit Corporation Ltd v Lissenden (1987) 8 NSWLR 411 .… 1.44 Cambridge Credit Corp Ltd v Lombard Australia Ltd (1977) 136 CLR 608; 14 ALR 420 .… 1.7, 3.14, 4.5, 17.2 Camco Inc v Frances Olson Realty (1979) Ltd (1986) 50 Sask R 161; 6 PPSAC 167 .… 5.102, 5.104 Cameron v Blau [1963] Qd R 421 .… 16.22 Cameron v Brisbane Fleet Sales Pty Ltd [2000] Q ConvR 54-540 .… 20.22, 20.29 Cameron v Brisbane Fleet Sales Pty Ltd [2002] Qd R 463 .… 20.22 Cameron’s Coalbrooke Rail Co, Re (1857) 25 Beav 1; 53 ER 535 .… 2.44 Camfield Pastoral Co v Dixon [1972] Qd R 289 .… 12.3, 19.5, 20.18 Camp v King (1887) 14 VLR 22 .… 6.9 Campbell, Re; Campbell v Campbell [1898] 2 Ch 206 .… 29.2, 29.3 Campbell v Bank of New South Wales (1883) 16 LR (NSW) Eq 285 .… 21.6 Campbell v Bank of New South Wales (1886) 11 App Cas 192 .… 21.6

Campbell v Campbell [1941] 1 All ER 274 .… 2.49, 2.51 Campbell v Canadian Co-operative Investment Co (1907) 5 WWR 153 .… 1.51 Campbell v Commercial Banking Co of Sydney (1879) 40 LT 137; 2 LR (NSW) 357 .… 17.9, 20.15 Campbell v Commercial Banking Co of Sydney (1881) 2 LR (NSW) (L) 397 .… 32.42 Campbell v Holyland (1877) 7 Ch D 166 .… 21.7, 22.6, 22.29, 22.35, 22.36, 33.5 Campbell v Hooper (1855) 3 Sm & G 153; 65 ER 603 .… 16.40 Campbell v Michale Mount PPB (1995) 16 ACSR 296 .… 8.21 Campbell v Moxhay (1854) 18 Jur 641 .… 22.31 Campion v Randwick Municipal Council (1933) 34 SR (NSW) 167 .… 16.1 Camp-Wee-Gee-Wa for Boys Ltd v Clark (1972) 23 DLR (3d) 158 .… 20.37, 32.43 Canadian Imperial Bank of Commerce v 64576 Manitoba Ltd (1990) 1 PPASC (2d) 1 .… 5.15 Canadian Imperial Bank of Commerce v 64576 Manitoba Ltd (1991) 77 DLR (4th) 190 .… 5.26 Canadian Imperial Bank of Commerce v AK Construction (1998) Ltd (1995) 171 AR 326 .… 5.121 Canadian Imperial Bank of Commerce v Haley (1979) 100 DLR (3d) 470 .… 20.21 Canadian Imperial Bank of Commerce v International Harvester Credit Corp of Canada (1986) 6 PPSAC 273 .… 5.91 Canadian Imperial Bank of Commerce v Melnitzer (Trustee of) (1993) 23 CBR (3d) 161; 6 PPSAC (2d) 5 .… 5.43, 5.72 Canadian Imperial Bank of Commerce v Otto Timm Enterprises Ltd (1995) 130 DLR (4th) 91; 10 PPSAC (2d) 288 .… 5.35 Canadian Imperial Bank of Commerce v Rehnby (1992) 22 RPC (2d) 93 .…

3.45 Canadian Imperial Bank of Commerce v Skender [1986] 1 WWR 884 .… 3.33 Canberra Advance Bank Ltd v Benny (1992) 38 FCR 427; 9 ACSR 179 .… 16.8, 18.6, 18.7 Cane v Allen (1814) 2 Dow 289; 3 ER 869 .… 42.2 Cannan v Bryce (1819) 3 B & Ald 179; 106 ER 628 .… 13.46 Cannock v Jauncey (1857) 27 LJ Ch 57 .… 24.46 Cape v Trustees of Savings Bank of NSW (1893) 14 LR (NSW) (Eq) 33 .… 4.10, 32.38 Capell v Winter [1907] 2 Ch 376 .… 24.25, 24.30 Capital Access Australia Pty Ltd v Hraiki [2011] NSWSC 109; 15 BPR 29,113 .… 4.16 Capital and Counties Bank v Rhodes [1903] 1 Ch 631 .… 36.2 Capital Finance Co Ltd v Stokes [1969] 1 Ch 261; [1968] 3 All ER 625 .… 1.38, 1.35, 2.13, 2.14, 36.13, 36.15, 42.19 Capital Finance Australia Ltd v Struthers [2008] NSWSC 440; 14 BPR 26,179 .… 11.4, 14.17 Capital Fire Insurance Association, Re (1883) 24 Ch D 408 .… 2.39, 2.43, 2.47 Capital Plymouth Chrysler Inc v Euro Sport Auto Sales Ltd (1998) 12 PPSAC (2d) 30; 224 AR 298 .… 5.39 Capper v Terrington (1844) 1 Coll 103; 63 ER 340 .… 32.80, 40.15 Car v Boulter (1697) 2 Freeman Ch 217; 22 ER 1169 .… 33.16 Card v Jaffray (1805) 2 Sch & Lef 374 .… 1.25 Care Shipping Corp v Itex Itagrani Export SA [1993] QB 1 .… 11.39 Carello v Jordan [1935] St R Qd 294 .… 13.30, 13.32, 32.18 Caretta Stud Nominees Pty Ltd v White (1982) 29 SASR 597 .… 4.37

Carew Counsel Pty Ltd v French (2002) 4 VR 172 .… 2.48, 2.49, 2.50 Carew v Arundell (1861) 8 Jur NS 71 .… 3.49 Carew’s Estate, Re (1868) 16 WR 1077 .… 26.11 Carey v Doyne (1856) 5 Ir Ch Rep 104 .… 39.42 Carlisle Banking Co v Thompson (1884) 24 Ch D 398 .… 34.3 Carlon v Farlar (1845) 8 Beav 526; 50 ER 206 .… 22.15, 33.20 Carl-Zeiss-Stiftung v Herbert Smith and Co (No 2) [1969] 2 Ch 276; [1969] 2 All ER 367 .… 20.46 Carney v Herbert [1985] AC 301; [1985] 1 All ER 438 .… 13.46 Carolan v Yoran (1905) 93 NYS 935 .… 4.19 Carpentaria Investments Pty Ltd v Airs and Arnold [1972] Qd R 436 .… 32.21 Carpenter v Parker (1857) 3 CBNS 206; 140 ER 718 .… 12.22 Carpet Call Pty Ltd v Chan (1987) ATPR 46-205 .… 5.10 Carr, Re [1918] 2 IR 448 .… 1.23 Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd [1985] Ch 207; [1985] 1 All ER 155 .… 2.2, 2.3 Carrick v Wigan Tramways Co [1893] WN [Eng] 98 .… 40.20 Carrington Confirmers Pty Ltd v Akins (23 April 1991, Giles J, unreported) . … 13.27 Carritt v Real and Personal Advance Co (1889) 42 Ch D 263 .… 24.30 Carroll’s Estate, Re [1901] I IR 78 .… 39.22 Carshalton Park Estate Ltd, Re; Graham v Carshalton Park Estate Ltd [1908] 2 Ch 62 .… 16.1 Carter, Re (1885) 53 LT 630 .… 2.35, 2.43 Carter v Barnadiston (1718) 1 P Wms 505; 24 ER 492 .… 30.2 Carter v Carter (1857) 3 K & J 591; 69 ER 1256 .… 24.6, 24.37 Carter v Carter (1885) 55 LJ Ch 230 .… 2.37

Carter v James (1881) 29 WR 437 .… 39.37 Carter v Palmer (1842) 1 Dr & War 722 .… 42.3 Carter v Palmer (1842) 8 Cl & Fin 657; 8 ER 256 .… 39.19 Carter v Sanders (1854) 2 Drew 248; 61 ER 714 .… 11.18 Carter v Tanners’ Leather Co (1907) 81 NE 902 .… 30.11 Carter v Wake (1877) 4 Ch D 605 .… 21.2, 21.3 Carter & Justins, Re; Ex parte Sheffield Union Banking Co (1865) 13 LT 477 .… 3.37 Casberd v AG (1819) 6 Price 411; 146 ER 850 .… 3.40 Casborne v Barsham (1839) 2 Beav 76; 48 ER 1108 .… 42.2 Casborne v Scarfe (1737) 1 Atk 603; 26 ER 377 .… 1.15, 32.4 Casella v Casella [1969] VR 49 .… 32.79 Casey v Irish Intercontinental Bank Ltd [1979] IR 364 .… 20.41 Casey’s Patents, Re; Stewart v Casey [1892] 1 Ch 104 .… 6.13 Cash Resources Australia Pty Ltd v BT Securities Ltd [1990] VR 576 .… 6.17, 24.25, 24.29, 24.37, 24.44, 26.12, 28.15, 28.16 Cash v Belcher (1842) 1 Hare 310; 66 ER 1051 .… 40.16 Castell and Brown Ltd, Re; Roper v The Company [1898] 1 Ch 315 .… 24.14, 24.45 Castellain v Preston (1883) 11 QBD 580 .… 3.20 Castellain v Thompson (1862) 13 CB (NS) 105; 143 ER 41 .… 2.24 Catley Farms Ltd v ANZ Banking Group (NZ) Ltd [1982] 1 NZLR 430 .… 3.14 Cato v Irving (1852) 5 De G & Sm 210; 64 ER 1084 .… 9.25 Caulfield v Maguire (1845) 2 Jo & Lat 141 .… 39.62 Cavander v Bulteel (1873) LR 9 Ch App 79 .… 24.21, 32.20 Cave v Cave (1880) 15 Ch D 639 .… 24.23, 24.25, 24.30

Cavendish v Cavendish (1885) 30 Ch D 227 .… 1.7 Cawdor v Lewis (1835) 1 Y & C Ex 427; 160 ER 174 .… 2.16 CBFC Finance v Dickinson [1992] ACL Rep 295 NSW 19 .… 9.4 CCG International Enterprises Ltd, Re [1993] BCLC 1428 .… 8.17 Cedar Holdings Ltd v Green [1981] Ch 129; [1979] 3 All ER 117 .… 3.49, 4.20, 13.44 Central Bank of India, Ex parte [1986] QB 1114 .… 11.40 Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 . … 39.58 Central Mortgage and Housing Corp v Johnson (1971) 20 DLR (3d) 622 .… 40.1 Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd [1984] 2 NSWLR 128 .… 4.25, 19.39, 24.33, 25.7, 25.8, 25.12, 25.16 Centrax Trustees Ltd v Ross [1979] 2 All ER 952 .… 19.12, 32.36 Chacmol Holdings Pty Ltd v Handberg (2005) 215 ALR 748 .… 3.8, 3.9 Challenge Bank Ltd v Hodgekiss (1995) 7 BPR 14,399 .… 32.42, 39.2 Challenger Managed Investments Ltd v Direct Money Corp Pty Ltd (2003) 12 BPR 22,257 .… 42.19 Challis v Casborn (1715) Prec Ch 407; 24 ER 183 .… 25.6 Chalmers v Pardoe [1963] 1 WLR 677; [1963] 3 All ER 552 .… 2.16, 35.12 Chambers v Goldwin (1804) 9 Ves 254; 32 ER 600 .… 14.1, 33.16, 39.20, 39.53 Chambers v Kingham (1878) 10 Ch D 743 .… 36.2 Chambers v Manchester & Milford Railway Co (1864) 10 Jur NS 700 .… 11.9 Champagne Perrier-Jouet SA v H H Finch Ltd [1982] 3 All ER 713; [1982] 1 WLR 1359 .… 2.18, 6.17, 20.6, 20.8, 26.12 Chan v Cresdon Pty Ltd (1989) 168 CLR 242 .… 19.11, 28.2

Chandler v Bradley [1897] 1 Ch 315 .… 12.24 Chant, Re [1905] 2 Ch 225 .… 16.33 Chant v Deputy Commissioner of Taxation (1991) 22 ATR 79 .… 4.7, 32.1 Chantry House Development plc, Re [1990] BCLC 813 .… 11.43 Chapleo v Brunswick Permanent Benefit Building Society (1881) 6 QBD 696 .… 11.33 Chaplin v Young (1864) 33 Beav 330; 55 ER 395 .… 19.31, 19.33 Chapman, Re 5 UCC Rep Serv 649 (1968) .… 5.44, 5.75 Chapman v Chapman (1851) 13 Beav 308; 51 ER 119 .… 3.40, 3.43 Chapman v Wade [1939] SASR 298 .… 20.6 Chappell v Rees (1852) 1 De GM & G 393; 42 ER 603 .… 30.5, 30.6, 33.26 Charge Card Services Ltd, Re [1987] Ch 150 .… 6.20 Charles v Day (1887) 35 Ch D 544 .… 4.25 Charles v Jones (1886) 33 Ch D 80 .… 40.6 Charles v Jones (1887) 35 Ch D 544 .… 10.12, 20.44, 39.44, 40.10, 40.17 Charlesworth v Mills [1892] AC 231 .… 5.43 Charlewood v Hammer (1884) 28 Sol Jo 710 .… 21.22 Charmelyn Enterprises Pty Ltd v Klonis (1981) 2 BPR 9527 .… 3.17, 17.2 Charter v Watson [1899] 1 Ch 175 .… 32.92 Charter Finance Pty Ltd v Abou-Antoun [2009]NSWSC 247 .… 16.37 Charters v The Cosmopolitan Land Banking Co Ltd (1902) 28 VLR 251 .… 21.4, 21.9, 22.15, 22.52 Chase Corporation (Australia) Pty Ltd v North Sydney Brick and Tile Co Ltd (1994) 35 NSWLR 1; 14 ACSR 586 .… 2.18, 6.17, 11.10, 25.7, 25.12, 25.13, 30.4, 30.5, 30.9, 30.10, 30.12 Chase Manhattan Asia Ltd v Official Receiver etc of First Bangkok City Finance Ltd [1988] 2 HKLR 618 .… 1.25 Chase Manhattan Asia Ltd v Official Receiver etc of First Bangkok City

Finance Ltd [1990] 1 WLR 1181 .… 1.25, 1.27 Chase Manhattan Bank v Gems-By-Gordon 649F (2d) 710 (9th Cir) (1981) . … 2.5 Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] Ch 105; [1979] 3 All ER 1025 .… 32.40 Chase Manhattan Bank NA v Wong Tui San (1992) 11 ACLC 3112 .… 6.16 Chase v Box (1702) Freem Ch 261; 22 ER 1197 .… 32.51 Chase v Westmore (1816) 5 M & S 180; 105 ER 1016 .… 2.49 Chasteauneuf v Capeyron (1882) 7 App Cas 127 .… 6.2, 6.15, 9.15, 9.28 Chatham Empire Theatre (1955) Ltd v Ultrans [1961] 1 WLR 817; [1961] 2 All ER 381 .… 37.11 Chatsworth Properties Ltd v Effiom [1971] 1 All ER 604; [1971] 1 WLR 144 .… 12.19, 18.8 Chatterton v Maclean [1951] 1 All ER 761 .… 35.8 Chatterton v Watney (1881) 17 Ch D 259 .… 7.14, 20.47 Chattis Nominees Pty Ltd v Norman Ross Homeworks Pty Ltd (1992) 28 NSWLR 338 .… 1.49 Cheah Theam Swee v Equiticorp Finance Group Ltd [1992] 1 AC 472 .… 3.34, 3.35, 32.20 Cheah v Equiticorp Finance Group Ltd [1991] 4 All ER 989 .… 24.3 Cheak Theam Swee v Equiticorp Finance Group Ltd [1992] 1 AC 472; [1991] 4 All ER 989 .… 32.12 Cheatley v R (1972) 127 CLR 291 .… 37.14 Cheese v Keen [1908] 1 Ch 245 .… 39.3 Chelsea Estates Investment Trust Co Ltd v Marche [1955] Ch 328 .… 3.27, 37.11 Cheltenham and Gloucester Building Society v Grattridge [1993] TLR 216 . … 20.24 Cheltenham and Gloucester plc v Appleyard [2004] EWCA Civ 291 .…

2.14, 17.12, 42.19 Cheltenham and Glouster plc v Krausz [1997] 1 WLR 1558; [1997] 1 All ER 21 .… 21.21, 21.23 Chennell, Re; Jones v Chennell (1878) 8 Ch D 492 .… 40.6 Chesters, Re; Whittingham v Chesters [1935] Ch 77 .… 36.5 Cheston v Wells [1893] 2 Ch 151 .… 22.37, 39.41 Chesworth v Hunt (1880) 5 CPD 266 .… 31.1, 31.7, 33.13 Chetwynd v Allen [1899] 1 Ch 353 .… 14.6, 42.18 Chia v Rennie (1997) 8 BPR 15,601 .… 4.39, 20.37 Chichester v Marquis of Donegall (1870) 5 Ch App 497 .… 3.32 Chidley, Re; Re Lennard (1875) 1 Ch D 177 .… 23.5 Chief Commissioner of Stamp Duties v Buckle (1998) 192 CLR 226; 151 ALR1 .… 2.18 Chiips Inc v Skyview Hotels Ltd (1994) 155 AR 281 .… 5.91 China and South Sea Bank Ltd v Tan Soon Gin [1990] 1 AC 536; [1989] 3 All ER 839 .… 16.7, 20.21, 20.22, 20.23, 21.21, 42.15 Chinnery v Evans (1864) 11 HL Cas 115 .… 16.33 Chissum v Dewes (1828) 5 Russ 29; 38 ER 938 .… 1.23, 3.42, 40.18 Cholmley v Countess of Oxford (1741) 2 Atk 267; 26 ER 565 .… 21.4, 33.10, 33.25 Cholmondeley (Marquis) v Clinton (Lord) (1817) 2 Mer 171; 35 ER 905 .… 19.12 Cholmondeley v Clinton (1820) 2 Jac & W 1 at 134; 37 ER 527 .… 19.41, 21.13, 33.3 Christian v Field (1842) 2 Hare 177; 67 ER 74 .… 32.26 Christie, Re (1968) 11 FLR 390 .… 27.15 Christmas v Christmas (1725) Cas t King 20; 25 ER 199 .… 30.7 Christy v Van Tromp [1886] WN 111 .… 21.23

Chrysler Corp v Adamatic Inc 208 NW 2d 92(1973) .… 5.104 Chubb Insurance Co of Australia Ltd v Moore [2013] NSWCA 212 .… 6.3 Chung Khiaw Bank Ltd v United Overseas Bank [1970] AC 767 .… 7.8 Church of England Building Society v Piskor [1954] Ch 553 .… 5.79, 12.21 Chute’s Estate, Re [1914] 1 IR 180 .… 25.15, 30.9 CIBC Mortgages plc v Pitt [1994] 1 AC 200; [1993] 4 All ER 433 .… 13.16, 13.17, 13.20, 13.22, 13.24 CIC Insurance Ltd, Re (2001) 38 ACSR 181 .… 11.35 CIC Insurance Ltd v Bankstown Football Club (1997) 187 CLR 384 .… 5.5 Cid v Cortes (1987) 4 BPR 9391 .… 4.28 Cinema Plus Ltd v Australia and New Zealand Banking Group Ltd (2000) 49 NSWLR 513 .… 1.9, 1.48, 6.20, 8.9, 8.11, 8.18 Citibank Pty Ltd v Simon Fredericks Pty Ltd (1991) V ConvR 54-408 .… 6.8, 12.13, 12.17, 19.2 Citibank Pty Ltd v Simon Fredericks Pty Ltd [1993] 2 VR 168 .… 1.51 Citibank Savings Ltd v Stergiou (1996) 66 FCR 587; 145 ALR 80 .… 4.2, 4.21, 19.5, 19.7, 19.8 Citibank Trust Ltd v Ayivor [1987] 3 All ER 241; [1987] 1 WLR 1157 .… 19.23 Citicorp Australia Ltd v McLoughney (1984) 35 SASR 375 .… 20.21 Citicorp Australia Ltd v O’Brien (1996) 40 NSWLR 398 .… 13.36, 38.6 Citicorp Australia Ltd v Syndal Securities Pty Ltd (SC (Qld), 21 Jun 1985, McPherson J, unreported) .… 25.13 Citizens Bank and Trust v Gibson Lumber Co (1989) 96 BR 751 .… 5.38 Citizens Bank of Americus v Federal Financial Services, Inc 235 Ga App 482 (1998) .… 5.87 City Bank of Sydney v McLaughlin (1909) 9 CLR 615 .… 11.20 City Life Assurance Co Ltd, Re; Stephenson’s case [1926] Ch 191 .… 1.53

City Mutual Life Assurance Society Ltd v Lance Creek Meat Works Pty Ltd [1976] VR 1 .… 12.3, 12.11, 12.18, 19.7, 19.10, 19.25, 28.4 City Mutual Life Assurance Society Ltd v Smith (1932) 48 CLR 532 .… 1.7, 15.1 City of London Building Society v Flegg [1988] AC 54 .… 24.1, 24.5, 24.21 City of South Melbourne v Taylor (1891) 17 VLR 167 .… 19.39 City of Sydney Real Estate Co Ltd, Re (1928) 29 SR (NSW) 80 .… 2.18 City Permanent Building Society v Miller [1952] Ch 840 .… 12.21 City Securities Pte, Re; Ho Mun-Tuke Don v Dresdner Bank AG [1990] 2 MLJ 257 .… 6.16 Cityland and Property (Holdings) Ltd v Dabrah [1968] Ch 166; [1967] 2 All ER 639 .… 3.13, 3.15, 13.14, 17.2, 19.13, 32.12, 32.14, 32.15, 32.17, 32.40, 39.42, 39.43, 39.57 Claire, Re (1889) 23 LR Ir 281 .… 22.42 Clare Morris Ltd v Hunter BNZ Finance Ltd (1988) 4 BPR 9609 .… 17.9, 20.15 Clark, Re; Ex parte Newland (1876) 4 Ch D515 .… 2.35 Clark v Crownshaw (1832) 3 B & Ad 804; 110 ER 295 .… 1.20 Clark v Hoskins (1868) 37 LJ Ch 561 .… 40.23 Clark v National Mutual Life Association of Australasia Ltd [1966] NZLR 196 .… 16.10 Clark v Raymor (Brisbane) Pty Ltd [1982] Qd R 479 .… 11.4 Clark v Raymor (Brisbane) Pty Ltd (No 2)[1982] Qd R 790 .… 1.34, 4.24, 28.15 Clark v Vile (1969) 209 EG 169 .… 3.16 Clark v Wilmot (1841) 1 Y & C Ch Cas 53;62 ER 787 .… 39.11 Clark v Woor [1965] 2 All ER 353 .… 16.36 Clark Boyce v Mouat [1994] 1 AC 428 .… 42.7

Clark Equipment of Canada Ltd v Bank of Montreal (1984) 8 DLR (4th) 424 .… 5.38 Clarke, Re (1887) 35 Ch D 109 .… 1.34, 1.39 Clarke, Re; Coombe v Carter (1887) 36 Ch D 348 .… 1.34, 1.41 Clarke, Re; Ex parte East and West India Dock Co (1881) 17 Ch D 759 .… 23.14 Clarke v Japan Machines (Australia) Pty Ltd [1984] 1 Qd R 404 .… 17.9, 20.15, 20.36, 20.37 Clarke v Japan Machines (Australia) Pty Ltd (No 2) [1984] 1 Qd R 421 .… 20.38, 20.42 Clarke v Lord Abingdon (1810) 17 Ves 106;34 ER 41 .… 39.48 Clarke v Palmer (1882) 21 Ch D 124 .… 24.41 Clarke v Pannell (1884) 29 Sol Jo 147 .… 21.21 Clark’s Refrigerated Transport Pty Ltd (in liq), Re [1982] VR 989 .… 3.8, 3.14, 17.2, 25.15 Clarkson v Mutual Life Association of Australasia (1879) 5 QSCR 165 .… 4.23, 4.25, 4.31 Classic Heights Pty Ltd v Black Hole Investments Pty Ltd (1994) V ConvR 54-506 .… 4.27 Clay v—(1745) 9 Sim 317n; 59 ER 380 .… 22.29 Clayton v Clayton [1930] 2 Ch 12 .… 3.31, 4.31 Clayton v Vincents’s Products Ltd (1934) 34 SR(NSW) 214 .… 6.25 Clayton’s case (1816) 1 Mer 572; 35 ER 781 .… 30.9 Clements v Ellis (1934) 51 CLR 217 .… 4.11, 4.38 Clifden (Lord), Re; Annaly v Agar-Ellis [1900] 1 Ch 774 .… 16.33, 16.35 Cliff v Wadsworth (1843) 2 Y & CCC 598; 63 ER 268 .… 32.49, 40.9, 40.13 Clifford v Turrill (1848) 2 De G & Sm 1; 64 ER 1 .… 2.43 Clifford Harris & Co v Solland International Ltd [2005] 2 All ER 334 .…

2.37 Cliffshaw Pty Ltd v Old Kiama Wharf Pty Ltd [2007] NSWSC 276 .… 20.8 Clifton Securities Ltd v Huntley [1948] 2 All ER 283 .… 19.19, 29.20 Clinton v Hooper (1791) 3 Bro CC 201; 29 ER 49 .… 30.7 Close v Phipps (1844) 7 Man & G 586; 135 ER 236 .… 32.40 Close Asset Finance Ltd v Derek Allan Taylor [2006] EWCA 788 .… 39.11 Clough Mill Ltd v Martin [1984] 3 All ER 982; [1985] 1 WLR 111 .… 8.13 Clough v Dixon (1841) 10 Sim 564; 59 ER 235 .… 33.4 Clough v Samuel [1905] AC 442 .… 13.7 Clowes v Hughes (1870) LR 5 Exch 160 .… 12.10 Clyde Properties Ltd v Tasker [1970] NZLR 754 .… 17.9, 20.15 Clydesdale v McManus (1934) 36 WALR 89 .… 18.23 Clyne v FCT (1981) 150 CLR 1 .… 8.11, 8.21 CNG Co (Aust) Pty Ltd v ANZ Banking GroupLtd [1992] ACL Rep 185 NSW 3; (1992) 6 BPR 97434 .… 3.36 Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 28 NSWLR 1 .… 1.41 Coast Realities Ltd v Nolan (1972) 20 DLR (3d) 96 .… 16.11 Coast Securities No 9 Pty Ltd v Bondoukou Pty Ltd (1986) 61 ALJR 285; 69 ALR 385 .… 25.3 Cobbett v Brock (1855) 20 Beav 524; 52 ER 706 .… 16.39 Cochrane v Cochrane (1985) 3 NSWLR 403 .… 14.6, 36.9, 42.18 Cockburn v Edwards (1881) 18 Ch D 449 .… 19.30, 32.53, 39.55, 42.3, 42.4 Cockcroft, Re; Broadbent v Groves (1883) 24 Ch D 94 .… 29.2 Cockell v Taylor (1882) 15 Beav 475; 51 ER 475 .… 14.2 Cocker v Bevis (1665) 1 Cas in Ch 61; 22 ER 695 .… 22.35 Cockes v Sherman (1676) Freem Ch 13; 22 ER 1026 .… 22.6

Cocks v Gray (1857) 1 Giff 77; 65 ER 831 .… 19.37 Cocks v Stanley (1857) 4 Jur NS 942 .… 40.13 Coco v R (1994) 179 CLR 427 .… 5.4 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 .… 1.25, 3.6, 3.7 Codrington v Johnstone (1838) 1 Beav 520; 48 ER 1042 .… 39.18 Coggs v Barnard (1703) 2 Ld Raym 909; 92 ER 107 .… 1.11 Cohen, Re [1960] Ch 179 .… 29.2 Cohen v Mitchell (1890) 25 QBD 262 .… 11.22, 26.6 Cohen and Cohen, Re [1905] 2 Ch 137 .… 40.31 Coldunell Ltd v Gallon [1986] QB 1184; [1986] 1 All ER 429 .… 13.18 Cole v Blake (1793) Peake 238; 170 ER 142 .… 32.47 Cole v Muddle (1852) 10 Hare 186; 68 ER 892 .… 11.18 Coleby v Coleby (1866) LR 2 Eq 803 .… 29.2 Coleman v De Lissa (1885) 6 LR (NSW) Eq 104 .… 4.7, 24.49, 24.51 Coleman v Llewellin (1886) 34 Ch D 143 .… 39.37, 39.41 Coleman v London County and Westminster Bank Ltd [1906] 2 Ch 353 .… 24.30 Coleman v Mellersh (1850) 2 Mac & G 309; 42 ER 119 .… 39.3 Coleman v Winch (1721) 1 P Wms 775; 24 ER 609 .… 25.6 Coles v Forrest (1847) 10 Beav 552; 50 ER 694 .… 33.5, 40.15 Coles Myer Finance Ltd v FCT (1993) 176 CLR 640 .… 41.3 Colin D Young Pty Ltd v Commercial and General Acceptance Ltd (1982) Conveyancing Service (NSW) [92179]; (1982) NSW ConvR 55-097 .… 20.6, 20.20, 20.32, 39.1 Collection Point Pty Ltd v Commissioner of Taxation (2012) 129 ALD 263; [2012] FCA 720 .… 5.4 Collection Point Pty Ltd v Commissioner of Taxation (2013) 212 FCR 184;

[2013] FCAFC 67 .… 5.4 Collie, Re; Ex parte Manchester and County Bank (1876) 3 Ch D 481 .… 23.8 Collier v Morlend Finance (Victoria) Pty Ltd [1989] NSW Conv R 55-473; [1989] ASC 55-716 .… 13.34 Collins, Re (1982) 140 DLR (3d) 755 .… 3.45 Collins, Re [1925] Ch 556 .… 6.19, 6.23 Collins v Lamport (1865) 34 LJ Ch 196 .… 9.16 Collins v Parker (1984) NSW ConvR 55-212 .… 38.6 Collins v Plumber (1709) 1 P Wms 104; 24 ER 313 .… 2.7 Collins v Shirley (1830) 1 Russ & M 638; 39 ER 245 .… 22.9, 33.27 Collinson v Jeffery [1896] 1 Ch 644 .… 22.36, 33.23 Collyer v Isaacs (1881) 19 Ch D 342 .… 6.23 Colmer v Ede (1870) 40 LJ Ch 185 .… 2.35 Colnbrook Chemical and Explosives Co, Re; A-G v Colnbrook Chemical and Explosives Co [1923] 2 Ch 289 .… 19.21, 39.25 Colonial Bank of Australasia v Kerr (1889) 15 VLR 314 .… 32.52 Colonial Bank of Australasia v Riddel (1893) 19 VLR 280 .… 4.24, 24.51 Colonial Bank v Cady (1890) 15 App Cas 267 .… 6.17 Colonial Bank v Roache (1870) 1 VR (L) 165 .… 4.10, 19.10 Colonial Bank v Whinney (1886) 11 App Cas 426 .… 26.12 Colonial Mutual Insurance Co Ltd v ANZ Banking Group (NZ) Ltd [1995] 1 WLR 1140; [1995] 3 All ER 987 .… 3.20 Colonial Trusts Corp, Re; Ex parte Bradshaw (1879) 15 Ch D 465 .… 8.12, 8.19 Color Leasing 3 v Federal Deposit Insurance Corporation 975 F Supp 177 . … 5.87 Color Point Pty Ltd v Mrkby’s Communication Group Pty Ltd (Federal

Court of Australia, Weinberg J, 27 November 1998, unreported) .… 2.48 Colquhoun v Brooks (1888) 21 QBD 52 .… 5.42 Coltman v Chamberlain (1890) 25 QBD 328 .… 9.15 Colyer v Finch (1854) 19 Beav 500; 52 ER 445 .… 24.36 Colyer v Finch (1856) 5 HL Cas 905; 10 ER 1159 .… 11.24, 24.36, 30.15 Combined Weighing & Advertising Machine Co, Re (1889) 43 Ch D 99 .… 7.14 Comfort v Betts [1891] 1 QB 737 .… 6.5 Coming, Ex parte (1803) 9 Ves 115; 32 ER 545 .… 3.41 Commercial and General Acceptance Ltd v Nixon (1981) 152 CLR 491 .… 20.21, 20.22, 20.23, 20.27, 20.28, 20.30, 20.32, 20.33, 20.35 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 .… 1.6, 13.16, 13.18, 13.30, 13.31, 13.32, 13.33, 13.39 Commercial Bank of Australia Ltd v Schierholter [1981] VR 292 .… 20.49, 27.3 Commercial Bank v Breen (1889) 15 VLR572 .… 19.7 Commercial Bank of Tasmania v Jones [1893] AC 313 .… 35.9 Commercial Banking Co of Sydeny Ltd v Love (1974) 133 CLR 459 .… 41.9 Commercial Banking Co of Sydney Ltd v Gaty [1978] 2 NSWLR 271 .… 35.10 Commercial Banking Co of Sydney Ltd v George Hudson Pty Ltd (1973) 131 CLR 605 .… 11.43 Commercial Factors Ltd v Maxwell Printing Ltd [1994] 1 NZLR 724 .… 6.9 Commissioner for Government Transport v Pacific Acceptance Corp Ltd (1964) 82 WN (Pt 1)(NSW) 71 .… 4.10 Commissioner of Stamp Duties v Bone [1977] AC 577 .… 34.2 Commissioner of Taxation v Gloxinia Investments (Trustee) (2010) 183 FLR 420; [2010] FCAFC 46 .… 5.79

Commissioner of Taxation v Government Insurance Office of NSW (1992) 36 FCR 314; 109 ALR 159 .… 2.9, 2.50 Commissioner of Taxation v ICI Australia Ltd (1971–72) 127 CLR 529 .… 5.4 Commissioner of Taxation v Lai Corp Pty Ltd (1986) 83 FLR 63 .… 8.18 Commissioners of the State Bank of Victoria v Judson (1985) ACLC 576 .… 8.24 Commissioners of the State Savings Bank of Victoria v Millane [1931] VLR 18 .… 12.11 Commodore Pty Ltd v Perpetual Trustees Estates Agency Co of New Zealand Ltd [1984] 1 NZLR 324 .… 17.9 Commonwealth Bank of Australia v Aspenview Productions Pty Ltd [2001] VSC 444 .… 3.9 Commonwealth Bank of Australia v Baranyay [1993] 1 VR 589 .… 12.13, 12.18, 12.19, 12.24, 12.26, 19.4 Commonwealth Bank of Australia v Bird (2011) 15 BPR 29,471 .… 19.6 Commonwealth Bank of Australia v Bowman [2003] WASC 205 .… 19.22 Commonwealth Bank of Australia v Buffett (SC (Norfolk Is), Morling J, 1 April 1993, unreported) .… 20.8 Commonwealth Bank of Australia v Butterell (1994) 35 NSWLR 64; 14 ACSR 343 .… 1.11, 2.52 Commonwealth Bank of Australia v Duggan [2003] FCAFC 64 .… 20.5, 20.6 Commonwealth Bank of Australia v Figgins Holdings Pty Ltd [1994] 2 VR 505 .… 12.13, 12.18, 19.4, 19.7, 19.25, 28.4 Commonwealth Bank of Australia v Fitzpatrick [2013] NSWSC 169 Commonwealth Bank of Australia v Graham [1995] ATPR 41-387 .… 13.2 Commonwealth Bank of Australia v Green (CA (NSW), 24 September 1997, unreported) .… 24.44 Commonwealth Bank of Australia v Grubic (SC (SA), 27 August 1993,

unreported, FC; noted (1993) 1 APLJ) .… 25.7, 25.12, 25.16 Commonwealth Bank of Australia v Hadfield (2001) 53 NSWLR 614 .… 19.34, 39.2 Commonwealth Bank of Australia v Hadfield [2005] NSWCA 350 .… 5.25, 20.21 Commonwealth Bank of Australia v Horvath [1996] ANZ Conv R 501 .… 2.13, 2.18 Commonwealth Bank of Australia v Jackson (1992) V ConvR 54-447 .… 19.2, 19.7, 19.22, 20.15 Commonwealth Bank of Australia v Lee (1996) 22 ACSR 574 .… 20.21 Commonwealth Bank of Australia v Muirhead [1997] 1 Qd R 567 .… 20.22 Commonwealth Bank of Australia v Platzer [1997] 1 Qd R 266 .… 24.9 Commonwealth Bank of Australia v Saunders (1995) 64 SASR 428 .… 3.13, 17.8, 19.2 Commonwealth Bank of Australia v Trellis Holdings Ltd (1995) 19 ACSR 319; 14 ACLC 650 .… 9.12 Commonwealth Trading Bank of Australia v Inglis [1966] Tas SR 104 .… 12.9, 12.11 Commonwealth Trading Bank v Colonial Mutual Life Assurance Society Ltd [1970] Tas SR 120; (1970) 26 FLR 338 .… 30.9, 30.10, 30.16 Commonwealth v Orr (1981) 37 ALR 653 .… 12.18, 12.19, 12.20, 12.21, 12.24, 12.26, 19.30 Commonwealth v Orr (1981) 40 ACTR 21 .… 12.18, 12.19, 12.20, 12.21 Commonwealth v Verwayen (1990) 170 CLR 394 .… 16.7, 34.6, 35.1 Community Futures Development Corp of Howe Sound v Spargo (2000) 1 PPSAC (3d) 263 .… 5.38 Compania Colombiana de Seguros v Pacific Steam Navigation Co [1905] 1 QB 101; [1964] 1 All ER 216 .… 6.4, 6.7, 7.2, 6.9 Compania de Electricidad de la Provincia de Buenos Aires Ltd, Re [1980] Ch 146; [1978] 3 All ER 668 .… 16.28, 16.34

Composite Buyers Ltd v Soong (1995) 38 NSWLR 286 .… 4.27 Composite Buyers Ltd v State Bank of NSW (1990) 3 ACSR 196 .… 5.79 Composite Buyers Ltd v State Bank of New South Wales [1991] ACL Rep 295 NSW 1 .… 8.19 Congresbury Motors Ltd v Anglo-Belge Finance Co Ltd [1970] Ch 294; [1969] 3 All ER 545 .… 39.57 Coni v Robertson [1969] 2 All ER 609; [1969] 1 WLR 1007 .… 33.11 Conn, Re 16 BR 454 .… 5.85, 5.86 Connolly Bros Ltd (No 2), Re; Wood v Connolly Bros Ltd [1912] 2 Ch 25 . … 5.79, 8.19, 12.21 Connolly v Barter [1904] 1 IR 130 .… 36.8 Connolly v Noone and Cairns Timber Ltd (1912) St R Qd 70 .… 28.16 Connolly v Ryan (1922) 30 CLR 498 .… 12.3, 12.18, 19.4, 19.7, 19.25 Conroy, Re (1990) 103 FLR 233 .… 2.43 Conroy v Knox (1901) 11 QLJ 112 .… 20.40 Consolidated Goldfields of South Africa v Simmer and Jack East Ltd (1913) 82 LJ Ch 214 .… 8.2 Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423 .… 4.12, 4.13, 6.7, 14.5, 17.5, 34.3 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 . … 13.46, 24.20 Contemporary Cottages (NZ) Ltd v MarginTraders Ltd [1981] 2 NZLR 114 . … 6.5, 6.19 Contractors Bonding Ltd v Snee [1992] 2 NZLR 157 .… 13.18, 13.20, 13.31 Cook, Re; Ex parte Hodgson (1821) 1 Gl & J 12 .… 1.40, 23.5 Cook v Bank of New South Wales (1982) 2 BPR 9580 .… 17.7 Cook v Fowler (1874) LR 7 HL 27 .… 1.40, 39.43 Cook v Guerra (1872) LR 7 CP 132 .… 12.7, 12.13

Cook v Hart (1871) LR 12 Eq 459 .… 21.16, 40.18 Cook v Thomas (1876) 24 WR 427 .… 19.31 Cooke v Brown (1840) 4 Y & C Ex 227; 160 ER 989 .… 40.13 Cooke v Clayworth (1811) Ves Jun 12 .… 13.30 Cooke v Poole [1885] WN (Eng) 15 .… 11.6 Cooke v Wilton (1860) 29 Beav 100; 59 ER 564 .… 25.4 Cooksey, Re; Ex parte Portal & Co (1900) 83 LT 435 .… 23.8 Cookson v Lee (1853) 23 LJ Ch 473 .… 24.6 Coombe, Ex parte (1810) 17 Ves 369; 34 ER 142 .… 3.40 Coombe v Stewart (1851) 13 Beav 111; 51 ER 44 .… 22.32 Coomber v Curry (1993) V ConvR 54-464 .… 4.11 Coombs and Freshfield and Fernley, Re (1850) 4 Ex 839; 154 ER 1456 .… 2.22 Coomer, Re 8 BR 351 (1980) .… 5.84, 5.85 Cooper, Re; Cooper v Vesey (1882) 20 Ch D 611 .… 13.43, 27.15, 33.4 Cooper v Federal Commissioner of Taxation (1958) 100 CLR 131 .… 36.17 Cooper v Jenkins (1863) 32 Beav 337; 55 ER 435 .… 42.13 Cooper v Stephenson (1852) 16 Jur 424 .… 42.4 Cooper and Allen’s Contract, Re (1876) 4 Ch D802 .… 20.6 Co-operative Farmers & Graziers Direct Meat Supply Ltd v Smart [1977] VR 386 .… 18.25 Coote v Mammon (1724) 5 Bro Parl Cas 355; 2 ER 727 .… 24.7 Cope v Cope (circa 1710) 2 Salk 449; 91 ER 389 .… 30.3 Copis v Middleton (1818) 2 Madd 410; 56 ER 386 .… 33.14 Coptic Ltd v Bailey [1972] Ch 446 .… 2.14 Corbett v Hallifax plc [2003] 4 All ER 180; [2003] 1 WLR 964 .… 20.40 Corbett v National Provident Association (1900) 17 TLR 5 .… 32.80

Corbett v Plowden (1884) 25 Ch D 678 .… 12.18, 12.19, 19.30 Corbett v Sullivan (1898) 19 ALT 177; 4 ALR 38 .… 17.1, 39.42, 39.57 Corder v Morgan (1811) 18 Ves 344; 34 ER 347 .… 20.1, 20.19 Corello v Jordan [1935] St R Qd 294 .… 14.1 Corin v Patton (1990) 169 CLR 540 .… 3.32, 6.11, 11.4 Cork and Youghall Railway Co, Re (1860) LR 4 Ch App 748 .… 42.19 Cornbrook Brewery Co Ltd v Law Debenture Corp Ltd [1904] 1 Ch 103 .… 11.42 Cornish v Midland Bank plc [1985] 3 All ER 513 .… 13.22 Cornish v Searell (1828) 8 B & C 471; 108 ER 1118 .… 12.11 Coronation Street Industrial Properties Ltd v Ingall Industries plc [1989] 1 All ER 979; [1989] 1 WLR 304 .… 19.40 Coroneo v Australian Provincial Assurance Association Ltd (1935) 35 SR (NSW) 391 .… 20.1, 20.20, 20.39, 39.2, Coronet Homes Pty Ltd v Bankstown Finance & Investment Co Pty Ltd [1966] 2 NSWR 351 .… 3.11 Corozo Pty Ltd v Total Australia Ltd [1987] 2 Qd R 11 .… 1.34, 8.14, 31.4 Corozo Pty Ltd v Total Australia Ltd [1988] 2 Qd R 366 .… 1.33, 1.34, 8.14 Corozo Pty Ltd v Westpac Banking Corp [1987] 2 Qd R 311 .… 32.56 Corozo Pty Ltd v Westpac Banking Corp [1988] 2 Qd R 481 .… 32.56 Corpers (No 664) Pty Ltd v NZI Securities Australia Ltd (1989) NSW ConvR 55-475 .… 1.41, 35.12 Corsellis v Patman (1867) LR 4 Eq 156 .… 22.43 Corser v Cartwright (1875) LR 7 HL 731 .… 11.16 Cory Bros & Co v Mecca Turkish SS (Owners); The Mecca [1897] AC 286 . … 32.54 Cory v Eyre (1863) 1 De GJ & Sm 149; 46 ER 58 .… 11.24, 24.25, 24.45, 28.16

Coshott v Learoyd [2001] FCA 88 .… 7.14 Cosser v Collinge (1832) 3 My & K 283; 40 ER 108 .… 24.19 Cossill v Strangman (1962) 80 WN (NSW) 628 .… 6.4, 6.9 Cosslett (Contractors) Ltd, Re [1998] Ch 495; [1997] 4 All ER 115 .… 1.4, 2.3, 8.11, 8.13, 11.41 Costain Australia Ltd v Superior Pipe Installations Pty Ltd [1975] 1 NSWLR 491 .… 7.10 Cotgrave v Cotgrave [1992] Fam 33; [1991] 4 All ER 537 .… 13.49 Cotham v West, Rolls, Nov 15 1839, Reg Lib .… 39.40 Cottee Dairy Products Pty Ltd v Minad Pty Ltd (1997) 8 BPR 15,611 .… 4.12 Cotterell v Price [1960] 3 All ER 315; [1960] 1 WLR 1097 .… 16.29, 16.32, 16.33, 16.35, 32.92 Cotterell v Purchase (1734) Cas Temp Talb 61; 25 ER 663 .… 1.28 Cotterell v Stratton (1872) 8 Ch App 295 .… 40.1, 40.11 Cotterell v Stratton (1874) LR 17 Eq 543 .… 40.1, 40.2 Cottey v National Provincial Bank of England Ltd (1904) 48 Sol Jo 589 .… 24.37 Cottingham v Earl of Shrewsbury (1843) 3 Hare 627; 67 ER 530 .… 22.20, 33.25, 39.9 Cotton v Heyl [1930] 1 Ch 510 .… 6.11 Cottrell v Finney (1874) LR 9 Ch App 541 .… 14.1, 39.53 Cottrill v Steyning & Littlehampton Building Society [1966] 2 All ER 295 . … 1.41 Coughlan v George (2003) 11 BPR 20,919 .… 39.43, 39.60 Couldery v Bartrum (1881) 19 Ch D 394 .… 23.8 Coulls v Bagot’s Executor and Trustee Co Ltd (1967) 119 CLR 460 .… 6.5, 7.3, 30.2

Council of the Law Institute of Victoriav Martin (1992) ConvR 54-449 .… 42.2 Countess of Shrewsbury v Earl of Shrewsbury (1790) 3 Bro CC 120; 29 ER 445 .… 36.5 Country Banking Corporation v Dean [1998] AC 338 .… 5.104 Country Stores Pty Ltd, Re [1987] 2 Qd R318 .… 13.7 Countrywide Banking Corp v Robinson [1991] 1 NZLR 75 .… 20.21 County of Gloucester Bank v Rudry Merthyr Steam and House Coal Colliery Co [1895] 1 Ch 629 .… 1.23, 19.31, 19.34, 39.33 Courtenay v Austin (1961) 78 WN (NSW) 1082 .… 28.4 Courtenay v Wright (1860) 2 Giff 337; 66 ER 141 .… 32.73 Courtier, Re; Coles v Courtier (1886) 34 Ch D 136 .… 11.12 Courtney v Taylor (1843) 6 Man & G 851; 134 ER 1135 .… 17.4 Cousins, Re (1886) 31 Ch D 671 .… 24.22, 42.5 Couston, Re; Ex parte Watkins [1873] LR 8 Ch 520 .… 5.43 Coutts & Co v Somerville [1935] Ch 438 .… 12.23, 12.24 Covacich v Riodan [1994] 2 NZLR 502 .… 8.20 Coventry Permanent Economic Building Society v Jones [1951] 1 All ER 901 .… 12.21 Cowburn, Re; Ex parte Firth (1882) 19 Ch D 419 .… 3.21, 40.24, 42.1 Cowderoy, Re; Ex parte Martin (1835) 2 Mont & A 243 .… 3.43 Cowdry v Day (1859) 1 Giff 316; 65 ER 936 .… 42.4 Cowell v Simpson (1809) 16 Ves 275; 33 ER 989 .… 2.32 Cowell v Stacey (1887) 13 VLR 80 .… 28.7 Cowper v Green (1841) 7 M & W 633; 151 ER 920 .… 34.2 Cowper v Smith (1838) 4 M & W 519; 150 ER 1534 .… 35.8 Cox v Dublin City Distillery Co Ltd (No 3) [1917] 1 IR 203 .… 22.5

Cox v Esanda Finance [2000] NSWSC 502 .… 20.8 Cox v Hickman (1860) 8 HL Cas 268; 11 ER 431 .… 6.22 Cox v Watson (1877) 7 Ch D 196 .… 22.47 Cox and Neve, Re [1891] 2 Ch 109 .… 24.15 Cox Moore v Peruvian Corporation Ltd [1908] 1 Ch 604 .… 8.16, 8.18 Cracknall v Janson (1877) 6 Ch D 735 .… 36.12 Cracknall v Janson (1879) 11 Ch D 1 .… 31.5, 31.7, 31.8, 31.10 Craddick v Cook (1863) 9 Jur NS 454 .… 33.3 Cradock v Rogers (1884) 53 LJ Ch 968 .… 42.4 Cradock v Scottish Provident Institution (1893) 69 LT 380 .… 1.34, 2.3, 2.7 Cradock v Scottish Provident Institution (1894) 70 LT 718 .… 1.34, 1.40, 2.3, 2.7 Crago v Multiquip (1998) ATPR 41-620 .… 5.10 Cragg v Taylor (1866) LR 1 Ex 148 .… 7.8 Craigie v Champion Mortgages Pty Ltd [2007] NSWCA 15 .… 9.12 Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305 .… 35.5 Crampton v Frenchy [1996] ANZ ConvR 156 .… 4.27 Crawshay v Homfray (1820) 4 B & Ald 50; 106 ER 856 .… 2.49 Creasey’s Grain Enterprises Pty Ltd v Clarke and Barwood Lawyers Colac Ltd [2004] VSC 77 .… 3.6, 3.7, 3.8 Credit Suisse Canada v 1133 Yonge Street Holdings Ltd (1996) 28 OR (3d) 670; 11 PPSAC (2d) 375 .… 5.35 Credit Suisse Canada v 1133 Yonge Street Holdings Ltd (1998) 114 OAC 296; 14 PPSAC (2d) 61 (Ont CA) .… 5.26, 5.35, 5.116 Credland v Potter (1874) 10 Ch App 8 .… 40.11 Crenver etc Mining Co Ltd v Willyams (1866) 35 Beav 353; 55 ER 932 .… 33.9 Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19

NSWLR 40 .… 13.38 Cresswell v Potter [1978] 1 WLR 255 .… 13.12, 13.23 Crest Realty Ltd, Re [1977] 2 NSWLR 450 .… 37.13 Cretanor Maritime Co Ltd v Irish Marine Management Ltd [1978] 3 All ER 164 .… 8.21 Cripps, Re [1946] 1 Ch 265 .… 12.23, 18.9 Cripps v Jee (1793) 4 Bro CC 472; 29 ER 994 .… 1.25 Cripps v Wood (1882) 51 LJ Ch 584 .… 21.21, 22.27 Cripps (Pharmaceuticals) Ltd v Wickenden [1973] 2 All ER 606; [1973] 1 WLR 944 .… 17.9, 18.7, 19.15 Cripps Warburg Ltd v Cologne Investment Co Ltd [1980] IR 321 .… 1.43 Crisp, Ex parte (1744) 1 Atk 133; 26 ER 87 .… 35.11 Crocombe v Pine Forests of Australia Pty Ltd [2005] NSWSC 151 .… 11.5, 12.5 Crocombe v Pine Forests of Australia Pty Ltd (No 2) [2005] NSWSC 245 . … 11.5 Croft v Cavanagh .… 19.23 Croft v Graham (1863) 2 De GJ & Sm 155; 46 ER 334 .… 13.11, 13.14 Croft v Kennaugh [1945] VLR 40 .… 4.25, 4.35, 10.8, 19.5, 19.6, 19.7, 19.11, 19.14, 19.23 Croftbell Ltd, Re [1990] BCLC 844; [1990] BCC 781 .… 8.14 Crofton v Ormsby (1806) 2 Sch & Lef 583 .… 24.19, 24.21 Crompton v Earl of Effingham (1782) 9 Sim311n; 59 ER 377 .… 22.35 Cromwell Property Investment Co Ltd v Western & Toovey [1934] Ch 322 . … 32.36, 32.38 Croney v Nand [1999] Qd R 342 .… 19.22 Cronin v State Bank of South Australia (1995) ANZ ConvR 119 .… 19.5 Crosbie-Hill v Sayer [1908] 1 Ch 866 .… 34.3

Crossley v Elworthy (1871) LR 12 Eq 158 .… 13.6 Crosthwaite v Hopkins (1895) 1 ALR 33 .… 19.10 Crothers, Re [1930] VLR 49 .… 6.15 Crouch v Credit Foncier of England (1873) LR 8 QB 374 .… 6.3, 7.1 Crow v Campbell (1884) 10 VLR 186 .… 4.22 Crowe v Ballard (1740) 1 Ves 215; 30 ER 308 .… 13.3 Crowe’s Mortgage, Re (1871) LR 13 Eq 26 .… 22.48 Crowle v Russell (1878) 4 CPD 186 .… 16.7 Crowley v Fenry (1888) 22 LR Ir 96 .… 22.49 Crowley v Templeton (1914) 17 CLR 457 .… 4.33, 28.3 Crunden and Meux’s Contract, Re [1909] 1 Ch 690 .… 20.4 Cruse v Nowell (1856) 25 LJ Ch 709 .… 15.3 Crusoe d Blencowe v Bugby (1771) 3 Wills 234; 95 ER 1030 .… 13.53 Cryne v Barclays Bank plc [1987] BCLC 548 .… 17.9, 18.6 CTM Nominees Pty Ltd v Galba (1982) 2 BPR 9588 .… 42.8 Cuban Land and Development Co, Re (1911) Ltd [1921] 2 Ch 147 .… 32.14 Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949; [1971] 2 All ER 633 .… 18.13, 18.13, 20.1, 20.21, 20.23, 20.27, 20.33, 30.35 Cumberland Court (Brighton) Ltd v Taylor [1964] Ch 29; [1963] 2 All ER 536 .… 32.61 Cumberland Union Banking Co v Maryport Hematite Iron and Steel Co [1892] 1 Ch 92 .… 1.20, 21.15, 22.23 Cuming, Re (1869) LR 5 Ch App 72 .… 22.48 Cummins v Fletcher (1880) 14 Ch D 699 .… 31.1, 31.4 Cunard SS Co Ltd, Re [1908] WN (Eng) 160 .… 11.43 Cunard SS Co Ltd v Hopwood [1908] 2 Ch 564 .… 11.42 Cunningham v National Australia Bank Ltd (1987) 15 FCR 495 .… 20.38

Cunningham-Reid v Public Trustee [1944] KB 602 .… 30.2 Curling v Law Society [1985] 1 WLR 470; [1985] 1 All ER 705 .… 7.1 Currey v Federal Building Society (1929) 42 CLR 421 .… 4.5 Curtis v Rush (1814) 2 Ves & B 416; 35 ER 378 .… 35.5 Custom Credit Corp Ltd v Heard and Raphael (1982) 31 SASR 101 .… 19.16 Custom Credit Corp Ltd v Heard and Raphael (1983) 33 SASR 45 .… 6.18, 11.28 Custom Credit Corp Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42 .… 4.28, 11.15 Cuthbertson v Irving (1859) 4 H & N 742; 157 ER 1034 .… 12.20, 12.21 Cuthbertson v Irving (1860) 6 H & N 56; 158 ER 56 .… 12.20, 12.21 Cuzeno RVM Pty Ltd v Overton Investments Pty Ltd (2002) 10 BPR 19,425 .… 3.8 D D & J Fowler (Australia) Ltd v Bank of New South Wales [1982] 2 NSWLR 879 .… 17.8, 30.2 D Jones & Co’s Mortgage, Re (1888) 59 LT 859 .… 22.48 Daintry, Re; Ex parte Arkwright (1864) 3 Mont D & De G 129 .… 3.38 Dale v Smithwick (1690) 2 Vern 151; 23 ER 704 .… 3.49 Dallas, Re [1904] 2 Ch 385 .… 6.14, 26.1, 26.3, 26.13, 26.15, 26.18, 26.23 Dalle Nogare, Re (1964) 6 FLR 277 .… 7.10 Dallimore v Oriental Bank Corp (1875) 1 VLR (Eq) 13 .… 39.32 Dallow v Garrold; Ex parte Adams (1884) 14 QBD 543 .… 2.48 Dalston Development Pty Ltd v Dean [1967] WAR 176 .… 2.8, 7.9 Dalton v Christofis [1978] WAR 42 .… 1.25 Dalton v Hayter (1844) 7 Beav 313; 49 ER 1085 .… 21.14, 33.7, 33.8

Dampier Salt (Operations) Pty Ltd v Collector of Customs (1995) 133 ALR 502 .… 5.4 Dandoroff v Rogozinoff [1988] 2 NZLR 588 .… 13.37 Daniel v Bank of Hayward 425 NW 2d 416 (1988) .… 5.104 Daniel v Russell (1807) 14 Ves 393; 33 ER 572 .… 26.8 Daniel v Skipwith (1787) 2 Bro CC 155; 29 ER 89 .… 21.11, 22.10 Daniell v Paradiso (1991) ANZ ConvR 496 .… 28.16 Daniell v Sinclair (1881) 6 App Cas 181 .… 39.3, 39.50 Daniels v Pynbland (No 2) (1985) 4 BPR 9716 .… 1.23 Daniher v Fitzgerald (1919) 19 SR (NSW) 260 .… 4.29, 12.18 Danziger v The Hydro-Electric Commission [1961] Tas SR 20 .… 5.4 Daponte v Schubert and Roy Nominees Ltd [1939] Ch 958 .… 7.8, 7.9 Darby’s Estate, Re; Rendall v Darby [1907] 2 Ch 465 .… 30.4, 30.6 Darbyshire v Darbyshire (1905) 2 CLR 787 .… 27.10 Darcy v Callan (1836) 1 Jo Ex Ir 614 .… 33.14 Darlow v Cooper (1865) 34 Beav 281; 55 ER 643 .… 16.7 Darzinskas, Re (1981) 132 DLR (3d) 77 .… 5.42 Dashwood v Bithazey (1729) Mos 196; 25 ER 347 .… 21.11 Dashwood v Blythway 191729) 1 Eq rep 217, pl 3; 21 ER 1072 .… 22.38 Data Homes Pty Ltd, Re [1971] 1 NSWLR 338; [1972] 2 NSWLR 22 .… 1.57 D’Auvergne v Cooper [1899] WN (Eng) 256 .… 7.9 Davenport v James (1847) 7 Hare 249; 68 ER 102 .… 22.4, 40.4 Davenport v King (1883) 49 LR 92 .… 11.6 Davey v Durrant; Smith v Durrant (1857) 1 De G & J 535; 44 ER 830 .… 20.6, 20.23, 20.32 David Lloyd & Co, Re; Lloyd v David Lloyd & Co (1877) 6 Ch D 339 .…

23.3 David Morris Fine Cars Ltd v North Sky Trading Inc (Trustee of) (1996) 38 Alta LR (3d) 428; 11 PPSAC (2d) 142 .… 5.25 David Securities Pty Ltd v Commonwealth Bank of Australia (1990) 23 FCR 1 .… 3.18 David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; 109 ALR 57 .… 3.18, 24.48, 41.3 Davidson v O’Halloran [1913] VLR 367 .… 27.10, 27.14 Davidson v Sydney County Council Employees’ Credit Union Ltd [1979] 1 NSWLR 41 .… 3.14, 17.2 Davies, In the Will of (1924) 20 Tas LR 36 .… 29.2 Davies, Re (1843) 12 LJ Ch 456 .… 2.43 Davies v Chamberlain (1909) 26 TLR 138 .… 32.11, 32.14 Davies v Davies (1841) 4 Beav 54; 49 ER 258 .… 24.15 Davies v Law Mutual Building Society (1971) 219 EG 309 .… 19.16, 19.21, 19.39 Davies v Littlejohn (1923) 34 CLR 174 .… 2.9, 2.11, 18.15, 29.2 Davies v Lowndes (1847) 3 CB 808; 136 ER 324 .… 2.49 Davies v Parry (1859) 1 Giff 174; 65 ER 874 .… 42.3 Davies v Premier Investment Co Ltd [1945] 2 All ER 681 .… 41.3 Davies v R Bolton & Co [1894] 3 Ch 678 .… 11.7 Davies v Ryan [1951] VLR 283 .… 4.16 Davies v Thomas [1900] 2 Ch 462 .… 2.9, 2.10, 2.12 Davies v Vernon (1844) 6 QB 443; 115 ER 169 .… 2.40 Davies v Williams (1843) 7 Jur 663 .… 16.7 Davies v Wright (1886) 32 Ch D 220 .… 21.14, 21.23 Davis v Barrett (1851) 14 Beav 542; 51 ER 394 .… 14.12, 36.7, 39.19 Davis v Davis (1876) 24 WR 962 .… 29.2

Davis v Davis [1894] 1 Ch 393 .… 6.22 Davis v Duke of Marlborough (1819) 2 Swan 108; 36 ER 555 .… 13.11, 13.13, 18.23 Davis v Gardiner (1723) 2 P Wms 187; 24 ER 693 .… 30.3 Davis v Symons [1934] Ch 442 .… 32.8, 32.9 Davis v Thomas (1831) Russ & M 506; 39 ER 195 .… 1.27, 1.29 Davis v Williams [2003] NSWCA 371 .… 4.15, 4.19 Davjoyda Estates v National Insurance Co [1965] NSWR 1529 .… 3.20 Dawson (Dec’d), Re; Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211 .… 39.42 Dawson v Dawson (1737) West t Hardwicke 171 .… 39.3 Day v Day (1857) 1 De G & J 144; 44 ER 678 .… 26.27 Day v Day (1862) 31 Beav 270; 54 ER 1142 .… 39.59 Dayton v Hayter (1844) 7 Beav 313; 49 ER 1085 .… 33.7 DCD Industries, Re (1995) Ltd (2005) 7 PPSAC (3d) 251; 253 DLR (4th) 171 .… 5.79 DCT v Government Insurance Office NSW (1992) 36 FCR 314; (1992) 23 ATR 378 .… 41.1 DCT v PM Developments Pty Ltd [2008] FCA 1886 .… 41.7 De Beers Consolidated Mines Ltd v British South Africa Co [1912] AC 52 . … 32.12, 32.14 De Borman v Makkofaides [1971] EGD 909 .… 32.6, 32.8 De Garis v Dalgety & Co Ltd (1915) SALR 102 .… 17.1, 39.42, 39.57 De Groot, Re [2001] 2 Qd R 359 .… 2.48, 26.1 De Lange v Eastman Pharmaceutical Co Ltd[1972] AR 551 .… 13.35 De Leeuw, Re; Jakens v Central Agency of Discount Corp [1922] 2 Ch 540 . … 13.43, 33.3 De Lisle v Union Bank of Scotland [1914] 1 Ch 22 .… 14.1, 15.2, 22.24,

39.20 De Nicholls v Saunders (1870) LR 5 CP 589 .… 12.7, 12.13, 19.30 De Rochefort v Dawes (1871) LR 12 Eq 540 .… 30.2 De Winton v Brecon Corp (1859) 26 Beav 533; 53 ER 1004 1 .… 11.8 De Witt v Addison (1899) 80 LT 207 .… 13.22 Deangrove Pty Ltd v Buckby (2006) 56 ACSR 630 .… 20.21 Dean-Willcocks v Nothingtoohard Pty Ltd (In liq) (2005) 53 ACSR 587 .… 18.15 Dearle v Hall (1828) 3 Russ 1; 38 ER 475; [1824–34] All ER Rep 28 .… 1.37, 6.7, 6.14, 6.17, 6.24, 26.1, 26.2, 26.8, 26.15, 26.16, 32.68 Debney v Semerdziev [1982] 2 NSWLR 391 .… 40.21 Debtor, Re a [1913] 3 KB 11 .… 35.8, 35.11 Debtor, Re a; Ex parte Debtor v Dodwell (Trustee) [1949] Ch 236; [1949] 1 All ER 510 .… 22.9 Debtor, Re a (No 24 of 1971); Ex parte Marley v Trustee of Property of Debtor [1976] 2 All ER 1010; [1976] 1 WLR 952 .… 22.8, 33.2 Dee Estates Ltd, Re [1911] 2 Ch 85 .… 2.39 Deeley v Lloyds Bank Ltd [1912] AC 756; [1911–13] All ER Rep 1149 .… 24.25, 25.7, 25.11, 25.15, 30.9, 32.54 Deeley v Lloyds Bank (No 2) (1909) 53 Sol Jo 419 .… 40.13 Dehy Fodders (Australia) Pty Ltd, Re (1973) 4 SASR 538 .… 8.18, 25.12, 25.13 Delabere v Norwood (1786) 3 Swan 144n .… 22.5 Della-Franca’s Caveat, Re [1993] 1 Qd R 382 .… 4.28 Demerara Bauxite Co Ltd v Hubbard [1923] AC 673 .… 13.24, 42.2 Demetrios v Gikas Dry Cleaning Industries Pty Ltd (1991) 22 NSWLR 561 . … 4.19 Dempsey v Traders’ Finance Co Ltd [1933] NZLR 1258 .… 8.18

Den Norske Bank AG v Owners of Ships Eurosea and Eurostar and Euro Marine Carriers BV [1993] 1 Lloyd’s Rep 106 .… 9.15 Den Norske Bank ASA v Acemex Management Co Ltd (The Tropical Reefer) [2005] 1 BCLC 274; [2004] 1 Ll Rep 1; [2004] 1 All ER (Comm) 904 .… 9.26 Denis v Duke of Marlborough (1819) 2 Swan 108; 36 ER 555 .… 33.8 Dennerley v Prestwich UDC [1930] 1 KB 334 .… 16.29 Denney, Gasquet and Metcalfe v Conklin [1913] 3 KB 177 .… 67 Dennis v Martin [1932] VLR 361 .… 4.30, 14.16, 17.10 Deposit Protection Board v Dalia [1993] Ch 243 .… 6.10, 6.14 Depsun Pty Ltd v Tahore Holdings Pty Ltd (1990) 5 BPR 11,314 .… 4.28 Deputy Commissioner of Taxation v Chant (1991) 103 ALR 387 .… 4.7 Deputy Commissioner of Taxation v Horsburgh [1983] 2 VR 591 .… 24.32 Deputy Federal Commissioner of Taxation v Horsburgh [1984] VR 773 .… 8.20 der Bach and Mueller, Re (1987) 46 DLR (4th) 320 .… 36.1, 36.7 Destone Fabrics Ltd, Re [1941] Ch 319; [1941] 1 All ER 545 .… 8.24 Detillin v Gale (1802) 7 Ves 583; 32 ER 234 .… 40.1, 40.3 Detmold, Re; Detmold v Detmold (1889) 40 Ch D 585 .… 13.51 Devaynes v Noble; Clayton’s Case (1816) 1 Mer 529; 35 ER 767 .… 5.33, 25.15, 32.54 Devaynes v Robinson (1857) 24 Beav 86; 53 ER 289 .… 11.9, 11.12 Development Consultants Ltd v Lion Breweries Ltd [1981] 2 NZLR 258 .… 16.10, 32.37 Deverges v Sandeman, Clark & Co [1902] 1 Ch 579 .… 20.3, 20.37 Deves v Wood [1911] 1 KB 806 .… 18.5, 20.6 Devitt v Kearney (1883) 13 LR Ir 45 .… 11.12 Devlin v Surfers Paradise Investments Pty Ltd [1998] 1 Qd R 404 .… 32.3,

32.12, 32.55, 33.9 Devon Nominees Ltd v Hampstead Holdings Ltd [1981] 1 NZLR 477 .… 32.41 DFC New Zealand Ltd v Poulopoulos (1992) ANZ ConvR 22 .… 17.11 Dibb v Walker [1893] 2 Ch 429 .… 16.33 Dickason v Marine National Bank of Naples, N.A. (2005) 898 So 2d 1170 . … 5.36 Dickenson v Harrison (1817) 4 Price 282; 146 ER 465 .… 3.13, 17.2 Dickinson v Kitchen (1858) 8 E & B 789; 120 ER 293 .… 9.15 Dickinson v Shee (1801) 4 Esp 67; 170 ER 644 .… 32.46 Dieas v Stockley (1836) 7 C & P 587; 173 ER 258 .… 2.32 Digby v Craggs (1762) Amb 612; 27 ER 396 .… 39.52 Dillwyn v Llewellyn (1862) 4 De GF & J 517; 45 ER 1285 .… 2.18 Dimmick v Pearce Investments Pty Ltd (1980) 43 FLR 235 .… 20.23, 20.33, 20.34 Dingle v Coppen [1899] 1 Ch 726 .… 16.30 Dinmore Meatworks Pty Ltd v Kerr (1962) 108 CLR 628 .… 2.22 Diplock v Hammond (1854) 5 De GM & G320; 43 ER 893 .… 6.11 District Bank Ltd v Luigi Grill Ltd [1943] Ch 78; [1943] 1 All ER 136 .… 24.15 District Bank Ltd v Webb [1958] 1 All ER 126; [1958] 1 WLR 148 .… 12.13 Dittmer Goldmines Ltd, Re [1954] QSR 255 .… 11.41 Dittmer Goldmines Ltd, Re (No 2) [1954] QSR 266 .… 11.41 Dix, Re; Ex parte Whitbread (1841) 2 Mont D & De G 415 .… 36.16 Dixon, Re (1922) 39 WN (NSW) 89 .… 4.28 Dixon v Ly Ty Tran Cao (Federal Court of Australia, Beazley J, 10 April 1995, unreported) .… 2.33, 2.40

Dixon v Muckleston (1872) LR 8 Ch App 155 .… 3.40, 24.27, 24.39, 24.45, 28.11, 28.14 Dixon v Steel [1901] 2 Ch 602 .… 32.30, 34.8 Dixon v Winch [1900] 1 Ch 736 .… 14.11, 39.13 Dixon Fuels Ltd v SWS Fuels Ltd (2011) 17 PPSAC (3d) 175; 84 CBR (5th) 206 .… 5.79, 5.87 Dixon v Wrench (1869) LR 4 Ex 154 .… 7.8 DM & BP Wiskich Pty Ltd v Drivehard Pty Ltd(SC (NSW), 13 December 1995, unreported) .… 7.14, 8.10, 8.16, 8.21 Dobbs v National Bank of Australasia Ltd (1935) 53 CLR 643 .… 17.7 Doble v Manley (1885) 28 Ch D 664 .… 21.4, 22.28 Dobson v Land (1850) 4 De G & Sm 575; 64 ER 963 .… 32.80, 39.19, 39.37, 40.15 Dobson v Lee (1842) 1 Y & CCC 714; 62 ER 1084 .… 39.27 Docksey v Else (1891) 64 LT 256 .… 22.46 Dodd v Lydall (1842) 1 Hare 333; 66 ER 1060 .… 22.15 Dodds v Hills (1865) 2 Hem & M 424; 71 ER 528 .… 24.20 Dodlot v Hartogen Energy Ltd (1991) 6 ACSR 397 .… 11.41 Doe d Barney v Adams (1832) 2 Cr & J 232; 149 ER 101 .… 12.29 Doe d Bastow v Cox (1847) 11 QB 122; 116 ER 421 .… 12.10 Doe d Bristowe v Pegge (1785) 1 Term Rep 758n; 99 ER 1362 .… 19.17 Doe d Christmas v Oliver (1829) 10 B & C 181; 109 ER 418 .… 19.18 Doe d Dixie v Davies (1851) 7 Exch 89; 155 ER 868 .… 12.10 Doe d Garrod v Olley (1840) 12 Ad & El 481; 113 ER 894 .… 19.29 Doe d Goody v Carter (1847) 9 QB 863; 115 ER 1505 .… 12.10 Doe d Griffith v Mayo (1828) 7 LJOSKB 84 .… 12.4, 12.5 Doe d Higginbotham v Barton (1840) 11 Ad & El 307; 113 ER 432 .… 12.9

Doe d Jones v Williams (1836) 5 Ad & El 291; 111 ER 1175 .… 12.9 Doe d Palmer v Eyre (1851) 17 QB 366 .… 16.31 Doe d Parsley v Day (1842) 2 QB 147; 114 ER 58 .… 12.10, 19.4, 19.7, 19.25, 29.29 Doe d Pitt v Hogg (1824) 4 Dow & Ry KB 226 .… 13.53 Doe d Roby v Maisey (1828) 8 B & C 767; 108 ER 1228 .… 12.4, 12.5, 12.9, 19.16 Doe d Rogers v Cadwallader (1831) 2 B & Ad 473; 109 ER 1218 .… 12.19 Doe d Roylance v Lightfoot (1841) 8 M & W 553; 151 ER 1158 .… 12.10, 19.12 Doe d Snell v Tom (1843) 4 QB 615; 114 ER 1030 .… 19.29 Doe d Whitaker v Hales (1831) 7 Bing 322; 131 ER 124 .… 12.19 Doering v Doering (1889) 42 Ch D 203 .… 6.8, 24.31 Dollar Land Corp Ltd and Solomon, Re (1963) 39 DLR (2d) 221 .… 19.40 Dolly Madison Industries, Inc (1972) 351 F Supp 1038 .… 5.44 Dolphin v Aylward (1870) LR 4 HL 486 .… 13.9, 24.49, 30.10, 30.12, 30.15 Domaschenz v Standfield Properties Pty Ltd (1977) 17 SASR 56 .… 39.50 Domville v Berrington (1837) 2 Y & C Ex 723;160 ER 585 .… 22.44 Donald v Suckling (1866) LR 1 QB 585 .… 1.11, 21.3 Donisthorpe v Porter (1762) 2 Eden 162; 28 ER 858 .… 36.4 Doody, Re; Fisher v Doody [1893] 1 Ch 129 .… 42.10 Dorman Long & Co Ltd Re South Durham Steel and Iron Co Ltd, Re [1934] Ch 635 .… 8.5 Dossi, Re (1905) 5 SR (NSW) 204 .… 7.10 Dotter v Evans [1969] VR 41 .… 32.79 Double Bay Newspapers Pty Ltd v AW Holdings Pty Ltd (1996) 42 NSWLR 409 .… 4.27, 24.28, 28.9, 28.15, 28.16 Douglas, Re; Ex parte Snowball (1872) 7 Ch App 534 .… 11.26, 24.9

Douglas v Culverwell (1862) 4 De GF & J 20; 45 ER 1089 .… 1.28, 1.29, 13.13, 39.37 Douglas Norman & Co, Re [1898] 1 Ch 199 .… 2.37 Dovey Enterprises Ltd v Guardian Assurance Publications Ltd [1993] 1 NZLR 540 .… 8.21 Dowager Duchess of Sutherland v Duke of Sutherland [1893] 3 Ch 169 .… 12.24 Dowle v Saunders (1864) 2 Hem & M 242; 71 ER 456 .… 24.43 Dowling v Ditanda Ltd (1975) 236 EG 485 .… 35.8, 42.15 Downes v Grazebrook (1817) 3 Mer 200; 36 ER 77 .… 20.40 Downs Distributing Co Pty Ltd v Associated Blue Star Stores Pty Ltd (1948) 76 CLR 463 .… 5.104 Downsview Nominees Ltd v First City Corp Ltd [1993] AC 295; [1993] 3 All ER 626; [1993] 2 WLR 86 .… 1.7, 18.5, 18.6, 20.21, 42.15 Dowsett v Reid (1912) 15 CLR 695 .… 42.2 Dowson and Jenkins’s Contract, Re [1904] 2 Ch 219 .… 20.9 Doyle v Doyle [1992] 3 NZLR 170 .… 1.7, 11.2, 17.3 Doyles Construction Lawyers v Harsands Pty Ltd (SC (NSW), McLelland CJ in Eq, 24 December 1996, unreported) .… 2.50 DPP v Lawler (1994) 68 ALJR 289 .… 37.14 Drake v Templeton (1913) 16 CLR 153 .… 4.5 Drake, Ex parte (1841) 1 Mont D & De G 539 .… 13.53 Drax, Re; Savile v Drax [1903] 1 Ch 781 .… 3.17, 3.46, 39.42, 39.57 Drew v Lockett (1863) 32 Beav 499; 55 ER 196 .… 25.5, 42.14 Drew v Willis [1891] 1 QB 450 .… 7.7 Driller v Smail (1968) 12 FLR 326 .… 23.5 Driver v Broad [1893] 1 QB 744 .… 1.33, 8.10, 8.11 Droop v Colonial Bank (1881) 7 VLR (E) 71 .… 13.9

Drought v Jones (1840) 4 Dru & War 174 .… 35.2 Drought v Redford (1827) 1 Mol 572 .… 21.5 Drulroad Pty Ltd v Gibson (1992) 5 BPR 11,878 .… 4.3, 24.14, 24.29, 28.15 Drum Reconditioners, Re (NSW) Pty Ltd (1992) 7 ACSR 82 .… 11.43 Dryden v Frost (1838) 3 My & Cr 670; 40 ER 1084 .… 2.13, 40.23, 42.5 Drysdale v Mace (1854) 5 De GM & G 103; 43 ER 809 .… 24.19 Drysdale v Piggot (1856) 8 De GM & G 546; 44 ER 500 .… 6.15, 32.73 DTC (NC) Ltd v Gary Sargeant & Co [1996] 1 WLR 797; [1996] 2 All ER 369 .… 2.28 Du Vigier v Lee (1843) 2 Hare 326; 67 ER 134 .… 22.16 Duberly v Day (1851) 14 Beav 9; 51 ER 190 .… 22.19 Duck v Tower Galvanising Co [1901] 2 KB 314 .… 8.19 Dudley and District Benefit Building Society v Emerson [1949] Ch 707; [1949] 2 All ER 252 .… 12.11, 12.17 Dudley Engineering Pty Ltd, Re [1968] 1 NSWR 483; 87 WN (Pt 1) NSW) 326 .… 11.43 Duff v Devlin [1924] 1 IR 56 .… 22.42 Duffy v Super Centre Development Corp Ltd [1967] 1 NSWR 382 .… 18.4 Dugdale v Robertson (1857) 3 K & J 695; 69 ER 1289 .… 16.6, 42.20 Duggan v Commonwealth Bank of Australia (SC (NSW), Cohen J, 28 April 1995, unreported) .… 19.38 Duke Finance Ltd v Commonwealth Bank of Australia (1990) 22 NSWLR 236 .… 2.35 Duke of Marlborough, Re; Davis v Whitehead [1894] 2 Ch 133 .… 1.28, 32.31 Duke v Robson [1973] 1 All ER 481 .… 20.36, 20.37, 32.55 Dunbar v Dunbar [1909] 2 Ch 639 .… 30.2 Duncan v Dixon (1890) 44 Ch D 211 .… 13.2

Duncan, Fox & Co v North and South Wales Bank (1879) 11 Ch D 88 .… 30.2 Duncan, Fox & Co v North and South Wales Bank (1880) 6 App Cas 1 .… 42.14 Duncombe v Greenacre (1860) 28 Beav 472; 54 ER 447 .… 1.51, 16.10 Dundas v Vavasour (1895) 39 Sol Jo 656 .… 12.28 Dunderland Iron Ore Co Ltd, Re [1909] 1 Ch 446 .… 8.7 Dunecar Pty Ltd v Colbron (2001) 40 ACSR 342 .… 4.26 Dungate v Dungate [1965] 3 All ER 393; [1965] 1 WLR 1477 .… 16.34 Dunlop, Re; Dunlop v Dunlop (1882) 21 Ch D 583 .… 30.2 Dunn v Dunn (1855) 1 Jur (NS) 122 .… 2.43 Dunn v Oakminster Ltd (1994) 12 ACLC 264 .… 11.40 Dunphy v Sleepyhead Manufacturing Co Ltd [2007] 3 NZLR 602 .… 5.24, 5.112 Dunstan v Patterson (1847) 2 Ph 341; 41 ER 974 .… 22.15, 22.16 Dunster v Lord Glengall (1853) 3 Ir Ch R47 .… 24.50 Durham Bros v Robertson [1898] 1 QB 765 .… 1.13, 6.5, 6.11 Dutton, Massey & Co, Re; Ex parte Manchester and Liverpool District Banking Co [1924] 2 Ch 199 .… 23.7 Dwyer v Derek [2004] 1 Qd R 371 .… 14.5 Dymond v Croft (1876) 3 Ch D 512 .… 22.12, 22.15 Dyson v Morris (1842) 1 Hare 413; 66 ER 1092 .… 22.24 E E Pfeiffer Weinkellerei-Weineinkauf GmbH v Arbuthnot Factors Ltd [1988] 1 WLR 150 .… 6.23 E S Schwab & Co Ltd v McCarthy (1975) 31 P & CR 196 .… 3.29, 3.33, 37.8

Eade v Vogiazopoulos [1993] ANZ ConvR 129; (1993) V ConvR 54-458 .… 4.11, 4.18, 4.20, 13.35, 13.44, 24.15, 28.16 Eades v Harris (1842) 1 Y & CCC 230; 62 ER 867 .… 33.5 Eagle Star Nominees Ltd v Merrill [1982] VR 557 .… 19.24 Eagles v Eagles [1960] VR 400 .… 11.6 Eardley v Knight (1889) 41 Ch D 537 .… 39.45 Earl Fitzwilliam v Price (1858) 4 Jur NS 889 .… 40.25 Earl Kingston’s Estate, Re [1869] 3 IR 485 .… 16.34 Earl of Aylesford v Morris (1873) LR 8 Ch 484 .… 13.14, 13.16 Earl of Buckinghamshire v Hobart (1818) 3 Swan 186; 36 ER 824 .… 36.4 Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125; 28 ER 82 .… 13.11, 13.16 Earl of Cork v Russell (1871) LR 13 Eq 210 .… 21.13, 22.5, 32.26, 40.16 Earl of Kinnoul v Money (1767) 3 Swan 202; 36 ER 830 .… 21.11, 30.7 Earl of Lucan, Re; Hardinge v Cobden (1890) 45 Ch D 470 .… 1.37, 2.6, 2.7, 6.11 Earl of Macclesfield v Fitton (1683) 1 Vern 168; 23 ER 392 .… 14.2 Earl of Sheffield v London Joint Stock Bank (1888) 13 App Cas 333 .… 6.17 Earl of Suffolk and Berkshire v Cox (1867) 36 LJ Ch 591 .… 26.15 Early, Re [1897] 1 IR 6 .… 40.21 Eason v Johnsonville Co-operative Building Society [1918] GLR 129 .… 32.32 East Central Development Corp v Freightliner Truck Sales (Regina) Ltd (1997) 12 PPSAC (2d) 328 .… 5.25 Eastdoro Pty Ltd (No 2), Re [1990] 1 Qd R 424 .… 4.13 Eastern Canada Savings and Loans Co v Campbell (No 2) (1971) 19 DLR (3d) 231 .… 31.9 Eastern Retreads Wholesale Pty Ltd, Re (1979) 4 ACLR 136 .… 8.24

Eaton v Hazel (1852) 1 WR 87 .… 33.7 Economic Life Assurance Society v Usborne [1902] AC 147 .… 36.14 Eddis v Chichester Constable [1969] 2 Ch 345; [1969] 2 All ER 912 .… 16.36 Ede v Knowles (1843) 2 Y & CCC 172; 63 ER 76 .… 3.40 Edelstein v Schuler & Co [1902] 2 KB 144 .… 8.3 Edge v Worthingon (1786) 1 Cox Eq Cas 211; 29 ER 1133 .… 3.40 Edgewater Growth Capital Partners LP v HIG Capital Inc 68 A 3d 197 (2013) .… 5.121 Edginton v Clark [1964] 1 QB 367; [1963] 3 All ER 468 .… 16.34 Edibles Corporation v West Ontario Street Limited (1995) 273 Ill App 3d 550 .… 5.41 Edlan No 54 Pty Ltd v McIntyre (2003) 47 ACSR 691 .… 2.18 Edmiston v Scottish Temperance and General Assurance Co Ltd (1929) 115 LT Jo 70 .… 42.9 Edmonds, Ex parte (1862) 4 De GF & J 488; 45 ER 1273 .… 2.18 Edmonds v Blaina Furnaces Co (1887) 36 Ch D 215 .… 8.1 Edmondson v Copland [1911] 2 Ch 301 .… 32.36, 32.38, 32.41 Edmunds v Waugh (1866) LR 1 Eq 418 .… 16.30 Edward Oliver, The (1867) LR 1 A & E 379 .… 30.10 Edward Wong Finance Ltd v Johnson Stokes & Master [1984] AC 296 .… 32.74 Edwards v Burt (1852) 2 De GM & G 55; 42 ER 791 .… 13.13 Edwards v Cunliffe (1816) 1 Madd 287; 56 ER 106 .… 22.30, 22.31, 22.32, 22.34 Edwards v Edwards (1876) 2 Ch D 291 .… 18.20 Edwards v Marshall-Lee (1975) 119 Sol Jo 506 .… 32.60, 32.62 Edwards v Martin (1856) 25 LJ Ch 284 .… 16.5

Edwards v Martin (1858) 28 LJ Ch 49 .… 22.28 Edwards v Martin (1865) LR 1 Eq 121 .… 24.8 Edwards v McDowell (1933) 50 WN (NSW) 244 .… 4.23, 4.25, 20.40 Edwards v Ottawa Valley Grain Products Ltd (1970) 11 DLR (3d) 137 .… 17.5 Edwards v Standard Rolling Stock Syndicate [1893] 1 Ch 574 .… 8.18 Edwards and Rudkin to Green, Re (1888) 58 LT 789 .… 20.19 Edward’s Will Trusts, Re [1937] Ch 553; [1937] 3 All ER 58 .… 16.33 Edwick v Hawkes (1881) 18 Ch D 199 .… 19.19 Edwin Hill and Partners (a firm) v First National Finance Corp plc [1988] 3 All ER 801 .… 16.3 Egbert v National Crown Bank [1918] AC 903 .… 35.7 Egerton v Jones [1939] 2 KB 702 .… 37.11 Eichholz, Re; Eichholz’s Trustee v Eichholz [1959] 1 Ch 708 .… 13.588 Eland v Baker (1861) 29 Beav 137; 54 ER 579 .… 11.8 Eland v Eland (1839) 1 Beav 235; 48 ER 930 .… 24.19 Elder v Maclean (1857) 5 WR 447 .… 26.27 Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210 .… 2.10, 4.27, 28.15, 28.16 Elders Pastoral Ltd v Bank of New Zealand (No 2) [1990] 1 WLR 1478 .… 1.34, 6.11, 6.23, 8.18 Elders Rural Finance Ltd v Westpac Banking Corp (1988) 4 BPR 9383 .… 14.1, 14.2, 14.12, 19.10, 39.19, 39.20 Elders Rural Finance Ltd v Westpac Banking Corp (1990) 5 BPR 11,790 .… 19.21 Elders Trustee & Executor Co Ltd v E G Reeves Pty Ltd (1988) 20 FCR 164; 84 ALR 734 .… 4.8, 4.9, 4.41, 33.29, 40.1, 40.2, 40.23 Elders Trustee and Executor Co Ltd v Bagot’s Executor and Trustee Co Ltd

[1964] SASR 306 .… 17.11 Elders Trustee and Executor Co Ltd v Eagle Star Nominees Ltd (1986) 4 BPR 9205 .… 36.14, 40.1, 40.2, 40.3 Electrical Enterprises Retail Pty Ltd v Rodgers (1988) 15 NSWLR 573 .… 8.10 Eley v Read (1897) 76 LT 39 .… 20.48 Elias v Snowdon Slate Quarries Co (1879) 4 App Cas 454 .… 42.21 Elite Promotions & Management Pty Ltd v SA Investments Pty Ltd (2011) 80 NSWLR 686 .… 12.8 Elkofairi v Permanent Trustee Company Limited [2002] NSWCA 413 .… 13.36 Ellenor v Ugle [1895] WN 161 .… 22.37 Ellingsen (2000) 190 DLR (4th) 47; 1 PPSAC (3d) 307 .… 5.15 Elliot, Re (1886) 7 LR (NSW) (L) 286 .… 4.28 Elliot v Edwards (1802) 3 Bos & P 181; 127 ER 100 .… 2.13 Ellis & Co’s Trustee v Dixon-Johnson [1924] 1 Ch 342 .… 22.38 Ellis & Co’s Trustee v Dixon-Johnson [1924] 2 Ch 451 .… 22.38 Ellis & Co’s Trustee v Dixon-Johnson [1925] AC 489 .… 16.11, 17.10, 20.3, 22.38, 42.13 Ellis v Deane (1827) Beat 5 .… 33.4 Ellis v Glover and Hobson Ltd [1908] 1 KB 388 .… 1.20, 3.26, 42.20 Ellison v Alliance Acceptance Ltd (1984) NSW ConvR 55-217 .… 20.30 Ellison v Vukucevic (1986) 7 NSWLR 104 .… 38.6 Ellison v Wright (1827) 3 Russ 458; 38 ER 647 .… 40.23 Elmer v Creasy (1873) 9 Ch App 69 .… 33.11, 39.5 Elnic Holdings Pty Ltd v New Wave Development (NSW) Pty Ltd [2005] NSWSC 1226 .… 30.10 Elric Pty Ltd v Taylor (1988) 19 ATR 1551 .… 41.1

Elsey v Lutyens (1850) 8 Hare 159; 68 ER 314 .… 27.15 Elton v Curteis (1881) 19 Ch D 49 .… 39.54 Eltran Ltd v Westpac Banking Corp (1988) 32 FCR 195 .… 20.38 Emanuel College v Evans (1625) 1 Chan Rep 18; 21 ER 494 .… 1.14 Emden v Carte (1881) 19 Ch D 311 .… 2.49 Emerald Securities Pty Ltd v Tee Zed Enterprises Pty Ltd (1981) 28 SASR 214 .… 20.4, 20.6 Emerson v Custom Credit Corporation Ltd (1991) Q ConvR ¶54-414 .… 20.45 Emerson v Custom Credit Corporation Ltd [1994] 1 Qd R 516 .… 18.13, 20.22 Emery, Re; Ex parte Harvey (1839) Mont & Ch 261 .… 36.15 EMI Records Ltd v Ian Cameron Wallace Ltd [1982] Ch 59 .… 3.21 Emmet v Tottenham (1865) 12 LT 838 .… 13.11 Emporia State Bank & Trust Co v Mounhes 519 P (2d) 618 (1974) (Kan) .… 3.8 England v Codrington (1758) 1 Eden 169; 28 ER 649 .… 1.25, 40.9 English and Scottish Mercantile Investment Co Ltd v Brunton [1892] 2 QB 700 .… 6.15, 8.16, 8.18, 8.21, 24.14, 24.20, 26.3 English Scottish & Australian Bank Ltd v Phillips (1937) 57 CLR 302 .… 1.18, 3.13, 4.1, 4.13, 4.34, 17.5, 31.11, 34.3, 36.11, 36.17 English, Scottish and Australian Bank Ltd v City National Bank Ltd [1933] St R Qd 81 .… 12.18, 19.3, 19.5 Eno v Tatham (1863) 3 De GJ & Sm 443; 46 ER 706 .… 29.3 Ensworth v Griffiths (1706) 5 Bro Parl Cas 184; 2 ER 615 .… 1.27, 1.30 Enterprise Colorvideo Productions Pty Ltd v Corporate Affairs Commission (NSW) (1984) 8 ACLR 767 .… 11.40 Epic Feast Pty Ltd v Mawson KLM Holdings Pty Ltd (1998) 71 SASR 161 . … 32.16

Epple v Wilson [1972] VR 440 .… 4.28 Epsworth Group Holdings Pty Ltd v Permanent Custodians Ltd [2010] SASC 327; 108 SASR 536 .… 12.18 Equiticorp Finance (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 . … 11.34 Equiticorp Financial Services Ltd (NSW) v Equiticorp Financial Services Ltd (NZ) (1992) 29 NSWLR 260 .… 13.38 Equity and Law Home Loans Ltd v Prestidge [1992] 1 All ER 909; [1992] 1 WLR 137; (1991) 63 P & CR 403 .… 14.18, 24.1 Equity One Mortgage Fund Ltd v Thompson [2009] VSC 409 .… 20.38 Equity Trustees Executors and Agency Co Ltd v Lee [1914] VLR 57 .… 12.11 Equity Trustees Executors and Agency Co Ltd v New Zealand Loan & Mercantile Agency Co Ltd [1940] VLR 201 .… 42.18 Equus Financial Services Ltd v RMBL Investments Pty Ltd (1996) 22 ACSR 744; 7 BPR 14,966 .… 33.21, 34.3, 39.5 Equuscorp Pty Ltd v Westpac Banking Corp Ltd [2003] VSC 241 .… 14.12, 39.20 Erewash Borough Council v Taylor [1979] CLY 1831 .… 32.65 Ernest v Partridge (1863) 1 New Rep 425 .… 33.9 Errington, Re; Ex parte Mason [1894] 1 QB 11 .… 17.5, 34.2 Esanda Finance Corp Ltd v Jackson (1992) 11 ACLC 138 .… 8.2 Esanda Finance Corp Ltd v Leserv (No 4) Pty Ltd [1992] ACL 295 Qld 8 .… 2.4 Esberger & Son Ltd v Capital & Counties Bank [1913] 2 Ch 366 .… 11.39 Espey v Lake (1852) 10 Hare 260; 68 ER 923 .… 13.22 Espin v Pemberton (1859) 3 De G & J 547; 44 ER 1380 .… 42.5 Espin v Pemberton (1859) 4 Drew 333; 62 ER 129 .… 24.39 Esso Petroleum Co Ltd v Alstonbridge Properties Ltd [1975] 3 All ER 358;

[1975] 1 WLR 1474 .… 17.3, 17.5, 17.8, 19.12, 19.15, 19.16 Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269; [1967] 1 All ER 699 .… 32.9, 32.12, 32.13 Estoril Investments Pty Ltd v Westpac Banking Corp (1993) 6 BPR 13,146 . … 3.8, 3.9, 3.12, 3.14, 16.1, 40.23 Estoril Investments Pty Ltd v Westpac Banking Corp (SC (NSW), Young J, 31 August 1999, unreported) .… 40.3 Euro Commercial Leasing Ltd v Cartwright & Lewis [1995] 2 BCLC 618 Euroclean Canada Inc v Forest Glade Investments Ltd (1985) 16 DLR (4th) 289 .… 5.91 Europe Mortgage Co v Halifax Estate Agencies [1996] TLR 325 .… 37.2 European Asian of Australia Ltd v Kurland (1985) 8 NSWLR 192 .… 13.25, 13.27, 13.30 European Asian of Australia Ltd v Lazich (1987) ASC 55-564 .… 13.27, 13.31 European Central Rly Co, Re; Ex parte Oriental Financial Corp (1876) 4 Ch D33 .… 36.13, 36.14, 39.43 Eusanio and IACI, Re (1982) 136 DLR (3d) 569 .… 3.15 Evandale Estates Pty Ltd v Keck [1963] VR 647 .… 2.13, 2.18, 4.27, 4.28 Evans v Bicknell (1801) 6 Ves 174 at 189; 31 ER 998 .… 24.14, 24.37 Evans v Clayhope Properties Ltd [1988] 1 All ER 444; [1988] 1 WLR 358 . … 18.25 Evans v Elliot (1838) 9 Ad & El 342; 112 ER 1242 .… 12.19 Evans v Evans (1983) Conveyancing Service (NSW) [92210] .… 32.6, 32.7 Evans v Jones (1839) 5 M & W 295; 151 ER 126 .… 17.2, 17.8 Evans v Judkins (1815) 4 Camp 156; 171 ER 50 .… 32.47 Evans v Kinsey (1855) Seton (7th ed) 1887 .… 22.17 Evans v McLean (1984) 9 ACLR 233 .… 2.10, 2.13

Evans v Rival Granite Quarries Ltd [1910] 2 KB 979 .… 8.11, 8.13 Evelyn, Re; Ex parte General Public Works and Assets Co Ltd [1894] 2 QB 302 .… 23.5 Evelyn v Evelyn (1731) 2 P Wms 659; 24 ER 904 .… 30.7 Everett Credit Union v Allied Ambulance Service Inc 424 NE (2d) 1142 (1981) (Mass) .… 3.8 Everitt v Automatic Weighing Machine Co [1892] 3 Ch 506 .… 2.18, 32.56 EVTR Ltd, Re [1987] BCLC 646 .… 11.36 EWA, Re [1901] 2 KB 642 .… 35.11 Ewart v Fryer [1901] 1 Ch 499 .… 37.11 Excel Finance Corp v Commonwealth Bank of Australia (1988) 48 SASR 225 .… 32.56 Exhall Coal Co, Re (1860) 35 Beav 449; 55 ER 970 .… 24.31 Ex parte Lambton (1876) 3 Ch D 36 .… 1.23 Ex parte National Trustees Executors and Agency Co Ltd (1898) 19 ALT 222 .… 4.9 Expo International Pty Ltd v Chant [1979] 2 NSWLR 820 .… 8.24, 18.5, 18.17, 20.22 Expo International Pty Ltd v Chant (No 2) (1980) 5 ACLR 193 .… 18.26 Exton v Scott (1833) 6 Sim 31; 58 ER 507 .… 1.26, 13.7 Eyre v Burmester (1862) 10 HL Cas 114; 11 ER 968 .… 24.9, 24.12 Eyre v Everett (1826) 2 Russ 381; 38 ER .… 34.8 Eyre v Hanson (1840) 2 Beav 478; 48 ER 1266 .… 22.31, 22.32, 22.34 Eyre v Hughes (1876) 2 Ch D 148 .… 19.41, 39.3 Eyre v M’Dowell (1861) 9 HL Cas 619; 11 ER 871 .… 1.40, 7.8, 24.49 F Fablehill Ltd, Re [1991] BCLC 830 .… 11.43

Factors Sundries Ltd v Miller [1952] 2 All ER 630 .… 37.11 Fahy v MSD Spiers Ltd [1975] 1 NZLR 240 .… 32.54 Fairbanx Corp v Royal Bank (2009) 15 PPSAC (3d) 265 .… 5.42 Fairbanx Corp v Royal Bank of Canada (2010) 319 DLR (4th) 618 (Ont CA) .… 5.22 Fairclough v Marshall (1878) 4 Ex D 37; 48 LJ QB 14; 27 WR 145 .… 3.54, 12.2, 33.14 Fairclough v Swan Brewery Co Ltd [1912] AC 562 .… 32.8, 32.11 Fairfold Properties Ltd v Exmouth Docks Co Ltd (No 2) [1993] Ch 196 .… 2.48 Fairholme and Palliser v Kennedy (1892) 24 LR Ir 498 .… 18.8 Fairline Boats Ltd v Leger (1980) 1 PPSAC 218 .… 5.104 Fairview Investments Ltd v Sharma (unreported, 14 October 1999, English Court of Appeal) .… 40.2 Faithfull v Woodley (1889) 43 Ch D 287 .… 22.12 Falcke v Scottish Imperial Insurance Co Ltd (1886) 34 Ch D 234 .… 2.17, 2.18 Falk v Haugh (1935) 53 CLR 163 .… 32.51, 39.59 Falk v Haugh [1935] VLR 20 .… 4.36 Fanning v Durham (1821) 5 Johnson Ch 122;9 Am Dec 292 .… 13.2 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 .… 5.109 Farebrother v Wodehouse (1856) 23 Beav 18; 53 ER 7 .… 25.5, 31.10 Farebrother v Wodehouse (1857) 26 LJ Ch 240 .… 31.10 Farhall v Farhall (1871) 7 Ch App 123 .… 11.15, 11.18 Farmer v Curtis (1829) 2 Sim 466; 57 ER 862 .… 33.19 Farmer v Pitt [1902] 1 Ch 954 .… 3.48 Farmer & Co v Inland Revenue Commissioners[1898] 2 QB 141 .… 12.2

Farmers’ Fertilizers Corp Ltd, Ex parte (1916) 16 SR (NSW) 645 .… 40.21 Farquharson v Seton (1828) 5 Russ 45; 38 ER 944 .… 39.8 Farran v Beresford (1842) 10 Cl & Fin 319; 8 ER 764 .… 16.29 Farrand v Yorkshire Banking Co (1888) 40 Ch D 182 .… 24.44, 24.45 Farrar v Farrars Ltd (1888) 40 Ch D 395 .… 19.34, 20.6, 20.14, 20.21, 20.40, 39.24 Farrer v Lacy, Hartland & Co (1885) 25 Ch D 636 .… 20.41 Farrer v Lacy, Hartland & Co (1885) 31 Ch D 42 .… 19.41, 20.41, 22.12, 40.25 Farrier-Waimak Ltd v Bank of New Zealand [1965] AC 376; [1964] 3 All ER 657 .… 28.5, 36.13 Farrington v Smith (1894) 20 VLR 90 .… 12.3, 12.11, 12.18, 19.7, 19.10 Farrow Mortgage Services Pty Ltd v Edgar (1993) 114 ALR 1 .… 11.45 Farrow Mortgage Services Pty Ltd v Regatta Development Services Pty Ltd (1993) 32 NSWLR 333 .… 4.37 Farrow Mortgage Services Pty Ltd v Victor Tunevitsch Pty Ltd (1998) 8 Tas R 65 .… 39.51 Farrow v Rees (1840) 4 Beav 18; 49 ER 243 .… 24.19 Farrugia v Official Receiver in Bankruptcy [1982] 43 ALR 700 .… 30.7 Faulkner v Bolton (1835) 7 Sim 319; 58 ER 860 .… 33.23, 33.24 Faulkner v Daniel (1843) 3 Hare 199; 67 ER 355 .… 22.15, 33.20 Fawcett v Lowther (1751) 2 Ves Sen 300; 28 ER 193 .… 32.2 FCT v Ashwick (Qld) No 127 Pty Ltd [2011] FCAFC 49 .… 41.2 FCT v Australian Guarantee Corporation .… 41.3 FCT v Everett (1980) 143 CLR 440 .… 6.18, 6.20 FCT v Hurley Holdings (NSW) Pty Ltd (1989) 20 ATR 1295 .… 41.3 FCT v Janmor Nominees Pty Ltd (1987) 19 ATR 254 .… 41.3 FCT v Munro (1926) 38 CLR 153 .… 41.3

FCT v Park (2012) 205 FCR 1 .… 41.1 FCT v Riverside Road (1990) 21 ATR 499 .… 41.3 FCT v Roberts and Smith (1992) 37 FCR 246 .… 41.3 FCT v Total Holdings (Australia) Ltd (1979) 9 ATR 885 .… 41.3 Featherstone v Fenwick (1784) 1 Bro CC 270n .… 21.3 Feaver, Re; Ex parte Smith (1844) 3 Mont D & De G 680 .… 39.15 Federal Bank of Australia Ltd, Re (1895) 6 BC (NSW) 3 .… 11.35 Federal Commissioner of Taxation v Everett (1980) 143 CLR 440 .… 6.5 Federal Commissioner of Taxation v Henderson (1943) 68 CLR 29 .… 5.4 Federal Commissioner of Taxation v Krokas Investments Pty Ltd (1995) 133 ALR 454 .… 1.28 Federal Commissioner of Taxation v Whitfords Beach Pty Ltd (1982) 150 CLR 355 .… 5.25 Federal Commissioner of Taxation v Williamson (1943) 67 CLR 561 .… 1.23 Federal Savings Credit Union Ltd v Hessian (1980) 98 DLR (3d) 488 .… 24.3 Fee v Cobine (1847) 11 Ir Eq R 406 .… 1.29, 39.31 Fegan, Re; Fegan v Fegan [1928] Ch 45 .… 29.3 Feilden v Slater (1869) LR 7 Eq 523 .… 19.40 Feistel v King’s College Cambridge (1847) 10 Beav 491; 50 ER 671 .… 13.49 Fell v Brown (1787) 2 Bro CC 276; 29 ER 151 .… 32.26, 33.3, 33.19 Fell v Official Trustee of Charity Lands [1898] 2 Ch 44 .… 1.7, 13.53 Fencott v Clarke (1833) 6 Sim 8; 58 ER 498 .… 2.44 Fenn v Bittleston (1851) 7 Exch 152; 155 ER 895 .… 3.55 Fennell v Gardiner (1885) 1 TLR 397 .… 20.39

Fenner-Fust v Needham (1886) 32 Ch D 582 .… 39.41 Fenton, Re; Ex parte Fenton Textile Association Ltd [1931] 1 Ch 85 .… 42.16 Fenwick v Potts (1856) 8 De GM & G 506 .… 3.40, 3.45 Fenwick v Reed (1816) 1 Mer 114; 35 ER 618 .… 1.13, 3.32 Fergusson, Re (1882) 3 LR (NSW) 43 .… 12.2 Ferrier v Bottomer (1972) 46 AJLR 148 .… 8.10 Fetherstone v Mitchell (1848) 11 Ir Eq R 35 .… 24.33 Fewings, Ex parte; Sneyd, Re (1883) 25 Ch D 338 .… 16.30 Field v Abdurahman [1984] 3 NSWLR 402 .… 13.45 Field v Hopkins (1890) 44 Ch D 524 .… 42.10 Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245 . … 1.15, 1.18, 3.23, 3.24, 4.1, 4.7, 4.9, 4.35, 12.3, 12.4, 12.7, 12.10, 12.11, 12.13, 12.18, 12.28, 12.30, 19.4, 19.7, 19.11, 19.21, 19.25, 19.29, 19.30 Finance & Investments Pty Ltd v Van Kempen (1986) 6 NSWLR 305 .… 30.2, 39.57 Finance Corp of Australia Ltd v Bentley (1991) 5 BPR 11,833 .… 30.2, 30.3, 30.9 Finance Corp of Australia Ltd v Stephens (1985) 3 Conveyancing Service (NSW) 92268 .… 20.22 Financial and Investment Services for Asia Ltd v Baik Wha International Trading Co Ltd [1985] HKLR 103 .… 14.6 Finch v Brown (1840) 3 Beav 70; 49 ER 26 .… 39.37, 39.38 Finch v Earl of Winchelsea (1715) 1 P Wms 277; 24 ER 387 .… 24.49 Finch v Shaw; Colyer v Finch (1854) 19 Beav 500; 18 Jur 935; 52 ER 445 . … 11.24, 22.33, 24.20, 24.38, 24.39, 30.5, 30.15 Finck v Tranter [1905] 1 KB 427 .… 19.14, 39.15 Fink v Robertson (1907) 4 CLR 864 .… 4.1, 4.2, 4.10, 4.34, 21.5, 21.6,

22.54, 22.55, 36.11, 36.17 Finlay v R & I Bank of Western Australia Ltd (1993) 6 BPR 13,232 .… 28.15 Firbank’s Executors v Humphreys (1886) 18 QBD 54 .… 11.9 Fire Nymph Products Pty Ltd v Heating Centre Pty Ltd (in liq) (1992) 7 ACSR 365 .… 5.104 Fire Nymph Products Ltd v The Heating Centre Pty Ltd (1988) 14 ACLR 274 .… 8.16, 8.20 Fire Nymph Products Ltd v The Heating Centre Pty Ltd (1992) 10 ACLC 629 .… 8.15, 8.20, 8.21 Fireproof Doors Ltd, Re; Umney v Fireproof Doors Ltd [1916] 2 Ch 142 .… 8.2 Firmin v Gray & Co Pty Ltd [1985] 1 Qd R160 .… 13.45 Firona Pty Ltd v Commonwealth Bank of Australia [1991] ACL Rep 295 Vic 11 .… 8.19 First Bank v Eastern Livestock Co (1993) 837 F Supp 792 .… 5.36 First Chicago Australia Ltd v Loyebe Pty Ltd [1980] 2 NSWLR 703 .… 32.56 First National Bank of Chicago Ltd v Moorgate Properties Ltd (1975) Times, 21 October .… 6.8 First National Bank v Lygrisse 647 P (2d) 1268 (1982) (Kan) .… 3.8 First National Bank of Steeleville, NA v Erb Equipment Co, Inc 921 S W 2d 57 (1996) .… 5.87 First National Securities Ltd v Hegerty [1985] QB 850; [1984] 1 All ER 139 .… 4.20, 11.3, 11.4, 13.44 First National Securities Ltd v Onwuegbuzie (1976) 120 Sol Jo 458 .… 3.17 Firth v Centrelink (No 2) (2002) 55 NSWLR 494 .… 2.48 Firth & Sons Ltd v IRC [1904] 2 KB 205 .… 32.57 Fisher, In the Will of [1948] VLR 8 .… 29.3

Fisher v Bridges (1854) 3 E & B 642; 118 ER 1283 .… 13.46 Fisher v Rural Adjustment and Finance Corp of Western Australia (1995) 57 FCR 1 .… 24.3 Fisher v Smith (1878) 4 App Cas 1 .… 1.10 Fisher v Tayler (1843) 2 Hare 218; 67 ER 91 .… 11.26 Fisher v The Automobile Finance Co of Australia Ltd (1928) 41 CLR 167 . … 2.27 Fisher v Westpac Banking Corporation (1993) 43 FCR 385 .… 3.5 Fison’s Will Trusts, Re [1950] Ch 394; [1950] 1 All ER 501 .… 29.2, 29.4 Fitch Lovell Ltd v IRC [1962] 3 All ER 685 .… 6.17 Fitzgerald v Fauconberge (1730) Fitzgib 207; 94 ER 722 .… 32.31 Fitzgerald v Rainsford (1804) 1 Ball & B 37n .… 3.29 Fitzgerald’s Trustee v Mellersh [1892] 1 Ch 385; [1891–4] All ER Rep 979 . … 17.9, 32.38 Flarty v Odlum (1790) 3 Term Rep 681; 100 ER 801 .… 13.49 FLE Holdings Ltd, Re [1967] 1 WLR 1409; [1967] 3 All ER 553 .… 11.39 Fleck, Re; Colston v Roberts (1888) 37 Ch D 677 .… 29.3 Fleetwood v Jansen (1742) 2 Atk 467; 26 ER 682 .… 21.7, 22.40 Fleming v Self (1854) 3 De M & G 997; 43 ER 390 .… 32.9 Fletcher, Ex parte (1832) Mont 454 .… 40.13 Fletcher v Bird (1896) unreported .… 21.13, 32.22 Fletcher v FCT (1991) 173 CLR 1 .… 41.3 Fletcher v Green (1864) 33 Beav 426; 55 ER 433 .… 11.14 Fletcher v Ould Pty Ltd [2003] WASC 226 .… 33.7 Fletcher & Campbell v City Marine Finance Ltd [1968] 2 Ll Rep 520 .… 9.26 Flight v Camac (1856) 4 WR 664 .… 39.14

Flinn v Pountain (1889) 58 LJ Ch 389 .… 24.28, 24.45 Flint v Howard [1893] 2 Ch 54 .… 30.2, 30.9, 30.12, 30.14, 30.15 Florence Land and Public Works Co, Re; Ex parte Moor (1878) 10 Ch D 530 .… 8.12, 8.14, 8.19 Florgale Uniforms Pty Ltd (Receivers and Managers Appointed) (In liq) v Orders (2004) 11 VR 54 .… 5.126, 18.13, 19.41, 20.22 Flower & Sons v Pritchard (1908) 53 Sol Jo 178 .… 20.40 FNCB-Walton Finance Ltd v Crest Realty Pty Ltd (1987) 10 NSWLR 621 . … 4.38, 28.16 Footner v Sturgis (1852) 5 De G & Sm 736; 64 ER 1322 .… 22.18 Forbes v Jackson (1882) 19 Ch D 615 .… 25.5, 42.13 Forbes v Moffatt (1811) 18 Ves 384; 34 ER 362 .… 36.4, 36.7 Forbes v Ross (1782) 2 Bro CC 430; 29 ER 240 .… 11.14 Ford, Re 574 F 3d 1279 (2009) .… 5.85 Ford v Earl of Chesterfield (1853) 16 Beav 516; 51 ER 878 .… 33.27, 40.16 Ford v Earl of Chesterfield (1854) 19 Beav 428; 52 ER 416 .… 1.30 Ford v Earl of Chesterfield (1856) 21 Beav 426; 52 ER 924 .… 40.20 Ford v Olden (1867) LR 3 Eq 461 .… 32.18 Ford v Perpetual Trustees Victoria Ltd [2009] NSWCA 186; 75 NSWLR 42; 14 BPR 26,895 .… 13.41 Ford v Rackham (1853) 17 Beav 485; 51 ER 1122 .… 22.5 Ford v Wastell (1847) 6 Hare 229; 67 ER 1151 .… 22.36 Ford v Wastell (1848) 2 Ph 591; 41 ER 1071 .… 22.35 Ford v White (1852) 16 Beav 120; 51 ER 723 .… 24.8 Ford Credit Canada Ltd v Percival Mercury Sales Ltd (1984) 4 PPSAC 92 . … 5.30, 5.112 Ford Motor Credit Company of Canada Limited v Centre Motors of Brampton Limited (1982) 2 PPSAC 63 .… 5.104

Fordham v Wallis (1853) 10 Hare 217; 68 ER 905 .… 16.34 Forgeard v Shanahan (1994) 35 NSWLR 206 .… 11.31 Forrest, Re [1953] VLR 266 .… 16.20, 16.21 Forrest v Shore (1884) 32 WR 356 .… 22.32 Forrest Trust, Re; Trustees, Executors and Agency Co Ltd v Anson [1953] VLR 246 .… 4.8, 4.10, 4.40, 20.46, 40.1 Forshaw, Re (1847) 16 Sim 121; 60 ER 818 .… 2.35 Forsinard Estates Ltd v Dykes [1971] 1 All ER 1018 .… 40.31 Forster v Baker [1910] 2 KB 636 .… 6.19 Forster v Finance Corp of Australia Ltd [1980] VR 63 .… 20.49 Forster v Forster [1918] 1 IR 95 .… 39.24 Forster v Hoggart (1850) 15 QB 155; 117 ER 417 .… 20.18 Forsyth, Re (1929) 29 SR (NSW) 411 .… 29.2 Forsyth v Blundell (1973) 129 CLR 477 .… 20.8, 20.20, 20.21, 20.23, 20.32, 20.37, 20.42 Forsyth v Bristowe (1853) 8 Ex 716; 155 ER 1540 .… 16.33 Fortesque’s Estate, Re [1916] 1 IR 268 .… 32.8 Fortson Pty Ltd v Commonwealth Bank of Australia [2008] SASC 49 .… 18.13 Fosbery v Burdekin [1937] VLR 165 .… 6.21 Foskett v McKeown [2000] 3 All ER 97 .… 5.33 Foster, Re (1985) 129 Sol Jo 333 .… 11.41 Foster, Re [1920] 3 KB 306 .… 42.1 Foster v Esley (1881) 19 Ch D 518 .… 2.42 Foster v Woolvett (1963) 39 DLR (2d) 532 .… 17.5 Fountain v Bank of America National Trust & Savings Assn (1992) 5 BPR 11,817 .… 3.8, 3.14

Four-Maids Ltd v Dudley Marshall (Properties) Ltd [1957] Ch 317; [1957] 2 All ER 35 .… 19.12, 19.15 Fournier v The Ship Margaret Z [1999] 3 NZLR 111 .… 9.22 Fourth City Mutual Benefit Building Society v Williams (1879) 14 Ch D 140 .… 25.4 Fowler, Re; Bishop v Fowler (1922) 128 LT 620 .… 21.24, 32.36 Fowler v Fowler (1881) 50 LJ Ch 686 .… 2.44 Fowler v Midland Electric Corp for Power Distribution [1917] 1 Ch 656 .… 8.2, 32.44 Fox, Re (1856) 5 Ir Ch R 541 .… 30.13 Fox v Everingham (1983) 50 ALR 337 .… 42.6 Fox v Jolly [1916] 1 AC 1 .… 17.9 Frado v Bank of Montreal (1984) 34 Alta LR(2d) 293 .… 5.16 Frail v Ellis (1852) 16 Beav 250; 51 ER 814 .… 36.13 France v Clark (1883) 22 Ch D 830 .… 1.11, 14.1, 20.3 France v Clark (1884) 26 Ch D 257 .… 6.17, 14.1, 15.1 France v Cowper [1871] WN 76 .… 16.15 Francis v Francis (1854) 2 De GM & G 73;42 ER 798 .… 2.46 Francis v Francis (1854) 5 De GM & G 108;43 ER 811 .… 2.18, 11.14 Francis v Francis [1952] VLR 321 .… 3.36 Francklyn v Fern (1740) Barn Ch 30; 27 ER 542 .… 21.13, 32.26, 33.14 Franicevich v Strong [1997] 1 NZLR 460 .… 2.35, 2.36, 2.41, 2.42 Frankcombe v Foster Investments Pty Ltd [1978] 2 NSWLR 41 .… 2.15 Franklin v Hosier (1821) 4 B & Ald 341; 106 ER 962 .… 2.24 Franklin v Midland Bank Ltd [1941] 2 All ER 135 .… 17.3 Fraser Trenholm & Co, Re (1868) 4 Ch App 49 .… 23.8 Fraser v Clarke (1872) 3 VR (E) 84 .… 27.10

Fraser v Deputy Commissioner of Taxation (1996) 69 FCR 99; 138 ALR 689 .… 13.5 Fraser v Pendlebury (1861) 10 WR 104 .… 32.40 Fraser v Power (2001) Aust Contract R 90-127 .… 32.55 Fraser v Power [2000] NSWSC 257; [2001] ACL Rep 295 NSW 4 .… 11.2 Frazer v Walker [1967] 1 AC 569 .… 4.11, 4.12, 4.16, 4.23, 13.40, 30.3, 30.4 Freeman, Re 956 F 2d 252 (1992) .… 5.85 Freeman, Re; Ex parte Williams (1865) 13 WR 564 .… 39.15 Freeman v Fairlie (1812) 3 Mer 29 at 44; 36 ER 12 .… 2.45 Freeman v Laing [1899] 2 Ch 355 .… 26.16 Freeman v Pope (1870) 5 Ch App 538 .… 13.6 Freeman v Trimble (1906) 6 SR (NSW) 133 .… 18.27 Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 .… 11.33 Freese Leasing Inc v Union Trust and Savings Bank, Stanwood 253 NW (2d) 921 (1977) (Iowa) .… 3.8 Freme v Brade (1858) 2 De G & J 582; 44 ER 1115 .… 6.15, 32.73 Fremoult v Dedire (1718) 1 P Wms 429; 24 ER 458 .… 1.34 French v Capple [2001] NSWSC 574 .… 2.8, 18.7 French v French (1855) 6 De GM & G 95; 43 ER 1166 .… 13.6 French v Gething [1922] 1 KB 236 .… 5.43 French v Hope (1887) 56 LJ Ch 363 .… 24.28 French v Queensland Premier Mines and Beckinsdale [2004] VSC 294 .… 14.5 French-Brewster’s Settlements, Re; Walters v French-Brewster [1904] 1 Ch 713 .… 36.4, 36.6 French Caledonia Travel Service Pty Ltd (in liq), Re (2003) 204 ALR 353 .

… 5.33 Freshfield’s Trusts, Re (1879) 11 Ch D 198 .… 26.1 Frew v Burnside (1925) 42 WN (NSW) 111 .… 2.22 Frewen v Law Life Assurance Society [1896] 2 Ch 511 .… 39.61 Friedmann Equity Developments Inc v Final Note Ltd [2000] 1 SCR 842; (2000) 188 DLR (4th) 269 .… 5.29 Friend v Mayer [1982] VR 941 .… 4.39, 32.36 Frisby, Re; Allison v Frisby (1889) 43 Ch D 106 .… 16.34, 16.35 Friswell v King (1846) 15 Sim 191; 60 ER 590 .… 2.33 Frith v Cartland (1865) 71 ER 525 .… 5.33 Frith v Cooke (1885) 52 LT 798 .… 22.46 Frontmond Pty Ltd v Rodgers (1993) 6 BPR 13,112 .… 2.32, 2.37 Fry, Re; Fry v Fry [1912] 2 Ch 86 .… 30.10 Fry v Lane (1888) 40 Ch D 312 .… 13.11, 13.12, 13.30, 13.31 Fuld Decd (No 4), Re [1968] P 727 .… 2.48, 2.49, 2.51 Fuller v Glyn Mills Currie & Co [1914] 2 KB 168 .… 6.17 Fuller v Goodwin (1865) 4 SCR (NSW) 66 .… 27.10 Fullerton v Provincial Bank of Ireland [1903] AC 309 .… 3.45 Fulton v 523 Nominees Pty Ltd [1984] VR 200 .… 11.6 Furber v Cobb (1887) 18 QBD 494 .… 19.41 Furlong v Howard (1804) 2 Sch & Lef 115 .… 2.44 Furness v Caterham Rail Co (1859) 27 Beav 358; 54 ER 140 .… 21.14 Fyfe v Smith [1975] 2 NSWLR 408; (1979) 129 NLJ 334 .… 19.34, 39.31 G G Merel & Co Ltd v Barclays Bank (1963) 107 Sol Jo 542 .… 20.24 GA Investments Pty Ltd v Standard Insurance Co Ltd [1964] WAR 264 .…

32.6 GA Listing and Maintenance Pty Ltd, Re (1994) 15 ACSR 308 .… 11.35 Gabriel Controls Pty Ltd, Re (1982) 6 ACLR 684 .… 18.7, 18.9 Gadsden v Commissioner for Probate Duties (Vic) [1978] VR 653 .… 30.2 Galbraith v Grimshaw and Baxter [1910] 1 KB 339 .… 7.14 Galland, Re (1885) 31 Ch D 296 .… 2.38 Gamboola Cabonne Properties Ltd, Re (1919) 19 SR (NSW) 227 .… 4.27 Gamlen Chemical Co (UK) Ltd v Rochem Ltd [1980] 1 WLR 614; [1980] 1 All ER 1049 (CA) .… 2.35, 2.38 Garafano v Reliance Finance Corp Ltd (1992) 5 BPR 11,941 .… 4.11, 4.12, 4.16 Garcia v National Australia Bank Ltd (1993) NSW ConvR 55-662 .… 13.17, 13.18, 13.27, 13.28, 13.30, 13.35 Garcia v National Australia Bank Ltd (1998) 194 CLR 395; 155 ALR 614 . … 13.25, 13.26, 13.27, 13.28, 13.29, 13.31, 13.33 Garden Mews-St Leonards Pty Ltd v Butler Pollnow Pty Ltd (1984) 9 ACLR 91 .… 18.23 Gardner v Fitzgerald [1962] Qd R 29 .… 32.40, 32.41 Gardner v Lachlan (1838) 4 My & Cr 129; 41 ER 51 .… 26.13 Gardner v London, Chatham and Dover Rail Co (1867) 2 Ch App 201 .… 21.14 Garfitt v Allen (1887) 34 Ch D 48 .… 2.7, 2.8, 3.36, 10.9, 19.11, 19.14 Garforth v Bradley (1755) 2 Ves Sen 675; 28 ER 430 .… 32.41 Garland, Ex parte (1803) 10 Ves 111; 32 ER 786 .… 2.18 Garland v Ralph Pay & Ransom (1984) 271 Estate Gazette 106 .… 20.35 Garlick v Jackson (1841) 4 Beav 154; 49 ER 297 .… 22.37 Garrett v St Marylebone, Middlesex Justices (1884) 12 QBD 620 .… 1.23, 16.1

Garrud, Re; Ex parte Newitt (1881) 16 Ch D 522 .… 26.4 Garry v Sternbauer Estate (2000) 1 PPSAC (3d) 51 .… 5.38 Garth v Ward (1741) Atk 174; 26 ER 509 .… 33.5, 33.25 Gartside v Silkstone and Dodworth Coal Co (1882) 21 Ch D 762 .… 24.26 Garwood’s Trusts, Re; Garwood v Paynter [1903] 1 Ch 236 .… 6.18, 11.28 Gaskell v Gosling [1896] 1 QB 669 .… 2.5, 18.5, 19.21, 39.25 Gattuso v Geelong Building Society (1989) NSW ConvR 54-343; ANZ ConvR 565 .… 20.22, 20.32 Gauntlet Energy Corp, Re (2003) 5 PPSAC (3d) 236 .… 5.30 Gay v Johnston (1936) 37 SR (NSW) 454 .… 1.23 GBS Meat Industry Pty Ltd v Kress-Dobkin Co, Inc 474 F Supp 1357 .… 5.23 GE Capital Australia v Davis (2002) 180 FLR 250; 11 BPR 20,529 .… 18.13, 19.24 GE Capital Canada Acquisitions Inc v Dix Performance (1995) 8 PPSAC (2d) 197 .… 5.38 Gedye v Matson (1858) 25 Beav 310; 53 ER 655 .… 21.13, 22.7, 22.8, 32.30, 33.2 Gee & Co (Woolwich) Ltd, Re [1975] Ch 52; [1974] 1 All ER 1149 .… 16.33 Gee v Liddell [1913] 2 Ch 62 .… 22.7, 22.8, 30.2, 30.4, 30.7, 30.8, 33.2 Gee, Re; Ex parte Official Receiver (1884) 24 QBD 65 .… 23.14 Geelong Building Society v Thomas (1996) V ConvR 54-545 .… 13.29 Geldard v Hornby (1841) 1 Hare 251; 66 ER 1026 .… 22.31, 22.32 Gellibrand v Murdoch (1937) 58 CLR 236 .… 29.2 General Credit & Discounts Ltd v Glegg (1883) 22 Ch D 549 .… 3.15, 21.1, 22.28, 32.15, 39.56 General Credits (Finance) v Registrar of Ships (1982) 44 ALR 571; 61 FLR

329 .… 9.15, 9.22, 9.23, 9.24, 9.28 General Credits (Finance) Pty Ltd v Brushford Pty Ltd [1975] 2 NSWLR 308 .… 36.16 General Credits (Finance) Pty Ltd v Stoyakovich [1975] Qd R 352 .… 1.51, 20.20 General Credits Ltd v Wenham (1989) 18 NSWLR 570 .… 16.20, 16.34, 19.12, 32.84, 39.2 General Finance Agency and Guarantee Co of Australia Ltd v Perpetual Executors and Trustees Association of Australia Ltd (1902) 27 VLR 739 .… 24.34 General Finance Co v Liberator Benefit Building Society (1878) 10 Ch D 15 .… 19.14 General Furnishing and Upholstery Co v Venn (1863) 2 H&C 153; 159 ER 64 .… 6.21 General Provident Assurance Co, Re; Ex parte National Bank (1872) LR 14 Eq 507 .… 11.8 General Share Trust Co v Chapman (1876) 1 CPD 771 .… 2.39 General South American Co, Re (1876) 2 Ch D 337 .… 8.12 General Steam-Navigation Co v Rolt (1858) 6 CB NS 550; 141 ER 572 .… 35.7 Geneva Finance Ltd, Re; Quigley v Cook (1991) 7 ACSR 415 .… 18.5 Gentle v Faulkner [1900] 2 QB 267 .… 13.53 George Attenborough & Son v Solomon [1913]AC 76 .… 11.16, 11.17 George Barker (Transport) Ltd v Eynon [1974] 1 All ER 900; [1974] 1 WLR 462 .… 6.6, 8.18 George v Cluning (1979) 28 ALR 57 .… 32.45 Georgiades v Edward Wolfe & Co Ltd [1965] Ch 487; [1964] 3 All ER 433 . … 1.38 German v Yates (1915) 32 TLR 52 .… 6.11

Gerty v Mann (1891) 29 LR Ir 7 .… 2.43 Gesellschaft Burgerlichen Rechts v Stockholms Rederiakteibolag Svea (The Brabant) [1967] 1 AB 588 .… 3.7 Gesualdi v Serenar Nominees Pty Ltd (1993) V ConvR 54-478 .… 4.41, 20.5, 20.6 Gethina v Keighley (1878) 9 Ch D 547 .… 39.3 Ghana Commercial Bank v Chandiram [1960] AC 732; [1960] 2 All ER 865 .… 11.10, 14.6, 36.7, 42.18 Ghirardi v Allregal Corp Pty Ltd [2001] WASC 366 .… 35.8, 35.11 Gibbins v Eyden (1869) LR 7 Eq 371 .… 30.2 Gibbon, Re; Moore v Gibbon [1901] 1 Ch 367 .… 36.6 Gibbon v Strathmore (1841) .… 22.5 Gibbs, Re; Ex parte Price (1844) 3 Mont D& De G 586 .… 26.8 Gibbs v Cruickshank (1873) LR 8 CP 454 .… 12.10 Gibbs v Haydon (1882) 30 WR 726 .… 11.6 Gibbs v Messer [1891] AC 248 .… 4.18, 4.22 Gibbs v Ougier (1806) 12 Ves 413; 33 ER 156 .… 30.16 Gibbston Downs Wines Ltd v Perpetual Trust Ltd [2012] NZHC 1022 .… 5.72, 5.91 Gibson v Co-ordinated Building Services Pty Ltd (1989) 4 BPR 9630 .… 4.28 Gibson v Ingo (1847) 6 Hare 112; 67 ER 1103 .… 24.19 Gibson v Jeyes (1801) 6 Ves 266; 31 ER 1044 .… 42.2 Gibson v May (1853) 4 De GM & G 512; 43 ER 607 .… 2.35 Gibson v Nicol (1846) 9 Beav 403; 50 ER 399 .… 33.26 Gibson v Seagrim (1855) 20 Beav 614; 52 ER 741 .… 30.9, 30.12 Gibson v Stock Co Ltd [2010] NZHC 2398; [2011] NZCCLR 29 .… 5.121 Giffen, Re [1998] 1 SCR 91; (1998) 155 DLR (4th) 332 .… 5.4, 5.24, 5.30

Gilbert v Bourne (1895) 6 QLJ .… 4.29 Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1957) 59 SR (NSW) 122 . … 1.27 Gilberto v Kenny (1983) 48 ALR 620 .… 3.7 Giles v Kruyer [1921] 3 KB 23 .… 7.11 Gill v Downing (1874) LR 17 Eq 316 .… 6.15, 40.25 Gill v Lewis [1956] 2 QB 1 .… 37.9 Gill v Newton (1866) 14 LT 240; 14 WR 490 .… 20.13, 20.13 Gill v The Continental Union Gas Co Ltd (1872) LR 7 Ex 332 .… 7.8 Gillett v Burke [1996] 1 VR 196 .… 12.24 Gilligan and Nugent v National Bank Ltd [1901] 2 IR 513 .… 32.82 Gilmour v Pyramid Building Society (in liq) (1995) 6 PPR 13,979 .… 6.7, 14.5, 14.11 Gilshenan & Luton v Commissioner of Taxation [1984] 1 Qd R 199 .… 2.37, 2.49 Gino and Associates Pty Ltd v Accordent Pty Ltd (1998) 201 LSJS 60 .… 7.10 Gippsland Steam Navigation Co, Re; Ex parte Chuck (1875) 1 VLR (Eq) 141 .… 2.18 Gladstone v Birley (1817) 2 Mer 401; 35 ER 993 .… 2.2, 2.9 Gladstone’s Mortgage, Re [1916] NZLR 489 .… 4.30 Glafki Shipping Co SA v Pinios Shipping Co (No 1), The Maira (No 2) [1985] 1 Lloyd’s Rep 300 .… 9.16 Gleebs Pty Ltd, Re [1933] VLR 293 .… 2.28 Glegg v Bromley [1932] 3 KB 474 .… 13.6 Glendore Pty Ltd v Elders Finance & InvestmentCo Ltd (1984) 4 FCR 130 . … 20.38 Glenn v General Motors Acceptance Corp of Canada Ltd (1992) 3 PPSAC

(2d) 203 .… 5.137 Glodale Pty Ltd v Investec Bank (Australia) Ltd [2007] VSC 276 .… 20.5, 20.6 Glover v Ellison (1872) 20 Wr 408 .… 39.6 Glyn v East & West India Dock Co (1880) 6 QBD 475 .… 3.55 Glyn v Hood (1860) 1 De GF & J 334; 45 ER 388 .… 6.11 Glyn Valley Tramway Co Ltd, Re [1937] Ch 465 .… 21.14 GMAC Commercial Credit Corp of Canada v TCT Logistics Inc (2004) 238 DLR (4th) 487; 6 PPSAC (3d) 163 .… 5.19 GMAC Leaseco Ltd v Tomax Credit Corp (2001) 3 PPSAC (3d) 15 .… 5.94 Gobind das Bhattar v Gajanand Pandey 31 AIR (1944) Cal 189 .… 2.30 Godber v Manning (1914) 33 NZLR 603 .… 7.10 Goddard, Re; Hooker v Buckley (1912) 57 Sol Jo 42 .… 26.18 Goddard v Whyte (1860) 2 Giff 449; 66 ER 188 .… 42.13 Godfrey v Chadwell (1707) 2 Vern 601; 23 ER 993 .… 22.6 Godfrey v Poole (1888) 13 App Cas 497 .… 13.6 Godfrey v Watson (1747) 3 Atk 517; 26 ER 1098 .… 39.45, 40.23 Goldcel Nominees Pty Ltd v Network Finance Ltd [1983] 2 VR 257 .… 20.21, 20.22, 20.23, 20.27, 20.32, 20.33, 20.34, 20.35, 20.37, 20.40 Goldcorp Pty Ltd v Schmierer [1992] ACL Rep 295 Qld 11 .… 18.6 Golden Dew Pty Ltd (rec appd) v Toweran Holdings Pty Ltd [1996] 1 Qd R 235 .… 28.3 Golding v Russell [1983] Qd R 53 .… 16.8, 17.8 Goldsborough Mort & Co Ltd v Hall [1948] VLR 145 .… 1.43 Goldsborough Mort & Co Ltd v Maurice (1938) 58 CLR 773 .… 3.20 Goldsmid v Stonehewer (1852) 9 Hare App xxxiii; 68 ER 778 .… 33.12 Goldstone’s Mortgage, Re [1916] NZLR 489 .… 3.34

Goldstrom v Tallerman (1886) 18 QBD 1 .… 39.43 Goldsworthy v Brickell [1987] Ch 378; [1987] 1 All ER 853 .… 13.20, 13.22, 13.23, 13.24 Gomba Holdings UK Ltd v Homan [1986] 3 All ER 94; [1986] 1 WLR 1301 .… 18.5 Gomba Holdings UK Ltd v Minories Finance Ltd [1988] 1 WLR 1231 .… 18.5 Gomba Holdings UK Ltd v Minories Finance Ltd (No 2) [1993] Ch 171; [1992] 4 All ER 588 (CA) .… 40.1, 40.2, 40.4, 40.6, 40.23, 40.26, 40.31 Gomez v State Bank of NSW [2001] FCA 1059 .… 20.21 Good v Parry [1963] 2 QB 418; [1963] 2 All ER 59 .… 16.34 Goodbody v Miller (1893) 19 VLR 581 .… 13.9 Goodchap v Weaving (1853) 16 Jur 586 .… 2.45, 2.46 Goodchild v Bradbury [2006] All ER (D) 247 .… 13.24 Goode v Burton (1847) 1 Ex 189; 154 ER 80 .… 2.10 Goodman v Grierson (1813) 2 Ball & B 274 .… 1.27 Goodman v Robinson (1886) 18 QBD 332 .… 6.19 Good’s Lease, Re [1954] 1 WLR 309; [1954] 1 All ER 275 .… 37.11 Goodwin v Gray (1874) 22 WR 312 .… 42.13 Goodwin v Waghorn (1835) 4 LJ Ch 172 .… 3.38 Goodwyn v Steeles-Glacier Home Delivery Freezer Food Service Pty Ltd [1987] ASC 55-597 .… 6.21 Gordillo v Weguelin (1877) 5 Ch D 287 .… 39.43 Gordon Grant & Co Ltd v Boos [1926] AC 781 .… 16.7, 16.11, 17.10 Gordon v Fowler (1901) 17 TLR 243 .… 13.14 Gordon v Graham (1716) 2 Eq Cas Abr 598;22 ER 502; 7 Vin Abr 52, pl 3; 22 ER 502 .… 25.7, 39.11 Gordon v Holland (1913) 82 LJ PC 81 .… 25.7

Gordon v Horsfall (1846) 5 Moo PCC 393; 13 ER 542 .… 21.14, 33.7 Gordon, Re; Ex parte Official Receiver (1889) 61 LT 299 .… 12.4, 12.5, 12.9, 19.14, 39.15, 39.16 Gore v Stacpoole (1813) 1 Dow 18 (HL); 3 ER 607 .… 21.7, 22.39 Gorgier v Mieville (1824) 3 B & C 45; 107 ER 651 .… 21.3 Gorringe v Irwell India Rubber and Gutta Percha Works (1886) 34 Ch D 128 .… 6.13, 6.14, 26.2 Gosling v Gaskell [1897] AC 578 .… 18.5 Goss v Chilcott [1996] AC 788; [1997] 2 All ER 110 .… 35.8 Gossip v Wright (1863) 32 LJ Ch 648 .… 1.30 Gottlieb v Cranch (1853) 4 De G M & G440;43 ER 579 .… 32.73 Gough, Re; Lloyd v Gough (1894) 70 LT 755 .… 2.36 Gough v Wood & Co [1894] 1 QB 713 (CA) .… 1.20 Gouthwaite v Rippon (1839) 8 LJ Ch 139 .… 20.44 Government Insurance Office (NSW) v KA Reed Services Pty Ltd [1988] VR 829 .… 19.40 Government Stock and Other Securities Investment Co v Manila Rly Co [1897] AC 81 .… 8.10, 8.11, 8.16, 8.19, 8.20 Gower v Gower (1783) 1 Cox Eq Cas 53; 29 ER 1059 .… 36.6 Grace Rymer Investments Ltd v Waite [1958] Ch 831; [1958] 2 All ER 777 . … 12.7, 12.13, 12.21, 12.23, 12.24 Graham v Graham (1871) 2 VLR (Eq) 145 .… 18.4 Graham v Lee (1857) 23 Beav 388; 53 ER 152 .… 13.51 Graham v Portacom New Zealand Ltd [2004] 2 NZLR 528 .… 5.4, 5.24, 5.25, 5.30, 5.41, 5.71 Graham v Seal (1918) 88 LJ Ch 31 .… 32.41, 32.55, 40.9 Grand Junction Co Ltd v Bates [1954] 2 QB 160; [1954] 2 All ER 385 .… 13.53, 37.11

Grange, Re; Chadwick v Grange [1907] 2 Ch 20 .… 20.46 Grangeside Properties Ltd v Collingwood Securities Ltd [1964] 1 All ER 143 .… 1.28 Grant v Humphery (1862) 3 F & F 162; 176 ER 73 .… 2.26 Graves v Wright (1842) .… 22.5 Gray v Bonsall [1904] 1 KB 601 .… 37.11 Gray v Dowman (1858) 27 LJ Ch 702 .… 22.22, 30.7 Gray v Royal Bank of Canada (1997) 143 DLR (4th) 179; 12 PPSAC (2d) 126 .… 5.30 Gray v Stone (1893) 69 LT 282 .… 30.14 Great Eastern Railway Co v Lord’s Trustee [1909] AC 109 .… 2.3 Green v All Motors Ltd [1917] 1 KB 625 .… 2.22, 2.27 Green v Biggs (1885) 52 LT 680 .… 21.22 Green v Briggs (1848) 6 Hare 632; 67 ER 1315 .… 40.14 Green v Burns (1879) 6 LR Ir 173 .… 19.12 Green v Rheinberg (1911) 104 LT 149 .… 12.7, 12.13, 12.23, 19.30, 24.21 Green v Schneller (2002) 29 Fam LR 346 .… 13.8 Green v Walker 45 A (2d) 742 (1900) .… 39.19 Green v Whitehead [1930] 1 Ch 38 .… 11.7 Green v Wynn (1869) LR 4 Ch App 204 .… 21.13, 32.30 Greenberg v Rapoport (1970) 10 DLR (3d) 737 .… 35.3 Greendon Investments v Mills (1973) 226 Estates Gazette 1957 .… 20.45 Greene v Foster (1882) 22 Ch D 566 .… 22.50 Greenhalgh, Re [1982] Qd R 99 .… 33.11 Greening v Beckford (1832) 5 Sim 195; 58 ER 310 .… 26.23 Greenough v Littler (1880) 15 Ch D 93 .… 22.15, 22.17 Greenwood v Sutcliffe [1892] 1 Ch 1 .… 32.47, 33.20, 40.9

Greenwood v Taylor (1845) 14 Sim 505; 60 ER 454 .… 35.2 Greer v Kettle [1938] AC 156 .… 17.1, 17.11, 39.11 Greg, Re; Fordham v Greg [1921] 2 Ch 24 .… 36.8 Gregg v Slater (1856) 22 Beav 314; 52 ER 1129 .… 40.9 Gregory Love & Co, Re [1916] 1 Ch 203 .… 8.11, 8.18, 8.21 Gregory v Pilkington (1857) 26 LJ Ch 177 .… 39.58 Gregson, Re (1858) 26 Beav 87; 53 ER 829 .… 2.39 Gregson, Re; Christison v Bolam (1887) 36 Ch D 223 .… 1.53, 31.5, 31.7 Greig v Watson (1881) 7 VLR (E) 79 .… 4.8, 4.9, 16.4, 19.7, 31.1, 31.11, 33.13 Gresham Life Assurance Society v Crowther [1915] 1 Ch 214 .… 26.11 Gresley v Moulsey (1861) 3 De GF & J 433; 45 ER 945 .… 39.12 Greswold v Marsham (1685) 2 Cas in Ch 170; 22 ER 898 .… 22.6 Grey v Manitoba & North Western Railway Co of Canada [1897] AC 254 . … 1.43 Greyvest Leasing Inc v Canadian Imperial Bank of Commerce (1991) 1 PPSAC (2d) 264 .… 5.82, 5.91 Greyvest Leasing Inc v Merkur (1994) 8 PPSAC (2d) 203 .… 5.121 Grgic v Australia and New Zealand Banking Group Ltd (1994) 33 NSWLR 202 .… 4.12, 4.19, 4.29, 17.3 Gribble v Stearman & Kaplan Inc 239 A (2d) 573 (1968) .… 30.17 Grierson v National Provincial Bank of England [1913] 2 Ch 18 .… 24.43 Griffith v Hodge (1979) 2 BPR 9474 .… 4.28 Griffith v Pound (1890) 45 Ch D 553 .… 22.5, 22.7, 31.1, 33.2 Griffiths v Commonwealth Bank of Australia (1994) 123 ALR 111 .… 6.20 Grigson v Taplin and Co (1915) 85 LJ Ch 75 .… 8.14 Grimwade v Mutual Society (1884) 52 LT 409 .… 1.4

Grogan, Re (2012) 476 BR 270 .… 5.38 Grogan v Orr [2001] NSWCA 114 .… 2.48 Groom v Cheesewright [1895] 1 Ch 730 .… 2.37 Groongal Pastoral Co Ltd (in liq) v Falkiner (1924) 35 CLR 157 .… 4.2, 4.24, 17.11, 31.11, 34.3 Grose v St George Commercial Credit Union Limited (1991) NSW ConVR 55-586 .… 20.38 Grossman v Saunders (1989) 237 Va 113; 376 SE 2d 66 .… 5.43 Grouse Nest Resources Ltd v First National Mortgage Corp (1977) 1 RPR (Can) 246 .… 36.3 Groutco (Aust) Pty Ltd v Thiess Contractors Pty Ltd [1985] 1 Qd R 238 .… 7.10 Grove v Portal [1902] 1 Ch 727 .… 3.43, 13.53 Grove v Public Trustee [1931] NZLR 1071 .… 4.30, 14.16 Groves v Lane (1852) 16 Jur 854 .… 33.4 Grugeon v Gerrard (1840) 4 Y & C 119; 160 ER 945 .… 16.2, 33.7 Grundy v Ley [1984] 2 NSWLR 467 .… 4.38, 17.11, 32.65 Guaranty State Bank & Trust Co v Van Diest Supply Company 30 Kan App 2d 1108 (2002) .… 5.87 Guaranty Trust Co of Canada v Canadian Imperial Bank of Commerce [1989] OJ No 1081 (Ont HC); [1993] OJ No 2152 .… 5.87 Guardian Mortgages Pty Ltd v Miller [2004] NSWSC 174 .… 3.17 Guardian Mortgages Pty Ltd v Miller [2004] NSWSC 1236 .… 19.11, 21.11 Guardian Mortgages Pty Ltd v Miller (2004) 12 BPR 22,833 .… 21.11, 32.16 Guardian Securities Ltd, Re [1984] 1 NSWLR 95 .… 11.43 Guardner v Boucher (1850) 13 Beav 68; 51 ER 26 .… 16.40, 22.19 Gubbins v Creed (1804) 2 Sch & Lef 214 .… 32.19, 39.31

Gulf and Fraser Fishermen’s Union v Calm C Fish Ltd [1975] 1 Lloyd’s Rep 188 .… 9.26 Gunn v Commonwealth Bank of Australia (1922) 18 Tas LR 26 .… 4.25, 32.25 Gunn v Land Mortgage Bank of Victoria Ltd (1890) 12 ALT 49 .… 20.16 Gunnion v Ardex Acceptance Pty Ltd [1968] VR 547 .… 12.3, 12.11, 12.18, 19.7, 19.10 Gunsbourg, Re; Ex parte Trustee (1919) 88 LJKB 479 .… 6.12 Gurfinkel v Bentley Pty Ltd (1966) 116 CLR 98 .… 1.25, 1.27 Gurnell v Gardner (1863) 4 Giff 626; 66 ER 857 .… 6.11, 6.14 Gurney v Jackson (1853) 1 Sm & G App xxvi; 67 ER 1330 .… 22.47 Gurney v Seppings (1846) 2 Ph 40; 41 ER 856 .… 15.3 Guthrie v ANZ Banking Group Ltd (1989) ANZ ConvR 221 .… 13.32 Guthrie v ANZ Banking Group Ltd (1991) 23 NSWLR 672; 14 Fam LR 773 .… 11.3, 11.4, 14.17, 36.4 Guy v Churchill (1887) 35 Ch D 489 .… 2.48 Gwembe Valley Development Co Ltd v Koshy [2000] 2 BCLC 705 .… 18.6, 28.2 GWH Pty Ltd v Commonwealth Bank of Australia (1994) 6 BPR 14,073 .… 1.40, 3.8, 10.1, 39.60 Gwynne v Edwards (1825) 2 Russ 289n; 38 ER 349 .… 30.10 Gy, Ree; Ex parte Smith (1841) 2 Mont D & De G 314 .… 3.43 Gyles v Hall (1726) 2 P Wms 378; 24 ER 774 .… 32.41, 32.44 H H v Minister for Immigration and Citizenship (2010) 188 FCR 393 .… 5.5 H & S Credits Ltd, Re; Tucker v Roberts [1969] Qd R 280 .… 14.6, 36.9 H & W Wallace Ltd, Re [1994] 1 NZLR 235 .… 2.49 H S Bird & Co v The Ship ‘Karu’ (1927) 27 SR (NSW) 476 .… 2.51

Habib Bank Ltd v Tailor [1982] 3 All ER 561; [1982] 1 WLR 1218 .… 16.31, 17.8 Haddad v AMH Import & Export Co Pty Ltd [1993] ACL Rep 295 SA 1 .… 8.19 Haddington Island Quarry Co Ltd v Huson [1911] AC 727 .… 20.22 Hagan v Waterhouse (1991) 34 NSWLR 308 .… 39.42 Haigh, Ex parte (1805) 11 Ves 403; 32 ER 1143 .… 3.37, 3.40 Haimes v Goode (1932) 33 SR (NSW) 1 .… 29.2 Haji Abdul Rahman v Mohomed Hassan [1917] AC 209 .… 4.5 Hal Wright Motor Sales Ltd and Industrial Development Bank (1975) 8 OR (23d) 76 .… 20.37 Halcyon Skies (No 2), The [1977] 1 Lloyd’s Rep 22 .… 16.7, 17.8 Hale, Re; Lilley v Foad [1899] 2 Ch 107 .… 16.33, 18.8 Hales v Cox (1863) 32 Beav 118; 55 ER 46 .… 30.13 Halesowen Presswork & Assemblies Ltd v Westminster Bank Ltd [1971] 1 QB .… 2.30 Halifax Building Society v Thomas [1996] Ch 217; [1995] 4 All ER 673 .… 20.43, 20.44, 32.1, 39.21 Halifax Mortgage Services Ltd v Muirhead (1997) 76 P & CR 418 .… 42.13 Halifax Mortgage Services Ltd v Stepsky [1996] 1 Ch 1 .… 42.5 Hall, Re; Ex parte Rocke (1871) 6 Ch App 795 .… 23.5 Hall v Busst (1960) 104 CLR 206 .… 1.27, 13.50 Hall v Hall [1891] P 302 .… 2.49 Hall v Hall [1911] 1 Ch 487 .… 30.7 Hall v Heward (1886) 32 Ch D 430 .… 1.37, 17.5, 19.21, 19.34, 21.13, 22.11, 32.20, 32.21, 33.3, 39.20, 40.9 Hall v Hubbard [1931] VLR 197 .… 17.1, 17.5 Hall v Richards (1961) 108 CLR 84 .… 23.4

Hall v West End Advance Co (1883) Cab & El 161 .… 24.43 Hall v Westpac Banking Corp (1987) 4 BPR 9578 .… 3.7, 3.14 Hall-Dare’s Contract (1882) 21 Ch D 41 .… 24.12 Hall (William) (Contractors) Ltd, Re (in liq) [1967] 2 All ER 1150 .… 32.53 Hallett, Re; Ex parte Cocks, Biddulph & Co [1894] 2 QB 256 .… 23.7 Hallett v Furze (1885) 31 Ch D 312 .… 22.21, 33.22 Hallet’s Estate, Re (1879–80) LR 13 Ch D 696 .… 5.33 Halliday v Holgate (1868) LR 3 Ex 299 .… 1.5 Hallifax Property Corp Pty Ltd v GIFC Ltd (1987) 4 BPR 9708 .… 20.27, 20.30, 20.38 Halliwell v Tanner (1830) 1 Russ & M 633; 39 ER 243 .… 30.3 Halsall v Brizell [1957] Ch 169; [1957] 1 All ER 371 .… 19.40 Halsall v Egbunike (1963) 107 Sol Jo 514 .… 40.23 Halstead, Re; Ex parte Westpac BankingCorporation (1991) 31 FCR 337 .… 13.27 Haly v Barry (1868) LR 3 Ch App 452 .… 24.50 Hamilton v Denny (1809) 1 Ball & B 199 .… 19.39 Hamilton v Hunter (1982) 7 ACLR 295 .… 8.11, 8.16, 8.18, 8.19 Hamilton v Kaljo (1989) 17 NSWLR 381 .… 16.36 Hamilton v Royse (1804) 2 Sch & Lef 315 .… 24.15 Hamilton’s Windsor Ironworks, Re; Ex parte Pitman and Edwards (1879) 12 Ch D707 .… 8.12, 26.23 Hammersley v Knowlys (1798) 2 Esp 666; 170 ER 490 .… 32.52 Hammersmith LBC v Top Shop Ltd [1990] Ch 237 .… 3.27 Hammerstone Pty Ltd v Lewis [1994] 2 QdR 267 .… 2.36, 2.37 Hammond, Re (1903) 3 SR (NSW) 270 .… 11.12 Hammonds v Barclay (1802) 2 East 227; 102 ER 356 .… 2.20

Hamp v Bygrave (1983) 266 EG 720 .… 1.21 Hampshire v Bradley (1845) 2 Coll 34; 63 ER 624 .… 40.29 Hampshire Land Co, Re [1896] 2 Ch 743 .… 42.5 Hampton v Hodges (1803) 8 Ves 105; 32 ER 292 .… 42.20 Hanbury v Litchfield (1833) 2 My & K 629; 39 ER 1084 .… 24.21 Hancock, Re (1888) 57 LJ Ch 793; 59 LT 197 .… 34.2, 34.6 Hand v Blow [1901] 2 Ch 721 .… 18.5 Handevel Pty Ltd v Comptroller of Stamps (Vic)(1985) 157 CLR 177 .… 1.7, 8.1 Handman and Wilcox’s Contract, Re [1902] 1 Ch 599 .… 12.24 Hang Seng Bank Ltd v Mee Cheong Investment Co Ltd [1970] HKLR 94 .… 22.35, 22.36 Hang Seng Bank Ltd v Yeung Sau-min [1986] HKLR 273 .… 22.41 Haniotis v Dimitriou [1983] VR 498 .… 19.26 Hanlon v Law Society [1981] AC 124 .… 7.1 Hansard v Hardy (1812) 18 Ves 455; 34 ER 389 .… 24.18 Hansen Yuncken Pty Ltd v Ian Jones Ericson t/as Flea’s Concreting (2012) 260 FLR 151 .… 41.1 Hanson v Derby (1700) 2 Vern 392; 23 ER 852 .… 42.21 Happé v Happé [1991] 4 All ER 527 .… 13.49, 42.2 Harbert’s Case (1584) 3 Co Rep 11b; 76 ER 647 .… 30.17 Harding v Harding (1886) 17 QBD 442 .… 6.5 Harding v Tingey (1864) 10 Jur NS 872 .… 33.7 Harding v Tingey (1864) 34 LJ Ch 13;4 New Rep 10 .… 21.14, 32.6 Hardingham v Nicholls (1745) 3 Atk 304; 26 ER 977 .… 24.11 Hardwick v Mynd (1793) 1 Anst 111; 145 ER 815 .… 35.5 Hardy, Re; Ex parte Hardy (1832) 2 Deac & Ch 393 .… 24.15

Hardy v Motor Insurers’ Bureau [1964] 2 QB 745; [1964] 2 All ER 742 .… 6.15 Hare v Horton (1833) 5 B & Ad 715; 110 ER 954 .… 1.21 Hare v Nicoll [1966] 2 QB 130 .… 1.27 Hari Sanker Paul v Kedar Nath Saha [1939] 2 All ER 737 .… 3.36 Harlock v Ashberry (1882) 19 Ch D 539 .… 16.33, 32.88 Harman & Co Solicitor Nominee Co v Secureland Mortgage Investment Nominees Ltd [1992] 2 NZLR 416 .… 12.17 Harman and Uxbridge and Rickmansworth Railway Co, Re (1883) 24 Ch D 720 .… 11.32, 14.8 Harman v Glencross [1986] Fam 81 .… 7.5 Harmer v Bean (1853) 3 Car & Kir 307; 175 ER 566 .… 12.13 Harmer v Priestly (1853) 16 Beav 569; 51 ER 899 .… 32.40 Harold v Plenty [1901] 2 Ch 314 .… 3.36 Harold Meggit Ltd v Discount and Finance Ltd (1939) 56 WN (NSW) 23 .… 18.9 Harper v Aplin (1886) 54 LT 383 .… 42.20 Harpham v Shacklock (1881) 19 Ch D 207 .… 2.18, 40.4, 40.5 Harpur v Ariadne Aust Ltd (SC (Qld), Williams J, 5 December 1994) .… 28.3 Harrington v Harrington 427 A (2d) 1314 (1981) .… 39.19 Harrington v Price (1832) 3 B & Ad 170; 110 ER 63 .… 24.40 Harris v Jenkins (1922) 31 CLR 341 .… 13.21 Harris v Western Australian Exim Corp (1994) 56 FCR 1; 129 ALR 387 .… 20.38 Harrison v Australia & New Zealand Banking Group Ltd (1996) [1999] Q ConvR 54-531; [1999] V ConvR 54-600 .… 20.30 Harrison v Guest (1860) 8 HL Cas 481; 11 ER 517 .… 13.23

Harrison v Hart (1726) 2 Eq Cas Abr 6; 22 ER 5 .… 21.1 Harrison v Lederman [1978] VR 590 .… 2.47 Harrison v Melhem (2008) 72 NSWLR 380 .… 5.5 Harrison (W F) & Co Ltd v Burke [1956] 2 All ER 169; [1956] 1 WLR 419 . … 6.7 Harrold v Plenty [1901] 2 Ch 314 .… 1.35, 6.16, 21.1, 21.3 Harryman v Collins (1854) 18 Beav 11; 52 ER 5 .… 19.35 Hart, Re; Ex parte Caldicott (1884) 25 Ch D 716 .… 23.7 Hart v Barnes [1983] 2 VR 517 .… 8.14 Hart v Hawthorne (1880) 42 LT 79 .… 22.47 Hart v O’Connor [1985] AC 1000; [1985] 2 All ER 880 .… 4.15, 11.20, 11.21, 13.12, 13.22 Harter v Colman (1882) 19 Ch D 630 .… 31.9 Hartl v Cowen (1982) [1993] 2 Qd R 633 .… 32.40, 32.65, 39.2 Hartley v Humphris [1928] St R Qd 83 .… 20.23 Hartley v Russell (1825) 2 Sim & St 244; 57 ER 339 .… 21.13 Harvey, Re; Harvey v Hobday [1896] 1 Ch 137 .… 36.5 Harvey v Brydges (1845) 14 M & W 437; 153 ER 546 .… 19.19 Harvey v McWatters (1948) 49 SR NSW 173 .… 20.38, 33.7 Harvey v Municipal Permanent Investment Building Society (1884) 26 Ch D 273 .… 3.15, 16.7, 32.17, 32.65 Harvey v Tebbutt (1820) 1 Jac & W 197; 37 ER 350 .… 21.7, 22.39 Harvey’s Estate, Re (1886) 17 LR Ir 165 .… 2.37 Harwood, Re (1887) 35 Ch D 471 .… 20.1 Harwood v Kirby (1829) 1 Paige Chancery 469 .… 11.6 Haskew v Equity Trustees Executors and Agency Co Ltd (1919) 27 CLR 231; [1918] VLR 634 .… 13.22, 13.24

Hatch v Skelton (1855) 20 Beav 453; 52 ER 678 .… 36.6 Hatmax Nominees Pty Ltd v BlannEnterprises Pty Ltd [1983] 3 NSWLR 338 .… 32.7 Hatton v Car Maintenance Co Ltd [1915] 1 Ch 621 .… 2.21, 2.22 Hatton v Harris [1892] AC 547 .… 39.48 Haupiri Courts Ltd (No 2), Re [1969] NZLR 353 .… 4.28 Hawes, Re; Ex parte Sadler (1881) 19 Ch D 122 .… 23.15 Hawke v Edwards (1947) 48 SR (NSW) 21 .… 36.3 Hawkes, Re; Ackerman v Lockhart [1898] 2 Ch 1 .… 2.43, 2.47 Hawkes, Re; Reeve v Hawkes [1912] 2 Ch 251 .… 29.4 Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation Ltd (1994) 8 BPR 15,581; (1995) NSW ConvR ¶55-731 .… 20.21, 39.43 Hawkins, Re [1972] Ch 714 .… 41.3 Hawkins v Gaden (1925) 37 CLR 183 .… 32.74 Hawkins v Woodgate (1844) 7 Beav 565; 49 ER 1185 .… 32.73 Hawks v McArthur [1951] 1 All ER 22 .… 7.7 Hay v Swedish and Norwegian Rly Co (1889) 5 TLR 460 .… 8.2 Hayes and Harlington UDC v Williams’ Trustee [1936] Ch 315 .… 22.9 Hayes Securities Ltd v Bambury [1991] 1 NZLR 304 .… 1.25, 1.28, 1.29, 3.6 Haynes v Forshaw (1853) 11 Hare 93; 68 ER 1201 .… 30.14, 30.15 Haynes v Haynes (1857) 3 Jur NS 504 .… 16.9 Hayward v Smith (1887) 9 LR (NSW) (Eq) 11 .… 9.7 Haywood v Martin (1883) 9 VLR (E) 143 .… 18.19 Haywood v Roadknight [1927] VLR 512 .… 42.2 Head v Egerton (1734) 3 P Wms 280; 24 ER 1065 .… 24.40 Head v Kelk [1963] SR (NSW) 340 .… 3.13, 11.15

Heald v O’Connor [1971] 2 All ER 1105 .… 13.45 Heales v M’Murray (1846) 23 Beav 401; 53 ER 157 .… 19.21 Healey v Commonwealth Bank of Australia (NSWCA, 8 December 1998, unreported) .… 32.52 Health & Life Care Ltd (in liq) v South Australian Asset Management Corporation (1995) 65 SASR 48 .… 23.6 Heams v Bance (1748) 3 Atk 630; 26 ER 1162 .… 25.6 Heath v Chinn (1908) 98 LT 855 .… 40.10 Heath v Crealock (1874) LR 10 Ch App 22 .… 19.18, 24.12, 24.40 Heath v Pugh (1881) 6 QBD 345 .… 12.5, 12.9, 16.4, 16.21, 16.32, 19.13, 21.2 Heathstar Properties Ltd, Re [1966] 1 WLR 993; [1966] 1 All ER 628 .… 1.40, 11.43 Heathstar Properties Ltd (No 2), Re [1966] 1 WLR 993; [1966] 1 All ER 1000 .… 11.43 Heaton and Dugard Ltd v Cutting Bros Ltd [1925] 1 KB 655 .… 8.19 Heid v Reliance Finance Corp Pty Ltd (1983) 154 CLR 326 .… 3.36, 4.31, 24.25, 24.29, 24.45, 28.14, 28.15, 28.16, 28.22 Heidelberg Canada Graphic Equipment Ltd v Arthur Andersen Inc (1992) 7 BLR (2d) 236 .… 5.29 Heighington v Grant (1845) 1 Ph 500; 41 ER 761 .… 39.3 Heinicke Instruments Company v Republic Corporation (1976) 543 F 2d 700 .… 5.43, 5.44 Heininger, Re (1908) 8 SR (NSW) 120 .… 29.3 Helbert Wagg & Co Ltd, Re [1956] Ch 323 .… 1.43 Hele v Lord Bexley (1855) 20 Beav 127; 52 ER 551 .… 39.14 Helmville Ltd v Astilleros Espanoles SA ‘The Jocelyn’ [1984] 2 Lloyd’s Rep 569 .… 20.37 Helstan Securities Ltd v Hertfordshire County Council [1978] 3 All ER 262 .

… 6.19, 10.4 Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 .… 11.33 Hemmings v Stoke Poges Golf Club [1920] 1 KB 720 .… 19.20 Henderson v Amadio (No 1) (1995) 140 ALR 391 .… 42.6 Henderson v Astwood [1894] AC 150 .… 20.4, 20.40, 37.5, 40.9, 40.19 Hennessey, Re (1842) 2 Dr & War 555 .… 26.21 Hennessy v Rourke (1893) 15 LR (NSW) 33 .… 17.1 Henry Roach (Petroleum) Pty Ltd v Credit House (Vic) Pty Ltd [1976] VR 309 .… 20.22, 20.23, 20.33, 20.37 Henry Walker Contracting Pty Ltd v Pegasus Gold (Aust) Pty Ltd (SC (NT), 1998, unreported) .… 2.26 Henson, Re; Chester v Henson [1908] 2 Ch 356 .… 11.18 Heperu Pty Ltd v Belle (2009) 76 NSWLR 230 .… 5.33 Hepworth v Heslop (1844) 3 Hare 485; 67 ER 472 .… 40.20 Hepworth v Hill (1862) 30 Beav 476; 54 ER 974 .… 29.2 Herman v Gill (1921) WALR 10 .… 32.12 Herman v Jeuchner (1885) 15 QBD 561 .… 13.46 Hermann v Hodges (1873) LR 16 Eq 18 .… 1.33, 21.18 Herries v Griffiths (1854) 2 WR 72 .… 16.10 Hervey v Wynn (1905) 22 TLR 93 .… 16.29 Heslop v Metcalfe (1837) 3 My & Cr 183, 40 ER 894 .… 2.35 Hewett v Court (1983) 149 CLR 639 .… 2.9, 2.10, 18.15 Hewitt v Loosemore (1851) 9 Hare 449; 68 ER 586 .… 24.9, 24.15, 24.23, 24.37, 24.39, 42.5 Hewitt v Nanson (1858) 28 LJ Ch 49 .… 21.23 Hewson v Shelley [1914] 2 Ch 13 .… 24.12 Heydon, Re (1969) 86 LQR 229 .… 32.13

Heyman v Dubois (1871) LR 13 Eq 158 .… 30.9, 30.13 HG & HR Securities Pty Ltd v Sayer (2009) 14 BPR 27,045 .… 20.11 HG & R Nominees Pty Ltd v Fava (1997) 2 VR 368 .… 27.11 Hi Fi Equipment (Cabinets) Ltd, Re [1988] BCLC 65 .… 8.4 Hiatt v Hillman (1871) 19 WR 694 .… 20.6 Hibblewhite v M’Morine (1840) 6 M & W 200; 151 ER 380 .… 6.17 Hibernian Bank vYourell (No 2) [1919] 1 IR 310 .… 16.30, 18.114 Hickes v Cooke (1816) 4 Dow 16; 3 ER 1074 .… 32.19 Hickey v Heydon (1895) 16 LR (NSW) Eq 49 .… 20.6 Hickey v Powershift Tractors Pty Ltd (1998) 9 BPR 17,339 .… 1.35, 4.19 Hickman Equipment (1985) Ltd, Re (2003) 5 PPSAC (3d) 93 .… 5.38 Hickson v Darlow (1883) 23 Ch D 690 .… 20.36, 20.37 Hickson v Fitzgerald (1826) 1 Mol 14n .… 40.15 Hiern v Mill (1806) 13 Ves 114; 33 ER 237 .… 24.15 Higgins v Frankis (1846) 10 Jur 328; 15 LJ Ch 329 .… 22.22, 31.4 Higgins v Scott (1831) 2 B & Ad 413; 109 ER 1196 .… 2.51 Higginson v German Athenaeum Ltd (1916) 32 TLR 277 .… 16.1 Higgs v Scott (1849) 7 CB 63; 137 ER 26 .… 12.13 Higton Enterprises Pty Ltd v BFC Finance Ltd p1997] 1 Qd R 168 .… 20.22, 20.30 Hildyard, Re; Ex parte Smith (1842) 2 Mont D & De G 587 .… 3.38, 3.43, 15.2 Hiley v The Peoples Prudential Assurance Co Ltd (1938) 60 CLR 468 .… 1.53 Hilger Analytical Ltd v Rank Precision Industries Ltd [1984] BCLC 301 .… 8.2 Hill, Re (1886) 33 Ch D 266 .… 2.49

Hill, Re (1886) 36 Ch D 266 .… 2.49 Hill, Re; Ex parte Southall (1848) 17 LJ Bktcy 21 .… 2.22, 2.28 Hill v Adams (1741) 2 Atk 39; 26 ER 420 .… 33.16 Hill v Anderson Meat Industries Ltd [1971] 1 NSWLR 868; [1972] 2 NSWLR 704 .… 35.10 Hill v Browne (1844) Drury t Sug 426 .… 19.39, 24.33, 39.19 Hill v Edmonds (1852) 5 De G & Sm 603; 64 ER 1262 .… 22.8, 22.22 Hill v Fox (1859) 4 H & N 359 .… 13.47 Hill v Kirkwood (1880) 28 WR 358 .… 20.36, 20.37 Hill v Peters [1918] 2 Ch 273 .… 26.1 Hill v Rowlands [1897] 2 Ch 361 .… 32.36 Hill v Simpson (1802) 7 Ves 152; 32 ER 63 .… 11.18 Hill v Ziymack (1908) 7 CLR 352 .… 2.17 Hill Pottery Co, Re (1886) 15 WR 97 .… 3.29 Hillpalm Pty Ltd v Heaven’s Door Pty Ltd [2004] HCA 59; 220 CLR 472; 211 ALR 588 .… 4.12 Hillston v Bar Mordecai [2003] NSWSC 89 .… 13.29 Hilton v Barker Booth & Eastwood [2005] 1 WLR 567 .… 42.7 Hilton v Tucker (1888) 39 Ch D 669 .… 1.11 Hinckley and Country Building Society v Henny [1953] 1 WLR 352; [1953] 1 All ER 515 .… 3.23, 19.10 Hinde v Blake (1841) 11 LJ Ch 26 .… 19.34, 39.28 Hindmarsh Building Society v Manhire (1979) 20 SASR 206 .… 20.14 Hiorns v Holtom (1852) 16 Beav 259; 51 ER 778 .… 24.28 Hipkins v Amery (1860) 2 Giff 292; 66 ER 122 .… 24.16 Hippesley v Spencer (1820) 5 Madd 422; 56 ER 956 .… 42.20 Hiscox v Greenwood (1802) 4 Esp 174; 170 ER 681 .… 2.24

Hiscox v Outhwaite [1992] 1 AC 562 .… 1.4 Hitchins v Lander (1807) G Coop 34; 35 ER 468 .… 33.14 Hitchock v Carew (1853) Kay App xiv; 69 ER 319 .… 16.35 Hoare, Re; Hoare v Owen [1892] 3 Ch 94 .… 39.18 Hoare (Charles) & Co v Hove Bungalows Ltd (1912) 56 Sol Jo 686 .… 12.15 Hobart v Abbot (1731) 2 P Wms 643; 24 ER 897 .… 22.7, 33.16 Hobday v Peters (1860) 28 Beav 349; 54 ER 400 .… 39.19 Hobson v Bell (1839) 2 Beav 17; 48 ER 1084 .… 20.19, 20.26 Hobson v Gorringe [1897] 1 Ch 182 .… 1.20, 3.26 Hobson v Shearwood (1845) 8 Beav 486; 50 ER 191 .… 2.51 Hockey v Western [1898] 1 Ch 350 .… 6.14, 19.45 Hockley v Bantock (1826) 1 Russ 141; 38 ER 55 .… 3.40 Hockley and Papworth v Goldstein (1920) 90 LJKB 111 .… 6.7 Hodge, Ex parte (1857) 26 LJ Bcy 77 .… 39.42 Hodges v Croydon Canal Co (1840) 3 Beav 86;49 ER 34 .… 40.9 Hodgson v Hodgson (1837) 2 Keen 704; 48 ER 800 .… 35.8, 39.45 Hodgson v Marks [1971] Ch 892; [1971] 2 All ER 684 .… 24.21 Hodson v Deans [1903] 2 Ch 647 .… 20.22, 20.40 Hodson and Howes’ Contract, Re (1887) 35 Ch D 668 .… 20.50 Hogan v Baird (1843) 4 Dr & War 296 .… 40.13 Hogg v Hogg [2007] EWHC 2240 (Ch); [2007] All ER (D) 54 .… 13.24 Hoghton v Hoghton (1852) 15 Beav 278; 51 ER 545 .… 13.31 Holden v Hearn (1839) 1 Beav 445; 48 ER 1012 .… 3.43 Holden v Silkstone and Dodworth Coal and Iron Co (1881) 30 WR 98 .… 22.1 Holford v Burnell (1687) 1 Vern 448; 23 ER 577 .… 33.8

Holford v Yate (1855) 1 K & J 677; 69 ER 631 .… 22.31, 22.32, 22.33 Holland, Re (1928) 28 SR (NSW) 369 .… 30.9 Holland, Re; Ex parte Alston (1868) LR 4 Ch App 168 .… 30.13, 30.14 Holland, Re; Gregg v Holland [1902] 2 Ch 360 .… 13.6, 13.51 Holland v Hodgson (1872) LR 7 CP 328 .… 1.20, 3.26 Holley v Metropolitan Permanent Building Soc [1983] 2 Qd R 756 .… 3.32 Hollier v Eyre (1840) 9 C & F 1; 8 ER 313 .… 35.7 Hollingshead, Re (1888) 37 Ch D 651 .… 16.33 Hollis v Bulpett (1865) 12 LT 293 .… 33.8 Hollis v Claridge (1813) 4 Taunt 807; 128 ER 549 .… 2.22, 2.33, 2.40 Hollis v Wingfield [1940] Ch 336; [1940] 1 All ER 531 .… 39.24 Holman v Vaux (1615) Toth 133; 21 ER 146 .… 1.14 Holme v Brunskill (1878) 3 QBD 495 .… 35.7, 35.8 Holme v Fieldsend [1911] WN 111 .… 32.55 Holmes, Re (1885) 29 Ch D 786 .… 26.5, 26.23 Holmes, Re; Ex parte Ashworth [1908] 2 KB 812 .… 23.15 Holmes v Bell (1841) 3 Man & G 213 .… 36.15 Holmes v Cowcher [1970] 1 All ER 1224 .… 16.30 Holmes v Dring (1788) 2 Cox 1; 30 ER 1 .… 11.14 Holmes v Kennard (1985) 49 P & CR 202 .… 32.74 Holmes v Penney (1856) 3 K & J 90; 69 ER 1035 .… 13.6, 13.7 Holmes v Turner (1843) 7 Hare 367n; 68 ER 151 .… 22.15, 22.18, 22.50, 31.1, 33.30 Holohan v Friends Provident and Century Life Office [1966] IR 1 .… 20.20, 20.31 Holroyd v Marshall (1862) 10 HL Cas 191; 11 ER 999; [1861–73] All ER Rep 414 .… 5.32, 6.19, 6.21, 6.23, 8.12

Holt v Dewell (1845) 4 Hare 446; 67 ER 723 .… 26.13, 26.14 Holt v Heatherfield Trust Ltd [1942] 2 KB 1; [1942] 1 All ER 404 .… 6.7, 6.9, 6.11 Home Building & Savings Assn v Pringle (1914) 14 DLR 482; 5 OWN 226 . … 33.3 Honeywood v Honeywood [1902] 1 Ch 347 .… 39.62 Hongkong and Shanghai Banking Corp v Kloeckner & Co AG [1990] 2 QB 514 .… 6.8 Hongkong Bank of Canada v National Bank of Canada (1990) 1 PPSAC (2d) 73; 72 DLR (4th) 372 .… 5.38 Hood v Easton (1856) 2 Giff 692; 66 ER 290 .… 39.28, 39.33 Hood v Easton (1856) 2 Jur NS 917 .… 33.15, 39.28 Hood v Phillips (1841) 3 Beav 513; 49 ER 202 .… 36.6 Hoogerdyk v Condon (1990) 22 NSWLR 171 .… 1.23 Hooker Town Developments Pty Ltd v Director of War Service Homes (1973) 47 ALJR 320 .… 13.42 Hooks, Re 40 BR 715 (1984) .… 5.87 Hoole v Roberts (1848) 12 Jur 108 .… 40.25 Hoole v Smith (1881) 17 Ch D 434 .… 20.13, 21.13 Hooper, Ex parte (1815) 19 Ves 477; 34 ER 593 .… 3.36, 3.43 Hooper, Re; Ashford v Brooks [1892] WN 151 .… 29.3 Hooper v Cooke (1856) 25 LJ Ch 467 .… 42.8 Hoover Owens Remscher v Gulf Navigation (1923) 54 OLR 483 .… 9.23 Hope v Bathurst City Council (1980) 144 CLR 1 .… 5.25 Hope v Hope [1977] NZLR 582 .… 4.23, 4.25 Hope v Liddell (1855) 20 Beav 438; 52 ER 672 .… 2.44, 24.19 Hope v Winter (1709) 2 Eq Cas Abr 690; 22 ER 580 .… 9.21 Hopgood, Re; Ex parte Coveney (1957) 18 ABC 133 .… 23.14

Hopkins, Re; Williams v Hopkins (1881) 18 Ch D 370 .… 16.9 Hopkins v Hemsworth [1898] 2 Ch 347 .… 26.11 Hopkins v Prescott (1847) 4 CB 578; 136 ER 634 .… 13.48 Hopkinson v Forster (1874) LR 19 Eq 74 .… 6.3, 7.1, 6.13 Hopkinson v Miers (1889) 34 Sol Jo 128 .… 21.21 Hopkinson v Rolt (1861) 9 HL Cas 514; 11 ER 829 .… 4.35, 25.7, 25.8, 25.12, 25.13, 25.14, 25.16, 26.11, 26.12, 31.9 Hordern v Federal Mutual Insurance Co of Aust Ltd (1924) 24 SR (NSW) 267 .… 3.20 Horlock v Smith (1842) 6 Jur 478; 11 LJ Ch 157 .… 19.16, 19.21 Horlock v Smith (1844) 1 Coll 287; 63 ER 422 .… 39.37, 39.40, 40.23 Hornby v Matcham (1848) 16 Sim 325; 60 ER 899 .… 32.82 Horne v Leigh (1906) 7 SR (NSW) 51 .… 18.27 Horn’s Estate, Re, Re; Public Trustee v Garnett [1924] 2 Ch 222 .… 22.51 Hornsey Local Board v Monarch Investment Building Society (1889) 24 QBD 1 .… 16.28, 16.29 Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd (1985) 1 NSWLR 545 .… 7.4 Horsham Properties Group Ltd v Clark [2009] 1 WLR 1255 .… 20.6 Horton v Smith (1858) 4 K & J 624; 70 ER 259 .… 36.5 Horvath v Commonwealth Bank of Australia [1999] 1 VR 643 .… 4.11 Hosack v Robbins [1917] 1 Ch 142 .… 7.9 Hosken v Sincock (1865) 11 Jur NS 477 .… 40.9 Hosking, Re; Ex parte Calder (1932) 5 ABC 130 .… 23.15 Hosking v Smith (1888) 13 App Cas 582 .… 34.3 Hough v Edwards (1856) 26 LJ Ch 54 .… 2.37 Household Financial Services Ltd v Island and River Trading Pty Ltd (1993)

6 BPR 13,312 .… 9.15, 9.17, 9.22, 9.24 Houssein v Department of Industrial Relations and Technology (1982) 148 CLR 88 .… 5.42 Houvardas v Zaravinos (2004) 202 ALR 535 .… 13.5, 13.8 Houvardas v Zaravinos [2004] NSWCA 421 .… 13.5, 13.8 How v Vigures (1628) 1 Chan Rep 32; 21 ER 499 .… 1.14, 21.11 Howard v Fanshawe [1895] 2 Ch 581 .… 37.9 Howard v Lud 119 Mich App 55 (1982 .… 5.136 Howard v Harris (1683) 1 Vern 190; 23 ER 406 .… 21.13, 32.11, 32.21 Howard, Re; Ex parte Tennant (1877) 6 Ch D 303 .… 6.22 Howard’s Estate, Re (1892) 29 LR Ir 266 .… 24.12, 36.9 Howe, Re; Ex parte Brett (1871) 6 Ch App 838 .… 23.7, 42.18 Howes v Bishop [1909] 2 KB 390 .… 13.17, 13.20 Hoy v AAA Home Loans Pty Ltd [1985] VR281 .… 24.51 HSBC Bank Canada v. Kupritz (2011) 18 PPSAC (3d) 322 .… 5.137 Hua Chiao Commercial Bank Ltd v Chiaphua Industries Ltd [1987] AC 99; [1987] 1 All ER 1110 .… 19.40 Hubbuck v Helms (1887) 56 LT 232 .… 8.16 Huddersfield Banking Co Ltd v Henry Lister & Son Ltd [1895] 2 Ch 273 .… 42.20 Hudson v Carmichael (1854) Kay 613; 69 ER 260 .… 30.7 Hudson v Granger (1821) 5 B & Ald 27; 106 ER 1103 .… 1.48 Hudson v Malcolm (1862) 10 WR 720 .… 32.80 Hudson v Owners of Swiftsure (1900) 82 LT 389 .… 39.7 Hudston v Viney [1921] 1 Ch 98 .… 24.37, 24.38 Hughes v Birks [1958] EG Digest 341 .… 19.23 Hughes v Britannia Permanent Benefit Building Society [1906] 2 Ch 607 .…

31.9 Hughes v Cook (1865) 34 Beav 407; 55 ER 692 .… 12.2, 33.7 Hughes v Howard (1858) 25 Beav 575; 53 ER 756 .… 3.29 Hughes v Pump House Hotel Co [1902] 2 KB 190 .… 6.5 Hughes v Waite [1957] 1 All ER 603; [1957] 1 WLR 713 .… 12.21, 12.23, 12.24, 19.21 Hughes v Williams (1806) 12 Ves 493; 33 ER 187 .… 19.35, 42.21 Hughes v Williams (1852) 3 Mac & G 683; 42 ER 423 .… 24.49, 30.5, 30.6, 33.26 Hughes v Williams (1853) Kay App iv; 69 ER 313 .… 39.59 Hughes Bros Pty Ltd v Trustee of Roman Catholic Church for the Archdiocese of Sydney (SC (NSW), Giles J, 21 September 1989, unreported) .… 3.10, 16.8 Hughes’ Trusts, Re (1864) 2 Hem & M 89; 71 ER 394 .… 26.11 Hugill v Wilkinson (1888) 36 Ch D 480 .… 16.31 Huguenin v Baseley (1807) 14 Ves 273; 33 ER 526 .… 13.22 Hulkes v Day (1840) 10 Sim 41; 59 ER 527 .… 26.23 Hulme v Brigham [1943] 1 KB 152; [1943] 1 All ER 204 .… 1.20, 3.26 Humber Ironworks Co, Re (1868) 16 WR 474 .… 16.1 Humber Ironworks Co (Warrant Finance Co’s Case), Re (1869) 4 Ch App 643 .… 23.10 Humberstone v Northern Timber Mills (1949) 79 CLR 389 .… 5.25 Hume v Munro (No 2) (1943) 67 CLR 461 .… 6.4, 7.2 Humes Ltd v PS (Enterprises) Nominees Pty Ltd (1989) 7 ACLC 944 .… 8.1 Humphreys v Harrison (1820) 1 Jac & W 581; 37 ER 489 .… 42.20 Hungerfords v Walker (1990) 171 CLR 125 .… 39.42 Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613; 296 ALR 3 .… 1.55

Hunt v Elmes (1860) 2 De GF & J 578; 45 ER 745 .… 24.37, 24.39, 24.40 Hunt v Fownes (1803) 9 Ves 70; 32 ER 527 .… 40.23 Hunt v Fripp [1898] 1 Ch 675 .… 26.6 Hunt v Hearn (1911) 30 NZLR 501 .… 32.37 Hunt v Luck [1902] 1 Ch 428 .… 24.13, 24.14, 24.21 Hunt v Worsfold [1896] 2 Ch 224 .… 33.9 Hunter v Hunter [1936] AC 222 .… 20.8 Hunter v Lord Langford (1828) 2 Mol 272 .… 1.41, 3.45 Hunter v Macklew (1846) 5 Hare 238; 61 ER 902 .… 33.2 Hunter v Nockolds (1850) 1 Mac & G 640; 41 ER 1413 .… 16.18, 16.23 Huntington v Greenville (1682) 1 Vern 49; 23 ER 303 .… 24.5 Huntington v Huntington (1702) 2 Vern 437; 23 ER 881 .… 30.7 Hurburg v Perpetual Trustee (Tas) Pty Ltd (SC Tas, Slicer J, 6 November 1998, unreported) .… 12.23 Hurley’s Estate, Re [1894] 1 IR 488 .… 1.40 Hurst v Hurst (1852) 16 Beav 372; 51 ER 822 .… 21.21 Husband v Davis (1851) 10 CB 645; 138 ER 256 .… 32.50 Hutchinson v Heyworth (1838) 9 Ad & El 375; 112 ER 1254 .… 6.14 Hutchinson v Johnston (1787) 1 Term Rep 729; 99 ER 1346 .… 24.49 Hutchinson v Joyce (1836) 2 Jo Ex Ir 122 .… 2.41 Hutchinson v Norwood (1886) 54 LT 842 .… 2.43 Hutchinson v Scott (1905) 3 CLR 359 .… 12.20 Huth & Co v Lamport (1886) 16 QBD 735 .… 2.32 Hutton (a bankrupt), Re [1969] 2 Ch 201; [1969] 1 All ER 936 .… 23.3 Hutton v Sealy (1858) 27 LJ Ch 263 .… 21.2 Huxley Catering Ltd, Re (1982) 2 PPSAC 22 .… 5.35

Hyatt Australia Ltd v LTCB Australia Ltd [1996] 1 Qd R 260 .… 18.8 Hyde v Hyde [1948] P 198 .… 7.4 Hyde v Warden (1877) 3 Ex D 72 .… 24.19 Hyde Management Services Pty Ltd v FAI Insurances Ltd (1979) 144 CLR 541 .… 1.15, 3.13, 3.15, 21.1, 32.6 Hypec Electronics Pty Ltd v Registrar-General [2005] NSWSC 1213; 64 NSWLR 679 .… 3.32 I IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550 .… 28.3, 28.4, 28.7, 28.8, 28.12, 28.14, 28.16 Ibrahim v Barclays Bank plc [2012] EWCA Civ 640; [2012] 2 Lloyd’s Rep 13 .… 42.18 Ideal Bedding Co Ltd v Holland [1907] 2 Ch 157 .… 7.11, 13.6 Illingworth v Houldsworth [1904] AC 355 .… 8.13 Imperial Bank of Canada v G M Annable Co [1925] 1 DLR 946 .… 1.51 Imperial Life Assurance Co of Canada v Efficient Distributors Ltd [1992] 2 AC 85 .… 39.50 Imperial Paper Mills of Canada v Quebec Bank (1913) 83 LJ PC 67 .… 8.2 In Regal Financial Co Ltd v Texstar Motors 355 SW 3d 595 (2010) .… 5.121 Inche Noriah v Shaik Allie Bin Omar [1929] AC 127 .… 13.22, 13.23, 13.24 Incorporated Society in Dublin v Richards (1841) 1 Dr & War 258 .… 39.37 Incorporated Trustee of the Australian Clergy Provident Fund v Perpetual Executors and Trustees Association of Australia Ltd [1957] VR 390 .… 20.46, 20.48 Ind, Coope & Co Ltd, Re; Fisher v IndCoope & Co [1911] 2 Ch 233 .… 12.2, 12.4, 12.7, 39.18 Independent Automatic Sales Ltd v Knowles and Foster [1962] 1 WLR 974; [1962] 3 All ER 27 .… 6.20, 11.41

Independent Order of Oddfellows of Victoria Friendly Society v Telford (1991) V ConvR 54-419 .… 12.13, 12.18, 19.4 Indianapolis Morris Plan Corporation v Karlen 28 NY 2d 30 (1971) .… 5.136 Indrisie v General Credits Ltd [1985] VR 251 .… 17.3, 17.9, 19.24, 20.15 Industrial Acceptance Corp Ltd v Tarulli [1974] WAR 125 .… 17.11 Industrial Acceptance Corp Ltd v Tompkins Contracting Ltd (1967) 62 DLR (2d) 693; 60 WWR 546 .… 2.32 Industrial Development Authority v Moran [1978] IR 159 .… 18.10 Industrial Development Bank v Lees (1971) 14 DLR (3d) 612 .… 21.15 Ingham, Re; Jones v Ingham [1893] 1 Ch 352 .… 24.40 Ingham v Sutherland (1890) 63 LT 614 .… 22.29, 22.37 Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 .… 1.51, 3.14, 19.23, 19.24, 20.36, 20.37 Inman v Parsons (1819) 4 Madd 271; 56 ER 706 .… 16.37 Inman v Wearing (1850) 3 De G & Sm 729; 64 ER 680 .… 21.1, 33.10, 33.25 Inns of Court Hotel Co, Re (1868) LR 6 Eq 82 .… 11.8 International Bulk Commodities Ltd, Re [1993] Ch 77; [1993] 1 All ER 361 .… 1.46 International Harvester Credit Corp of Canada v Bell’s Dairy (1986) 6 PPSAC 138; 50 Sask R 177 .… 5.21, 5.24, 5.26, 5.30 International Harvester Export Co v International Harvester Australia Ltd [1983] 1 VR 539 .… 19.31 International Military Services Ltd v Capital and Counties plc [1982] 2 All ER 20 .… 39.43 International Tyre Co Pty Ltd, Re (1979) 4 ACLR 553 .… 2.28 Interstate Investment Co Ltd v Mobbs (1928) 28 SR (NSW) 572 .… 6.5 Interview Ltd, Re [1975] IR 382 .… 6.5

Invercargill Savings Bank v George [1929] NZLR 375 .… 17.10 Investec Bank (Australia) Ltd v Glodale Pty Ltd (2009) 24 VR 617; 256 ALR 104 .… 5.126, 18.13, 20.5, 20.6, 20.22, 20.35 Investment & Merchant Finance Corp Ltd v Kirkwood Estates Ltd (1975) 5 ALR 191 .… 4.28 Ipswich Permanent Money Club Ltd v Arthy [1920] 2 Ch 257 .… 26.15 Irani v St George Bank [2007] VSCA 33 .… 20.5 Irani v St George Bank (No 2) [2005] VSC 403 .… 20.5, 20.6 Irby v Irby (1855) 22 Beav 217; 52 ER 1091 .… 22.45, 25.6 IRC (NZ) v National Bank of New Zealand (1976) 7 ATR 282 .… 41.2 IRC v Electric and Musical Industries Ltd [1949] 1 All ER 120 .… 6.11 IRC v Goldblatt [1972] Ch 498; [1972] 2 All ER 202 .… 8.25 IRC v Oswald [1945] AC 360; [1945] 1 All ER 641 .… 39.51, 41.3 IRC v Parker [1965] Ch 866 .… 1.4 IRC v Thomas Nelson & Sons Ltd [1938] SC 816 .… 41.3 Ireland v Hart [1902] 1 Ch 522 .… 6.17 Ireson v Denn (1796) 2 Cox Eq Cas 425 .… 22.11, 31.10 Irish Club Co Ltd, Re [1906] WN 127 .… 8.14 Iron Trades Employers Insurance Association Ltd v Union Land and House Investors Ltd [1937] Ch 313; [1937] 1 All ER 481 .… 12.17, 12.21, 12.24, 12.26 Irvin v Ironmonger (1831) 2 Russ & M 531; 39 ER 496 .… 30.2 Irvine v Carson (1991) 19 IPR 187 .… 37.14 Irving v Commercial Banking Co of Sydney (1897) 19 LR (NSW) Eq 54 .… 20.6 Irving v Commissioner of Titles (WA) [1963] WAR 67 .… 20.16 Isaack v Clark (1615) 2 Bulst 306; 80 ER 1143 .… 1.11 Isherwood v Butler Pollnow Pty Ltd (1986) 6 NSWLR 363 .… 18.2, 18.3,

18.7 Ismail v Richards Butler [1996] QB 711 .… 2.35 Ismoord v Claypool (1666) 9 Sim 317n; 59 ER 380 .… 22.35 Ivie & Associates Inc, Re 84 BR 882 (1988) .… 5.87 J J & H Just (Holdings) Pty Ltd v Bank of NewSouth Wales (1971) 125 CLR 546 .… 4.23, 4.24, 4.27, 24.13, 24.15, 28.8, 28.12, 28.13, 28.14, 28.16 J & S Holdings Pty Ltd v NRMA Insurance Ltd (1981) 39 ACTR 1 .… 32.35, 32.40, 39.2 J B Davies Enterprises Pty Ltd (in liq), Re [1990] 2 Qd R 129 .… 3.4, 6.15, 18.3, 20.6 Jackson, Ex parte; Re Australasian Catholic Assurance Co Ltd (1941) 41 SR (NSW) 285 .… 4.36, 12.11, 19.5 Jackson, Re (1887) 34 Ch D 732 .… 11.31, 11.32 Jackson v Barnett (1903) 23 NZLR 17 .… 7.10 Jackson v Brettall, MR (1795) A 241 .… 22.16 Jackson v Cummins (1839) 5 M & W 342;151 ER 145 .… 2.22 Jackson v Esanda Finance Corporation Ltd (1992) 59 SASR 415 .… 6.20 Jackson v Innes (1819) 1 Bli 104; 4 ER 38 .… 32.31 Jackson v North Eastern Rly Co (1877) 7 Ch D 573 .… 17.4 Jackson v Pierce (1813) 10 Johnson (Ch) 413 .… 11.6 Jackson v Richards [2005] NSWSC 630; (2005) 12 BPR 23,091 .… 2.3, 2.48, 6.12 Jackson & Bassford, Re [1906] 2 Ch 467 .… 2.5 Jacob v Earl of Suffolk (1728) Mos 27; 25 ER 250 .… 39.51 Jacobs v Platt Nominees Pty Ltd [1990] VR 146 .… 24.29, 28.15, 28.16 Jacobs v Richards (1854) 18 Beav 300; 52 ER 118 .… 16.37

Jacobson v National Australia Bank (SC (Vic), 15 April 2003, unreported) . … 20.22 Jacobson v Williams (1919) 48 DLR 51 .… 1.58, 14.2 Jaffe v Premier Motors Pty Ltd [1960] NZLR 146 .… 17.9 Jageev Pty Ltd v Bank of New South Wales (SC (NSW), Sperling J, 26 March 1996, unreported) .… 3.6, 3.7, 3.9, 39.42 Jalmoon Pty Ltd, Re [1986] 2 Qd R 264 .… 2.49 James, Re; Ex parte Harris (1874) LR 19 Eq 253 .… 36.13 James, Re; James v Jones [1911] 2 Ch 348 .… 16.9 James v Abrahams (1981) 51 FLR 16 .… 3.13 James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 .… 13.22 James v Commonwealth Bank of Australia (1992) 8 ACSR 444 .… 18.17 James v Ellis [1870] WN 269; 24 LT 12 .… 22.24 James v Harding (1855) 24 LJ Ch 749 .… 40.15 James v James (1873) LR 16 Eq 153 .… 3.45, 21.9 James v Rice (1854) 5 De GM & G 461; 43 ER 949 .… 3.43 James v Rumsey (1879) 11 Ch D 398 .… 32.81, 39.59, 40.12 James Bibbey Ltd v Woods [1949] 2 KB 449 .… 2.49 James Roscoe (Bolton) Ltd v Winder [1915] 1 Ch 62 .… 5.33 James Talcott Inc v Associated Capital Company 491 F 2d 879 (6th Cir 1974) .… 5.87 Jameson v Union Bank of Scotland (1914) 109 LT 850 .… 24.30 Jamieson v English (1820) 2 Mol 337 .… 39.20 Jamieson v Gosigil Pty Ltd [1983] 1 Qd 117 .… 40.2 Jamieson v Johnson (1871) 2 VR (E) 26 .… 33.23 Jankowski v Mastoris (1995) 7 BPR 14,589 .… 2.35, 2.38

Jardine v Hoyt (1871) 2 VR(E) 152 .… 9.24 Jared v Clements [1903] 1 Ch 428 .… 24.35, 24.46 Jared v Walke (1902) 18 TLR 569 .… 32.49 Jay v United Building Society (1991) ANZ ConvR 124 .… 3.15 Jay’s the Jewellers Ltd v IRC [1947] 2 All ER 762 .… 20.48 Je Maintiendrai Pty Ltd v Quaglio (1980) 26 SASR 101 .… 39.58 Jeffcott Holdings Ltd v Paior (1995) 18 ACSR 213; 13 ACLC 1798 .… 2.48 Jefferys v Dickson (1866) 1 Ch App 183 .… 33.7, 33.8 Jeffryes v Reynolds (1882) 52 LJQB 55 .… 7.7 Jenkin v Pharmaceutical Society [1921] 1 Ch 392 .… 11.33 Jenkin v Row (1851) 5 De G & Sm 107; 64 ER 1039 .… 21.24 Jenkins v Jones (1860) 2 Giff 99; 66 ER 43 .… 20.20, 20.36, 20.37 Jenkins v National Australia Bank Ltd [1999] V ConvR 54-602 .… 17.7, 20.22, 20.54 Jenkins v Ridgley (1893) 41 WR 585 .… 22.12, 22.49 Jennings v Credit Corp Australia Pty Ltd (2000) 48 NSWLR 709 .… 6.7 Jennings v Jordan (1881) 6 App Cas 698 .… 22.28, 25.10, 25.11, 31.1, 31.6, 31.9 Jennings v Mather [1902] 1 KB 1 .… 18.15 Jennings v Ward (1705) 2 Vern 520; 23 ER 935 .… 32.11 Jennings Constructions Ltd v Burgundy Royale Investments Pty Ltd (No 2) (1987) 162 CLR 153 .… 7.10 Jensen v Giugni (SC (NSW), Young J, 30 November 1994, unreported) .… 4.7, 4.26, 4.28, 11.24 Jenyns v Public Curator (1953) 90 CLR 113 .… 13.24 Jeogla Pty Ltd v ANZ Banking Group Ltd (1999) 150 FLR 359 .… 18.13 Jesseron Pty Ltd v Middle East Trading Pty Ltd (1994) 13 ACSR 455 .… 8.22

Joachim v M’Douall (1798) 9 Sim 314n; 59 ER 379 .… 22.36 Joachimson v Swiss Bank Corp [1921] 3 KB 110 .… 20.47, 25.15 John Bros Abergarw Brewery Co v Holmes [1900] 1 Ch 188 .… 32.14 John Fox v Bannister King & Rigbeys [1988] QB 925; [1987] 1 All ER 737 . … 32.74 Johncorp Industries Pty Ltd v Sussman (2001) 10 BPR 18,975 .… 3.8 Johns v Cassel (1993) FLC 92-364 .… 2.48, 2.51 Johns v Law Society of NSW [1982] 2 NSWLR 1 .… 2.49 Johns v Ware [1899] 1 Ch 359 .… 1.19 Johnson, Re; Golden v Gillam (1881) 20 Ch D 389; (1882) 51 LJ Ch 503 .… 13.6 Johnson, Re; Shearman v Robinson (1880) 15 Ch D 548 .… 2.18 Johnson v Bourne (1843) 2 Y & CCC 268; 63 ER 118 .… 39.21 Johnson v Buttress (1936) 56 CLR 113; [1936] ALR 390 .… 13.16, 13.20, 13.22, 13.23, 13.24, 13.24 Johnson v Child (1844) 4 Hare 87; 67 ER 572 .… 30.2 Johnson v Curtis (1791) 3 Bro CC 266; 29 ER 528 .… 39.3 Johnson v Diprose [1893] 1 QB 512 .… 19.37, 32.1, 32.3 Johnson v Fesenmeyer (1858) 25 Beav 88; 53 ER 569 .… 16.40, 33.9, 42.4 Johnson v Holdsworth (1850) 1 Sim NS 106; 61 ER 41 .… 22.5, 33.19 Johnston and Halliday v Halliday (1984) ANZConvR 652 .… 13.50 Johnstone v Cox (1881) 19 Ch D 17 .… 26.15 Jolly v Arbuthnot (1859) 4 De G & J 224; 45 ER 87 .… 12.4, 12.5, 12.20, 19.16 Jones, Re (1876) 2 Ch D 70 .… 40.28 Jones, Re; Farrington v Forrester [1893] 2 Ch 461 .… 30.5, 30.6 Jones v Atherton (1816) 7 Taunt 56; 129 ER 23 .… 24.49

Jones v Barnett [1900] 1 Ch 370 .… 24.12 Jones v Creswicke (1839) 9 Sim 304; 59 ER 374 .… 22.35 Jones v Davies (1861) 7 H & N 507; 158 ER 573 .… 36.2 Jones v Davies [1940] WN (Eng) 174 .… 3.36, 22.48 Jones v Farrell (1857) 1 De G & J 208; 44 ER 703 .… 6.14, 6.24 Jones v Foley [1891] 1 QB 730 .… 19.26 Jones v Gibbons (1804) 9 Ves 407; 32 ER 659 .… 14.7, 26.7 Jones v Griffith (1845) 2 Coll 207; 63 ER 702 .… 22.15, 31.4, 33.20 Jones v Harris (1887) 55 LT 884 .… 21.22 Jones v Humphreys [1902] 1 KB 10 .… 6.5 Jones v Jones (1838) 8 Sim 633; 59 ER 251 .… 26.11 Jones v Kendrick (1727) 2 Eq Ca Abr 602; 22 ER 505 .… 22.40 Jones v Lewis (1751) 2 Ves Sen 240 ; 28 ER 155 .… 32.82 Jones v Matthie (1847) 16 LJ Ch 405 .… 20.36, 20.37 Jones v Morgan [2003] Lloyd’s Rep Bank 323 .… 32.14 Jones v Peppercorne (1858) John 430; 70 ER 490 .… 2.33 Jones v Pugh (1842) 1 Ph 96; 41 ER 567 .… 33.11 Jones v Roberts (1827) M’Cle & Yo 567; 148 ER 538 .… 22.34 Jones v Smith (1794) 2 Ves 372; 30 ER 679 .… 31.4 Jones v Smith (1841) 1 Hare 43; 66 ER 943 .… 24.10, 24.14, 24.15, 24.16, 24.20 Jones v Smith (1843) 1 Ph 244; 41 ER 624 .… 24.14, 24.15, 24.19, 24.20 Jones v Tinney (1845) Kay App XLV; 69 ER 336 .… 16.15 Jones v Williams (1857) 24 Beav 47; 53 ER 274 .… 3.42, 24.14, 24.16 Jones v Wyse (1838) 2 Keen 285; 48 ER 638 .… 13.52 Jones’ Estate, Re [1914] 1 IR 188 .… 16.36

Jonesco v Evening Standard Co [1932] 2 KB 340 .… 42.3 Jonmenjoy Coondoo v Watson (1884) 9 App Cas 561 .… 11.7 Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969) 89 WN (Pt 1) (NSW) 568; [1969] 1 NSWR 621 .… 28.7, 28.8 Jonsson v Arkway Ltd (2003) 58 NSWLR 451 .… 5.10 Jordan, Re (1884) 13 QBD 228 .… 21.23 Joro Pty Ltd v State Bank of NSW (1992) 5 BPR 11709 .… 20.15 Jortin v South Eastern Rly Co (1854) 2 Sm & G 48; 65 ER 296 .… 19.36 Josef v Mulder (1903) 72 LJPC 50 .… 1.9 Joseph v Lyons (1884) 15 QBD 280 .… 24.4 Joseph Constantine Steamship Line Ltd v Imperial Smelting Corp Ltd [1942] AC 154 .… 25.7 Joseph Phillips Ltd, Re [1964] 1 All ER 441 .… 2.52 Joseph Stocks & Co Ltd, Re (1909) [1912] 2 Ch 134n .… 8.2 Josephson v Mason (1912) 12 SR (NSW) 249 .… 28.7 Josselson v Borst [1938] 1 KB 723; [1937] 3 All ER 722 .… 6.7 Joubert v Johnson (1894) 15 LR (NSW) 64 .… 32.38 Jovanovic v Commonwealth Bank of Australia (2004) 87 SASR 570 .… 18.13, 20.21 Jowitt v Callaghan (1938) 38 SR (NSW) 512 .… 35.10 Joyce, Re; Ex parte Warren (1875) 10 Ch App 222 .… 39.18 Joyce v Cam [2004] NSWSC 621; 12 BPR [98092] .… 20.6, 20.7 Judd v Green (1875) 45 LJ Ch 108 .… 14.2 Judson v Etheridge (1833) 1 Cr & M 743; 149 ER 548 .… 2.22 Juggeewundas-Keeka Shah v Ramadas Brijbookundas (1841) 2 Moo Ind App 487; 18 ER 386 .… 18.8 Julian S Hodge & Co Ltd v St Helen’s Credit Ltd [1965] EG Digest 143 .… 12.24, 19.32

Julong Pty Ltd v Fenn [2002] QSC 26 .… 16.8, 17.5, 39.42 Just Juice Corp Ltd, Re; James v Commonwealth Bank of Australia (1992) 37 FCR 445; 109 ALR 334 .… 14.2 Justelius v Douglass (1985) Conveyancing Service (NSW) [92263] .… 40.2, 40.3, 40.4 JS Brooksbank and Co (Australasia) Ltd v EXFTX Ltd (in rec and liq) (2009) NZCLC 264, 520; [2009] NZCA 122 .… 5.17, 5.18 K K v K [1976] 2 NZLR 31 .… 13.16 K-Ram Inc, Re (2011) 451 BR 154 .… 5.42 Kaak v Bank of Montreal (2003) 5 PPSAC (3d) 187 .… 5.18 Kali Bakhsh v Ram Gopal Singh (1913) 30 TLR 138 .… 13.24 Kama v Wong (No 1) [2005] NSWSC 427 .… 1.41 Kamouh v Associated Electrical Industries International Ltd [1980] QB 199 . … 16.34 Karak Rubber Co Ltd v Burden (No 2) [1972] 1 WLR 602; [1972] 1 All ER 1210 .… 24.20 Karovnos v The Official Trustee in Bankruptcy [1992] ACL [295 SA 1] .… 16.17, 17.1 Kater v Kater (No 1) [1963] NSWR 1667 .… 20.11 Katsaitis v Commonwealth Bank of Australia (1987) 5 BPR 12,049 .… 3.49, 4.20, 11.3, 13.44 Katsaounis v Belehris (1995) ANZ ConvR 114 .… 32.52, 40.2 Katsikalis v Deutsche Bank (Asia) AG [1988] 2 Qd R 641 .… 3.14, 17.2 Kay, Re [1969] SASR 1 .… 4.40, 16.23 Kay’s Leasing Corp Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VR 429 .… 1.20, 3.26, 20.6 Keane v Robarts (1819) 4 Madd 332; 56 ER 728 .… 11.18

Kearney v Cullen [1955] IR 18 .… 42.9 Keatinge v Keatinge (1843) 6 I Eq R 43 .… 22.45 Kebell v Philpot (1838) 7 LJ Ch 237 .… 3.43 Keech v Hall (1778) 1 Doug KB 21; 99 ER 17 .… 12.9, 12.17, 12.19 Keenan Bros Ltd, Re [1986] BCLC 242 .… 8.14 Keene v Biscoe (1878) 8 Ch D 201 .… 3.16, 16.6 Keene v Thomas [1905] 1 KB 136 .… 2.22, 2.40 Keiner v Keiner [1952] 1 All ER 643 .… 1.43 Keith v Burrows (1877) 2 App Cas 636 .… 9.15, 9.25 Keith v Butcher (1884) 25 Ch D 750 .… 22.6 Keith v Day (1888) 39 Ch D 452 .… 22.12, 22.49 Keith v R Gancia & Co Ltd [1904] 1 Ch 774 .… 12.19 Keith Murphy Pty Ltd v Custom Credit Corp Ltd (1992) 6 WAR 332 .… 11.24 Kekewich v Manning (1851) 1 De GM & G176;42 ER 519 .… 1.37 Kelcey, Re [1899] 2 Ch 530 .… 1.34 Kelday, Re; Ex parte Meston (1888) 36 WR 585 .… 21.24 Kelles-Sharpe v PSAL Ltd [2012] QCA 371 .… 39.55 Kelly v Calhoun (1877) 95 US 710 .… 4.19 Kelly v Central Hanover Bank & Trust Co (1935) 11 F Supp 497 .… 2.5 Kelly v Commonwealth Trading Bank of Australia Ltd [1991] ACL Rep 295 Qld 1 .… 20.36 Kelly v Fuller (1867) 1 SALR 15 .… 16.17, 17.1 Kelly v Selwyn [1905] 2 Ch 117 .… 26.9 Kelso v McCulloch [1994] ACL Rep 185 NSW 31 .… 2.48, 2.49, 23.9 Kemmis v Stepney (1828) 2 Mol 85 .… 35.5 Kemp v Hornsby (1982) 43 ALR 410 .… 37.5

Kemp v Wright [1895] 1 Ch 121 .… 32.34 Kempson v Ashbee (1874) LR 10 Ch App 15 .… 13.3 Kendall, Ex parte (1911) 17 Ves 514 .… 30.11 Kendle v Melsom (1998) 193 CLR 46 .… 18.2, 18.6, 18.9, 18.14 Kendrick v Headwaters Production Credit Association (1987) 362 Pa Super 1 .… 5.43 Kennard v Futvoye (1860) 2 Giff 81; 66 ER 35 .… 1.7, 21.11 Kennedy v De Trafford [1897] AC 180; [1896] 1 Ch 762 .… 20.6, 20.21, 20.40, 39.19 Kennedy v General Credits Ltd (1982) 2 BPR 9456 .… 19.37, 20.37, 39.2 Kennedy v Green (1834) 3 My & K 699; 40 ER 266 .… 24.15, 24.23, 42.5 Kennedy and Cheesman, Re [1923] GLR 577 .… 16.7 Kensington, Ex parte (1813) 2 Ves & B 79; 35 ER 249 .… 3.40, 3.43 Kent v Thomas (1856) 1 H & N 473; 156 ER 1287 .… 32.49 Kent and Sussex Sawmills Ltd, Re [1947] Ch 177; [1946] 2 All ER 638 .… 1.28, 6.5, 6.13 Ker v Ker (1869) 4 IR Eq 15 .… 30.4, 30.6 Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222 .… 4.26, 20.45, 20.49 Kerford v Mondel (1859) 28 LJ Ex 303 .… 32.42 Kerr v Ducey [1994] 1 NZLR 577 .… 3.14 Kerr v WA Trustee Executor and Agency Co Ltd (1937) 39 WALR 34 .… 13.22 Kerrick v Saffery (1835) 7 Sim 317; 58 ER 859 .… 22.9 Kerr’s Policy, Re (1869) LR 8 Eq 331 .… 21.3, 39.42, 39.57 Kerry Lowe Management Pty Ltd v Isherwood & Sherlock (1989) 15 ACLR 615 .… 28.2 Kershaw, Re [2005] NSWSC 313 .… 23.10 Kershaw v Kirkpatrick (1878) 3 App Cas 345 .… 32.53

Kettlewell v Watson (1882) 21 Ch D 685 .… 24.38, 24.44, 42.5 Kettlewell v Watson (1884) 26 Ch D 501 .… 24.7, 24.46 Key Book Service, Inc, Re 103 BR 39 (1989) .… 5.23 Keys v Williams (1838) Y & C Ex 551; 160 ER 612 .… 3.40 Khalid v Perpetual Ltd [2012] NSWCA 153; 16 BPR 31,225 .… 4.37 Kibble v Fairthorne [1895] 1 Ch 219 .… 16.31, 16.35 Kidd, Re; Brooman v Withall [1894] 3 Ch 558 .… 29.2 Kidderminster Mutual Benefit Building Society v Haddock [1936] WN 158 . … 16.5 Kilmurry v Geery (1713) 2 Salk 538; 91 ER 456 .… 39.42 Kilners Ltd v The John Dawson Investment Trus Ltd (1935) 35 SR (NSW) 274 .… 2.27 Kinahan’s Trusts, Re [1907] 1 IR 321 .… 26.15 Kinane v Mackie-Conteh [2004] 19 EG 164 .… 2.3, 2.7 Kinderley v Jervis (1856) 22 Beav 1; 52 ER 1007 .… 24.50 King, Ex parte (1810) 17 Ves 115; 34 ER 45 .… 2.17 King, Re; Ex parte Furber (1881) 17 Ch D 191 .… 39.42, 39.43 King v AGC (Advances) Ltd [1983] 1 VR 682 .… 1.23, 3.29, 28.16 King v Bird [1909] 1 KB 837 .… 12.23, 12.24, 12.28 King v Bromley (1709) 2 Eq Cas Abr 595; 22 ER 500 .… 1.30 King v Hough [1895] WN 60 .… 22.47 King v King (1735) 3 P Wms 358; 24 ER 1100 .… 17.1 King v Leach (1842) 2 Hare 57; 67 ER 24 .… 22.25 King v Marshall (1864) 33 Beav 565; 55 ER 488 .… 8.12 King v Midland Railway Co (1868) 17 WR 113 .… 1.23 King v Smith (1843) 2 Hare 239; 67 ER 99 .… 12.4, 16.9, 42.20

King v Smith (1848) 6 Hare 473; 67 ER 1251 .… 40.28 King Investment Solutions Pty Ltd v Hussain (2005) 64 NSWLR 441; [2005] NSWSC 1076 .… 10.8, 20.6, 20.8, 21.11 King (J) Ltd v Hay Currie (1911) 28 TLR 10 .… 13.11 King (Township) v Rolex Equipment Co (1992) 23 RPR (2d) (Can) 313 .… 7.3 King Robb Ltd (in liq); Sleepyhead Manufacturing Co Ltd, Re v Dunphy (2006) 9 NZCLC 264,000 .… 5.112 Kingdrake Pty Ltd v Tarkington Pty Ltd [1998] VSC 65 .… 39.50, 40.23 Kingscroft Insurance Co Ltd v H S Weavers (Underwriting) Agencies Ltd [1992] TLR 415 .… 1.48 Kingsford v Poile (1859) 8 WR 110 .… 22.31 Kingsford v Swinford (1859) 4 Drew 705; 62 ER 270 .… 16.12 Kingsnorth Trust Ltd v Bell [1986] 1 All ER 423; [1986] 1 WLR 119 .… 13.18, 13.25 Kingsnorth Trust Ltd v Tizard [1986] 1 WLR 119; [1986] 2 All ER 54 .… 24.1, 24.13, 24.14, 24.21 Kingston v Cowbridge Rly Co (1871) 41 LJ Ch 152 .… 39.29 Kingsway Group Ltd v Belramoul (2009) 14 BPR 27,075 .… 20.21 Kinjella Pty Ltd v Jay (1996) 18 ATPR 41-514 .… 18.10 Kinnaird v Trollope (1888) 39 Ch D 636 .… 17.5, 21.5, 21.13, 22.38, 32.16, 32.41, 32.55, 40.9, 40.10, 40.11 Kinnaird v Webster (1878) 10 Ch D 139 .… 32.54 Kinnaird v Yorke (1889) 60 LT 380 .… 22.46 Kinnoul (Earl of) v Money (1767) 3 Swan 202n; 36 ER 830 .… 21.13 Kirby v Cowderoy [1912] AC 599 .… 19.21, 32.86 Kirby (Inspector of Taxes) v Thorn EMI plc [1988] WLR 445 .… 5.9 Kirk v Commissioner of Taxation (1988) 19 FCR 530 .… 2.49

Kirkham v Smith (1749) 1 Ves Sen 258; 27 ER 1018 .… 30.4, 40.11 Kirkwall v Flight (1855) 3 WR 529 .… 16.40 Kirkwood v Gadd [1910] AC 422 .… 6.20 Kirkwood v Thompson (1865) 2 Hem & M 392; 71 ER 515 .… 20.40 Kison v Papasian (1994) 61 SASR 567 .… 2.48 Kitchen’s Trustee v Madders [1949] Ch 588; [1949] 2 All ER 54 .… 12.19 Kitchen’s Trustee v Madders [1950] Ch 134; [1949] 2 All ER 1079 .… 12.19, 19.30 Kitchin, Re; Ex parte Punnett (1880) 16 Ch D 226 .… 1.23, 3.23, 3.27 Kitson v Goodge (1997) 7 BPR 15,173 .… 32.55, 39.55, 39.60 KL Tractors Ltd, Re [1954] VLR 505 .… 19.24 Knight, In the Will of [1918] VLR 343 .… 29.3 Knight, Re; Ex parte Isherwood (1882) 22 Ch D 384 .… 39.26 Knight v Bampfield (1683) 1 Vern 179; 23 ER 399 .… 39.3 Knight v Bowyer (1858) 2 De G & J 421; 44 ER 1053 .… 33.8 Knight v Independent Mortgage Management Services Pty Ltd [1998] V ConvR 54-587 .… 20.15 Knight v Lawrence [1993] BCLC 215 .… 18.5, 30.8 Knight v Marjoribanks (1849) 2 Mac & G10; 42 ER 4 .… 32.18 Knight v New England Credit Union Ltd (1992) 5 BPR 11744 .… 1.58, 3.7 Knight Sugar Co Ltd v The Alberta Railway & Irrigation Co [1938] 1 All ER 266 .… 36.3 Knightsbridge Estates Trust Ltd v Byrne [1938] Ch 741; [1938] 2 All ER 444 .… 32.8 Knightsbridge Estates Trust Ltd v Byrne [1939] Ch 441; [1938] 4 All ER 618 .… 3.13, 3.15, 3.17, 32.8, 32.9, 32.12 Knightsbridge Estates Trust Ltd v Byrne [1940] AC 613; [1940] 2 All ER 401 .… 8.1, 8.2, 32.9

Knott, Ex parte (1806) 11 Ves 609; 32 ER 1225 .… 25.4 Knowles v Chapman (1815) 3 Seton (7th ed, 1888) 1905 .… 39.45 Knowles v Dibbs (1889) 37 WR 378 .… 22.9 Knox v Simmons (1793) 4 Bro CC 433; 29 ER 975 .… 32.43 Koorootang Nominees Pty Ltd v ANZ Banking Group Ltd [1998] 3 VR 16 . … 4.11, 4.15 Koppel v Koppel [1966] 2 All ER 187 .… 5.43 Kortright v Cady ((1860) 21 NY 343; 78 Am Dec 145 .… 34.3 Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; 77 NSWLR 205; 229 FLR 4, 14 BPR 26,565 .… 13.36 Krambousanos v Jedda Investments Pty Ltd (1996) 142 ALR 604 .… 38.5 Kravchenko v The Rock Building Society (2009) 26 VR 400 .… 20.22, 20.40 Kreglinger (G and C) v New Patagonia Meat and Cold Storage Co Ltd [1914] AC 25 .… 1.14, 1.25, 32.12, 32.14, 32.15 Kreick v Wansbrough (1973) 35 DLR (3d) 275 .… 1.27 Krey v National Australia Bank Ltd (1992) NSW ConvR 55-653 .… 20.15 Kulchyski v Shuswap Ventures Corp (1994) 7 PPSAC (2d) 216 .… 5.94 Kumar, Re [1993] 1 WLR 224; 2 All ER 700 .… 13.4 Kumar v Dunning [1987] 2 All ER 801 .… 19.40 KWA v Bank of Western Australia [2003] WASCA 227 .… 11.13 L L K Bros Pty Ltd v Collins [2004] QSC 26 .… 11.34 Laborers Pension Trust Fund-Detroit and Vicinity v Interior Exterior Specialists Co (2011) 824 F Supp (2d) 764 .… 5.43 Lacey v Ingle (1847) 2 Ph 413; 41 ER 1002 .… 24.18, 25.4 Lacon v Allen (1856) 3 Drew 579; 61 ER 1024 .… 3.38

Lacon v Liffen (1862) 4 Giff 75; 66 ER 626 .… 9.17 Lacon v Liffen (1863) 32 LJ Ch 315 .… 9.17 Lacon v Mertins (1743) 3 Atk 1; 26 ER 803 .… 19.39 Lacon v Tyrrell (1887) 56 LT 483 .… 39.41 Ladup Ltd v Williams and Glyns Bank plc [1985] 2 All ER 577; [1985] 1 WLR 851 .… 2.7, 37.10 Lai v Gong (1997) 8 BPR 15,837 .… 39.42, 39.43 Laird, Re; Ex parte M’Gregor (1851) 4 DeG & Sm 603; 64 ER 976 .… 22.44 Lake, Re; Ex parte Cavendish [1903] 1 KB 151 .… 6.15, 26.3 Lake v Brutton (1856) 8 De GM & G 440; 44 ER 460 .… 42.13 Lake Apartments Ltd v Bootwala (1973) 37 DLR (3d) 523 .… 20.21 Lakeglen Construction Ltd, Re [1980] IR 347 .… 8.14 Lakshmijit v Sherani [1974] AC 605 .… 17.8 Lambert’s Estate, Re (1884) 13 LR Ir 234 .… 24.42 Laminated Veneers Co, Inc, Re (1973) 471 F 2d 1124 .… 5.38 Lamont v Bank of New Zealand [1981] 2 NZLR 142 .… 23.17 Lamotte v Lamotte (1942) 42 SR (NSW) 99 .… 13.22 Lampet’s Case (1612) 10 Co Rep 46b; 77 ER 994 .… 6.3, 7.1 Lamshed v Lamshed (1963) 109 CLR 440 .… 28.16 Lamshed v Plakakis (1988) 47 SASR 316 .… 16.8, 18.2, 19.2, 19.8, 20.15, 21.5 Lamson Store Service Co Ltd v Russell Wilkins & Sons Ltd (1906) 4 CLR 672 .… 3.15 Lancashire and Yorkshire Reversionary Interest Co Ltd v Crowe (1970) 114 Sol Jo 435 .… 22.14, 22.36 Lancashire Loans Ltd v Black [1934] 1 KB 380; [1933] All ER Rep 201 .… 13.2, 13.18, 13.20, 13.22, 13.24 Lancaster v Evors (1846) 10 Beav 154; 50 ER 541 .… 30.7

Land Credit Co of Ireland, Re; Weikersheim’s Case (1873) 8 Ch App 831 . … 11.29 Landall Holdings Ltd v Caratti [1979] WAR 97 .… 8.10, 8.11 Landers v Schmidt [1983] 1 Qd R 188 .… 1.9 Landowners West of England and South Wales Land Drainage and Inclosure Co v Ashford (1880) 16 Ch D 411 .… 2.9, 2.16, 3.27, 11.9, 19.39, 24.33 Lane v Horlock (1853) 1 Drew 587; 61 ER 576 .… 24.32 Langdon v Reuss (1883) 4 LR (NSW) Eq 21 .… 13.11, 13.13 Langen & Wind Ltd v Bell [1972] Ch 685 .… 2.10, 2.12 Langman v Handover (1929) 43 CLR 334 .… 13.2, 33.8 Langstaffe v Fenwick (1805) 10 Ves Jun 405; 32 ER 902 .… 39.3 Langston, Ex parte (1810) 17 Ves 227; 34 ER 88 .… 3.40 Langton v Horton (1842) 1 Hare 549; 66 ER 1149 .… 1.22, 7.8, 24.49, 24.52 Langton v Horton (1842) 5 Beav 9; 49 ER 479 .… 1.29 Langton v Waite (1869) 4 Ch App 402 .… 39.28 Lanoy v Duke of Athol (1742) 2 Atk 444; 26 ER 668 .… 30.9, 30.10, 30.14 Lansen v Olney (1999) 100 FCR 7; 169 ALR 49 .… 36.2 Lant v Crisp (1719) 15 Vin 467; 22 ER 503 .… 22.40 Lapin v Abigail (1930) 44 CLR 166 .… 4.5, 28.7, 28.11, 28.12, 28.14 Lapin v Abigail [1934] AC 491; (1934) 51 CLR 58 .… 4.5 Lapin v Heavener (1929) 29 SR (NSW) 514 .… 28.11 Larios v Gurety (1873) LR 5 PC 346 .… 1.41, 3.45 Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 . … 4.6, 4.15, 20.20, 20.40, 20.42, 24.21, 24.25, 24.28, 28.9, 28.14, 32.4 Lathom v Greenwich Ferry Co (1895) 72 LT 790 .… 40.1 Latimer v Gilbert (1896) 18 ALT 109 .… 33.23 Latouche v Dunsany (1803) 1 Sch & Lef 137 .… 25.2, 25.12

Laurel Motors Inc v Airways Transportation Group of Companies Inc (1996) 284 Ill App 3d 312 .… 5.41 Lavery v R & I Bank of WA Ltd (SC (WA), Full Ct, 7 September 1995) .… 2.9, 2.18 Law Debenture Trust Corp plc v Ural Caspian Oil Corp Ltd [1993] 2 All ER 355 .… 1.48, 19.40 Law Guarantee and Trust Society Ltd v Micham and Cheam Brewery Co Ltd [1906] 2 Ch 98 .… 1.23 Law Guarantee and Trust Society v Russian Bank for Foreign Trade [1905] 1 KB 815 .… 6.3, 9.15, 9.16 Law v Glenn (1867) 2 Ch App 634 .… 39.18 Law Institute of Victoria v Martin (1992) V ConvR 54-449 .… 42.5 Lawder’s Estate, Re (1861) 11 I Ch R 346 .… 30.9 Lawless v Mansfield (1841) 1 Dr & War 557 .… 16.39, 32.9, 39.3, 39.12, 42.3 Lawloan Mortgages Pty Ltd v Young [2009] NSWSC 1180 .… 19.6 Lawnic Pty Ltd v Wilson (SC (Qld), Shepherdson J, 17 December 1997, unreported) .… 40.3 Lawrance, Re; Bowker v Austin [1894] 1 Ch 556 .… 2.39 Lawrence v Galsworthy (1857) 3 Jur NS 1049 .… 30.9 Lawrence v Hayes [1927] 2 KB 111 .… 6.8 Lawrenson Light Metal Die Casting Pty Ltd, Re; Australian Securities and Investments Commission v Lawrenson Light Metal Die Casting Pty Ltd (1999) 33 ACSR 288 .… 18.15 Lawson Constructions Pty Ltd, Re [1942] SASR 201 .… 6.21 Lawson v Dickenson (1724) 8 Mod 306; 88 ER 218 .… 2.35, 2.41 Layard v Maud (1867) LR 4 Eq 397 .… 24.45 Le Bas v Grant (1895) 64 LJ Ch 368 .… 22.12, 22.49 Le Gros v Cockerell (1832) 5 Sim 384; 58 ER 380 .… 22.38

Le Neve v Le Neve (1747) Amb 436; 27 ER 291 .… 27.13 Le Neve v Le Neve (1748) 3 Atk 646; 26 ER 1172 .… 24.23, 25.14 Leadbitter, Re (1878) 10 Ch D 388 .… 22.9 Leahy’s Estate, Re [1975] 1 NSWLR 246 .… 13.50 Leamey v Heath [2001] NSWSC 1095 (Campbell J) .… 2.48 Leary v City of Geelong West [1914] VLR 370 .… 19.39 Leathes, Re; Ex parte Leathes (1833) 3 Deac & Ch 112 .… 3.37, 3.42 Lechmere v Clamp (No 2) (1861) 30 Beav 218; 54 ER 872 .… 22.48 Lechmere v Clamp (No 3) (1862) 31 Beav 578; 54 ER 1263 .… 22.47, 22.48 Ledbrook v Passman (1888) 57 LJ Ch 855 .… 25.4 Lee v Angus (1866) 15 LT 380 .… 13.40 Lee v Heath (1747) 9 Sim 306n; 59 ER 575 .… 22.29 Lee v Howlett (1856) 2 K & J 531; 69 ER 893 .… 26.11 Lee v Rook (1730) Mos 318; 25 ER 415 .… 30.7 Lee v Wansey [1964] NSWR 1268 .… 21.13, 32.22 Leeds and Hanley Theatre of Varieties v Broadbent [1898] 1 Ch 343 .… 3.16, 16.6 Leeds Building Society v Banfield [2007] EWCA Civ 1369 .… 39.21 Legal Services Board (Vic) v Gillespie-Jones[2012] VSCA 68 .… 5.5 Lee-Parker v Izzet [1971] 1 WLR 1688 .… 2.15 Leeper v Primary Producers’ Bank of Australia Ltd (1935) 50 CLR 250 .… 2.33, 2.35 Lees v Fisher (1882) 22 Ch D 283 .… 22.46, 40.30 Lees v Whiteley (1866) LR 2 Eq 143 .… 32.73 Leete v Wallace (1888) 58 LT 577 .… 40.25 Leeward Holdings Ltd v Douglas [1982] 2 NZLR 532 .… 32.45 Legg v Mathieson (1860) 2 Giff 71; 66 ER 31 .… 3.15, 16.1

Leggott v Barrett (1880) 15 Ch D 306 .… 36.3 Leicester Permanent Building Society v Butt[1943] Ch 308; [1943] 2 All ER 523 .… 18.5 Leicestershire Banking Co v Hawkins (1900) 16 TLR 317 .… 25.5 Leigh v Burnett (1885) 29 Ch D 231 .… 2.16, 3.29 Leigh v IRC [1928] 1 KB 73 .… 41.2 Leigh v Lloyd (1865) 35 Beav 455; 55 ER 972 .… 16.37 Leighton v Parton [1976] 1 NZLR 165 .… 13.42 Leighton’s Conveyance, Re [1937] Ch 149;[1936] 3 All ER 1033 .… 40.23 Leith v Irvine (1833) 1 My & K 277; 39 ER 686 .… 19.41 Leith’s Estate, Re (1866) LR 1 PC 296 .… 2.2 Leivers v Barber, Walker & Co Ltd [1943] 1 KB 385 .… 16.17 Lemon v Austin Friars Investment Trust Ltd [1926] Ch 1 .… 8.1, 8.2 Leonino v Leonino (1879) 10 Ch D 460 .… 29.3, 30.2 Lep Air Services Ltd v Rollsowin Investments Ltd [1971] 1 WLR 934 .… 35.8 Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407; 106 ALR 595; 66 ALJR 399 .… 4.13 Leslie, Re (1883) 23 Ch D 552 .… 2.16 Leslie Homes (Aust) Pty Ltd, Re (1984) 8 ACLR 1020 .… 18.5 Lesser v Shire of Wannon (1897) 23 VLR 446 .… 6.20 Lever Finance Ltd v Needleman’s Property Trustee [1956] Ch 375; [1956] 2 All ER 378 .… 12.26, 18.5, 18.8 Levey, Re (1894) 15 NSWLR (B&P) 30 .… 13.32 Levy v Abercorris Slate and Slab Co (1887) 37 Ch D 260 .… 8.1 Lewenberg v Direct Acceptance Corp Ltd [1981] VR 344 .… 4.26, 20.49 Lewer, Re; Ex parte Wilkes (1876) 4 Ch D 101 .… 26.21

Lewes v Morgan (1817) 3 Y & J 230; 148 ER 1164 .… 39.12 Lewes v Morgan (1817) 5 Price 42; 146 ER 530 .… 16.39, 39.3 Lewes, Re (1849) 1 Mac & G 23; 41 ER 1170 .… 40.28 Lewin v Wilson (1880) 11 App Cas 639 .… 16.33 Lewis v Aberdare and Plymouth Co (1884) 53 LJ Ch 741 .… 22.26, 22.28 Lewis v Frank Love Ltd [1961] 1 All ER 446 .… 1.29 Lewis v Frank Love Ltd [1961] 1 All ER 446 .… 32.11, 32.18 Lewis v Keene (1936) 36 SR (NSW) 493 .… 4.2, 4.34, 36.17 Lewis v Levy (1876) 2 VLR (E) 110 .… 39.58 Lewis v Lord Zouche (1828) 2 Sim 388; 57 ER 834 .… 22.5 Lewis v Nangle (1752) 1 Amb 150; 27 ER 97 .… 30.7 Lewis v Plunket [1937] Ch 306; [1937] 1 All ER 530 .… 16.35 Lewis v Ramsdale (1886) 55 LT 179 .… 2.49, 11.7 Lewis Broadcasting Corporation v Phoenix Broadcasting Partners 232 Ga App 94 (1998) .… 5.136 Ley v Barlow (1848) 1 Ex 800; 154 ER 340 .… 2.44 Ley v Scarff (1981) 146 CLR 56 .… 32.56 Leyland DAF Ltd, Re p1994] 1 BCLC 264 .… 18.5 Lidco Investments Ltd v Hale (1971) 219 EG Digest 669 .… 19.23, 32.77 Liddell v Norton (1853) Kay, xi; 69 ER 317 .… 2.45 Liebowitz v Vioiella 107 F 2d 914 (1939) .… 5.23 Life Interest and Reversionary Securities Corp v Hand-in-Hand Fire and Life Insurance Society [1898] 2 Ch 230 .… 20.6 Lift Capital Partners Pty Ltd v Merrill Lynch International [2009] NSWSC 7; 73 NSWLR 404 .… 32.16 Lightfoot v Keane (1836) 1 M & W 745; 150 ER 634 .… 2.40 Liles v Terry [1895] 2 QB 679 .… 42.2

Lilley v Barnsley (1844) 1 Car & K 344; 174 ER 839 .… 2.49 Lind, Re; Industrial Finance Syndicate Ltd v Lind [1915] 2 Ch 345 .… 6.23 Linden, Ex parte (1841) 1 Mont D & De G428 .… 2.13 Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1993] 3 All ER 417; [1993] 3 WLR 408 .… 6.19, 10.4 Linderstam v Barnett (1915) 19 CLR 528 .… 13.24 Lindon, Re; Ex parte Clouter (1843) 7 Jur 135 .… 3.43 Linter Group Ltd v Goldberg (1992) 7 ACSR 580 .… 26.12 Lipkin Gorman (a firm) v Karpnale Ltd [1992] 4 All ER 331 .… 24.20 Lipkin Gorman (a firm) v Karpnale Ltd [1992] 4 All ER 409 .… 20.46, 24.20 Lippard v Ricketts (1872) LR 14 Eq 291 .… 39.42 Lipscomb v Lipscomb (1868) LR 7 Eq 501 .… 29.2, 29.3, 30.2 Liquidation Estates Purchase Co v Willoughby [1896] 1 Ch 726 .… 36.7, 36.10 Lister v Tidd (1867) LR 4 Eq 462 .… 26.25 Lister v Turner (1846) 5 Hare 281; 67 ER 919 .… 13.9, 21.11, 22.25 Litherland, Re; Ex parte Howden (1842) 2 Mont D & de G 574 .… 11.26 Liu v Adamson [2003] NSWSC 74 .… 13.29 Liverpool Borough Bank v Eccles (1859) 4 H & N 139; 157 ER .… 3.45 Liverpool Marine Credit Co v Wilson (1872) 7 Ch App 507 .… 9.25, 30.12 Livesey v Harding (1856) 23 Beav 141; 53 ER 55 .… 26.17, 26.26 Llewellin, Re [1891] 3 Ch 145 .… 2.33, 2.40, 2.53 Lloyd v Attwood (1859) 3 De G & J 614; 44 ER 1405 .… 3.40, 25.4 Lloyd v Banks (1868) LR 3 Ch App 488 .… 26.1, 26.18 Lloyd v Johnes (1804) 9 Ves 37; 32 ER 514 .… 30.4 Lloyd v Jones (1842) 12 Sim 491; 59 ER 1221 .… 39.40

Lloyd v Jones (1879) 40 LT 514 .… 2.51 Lloyd v Lander (1821) 5 Madd 282; 56 ER 903 .… 22.9 Lloyd v Mason (1845) 4 Hare 132; 67 ER 590 .… 36.13 Lloyd v Vickery (1871) 12 SCR (NSW) (Eq) 4 .… 20.38 Lloyd v Wait (1842) 1 Ph 61; 41 ER 554 .… 33.2 Lloyd v Whittey (1853) 17 Jur 754; 22 LJ Ch 1038 .… 22.25, 22.42 Lloyd, Re [1903] 1 Ch 385 .… 2.7, 2.8, 20.46 Lloyd, Re [1911] 1 IR 153 .… 16.34 Lloyds and Scottish Finance Ltd v Cyril Lord Carpet Sales Ltd (1979) 129 NLJ 366 .… 6.5, 7.3 Lloyds and Scottish Trust Ltd v Britten (1982) 44 P & CR 249 .… 16.7, 22.38 Lloyds Bank Ltd, Re [1931] 1 Ch 289 .… 13.22, 13.25 Lloyds Bank Ltd v Bullock [1896] 2 Ch 192 .… 24.30, 24.46 Lloyds Bank Ltd v Bundy [1975] QB 326 .… 13.16, 13.22, 13.23 Lloyds Bank Ltd v Colston (1912) 106 LT 420 .… 21.15, 21.21, 22.42 Lloyds Bank Ltd v Marcan [1973] 1 WLR 339; [1973] 2 All ER 359 .… 13.6 Lloyds Bank Ltd v Marcan [1973] 1 WLR 1387; [1973] 3 All ER 754 .… 12.23, 13.6, 42.5 Lloyds Bank Ltd v Margolis [1954] 1 All ER 734 .… 16.31 Lloyds Bank NZA Ltd v National Safety Council of Australia Victorian Division (1993) 115 ALR 93; 10 ACSR 572 .… 1.53, 4.25, 10.12 Lloyds Bank plc v Rosset [1991] 1 AC 107; [1990] 1 All ER 1111 .… 24.1, 24.13 Lloyds Bank plc v Waterhouse (1991) 10 Trin LR 161 .… 13.41 Lloyds Bank v Pearson [1901] 1 Ch 865 .… 26.3, 26.11, 26.18 Lloyds Bank v Swiss Bankverein (1913) 108 LT 143 .… 6.8 Lloyds Banking Co v Jones (1885) 29 Ch D 221 .… 24.15, 24.20

Loan Investment Corp of Australasia Ltd v Bonner [1970] NZLR 724 .… 1.41 Lock v Lomas (1851) 15 Jur 162 .… 33.27 Lockett v Cary (1864) 10 Jur (NS) 144 .… 2.44 Lockhart v Hardy (1846) 9 Beav 349; 50 ER 378 .… 16.7, 16.11, 21.5, 22.38 Locking v Parker (1872) 8 Ch App 30 .… 36.16 Loc-tex International Pty Ltd v Bolfox Pty Ltd (1990) 8 ACLC 1146 .… 6.19 Lodge v Lyseley (1832) 4 Sim 70; 58 ER 27 .… 24.49 Lodge v National Union Investment Co Ltd [1907] 1 Ch 300 .… 33.8 Loftus v Swift (1806) 2 Sch & Lef 642 .… 19.35, 40.11 Lomarto v Bank of America 99 Cal Repr 442 (1972) .… 3.8 Lomax v Bird (1683) 1 Vern 182; 23 ER 402 .… 33.2 Lomax v Hide (1690) 2 Vern 185; 23 ER 721 .… 22.6 Lomax v Peter Dixon & Sons Ltd [1943] KB 671 .… 41.3 Lombard (Aust) Ltd v Wells Park Motors Pty Ltd [1960] VR 693 .… 2.27 Lombard North Central plc v Stobart [1990]TLR 171 .… 17.9, 32.40 London v Manby (1879) 13 Ch D 239 .… 33.11 London and Canadian Loan and Agency Co Ltd v Duggan [1893] AC 506 . … 24.18 London and Cheshire Insurance Co Ltd v Laplagrene Property Co Ltd [1971] Ch 499 .… 2.10 London and County (A & D) Ltd v Wilfred Sportsman Ltd [1971] Ch 764 . … 3.29, 37.8 London and County Banking Co v Goddard [1897] 1 Ch 642 .… 1.40, 3.3 London and County Banking Co v Ratcliffe (1881) 6 App Cas 722 .… 25.7 London and County United Building Society v Angell (1896) 65 LJ QB 194 . … 32.65

London and Globe Finance Corp Ltd v Montgomery (1902) 18 TLR 661 .… 32.11 London and Midland Bank Ltd v Mitchell [1899] 2 Ch 161 .… 16.28, 21.3 London and South of England Building Society v Stone [1983] 1 WLR 1242; [1983] 3 All ER 105 .… 37.3 London Chartered Bank v Davison (1897) 13 WN (NSW) 134 .… 33.23 London Chartered Bank of Australia v Hayes (1871) 2 VR (Eq) 104 .… 4.1, 4.24 London, Chatham and Dover Rly Co v South Eastern Rly Co [1893] AC 429 .… 39.43 London County and Westminster Bank Ltd v Tompkins [1918] 1 KB 515 .… 1.8, 21.18 London Joint Stock Bank v Simmons [1892] AC 201 .… 6.8, 6.17, 24.30, 26.8 London Monetary Advance Co v Bean (1868) 18 LT 349 .… 22.47 London Permanent Benefit Building Society v De Baer [1969] 1 Ch 321; [1968] 1 All ER 372 .… 19.12 London, Windsor and Greenwich Hotels Co, Re; Quartermaine’s Case [1892] 1 Ch 639 .… 23.10 Long, Re; Ex parte Fuller (1881) 16 Ch D 617 .… 2.36 Long v Bowring (1864) 33 Beav 585; 55 ER 496 .… 33.14 Long v Storie (1854) 23 LJ Ch 200 .… 22.27 Long v Town (1889) 10 LR (NSW) Eq 253 .… 22.52 Long Leys Co Pty Ltd v Silkdale Pty Ltd (1991) 5 BPR 11512 .… 4.13, 14.5, 17.7, 19.2, 20.9 Longbotham & Sons, Re [1904] 2 Ch 152 .… 40.31 Longbottom v Berry (1869) LR 5 QB 123 .… 1.20, 3.26 Loosemore, Re; Ex parte Berridge (1843) 3 Mont D & De G 464 .… 31.1, 31.6

Loosemore, Re; Ex parte Patch (1843) 12 LJ Bcy 44 .… 26.21 Lord, Ex parte [1985] 2 Qd R 198 .… 4.28 Lord v Colvin (1862) 2 Drew & Sm 82; 62 ER 553 .… 26.23 Lord v Lord (1866) 2 Eq 605 .… 39.6 Lord v Price (1874) LR 9 Ex 54 .… 3.55 Lord v Wormleighton (1822) Jac 580, 37 ER 969 .… 2.34 Lord Advocate v Lord Lovat (1880) 5 App Cas 273 .… 32.86 Lord Advocate v Young (1887) 12 App Cas 544 .… 19.21 Lord Annaly, Re; Crawford v Annaly (1891) 27 LR Ir 534 .… 22.5 Lord Crewe v Edleston (1857) 3 Jur NS 128, 1061; 1 De G & J 93; 44 ER 657 .… 16.1 Lord Kensington v Bouverie (1852) 16 Beav 194; (1859) 7 HL Cas 557; 51 ER 752 .… 22.5, 31.4 Lord Kensington v Bouverie (1854) 19 Beav 39; 32 ER 262 .… 33.8 Lord Kensington v Bouverie (1855) 7 De G M & G 134; 44 ER 53 .… 39.24, 39.25, 39.28 Lord Kensington, Re; Bacon v Ford (1885) 29 Ch D 527 .… 26.17 Lord Marples of Wallasey v Holmes (1975) 31 P & CR 94 .… 22.12 Lord Midleton v Eliot (1847) 15 Sim 531; 60 ER 725 .… 32.80, 32.82, 39.59, 40.12 Lord Milton v Edgworth (1773) 5 Bro Parl Cas 313; 2 ER 700 .… 39.58 Lord St John v Boughton (1838) 9 Sim 219; 59 ER 342 .… 16.34 Lord Strathcona SS Co Ltd v Dominion Coal Co Ltd [1926] AC 108 .… 16.14 Lord Sudeley v AG [1897] AC 11 .… 1.43 Lord Trimleston v Hamill (1810) 1 Ball & B 377 .… 19.35 Lord Waring v London and Manchester Assurance Co [1935] Ch 310 .… 20.20, 20.36, 20.37, 32.55

Losa, Re [1982] Qd R 381 .… 32.39, 32.50 Louth v Diprose (1992) 175 CLR 621 .… 13.16, 13.30 Love v Geelong Building Society [1995] 2 VR 112 .… 11.45 Loveday v Chapman (1875) 32 LT 689 .… 22.27 Lovelock v Margo [1963] 2 QB 786 .… 37.10 Low v Bouverie [1891] 3 Ch 82 .… 26.16 Low Moor Co v Stanley Coal Co Ltd (1876) 34 LT 186 .… 19.21 Lowloan Mortgages Pty Ltd v Hancock [2001] NSWSC 607 .… 9.12 Lowry v Williams [1895] 1 IR 274 .… 36.14 Lowther v Carlton (1740) 2 Atk 139; 26 ER 487 .… 33.16 Lowther v Carlton (1740) Barn Ch 358; 27 ER 678 .… 33.16 Lowther v Carlton (1741) 2 Atk 242; 26 ER 549 .… 24.7 Loyd v Mansell (1722) 2 P Wms 73; 24 ER 645 .… 21.7, 22.39 Lucas v Dennison (1843) 13 Sim 584; 60 ER 227 .… 32.88 Lucas v Lucas [1943] P 68; [1943] 2 All ER 110 .… 13.49 Lucas v Seale (1740) 2 Atk 56; 26 ER 431 .… 21.11 Lucas v Smith [1926] VLR 400 .… 12.21 Lucia Heights Pty Ltd v Comptroller of Stamps [1985] VR 338 .… 3.45 Luckins v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR 164 .… 8.11, 8.13 Ludbrook v Ludbrook [1901] 2 KB 96 .… 16.31 Luffman v Luffman (1898) 25 Ont AR 48 .… 9.23 Lukass Investments Pty Ltd v Makaroff (1964) 82 WN (Pt 1) (NSW) 226 .… 20.20 Luke v South Kensington Hotel Co (1879) 11 Ch D 121 .… 3.49, 22.4 Lusk v Sebright [1894] WN 134 .… 22.37 Lusty, Re; Ex parte Lusty v Official Receiver (1889) 60 LT 160 .… 1.20

Ly Ty Tran Cao; Ex parte Dixon v Ly Ty Tran Cao (1995) 62 FCR 432 .… 2.37 Lyddon v Moss (1859) 4 De G & J 104; 45 ER 41 .… 42.3 Lynch v O’Keefe [1930] St R Qd 74 .… 28.16 Lynch v Subjic (1988) The Times, 18 May .… 13.49 Lynde v Waithman [1895] 2 QB 180 .… 18.8 Lyon & Co v London City and Midland Bank [1903] 2 KB 135 .… 1.20 Lyons v Imperial Land, Building and Deposit Co Ltd (1894) 15 LR (NSW) Eq 64 .… 27.10 Lyons v Lyons [1967] VR 169 .… 3.39, 4.6, 4.10, 11.4, 37.1, 37.4 Lysaght v Edwards (1876) 2 Ch D 499 .… 2.11, 2.13 Lysaght v Westmacott (1864) 33 Beav 417; 55 ER 429 .… 33.21 Lysnar v National Bank of New Zealand Ltd (No 2) [1936] NZLR 541 .… 12.3, 19.6 Lyus v Prowsa Developments Ltd [1982] 2 All ER 953; [1982] 1 WLR 1044 .… 19.40, 24.1 M M Collins & Son Pty Ltd v Bankstown Municipal Council (1958) 3 LGRA 216 .… 5.4 M G Charley Pty Ltd v F H Wells Pty Ltd [1963] NSWR 22 .… 7.14 M Hoffman Nominees Pty Ltd v Cosmas Fish Processors Pty Ltd (1982) 7 ACLR 65 .… 8.24 M Wheeler & Co Ltd v Warren [1920] Ch 840 .… 18.9 McArdle, Re [1951] Ch 669; [1951] 1 All ER 905 .… 6.11 McArthur v Dudgeon (1872) LR 15 Eq 102 .… 39.6 M’Carogher v Whieldon (1864) 34 Beav 107; 55 ER 574 .… 20.41 M’Carthy v M’Cartie [1904] 1 IR 100 .… 30.5 McCann, Re [1985] 2 Qd R 381 .… 16.7, 23.1, 23.3

McCarthy and Stone Ltd v Julian S Hodge & Co Ltd [1971] 1 WLR 1547; [1971] 2 All ER 973 .… 1.33, 24.1, 24.4, 24.6, 24.9, 24.13, 24.14, 24.25, 24.28, 24.29, 24.45, 25.4, 25.10, 25.11 Macartney v Graham (1828) 2 Russ & M 353; 39 ER 429 .… 32.82 McCaughey v Commissioner of Stamp Duties (1945) 46 SR (NSW) 192 .… 1.43 McCauley, Re (1995) 61 FCR 251 .… 13.5 McColl’s Wholesale Pty Ltd v State Bank of New South Wales [1984] 3 NSWLR 365 .… 39.42 McColl’s Wholesale Pty Ltd v State Bank of New South Wales [1984] 3 NSWLR 365 .… 42.13, 42.17 McCombie v Davies (1805) 7 East 5; 103 ER 3 .… 2.31 McCurdy Supply Co Ltd v Doyle (1956) 20 WWR 125 .… 4.33 MacDiarmid v Burton (1980) 1 NZCPR 238 .… 4.26 McDonald, Re (1972) 28 DLR (3d) 380 .… 31.7 Macdonald v CBFC Ltd [2001] QSC 453 .… 37.10 Macdonald v Eyles [1921] 1 Ch 631 .… 6.25 McDonald v Gardiner [1933] VLR 129 .… 4.30, 14.16, 17.5, 17.10 MacDonald v Green [1951] 1 KB 594 .… 13.47 McDonald v Lloyd (1931) 31 SR (NSW) 415 .… 4.6, 12.3, 12.18 McDonald v Rowe (1872) 3 VLR (E) 143 .… 20.15, 20.16 Macdonald & Cowtin, Re (1972) 28 DLR (3d) 380 .… 32.13, 32.14 McDonald’s Australia Ltd v Bendigo and Adelaide Bank Ltd .… [2013] VSC 639 McDonough v Shewbridge (1814) 2 Ball &B 555 .… 33.7 McDougall, Ex parte [1982] Qd R 553 .… 4.25 Mace Builders (Glasgow) Ltd v Lunn [1987] Ch 191 .… 8.24 MacEwen Agriculture Centre Inc v Beriault (2002) 61 OR (3d) 63 .… 5.36,

5.38 McFadden v Allt (1888) 4 WN (NSW) 174 .… 20.1 Macfarlane v Lister (1887) 37 Ch D 88 .… 2.42 McGinnis v Union Bank of Australia Ltd [1935]VLR 161 .… 20.20, 39.2 McGowan v Gannas [1983] 3 Ir LR (Monthly) 616 .… 20.23 McHenry, Re; McDermot v Boyd (Barker’s Claim) [1894] 3 Ch 290 .… 17.10, 20.46 McHugh v Union Bank of Canada [1913] AC 299 .… 20.21, 40.25 McIntosh v Goulburn City Council (1986) 3 BPR 9367 .… 3.12, 4.29, 4.41 McIntyre v Perkes (1988) 15 NSWLR 417 .… 18.20, 18.27 Mac-Jordan Construction Ltd v BrookmountErostin Ltd [1992] BCLC 350 . … 1.48 Mack v Postle [1894] 2 Ch 449 .… 26.25 Mackay, Ex parte (1873) LR 8 Ch App 643 .… 2.30 Mackay v Douglas (1872) LR 14 Eq 106 .… 13.6 McKean v Maloney [1988] 1 Qd R 268 .… 20.20, 20.22, 20.28, 20.30, 20.35, 20.37, 20.42 McKenzie v Bank of Montreal (1975) 55 DLR (3d) 641 .… 13.22 Mackenzie v Gordon (1839) 6 Cl & Fin 875; 7 ER 927 .… 32.53 Mackenzie v Royal Bank of Canada [1934] AC 468 .… 13.20, 13.25, 13.40 McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303 .… 5.94, 5.95, 5.97, 5.98 Mackereth v Wigan Coal and Iron Co Ltd [1916] 2 Ch 293 .… 6.17 Mackey’s case (No 1) [1985] Ch 168 .… 37.11 McKinnon v Portelli (1959) 60 SR (NSW) 343 .… 3.23 MacKinnon v The Regent Trust Company Ltd (6 December 2004, unreported) .… 42.22 Mackintosh v Pogose [1895] 1 Ch 505 .… 13.51

Mackreth v Symmons (1808) 15 Ves 329; 33 ER 778 .… 2.10, 2.13, 2.19 McLaughlin v Daily Telegraph Newspaper Co Ltd (1904) 1 CLR 243 .… 11.20 MacLaine v Gatty [1921] 1 AC 376 .… 1.27, 3.16, 16.6 Maclaine Watson & Co Ltd v International Tin Council [1988] Ch 1; [1989] Ch 253; [1990] 2 AC 418 .… 7.11 McLeish v Palmer (1921) 21 SR (NSW) 382;(1921) 22 SR (NSW) 53 .… 2.33, 2.52 McLellan v Halsey [1955] QWN 61 .… 18.19 Macleod v Buchanan (1864) 4 De GJ & Sm 265;46 ER 921 .… 26.25 McLeod v Drummond (1810) 17 Ves 152; 34 ER 59 .… 11.18 Macleod v Jones (1883) 24 Ch D 289 .… 20.36, 20.37 McMahon, Re; McMahon v McMahon (1886) 55 LT 763 .… 3.43 McMahon v AF Wade Pty Ltd [1983] WAR 152 .… 11.6 McMahon v State Bank of New South Wales(1990) 8 ACLC 315 .… 16.8, 18.6, 18.7 McMaster v Byrne [1952] 1 All ER 1362 .… 42.2 McMeehan v Aitken (1895) 21 VLR 65 .… 18.25 McNaghten v Paterson (1908) 6 CLR 257 .… 20.18 Macnamara, Re (1884) 13 LR Ir 158 .… 24.24 McPhail v Persons Unknown [1973] Ch 447 .… 19.19, 19.20 MacPhee v SWS Fuels Limited (2011) 17 PPSAC (3d) 175 .… 5.43 McPherson v Summerville (1905) 6 SR (NSW) 1 .… 39.43, 39.60 McPhie v Mackay [1975] 2 NSWLR 369 .… 29.2, 29.3 Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 .… 4.11, 25.7 Macquarie Health Corp Pty Ltd v FCT (1999) 96 FCR 238; (1999) 43 ATR 650 .… 41.1

M’Queen v Farquhar (1805) 11 Ves 467; 32 ER 1168 .… 24.20 McRae v Commonwealth Disposals Commissioner (1951) 84 CLR 377 .… 13.41 Macrea v Evans (1875) 24 WR 55 .… 22.47 Maddison v Alderson (1883) 8 App Cas 467 .… 3.36 Madell v Thomas & Co [1891] 1 QB 230 .… 1.29 Magadi Soda Co Ltd, Re (1925) 41 TLR 297 .… 18.5 Magee v UDC Finance Ltd [1983] NZLR 438 .… 6.14, 14.2, 14.11, 24.22, 42.5 Magnus v Queensland National Bank (1888) 37 Ch D 466 .… 32.55 Maguire v Leigh-on-Sea UDC (1906) 95 LT 319 .… 19.39, 37.5 Maguire v Makaronis (1997) 188 CLR 449 .… 13.2, 42.4 Maher v Network Finance Ltd [1982] 2 NSWLR 503 .… 39.2, 40.1, 40.2, 40.23 Mahlo v Westpac Banking Corp (1998) NSW ConvR 55-844 .… 13.36 Mahoney v McManus (1981) 180 CLR 370 .… 30.2 Maiden Civil (P&E) Pty Ltd, Re [2013] NSWSC 852 .… 5.1, 5.4, 5.5, 5.30 Mailman v Challenge Bank Ltd (1991) 5 BPR 11721 .… 20.22, 20.23 Maine Family Federal Credit Union v Sun Life Assurance Co of Canada 727 A. 2d 335 (1999) .… 5.121 Mainland v Upjohn (1889) 41 Ch D 126 .… 13.14, 22.20, 32.15, 33.22, 39.10, 39.11 Mainwaring, Re; Mainwaring v Verden [1937] Ch 96; [1936] 3 All ER 540 . … 30.4 Maio v Piro [1956] SASR 233 .… 19.14 Maitland v Irving (1846) 15 Sim 437; 60 ER 688 .… 13.2 Major, Re [1914] 1 Ch 278 .… 29.2 Major v Bretherton (1928) 41 CLR 62 .… 36.3

Major v Ward (1847) 5 Hare 598; 67 ER 1049 .… 20.14 Major’s Furniture Mart, Inc v Castle Credit Corp (1979) 602 F 2d 538 .… 5.133 Malcolm v Charlesworth (1836) 1 Keen 63; 48 ER 230 .… 29.11 Malcolm v Scott (1843) 3 Hare 39; 67 ER 288 .… 6.13 Mallicoat v Volunteer Finance & Loan Corp 415 SW 2d 347 (1966) .… 5.121 Mallott v Wilson [1903] 2 Ch 494 .… 30.13 Malone v Geraghty (1843) 3 Dru & War 239; 1 HL Cas 81 .… 16.2 Malpas v Ackland (1827) 3 Russ 273; 38 ER 578 .… 24.18 Mancetter Developments Ltd v Garmanson Ltd [1986] QB 1212; [1986] 1 All ER 449 .… 1.20 Manches v Trimborn (1946) 115 LJKB 305 .… 13.12 Manchester and Liverpool Bank v Parkinson (1889) 68 LT 258 .… 22.12 Manchester and Milford Rly Co, Re; Ex parte Cambrian Rly Co (1880) 14 Ch D645 .… 18.4 Manchester & Oldham Bank v Cook (1883) 49 LT 674 .… 1.41 Manchester Unity Life Insurance Collecting Society Trustees v Sadler [1974] 2 All ER 410; [1974] 1 WLR 770 .… 22.12 Manchester, Sheffield, and Lincolnshire Railway Co v North Central Wagon Co (1888) 13 App Cas 554 .… 1.27 Mander v Falcke [1891] 2 Ch 554 .… 19.40 Mangan, Re; Ex parte Andrew (1983) 123 ALR 633 .… 3.17, 32.6, 32.7, 32.14, 32.15, 32.51, 32.52, 39.46, 39.50, 39.59, 40.3, 40.25 Mangles v Dixon (1852) 3 HL Cas 702 .… 39.9, 39.20, 39.53 Mango Media Pty Ltd v Mertes (2006) 14 BPR 26, 971 .… 20.6, 21.11 Manks v Whiteley [1911] 2 Ch 448; [1912] 1 Ch 735 .… 36.10 Manlove v Bale and Bruton (1688) 2 Vern 84; 23 ER 664 .… 19.39

Manners v Mew (1885) 29 Ch D 725 .… 24.40 Manning v Burges (1663) 1 Cas in Ch 29; 22 ER 678 .… 32.44 Manser v Dix (1857) 8 De G M & G 703; 44 ER 561 .… 10.10, 20.10 Manson Finance v Oliso-Emosingoit [1975] CLY 273 .… 19.23 Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 .… 3.5, 20.5, 20.6, 20.13, 20.14, 20.17, 20.42, 21.4, 21.8, 21.11, 21.15, 21.21, 21.22, 21.23, 22.15 Manurewa Transport Ltd, Re [1971] NZLR 909 .… 8.20 Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 .… 13.42 Marchant v Morton, Down & Co [1901] 2 KB 829 .… 6.5, 6.8 Marcolongo v Chen [2011] HCA 3; 242 CLR 546; 274 ALR 634 .… 13.6 Marcoly, In Re 32 BR 423 (1983) .… 5.23 Marcon v Bloxam (1856) 11 Exch 586; 156 ER 964 .… 31.4 Mardon v Holloway [1967] NZLR 372 .… 4.28 Margart Pty Ltd, Re (1984) 79 FLR 330;9 ACLR 269 .… 8.11, 8.19, 8.21, 20.51 Marginson v Potter (1976) 136 CLR 161; 11 ALR 64 .… 2.18 Margrave v Le Hooke (1690) 2 Vern 207; 23 ER 734 .… 31.8 Marine Mansions Co, Re (1867) LR 4 Eq 601 .… 8.12 Marks v Lahee (1837) 3 Bing NC 408; 132 ER 467 .… 2.26 Markwick v Hardingham (1880) 15 Ch D 339 .… 32.86, 32.88 Marnham v Weaver (1899) 80 LT 412 .… 14.2 Marquis of Anglesey, Re; De Galve v Gardner[1903] 2 Ch 727 .… 26.4, 26.17, 26.26 Marquis of Bute v Cunynghame (1826) 2 Russ 275; 33 ER 339 .… 30.2 Marriott v Anchor Reversionary Co (1861) 3 De GE & J 177; 45 ER 846 .… 19.34 Marriott Industries Pty Ltd v Mercantile Credits Ltd (1990) 55 SASR 228 .

… 7.10 Marsden v Campbell (1897) 18 LR (NSW) (Eq) 33 .… 27.13 Marsh, Ex parte (1815) 1 Mad 148; 56 ER 56 .… 22.44 Marsh v Bathoe (1744) Ridg Cas temp Hardwicke 256; 27 ER 822 .… 2.40 Marsh v Lee (1670) 2 Ventr 337; 86 ER 473 .… 25.2, 25.11 Marshall v Cave (1824) 3 LJ OS Ch 57 .… 19.34, 19.36 Marshall v Cottingham [1982] Ch 82; [1981] 3 All ER 8 .… 18.4, 18.10, 18.15 Marshall v Crowther (1874) 2 Ch D 199 .… 39.61 Marshall v Director-General, Department of Transport (2001) 205 CLR 603 . … 5.4 Marshall v Miles (1971) 13 DLR (3d) 158 .… 21.4, 22.42 Marshall v Shrewsbury (1875) LR 10 Ch App 250 .… 21.3, 22.12, 33.25 Marshall v South Staffordshire Tramways Co [1895] 2 Ch 36 .… 18.23 Marston v Charles H Griffith & Co Pty Ltd (1982) 3 NSWLR 294 .… 3.49 Martin, Re Goods of (1883) 13 LR Ir 312 .… 2.33 Martin v Diamantikos [1964] VR 593 .… 32.49 Martin v Lewis (1985) ConveyancingService (NSW) [92266]; [1985] ACLD 630 .… 20.22 Martin v Reid (1862) 11 CB (NS) 730; 142 ER 982 .… 1.11 Martin v Sedgwick (1846) 9 Beav 333; 50 ER 372 .… 35.4 Martin v Watson and Egan [1919] 2 IR 534 .… 19.16 Martin Bros Implement Co v Diepholz 440 NE 2d 320 (1982) .… 5.104 Martindale v Booth (1832) 3 B & Ad 498; 110 ER 180 .… 13.6, 13.7 Martinez v Cooper (1826) 2 Russ 198; 38 ER 309 .… 24.43, 33.9 Martin-Smith v Woodhead [1990] WAR 62 .… 11.6 Martinson v Clowes (1882) 21 Ch D 857; (1885) 52 LT 706 .… 20.40

Marwalt, Re [1992] BCC 32 .… 7.3 MAS Food Industries (Aust) Pty Ltd (in liq), Re [2000] WASC 155 .… 2.9, 2.11 Mason, Re (1953) 16 ABC 132 .… 7.10 Mason v Bogg (1837) 2 My & Cr 443; 40 ER 709 .… 30.10 Mason v Mason [1933] P 199 .… 2.49 Mason v Morley (1865) 11 Jur (NS) 459 .… 2.32, 2.37 Mason v Stokes Bay Pier & Rail Co (1862) 32 LJ Ch 110 .… 2.22 Mason and Taylor, Re (1878) 10 Ch D 729 .… 2.42 Mason Logging Co v General Electric Capital Corporation 13 FC DR 2117 . … 5.121 Massey, Re; Re Freehold Land and Brickmaking Co (1870) LR 9 EQ 367 . … 2.48 Massey v Sladden (1868) LR 4 Exch 13 .… 17.9, 20.4 Masters v Cameron (1954) 91 CLR 353 .… 3.40 Mather v Fraser (1856) 2 K & J 536; 69 ER 895 .… 1.20, 1.21, 1.22, 3.26 Mathew v Blackmore (1857) 1 H & N 762; 156 ER 1409 .… 17.3 Mathew v T M Sutton Ltd [1994] 4 All ER 793 .… 20.48 Mathieson v Mercantile Finance Trustees and Agency Co Ltd (1891) 17 VLR 271 .… 4.29, 4.37, 20.8 Mathieson v Wahlen (1928) 28 SR (NSW) 189 .… 5.79 Mathison v Clark (1855) 25 LJ Ch 29 .… 20.48 Mathison v Clarke (1854) 3 Drew 3; 61 ER 801 .… 19.41 Mathura Daas v Raja Narindar Bahadur Pal (1896) 12 TLR 609 .… 39.43 Matson v Dennis (1864) 4 De G J & Sm 345; 46 ER 952 .… 11.31, 33.18 Matthew Ellis Ltd, Re [1933] Ch 458 .… 8.24 Matthews, Re 724 F 2d 798 (1984) .… 5.85, 5.86

Matthews v Antrobus (1879) 49 LJ Ch 80 .… 32.55 Matthews v Goodday (1861) 31 LJ Ch 282; 8 Jur NS 90 .… 1.37, 3.36, 21.11, 21.18 Matthews v Usher [1900] 2 QB 535 .… 12.2 Matthews v Wallwyn (1798) 4 Ves 118; 31 ER 62 .… 14.2, 39.20, 39.53 Matthews Thomspon & Co v Everson (1934) 34 SR (NSW) 114 .… 35.7 Matton v Lipscomb (1895) 16 LR (NSW) Eq 142 .… 4.7, 22.54, 33.12 Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293 .… 4.35, 10.6, 19.38, 20.43, 24.33, 25.2, 25.3, 25.7, 25.8, 25.12, 25.13, 25.16, 40.19 Maudslay, Sons & Field, Re [1900] 1 Ch 602 .… 1.46 Maughan v Ridley (1863) 8 LT(NS) 309 .… 6.15 Maurer v Arab Petroleum Corp (1940) 131 Am LR 1 .… 30.17 Maxfield v Burton (1873) LR 17 Eq 15 .… 24.39 Maxson, Re; Ex parte Trustee [1919] 2 KB 330 .… 23.6 Maxwell Communications Corp, Re [1993] 1 WLR 1402 .… 10.15 Maxwell v Ashe (1752) 1 Bro CC 444n; 28 ER 1229 .… 3.27 Maxwell v Lady Montacute (1719) Prec Ch 526;24 ER 235 .… 1.25 May v Lane (1894) 64 LJ QB 236 .… 6.12 Mayer v Murray (1878) 8 Ch D 424 .… 19.34, 39.24 Mayfair London Bank Ltd v Workman (1972) 22 EG 989 .… 1.28 Mayfair Property Co, Re; Bartlett v Mayfair Property Co [1898] 2 Ch 28 .… 8.14 Maynard v Moseley (1676) 3 Swanst 651; 36 ER 1009 .… 13.23 MBF Investments Ltd v Nolan [2011] VSCA 114 .… 20.6, 20.22 Meacham v Cooper (1873) 16 LR Eq 102 .… 39.6 Mead v Lord Orrery (1745) 3 Atk 235; 26 ER 937 .… 11.17, 11.18, 39.8 Meah v Mouskos [1964] 2 QB 23; [1963] 3 All ER 908 .… 12.23

Measures v McFadyen (1910) 11 CLR 723 .… 17.5 Meder v Birt (1726) Gilb Rep in Eq 185; 25 ER 130 .… 33.14 Medforth v Blake [2000] Ch 86; [1999] 3 All ER 97 .… 18.2, 18.5, 18.14, 20.21, 20.22 Mediservices International Pty Ltd v Stocks and Realty (Security Finance) Pty Ltd [1982] 1 NSWLR 516 .… 17.9, 20.15, 20.37, 20.38 Medley, Re; Ex parte Barnes (1838) 3 Deac 223 .… 23.5 Medley, Re; Ex parte Glyn (1840) 1 Mont D & De G 29 .… 3.42 Meehan v Jones (1982) 149 CLR 571 .… 1.32 Meftah v Lloyds TSB Bank plc [2001] 2 All ER (Comm) 741 .… 20.23, 20.34 Megevand, Re; Ex parte Delhasse (1878) 7 Ch D 511 .… 6.22 Mehrban Khan v Makhna (1930) 57 Ind App 168 .… 32.9 MEK Nominees Pty Ltd v Billboard Entertainment Pty Ltd (1993) V ConvR 54-468 .… 6.8, 19.2, 19.24 Melbourne Banking Corp v Brougham (1879) 4 App Cas 156 .… 22.9, 32.18, 39.10 Melbourne v Cottrell (1857) 29 LTOS 293 .… 40.24 Melland v Gray (1843) 2 Y & CCC 199; 63 ER 87 .… 16.40, 39.11 Meller v Woods (1836) 1 Keen 16; 48 ER .… 22.25 Mellersh v Brown (1890) 45 Ch D 225 .… 16.30, 39.43 Mellick v Mellick [1939] St R Qd 251 .… 19.39 Mellish v Vallins (1862) 2 John & H 194; 70 ER 1027 .… 29.3 Melverton v Commonwealth Development Bank of Australia (1989) ASC 55-921 .… 13.31 Mendl v Smith (1943) 143 LT 153; 112 LJ Ch 279 .… 3.13, 3.17, 39.42, 39.57 Merbank Corp Ltd v Cramp [1980] 1 NZLR 721 .… 13.42

Merbank Corp Ltd v Landel Corp of New Zealand Ltd (1979) 1 NZCPR 33 . … 28.7 Mercantile Bank of India Ltd v Chartered Bank of India, Australia and China and Strauss & Co Ltd [1937] 1 All ER 231 .… 11.41 Mercantile Bank of Sydney v Taylor [1893] AC 317 .… 35.11 Mercantile Building Co v Murphy (1888) 4 WN (NSW) 105 .… 4.29 Mercantile Credits Ltd v ANZ Banking Group (1988) 48 SASR 407 .… 25.12 Mercantile Credits Ltd v Archbold [1970] QWN 9 .… 4.37, 19.11, 19.14 Mercantile Credits Ltd v Atkins (1985) 1 NSWLR 670, 9 ACLR 757 .… 18.5, 19.21, 19.31 Mercantile Credits Ltd v Atkins (1985) 10 ACLR 153 .… 28.5 Mercantile Credits Ltd v Australia and New Zealand Banking Group Ltd (1988) 48 SASR 407 .… 25.16 Mercantile Credits Ltd v McDowell [1980] 2 NSWLR 101 .… 36.14, 39.49 Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326 .… 4.13 Mercantile Investment and General Trust Co v International Co of Mexico [1893] 1 Ch 484n .… 8.2 Mercantile Investment and General Trust Co v River Plate Trust, Loan, and Agency Co [1892] 2 Ch 303 .… 1.46, 18.23 Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR 32 . … 4.11, 4.12, 4.16, 4.31 Mercer and Moore, Re (1880) 14 Ch D 287 .… 37.13 Mercer v Graves (1872) LR 7 QB 499 .… 2.49, 2.51 Mercer v Vans Colina [1900] 1 QB 130 (n2) .… 26.4, 26.6 Merchant Banking Co of London v London and Hanseatic Bank (1886) 55 LJ Ch 479 .… 21.21 Meredith v Davis (1933) 33 SR (NSW) 334 .… 20.39, 39.24, 40.1, 40.3

Meretz Investments NV v ACP [1997] Ch 197; [2006] 3 All ER 1029 .… 14.10 Meretz Investments NV v ACP Ltd [2008] Ch 244 .… 20.11, 20.21 Meriton Apartments Pty Ltd v McLaurin and Tait (Developments) Pty Ltd (1976) 50 ALJR 743 .… 28.8 Merrewether v Mellish (1806) 13 Ves 161; 33 ER 255 .… 2.34 Merriman v Bonner (1864) 10 Jur NS 534 .… 40.27 Merry v Abney (1663) 1 Cas in Ch 38; 22 ER 682 .… 24.7, 24.10, 24.22 Mersey Rail Co, Re [1895] 2 Ch 287 .… 8.2 Messenger, Re; Ex parte Calvert (1876) 3 Ch D317 .… 2.42 Mestaer v Gillespie (1805) 11 Ves 621; 32 ER 1230; [1803–13] All ER Rep 594 .… 3.49, 11.3 Metcalf v Campion (1828) 1 Mol 238 .… 19.35, 39.30 Metcalfe v Archbishop of York (1836) 1 My & Cr 547; 40 ER 547 .… 2.4, 2.7 Metcalfe v Archbishop of York (1836) 6 Sim 224; 58 ER 577 .… 2.4, 2.7 Metcalfe v Pulvertoft (1813) 2 Ves & B 200; 35 ER 295 .… 33.5 Meter Cabs Ltd, Re [1911] 2 Ch 557 .… 2.48, 2.49 Metropolis and Counties Permanent Investment Building Society, Re; Gatfield’s Case [1911] 1 Ch 698 .… 32.87, 32.88 Metropolitan Amalgamated Estates Ltd, Re; Fairweather v Metropolitan Amalgamated Estates Ltd [1912] 2 Ch 497 .… 19.16 Metropolitan Gas Co v McIlwraith McEachern Ltd [1932] VLR 88 .… 1.7 Metropolitan Life Assurance Co v McQueen [1924] 2 DLR 942 .… 42.20 Metropolitan Railway Co, Re; Re Tower Hill Extension Act; Re Rawlins’ Estate; Ex parte Kent (1871) 19 WR 596 .… 26.1 Metropolitan Water Sewerage & Drainage Board v Aston Investment Pty Ltd (1978) 4 BPR 9728 .… 7.2, 41.12

Meux v Bell (1841) 1 Hare 73; 66 ER 955 .… 26.1, 26.3, 26.15, 26.16 Meux v Jacobs (1875) LR 7 HL 481 .… 1.20 Mexborough UDC v Harrison [1964] 2 All ER 109 .… 19.21 Meyer v Charters (1918) 34 TLR 589 .… 42.5 Meyerhoff v Zed [1923] SASR .… 2.11 Meynell v Howard (1696) Prec Ch 61; 24 ER 30 .… 17.1 Michael v Michael [1986] 2 FLR 389; [1986] Fam Law 334 .… 13.49 Middle Harbour Investments Ltd, Re [1977] 2 NSWLR 652 .… 37.13 Middleton v Brown (1878) 47 LJ Ch 411 .… 13.23 Middleton v Magnay (1864) 2 H & M 233; 71 ER 452 .… 2.9 Middleton v Middleton (1852) 15 Beav 450; 51 ER 612 .… 30.2 Middleton v Pollock; Ex parte Elliott (1876) 2 Ch D 104 .… 3.41 Midland Bank Ltd v Farmpride Hatcheries Ltd (1981) 260 EG 493 .… 24.21, 35.12 Midland Bank Ltd v Joliman Finance Ltd (1967) 203 Estates Gazette 612 .… 20.28 Midland Bank Ltd’s Application, Re [1941] Ch 350 .… 3.13, 17.3 Midland Bank plc v Perry (1989) 58 P & CR 221 .… 13.18 Midland Bank plc v Phillips (1986), Times, 28 March, CA .… 13.23 Midland Bank plc v Pike [1988] 2 All ER 434 .… 7.9 Midland Bank plc v Shephard [1988] 3 All ER 17 .… 13.17, 13.23, 13.25 Midland Bank Trust Co Ltd v Green [1981] AC 513; [1981] 1 All ER 153 . … 24.1, 27.11 Midland Credit Ltd v Hallad Pty Ltd (1977) 1 BPR 9570 .… 17.2, 19.36, 19.37, 19.38, 20.6, 37.5 Midland Express Ltd, Re [1914 ] 1 Ch 41 .… 8.2 Midland Montague Australia Ltd v Cuthbertson[1989] ACLD 666 .… 4.37

Midland Mortgage Australia Ltd v Cuthberton (1989) 17 NSWLR 309 .… 20.8 Midleton (Lord) v Eliot (1847) 15 Sim 531; 60 ER 725 .… 40.12 Midway Wood Products Pty Ltd v Permanent Custodians Pty Ltd [1991] ACL Rep 295 Vic 9 .… 20.24 Mihalic v Mihalic (1987) 73 ALR 304 .… 4.28 Mijac Investments Pty Ltd v Graham (No 2) (2009) 72 ACSR 684; [2009] FCA 77 .… 18.13, 20.11 Mike Griffikin Marine Pty Ltd v Princes Street Marine Pty Ltd (1995) 122 FLR 294; 17 ACSR 495 .… 20.54 Mildura Co-operative Fruit Co Ltd v Noyce [1928] VLR 390 .… 6.20 Miles v Picuga Pty Ltd (1996) 20 ACSR 156; 131 FLR 171 .… 9.12 Miles v Hussey (1909) 28 NZLR 382 .… 16.7 Miles v Langley (1831) 1 Russ & M 39; 39 ER 15; (1831) 2 Russ & M 626; 39 ER 533 .… 24.21 Miles v Official Receiver (1963) 109 CLR 501 .… 30.9 Miles v Picuga Pty Ltd (1996) 131 FLR 171; 20 ACSR 156 .… 9.10 Milgun Pty Ltd v Austco Pty Ltd [1988] 2 Qd R 670 .… 7.10 Millar, Re; Burns v ES&A Bank (1952) ABC 49 .… 1.23 Millar v Craig (1843) 6 Beav 433; 49 ER 893 .… 39.3 Millear, Re (1897) 22 VLR 542 .… 2.19 Miller, Re (1977) 545 F 2d 916 .… 5.38 Miller, Re 44 BR 716 (1984) .… 5.87 Miller v Cook (1870) LR 10 Eq 641 .… 13.11, 13.14 Miller v Minister of Mines [1963] AC 484; [1963] NZLR 560 .… 4.27, 27.3 Miller Gibb & Co Ltd, Re [1957] 1 WLR 703; [1957] 2 All ER 266 .… 2.29 Millett v Davey (1862) 31 Beav 470; 54 ER 1221 .… 39.33, 42.21 Millns v Borck [1985] BCL para 981 .… 4.14

Mills v Banks (1724) 3 P Wms 1; 24 ER 943 .… 11.12 Mills v Fowkes (1839) 5 Bing NC 455; 132 ER 1174 .… 32.52 Mills v Jennings (1880) 13 Ch D 639 .… 31.1, 32.27, 33.4 Mills v Lewis (1985) 3 BPR 9421 .… 19.11, 19.14 Mills v Osborne (1834) 7 Sim 30; 58 ER 748 .… 11.14 Mills v Renwick (1901) 1 SR (NSW) (Eq) 173 .… 4.3, 25.14, 27.10, 27.16, 28.15 Mills v Stokman (1967) 116 CLR 61 .… 4.15 Mills v United Counties Bank Ltd [1912] 1 Ch 231 .… 17.5 Milton Park Country Club Pty Ltd v Yasuda Trust Australia Ltd [1991] ACL Rep 295 NSW 3 .… 20.38 Minchillo v Ford Motor Co of Australia Ltd [1995] 2 VR 594 .… 5.10 Minn v Stant (1851) 12 Beav 190; 50 ER 1032 .… 33.4 Minn v Stant (1851) 15 Beav 49; 51 ER 454 .… 33.15 Minter v Carr [1894] 3 Ch 498 .… 31.1, 31.9, 36.10 Minot v Eaton (1826) 4 LJOS Ch 134 .… 39.11 Mir Bros Projects Pty Ltd v Lyons [1977] 2 NSWLR 192; [1978] 2 NSWLR 505 .… 30.9, 30.10 Mir Bros Projects Pty Ltd v 1924 Pty Ltd [1980] 2 NSWLR 907 .… 17.9, 20.15 Mirams, Re [1891] 1 QB 594 .… 13.49 Mister Broadloom Corp (1968) Ltd v Bank of Montreal (1984) 4 DLR (4th) 74 .… 17.9 Mitchell, Re; Wavell v Mitchell (1892) 65 LT 851 .… 33.4 Mitchell v Purnell Motors Pty Ltd [1961] NSWR 165 .… 6.6 Mitchelson v Mitchelson (1979) 24 ALR 522 .… 3.33 Mixon v Georgia Bank & Trust Company 154 Ga App 32 .… 5.94, 5.95

M’Kinleys Estate, Re (1873) 7 IR Eq 467 .… 19.34 Mobil Oil Canada Ltd v Rural Municipality of Storthoaks No 31 [1973] 6 WWR 644 .… 32.40 Mobil Oil Co Ltd v Rawlinson (1982) 43 P & CR 221 .… 1.51, 3.14, 19.12, 19.13, 19.16, 19.23 Modular Design Group Pty Ltd, Re (1994) 35 NSWLR 96 .… 3.8 Moet v Pickering (1878) 8 Ch D 372 .… 2.18, 2.24 Moffett v Dillon [1999] 2 VR 480 .… 24.34, 28.16 Mohamedali Jaffer Karachiwalla v Noorally Rattanshi Rajan Nanji [1959] AC 518; [1959] 1 All ER 137 .… 16.5 Molesworth v Robbins (1845) 2 Jo & Lat 358 .… 2.40, 24.27 Molton Finance Ltd, Re [1968] Ch 325; [1976] 3 All ER 843 .… 2.14, 3.31, 3.43, 11.41, 36.13 Molyneux v Richard [1906] 1 Ch 34 .… 12.2 Monas v Perpetual Trustees Victoria Ltd [2011] NSWCA 417; (2011) 80 NSWLR 739 Monkhouse v Bedford Corp (1810) 17 Ves 380; 34 ER 147 .… 22.33 Monks v Poynice Pty Ltd (1987) 8 NSWLR 662 .… 18.15 Montague v Earl of Sandwich (1886) 32 Ch D 525 .… 2.7, 6.21 Montague’s Settlement Trusts, Re [1992] 4 All ER 308 .… 24.20 Montecatini’s Patent, Re (1973) 47 ALJR 161 .… 39.7 Montefiore v Guedalla [1903] 2 Ch 26 .… 6.14, 26.1, 26.23 Montesquieu v Sandys (1811) 18 Ves 301; 34 ER 331 .… 42.2 Montgomery v Continental Bags (NZ) Ltd [1972] NZLR 884 .… 13.40 Montreal Trust Co v Hounslow Holdings Ltd (1972) 22 DLR (3d) 503 .… 39.36 Moodemere Pty Ltd v Waters [1988] VR 215 .… 8.11, 18.5, 18.15 Moody v Matthews (1802) 7 Ves 174; 32 ER 71 .… 3.29

Moore, Re; Ex parte Powell (1842) 6 Jur 490 .… 3.42 Moore v Kelly [1918] 1 IR 169 .… 13.9 Moore v Lean (1905) 5 SR (NSW) 671 .… 34.40 Moore v Lee (1871) 2 VR (L) 4 .… 12.10 Moore v Morton [1886] WN 196 .… 21.1, 21.13 Moore v North-Western Bank [1891] 2 Ch 599 .… 26.12 Moore v Painter (1842) 6 Jur 903 .… 19.36, 39.37 Moore v Shelley (1883) 8 App Cas 285 .… 12.9, 19.15 Moore v Woolsey (1854) 4 E & B 243; 119 ER 93 .… 6.15, 20.43, 20.44 Moore and Hulm’s Contract, Re [1912] 2 Ch 105 .… 3.3, 32.62 Moore and Texaco Canada, Re [1965] CLY 2548 .… 32.11 Moorgate Estates Ltd v Trover [1940] Ch 206 .… 37.3 Moran v Gardemeyer 23 P 8 (1889) (Cal) .… 3.8 Moray v Scandinavian Pacific Ltd (1992) 5 BPR 11,902 .… 13.36 Morgan, Re; Pillgrem v Pillgrem (1881) 18 Ch D 93 .… 24.30 Morgan v Cambridge Acceptance Pty Ltd [1966] 2 NSWR 556 .… 1.41 Morgan v Higgins (1859) 1 Giff 270; 65 ER 915 .… 42.3 Morgan v Jeffreys [1910] 1 Ch 620 .… 32.9 Morgan v Jones (1853) 8 Exch 620; 155 ER 1500 .… 39.43 Morgan v Jones [2001] EWCA Civ 995 .… 32.16 Morgan v Minett (1877) 6 Ch D 638 .… 42.2 Morland v Isaac (1855) 20 Beav 389; 52 ER 653 .… 6.15, 32.73 Morley, Re (1869) LR 8 Eq 594 .… 39.62 Morley v Bird (1758) 3 Ves 628; 30 ER 1192 .… 11.31 Morley v Loughnan [1893] 1 Ch 736 .… 13.22 Morley v Morley (1858) 25 Beav 253; 53 ER 633 .… 14.7, 33.6

Morling v Morling (1992) 16 Fam LR 161 .… 4.28 Morony v O’Dea (1809) 1 Ba & Be 109 .… 32.19 Morret v Paske (1740) 2 Atk 52; 26 ER 429 .… 25.4, 25.6, 39.19 Morris, Re [1908] 1 KB 473 .… 2.37 Morris, Re; Mayhew v Halton [1922] 1 Ch 126 .… 39.51 Morris v Baron & Co Ltd [1918] AC 1 .… 3.33 Morris v Burroughs (1737) 1 Atk 399; 26 ER 253 .… 13.16 Morris v Islip (1855) 20 Beav 654; 52 ER 756 .… 39.38, 40.10 Morris v Merbank Corp Ltd [1984] 1 NZLR 552 .… 28.16 Morris v Morris [1982] 1 NSWLR 61 .… 2.16 Morris Fletcher & Cross’ Bill of Costs, Re [1997] 2 Qd R 228 .… 40.21 Morrison, Re; Bennell v Smith [1962] Tas SR 337 .… 20.44 Morrison v Coast Finance Ltd (1965) 55 DLR (2d) 710 .… 13.12, 13.16 Morrison v Guaranty Trust Co of Canada (1972) 28 DLR (3d) 458 .… 36.9 Morrison v Morrison (1855) 2 Sm & Giff 564; 65 ER 527 .… 2.52 Morrison, Jones and Taylor Ltd, Re [1914] 1 Ch 50 .… 1.20 Morritt, Re; Ex parte Official Receiver (1886) 18 QBD 222 .… 1.11, 20.3, 20.6 Morritt, Re; Re Fada (Australia) Ltd [1932] SASR 134 .… 20.3 Mortgage Express Ltd v Bowerman & Partners [1996] 2 All ER 836 .… 42.6, 42.7 Mortgage Insurance Corp Ltd v Canadian Agricultural, Coal and Colonization Co Ltd [1901] 2 Ch 377 .… 8.8 Mortgage Insurance Corp Ltd v Pound (1895) 64 LJ QB 394 .… 35.8 Mortgage Management Ltd, Re [1978] 1 NZLR 494 .… 13.46 Mortleman v Public Trustee [1928] NZLR 337 .… 17.10 Morton, Re; Ex parte Morton and Westpac Banking Corp (1988) 79 ALR

206 .… 23.9 Morton v Black (1986) 4 BPR 9164 .… 20.37 Morton v Suncorp Finance Ltd (1987) 8 NSWLR 325 .… 20.15, 20.17, 20.18, 20.37 Morton v Woods (1869) LR 4 QB 293 .… 12.10, 12.20 Moschi v Lep Air Services Ltd [1973] AC 331 .… 35.8 Moseley v Cressey’s Co (1865) LR 1 Eq 405 .… 6.12 Moser v Marsden [1892] 1 Ch 487 .… 22.6 Moss, Re; Ex parte Hallett [1905] 2 KB 307 .… 42.16 Moss, Re; Levy v Sewill (1885) 31 Ch D 90 .… 32.36, 32.38 Moss v Gallimore (1779) 1 Doug KB 279; 99 ER 182 .… 3.24, 12.2, 12.4, 12.7, 12.9, 12.14, 19.30, 39.14 Moss v Williamson (1877) 3 VLR (E) 221 .… 13.9 Mostyn, Re; Ex parte Griffiths (1853) 3 DeG M& G 174; 43 ER 69 .… 36.13 Mostyn v Lancaster (1883) 23 Ch D 583 .… 11.7 Mostyn v Mostyn [1893] 3 Ch 376 .… 24.12 Motor Auctions Pty Ltd v John Joyce Wholesale Cars Pty Ltd (1997) 8 BPR 15,565 .… 3.32 Motor Credits Ltd v WF Wollaston Ltd (in liq)(1929) 29 SR (NSW) 227 .… 11.41 Moulis v Owen [1907] 1 KB 746 .… 13.46 Mounsey v Rankin (1885) 1 Cab & El 496 .… 1.40, 3.45 Mount Burnett Ltd v Chambers [1929] NZLR 609 .… 11.41 Mountford v Scott (1823) Turn & R 274; 37 ER 1105 .… 3.43 Mountford v Scott [1975] Ch 258 .… 27.11 Mountford, Ex parte (1808) 14 Ves 606; 33 ER 653 .… 3.40 Mower’s Trust, Re (1869) LR 8 Eq 110 .… 30.12

Moxon v Berkeley Mutual Benefit BuildingSociety (1890) 59 LJ Ch 524 .… 30.12 Moyes v Magnus Motors Ltd [1927] NZLR 906 .… 2.27 Muir v City of Glasgow Bank (1879) 4 App Cas 337 .… 3.13, 11.15 Muirhead v Commonwealth Bank of Australia (1996) 125 FLR 434; 139 ALR 561 .… 18.3, 20.22, 28.3 Mulinglebar Pty Ltd v Wongala Holdings Pty Ltd (1994) NSW ConvR ¶55697 .… 20.15 Muller, Re; Ex parte Buxton (1880) 15 Ch D 289 .… 23.14 Mulliner v Florence (1878) 3 QBD 484 .… 3.55 Multiservice Bookbinding Ltd v Marden [1979] Ch 84; [1978] 2 All ER 489 .… 3.17, 17.2, 32.8, 32.12, 32.14, 32.15 Mulville v Munster and Leinster Bank (1891) 27 LR Ir 379 .… 24.15 Mumford v Stohwasser (1874) LR 18 Eq 556 .… 24.6 Municipal Permanent Investment Building Society v Smith (1888) 22 QBD 70 .… 12.23, 12.28 Munns v Isle of Wight Railway Co (1870) LR 5 Ch App 414 .… 2.13 Munro v Stuart (1924) 41 SR (NSW) 203 .… 4.15 Munrow v Stuart (1924), reported (1941) 41 SR (NSW) 203 .… 28.6 Murad v National Provincial Bank (1966) 198 EG 117 .… 33.8 Mure, Ex parte (1788) 2 Cox Eq Cas 63; 30 ER 30 .… 6.19 Murphy, Re Bankrupt Estate of; Donnelly v Commonwealth Bank of Australia Ltd (1996) 140 ALR 46 .… 3.9 Murphy v Lawrence [1960] NZLR 772 .… 17.8 Murphy v New Zealand Newspapers Ltd [1983] NZLR 225 .… 32.39 Murphy v Westpac Banking Corp [1994] 1 NZLR 187 .… 10.12 Murphy v Wright (1992) 5 BPR 11734 .… 2.4, 2.7, 4.24, 4.28 Murphy v Zomonex Pty Ltd (1993) 31 NSWLR 439 .… 3.4, 3.25

Murray Bros (Parramatta) Pty Ltd v Commercial Bank of Australia Ltd (1983) Conveyancing Service (NSW) [92204] .… 18.7 Mur-Ray Management Corporation v Founders Title Company (1991) 169 Ariz 417 .… 5.44 Murrell, Re; Ex parte Official Trustee in Bankruptcy (1984) 57 ALR 85 .… 1.34, 1.39, 20.45, 20.46 Murugaser Marimuttu v De Soysa [1891] AC 69 .… 21.14, 33.10 Muschinski v Dodds (1985) 160 CLR 583 .… 2.9, 2.16, 30.2 Musselwhite v C H Musselwhite & Son Ltd [1962] Ch 964; [1962] 1 All ER 201 .… 2.10, 6.16 Muston, Ex parte (1903) 3 SR (NSW) 663 .… 4.27 Muswellbrook Pty Ltd v Deutsche Bank (Asia) AG (1988) 12 NSWLR 16 . … 20.38 Mutual Federal Savings & Loan Association v Wisconsin Wire Works 205 NW (2d) 762 (1973) (Wis) .… 3.15 Mutual Life Assurance Society v Langley (1886) 32 Ch D 460 .… 21.13, 22.21, 22.28, 26.1, 26.5, 26.19, 26.24, 26.25, 26.27, 31.8, 31.9, 32.21, 32.23 Mutual Loan Fund Association v Sudlow (1858) 5 CB NS 449; 141 ER 183 . … 42.15 Mycock v Beatson (1879) 8 Ch D 384 .… 2.18 Myers v United Guarantee and Life Assurance Co (1855) 7 De GM & G 112; 44 ER 44 .… 24.33 Myross (NSW) Pty Ltd v Kahlefedldt Securities Pty Ltd (2003) 11 BPR 21,015 .… 3.15, 32.7, 32.36 N N H Dunn Pty Ltd v L M Ericsson (1979) 2 BPR 9241 .… 1.20 N W Robbie & Co Ltd v Witney Warehouse Co Ltd [1963] 3 All ER 613 .… 7.4, 8.18

Naas v Westminster Bank Ltd [1940] AC 366 .… 3.49 Nadrak Pty Ltd v Permanent Custodians Ltd (1994) 6 BPR 13,344 .… 32.55, 35.6 Nairn v Prowse (1802) 7 Ves 752; 31 ER 1291 .… 2.19 Nairn’s Application, Re [1961] VR 26 .… 4.24, 21.9, 22.52, 32.79 Nanfan v Perkins (1766) 9 Sim 308n; 59 ER 376 .… 22.35 Nanney v Morgan (1887) 37 Ch D 346 .… 6.5, 6.11 Nanny v Edwards (1827) 4 Russ 124; 38 ER 752 .… 22.31 Nant-y-glo & Blaina Ironworks Co v Tamplin (1876) 35 LT 125; [1874]– [1880] All ER Rep 1168 .… 14.2 Napier (Lord) v Hunter [1993] 1 All ER 385 .… 2.29 Narich Pty Ltd v Commissioner of Payroll Tax [1983] 2 NSWLR 597 .… 1.28 Nash v Eads (1880) 25 Sol Jo 95 .… 20.21 Nathan, Re (1863) 1 SALR (App) 166 .… 4.24 Nathan Securities Ltd v Stavefield Holdings (No 29) Ltd (1993) 6 BCB 227; [1993] ANZ ConvR 597 .… 20.30 National & Provincial Building Society v Ahmed [1995] 2 EGLR 127 .… 20.37 National Australia Bank Ltd v Blacker (2000) 104 FCR 288 .… 1.20, 1.23, 9.11 National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 169 CLR 271; 92 ALR 49 .… 18.19 National Australia Bank Ltd v Chen-Conway [2008] NSWSC 448 .… 19.6 National Australia Bank Ltd v Clowes [2013] NSWCA 179 .… 1.33 National Australia Bank Ltd v Flair Realty Pty Ltd (1992) ANZ Conv R 241 .… 12.19 National Australia Bank Ltd v Jenkins (1999) V ConvR 54-601 .… 19.26, 19.36, 19.28

National Australia Bank Ltd v Mangos [1993] ACL Rep 295 Vic 9; (1993) V ConvR 54-475 .… 11.2, 13.27, 13.30, 13.31 National Australia Bank Ltd v Nobile (1988) 100 ALR 227; (1988) ATPR 40-856 .… 13.30, 13.31, 38.5 National Australia Bank Ltd v Sampson (No 2) (SC (NSW), Young J, 9 September 1991, unreported) .… 17.7 National Australia Bank Ltd v Sproule (1989) 17 NSWLR 505 .… 19.31, 20.21 National Australia Bank Ltd v State of New South Wales (2009) 182 FCR 52 .… 23.14 National Australia Bank Ltd v State of Victoria (2010) 118 ALD 527 .… 23.14 National Australia Bank Ltd v Zollo (1992) 59 SASR 76 .… 17.9 National Australia Bank v Convy [2007] NSWSC 1039 .… 20.38 National Australia Bank v Composite Buyers Ltd (1991) 6 ACSR 94 .… 18.15, 24.3 National Australia Bank v Finlay (1995) 13 ACLC 269 .… 8.19 National Bank Ltd v Hegarty (1901) 1 NIJR 13 .… 19.14 National Bank of Australasia Ltd v Falkingham [1902] AC 585 .… 6.21 National Bank of Australasia Ltd v Morrow (1887) 13 VLR 2 .… 24.51 National Bank of Australasia v Cohen (1896) 22 VLR 269 .… 22.14 National Bank of Australasia v United Hand-in-Hand and Band of Hope Co (1879) 4 App Cas 391 .… 18.21, 19.23, 20.21, 20.40, 33.7, 33.9, 39.2, 39.24, 39.37, 39.45, 39.50, 39.55, 40.9 National Bank of Eastern Arkansas v General Mills Inc 283 F (2d) 574 (1960) (Ark) .… 3.8 National Bank of Greece SA v Pinios Shipping Co (No 1) [1990] 1 AC 637; [1990] 1 All ER 78 .… 39.10, 39.50 National Bank of New Zealand Ltd v West [1978] 2 NZLR 451 .… 3.7

National Bank of Tasmania Ltd v McKenzie [1920] VLR 411 .… 17.1, 20.6, 21.18 National Bank v Behan [1913] 1 IR 512 .… 13.9 National Bank v Kenny [1898] 1 IR 197 .… 18.16 National Bus Co Ltd v FCT (1998) 98 ATC 4170 .… 5.94 National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675 .… 37.8 National Commercial Banking Corp of Australia Ltd v Batty (1986) 160 CLR 251 .… 5.104 National Commercial Banking Corp of Australia Ltd v Hedley (1984) 3 BPR 9477 .… 4.19, 4.20, 11.3, 13.44, 17.2 National Commercial Banking Corp of Australia Ltd v Solanowski (1984) NSW Conv R 55-194 .… 20.28, 20.30 National Home Loans Corp plc v Giffen Couch & Archer [1997] 3 All ER 808 National Mutual Life Association of Australasia Ltd v Godrich (1909) 10 CLR 1 .… 5.4 National Mutual Life Association of Australasia Ltd v National Bank of Australasia Ltd [1944] QWN 7 .… 21.6, 22.55 National Operating, LP v Mutual Life Insurance Company of New York 244 Wis 2d 389 (2001) .… 5.136 National Permanent Benefit Building Society, Re; Ex parte Williamson (1870) 5 Ch App 309 .… 11.9, 11.19 National Permanent Building Society v Raper [1892] 1 Ch 54 .… 22.37 National Provincial and Union Bank of England v Charnley [1924] 1 KB 431 .… 1.37 National Provincial Bank of England Ltd v United Electric Theatres Ltd [1916] 1 Ch 132 .… 8.14 National Provincial Bank of England v Games (1886) 31 Ch D 582 .… 40.3, 40.23, 40.24, 40.25 National Provincial Bank of England v Jackson (1886) 33 Ch D 1 .… 24.44

National Trustees Executors and Agency Co, Ex parte (1898) 19 ALT 222 . … 4.8, 33.1 National Trustees Executors and Agency Co v Tindall [1933] VLR 369 .… 19.7 National Westminster Bank Ltd v Barclays Bank International Ltd [1975] QB 654; [1974] 3 All ER 834 .… 32.40 National Westminster Bank plc v Skelton [1993] 1 All ER 242; [1993] 1 WLR 72 .… 19.15, 19.23, 19.25 National Westminster Bank plc v Spectrum Plus Ltd [2005] UKHL 41 .… 5.118 National Westminster Bank plc v Morgan [1985] AC 686; [1985] 1 All ER 821 .… 13.22, 13.23, 13.39 Nationwide Building Society v Registry of Friendly Societies [1983] 1 WLR 1226; [1983] 3 All ER 296 .… 3.17, 17.2 Nationwide News Pty Ltd v Samalot Enterprises Pty Ltd (1986) 5 NSWLR227 .… 2.52 Natwest Finance New Zealand Ltd v United Finance & Securities Ltd (1987) ANZ Conv R 486 .… 20.34 Natwest Markets Australia Ltd v Mannix (1995) NSW ConvR 55-743 .… 19.2 Naxatu Pty Ltd v Perpetual Trustee Co Ltd (2012) 92 ACSR 131; [2012] FCAFC 163 .… 25.7, 25.8, 30.9, 30.16 Neale v Mackenzie (1836) 1 M & W 747; 150 ER 635 .… 12.13 Nearhaze Pty Ltd v Official Trustee in Bankruptcy (1999) 9 BPR 17,273 .… 1.35 NEC Information Systems Australia Pty Ltd (1991) 22 NSWLR 518; 101 ALR 95 .… 28.2 Nedrak Pty Ltd v Permanent Custodians Ltd (1994) 6 BPR 13,344 .… 32.7 Needler v Deeble (1677) 1 Ch Cas 299; 22 ER 810 .… 22.6, 39.3 Neeld, Re [1962] Ch 643 .… 29.3

Neesom v Clarkson (1845) 4 Hare 97; 67 ER 576 .… 39.37 Neill v Hewens (1953) 89 CLR 1 .… 3.49 Nelson Diocesan Trust Board v Hamilton [1926] NZLR 342 .… 4.30, 17.10 Nelson v Booth (1857) 27 LJ Ch 110 .… 30.7, 42.3 Nelson v Booth (1858) 3 De G & J 119; 44 ER 1214 .… 39.33, 39.37 Nelson v Hannam [1943] Ch 59; [1942] 2 All ER 680 .… 3.29, 32.11, 32.60 Nelson v Page (1868) LR 7 Eq 25 .… 29.3 Nemeth v Reachcord Pty Ltd [1998] NSWConvR 55-873 .… 39.2, 40.3 Neon Signs (Australasia) Ltd, Re [1965] VR 125 .… 18.17 Nesbitt, Ex parte (1805) 2 Sch & Lef 279 .… 2.33, 2.40 Nesbitt v Tredennick (1808) 1 Ball & B 29 .… 3.29 Network Finance Ltd v Deposit & Investment Co Ltd [1972] QWN 19; 46 ALJ 413 .… 19.38, 20.43, 24.33, 25.3, 25.13, 25.16 Network Finance Ltd v Lane (1984) ANZ ConvR 571 .… 17.9 Neve v Pennell (1863) 2 Hem & M 170; 71 ER 427 .… 31.6, 31.10 New, Re; Ex parte Farley (1841) 1 Mont D & De G 683 .… 3.42, 3.43 New Beach Apartments Pty Ltd v Epic Hotels Pty Ltd (2007) 14 BPR 26,317 .… 20.40 New Bullas Trading Ltd, Re [1994] TLR 18 .… 8.13, 8.17, 11.39 New Hart Builders Ltd v Bradley [1975] Ch 342 .… 3.33 New Land Development Association and Gray, Re [1892] 2 Ch 138 .… 26.6 New London and Brazilian Bank v Brocklebank (1882) 21 Ch D 302 .… 24.30 New South Wales Medical Defence Union Ltd v Crawford (No 3) (23 November 1994, unreported, BC 9404919) .… 42.18 New South Wales v McCloy Hutcherson Pty Ltd (1993) 116 ALR 363 .… 16.36 New World Screen Printing Ltd v Xerox Canada [2003] BCSC 1685 .… 5.38

New Zealand Bloodstock Ltd v Waller [2005] NZCA 254; [2006] 3 NZLR 629 .… 5.1, 5.26, 5.29 Newbould v Smith (1886) 33 Ch D 127 .… 16.33 Newbould v Smith (1889) 14 App Cas 423 .… 16.33 Newcastle City Council v Kern Land Pty Ltd (1997) 42 NSWLR 273 .… 28.15, 28.16 Newcomb v Bonham (1861) 1 Vern 7; 23 ER 266 .… 32.11 Newdigate Colliery Ltd, Re [1912] 1 Ch 468 .… 18.4 Newen v Whetter (1862) 31 Beav 315; 54 ER 1160 .… 39.3 Newington Local Board v Eldridge (1879) 12 Ch D 349 .… 2.36 Newlands v Paynter (1839) 4 My & Cr 408;41 ER 158 .… 24.49 Newman v Cook [1963] VR 659 .… 1.53 Newman v Newman (1885) 28 Ch D 674 .… 6.15, 24.6 Newman Air Charter Pty Ltd, Re (1991) 6 ASCR 435 .… 20.15 Newmand v Real Estate Debenture Corp Ltd and Flower Decorations Ltd [1940] 1 All ER 131 .… 24.14 Newmarch, Re; Newmarch v Storr (1878) 9 Ch D 12 .… 29.2, 29.3 Newsham v Gray (1742) 2 Atk 286; 26 ER 575 .… 33.24 Newshul v Mellish & Harkavy (1967) 111 Sol Jo 399 .… 42.6 Newton v Earl of Egmont (1831) 4 Sim 574; 58 ER 215 .… 22.8 Newton v Harland (1840) 1 Man & G 644; 133 ER 490 .… 19.19 Newton v Newton (1868) LR 4 Ch App 143 .… 24.40 Newton v Newton (1868) LR 6 Eq 135 .… 24.40 Nguyen v Taylor (1992) 27 NSWLR 48 .… 13.36 Nia v Phuong (1993) 6 BPR 13,141 .… 10.1, 10.4, 25.8, 25.8, 25.12 NIAA Corp Ltd, Re (1993) 12 ASCR 141 .… 10.15 Nichibo Trading Company New Zealand Ltd v Lucich HC Auckland [2011]

NZHC 722; (2011) 9 NZBLC 103,253 .… 5.104 Nichol v Allenby (1889) 17 OR 275 .… 33.2 Nicholas v Ridley (1904) 89 LT 234 .… 31.10 Nicholas v Ridley [1904] 1 Ch 192 .… 25.5, 31.10, 35.12, 42.14 Nicholas, Re (1951) 68 WN (NSW) 193 .… 4.38, 32.55 Nicholas John Holdings Pty Ltd v ANZ Banking Group Ltd [1992] 2 VR 715 .… 20.38 Nicholls v Short (1713) 2 Eq Cas Abr 608; 22 ER 511; 15 Vin Abr 478 .… 33.12 Nichols v Stewart Title & Trust of Tucson (1988) 88 BR 871 .… 5.44 Nicholson, Re; Ex parte Quin (1883) 49 LT 811 .… 2.42 Nicholson, Re; Nicholson v Boulton [1923] WN 251 .… 29.2 Nicholson v Chapman (1793) 2 H Bl 254; 126 ER 536 .… 2.17 Nicholson v England [1926] 2 KB 93 .… 16.31, 16.35 Nicholson v Revill (1836) 4 Ad & El 675; 111 ER 941 .… 32.50, 35.11 Nicholson v Tutin (No 2) (1857) 3 K & J 159; 69 ER 1063 .… 19.41 Nicobar Pty Ltd v Abrokiss Pty Ltd [2003] NSWSC 1247 .… 40.26 Nickerson & Nickerson, Inc, Re (1971) 452 F 2d 56 .… 5.36 Niemann v Niemann (1889) 43 Ch D 198 .… 11.29 Ninety Five Pty Ltd (in liquidation) v Banque Nationale de Paris [1988] WAR 132 .… 13.46 Nioa v Bell (1901) 27 VLR 82 .… 4.13, 14.1, 14.11, 15.2, 17.5 Nisbet and Potts’ Contract, Re [1905] 1 Ch 391; [1906] 1 Ch 386 .… 24.15 Nives v Nives (1880) 15 Ch D 649 .… 22.15 Nixon v Commercial and General Acceptance Ltd [1980] Qd R 153 .… 20.28 Noakes v Harvy Holmes & Son (1979) 26 ALR 297 .… 13.5, 13.7

Noakes & Co Ltd v Rice [1902] AC 24 .… 1.7, 4.10, 32.8, 32.14 Nobbs, Re; Nobbs v Law Reversionary Interest Society [1896] 2 Ch 830 .… 33.8 Noble, Re; Ex parte Douglas (1833) Deac & Ch 310 .… 2.32 Nolin Production Credit Association v Canmer Deposit Bank (1986) 726 SW 2d 693 .… 5.38 Norfolk Rly Co v M’Namara (1840) 3 Exch 628; 154 ER 996 .… 36.15 Norgard v Deputy Commissioner of Taxation (1987) 85 FLR 220 .… 8.14, 8.20 Norman Holding Co Ltd, Re [1990] 3 All ER 757; [1991] 1 WLR 10 .… 1.4, 1.6 Norman v Beaumont [1893] WN 45 .… 21.21, 21.23 Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 .… 5.32, 6.4, 6.5, 7.2, 6.9, 6.11, 6.21, 6.23, 14.7 Norris v Caledonian Insurance Co (1869) LR 8 Eq 127 .… 39.17 Norris v Wilkinson (1806) 12 Ves 192; 33 ER 73 .… 3.40 Norrish v Marshall (1821) 5 Madd 475; 56 ER 977 .… 22.2, 33.16 North Brisbane Finance and Insurances Pty Ltd, Ex parte [1983] 2 Qd R 684 .… 9.15, 9.16 North City Developments; Ex parte Walker (1990) 20 NSWLR 286 .… 18.4 North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] 1 QB 705 .… 13.38 North Platte State Bank v Production Credit Association of North Platte (1972) 200 NW 2d 1 .… 5.82, 5.89 North Shore City Council v Stiassny [2009] 1 NZLR 342 .… 5.20 North Wales Produce and Supply Society Ltd, Re [1922] 2 Ch 340 .… 11.41 North West Construction Co Pty Ltd v Marian [1965] WAR 205 .… 2.48 North West Trust Co v Rezyn Developments Inc (1991) 81 DLR (4th) 75 .… 1.20, 3.26

Northern Assurance Co Ltd v Farnham Breweries Ltd [1912] 2 Ch 125 .… 8.2 Northern Bank Ltd v Henry [1981] IR 1 .… 24.14 Northern Bank Ltd v Ross [1991] BCLC 504 .… 6.19, 11.39 Northern Banking Co Ltd v Devlin [1924] 1 IR 90 .… 19.14 Northern Counties of England Fire Insurance Co v Whipp (1884) 26 Ch D 482 .… 24.37, 24.43, 24.47, 40.5 Northern Developments (Holdings) Ltd v UDT Securities [1977] 1 All ER 747 .… 20.6, 20.20 Northside Development Pty Ltd v Registrar General (1990) 170 CLR 146 .… 4.18, 11.33 Northwestern National Bank Southwest v Lectro Systems Inc 262 NW 2d 678 (1977) .… 5.79 Norton v Cooper (1854) 25 LJ Ch 121; 43 ER 1053 .… 39.33, 40.11, 42.21 Norton v Yates [1906] 1 KB 112 .… 7.14, 8.19, 20.47 Norwich and Peterborough Building Society v Steed [1993] Ch 116 .… 13.41 Norwich General Trust v Grierson [1984] CLY 2306 .… 19.37, 39.31 Norwich Union Insurance Society v Preston [1957] 2 All ER 428; [1957] 1 WLR 813 .… 19.26 Nos 56 and 58, Albert Rd, Norwood, Re [1916] 1 Ch 289 .… 22.18 Notaras v Sly & Weigall (2005) 12 BPR 23,765 (CA) .… 4.37, 20.11, 20.38 Novosielski v Wakefield (1811) 17 Ves 417; 34 ER 161 .… 22.29, 33.23 Noyes v Pollock (1885) 30 Ch D 336 .… 39.32 Noyes v Pollock (1886) 32 Ch D 53 .… 12.23, 19.21, 19.35 NRG Vision Ltd v Churchfield Leasing Ltd [1988] BCLC 624 .… 18.7 NRMA Insurance Ltd v Individual Homes Pty Ltd (1988) 92 FLR 1 .… 20.8 NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR

90 .… 5.25 Nugent v Gifford (1738) 1 Atk 463; 26 ER 294 .… 11.18 Nunes and District Registrar for the District of Winnipeg, Re (1972) 21 DLR (3d) 97 .… 20.40 Nunn v Wily (2001) 10 BPR 18,983 .… 1.25, 3.6, 24.29, 39.57 Nutt v Easton [1899] 1 Ch 873; [1900] 1 Ch 29 .… 20.40 NV Slavenburg’s Bank v Intercontinental Natural Resources Ltd [1980] 1 All ER 955 .… 11.39 NZI Capital Corp Ltd v Ianthe Pty Ltd (1991) ACL [185 NSW 22] .… 13.38 NZI Capital Corp Pty Ltd v Child (1991) 23 NSWLR 481 .… 3.13, 39.42 O Oakeley v Pasheller (1836) 10 Bli NS 548; 6 ER 202 .… 35.8 Oatley v Oatley (1898) 19 LR (NSW) (Eq) 129 .… 11.6 Obie Pty Ltd (No 2), Re (1983) 8 ACLR 574 .… 8.20 O’Brien, In the Will of [1924] VLR 262 .… 29.2 O’Brien, Re (1883) 11 IR 213 .… 1.23 O’Brien v Skidmore [1951] NZLR 884 .… 17.2 O’Byrne’s Estate, Re (1885) 15 LR (IR) 373 .… 25.8 Occidental Life Assurance Co of Australia Ltd v Life Style Planners Pty Ltd (1992) 9 ACSR 171 .… 32.41 Ocean Accident and Guarantee Corp v Collum [1913] 1 IR 337 .… 30.5, 32.84 Ocean Accident and Guarantee Corp v Ilford Gas Co [1905] 2 KB 493 .… 12.14, 19.11, 19.14, 19.30 Ocean National Bank v Palmer 457 A 2d 1225 (1938) .… 5.104 O’Connell v O’Connell (1894) 20 VLR 253 .… 13.9 O’Connor v McCarthy [1982] IR 161 .… 24.14

Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 .… 2.9, 2.18 O’Day v Commercial Bank of Australia Ltd (1933) 50 CLR 200 .… 16.11, 42.13 O’Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359 .… 3.15, 3.18, 32.15 Odessa Promotions Pty Ltd, Re (1979) ACLC 40-523 .… 18.15 Odessa, The [1916] 1 AC 145 .… 1.11 Oertel v Hordern (1902) 2 SR (NSW) (Eq) 37 .… 4.15 Official Assignee of Reeves & Williams v Dorrington [1918] NZLR 702 .… 2.49 Official Custodian for Charities v Mackey [1985] Ch 168 .… 37.11 Official Custodian for Charities v Mackey (No 2) [1985] 1 WLR 1308; [1985] 2 All ER 1016 .… 37.11 Official Receiver v Cooke [1906] 2 Ch 661 .… 26.6 Official Solicitor to the Supreme Court v Thomas (1986) 279 EG 407 .… 32.45 Official Trustee in Bankruptcy v Citibank Savings Ltd (1995) 38 NSWLR 116 .… 30.2, 30.4 Official Trustee in Bankruptcy v Kioussis (2000) 10 BPR 18,021 .… 2.35 Official Trustee in Bankruptcy v Mateo (2003) 202 ALR 571 .… 13.8 Official Trustee in Bankruptcy v Westpac Banking Corp Ltd (1987) 77 ALR 677 .… 39.16 Ogden v Battams (1855) 1 Jur NS 791 .… 1.30, 39.7 O’Geran v McSwiney (1874) 1 R 8 Eq 500 .… 2.17 Ogilvie v Adams [1981] VR 1041 .… 16.8, 16.29, 16.31 Ogle v Story (1833) 4 B & Ad 735; 110 ER 632 .… 2.41 O’Keeffe v O’Flynn Exhams & Partners (1992) HC (Ireland) .… 11.3 Old Inns of NSW Pty Ltd, Re [1994] ACL 120 NSW 27 .… 11.39

Oldham v Hand (1751) 2 Ves Sen 259; 28 ER 167 .… 42.2 Oldham v Stringer (1884) 51 LT 895; 33 WR 251 .… 3.36, 21.17, 21.21, 21.22 O’Leary, Re; Ex parte Bayne (1985) 61 ALR 674 .… 30.9, 30.11 Oliver, Re; Ex parte Jones (1837) 3 Mont& A 152 .… 3.40, 3.43 Oliver v Hinton [1899] 2 Ch 264 .… 24.15, 24.37 Oliveri v PM Sulcs & Associates Pty Ltd [2013] NSWSC 590; 16 BPR 28590 .… 2.48 O’Loughlin v Dwyer (1884) LR Ir 13 Ch D75 .… 2.17 O’Loughlin v Fitzgerald (1873) 7 IR Eq 483 .… 36.4 Olsson v Dyson (1969) 120 CLR 365 .… 6.5, 6.11 Onawa State Bank v Simpson 403 NW (2d) 791 (1987) (Iowa) .… 3.8 Oneal v Mead (1720) 1 P Wms 693; 24 ER 574 .… 30.3 One.Tel Ltd (in liq) v Rich (2005) 190 FLR 443 .… 5.5 One-Tel Networks Holdings (2001) 40 ACSR 83 .… 20.40 Onslow’s Trusts, Re (1875) LR 20 Eq 677 .… 13.46, 24.50 Ontario (AG) v Tyre King Recycling Ltd (1992) 9 OR (3d) 318 .… 37.5 Ontario Dairy Cow Leasing v Ontario Milk Marketing Board (1993) 4 PPSAC (2d) 269 .… 5.72 Onward Building Society v Smithson [1893] 1 Ch 1 .… 19.18 Orakpo v Manson Investments Ltd [1978] AC 95; [1977] 3 All ER 1 .… 2.14, 24.5, 42.17, 42.19 Orby v Trigg (1722) 9 Mod Rep 2; 88 ER 276 .… 32.11 Orchard v Rackstraw (1850) 9 CB 698; 137 ER 1066 .… 2.22 O’Reilly v Heydon (1893) 14 LR (NSW) Eq 283 .… 3.13, 3.15, 32.6 Oriental Hotels Co, Re; Perry v Oriental Hotels Co (1871) LR 12 Eq 126 .… 40.19 Orion Finance Ltd v Crown Financial Management Ltd [1996] 2 BCLC 78 .

… 1.29, 6.20 Orix v Milne [2007] NZHC 507; 3 NZLR 637 .… 5.104 Ormsby v Thorpe (1808) 2 Mol 503 .… 22.5 O’Rorke v Bolingbroke (1877) 2 App Cas 814 .… 13.14, 13.30 Orr v Ford (1989) 167 CLR 316 .… 17.9 Ortigosa v Brown Janson & Co (1878) 47 LJ Ch 168 .… 6.17 Ory and Ory v Betamore Pty Ltd (1990) 54 SASR 331 .… 5.4 Osborne Computer Corp Pty Ltd v Airroad Distribution Pty Ltd (1995) 17 ACSR 614 .… 1.11 O’Shea, Re [1911] 2 KB 981 .… 13.47 Osmanoski v Rose [1974] VR 523 .… 28.15, 28.16 Ostabridge Pty Ltd v Adelaide Brighton Ltd [2007] NSWCA 59 .… 20.8, 20.11 Ostrander v Niagra Helicopters Ltd (1973) 20 DLR (3d) 161 .… 18.5 Otter v Lord Vaux (1856) 6 De G M & G 638; 43 ER 1381 .… 4.12, 4.25, 20.40, 20.49, 32.60, 36.9, 39.19 Overend, Gurney & Co v Oriental Finance Corp (1874) LR 7 HL 348 .… 35.8 Overlack v Martin [1955] QWN 56 .… 21.4, 22.15, 22.25, 33.23 Overmark Smith Warden, Re [1982] 3 All ER 513; [1982] 1 WLR 1195 .… 16.34 Oversea-Chinese Banking Corp Ltd (OCBC) v Malaysian Kuwaiti Investment Co (MKIC) and Aljade [2003] VSC 495 .… 3.6, 3.7, 3.8, 3.9, 24.10, 24.16, 24.35, 24.46, 25.7, 25.8, 25.12, 25.16, 36.9 Overton Investments Pty Ltd v Cuzeno RVM Pty Ltd [2003] NSWCA 27 .… 3.8 Owen and Gutch v Homan (1853) 4 HL Cas 997; 10 ER 752 .… 13.31 Owen v Cornell (1967) 203 EG 29 .… 19.13

Owen v Crouch (1857) 5 WR 545 .… 40.23 Owen v Homan (1851) 3 mac & G 378; 42 ER 307 .… 18.19, 36.13 Owen v Tate [1976] QB 402 .… 42.13 Owen, Re [1894] 3 Ch 220 .… 2.7, 3.36, 21.10, 21.18 Oxenham v Ellis (1854) 18 Beav 593; 52 ER 233 .… 19.39, 39.41 Oxford etc Railway Co, Re (1849) 1 De G & Sm 728; 63 ER 1270 .… 2.47 P P & A Swift Investments (a firm) v Combined English Stores Group plc [1988] 2 All ER 885 .… 19.40 P & M Thompson Pty Ltd v Total Australia Ltd [1980] 2 NSWLR 1 .… 13.35 Paccar Financial Services v Sinco Trucking Ltd (Trustee of) (1989) 9 PPSAC 7; 57 DLR (4th) 438 .… 5.24, 5.25 Paddington Building Society v Mendelsohn (1985) 50 P & CR 244 .… 24.1, 24.21 Paddon v Richardson (1855) 7 De G M & G563; 44 ER 219 .… 11.14 Page v Linwood (1837) 4 Cl & Fin 399; 7 ER 154 .… 39.25, 39.36 Page v Newman (1829) 9 B & C 378; 109 ER 140 .… 39.42 Paget v Paget [1898] 1 Ch 470 .… 30.7 Pain, Re; Gustavson v Haviland [1919] 1 Ch 38 .… 6.5, 6.24, 24.31, 26.18 Paine v Edwards (1862) 6 LT 600 .… 16.15, 21.16 Painten and Nottingham Ltd v Miller Gale & Winter [1971] NZLR 164 .… 1.9 Palette Shoes Pty Ltd (in liq) v Krohn (1937) 58 CLR 1 .… 5.32, 6.19, 6.21 Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249; 215 ALR 253; 79 ALJR 1121 .… 1.11, 5.43 Palk v Lord Clinton (1805) 12 Ves 48; 33 ER 19 .… 33.3, 33.7, 33.10 Palk v Lord Clinton (1806) 12 Ves 48; 34 ER 1096 .… 32.25

Palk v Mortgage Services Funding plc [1993] Ch 330; [1993] 2 All ER 481 . … 20.22, 20.23, 20.24, 20.28, 21.12, 21.13, 21.15, 21.21, 21.23, 22.20, 32.3 Pallos v Munro (1970) 72 SR (NSW) 507 .… 36.1, 36.3, 36.16 Palmer v Barclays Bank Ltd (1971) 23 P & CR 30 .… 1.23, 3.46, 20.21, 20.50, 20.52 Palmer v Carey [1926] AC 703 .… 6.11, 6.12 Palmer v Earl of Carlisle (1823) 1 Sim & St 423; 57 ER 169 .… 22.4 Palmer v Hendrie (1859) 27 Beav 349; 54 ER 136 .… 16.7, 16.11, 21.5, 22.38 Palmer v Hendrie (No 2) (1860) 28 Beav 341; 54 ER 397 .… 22.38 Palmer v Locke (1881) 18 Ch D 381 .… 26.4, 26.27 Palmer v Wright (1846) 10 Beav 234; 50 ER 572 .… 3.32 Palmer’s Decoration and Furnishing Co, Re [1904] 2 Ch 743 .… 8.2 Panama, New Zealand and Australia Royal Mail Co, Re (1870) 5 Ch App 318 .… 8.12, 8.14, 8.19 Pandoorung Bullal Pundit v Balkrishen Hurba-Jee Mahajun (1838) 2 Moo Ind App 60; 18 ER 224 .… 16.39 Pao On v Lau Yiu Long [1980] AC 614; [1979] 3 All ER 65 .… 13.38 Papesch, Re [1992] 1 NZLR 751 .… 1.35, 2.27 Papua and New Guinea Development Bankv Manton [1982] VR 1000 .… 17.7 Paradise Constructions & Co Pty Ltd v Poyser [2007] VSCA 316; 20 VR 294 .… 4.15 Paragon Finance plc v Pender [2005] EWCA Civ 760; [2005] 1 WLR 3412 . … 14.10 Paragon Finance plc v Staunton; Paragon Finance v Nash [2002] 1 WLR 685; [2002] 2 All ER 248 .… 3.8, 3.17 Parbola Ltd, Re; Blackburn v Parbola Ltd [1909] 2 Ch 437 .… 22.6, 22.31,

33.6 Pargeter v Harris (1845) 7 QB 708 .… 12.20 Parish v Poole (1884) 53 LT 35 .… 1.40 Parist Holdings Pty Ltd v Perpetual NomineesLtd (2006) NSW Conv R ¶56161 .… 20.38 Park v Brady [1976] 2 NSWLR 329 .… 32.86, 32.89 Parkash v Irani Finance Ltd [1970] Ch 101; [1969] 1 All ER 930 .… 36.9 Parker, Re; Ex parte Turquand (1885) 14 QBD 636 .… 15.2 Parker v Braithwaite [1952] 2 All ER 837 .… 12.17, 12.19 Parker v Brooke (1804) 9 Ves 583; 32 ER 729>.… 24.18 Parker v Butcher (1867) LR 3 Eq 762 .… 32.33, 39.50 Parker v Calcraft (1821) 6 Madd 11; 56 ER 992 .… 19.34, 39.28, 39.29 Parker v Fuller (1830) 1 Russ & M 656 .… 22.5 Parker v Housefield (1834) 2 My & K 419; 39 ER 1004 .… 3.37, 21.3, 21.9, 22.25, 33.23 Parker v Jackson [1936] 2 All ER 281 .… 1.48, 14.1, 15.2 Parker v Rock Finance Corp Ltd [1981] 1 NZLR 488 .… 17.9 Parker v Watkins (1859) Johns 133; 70 ER 369 .… 39.27, 40.23 Parker and Parker (No 1), Re; Ex parte Turquand (1884) 14 QBD 405 .… 23.14 Parker-Tweedale v Dunbar Bank plc [1991] Ch 12; [1990] 2 All ER 577 .… 12.9, 20.21, 20.22 Parker-Tweedale v Dunbar Bank plc (No 2) [1991] Ch 26; [1990] 2 All ER 588 .… 40.2, 40.23 Parkes, Re; Ex parte Parkes (1822) 1 Gl & J 228 .… 2.19 Parkes Garage (Swadlincote) Ltd, Re [1929] 1 Ch 139 .… 8.24 Parkinson v Braham [1962] 62 SR (NSW) 663 .… 12.18, 19.3 Parkinson v Hanbury (1860) 1 Drew & Sm 143; 62 ER 332 .… 20.20, 20.40

Parkinson v Hanbury (1867) LR 2 HL 1 .… 39.3, 39.25 Parkinson v Wainwright & Co (1895) 64 LJ Ch 493 .… 8.8 Parkinson’s Estate, Re (1865) 13 LT 26 .… 1.34, 1.40 Parramatta River Lodge Pty Ltd v Sunman (1991) 5 BPR 12,038 .… 3.21, 40.21 Parr’s Banking Co v Yates [1898] 2 QB 460 .… 32.51 Parry v Great Ship Co (1863) 4 B & S 556; 122 ER 568 .… 1.30, 16.13 Parry v Wright (1823) 1 Sim & St 369; 57 ER 148 .… 36.6 Parry v Wright (1823) 5 Russ 142; 38 ER 981 .… 36.11 Parsons v McBain (2001) 109 FCR 120 .… 30.7, 30.8 Parteriche v Powlett (1742) 2 Atk 383; 26 ER 632 .… 30.7 Partnership Pacific Securities Ltd, Re [1992] ACL 295 Qld 5 .… 1.51, 4.8, 4.9 Partridge v McIntosh and Sons Ltd (1933) 49 CLR 453 .… 3.23, 12.11 Pascoe-Webbe v Nusuna Pty Ltd (1985) 3 BPR 9620 .… 12.14 Pascon Pty Ltd v San Marco in Lamis Cooperative Social Club Ltd [1991] 2 VR227 .… 36.1, 36.3, 36.16 Passieu v BF Goodrich Co 58 Ga App 691, 199 SE 775 (1938) .… 5.94 Pastoral Finance Assoc Ltd, Re (1922) 35 SR (NSW) 43 .… 3.20 Patch v Ward (1862) 4 Giff 96; 66 ER 635 .… 22.35 Patch v Ward (1865) LR 1 Eq 436 .… 3.32 Patch v Ward (1867) LR 3 Ch App 203 .… 21.7, 22.35, 22.36, 22.37, 22.39, 33.5 Patch v Wild (1861) 30 Beav 99; 54 ER 826 .… 39.37 Patchell v Maunsell (1881) 7 VLR(E) 6 .… 4.28, 24.51 Patent Bread Machinery Co, Re; Ex parte Valpy and Chaplin (1872) 7 Ch App 289 .… 42.4

Patent File Co, Re; Ex parte Birmingham Banking Co (1870) 6 Ch App 83 . … 11.8 Paterson v Irvine [1926] NZLR 352 .… 4.30, 17.10 Paterson v McNaghten (1905) 2 CLR 615 .… 20.18 Patience, Ex parte; Makinson v The Minister (1940) 40 SR (NSW) 96 .… 2.48, 2.49, 2.51, 38.4 Patten v Bond (1889) 60 LT 583 .… 42.18 Patterson v Roden (1972) 223 EG 945 .… 13.45, 19.23 Paul and Frank Ltd v Discount Bank (Overseas) Ltd [1967] Ch 348 .… 6.20 Paul Kennedy Transport Pty Ltd v Australia and New Zealand Banking Group Ltd (1993) 6 BPR 13,883 .… 3.10, 16.8, 18.6 Paul v Spierway Ltd (in liq) [1976] Ch 220 .… 2.14, 11.9, 42.18, 42.19 Pauling’s Settlement Trusts, Re [1964] Ch 303 at 337; [1963] 3 All ER 1 .… 13.22 Pauly, Re (1994) 115 FLR 473 .… 2.7 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 .… 24.48 Pawlett v AG (1667) Hard 465; 145 ER 550 .… 32.2 Pawson v Revell [1958] 2 QB 360; [1958] 3 All ER 233 .… 12.24 Pawson’s Settlement, Re; Higgins v Pawson [1917] 1 Ch 541 .… 6.24, 19.21, 19.45 Payne v Cardiff Rural District Council [1932] 1 KB 241 .… 20.6 Payne v Compton (1837) 2 Y & C Ex 457; 160 ER 476 .… 22.11 Payne v Esdaile (1888) 13 App Cas 613 .… 1.9, 16.28 Payne v Hornby (1858) 25 Beav 280; 53 ER 643 .… 2.18 Payne v R [1902] AC 552 .… 1.44, 16.17 Paynter v Carew (1854) Kay App xxxvi; 69 ER 331 .… 16.7 Peacock v Burt (1834) 4 LJ Ch 33 .… 25.4 Peake’s Abattoirs Ltd, Re [1986] BCLC 73 .… 14.6

Pearce, Re [1909] 2 Ch 492 .… 31.2 Pearce, Re [1936] SASR 137 .… 11.12 Pearce, Re; Ex parte Official Receiver [1919] 1 KB 354 .… 7.11 Pearce v Bulteel [1916] 2 Ch 544 .… 24.6 Pearce v Morris (1869) LR 5 Ch App 227>.… 21.13, 32.20, 32.48, 32.55, 33.3 Pearce v Watkins (1852) 5 De G & Sm 315; 64 ER 1132 .… 40.13 Pearl v Deacon (1857) 1 De G & J 461; 44 ER 802 .… 34.8 Pearl v Deacon (1857) 24 Beav 186; 53 ER 328 .… 32.54 Pearl v Deacon (1857) 24 Beav 186; 53 ER 328 .… 42.13, 42.15 Pearse v Hewitt (1835) 7 Sim 471; 58 ER 918 .… 33.13 Pearse, Ex parte (1900) 16 WN (NSW) 262 .… 27.10 Pearson v Benson (1860) 28 Beav 598 .… 42.4 Peaslee, Re 13 NY 3d 75; 69 UCC Rep Serv 2d315 (2009) .… 5.81, 5.82 Peat v Clayton [1906] 1 Ch 659 .… 26.12 Peat v Nicholson (1886) 54 LT 569 .… 22.37 Peat Marwick Ltd v Consumers’ Gas Co (1980) 113 DLR (3d) 754 .… 18.5 Peers v Ceeley (1852) 15 Beav 209; 51 ER 517 .… 40.23 Peeters v Schimanski [1975] 2 NZLR 328 .… 13.12, 13.22 Pegasus Leasing Ltd v Cofini (SC (NSW), Powell J, 13 November 1991, noted 67 ALJ 467) .… 2.22 Pegg v Wisden (1852) 16 Beav 239; 51 ER 770 .… 1.27 Pegler v Dale [1975] 1 NSWLR 265 .… 23.1 Peirs v Peirs (1750) 1 Ves Sen 521; 27 ER 1180 .… 30.7 Pelly v Wathen (1849) 7 Hare 351; 68 ER 144 .… 22.21, 31.1, 33.8, 33.22 Pelly v Wathen (1851) 1 De GM & G 16; 42 ER 457 .… 2.36, 2.40, 2.41, 22.21, 24.27

Pelonoy Pty Ltd v Donovan Oates Hannaford Mortgage Corp [2004] NSWSC 4 .… 2.52 Pembrooke v Friend (1860) 1 John & H 132; 70 ER 692 .… 29.2 Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 .… 20.21, 20.22, 20.23, 20.32, 20.33 Penketh v Midword (1914) 33 NZLR 1399 .… 7.10 Penny v Walker (1855) 24 LJ Ch 319 .… 37.5 Penny Nominees Pty Ltd v Fountain (SC (NSW), Young J, 2 May 1989, unreported) .… 3.45 Penny Nominees Pty Ltd v Fountain (No 3) (1990) 5 BPR 11284 .… 3.45, 11.4, 11.6, 37.6 Pennywise Smart Shopping Australia Pty Ltd v Sommer & Co Pty Ltd (1992) 9 ACSR 557 .… 8.24 Percival v Dunn (1885) 29 Ch D 128 .… 6.12 Percival Mercury Sales Ltd v Touche Ross Ltd (1984) 4 PPSAC 65 .… 5.112 Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1 .… 6.9, 6.24, 6.25 Perham v Kempster [1907] 1 Ch 373 .… 24.6 Perimeter Transportation Ltd, Re (2010) 71 CBR (5th) 134; 17 PPSAC (3d) 337 .… 5.112 Perkins v Bradley (1842) 1 Hare 219; 66 ER 1013 .… 24.22 Permanent Custodians Ltd v McLanders [2013] NSWSC 627; (2013) 17 BPR 32,101 .… 9.12, 13.36 Permanent Custodians Ltd v McMahon (2013) 17 BPR 32,177 .… 9.12 Permanent Finance Corp Ltd v Flavel; Ex parte Flavel [1968] Qd R 84 .… 12.11 Permanent Houses (Holdings) Ltd, Re [1988] BCLC 563 .… 11.39 Permanent Trustee Australia Ltd v Shand (1992) 27 NSWLR 426 .… 4.27

Permanent Trustee Co Ltd v Angus (1917) 17 SR (NSW) 364 .… 11.12 Permanent Trustee Co Ltd v Cormack (1920) 21 SR (NSW) 1 .… 3.10, 3.15, 16.8 Permanent Trustee Co Ltd v University of Sydney [1983] 1 NSWLR 578 .… 24.50 Permanent Trustee Co of New South Wales Ltd v Bridgewater [1936] 3 All ER 501 .… 13.14, 13.24 Permanent Trustee Co of New South Wales Ltd v Martin (No 2) (1905) 22 WN (NSW) 76 .… 22.14, 22.25, 33.23 Perpetual Executors and Trustees Assoc of Australia Ltd v Eades (No 1) [1925] VLR82 .… 12.11 Perpetual Executors and Trustees Assoc of Australia Ltd v Eades (No 2) [1925] VLR224 .… 12.11 Perpetual Executors and Trustees Assoc of Australia Ltd v Hosken (1912) 14 CLR 286 .… 4.5 Perpetual Finance Corp Ltd v Blain (1996) 9 BPR 16,243 .… 12.18 Perpetual Ltd v Treloar (2009) 14 BPR 27,699 .… 19.2, 20.16 Perpetual Trustee Co Ltd v Cowan (No 2) (1920) 21 LR (NSW) Eq 278 .… 20.4 Perpetual Trustee Co Ltd v Gregg (1914) 14 SR (NSW) 266 .… 32.81 Perpetual Trustees Co Ltd, Re; Application of Chen [2010] NSWSC 808; (2010) 15 BPR 28,845 .… 4.25, 10.12 Perpetual Trustees Estate and Agency Co of New Zealand Ltd v Elworthy [1926] NZLR 621 .… 4.30 Perpetual Trustees Estate and Agency Co of New Zealand Ltd v Morrison [1980] 2 NZLR 447 .… 17.11, 32.65 Perpetual Trustees Victoria Limited v English [2010] NSWCA 32; 14 BPR 27,339 .… 4.17 Perpetual Trustees Victoria Limited v Menzies [2012] NSWSC 1066; 16 BPR 31,541 .… 4.17

Perpetual Trustees Victoria Limited v Tsai (2004) 12 BPR 22,281 .… 17.3 Perry v Barker (1806) 13 Ves 198; 33 ER 269 .… 16.7, 22.38 Perry v Holl (1860) 2 Giff 138; 66 ER 59 .… 11.7 Perry v Keane; Perry v Partridge (1836) 6 LJ Ch 67 .… 21.9 Perry v Meddowcroft (1841) 4 Beav 197; 49 ER 314 .… 1.27 Perry v National Provincial Bank of England [1910] 1 Ch 464 .… 35.8, 35.9 Perry v Rolfe [1948] VLR 297 .… 4.8, 19.7, 32.1, 33.1, 33.20, 39.15, 40.1 Perry v Walker (1855) 24 LJ Ch 319 .… 19.37 Perry-Herrick v Attwood (1857) 2 De G & J21; 44 ER 895 .… 24.41, 24.47 Person to Person Financial Services Pty Ltd v Sharari [1984] 1 NSWLR 475 .… 4.27, 28.15 Perth Brewery Co Ltd v Simms (1903) 5 WALR 24 .… 32.12 Peruss Pty Ltd, Re (1980) 5 ACLR 176 .… 8.24 Petelin v Cullen (1975) 132 CLR 355 .… 13.40 Peter v Russell (1716) 1 Eq Cas Abr 321; 21 ER 1075 .… 24.36, 24.43 Peters v Commonwealth Bank of Australia (1992) NSW ConvR 55-629 .… 13.17, 13.18, 13.27 Peters v Thornton (1868) 7 SCR (NSW) (L) 298 .… 20.3 Peto v Hammond (1860) 29 Beav 91; 54 ER 560 .… 22.11, 33.3 Peto v Hammond (1861) 30 Beav 495; 54 ER 981 .… 22.27 Petranick v Dale (1973) 33 DLR (3d) 389 .… 21.4, 22.42 Petrol Filling Station, Vauxhall Bridge Road, London, Re; Rosemex Service Station v Shell Mex and BP (1968) 20 P & CR 1 .… 32.9, 32.11, 32.12 Pettat v Ellis (1804) 9 Ves 563; 32 ER 721 .… 1.51, 39.61 Pettit v Pettit [1970] AC 777 .… 2.18 Petty v Styward (1631) 1 Eq Cas Abr 290; 21 ER 1052 .… 32.50 Petty v Styword (1631) 1 Rep Ch 57; 21 ER 506 .… 11.31

Peyman v Lanjani [1985] Ch 457; [1984] 3 All ER 703 .… 13.2 Philippa Power & Associates v Primrose Couper Cronin Rudkin [1997] 2 Qd R266 .… 2.48 Philips v Davies (1843) 7 Jur 52 .… 40.13 Phillips, Re (1869) 4 Ch App 629 .… 40.28 Phillips, Re; Ex parte Bath (1882) 22 Ch D 450; (1884) 27 Ch D 509 .… 23.10 Phillips, Re; Ex parte National Mercantile Bank (1880) 16 Ch D 104 .… 39.16 Phillips v Hogg [2001] QSC 390 .… 2.8, 21.12, 21.21 Phillips v Hutchinson [1946] VLR 270 .… 13.18 Phillips v Phillips (1862) 4 De GF & J 208; 45 ER 1164 .… 24.25, 24.28, 24.34 Phillips v Vaughan (1685) 1 Vern 336; 23 ER 504 .… 39.19 Phillips’ Trusts, Re [1903] 1 Ch 183 .… 26.16 Phillips-Higgins v Harper [1954] 1 QB 411; [1954] 2 All ER 51n .… 16.36 Philos Pty Ltd v National Bank of Australasia Ltd (1976) 5 BPR 11,810 .… 4.34, 25.12, 25.14, 25.15, 25.16 Philpott v NZI Bank Ltd (1990) ANZ ConvR 242 .… 1.33 Phipps v Earl of Anglesea (1721) 5 Vin Abr 209 .… 32.44 Phipps v Lovegrove (1873) LR 16 Eq 80 .… 24.6, 26.15, 26.18, 26.20, 26.22 Piazza Grande Pty Ltd v Portis Pty Ltd (1993) V ConvR 54-460 .… 19.2 Piccolo, Re; McVeigh v National Australia Bank Ltd [2000] FCA 187 .… 3.7, 3.8, 3.9 Pickard v Sears (1837) 6 A & E 469; 112 ER 179 .… 24.46 Pickering v Ilfracombe Rly Co (1868) LR 3 CP 235 .… 24.50 Pickering v Wells [2002] FLR 798 (UK) .… 7.5 Pico Holdings Inc v Turf Club Australia Pty Ltd[2002] QSC 86 .… 11.34

Pico Holdings Inc v Wave Vista Pty Ltd [2003] QCA 204 .… 11.34 Pico Holdings Ltd v Wave Vistas Pty Ltd [2005] HCA 13; 79 ALJR 825; 214 ALR 392 .… 1.33 Pidcock, Re; Penny v Pidcock (1807) 51 Sol Jo 514 .… 3.41 Piddock v Brown (1734) 3 P Wms 288; 24 ER 1069 .… 39.11 Pierce, Ex parte (1925) 42 WN (NSW) 23 .… 7.7 Pierce v Canada Permanent Loan and Savings Co (1894) 25 OR 671 .… 25.8 Piggott v Williams (1821) 6 Madd 95; 56 ER 1027 .… 1.48 Pigot v Cubley (1864) 15 CB (NS) 701; 143 ER 960 .… 1.11 Pigot’s case (1614) 11 Co Rep 266; 77 ER 1177; [1558–1774] All ER Rep 50 .… 3.33 Pilcher v Rawlins (1872) LR 7 Ch App 259 .… 24.5, 24.6, 24.12, 25.4 Pile v Pile (1875) 23 WR 440 .… 25.6 Pile’s Caveat, Re [1980] Qd R 81 .… 4.28 Pilkington v Wood [1953] Ch 770 .… 3.11 Pinchard v Fellows (1874) LR 17 Eq 421 .… 21.16 Pincus v Ord Minnett Ltd (SC (Vic), Hedigan J, 5 May 1994, unreported) .… 6.7, 6.9, 6.11 Pinhorn v Souster (1853) 8 Exch 763; 1 WR 336 .… 12.10 Pinnock v Bailey (1883) 23 Ch D 497 .… 6.14, 26.23 Pinnock v Harrison (1838) 3 M & W 532; 150 ER 1256 .… 2.49 Pioneer Container (The) [1994] 2 AC 324; [1994] 2 All ER 250 .… 2.20 Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW (1970) 2 BPR 9562 .… 37.9 Pipeline Properties Pty Ltd v Leichhardt Development Co Pty Ltd (1989) 58 NTR 17 .… 7.10 Piromalli, In the Application of [1977] 1 NSWR 39 .… 32.39, 38.7 Pirpiris v Iovanella [1975] VR 129 .… 24.51

Pit v Cholmondeley (1754) 2 Ves Sen 565; 28 ER 360 .… 39.3 Pitt v Pitt (1856) 22 Beav 294; 52 ER 1121 .… 36.6 Pitt Ltd v Glenelg Corp [1927] SASR 501 .… 7.10 Pitt Street Pty Ltd v McGurk [2004] NSWSC 413 .… 4.26 Pittortou, Re [1985] 1 All ER 285; [1985] 1 WLR 58 .… 30.7 Place v Fagg (1829) 4 Man & Ry KB 277 .… 1.22 Planwest Consultants Ltd v Milltimber Holdings Ltd (1995) 10 PPSAC (2d) 116 .… 5.25 Platt v Mendel (1884) 27 Ch D 246 .… 21.4, 22.2, 22.15, 22.25, 22.26, 22.28 Platt v Platt (1976) 120 Sol Jo 199 .… 7.4 Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266 .… 28.7, 28.15 Pledge v Buss (1860) John 663; 70 ER 585 .… 42.13, 42.15 Pledge v White [1896] AC 187 .… 31.6, 31.8 Plomley v Felton (1888) 14 App Cas 61 .… 32.31 Plumb v Fluitt (1791) 2 Anst 432; 145 ER 926 .… 24.9, 24.14 Plumbe v Plumbe (1841) 4 Y & C Ex 345; 160 ER 1039 .… 33.13 Plumpton v Plumpton (1886) 11 VLR 733 .… 4.24 Plumtre v O’Dell (1838) 1 Ir Eq R 113 .… 2.41 Plunketts Ltd v Harrods Ltd (in liquidation) (1942) 44 WALR 1 .… 5.43 Pocock v Lee (1707) 2 Vern 604; 23 ER 995 .… 30.7 Pocock v Reddington (1801) 5 Ves 794; 31 ER 862 .… 11.14 Polak v Everett (1876) 1 QBD 669 .… 35.8 Pollen v Brewer (1859) 7 CB (NS) 371; 141 ER 860 .… 19.19 Pollitt, Re; Ex parte Minor [1893] 1 QB 455 .… 2.40 Polly Peck International plc v Nadir (No 2) [1992] 4 All ER 769 .… 24.20

Pongetti v Bankers Trust 368 So (2d) 819 (1979) (Miss) .… 3.8 Pont Data Australia Ltd v ASX Operations Pty Ltd (1990) 93 ALR 523 .… 13.46 Poole Corporation v Moody [1945] 1 KB 350; [1945] 1 All ER 536 .… 16.28 Pooley v Driver (1876) 5 Ch D 458 .… 6.22 Pooley Hall Colliery Co, Re (1869) 18 WR 201;(1869) 21 LT 690 .… 11.9, 11.33 Pooley’s Trustee v Whetham (1886) 33 Ch D 111 .… 42.3 Poosathurdi v Kanappa Chettiar (1919) LR 47 Ind App 1 .… 13.21 Pope v Biggs (1829) 9 B & C 245; 109 ER 91 .… 19.12 Popple v Sylvest (1882) 22 Ch D 98 .… 36.14 Popular Homes Ltd v Circuit Developments Ltd [1979] 2 NZLR 642 .… 1.41, 1.51, 1.48, 6.8, 15.2 Port Line Ltd v Ben Line Steamers Ltd [1958] 2 QB 146; [1958] 1 All ER 787 .… 16.14 Port of Melbourne Authority v Anshun Pty Ltd (No 2) (1981) 147 CLR 589 . … 16.7, 17.12 Portbase Clothing Ltd, Re [1993] 3 All ER 829 .… 24.3 Porter v Associated Securities Ltd (1976) 1 BPR9279 .… 20.18, 30.13, 32.25, 32.71 Porter, Re [1892] 3 Ch 481 .… 13.52 Porter v Moore [1904] 2 Ch 367 .… 26.16 Portland Holdings Ltd v Cameo Motors Ltd[1966] NZLR 571 .… 13.46 Portman Building Society v Dusangh [2000] 2 All ER (Comm) 221 (CA) .… 13.12 Portman Building Society v Gallway [1955] 1 All ER 227; [1955] 1 WLR 96 .… 18.14 Portman Building Society v Hamlyn Taylor Neck [1998] 4 All ER 202 .…

39.10 Postle v Sengstock [1994] 2 Qd R 290 .… 1.7, 1.11 Postle, Re; Ex parte Bignold (1834) 4 Deac& Ch 259 .… 3.36, 19.14, 39.15 Postlethwaite v Tavers [1871] WN 173 .… 22.47 Potter v Edwards (1857) 26 LJ Ch 468 .… 13.14, 32.15 Potters Oils Ltd (No 2), Re [1986] 1 All ER 890; [1986] 1 WLR 201 .… 18.6, 18.15 Potts, Re; Ex parte Taylor [1893] 1 QB 648 .… 7.11 Potts v Miller (1940) 64 CLR 282 .… 39.7 Powell v Brodhurst [1901] 2 Ch 160 .… 32.50, 33.18 Powell v Brown (1907) 97 LT 854 .… 14.1 Powell v Glover (1721) 3 P Wms 251n; 24 ER 1050 .… 39.19 Powell v London and Provincial Bank [1893] 2 Ch 555 .… 6.17, 24.6 Powell v Powell [1900] 1 Ch 243 .… 13.24 Powell v Roberts (1869) LR 9 Eq 169 .… 21.15, 33.10 Power and Carton’s Contrac, Re (1890) 25 LR Ir 459 .… 22.35 Powers, Re; Lindsell v Phillips (1885) 30 Ch D 291 .… 16.28, 16.34, 16.35 Powney v Blomberg (1844) 14 Sim 179; 60 ER 325; 8 Jur 746 .… 16.40, 32.46 Powys v Brown (1924) 25 SR (NSW) 65 .… 42.6 Prackert, Ex parte [1987] 2 Qd R 560 .… 32.39, 38.7, 40.3 Practice Direction [1955] 1 All ER 30; [1955] 1 WLR 36 .… 22.15, 22.25 Practice Direction [1969] 2 All ER 639; [1969] 1 WLR 974 .… 22.13 Praed v Gardiner (1788) 2 Cox Eq Cas 86; 30 ER 40 .… 42.14 Pratt v Vizard (1833) 5 B & Ad 808; 110 ER 989 .… 2.41 Pratt & Whitney Canada Leasing Inc v Ellis Air Inc (2002) 6 PPSAC (3d) 84; 3 CBR (5th) 81 .… 5.94, 5.95

Predeth v Castle Phillips Finance Co Ltd [1986] 2 EGLR 144; (1986) 279 Estates Gazette 1355 .… 20.23, 20.28, 20.35 Prees v Coke (1871) LR 6 Ch App 645 .… 22.37, 22.46 Premier Building Society, Re (1890) 16 VLR 643 .… 11.35 Premier Group Ltd v Lidgard [1970] NZLR 280 .… 1.28 Premier Group Pty Ltd v Follow mount Transport Pty Ltd (SC (Qld), Williams J, 19 March 1998, unreported) .… 2.20 Prenn v Simmonds [1971] 1 WLR 1381; [1971] 3 All ER 237 .… 1.25, 3.6, 3.7 Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd [2007] NSWSC 676; 13 BPR 24,969; 64 ACSR 31 .… 4.12 President of India v La Pintada Cia Navigacion SA [1985] AC 104; [1984] 2 All ER 773 .… 39.42 Press v Coke (1871) 6 Ch App 645 .… 39.41 Preston v Tonbridge Wells Opera House Ltd[1893] 2 Ch 323 .… 18.21 Price, Re (1931) 26 Tas LR 158 .… 1.9, 1.37 Price, Re; Ex parte Pearse & Prothero (1820) Buck 525 .… 3.38 Price v Carver (1837) 3 My & Cr 157; 40 ER 884 .… 22.25 Price v Great Western Rly Co (1847) 16 M & W 244; 153 ER 1179 .… 39.43 Price v Moulton (1851) 10 CB 561; 138 ER 222 .… 17.4, 36.13 Prideaux v DPP (Cic) (1987) 163 CLR 483 .… 19.19, 19.20 Prior Bros, Re 29 Wash App 905 (1981) .… 5.87 Prioris Pty Ltd v Inscorp Ltd (SC, NSW, 4 February 1994) .… 18.11 Pritchard v Briggs [1980] Ch 338 .… 24.12 Proctor v Oates (1740) 2 Atk 140; 26 ER 488 .… 33.24 Proctor Endowment and Annuity Loan Co v Grice (1880) 5 QBD 592 .… 3.15

Progress & Properties (Strathfield) Pty Ltd v Crumblin (1984) 3 BPR 9496 . … 1.32 Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 .… 37.8 Project Research Pty Ltd v Permanent Trustee of Australia Ltd (1990) 5 BPR 11225 .… 32.40, 33.1, 33.21, 40.1, 40.11 Property and Bloodstock Ltd v Emerton [1968] Ch 94; [1967] 3 All ER 321 . … 20.6, 20.8, 20.36, 20.37, 32.55 Property Builders Pty Ltd v Adelaide Bank Ltd [2011] NSWCA 266; 15 BPR 29,411 .… 14.5 Prosser v Rice (1859) 28 Beav 68; 54 ER 291 .… 25.4 Protean Enterprises (Newmarket) Pty Ltd v Randall [1975] VR 327 .… 2.22 Protector Endowment and Annuity Loan Co v Grice (1880) 5 QBD 592 .… 1.30, 3.15, 32.15 Provident Building Society v Greenhill (1878) 9 Ch D 122 .… 11.45, 32.32, 39.10 Provident Clerks’ Mutual, etc Association v Lewis (1892) 62 LJ Ch 89 .… 21.21 Province of Alberta Treasury Branches v Faja Bison Ranch Inc (1994) 6 PPSAC (2d) 205; 152 AR 112 .… 5.39 Pryce v Bury (1853) 2 Drew 41; 61 ER 633 .… 3.42, 21.3, 21.11, 22.18, 40.30 Pryce v Bury (1854) LR 16 Eq 153(n) .… 21.9, 21.18 Prytherch, Re; Prytherch v Williams (1889) 42 Ch D 590 .… 18.19, 18.21, 19.34 PT Ltd v Maradona Pty Ltd (1992) 25 NSWLR 643 .… 4.11, 4.13, 11.21, 13.40, 14.5 PT Ltd v Maradona Pty Ltd (1992) 27 NSWLR 241 .… 5.4 Public Service Employees Credit Union Co-operative v Campion (1984) 56 ACTR 39 .… 13.23

Public Trustee v Lawrence [1912] 1 Ch 789 .… 12.24 Public Trustee v Mortleman [1928] NZLR 337 .… 3.34, 4.30 Public Trustee v Pfeiffle [1991] 1 VR 19 .… 11.4 Public Works Commissioners v Harby (1857) 23 Beav 508; 53 ER 199 .… 26.22 Puddephatt v Leith [1916] 1 Ch 200 .… 6.16 Pugh v Heath (1882) 7 App Cas 235 .… 12.5, 16.4, 19.13 Pullen v Abalcheck Pty Ltd (1990) 20 NSWLR 732 .… 2.5, 8.18 Pumford v W Butler & Co Ltd [1914] 2 Ch 353 .… 12.24 Pumfrey, Re (1882) 22 Ch D 255 .… 2.18 Punnett, Ex parte; Re Kitchin (1880) 16 Ch D226 .… 12.11 Puntoriero, Re (1991) 104 ALR 523 .… 5.72 Purley Automobile Co v Aldon Motors (1968) 112 Sol Jo 482 .… 37.11 Purnell v Roche [1927] 2 Ch 142 .… 16.31 Putz v Registrar of Titles [1928] VR 348 .… 4.5 Pyke v Peters [1943] KB 242 .… 32.61 Pyramid Building Society (in liq) v Chen [1999] FCA 58 .… 14.5 Pyramid Building Society (in liq) v Rick Nominees Pty Ltd (SC (Vic), Byrne J, 23 42.2, 42.5 Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd (1996) 136 ALR 166 .… 4.11, 4.18, 11.33, 11.34 Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188 .… 25.7 Q Quadramain Pty Ltd v Sevastapol Investments Pty Ltd (1976) 133 CLR 390 . … 32.9 Quarles v Knight (1820) 8 Price 630; 146 ER 1318 .… 22.31

Quarrell v Beckford (1816) 1 Madd 260; 56 ER 100 .… 1.7, 3.13, 10.12, 33.12, 39.45, 39.57 Queensland Brewery Ltd v Baker [1936] St R Qd 98 .… 32.12 Queensland Land & Coal Co, Re; Davis v Martin [1894] 3 Ch 181 .… 8.2, 11.8 Queensland Mercantile and Agency Co, Re; Ex parte Australasian Investment Co; Ex parte Union Bank of Australia [1892] 1 Ch 219 .… 26.9 Queensland Mushrooms Pty Ltd v Willemse Family Co Pty Ltd [2002] QSC 76 .… 2.33, 2.36 Queensland Trustees Ltd v Registrar of Titles (1893) 5 QLJ 46 .… 25.8 Quennell v Maltby [1979] 1 All ER 568; [1979] 1 WLR 318 .… 12.17, 16.10, 16.12, 19.13, 19.16, 20.21 Quint v Robertson (1985) 3 NSWLR 398 .… 4.7, 7.5, 24.50, 32.1, 32.80, 39.15 Quzag v Gunning Shire Council (2005) 142 LGERA 77; [2005] NSWSC 970 .… 20.21 R R & I Bank of Western Australia Ltd v Cash Resources Australia Pty Ltd (1993) 11 WAR 536 .… 25.7, 25.8, 25.12, 25.16 R v Bolger (1989) 41 A Crim R 222 .… 37.14 R v Curr [1968] 2 QB 944; [1967] 1 All ER 478 .… 13.49 R v De la Motte (1857) 2 H & N 589 .… 22.45 R v Galek (1993) 70 A Crim R 252 .… 37.14 R v Ghadami [1997] Crim LR 606 .… 37.14 R v Mountford [1972] 1 QB 28 .… 19.19 R v New Queensland Copper Co Ltd (1917) 23 CLR 495 .… 3.13, 11.15 R v Panel on Take-overs & Mergers; Ex parte Datafin plc [1987] 1 QB 815; [1987] 1 All ER 564 .… 9.5

R v Registrar General; Ex parte Roxburgh (1868) 1 QSCR 201 .… 4.5 R v Registrar of Companies [1912] 3 KB 23 .… 11.40 R v Registrar of Companies (ACT); Ex parte Ganke (1960) 1 FLR 109 .… 11.40 R v Registrar of Titles; Ex parte Watson [1952] VLR 470 .… 4.25, 20.40, 20.49 R v Robinson [1971] 1 QB 156 .… 19.19 R v Roget (1992) 7 WAR 356 .… 3.36 R v Sankey (1836) 5 A & E 423; 111 ER 1226 .… 2.36 R v Smyth (1832) 5 Car & P 201; 172 ER 939 .… 19.20 R v South Devon Rail Co (1850) 15 QB 1043; 117 ER 754 .… 2.22 R v Waugh (1935) 52 WN (NSW) 20 .… 19.19 R v Williams [1942] AC 541 .… 16.17 R A Price Securities Ltd v Henderson [1989] 2 NZLR 257 .… 18.5 R W Miller & Co Pty Ltd v The Ship Patris [1975] 1 NSWLR 704 .… 39.49 Rabobank New Zealand Ltd v McAnulty [2011] NZCA 212; 3 NZLR 192 . … 5.24, 5.25, 5.30 Radcliff v Salmon (1852) 4 De G & Sm 526; 64 ER 942 .… 22.27 Radcliffe, Re; Radcliffe v Bewes [1892] 1 Ch 227 .… 36.2 Radin v Commonwealth Bank of Australia [1998] ACL 295 FC 1 .… 36.2, 36.17 Radin v Commonwealth Bank of Australia [1998] FCA 1361 .… 3.9 Radin v Commonwealth Bank of Australia [1999] FCA 748 .… 4.34 Rafferty v Time 2000 West Pty Ltd (No 3) (2009) 257 ALR 503 .… 2.35 Raggett, Re; Ex parte Williams (1880) 16 Ch D 117 .… 31.4, 31.5, 31.7 Raitt v Mitchell (1815) 4 Camp 146; 171 ER 47 .… 2.21 Raja v Austin Gray (a firm) [2002] EWCA Civ 1965; [2003] 1 EGLR 91; 3 EGLR 49 .… 20.21

Raja v Lloyds TSB Bank (16 May 2000) Times Law Reports 379 .… 20.21 Raja v Lloyd’s TSB Bank plc [2001] EWCA Civ 210; (2001) 82 P & CR 191 .… 16.19 Rajah Kishendatt Ram v Ralah Mumtaz AliKhan (1879) LR 6 Ind App 145 . … 20.43, 39.2 Rakestraw v Brewer (1729) 2 P Wms 511; 24 ER 839 .… 3.29 Raleigh Industries of America Inc v Tassone (1977) 74 Cal App 3d 692 .… 5.43 Ramsbottom v Wallis (1835) 5 LJ Ch 92 .… 16.6, 33.3, 33.19 Ramsden v Dyson (1866) LR 1 HL 129 .… 2.17, 2.18 Ramsden v Lanaley (1705) 2 Vern 536; 23 ER 947 .… 40.23 Ramsey v Hartley [1977] 2 All ER 673; [1977] 1 WLR 686 .… 6.5, 6.10, 6.11 Ramsay v Margrett [1894] 2 QB 18 .… 5.43 Rancliffe v Parkyns (1818) 6 Dow 149; 3 ER 1428 .… 30.10 Rand v Cartwright (1664) 1 Ch Cas 59; 22 ER 694 .… 21.13 Randall v Lithgow (1884) 12 QBD 525 .… 6.15 Ranson v Ranson [1988] 1 WLR 183 .… 13.49 Rapid Road Transit Co Ltd, Re [1909] 1 Ch 96 .… 2.36, 2.39, 2.47 Rapid Transit Mix Ltd v Commcorp Financial Services Inc (1998) 156 DLR (4th) 366 .… 5.137 Ratcliffe v Barnard (1871) LR 6 Ch App 652 .… 24.37, 24.39 Ratford v Northavon District Council [1987] QB 357; [1986] 3 All ER 193 . … 18.5 Rath v M’Mullan [1916] 1 Ir R 349 .… 2.40 Rawcliffe v Custom Credit Corporation Ltd [1994] ATPR 41-922 .… 20.38 Rawson v Eicke (1837) 7 Ad & El 451; 112 ER 539 .… 12.14 Rawson v Samuel (1839) Cr & Ph 161; 41 ER 451 .… 19.24

Read v Brown (1888) 22 QBD 128 .… 6.4, 7.2, 6.8 Read v Dupper (1795) 6 TR 361; 101 ER 595 .… 2.49, 2.51 Read v Eley (1899) 80 LT 369 .… 20.48 Read v Ward (1739) 7 Vin Abr 123 .… 24.19 Reardon Smith Line v Hansen-Targen [1976] 1 WLR 989; [1976] 3 All ER 570 .… 3.7 Reay, Re; Ex parte Barnett (1845) De G 194 .… 26.7 Redglove Projects Pty Ltd v Ngunnawal Local Aboriginal Land Council (2004) 12 BPR 22,319 .… 2.3 Redgrave v Redgrave (1951) 82 CLR 521 .… 1.4 Redman v Permanent Trustee of NSW Ltd (1916) 22 CLR 84 .… 14.2 Redmayne v Forster (1866) LR 2 Eq 467 .… 21.3, 21.9, 22.5 Reed v Norris (1837) 2 My & Cr 361; 40 ER 678 .… 39.19 Rees v Metropolitan Board of Works (1880) 14 Ch D 372 .… 40.27 Reeve v Lisle [1902] AC 461 .… 13.10, 32.14, 32.18 Reeve v Whitmore (1863) 4 De GJ & Sm 1; 46 ER 814 .… 8.12, 15.2 Reeves v Barlow (1884) 12 QBD 436 .… 6.21 Reeves v Pope [1914] 2 KB 284 .… 1.51, 6.8, 12.13, 19.30 Refuge Assurance Co Ltd v Pearlberg [1938] Ch 687; [1938] 3 All ER 231 . … 16.7, 18.7, 19.21, 19.34 Regent Oil Co Ltd v J A Gregory (HatchEnd) Ltd [1966] Ch 402 .… 3.23, 12.11, 19.10 Regent’s Canal Ironwork Co, Re; Ex parte Grissell (1875) 3 Ch D 411 .… 2.52, 11.35, 40.19 Registrar of Titles v Paterson (1876) 2 App Cas 110 .… 24.51 Reid v Explosives Co (1887) 19 QBD 264 .… 19.31 Reid v Fitzgerald (1926) 41 WN (NSW) 25 .… 3.20

Reid v Kearney (1887) 8 LR (NSW) (Eq) 37 .… 27.11 Reis, Re; Ex parte Clough [1904] 2 KB 769 .… 13.7 Reliance Finance Corp Pty Ltd v Heid [1982] 1 NSWLR 466 .… 2.11, 2.13 Reliance Finance Corp Pty Ltd v Orwin (1964) 154 CLR 326; 82 WN (Pt 1) (NSW) 11 .… 2.11, 4.36, 10.8, 19.23 Reliance Finance Corp Pty Ltd v Orwin [1964–65] NSWR 970 .… 19.5 Reliance Permanent Building Society v Harwood-Stamper [1944] Ch 362; [1944] 2 All ER 75 .… 20.23 Relwood Pty Ltd v Manning Homes Pty Ltd (No 2) [1992] 2 Qd R 197 .… 7.14, 8.19, 8.21 Remer v Stokes (1856) 4 WR 730 .… 22.4 Renard Constructions (M E) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 .… 3.10, 5.121, 16.8 Rendell v Associated Finance Pty Ltd [1957] VR 604 .… 5.94 Rendell v Morphew (1914) 84 LJ Ch 517 .… 17.5 Renshaw v Moore (1917) 34 WN (NSW) 95 .… 4.29 Renton, Re; Ex parte Glendinning (1819) Buck 517 .… 35.8, 35.10 Renvoize v Cooper (1823) 1 Sim & St 364; 57 ER 146 .… 22.32 Republic of Guatemala v Nunez [1927] 1 KB 669; (1926) 42 TLR 625 .… 26.9 Resich v Commonwealth Bank of Australia (1998) ANZ ConvR 628 .… 13.36 Residential Housing Corporation v Esber (2011) 80 NSWLR 69 .… 4.4, 4.37, 20.43, 20.45 Retail Equity Pty Ltd v Custom Credit Corp Ltd(1991) 4 ACSR 23 .… 16.8 Reuthlinger v MacDonald [1976] 1 NSWLR 88 .… 13.50 Reynolds v Aluma-Lite Products Pty Ltd [2009] QSC 379 .… 19.41 Reynolds v Ashby & Son [1904] AC 466 .… 1.20, 3.26

Reynolds Bros (Motors) Pty Ltd v Esanda (1983) 8 ACLR 422 .… 5.104, 8.16 Reynoldson v Perkins (1769) Amb 564; 27 ER 362 .… 22.51 RGP Constructions Pty Ltd, Re (1982) 7 ACLR 233 .… 7.10 Rhodes v Allied Dunbar Pension Services Ltd [1989] 1 All ER 1161; [1989] 1 WLR 800 .… 8.19, 12.2, 12.13, 18.5 Rhodes v Bate (1865) LR 1 Ch App 252 .… 13.24, 42.2 Rhodes v Buckland (1852) 16 Beav 212; 51 ER 759 .… 20.36, 32.25 Rhodes v Dalby [1971] 2 All ER 1144; [1971] 1 WLR 1325 .… 12.23, 12.24, 12.26 Rhodes v Moules [1895] 1 Ch 236 .… 24.23, 42.8 Rhyl UDC v Rhyl Amusements [1959] 1 All ER 257 .… 12.30 Rhymney Valley District Council v Pontygwindy Housing Association Ltd [1976] LS Gaz R 405 .… 21.21, 21.22 Riccard v Prichard (1855) 1 K & J 277; 69 ER 462 .… 6.12 Rice v Rice (1853) 2 Drew 73; 61 ER 646 .… 24.25, 24.28, 24.45, 24.46, 28.10, 28.11, 28.14 Richard Smith & Co Ltd, Re [1901] 1 Ir R73 .… 6.4, 7.2 Richard West & Partners (Inverness) Ltd v Dick [1969] 2 Ch 424 .… 1.46 Richards, Re; Ex parte Astbury; Ex parte Lloyd’s Banking Co (1869) 4 Ch App 630 .… 1.22 Richards v Commercial Bank of Australia (1971) 18 FLR 95 .… 17.2, 32.9 Richards v Cooper (1842) 5 Beav 304; 49 ER 595 .… 22.5, 33.19 Richards v Jones (1865) 1 SALR (App) 167 .… 4.24 Richards v Macclesford (1841) 10 LJ Ch 329 .… 40.25 Richards v Morgan (1753) 4 Y & C Ex 570 .… 19.36 Richards v Platel (1841) Cr & Ph 79; 41 ER 419 .… 2.43 Richards, Re; Humber v Richards (1890) 45 Ch D 589 .… 26.11

Richardson, Re; Ex parte Jones (1832) 2 Cr & J 513; 149 ER 217 .… 13.1 Richardson, Re; Shillito v Hobson (1885) 30 Ch D 396 .… 6.11, 14.4, 34.6 Richardson’s Will Trusts, Re [1958] Ch 504 .… 7.4 Richerson, Re; Scales v Hoyle (No 2) [1893] 3 Ch 146 .… 33.2 Rick Cobby Haulage Pty Ltd, Re (1992) 7 ACSR 456; 10 ACLC 1251 .… 8.2 Rick Cobby Haulage Pty Ltd, Re (1992) 11 ACLC 138 .… 11.43 Rickards v Gledstanes (1861) 3 Giff 298; 66 ER 423 .… 24.8 Ricketts v Lewis (1882) 20 Ch D 745 .… 11.18 Ricketts v Ricketts [1891] WN 29 .… 22.49 Rickman, Re; Ex parte Bank of New Zealand(1890) 8 NZLR 381 .… 37.13 Rider v Jones (1843) 2 Y & CCC 329; 63 ER 145 .… 2.46 Ridge, Re; Ex parte Halifax (1842) 2 Mont D & De G 544 .… 3.37 Ridge of Brooklyn Realty Co v Offerman (1912) 134 NYS 788 .… 30.17 Ridgeways, Re (1825) Hog 309 .… 11.21 Ridgway v Kynnersley (1856) 2 Hem & M 565; 71 ER 583 .… 40.16 Ridout v Fowler [1904] 1 Ch 658 .… 2.15 Rigden v Vallier (1751) 2 Ves Sen 252; 28 ER 163 .… 11.31 Right d Jefferys v Bucknall (1831) 2 B & Ad 278; 109 ER 1146 .… 19.18 Riley v Hall (1898) 79 LT 244 .… 31.6 Rimmer v Bourke [2003] NSWSC 200 .… 32.37 Rimmer v Webster [1902] 2 Ch 163 .… 24.42, 24.46, 24, 47, 28.14 Ritson, Re; Ritson v Ritson [1899] 1 Ch 128 .… 29.4 Riverlate Properties Ltd v Paul [1975] Ch 133; [1974] 2 All ER 656 .… 13.42 Rizoto Kaihatsu Gumi Ltd v Capital and Coastal Ltd [1998] 1 ConvR 54-511 .… 2.15

RJE v Department of Justice (2008) 192 A Crim R 156 .… 5.4 RN Home v Chester Fein Property Developments Pty Ltd [1987] VR 913; 11 ACLR 245 .… 10.15 Road Chalets Pty Ltd v Thornton Motors Pty Ltd (1986) 47 SASR 532 .… 1.25, 4.5, 4.8, 40.1 Roam Australia Pty Ltd v Telstra Corporation Ltd (Federal Court of Australia, Lehane J, 22 September 1997, unreported) .… 2.48, 2.50 Robarts v Jefferys (1830) 8 LJ OS Ch 137 .… 32.46 Robbie (N W) & Co Ltd v Witney Warehouse Co Ltd [1963] 3 All ER 613; [1963] 1 WLR 1324 .… 6.6, 8.19, 18.5 Robbins v Whyte [1906] 1 KB 125 .… 12.30 Robert Nettlefold Pty Ltd v Schofield (1934) 29 Tas LR 93 .… 5.43 Robert Reid & Co v Minister of Public Works (1902) 2 SR (NSW) L 405 .… 4.7, 12.2, 38.4 Roberts, Re (1889) 43 Ch D 52 .… 42.10 Roberts, Re (1982) 84 FLR 88 .… 2.7 Roberts, Re; Goodchap v Roberts (1880) 14 Ch D 49 .… 39.43 Roberts v Croft (1857) 2 De G & J 1; 44 ER 887 .… 3.38, 24.27, 24.39 Roberts v Croft (1857) 24 Beav 223; 53 ER 343 .… 3.38, 24.45 Roberts v Goldenberg (1997) ANZ ConvR 405 .… 13.36 Roberts v Holland [1893] 1 QB 665 .… 11.2, 17.3 Roberts v J Hampson & Co [1990] 1 WLR 94 .… 37.5 Roberts v Roberts [1986] 2 All ER 483; [1986] 1 WLR 437 .… 13.49 Roberts Petroleum Ltd v Bernard Kenny Ltd [1983] 2 AC 192; [1983] 1 All ER 564 .… 7.5 Robertson, Re (1907) 24 WN (NSW) 94 .… 4.28 Robertson v Grigg (1932) 47 CLR 257 .… 1.9, 5.104 Robertson v Norris (1857) 1 Giff 421; 65 ER 983 .… 19.41

Robertson v White [1923] NZLR 1275 .… 17.10 Robins v Goldingham (1872) LR 13 Eq 440 .… 2.33 Robinson v Briggs (1870–1871) LR 6 Exch 1 .… 5.43 Robinson v Burnell’s Vienna Bakery Co [1904] 2 KB 624 .… 8.19 Robinson v Campbell (No 2) (1992) 30 NSWLR 503 (CA) .… 30.2 Robinson v Cumming (1742) 2 Atk 409; 26 ER 646 .… 39.36 Robinson v Gee (1749) 1 Ves Sen 251; 27 ER 1013 .… 30.7 Robinson v Marsh [1921] 2 KB 640 .… 13.46 Robinson v M’Donnell (1818) 2 B & Ald 134; 106 ER 316 .… 13.7 Robinson v Nesbitt (1868) LR 3 CP 264 .… 24.50 Robinson v Preston (1858) 4 K & J 505; 70 ER 211 .… 11.31 Robinson v Ridley (1821) 6 Madd 2; 56 ER 988 .… 19.38 Robinson Printing Co, Ltd v Chic, Ltd [1905] 2 Ch 123 .… 18.5 Robinson’s Settlement, Re; Grant v Hobbs [1912] 1 Ch 717 .… 11.13 Robson v Smith [1895] 2 Ch 118 .… 8.2, 8.18, 8.19 Roche’s Estate, Re (1890) 25 LR Ir 271 .… 30.5, 30.6 Rockett v Moneycorp Securities Pty Ltd [2008] QSC 258 .… 20.45 Roddam v Morley (1857) 1 De G & J 1; 44 ER 622 .… 16.33 Roddy v Williams (1845) 3 Jo & Lat 1 .… 24.28 Roddy’s Estate, Re; Ex parte Fitzgerald (1861) 11 I Ch R 369 .… 30.5, 30.6, 30.9 Rodgers v Moonta Town Corporation (1981) 37 ALR 49 .… 19.24 Rodick v Gandell (1847) 10 Beav 270; 50 ER 586 .… 2.45 Rodick v Gandell (1852) 1 De GM & G 763; 42 ER 749 .… 2.3, 6.11, 6.12, 6.13, 6.14 Roger v Harrison [1893] 1 QB 161 .… 2.15 Rogers v Challis (1859) 27 Beav 175; 54 ER 68 .… 1.41, 3.45

Rogers v Grazebrook (1846) 8 QB 895; 115 ER 1111 .… 19.12 Rogers v Holloway (1843) 5 Man & G 292; 134 ER 576 .… 7.8 Rogers v Hosegood [1900] 2 Ch 388 .… 12.2 Rogers v Humphreys (1835) 4 Ad & El 299; 111 ER 799 .… 12.2, 12.4, 12.13, 12.17, 12.19, 19.30 Rogers v Resi-Statewide Corp Ltd (1991) 101 ALR 377 .… 4.18, 4.21, 36.9 Rogers v Rogers (1842) 6 Jur 497 .… 3.32 Rogers v Whiteley [1892] AC 118 .… 7.14 Rogers & Co v British and Colonial Colliery Supply Association (1898) 68 LJQB 14 .… 17.8 Rogers’ Trusts, Re (1860) 1 Drew & Sm 338; 62 ER 408 .… 39.42 Rolain, Re; Norwest Bank St Paul, NA v Bergquist (1987) 823 F 2d 198 .… 5.44 Rolfe and Bank of Australasia v Flower & Co (1865) LR 1 PC 27 .… 23.8 Rollason, Re (1887) 34 Ch D 495 .… 1.11 Rolled Steel Products (Holdings) Ltd v British Steel Corp [1986] Ch 246 .… 11.33 Romford Canal Co, Re (1883) 24 Ch D 85 .… 11.8, 39.19 Ronald Elwyn Lister Ltd v Dunlop Canada Ltd (1982) 135 DLR (3d) 1; [1982] 1 SCR 726 .… 17.9, 19.15 Ronan v Australia and New Zealand Banking Group Ltd (2000) 2 VR 531 . … 3.6, 3.8, 3.9, 3.14, 11.30 Rondo Building Services Pty Ltd v Casaron Pty Ltd [2003] 2 Qd R 558 .… 1.49 Rooker v Hoofstetter (1896) 26 SCR 41 (Can) .… 3.45 Rooper v Harrison (1855) 2 K & J 86; 69 ER 704 .… 25.4, 26.11 Roots v Williamson (1888) 38 Ch D 485 .… 6.17 Rosanove v O’Rourke [1987] 1 Qd R 275 .… 18.26

Rose v Page (1829) 2 Sim 471; 57 ER 864 .… 22.5, 33.19 Rose v Watson (1864) 10 HL Cas 672; 11 ER 1187 .… 2.10, 2.13, 2.15 Rosemex Service Station v Shell-Mex and BP Ltd (1969) 20 P & CR 1 .… 32.11, 32.12 Rosenbaum v Minister for Public Works (1965) 114 CLR 424 .… 38.4 Ross v Buxton (1889) Ch D 190 .… 2.49 Ross v Laughton (1813) 1 V & B 349; 35 ER 136 .… 2.34 Ross v Victorian Permanent Property Investment and Building Society (1882) 8 VR 254 .… 4.41, 20.5, 20.6, 20.21, 20.43, 21.23 Ross T Smyth & Co Ltd v TD Bailey, Son & Co [1940] 3 All ER 60 .… 35.1 Rossiter; Rossiter v Rossiter (1979) 13 Ch D 355 .… 29.3 Rother Iron Works Ltd v Canterbury Precision Engineers Ltd [1974] QB 1; [1973] 1 All ER 394 .… 6.6, 8.14, 8.19 Rottenberg v Monjack [1993] BCLC 374 .… 40.26 Roundwood Colliery Co Ltd, Re; Lee v Roundwood Colliery Co [1897] 1 Ch 373 .… 8.19 Rourke v Robinson [1911] 1 Ch 480 .… 32.41 Rouse v Bradford Banking Co Ltd [1894] AC 586 .… 17.10, 25.15, 42.14 Routestone Ltd v Minories Finance Ltd [1997] BCC 180 .… 20.23 Row v Dawson (1749) 1 Ves Sen 331; 27 ER 1064 .… 6.11, 6.14 Row Dal Constructions Pty Ltd, Re [1966] VR 249 .… 1.29, 11.41 Rowe v B & R Nominees Pty Ltd [1964] VR 477 .… 13.43 Rowe v Equity Trustees Executors & Agency Co Ltd (1895) 21 VLR 762 .… 24.49, 24.51 Rowe v May (1854) 18 Beav 613; 52 ER 241 .… 39.21 Rowe v Wood (1820) 2 Jac & W 553; 37 ER 740 .… 39.24, 39.33, 42.21 Roxburghe v Cox (1881) 17 Ch D 520 .… 6.8, 26.18 Royal Bank v 216200 Alberta Ltd (1987) 6 PPSAC 277; 51 Sask R 146 .…

5.104 Royal Bank v Tenneco Canada Inc (1990) 72 OR (2d) 60 .… 5.91 Royal Bank v Russell Food Equipment Ltd (2001) 28 CBR (4th) 111; 211 Sask R 81 .… 5.88 Royal Bank of Canada v 212600 Alberta Ltd (1983) 3 PPSAC 113 .… 5.104 Royal Bank of Canada v Banque d’Hocheloga (1914) 7 WWR 817 (Alberta) .… 4.29 Royal Bank of Canada v LVG Auctions Ltd (1984) 2 DLR (4th) 95 .… 32.40 Royal Bank of Canada v Radius Credit Union [2010] SCC 48: [2010] 3 SCR 38 .… 5.26, 5.72, 24.26 Royal Bank of Canada v Sparrow Electric Corp [1997] 1 SCR 411 .… 5.26, 5.35 Royal Bank of Pennsylvania v Selig (1994) 434 Pa Super 537 .… 5.43 Royal Bank of Scotland plc v Miller [2002] QB 255 .… 11.17 Royal Bank of Scotland v Etridge [1997] 3 All ER 628 (CA) .… 42.5 Royal British Bank v Turquand (1856) 6 El & Bl 327; 119 ER 886 .… 4.18, 11.33 Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 387 .… 5.121 Royal London Mutual Insurance Society v Barrett [1928] Ch 411 .… 6.15 Royal Trust Co Mortgage Corp v Nudnyk Holdings Ltd (1974) 4 OR (2d) 721 .… 32.30 Roynat Inc v United Rescue Services Ltd (1982) 2 PPSAC 49 .… 5.35 Rudd & Son Ltd, Re; Fosters v Rudd (1986) 3 BCC 9855 .… 3.14, 32.6 Rudge v Richens (1873) LR 8 CP 358 .… 16.7, 16.11, 17.10, 32.55 Rufa Pty Ltd v Cross [1981] Qd R 365 .… 19.40 Rumbold v Rumbold (1796) 3 Ves 65; 30 ER 896 .… 30.4 Rumney and Smith, Re [1897] 2 Ch 351 .… 20.4 Rural Bank Ltd v Merriba Pty Ltd (2012) 16 BPR 31,217 .… 9.12

Ruscombe v Hare (1828) 6 Dow 1; 3 ER 1379 .… 30.7 Rushton (a bankrupt), Re; Ex parte National Westminster Bank Ltd v Official Receiver [1972] Ch 197; [1971] 2 All ER 937 .… 23.9 Rushton v Industrial Development Bank (1973) 34 DLR (3d) 582 .… 22.11, 22.38 Russel v Russel (1783) 1 Bro CC 269; 28 ER 1121 .… 3.36, 3.37, 3.40 Russel v Smithies (1794) 1 Anst 96; 145 ER 811 .… 19.36, 19.37 Russell v East Anglian Railway Co (1850) 3 Mac & G 104; 42 ER 201 .… 8.12 Russell Road Purchase-Moneys, Re (1871) LR 12 Eq 78 .… 25.4 Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 .… 32.45, 33.7 Russo v Bendigo Bank Ltd [1999] 3 VR 376 .… 4.15, 4.19, 25.7 Rust v Goodale [1957] Ch 33; [1956] 3 All ER 373 .… 12.17, 12.23, 36.4 Rustic Homes Pty Ltd, Re (1988) 13 ACLR 105; 49 SASR 41 .… 20.16 Rutter v Daniel (1882) 30 WR 724; 30 WR 801 .… 1.23 Ryall v Rolle (1749) 1 Atk 165; 26 ER 107 .… 1.11 Ryall v Rowles (1750) 1 Ves Sen 348; 27 ER 1074; 9 Bli NS 337 .… 26.2 Ryan v Dries (2002) 10 BPR 19,497 .… 11.31 Ryan v O’Sullivan [1956] VLR 99 .… 3.37, 4.24, 19.11, 21.9, 21.18, 22.52 S S & D International Pty Ltd v MIG Property Services Pty Ltd [2009] VSC 225 .… 20.45 Sabine, Re (1958) 18 ABC 188 .… 4.25, 4.28 Sabah Yazgi v Permanent Custodians Ltd [2007] NSWCA 240 .… 17.3 Sachs v Ashby & Co (1903) 88 LT 393 .… 3.21, 40.23 Sackville v Smyth (1873) LR 17 Eq 153 .… 30.2

Sadd (1865) 34 Beav 650; 55 ER 786 .… 2.42 Sadler v Worley [1894] 2 Ch 170; [1891–94] All ER Rep 1209 .… 21.3, 21.11 Saffron Walden Second Benefit Building Society v Rayner (1880) 14 Ch D 406 .… 24.8, 26.1, 26.18, 26.21, 42.5 Salander-O’Reilly Galleries, LLC, Re, 475 BR 9(2012) .… 5.23 Salera v Cousens [2001] VSC 378 .… 24.23 Salmon, Re; Ex parte the Trustee [1903] 1 KB 147 .… 31.1, 31.6, 31.8 Salmon v Dean (1851) 3 Mac & G 344; 42 ER 293 .… 12.13, 14.1 Salmon v Dean (1849) 14 Jur 235 .… 12.14 Salmon v Matthews (1841) 8 M & W 827 .… 12.15 Salt v Edgar (1886) 54 LT 374 .… 22.12, 22.17, 22.49 Salt v Marquess of Northampton [1892] AC 1 .… 1.29, 6.15, 32.11, 32.73 Sam Management Services (Aust) Pty Ltd v Bank of Western Australia Ltd [2009] NSWCA 320 .… 32.16 Samuel v Jarrah Timber and Wood Paving Corp[1904] AC 323 .… 1.8, 32.9, 32.11, 32.18 Samuel v Jones (1862) 7 LT 760 .… 40.23 Samuel Allen & Sons Ltd, Re [1907] 1 Ch 575 .… 1.20 Samuel Johnson & Sons Ltd v Brock [1907] 2 Ch 533 .… 16.31 Samuel Keller (Holdings) Ltd v Martins Bank Ltd [1970] 3 All ER 950; [1971] 1 WLR 43 .… 1.48, 3.14, 19.23, 19.24, 20.46, 32.55 Samuell v Howarth (1817) 3 Mer 272; 36 ER 105 .… 35.8 Sandeman Comprimar SA v Transitos y Transportes Integrales SL [2003] EWCA Civ 113; QB 1270 .… 5.25 Sander v Twigg (1887) 13 VLR 765 .… 4.5, 24.51 Sanders v Davis (1885) 15 QBD 218 .… 1.20 Sanders v Sanders (1881) 19 Ch D 373 .… 16.31, 16.35

Sanderson v Aston (1873) LR 8 Ex 73 .… 35.7 Sanderson v Bell (1834) 2 Cr & M 304; 149 ER 776 .… 2.22 Sandes’ Trusts, Re [1920] 1 IR 342 .… 26.11 Sandford v DV Building and Constructions CoPty Ltd [1963] VR 137 .… 6.5 Sandgate Corporation Pty Ltd v Ionnou Nominees Pty Ltd (2000) 22 WAR 172 .… 4.7, 32.1 Sandon v Hooper (1843) 14 LJ Ch 120 .… 40.23 Sandon v Hooper (1843) 6 Beav 246; 49 ER 820 .… 19.36, 19.37, 19.38, 37.5, 40.23 Sands v Thompson (1883) 22 Ch D 614 .… 32.55 Sandtara Pty Ltd v Australian European Finance Corp Ltd (1990) 20 NSWLR 82 .… 40.2, 40.2 Sandwell Pty Ltd, Re (1991) 4 ACSR 478 .… 11.43 Sanguinetti v Stuckey’s Banking Co (No 2) [1986] 1 Ch 502 .… 21.4, 39.4, 39.37 Sansom v Westpac Banking Group (1996) 7 BPR 14,615 .… 11.3, 13.36, 13.44 Santen v Felix (SC (SA), Duggan J, 25 February 1993, unreported) .… 17.11 Santley v Wilde [1899] 2 Ch 474 .… 1.7, 20.17, 32.8, 32.12 Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd [1991] 2 Qd R 456; 2 ACSR 692 .… 11.43 Sanwa Australia Leasing Ltd v National Westminster Australia (1988) 4 BPR 9514 .… 3.26 Sanyo Australia Pty Ltd v Componere Information Systems [1994] NSWCA 389 .… 28.2 Sapio v Hackney (1907) 51 Sol Jo 428 .… 17.6 Sara Properties Pty Ltd, Re [1982] 2 NSWLR 277 .… 24.5 Sarge Pty Ltd v Cazihaven Homes Pty Ltd (1994) 34 NSWLR 658 .… 30.9,

30.10, 30.11, 30.17 Sass, Re; Ex parte National Provincial Bank of England [1896] 2 QB 12 .… 42.16 Saulnier (Receiver of) v Saulnier (2008) 298 DLR (4th) 193 .… 5.9 Saunders v Anglia Building Society [1971] AC 1004; [1970] 3 All ER 961 . … 13.41 Saunders v Anglia Building Society (No 2) [1971] AC 1039; [1971] 1 All ER 243 .… 40.23 Saunders v Dehew (1692) 2 Vern 271; 23 ER 775 .… 25.4 Saunders v Dunman (1878) 8 Ch D 825 .… 40.23 Saunders v Evans (1861) 8 HL Cas 721 .… 5.42 Saunders v Leslie (1814) 2 Ball & B 509 .… 35.5 Saunders v Merryweather (1865) 3 H & C 902; 159 ER 790 .… 12.20 Saunders v Milsome (1866) LR 2 Eq 573 .… 3.48, 17.4, 36.13 Savage v Thompson (1903) 29 VLR 436 .… 6.21 Savage v Union Bank of Australia Ltd (1906) 3 CLR 1170 .… 18.15 Savill v Damesh Holdings Ltd [2004] 2 NZLR 289 .… 32.37 Savin, Re (1872) LR 7 Ch App 760 .… 23.10 Sawyers v Kyte (1870) 1 VR 94 .… 2.40 Scallan v Registrar General (1988) 12 NSWLR 514 .… 4.19, 32.51 Scandinavian Pacific Bank Ltd v Burke (1991) 5 BPR 11846 .… 17.8, 20.46 Scarel v City Loan and Credit Corp Pty Ltd (1986) 4 BPR 9226 .… 3.34, 20.5 Scarfe v Morgan (1838) 4 M & W 270; 150 ER 1430 .… 32.36, 32.42 Scheibler, Re; Ex parte Holthausen (1874) LR 9 Ch App 722 .… 1.35 Scheyer, Ex parte (1888) 52 JP 183 .… 2.43 Schiffshypothekenbank zu Luebeck AG v Norman Phillip Compton, The Alexion Hope [1987] 1 Lloyd’s Rep 60 .… 6.3, 9.16

Schmeliong v Stankovic (1984) 2 BPR 9325 .… 11.4 Scholefield v Lockwood (No 3) (1863) 32 Beav 439; 55 ER 172 .… 30.7, 39.38 Scholefield Goodman & Sons v Zyngier [1986] AC 562; [1985] 3 All ER 105 .… 30.2 Scholes v Blunt (1917) 17 SR (NSW) 36 .… 27.13 Schoole v Sall (1803) 1 Sch & Lef 176 .… 16.11, 17.10, 32.81 Schrader v Glassen (1975) ANZ ConvR 464;(1995) NSW ConvR 55-748 .… 13.36 Schroder v Hebbard [1907] VLR 107 .… 6.20 Schulz v Corwill Properties Pty Ltd (1969) 90 WN (NSW) 529 .… 4.38 Sclater v Cottam (1857) 5 WR 744 .… 40.23 Scobie v Collins [1895] 1 QB 375 .… 12.10 Scott v Colburn (1858) 26 Beav 276; 53 ER 904 .… 11.8 Scott v Lord Hastings (1858) 4 K & J 633; 70 ER 263 .… 24.50, 26.4 Scott v Nesbitt (1808) 14 Ves 438; 33 ER 589 .… 2.52, 18.15 Scott v Scott [1924] 1 IR 141 .… 24.30 Scott v Scott (1963) 109 CLR 649 .… 5.33 Scott v Tyler (1788) Dick 712; 21 ER 448 .… 11.17, 11.18 Scottish and Newcastle Breweries Ltd v Liquidator of Rathbourne Hotel Co Ltd [1970] SLT 313 .… 1.28, 3.35 Scottish Properties Pty Ltd, Re (1972) 2 ACLR 264 .… 18.10 SEAA Enterprises Pty Ltd v Figgins Holdings Pty Ltd [1998] 2 VR 90 .… 12.4, 12.7 SEAA Enterprises Pty Ltd v Figgins Holdings Pty Ltd (No 2) [1996] V ConvR 54-538 .… 19.21 Seager v Aston (1857) 26 LJ Ch 809 .… 16.34 Seager Hunt, Re [1906] 2 Ch 295 .… 26.23

Seagrave v Pope (1851) 1 De GM & G 783; 42 ER 756 .… 33.26 Seal v Gimson (1914) 110 LT 583 .… 3.16, 16.6 Searle v Choat (1884) 25 Ch D 723 .… 19.16 Seaton v Simpson [1870] WN 261 .… 16.13 Seaton v Twyford (1870) LR 11 Eq 591 .… 3.16, 16.6 Secure Funding Pty Ltd v Coughlin (2009) 74 NSWLR 687 .… 19.6 Secured Income Real Estate (Australia) Ltd v St Martin’s Investments Pty Ltd (1980) 144 CLR 596 .… 3.7 Security Trust Co v Royal Bank of Canada [1976] AC 503; [1976] 1 All ER 381 .… 3.5, 5.79, 6.6, 8.19, 11.39, 36.13 Seddon v North Eastern Salt Co Ltd [1905] 1 Ch 326 .… 13.40 Segard Masurel (NZ) Ltd v Nicol (2008) 10 NZCLC 264,386; [2008] NZHC 109 .… 5.18 Seidel v Kohn (1894) 20 VLR 145 .… 6.21 Seka Pty Ltd v Fabric Dyeworks (Aust) Pty Ltd (1991) 4 ACSR 455 .… 1.11, 2.3 Selangor United Rubber Estates Ltd v Cradock (No 3) [1968] 2 All ER 1073 .… 13.46 Selby v Jackson (1844) 6 Beav 192; 49 ER 799 .… 11.20 Selby v Pomfret (1861) 1 John & H 336; 70 ER 776 .… 31.5 Selby v Pomfret (1861) 3 De GF & J 595; 45 ER 1009 .… 31.1, 31.6, 31.8 Selby, Re; Ex parte Rogers (1856) 8 De GM & G 271; 44 ER 394 .… 2.4 Seligman v Prince [1895] 2 Ch 617 .… 11.8 Selkrig v Davies (1814) 2 Dow 230; 3 ER 848 .… 26.18 Sellick v Smith (1826) 11 Moore CP 459 .… 12.4 Selwyn v Garfit (1888) 38 Ch D 273 .… 20.18, 20.20, 20.37, 20.42 Senanayake v Cheng [1965] 3 All ER 296 .… 13.40

Senhouse v Earl (1752) 2 Ves Sen 450; 28 ER 287 .… 33.12 Sentance v Porter (1849) 7 Hare 426; 68 ER 176 .… 40.9 Sergeant v Nash, Field & Co [1903] 2 KB 304 .… 13.53 Service v Flatau (1900) 16 WN (NSW) 248 .… 7.8 Seton v Slade (1802) 7 Ves 265; 32 ER 108 .… 1.14, 3.18 Sevier v Greenway (1815) 19 Ves 413; 34 ER 570 .… 1.25 Sewell v Agricultural Bank of Western Australia (1930) 44 CLR 104 .… 20.22, 20.40 Sewell v Bishopp (1893) 62 LJ Ch 985 .… 40.25 Sewell v Burdick (1884) 10 App Cas 74 .… 3.55 Seymour, Re; Fielding v Seymour [1913] 1 Ch 475 .… 6.17 Shackell v Rosier (1836) 2 Bing NC 634 .… 13.46 Shackleton v Shackleton (1825) 2 Sim & St 242; 57 ER 338 .… 40.15 Shalhoub Holdings Pty Ltd v Donnelly [1992] ACL Rep 295 NSW 20 .… 18.6 Shallay Holdings Pty Ltd v Griffith Co-operative Society Ltd [1983] 1 VR 760 .… 32.44 Shallcross v Dixon (1838) 7 LJ NS Ch 180 .… 30.12 Shalsom v Russo [2003] TLR 506 .… 1.58, 42.22 Shamii v Johnson Matthey Bankers Ltd [1991] BCLC 36 .… 18.6 Shanahan, Re (1941) 58 WN (NSW) 132 .… 33.1, 40.2 Shand v M J Atkinson Ltd [1966] NZLR 551 .… 2.30, 2.49 Sharp v Jackson [1899] AC 419 .… 3.41 Sharp v Rickards [1909] 1 Ch 109 .… 31.4 Sharpnell v Blake (1737) 2 Eq Ca Abr 604; 22 ER 507 .… 39.60 Sharshaw v Gibbs (1834) Kay 333; 69 ER 141 .… 39.62 Shaw, Ex parte (1816) Jac 270; 37 ER 853 .… 2.45

Shaw v Bunny (1865) 2 De G J & Sm 468; 46 ER 456 .… 20.40 Shaw v Foster (1872) LR 5 HL 321 .… 3.40 Shaw v Hudson (1879) 48 LJ Ch 689 .… 26.25 Shaw v Jeffery (1860) 13 Moo PCC 432; 15 ER 162 .… 1.27 Shaw v Neale (1858) 6 HL Cas 580; 10 ER 1422 .… 2.49 Shaw v Scottish Widows’ Fund Assurance Society (1917) 87 LJ Ch 76 .… 19.39 Shawyer v Amberday Pty Ltd (in liq) (2001) 10 BPR 18,869 .… 24.28 Shea v Moore [1894] 1 IR 158 .… 21.10, 21.18 Shears and Alder (1891) 17 VLR 316 .… 24.51 Shee v Larkin [1907] VLR 295 .… 35.7 Sheehy v Sheehy [1901] 1 IR 239 .… 13.46 Sheffield v Eden (1878) 10 Ch D 291 .… 2.36 Sheldon v Cox (1764) Ambl 624; 27 ER 404 .… 24.22 Shell Co of Australia Ltd v Zanelli [1973] 1 NSWLR 216 .… 36.2, 36.17 Shelley, Re; Ex parte Stewart (1864) 4 De GJ & Sm 543; 46 ER 1029 .… 26.12 Shelmardine v Harrop (1821) 6 Madd 39; 56 ER 1004 .… 32.82 Shepard v Jones (1882) 21 Ch D 469 .… 19.38, 39.31 Shephard, Re (1889) 43 Ch D 131 .… 7.11 Shephard v Elliot (1918) 4 Madd 254 .… 39.37 Shepherd v Federal Commissioner of Taxation(1965) 113 CLR 385 .… 6.5, 6.11, 14.7 Shepherd v Silvia (1993) NSW ConvR 55-660 .… 13.25, 13.27, 20.38 Shepherd v Titley (1742) 2 Atk 348; 26 ER 612 .… 25.4 Sherborn v Tollemache (1863) 13 CB NS 742 .… 16.12 Shercliff v Engadine Acceptance Corp Pty Ltd [1978] 1 NSWLR 729 .…

20.37 Shercliff v Engadine Acceptance Corp Pty Ltd (No 2) (1982) 3 BPR 9207 . … 3.21, 40.2, 40.4 Shields v Lozeur (1869) 34 NJL 496; 3 Am Rep 256 .… 34.3 Shillito v Biggart [1903] 1 KB 683 .… 9.25 Shipley v Marshall (1863) 14 CB(NS) 566; 143 ER 567 .… 6.20, 11.39 Shirlaw v Taylor (1991) 31 FCR 222; 102 ALR 551 .… 2.16, 2.17, 2.22, 2.52, 18.15 Shomat Pty Ltd v Rubinstein (1995) 124 FLR 285 .… 17.7 Shoobridge v Woods (1843) 8 Jur 27 .… 39.28 Shore v Shore (1847) 2 Ph 378; 41 ER 989 .… 17.5 Showa Shoji Australia Pty Ltd v Oceanic Life Ltd (1994) 34 NSWLR 548 . … 14.5, 19.40 Shropshire Union Railways and Canal Co v R (1875) LR 7 HL 496 .… 28.10, 28.16 Sibard v AGC (Advances) Ltd (1992) 6 BPR 13178 .… 39.51 Sibbles v Highfern Pty Ltd (1987) 164 CLR 214 .… 1.9, 3.25, 25.2, 25.3, 25.8, 25.12, 25.15, 32.4, 32.54 Sickel v Mosenthal (1862) 30 Beav 371; 54 ER 932 .… 1.41, 3.45 Sidmay v Wehttam Investments (1967) 61 DLR (2d) 358 .… 13.45 Sidu v Ba’li (1892) 17 Indian LR 33 (Bom) .… 1.51 Siebe Gorman & Co Ltd v Barclays Bank Ltd [1979] 2 Lloyd’s Rep 142 .… 5.118, 6.19, 8.13, 8.14, 8.18 Silberschildt v Schiott (1814) 3 Ves & B 45; 35 ER 396 .… 22.38 Silcock v Roynon (1843) 2 Y & CCC 376; 63 ER 166 .… 33.27 Silkdale Pty Ltd v Long Leys Co Pty Ltd (1995) 7 BPR 14,414 .… 14.2, 14.5, 19, 2, 19.23, 20.9, 20.15 Silsby v Holliman [1955] Ch 552; [1955] 2 All ER 373 .… 21.21

Silven Properties Ltd v Royal Bank of Scotland plc [2004] 4 All ER 484; [2004] 1 WLR 997 .… 18.5, 20.21, 28.5 Silver v R R Seeton Construction Ltd (1977) 74 DLR (3d) 212 .… 2.49 Silver and Drake v Baines [1971] 1 QB 396; [1971] 1 All ER 473 .… 32.74 Silvera v Savic (1996) 46 NSWLR 124; 9 BPR 16,881 .… 13.8 Siminot v Burlingham Associates Inc (1998) 165 Sask R 209 .… 5.39 Simmins v Shirley (1877) 6 Ch D 173 .… 19.21, 42.20 Simmons, Re; Dennison v Orman (1902) 87 LT 594 .… 36.4 Simmons v Blandy [1897] 1 Ch 19 .… 22.15, 22.37, 39.41 Simmons v Montague [1909] 1 IR 87 .… 3.38 Simons v David Benge Motors Pty Ltd [1974] VR 585 .… 4.28 Simpson, Re 4 UCC Rep Serv 243 .… 5.85 Simpson v Forrester (1973) 132 CLR 499; 47 ALJR 149 .… 9.8, 17.5, 20.40, 24.49, 24.51, 32.5 Simpson v Geoghegan [1934] WN 232; (1934) 78 Sol Jo 930 .… 32.61 Sims v Helling (1851) 21 LJ Ch 76 .… 3.29 Sims v Lowe [1988] 1 NZLR 656 .… 16.39 Sims v SPM Business Consultants Pty Ltd (2002) 43 ACSR 633 .… 5.94, 5.98 Simson v Ingham (1823) 2 B & C 65; 107 ER 307 .… 32.52, 32.53 Sinclair v Brougham [1914] AC 398 .… 11.8, 11.9 Sinclair v Elderton (1900) 21 LR (NSW) Eq 21 .… 13.11 Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870 .… 4.28 Sinclair v James [1894] 3 Ch 554 .… 11.6 Sinclair’s Life Policy, Re [1938] Ch 799; [1938] 3 All ER 124 .… 6.15 Sinfield v Sweet [1967] 3 All ER 479 .… 20.28, 40.4, 40.23 Singer v Williams [1921] 1 AC 41 .… 1.4

Sinnott v Bowden [1912] 1 Ch 414 .… 3.20 Sixty-Fourth Throne Pty Ltd v Macquarie Bank (1996) 130 FLR 411 .… 4.18 Skerret, Re (1868) 25 ALR 21 .… 4.5 Sketchley, Re; Ex parte Boulton (1857) 1 De G & J 163; 44 ER 685 .… 26.21 Skinner, Re; Ex parte Temple (1822) 1 Gl & J 216 .… 39.16 Skinner v Elders Ltd (1995) V ConvR 54-527 .… 32.25 Skinner v Jegola Pty Ltd (2001) 37 ACSR 106 .… 18.13 Skipton Building Society v Clayton [1993] TLR 172 .… 12.13 Skybridge Holidays Inc, Re (1998) 13 PPSAC (2d) 387 .… 5.20 Slack v Atkinson (1875) 1 VLR (E) 335 .… 12.3 Slack v Burt (1862) 1 QSCR 50 .… 20.4 Slade v Rigg (1843) 3 Hare 35; 67 ER 286 .… 21.3, 21.11, 21.5, 33.19 Small v Tomassetti [2001] NSWSC 1112; (2001) 12 BPR 22,253 .… 4.12 Smartle v Williams (1694) Comber 247; 90 ER 1163 .… 39.11 Smeathman v Bray (1851) 15 Jur 1051 .… 31.1 Smith, In the Will of [1909] VLR 91 .… 29.2 Smith, Re; Ex parte Hepburn (1884) 25 QBD 536 .… 23.15 Smith, Re; Hannington v True (1886) 33 Ch D 195 .… 30.2 Smith, Re; Lawrence v Kitson [1916] 2 Ch 206 .… 1.35, 25.3, 39.11 Smith v Australia & New Zealand Banking Group Ltd (1996) 7 BPR 15,069 .… 3.8 Smith v Baker (1842) 1 Y & CCC 223; 62 ER 864 .… 21.13 Smith v Bicknell (1810), cited 3 Ves & B 51n .… 32.81 Smith v Boucher (1852) 1 Sm & G 72; 65 ER 32 .… 22.48 Smith v Bridgend CBC [2000] 1 BCLC 775 .… 11.41

Smith v Chadwick (1882) 20 Ch D 27 .… 3.7 Smith v Chichester (1842) 2 Dr & War 393 .… 2.35, 2.40, 3.31, 21.15, 22.2, 22.6, 24.27, 24.40, 40.15 Smith v Davy (1884) 2 NZLR (SC) 398 .… 4.34, 36.17 Smith v Deane (1889) 10 LR (NSW) Eq 207 .… 27.10 Smith v Eggington (1874) LR 9 CP 145 .… 12.19 Smith v Everett (1792) 4 Bro CC 64; 29 ER 780 .… 6.14 Smith v Green (1844) 1 Coll 555; 63 ER 541 .… 32.25, 40.9 Smith v Jones [1954] 1 WLR 1089; [1954] 2 All ER 823 .… 24.21 Smith v Kay (1859) 7 HL Cas 750; 11 ER 299 .… 13.13 Smith v Maclure (1884) 32 WR 459 .… 1.20, 3.26 Smith v Metropolitan City Properties Ltd (1985) 277 EG 753 .… 37.10 Smith v National Trust Co [1912] 1 DLR 698 .… 4.33 Smith v Olding (1884) 25 Ch D 462 .… 22.28 Smith v Owners of the Steamship ‘Zigurds’ [1934] AC 209 .… 26.18 Smith v Pearman (1888) 36 WR 681 .… 39.41 Smith v Phillips (1837) 1 Keen 694; 48 ER 474 .… 36.4 Smith v Pilkington (1859) 1 De GF & J 120; 45 ER 304 .… 39.44 Smith v Robinson (1853) 1 Sm & G 140; 65 ER 61 .… 22.42 Smith v Smith (1815) Coop G 141; 35 ER 508 .… 40.13 Smith v Smith [1891] 3 Ch 550 .… 32.36, 32.38 Smith v Vallence (1655) 1 Rep Ch 169; 21 ER 540 .… 33.14 Smithett v Hesketh (1890) 44 Ch D 161 .… 21.21, 22.28 Smith’s Mortgage Account, Re (1861) 9 WR 799 .… 22.18 Smith’s Mortgage, Re; Harrison v Edwards [1931] 2 Ch 168 .… 20.46, 40.23 Smyth v Toms [1918] 1 IR 338 .… 30.12

Smyth’s Trust, Re [1970] ALR 919 .… 14.7 Snaith v Burridge (1812) 4 Taunt 684; 128 ER 499 .… 11.26 Snell, Re (1877) 6 Ch D 105 .… 2.42 Sneyd, Re; Ex parte Fewings (1883) 25 Ch D 338 .… 33.20, 36.14, 40.4 Snook v London and West Riding Investments Ltd [1967] 2 QB 786; [1967] 1 All ER 518 .… 42.22 Soar v Dalby (1852) 15 Beav 156; 51 ER 496 .… 19.21 Société Générale de Paris v Tramways Union Co (1884) 14 QBD 424 .… 6.17, 26.12 Société Générale de Paris v Walker (1885) 11 App Cas 20 .… 6.17, 26.8, 26.12 Softley, Re; Ex parte Hodgkin (1875) LR 20 Eq 746 .… 9.17, 31.6 Sogelease Australia Ltd v Boston Australia Ltd (1991) 26 NSWLR 1 .… 5.79 Solfire Pty Ltd (in liq), Re [1998] 2 Qd R92; (1998) 25 ACSR 160 .… 8.22 Solicitor, Re a (Lincoln) [1966] 3 All ER 52 .… 32.74 Solicitor-General v Mere Tini (1899) 17 NZLR 773; 2 GLR 60 .… 28.7 Solicitors Life Assurance Society v Lamb (1864) 2 De GJ & Sm 251; 46 ER 372 .… 6.15, 20.43, 20.44 Solomons v R Gertzenstein Ltd [1954] 2 QB 243; [1954] 2 All ER 625 .… 19.39 Soloway v Sheahan (1972) 21 DLR (3d) 388 .… 32.36 Somerset v Cox (1864) 33 Beav 634; 55 ER 514 .… 26.15, 26.18 Sood v Christianos [2008] NSWSC 1087; (2008) 14 BPR 26,101 .… 10.8, 21.11 Sotiropoulos v Angelides [2004] NSWSC 1184 .… 32.39, 32.51 South African Territories v Wallington [1898] AC 309 .… 1.41, 8.1 South Australia v Commonwealth (1942) 65 CLR 373 .… 5.5

South Eastern Railway Co v Jortin (1857) 6 HL Cas 425; 10 ER 1360 .… 4.25, 19.36, 20.43 South Essex Estuary & Reclamation Co, Re (1869) 4 Ch App 215 .… 2.47 South v Bloxam (1865) 2 Hem & M 357; 71 ER 541 .… 30.13 South Johnstone v Dennis (2007) 163 FCR 343 .… 18.5 South Western District Bank v Turner (1882) 31 WR 113 .… 21.15 Southern British National Trust Ltd v Pither (1937) 57 CLR 898 .… 14.2 Southern Goldfields Ltd v General Credits Ltd (1991) 4 WAR 138 .… 20.21, 20.22, 20.32, 20.33 Southern Livestock Producers Ltd, Re [1964] 1 WLR 24; [1963] 3 All ER 801 .… 2.22 Southpac Custodian Ltd v Bank of New Zealand [1993] 1 NZLR 663 .… 19.21 Southport and West Lancashire Banking Co v Thompson (1887) 37 Ch D 64 .… 1.20 Southwell v Martin (1901) 1 SR (NSW) Eq 32 .… 11.12 Southwell v Roberts (1940) 63 CLR 58 .… 19.36, 19.38, 37.5 Southwestern Loan & Discount Co v Robertson (1881) 8 QBD 17 .… 7.8 Southwestern Mineral Water Co Ltd v Ashmore [1967] 1 WLR 1110 .… 13.46 Sowman v David Samuel Trust Ltd [1978] 1 All ER 616; [1978] 1 WLR 22 . … 18.5, 20.51 Spalding v Thompson (1858) 26 Beav 637; 53 ER 1044 .… 31.7 Sparke v Minister for Works (1891) 12 LR (NSW) L 276 .… 38.4 Sparke, Re; Ex parte Cohen (1871) 7 Ch App 20 .… 23.5 Sparrow v Hardcastle (1754) 3 Atk 798; 26 ER 1256 .… 1.14 Spector v Ageda [1973] Ch 30; [1971] 3 All ER 417 .… 13.46 Spector v Applefield Properties Ltd (1968) 206 EG 537 .… 19.13

Spectrum Plus Ltd, Re [2004] Ch 337; [2004] 4 All ER 995 .… 8.13, 8.17 Spectrum Plus Ltd, Re [2005] 3 WLR 58 .… 8.13 Spellman v Spellman [1961] 2 All ER 498 .… 32.4 Spence v Roberts (1995) ASC 56-312 .… 9.3 Spencer v Bamber [2011] NSWSC 1313; [2012] NSWCA 274 .… 20.16, 22.52 Spencer v Clarke (1878) 9 Ch D 137 .… 6.9, 6.15, 24.39, 26.1 Spencer v Mason (1931) 75 Sol Jo 295 .… 19.11, 19.14 Spencer v The Commonwealth (1907) 5 CLR 418 .… 18.13 Spencer-Bell to L & SW Rly Co (1885) 33 WR 771 .… 32.38 Spensley’s Estate, Re; Spensley v Harrison (1872) LR I5 Eq 16 .… 40.20 Sperry Inc v Canadian Imperial Bank of Commerce (1985) 4 PPSAC 314; 17 DLR (4th) 236; 50 OR (2d) 267 .… 5.44, 5.45, 5.71, 5.72, 5.91 Spina v Conrad Associates Pty Ltd [2008] NSWSC 326; 13 BPR 25,435 .… 11.24 Spirett v Willows (1865) 3 De GJ & S 293; 46 ER 649 .… 13.6 Spittlehouse v Northshore Marine Inc (1994) 7 PPSAC (2d) 67; 144 DLR (4th) 500 .… 5.104 Spong v Spong (1914) 18 CLR 544 .… 13.20, 13.21 Spooner v Sandilands (1842) 1 Y & CCC 390; 62 ER 939 .… 1.34, 1.39, 1.40 Sporle v Whayman (1855) 20 Beav 607; 52 ER 738 .… 3.37, 16.2, 21.9 Spragg v Binkes (1800) 5 Ves 583; 31 ER 751 .… 21.13, 32.23 Sprague v Mayne (1930) 38 OWN 16 .… 33.3 Sproule v Prior (1826) 8 Sim 189; 59 ER 76 .… 30.10 Sprung Instant Structures v Caswan Environmental Services Inc [1998] 6 WWR 535 .… 5.1 Spurgeon v Collier (1758) 1 Eden 55; 28 ER 605 .… 32.11

Squib v Wyn (1717) 1 P Wms 378; 24 ER 432 .… 6.11 Squire v Ford (1851) 9 Hare 47; 68 ER 408 .… 36.12 Squire v Pardoe (1891) 40 WR 100 .… 31.8 St George Bank v Emery [2004] WASC 35 .… 17.7 St John v Wareham (1635), cited in Thornborough v Baker 3 Swan 628; 36 ER 1000 .… 1.27 St Kilda Road Pty Ltd v Parker Simmonds Securities Ltd (2002) V ConvR 54-652 .… 4.31 St Leger v Robson (1831) 9 LJ OS KB 184 .… 40.24 St Lucia Usines & Estates Co Ltd v Colonial Treasurer of St Lucia [1924] AC 508 .… 41.2 Stackhouse v Barnston (1805) 10 Ves 453; 32 ER 921 .… 35.1 Stackhouse v Countess of Jersey (1861) 1 J & H 721; 70 ER 933 .… 24.40, 33.3 Stackpole v Earle (1761) 2 Wils 133; 95 ER 727 .… 13.48 Staff Mortgage and Investment Corporation, Re (1977) 550 F 2d 1228 .… 5.43 Stage Club Ltd v Millers Hotels Pty Ltd (1981) 150 CLR 535 .… 16.34 Stainbank v Fenning (1851) 11 CB 51; 138 ER 389 .… 2.2 Stainbank v Shepard (1853) 13 CB 418; 138 ER 1262 .… 2.2 Stains v Rudlin (1852) 9 Hare App 53; 68 ER 788 .… 22.42 Stamford, Spalding and Boston Banking Co v Ball (1862) 4 De GF & J 310; 45 ER 1203 .… 21.3, 21.23, 22.22 Stamps Comrs v Hope [1891] AC 476 .… 36.13, 36.16 Standard Chartered Bank Ltd v Walker [1982] 3 All ER 938; [1982] 1 WLR 1410 .… 18.5, 19.36, 20.22, 20.23, 20.30, 20.33 Standard Electronic Apparatus Laboratories Pty Ltd v Stenner [1960] NSWR 447 .… 2.22, 3.55

Standard Pattern Co Ltd v Ivey [1962] Ch 432 .… 37.9 Standard Rotary Machine Co Ltd, Re (1906) 95 LT 829 .… 8.18 Stanhope v Earl Verney (1761) 2 Eden 81; 28 ER 826 .… 24.4, 25.4 Stanhope v Manners (1763) 2 Eden 197; 28 ER 873 .… 16.6, 39.55 Stanley v Auckland Co-operative Terminating Building Society [1973] 2 NZLR 673 .… 17.9 Stanley v Bond (1844) 14 LJ Ch 51 .… 7.8 Stanley v Grundy (1883) 22 Ch D 478 .… 39.26 Stannard v Ullithorne (1834) 10 Bing 491; 131 ER 985 .… 42.6 Stapleford Colliery Co, Re; Barrow’s Case (1880) 14 Ch D 432 .… 24.7 Stapleton v F T S O’Donnell, Griffin & Co (Qld) Pty Ltd (1961) 108 CLR 106 .… 7.10 Star v Silvia (No 1) (1994) 12 ACLC 600 .… 20.22 State Bank of Albany v Fioravanti 435 NYS (2d) 947; 417 NE (2d) 60 (1980) (NY) .… 3.8 State Bank of New South Wales Ltd v Hibbert (2000) 9 BPR 17,543 .… 13.29 State Bank of New South Wales v Berowra Waters Holdings Pty Ltd (1986) 4 NSWLR 398 .… 4.38, 17.11, 32.65 State Bank of New South Wales v Cadea (No 18) Pty Ltd (1995) 7 PBR 14,301 .… 34.3 State Bank of New South Wales v Chia (2000) 50 NSWLR 587 .… 17.7, 18.5, 20.21 State Bank of New South Wales v Geeport Developments Pty Ltd (1991) 5 BPR 11,947 .… 42.18 State Bank of New South Wales v Muir (1997) 8 BPR 15,483 .… 3.8, 13.35 State of Nebraska ex rel Wagner v Amwest Surety Insurance Co (2010) 280 Neb 729 .… 5.41 State of New Mexico v Woodward 100 NM 708 .… 5.94

State Rail Authority of NSW, Re [1994] ACL Rep 295 NSW 20 .… 8.1 State Rail Authority of NSW v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 .… 1.25 State Superannuation Board v Trustees Executors and Agency Co Ltd (1963) 38 ALJR 1 .… 8.4 State Street Auto Sales, Inc, Re 81 BR 215 (1988) .… 5.23 Statewide Computer Services Pty Ltd, Re [1992] 2 Qd R 647 .… 2.48 Stead v Banks (1852) 5 De G & Sm 560; 64 ER 1241 .… 22.27 Steadman v Hockley (1846) 15 M & W 553; 153 ER 969 .… 2.22, 2.26 Steadman v Steadman [1976] AC 536 .… 3.45 Steamship Boveric Co Ltd v Howard Smith & Sons Pty Ltd (1901) 27 VLR 347 .… 9.24 Steeds v Steeds (1889) 22 QBD 537 .… 11.31 Steel v Brown (1808) 1 Taunt 381; 127 ER 881 .… 13.7 Steel Wing Co Ltd, Re [1921] 1 Ch 349 .… 6.5, 6.10, 6.11, 14.7 Steele v DFCT (1999) 197 CLR 459 .… 41.3 Steele v Maunder (1844) 1 Coll 535; 63 ER 532 .… 22.9 Steen v Law [1964] AC 287 .… 13.45 Steers v Rogers [1893] AC 232 .… 19.35 Steiglitz v Egginton (1815) Holt NP 141; 171 ER 193 .… 11.27 Stein v Rand Construction Company, Inc (1975) 400 F Supp 944 .… 5.44 Stein v Saywell (1969) 121 CLR 529 .… 8.11, 8.20 Steindlberger v Mistroni (1992) 5 BPR 11529 .… 3.13, 3.15, 32.7 Stephanian’s Persian Carpets Ltd (1980) 1 PPSAC 119 .… 5.23 Stephens v Broomfield; The Great Pacific (1869) LR 2 PC 516 .… 6.14, 9.27 Stephens v Green [1895] 2 Ch 148 .… 26.14, 26.15, 26.23 Stephens v Venables (1862) 30 Beav 625; 54 ER 1032 .… 26.18

Stephenson, Re; Ex parte Stephenson (1847) De G 586 .… 30.10, 30.14 Stephenson, Re; Solomon v Trustees Executors and Agency Co of NZ Ltd [1911] NZLR 145 .… 30.4, 30.13, 30.15 Stephenson Developments Pty Ltd v Finance Corp of Australia Ltd [1976] Qd R 326 .… 20.15 Sterling; Ex parte (1809) 16 Ves 258; 33 ER 982 .… 2.33 Stern v McArthur (1988) 165 CLR 489 .… 1.25, 37.12 Sterne v Beck (1863) 1 De GJ & Sm 595; 46 ER 236 .… 1.30, 3.15 Stevens, Re; Ex parte Stevens (1834) 4 Deac & Ch 117 .… 26.1 Stevens v Hoberg [1951] QWN 44 .… 33.23 Stevens v Hoberg (No 2) [1952] QWN 13 .… 21.6, 22.55 Stevens v Hutchinson [1953] Ch 299 .… 7.11 Stevens v Mid-Hants Rly Co; London Financial Association v Stevens (1873) 8 Ch App Cas 1064 .… 36.10, 36.11 Stevens v Theatres Ltd [1903] 1 Ch 857 .… 16.7, 20.1, 20.4, 21.4, 21.7, 22.38, 22.41, 22.42 Stevens v Williams (1851) 1 Sim NS 545; 61 ER 210 .… 22.35 Stevenson v Blakelock (1813) 1 M & S 535; 105 ER 200 .… 2.36 Stevenson v Byrne (1897) 19 ALR 47; 3 ALR 198 .… 33.3 Stevenson v Byrne (1897) 3 Arg LR 198, 19 ALT 46 .… 20.17 Stevenson v Byrne (1897) 3 Arg LR 250 .… 20.17 Stewart Gill Ltd v Horatio Myer & Co Ltd [1992] QB 600 .… 6.8 Stewart v Casey [1892] 1 Ch 104 .… 6.26 Stewart v Strevens [1976] 2 NSWLR 321 .… 2.49 Steyning and Littlehampton Building Society v Wilson [1951] Ch 1018 .… 3.23 Stickney v Sewell (1835) 1 My & Cr 8; 40 ER 280 .… 11.14 Stock Co v Gibson [2012] NZCA 330; (2012) 10 NZBLC 99-709 .… 5.104

Stockl v Rigura Pty Ltd (2004) 12 BPR 23,151; [2004] NSWCA 73 .… 20.28, 20.30 Stockland (Macquarie) Pty Ltd v Australia and New Zealand Banking Group Ltd (1991) ACL Rep 295 Qld 9 .… 19.31 Stocks & Enterprises Pty Ltd v McBurney (1977) 1 BPR 9521 .… 1.15, 3.15, 4.7, 32.1, 32.6, 32.36 Stocks v Dobson (1853) 4 De GM & G 11; 43 ER 411 .… 6.14, 6.19 Stoddart v Union Trust Ltd [1912] 1 KB 181 .… 6.8 Stokes v Clendon (1790) 3 Swans 150n; 36 ER 812 .… 22.8, 30.7, 33.2 Stokes v Prance [1898] 1 Ch 212 .… 42.6 Stokoe v Robson (1814) 3 Ves & B 51; 35 ER 398 .… 32.81, 32.82 Stone v Farrow Mortgage Services Pty Ltd (1999) 12 BPR 22,175 .… 20.28 Stone v Lickorish [1891] 2 Ch 363 .… 40.7,42.10 Stone v Lidderdale (1795) 2 Anst 533; 145 ER 958 .… 13.49 Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722 .… 4.16, 4.18 Stoyanovich v National Westminster Finance (1984) 3 BPR 9310 .… 20.24 Strachan v Brown and Visser (2000) 9 Tas R 291; [2000] TASSC 142 .… 5.4 Stramit Industries Ltd v Gardner [1970] 2 NSWR 450; 92 WN (NSW) 433 . … 35.10 Strand Music Hall Co Ltd, Re (1865) 3 De GJ & Sm 147; 46 ER 594 .… 8.2 Stratford v Twynam (1822) Jac 418; 37 ER 908 .… 20.40 Strathblaine Estates Ltd, Re [1948] Ch 228; [1948] 1 All ER 162 .… 22.18 Stratton, Re; Ex parte Salting (1883) 25 Ch D 148 .… 30.13 Stratton Industries Inc v Northwest Georgia Bank 191 Ga App 683 .… 5.94 Strickland v Symons (1884) 26 Ch D 245 .… 2.42 Stringer, Ex parte (1882) 9 QBD 436 .… 2.18

Stringer v Harper (1858) 26 Beav 33; 53 ER 808 .… 30.2 Strode v Parker (1694) 2 Vern 316; 23 ER 804 .… 3.18 Strong v Bird (1874) LR 18 Eq 315 .… 34.2 Stronge v Hawkes (1853) 4 De GM & G 186; 43 ER 478 .… 30.2 Stronge v Hawkes (1859) 4 De G & J 632; 45 ER 246 .… 30.5 Stroud Building Society v Delamont [1960] 1 All ER 749; [1960] 1 WLR 431 .… 12.17, 12.19, 12.26 Stroughill v Anstey (1852) 1 De GM & G 635; 42 ER 700 .… 11.12 Strutt v Tippett (1889) 61 LT 460; 62 LT 475 .… 2.16 Stuart, Re; Ex parte Marshall (1859) 4 De G& J 317; 45 ER 123 .… 40.28 Stuart v Cockerell (1869) LR 8 Eq 607 .… 26.27 Stuart v Worrall (1785) 1 Bro CC 581; 28 ER 1310 .… 33.24 Stubbs v Lister (1841) 1 Y & CCC 81; 62 ER 799 .… 20.40, 39.23 Stubbs v Slater [1910] 1 Ch 632 .… 20.3, 20.4, 21.1 Stucley, Re [1906] 1 Ch 67 .… 2.9, 2.10, 2.12, 2.13 Studebaker Corporation of Australasia Ltd v C of T (NSW) (1921) 29 CLR 225 .… 41.4 Stumore v Campbell [1892] 1 QB 314 .… 2.35, 2.36 Sue Dwyer Real Estate Pty Ltd v Histcote Pty Ltd (2001) 161 FLR 413 .… 18.6 Sullivan v Pearson, Re; Ex parte Morrison (1868) LR 4 QB 153 .… 2.50 Sun Hung Kai Bank Ltd v AG [1986] HKLR 587 .… 3.40 Sun North Investments Pty Ltd v Dale [2013] QSC 44 .… 32.16 Sun Tai Cheung Credits Ltd v AG (Hong Kong) [1987] 1 WLR 948 .… 3.40, 11.40 Super 1000 Pty Ltd v Pacific General Securities Ltd [2008] NSWSC 1222; 221 FLR 427 .… 4.12 Supreme Court Registrar to Alexander Dawson Inc, Re [1976] 1 NZLR 615 .

… 32.11, 32.12 Surrendra Overseas Ltd v Government of Sri Lanka [1977] 1 WLR 565 .… 16.34 Sussman v AGC Advances Ltd (1991) 5 BPR 11,822 .… 36.9 Sussman v AGC Advances Ltd (1995) 37 NSWLR 37 .… 4.12, 4.25 Sutherland Shire Council v Glendon Court Ltd(1934) 12 LGR 20 .… 7.2, 41.12 Sutherland, Re [1963] AC 235 .… 3.14 Sutherland, Re; French Caledonia Travel ServicePty Ltd (2003) 59 NSWLR 361 .… 32.54 Sutherland v Peel (1864) 1 WW & a’B (E) 18 .… 27.8, 27.15 Sutton v O’Kane [1973] 2 NZLR 304 .… 4.14 Sutton v Sutton (1882) 22 Ch D 511 .… 3.13, 16.18, 16.28, 17.1 Svanosio v McNamara (1956) 96 CLR 186 .… 13.40 Swan v Swan (1820) 8 Price 578; 146 ER 1281 .… 11.6 Swann v Secureland Mortgage Investment Nominees Ltd [1992] 2 NZLR 144 .… 13.5 Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672; (1993) V ConvR 54-487 .… 4.1, 4.7, 4.27, 4.28, 20.41, 20.42, 20.49, 28.9 Swayne v Swayne (1848) 11 Beav 463; 50 ER 896 .… 26.23, 26.26 Sweet & Maxwell Ltd v Universal News Services Pty Ltd [1964] 2 QB 699 . … 1.41 Sweet v Pym (1800) 1 East 4; 102 ER 2 .… 2.32 Sweetland v Smith (1833) 1 Cr & M 585; 149 ER 532 .… 40.24 Swift v Westpac Banking Corporation [1995] ATPR 41-401 .… 20.38 Swift 1st Ltd v Colin [2012] 2 WLR 186 .… 20.50 Swinfen v Swinfen (No 3) (1860) 29 Beav199; 54 ER 603 .… 36.4, 36.6

Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584; [1980] 2 All ER 419; [1981] 2 All ER 449 .… 1.9, 1.25, 1.33, 1.38, 1.41, 1.37, 2.2, 2.3, 2.6, 2.7, 3.6, 5.16, 6.11, 6.12, 16.14 Sydney and Suburban Mutual Building and Land Investment Assoc Ltd v Lyons [1894] Syers v Syers (1876) 1 App Cas 174 .… 6.22 Syme v Commonwealth (1942) 66 CLR 413 .… 38.4 Symon, Re [1944] SASR 102 .… 11.12 Symons v James (1843) 2 Y & C Ch Cas 301;63 ER 132 .… 30.3 Symons v Williams (1875) 1 VLR (Eq) 199 .… 13.16 Syrett v Egerton [1957] 3 All ER 331 .… 1.34 T Taafe’s Estate, Re (1864) 14 1 Ch R 347 .… 3.16 Tadrous v Tadrous [2010] NSWSC 1388 .… 39.50 Tadrous v Tadrous [2012] NSWCA 16 .… 39.50 Tagart, Beaton & Co v James Fisher & Sons[1903] 1 KB 391 .… 2.20 Tahiti Cotton Co, Re; Ex parte Sargent (1874) LR 17 Eq 273 .… 14.1, 15.1 Tailby v Official Receiver (1888) 13 App Cas 523; [1886–90] All ER Rep 486 .… 1.34, 5.5, 6.19, 6.21, 6.23, 6.25, 11.39 Takemura v National Australia Bank Ltd (2003) 11 BPR 21,185 .… 1.41, 3.17, 30.9 Talbot v Frere (1878) 9 Ch D 568 .… 1.53, 31.7 Tancred v Delagoa Bay Co (1889) 23 QBD 239 .… 6.5, 7.3 Tancred v Potts (1749) 2 Fonbl Eq 261n .… 21.1 Tancred’s Settlement, Re [1903] 1 Ch 715 .… 13.52 Tanner v Heard (1857) 23 Beav 555; 53 ER 219 .… 40.10, 40.17 Tannock v North Queensland Securities Ltd [1932] St R Qd 285 .… 9.8, 20.39, 21.7 Tanwar Enterprises Pty Ltd v Cauchi (2003) 201 ALR 359 .… 37.12

Tapply v Sheather (1862) 7 LT 298 .… 1.27 Target Home Loans Ltd v Clothier [1994] 1 All ER 439 .… 20.24 Tarn v Turner (1888) 39 Ch D 456; (1888) 57 LJ Ch 452 .… 12.17, 21.13, 32.20, 32.21, 40.9 Tasburgh v Echlin (1733) 3 Bro Parl Cas 265; 1 ER 934 .… 1.30 Task Enterprises Inc v Pratt Adjustment Company 695 P 2d 762 (1985) .… 5.136 Tasker v Small (1837) 3 My & Cr 63; 40 ER 848 .… 33.7, 33.14 Tasmanian Development Authority v Booth [1992] ACL Rep 295 Tas 1 .… 19.24 Tassell v Smith (1858) 2 De G & J 713; 44 ER 1166 .… 31.6, 31.7 Tate v Austin (1714) 1 P Wms 264; 24 ER 382 .… 30.7 Tate v Crewdson [1938] Ch 869 .… 3.16 Taunton v Sheriff of Warwickshire [1895] 2 Ch 319 .… 8.19 Taws v Knowles [1891] 2 QB 564 .… 36.5 Taylor, Re (1854) 18 Beav 165 .… 40.21 Taylor v Baker (1818) 5 Price 306; 146 ER 616 .… 24.16 Taylor v Bank of New South Wales (1886) 11 App Cas 596 .… 42.15 Taylor v Ellis [1960] Ch 368; [1960] 1 All ER 549 .… 12.17, 12.26 Taylor v Haylin (1788) 2 Bro CC 310; 29 ER 170 .… 39.3 Taylor v Johnson (1983) 151 CLR 422 .… 13.41 Taylor v London and County Banking Co [1901] 2 Ch 231 .… 3.41, 24.4, 24.6, 24.43, 24.44, 25.4, 26.11, 26.17 Taylor v Manners (1865) 1 Ch App 48 .… 34.2 Taylor v Mostyn (1883) 25 Ch D 48 .… 39.10, 39.33 Taylor v Mostyn (1886) 33 Ch D 266 .… 19.37, 39.33, 39.37 Taylor v Parkinson & Blyth (1911) 31 NZLR 354 .… 20.31

Taylor v Russell [1891] 1 Ch 8 .… 24.44, 25.4 Taylor v Russell [1892] AC 244 .… 24.6, 25.4 Taylor v Waters (1836) 1 My & Cr 266; 40 ER 376 .… 22.45 Taylor v Wheeler (1706) 2 Salk 449; 91 ER 388 .… 3.49 Taylor v Wheeler (1706) 2 Vern 564; 23 ER 968 .… 11.3 Taylor v White (1964) 110 CLR 129 .… 5.104 Taylor v Wolfe & Co (1892) 18 VLR 727 .… 4.38 Taylor and Rumboll, Re; Ex parte Rumbol (1971) 6 Ch App 842 .… 23.5 Taylor, Stileman and Underwood, Re [1891] 1 Ch 590 .… 2.36, 2.37 Teachers Health Investments Pty Ltd v Wynne (1994) 6 BPR 13,499 .… 13.16, 13.30 Teaktrim Pty Ltd v Lewis (SC (Qld), McPherson J, 14 December 1989, unreported) .… 17.2 Teevan v Smith (1882) 20 Ch D 724 .… 21.13, 32.8, 32.25, 33.19 Teissier’s Settled Estates, Re [1893] 1 Ch 153 .… 2.17 Tempest v Lord Camoys (1882) 21 Ch D 571 .… 11.12 Temple, Ex parte (1822) 1 GL & J 216 .… 12.5, 12.9 Templeton v Leviathan Pty Ltd (1921) 30 CLR 34 .… 4.15, 24.12, 28.7 Temwood Holdings Pty Ltd v Oliver [2002] WASC 220 .… 32.55 Tenison v Sweeney (1844) 1 Jo & Lat 710 .… 36.13 Tennant v Trenchard (1869) LR 4 Ch App 537 .… 2.8, 3.36, 20.40, 21.10, 21.11, 21.18, 22.44 Terrapin International Ltd v IRC [1976] 1 WLR 665; [1976] 2 All ER 461 . … 3.5 Teulon v Curtis (1832) 1 You 610; 159 ER 1135 .… 40.11 Tewkesbury Gas Co, Re [1911] 2 Ch 279 .… 17.8 Tewkesbury Gas Co, Re [1912] 1 Ch 1 .… 17.3

Tex Star Motors Inc v Regal Finance Company Ltd 401 SW 3d 190 .… 5.121, 5.126 Texaco Ltd v Mulberry Filling Station [1972] 1 All ER 513 .… 32.9 Textron Financial Canada Ltd v Beta Ltée/Beta Brands Ltd (2007) 12 PPSAC (3d) 46; 37 CBR (5th) 107 .… 5.72 Thackwray & Young’s Contract, Re (1888) 40 Ch D 34 .… 2.11 Thames Guaranty Ltd v Campbell [1984] 2 All ER 585 .… 1.33 Thames Guaranty Ltd v Campbell [1985] QB 210; [1984] 1 All ER 144 .… 1.9, 1.29, 1.38, 1.41, 3.32, 3.37, 3.39, 3.40, 4.20, 11.4, 13.44 Thanes Pty Ltd v Custom Credit Corporation Ltd (1985) 5 BPR 11,955 .… 12.7, 12.20 Tharp, Re (1852) 2 Sm & Giff 578; 65 ER 533 .… 2.17 Thatcher v C H Pearce & Sons (Contractors) Ltd [1968] 1 WLR 748 .… 37.10 The Africano [1894] P 141 .… 9.21 The Aina (1854) 1 Sp Ecc & Ad 313; 164 ER 181 .… 9.27, 37.2 The Aline (1839) 1 W Rob 111; 166 ER 514 .… 9.21 The Anchor Line (Henderson Bros) Ltd, Re [1937] Ch 483; [1937] 2 All ER 823 .… 1.46, 8.2 The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400 .… 5.43 The Arab (1859) 5 Jur NS 417 .… 6.7, 9.20 The Atlas (1827) 2 Hag Adm 48 .… 9.19 The Basildon [1967] 2 Lloyd’s Rep 134 .… 9.16, 9.26 The Benwell Tower (1895) 72 LT 664 .… 6.2, 9.15, 20.44, 25.7, 32.15, 39.56 The Betty Orr [1992] 1 NZLR 655 .… 9.22 The Blanche (1887) 58 LT 592 .… 9.15

The Brown Buccleugh (1851) 7 Moo PCC 367; 13 ER 884 .… 9.21 The Cathcart (1867) LR 1 A & E 314 .… 9.15, 9.24, 9.26 The Celtic King [1894] P 175 .… 9.16 The Colorado [1923] P 102 .… 9.22 The Coromandel (1857) Sw 205; 166 ER 1097 .… 9.21 The Dowthorpe (1843) 2 W Rob 73; 166 ER 682 .… 9.21 The Eastern Monarch (1860) Lush 81; 167 ER 43 .… 9.21 The Edward Oliver (1867) LR 1 A & E 379 .… 9.20 The Elin (1883) 8 PD 129 .… 9.21 The Europa (1863) Brown & Lush 89; 167 ER 313 .… 9.21 The Fair Haven (1866) LR 1 A & E 67 .… 19.39 The Fairport (1882) 8 PD 48 .… 9.21 The Fairport (No 4) [1967] 1 WLR 964; [1967] 2 All ER 914n .… 9.21 The Halcyon Isle [1980] 2 Lloyd’s Rep 325 .… 9.19 The Halcyon Isle [1981] AC 221; [1988] 3 All ER 197 (PC) .… 9.22 The Harriett (1841) 1 Wm Rob 182; 166 ER 541 .… 35.8 The Heather Bell [1901] P 143 .… 9.16 The Heather Bell [1901] P 272 .… 9.16 The Hope (1873) 1 Asp MLC 563 .… 9.21 The John (1849) 3 W Rob 170;166 ER 926 .… 9.25 The Kepler (1861) Lush 201; 167 ER 97 .… 40.8 The La Constancia (1846) 2 Wm Rob 460; 166 ER 829 .… 9.20 The Linda Flor (1857) Sw 309; 166 ER 1150 .… 9.21 The Marie Glaeser [1914] P 218 .… 9.27, 37.2 The Maule [1997] 1 WLR 520 .… 9.26, 20.11 The Manor [1907] P 339 .… 9.15

The Mary Ann (1865) LR 1 A & E 8 .… 9.19 The Monmouth Coast (1922) 12 L1 L Rep 22 .… 9.26 The Myrto [1977] 2 Ll Rep 243 .… 9.16 The Myrto [1978] 1 Ll Rep 11 .… 9.16 The Neptune (1835) 3 Knapp 94; 12 ER 584 .… 9.21 The New Eagle (1846) 2 W Rob 441; 166 ER 822 .… 9.21 The Ningchow (1916) 31 TLR 470 .… 20.3 The Pan Oak [1992] 2 Lloyd’s Rep 36 .… 9.15 The Pioneer Container [1994] 2 AC 324 (PC) .… 5.25 The Priscilla (1859) 1 Lush 1;167 ER 1 .… 9.20 The Queen of the South [1968] 1 Lloyd’s Rep 182 .… 9.26 The Rellim (1922) 39 TLR 41 .… 9.21 The Rose (1873) LR 4 A & E 6 .… 9.28 The Russland [1924] P 55 .… 9.21 The Saracen (1846) 4 Notes of Cases 512 .… 9.21 The Saracen (1847) 6 Moo PCC 75; 13 ER 604 .… 9.21 The Scio (1867) LR 1 A & E 353 .… 9.21 The Span Terza (No 2) [1983] 1 WLR 632 .… 9.15 The Span Terza (No 2) [1984] 1 WLR 27 .… 9.15 The Steam Fisher [1927] P 73 .… 9.21 The Sydney Cove (1815) 2 Dods 1; 165 ER 1396 .… 9.21 The Tagus [1903] P 44 .… 9.21 The Tobago (1804) 5 C Rob 218; 165 ER 754 .… 9.27, 37.2 The Tremont (1841) 1 Wm Rob 163; 166 ER 534 .… 22.50 The Veritas [1901] P 304 .… 9.21 The William F Safford (1860) Lush 69; 167 ER 37 .… 9.21

The Wilsons (1841) 1 Wm Rob 173 .… 22.44 Theodore v Mistford Pty Ltd (2005) CLR 612; 219 ALR 296 .… 3.36 Thet Mah and Associates, Inc v First Bank of North Dakota 336 N W 2d 134; 36 UCC Rep Serv 649 (1983) .… 5.82 Thoars, Re [2005] 1 BCLC 331 .… 13.4 Thomas, Re (2002) 301 AR 373 .… 5.15, 5.30 Thomas v Brigstocke (1827) 4 Russ 64; 38 ER 729 .… 19.16, 39.18 Thomas v Cross (1864) 11 LT 430 .… 42.3 Thomas v Evans (1808) 10 East 101; 103 ER 714 .… 32.46 Thomas v National Australia Bank Ltd [2000] 2 Qd R 448 .… 26.2 Thomas v Robinson [1977] 1 NZLR 385 .… 5.94, 5.97 Thomas v Rose [1968] 3 All ER 765 .… 1.38 Thomas v Silvia (1994) 35 NSWLR 96; 14 ACSR 446 .… 32.16 Thomas v Thomas (1855) 2 K & J 79; 69 ER 701 .… 30.7 Thomas v Thomas (1856) 22 Beav 341; 52 ER 1139 .… 25.6 Thompson, Re; Ex parte Smith (1976) 8 ALR 479 .… 22.8, 30.7, 32.30, 33.2 Thompson v Baskerville (1688) 3 Rep Ch 215;21 ER 770 .… 33.3 Thompson v Boyd (1888) 14 VLR 594 .… 13.9 Thompson v Cartwright (1836) 33 Beav 178;55 ER 335 .… 24.23 Thompson v Drew (1855) 20 Beav 49; 52 ER 521 .… 39.42 Thompson v Grant (1819) 4 Madd 438; 56 ER 767 .… 22.51, 33.12 Thompson v Hudson (1869) LR 4 HL 1 .… 1.30 Thompson v Hudson (1870) LR 10 Eq 497 .… 39.35 Thompson v Kendall (1840) 9 Sim 397; 59 ER 411 .… 22.9, 33.27 Thompson v Lack (1846) 3 CB 540; 136 ER 216 .… 35.11 Thompson v Palmer (1933) 49 CLR 507 .… 2.19, 17.11

Thompson v Rumball (1839) 3 Jur 53 .… 40.27 Thompson v Waithman (1856) 3 Drew 628;61 ER 1043 .… 16.34 Thompson v Webster (1859) 4 Drew 628; 62 ER 241 .… 13.6 Thompson v Yockney (1914) 6 WWR 1397 .… 1.40, 4.7 Thompson and Holt, Re (1890) 44 Ch D 492 .… 20.6, 20.18 Thomson and Chipp v Finlay (1886) NZLR 5 SC 203 .… 12.7, 12.17, 12.19 Thomson’s Mortgage Trusts, Re [1920] 1 Ch 508 .… 20.45 Thorn v Croft (1866) LR 3 Eq 193 .… 12.10 Thornborough v Baker (1675) 3 Swan 628; 36 ER 1000 .… 1.14, 1.27, 1.29 Thorne v Cann [1895] AC 11 .… 36.4, 36.7 Thorne v Heard [1894] 1 Ch 599 .… 16.36 Thorne v Heard [1895] AC 495 .… 20.44, 24.22 Thorne (H E) & Son Ltd, Re [1914] 2 Ch 438 .… 1.53 Thorneycroft v Crockett (1848) 16 Sim 445; 60 ER 946 .… 39.33, 39.36, 42.21 Thorneycroft v Crockett (1848) 2 HL Cas 239; 9 ER 1082 .… 22.15, 31.4, 39.37, 39.39 Thornhill v Manning (1851) 1 Sim (NS) 451; 61 ER 174 .… 21.7, 22.35, 22.40 Thornton v Court (1854) 3 De GM & G 293;43 ER 115 .… 32.55, 39.42 Thornton v France [1897] 2 QB 143 .… 16.31 Thorp Sales Corp v Dolese Brothers Co 453 F Supp 196 (1978) (WD Okla) . … 3.8 Threlfall, Re; Ex parte Queen’s Benefit Building Society (1880) 16 Ch D 274 .… 12.10 Thunder d Weaver v Belcher (1803) 3 East 449; 102 ER 669 .… 12.9 Thurlow v Mackenson (1868) LR 4 QB 97 .… 20.6 Thurston v Nottingham Permanent Benefit Building Society [1902] 1 Ch 1;

[1903] AC 6 .… 2.13, 2.14, 2.18, 42.19 Thynne v Sarl [1891] 2 Ch 79 .… 22.13, 22.49 Tibbits v George (1836) 5 Ad & El 107; 111 ER 1107 .… 1.40, 6.11 Tichener, Re (1865) 35 Beav 317; 55 ER 918 .… 26.18 Tidd v Lister (1852) 10 Hare 140; 68 ER 872 .… 30.9 Tidd v Lister (1854) 3 De GM & G 857; 43 ER 336 .… 30.14 Tietyens v Cox (1916) 17 SR (NSW) 48 .… 4.2, 21.9, 22.52 Tighe v Dolphin [1906] 1 IR 305 .… 30.5 Tildesley v Lodge (1857) 3 Sm & G 543; 65 ER 772 .… 24.11, 40.3 Tillett v Nixon (1883) 25 Ch D 238 .… 18.21 Timson v Ramsbottom (1837) 2 Keen 35; 48 ER 541 .… 26.12, 26.23 Tinsley v Milligan [1993] 3 WLR 126; [1993] 3 All ER 65 .… 13.46 Tipping v Power (1842) 1 Hare 405; 66 ER 1090 .… 21.8, 40.16 Tipton Green Colliery Co v Tipton Moat Colliery Co (1877) 7 Ch D 192 .… 19.36 Titley v Davies (1743) 2 Y & CCC 399n; 63 ER 177 .… 22.26, 30.12, 31.10 Tobin v Melrose [1951] SASR 139 .… 2.31 Todd Shipyards Corp v Altema Compania Maritima SA (1972) 32 DLR (3d) 571 .… 1.43 Todd Shipyards Corp v Altema Compania Maritima SA; The Ioannis Daskalelis [1974] 1 Ll Rep 174 .… 9.21 Toft v Stephenson (1851) 1 De GM & G 28; 42 ER 461 .… 16.34 Toleman & England, Re; Ex parte Bramble (1880) 13 Ch D 885 .… 2.47 Tolhurst v Associated Portland Cement Manufacturers [1903] AC 414; [1902] 2 KB 660 .… 6.4, 7.2 Tomlin v Luce (1889) 41 Ch D 573 .… 20.21, 20.27 Tomlin v Tomlin (1841) 1 Hare 236; 66 ER 1019 .… 39.2, 39.5

Tompsett v Wickens (1855) 3 Sm & G 171; 65 ER 611 526 .… 22.45 Tompson v Leith (1858) 4 Jur NS 1091 .… 39.52 Toms v Kimble [1992] ACL Rep 295 NSW 3 .… 33.7 Toms v Wilson (1862) 4 B & S 442; 122 ER 524 .… 19.15 Tomson v Judge [1855] 3 Drew 306; 61 ER 920 .… 42.2 Tonkin, Re; Ex parte Jones (1933) 6 ABC 197 .… 1.23 Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389; (2011) 15 BPR 29,699 .… 1.55, 13.36 Tony Lee Motors Ltd v M S MacDonald & Son (1974) Ltd [1981] 2 NZLR 281 .… 6.6 Toogood, Re (1889) 61 LT 19 .… 25.5 Toohey v Gunther (1928) 41 CLR 181 .… 17.11, 32.11, 32.12 Tooheys Ltd v Sydney MC (1946) 71 CLR 407 .… 4.10 Took v Bishop of Ely (1705) 15 Vin Abr 476 .… 22.38, 22.40 Tooth & Co Ltd v Lapin (1936) 35 WN (NSW) 224 .… 20.22 Tooth & Co v Parkes (1900) 21 LR (NSW) (Eq) 173 .… 1.7, 32.12 Tori and McMahon, Re [1971] Qd R 256 .… 32.6 Torkington v Magee [1902] 2 KB 427 .… 6.5, 7.2, 6.24 Toronto-Dominion Bank v Block Bros Contractors Ltd (1980) 118 DLR (3d) 311 .… 4.33 Toronto-Dominion Bank v Flexi-Coil (1993) 4 PPSAC (2d) 288; 107 Sask R 221 .… 5.39 Toronto Dominion Bank v Gottdank (2000) 1 PPSAC (3d) 67 .… 5.16 Toronto Dominion Bank v McCowan (1995) 20 BLR (2d) 138 .… 5.16 Toronto General Trust Corp v R [1919] AC 679 .… 1.44 Topfelt Pty Ltd v State Bank of NSW Ltd (1993) 6 BPR 13,209 .… 4.37, 20.11 Torre v Jonamill (2002) 10 BPR 19,417 .… 3.14

Torzillu Pty Ltd v Brynac Pty Ltd (1983) 8 ACLR 52 .… 8.11 Toscano v Holland Securities Pty Ltd (1985) 1 NSWLR 145 .… 38.6 Tottenham v Green (1863) 32 LJ Ch 201 .… 13.11, 39.11 Toulmin v Steere (1817) 3 Mer 210; 36 ER 81 .… 24.10, 24.12, 36.10 Touzell v Cawthorn (1995) 18 ACSR 328 .… 33.21 Towerson v Jackson [1891] 2 QB 484 .… 12.19, 39.14 Town and Country Bank v Inverarity (SC (WA), Murray J, 29 March 1995, unreported) .… 19.24 Town & Country Sport Resorts (Holdings) Pty Ltd v Partnership Pacific Ltd (1988) 20 FCR 540 .… 20.38 Townsend v Westacott (1840) 2 Beav 340; 48 ER 1212 .… 13.6 Trademark Homes (Aust) Pty Ltd, Re (1996) 131 FLR 201; 67 SASR 107 . … 7.10 Traders Finance Corp Ltd v Bond Motor Sales [1954] OWN 785 .… 2.32 Tramways Building & Construction Co Ltd, Re (1987) The Times 21 August .… 14.6 Trans Trust SPRL v Danubian Trading Co Ltd [1952] 2 QB 297 .… 1.41 Transamerica Commercial Finance Corp, Canada v Imperial TV & Stereo Centre Ltd (Receiver of) (1993) 146 AR 31 .… 5.91 Transcontinental Corporation Ltd v Commissioner of Taxation (1987) 87 FLR 453 .… 8.11 Transport & General Credit Corp Ltd v Morgan [1939] Ch 531 .… 11.39 Transport Equipment Company v Quaranty State Bank (1975) 518 F 2d 377 . … 5.43 Trapp v Tidwell 418 So 786 (1982) (Miss) .… 3.8 Trappes v Harter (1833) 2 Cr & M 153; 149 ER 712 .… 1.21 Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1 .… 4.12, 4.13, 4.18 Travis and Arnold Ltd v Burnett [1964] EGD 318 .… 1.38

Trembatt v Carr (1897) 23 VLR 437 .… 4.29 Trench v Doran (1887) 20 LR Ir 338 .… 17.3 Trendent Industries Pty Ltd, Re (1983) 8 ACLR 115 .… 2.3 Trent v Hunt (1853) 9 Exch 14; 156 ER 7 .… 12.13, 12.17, 12.20 Trestrail v Mason (1878) 7 Ch D 665 .… 29.2, 30.2 Trevascus, Ex p; William McCulloch & CoLtd, Re (1879) 5 VLR (L) 195 . … 2.18 Trevillan v Exeter (1854) 5 De G M & G828; 43 ER 1091 .… 2.18 Triantafillidis v National Australia Bank Ltd (1995) ConvR 54-536 .… 19.24 Tribourg v Lord Pomfret (1773) cited Amb 733; 27 ER 474 .… 31.3 Tricontinental Corp Ltd v FCT (1987) 18 ATR 827 .… 41.1 Tricontinental Corp Ltd v FCT [1988] 1 QdR 474; (1987) 73 ALR 433 .… 8.18, 8.21 Trimleston v Hamill (1810) 1 Ball & B 377 .… 39.25, 39.30 Trimmer v Bayne (1803) 9 Ves 209; 32 ER 592 .… 30.10 Tristram, Re; Ex parte Hartley (1835) 1 Deac 288 .… 30.14 Troncone v Aliperti (1994) 6 BPR 13,291 .… 2.3, 2.4, 4.24, 4.28 Tropical Traders Ltd v Goonan [1964] WAR 234 .… 12.11, 19.2 Troughton v Binkes (1801) 6 Ves 573; 31 ER 1202 .… 32.26, 32.27, 33.6, 33.7 Trulock v Robey (1841) 12 Sim 402; 59 ER 1186 .… 32.88 Trulock v Robey (1846) 15 Sim 265; 60 ER 619 .… 39.31 Truro (Town of) v Toronto General Insurance Co (1973) 38 DLR (3d) 1 .… 35.8 Trust & Agency Co v Markwell (No 2) (1874) 4 QSCR 50 .… 4.7, 4.8 Trustees and Executor Co Ltd v Bagot’s Executor and Trustee Co Ltd [1964] SASR 306 .… 4.38 Tsang Chuen v Li Po Kwai [1932] AC 715 .… 24.37, 28.14

TSB Bank plc v Camfield [1995] 1 All ER 951; [1995] 1 WLR 430 .… 13.19 TSB Bank plc v Platts [1998] 2 BCLC 1 .… 1.48, 23.9 Tse Kwong Lam v Wong Chit Sen [1983] 3 All ER 54; [1984] 1 WLR 1349 .… 20.21, 20.23, 20.33, 20.34, 20.40, 20.42 Tubbs v Ruby 2005 Limited [2010] NZCA 353 .… 5.104 Tucaba Pty Ltd v AGC Advances Ltd [1991] ACL Rep 295 NSW 13 .… 20.38, 32.53 Tucker v Farm & General Investment TrustLtd [1966] 2 QB 421 .… 3.27 Tudor Heights Ltd v United Dominions Corp Finance Ltd [1977] 1 NZLR 532 .… 8.4 Tufdnell v Nicholls (1887) 56 LT 152 .… 22.28 Tufton v Sperni [1952] 2 TLR 516 .… 13.18, 13.24 Tull v Owen (1840) 4 Y & C Ex 192; 160 ER 965 .… 1.25 Tulloch Ltd (in liq), Re (1978) 3 ACLR 808 .… 23.14, 37.13 Turbinator Inc v Superior Court of Riverside County (1995) 33 Cal App 4th 443 .… 5.43 Turcan, Re (1888) 40 Ch D 5 .… 1.34 Turnbull v Duval [1902] AC 429 .… 13.17 Turnbull v National Mutual Royal Bank Ltd (1991) 26 NSWLR 361 .… 20.15 Turner, Re; Ex parte West Riding Union Banking Co (1881) 19 Ch D 105 . … 23.7 Turner, Re; Tennant v Turner [1938] Ch 593; [1938] 2 All ER 560 .… 29.2 Turner, Re; Turner v Spencer (1894) 43 WR 153 .… 16.5 Turner v Barton [1918] NZLR 107 .… 16.7 Turner v Deane (1849) 3 Ex 836; 154 ER 1083 .… 2.40 Turner v Hancock (1882) 20 Ch D 303 .… 40.6

Turner v Letts (1855) 7 De GM & G 243; 44 ER 95 .… 2.40 Turner v Meymott (1823) 1 Bing 158; 130 ER 64 .… 19.19 Turner v Smith [1901] 1 Ch 213 .… 14.2, 14.11, 39.12, 39.20 Turner v Walsh [1900] 2 KB 484 .… 12.3, 12.28, 12.31 Tweedale v Tweedale (1857) 23 Beav 341; 53 ER 134 .… 31.6, 31.7, 31.8 Tweedie, Re (1908) 53 Sol Jo 118 .… 12.14 Twentieth Century Banking Corp Ltd v Wilkinson [1977] Ch 99; [1976] 3 All ER 361 .… 1.15, 16.4, 16.5, 17.8, 19.12, 20.6, 21.2, 21.21, 21.23 Twigg v Keady (1996) 135 FLR 257 .… 2.48 Twigg v Kung (2002) 55 NSWLR 485 .… 2.49 Twinsectra Ltd v Yardley [2002] 2 AC 164 .… 5.121 Twopenny v Young (1824) 3 B & C 208; 107 ER 711 .… 34.8, 36.16 Twyne’s case (1602) 3 Co Rep 80 b; 76 ER 809 .… 5.41, 13.7 Tylee v Webb (1843) 6 Beav 552; 49 ER 939 .… 22.5, 22.7, 33.2 Tyler v Lake (1831) 4 Sim 351; 58 ER 131 .… 36.6 Tyler v Manson (1826) 5 LJ OS Ch 34 .… 39.58 Tyler v Yates (1871) LR 6 Ch App 665 .… 13.11, 13.14 Tyrwhitt v Tyrwhitt (1863) 32 Beav 244; 55 ER 96 .… 36.6 U UCB Group Ltd v Hedworth [2003] EWCA Civ 1717; [2003] All ER (D) 71 .… 2.18, 11.10 Udall v Capri Lighting Ltd [1988] QB 907; [1987] 3 All ER 262 .… 32.74 Ultimate Property Group Pty Ltd v Lord (2004) 60 NSWLR 646; 11 BPR 21,477 .… 18.13, 19.34, 20.21, 20.22, 20.51, 20.54, 39.2, 39.2 Ultra Precision Industries, Re 503 F 2d 414 (9th Cir) (1974) .… 5.87 Underhay v Read (1887) 20 QBD 209; 36 WR 298 .… 12.14, 12.20, 19.16, 39.14

Underwood, In the Will of (1889) 10 LR (NSW) Eq 227 .… 31.8 Union Bank of Australia Ltd v Whitelaw [1906] VLR 711 .… 13.21 Union Bank of Australia v O’Leary (1897) 13 WN (NSW) 124 .… 7.8 Union Bank of Australia v Waterman (1894) 12 NZLR 673 .… 1.48 Union Bank of London v Ingram (1880) 16 Ch D 53 .… 19.42, 39.35, 39.55 Union Bank of London v Ingram (1882) 20 Ch D 463 .… 21.15 Union Bank of London v Kent (1888) 39 Ch D 238 .… 24.27, 26.11 Union Bank of Manchester Ltd v Beech (1865) 3 H & C 672; 159 ER 695 . … 35.8 Union Bank of Scotland v National Bank of Scotland (1886) 12 App Cas 53 . … 25.7 Union Bank v Downes (1896) 12 WN (NSW) 131 .… 16.8, 18.7 Union Bank v Munster (1887) 37 Ch D 51 .… 21.23 Union Bank v O’Leary (1897) 13 WN (NSW) 124 .… 24.50 Union Cement and Brick Co, Re; Ex parte Pulbrook (1896) 4 Ch App 627 . … 2.40 Union Fidelity Trustee Co v Gibson [1971] VR 573 .… 13.16, 13.24 Union Trustee Co of Australia Ltd v Exton [1937] QWN 51 .… 21.6, 21.5, 22.55 Unisource Canada Inc v Laurentian Bank of Canada (2000) 15 PPSAC (2d) 105; 15 CBR (4th) 315 .… 5.79, 5.82, 5.86 United Bank of Kuwait Plc v Sahib [1995] 2 All ER 973; [1995] 2 WLR 94 . … 26.4 United Builders Pty Ltd v Commercial Banking Co of Sydney Ltd [1975] Qd R357 .… 20.38 United Builders Pty Ltd v Mutual Acceptance Ltd (1980) 144 CLR 673 .… 5.35, 5.117, 6.18, 8.11, 8.13, 11.28 United Dominions Corp Ltd v Jaybe Homes Pty Ltd [1978] Qd R 111 .… 3.14, 19.23, 20.36

United Dominions Trust Ltd v Beech [1972] 1 Lloyd’s Rep 546 .… 1.25 United Dominions Trust Ltd v Shellpoint Trustees [1993] 4 All ER 310 .… 37.9, 37.11 United Dominions Trust Ltd v Western [1976] QB 513; [1975] 3 All ER 1017 .… 13.41 United Law Clerks’ Society, Re [1947] Ch 150 .… 1.4 United Mining and Finance Corp Ltd v Becher [1910] 2 KB 296 .… 32.74 United Overseas Bank v Jiwani [1977] 1 All ER 733 .… 32.40 United Pacific Transport Pty Ltd, Re [1968] Qd R 517 .… 3.7 United Realization Co Pty Ltd v Commissioners of Inland Revenue [1899] 1 QB 361 .… 1.7 United Starr-Bowkett Co-op BuildingSociety (No 11) Ltd v Clyne (1967) 68 SR (NSW) 331; [1968] 1 NSWR 134 .… 4.10, 4.36, 12.13, 12.17, 19.5 United States Trust Co of New York v Australia & New Zealand Banking Group Ltd (1993) 11 ACSR 7 .… 10.15 United Travel Agencies Pty Ltd v Cain (1990) 20 NSWLR 566 .… 1.9, 1.37, 2.2, 2.8, 7.5, 7.8, 7.9, 21.1, 21.9, 21.10, 21.11, 22.5, 24.50 Universal Distributing Co Ltd, Re (1933) 48 CLR 171; [1933] ALR 107 .… 2.16, 2.17, 2.52, 8.21, 18.15 Universal Handling Equipment Co v Redipac Recycling Inc (1992) 4 PPSAC (2d) 15 .… 5.39 Universal Management Ltd, Re [1983] NZLR 462 .… 1.28, 1.29 Universal Showcards & Display Manufacturing Ltd v Brunt (1984) 128 Sol Jo 581 .… 10.10, 19.13 Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366; [1982] 2 All ER 67 .… 13.38, 13.39 University of Melbourne v Avram Hotels Pty Ltd (1991) V ConvR 54-395 . … 1.20 Uplands, Re [1948] WN (Eng) 165 .… 32.77

Upper Hunter County District Council v Australian Chilling & Freezing Co (1968) 118 CLR 429 .… 5.38 Upton v Tasmanian Perpetual Trustees Pty Ltd (2007) 242 ALR 422; 158 FCR 118 .… 20.21, 20.22 Ure v FCT (1981) 11 ATR 484 .… 41.3 Usborne v Usborne (1740) 1 Dick 75; 21 ER 196 .… 42.20 Ushers Brewery Ltd v Alro Club Holdings Ltd (1970) 213 EG 1537 .… 19.23 Ushers Brewery Ltd v PS King & Co (Finance) Ltd (1969) 113 Sol Jo 815 . … 3.29, 37.8 UTC Ltd (in liq) v NZI Securities Australia Ltd (1991) 4 WAR 349 .… 1.7, 3.36, 3.37, 3.42, 6.17, 15.2, 34.5 Uttermare v Stevens (1851) 17 LTOS 115 .… 39.37, 39.40 Uziell-Hamilton v Keen (1971) 22 P & CR 655 .… 2.13 V Vacuum Oil Co Ltd v Ellis [1914] 1 KB 693 .… 10.9, 19.11, 19.14, 19.21, 20.47 Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319 .… 2.9, 2.18 Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 .… 13.40 Vale v Merideth (1854) 18 Jur 992 .… 33.27 Vale v Oppert (1875) LR 10 Ch 340 .… 2.44 Valletort Sanitary Steam Laundry Co, Re; Ward v Valletort Sanitary Steam Laundry Co Ltd [1903] 2 Ch 654 .… 8.18, 8.21, 24.14, 24.20 Valley Media, Inc, Re 279 BR 105 (2002) .… 5.23 Valpy, Re;Valpy v Valpy [1906] 1 Ch 531 .… 29.3 Van Den Bosch v Australian Provincial Assurance Association [1968] 2 NSWR 550; 88 WN (Pt 1) (NSW) 357 .… 16.20, 21.3, 21.4, 22.54 Van den Heuvel v Perpetual Trustees Victoria Ltd [2010] NSWCA 171; 15

BPR 28,647 .… 4.17, 4.20 Van Der Velde v Ng [2011] FCA 594 .… 40.2 Van Gelder, Apsimon & Co v Sowerby Bridge United District Flour Society (1890) 44 Ch D 374 .… 6.26, 12.2, 19.45 Van Hagan, Re (1880) 16 Ch D 18 .… 21.13 Van Hool McArdle Ltd v Rohan Industrial Estates Ltd [1980] IR 237 .… 20.41 Van Kempen v Finance & Investment Pty Ltd (1984) 6 NSWLR 293 .… 32.15, 32.35, 39.59 Van Lynn Developments Ltd v Pelias Construction Co Ltd [1969] 1 QB 658; [1968] 3 All ER 824 .… 6.4, 6.7 Vane v Ryden (1870) 5 Ch App 663 .… 11.17 Varangian Pty Ltd v OFM Capital Ltd [2003] VSC 444 .… 16.7 Varga v Commonwealth Bank of Australia (1996) 7 BPR 15,052 .… 9.12 Vasiliou v Westpac Banking Corporation (2007) 19 VR 229 .… 20.22, 20.32, 20.37 Vassis, Re; Ex parte Leung (1986) 9 FCR 518; 64 ALR 407 .… 11.3, 13.43 Vassos v State Bank of South Australia [1993] 2 VR 316; (1992) V ConvR 54-443 .… 4.11, 4.16, 4.20 Vaudeville Electric Cinema v Muriset Ltd [1923] 2 Ch 74 .… 1.20, 3.26, 13.42 Vaughan v Vanderstegen (1854) 2 Drew 289; 61 ER 730 .… 36.13 Vaughan v Vanderstegen (Annesley’s case) (1854) 2 Drew 409; 61 ER 778 . … 2.35, 2.36 Vector Capital Ltd v SNS Software Network Systems Pty Ltd (1988) 12 ACLR 723 .… 11.41 Vella v Permanent Mortgages Pty Ltd (2008) 13 BPR 25,343 .… 1.55 Venables v Foyle (1661) 1 Cas in Ch 2; 1 ER 789 .… 19.34 Venn & Furze’s Contract, Re [1894] 2 Ch 101 .… 11.18

Venning, Re (1947) 63 TLR 394 .… 39.58 Vered v Inscorp Holdings Ltd (1993) 31 NSWLR 290 .… 2.21, 2.28, 2.31 Vernon, Re (1886) 33 Ch D 402 .… 24.43 Vernon v Bethell (1762) 2 Eden 110; 28 ER 838 .… 32.11, 32.18 Vernon, Ewens & Co, Re (1886) 33 Ch D 402 .… 2.18 Vibart v Coles (1890) 24 QBD 364 .… 36.15 Vickers v Cowell (1839) 1 Beav 259; 48 ER 1046 .… 22.4, 32.50, 33.18 Victor Investment Corp v Fidelity Trust Co (1973) 41 DLR (3d) 65 .… 30.12 Victoria and Grey Trust Co v Brewer (1971) 14 DLR (3d) 28 .… 30.9 Victoria Steamboats Ltd, Re; Smith v Wilkinson [1897] 1 Ch 158 .… 8.11, 18.19 Victorian Farmers’ Loan and Agency Co Ltd, Re (1897) 22 VLR 629 .… 4.28 Victorian Producers’ Co-operative Co Ltd v Leng (1918) 24 ALR 35 .… 6.5 Vimbos Ltd, Re [1900] 1 Ch 470 .… 18.15 Vint v Padget (1858) 2 De G & J 611; 44 ER 1126 .… 31.6, 31.8 Visbord v Federal Commissioner of Taxation (1943) 68 CLR 354 .… 12.9, 18.5, 19.21 Visbord v Irvine [1921] VLR 562 .… 16.17, 17.1 Vital Learning Aids Pty Ltd, Re [1979] 2 NSWLR 442 .… 1.11 Vivian & Co, Re; Metropolitan Bank of England and Wales v Vivian & Co [1900] 2 Ch 654 .… 8.16, 8.18 Voisey, Ex parte; Re Knight (1882) 21 Ch D 442 .… 12.11 Voyce v Voyce (1991) 62 P & CR 290 .… 35.12 Vrkic v Otta International Pty Ltd [2003] NSWSC 433 .… 1.34 Vukicevic v Alliance Acceptance Co Ltd (1987) 9 NSWLR 13 .… 4.9, 12.18 Vulcan Ironworks Ltd, Re (1888) 4 TLR 312 .… 2.12

Vyvyan v Vyvyan (1861) 30 Beav 65; 54 ER 813 .… 35.1 W W R Carpenter Australia Ltd v Ogle [1999] 2 Qd R 327 .… 22.36 W Tasker & Sons Ltd, Re; Hoare v W Tasker & Sons Ltd [1905] 2 Ch 587 . … 36.9 Waddell v Hutton [1911] SC 575 .… 6.17 Waddell v Toleman (1878) 9 Ch D 212 .… 14.14 Waddilove v Taylor (1848) 6 Hare 307; 67 ER 1183 .… 40.25 Wade and Thomas, Re (1881) 17 Ch D 348 .… 32.80, 40.25 Wade v Coope (1827) 2 Sim 155; 57 ER 747 .… 21.13 Wade v Wilson (1882) 22 Ch D 235 .… 21.22, 21.23 Wadham, Re (1879) 13 SALR 70 .… 4.24 Wadsworth, Re; Rhodes v Sugden (1886) 34 Ch D 155 .… 24.33 Wadsworth v Lydall [1981] 2 All ER 401; [1981] 1 WLR 598 .… 1.41 Waimiha Sawmilling Co Ltd (in liq) v Waione Timber Co Ltd [1926] AC 101 .… 4.15 Wainman v Bowker (1845) 8 Beav 363; 50 ER 142 .… 39.45 Waite v Bingley (1882) 21 Ch D 674 .… 11.6 Waitomo Wools (NZ) Ltd v Nelsons (NZ) Ltd [1974] 1 NZLR 484 .… 1.9, 1.37, 2.3 Wakefield, Re; Gordon v Wakefield [1943] 2 All ER 29 .… 29.2 Wakefield v Newbon (1844) 6 QB 276; 115 ER 107 .… 2.41 Wakefield and Barnsley Union Bank Ltd v Yates [1916] 1 Ch 452 .… 16.31 Waldron v Bird [1974] VR 497 .… 1.7 Waldron v Sloper (1852) 1 Drew 193; 61 ER 425 .… 24.43, 25.45 Waldy v Gray (1875) LR 20 Eq 238 .… 24.40 Wale, Re; Wale v Harris [1956] 1 WLR 1346; [1956] 3 All ER 280 .… 6.11,

34.2 Wales v Carr [1902] 1 Ch 860 .… 2.41, 3.21, 40.24, 42.1 Walhampton Estate, Re (1884) 26 Ch D 391 .… 20.46, 31.9 Walia v Michael Naughton Ltd [1985] 1 WLR 1115; [1985] 3 All ER 673 . … 11.7 Walker, Re (1969) 90 WN (Pt 1) (NSW) 273 .… 7.4 Walker, Re; Meredith v Walker (1893) 68 LT 517 .… 2.36 Walker v Bradford Old Bank (1884) 12 QBD 511 .… 6.14 Walker v European Electronics Pty Ltd (in liq) (1990) 23 NSWLR 1 .… 5.104 Walker v Giles (1848) 6 CB 662; 136 ER 1407 .… 12.10 Walker v Jones (1866) LR 1 PC 50 .… 16.11, 17.10, 22.38, 32.55 Walker v Linom [1907] 2 Ch 104 .… 24.30, 24.37, 24.45 Walker v Southall (1887) 56 LT 882 .… 11.12 Walker v Walker [1983] Fam 68; [1983] 2 All ER 909 .… 13.49 Walker v Whitmore 262 SW 678 (1924) (Ark) .… 3.8 Walker and Mackenzie v Sachs [1902] QWN 56 .… 21.6, 22.55 Walker Construction Co Ltd, Re [1960] NZLR 523 .… 10.15 Wallace McLean Bawden & Partners Nominees Ltd v Fish [1980] 1 NZLR 540 .… 16.7 Wallace v Evershed [1899] 1 Ch 891 .… 8.10, 8.11, 8.16, 8.19, 21.5 Wallace v Universal Automatic Machines Co [1894] 2 Ch 547 .… 8.2 Wallace v Woodgate (1824) Ry & M 193; 173 ER 990; 1 Car & P 575; 171 ER 1323 .… 2.32 Waller v Hargraves Secured Investments Ltd (2012) 245 CLR 311; 285 ALR 41; 86 ALJR 229 .… 9.12, 19.6 Waller v New Zealand Bloodstock Ltd [2006] 3 NZLR 629 .… 5.4, 5.24, 5.71

Wallersteiner v Moir (No 2) [1980] Ch 515; [1980] 2 All ER 92 .… 39.43 Wallingford v Mutual Society (1880) 5 App Cas 685 .… 1.30, 3.15, 3.18, 32.15, 39.55 Wallington v Cook (1878) 47 LJ Ch 508 .… 36.14, 39.43 Wallis, Re; Ex parte Jenks [1902] 1 KB 719 .… 6.15, 26.4 Wallis, Re; Ex parte Lickorish (1890) 25 QBD 176 .… 3.21, 39.10, 40.1, 40.4, 40.28 Wallis v Bastard (1853) 4 De G M & G 251; 43 ER 503 .… 39.61 Wallis v Woodyear (1855) 2 Jur NS 179 .… 30.10 Wallis & Simmonds (Builders) Ltd, Re [1974] 1 All ER 561 .… 1.9, 2.2, 3.36, 3.37, 3.44 Wallman, Re (1981) 60 FLR 453 .… 11.22 Walmsley v Booth (1741) 2 Atk 25; 26 ER 412 .… 13.11 Walmsley v Christchurch City Council [1990] 1 NZLR 199 .… 13.30 Walmsley v Milne (1859) 7 CB (NS) 115; 141 ER 759 .… 1.20, 3.26 Walsh, Re; Ex parte Deputy Federal Comr of Taxation (1982) 42 ALR 727 . … 32.52 Walsh v Derrick (1903) 19 TLR 209 .… 20.18 Walsh v Lonsdale (1882) 21 Ch D 9 .… 19.11, 19.14 Walter and Sullivan Ltd v J Murphy & Sons Ltd [1955] 2 QB 584; [1955] 1 All ER 843 .… 6.5, 6.9, 6.10, 6.11 Walters v Mynn (1850) 14 Jr 341 .… 1.27 Walthamstow Building Society v Davies (1990) 22 HLR 60 .… 12.17, 32.57 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 .… 12.20, 24.46, 24.48, 34.6 Wandsworth Norton Solicitors Nominee Co Ltd v Edmonds [1992] 1 NZLR 596; (1992) ANZ ConvR 188 .… 16.39 Wanner v Caruana [1974] 2 NSWLR 301 .… 3.15, 32.14, 32.15

Warburton v Edge (1839) 9 Sim 508; 59 ER 454 .… 2.35, 2.43 Warburton v Hill (1854) Kay 470; 69 ER 199 .… 24.50, 26.23 Warburton v Whiteley (1989) 5 BPR 11628; (1989) NSW ConvR 55-451 .… 3.40, 11.2, 11.4, 13.16, 13.27, 13.30, 13.31 Ward v Carttar (1865) LR 1 Eq 29; 35 Beav 171; 55 ER 860 .… 19.21, 32.48, 32.86 Ward v Duncombe [1893] AC 369 .… 6.7, 6.8, 26.1, 26.2, 26.3, 26.8, 26.11, 26.15, 26.16 Ward v Liddaman (1847) 10 LT OS 225 .… 36.13 Ward v National Bank of New Zealand (1883) 8 App Cas 755 .… 35.8, 35.11 Ward v Royal Exchange Shipping Co; Ex parte Harrison (1887) 58 LT 174 . … 26.24 Ward v Shakeshaft (1860) 1 Drew & Sm 269; 62 ER 381 .… 40.16 Ward v Sharpe (1884) 53 LJ Ch 313 .… 39.3 Warde, Re; Ex parte Official Trustee in Bankruptcy v Dabnas Pty Ltd (1984) 55 ALR 395 .… 6.9 Wardle v Oakley (1864) 36 Beav 27 at 30; 55 ER 1066 .… 3.37 Wardley Australia Ltd v McPharlin (1984) 3 BPR 9500 .… 13.38 Waring (Lord) v London and ManchesterAssurance Co Ltd [1935] Ch 310 . … 20.36, 20.37 Waring v Ward (1802) 7 Ves 332; 34 ER 915 .… 17.5, 34.2 Warnboroguh Ltd v Garmite Ltd [2004] 1 P & CR 8 .… 32.16 Warnecke v the Equitable Life Assurance Society [1906] VLR 482 .… 5.4 Warner v Jacob (1882) 20 Ch D 220 .… 20.21, 20.22, 20.36, 20.37, 20.44 Warner v Wellington (1856) 3 Drew 523; 61 ER 1002 .… 3.45 Warner Bros Records Inc v Rollgreen Ltd [1976] QB 430; [1975] 2 All ER 105 .… 6.9, 26.1

Warren, Re; Ex parte Wheeler v The Trustee in Bankruptcy [1938] Ch 725; [1938] 2 All ER 331 .… 6.11 Wasdale, Re; Brittin v Partridge [1899] 1 Ch 163 .… 26.13, 26.17 Waterhouse v Bank of Ireland (1891) 29 LR Ir 384 .… 6.17 Waters v Monarch Fire & Life Assurance Co (1856) 5 E & B 870; 119 ER 705 .… 3.20 Waters v Widdows [1984] VR 503 .… 8.14, 24.3 Watkin v Watson-Smith (1986) Times, 3 July .… 13.12, 13.23 Watkins (deceased), Re; Guardian Trust and Executors Co of NZ Ltd v Watkins [1938] NZLR 847 .… 30.13 Watkins v Coombes (1922) 30 CLR 180 .… 13.20, 13.21 Watkinson v Bernardiston (1726) 2 P Wms 367; 24 ER 769 .… 9.21 Watling v Lewis [1911] 1 Ch 414 .… 17.3 Watson v Brown [1919] NZLR 60 .… 16.7, 32.37 Watson v Duke of Wellington (1830) 1 Russ & M 602; 39 ER 231 .… 6.12 Watson v Eales (1857) 23 Beav 294; 53 ER 115 .… 22.15 Watson v Marston (1853) 4 De GM & G 230; 43 ER 495 .… 21.7, 22.38 Watson v Royal Permanent Building Society (1888) 14 VLR 283 .… 4.5, 24.51 Watson v Waltham (1835) 2 Ad & El 485; 111 ER 188 .… 19.12 Watt v McMahon (1897) 14 WN (NSW) 99 .… 21.23 Watt v State Bank of NSW Ltd [2003] ACTCA 7 .… 13.29 Watts, Re; Smith v Watts (1882) 22 Ch D 5 .… 40.11 Watts v Driscoll [1901] 1 Ch 294 .… 6.18, 11.28 Watts v Symes (1851) 1 De GM & G 240; 42 ER 544 .… 22.16, 31.1, 31.6, 31.7, 36.10 Waugh v Wren (1862) 7 LT 612 .… 35.8 Wayne v Hanham (1851) 9 Hare 62; 68 ER 415 .… 20.8, 21.2, 21.3, 21.11

Wayne v Kusznierz [1973] 2 NSWLR 799 .… 32.39, 38.7 Wayne v Lewis (1855) 3 WR 600 .… 39.55 Webb, Re; Lambert v Still [1894] 1 Ch 73 .… 39.3 Webb v Austin (1844) 7 Man & G 701; 135 ER 282 .… 12.20 Webb v Crosse [1912] 1 Ch 323 .… 32.40, 32.41, 32.55, 40.28 Webb v Herne Bay Commissioners (1870) LR 5 QB 642 .… 11.8 Webb v Hewitt (1857) 3 K & J 438; 69 ER 1181 .… 34.7, 35.8, 35.9 Webb v Hooper [1953] NZLR 111 .… 28.7 Webb v Rorke (1806) 2 Sch & Lef 661 .… 32.19, 39.31, 39.35, 39.45 Webb v Russell (1789) 3 Term Rep 393; 100 ER 639 .… 12.29 Webb v Smith (1885) 30 Ch D 192 .… 2.30, 30.9, 30.10 Webber v Farmer (1718) 4 Bro Parl Cas 170; 2 ER 116 .… 1.25, 1.26 Webber v Hunt (1815) 1 Madd 13; 56 ER 6 .… 39.39 Webber v Smith (1689) 2 Vern 103; 23 ER 676 .… 37.11 Websdale v S & J D Investments Pty Ltd (1991) 24 NSWLR 573 .… 17.9, 20.15 Webster v Jones (1844) 6 I Eq R 142 .… 22.45 Webster v Patteson (1884) 25 Ch D 626 .… 22.37 Webster v Power (1868) LR 2 PC 69 .… 3.27 Webster v Webster (1862) 31 Beav 393; 54 ER 1191 .… 26.15, 26.18 Weddell v J A Pearce & Major [1988] Ch 26; [1987] 3 All ER 624 .… 6.7, 6.9, 6.11, 6.14 Weiland, Re (1945) 13 ABC 220 .… 4.10 Weiner v Harris [1910] 1 KB 285 .… 6.22 Welch v National Cycle Works Co (1886) 55 LT 673 .… 39.41 Weld v Petre [1929] 1 Ch 33 .… 32.89

Weld-Blundell v Synott [1940] 2 KB 107; [1940] 2 All ER 580 .… 20.46, 39.3, 39.21 Welles v Middleton (1784) 1 Cox 112; 29 ER 1086 .… 42.2 Wellesley v Wellesley (1839) 4 My & Cr 561; 41 ER 213 .… 2.7 Wellington & Manawatu Railway Co Ltd v Hazelden (1899) 18 NZLR 278 . … 4.29 Wells v Kilpin (1874) LR 18 Eq 298 .… 32.26 Wells v Mitchell [1942] VLR 55 .… 29.3 Wells, Re; Swinburne-Hanham v Howard [1933] Ch 29 .… 1.15, 22.18, 32.2, 32.24 Welsh Development Agency v Export Finance Co Ltd [1991] BCLC 936 .… 6.5 Welsh Development Agency v Export Finance Co Ltd [1992] BCLC 148 .… 1.34, 1.39, 6.5, 6.20, 11.39 Welsh Irish Ferries Ltd, Re [1986] Ch 471 .… 6.5, 6.11, 9.19, 11.39 Welsh v Nilsson [1961] NZLR 644 .… 39.2 Wenham v General Credits Ltd; General Credits Ltd v Wenham (1989) 18 NSWLR 570 .… 19.37, 39.2 Weniger’s Policy, Re [1910] 2 Ch 291 .… 6.15, 25.7, 26.1, 26.13, 26.17 Wentworth, Re (1915) 15 SR (NSW) 384 .… 11.13 West v AGC (Advances) Ltd (1986) 5 NSWLR 610 .… 13.36 West v Diprose [1900] 1 Ch 337 .… 20.48 West v Jones (1851) 1 Sim (NS) 205; 61 ER 79 .… 40.7 West v Public Trustee [1942] SASR 109 .… 13.18 West v Read (1913) 13 SR (NSW) 575 .… 4.29 West v Reid (1843) 2 Hare 249; 67 ER 104 .… 24.8 West v Williams [1899] 1 Ch 132 .… 1.9, 24.25, 25.12, 25.13, 26.1, 26.4 West Bromwich Building Society v Bullock [1936] 1 All ER 887 .… 17.3

West Bromwich Building Society v Wilkinson [2005] 1 WLR 2303 .… 16.29 West London Commercial Bank v Reliance Permanent Building Society (1885) 29 Ch D 954 .… 20.45, 24.32, 25.4, 42.9 West of England and South Wales Bank v Nickolls (1877) 6 Ch D 613 .… 33.11 West Riding of Yorkshire Permanent Building Society, Re; Ex parte Pullman (1890) 45 Ch D 463 .… 32.33 West St Properties Pty Ltd v Jamison [1974] 2 NSWLR 435 .… 18.14 Westbourne Park Building Society v Levermore [1955] CLY 1703 .… 12.26 Western Bank Ltd v Schindler [1977] Ch 1; [1976] 2 All ER 393 .… 3.7, 16.1, 19.12, 19.15, 19.16, 19.34, 20.6 Western Wagon & Property Co v West [1892] 1 Ch 271 .… 1.41, 3.45, 6.12 Westerton, Re [1919] 2 Ch 104 .… 7.3, 6.11 Westfield Holdings Ltd v Australian Capital Television Pty Ltd (1992) 32 NSWLR 194 .… 1.28, 1.38, 20.38, 2.11, 32.12, 32.16 Westhead v Riley (1883) 25 Ch D 413 .… 7.11 Westminster Bank Ltd v Residential Properties Improvement Co Ltd [1938] Ch 639; [1938] 2 All ER 374 .… 21.15, 22.5, 33.3 Westminster City Council v Haymarket Publishing Ltd [1981] 2 All ER 555; [1981] 1 WLR 677 .… 7.1, 19.39, 37.5 Westminster Properties Pty Ltd v Comco Constructions Pty Ltd (1991) 5 WAR 191 .… 16.8 Westmorland Green and Blue Slate Co v Feilden [1891] 3 Ch 15 .… 36.15 Weston v Carling Construction Pty Ltd (2000) 175 ALR 202; 35 ACSR 100; [2000] NSWSC 693 .… 18.15 Weston v Davidson [1882] WN 28 .… 21.15 Westover v Chapman (1844) 1 Coll 177; 63 ER 372 .… 11.14 Westpac Banking Corp, Re [1987] 1 Qd R 300 .… 4.29

Westpac Banking Corp v Adelaide Bank Ltd [2005] NSWSC 517; (2005) 12 BPR 22,919 .… 25.7, 25.8, 25.12, 25.13 Westpac Banking Corp Ltd v Kingsland (1991) 26 NSWLR 700 .… 12.29, 12.31, 19.5 Westpac Banking Corp v Cronin [1991] ACL Rep 45 NSW 3 .… 3.40 Westpac Banking Corp v Daydream Island Pty Ltd [1985] 2 Qd R 330 .… 16.4, 16.7, 30.14, 40.1, 40.2 Westpac Banking Corp v Hodgson Pastoral Co (Torry Plains) (1995) 7 BPR 14,540 .… 9.12 Westpac Banking Corp v Kingsland (1991) 26 NSWLR 700 .… 20.21, 20.22, 20.23 Westpac Banking Corp v Mousellis (1986) 37 NTR 1 .… 20.21, 41.9 Westpac Banking Corp v Sansom (1994) 6 BPR 13,790 .… 3.49, 4.19, 4.20, 11.3, 13.30, 13.44 Westpoint Finance Pty Ltd v Chocolate Factory Apartments Ltd [2002] NSWCA 287 .… 33.7, 39.2, 39.2 Westzinthus, Re (1833) 5 B & Ad 817; 110 ER 992 .… 30.13 Wetherell, Ex parte (1804) 11 Ves 398; 32 ER 1141 .… 3.38 Wetherell v Collins (1818) 3 Madd 255; 56 ER 502 .… 22.2, 33.14, 40.15 WF Le Cornu Ltd, Re [1931] SASR 425 .… 11.39 WFM Motors Pty Ltd v Maydwell [1994] ACL Rep 295 NSW 1; (1994) 6 BPR 13,381 .… 2.30, 2.49 Wharton v Greville (1856) 1 VLT 76 .… 27.10 Wheatley v Bastow (1855) 7 De GM & G261; 3 WR 540 .… 26.23 Whenuapai Joinery (1988) Ltd v Trust Bank Central Ltd [1994] 1 NZLR 406 .… 1.20 Whereat v Duff [1972] 2 NSWLR 147 .… 13.20 Whereat v Duff (1973) 1 ALR 363 .… 13.20 Wherly, Re Ex parte Hirst (1879) 11 Ch D 278 .… 23.3, 23.5

Whetham v Davey (1885) 30 Ch D 574 .… 6.18 Whicker v Pettiford (NSWSC, Macready J, 1 August 2005) .… 21.11 Whild v GE Mortgage Solutions Ltd (2012) VConvR 58-816 .… 20.11, 20.14, 20.15, 20.16 Whistler, Re (1887) 35 Ch D 561 .… 11.18 Whitaker v Wright (1843) 2 Hare 310; 67 ER 128 .… 39.11 Whitbread, Ex parte (1812) 19 Ves 209; 34 ER 496 .… 3.43 Whitbread v Jordan (1835) 1 Y & C Ex 303; 160 ER 123 .… 24.15 Whitbread v Lyall (1856) 8 De GM & G 383; 44 ER 437 .… 22.46 Whitbread v Smith (1854) 3 De GM & G 727; 46 ER 286 .… 39.25 Whitbread & Co Ltd v Watt [1902] 1 Ch 835 .… 2.9, 2.15 Whitbread plc v USB Corporate Services Ltd (2000) 35 EG 136 .… 39.42, 39.50 White, Re (2006) 352 BR 633 .… 5.81 White, Re; Ex parte Goggs (1866) 1 QSCR 149 .… 20.40 White v British Empire Mutual Life Assurance Co (1868) LR 7 Eq 394 .… 6.15 White v City of London Brewery Co (1889) 42 Ch D 237 .… 19.35, 39.10, 40.4, 40.25 White v Elder, Smith & Co Ltd [1934] SASR 56 .… 3.55 White v Hunter (1868) 5 WW & a’B (E) 178 .… 27.1 White v Metcalf [1903] 2 Ch 567 .… 18.16 White v Morris (1852) 11 CB 1015; 138 ER 778 .… 3.55 White v Naylon (1886) 11 App Cas 171 .… 27.1 White v Pacific Acceptance Corp (1961) 62 SR(NSW) 60 .… 33.8 White v Parnther (1829) 1 Knapp 179; 12 ER 288 .… 32.26 White v Simmons (1871) 6 Ch App 555 .… 23.3

White and Smith’s Contract, Re [1896] 1 Ch 637 .… 24.19 White Rose Cottage, Re [1965] Ch 940; [1965] 1 All ER 11 .… 3.36, 3.40, 20.50 Whitehaven Joint Stock Banking Co v Read (1886) 54 LT 360 .… 11.33 Whitehorn Bros v Davison [1911] 1 KB 463 .… 12.21 Whiteley v Delaney [1914] AC 132 .… 3.33, 36.7, 36.10 Whitely, Re (1886) 33 Ch D 347 .… 2.18 Whiteman v Hawkins (1878) 4 CPD 13 .… 42.4, 42.6 Whitfield v Fausset (1750) 1 Ves Sen 387; 27 ER 1097 .… 24.8 Whitley v Challis [1892] 1 Ch 64 .… 1.23, 39.33 Whitmore v Empson (1857) 23 Beav 313; 53 ER 123 .… 1.21 Whitting, Re; Ex parte Hall (1879) 10 Ch D 615 .… 1.40, 3.45, 6.13 Whitton v ACN 003 266 886 Pty Ltd (1996) 42 NSWLR 123 .… 8.13 Whitworth v Gaugain (1844) 3 Hare 416; 67 ER 444 .… 7.8, 24.49 Whitworth v Gaugain (1846) 1 Ph 728; 41 ER 809 .… 7.8, 24.49 Wickenden v Rayson (1855) 6 De GM & G210; 43 ER 1212 .… 21.24 Wickens, Ex parte [1898] 1 QB 543 .… 32.6 Wickens v Townshend (1830) 1 Russ & My 361; 39 ER 140 .… 2.30 Wicklow Enterprises Pty Ltd v Doysal Pty Ltd (1986) 45 SASR 247 .… 4.18 Wicks v Bennett (1921) 30 CLR 80 .… 4.15 Wigg v Wigg (1739) 1 Atk 384; 26 ER 244 .… 24.11 Wight v Haberdan Pty Ltd [1984] 3 NSWLR 280 .… 1.41, 8.1 Wigsell v Wigsell (1825) 2 Sim & St 364; 57 ER 385 .… 36.5 Wilberforce, Re [1915] 1 Ch 94 .… 32.77 Wilcox & Co, Re; Hilder v Wilcox & Co [1903] WN 64 .… 22.5 Wilcox Mofflin Ltd v Commissioner of Stamp Duties [1978] 1 NSWLR 341 .… 1.7

Wildash, Re; Ex parte Muskin (1877) 5 QSCR 46 .… 4.24 Wilde, Re; Ex parte Daglish (1873) 8 Ch App 1072 .… 1.19 Wilde v Australian Trade Equipment Co Pty Ltd (1980) 145 CLR 590 .… 11.43 Wilde v Gibson 1 HL Cas 632; 9 ER 897 .… 13.40 Wildy v Mid-Hants Rly Co (1868) 16 WR 409 .… 16.1 Wilkes v Bodington (1707) 2 Vern 599; 23 ER 991 .… 24.4, 25.4 Wilkes v Collin (1869) LR 8 Eq 338 .… 36.4 Wilkes v Saunion (1877) 7 Ch D 188 .… 16.7, 40.23 Wilkes v Spooner [1911] 2 KB 473 .… 24.7 Wilkes v Steward (1801) G Coop 6; 35 ER 457 .… 11.14 Wilkin v Deans (1886) 6 NZLR 425 .… 31.11 Wilkinson v ASB Bank Ltd [1998] 1 NZLR 674 .… 13.28 Wilkinson v Beale (1823) 1 LJ OS Ch 89 .… 22.22 Wilkinson v Grant (1856) 18 CB 319; 139 ER 1392 .… 40.24 Wilkinson v Hall (1837) 3 Bing (NC) 508; 132 ER 506 .… 12.10, 16.32, 19.7 Wilkinson v Joberns (1873) LR 16 Eq 14 .… 11.6 Wilkinson v Spooner [1957] Tas SR 121 .… 4.14 Wilkinson v Sterne (1744) 9 Mod Rep 427;88 ER 551 .… 32.53 Wilkinson v Wilkinson (1819) 3 Swan 515; 36 ER 958 .… 1.34, 1.39 Willcox v Terrell (1878) 3 Ex D 323 .… 13.49 Willes v Greenhill (1860) 29 Beav 376 (No 1); 29 Beav 387 (No 2) .… 26.18 Willes v Greenhill (1861) 4 De GF & J 147; 45 ER 1139 .… 26.16 Willes v Levett (1847) 1 De G & Sm 392; 63 ER 1119 .… 16.7 Willett v Birt [1921] VLR 115 .… 20.15 William Brandt’s Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454 .…

1.34, 6.4, 6.9, 6.11 William Hall (Contractors) Ltd (in liq), Re [1967] 2 All ER 1150 .… 23.3, 23.10, 32.53 Williams, Re; Cunliffe v Williams [1915] 1 Ch 450 .… 29.4 Williams, Re; Ex parte The Official Assignee (1899) 17 NZLR 712 .… 7.10 Williams v Allsup (1861) 10 CB (NS) 417; 142 ER 514 .… 2.27 Williams v Atlantic Assurance Co Ltd [1933] 1 KB 81 .… 6.5 Williams v Bayley (1866) LR 1 HL 200 .… 13.23 Williams v Bosanquet (1819) 1 Bod & Bing 238;129 ER 714 .… 3.3 Williams v Bullmore (1863) 33 LJ Ch 461 .… 13.46 Williams v Burlington Investments Ltd (1977) 121 Sol Jo 424 .… 1.38, 2.4, 2.7, 3.46 Williams v Craddock (1831) 4 Sim 313; 58 ER 117 .… 24.49 Williams v Fleetwood Holidays Ltd (1974) 41 DLR (3d) 636 .… 13.45 Williams v Hathaway (1877) 6 Ch D 544 .… 17.3 Williams v Hensman (1861) 1 John & H 546;70 ER 862 .… 11.4 Williams v Jones (1911) 55 Sol Jo 500 .… 40.17 Williams v Lloyd (1934) 50 CLR 341 .… 13.5 Williams v Lucas (1789) 2 Cox 160; 30 ER 73 .… 1.34 Williams v Morgan [1906] 1 Ch 804 .… 16.5, 32.8, 32.9 Williams v Owen (1840) 5 My & Cr 303; 41 ER 386 .… 1.27, 1.29 Williams v Owen (1843) 13 Sim 597; 60 ER 232 .… 25.5 Williams v Price (1824) 1 Sim & St 581; 57 ER 229 .… 6.19, 19.34, 19.37 Williams v Sorrell (1799) 4 Ves 389; 31 ER 198 .… 14.2 Williams v State Bank of New South Wales (1993) 6 BPR 97,485 .… 1.40, 11.2, 13.26 Williams v State Bank of New South Wales[1993] ACL Rep 220 NSW 15 .

… 3.8 Williams v Stern (1879) 5 QBD 409 .… 16.7 Williams v Thorp (1828) 2 Sim 257; 57 ER 785 .… 26.21 Williams v Turner [2009] 1 Qd R 296 .… 16.37 Williams v Wellingborough Borough Council[1975] 3 All ER 462; [1973] 1 WLR 1327 .… 20.8, 20.40, 32.11 Williams v Williams (1881) 17 Ch D 437 .… 24.20 Williams v Williams-Wynn (1915) 84 LJ Ch 801 .… 36.5 Williams & Glyn’s Bank Ltd v Barnes [1981] Com LR 205 .… 17.9 Williams & Glyn’s Bank Ltd v Boland [1979] Ch 312; [1979] 2 All ER 697 . … 24.1 Williams & Glyn’s Bank Ltd v Boland [1981] AC 487; [1980] 2 All ER 408 .… 3.50, 4.20, 13.44, 19.12, 24.1, 24.13, 24.21 Williamson v Barbour (1877) 9 Ch D 529 .… 3.49, 39.3 Williamson v Diab [1988] 1 Qd R 210 .… 3.49, 13.46 Williamson v Loonstra (1973) 34 DLR (3d) 275 .… 30.13 Willis v Palmer (1859) 7 CB NS 340; 141 ER 847 .… 11.7 Willmot v London Celluloid Co (1886) 34 Ch D 147 .… 8.16 Willoughby v Willoughby (1756) 1 Term Rep 763; 99 ER 1366 .… 24.25, 25.4, 25.11 Wills, Ex parte (1790) 1 Ves 162; 30 ER 281 .… 1.40, 2.7 Wills v Ogier (1880) 2 ALT 1 .… 33.23 Wilmot v Alton (1897) 1 QB 17 .… 6.23 Wilmot v Pike (1845) 5 Hare 14; 67 ER 808 .… 25.4, 26.11 Willmott Forests Ltd, Re (recs and mgrs apptd) (in liq) (2012) 91 ACSR 182 .… 23.14 Wilson, Ex parte (1813) 2 Ves & B 252; 35 ER 315 .… 39.14 Wilson, Ex parte; Re Bavister (1925) 25 SR(NSW) 375 .… 3.23, 4.29, 12.11

Wilson, Re [1916] 1 Ch 220 .… 29.2 Wilson, Re; Ex parte Official Receiver in Bankruptcy (1890) 25 QBD 27 .… 1.29 Wilson, Re; Wilson v Wilson [1908] 1 Ch 839 .… 29.4 Wilson v Brown (1896) 7 QLJ 16 .… 21.6, 22.55 Wilson v Cluer (1840) 3 Beav 136; 49 ER 53 .… 39.37, 39.38, 39.39, 39.40 Wilson v Dunn (1994) 15 ACSR 156 .… 11.40 Wilson v Ferrier (1985) Conveyancing Service (NSW) [92262] .… 20.6 Wilson v Hart (1866) LR 1 Ch App 463 .… 19.40 Wilson v Holland [1915] VLR 46 .… 25.7, 25.12, 25.13 Wilson v Kelland [1910] 2 Ch 306 .… 5.79, 8.18, 24.20 Wilson v Kelly [1957] VR 147 .… 12.18, 19.3 Wilson v Metcalfe (1818) 3 Madd 45; 56 ER 426 .… 40.11 Wilson v Metcalfe (1826) 1 Russ 530; 38 ER 204 .… 39.36, 39.40 Wilson v Queen’s Club [1891] 3 Ch 522 .… 12.28, 12.31 Wilson v Tooker (1714) 5 Bro Parl Cas 193; 2 ER 622 .… 20.3 Wilson v Walton and Kirkdale Permanent Building Society (1903) 19 TLR 408 .… 32.88 Wilson v Ward [1930] 2 DLR 433 .… 1.25 Wilson v Wilson (1872) LR 14 Eq 32 .… 9.25 Wilson Tyres Pty Ltd (1992) 7 ACSR 318 .… 11.43 Wilton v Commonwealth Bank of Australia [1974] 2 NSWLR 96 .… 18.10 Wilton v Farnworth (1948) 76 CLR 646 .… 13.32 Wiltshire v Marshall (1866) 14 LT 396 .… 13.30 Wiltshire v Rabbits (1844) 14 Sim 76; 60 ER 285 .… 26.11 Wily v Endeavour Health Care Services Pty Ltd (No 5) (2003) 11 BPR 21,081 .… 1.25

Wily v Endeavour Health Care Services Pty Ltd (No 5) [2003] NSWCA 321; (2003) 12 BPR 22, 247 .… 1.25, 1.27, 1.29, 32.12, 32.16 Wily v Rothschild Australia Ltd (1999) 47 NSWLR 555 .… 6.20 Wily v St George Partnership Bank Ltd (1999) 84 FCR 423; 161 ALR 1; 30 ACSR 204 .… 5.35, 8.11 Windella (NSW) Pty Ltd v Hughes (1999) 49 NSWLR 158 .… 4.7, 4.24 Windle, Re; Ex parte Trustee of Bankrupt v Windle [1975] 3 All ER 987 .… 17.5 Winn v Burgess (1986) Times, 8 July .… 6.23 Winstone Ltd v Bourne [1978] 1 NZLR 94 .… 35.8 Winter v Lord Anson (1827) 3 Russ 488; 38 ER 658 .… 2.11, 2.13, 36.13 Winter, Re [1930] NZGLR 23 .… 29.2 Winterbottom v Tayloe (1854) 2 Drew 279; 61 ER 726 .… 33.2 Wisden v Wisden (1854) 2 Sm & G 396; 65 ER 452 .… 30.3 Wise, Re; Ex parte Mercer (1886) 17 QBD 290 .… 13.5, 13.6 Wise v Landsell [1921] 1 Ch 420 .… 6.16 Wise v Whitburn [1924] 1 Ch 460 .… 11.16, 11.17 Wise v Wise (1845) 2 Jo & Lat 403 .… 26.15, 40.3 Wiseman v Westland (1826) 1 Y & J 117; 148 ER 610 .… 3.31 Wiskich (DM & BP) v Drivehard Pty Ltd (SC (NSW), Giles J, 13 December 1993, unreported) .… 7.14 Withall v Nixon (1885) 28 Ch D 413 .… 22.49 Witham, Re [1922] 2 Ch 413 .… 16.31 Withers LLP v Langbar International Ltd [2012] 2 All ER 616 .… 2.35 Withington v Tate (1869) 4 Ch App 288 .… 32.49, 39.13 Withrington v Banks (1725) Cas temp King 30; 25 ER 205 .… 16.14, 42.21 Woking Urban District Council (Basingstoke Canal) Act, Re 1911 [1914] 1 Ch 300 .… 21.14

Wolff v Vanderzee (1869) 17 WR 547 .… 20.27 Wolff v Vanderzee (1869) 20 LT 350 .… 20.21 Wollam v Barclays Bank plc [1988] EGCS 22; 18 Fam Law (Eng) 381 .… 3.5, 11.3 Wolmershausen, Re (1890) 62 LT 541; 38 WR 537 .… 35.7, 35.8 Wolmershausen v Gullick [1893] 2 Ch 514 .… 30.2 Wombat Nominees Pty Ltd v De Tullio (1990) 98 ALR 307 .… 16.8, 18.2, 19.2, 19.8, 20.15, 21.5 Wongala Holdings Pty Ltd v Mulinglebar Pty Ltd (1994) 6 BPR 13,527 .… 20.15 Wonham v Machin (1870) LR 10 Eq 447 .… 21.16, 40.20 Wontner v Wright (1829) 2 Sim 543; 57 ER 890 .… 40.12 Wood, Re [1949] St R Qd 17 .… 30.13 Wood v Downes (1811) 18 Ves 120; 34 ER 263>.… 42.2 Wood v Martin (1877) 47 LJQB 191 .… 20.17 Wood v Smallpiece [1942] Ch 190; [1942] 1 All ER 252 .… 22.49 Wood v Surr (1854) 19 Beav 551; 52 ER 465 .… 33.6, 33.25 Wood v Wheater (1882) 22 Ch D 281 .… 22.17, 22.49 Wood v Williams (1819) 4 Madd 186; 56 ER 676 .… 22.2, 33.14 Woodman v Higgins (1850) 14 Jur 846 .… 32.82 Woodroffes (Musical Instruments) Ltd, Re [1986] Ch 366; [1985] 2 All ER 908 .… 8.18, 8.19, 8.20, 24.3 Woods, Re; Ex parte Ditton (1876) 1 Ch D 557 .… 23.5 Woods v Commonwealth Bank of Australia(1990) 5 BPR 11521 .… 20.38 Woods v Oliver [1880] WN Eng 51 .… 39.6 Woodstead Finance Ltd v Petrou [1986] FTLR 267 .… 13.23 Woodstock, Re (a bankrupt) (19 November 1979, unreported) .… 30.7

Woodworth v Conroy [1976] QB 884 .… 2.28 Woolwich Building Society v Brown [1996] CLC 625 .… 39.21 Woolley v Colman (1882) 21 Ch D 169 .… 21.14, 21.15, 21.21, 21.23 Woolley v Drage (1795) 2 Anst 551; 145 ER 964 .… 19.39, 39.45, 39.57 Woolstencroft v Woolstencroft (1860) 2 DeGF & J 347; 45 ER 655 .… 29.3 Woolston v Ross [1900] 1 Ch 788 .… 12.9 Woolwich Equitable Building Society v Preston [1938] Ch 129 .… 3.23, 12.11 Worcester, Re; Ex parte Agra Bank (1868) 3 Ch App 555 .… 26.18 World Tech Pty Ltd v Yellowin Holdings Pty Ltd (1992) 5 BPR 11729 .… 3.36, 3.40 Wormald v Maitland (1866) 3 LJ Ch 69 .… 25.13 Worrall v Harford (1802) 8 Ves 4; 32 ER 250 .… 2.42 Worrell v Issitch [2001] 1 Qd R 570 .… 21.10, 21.12, 21.21 Worrell v Power & Power (1993) 118 ALR 237 .… 2.48, 2.49 Worthington v Abbott [1910] 1 Ch 588 .… 17.10 Worthington & Co Ltd v Abbott [1910] 1 Ch 588 .… 17.9 Wortley v Birkhead (1754) 2 Ves Sen 571; 28 ER 364 .… 24.4, 25.4, 25.11 Wossidlo v Catt (1934) 52 CLR 301 .… 2.11, 2.13 Wotten v Copeland (1823) 7 Johnson (Ch) 140 .… 11.6 Wragg v Denham (1836) 2 Y & C Ex 117; 160 ER 335 .… 19.35, 19.36, 19.37, 39.12 Wrexham, Re; Mold & Connah’s Quay Railway Co [1899] 1 Ch 440 .… 11.9, 42.19 Wright, Ex parte (1812) 19 Ves 255; 34 ER 513 .… 3.40, 21.3, 21.9 Wright, Re; Ex parte Landay [1949] Ch 729;[1949] 2 All ER 605 .… 20.8 Wright v Carter [1903] 1 Ch 27 .… 42.2

Wright v Haberdan [1984] 2 NSWLR 280 .… 3.45 Wright v Kirby (1857) 23 Beav 463; 53 ER 182 .… 40.20 Wright v New Zealand Farmers Co-operative Association of Canterbury Ltd [1939] AC 439; [1939] 2 All ER 701 .… 20.6, 20.41 Wright v Pepin [1954] 2 All ER 52; [1954] 1 WLR 635 .… 16.32, 16.33, 16.34, 19.12 Wright v Registrar of Titles [1979] Qd R 523 .… 4.5 Wrights Hardware Pty Ltd v Evans (1988) 13 ACLR 631 .… 18.7 Wrightson v McArthur and Hutchisons (1919) Ltd [1921] 2 KB 807 .… 1.11 Wrigley v Gill [1905] 1 Ch 241 .… 19.33, 32.53, 39.35, 39.37, 39.50, 39.55 Wrigley v Gill [1906] 1 Ch 165 .… 32.51 Wrixon v Vize (1842) 2 Dr & War 192 .… 39.3, 39.8 Wrout v Dawes (1858) 25 Beav 369; 53 ER 678 .… 2.10, 32.52 WT & ME Peterie Pty Ltd, Re (1981) 6 ACLR 65 .… 11.39 Wulff v Jay (1872) LR 7 QB 556 .… 3.25, 16.2 Wyatt v Wyatt (1916) 16 SR (NSW) 455 .… 29.3 Wyatt, Re; Ex parte Adams (1837) 3 Mont& A 157 .… 23.7 Wyatt, Re; White v Ellis [1892] 1 Ch 188 .… 26.2, 26.11, 26.16, 26.17 Wyke v Rogers (1852) 1 De G M & G 408; 42 ER 609 .… 35.8 Wylde v Radford (1863) 33 LJ Ch 51 .… 3.42 Wylie v Carlyon [1922] 1 Ch 51 .… 8.1, 42.18 Wyllie v Pollen (1863) 3 De GJ & Sm 596; 46 ER 767 .… 25.7 Wynne v Robinson (1830) 4 Bli NS 27; 5 ER 10 .… 13.1 Wynne v Styan (1847) 2 Ph 303; 41 ER 959 .… 16.39 Wythe v Henniker (1833) 2 My & K 635; 39 ER 1087 .… 30.3 Wythes v Lee (1855) 3 Drew 396; 61 ER 954 .… 2.15

Y Yango Pastoral Co Pty Ltd v First Chicago (1978) 139 CLR 410 .… 13.45 Yanner v Eaton (1999) 201 CLR 351 .… 5.9 Yarrangah Pty Ltd v National Australia Bank Ltd (1999) 7 BPR 17,061 .… 19.11, 20.37, 21.11 Yates, Re; Batcheldor v Yates (1888) 38 Ch D 112 .… 3.26, 20.6 Yates v Aston (1843) 4 QB 182; 114 ER 866 .… 3.13, 17.4 Yates v Cox (1868) 17 WR 20 .… 26.15 Yates v Hambly (1742) 2 Atk 237; 26 ER 547 .… 22.6 Yates v Hambly (1742) 2 Atk 360; 26 ER 618 .… 22.17, 39.39 Yates v Plumbe (1854) 2 Sm & G 174; 65 ER 354 .… 32.80 Yazgi v Permanent Custodians Ltd [2007] NSWCA 240; 13 BPR 24,567 .… 4.12, 4.17 Yeomans v Williams (1865) LR 1 Eq 184 .… 34.2, 34.6, 35.1 Yeovil Glove Co Ltd, Re [1965] Ch 148; [1964] 2 All ER 849 .… 8.24 Yerkey v Jones (1939) 63 CLR 649 .… 3.8, 11.2, 13.17, 13.21, 13.22, 13.25, 13.26, 13.27, 13.41 Yianni v Edwin Evans & Sons [1982] QB 438 .… 37.5 York v Stone (1709) 1 Salk 158; 91 ER 146 .… 11.4 York Union Banking Co v Artley (1879) 11 Ch D 205 .… 21.21 Yorkshire Bank plc v Hall [1999] 1 WLR 1713; [1999] 1 All ER 879 .… 1.16, 3.25, 16.2, 20.21, 20.23 Yorkshire Bank plc v Tinsley [2004] 1 WLR 2380; [2004] 3 All ER 411 .… 13.3 Yorkshire Banking Co v Mullan (1887) 35 Ch D 125 .… 12.5, 19.13, 39.18 Yorkshire Woolcombers Association Ltd, Re; Houldsworth v Yorkshire Woolcombers Association Ltd [1903] 2 Ch 284 .… 5.35, 5.117, 8.12, 8.13, 8.15

Young, Re [1955] St R Qd 254 .… 18.23 Young, Re; Ex parte Jones [1896] 2 QB 484 .… 6.22 Young v ACN 081 162 512 [2005] NSWSC 139 .… 23.6 Young v Clarey [1948] Ch 191; [1948] 1 All ER 197 .… 4.40, 19.43, 20.46, 21.13, 32.85 Young v English (1843) 7 Beav 10; 49 ER 965 .… 2.35, 2.42, 39.21 Young v Kitchin (1878) 3 Ex D 127 .… 7.4 Young v Matthew Hall Mechanical & Electrical Engineers Pty Ltd (1988) 13 ACLR 399 .… 1.9, 1.37 Young v Queensland Trustees Ltd (1956) 99 CLR 560 .… 17.8 Yourell v Hibernian Bank Ltd [1918] AC 372 .… 39.10 Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484 .… 42.6 YZ Finance Co Pty Ltd v Cummings (1964) 109 CLR 395 .… 1.4 Z Zamet v Hyman [1961] 3 All ER 933; [1961] 1 WLR 1442 .… 13.18, 13.23, 13.24 Zanzoul v Westpac Banking Corp (1995) 6 BPR 14,142 .… 19.23 Zhou v Kousal and the Sheriff for the State of Victoria [2012] VSC 187 .… 20.40 Zell v Commonwealth Bank of Australia [1998] NSW Conv R 55-835 .… 3.8 Zielinski v Gordon [1983] 1 WWR 414 .… 33.11 Zegalski, Re (1972) 31 DLR (3d) 766 .… 5.3 ZL v R (2010) 208 A Crim R 325 .… 5.4 Zoneff v Elcom Credit Union Ltd (1990) ATPR 41-009 .… 13.35

Table of Statutes References are to paragraphs Co-operative Scheme Legislation European Convention of Human Rights .… 20.6 Co-operative Scheme Legislation Consumer Credit Code .… 9.1, 9.2, 9.3, 9.4, 9.5, 32.6, 32.15, 32.40 s 5 .… 9.2 s 6 .… 9.2 s 7 .… 9.2 s 8 .… 9.2 s 14 .… 9.2 s 15 .… 9.2 s 40 .… 9.3 s 41 .… 9.3 s 43 .… 9.3 s 44 .… 9.3 s 45 .… 9.3 s 46 .… 9.3 s 47 .… 9.3 s 48 .… 9.3 s 80 .… 9.4 s 80(6) .… 9.4

s 91 .… 9.3 s 92 .… 9.3 s 161(2) .… 9.4 National Credit Code .… 5.127, 18.3 s 88(2) .… 18.3 s 88(4) .… 18.3 National Scheme Laws Corporations Law .… 8.18, 23.2 s 165(1) .… 8.18 s 165(2) .… 8.18 s 1049 .… 8.1 Commonwealth Aboriginal Land Rights (Northern Territory) Act 1976 .… 13.50 Acts Interpretation Act 1901 s 13 .… 5.5 s 15AB(1) .… 5.5 s 15AB(2) .… 5.5 Air Navigation Act 1920 .… 9.29 Australian Consumer Law s 18 .… 38.5 s 20–22 .… 38.5 s 227 .… 38.5 s 238 .… 38.5 Banking Act 1959 .… 5.51 Bankruptcy Act 1966 .… 5.111, 6.1, 11.22,13.1, 13.5, 16.16, 23.2, 23.10, 23.11, 23.14, s 5823.2

s 5(1) .… 23.4, 26.4 s 55 .… 5.112 s 56E .… 5.112 s 57 .… 5.112 s 58 .… 11.22, 14.14, 23.3 s 60 .… 23.3 s 64ZA(5) .… 23.6 s 74A .… 35.10 s 75 .… 35.10 s 75(2) .… 35.10 s 81 .… 2.47 s 82–94 .… 23.2 s 82(3B) .… 3.17, 23.10, 39.46 s 88 .… 3.17, 23.10 s 89 .… 3.17, 23.10 s 90 .… 23.9 s 90(2) .… 23.1, 23.9 s 90(3) .… 23.9 s 90(4) .… 23.9 s 90(5) .… 23.9 s 91 .… 23.12 s 91(2) .… 23.13 s 91(3) .… 23.13 s 91(4) .… 23.12 s 92 .… 23.9 s 93 .… 23.9

s 94 .… 23.9 s 96 .… 23.2 s 108 .… 10.15 s 120 .… 13.5 s 120 ff .… 13.4 s 121 .… 13.5, 13.8 s 122 .… 8.23 s 126 .… 11.22, 26.6 s 133 .… 23.14 s 133(4) .… 23.14 s 133(5) .… 23.14 s 133(5A) .… 23.14 s 133(9) .… 23.14 s 133(10) .… 23.14 s 135(1)(da) .… 11.23 s 136 .… 23.12, 32.6, 32.23 s 141 .… 23.8 s 149 .… 23.16 s 149D .… 23.16 s 153(1) .… 23.17 s 153(3) .… 23.17 s 153(4) .… 35.10 s 244–252C .… 23.11 s 302 .… 23.3, 23.5 Pt XI .… 23.11 Civil Aviation Act 1988 .… 9.29

Companies Act .… 6.16, 11.33 Companies Code 1981 .… 11.33 Competition and Consumer Act 2010 .… 13.17,20.38, 32.12, 32.14, 38.5 s 20 .… 13.35 s 21 .… 13.35 s 21(1) .… 13.35 s 21(3) .… 13.35 s 47 .… 32.9 s 60 .… 19.31 s 87 .… 38.5 Pt 2.2 .… 13.35 Sch 2 .… 38.5 Constitution s 109 .… 9.16 Copyright Act 1968 .… 6.25 s 133(4) .… 37.14 s 196 .… 6.25 Corporations Act 2001 .… 1.2, 1.11, 2.2, 2.39,3.53, 5.105, 5.112, 5.115, 5.116, 6.16, 8.1,8.2, 8.4, 8.9, 8.18, 11.5, 11.40, 11.41, 16.16,23.2, 34.3, 35.10 s 9 .… 5.105, 8.1, 8.9, 8.25, 18.11, 18.12,41.6, 41.7, 42.11 s 9(a) .… 41.6 s 9(b) .… 41.6 s 9(c) .… 41.6 s 9(d) .… 41.6 s 9(e) .… 41.6 s 9(i) .… 41.6

s 9(m) .… 41.6 s 52A .… 11.34 s 57A .… 18.11 s 58AA .… 18.11 s 66A .… 18.11 s 124 .… 11.33 s 124(1)(b) .… 8.2, 32.9, 36.9 s 125 .… 11.33 s 126 .… 5.39, 11.34 s 127 .… 5.39, 11.34 s 128 .… 4.18 s 129 .… 4.18 s 169 .… 26.12 s 171 .… 8.3 s 180 .… 18.13 s 180–184 .… 18.13 s 180 ff .… 18.14 s 181 .… 18.13 s 182 .… 18.13 s 183 .… 18.13 s 184 .… 18.13 s 191(2)(a)(iv) .… 11.37 s 199A .… 18.17 ss 261–282 .… 6.2 s 262 .… 6.20, 11.38 s 262(1)(a)–(j) .… 11.38

s 262(2) .… 11.38 s 262(2)(b) .… 1.11 s 262(4) .… 6.20 s 262(8) .… 3.53 s 262(9) .… 3.53 s 262ff .… 11.38 s 263 .… 5.115 s 264 .… 5.115 s 265 .… 11.40 s 266 .… 5.115, 11.43 s 266(1) .… 5.115, 11.43 s 266(2) .… 5.115 s 266(3) .… 11.41 s 266(4) .… 5.115, 11.43 s 267 .… 8.22 s 267(1) .… 8.22 s 267(2) .… 8.22 s 267(3) .… 8.22 s 267(5) .… 8.22 s 269 .… 11.40, 32.69 s 270(4) .… 11.38 s 271 .… 11.44 s 271(2)(e) .… 8.3 s 272 .… 11.38 s 272(2) .… 11.38 s 274 .… 11.44

s 283AA .… 8.4 s 283AB .… 8.4 s 283AC .… 8.6 s 283BH .… 8.1 s 283DB(1) .… 8.6 s 283DB(2) .… 8.6 s 416 .… 18.11 s 416–434G .… 18.3 s 417 .… 18.11 s 418 .… 18.6 s 418A .… 18.11 s 419 .… 18.14 s 419(2) .… 18.11 s 420 .… 18.7, 18.12 s 420(1) .… 18.11, 18.12 s 420(2) .… 18.11, 18.12 s 420(4) .… 18.12 s 420A .… 5.130, 18.12, 18.13, 20.6, 20.22, 20.31 s 420B .… 18.11, 18.13 s 420B(6)(b) .… 18.13 s 421 .… 18.11, 18.12 s 421(1)(d) .… 18.5 s 421(2) .… 18.5 s 421A .… 18.11, 18.12 s 422 .… 18.12 s 424 .… 18.12

s 425 .… 18.15 s 427 .… 18.7, 18.17, 18.25 s 428 .… 18.7 s 433 .… 18.16 s 433(2) .… 8.25 s 433(3) .… 8.25 s 433(9) .… 8.25 s 434D–434G .… 18.11 s 468 .… 20.51, 23.3 s 471B .… 23.3 s 471C .… 23.3 s 474(1) .… s 5823.2 s 477(2B) .… 11.35 s 477(2)(g) .… 11.35 s 483 .… 2.47 s 513C .… 5.112 s 553E .… 23.2 s 554E(1) .… 23.9 s 554E(4) .… 23.1, 23.9 s 554E(5) .… 23.9 s 554F .… 23.12 s 554F(2) .… 23.9 s 554F(3) .… 23.9, 23.13 s 554F(4) .… 23.13 s 554F(5) .… 23.12 s 555 .… 8.25, 10.15

s 556 .… 8.25 s 560 .… 8.25 s 561 .… 8.25 s 562 .… 8.25 s 563AAA .… 8.2 s 563B .… 23.10 s 565 .… 8.23 s 566 .… 18.15 s 566ff .… 8.24 s 568 .… 23.14, 37.13 s 568(1A) .… 23.14 s 568B .… 23.14 s 568D(2) .… 23.14 s 568E .… 23.14 s 568F .… 23.14 s 588 .… 32.24 s 588FA ff .… 8.23 s 588FF .… 13.4 s 588FJ .… 8.24 s 588FL .… 5.41 s 588FL(1) .… 5.115 s 588FL(2) .… 5.115 s 588FL(4) .… 5.115 s 588FL(4)(a) .… 5.115 s 588FL(4)(b) .… 5.115 s 588FM .… 5.115

s 588FN(1) .… 5.115 s 588FN(2) .… 5.115 s 588FN(3) .… 5.115 s 588FN(4)(a) .… 5.115 s 588FN(4)(b) .… 5.115 s 588L .… 11.43 s 588M .… 11.43 s 601AD .… 14.15 s 601AD(2) .… 32.24 s 601AF .… 14.15 s 601AH .… 14.15 s 601EA ff .… 42.11 s 761A .… 6.16 s 1070A(4) .… 1.44, 6.16 s 1071B .… 6.16 s 1072A .… 6.16 s 1072B .… 6.16 s 1072D .… 6.16 s 1072E .… 26.12 s 1072E(10) .… 26.12 s 1072E(10)(c) .… 26.12 s 1072F .… 6.16 s 1072G .… 6.16 s 1317B .… 11.40 s 1323 .… 18.19 ss 1503–1510 .… 6.2

s 1505 .… 11.44 Ch 2.K .… 5.36, 5.68 Div 2A .… 5.115 Pt 5.2 .… 5.120, 18.3, 18.11, 19.21, 19.34,19.35, 20.22, 20.51 Pt 5.3A .… 5.111 Pt 5.6 Div 6 .… 23.2 Pt 6D .… 8.2 Ch 2.K .… 6.2 Corporations Regulations 2001 reg 1.0.02A .… 5.105 reg 5.6.24 .… 23.6 reg 5.6.24(3) .… 23.6 Criminal Justice Act 1998 .… 37.14 Customs Act 1901 .… 37.14 Designs Act 2003 .… 6.27 s 10(2) .… 6.27 s 11 .… 6.27 s 21 .… 6.27 s 46 .… 6.27 s 47 .… 6.27 s 114 .… 6.27 Family Law Act 1975 .… 13.8 s 79 .… 13.8 s 85A .… 13.8 s 90AE .… 13.8 Financial Institutions Code .… 11.45

Foreign Acquisitions and Takeovers Act 1975 .… 1.47 s 5(1) .… 1.47 s 12A(5) .… 1.47 s 26A(2) .… 1.47 Income Tax Assessment Act 1936 s 128B .… 41.4 s 128D .… 41.4 s 128F .… 41.4 s 215 .… 18.7 s 218 .… 41.1 Pt III Div 16E .… 41.3 Income Tax Assessment Act 1997 s 6-5 .… 41.4 s 6-5(1) .… 41.2 s 8-1 .… 41.3 s 25-25 .… 41.3 s 25-30 .… 41.3 s 25-30(3) .… 41.3 s 82KZL .… 41.3 s 82KZM .… 41.3 s 82KZMA .… 41.3 s 82KZMD .… 41.3 s 82KZO .… 41.3 s 102-20 .… 41.5 s 104-10(1) .… 41.5 s 104-10(2) .… 41.5

s 104-10(7) .… 41.5 s 106-60 .… 41.5 s 328-110 .… 41.3 Div 230 .… 41.3 Pt 3-1 .… 41.5 Pt 3-3 .… 41.5 Lands Acquisition Act 1989 s 53 .… 32.35 s 62 .… 32.35 s 64 .… 32.35, 38.3 s 66 .… 32.35 s 68 .… 38.3 s 69 .… 38.3 s 84 .… 32.35 s 92 .… 32.35 Life Insurance Act 1945 .… 6.15 s 4(1) .… 6.15 s 87(1) .… 6.15 s 87(1)(b) .… 6.15 s 87(2) .… 6.15 s 88 .… 6.15 s 89 .… 6.15 s 89(1) .… 6.15 s 90 .… 6.15 s 91 .… 6.15 Sch 5 .… 6.15

National Consumer Credit Code .… 38.6 s 6 .… 38.6 s 7 .… 38.6 s 13A .… 38.6 s 42–53 .… 38.6 s 88 .… 38.6 Pt III .… 38.6 National Consumer Credit Protection Act 2009 .… 38.6 A New Tax System (Goods and Services Tax) Act 1999 s 9-5 .… 41.6 s 9-10(2) .… 41.6 s 9-25(4) .… 41.6 s 9-70 .… 41.6 s 9-75 .… 41.6 s 11-5 .… 41.6 s 11-15(4) .… 41.6 s 11-20 .… 41.6 s 29-10(3) .… 41.6 s 29-70(2) .… 41.6 s 40-5(2) .… 41.6 s 58-20 .… 41.7 s 58-95 .… 41.7 s 105-5 .… 41.7 s 105-5(1) .… 41.7 s 105-5(1)(a) .… 41.7 s 105-5(2) .… 41.7

s 105-5(3)(a) .… 41.7 s 189-5 .… 41.6 s 189-10 .… 41.6 s 189-15 .… 41.6 s 195-1 .… 41.6, 41.7 Div 40 .… 41.6 Div 58 .… 41.7 Div 105 .… 41.7 A New Tax System (Goods and Services Tax) Regulations 1999 .… 41.6 reg 40-5.02 .… 41.6 reg 40-5.09 .… 41.6 reg 40-5.09(3) .… 41.6 reg 40-5.09(4) .… 41.6 Sch 7 .… 41.6 Sch 7 Pt 3 .… 41.6 Sch 7 Pt 8 .… 41.6 Patents Act 1990 s 13(2) .… 6.26 s 14 .… 6.26 s 187 .… 6.26 s 188 .… 6.26 s 189 .… 6.26 s 189(1) .… 6.26 s 189(2) .… 6.26 s 189(3) .… 6.26 s 196(b)(ii) .… 6.26

Patents Regulations 1991 reg 19.1(a) .… 6.26 Personal Property Securities Act 2009 (PPSA) .… 1.2, 1.7, 1.19, 1.49, 2.6, 3.26, 3.27, Ch 5, 6.1, 6.2, 8.12, 9.11, 9.13, 9.15, 9.23, 13.1, 32.70 s 3 .… 5.1 s 5(1)(j) .… 1.19 s 6(1)(a) .… 5.7 s 6(1A)(a) .… 5.7 s 6(1A)(b) .… 5.7 s 6(1)(b) .… 5.7 s 6(2)(a) .… 5.7 s 6(2)(b) .… 5.7 s 6(2)(c)(i) .… 5.7 s 6(2)(c)(ii) .… 5.7 s 6(2)(d) .… 5.7 s 6(2)(e) .… 5.7 s 8 .… 3.26, 5.6, 5.11, 5.12, 6.1 s 8(1) .… 5.16 s 8(1)(a) .… 5.11 s 8(1)(c) .… 5.11, 5.15 s 8(1)(d) .… 5.11 s 8(1)(f)(i) .… 5.11 s 8(1)(f)(vi) .… 5.11 s 8(1)(f)(vii) .… 5.11 s 8(1)(h) .… 5.11, 5.20 s 8(1)(j) .… 5.9, 5.11

s 8(1)(ja) .… 5.11 s 8(1)(jb) .… 5.11 s 8(2) .… 5.11 s 8(6) .… 5.11 s 8(f)(vi)–(ix) .… 5.22 s 10 .… 5.2, 5.7, 5.8, 5.9, 5.10, 5.22, 5.23,5.25, 5.29, 5.38, 5.39, 5.42, 5.51, 5.53,5.82, 5.94, 5.95, 5.103, 5.117 s 12 .… 5.6, 5.11, 6.1 s 12(1) .… 5.1, 5.8, 5.12, 5.13, 5.14, 5.15,5.16, 5.20, 5.21, 5.22, 5.23, 5.24, 5.26,5.30, 5.34, 5.79, 5.120 s 12(2) .… 5.2, 5.14, 5.16, 5.20 s 12(2)(d) .… 1.49 s 12(2)(l) .… 5.16 s 12(3) .… 5.1, 5.2, 5.8, 5.12, 5.13, 5.21, 5.30,5.34, 5.79, 5.98 s 12(3A) .… 5.9 s 12(3)(a) .… 5.22 s 12(3)(b) .… 5.23 s 12(4) .… 5.51 s 12(5) .… 5.11, 5.12 s 12(6) .… 5.11, 5.12 s 13 .… 5.25 s 13(1) .… 5.25 s 13(1)(a)–(d) .… 5.25 s 13(1)(e) .… 5.25, 5.114 s 13(2) .… 5.25 s 13(2)(a) .… 5.25 s 13(2)(b) .… 5.25

s 13(3) .… 5.25 s 13(c) .… 5.25 s 13(d) .… 5.25 s 14(1) .… 5.84 s 14(1)(a) .… 5.81 s 14(1)(b) .… 5.82, 5.86 s 14(1)(c) .… 5.81, 5.83 s 14(1)(d) .… 5.81, 5.83 s 14(2) .… 5.84 s 14(2A) .… 5.84 s 14(2)(a) .… 5.84 s 14(2)(b) .… 5.84 s 14(2)(c) .… 5.84, 5.85 s 14(3) .… 5.85 s 14(4) .… 5.85 s 14(5) .… 5.86 s 14(6) .… 5.82, 5.85 s 14(6)(a) .… 5.85 s 14(6)(b) .… 5.85 s 14(6)(c) .… 5.85 s 14(8) .… 5.81 s 15 .… 5.10 s 15(2) .… 5.10 s 18(1) .… 5.35 s 18(2) .… 5.32, 5.79, 5.116 s 18(3) .… 5.32, 5.72, 5.116

s 18(5) .… 5.133, 5.136 s 19 .… 5.27, 5.28, 5.87, 8.12 s 19(1) .… 5.28, 5.36 s 19(2) .… 5.28, 5.30, 5.31, 5.32 s 19(2)(a) .… 5.30 s 19(2)(b) .… 5.77 s 19(3) .… 5.32, 5.35 s 19(4) .… 5.35, 5.116 s 19(5) .… 5.4, 5.30 s 20 .… 5.8, 5.27, 5.36, 5.38, 5.41 s 20(1) .… 5.36 s 20(1)(b)(i) .… 5.40 s 20(1)(b)(ii) .… 5.40, 5.51 s 20(1)(b)(iii) .… 5.36, 5.37, 5.39 s 20(2) .… 5.37, 5.38, 5.39, 5.40 s 20(2)–(5) .… 5.36 s 20(2)(a) .… 5.39 s 20(2)(b) .… 5.38 s 20(2)(b)(ii) .… 5.38 s 20(2)(b)(iii) .… 5.38 s 20(3) .… 5.39 s 20(4) .… 5.38 s 20(5) .… 5.38 s 21 .… 5.8, 5.27, 5.41, 5.42 s 21(1)(a) .… 5.54 s 21(1)(b) .… 5.36, 5.41, 5.51

s 21(1)(b)(i) .… 5.77 s 21(2) .… 5.41 s 21(2)(a) .… 5.53 s 21(2)(b) .… 5.4, 5.42, 5.44, 5.45 s 21(2)(c)(i) .… 5.51 s 21(3) .… 5.41 s 21(4) .… 5.74 s 22 .… 5.27, 5.42, 5.43 s 22(1) .… 5.61 s 22(1)(a) .… 5.44, 5.57 s 22(1)(b) .… 5.43, 5.44, 5.57 s 22(1)(c) .… 5.44, 5.57 s 22(1)(d) .… 5.57, 5.62 s 22(2) .… 5.57, 5.62 s 22(3) .… 5.62 s 22(4) .… 5.62 s 22(4)(a) .… 5.62 s 22(4)(b) .… 5.62 s 23 .… 5.50 s 24 .… 5.42, 5.127 s 24(1) .… 5.40, 5.43, 5.44, 5.45 s 24(4) .… 5.47 s 24(4)–(6) .… 5.40 s 24(5) .… 5.42 s 24(5)(a)–(c) .… 5.48 s 24(5)(d)–(f) .… 5.48

s 24(6) .… 5.4, 5.42, 5.78 s 24(6)(a) .… 5.49 s 24(6)(b) .… 5.49 s 24(6)(c)(i) .… 5.49 s 24(6)(c)(ii) .… 5.49 s 24(6)(c)(iii) .… 5.49 s 25 .… 5.51 s 25(1) .… 5.51 s 25(4) .… 5.51 s 26 .… 5.52 s 26(2)(a) .… 5.52 s 26(2)(b) .… 5.52 s 27(2) .… 5.52 s 27(3) .… 5.52, 5.78 s 27(4) .… 5.52 s 27(5) .… 5.52 s 27(6) .… 5.52 s 28 .… 5.52 s 29 .… 5.52 s 29(1)(a) .… 5.52 s 29(1)(b) .… 5.52 s 29(2) .… 5.52 s 31(1)(a) .… 5.33 s 31(1)(b)–(e) .… 5.33 s 31(2) .… 5.33 s 31(3) .… 5.33

s 31(3)(a) .… 5.33 s 31(4) .… 5.33 s 31(5) .… 5.33 s 31(6) .… 5.33 s 32 .… 5.65, 5.104, 5.139, 8.12 s 32(1) .… 5.33, 5.90 s 32(1)(a) .… 5.33, 5.110 s 32(1)(b) .… 5.33, 5.56, 5.60, 5.110 s 32(5) .… 5.90 s 33(1) .… 5.60 s 33(1)(a) .… 5.56 s 33(1)(b) .… 5.56 s 33(1)(c) .… 5.56 s 33(2) .… 5.60 s 33(3) .… 5.60 s 34(1) .… 5.65 s 34(1)(a) .… 5.65 s 34(1)(b) .… 5.65 s 34(1)(c)(i) .… 5.65 s 34(1)(c)(ii) .… 5.65 s 34(2) .… 5.65 s 34(3) .… 5.65 s 35(1) .… 5.61 s 35(2) .… 5.61 s 35(3) .… 5.61 s 36(1) .… 5.63

s 36(2) .… 5.63 s 36(3) .… 5.63 s 37(1) .… 5.34, 5.58, 5.66 s 37(1)(a) .… 5.58 s 37(1)(b) .… 5.58 s 37(1)(c) .… 5.58 s 37(1)(d) .… 5.58 s 37(1)(e) .… 5.58 s 37(2) .… 5.34, 5.58, 5.66 s 38(1) .… 5.67 s 38(2) .… 5.67 s 38(3) .… 5.67 s 38(4) .… 5.67 s 39(1) .… 5.64 s 39(2) .… 5.64 s 39(2A) .… 5.64 s 39(2)(a) .… 5.64 s 39(2)(b) .… 5.64 s 39(3) .… 5.64 s 39(4) .… 5.64 s 40(1) .… 5.64 s 40(2) .… 5.64 s 40(3) .… 5.64 s 40(4) .… 5.64 s 40(5) .… 5.64 s 42 .… 5.102, 5.105

s 42(b) .… 5.34, 5.105 s 43(1) .… 5.41, 5.103 s 43(2) .… 5.103 s 44(1) .… 5.108 s 44(2)(a) .… 5.108 s 44(2)(b) .… 5.108 s 44(3) .… 5.108 s 45 .… 5.108 s 45(1) .… 5.108 s 45(1)(a) .… 5.108 s 45(2) .… 5.108 s 45(3) .… 5.108 s 45(3)(a) .… 5.108 s 45(4) .… 5.108 s 46 .… 5.35, 5.104, 5.105 s 46(1) .… 5.34, 5.66, 5.104, 5.116 s 47(1) .… 5.107 s 47(2)(a) .… 5.107 s 47(2)(b) .… 5.107 s 47(2)(c) .… 5.107 s 48 .… 5.105 s 48–51 .… 5.106 s 49 .… 5.105 s 50 .… 5.105 s 50(1) .… 5.105 s 50(2) .… 5.105

s 50(3) .… 5.105 s 51 .… 5.105 s 51(1) .… 5.105 s 51(1)(a) .… 5.105 s 51(2) .… 5.105 s 52(1) .… 5.106 s 52(2) .… 5.106 s 52(2)(a) .… 5.106 s 52(2)(b) .… 5.106 s 53 .… 5.110 s 53(2) .… 5.110 s 53(3) .… 5.110 s 55 .… 5.8, 5.55, 5.69, 5.96 s 55(1) .… 5.70 s 55(2) .… 5.28, 5.71, 5.72 s 55(3) .… 5.41, 5.71, 5.89 s 55(4) .… 5.41, 5.73, 5.74, 5.75, 5.76, 5.78, 5.79, 5.82, 5.87, 5.100 s 55(4)–(6) .… 5.74 s 55(5) .… 5.41, 5.73, 5.74, 5.75, 5.78, 5.100 s 55(5)(a) .… 5.74, 5.79, 5.82, 5.87 s 55(5)(b) .… 5.75, 5.77, 5.78 s 55(5)(c) .… 5.75 s 55(6) .… 5.73, 5.74, 5.75, 5.78 s 56 .… 5.41, 5.78, 5.89 s 56(2) .… 5.41 s 57 .… 5.69, 5.78

s 57(1) .… 5.89 s 57(2) .… 5.89 s 57(2A) .… 5.51 s 57(3) .… 5.89 s 58 .… 5.90 s 60 .… 5.90 s 61 .… 5.90, 5.91 s 61(2)(b) .… 5.91 s 62 .… 5.69, 5.79, 5.87, 5.88, 5.134 s 62(2)(b)(i) .… 5.87 s 62(2)(b)(ii) .… 5.87 s 62(2)(c) .… 5.80, 5.87 s 62(3)(b)(i) .… 5.87 s 62(3)(b)(ii) .… 5.87 s 62(3)(c) .… 5.80, 5.87 s 63 .… 5.69, 5.79, 5.87, 5.88, 5.134 s 63(a) .… 5.88 s 63(b) .… 5.88 s 63(c) .… 5.88 s 63(d) .… 5.88 s 64 .… 5.87 s 66–68 .… 5.90 s 69–72 .… 5.90 s 70 .… 5.47 s 71 .… 5.48 s 73–77 .… 5.90

s 75 .… 5.51 s 76 .… 5.58, 5.66 s 80 .… 5.118 s 80(8) .… 5.118 s 87 .… 5.93 s 88 .… 5.93, 5.94, 5.95, 5.98 s 89 .… 5.93, 5.95, 5.96, 5.98 s 90(a) .… 5.95, 5.96 s 90(b) .… 5.95 s 90(c) .… 5.95 s 90(d) .… 5.95 s 91 .… 5.95 s 91(a) .… 5.95 s 92 .… 5.97 s 93(1) .… 5.97 s 93(2) .… 5.97 s 94 .… 5.97 s 95 .… 5.97, 5.104 s 95(1) .… 5.97 s 95(1)–(4) .… 5.97 s 95(5) .… 5.97 s 95(6) .… 5.97 s 95(7) .… 5.97 s 96 .… 5.97, 5.98 s 97(a) .… 5.97 s 98 .… 5.93

s 99 .… 5.55, 5.101 s 99(1) .… 5.98, 5.99, 5.100, 5.101 s 99(2) .… 5.98, 5.99 s 100 .… 5.55, 5.100, 5.101 s 101 .… 5.100, 5.101 s 102 .… 5.101 s 102(1) .… 5.101 s 102(1)–(3) .… 5.101 s 102(2) .… 5.101 s 102(3) .… 5.101 s 102(4) .… 5.101 s 103 .… 5.101 s 103(b) .… 5.101 s 108 .… 5.119 s 109(1) .… 5.120 s 109(2) .… 5.120 s 109(3) .… 5.120 s 109(4) .… 5.120 s 109(5) .… 5.131, 5.138 s 110 .… 5.119, 5.120 s 111 .… 5.119, 5.120, 5.121 s 111(1) .… 5.121 s 111(2) .… 5.121 s 112(1) .… 5.122 s 112(2)(a) .… 5.122 s 112(2)(b) .… 5.122

s 113 .… 5.120 s 114 .… 5.119 s 115 .… 5.119, 5.133 s 115(1) .… 5.135 s 116 .… 5.120 s 117 .… 5.138 s 117(1)(b)(ii) .… 5.138 s 117(3) .… 5.138 s 118(1)(b) .… 5.138 s 118(3) .… 5.138 s 118(4) .… 5.138 s 120 .… 5.139 s 120(1) .… 5.139 s 120(2)(a) .… 5.139 s 120(2)(b) .… 5.139 s 120(3) .… 5.139 s 120(4) .… 5.139 s 120(5) .… 5.139 s 121(1) .… 5.139 s 121(2)(a)–(d) .… 5.139 s 121(2)(e) .… 5.139 s 121(3) .… 5.139 s 121(4) .… 5.139 s 121(5) .… 5.139 s 123 .… 5.124, 5.125, 5.128 s 123(1) .… 5.97, 5.124, 5.127

s 123(2) .… 5.124 s 123(3) .… 5.124 s 123(4) .… 5.45 s 124 .… 5.124 s 125(1) .… 5.128 s 125(2) .… 5.128 s 125(3) .… 5.128 s 126(1) .… 5.127 s 126(2) .… 5.129 s 126(3) .… 5.45, 5.127 s 127(2) .… 5.124, 5.126 s 127(3) .… 5.124 s 127(4) .… 5.124 s 127(5) .… 5.124 s 127(5)–(11) .… 5.124 s 128 .… 5.128, 5.130, 5.131, 5.132, 5.134,5.136 s 128(1) .… 5.131 s 128(2) .… 5.129 s 128(3) .… 5.129 s 128(6) .… 5.129 s 129 .… 5.120, 5.129, 5.132 s 129(1) .… 5.131 s 129(2)(a) .… 5.131 s 129(2)(b) .… 5.131 s 129(3)(a) .… 5.131 s 129(3)(b) .… 5.131

s 130 .… 5.124, 5.126, 5.131 s 130(3) .… 5.131 s 131 .… 5.119, 5.121, 5.130 s 133 .… 5.119, 5.133 s 133(1) .… 5.132 s 133(2) .… 5.132 s 134 .… 5.120, 5.134 s 135 .… 5.134 s 135(1)(a) .… 5.134 s 135(1)(b) .… 5.134 s 135(1)(c) .… 5.134 s 135(2) .… 5.134 s 135(3) .… 5.134 s 135(4) .… 5.134 s 136 .… 5.136 s 136(5) .… 5.136 s 137 .… 5.134 s 137(1) .… 5.131 s 137(2) .… 5.131 s 137(3) .… 5.131 s 138 .… 5.131 s 140 .… 5.119, 5.120, 5.133, 5.139 s 140(2) .… 5.133 s 140(3) .… 5.133 s 140(4) .… 5.133 s 140(7) .… 5.121, 5.133

s 142 .… 5.136, 5.137 s 142(1) .… 5.136 s 142(1)(a) .… 5.136 s 142(1)(b) .… 5.136 s 142(2) .… 5.136 s 142(3) .… 5.136 s 143(1) .… 5.137 s 143(2) .… 5.137 s 144 .… 5.129, 5.134 s 144(d) .… 5.129 s 150 .… 5.53 s 151(1) .… 5.74 s 153 .… 5.53, 5.56, 5.87, 5.88 s 161 .… 5.53 s 163(1) .… 5.53 s 163(1)(a) .… 5.53 s 163(1)(b) .… 5.53 s 163(1)(c) .… 5.53 s 164(1) .… 5.53 s 164(2) .… 5.53 s 164(3) .… 5.53 s 165 .… 5.53 s 166(1) .… 5.53 s 166(2) .… 5.53 s 166(3) .… 5.53 s 167 .… 5.53

s 167(1) .… 5.53 s 167(1)(c) .… 5.53 s 167(2) .… 5.53 s 167(3) .… 5.53 s 177(5) .… 5.138 s 235 .… 5.64 s 254 .… 5.2, 5.12, 5.42, 5.43, 5.72 s 254(1)(c) .… 5.93 s 267(1) .… 5.41, 5.111 s 267(1)(a)(i) .… 5.112 s 267(1)(a)(ii) .… 5.112 s 267(1)(a)(iii) .… 5.112 s 267(1)(a)(v) .… 5.112 s 267(1)(b)(i) .… 5.112 s 267(1)(b)(ii) .… 5.112 s 267(1)(b)(iii) .… 5.112 s 267(2) .… 5.112, 5.114 s 267A .… 5.113, 5.114 s 268(1)(aa) .… 5.114 s 268(1)(a)(i) .… 5.114 s 268(1)(a)(ii) .… 5.114 s 268(1)(a)(iii) .… 5.114 s 268(1)(b) .… 5.114 s 268(2) .… 5.114 s 275 .… 5.38 s 275(9) .… 5.38

s 296(f) .… 5.131 s 297 .… 5.53, 5.109 s 298 .… 5.109 s 299 .… 5.109 s 300 .… 5.48 s 306 .… 5.8 s 307 .… 5.8 s 308 .… 5.8 s 310 .… 5.8 s 311 .… 5.8 s 314 .… 5.8 s 321 .… 5.8 s 322 .… 5.8, 5.106 s 322(1) .… 5.8 s 322(2) .… 5.8 s 322(2)(a) .… 5.8 s 332 .… 5.8 s 333 .… 5.8 s 337 .… 5.8 s 340 .… 5.117 s 340(1)(a) .… 5.117 s 340(1)(b) .… 5.117 s 340(2) .… 5.117, 5.118 s 340(3) .… 5.117 s 340(4) .… 5.117 s 340(5) .… 5.117, 5.118

s 341(1A)(a) .… 5.118 s 341(1B) .… 5.117 s 341(1)(b) .… 5.118 s 341(2) .… 5.118 s 341(3) .… 5.118 s 341(4) .… 5.118 s 341A(1)(a) .… 5.118 s 341A(1)(b) .… 5.118 s 341A(2) .… 5.118 Ch 4 .… 5.21, 5.23, 5.26, 5.95, 5.97, 5.119, 5.120, 5.121, 5.122, 5.123, 5.124, 5.137, 5.138 Div 2 .… 5.69 Div 3 .… 5.69 Div 4 .… 5.69, 5.90 Div 5 .… 5.69, 5.90, 5.134 Div 6 .… 5.8, 5.69, 5.90 Div 7 .… 5.8 Pt 2.3 .… 5.118 Pt 2.6 .… 5.69, 5.90 Pt 3.3 .… 5.93 Pt 3.4 .… 5.93 Pt 5.3 .… 5.53 Pt 5.4 .… 5.8,5.53 Pt 7.2 .… 5.7 Personal Property Securities (Corporations and Other Amendments) Act 2010 .… 5.115 Personal Property Securities (Corporations and Other Amendments) Act

2011 .… 5.51 s 13 .… 5.52 s 14 .… 5.52 Sch 2 .… 5.52 Personal Property Securities (Corporations and Other Amendments) Bill 2009 .… 5.15, 5.16,5.51, 5.72 Personal Property Securities (Corporations and Other Amendments) Bill 2010 .… 5.5 Personal Property Securities Regulations 2010 .… 5.25, 5.74, 5.94, 5.95, 5.107, 5.108, 5.134 r 1.6 .… 5.94 r 1.7 .… 5.108 r 2.1 .… 5.108 r 2.2 .… 5.106, 5.108 Sch 1 Pt 2.2 .… 5.94 Proceeds of Crime Act 2002 Pt 2.2 .… 37.14 Pt 2.3 .… 37.14 Securities Industry Act 1980 .… 14.2 Shipping Registration Act 1981 .… 9.13, 9.14, 9.15, 9.16, 9.17, 9.23, 9.24, 20.47 s 3(1) .… 9.14 s 4 .… 9.14 s 7 .… 9.14 s 8(1) .… 9.14 s 11(1)(a) .… 9.14 s 11(1)(d) .… 9.14

s 11(1)(e) .… 9.14 s 12 .… 9.14 s 12(1) .… 9.14 s 12(3) .… 9.14 s 12(4) .… 9.14 s 13 .… 9.14, 9.17 s 14 .… 9.14 s 14(a) .… 9.14 s 14(b) .… 9.14 s 14(c) .… 9.14 s 33 .… 9.23 s 34 .… 9.17 s 35 .… 9.23 s 36 .… 9.24 s 38 .… 9.15, 9.28 s 38–40 .… 9.24 s 38(1) .… 9.15 s 38(2) .… 9.15, 9.17 s 38(3) .… 9.15 s 38(4) .… 9.15 s 39 .… 9.15, 9.16, 9.23, 9.24 s 40 .… 9.15, 9.16, 9.26 s 41 .… 9.16, 9.23, 9.24, 9.26 s 41(1) .… 9.15 s 41(2) .… 9.15 s 41(4) .… 9.15

s 42(1) .… 9.16 s 42(2A) .… 9.16 s 43(2) .… 9.16 s 44(1) .… 9.28 s 44(2) .… 9.15, 9.28 s 44(3) .… 9.28 s 44(4) .… 9.28 s 45 .… 9.15, 9.16, 9.23, 9.24 s 46 .… 9.23, 9.24 s 47 .… 9.15, 9.23, 9.24 s 47A .… 9.15, 9.17 s 47A(1) .… 9.18 s 47A(2) .… 9.18 s 47A(3) .… 9.18 s 47A(6) .… 9.18 s 47B(1) .… 9.18 s 47B(2) .… 9.18 s 47C .… 9.18 s 47D(1) .… 9.18 s 47E .… 9.18 s 51 .… 9.23 s 56 .… 9.23 s 57 .… 9.23 s 59 .… 9.23 s 59(1) .… 9.23 s 60 .… 9.23

s 63 .… 9.14 s 68 .… 9.14 s 69 .… 9.14 s 71 .… 9.14 s 86(1) .… 9.14 s 89 .… 9.14 Pt II .… 9.14 Shipping Registration Regulations 1981 reg 26 .… 9.16 reg 27 .… 9.16 reg 28 .… 9.28 Taxation Administration Act 1953 s 12-245 .… 41.4 s 16-25 .… 41.4 s 16-30 .… 41.4 s 260-5 .… 41.1 s 260.75 .… 18.7 Sch 1 .… 41.4 Tax Laws Amendments (2012 Measures No 4) Act 2012 .… 41.6 Trade Marks Act 1995 s 21 .… 6.27 s 22 .… 6.27 s 106 .… 6.27 s 107 .… 6.27 s 108 .… 6.27 Trade Practices Act 1974 .… 13.17, 20.38, 38.5

s 47 .… 32.9 s 51AA .… 38.5 s 51AB .… 13.35, 38.5 s 51AC .… 38.5 s 52 .… 13.40, 38.5 s 52A .… 38.5 s 74(1) .… 19.31 s 87 .… 38.5 Trade Practices Revision Act 1986 .… 38.5 New South Wales Bills of Sale Act 1898 .… 1.19 Civil Procedure Act 2005 s 101 .… 39.42, 39.49 s 106(1)(c) .… 26.23 s 126 .… 7.5, 24.50 s 126–128 .… 26.23 Confiscation of Proceeds of Crime Act 1989 .… 37.14 s 19 .… 37.14 Contractors Debts Act 1997 .… 7.10 Contracts Review Act 1980 .… 3.8, 13.17, 13.36,17.7, 20.22, 32.14, 38.6 s 4 .… 38.6 s 6 .… 38.6 s 7 .… 38.6 s 8 .… 13.36 s 9 .… 13.36 s 19 .… 38.6

Conveyancing Act 1919 .… 1.2, 1.3, 3.11, 4.2,4.41, 7.1, 7.6, 9.4, 21.9, 27.1, 27.4 s 3(1) .… 4.4 s 5 .… 4.41 s 6 .… 4.41 s 7 .… 3.3, 4.41, 21.9 s 7(1) .… 3.32, 13.6, 18.3, 19.15, 20.6, 20.9, 20.13, 24.13, 31.2, 32.56 s 8 .… 4.41 s 10 .… 36.2 s 11 .… 12.2, 12.4, 33.14 s 12 .… 1.37, 6.4, 14.2, 14.4, 14.5, 14.11, 15.2, 17.3, 32.68 s 23B .… 3.4, 14.4, 15.2 s 23C .… 1.35, 1.37, 3.37, 14.4, 32.18 s 23C(1)(c) .… 1.40 s 37 .… 38.2 s 37A .… 13.5 s 37A(1) .… 13.5 s 37A(3) .… 13.6 s 37B .… 13.9 s 37C .… 13.14 s 46 .… 14.5 s 52A .… 15.4 s 53 .… 24.15 s 54A .… 1.35, 1.40, 3.37, 3.45 s 60 .… 4.10 s 66 .… 32.39, 32.77

s 66(2) .… 32.77 s 66(5) .… 32.77 s 66B .… 32.78 s 66G .… 11.5 s 76 .… 32.79 s 78 .… 1.31 s 78(1)(c) .… 3.11 s 78(1)(d) .… 3.11 s 79 .… 32.5 s 80 .… 3.19 s 80–83 .… 17.1 s 81 .… 3.12 s 82 .… 3.19 s 83 .… 3.12 s 88D .… 21.9 s 88F .… 4.4, 21.9 s 91 .… 3.34, 14.10, 15.5, 21.9, 22.17, 32.58, 34.3 s 91(1) .… 32.58 s 91(2) .… 32.58 s 91(3) .… 32.65 s 91(3)(a) .… 32.58, 32.60, 36.9 s 91(3)(b) .… 32.60 s 91(4) .… 14.3, 14.10 s 91(5) .… 32.60 s 91(6) .… 4.30 s 92 .… 1.60, 20.11, 32.37

s 93 .… 3.13, 3.15, 3.16, 4.9, 32.6, 32.7 s 93(1) .… 32.7 s 93(3) .… 32.7 s 93(4) .… 32.7 s 94 .… 32.56 s 94(1) .… 32.56 s 94(2) .… 32.56 s 94(3) .… 32.56 s 94(4) .… 32.56 s 95 .… 32.56 s 96 .… 3.32, 10.5, 22.42, 33.11 s 96A .… 14.8, 24.34 s 97 .… 31.2, 31.11 s 97(3) .… 31.11 s 98 .… 4.9, 32.39, 38.7 s 99 .… 11.2, 32.50, 33.18 s 99(1) .… 11.32 s 100 .… 21.5, 22.29 s 101 .… 21.1, 21.9, 22.52 s 101(1) .… 21.9 s 102(1) .… 20.40 s 102(1)(c) .… 18.3 s 103 .… 20.50, 21.9, 21.12, 32.3 s 103(1) .… 33.8 s 103(2) .… 21.21 s 103(7) .… 21.9

s 104 .… 4.41, 20.5 s 106 .… 1.35, 3.12, 4.41, 12.22 s 106(3) .… 12.22, 12.23 s 106(5) .… 12.22, 12.23 s 106(6) .… 12.22, 12.24 s 106(7) .… 12.22 s 106(11) .… 12.21 s 106(17) .… 12.25 s 107 .… 12.30 s 107(12) .… 12.31 s 109 .… 1.19, 6.16, 20.6 s 109(1) .… 20.6 s 109(1)(a) .… 20.5, 20.6 s 109(1)(b) .… 3.20, 19.39 s 109(1)(d) .… 20.6, 41.21 s 109(1)(e) .… 1.19, 20.6 s 109(2) .… 18.3, 20.6, 20.11, 41.21 s 109(3) .… 18.3, 20.6, 20.11, 41.21 s 109(5) .… 18.3, 20.5 s 109A .… 1.19, 20.6 s 110 .… 20.7 s 111 .… 4.2 s 111(1) .… 20.11 s 111(2) .… 4.37, 20.11 s 111(2)(b) .… 20.13, 20.14, 20.16 s 111(3) .… 20.11, 20.14

s 111(3)(a) .… 20.14 s 111(3)(d) .… 20.11, 20.14 s 111(4) .… 20.15 s 112 .… 15.3, 20.39 s 112(1) .… 20.49 s 112(2) .… 20.49 s 112(3) .… 20.19 s 112(4) .… 1.53, 10.12, 20.43, 20.47, 42.9 s 112(5) .… 20.9 s 112(6) .… 20.8 s 112(8) .… 20.8 s 113 .… 15.3 s 113(1) .… 20.41 s 113(2) .… 20.43 s 114 .… 3.20 s 115 .… 3.46 s 115(2) .… 18.5, 18.14 s 115(3) .… 18.9, 20.51 s 115(4) .… 18.9 s 115(5) .… 18.7, 18.17 s 115(6) .… 18.15 s 115(6A) .… 18.6 s 115(7) .… 18.9 s 115(8) .… 18.16 s 115A(1) .… 18.3 s 115A(2) .… 18.3, 18.6

s 115A(2)(c) .… 18.7 s 115A(3) .… 18.3 s 117 .… 12.3, 12.13, 19.30 s 117(4) .… 12.3 s 117(4)(b) .… 12.3 s 118 .… 12.13 s 125 .… 12.13 s 129 .… 3.3, 37.9 s 129(1) .… 19.10 s 130 .… 3.27, 37.11 s 134 .… 3.27, 32.91 s 142–144 .… 39.42 s 145 .… 29.2 s 153 .… 11.16 s 153(3) .… 11.16 s 161 .… 3.47 s 164 .… 24.13, 24.22, 25.14 s 164(1) .… 20.20, 27.16 s 164(1A) .… 24.13, 27.16 s 170 .… 4.41, 20.11, 20.16, 22.52 s 170(1) .… 20.16 s 170(1A) .… 20.16 s 170(1)(d) .… 22.52 s 170(2) .… 20.16 s 171 .… 32.77 s 173 .… 24.12

s 183 .… 24.15 s 184 .… 3.33 s 184A–184J .… 3.52, 27.1 s 184A ff .… 32.58 s 184B .… 27.4 s 184C .… 27.3 s 184G .… 27.4 s 184G(1) .… 27.3, 27.5, 27.10, 27.11 s 184G(2) .… 27.5, 27.14 s 185–194 .… 7.6 s 186–188 .… 24.50 s 186–189 .… 24.51 s 186(2) .… 24.51 s 188 .… 24.51 s 189(1) .… 24.51 s 213 .… 42.10 Pt 23 .… 27.5 Pt XXIII .… 3.52, 27.1 Sch 2 .… 3.4 Sch 4 .… 3.12 Sch 5 .… 3.34, 32.58 Conveyancing and Law of Property Act 1898 .… 32.28 Credit Act 1984 s 105 .… 3.15 Credit (Home Finance Contracts) Act 1984 .… 9.1 Crown Lands (Continued Tenures) Act 1987

Sch 7 cl 117 .… 9.6 Crown Lands Act 1989 .… 9.6, 9.7 s 40 .… 9.6 Crown Lands Consolidation Act 1913 .… 9.6 Drug Trafficking (Civil Proceedings) Act 1990 .… 37.14 Duties Act 1997 .… 41.8 s 203A .… 41.10 s 205 .… 41.8 s 206 .… 41.8 s 208 .… 41.8 s 209 .… 41.8 s 210 .… 41.8 s 211 .… 41.9 s 213 .… 41.8 s 214 .… 41.10 s 216 .… 41.10 s 217 .… 41.10 s 223 .… 41.11 s 295 .… 41.8 s 304 .… 41.9 Evidence Act 1995 s 155 .… 27.16 s 156 .… 27.16 Fair Trading Act 1987 Pt 3 .… 38.5 Farm Debt Mediation Act 1994 .… 9.12, 14.2,19.6

Financial Institutions Act 1992 .… 11.45 Fisheries Management Act 1994 s 286A .… 5.9 General Register of Deeds (Conveyancing) Act 1919 s 111(2)(b1) .… 20.13 Imperial Acts Application Act 1969 s 18–20 .… 19.19 Industrial Relations Act 1996 .… 13.35 s 106 .… 13.35 Judgment Creditors’ Remedies Act 1901 .… 24.50 Land Acquisition (Just Terms Compensation) Act 1991 .… 38.3 s 20(1) .… 38.2 s 65 .… 32.35 Landlord and Tenant Act 1899 s 10 .… 37.9 Landlord and Tenant (Amendment) Act 1948 s 8(1) .… 12.13 Land Tax Management Act 1956 s 47(1) .… 7.1, 41.12 Law Reform (Miscellaneous Provisions) Act 1965 s 3 .… 42.14 Legal Aid Commission Act 1979 s 47 .… 40.23 Legal Profession Act 1987 s 199 .… 40.21 s 209 .… 42.10

s 477–493 .… 42.11 s 479 .… 42.11 Pt 3.5 .… 42.11 Legal Profession Act 2004 s 728 .… 2.38 Limitation Act 1969 .… 14.1, 16.17, 16.20, 16.25, 16.26, 32.91 s 11(1) .… 17.1 s 14(1)(a) .… 17.1 s 15 .… 16.20 s 27 .… 16.20 s 40 .… 16.20 s 41 .… 16.20, 32.84, 32.89 s 42 .… 16.20 s 42(1) .… 16.20 s 42(2) .… 16.20, 17.1 s 43(1) .… 16.20 s 43(2) .… 16.20 s 44 .… 16.20 s 45 .… 16.20 s 46 .… 16.20 s 47–50 .… 20.47 s 51 .… 16.20 s 52 .… 32.87 s 52–56 .… 16.20 s 53 .… 32.87 s 54 .… 32.88

s 54(2)(a)(i) .… 16.20 s 55 .… 16.36, 32.84, 32.87 s 56 .… 16.36, 32.87 s 63–68A .… 16.20 s 65 .… 4.40, 32.85 Pt 2 .… 16.20 Pt 2 Div 3 .… 16.20 Pt 2 Div 4 .… 16.20 Pt 3 .… 16.20 Pt 4 Div 1 .… 16.20 Local Government Act 1993 s 68B .… 5.9 s 729 .… 11.45 Minors, Property and Contracts Act 1970 .… 11.19 New South Wales Act 1862 .… 21.6 Partnership Act 1892 s 2 .… 6.22 s 2(III) .… 6.22 s 31 .… 6.18, 6.22 s 33 .… 6.18 Powers of Attorney Act 2003 s 47 .… 3.47 Probate and Administration Act 1898 s 44 .… 32.27 s 45 .… 32.27 s 46C .… 16.9

s 46E .… 32.27 s 61B(7) .… 32.24 Protected Estates Act 1973 .… 11.21 Public Health Act 1902 s 58 .… 38.1 Real Property Act 1900 .… 1.2, 4.10, 4.12, 4.17, 4.36, 4.37, 4.41, 6.7, 9.4, 16.20, 17.1, 19.3, 19.6, 20.5, 21.5, 21.9, 27.4, 28.12, 31.11, 38.6 s 3(1) .… 1.9 s 32(6) .… 32.63 s 36(4) .… 28.5 s 36(5) .… 28.5 s 36(6) .… 28.5, 28.8 s 36(6A) .… 28.5 s 36(9) .… 28.5 s 36(11) .… 16.17, 28.3 s 41 .… 22.52, 28.3 s 41(1) .… 4.24 s 42 .… 4.14, 4.22, 9.24, 12.21, 12.25, 19.18 s 42(1)(d) .… 12.13, 12.18 s 42(a) .… 4.14 s 42(b) .… 4.14 s 43 .… 9.24, 19.18, 28.8, 28.9 s 43(1) .… 28.7 s 43A .… 28.4, 28.8, 28.9 s 43(a) .… 4.23 s 43A(3) .… 27.4

s 45 .… 19.18 s 45D .… 4.40, 32.84 s 46 .… 4.33 s 51 .… 4.33, 14.5, 17.5 s 52 .… 4.33, 14.5, 17.5 s 52A .… 4.6 s 53(4) .… 12.18, 19.3 s 56 .… 4.5 s 56A .… 4.32, 28.1, 28.6 s 56B .… 28.1 s 57 .… 4.2, 16.20, 20.11, 20.14 s 57(1) .… 4.1, 19.11 s 57(2) .… 4.37, 20.8, 20.11 s 57(2)(a) .… 20.15 s 57(2)(b) .… 19.2, 20.14, 20.16, 40.3 s 57(2)(b1) .… 20.13 s 57(3) .… 20.14 s 57(3)(d) .… 20.14 s 57(4) .… 20.15 s 57(5) .… 20.15 s 58 .… 4.25, 4.37, 16.20, 19.31, 20.11 s 58(1) .… 4.37 s 58(2) .… 4.37, 20.20 s 58(3) .… 10.12, 20.6, 20.44, 20.47 s 58A .… 4.37 s 59 .… 20.49

s 60 .… 4.36, 12.3, 16.20, 19.2, 19.6, 19.7, 19.10, 19.31, 28.4 s 60(a) .… 19.5, 19.6 s 60(c) .… 19.5 s 61 .… 16.20, 21.9, 22.52 s 61(2) .… 22.52 s 62 .… 21.9, 22.52 s 62(1) .… 21.9, 22.53 s 62(2) .… 22.53 s 62(3) .… 33.12 s 63 .… 16.20 s 63(1) .… 19.5, 19.6, 19.7 s 64 .… 4.10 s 65 .… 4.38 s 65(1) .… 4.38 s 74F .… 4.27, 4.28, 28.9 s 74J .… 4.27, 20.49 s 74K .… 4.27 s 74MA .… 4.27, 20.49 s 75 .… 4.29 s 76 .… 32.5 s 80(1) .… 32.5 s 80A .… 3.12, 4.29, 4.41 s 90 .… 14.14 s 96(2) .… 4.31 s 105 .… 24.51 s 111 .… 32.81

s 118 .… 19.18 Pt 7 Div 3 .… 19.11 Registration of Deeds Act 1897 .… 27.1, 27.5 Residential Tenancies Act 1987 Pt 5 .… 12.11 Rural Land Protection Act 1989 s 175 .… 3.28 s 176 .… 11.13 Sch 4 .… 7.1 Sale of Goods Act 1923 s 5(2) .… 5.121 s 23(5) .… 5.82 Stamp Duties Act 1920 .… 41.8 s 83 .… 41.8 State Revenue Legislation Amendment Act 2002 .… 41.8 Supreme Court Act 1970 s 67 .… 18.18 s 73 .… 3.3 s 74 .… 2.38 Supreme Court Rules Pt 29(2) .… 18.20 Taxation Administration Act 1996 .… 41.9 Trustee Act 1925 .… 11.13 s 9 .… 14.9 s 34 .… 11.13 s 39 .… 11.13

s 45 .… 13.51 s 53 .… 32.49 s 70 .… 32.79 s 71 .… 22.48, 32.79 s 76 .… 21.17 s 82(4) .… 11.13 s 82A .… 11.13 s 84 .… 11.13 s 85 .… 8.6 s 95 .… 19.26, 20.45 Uncollected Goods Act 1995 .… 19.27 Uniform Civil Procedure Rules 2005 r 26.3 .… 18.20 r 39.44 .… 26.23 r 39.45 .… 26.23 r 41.16 .… 7.13 reg 36.4 .… 39.49 s 41.16 .… 26.23 Pt 6 .… 18.19 Pt 18 .… 18.19 Pt 26 .… 18.19 Pt 42 .… 40.1, 40.7 Pt 46 reg 46.8 .… 40.27 Usury, Bills of Lading and Written Memoranda Act 1902 s 8A .… 42.14 Water Act 1912 .… 9.11

Water Management Act 2000 .… 9.11 Victoria Administration and Probate Act 1958 s 13 .… 32.27 s 14 .… 32.27 s 39 .… 16.9 s 40 .… 29.2 s 46 .… 11.16 Australian Consumer Law and Fair Trading Act 2012 s 3 .… 19.27 s 54 .… 19.27 s 55(1) .… 19.27 s 55(2) .… 19.27 s 56 .… 19.27 s 56(2)(a) .… 19.27 s 56(4) .… 19.27 s 58(2) .… 19.27 s 60–62 .… 19.27 Pt 4.2 .… 19.27 Environmental Protection Act 1970 s 31A .… 37.5 s 31B .… 37.5 Evidence Act 2008 s 155 .… 27.16 s 156 .… 27.16 Fair Trading Act 1999

Pt 2 .… 38.5 Farm Debt Management Act 2011 .… 9.12 Farm Debt Mediation Act 2011 .… 19.7 Geelong Market Site Act 1990 .… 13.50 Goods Act 1958 s 3(2) .… 5.121 Guardianship and Administration Act 1986 .… 11.21 Instruments Act 1958 .… 1.19, 6.21 s 83 .… 6.20 s 84 .… 6.21 s 85 .… 6.21 s 87–92 .… 6.21 s 95 .… 6.21 s 126 .… 1.35 s 127 .… 1.40, 3.37, 3.45 Pt IX .… 6.21 Sch 9 .… 6.21 Land Acquisition and Compensation Act 1986 s 68ff .… 32.35 Land Act 1958 .… 9.6 Landlord and Tenant Act 1958 s 42A–42F .… 19.27 s 43(1) .… 12.13 Pt IVA .… 19.27 Limitation of Actions Act 1958 .… 14.1, 16.21, 16.25, 32.91 s 3(1) .… 32.86

s 3(2) .… 16.21 s 3(3) .… 16.21 s 3(6) .… 32.86 s 3(7) .… 16.21 s 5(1) .… 16.17, 17.1 s 5(3) .… 17.1 s 5(7) .… 16.21 s 8 .… 16.21 s 9 .… 16.21 s 10 .… 16.21 s 15 .… 4.40, 16.21, 32.84 s 18 .… 4.40, 16.21, 32.85 s 20 .… 16.21 s 20(4) .… 16.21 s 21 .… 20.47 s 23 .… 32.87 s 23(1) .… 16.21 s 23(2) .… 16.21 s 24–26 .… 16.21, 32.88 s 24(2) .… 32.84 s 25(2) .… 32.88 s 26(3) .… 32.88 s 26(4) .… 32.88 s 27 .… 16.21, 32.87 Local Government Act 1989 s 156(1) .… 19.39

Partnership Act 1958 s 6 .… 6.22 s 6(3) .… 6.22 s 7 .… 6.22 s 35 .… 6.18 s 37 .… 6.18 Property Law Act 1928 .… 12.3, 25.14 s 94(3) .… 25.10 Property Law Act 1958 .… 1.2, 4.2, 12.23, 21.9,22.12, 27.11, 32.77 s 2(3) .… 25.11, 25.13, 25.14 s 3 .… 24.12 s 4 .… 27.1 s 4–17 .… 27.1 s 5 .… 3.52, 27.1 s 6 .… 3.52, 27.3, 27.5 s 7–14 .… 27.1 s 13 .… 3.52 s 15–17 .… 3.52 s 15ff .… 27.1 s 18 .… 3.32, 24.12 s 18(1) .… 12.23, 12.24, 18.3, 19.15, 20.6, 20.9, 20.13, 21.9, 21.14, 24.13, 26.1, 31.2, 32.56 s 20 .… 32.62 s 20(3) .… 32.62 s 34 .… 32.78 s 38(1) .… 22.51

s 40(2)(a) .… 29.3 s 44 .… 4.21 s 44(1) .… 24.15 s 44(5) .… 24.15 s 45 .… 14.5 s 49 .… 2.13 s 50 .… 32.39, 32.77 s 50(2) .… 32.77 s 50(3) .… 32.77 s 52 .… 3.4, 14.4, 15.2 s 53 .… 1.35, 14.4, 32.18 s 53(1) .… 2.3, 2.7 s 53(1)(c) .… 1.37 s 56 .… 32.79 s 64 .… 3.32 s 69 .… 32.49 s 76 .… 1.31, 3.11, 3.19 s 77 .… 1.31 s 77(1) .… 20.23 s 84 .… 12.22 s 86 .… 12.25, 12.31, 21.5, 21.9, 25.14 s 87 .… 21.5, 22.29 s 88 .… 20.49 s 90 .… 21.9, 21.17, 21.20, 22.18, 22.45 s 90(1) .… 21.18 s 90(2) .… 21.20

s 91 .… 20.50, 21.9, 21.12, 22.42, 32.3, 33.8 s 91(2) .… 21.21, 22.43 s 93 .… 31.2, 31.11 s 94 .… 25.10, 25.11, 25.12, 25.13, 25.14 s 94(1) .… 25.11, 25.13 s 94(1)(b) .… 25.8, 25.13 s 94(1)(c) .… 25.13, 25.14 s 94(2) .… 25.14 s 94(3) .… 25.11, 25.14 s 94(4) .… 25.11, 25.14, 26.1 s 95 .… 32.56 s 95(1) .… 32.56 s 95(2) .… 32.56 s 95(3) .… 32.56 s 95(4) .… 32.56 s 96 .… 3.32, 10.5, 22.42, 33.11 s 97 .… 32.80 s 98 .… 12.2, 33.14 s 98(1) .… 12.4 s 99 .… 3.12, 12.22, 12.28 s 99(2) .… 12.27, 19.32 s 99(3) .… 12.23 s 99(5) .… 12.23 s 99(6) .… 12.24, 12.27 s 99(7) .… 12.24 s 99(9) .… 12.24

s 99(11) .… 19.32 s 99(12) .… 12.24 s 99(15) .… 12.24 s 99(16) .… 12.23, 19.32 s 99(17) .… 12.23, 19.32 s 100 .… 12.30 s 100(2) .… 19.32 s 100(3) .… 12.31 s 100(4) .… 12.31 s 100(6) .… 12.31 s 100(8) .… 12.31 s 100(9) .… 12.31 s 100(11) .… 12.31 s 101 .… 1.35, 3.20, 6.16, 21.9, 21.18, 21.19, 21.20 s 101(1) .… 20.6, 21.20, 21.21 s 101(1)(a) .… 20.5, 20.6, 20.11, 21.20 s 101(1)(b) .… 19.39 s 101(1)(c) .… 18.3 s 101(2) .… 20.7 s 101(3) .… 18.3, 20.6 s 101(4) .… 18.3, 20.6 s 102 .… 18.3 s 103 .… 20.11 s 103(a) .… 20.13, 20.14 s 104 .… 21.19 s 104–106 .… 15.2

s 104(1) .… 20.49, 21.20 s 104(2) .… 20.19 s 105 .… 1.53, 10.12, 20.43, 21.16, 21.20, 42.9 s 106(1) .… 20.9 s 106(2) .… 20.8 s 106(4) .… 20.8 s 107(1) .… 20.41 s 107(2) .… 20.43 s 108 .… 3.20 s 109 .… 2.8, 19.11 s 109(1) .… 18.3, 18.7 s 109(2) .… 18.5, 18.14 s 109(3) .… 18.9, 20.51 s 109(4) .… 18.9 s 109(5) .… 18.17 s 109(6) .… 18.15 s 109(7) .… 18.9 s 110 .… 18.16 s 111 .… 20.11, 23.3 s 112 .… 11.2, 32.50, 33.18 s 112(4) .… 11.32 s 113 .… 14.8, 24.34 s 114–119 .… 15.5 s 115 .… 14.3, 14.10, 22.17, 32.58, 32.62, 32.64, 34.3 s 115(1) .… 32.59, 32.65 s 115(1)(a) .… 32.60

s 115(2) .… 32.60 s 115(3) .… 32.60, 36.9 s 115(4) .… 32.60, 32.62 s 115(5) .… 32.59 s 115(6) .… 32.62 s 115(7) .… 32.60, 32.71 s 115(8) .… 32.60, 32.66 s 115(9) .… 32.60, 32.64 s 116 .… 32.62 s 123 .… 3.12 s 124 .… 32.66 s 134 .… 1.37, 6.4, 6.7, 6.14, 6.15, 14.2, 14.4, 14.11, 15.2, 17.3, 32.68 s 141 .… 12.3, 12.13, 19.30 s 141(2) .… 12.3 s 141(4) .… 12.3 s 142 .… 12.13 s 146 .… 3.3, 12.11, 37.9 s 146(1) .… 19.10 s 146(2) .… 24.12 s 146(4) .… 3.27, 37.11 s 151 .… 12.13 s 152 .… 12.24, 12.26 s 153 .… 3.27, 32.91 s 154 .… 32.79 s 172 .… 13.5 s 172(1) .… 13.5

s 172(3) .… 13.6 s 173 .… 13.9 s 174 .… 13.9 s 175 .… 13.14 s 175(2) .… 13.14 s 179 .… 22.18 s 183 .… 24.15 s 185 .… 36.2 s 198 .… 20.16 s 198(6) .… 20.16 s 199 .… 24.13, 25.14 s 199(1) .… 20.20, 24.14, 27.16 s 202 .… 32.77 s 205 .… 24.12 s 209 .… 7.6 s 209–214 .… 24.51 s 209–218 .… 7.6 s 213 .… 7.6 s 221–223 .… 11.5 s 248 .… 3.3 Pt I .… 25.13, 27.1 Pt I Div 3 .… 21.9 Pt IV .… 11.5 Pt IV Div 3 .… 21.9 Sch 4 Pt III .… 19.12 Sch 6 .… 32.59

Sch 7 Pt III .… 32.66 Sch 8 .… 3.4 Residential Tenancies Act 1997 .… 19.27 Pt 6 .… 12.11 Rules of Supreme Court r 73.02–73.09 .… 7.5 Settled Land Act 1958 .… 32.28 Solicitors’ (Professional Conduct and Practice) Rules 1984 r 5 .… 42.3 Supreme Court Act 1986 s 37(1) .… 18.18 s 37(2) .… 18.18 s 50 .… 11.19 s 52 .… 42.14 s 54 .… 39.42 s 56 .… 39.42 s 63 .… 42.10 s 73 .… 40.21 s 79 .… 37.9 s 80 .… 37.9 s 85 .… 37.9 s 101 .… 39.49 Supreme Court (General Civil Procedure) Rules 2005 O 25 .… 22.41 O 39 .… 18.19 O 53 .… 19.16

O 55 .… 21.24 O 63 .… 40.7 r 52.06 .… 40.27 r 53.01(2) .… 19.16 r 63.26 .… 40.1 r 73.01–73.11 .… 26.23 r 73.12 .… 26.23 r 73.13 .… 7.13 r 73.13–73.16 .… 26.23 Transfer of Land Act 1890 .… 21.5 s 63 .… 21.5 s 74 .… 21.5 s 89 .… 21.5 s 95 .… 21.5 s 99 .… 19.4 s 113 .… 21.5 s 114 .… 21.5 s 118 .… 21.5 s 121 .… 21.5 s 129 .… 21.5, 22.54 s 130 .… 21.5, 22.54 s 188 .… 21.5 s 226–230 .… 21.5 Transfer of Land Act 1958 .… 1.2, 4.6, 4.8, 4.27, 4.37, 13.9, 16.21, 19.7, 19.10, 19.23, 20.16, 21.5, 21.6, 21.9, 22.55, 31.11, 33.12 s 26C ff .… 27.1

s 27A .… 28.5 s 33–34A .… 28.5 s 34(1) .… 28.5 s 40 .… 28.3 s 40(1) .… 4.24, 22.52 s 40(2) .… 16.17, 17.1, 17.4, 28.3 s 42 .… 4.22, 4.40, 12.25, 19.18, 32.84 s 42(1)(a) .… 4.14 s 42(2)(b) .… 4.14 s 42(2)(d) .… 4.14 s 42(2)(e) .… 12.13, 12.18, 19.4, 24.21, 28.6 s 43 .… 19.18, 28.7, 28.9 s 44 .… 19.18 s 45 .… 4.33, 14.5 s 45(2) .… 4.33 s 46 .… 14.5, 17.5 s 46(1) .… 4.33 s 46(2) .… 17.5, 21.5, 32.5 s 51 .… 14.14 s 52 .… 24.51 s 52(5) .… 24.51 s 66(2) .… 12.18, 19.3 s 74 .… 12.25, 20.8 s 74(2) .… 4.1, 4.5, 19.11 s 75 .… 4.29 s 75A .… 4.30, 28.6

s 75(a) .… 17.1 s 75B .… 4.32, 28.1 s 76 .… 3.20, 20.14 s 76(1) .… 4.37, 20.14 s 76(2) .… 4.37 s 77 .… 20.14 s 77(1) .… 4.37, 20.5, 20.6, 20.14, 20.22, 20.40 s 77(3) .… 4.25, 10.12, 20.6, 20.44, 20.47 s 77(4) .… 20.20, 20.49 s 78 .… 4.36, 19.2, 19.7, 19.10, 19.25, 28.4 s 78(1) .… 12.3, 19.2, 19.7 s 78(1)(b) .… 19.5, 19.7, 19.25 s 79 .… 21.9 s 79(2)(c) .… 22.52 s 79(3) .… 22.53 s 79(4) .… 22.52, 22.53, 33.12 s 81 .… 4.9, 19.2, 19.7, 19.10, 19.25, 28.4 s 81(1) .… 12.3, 12.10, 12.11, 12.18, 19.4, 19.7, 19.25, 19.29 s 84(1) .… 4.38, 17.11 s 84(2) .… 4.38 s 86 .… 4.31 s 87 .… 32.56 s 89(1) .… 28.9 s 89A .… 4.27, 20.49 s 90(3) .… 4.27, 20.49 s 96 .… 4.31

s 100 .… 4.27 s 112(1) .… 32.5 s 113 .… 20.16, 22.52 s 118 .… 9.18 Pt IIIA .… 28.5 Pt IV Div 9 .… 19.11, 20.8 Sch 13 .… 12.25 Transfer of Land (Single Register) Act 1998 .… 27.1 Trustee Act 1958 .… 6.4, 11.13 s 20 .… 11.13 s 28(1) .… 32.49 s 28(3) .… 32.49 s 39 .… 13.51 s 45 .… 14.9 s 48 .… 32.79 s 51 .… 22.48, 32.79 s 52 .… 22.48 s 56 .… 21.19 s 58 .… 32.79 s 67 .… 8.6 s 69 .… 19.26, 20.45 Queensland Acquisition of Land Act 1967 s 20(1)(b) .… 5.4 s 32 .… 32.35 Bills of Sale and Other Instruments Act 1955 .… 9.16

Companies Act 1961 s 100(1) .… 9.16 s 100(3)(d) .… 6.18 Criminal Code Act 1899 s 70 .… 19.19 s 71 .… 19.19 Crown Lands Act .… 2.10 Duties Act s 252 .… 41.8 s 255 .… 41.8 Fair Trading Act 1989 Pt 3 .… 38.5 Industrial Relations Act 1999 .… 7.10 Land Act 1994 .… 9.6, 9.8 s 39 .… 2.10 s 300 .… 9.8 s 341 .… 9.8 s 345–347 .… 9.8 s 347 .… 9.8 Land Title Act 1994 .… 1.2, 21.6, 27.4 s 62 .… 14.5 s 65 .… 12.18 s 66 .… 19.3 s 74 .… 12.3, 19.5 s 75 .… 4.24 s 77 .… 28.6

s 78 .… 12.3, 19.5, 19.8, 28.4 s 79 .… 20.49 s 81 .… 4.38 s 98–108 .… 4.40 s 108 .… 4.40 s 110A .… 21.6 s 117–119 .… 24.51 s 120 .… 24.51 s 122(1) .… 28.9 s 124(2)(c) .… 20.49 s 174 .… 28.5 s 175 .… 28.5 s 176 .… 16.17, 28.3 s 178 .… 2.10, 28.5 s 181 .… 12.25, 28.3 s 184 .… 4.14, 4.22, 12.25, 19.18, 28.7 s 185 .… 4.14, 4.22, 12.18, 12.25, 19.18 s 185(1)(b) .… 4.14, 12.13 Limitation of Actions Act 1974 .… 14.1, 16.22 s 10(1)(a) .… 16.17 s 13 .… 16.22 s 14–19 .… 16.22 s 20 .… 16.22, 32.84 s 24 .… 16.22 s 26 .… 16.22 s 26(1) .… 16.22

s 26(2) .… 16.22 s 26(4) .… 16.22 s 26(6) .… 16.22 s 29 .… 16.22 s 35–37 .… 16.22 s 38 .… 16.22 Partnership Act 1891 s 6 .… 6.22 s 6(3) .… 6.22 s 7 .… 6.22 s 34 .… 6.18 s 36 .… 6.18 Property Law Act 1974 .… 1.2, 1.19, 25.13, 27.4 s 5(1)(b) .… 27.4, 31.11, 32.56 s 6 .… 31.2 s 38 .… 11.5 s 44–48 .… 3.52 s 77(1)(b)(i) .… 4.37 s 78 .… 17.1 s 78(1) .… 39.42 s 81 .… 12.2, 12.4 s 82 .… 25.10 s 82(1)(b) .… 25.8, 25.13, 25.14 s 83(1)(a) .… 3.4, 4.37, 20.6 s 83(1)(b) .… 19.39 s 83(1)(c) .… 18.3

s 83(1)(d) .… 41.21 s 83(3) .… 41.21 s 83(4) .… 41.21 s 84 .… 20.14 s 84(3) .… 4.37 s 85 .… 18.3, 18.13, 20.29 s 85(1) .… 20.6, 20.22 s 85(5) .… 20.22 s 85(6) .… 20.22 s 86(1) .… 20.49 s 87 .… 20.19 s 88 .… 20.43, 20.44 s 89(4) .… 20.8 s 90 .… 19.8 s 94(2) .… 25.13 s 94(3)(b) .… 32.56 s 95 .… 3.15, 21.7 s 96 .… 20.11, 32.37 s 96(1) .… 18.3 s 97 .… 20.40 s 98 .… 31.2, 31.11 s 99 .… 21.12, 21.21 s 99(2) .… 21.12 s 99(7) .… 21.17 s 100 .… 20.50 s 101 .… 32.39

s 117 .… 12.3, 12.13 s 118 .… 12.13 s 199 .… 6.4, 25.13 s 200 .… 6.4 s 228 .… 13.5 s 229 .… 13.9 s 241 .… 27.3, 27.4 s 241–249 .… 27.1 s 241(1)(a) .… 27.3 s 246 .… 27.4, 27.5, 27.10, 27.11 s 247 .… 27.14 s 249 .… 27.16 s 346 .… 24.13 s 346(1) .… 27.16 s 347 .… 20.16 Form 4 Version 1 .… 20.14 Pt 18 Div 3 .… 27.5 Pt I .… 25.13 Real Property Act 1877 .… 22.55 s 51 .… 9.23 Residential Tenancies Act 1975 Pt 3 .… 12.11 Sale of Goods Act 1896 s 3(2) .… 5.121 Subcontractors’ Charges Act 1974 .… 7.10 Succession Act 1981 s 57 .… 16.9

s 61(1) .… 29.2 Supreme Court Act 1995 s 48 .… 39.49 s 246 .… 18.18 Supreme Court Rules r 874–880 .… 26.23 Trusts Act 1973 .… 21.6, 22.55 s 82 .… 22.48 s 83 .… 22.48 s 89 .… 21.6, 22.55 Trusts Act 1981 s 64 .… 13.51 Uniform Civil Procedure Rules 1999 r 882 .… 26.23 South Australia Administration and Probate Act 1919 s 52 .… 29.2 s 60 .… 16.9 s 61 .… 16.9 Crown Lands Act 1929 .… 9.6 Enforcement of Judgments Act 1991 s 8 .… 26.23 Fair Trading Act 1987 Pt 3 .… 38.5 Home Improvement Act 1940 s 23 .… 38.1

Land Acquisition Act 1969 s 26A .… 32.35 Law of Property Act 1936 .… 1.2, 1.19 s 14 .… 12.2, 12.4 s 15 .… 6.4 s 17(2) .… 32.62 s 27 .… 32.39, 32.77 s 43 .… 20.50, 21.18 s 44 .… 21.12 s 44(6) .… 21.17 s 45 .… 32.56 s 47(1)(a) .… 20.6 s 47(1)(b) .… 19.39 s 47(1)(c) .… 18.3 s 48 .… 20.14 s 49(1) .… 20.49 s 49(2) .… 20.19 s 50 .… 20.43 s 52 .… 19.8 s 55A .… 18.3, 19.2, 19.8, 20.14, 21.5, 22.52 s 55B(1) .… 20.15 s 55B(2) .… 32.12 s 55B(3) .… 21.6 s 86(1) .… 13.5 s 87 .… 13.9 s 88 .… 13.14

s 112 .… 20.16 s 117(1) .… 24.13, 27.16 s 132 .… 20.14 Pt 8 .… 11.5 Limitation of Actions Act 1936 .… 14.1, 16.23 s 4 .… 16.23 s 5–17 .… 16.23 s 27 .… 16.23 s 27(1) .… 32.84 s 28 .… 16.23 s 33 .… 16.23 s 34 .… 16.23 s 35 .… 16.23 s 35(a) .… 16.17 s 36 .… 16.23 s 37 .… 16.23 s 39 .… 16.23 s 45 .… 16.23 Misrepresentation Act 1971 .… 13.40 Partnership Act 1891 s 2 .… 6.22 s 2(III) .… 6.22 s 31 .… 6.18, 6.22 s 33 .… 6.18 Real Property Act 1886 .… 1.2, 16.23, 27.6 s 54 .… 28.5

s 56 .… 28.5 s 56(1a) .… 28.5 s 56A .… 28.5 s 57 .… 16.17, 28.3 s 64 .… 4.38 s 67 .… 22.52, 28.3 s 69 .… 4.18, 4.22, 12.25, 19.18 s 69(b) .… 4.21 s 69(d) .… 4.14 s 69 Pt VIII .… 4.14, 12.13, 12.18 s 69V .… 4.14 s 70 .… 19.18 s 72 .… 19.18 s 105–110 .… 24.51 s 118 .… 12.18, 19.3 s 129 .… 12.25 s 131 .… 32.56 s 133 .… 4.37 s 135 .… 20.44 s 135A .… 20.44 s 136 .… 20.49 s 137 .… 12.3, 19.2, 19.5, 19.8, 28.4 s 140 .… 22.52 s 141 .… 22.53 s 143 .… 4.38 s 186 .… 19.18, 28.7

s 187 .… 19.18, 28.7 s 191 .… 28.9 s 207 .… 19.18 s 251 .… 4.40 s 276 .… 20.16 Registration of Deeds Act 1935 .… 3.52, 27.1 s 5(1) .… 27.3 s 9 .… 27.4 s 10(1) .… 27.3 s 10(2) .… 27.6, 27.11, 27.15 s 10(3) .… 27.10 s 10(4) .… 27.6 s 28 .… 27.16 Sale of Goods Act 1895 s 2(2) .… 5.121 Supreme Court Act 1935 s 29 .… 18.18 s 114 .… 39.49 Trustee Act 1936 s 36 .… 22.48 s 37 .… 22.48 s 41 .… 22.48 Workers Liens Act 1893 .… 7.10 Western Australia Administration Act 1903 s 10 .… 11.16

s 10A .… 16.9 Administration and Probate Act 1935 s 35 .… 29.2 Age of Majority Act 1972 .… 16.24 Criminal Code Compilation Act 1913 s 69 .… 19.19 s 70 .… 19.19 Fair Trading Act 2010 .… 38.5 Land Act 1933 .… 9.6 Land Administration Act 1997 s 257 .… 32.35 Limitation Act 1935 .… 14.1, 16.24 s 29 .… 32.84 s 38(1)(c)(v) .… 16.17 Limitation Act 2005 .… 16.17, 16.24 s 5 .… 16.24 s 9 .… 16.24 s 13 .… 16.24 s 15 .… 16.24 s 16 .… 16.24 s 18 .… 16.24 s 19 .… 16.24 s 20 .… 16.24 s 22 .… 16.24 s 23 .… 16.24 s 24 .… 16.24

s 25 .… 16.24 s 29 .… 16.24 s 30 .… 16.24 s 32 .… 16.24 s 34 .… 16.24 s 35 .… 16.24 s 38 .… 16.24 s 40 .… 16.24 s 41 .… 16.24 s 44 .… 16.24 s 65–73 .… 16.24 Pt 2 Div 3 .… 16.24 Pt 3 .… 16.24 Pt 3 Div 1 .… 16.24 Pt 3 Div 2 .… 16.24 Pt 3 Div 3 .… 16.24 Pt 3 Div 4 .… 16.24 Partnership Act 1895 s 8 .… 6.22 s 8(3) .… 6.22 s 9 .… 6.22 s 42 .… 6.18 s 44 .… 6.18 Property Law Act 1969 .… 1.2, 1.19, 4.14, 7.4 s 7 .… 31.2 s 19(1) .… 12.2, 12.4

s 20 .… 6.4 s 20(3) .… 6.4 s 22(2) .… 32.62 s 53 .… 21.5, 22.29 s 53(2) .… 21.5 s 54 .… 20.50, 21.18 s 55 .… 21.12 s 55(7) .… 21.17 s 56 .… 31.2, 31.11 s 57(1)(a) .… 20.6 s 57(1)(b) .… 19.39 s 57(1)(c) .… 18.3 s 58 .… 21.5 s 59 .… 20.14 s 60(1) .… 20.49 s 60(2) .… 20.19 s 61 .… 20.43 s 68 .… 21.5 s 72 .… 12.11 s 77 .… 12.3, 12.13 s 78 .… 12.13 s 82 .… 21.5 s 88 .… 21.5 s 89(1) .… 13.5 s 90 .… 13.9 s 91 .… 13.9

s 92 .… 13.14 s 105 .… 21.5 s 106 .… 21.5 s 110 .… 21.5 s 113 .… 21.5 s 122 .… 21.5 s 133 .… 21.5 s 135 .… 20.16 s 220 .… 21.5 s 221 .… 21.5 s 226 .… 21.5 s 227 .… 21.5 s 228 .… 21.5 Pt XIV .… 11.5 Registration of Deeds Act 1856 .… 3.52, 27.1 s 2 .… 27.3 s 3 .… 27.3, 27.7, 27.10, 27.11 s 15 .… 27.16 s 16 .… 27.16 Sale of Goods Act 1895 s 60(2) .… 5.121 Supreme Court Act 1935 s 25(9) .… 18.18 s 142 .… 39.49 Transfer of Land Act 1893 .… 1.2, 22.52, 31.11 s 52 .… 28.5

s 53 .… 28.5 s 54 .… 28.5 s 56 .… 28.5 s 58 .… 22.52, 28.3 s 68 .… 4.14, 4.22, 12.13, 12.18, 12.25, 19.18 s 85 .… 16.17, 28.3 s 91 .… 12.18, 19.3 s 105 .… 12.25 s 106 .… 20.16 s 106–108 .… 20.14 s 107 .… 4.37 s 108 .… 4.37 s 109 .… 20.44 s 110 .… 20.49 s 111 .… 12.3, 19.2, 19.5, 19.25, 28.4 s 113 .… 17.1 s 116 .… 12.3, 12.10, 12.11, 12.18, 19.2,19.4, 19.7, 19.25, 19.29 s 121 .… 22.52 s 122 .… 22.53 s 123 .… 4.38 s 128A .… 32.56 s 133 .… 24.51 s 134 .… 19.18, 28.7 s 137 .… 28.9 s 146–150 .… 28.8 s 199 .… 19.18

s 202 .… 19.18 s 222 .… 4.40 s 240 .… 20.16 Trustees Act 1962 s 61 .… 13.51 s 78 .… 22.48 s 79 .… 22.48 Workmen’s Wages Act 1898 .… 7.10 Tasmania Administration and Probate Act 1935 s 34(1) .… 16.9 s 39 .… 11.16 Australian Consumer Law (Tasmania) Act 2010 .… 38.5 Contractors’ Debts Act 1939 .… 7.10 Conveyancing and Law of Property Act 1884 .… 1.2, 1.19, 20.11, 32.66 s 4 .… 32.39, 32.77 s 5(1) .… 24.13, 27.16 s 10 .… 12.13 s 11 .… 12.13 s 11(5) .… 12.2 s 17 .… 32.56 s 19 .… 12.22 s 20 .… 12.30 s 21(1)(a) .… 20.6 s 21(1)(b) .… 19.39 s 21(1)(c) .… 18.3

s 21(1)(d) .… 41.21 s 21(2) .… 41.21 s 21(3) .… 41.21 s 22(1) .… 20.14 s 22(4) .… 20.11 s 23(1) .… 20.49 s 23(2) .… 20.19 s 23(3) .… 20.43 s 27 .… 21.12 s 28 .… 32.66 s 31 .… 32.66 s 31A .… 14.10, 32.58, 32.60 s 32(2) .… 32.62 s 38 .… 25.10 s 40(1) .… 13.5 s 41 .… 13.9 s 42 .… 13.14 s 69 .… 32.49 s 83 .… 32.91 s 85 .… 20.16 s 86 .… 6.4 s 91 .… 32.56 Sch 1 Pt 1 .… 32.66 Sch 4 .… 32.56 Criminal Code Act 1924 s 79 .… 19.19

Crown Lands Act 1976 .… 9.6 s 25 .… 9.9 Duties Act s 142 .… 41.8 s 143 .… 41.8 Evidence Act 2001 s 155 .… 27.16 s 156 .… 27.16 Land Acquisition Act 1993 .… 32.35 Land Titles Act 1980 .… 1.2, 16.25, 28.8 s 33(11) .… 28.5 s 40 .… 12.25, 19.18 s 40(3)(b) .… 4.14, 4.22 s 40(3)(c) .… 4.14 s 40(3)(d) .… 4.14, 12.13, 12.18 s 40(3)(h) .… 4.40 s 41 .… 19.18, 28.7 s 42 .… 19.18 s 47 .… 19.18 s 48(7) .… 16.17, 28.3 s 49 .… 28.3 s 49(1) .… 22.52 s 52 .… 28.8 s 61 .… 24.51 s 64(3) .… 19.3 s 72 .… 12.25

s 75(1) .… 4.6 s 76 .… 28.1, 28.6 s 77 .… 20.14 s 77(1) .… 20.16 s 78 .… 4.37, 20.44 s 78(1) .… 20.14, 20.22, 20.23 s 81 .… 20.49 s 82 .… 12.3, 19.2, 19.8, 28.4 s 85 .… 22.52 s 86(1) .… 22.53 s 86(2) .… 22.53 s 89 .… 4.38 s 133 .… 28.9 s 146 .… 19.5 s 168 .… 20.16 s 170(2)(b) .… 28.8 Limitation Act 1974 .… 14.1, 16.25, 32.91 s 4(1)(a) .… 16.17 s 4(2) .… 16.25 s 4(5) .… 16.25 s 10(1) .… 16.25 s 10(2) .… 16.25 s 10(3) .… 16.25 s 11 .… 16.25 s 12 .… 16.25 s 13 .… 16.25

s 18 .… 16.25, 32.84 s 21 .… 16.25 s 23(1) .… 16.25 s 23(2) .… 16.25 s 23(3) .… 16.25 s 26 .… 16.25 s 27 .… 16.25 s 34 .… 16.25 Pt III Div 2 .… 16.25 Pt III Div 3 .… 16.25 Partition Act 1869 .… 11.5 Partnership Act 1891 s 7 .… 6.22 s 7(c) .… 6.22 s 8 .… 6.22 s 36 .… 6.18 s 38 .… 6.18 Registration of Deeds Act 1935 .… 3.52, 27.1, 27.8 s 3 .… 27.4 s 3(b) .… 27.3 s 5 .… 27.3 s 9 .… 27.5, 27.11 s 10 .… 27.8 s 11 .… 7.4, 27.3 Sale of Goods Act 1896 s 3(2) .… 5.121

Supreme Court Civil Procedure Act 1932 s 10 .… 12.3 s 11(5) .… 12.4 s 11(12) .… 18.18 s 165 .… 39.49 s 166–168 .… 26.23 Supreme Court Rules 2000 r 930–935 .… 26.23 r 936 .… 26.23 r 937 .… 26.23 Trustee Act 1898 s 30 .… 13.51 s 33 .… 22.48 s 34 .… 22.48 s 38 .… 21.17 Northern Territory Consumer Affairs and Fair Trading Act Pt 4 .… 38.5 Limitation Act 1981 s 26 .… 32.84 s 27(1)(b) .… 16.26 s 27(1)(c) .… 16.26 Sale of Goods Act 1954 s 5(2) .… 5.121 Australian Capital Territory

Fair Trading (Australian Consumer Law) Act 1992 .… 38.5 Land Titles Act 1925 s 96 .… 19.8 Law Reform (Misrepresentation) Act 1977 .… 13.40 Limitation Act 1985 s 23 .… 32.84 s 24(1)(b) .… 16.26 s 24(1)(c) .… 16.26 Sale of Goods Act 1954 s 4(a) .… 5.121 United Kingdom Access to Justice Act 1999 s 10(7) .… 7.1 Administration of Estates Act 1925 .… 29.2 s 25 .… 30.2 Administration of Justice Act 1970 s 36 .… 19.19 Bills of Sale Act 1878 .… 1.20, 31.7 Chancery Procedure Act 1852 .… 21.15 s 48 .… 21.18, 21.21 Civil Procedure Act 1833 .… 16.18 s 3 .… 16.18 Civil Procedure Rules r 40.15–40.19 .… 21.24 r 73.11–73.15 .… 26.23 r 73.13 .… 26.23

r 73.14 .… 26.23 r 73.16–73.21 .… 26.23 Practice Direction 40D .… 21.24 Common Law Procedure Act 1852 .… 37.9 s 210–212 .… 3.3 Companies Act 1862 .… 6.4, 11.41 Companies Act 1985 s 360 .… 26.12 Companies Clauses Consolidation Act 1845 .… 26.12 Conveyancing Act 1881 .… 20.4, 20.50, 21.21 s 3 .… 24.13, 24.14 s 11(1) .… 12.13 s 16 .… 22.42 s 17 .… 31.2 s 18 .… 12.22 s 18(3)(i) .… 12.23 s 21(2) .… 20.20 s 25 .… 21.12 s 25(1) .… 21.14 s 25(2) .… 21.14, 21.21 s 70 .… 24.12 Conveyancing Act 1882 s 3(1) .… 20.20 Conveyancing Act 1911 s 2 .… 12.3 s 3 .… 12.30

s 5(1) .… 20.20 County Courts Act 1888 .… 21.15 English Building Societies Act 1836 s 5 .… 32.57 Factors Act 1889 .… 5.14, 5.104, 11.24 Forcible Entry Act 1381 .… 19.19 General Rate Act 1967 s 17A .… 19.39 s 17B .… 19.39 Grantees of Reversions Act 1540 .… 12.3, 12.13 Highways Act .… 19.39 Insolvency Act 1986 s 423(2) .… 13.5 Insolvency Act 1996 s 339 .… 13.4 Insolvency Rules 1986 .… 23.5 Judgments Act 1838 .… 7.4 s 14 .… 7.5 Judgments Act 1873 s 25(6) .… 6.4 Judicature Act 1873 .… 1.14, 7.8, 24.4, 24.40 s 25(5) .… 12.2 Judicature Act 1875 .… 24.4, 24.40 Land Clauses Consolidation Act 1845 s 63 .… 5.4 Land Registration Act 1925

s 34(2) .… 19.43 s 75 .… 19.43 Law of Property Act 1925 .… 1.2, 1.3, 6.4, 20.11, 22.12, 31.2, 32.57 s 3(i) .… 12.23 s 23 .… 7.12 s 44(1) .… 24.15 s 44(5) .… 24.15 s 53(1)(c) .… 1.37, 6.24 s 85(3) .… 1.13 s 86(3) .… 1.13 s 90 .… 21.19, 22.18, 22.45 s 90(1) .… 21.14, 21.18, 21.20 s 90(2) .… 21.20 s 91 .… 21.10, 21.12, 21.18, 21.19, 21.21,22.42 s 91(1) .… 21.14, 21.15, 21.19, 21.21 s 91(2) .… 20.24, 21.14, 21.15, 21.16, 21.19, 21.21, 21.22, 21.23, 21.24, 22.42, 22.43 s 91(3) .… 21.16, 21.23, 21.24 s 91(4) .… 21.16 s 91(7) .… 21.17, 21.19 s 93 .… 31.2 s 93(1) .… 31.2 s 94 .… 25.10, 26.1 s 94(4) .… 26.1 s 96(1) .… 22.42 s 98 .… 3.52, 12.2

s 99 .… 12.4, 12.22, 12.24, 12.26, 12.28, 12.30, 19.32 s 99(2) .… 12.23, 12.27, 19.32 s 99(3)(i) .… 12.23 s 99(6) .… 12.27 s 99(7) .… 12.24 s 99(9) .… 12.23 s 99(10) .… 12.23 s 99(11) .… 12.24 s 99(13) .… 19.32 s 99(14) .… 12.24 s 99(17) .… 12.24 s 99(18) .… 12.23, 19.32 s 99(19) .… 12.23, 19.32 s 100 .… 12.23, 12.30 s 100(2) .… 19.32 s 100(3) .… 12.31 s 100(4) .… 12.31 s 100(6) .… 12.31 s 100(8) .… 12.31 s 100(9) .… 12.31 s 100(11) .… 12.31 s 100(12) .… 12.23 s 101 .… 2.8, 6.16, 20.50, 21.18, 21.19,21.20 s 101(1) .… 21.20, 21.21 s 101(1)(a) .… 21.20 s 101(1)(i) .… 20.5

s 101(1)(ii) .… 19.39 s 101(1)(iv) .… 41.21 s 101(4) .… 19.39 s 104 .… 20.50, 21.19 s 104(1) .… 21.20 s 104(2) .… 20.19 s 105 .… 21.16, 21.20 s 113 .… 24.34 s 114 .… 14.3 s 115 .… 22.17 s 134 .… 6.6, 6.9 s 136 .… 6.4, 6.24 s 136(1) .… 6.4, 6.5, 6.19 s 137 .… 1.37, 6.8, 26.8, 26.15 s 137(1) .… 6.8 s 137(3) .… 6.14, 26.18 s 138 .… 1.37 s 141 .… 12.3, 19.30 s 141(1) .… 12.3 s 141(2) .… 12.3 s 141(3) .… 12.3 s 141(4) .… 12.3 s 142(1) .… 12.13 s 152 .… 12.26 s 152(1) .… 12.24 s 172 .… 13.5

s 173 .… 13.9 s 173(2) .… 31.9 s 174 .… 6.23, 13.9, 13.14 s 181 .… 22.18 s 183 .… 24.15 s 198 .… 24.8 s 199 .… 25.14 s 199(1)(ii) .… 24.14 s 204 .… 24.12 s 205(1)(xix) .… 12.23 s 205(1)(xvi) .… 12.23 s 205(1)(xxi) .… 24.13 s 205(1)(xxiii) .… 12.24 Sch 2 Pt III .… 19.12 Limitation Act 1939 .… 16.17 Limitations Act 1980 s 16 .… 19.43 s 17 .… 19.43 s 32(3) .… 16.36 s 32(4) .… 16.36 Locke King’s Act 1854 (17 & 18 Vict c 113) .… 29.2, 29.3 Locke King’s Act 1867 (30 & 31 Vict c 69) .… 29.2, 29.3 Locke King’s Act 1877 (40 & 41 Vict c 34) .… 29.2, 29.3 Locke King’s Acts .… 29.2, 29.4, 30.10 Lock King’s Act 1867 (30 & 31 Vict c 69) s 2 .… 29.2

Manchester Ship Canal Act 1885 .… 21.21 Mercantile Law Amendment Act 1856 .… 42.14 Merchant Shipping Act 1894 .… 9.14, 9.23, 9.24, 9.28, 16.20 s 33 .… 9.23 s 35 .… 9.23 s 56 .… 9.23 s 57 .… 9.23 Pt I .… 9.14 Misrepresentation Act 1967 .… 13.40 s 1 .… 13.40 s 2(2) .… 13.40 Mortgagees Legal Costs Act 1895 .… 42.10 National Debt Act 1870 s 22 .… 6.4 Partnership Act 1890 .… 11.25, 11.28 s 2 .… 6.22 s 2(3) .… 6.22 s 5 .… 11.25, 11.27 s 31 .… 6.18, 11.28 s 33 .… 6.18, 11.28 Public Health Act 1936 .… 19.39 Real Property Limitation Act 1833 .… 16.18, 16.19, 16.24, 32.90 s 28(3) .… 16.20 s 42 .… 16.18 Real Property Limitation Act 1874 .… 16.18, 16.19, 16.24 s 2 .… 16.31

s 4 .… 16.24 s 8 .… 16.18, 16.29 Rules of Supreme Court O 21 .… 22.41 O 113 .… 19.16 Sales of Reversions Act 1867 .… 13.14 Satisfied Terms Act 1845 .… 32.62 Settled Land Act 1925 s 71 .… 11.11 Solicitors Act 1860 .… 2.42 Solicitors Act 1974 s 2 .… 42.10 s 55 .… 42.10 s 69(1) .… 42.3 Statute of 1571 .… 13.5 Statute of Frauds 1677 s 9 .… 6.24 Statute of Limitations 1623 s 3 .… 16.17 s 7 .… 16.17 Trustee Act 1925 s 33 .… 13.51 s 33(3) .… 13.51 s 63 .… 19.26 Uniform Contract Terms Act 1977 .… 6.8 Usury Act 1545 .… 1.13

Voluntary Conveyances Act 1893 .… 13.9 United States Uniform Commercial Code .… 5.4, 5.23, 5.43,5.44, 5.50, 5.79, 5.85, 5.93, 5.94, 5.104, 5.121 § 2-401(2) .… 5.82 § 8-106 .… 5.50 § 9-102(a)(1) .… 5.94 § 9-102(a)(11) .… 5.22 § 9-102(a)(20) .… 5.23 § 9-102(a)(43) .… 5.121 § 9-103 .… 5.81 § 9-103(e) .… 5.85 § 9-103(e)(1) .… 5.85 § 9-103(f)(1) .… 5.85 § 9-103(f)(2) .… 5.85 § 9-103(f)(3) .… 5.86 § 9-104(2) .… 5.51 § 9-104(3) .… 5.51 § 9-107(b) .… 5.82 § 9-109(a)(1) .… 5.15 § 9-305 .… 5.44 § 9-312(4) .… 5.87 § 9-313(1) .… 5.42 § 9-324(a) .… 5.87 § 9-402 .… 5.41 § 9-501 .… 5.136

§ 9-506 .… 5.136 § 9-610 .… 5.121 § 9-627 .… 5.121 § 9-627(b)(3) .… 5.121 Article 8 .… 5.50 Article 9 .… 5.1, 5.2, 5.4, 5.26, 5.30, 5.35,5.43, 5.50, 5.51, 5.94, 5.116, 5.121, 5.136 Wisconsin Statutes § 409.501 .… 5.136 New Zealand Administration Act 1969 s 31 .… 16.9 Deeds Registration Act 1908 .… 27.1 s 9 .… 27.3 s 35 .… 27.9, 27.10 s 36 .… 27.10 s 39 .… 27.11, 27.13 Land Transfer Act 1915 s 105 .… 19.6 Land Transfer Act 1952 .… 13.9 s 34(1) .… 28.5 s 37 .… 28.5 s 62(a) .… 4.14 s 62(b) .… 4.14 s 63(1)(e) .… 4.14 s 100 .… 19.2

s 103 .… 28.6 s 109 .… 19.2 s 137 .… 28.9 s 182 .… 13.9, 28.7 s 183 .… 13.9 Personal Property Securities Act 1999 .… 5.1, 5.4, 5.93, 5.137 s 16 .… 5.23 s 16(1) .… 5.25, 5.125 s 17(3) .… 5.20 s 18 .… 5.42 s 25(1) .… 5.121 s 36(1)(b)(i) .… 5.38 s 56 .… 5.106 s 66(b)(ii) .… 5.77 s 79 .… 5.95 s 80 .… 5.95 s 81 .… 5.95 s 125 .… 5.97 s 130 .… 5.97 s 132(1) .… 5.136 s 133 .… 5.137 s 134 .… 5.137 Property Law Act 1952 s 61 .… 13.9 s 62 .… 13.14 s 85 .… 31.2

s 90 .… 32.37 s 98 .… 32.39 s 102A .… 32.39 s 112 .… 12.3, 12.13 s 113 .… 12.13 s 130 .… 6.4 Property Law Act 2007 s 5(1) .… 24.15 s 43 .… 24.12 s 89–94 .… 25.10 s 117 .… 21.1 s 233 .… 19.30 Sch 6 .… 24.15 Trustee Act 1956 s 42 .… 13.51 Canada Alberta Personal Property Security Act 2000 .… 5.93 s 1(1)(h) .… 5.23 s 1(1)(n) .… 5.125 s 1(1)(z) .… 5.25 s 24(1) .… 5.42 s 24(3) .… 5.4 s 27(1) .… 5.44 s 30(5) .… 5.106 s 35(1)(a)(ii) .… 5.77 s 38(2) .… 5.95

s 38(3)(b) .… 5.95 s 38(4)(b) .… 5.95 s 38(6) .… 5.95 s 38(7) .… 5.97 s 38(11) .… 5.97 s 38(12) .… 5.97 s 63(1) .… 5.136, 5.137 s 64 .… 5.137 s 66(1) .… 5.121 c P-7 .… 5.1 Bankruptcy and Insolvency Act 1985 c B-3 .… 5.9, 5.112 British Columbia Personal Property Security Act 1996 .… 5.4, 5.38, 5.93 s 1(1) .… 5.23, 5.25, 5.125 s 24(1) .… 5.42 s 24(3) .… 5.4 s 27(1) .… 5.44 s 35(1)(a)(ii) .… 5.77 s 38(2) .… 5.95 s 38(3)(b) .… 5.95 s 38(4)(b) .… 5.95 s 38(6) .… 5.95 s 38(7) .… 5.97 s 38(11) .… 5.97 s 38(12) .… 5.97 s 62(1)(b) .… 5.137

s 68(2) .… 5.121 c 38(3)(b)(ii) .… 5.95 c 359 .… 5.1 Manitoba Personal Property Security Act .… 5.93 s 1 .… 5.23, 5.25, 5.125 s 24(1) .… 5.45 s 24(3) .… 5.4 s 35(1)(a)(ii) .… 5.77 s 38(3)(b) .… 5.95 s 38(4)(b) .… 5.95 s 38(6) .… 5.95 s 38(7) .… 5.97 s 38(11) .… 5.97 s 38(12) .… 5.97 s 38(s) .… 5.95 s 62(1) .… 5.136 s 62(1)(b) .… 5.137 s 65(3) .… 5.121 c P35 .… 5.1 Nova Scotia Personal Property Security Act 1995–1996 .… 5.9 s 2(1)(h) .… 5.23 s 2(1)(y) .… 5.25 s 25(1) .… 5.42 s 66(2) .… 5.121 c 13 .… 5.1 Ontario Personal Property Security Act 1990 .… 5.42, 5.77, 5.93, 5.121,

5.137 s 1(1) .… 5.25, 5.125 s 11(2)(a)(i) .… 5.38 s 20(1)(b) .… 5.112 s 22(1) .… 5.42, 5.45 s 22(2) .… 5.4 s 24(1) .… 5.42 s 26(1) .… 5.44 s 30(1) .… 5.77 s 35(1)(a) .… 5.87 s 35(1)(b) .… 5.95 s 35(2)(a)(i) .… 5.95 s 35(3) .… 5.95 s 35(4) .… 5.97 s 35(8) .… 5.97 s 63(2) .… 5.121 s 66(1) .… 5.136 s 66(2) .… 5.137 c P310 .… 5.1 Ontario Repair and Storage Liens Act 1990 c R 25 .… 5.94 Saskatchewan Personal Property Security Act 1993 .… 5.93 s 2(1)(h) .… 5.23 s 2(1)(n) .… 5.4, 5.125 s 2(1)(y) .… 5.25 s 3(1) .… 5.20

s 20(2) .… 5.112 s 24(1) .… 5.42 s 24(3) .… 5.4, 5.49 s 27(1) .… 5.44 s 30(5) .… 5.106 s 34(5) .… 5.88 s 35(1)(a)(ii) .… 5.77 s 38(2) .… 5.95 s 38(3)(b) .… 5.95 s 38(4)(b) .… 5.95 s 38(6) .… 5.95 s 38(7) .… 5.97 s 38(11) .… 5.97 s 38(12) .… 5.97 s 62(1) .… 5.136 s 62(1)(b) .… 5.137 s 63(3) .… 5.121 c P-62 .… 5.1

Contents Preface Table of Cases Table of Statutes Introduction

Part I Mortgages and Charges 1. Mortgages and Other Securities Generally 2. Charges and Liens 3. Mortgages of Land at Common Law 4. Mortgages of Torrens System Land 5. Security Interests in Personal Property covered by the PPSA 6. Mortgages of Personal Property Not Affected By PPSA 7. Statutory Charges and Judgments 8. Debentures 9. Special Securities 10. Second and Subsequent Mortgages

Part II Parties to Mortgages 11. Parties to Mortgages

Part III The Mortgagor’s Rights

12. Mortgagor’s Rights

Part IV

Void or Imperfect Securities

13. Void or Imperfect Securities

Part V

Transfer and Devolution of Mortgages

14. Transfer and Devolution of Mortgages 15. Sub-mortgages

Part VI The Mortgagee’s Remedies 16. The Mortgagee’s Remedies 17. The Personal Remedy 18. The Appointment of a Receiver 19. The Mortgagee’s Right to Possession 20. The Mortgagee’s Power of Sale 21. Foreclosure and Judicial Sale 22. Procedure on Foreclosure 23. Insolvency of Mortgagor

Part VII Priorities of Mortgages 24. Priorities of Mortgages 25. Tacking Further Advances 26. Priority by Notice to Trustees 27. Effect of Registration of Deeds 28. Effect of the Torrens System

Part VIII Incidence of the Mortgage Debt

29. Incidence on the Death of the Mortgagor 30. Incidence as Between Different Properties 31. Consolidation

Part IX

Discharge of the Mortgage

32. Redemption 33. Redemption Proceedings 34. The Release of the Debt or Security 35. Waiver and Allied Concepts 36. Merger 37. Destruction or Loss of the Property 38. Discharge or Modification by Statute

Part X

Accounts and Costs

39. Accounts 40. Costs

Part XI Taxation Considerations 41. Taxation Considerations

Part XII Miscellaneous Matters 42. Miscellaneous Aspects of Mortgages Index

[page 1]

Introduction Form of the work Date of the work Comparable statutory provisions Acknowledgments Table of Comparable Sections

The first Australian edition of this work was produced in 1995 because it was felt that the reliance by Australian practitioners on English works on mortgages might shortly cease as England becomes more and more integrated into the Common Market and Australian law goes its own way. English mortgage law did not in fact so disintegrate; mainly it seems because of vital differences in the security law of the major mainland European countries, particularly Germany and France. For over a century works like Fisher and Lightwood have formed the dayto-day point of reference to the law for judges and academics as well as for the profession. The present authors considered then and still consider that this basic text deserves to be preserved and adapted to current Australian conditions so that it may be used for 100 years into the future. The first two Australian editions have been so well received that it is now widely considered the leading Australian work on mortgages and is widely cited in the courts. The time has now come for a third Australian edition.

Form of the work This third Australian edition follows the broad scheme of the previous edition save that the enactment of the Personal Property Securities Act 2009 (Cth)

has required the rewriting of chapter 5 and consequential adjustments to the text. Otherwise, the work has been updated to deal with the many decisions on the subject that have issued from the courts since 2005. The area of forged mortgages appears to be the most prolific. We have also updated with respect to statutory amendment and further research put into the subject by the editors of the current 13th English edition.

Date of the work The law set out is as available in Australia as of 1 July 2013 though occasional authorities decided later have been noted where possible.

Law of Mortgage Comparable statutory provisions A table of comparable statutory provisions appears on pp 3–5.

Acknowledgments The authors acknowledge their debt to the authors of Ashburner’s Concise Treatise on Mortgages, Pledges and Liens (Butterworths, London, 1911); Sykes and Walker, Law of Securities, 5th ed (Law Book Co, Sydney, 1993); Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, 4th ed (LexisNexis Butterworths, Sydney, 2002); and Croft and Hay, The Mortgagee’s Power of Sale, 3rd ed (LexisNexis Butterworths, Sydney, 2013). [page 2] These are referred to in the text as ‘Ashburner’; ‘Sykes and Walker’; ‘Meagher, Gummow and Lehane’ and ‘Croft and Hay’ respectively. The reference to ‘Halsbury’ is to the latest reissue of the relevant volume of the fifth edition of English Halsbury available in Sydney and Melbourne on 1 July 2013. Reference to other works quoted less frequently appear in the text.

Table of Comparable Sections [page 3]

[page 4]

[page 5]

[page 7]

Part I

Mortgages and Charges

[page 9]

Chapter 1

Mortgages and Other Securities Generally A. Introduction The mortgage in history Scope of the work Australian statutes History of mortgages B. Securities Generally The nature and kinds of security Real security Personal security Mortgages Definitional problems Charge Lien Pledge C. Mortgages Generally Legal mortgage Mortgages before the 1925 Reforms Equity of redemption

1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 1.13 1.14

The term ‘equity of redemption’ today Obligations under mortgages D. Mortgages of Land in Australia Australian mortgages Mortgages of Torrens system land E. Other Mortgages — Fixtures — Goodwill & Incidental Rights Fixtures Fixtures passing by mortgage of land Fixtures not passing Loose parts of fixtures Goodwill and other Incidental Rights F. Sales with Right of Repurchase Mortgage or absolute conveyance Construction as to the nature of the transaction Fraudulent or secret conveyance Mortgage or conveyance with option of repurchase The intent of the transaction

1.15 1.16 1.17 1.18

1.19 1.20 1.21 1.22 1.23 1.24 1.25 1.26 1.27 1.28

[page 10]

Test for meaning of instrument Defeasible purchase of equity of redemption Mortgage ‘as beneficial owner’ ‘Subject to mortgage’ G. Equitable Mortgages Generally Creation of equitable mortgages

1.29 1.30 1.31 1.32 1.33 1.34

Formal requirements Types of equitable mortgage Mortgages of equitable rights Equitable mortgages by legal owners Mortgages/charges in supply agreements Other examples of such mortgages Specific performance of agreements for mortgages Equitable charges distinguished from equitable mortgages H. Collateral Security Additional security I. Where mortgage situated Generally Situation when mortgage is transferred Proper law of mortgage debt when foreign element Foreigners’ interests in Australian mortgages J. Quasi-mortgage Quasi securities Romalpa clauses K. Set-off Set-off generally Set-off on accounts Transactional set-off Miscellaneous examples of set-off Set-off as quasi security L. Miscellaneous Mortgage Brokers and Originators Reverse mortgages

1.35 1.36 1.37 1.38 1.39 1.40 1.41 1.42

1.43 1.44 1.45 1.46 1.47 1.48 1.49 1.50 1.51 1.52 1.53 1.54 1.55 1.56

New types of security Phantom mortgages

1.57 1.58

Perpetuities Mortgages and equities

1.59 1.60

A. Introduction The mortgage in history Scope of the work 1.1 Doubtless when WR Fisher first wrote this work in 1856, the traditional mortgage over land was for the most part the most significant security in existence. However, over the next 150 years, various forms of quasi-mortgage have eclipsed the traditional [page 11] form. Had Fisher been composing this edition, he might well have entitled his work ‘Mortgages and Quasi Mortgages’ or, perhaps, ‘Securities’. This work commences with a focus on mortgages in their original form. This is because there must be an understanding of the concept of the original before there can be a proper consideration of the derivatives. Thus, Torrens system mortgages, while not within the pure definition of mortgages, are commonly referred to as mortgages and are the most significant security over land in Australia. The equitable charge, particularly the floating charge, is currently the most significant security granted by corporations. The equitable lien is the common device resorted to in order to provide a fair distribution of disputed funds. All these are considered in depth in this work. It was tempting to begin an Australian discussion of mortgages with a treatment of the Torrens mortgage. However, a moment’s consideration makes one resist that temptation as impossible to pursue. Although the Torrens mortgage sets up completely different relationships to the traditional

mortgage, for the most part, the traditional concepts of the law of mortgage underpin it. One cannot understand the Torrens mortgage without first having a good understanding of the law of mortgages generally. Additionally it must be kept in mind that mortgages and securities are not confined to land but extend to all species of alienable property, real or personal. Thus outside the Torrens system the general law of mortgages remains of primary relevance and importance.

Australian statutes 1.2 Because the applicable statutes in the law of mortgage are state Acts, it is too cumbersome to refer to each one. As a general rule this work refers in the text to the applicable New South Wales and Victorian provision only. The corresponding provision in the other states, England and New Zealand may be found in the Table of Comparable Sections in the Introduction. In situations where the precise text may be significant, the local statute should be examined, as a corresponding provision in the table does not necessarily indicate exact correspondence. The following abbreviations have been employed with reference to statutes: the NSW Act: Conveyancing Act 1919 (NSW) the Victorian Act: Property Law Act 1958 (Vic) the Queensland Act: Property Law Act 1974 (Qld) the South Australian Act: Law of Property Act 1936 (SA) the Western Australian Act: Property Law Act 1969 (WA) the Tasmanian Act: Conveyancing and Law of Property Act 1884 (Tas) the English Act: Law of Property Act 1925 (UK) the NSW Torrens Act: Real Property Act 1900 (NSW) the Victorian Torrens Act: Transfer of Land Act 1958 (Vic) the Queensland Torrens Act: Land Title Act 1994 (Qld) the South Australian Torrens Act: Real Property Act 1886 (SA) the Western Australian Torrens Act: Transfer of Land Act 1893 (WA)

the Tasmanian Torrens Act: Land Titles Act 1980 (Tas) the Corporations Act (Corporations Act 2001 (Cth)) the PPSA (Personal Property Securities Act 2009 (Cth)). In each case the statutes are considered in their form as amended to 1 July 2013. [page 12]

History of mortgages 1.3 In almost all developed societies throughout the ages, it has been expedient for people to be able to borrow on security. The form of transaction has differed from age to age and from place to place. It is no part of the scope of this work to discuss these matters in detail. Pollock and Maitland, in The History of English Law, 2nd ed, Cambridge University Press, UK, 1898, pp 117–24, trace the history of gage of land. The word ‘gage’ connotes ‘security’. The explanation for the term ‘mort’ (or ‘dead’) gage appears differently from the writings of Glanvill, c 1187, and Littleton, c 1480. In Glanvill’s time the gage was dead because the gagee, who was in possession, took the rents and profits of the land for himself (as interest), the principal still remaining owing. By Littleton’s time it was said that the land was dead to the mortgagor if he did not repay the loan made. At the foundation of the Australian colonies and for some time before and afterwards, and in England at all material times prior to 1926, a mortgage of land took the form of a conveyance of the whole or part of the estate or interest of the debtor in real or personal property of which he had power to transfer with a proviso for reconveyance if the debt was repaid by the due date: see 1.13. The position changed drastically in Australia when the Torrens system was introduced in the 1860s. Under this system there was no conveyance but rather the memorandum of mortgage, executed by the registered proprietor when registered, conferred a legal interest on the mortgagee. The statutes provided a mechanism to enable the mortgagee to realise the land if default

was made. These matters are discussed in Chapter 4. Various amendments were made to conveyancing laws in Australia from 1880. These differed from state to state. An extensive enquiry was conducted by Harvey CJ in Eq in New South Wales. His report, printed in Butterworths Conveyancing Service, [35102], contained a draft bill that was enacted as the Conveyancing Act 1919, which came into force on 1 July 1920. Amendments of a substantial nature were made in 1930 as a result of the English reforms of 1925. The Conveyancing Act as amended is here referred to as ‘the NSW Act’. Most of the provisions of the NSW Act have now been enacted in the other states though not necessarily always in identical words. The English reforms of 1925 generally proceeded along a different path from those adopted here, though the Australian states have re-enacted verbatim many of the sections of the English Law of Property Act 1925, usually referred to in this work as ‘the English Act’. Under the English Act, a legal mortgage of land must be created by demise for a term of years, or by charge by way of legal mortgage, subject to a proviso for cesser on redemption. Care must be taken when applying English cases since 1925 as the legislative foundation for the law of mortgage is so different.

B. Securities Generally The nature and kinds of security 1.4 A creditor may be willing to rely solely on his debtor’s personal credit, and for that the creditor will want something more than a mere contractual remedy against a debtor who defaults. Indeed, in some cases, such as where a loan is by trustees, security may well be required by the terms of the trust deed or statute. That something more is achieved by taking security. As Goode notes in his Legal Problems of Credit and Security, 4th ed, Sweet & Maxwell, London, 2008, p 30, there are only four kinds of consensual securities known to Australian law: (i) pledge (see 1.11); (ii) contractual lien (see Chapter 2); (iii) equitable charge (see Chapter 2); and (iv) mortgage. This categorization was applied by Finkelstein J in [page 13]

Beconwood Securities Pty Ltd v Australia and New Zealand Banking Group Ltd (2008) 246 ALR 361: 66 ACSR 116 (a case of a share lending agreement). Each kind is capable of being the subject of security so as to create a sub-security interest. A pledge and a contractual lien depend on delivery of possession to the creditor. The difference between them is that, in the case of pledge, the owner delivers possession to the creditor as security whereas in the case of lien, the creditor retains possession of goods previously delivered to it for some other purpose. Neither a mortgage nor a charge depends on delivery of possession. The difference between them is that a mortgage under the traditional old system title involves a transfer of legal or equitable ownership to the creditor whereas an equitable charge does not: Re Cosslett (Contractors) Ltd [1998] Ch 495 at 508; [1997] 4 All ER 115 at 126 per Millett LJ (cf the position with Torrens mortgages, as to which see Chapter 4). In its most primitive form, the word ‘security’ denotes something which makes the creditor more assured of being able to recover the debt as distinct from a mere acknowledgment such as an IOU: Bank of New Zealand v Assets Realisation Board (1905) 7 GLR 483 at 485. In this sense any slight advantage to the creditor may operate to justify calling the creditor a ‘secured creditor’: see Stroud’s Judicial Dictionary of Words and Phrases, 8th ed, Sweet & Maxwell, London, 2012, p 2667; Batchelor & Co Pty Ltd v Websdale [1963] SR (NSW) 49 at 51; YZ Finance Co Pty Ltd v Cummings (1964) 109 CLR 395 at 403. In Bevham Investments Pty Ltd v Belgot Pty Ltd (1982) 149 CLR 494 at 499, the High Court pointed out that the word ‘secure’ is apt to include personal security; see also Redgrave v Redgrave (1951) 82 CLR 521 at 530. This is, however, an unusual sense of the word in modern times. The prime sense of the word is a right given to the creditor over property or against a person over and above the personal obligation to repay the debt. In Singer v Williams [1921] 1 AC 41 the members of the House of Lords put forward various definitions of ‘securities’. Lord Shaw at 57 said that the word had no legal signification. It was ‘an ordinary English word used in a variety of collocations and is to be interpreted without the embarrassment of a legal definition and simply according to the best conclusion one can make as to the real meanings of the term as it is employed in, say, a testament, an agreement, or a taxing or other statute as the case may be’. See also Lord

Cave at 49 and Lord Wensbury at 59. See also Grimwade v Mutual Society (1884) 52 LT 409 at 415 and Re United Law Clerks’ Society [1947] Ch 150 at 152. In Inland Revenue Commissioners v Parker [1965] Ch 866 at 884, Ungoed-Thomas J summed up these cases as follows: (1) that prima facie security is limited to security for the payment of a debt as contrasted with shares in the capital of a company; (2) that the context may extend its meaning to include shares; (3) that security by a document establishing personal liability and without charge on property is recognised as a form of security; (4) that it is questionable whether security in that sense would be within its prima facie meaning; but (5) even if it is not within the prima facie meaning of security, yet such security is a less extended meaning of that word than are shares.

The word ‘security’ may have a special meaning under certain taxing statutes: see Broad v Commissioner of Stamp Duties [1980] 2 NSWLR 40 at 45; see also Chapter 41. In Bristol Airport plc v Powdrill [1990] Ch 744 at 760; [1990] 2 All ER 493 at 502, Browne-Wilkinson VC considered a definition by counsel that ‘Security is created where a person (“the creditor”) to whom an obligation is owed by another (“the debtor”) by statute or contract, in addition to the personal promise of the debtor to discharge the obligation, obtains rights exercisable against some property in which the debtor has an interest in order to enforce the discharge of the debtor’s obligation to the creditor’. His Lordship commented that the definition, while not comprehensive, was ‘no wider than the ordinary meaning of the word’. The proffered definition is essentially similar [page 14] to that in Sykes and Walker, The Law of Securities, 5th ed, Law Book Co, Sydney, 1993, p 4, which the authors say may be ‘too mechanistic, but it will serve as a starting point for analysis’. It should be noted that, in appropriate situations, a security may exist as the result of estoppel. As to conventional estoppel see Amalgamated Investment and Property Co Ltd v Texas Commerce International Bank Ltd (in liq) [1982] QB 84 and Hiscox v Outhwaite [1992] 1 AC 562 at 574-5 and 584.

In England prior to 1926, if the additional right is a right against property, then the term ‘real security’ is sometimes employed. As is pointed out in Sykes and Walker p 4, this means that the creditor has a right in and enforceable against a res. If the creditor only has a right against, say, a promissory note or under a guarantee, the security is said to be personal. Real security gives the creditor rights over property which has been appropriated to meet the debt or other obligation. Its attraction for the creditor is that, if the debtor should become insolvent, the creditor may exercise his rights over the security in priority to the claims of the general creditors. The property may be real or personal: see Goode, Legal Problems of Credit and Security, pp 5–6. Further, a secured creditor of an insolvent company is not required to set off money owed to the company against the secured debt if the creditor relies on the security and does not prove in the liquidation: Re Norman Holding Co Ltd [1990] 3 All ER 757; [1991] 1 WLR 10 and see Derham, Derham on the Law of Set-Off, 4th ed, Oxford University Press, Oxford, 2010, [6.173]– [6.178].

Real security 1.5 Real security may be created by contract or even by will and may arise by operation of law. Real securities fall into three classes: first, those by which the creditor obtains proprietary rights over the subject matter of the security, but which do not depend on the creditor obtaining possession of such property (for instance, mortgage securities); second, those by which the creditor does not obtain proprietary rights over the property, and which depend on him obtaining possession of the property (such as pledges and possessory liens); and, third, those which do not depend on the creditor obtaining either proprietary rights over or the possession of the property (such as charges and non-possessory liens). This threefold classification derives from what Willes J said in Halliday v Holgate (1868) LR 3 Ex 299 at 302, and as can be expected, the classes are not watertight ones. The classification really only holds good if one asserts that there can only be a security in the true sense where the mortgagor owns the asset before granting the security. Cases where there is a conditional sale where the buyer

never owns the goods until the seller is paid and property remains in the seller such as under a Romalpa clause: see Aluminium Industrie Vaassen BV v Romalpa Ltd [1976] 1 WLR 676; [1976] 2 All ER 552. Such arrangements operate functionally as securities and may loosely be called securities, but in Australian and English law do not qualify as securities strictly so called, see Goode, Legal Problems of Credit and Security, pp 3–5. ‘Romalpa clauses’ are considered in 1.49. To each of the kinds of real security is incident a right in the creditor to make the property which is subject to the security answerable for the debt or other obligation, a right in the debtor to redeem the property by paying the debt or performing the obligation, and a liability on the part of the creditor upon such payment or performance to restore the property to the owner. [page 15]

Personal security 1.6 Personal security may involve suretyship which consists of the contract of guarantee, whereby the guarantor promises to answer for the obligation of the debtor should the debtor default. It may also, in a looser sense, involve the further ‘securing’ of an obligation in rem by way of an obligation in personam, such as a mortgagor’s obligation on the personal covenant to pay under a mortgage, which may survive the discharge or enforcement of the obligations in rem (see 17.1 and following). The effect of personal security, in the case of suretyship, is to give the creditor a secondary contractual action should the principal debtor default. Although the personal security may be in the form of an IOU (see Batchelor & Co Pty Ltd v Websdale [1963] SR (NSW) 49), the most usual form of personal security is a guarantee. The disadvantages of personal security, from the creditor’s point of view, are that the efficacy of a guarantee depends on the completeness in the form of the document itself and on the original and continued solvency of the guarantor and the possibility of the guarantee being successfully attacked under the principle laid down in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447. By contrast, real security gives the creditor rights over real or personal

property appropriated to meet the debt or other obligation. For the creditor, the attraction of real security is that, if the debtor should become insolvent, the creditor may exercise rights over the security in priority to the claims of the general creditors. Furthermore, a secured creditor of an insolvent company is not required to set off money owed by it to the company against the secured debt, Re Norman Holding Co Ltd [1990] 3 All ER 757; [1991] 1 WLR 10.

Mortgages 1.7

The mortgage is the most important form of real security.

A mortgage is a form of security almost invariably created by contract, conferring an interest in property defeasible — that is, annullable — upon performing the condition of paying a given sum of money, with or without interest, or performing some other condition. The classic definition of a mortgage was given by Lindley MR in Santley v Wilde [1899] 2 Ch 474, as follows: ‘A mortgage is a conveyance of land or an assignment of chattels as a security for the payment of a debt or the discharge of some other obligation for which it is given.’ This classic definition has been applied on many subsequent occasions: see, for example, Bevham Investments Pty Ltd v Belgot Pty Ltd (1982) 149 CLR 494 at 499; UTC Ltd v NZI Securities Australia Ltd (1991) 4 WAR 349 at 351; Alcoota Aboriginal Corp v Gray (2002) 170 FLR 29 at 39. In Handevel Pty Ltd v Comptroller of Stamps (Vic) (1985) 157 CLR 177 at 192, the High Court noted that the conveyance may be either in equity or at law and while the mortgage usually secures a money debt, it does not always do so. (The old New South Wales case, Tooth & Co v Parkes (1900) 21 LR (NSW) (Eq) 173 was to the contrary.) In Waldron v Bird [1974] VR 497 at 501, Gillard J said: Although the actual decision of Santley v Wilde was subsequently overruled in the House of Lords (see Noakes & Co Ltd v Rice [1902] AC 24), that description by Lord Lindley of what constitutes a mortgage was expressly affirmed in Noakes’ case at 28 and has hardly ever been dissented from. The features necessary to constitute a mortgage are threefold: first, there must be a promise by the alleged mortgagor to repay money to the alleged mortgagee or to perform some other obligation; secondly, as security for repayment of such moneys or performance of such obligation, the alleged mortgagor must transfer or assign his estate and interest in property, real

or personal,

[page 16] to the mortgagee absolutely; thirdly, to distinguish between an absolute transfer of title in a mortgage, the transfer or assignment must, in order to constitute a mortgage, be subject to a proviso that if and when the alleged mortgagor makes repayment or performs the obligation imposed upon him, the alleged mortgagee will retransfer or reassign the property to the alleged mortgagor.

The conclusion reached in Waldron v Bird was that a mortgagee was at least the assignee or transferee of any property, real or personal, given by way of security on an assurance whereby there is provision for redemption of such property on repayment of monies lent. The emphasis on a transfer or assignment to the mortgagee is central to the English conception of mortgage; see, for example, Goode, Legal Problems of Credit and Security, p 35. Note, however, that it is not necessary that the full ownership of the property be assigned to the mortgagee. The mortgagee only receives the title that the mortgagor owns. The mortgagor totally divests himself of what property rights he had in the land or thing mortgaged so that after the transaction he has nothing left but rights of a contractual nature and rights in equity. Thus there may be a mortgage of an easement or a life interest or a mortgage: see Sykes and Walker, p 15. However, even on the strictest view, there may be a mortgage without an actual assignment, as where there is a sale and mortgage back. As the Queensland Court of Appeal said in Postle v Sengstock [1994] 2 Qd R 290 at 296, there is no reason why such an assignment is necessary where the mortgagee already holds the legal title. The court said that the essential feature of a mortgage was not the assignment of title to the mortgagee but the fact that the title was vested in the mortgagee by way of security. The position was analogous to the delivery of goods by way of pledge when they were already in the creditor’s hands for other purposes. Again, Meares J in Wilcox Mofflin Ltd v Commissioner of Stamp Duties [1978] 1 NSWLR 341 at 349, after analysing a series of cases including United Realization Co Pty Ltd v Commissioners of Inland Revenue [1899] 1 QB 361 at 365 and also definitions in leading texts, found that he could not

agree with Gillard J’s proposition that Lord Lindley’s definition had never been dissented from. It is still, however, the best definition available. A mortgage security depends upon grant by the debtor or someone on the debtor’s behalf, not in reservation: Re Bond Worth Ltd [1980] Ch 228 at 2526; [1979] 3 All ER 919 at 942-5 and see generally, Goode, Legal Problems of Credit and Security, pp 5–10. A mortgage may be either legal or equitable: Realty or personalty may be mortgaged. Traditionally, mortgages of chattels was effected as a general rule by bills of sale. However, they are now covered by the PPSA considered in Chapter 5. ‘A mortgage, whether legal or equitable, is security for repayment of a debt. The security may be constituted by a conveyance, assignment or demise or by a charge on any interest in real or personal property’: Downsview Nominees Ltd v First City Corp Ltd [1993] AC 295 at 311. See also Doyle v Doyle [1992] 3 NZLR 170 at 172. It is an essential feature of a mortgage that the mortgagor is entitled to get back the subject matter of the mortgage on repayment, Beconwood Securities Pty Ltd v Australia and New Zealand Banking Group Ltd (2008) 246 ALR 361: 66 ACSR 116. For further consideration as to the definition of mortgage see Quarrell v Beckford (1816) 1 Madd 269 at 278; 56 ER 100 at 103; Kennard v Futvoye (1860) 2 Giff 81; 66 ER 35; Re Allenborough and Inland Revenue Commissioners (1855) 11 Ex 461; 156 ER 912; Cavendish v Cavendish (1885) 30 Ch D 227 at 229; Re Beirnstein [1925] Ch 12 at 18; Metropolitan Gas Co v McIlwraith McEachern Ltd [1932] VLR 88; Barcelo v Electronic Zinc Co of Australasia Ltd (1932) 48 CLR 391; City Mutual Life Assurance Society Ltd v Smith (1932) 48 CLR 532; Allsop v Marshall (1946) 46 SR (NSW) 274 at 277; Cambridge [page 17] Credit Corp Ltd v Lombard Australia Ltd (1977) 136 CLR 608 at 615. For definitions in connection with taxing laws see 41.8. It should be noted that the types of mortgage instruments that may be brought into existence are almost infinitely various, depending on the type of transaction the parties have put in place. For a case where the mortgage

excluded personal liability, see Baypoint Pty Ltd v Baker (1994) 6 BPR 13 at 687.

Definitional problems 1.8 A precise definition of the traditional mortgage of real estate is extremely difficult to formulate. Indeed, in Samuel v Jarrah Timber and Wood Paving Corporation [1904] AC 323 at 326, Lord Macnaghten said that no-one by the light of nature ever understood it. The cases reviewed in the previous paragraph demonstrate that the term ‘mortgage’ is not always employed in its strict sense, whatever that may be, even outside the extended definitions in revenue statutes. Sykes and Walker (at p 14) say that the problem commences with the adoption in English law of the threefold Roman Law classification of fiducia (mortgages in the strict sense), pignus (possessory security) and hypotheca (charges and similar). As commercial life developed, these classifications were inadequate, yet the judgments continued to force the new types of security into the established categories. Thus, the categories represent the ideal rather than any practical classification. In London County & Westminster Bank Ltd v Tompkins [1918] 1 KB 515 at 528-9, Scrutton LJ noted the gap between textbook classifications and the way in which equity and commercial lawyers habitually used the words ‘mortgage’ and ‘charge’ and this is still far from unusual. This is exacerbated in Australia because of the nature of the Torrens system mortgage which is not a mortgage in the strict sense at all. Gough, in Company Charges, 2nd ed, Butterworths, London, 1996, particularly chapter 13, discusses numerous cases on the definition of charge or floating charge, from which discussion can clearly be seen that there is a range of views by eminent judges on the proper definition of these terms. It is therefore not unexpected to find many robust and loose definitions of mortgage, charge etc in the cases. Moreover, words such as ‘charge’ are often used in statutes in a loose sense: see 1.9.

Charge 1.9

A charge is the appropriation of real or personal property for the

discharge of a debt or other obligation, without giving the creditor either a general or special property in, or possession of, the subject of the security. Thus, an order upon a third party to apply money in that person’s hands to the discharge of a debt, or a charge on realty for the payment of a specified amount, creates a charge. The creditor has a right of realisation by judicial process in the case of non-payment of the debt. The basic definitional elements of the term ‘charge’ are examined in 2.2. The word ‘charge’ is often used in a broad or loose sense in statutes: Cinema Plus Ltd v Australia and New Zealand Banking Group Ltd (2000) 49 NSWLR 513 at 521-2; 35 ACSR 1 at 6-7; 157 FLR 204 at 210-12. Thus in Payne v Esdaile (1888) 13 App Cas 613 at 622-4, Lord Herschell looked at the word ‘in a broad sense’. In Fell v Official Trustee of Charity Lands [1898] 2 Ch 44 at 57, Rigby LJ said that the word ‘charge’ was a very general one; see also Landers v Schmidt [1983] 1 Qd R 188. Indeed, both ‘mortgage’ and ‘charge’ are often loosely used as a generic term for all species of security. In the company context especially, ‘mortgage’ and ‘charge’ are often used as if there were no difference between the terms: see Re Bond Worth Ltd [page 18] [1980] Ch 228 at 250; [1979] 3 All ER 919 at 940; Re Wallis & Simmonds (Builders) Ltd [1974] 1 All ER 561; [1974] 1 WLR 391. In the construction of wills, ‘mortgage’ includes ‘charge’ and vice versa: see Re Beirnstein; Barnett v Beirnstein [1925] Ch 12. For a case where the distinction between ‘mortgage’ and ‘charge’ was expressly made by the plaintiff see Thames Guaranty Ltd v Campbell [1985] QB 210 at 217. There is, as is explained more fully at 1.33 and 1.39, a difference between an equitable mortgage and an equitable charge because of the methods of enforcement: see also United Travel Agencies Pty Ltd v Cain (1990) 20 NSWLR 566. Even at law, there is a fundamental difference in the nature of a mortgage and a charge even though they may popularly be considered very similar: see Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584. ‘A charge involves some deduction from the right of ownership in the

property rather than a mere interference with the right to possession which is normally an incident of ownership. It is not a word which is apt to describe a purely possessory lien as opposed to a lien of a non-possessory nature such as an equitable lien’: Waitomo Wools (NZ) Ltd v Nelsons (NZ) Ltd [1974] 1 NZLR 484 at 490 per Richmond J. See also Re Price (1931) 26 Tas LR 158 at 160; Painten and Nottingham Ltd v Miller Gale & Winter [1971] NZLR 164 at 179; Young v Matthew Hall Mechanical & Electrical Engineers Pty Ltd (1988) 13 ACLR 399 at 403. Strictly speaking, not all charges are mortgages. As a mortgage involves a grant or transfer or assignment of property, a charge which merely reserves rights in property to which the chargee may resort in the event of default cannot qualify as a mortgage. “Charge” is specifically defined in s 3(1) of the NSW Torrens Act, see 4.4. A charge in relation to a future advance cannot operate until the advance is made: West v Williams [1899] 1 Ch 132 at 146; Robertson v Grigg (1932) 47 CLR 257 at 271. However a charge is made when the underlying contract creating the charge is made. Thus there is not a fresh charge each time an advance is made under that contract: Sibbles v Highfern Pty Ltd (1987) 164 CLR 214 especially at 223. In Josef v Mulder (1903) 72 LJPC 50, a couple held property on condition that they never sell or part with it. The couple granted a charge over the property. This was held not to be a breach, as a charge was not a mortgage and did not involve a parting with property. Charges are considered in detail in Chapters 2 and 8.

Lien 1.10 A common law lien is a right conferred by law upon a person to retain possession of, or to have a charge upon, the real or personal property of another, until certain demands are satisfied. Although the right is conferred by law and not by contract (see Re Bond Worth Ltd [1980] Ch 228 at 250; [1979] 3 All ER 919 at 940), the word ‘lien’ is sometimes used in practice to describe a right which arises by way of express contractual agreement. The better analysis is that contract supersedes a common law lien so that the rights of a person claiming under the contract are solely to be found in the contract: see, for example, Fisher v Smith (1878) 4 App Cas 1.

Unfortunately the word ‘lien’ is used in different senses. A common law lien is completely different from an equitable lien. The former is based on possession and usually confers a mere right to detain. The latter is not based on possession and entitles the holder to judicial sale. See McGhee, Snell’s Equity, 31st ed, Sweet & Maxwell, London, 2005, 34.07, p 780. Equitable liens are discussed in 2.22ff; common law liens in 2.33 ff. [page 19]

Pledge 1.11 The usual definition of pledge or pawn is that it is a security created by contract and effected by a bailment of a chattel to the creditor, to be kept by the creditor until the debt is discharged. It is incomplete without actual or constructive delivery of the goods to the pledgee: Martin v Reid (1862) 11 CB (NS) 730 at 734; 142 ER 982 at 984; Ayres v South Australian Banking Co (1871) LR 3 PC 548 at 554. The general property in the goods remains in the pledgor: see Coggs v Barnard (1703) 2 Ld Raym 909 at 913; 92 ER 107 at 109; Donald v Suckling (1866) LR 1 QB 585 at 594; and Halsbury’s Laws of England, 5th ed, vol 4, [190, 206]. AWB Simpson’s A History of the Common Law, 2nd ed, Clarendon Press, Oxford, p 141 notes that the pledge was the earliest form of security over land known to English law. The High Court considered the definition of pledge in Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249; 215 ALR 253; 79 ALJR 1121. The judges made it clear at [19] that time has not dulled the traditional definitions and distinctions in this area of the law. McHugh, Gummow, Hayne & Heydon, JJ said at CLR 257, 258; ALR 257–8; ALJR 1125 [16]–[17]. [16] Both ‘pawn’ and ‘pledge’ are words as having a long-established legal meaning. That is hardly surprising when the ancient origins of such transactions are recalled. For centuries, pawn or pledge (the terms are used interchangeably) has been recognised as one class of bailment of goods.… [17] Commentators and the courts have long recognised that pawn or pledge is a ‘bailment of personal property as a security for some debt or engagement. They have identified such a transaction as distinct and different from mortgage where ‘the whole legal title passes conditionally to the mortgagee’. This distinction was sometimes expressed in terms of the

difference between ‘special property’ of the pledge and the ‘general property’ which remained in the pledgor. The ‘special property’ of the pledge was described as the right to detain the goods for the pledgee’s security and ‘is in truth no property at all.’ That ‘special property’ depends upon delivery of possession whereas in the case of a mortgage of personal property the right of property passes by the conveyance and possession is not essential; to create or support the title.

The quoted definition of pledge is taken from Story on Bailments at 286. This definition was also preferred by Ormiston J in Australia and New Zealand Banking Group Ltd v Curlett, Cannon and Galbell Pty Ltd [1992] 2 VR 647 at 653-4. See also Isaack v Clark (1615) 2 Bulst 306; 80 ER 1143, where a bag of money was deposited as security for redelivery of three butts of sack. See also (1993) 6 JBIL 252 (Paleson). The High Court’s definition of ‘special property’ derives from Ryall v Rolle (1749) 1 Atk 165 at 167; 26 ER 107 at 108-9; the reference to ‘no property at all’ is a quote from Lord Mersey in The Odessa [1916] 1 AC 145 at 158. The reference to the essentiality of delivery derives from Story at 287. Delivery may be actual — namely, physical handing over of the chattel — or constructive, such as the case where the key to the room in which the goods are stored is handed over: see Hilton v Tucker (1888) 39 Ch D 669; Wrightson v McArthur and Hutchisons (1919) Ltd [1921] 2 KB 807. However, care must be taken to remember that delivery of possession does not necessarily signify the existence of a pledge, it may equally be referable to an intention to create an equitable mortgage or charge, see Goode, Commercial Law, Lexis Nexis, London, 2004, pp 617–8, quoted with approval by the High Court in Palgo at [19], a passage not included in the 4th edition. A contract of pledge may convert a bailment by way of pledge: Australia and New Zealand Banking Group Ltd v Curlett, Cannon and Galbell Pty Ltd, above, at 656; see also Blundell-Leigh v Attenborough [1921] 1 KB 382 at 389 and Postle v Sengstock [1994] 2 Qd R 290 at 297. A pledge is not within the definition of ‘charge’ in the Corporations Act: Re Vital Learning Aids Pty Ltd [1979] 2 NSWLR 442; Seka Pty Ltd v Fabric Dyeworks (Aust) Pty [page 20]

Ltd (1991) 4 ACSR 455; Commonwealth Bank of Australia v Butterell (1994) 14 ACSR 343; Osborne Computer Corp Pty Ltd v Airroad Distribution Pty Ltd (1995) 17 ACSR 614 at 622. A pledge of a personal chattel need not be registered under the Corporations Act: see s 262(2)(b). Pledge differs from mortgage and lien in that the person taking the pledge acquires a special property in the thing pledged and not just the right to detain it: see Palgo Holdings Pty Ltd v Gowans quoted above and also Donald v Suckling (1866) LR 1 QB 585; Burdick v Sewell (1883) 10 QBD 363 at 367, affirmed (1884) 10 App Cas 74 and Gunnedah MC v New Zealand Land and Mercantile Agency Co Ltd [1963] NSWR 1229 (FC.A socalled general lien over goods in the custody of a customs agent may actually be pledged: see Re Vital Learning Aids Pty Ltd [1979] 2 NSWLR 442. In Palgo Holdings Pty Ltd v Gowans (2005) 215 ALR 253; 79 ALJR 1121, McHugh, Gummow, Hayne & Heydon, JJ said at ALR 257-8, ALJR 1125, [18]: [18] It has also long been recognised that pawn and pledge must also be distinguished from lien. “One who has a lien has only a right of detaining the res until the money owing is paid: a lien disappears if possession is lost, and there is no right of sale.” A lien is merely a personal right and cannot be taken in execution: a pledge creates an interest in the pledge that can be seized in execution.

The quote is from Paton on Bailment p 352. The authority for the last subclause is Re Rollason (1887) 34 Ch D 495. A person taking a pledge has a power to sell the chattel to satisfy the debt if not redeemed by the due date or, if no date is set, after demand: Martin v Reid (1862) 11 CB (NS) 730; 142 ER 982; Pigot v Cubley (1864) 15 CB (NS) 701; 143 ER 960; Re Morritt; Ex parte Official Receiver (1886) 18 QBD 222 at 235; France v Clark (1883) 22 Ch D 830; Burdick v Sewell (1883) 10 QBD 363 at 367; and see Halsbury’s Laws of England, 5th ed, vol 4, [214]. A negative pledge considered in 2.5 is basically a promise by a debtor that it will not grant any security over nominated property without the promisee’s consent.

C. Mortgages Generally Legal mortgage 1.12 Under the general law, a legal mortgage is a conveyance or assignment of the whole or part of the estate or interest of the debtor in real or personal property of which the debtor is the legal owner or has some legal estate or interest which the debtor has the power to transfer: see the cases cited in 1.7. Generally speaking, the absolute assurance of the property is subject to a proviso that upon payment of the debt at a certain time the property must be reconveyed. The essence of the legal mortgage of land is the vesting of a legal estate in the mortgagee, together with an immediate right of possession, although this right of possession may, in the large majority of cases, not be exercised. On payment of the debt at the time fixed, the mortgagor may re-enter and is entitled to a reconveyance. This classic form of mortgage of land is now the exception rather than the rule, especially in view of the large percentage of the land in Australia and New Zealand which is held under the Torrens system.

Mortgages before the 1925 Reforms 1.13 The history of mortgages has been briefly outlined in 1.3. Fuller dissertations can be found in Holdsworth, A History of English Law, Sweet & Maxwell, London, 1922–1972 (‘HEL’); Pollock and Maitland, The History of English Law, 2nd ed, Cambridge University Press, Cambridge, 1898, (‘P & M’), particularly vol 2, pp 117–24; Turner, The Equity of Redemption, Cambridge University Press, Cambridge, 1931; [page 21] Plucknett, A Concise History of the Common Law, 5th ed, Butterworths, London, 1956, pp 603–8; and see also the article by Barton (1967) 83 LQR 229. Pledges of land are found in Anglo-Saxon times and in the Domesday Book. In Glanvill (c 1187) the rules relating to gage (or pledge) are dealt with as for movables and then applied by reference to immovables (Book X, cc 6–

11; see HEL, vol ii, pp 188 ff). Possession would usually be given to the mortgagee (for the influence of the usury laws on mortgages, see HEL, vol viii, pp 100 ff), but he had only a special sort of seisin (seisina ut de vadio) which the law did not protect (HEL, vol iii, pp 128 ff; P & M, vol 2, p 120). Such a pledge was called a mortgage (mortuum vadium) when the fruits or rent received did not tend to reduce the debt; it was called a vivum vadium when they were so applied (Glanvill, Book X, c 6). The property became the mortgagee’s on default of repayment on the appointed day, if it was so agreed, or if the mortgagor failed to redeem within a reasonable time after the court had ordered him to do so (Glanvill, Book X, cc 6–8). This form of mortgage of land was succeeded by the one, ever since in use, by which the mortgagee took an ordinary estate in the land entitling him to the usual remedies for recovering possession. In Bracton (c 1257) the mortgagee’s estate appears as a term of years capable of being enlarged automatically into the fee simple on default of payment at the end of the term (F 20. Also see P & M, vol 2, p 121; HEL, vol iii, p 129). Later, when the treatment of estates had become more exact, this elasticity was not permitted. Livery of seisin was essential for the creation of a fee simple, and since there was no livery on the grant of the term a freehold estate would not arise afterwards (Littleton (c 1480), Tenures, s 349; Co Litt, p 216 ff). Accordingly it was necessary for the mortgagee to take at once the estate which was to become absolute on nonpayment at the time named (Litt, s 333). Mortgages might still be made by a lease at a nominal rent (but the mortgagee having no right to the fee) and upon the terms that the mortgagee was to receive the rents and profits of the land in satisfaction of the debt. Alternatively, in the case of freeholds, a mortgage might be made by a conveyance of the land in fee simple, subject to the condition either that the mortgagor might re-enter or that the conveyance should be void if the debt was paid by the appointed day (HEL, vol iii, pp 129, 130. There were also statutory forms of real security (for example under Statutes Merchant and Staple) which were commonly used until the 17th century; see HEL, vol iii, p 132). Under this system the mortgagee did not necessarily go into possession and a new explanation of mortuum vadium and vivum vadium became necessary: see Littleton, s 332. This was that the land was dead to the debtor if he did not pay at the appointed day, and the pledge was dead if he did pay. But Coke, in his comment on this, remarks that the mortgage or mortuum vadium is so called to distinguish it from the vivum vadium, which he defines in Glanvill’s sense

(Co Litt, p 205a), though he carries out Littleton’s idea by saying that ‘if the creditor’s estate is granted only till he has received his debt out of the issue and profits, neither money nor land dieth, or is lost’; see also per Lord Eldon in Fenwick v Reed (1816) 1 Mer 114 at 124; 35 ER 618 at 622. The Usury Act 1545 permitted loans at interest, so that there was no longer any need for rents and profits to be taken in lieu of interest. In or before the 16th century the form of the mortgage by conveyance had changed. The conditions previously mentioned were replaced by the more convenient covenant for re-conveyance by the mortgagee on repayment by the appointed time (HEL, vol v, pp 330, 331). The Court of Chancery would grant specific performance of this covenant. Moreover this change simplified proof of title which then depended on execution of the reconveyance: see Durham Bros v Robertson [1898] 1 QB 765 at 772 (CA). Although expressed as a covenant for reconveyance the proviso had the effect of a condition subsequent: see Hazeltine’s preface to Turner, Equity of Redemption, pp xi– xiv. This form of mortgage by conveyance became the usual form of legal mortgage of land, other than land under the Torrens system, until the conveyancing reforms of the 20th [page 22] century, and it still remains the usual form of legal mortgage in other cases. The alternative form of mortgage by lease continued to be generally used until the early 19th century. This form had advantages in that it could be used for a mortgage of both freehold and leasehold land, and, since it created only a chattel interest, on the mortgagee’s death this passed to his executors and not to his heir (Co Litt, p 204b). It had the disadvantage, however, that a reversion was left in the mortgagor, even if he defaulted. Moreover, there was doubt as to whether the mortgagee could call for the title deeds. Therefore, apart from those circumstances where it was particularly useful (as, for example, for raising portions in family settlements) because the term created did not disturb the limitations of the settlement, this form fell into disuse. It is convenient to mention here two other forms of mortgage now obsolete. Formerly a security was sometimes made in the form of a trust for sale, in case of non-payment of the debt at a certain time. This type of

mortgage is referred to in the English Act of 1925 (defined in 1.2): ss 85(3), 86(3). This was in effect a mortgage and redeemable as such; the remedy of the mortgagee being under the trust for sale, instead of by foreclosure, though if the mortgagor commenced an action for redemption and failed to redeem he was foreclosed. See also Goode, Hire-Purchase Law and Practice, 2nd ed, Butterworths, London, 1970, p 552; (1984) 100 LQR 86, 87–90 (Anderson). A ‘Welsh mortgage’ was an assurance by which property was conveyed to the creditor without any condition for payment (as distinguished from a personal covenant), but upon the terms that the creditor was to receive the rents and profits in satisfaction of principal and interest or in lieu of interest. Since the assurance was without condition that could be no forfeiture; consequently that was no equity of redemption, which could be the subject of foreclosure. But there was a continuing right of redemption and the mortgagor could redeem at any time. See further Wylie, A Casebook on Irish Land Law, Professional Books, Abingdon, 1984, pp 571–2.

Equity of redemption 1.14 At common law, upon non-repayment by the appointed time, the estate of the mortgagee became absolute and irredeemable unless the mortgage provided otherwise. See HEL, vol ii, pp 336, 579. Furthermore, the mortgagor was still liable for the debt: Kreglinger v New Patagonia Meat & Cold Storage Co Ltd [1914] AC 25 at 35 (HL). In courts of equity, on the other hand, the mortgagee’s estate was subject to a right called the equity of redemption, which arose from the court’s consideration that the real object of the transaction was the creation of a security for the debt (Sparrow v Hardcastle (1754) 3 Atk 798 at 805; 26 ER 1256 at 1260 per Lord Hardwicke; Seton v Slade (1802) 7 Ves 265; 32 ER 108 per Lord Eldon); and the court was, no doubt, anxious to increase its jurisdiction. Another motivation was a change in the usury laws: see HEL, vol viii, pp 100 ff. Thus equity allowed the mortgagor to redeem (or recover the property) even though there had been a failure to repay by the appointed time. At first, the court would only intervene in cases of special hardship, but by the 17th century relief was given as a matter of course: see Turner, Equity of Redemption, pp 21 ff; HEL, vol v, pp 330–2; Emanuel College v Evans (1625) 1 Chan Rep 18; 21 ER 494.

In England the expression ‘equity of redemption’ traditionally denoted the sum total of the mortgagor’s rights including those at law and arose on the creation of the mortgage. This was to be distinguished from the equitable right to redeem which only arose in equity after the contractual right to redeem had expired: Kreglinger v New Patagonia Meat & Cold Storage Co Ltd [1914] AC 25 at 48 (HL), and see Brown v Cole (1845) 14 Sim 427; 60 ER 424. However, as Cousins points out in The Law of Mortgages, 2nd ed, Sweet & Maxwell, London, 2001, 17.01 the equitable right to redeem must again be distinguished from the equitable interest which arises in the mortgagor simultaneously with the execution of the mortgage since, in equity, the mortgage conveyance does [page 23] not have the effect of transferring to the mortgagee the whole beneficial interest in the security, but separates the legal and the equitable ownership. Turner notes the case of Bodenham v Halle (1456) Select Cases in Chancery 1346–1471 (vol 10 Selden Society Yearbooks). Bodenham borrowed £80 from Halle in 1455 and enfeoffed Halle of property at ShiptonBellinger, New Andover on condition that if £100 was repaid together with interest at 70 per cent in 1461 there would be a reconveyance. In 1456 the mortgagee committed Bodenham to debtors’ prison on a collateral bond. The decree was that, Bodenham having paid into court the £80, he should be released from prison, discharged from the collateral bond and re-enfeoffed of the mortgaged land. Turner says relief was probably given on the grounds of conscience, the Chancellor at the time being particularly concerned with unjust imprisonments. Although in the 15th century the Chancellor would only relieve before the due date for payment, by Elizabeth I’s time relief might be given even some short time afterwards, such as the case where the mortgagor was robbed on the way to repay the debt. See Cary 1; 21 ER 1. The Chancellor by the mid-17th century had come to grant relief after the due date even in the absence of special circumstances. See Turner, pp 25–9. The Chancellor, however, did not have everything his own way; an ordinance was made in 1654, during the period of the Commonwealth, to restrict the right of redemption. This was repeatedly violated by the

Commissioners in Chancery and was not adopted by the Restoration Parliament. At the same time as relief became a matter of course the mortgagee in possession became accountable to the mortgagor for rent: Holman v Vaux (1615) Toth 133; 21 ER 146. The mortgagee was compensated for the special favour shown the mortgagor by the right of foreclosure which is first mentioned in How v Vigures (1628) 1 Chan Rep 32; 21 ER 499. One of the earliest authorities to analyse the mortgagor’s position both at law and in equity is Thornborough v Baker (1675) 3 Swan 628 at 630; 36 ER 1000 at 1001 where Lord Nottingham states a series of propositions. These equitable rights became recognised in common law courts by the Judicature Act 1873 (UK), which now has its local equivalent.

The term ‘equity of redemption’ today 1.15 The equity of redemption must be distinguished from the equitable right to redeem which it includes. However, in current practice the term ‘equity of redemption’ is often used indiscriminately to refer to one or both rights. Before the Torrens system and 20th century reforms to the law of property, the usual method of freehold mortgage vested the legal fee simple in the mortgagee. The phrase ‘equity of redemption’ was used to denote the equitable interests of the mortgagor: see, for example, Casborne v Scarfe (1737) 1 Atk 603; 26 ER 377. In equity, the mortgagor was considered as the owner of the land subject to the mortgage: Re Wells; Swinburne-Hanham v Howard [1933] Ch 29 at 52. This is still the case with the general law mortgage of land. With a mortgage under the general law, the mortgagor may have a contractual right to redeem; the mortgagor’s equitable right to redeem only arises when the contractual right to redeem has passed, Brown v Cole (1845) 14 Sim 427: 60 ER 424, see also Twentieth Century Banking Corporation Ltd v Wilkinson [1977] Ch 99: [1976] 3 All ER 361. Under the Torrens system, the legal estate in fee simple remains in the mortgagor, but the phrase ‘equity of redemption’ is used to denote the mortgagor’s interest in the land even though it is by statute a legal right attached to the mortgagor’s legal estate: see Abigail v Lapin [1934] AC 491 at 501; 51 CLR 58 at 65; and Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245 at 261, and see 4.7.

Thus, whatever purists might think, these days the phrase ‘equity of redemption’ frequently comprehends both the legal right to redeem the mortgage as a matter of contractual right which existed up until the date of redemption at common law, and [page 24] also the equitable right to redeem the mortgage after such date had passed up to the making of an order absolute for foreclosure. The old distinction is, however, sometimes of importance, such as in the situation where the mortgagor wishes to redeem before the contractual date: see Stocks & Enterprises Pty Ltd v McBurney (1977) 1 BPR 9521 at 9526 and Hyde Management Services Pty Ltd v FAI Insurances Pty Ltd (1979) 144 CLR 541. An equity of redemption may be disposed of inter vivos or by will and passes on intestacy: see 32.2. Any attempted restriction on the equity of redemption beyond certain narrow limits is void: see 32.6ff. The equity of redemption may be determined by release (see 32.9), by lapse of time (see 32.85), by sale (see 20.1) and by foreclosure (see 21.1).

Obligations under mortgages. 1.16 Under modern conditions, a mortgage transaction generates a spectrum of rights and duties. The mortgagee still occupies the strongest position, but the mortgagee and its privies such as receivers are not free from obligations. Such obligations usually arise in equity and by statute, but may also spring from express or implied terms in the mortgage document. Thus a mortgagee owes a duty to the mortgagor to complete his security: see Yorkshire Bank plc v Hall [1999] 1 WLR 1713 at 1728; [1999] 1 All ER 879 at 893 and 16.2. The rights of a mortgagor generally are discussed in Chapter 12. The range of duties that attach to a mortgagee or receiver after going into possession or when exercising power of sale are considered in Chapters 19 and 20 (see 20.1).

D. Mortgages of Land in Australia

Australian mortgages 1.17 In addition to the types of mortgage inherited from England, Australian law has evolved additional forms of mortgage security. Some of these, such as the mortgage of Crown lands, so closely follow the traditional form of mortgage of land that only a small amount of comment is needed in the appropriate place in this work: see 9.5ff. Only the Torrens system mortgage needs special mention. Up until recently, there was special legislation in existence governing mortgages of crops, livestock and wool etc. These have now been subsumed into the Personal Property Securities legislation considered in Chapter 5.

Mortgages of Torrens system land 1.18 Under the Torrens system, the mortgage takes the form of a statutory instrument which, when registered, confers on the mortgagee an interest in the land at law which carries with it most of the rights and obligations that a mortgagee would have with an old system mortgage. The mortgagor, however, also has a legal interest in the land, in contradistinction to the position under the general law, where his interest only would be equitable. Accordingly, a second mortgage is, if registered, a legal interest and is a form of legal mortgage, not merely an equitable mortgage. The nearest one can get to a short description of a Torrens system mortgage is that it is an hypothecation. In English Scottish & Australian Bank Ltd v Phillips (1937) 57 CLR 302 at 321, the majority of the High Court justices said, ‘The statutory charge described as a mortgage is a distinct interest. It involves no ownership of the land the subject of the security. Like a lease, it is a separate interest in land which may be dealt with apart altogether from the fee simple or other estate or interest mortgaged. But, like a lease, it involves, or usually includes, personal obligations’. See also Alliance Acceptance Co Ltd v Ellison (1986) 5 NSWLR 102, affirmed by the Court of Appeal (1987) 9 NSWLR 13. The topic was recently discussed by the High Court in Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245 especially at 261. [page 25]

Despite the considerable change in form, the substantive rights and obligations of mortgagees and mortgagors under Torrens system mortgages are very similar to those under old system mortgages. Even terms such as ‘equity of redemption’ and ‘foreclosure’ are used, although, on analysis, it is clear that they are used with a different legal meaning. A full conspectus of the law of Torrens system mortgages is contained in Chapter 4.

E. Other Mortgages — Fixtures — Goodwill & Incidental Rights Fixtures 1.19 A mortgage can be taken over almost any property. However, many mortgages are covered by the PPSA considered in Chapter 5. The PPSA exempts mortgages over fixtures s 5(1)(j). PPSA defines ‘fixtures’ as ‘goods, other than crops, that are affixed to land’. With regard to fixtures, New South Wales and Victoria form one group and the remaining states another. In the former group the test is whether the fixtures are ‘capable of complete transfer by delivery (either at the time of the making or giving of a bill of sale of the personal chattels specified in the bill or at any time thereafter)’. In the latter group fixtures are chattels ‘when separately assigned’. In New South Wales a mortgagee is given a specific statutory power, where the mortgage is made by deed, to sever and sell fixtures apart from the balance of the mortgaged property (Conveyancing Act 1919 (NSW) s 109(1) (e)), but a mortgage of land which confers such a power, either expressly or by the implication of the statutory power, upon the mortgagee, shall not be and shall be deemed never to have been merely because of such power a bill of sale or subject to avoidance or invalidity under the Bills of Sale Act 1898 by reason of not having been registered under the provisions of that Act: Conveyancing Act 1919 (NSW) s 109A. It seems, however, that if fixtures were to be mortgaged by deed, apart from the tenement or hereditament to which they were attached, then the power to sever contained in s 109 of the Conveyancing Act would apply to the deed, but the protection afforded by s

109A would not, and consequently the deed would be a bill of sale. In Victoria there does not appear to be any statutory counterpart of the New South Wales Conveyancing Act s 109A, or of the implied power to sever and sell fixtures; severance, however, would appear to be a condition precedent to making fixtures ‘capable of complete transfer by delivery’: Re Wilde; Ex parte Daglish (1873) 8 Ch App 1072; Johns v Ware [1899] 1 Ch 359. It would follow therefore that in Victoria a power to sever and sell fixtures included in a mortgage of real estate, whether freehold or leasehold, would require registration as a bill of sale under the Instruments Act. In Queensland, South Australia, Western Australia and Tasmania fixtures (other than trade machinery) will be ‘chattels’ for the purposes of the Acts only when separately assigned. If therefore they are assigned together with a freehold or leasehold estate in land, they will not be ‘chattels’ for the purposes of the Acts, whether the assignment includes a power to sever or not; indeed, when so assigned they are specifically excluded from the definitions.

Fixtures passing by mortgage of land 1.20 A mortgage of land — whether legal or equitable (see Re Lusty; Ex parte Lusty v Official Receiver (1889) 60 LT 160), and whether of freeholds or leaseholds (see Meux v Jacobs (1875) LR 7 HL 481; Southport and West Lancashire Banking Co v Thompson (1887) 37 Ch D 64 (CA)) comprises, without express mention, and subject to any [page 26] contrary intention, all fixtures which at the date of the mortgage are, or at any time afterwards during its continuance may be, annexed to the land (Mather v Fraser (1856) 2 K & J 536; 69 ER 895; Walmsley v Milne (1859) 7 CB NS 115; 141 ER 759; Longbottom v Berry (1869) LR 5 QB 123; Holland v Hodgson (1872) LR 7 CP 328; Smith v Maclure (1884) 32 WR 459; Reynolds v Ashby & Son [1904] AC 466 (HL); Ellis v Glover and Hobson Ltd [1908] 1 KB 388 (CA); Vaudeville Electric Cinema v Muriset [1923] 2 Ch 74; Hulme v Brigham [1943] 1 KB 152; [1943] 1 All ER 204; as to the power of sale in

relation to fixtures, see 1.21), whether or not they are removable as between landlord and tenant. Fixtures passing by a mortgage of land will not pass to the trustee in bankruptcy of the mortgagor: Clark v Crownshaw (1832) 3 B & Ad 804; 110 ER 295. In relation to fixtures generally, see Bradbrook, MacCallum and Moore, Australian Real Property Law, 3rd ed, Law Book Co, Sydney, 2002, pp 585– 96; Hinde, McMorland and Sim, Introduction to Land Law, 2nd ed, Butterworths, Wellington, 1986, pp 571–700; and see Halsbury’s Laws of England, vol 27, Landlord and Tenant, paras 142ff; Megarry and Wade, The Law of Real Property, 6th ed, Sweet & Maxwell, London, 2000, pp 928ff; (1985) 135 NLJ 539, 588 (Haley); and Griggs, ‘The doctrine of fixtures: questionable origin, debatable history and a future that is past!’ (2001) 9 APLJ 51; and see Alston, ‘Chattels Attached to Chattels’ (1996) 4 APLJ 120. For recent examples of what are fixtures, see Bank of Melbourne Ltd v CBFC Leasing Pty Ltd [1991] ACL Rep 295 Qld 7 (air conditioner); NorthWest Trust Co v Rezyn Developments Inc (1991) 81 DLR (4th) 751 (ten-pin bowling alley); University of Melbourne v Avram Hotels Pty Ltd (1991) VConvR 54-395 (carpets). Nevertheless, it was emphasised in N H Dunn Pty Ltd v L M Ericsson (1979) 2 BPR 9241 (CA) that no single principle or test is adequate to determine whether an item of personal property is a fixture or a chattel: and see National Australia Bank Ltd v Blacker (2000) 104 FCR 288 at [9]–[17]. Where, however, trade fixtures customarily belong to the tenant of the mortgagor, the mortgagee cannot claim them as against the tenant: Sanders v Davis (1885) 15 QBD 218. A mortgagor while in possession may permit trade fixtures to be put up and removed, so long as he does not either materially diminish the mortgagee’s security, or commit a breach of some express stipulation in the mortgage: Ellis v Glover and Hobson Ltd [1908] 1 KB 388 (CA). On the removal of fixtures and waste, see Mancetter Developments Ltd v Garmanson Ltd [1986] QB 1212; [1986] 1 All ER 449 (CA); (1986) 136 NLJ 675 (Wilkinson). The right of removal ceases when possession is taken by the mortgagee; but the exception as to trade fixtures in favour of a tenant does not apply in the case of fixtures erected on the mortgaged premises under a hire-purchase

agreement on the terms that, until paid for, they shall remain the property of the owner who supplied them. In such cases, if the mortgage is a legal mortgage and the mortgagee had no notice of the hire-purchase agreement (Re Samuel Allen & Sons Ltd [1907] 1 Ch 575; but see below) or the agreement was made later than the mortgage, the title of the mortgagee will prevail over that of the owner by virtue of his legal title unless the mortgagee has acquiesced in their removal: Hobson v Gorringe [1897] 1 Ch 182 (CA), distinguishing Cumberland Union Banking Co v Maryport Hematite Iron and Steel Co [1892] 1 Ch 415; Gough v Wood [1894] 1 QB 713 (CA); Reynolds v Ashby & Son; Lyon & Co v London City and Midland Bank [1903] 2 KB 135; but see below. Where, however, the mortgage is an equitable mortgage, and is given after the hire-purchase agreement, then, even if the mortgagee takes without notice of it, his title is postponed to that of the owner: Re Samuel Allen & Sons Ltd [1907] 1 Ch 575; Re Morrison, Jones and Taylor Ltd [1914] 1 Ch 50 (CA). Where a hire-purchase agreement [page 27] entitles the owner to enter and seize on default, etc, the owner has an equitable interest in the land to which the fixture is attached: Gough v Wood & Co [1894] 1 QB 713 at 722 (CA); Hobson v Gorringe [1897] 1 Ch 182 at 192 (CA); Reynolds v Ashby & Son Ltd, above; Kay’s Leasing Corp Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VR 429 at 436. The matter of hire-purchase agreements and fixtures is expressly covered by Australian state legislation: see Sykes and Walker, p 829. On hirepurchase agreement and fixtures, see [1990] Conv 275 (McCormack). In Whenuapai Joinery (1988) Ltd v Trust Bank Central Ltd [1994] 1 NZLR 406, a joinery supplied timber — under contract containing a Romalpa clause — which was incorporated into a building mortgaged to the defendant. The joinery company retook the timber but, as it had become a fixture, the mortgagee prevailed. Before the Bills of Sale Act 1878 (UK), a grantee by bill of sale of fixtures

annexed to mortgaged premises had no title against the mortgagee (Longbottom v Berry (1869) LR 5 QB 123), and this appears still to be the law: Reynolds v Ashby & Son Ltd, above. A mortgage of land which passes fixtures without mentioning them is not a bill of sale: Meux v Jacobs (1875) LR 7 HL 481.

Fixtures not passing 1.21 The general rule as to fixtures is subject to qualifications arising out of the terms of the security. Thus, if two kinds of property are mortgaged, and the fixtures are expressly included in one of them, the principle expressio unius est exclusio alterius may exclude the fixtures annexed to the other: see, for example, Hare v Horton (1833) 5 B & Ad 715; 110 ER 954. But quaere whether this would not be too refined a distinction to be followed now. The bare enumeration of specific fixtures in the mortgaged property will not rebut the inference that all fixtures were intended to pass: Mather v Fraser (1856) 2 K & J 536; 69 ER 895; and see Hamp v Bygrave (1983) 266 Estates Gazette 720 (QBD). Again, if it is the custom of the place that fixed machinery which can be removed without injury to the freehold should be so removed, and it has been treated between the parties as separate from the land and unaffected by the mortgage, such machinery may be held not to pass by a mortgage of the buildings and machinery: Trappes v Harter (1833) 2 Cr & M 153; 149 ER 712; cf Whitmore v Empson (1857) 23 Beav 313; 53 ER 123.

Loose parts of fixtures 1.22 With any fixture will pass, without any special mention, whatever, though accidentally detached from it, or not of its own nature a fixture, may be essential for the proper employment of the machine or fixed article of which it forms part, even though it is more or less capable of use in a detached state: Place v Fagg (1829) 4 Man & Ry KB 77; Mather v Fraser (1856) 2 K & J 536; 69 ER 895. The same rule is also applicable in the case of machinery not of a fixed kind: Re Richards; Ex parte Astbury; Ex parte Lloyd’s Banking Co (1869) 4 Ch App 630. And on the same principle a mortgage of a ship at sea with its tackle and appurtenances will pass a chronometer then on board belonging to the owner of the ship: Langton v Horton (1842) 1 Hare 549; 66 ER 1149.

Goodwill and other incidental rights 1.23 All incidental rights such as the goodwill of a business carried on upon and inseparably connected with the mortgaged property, and compensation for such goodwill when the property is taken compulsorily, will follow the security: Chissum v Dewes (1828) 5 Russ 29; 38 ER 938; King v Midland Railway Co (1868) 17 WR 113; Pile v Pile; [page 28] Ex parte Lambton (1876) 3 Ch D 36; Re Kitchin; Ex parte Punnett (1880) 16 Ch D 226. Note however that the same rule is not to be applied to the equity of redemption: see Re Bennett; Clarke v White [1899] 1 Ch 316. Thus where an abattoir was being carried on, the licence to operate the abattoir formed part of the security (Daniels v Pynbland (No 2) (1985) 4 BPR 9716 and see also Gay v Johnston (1936) 37 SR (NSW) 454), where a publican’s licence for a mortgaged hotel was held to constitute part of the mortgagee’s security though not mentioned in the deed: see also Rutter v Daniel (1882) 1 WR 724 and on appeal 30 WR 801; Re O’Brien (1883) 11 Ir R 213; Garrett v St Marylebone, Middlesex JJ (1884) 12 QBD 620. In 888 Casino & Tavern Pty Ltd v Hurlfobe Pty Ltd (1997) 8 BPR 15,505, Windeyer J held that a mortgage of a hotel carried a security over the licence so that the mortgagee entering into possession was entitled to call for the transfer of the licence. However, in Burns Philp Trustee Co Ltd v Ironside Investments Pty Ltd [1984] 2 Qd R 16 at 21 Shepherdson J held that in Queensland liquor licences and grocers’ licences were not property, but merely a personal right granted to the mortgagor. For a case of a permit to receive a quota of beer during wartime see: Re Carr [1918] 2 Ir R 448. See also, as to licences generally, Re Tonkin; Ex parte Jones (1933) 6 ABC 197. In Victoria, a milk licence was held to be included in the mortgage of a dairy: Re Millar; Burns v ES&A Bank (1952) ABC 49 at 60-1. See also Federal Commissioner of Taxation v Williamson (1943) 67 CLR 561 at 564 and Hoogerdyk v Condon (1990) 22 NSWLR 171. For the problems over this

type of security when the milk industry is deregulated, see National Australia Bank Ltd v Blacker (2000) 179 ALR 97; 104 FCR 288. So in Law Guarantee and Trust Society Ltd v Micham and Cheam Brewery Co Ltd [1906] 2 Ch 98 compensation for the licence on the compulsory acquisition of a mortgaged hotel was held to belong to the mortgagee as part of the mortgaged security. In Votrubec Investments Pty Ltd v Hospital Food & Services Pty Ltd (1981) 5 BPR 11,712, a case which held that the goodwill of a nursing home was part of the security, Helsham CJ in Eq said at 11,716, ‘It is clear from the authorities [those set out in the 8th English edition of this work, and repeated in this chapter] that the question of whether a mortgage of premises upon which a business is being conducted was intended to include in the security the goodwill of the business is a matter of construction and, no doubt, construction bearing in mind relevant surrounding circumstances’. The rule will not apply where the goodwill exists as a consequence of the personal skill of the mortgagor (Cooper v Metropolitan Board of Works (1883) 25 Ch D 472) or is excluded by the terms of the security: Whitley v Challis [1892] 1 Ch 64; Palmer v Barclays Bank Ltd (1971) 23 P & CR 30. See also County of Gloucester Bank v Rudry Merthyr Steam & House Coal Colliery Co [1895] 1 Ch 629. The benefit of some rights relating to the security, for instance appurtenant easements, will pass automatically with the mortgage of the security. Other rights need to be expressly assigned by separate provisions in the mortgage deed. Care must be taken with mortgages over home units that there is not a separate title to a garage or shares in a unit trust which will require special consideration: see, for example, King v AGC (Advances) Ltd [1983] 1 VR 682.

F. Sales with Right of Repurchase Mortgage or absolute conveyance 1.24 When a legal mortgage might be made in the form of an absolute conveyance of the property, it was sometimes doubtful on the terms of the

instrument whether it [page 29] really was a mortgage or an absolute conveyance. While the courts protect a bona fide purchaser (see, for example, Premier Group Ltd v Lidgard [1970] NZLR 280), and will not lightly infer an intention to make a mere security, if none is expressed (see Cotterell v Purchase (1734) Cases, t. Talb. 61; 25 ER 663), they will give effect to an intention, if proved to create a security. Courts will also take care that a borrower shall not suffer from the omission by fraud, mistake, or accident, are the usual requisites of a mortgage. The burden of proof is on the party claiming that the apparent absolute conveyance is merely a security: see Mayfair London Bank Ltd v Workman (1972) 22 EG 989, a case where the security was not proved. An instrument which purports to be an absolute conveyance may therefore be construed as a mortgage, where, according to the true intention of the parties, it was intended to be regarded as such: Douglas v Culverwell (1862) 4 De GF & J 20; 45 ER 1089; Re Duke of Marlborough; Davis v Whitehead [1894] 2 Ch 133; Grangeside Properties Ltd v Collingwood Securities Ltd [1964] 1 All ER 143; Re Kent & Sussex Sawmills Ltd [1947] Ch 177; Scottish & Newcastle Breweries Ltd v Liquidator of Rathbourne Hotel Co Ltd [1970] SLT 313; and Re Universal Management Ltd [1983] NZLR 462. As to mortgages of chattels, see 5.15.

Construction as to the nature of the transaction 1.25 Whether a transaction is a mortgage or conveyance depends upon the construction of the documents and the evidence of the surrounding circumstances or factual matrix of the transaction: see Prenn v Simmonds [1971] 1 WLR 1381; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; and see Wily v Endeavour Health Care Services Pty Ltd (No 5) (2003) 11 BPR 21,081 affirmed on appeal [2003] NSWCA 321. The nature of the transaction depends upon the construction of the relevant documents in the light of any admissible evidence, even though the parties

may not have realised the consequences: Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584. Parol evidence is admissible to prove the true nature of the transaction: Barton v Bank of New South Wales (1890) 15 App Cas 379; C & G Kreglinger v New Patagonia Meat & Cold Storage Co Ltd [1914] AC 25 at 47; Hayes Securities Ltd v Bambury [1991] 1 NZLR 304 at 307; Gurfinkel v Bentley Pty Ltd (1966) 116 CLR 98; and see also Maxwell v Lady Mountacute (1719) Prec Ch 526; 24 ER 235; Cripps v Jee (1793) 4 Bro CC 472; 29 ER 994; Sevier v Greenway (1815) 19 Ves 413; 34 ER 570; Allenby v Dalton (1827) 5 LJ KB (OS) 312; Wilson v Ward [1930] 2 DLR 433; and Nunn v Wily (2001) 10 BPR 18,983. On the parol evidence rule generally, see English Law Commission Report on Parol Evidence Rule, English Law Comm No 154 (1986) (Cmd 9700) and State Rail Authority of NSW v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170. The court will construe a document as a mortgage where there is parol evidence of non-execution, erasure, or omission by mistake or fraud of an intended defeasance or proviso for redemption: Maxwell v Lady Mountacute, above; England v Codrington (1758) 1 Eden 169; 28 ER 649; AG v Crofts (1788) 4 Bro Parl Cas 136; 2 ER 91; Card v Jaffray (1805) 2 Sch & Lef 374. The Statute of Frauds would not be allowed to be pleaded to cover what would amount to a fraud, unless perhaps the parties deliberately abstained from putting their meaning into writing: Re Duke of Marlborough [1894] 2 Ch 133; and see Dalton v Christofis [1978] WAR 42 at 46-7. The court will also hold that there is a mere mortgage if a separate defeasance or agreement for a right of redemption has been made by the mortgagee or a duly authorised agent of the mortgagee either in writing or orally, or if it appears from recitals in, or by inference drawn from, the contents of other instruments, or from the payment of interest or other circumstances, that the conveyance was intended to be redeemable(Webber v Farmer (1718) 4 Bro Parl Cas 170; 2 ER 116; Maxwell v Lady Mountacute; Cripps v Jee; [page 30]

Sevier v Greenway; Allenby v Dalton (all above); Barton v Bank of New South Wales (1890) 15 App Cas 379 (considered in United Dominions Trust Ltd v Beech [1972] 1 Lloyd’s Rep 546; Beattie v Jenkinson [1971] 3 All ER 495; [1971] 1 WLR 1419)); but see: Tull v Owen (1840) 4 Y & C Ex 192; 160 ER 965. See also as to whether a transaction was an absolute assignment or an assignment by way of charge: Chase Manhattan Asia Ltd v Official Receiver and Liquidator of First Bangkok City Finance Ltd [1990] 1 WLR 1181 (PC), reversing the Hong Kong Court of Appeal which had held the transaction to be an absolute assignment in [1988] 2 HKLR 618. Reference should also be made to Road Chalets Pty Ltd v Thornton Motors Pty Ltd (1986) 47 SASR 532; Stern v McArthur (1988) 165 CLR 489 and to 3.6 and 3.7.

Fraudulent or secret conveyance 1.26 If an absolute conveyance is made with a secret defeasance, in order, by concealing the defeasance, to commit a fraud, the defeasance will be void against a purchaser who had no notice of the defeasance: Webber v Farmer (1718) 4 Bro Parl Cas 170; 2 ER 116. If a mortgage has been fraudulently made to appear as an absolute conveyance it will not be corrected at the instance of those concerned in the fraud: Baldwin v Cawthorne (1812) 19 Ves 166; 34 ER 480. A mortgage may be created by a deed duly executed, though it is retained by the debtor without communication with the creditor, unless it is shown that there was fraud in the execution, or that it was delivered as an escrow, and was intended to operate conditionally: Exton v Scott (1833) 6 Sim 31; 58 ER 507. As to escrows, see 3.5.

Mortgage or conveyance with option of repurchase 1.27 Although there are certain cases in which conveyances, apparently absolute, may be construed as mortgages, an absolute conveyance, with an agreement for repurchase or that the conveyance shall be void upon payment of a certain fixed sum at a fixed time, will create a mere right of repurchase to be exercised according to the strict terms of the power. It will not create such a right of redemption as is incidental to a mortgage unless it is proved that the transaction was in the nature of a mortgage security, and that the grantor and grantee were intended to have mutual and reciprocal rights to insist upon reconveyance of the estate and repayment of the consideration: see St John v

Wareham ((1635) noted below); Barrell v Sabine (1684) 1 Vern 268; 23 ER 462; Ensworth v Griffiths (1706) 5 Bro Parl Cas 184; 2 ER 615; Goodman v Grierson (1813) 2 Ball & B 274; Perry v Meddowcroft (1841) 4 Beav 197; 49 ER 314; Alderson v White (1858) 2 De G & J 97; 45 ER 924; Shaw v Jeffery (1860) 13 Moo PCC 432; 15 ER 162; Tapply v Sheather (1862) 7 LT 298; Manchester v Sheffield & Lincolnshire Railway Co v North Central Railway Co (1888) 13 App Cas 554; Beckett v Tower Assets Co [1891] 1 QB 1 at 25; Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1957) 59 SR (NSW) 122; Hall v Busst (1960) 104 CLR 206; Gurfinkel v Bentley Pty Ltd (1966) 116 CLR 98; Kreick v Wansbrough (1973) 35 DLR (3d) 275; Chase Manhattan Asia Ltd v Official Receiver and Liquidator of First Bangkok City Finance Ltd [1990] 1 WLR 1181 (PC); and Ramsbotham, Coote’s Treatise on the Law of Mortgages, 9th ed, Stevens and Sons, Sweet & Maxwell, London, 1927, pp 27–34. It is not the purpose of this work to examine the limitations that there may be on arrangements for repurchase: for some of the difficulties, see Hall v Busst. The point to be made is that with some exceptions (see, for example, the line of cases including Pegg v Wisden (1852) 16 Beav 239; 51 ER 770), equity does not intervene to give relief in the case of a repurchase if any of the conditions precedent to the repurchase are not fulfilled: see Barrell v Sabine (1684) 1 Vern 268; 23 ER 462 and Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd, above. Accordingly, repurchase was refused where a limited time was fixed for repayment: Williams v Owen (1840) 5 My & Cr 303; 41 ER 386; Acton v Acton (1704) Prec Ch 237; 24 ER 115; but see Waters v Mynn (1850) 14 Jur 341. Again, repurchase was refused where the agreement for repurchase was to be void on failure [page 31] in punctual payment of the rent at which the land had been demised to the vendor and there was a default in compliance with the conditions: Davis v Thomas (1831) Russ & M 506; 39 ER 195; St John v Wareham (1635), cited in Thornborough v Baker 3 Swan 628 at 631; 36 ER 1000 at 1001; and see MacLaine v Gatty [1921] 1 AC 376. In the case of a mortgage, the penalty or forfeiture is introduced for the purpose of security only, and, in case of

default in payment at the appointed time, the mortgagee is compensated by receiving interest. However, in the case of a defeasible purchase, forfeiture is out of the question, the estate being absolutely vested in the grantee; and the power of repurchase, not arising from the nature of the contract, but being a special privilege given to one of the parties without any corresponding right in the other, must be strictly exercised. As to the strict observance of option terms see also Hare v Nicoll [1966] 2 QB 130. In so far as many of the cases just referred to indicate that estoppels may not be relied upon to relieve against the strict legal position, they may need to be re-examined in the light of recent developments in the law of estoppel in the High Court of Australia. In all these cases the question is: what was the real intention of the parties?: Manchester, Sheffield & Lincolnshire Railway Co v North Central Wagon Co (1888) 13 App Cas 554 at 568. The rule is that prima facie an absolute conveyance, containing nothing to show that the relation of debtor and creditor is to exist between the parties, does not cease to be an absolute conveyance and become a mortgage merely because the vendor stipulates that he shall have a right to repurchase(Alderson v White (1858) 2 De G & J 97 at 105; 44 ER 924 at 928; cf Wily v Endeavour Health Care Services Pty Ltd (No 5) [2003] NSWCA 321) where it was found that the true intention of the parties was to grant an option to purchase.

The intent of the transaction 1.28 The intent of a transaction is to be found from common sense, the fair construction of the documents and surrounding circumstances: Alderson v White (1858) 2 De G & J 97 at 105; 44 ER 924 at 928; Hayes Securities Ltd v Bamburg [1991] l NZLR 304 at 307. The decided cases on the subject merely produce guidelines. Thus, the absence of a covenant to repay will not be decisive: Hayes Securities v Bamburg. The enquiry usually is whether as a matter of substance rather than form the transaction is one of mortgage: Westfield Holdings Ltd v Australian Capital Television Pty Ltd (1992) 32 NSWLR 194 at 199. Although parties cannot merely by attaching a label to their document alter the nature of the proper legal classification of the rights they have dealt with, the label which the parties have given will be given considerable weight unless it can be seen that it is not a genuine statement of the parties’ intention: Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385

at 389-90; sub nom Australian Mutual Provident Society v Allan (1978) 52 ALJR 407 at 409 (PC); Narich Pty Ltd v Commissioner of Payroll Tax [1983] 2 NSWLR 597; [1984] ICR 286 (PC); Federal Commissioner of Taxation v Krokas Investments Pty Ltd (1995) 133 ALR 545 at 550.

Test for meaning of instrument 1.29 In all cases the real question is: what was the intention of the parties? Where the transaction is fully documented this question will virtually become: what, upon a fair construction, is the meaning of the instrument? The true nature rather than the form of the transaction is to be considered: Re Wilson; Ex parte Official Receiver in Bankruptcy (1890) 25 QBD 27; Madell v Thomas [1891] 1 QB 230; Salt v Marquess of Northampton [1892] AC 1; Bradley v Carritt [1903] AC 253; Lewis v Frank Love Ltd [1961] 1 All ER 446; Alec Lobb (Garages) Ltd v Total Oil Great Britain Ltd [1983] 1 WLR 87; [1983] 1 All ER 944, on appeal [1985] 1 WLR 173; [1985] 1 All ER 303; Re Row Dal Constructions Pty Ltd [1966] VR 249; Arnal v Arnal (1969) 6 DLR (3d) 245; Automobile Association (Canterbury) Inc v Australasian Secured Deposits Ltd [1973] 1 NZLR 417; Re Universal Management Ltd [1983] NZLR 462; Hayes Securities Ltd v Bamburg [1991] 1 NZLR 304. [page 32] Unless it is demonstrated that the title of the documents or the documents themselves are a sham, the question of the proper legal categorisation is a matter of construction. However, as Millett LJ said in Orion Finance Ltd v Crown Financial Management Ltd [1996] 2 BCLC 78 at 84: This does not mean that the terms which the parties have adopted are necessarily determinative. The substance of the parties’ agreement must be found in the language they have used, but the categorisation of a document is determined by the legal effect which it is intended to have, and if when properly construed the effect of the document as a whole is inconsistent with the terminology which the parties have used, then their ill-chosen language must yield to the substance.

See also Re ASRS Establishment Ltd [2000] 2 BCLC 631 at 638; and Wily v Endeavour Health Care Services Pty Ltd (No 5) [2003] NSWCA 321. The inadequacy of the consideration to the value of the property, the taking

by the grantee of immediate possession under the conveyance, and the payment (by him or by the grantor) of the costs of the transaction, or of insurances and other outgoings of the property, will be taken into consideration, but will not be conclusive upon the question whether a doubtful instrument was intended to take effect by way of mortgage or by way of sale: Thornborough v Baker (1675) 3 Swan 628, 632; 36 ER 1000; Davis v Thomas (1831) Russ & M 506; 39 ER 195; Williams v Owen (1840) 5 My & Cr 303; 41 ER 386; Langton v Horton (1842) 5 Beav 9; 49 ER 479; Alderson v White (1858) 2 De G & J 97; 44 ER 924; Douglas v Culverwell (1862) 4 De GF & J 20; 45 ER 1089. Circumstances of pressure upon the grantor (as where he is insolvent or is represented by the same solicitor as the grantee) will materially influence the court in construing an apparently absolute or conditional sale as a mortgage, where, in the absence of such circumstances, the mere insufficiency of price would be little regarded. Weight will also be given to the circumstance that, in the peculiar position of the grantor, a mortgage might be beneficial to him when a sale would not: Fee v Cobine (1847) 11 Ir Eq R 406. However, it may be shown that the grantor entered into the contract with full knowledge of the consequences: Bonham v Newcomb (1681) 1 Vern 214 at 232; 23 ER 422 at 435; Langton v Horton (1842) 5 Beav 9; 49 ER 479.

Defeasible purchase of equity of redemption 1.30 The strict compliance with the conditions has been upheld even in transactions relating to securities. For instance, when the equity of redemption is released to the mortgagee by the mortgagor, it has been agreed that the mortgagee should reconvey upon repayment to the mortgagor within a fixed time of the original debt, with the money paid for the release and interest and the outlay for repairs and improvements: Ensworth v Griffiths (1706) 5 Bro Parl Cas 184; 2 ER 615; Gossip v Wright (1863) 32 LJ Ch 648; Sterne v Beck (1863) 1 De GJ & Sm 595; 46 ER 236; Wallingford v Mutual Society (1880) 5 App Cas 685; Protector Endowment & Annuity Loan Co v Grice (1880) 5 QBD 592. Similarly, if the creditor agrees to forgo part of his debt upon payment of the residue on a fixed day, or to refrain from entering judgment if an insurance is kept up, in the former case no relief will be given in case of default, but the mortgagee will be entitled to the whole of the original debt, and in the latter the creditor can take advantage of failure in the

strict performance of the conditions: Ford v Earl of Chesterfield (1854) 19 Beav 428; 52 ER 416; Parry v Great Ship Co (1863) 4 B & S 556; 122 ER 568 and see Thompson v Hudson (1869) LR 4 HL 1; Tasburgh v Echlin (1733) 3 Bro Parl Cas 265; 1 ER 934; Ogden v Battams (1855) 1 Jur NS 791; King v Bromley (1709) 2 Eq Cas Abr 595; 22 ER 500.

Mortgage ‘as beneficial owner’ 1.31 Section 78 of the NSW Act and ss 76 and 77 of the Victorian Act give special magic to the term ‘as beneficial owner’. Sometimes a court will construe these words [page 33] in a mortgage as used merely to pick up the statutory covenants implied by use of these words. Sometimes, especially in the states where there is no equivalent of NSW s 78, the words will be taken to have the effect of charging only land which the mortgagee owns beneficially and not that which he merely holds as trustee. See Ex parte Stanford (1886) 17 QBD 259; Avco Financial Services Ltd v White [1977] VR 561 at 565; Corozo Pty Ltd v Total Australia Ltd [1987] 2 Qd R 11 at 19, on appeal [1988] 2 Qd R 366 at 372; and Custom Credit Corp Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42.

‘Subject to mortgage’ 1.32 Commercial considerations may bring about the situation where a contract is made ‘subject to mortgage’ or ‘subject to finance’ etc. Until recently, most of such clauses failed for uncertainty. In Meehan v Jones (1982) 149 CLR 571, the High Court made it clear that, generally speaking, such clauses were not void for uncertainty, and ‘subject to finance’ clauses have since then been upheld as a general rule: see, for example, Progress & Properties (Strathfield) Pty Ltd v Crumblin (1984) 3 BPR 9496. See also the article by Swanton in (1984) 58 ALJ 633 and 690. The English cases are reviewed in Graham v Pitkin [1992] 2 All ER 235; [1992] 1 WLR 403 (PC).

G. Equitable Mortgages

Generally 1.33 The essence of any transaction by way of mortgage is (1) that a debtor confers upon his creditor a proprietary interest in property of the debtor, or undertakes in a binding manner to do so, by the realisation or appropriation of which the creditor can procure the discharge of the debtor’s liability to him, and (2) that the proprietary interest is redeemable, or the obligation to create it is defeasible, in the event of the debtor discharging his liability. If there has been no legal transfer of a proprietary interest, but merely a binding undertaking to confer such an interest, that obligation, if specifically enforceable, will confer a proprietary interest in the subject matter in equity: Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584 at 595 (CA and HL); [1980] 2 All ER 419 at 426, per Buckley LJ; affirmed [1982] AC 584; [1981] 2 All ER 449 (HL). A binding promise for delivery of a certificate of title by way of security if specifically enforceable will thus create an equitable mortgage and an interest in land, Pico Holdings Ltd v WaveVistas Pty Ltd [2005] HCA 13: (2005) 79 ALJR 825:214 ALR 392 and see National Australia Bank Ltd v Clowes [2013] NSWCA 179. An equitable mortgage is a contract which operates as a security and is enforceable under the equitable jurisdiction of the court. The court carries it into effect either by giving the creditor immediately the appropriate remedies or by compelling the debtor to execute a security in accordance with the contract: Ashton v Corrigan (1871) LR 13 Eq 76; Hermann v Hodges (1873) LR 16 Eq 18. It is applicable to all property of which a legal mortgage can be made, even where statute provides — as, for example, in the case of ships — a particular method for passing the legal property therein. Whether a particular transaction gives rise to an equitable mortgage must depend upon the intention of the parties ascertained from what they have done in the then existing circumstances, see 3.37ff. The intention may be expressed or it may be inferred. If the debtor undertakes to segregate a particular fund or asset and to pay the debt out of that fund or asset, the inference may be drawn, in the absence of any contrary indication, that the parties’ intention is that the creditor should have such a proprietary interest in the segregated fund or asset as will enable him to realise out of it the amount owed to him by the debtor.

[page 34] Notwithstanding that the matter depends upon the intention of the parties, if, upon the true construction of the relevant documents, the parties have entered into a transaction the legal effect of which is to give rise to an equitable mortgage in favour of one of them over the property of the other, the fact that they may not have realised this consequence will not mean that there is no mortgage. They must be presumed to intend the consequences of their acts: Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584 at 595-6 per Buckley LJ; [1980] 2 All ER 419 at 426; Thames Guaranty Ltd v Campbell [1985] QB 210 at 218; [1984] 1 All ER 144 at 149; affirmed [1985] QB 210; [1984] 2 All ER 585 (CA). Where the subject matter is precarious, this may be an indication that a security was not intended: Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584 at 596-7 per Buckley LJ; [1980] 2 All ER 419 at 427 (CA); affirmed [1981] 2 All ER 449 (HL). It must be clearly noted that there is a distinct disadvantage in a creditor merely taking an equitable mortgage, particularly the possible loss of priority if subsequent mortgages are created: see, for example, McCarthy and Stone Ltd v Julian S Hodge & Co Ltd [1971] 2 All ER 973; [1971] 1 WLR 1547; Barclays Bank Ltd v Taylor [1973] Ch 63; [1972] 2 All ER 752; and (1972) 116 Sol Jo (Harris).

Creation of equitable mortgages 1.34 An equitable mortgage may be created by general words: William Brandt’s Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454 at 462; Elders Pastoral Ltd v Bank of New Zealand [1990] 1 WLR 1478 (PC). No particular form is necessary: see Vrkic v Otta International Pty Ltd [2003] NSWSC 433. The ordinary debenture of a limited company is a common example of this. Again a power of attorney to receive rent of land until a loan is repaid may be held to constitute a charge: Wilkinson v Wilkinson (1819) 3 Swan 515; 36 ER 958; Spooner v Sandilands (1842) 1Y & CCC 390; 62 ER 939; Abbott v Stratton (1846) 3 Jo & Lat 603; Re Parkinson’s Estate (1865) 13 LT 26 at 27 (Ir Ch). This lack of a requirement as to form is in stark contrast to a legal mortgage. A mortgage of all the mortgagor’s ‘real and personal property whatsoever

and wheresoever’ is not void for uncertainty, nor as being against public policy, if it is possible at the time when the charge is sought to be enforced to point out the property comprised in it: Re Clarke; Coombe v Carter (1887) 36 Ch D 348 (CA); Re Turcan (1888) 40 Ch D 5 (CA); Tailby v Official Receiver (1888) 13 App Cas 523 (HL); Re Kelcey [1899] 2 Ch 530 at 532-4; Bridge Wholesale Acceptance Corp (Aust) Ltd v Burnard (1992) 27 NSWLR 415 and see Syrett v Egerton [1957] 3 All ER 331 at 332, 334; compare Barker v Barker [1952] 1 All ER 1128 (CA). In Cradock v Scottish Provident Institution (1893) 69 LT 380 at 382, Romer J said, ‘To constitute a charge in equity by deed or writing it is not necessary that any general words of charge should be used. It is sufficient if the court can fairly gather from the instrument an intention by the parties that the property therein referred to should constitute a security’. This decision was affirmed on appeal (1894) 70 LT 718. This test was utilised in Avco Finance Services Ltd v White [1977] VR 561 at 564 where it was held that a loan agreement containing the following words conferred a valid equitable charge, ‘As for the security for the payment of the loan and interest I agree … to charge as beneficial owner all freehold and leasehold interest in the land which I may now have or during the currency of the loan may acquire, including.…’ In Corozo Pty Ltd v Total Australia Ltd [1987] 2 Qd R 11 at 18, Connolly J pointed out that while a promise to give a real security without identifying the land gave no charge on particular land (Fremoult v Dedire (1718) 1 P Wms 429; 24 ER 458; Williams v Lucas (1789) 2 Cox 160; 30 ER 73; Berrington v Evans (1839) 3 Y & C Ex 384; 160 ER 751), a promise to charge all one’s lands was on a different footing: Re Kelcey [1899] 2 Ch 530; Clark v Raymor (Brisbane) Pty Ltd (No 2) [1982] Qd R 790 at 795. The Corozo decision went on appeal, but the appeal was dismissed: [1988] 2 Qd R 366. [page 35] These matters are most relevant to mortgages and charges imposed under agreements with suppliers of goods considered in detail in 1.34.

Formal requirements

1.35 It is essential that an equitable mortgage be by deed if the mortgagee is to have the power of sale and other powers conferred on a mortgagee by statute — that is, under s 106 of the NSW Act and s 101 of the Victorian Act. An equitable mortgage over land will need to comply with formal requirements under ss 23C and 54A of the NSW Act, s 53 of the Victorian Act and s 126 of the Instruments Act 1958 (Vic) respectively unless there has been part performance: Australia and New Zealand Banking Group Ltd v Widin (1990) 102 ALR 289. Thus, in Nearhaze Pty Ltd v Official Trustee in Bankruptcy (1999) 9 BPR 17,273, a wife was not bound by an informal mortgage where only the husband had signed a letter containing a full description of the mortgaged property and other essential terms; but cf Hickey v Powershift Tractors Pty Ltd (1998) 9 BPR 17,339 (Bryson J) where it was held that fraud in relation to the witnessing of a mortgage instrument did not extend to the substance of the transaction, so the document operated as an equitable mortgage. A classic situation of an informal equitable mortgage is where a security is obtained by deposit of title deeds: see 3.37 ff. Such a mortgage will be valid not only with respect to local land, but also over foreign land, notwithstanding that the foreign jurisdiction has no equivalent notion. Thus land in China has been so mortgaged in equity: Re Scheibler; Ex parte Holthausen (1874) 9 Ch App 722. See also Re Courtney; Ex parte Pollard (1840) 4 Deac 27; Mont & Ch 239; British South Africa Co v De Beers Consolidated Mines Ltd [1910] 2 Ch 502 (reversed on other grounds [1912] AC 52) and Re Smith; Lawrence v Kitson [1916] 2 Ch 206. Equitable mortgages may be created over shares in a company by deposit of the share certificate: see Harrold v Plenty [1901] 2 Ch 314. For a case where it was held that there was an informal but valid equitable charge over a motor car by handing the bank the car keys, see Re Papesch [1992] 1 NZLR 751.

Types of equitable mortgage 1.36 Equitable mortgages may be divided into two classes, namely: mortgages by equitable owners of their equitable rights (see 1.33); and the creation by legal owners of equitable rights by way of security (see 1.34). Equitable rights by way of equitable charges are dealt with in 1.37 and 2.2,

and equitable liens in 2.22 ff.

Mortgages of equitable rights 1.37 Mortgages by equitable owners of their equitable rights usually occur in the case of mortgages of interests by beneficiaries under a trust or in the case of second and subsequent mortgages involving old system land. Where a beneficiary is mortgaging an interest under a trust, the mortgage must be in writing signed by the mortgagor or the mortgagor’s agent authorised in writing, or made by will: see English Act s 53(1)(c), s 23C of the NSW Act and s 53(1)(c) of the Victorian Act and the corresponding sections in other states and territories shown in the Table of Comparable Sections in the Introduction. If the mortgage is not based on valuable consideration, it is essential that it should purport to operate by way of complete assignment of all the mortgagor’s equitable interest, for although equity will give effect to a completed voluntary assignment of equitable rights (see, for example, Kekewich v Manning (1851) 1 De GM & G 176; 42 ER 519), it will not give effect to an incomplete assignment or one resting on executory contract only: Re Earl of Lucan (1890) 45 Ch D 470 and see 7.8. The mortgagee should give notice in writing to the trustees who are the legal owners in order to preserve priority: Dearie v Hall (1828) 3 Russ 1; 38 ER 475; English Act ss 137, 138, [page 36] NSW Act s 12, Victorian Act s 134 and for other sections see the Table of Comparable Sections in the Introduction. See also ‘Equitable charges’ (2.2ff), noting the difference between the two.

Equitable mortgages by legal owners 1.38 Equitable mortgages of the property of legal owners are created by some instrument or act which is insufficient to confer a legal estate or title, but which, being founded on valuable consideration, shows the intention of the parties to create a present security (see Williams v Burlington Investments Ltd (1977) 121 Sol Jo 424 (HL)) or, in other words, evidences a contract to do so. See National Provincial and Union Bank of England v Charnley

[1924] 1 KB 431 at 440 (CA); Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584 at 595 (CA), per Buckley LJ (citing the 9th English edition of this work); [1980] 2 All ER 419 at 425; Thames Guaranty Ltd v Campbell [1985] QB 210; [1984] 1 All ER 144; [1984] All ER 585 (CA); Westfield Holdings Ltd v Australian Capital Television Pty Ltd (1992) 32 NSWLR 194 at 200 (citing the 10th English edition of this work). For cases where the intention could not be found, see Travis and Arnold Ltd v Burnett [1964] EGD 318; Georgiades v Edward Wolfe & Co Ltd [1965] Ch 487; [1964] 3 All ER 433; Thomas v Rose [1968] 3 All ER 765; Swiss Bank Corp v Lloyds Bank Ltd, above. A binding obligation that a particular fund shall be applied in a particular manner may found no more than an injunction to restrain its application in another way, but if the obligation be to pay out of the fund a debt due by one party to the transaction to the other, the fund belonging to or being due to the debtor, this amounts to an equitable assignment pro tanto of the fund: Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584 at 596; [1980] 2 All ER 419 at 426 (CA); affirmed [1981] 2 All ER 449 (HL). The initial distinction is, therefore, between a transaction which creates merely personal contractual rights (which may nevertheless be enforceable against third parties under the rule in De Mattos v Gibson (1859) 4 De G & J 276; 45 ER 108 considered in Swiss Bank Corp v Lloyds Bank Ltd) and a transaction which creates proprietary rights. In practice the most important type of equitable mortgage is one created by deposit of title deeds, whether with or without a memorandum or other instrument of charge: Russel v Russel (1783) 1 Bro CC 269; 28 ER 1121. This type of equitable mortgage is examined in detail in 3.37 ff. Where proprietary rights are created, the transaction will be either an equitable mortgage or an equitable charge. Under an equitable mortgage the intention is that the creditor shall have a transfer of the property, whereas under an equitable charge a transfer is not intended, but a present right to have the property appropriated to meet the debt in the event of default: see 2.1 and 7.8. Formal agreements for mortgages are not common, save in a commercial context: see Capital Finance Co Ltd v Stokes [1968] 1 All ER 573; affirmed [1969] 1 Ch 261; [1968] 3 All ER 625 (CA). Another quite common instance of an equitable mortgage is where a

formal legal mortgage has been attempted, but proves ineffective for some reason, such as some defect in execution or formality (see, for example, 3.50) or lack of title of the mortgagor (see 13.39).

Mortgages/Charges in supply agreements 1.39 It is relatively common for a company supplying commercial goods on credit to include in its customer supply agreement a clause (usually hidden in the small print as usual conditions on the reverse side) a clause mortgaging or charging all the land which the customer has or may have in the future. Usually guarantors are bound as well. Many [page 37] of these are badly drawn and fail to deal with the situation where the guarantor owns property as joint tenant with a spouse. In Bridge Wholesale Acceptance Corp (Aust) Ltd v Burnard (1992) 27 NSWLR 415 (distinguishing Re Clarke (1887) 35 Ch D 109) it was held that equity would enforce such agreements notwithstanding that they were couched in wide terms. See also Wilkinson v Wilkinson (1819) 3 Swan 515 at 527; 36 ER 958 at 962; Spooner v Sandilands (1842) 1 Y & CCC 390 at 399; 62 ER 939 at 943; Re Murrell (1984) 57 ALR 85 and Avco Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679 at 680; Welsh Development Agency v Export Finance Co Ltd [1992] BCLC 148. Often it will be difficult to ascertain whether the transaction is one creating an equitable mortgage or charge or some other legal relationship. There is no one clear touchstone by which one can determine this; all relevant circumstances and the terms of the documentation must be considered.

Other examples of such mortgages 1.40

Other examples are:

a written agreement to create a security in consideration of a debt due or an advance made (Eyre v M’Dowell (1861) 9 HLC 619; 11 ER 871; Parish v Poole (1884) 53 LT 35; Re Hurley’s Estate [1894] 1 IR 488;

Capital Finance Co Ltd v Stokes, above; Thompson v Yockney (1914) 6 WWR 1397); a document charging property with the debt and containing a declaration by the debtor that he holds the property in trust for the creditor (London and County Banking Co v Goddard [1897] 1 Ch 642); a written undertaking given in consideration of a loan to hold title deeds to the order of the lender (Re Heathstar Properties Ltd [1966] 1 All ER 628; [1966] 1 WLR 993); a written authority for a creditor to sell and retain a debt out of the proceeds (Re Cook; Ex parte Hodgson (1821) 1 Gl & J 12); an assignment in writing of rent (Ex parte Wills (1970) 1 Ves 162; 30 ER 281 (compare Re Whitting; Ex parte Hall (1879) 10 Ch D 615 (CA))); any written instruments showing the intention of the parties that a security should be thereby created, although it contains no general words of charges — for example, the appointment of a receiver to receive rents and pay an annuity thereout (Cradock v Scottish Provident Institution (1894) 70 LT 718); a power of attorney to a creditor to enter up judgment in his favour (Cook v Fowler (1874) LR 7 HL 27 at 35), or to receive rents and profits and apply them in payment of interest, or to repay himself out of the surplus proceeds of the sale of property in mortgage to the debtor, or to mortgage the debtor’s land for payment of the debt (Spooner v Sandilands (1842) 1Y & C Ch Cas 390; 62 ER 939; Abbott v Stratton (1846) 3 Jo & Lat at 603; Re Cook; Ex parte Hodgson, above; Re Parkinson’s Estate (1865) 13 LT 26); In appropriate cases, parties may agree that an existing legal mortgage may stand as security for an additional obligation. Such an agreement would seem to operate so as to create an equitable mortgage in respect of the additional obligation, unless the mortgage is an ‘all moneys’ mortgage which is sufficiently wide to encompass the additional obligation or there is a formal variation of the original mortgage. Examples are: (Becket v Cordley (1784) 1 Bro CC 353; 28 ER 1174; Banks v Whittall (1847) 1 De M & G 536; 63 ER 1182; Williams v State Bank of NSW (1993) 6 BPR 97,485; and see GWH Pty Ltd v Commonwealth Bank of Australia (1994)

6 BPR 14,073); It will be seen from the above examples that an equitable mortgage of land, not being by way of deposit of title deeds, requires to be evidenced in writing (NSW [page 38] Act s 54A; Instruments Act 1958 (Vic) s 127; Mounsey v Rankin (1885) Cab & El 496) or supported by a sufficient act of part performance. An equitable mortgage of personalty, not being of an equitable interest in personalty (which is required to be in writing: see NSW Act s 23C(1)(c)), is not required to be in writing: Tibbits v George (1836) 5 Ad & El 107; 111 ER 1107; Parish v Poole (1884) 53 LT 35 at 38; Brown, Shipley & Co v Kough (1885) 29 Ch D 848 at 854 (CA).

Specific performance of agreements for mortgages 1.41 The general rule is that specific performance will not be ordered in respect of a contract to make or take a loan of money, whether or not the loan is to be on security, so long as the contract remains executory: see, for example, Hunter v Langford (Lord) (1828) 2 Moll 272; Rogers v Challis (1859) 27 Beav 175; 54 ER 68; Sickel v Mosenthal (1862) 30 Beav 371; 54 ER 932; Larios v Gurety (1873) L.R. 5 PC 346; Western Wagon & Property Co v West [1892] 1 Ch 271; South African Territories v Wallington [1898] AC 309; Takemura v National Australia Bank Ltd (2003) 11 BPR 21,185, where the loan was at an excessively high rate of interest. The parties will be left to their remedies in damages: Astor Properties Ltd v Tunbridge Wells Equitable Friendly Society [1936] 1 All ER 531; Manchester & Oldham Bank v Cook (1883) 49 LT 674; Trans Trust SPRL v Danubian Trading Co Ltd [1952] 2 QB 297; Cottrill v Steyning & Little Hampton Building Society [1966] 2 All ER 295; [1966] 1 WLR 753; Loan Investment Corp of Australasia Ltd v Bonner [1970] NZLR 724; Wadsworth v Lydall [1981] 2 All ER 401; [1981] 1 WLR 598 and Popular Homes Ltd v Circuit Developments Ltd [1979] 2 NZLR 642. Palmer J put the matter simply in Kama v Wong (No 1) [2005] NSWSC

427: It is well established that equity very rarely, if ever, grants specific performance of a simple agreement to lend money. There must be extraordinary circumstances before equity will compel an unwilling lender to outlay funds in a transaction which the lender feels is not worth the risk. If a simple loan agreement is breached by the lender then equity usually leaves the disappointed borrower to its remedy in damages.

However, an agreement to execute a mortgage will ordinarily be specifically enforced if the mortgage has already advanced the monies: Takemura v National Australia Bank Ltd (2003) 11 BPR 21, 185 and see Northcote and Fry, Specific Performance, 6th ed, Stevens, London, 1921, [54]. Especially in Australia, it has been recognised in more recent times that, commercially speaking, damages may not be an adequate remedy for a breach of a promise to give a mortgage and that, accordingly, specific performance should in appropriate circumstances be decreed. The first case to state this clearly was Wight v Haberdan Pty Ltd [1984] 3 NSWLR 280; see also Corpers (No 664) Pty Ltd v NZI Securities Australia Ltd (1989) NSW ConvR 55-475; Australia and New Zealand Banking Group Ltd v Widin (1990) 26 FCR 21; Bridge Wholesale Acceptance Corp (Australia) Pty Ltd v Fairstar Pty Ltd (1991) ACL Rep 295 NSW 4. Even before the recent developments just referred to, specific performance of an enforceable contract to give security was ordered where the loan has actually been made or the debt or other obligation incurred. This was because a mere claim to damages or repayment was obviously less valuable than a security in the event of a debtor’s insolvency: Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584, especially at 595 and Thames Guaranty Ltd v Campbell [1985] QB 210. See also Northcote and Fry, as above, pp 24 ff and Halsbury’s Laws of England, 5th ed, vol 77, [145]. Equity may enforce an agreement for mortgage even though the property concerned was not identified at the date of the agreement, so long as it is able to be identified at the date of trial: Re Clarke; Crombe v Carter (1887) 36 Ch D 348 at 352. The mere fact that the agreement is couched in wide terms and may deprive a person of his or her means [page 39]

of subsistence if enforced is no reason to deny specific performance: Bridge Wholesale Acceptance Corp (Aust) Ltd v Burnard (1992) 27 NSWLR 415. See also Alexsen v O’Brien (1949) 80 CLR 219 at 226 where Dixon, J notes the power of equity to settle the terms of a mortgage in a specific performance suit. For analogous situations see also Sweet & Maxwell Ltd v Universal News Services Pty Ltd [1964] 2 QB 699 at 726; [1964] 3 All ER 30 at 38 CA; Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 28 NSWLR 1 at 38. In particular, the court will assume that the usual covenants are to be included. As to what standard moneylender’s covenants are not ‘usual covenants’ see Morgan v Cambridge Acceptance Pty Ltd [1966] 2 NSWR 556 at 560-1. As to specific performance by a mortgagee to perfect its security, see Browne v London Necropolis and National Mausoleum Co (1857) 6 WR 188 and 16.2.

Equitable charges distinguished from equitable mortgages 1.42 An equitable charge is created when real or personal property is expressly or constructively made liable, or specially appropriated, to the discharge of a debt or some other obligation. It creates an equitable interest and confers on the chargee a right of realisation by judicial process. Equitable charges differ from equitable mortgages. Sykes and Walker, p 197, say that the essential theoretical difference is that an equitable mortgagee takes some equitable rights of property whereas an equitable charge is a pure hypothecation. The practical difference is that the equitable mortgagee may foreclose, but the chargee merely has the remedy of judicial sale. See Matthews v Goodday (1861) 31 LJCh 282; Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584 at 595 per Buckley LJ (citing the 9th English edition of this work); and United Travel Agencies Pty Ltd v Cain (1990) 20 NSWLR 566. Equitable liens are akin to equitable charges. As to equitable liens see 2.22–2.32. An equitable chargee is sometimes said to have a proprietary interest in the asset charged though less than the full proprietary interest of a mortgagee. An equitable charge has been said to involve a deduction from the ownership of the debtor: Re Price (1931) 26 Tas LR 158 at 160, adopted in Waitomo Wools (NZ) Ltd v Nelsons (NZ) Ltd [1974] 1 NZLR 484 at 490 and in Young v

Matthew Hall Mechanical & Electrical Engineers Pty Ltd (1988) 13 ACLR 399 at 403. See 2.2.

H. Collateral Security Additional security 1.43 Collateral or additional security may be given by the principal mortgagor personally or by a third party. The most common example of the first type of collateral security is a mortgage of a life insurance policy by the principal mortgagor, which is additional to and is to secure the same debt as that secured by the principal mortgage: see 7.13. Examples of the second type of collateral security are a guarantee by a third party for the repayment of the principal mortgage debt, and a mortgage of land or other property by a third party to secure either a principal debt or the liability under a guarantee: see, Re Wallis & Simmonds (Builders) Ltd [1974] 1 All ER 561; [1974] 1 WLR 391. Where stamp duty is relevant there may be questions as to which of two or more documents is the primary security and which is collateral: see, Stardawn Investments Pty Ltd v Comptroller of Stamps (Vic) (1983) 15 ATR 180. A collateral mortgage is not necessarily subordinate to or of lesser importance than another security, it merely impinges upon or is related to it: David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 365 and see Re Athill (1880) 16 Ch D 211 at 222-3. [page 40] In England, because of amendments to the Statute of Frauds, there has been debate whether a deposit of deeds by a third party to secure a borrower’s overdraft facility is an equitable mortgage or a guarantee: see Deutsche Bank (Asia) AG v Ibrahim (Financial Times, 13 December 1991 and 15 January 1992) and Baughen [1992] Conv 330. The advantage of taking additional real security from a third party to secure the principal debt is that in the event of the principal mortgagor’s bankruptcy, collateral security need not go in reduction of proof: see 23.8.

For an example of a collateral security given in breach of duty by one joint venturer see Brian Pty Ltd v United Dominions Corp Ltd [1983] 1 NSWLR 490, and on appeal United Dominions Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1. Especially since the decision of the High Court in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, great care must be taken when obtaining a collateral mortgage from a third party to ensure that the third party has no doubt at all that the mortgage, for which the third party may not be receiving any material advantage, is fully understood by the person giving it. Where the principal mortgage is discharged, the mortgagor is entitled to a discharge of all collateral mortgages: Porter v Associated Securities Ltd (1976) 1 BPR 9279 and see Hall v Heward (1886) 32 Ch D 430.

I. Where mortgage situated Generally 1.44 As a general rule, any interest in or over land must be considered as having its situs where the land is: Haque v Haque (No 2) (1965) 114 CLR 98 at 136. However, for purposes of succession, (including death duty) often a mortgage over land is considered to be located where the debt is located rather than where the land over which the security is held is situated: Re O’Neill [1922] NZLR 468 and Haque’s case. English law takes a different course: see Re Hoyles [1911] 1 Ch 179. As a mortgage is almost invariably a specialty debt, then according to general principle it should be situate where the mortgage deed happens to be at the relevant time. If the mortgage is over Torrens system land and is registered, the mortgage debt may be regarded as situate in the place where the registry is: Toronto General Trust Corp v R [1919] AC 679, but query whether this is a true exception or whether the case is merely one which does not fit into the general pattern of decisions or was so decided because of peculiarities in Canadian law. The decision in Payne v R [1902] AC 552 goes the other way and treats a Torrens mortgage in the same way as a simple debt.

A debt secured by an instrument under seal has been regarded as having a corporeal existence by which its locality may be reduced to a certainty: its place is where the instrument happens to be. Hence, again with some exceptions to meet the situations referred to above, the incidence of any inheritance tax has been determined by the place of the speciality at the creditor’s death: see McCaughey v Commissioner of Stamp Duties (1945) 46 SR (NSW) 192 at 201 and cases there cited; AG v Bouwens (1838) 4 M & W 171 at 191; 150 ER 1390 at 1398; Commissioner of Stamps v Hope [1891] AC 476 at 481; Re Maudslay, Sons & Field [1900] 1 Ch 602; New York Life Insurance Co v Public Trustee [1924] 2 Ch 101; English Scottish & Australian Bank Ltd v Inland Revenue Commissioners [1932] AC 238; Re Russian Bank of Foreign Trade [1933] Ch 745 at 767; Re Russo-Asiatic Bank [1934] Ch 720 at 738; F & K Jabbour v Custodian of Israeli Property [1954] 1 All ER 145 at 152; Re Helbert Wagg & Co Ltd [1956] Ch 323; and Brown v Silvia (1984) 8 ACLR 700. There are considerable problems in applying the lex situs of the deed in 21st century conditions. What happens if the deed is in an aircraft over the Pacific Ocean at [page 41] the moment the testator dies? Probably one then applies the law with which the mortgage has the closest connection namely the place where the land over which the mortgage was granted exists, cf Ex parte Coote (1948) 49 SR (NSW) 179 at 184-5 where there is discussion of property that might have more than one situs. See also Cambridge Credit Corporation Ltd v Lissenden (1987) 8 NSWLR 411 at 416-7 and Nygh, Conflict of Laws in Australia, 8th ed, LexisNexis, Australia 2010, 32.24–32.26, pp 656–7. Where the mortgage is over personal property and the situs of the deed of mortgage rule does not apply, one must consider the private international law rules governing the situation of the relevant property. Thus, for shares s 1070A(4) of the Corporations Act 2001 (Cth) applies so that the share is deemed to be situate in the State, Territory or overseas country on whose register it appears. This was also the position under the general law, see Bassard v Smith [1925] AC 371. A judgment debt is situated where it is

recorded: AG v Bouwens (1838) 4 M&W 171 at 191: 150 ER 1390 at 1398.

Situation when mortgage is transferred 1.45 The better view is that the rule noted in 1.39 does not apply when the question to be considered is the validity of a transfer of mortgage. In this situation, the mortgage must be treated as an interest in land and the law of the situs of the land itself governs the case. Nygh’s Conflict of Laws in Australia, [32.26] takes this view as does Dicey Morris and Collins 2006 p 1122 although there are no actual authorities to support it.

Proper law of mortgage debt when foreign element 1.46 The proper law will be that chosen by the parties, expressly or by inference. Where an express choice is made, it must have some bona fide connection with the contract. An inference will be drawn from, inter alia, the form and terminology of the documents, the nature and location of the subject matter and the residence of the parties: Re Helbert Wagg & Co Ltd [1956] Ch 323 and Keiner v Keiner [1952] 1 All ER 643. The proper law of the deed is material to, inter alia, the capacity of the parties, its validity and questions of priority: see, Todd Shipyards Corp v Altema Compania Maritima SA (1972) 32 DLR (3d) 571. Questions of deductibility of tax from payments and interest made under the deed may also be affected by the proper law: see 41.3. Although any question affecting the substance of the debt is determined by the proper law of the contract, any question concerning the mode of performance falls to be determined by the law of the place of the performance: Bonython v Commonwealth [1951] AC 201 at 219. As to what is meant by ‘mode of performance’ see Goldsbrough Mort & Co Ltd v Hall [1948] VLR 145 at 152 and Nygh, Conflict of Laws in Australia, 19.20, p 380. To perfect title, a mortgage must comply with the requirements of the local law as to form and registration etc. However, even where those requirements have not been satisfied, a local court may be able to give equitable relief if the defendant is within the jurisdiction and the transaction is one which would be enforced as an equitable mortgage: Mercantile Investment & General Trust Co v River Plate Trust Loan & Agency Co [1892] 2 Ch 303;

Re The Anchor Line (Henderson Bros) Ltd [1937] Ch 483; Richard West & Partners (Inverness) Ltd v Dick [1969] 2 Ch 424; Re International Bulk Commodities Ltd [1993] Ch 77; [1993] 1 All ER 361. However, the local court will not interfere with rights which have been acquired under foreign law in the land and if a receiver is appointed by the local court the receiver will need to comply with the foreign law in order to perfect the receiver’s title: Re Maudslay, Sons & Field [1900] 1 Ch 602. Again, a security may be created in Australia (over, inter alia, assets situate overseas) of a type which is not recognised by the law of the place where some of the property actually is. Thus, a floating charge is not recognised in many overseas countries. If an [page 42] Australian company creates a floating charge over assets situate in such a country, that charge will still constitute a valid equitable security according to Australian law. See, in general, as to the proper law of the mortgage: Cripps Warburg Ltd v Cologne Investment Co Ltd [1980] Ir R 321; Re The Assunzione [1954] 1 All ER 278 and Grey v Manitoba & North Western Railway Co of Canada [1897] AC 254; see also Lord Sudeley v AG [1897] AC 11 and McCaughey v Commissioner of Stamp Duties (1945) 46 SR (NSW) 192.

Foreigners’ interests in Australian mortgages 1.47 Section 26A(2) of the Foreign Acquisitions and Takeovers Act 1975 (Cth) provides that natural persons not ordinarily resident in Australia or corporations or trusts controlled by such persons must notify the Commonwealth Treasurer of intention to enter into any agreement to acquire an interest in Australian urban land. ‘Australian urban land’ is any land in Australia not used wholly and exclusively for the business of primary production: see s 5(1). A mortgage involving an interest in land would fall within this section. However, s 12A(5) exempts acquisition of land solely as security for the purposes of a ‘moneylending agreement’. ‘Moneylending agreement’ is

defined by s 5(1) as ‘an agreement entered into in good faith in the ordinary course of carrying on a business of lending money, not being an agreement dealing with any matter unrelated to the carrying on of that business’. Thus it would appear that where the mortgagee is a foreigner other than a financier, the Act will apply. However, regulations exempt certain types of transaction. As at October 2004, acquisition of non-residential commercial property valued at less than $5 million is an exempt transaction.

J. Quasi-mortgage Quasi securities 1.48 There are a series of situations where money is lent or obligations are undertaken where the lender or obligor is comforted by the presence of an arrangement which arrangement is not security in the accepted sense. A series of quasi securities have evolved with creative use of set-off as noted in 1.50. Trusts may be used to give quasi security. Thus, a debtor may declare that it holds an asset in trust for the creditor until the debt is paid. This may create ‘an interest in property defeasible or destructible upon payment of the debt’ per Slade J in Re Bond Worth Ltd [1980] Ch 228 at 248; [1979] 3 All ER 919 at 939 and thus constitute a charge. However, as his Lordship pointed out at that page, this is inconsistent with trust as the existence of an equity of redemption is quite inconsistent with a bare trustee-beneficiary relationship. In Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588, a buyer took goods under a retention of title clause and promised that if it onsold them, it would hold the proceeds of sale on trust for the seller. The High Court held that, as a trust, the proceeds terms was not a registrable charge. Essentially the difference between a security and what has been termed quasi security is that with security the creditor has a proprietary right rather than a mere contractual right. However, this is not an exhaustive statement and, in some cases, where there is a trust, the ‘creditor’ may have proprietary rights no matter which way the arrangement is construed. As to contractual rights and trusts, reference should also be made to

MacJordan Construction Ltd v Brookmount Erostin Ltd [1992] BCLC 350; Kingscroft Insurance Co Ltd v H S Weavers (Underwriting) Agencies Ltd [1992] TLR 415; Law Debenture Trust [page 43] Corp v Ural Caspian Oil Corp Ltd [1993] 2 All ER 355; [1993] 1 WLR 138, reversed on appeal [1995] Ch 152; [1995] 1 All ER 157 (CA). See also Ansett Australia Ground Staff Superannuation Plan Pty Ltd v Ansett Australia (2002) 174 FLR 1 (Vic SC). A banker’s right to combine accounts does not constitute a security by way of charge: Cinema Plus Ltd v Australia and New Zealand Banking Group Ltd (2000) 49 NSWLR 513. The English Law Reform Commission has sought to rationalise quasi securities: see ‘Registration of Security Interests’ (2002) LCCP 164. For discussion on this move see Glister, ‘ Trusts as Quasi Securities’ (2004) L1 MCLQ 460.

Romalpa clauses 1.49 Reservation of title clauses are called ‘Romalpa’ clauses because the most celebrated treatment of them is Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676. The effect of the clause is that title to goods does not pass from vendor to purchaser until a certain event happens, which may be payment in full for those goods or the total discharge of the purchaser’s indebtedness to the vendor. Romalpa clauses and their juristic nature were considered by the High Court in Associated Alloys Pty Ltd v CAN 001 452 106 Pty Ltd (2000) 202 CLR 588; 171 ALR 568: the court held that there is no charge involved in a Romalpa clause ‘security’. See also Rondo Building Services Pty Ltd v Casaron Pty Ltd [2003] 2 Qd R 558. Although under the general law it has been held that the clause does not constitute the creation of a security (Armour v Thyssen Edelstahlwerke AG [1991] 2 AC 339; Chattis Nominees Pty Ltd v Norman Ross Homeworks Pty Ltd (1992) 28 NSWLR 338 at 345) it is governed by PPSA because of s 12(2) (d) which includes as a security interest “a conditional sale agreement

(including an agreement to sell subject to retention of title)”. See Bruce Whittaker ‘Retention of Title Clauses under the PPSA’ (2010) 21 Journal of Banking and Finance Law and Practice 273.

K. Set-off Set-off generally 1.50 This work is no place to discuss the technicalities of set-off, as to which, see Wood, English and International Set-Off, Sweet & Maxwell, London, 1989 and Derham on the Law of Set-Off, 4th ed, OUP, Oxford, 2010. Set-off usually becomes an issue when the mortgagee is about to take enforcement action or where accounts are being taken. These matters are considered in 1.51. Another area where set-offs arise is where the mortgage is only part of a larger transaction; see 1.52. Then there are other cases where set-offs are claimed against the mortgage debt; see 1.53.

Set-off on accounts 1.51 A claim of set-off by a mortgagor will rarely entitle him to delay the mortgagee from enforcing his rights under the mortgage: Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161; Mobil Oil Co Ltd v Rawlinson (1981) 43 P & CR 221; Australia & New Zealand Bank v Squires (SC (NSW), Lusher J, 23 August 1982; CA, 6 December 1982, unreported); Ashley Guarantee plc v Zacaria [1993] 1 WLR 62; [1993] 1 All ER 254 (CA); see also Pettat v Ellis (1804) 9 Ves 563; 32 ER 721; Atterbury v Jarvie (1857) 2 H & N 113; 157 ER 47; and see 3.13 and 19.11. However, the person claiming a set-off may obtain time if a substitute security is offered: Booth v Booth (1742) 2 Atk 343; 26 ER 609; Duncombe v Greenacre (1860) 28 Beav 472; 54 ER 447; Altarama Ltd v Camp (1980) 5 ACLR 513. There have been cases where a mortgagor has been permitted to raise a matter of set-off unconditionally. This may occur where the breach of which the mortgagee [page 44]

is accused has contributed to the non-payment by the mortgagor. Thus in Campbell v Canadian Co-operative Investment Co (1907) 5 WWR 153 the mortgagor claimed that the mortgagee had breached his covenant to insure the mortgaged premises, a hotel, which had burnt down, rendering the mortgagor unable to pay what was due under the mortgage. In Popular Homes Ltd v Circuit Developments Ltd [1979] 2 NZLR 642, a mortgagor was permitted to raise by way of set-off a claim that the mortgagee had breached a covenant to lend further money which the mortgagor expected to receive to complete a building on the mortgaged land, thus rendering it unable to pay the mortgage debt. Even claims that a mortgagee has caused damage while in possession may be set off against a claim for the mortgage debt: Imperial Bank of Canada v G M Annable Co [1925] 1 DLR 946; General Credits (Finance) Pty Ltd v Stoyakovich [1975] Qd R 352 and see also Sidu v Ba’li (1892) 17 Indian LR 33 (Bom), noted in Wood, p 132. Where the mortgagee goes into possession, a claim by the mortgagor’s tenant to set off damages allegedly payable by the mortgagor may not avail against the mortgagee: Reeves v Pope [1914] 2 KB 284; Citibank Pty Ltd v Simon Fredericks Pty Ltd [1993] 2 VR 168 and see Derham (1994) 68 ALJ 331 at 349-51. However, in Queensland, it has been held that the principle in Reeves v Pope does not apply to Torrens mortgages: Re Partnership Pacific Securities Ltd [1992] ACL 295 Qld 5, noted (1994) 68 ALJ 351 and see (1992) 3 JBFLP 284. Derham’s view is that this result might apply in other states as well.

Transactional set-off 1.52 It not infrequently occurs that a mortgage is given as part of a trading arrangement. Thus, a buyer is given credit on furnishing security for the amount of the trading debt. In such a case, the debt covered by the security will be calculated taking account of set-offs in the trading accounts: Bow McLachlan & Co v Ship Camosun [1909] AC 597 at 612; Newman v Cook [1963] VR 659; Popular Homes Ltd v Circuit Developments Ltd [1979] 2 NZLR 642; Altarama Ltd v Camp (1980) 5 ACLR 513 at 520; and see Samuel Keller (Holdings) Ltd v Martins Bank Ltd [1971] 1 WLR 43. In Piggott v Williams (1821) 6 Madd 95; 56 ER 1027, a client granted a

solicitor a mortgage to secure costs. A set-off was allowed to be raised that the solicitor’s negligence in the matter had caused loss; see also Parker v Jackson [1936] 2 All ER 281. Note that if there are separate transactions, one of loan and the other in commerce, such as where the mortgagee loans money so that the mortgagor will be able to trade with him, set-off on the trading account will have no relevance to the mortgage debt. However, courts are not often persuaded that there are not separate transactions so that set-off will be applicable. See, generally, Bow McLahlan, supra, Newman v Cook [1965] VR 659 at 575-6, Samuel Keller (Holdings) Ltd v Martins Bank Ltd [1971] 1 WLR 43 at 51; [1970] 3 All ER 950 at 953; Altarama Ltd v Camp (1980) 5 ACLR 513 at 520; and Derham, [4.128] 129 ff. Where the mortgagee sells the mortgaged property, the buyer may be able to raise a set-off against the purchase price of some other debt. Thus in Hudson v Granger (1821) 5 B & Ald 27; 106 ER 1103 the mortgagee sold the mortgaged goods to a buyer to whom he owed money. On the mortgagee’s bankruptcy, a set-off was allowed. In Union Bank of Australia v Waterman (1894) 12 NZLR 673, the plaintiffs sued the purchaser of a boat for the balance of the purchase price. The first plaintiff bank was owed £412 and the second plaintiff mortgagor was owed £488. The buyer had a claim of £122 against the mortgagor which he was able to set off. In TSB Bank plc v Platts [1998] 2 BCLC 1, a set-off was allowed where the bank had failed to obtain the market price for the mortgaged property. It was held that the court was entitled to determine the maximum [page 45] possible value of the mortgagor’s counter-claim and deduct it from the mortgage debt; with the possibility of a bankruptcy order if the set-off was insufficient.

Miscellaneous examples of set-off 1.53 Set-off may arise in many cases. In Hiley v The Peoples Prudential Assurance Co Ltd (1938) 60 CLR 468, a policyholder had borrowed from the

defendant assurance company which had taken an assignment by way of security of his life policy. The assurance company had then assigned the policy to its bank by way of security. After the commencement of the winding up of the assurance company, the bank reassigned the policy. The High Court held, distinguishing Re City Life Assurance Co Ltd; Stephenson’s case [1926] Ch 191 at 214, that the policyholder could set off against the mortgage debt a claim for damages for repudiating the policy. Where a mortgaged property is sold by the mortgagee, the surplus is held for the mortgagor or second mortgagee (see 20.26) and thus is not available to satisfy unsecured debts owed by the mortgagor to the mortgagee: Talbot v Frere (1878) 9 Ch D 568 at 573; Lloyds Bank NZA Ltd v National Safety Council of Australia Victorian Division (1993) 115 ALR 93 at 98 and 102. There have been attempts to get round this rule. For a time, it was thought that a mortgagee had a right of retention, but this was exploded by Talbot v Frere, above, and Re Gregson (1887) 36 Ch D 227; see also Derham, 10.39, p 458. Indeed there is support for the opposing view: see Re H E Thorne & Son Ltd [1914] 2 Ch 438, where a set-off was allowed in such a situation. Other examples are given in Wood at pp 556–1. The better view is that Thorne’s case was wrongly decided or that it has been overtaken by the statutory trust provisions of the surplus contained in s 112(4) of the NSW Act and s 105 of the Victorian Act: see Derham, 10.43, p 459.

Set-off as quasi security 1.54 In a series of essays published as Using Set-Off as Security, Neale (ed), IBA, London, 1990, the essayists discuss three common banking transactions which employ set-off as a means of taking security. The first is the ‘washable’ loan in which a major shareholder of a foreign company, S, wishes to finance investment by a company, C, without making a direct investment. S thus approaches the bank, B, to lend money to C with S depositing the same sum with B. All intend that any problem with the loan from B to C will be dealt with by a right of set-off by B against S. The second is the syndicated loan whereby a lending bank lays off part of a risk by taking a deposit from participating banks on terms that its liability is limited to payment of the appropriate part of the principal and interest received from the principal borrower. Here the lending bank has a form of

set-off against a liability in respect of the deposit. The third is cash cover whereby cash is deposited to provided against contingent liabilities. However, set-off is not security in the strict sense. As Hapgood points out in the same volume at p 37: A right of set-off is not per se security in the strict sense. The essential difference between setoff and security is that set-off is a procedure by which a debtor reduces or extinguishes his own liability by the application of property to which he is beneficially entitled (his claim against the other party); whereas the realisation of security is a process by which a creditor reduces or extinguishes the secured liability by the application of property in which the creditor has the limited interest of a mortgagee or chargee. However set-off and security are not wholly unrelated in that set-off is a method by which a charge can be realized.

[page 46] Hapgood further opines at p 38 that creating a quasi security by way of setoff would not breach a negative pledge.

L. Miscellaneous Mortgage Brokers and Originators 1.55 It has become the custom in parts of Australia in the last decade for lenders to appoint persons called mortgage managers to manage their lending and to market their facility by appointing people called mortgage originators. Sometimes these mortgage originators appoint sub-originators. A person trading as an originator may have accepted appointment from a number of lenders. Ordinarily an originator will be considered to be the agent of the lender. A person seeking finance will often not approach the lender, but instead consult a mortgage broker. Such a broker is the agent of the borrower. The broker will approach an originator with a proposal. The originator will then put the application for finance to one or several mortgage managers. If a mortgage manager likes a proposal, it will issue an offer for finance which

the potential borrower may accept. Usually the loan is under what is called the Lo-Doc or low documentary scheme. (sometimes called ‘sub-prime’). If the offer is accepted, the mortgage manager refers matter to a solicitor who has been appointed by the lender to vet the application. Often such solicitors have obtained the work by a tender process which has meant that the solicitor might be in a provincial town in a State other than the State where the land is situate. Although the various agents are on commission, there is usually an indemnity clause in favour of the lender to cover it if things go wrong. Unfortunately, the brokers and originators are often single purpose two dollar companies. These arrangements have facilitated fraud in many cases because of fraudulent conduct by employees of the originator or the broker particularly in overstating the income of the borrower or not ensuring that the mortgage is not the subject of forgery. A v B1 (no 2) (2012) 271 FLR 122 (Edelman J WA Sup Ct) contains a detailed discussion of the liabilities of the various actors in this sort of chain of command. See also Vella v Permanent Mortgages Pty Ltd (2008) 13 BPR 25,343 (on appeal to the High Court Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613; 296 ALR 3 on the liability of the solicitors involved to contribute to the lender’s loss) and Tonto Home Loans Australia Pty Ltd v Tavares (2011) 15 BPR 29,699 (CA).

Reverse Mortgages 1.56 In recent years, use has been made of the reverse mortgage, which is said to be particularly attractive to elderly persons as it permits them to obtain funds on the security of their realty, without having to repay the capital until after their demise. Typically, the so-called ‘reverse mortgage’ involves an elderly person mortgaging their otherwise unencumbered home to gain spending money, by means of a loan under which the interest will be capitalised and the principal and interest only paid on his or her death. Care must be taken in such transactions to ensure that the transaction cannot be attacked under principles of undue influence or the like. As pointed out by Pascoe in (2007) 15 APLR 194, there are various hidden dangers in a person taking out a reverse mortgage. These include the need to

watch the small print. Sometimes, the capital is not only repayable after death, but also if the house is sold (and it may be necessary to sell it for the elderly owner to move into a retirement village) or if some minor covenant in the mortgage is breached. Such events of default [page 47] may also render void any ‘no negative equity guarantee’ which would otherwise prevent the capitalisation of the secured debt to an amount in excess of the realisable value of the property, with the borrower personally liable for any shortfall.

New types of security 1.57 The finance industry is constantly thinking up new ways to raise money on security. Methods which were almost unthinkable some years ago are now commonplace: see, for example, the comments on subordinated debt in Re Data Homes Pty Ltd [1971] 1 NSWLR 338 (affirmed [1972] 2 NSWLR 22). Negative pledge is another recent creation: see 2.5. ‘Securitisation’ is a recently created word. It comprehends a method of financing whereby the income flowing from a number of assets is pooled and packaged. Thus the income from a series of coal mines may be packaged and marketed as ‘Consolidated Coal Security’: see note (1994) 68 ALJ 322-3. Time alone will tell what new devices are successfully used. The basic rules which will govern them will, however, be the same rules that are discussed in this work that govern the traditional forms of financing.

Phantom mortgages 1.58 A mortgage purporting to secure a loan which in fact was never made is a nullity: Re GM Industries Pty Ltd [1980] ACLC 40-665; see also Jacobson v Wilkins (1919) 48 DLR 51 at 57. An assignment of such a mortgage conveys nothing; see 4.32, 14.2. A mortgage to secure $x plus further advances as requested by the mortgagor did not secure advances made for the mortgagor’s benefit which

he did not actually request: Knight v New England Credit Union Ltd (1992) 5 BPR 11,744. A mortgage purportedly granted by a company that has been deregistered confers no interest in the relevant land in the ‘mortgagee’, much less any indefeasible title: see Australia and New Zealand Banking Group v Barns (1994) 6 BPR 13,739; (1994) 13 ACSR 592; [1995] ANZ ConvR 123. Some cases come under this category because instead of naming the amount which the mortgage secures, there is some meaningless reference to another document which in fact does not elucidate the matter. Examples are Re Regis Towers Real Estate Pty Ltd [2006] NSWSC 452: 12 BPR 23,957 and Vouzas v Sibonna Nominees Pty Ltd [2011] VSC 261: [2011] V ConvR 54-795. There have been a number of recent considerations as to when a document may be disregarded as a sham. These are collected by Tilley ((2005) 79 ALJ 518). Where rights are purportedly conferred upon a third party by a document alleged to be a sham, there must a common intention that the documents are a sham; the unexpressed intentions of the shammer are insufficient to affect the person who was deceived: see per Diplock LJ in Snook v London and West Riding Investments Pty Ltd [1967] 2 QB 786 at 802; [1967] 1 All ER 518 at 528. The decision has been applied in England by Rimer J in Shalsom v Russo [2003] TLR 506, more fully reported in [2003] WTLR 1165 (Wills and Trusts Law Reports (UK)), by the Royal Court of Jersey in Abacus (CI) Ltd v Sheikh Fahad (the ‘Esteem case’) (13 June 2003, seemingly unreported), and also by the bailiff in Jersey in MacKinnon v The Regent Trust Company Ltd (6 December 2004, unreported). [page 48]

Perpetuities 1.59 Neither the modern rule against perpetuities nor its statutory replacements apply to mortgages: Knightsbridge Estates Trust v Byrne [1938]

Ch 741 at 757–63; [1939] Ch 441 at 463–4 (CA); [1940] AC 613 at 625 (HL).

Mortgages and equities 1.60 It must always be borne in mind that a considerable amount of the law governing mortgages has been generated from equitable principles and will not be found in any statute. Being equitable principles, these rules are subject to fine tuning and adjustment in order to make them compatible with modern commercial life. Sometimes even relatively basic principles such as the rule restricting mortgages taking collateral advantages may be up for review: see Westfield Holdings Ltd v Australian Capital Television Pty Ltd (1992) 32 NSWLR 194; see also 32.11–32.16. Sometimes a rule will be found partially in a statute and partially in an equitable doctrine. Thus, s 92 of the NSW Act gives some protection to a defaulting mortgagor where the mortgagee has continued to accept interest: see 32.37. This must be read in conjunction with the six months rule, a rule of equity that a mortgagor who had made default in the repayment of principal could not pay out the mortgage without warning, but had to give six months’ notice or pay six months’ interest: Cromwell Property Investment Co Ltd v Western & Toovey [1934] Ch 322 and see 32.36–32.38. Care must be taken with the tags that are sometimes used in connection with equitable doctrines. Thus the word ‘marshalling’ basically means the ranking or ordering of several estates or parcels of land for the satisfaction of a judgment or mortgage, but the word is used with four different shades of meaning. First, the term is used to describe the doctrine that a mortgagee with the right to only one fund of a mortgagor may protect himself as against a mortgagee with access to two funds of that mortgagor: see 30.9ff. Second, it describes the right of a surety to have access to the principal’s property to make good what the surety has paid: Heyman v Dubois (1871) LR 13 Eq 158; Finance Corp of Australia Ltd v Bentley (1991) 5 BPR 11,833 at 11,842-3. Third, it is used for the inverse order rule that if a large parcel of land is mortgaged and the mortgagor sells part to several purchasers, the mortgagee should look first to the land retained by the mortgagor and then to that onsold in inverse order to the date of sale. There is no modern Australian case on this rule which stems from Harbert’s Case (1584) 3 Co Rep 11b; 76 ER 647, and see Gribble v Stearman & Kaplan Inc 239 A (2d) 573 (1968) and Nelson

and Whitman, Real Estate Finance Law, 2nd ed, West, Minnesota, 1981, pp 728 ff. The best exposition of the rule may be found in the annotations to Maurer v Arab Petroleum Corp (1940) 131 AmLR 1 at 4-114; see also Hartley v O’Flaherty (1833) Lloyd & Goold (temp Plunket) 216; Clark v Bogart (1880) 27 Grant Ch 450; Fraser v Nagle (1888) 16 OR 241. Fourth, it covers analogous equitable principles to any of the above: Finance Corp of Australia v Bentley, above, at 11,834. See, generally, Sarge Pty Ltd v Cazihaven Homes Pty Ltd (1994) 34 NSWLR 658.

[page 49]

Chapter 2

Charges and Liens Scheme of chapter A. Equitable Charges Definition Creation Aspects of creation of charges Negative pledge Charges over personalty Equitable charges on realty Remedies of chargee B. Equitable Liens Equitable liens generally Vendor’s lien Contracts for the sale of land Vendor’s lien over chattels Extent of vendor’s lien Liens and invalid mortgages Purchaser’s lien Liens for expenditure on another’s property Salvage Other equitable liens

2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12 2.13 2.14 2.15 2.16 2.17 2.18

Extinction of equitable liens C. Common Law Liens Liens generally Artificers’ liens Improvement Delivered to the artificer Work done with owner’s authority Work completely performed Extent of lien Priority of lien over mortgagee Accountants’ liens Insurers’ liens Liens over cash Assignment of lien Loss of lien D. Solicitors’ Liens Solicitors’ liens

2.19 2.20 2.21 2.22 2.23 2.24 2.25 2.26 2.27 2.28 2.29 2.30 2.31 2.32 2.33

[page 50]

Historical development Solicitor’s lien over documents etc Lien limited to professional matter Loss or displacement of solicitor’s lien Substitute security Persons affected by solicitor’s lien Lien only to extent of client’s interest Mortgagee’s solicitor Solicitor for both parties

2.34 2.35 2.36 2.37 2.38 2.39 2.40 2.41 2.42

Documents required in litigation Production in a stranger’s litigation Discharge of lien to enable production Deeds belonging to a trust Production in winding up Solicitor’s lien over fruits of litigation Solicitor’s right to attach funds Examples Enforcement of the lien E. Liquidators’ Liens Liquidators’ liens

2.43 2.44 2.45 2.46 2.47 2.48 2.49 2.50 2.51 2.52

Scheme of chapter 2.1 As Browne, Ashburner’s Principles of Equity 2nd ed, Butterworths, London, 1933, points out at p 249, there is virtually no distinction between an equitable lien and an equitable charge, the former term being used when the equitable security arises otherwise than under an express contract. Webster, Ashburner’s Concise Treatise on Mortgages, Pledges and Liens, 2nd ed, Butterworths, London, 1911, p 107, makes the same point. However, the distinction is commonly made, and it is appropriate to deal with this topic by first considering charges (other than charges under statute or judgments which are considered in Chapter 7) and then various types of liens.

A. Equitable Charges Definition 2.2 A charge is a security whereby real or personal property is appropriated for the discharge of a debt or other obligation, but which does not pass either an absolute or a special property in the subject of the security to the creditor, nor any right of possession, but only a right of realisation by judicial process in case of non-payment of the debt: see Stainbank v Fenning (1851) 11 CB

51; 138 ER 389 and Stainbank v Shepard (1853) 13 CB 418; 138 ER 1262. This definition was cited with approval by Buckley LJ in Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584 at 595; [1980] 2 All ER 419 at 425; and see also Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd [1985] Ch 207 at 227; [1985] 1 All ER 155 at 169 and United Travel Agencies Pty Ltd v Cain (1990) 20 NSWLR 566. With possible statutory exceptions, charges are enforceable only in equity. Equitable charges arise out of agreement between the parties thereto and in that respect differ from statutory charges (as to which see Chapter 7) and equitable liens, though the word ‘lien’ is often used to include not only liens arising by operation of law, but also charges or hypothecations arising out of contract. [page 51] The distinction between lien and charge is especially important for the purpose of registration under the Corporations Act: see Re Wallis & Simmonds (Builders) Ltd [1974] 1 All ER 561; [1974] 1 WLR 391; see also Chapter 11. A charge, though expressed to be an agreement for a lien, does not confer an actual lien, which is a right given by law. In such cases the rights of the parties are limited by the terms of the express contract (Gladstone v Birley (1817) 2 Mer 401 at 404; 35 ER 993 at 994; Re Leith’s Estate (1866) LR 1 PC 296 at 305); but, nevertheless, subject to the terms of the contract by which such an agreement is effected, and the special rights thereby created, the rights correspond with such as arise under actual liens. The express stipulation in agreement for a security excludes a lien and limits the rights by the extent of the express contract — expressum facit cessare tacitum.

Creation 2.3

An ordinary charge may be created in either of the following ways:

1. by a charge or direction in a settlement, will, or other instrument, whereby real or personal property is expressly or constructively made liable or specifically appropriated to the discharge of a debt, portion, legacy, or

other burden, or declared to be subjected to a charge for securing the same; no debt is implied, but a right of realisation by judicial process is conferred; or 2. by the appropriation to the discharge of a debt of specific things in action or chattels, which either are, at the time of appropriation, or may or will thereafter be in the hands of a third person: see Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584 at 594-596; [1980] 2 All ER 419 at 426. For a trust by way of securities see Re Bond Worth Ltd [1980] Ch 228 at 250; [1979] 3 All ER 919 at 940, and compare Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd [1985] Ch 207 at 227; [1985] 1 All ER 155 at 169. In Jackson v Richards [2005] NSWSC 630; (2005) 12 BPR 23,071 at 23,094 [18] White J said on the basis of Rodick v Gandell (1852) 1 De G M & G 763 at 777, 778; 42 ER 749 at 754: An agreement between a debtor and his creditor that the debt owing shall be paid out of a specific fund coming to the debtor will create a valid equitable charge upon the fund and operate as an equitable assignment of it. However, for this principle to apply, there must be a specific fund from which the debt owing is to be paid.

His Honour cited the Swiss Bank case at AC 595, All ER 426 in support of the latter statement. No special form is required to create a charge: Cradock v Scottish Provident Institution (1893) 69 LT 380; affirmed 70 LT 718. As to the requirements of provisions such as s 53(1) of the Victorian Act with respect to real property, see Kinane v Mackie-Conteh [2004] 19 EG 164 (CS). The court itself may create an equitable charge in appropriate circumstances, see 2.13. The mere fact that another person may have a power of sale over property or the right to retain possession of property does not of itself indicate a charge: Great Eastern Railway Co v Lord’s Trustee [1909] AC 109; Waitomo Wools (NZ) Ltd v Nelsons (NZ) Ltd [1974] 1 NZLR 484; Re Trendent Industries Pty Ltd (1983) 8 ACLR 115; Seka Pty Ltd v Fabric Dyeworks (Aust) Pty Ltd (1991) 4 ACSR 455 and see the argument in Re Cosslett (Contractors) Ltd [1998] Ch 495 at 499. With Torrens land, an agreement that the creditor may lodge a caveat will

ordinarily create a charge, Troncone v Aliperti (1994) 6 BPR 13,291: see, however, Redglove Projects Pty Ltd v Ngunnawal Local Aboriginal Land Council (2004) 12 BPR 22,319. [page 52]

Aspects of creation of charges 2.4 An agreement to charge property which at the date of the agreement has been sold will bind the corresponding interest in the purchase money: Re Selby; Ex parte Rogers (1856) 8 De GM & G 271; 44 ER 394, and see also Byrne v Allied Irish Banks Ltd [1978] IR 446. On the other hand, on the death of the chargor, the charge will only affect the property of which he died possessed, and not such as did not belong to him at his death, whether he had it at the date of the obligation or acquired it afterwards. The property over which the charge exists must be clear. This is because the property must be appropriated to meet the charge: see, for example, Brown, Shipley & Co v Kough (1885) 29 Ch D 848; see also Chapter 7. Notwithstanding this rule, a charge may survive if it is over such land as a developer should still own when a request for a security is made (see Williams v Burlington Investments Ltd (1977) 121 Sol Jo 424) or over such living as the rector of X might exchange for his present living: Metcalfe v Archbishop of York (1836) 6 Sim 224; 58 ER 577; affirmed (1836) 1 My & Cr 547; 40 ER 547. Just as a mortgage of all a mortgagor’s ‘real and personal property whatsoever and wheresoever’ may be supported if it is possible at the time when the charge is sought to be enforced to identify the property mortgaged (see 1.34), so the same seems to apply to a charge. However, it is suggested there must be a limit and that a charge over all the real and personal property over which the chargor owns or may hereafter acquire may be too wide. A floating charge escapes this problem because there is a two-stage process to the appropriation of assets to the charge, and it is only upon crystallisation of the charge that the assets then in existence become appropriated to it: Biggerstaff v Rowatt’s Wharf Ltd [1896] 2 Ch 93 at 106; see 8.10–8.12. An agreement that a person may place a caveat on another’s title amounts

to an equitable charge: Murphy v Wright (1992) 5 BPR 11,734; Esanda Finance Corp Ltd v Leserv (No 4) Pty Ltd [1992] ACL 295 Qld 8; Troncone v Aliperti (1994) 6 BPR 13,291.

Negative pledge 2.5 In recent years it has become a common practice for a creditor to obtain from a debtor a promise that the debtor will not charge an asset in favour of any other person. This situation is known as ‘negative pledge’. It is the absence of any immediate appropriation which prevents a negative pledge clause from creating any security interest, at least until default: Kelly v Central Hanover Bank & Trust Co (1935) 11 F Supp 497; Pullen v Abalcheck Pty Ltd (1990) 20 NSWLR 732. As to whether such a clause can create a charge upon default, Goode, Legal Problems of Credit and Security, 4th ed, Sweet & Maxwell, London, 2008, pp 52–59 discusses the operation of negative pledges in different circumstances. He notes that there is little English caselaw, but concludes that the negative pledge is not properly included within the category ‘security’ and the remedies to protect and enforce it are so weak. Gabriel, Legal Aspects of Syndicated Loans, Butterworths, London, 1986, pp 86–90, takes the opposite view. See also Stone (1991) NZLJ 364 at 365, who suggests that cases such as Re Jackson & Bassford [1906] 2 Ch 467 at 479 and Re Love; Francis v Gregory Love & Co [1916] 1 Ch 203 at 211 support Gabriel’s view. A negative pledge may be enforced by obtaining an injunction to prevent the mortgagor from breaching a negative covenant: Pullen v Abalcheck Pty Ltd (1990) 20 NSWLR 732 at 735 and see Bond Brewing Holdings Ltd v National Australia Bank Ltd (1990) 1 ACSR 445 at 461. There would appear to be no objection to a negative pledge deed providing that, if certain events happen, the creditor might appoint a receiver: see Stone (1991) [page 53] NZLJ 312, where it is said that such a result follows from the analysis in Gaskell v Gosling [1896] 1 QB 669. There is a general judicial unwillingness

to permit negative pledges to become the vehicle for the creation of equitable mortgages: Nelson and Whitman, Real Estate Finance Law, 2nd ed, West, Minnesota, 1985, s 338, p 139; and see Brown v San Luis Obispo National Bank 462 F (2d) 129 (9th Cir) (1972); Chase Manhattan Bank v Gems-ByGordon 649F (2d) 710 (9th Cir) (1981). A creditor who misses out on obtaining an injunction is left with the remedy of an action in debt. This is cold comfort if the debtor is insolvent. Stone (1990) NZLJ 411 suggests that, in appropriate circumstances, the creditor may be able to sue a third party for the tort of interfering with contractual relations if that party has taken a charge over the relevant assets with knowledge of the negative pledge.

Charges over personalty 2.6 Charges over personalty are regulated by legislation principally by the PPSA which repealed and displaced most previous legislation of the Commonwealth and States. The Act and its operation is considered in Chapter 5. Where the charge is not in respect of a personal chattel, such as a charge of a chose in action, the charge is often effected by an assignment of the property and will then be treated as an equitable mortgage. Moreover a mere charge on a fund or debt operates as a partial equitable assignment: Durham Bros v Robertson [1898] 1 QB 765 at 769 and see Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584. Compare Gough, Company Charges, 2nd ed, Butterworths, London, 1996, p 215. This is fully discussed in Chapter 6. However, while an absolute assignment of existing property is effectual though voluntary, an equitable assignment which merely gives a charge on property requires valuable consideration to support it (Re Earl of Lucan; Hardinge v Cohen (1890) 45 Ch D 470); though see Sykes and Walker p 773, which suggests that this statement is wrong and that Re Lucan is a ‘very dubious and ambiguous authority’. The fund upon which the charge operates must be clear: Brown, Shipley & Co v Kough (1885) 29 Ch D 848, and see 2.4 and 6.10. Charges over the property of corporations are considered in detail in Chapter 8.

Equitable charges on realty 2.7 The assimilation of mortgages and charges referred to in 1.9 is illustrated by the older cases. Cousins, The Law of Mortgages, 2nd ed, Sweet & Maxwell, London, 2001 (the successor to Waldock on Mortgages), suggests that even an express contract to create a charge has been held to be a contract to make a mortgage and the case to be within the rules of equitable mortgage: see too Ex parte Wills (1790) 1 Ves 162; 30 ER 281; Montague v Earl of Sandwich (1886) 32 Ch D 525 and Re Roberts (1982) 84 FLR 88. It is also suggested that where a security is intended and the land charged is specified, provided that the instrument by which the charge is effected is not a will (Re Owen [1894] 3 Ch 220), or a voluntary settlement (Balfe v Lord (1842) 2 Dr & War 480; Re Lloyd [1903] 1 Ch 385), an equitable mortgage will be created: Cradock v Scottish Provident Institution [1893] 69 LT 380; affirmed 70 LT 718; Montague v Earl of Sandwich (1886) 32 Ch D 525; Re Roberts (1982) 84 FLR 88 and Avco Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679. There is a fundamental difference in the nature of an equitable charge and an equitable mortgage (see, for example, 1.4 and 2.2), and the remedies available to the equitable mortgagee are more extensive than those available to the equitable chargee. [page 54] In particular, an equitable chargee does not have the remedy of foreclosure: see 2.8. Although some of the older cases seem to overlook this vital distinction (see, for example, Garfitt v Allen (1888) 37 Ch D 48), the distinction between the equitable charge and equitable mortgage has been clearly drawn in more recent cases such as Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584 at 594-7; [1980] 2 All ER 419 at 426 and Ladup Ltd v Williams & Glyn’s Bank plc [1985] 2 All ER 577. One should approach the older cases with caution in the light of this; see also the discussion in Sykes and Walker, pp 195–6. Not even a charge will be created where no particular land is mentioned in the agreement; or where the agreement is only for a personal security, with

power to call for a real security. (As to the contrast between a mere contract and a security interest see, for example, Williams v Burlington Investments Ltd (1977) 121 Sol Jo 424.) Again, not even a charge will be created where it otherwise appears to be intended to rely upon the agreement and not any security (see, for example, Collins v Plumber (1709) 1 P Wms 104; 24 ER 313; Berrington v Evans (1839) 3 Y & C Ex 384; 160 ER 751); nor where the agreement is not based on valuable consideration: Re Earl of Lucan (1890) 45 Ch D 470. The charge must be a present charge of specified property either already in the chargor’s possession or such as he or she may afterwards acquire or derive from a specified source: see 2.4 and Metcalfe v Archbishop of York (1836) 6 Sim 224; 58 ER 577; affirmed (1836) 1 My & Cr 547; 40 ER 547; Buller v Plunkett (1860) 1 John & H 441; 70 ER 819 and Murphy v Wright (1992) 5 BPR 11,734. As to the distinction between a charge over land and a charge over the proceeds of sale see Re Pauly (1994) 115 FLR 473. An agreement for a future charge is not enforceable if it is voluntary (Re Earl of Lucan, above), but if it is given for value, the charge will attach to the chargor’s land at the time agreed: Wellesley v Wellesley (1839) 4 My & Cr 561; 41 ER 213. As to the requirements of provisions such as s 53(1) of the Victorian Act, see Kinane v Mackie-Conteh [2004] 19 EG 164 (CS).

Remedies of chargee 2.8 The principal remedies of the chargee are sale and the appointment of a receiver. If the charge is by deed the chargee will have statutory powers in this respect. (See s 101 of the English Act, s 109 of the NSW Act and other corresponding sections referred to in the introduction to this work.) Where the charge is not by deed the chargee must apply to the court for an order for sale: Tennant v Trenchard (1869) 4 Ch App 537 at 542. (See the further discussion in Chapter 20.) Where shares are charged, restrictions on the transfer of the shares may prevent sale: Dalston Development Pty Ltd v Dean [1967] WAR 176. It may be necessary to appoint an independent person to conduct the sale: Phillips v Hogg [2001] QSC 390.

Alternatively, the application must be for the appointment of a receiver (see 19.14), but a mere equitable chargee is not entitled to possession (Garfitt v Allen (1887) 34 Ch D 48 at 50 and 19.14), nor foreclosure: Tennant v Trenchard, above; Re Lloyd [1903] 1 Ch 385 at 404 and United Travel Agencies Pty Ltd v Cain (1990) 20 NSWLR 566. As a strict matter of law there should be no stay imposed on the right of the mortgagee to exercise its powers under the deed of charge in the absence of any evidence of ability to pay: French v Capple [2001] NSWSC 574. [page 55]

B. Equitable Liens Equitable liens generally 2.9 The use of the word ‘lien’ has a tendency to be misleading. A common law lien (see 2.20 ff) is based on possession and usually confers a mere right to detain. An equitable lien is not based on possession and entitles the holder to judicial sale. The nature of equitable liens was considered by the High Court in Hewett v Court (1983) 149 CLR 639. Deane J (at 663) said (omitting reference to authority): An equitable lien is a right against property which arises automatically by implication of equity to secure the discharge of an actual or potential indebtedness. Though called a lien, it is, in truth, a form of equitable charge over the subject property in that it does not depend upon possession and may, in general, be enforced in the same way as any other equitable charge, namely, by sale in pursuance of court order or, where the lien is over a fund, by an order for payment thereout. Equitable lien differs from traditional mortgage in that it does not transfer any title to the property and therefore cannot be enforced by foreclosure. While it arises by implication of some equitable doctrine applicable to the circumstances, its implication can be precluded or qualified by express or implied agreement of the parties. It can exist over land or personalty or both.

Deane J cited copious authority in connection with that statement, particularly Re Beirnstein [1925] Ch 12 at 17-18; Re Bond Worth Ltd [1980] Ch 228 at 251; pages corresponding to McGhee, Snell’s Equity, 31st ed, Sweet & Maxwell, London, 2005, pp 889–91; Landowners West of England

and South Wales Land Drainage and Inclosure Co v Ashford (1880) 16 Ch D 411; Bowles v Rogers (1800) 6 Ves 95 n; 31 ER 957; Re Stucley [1906] 1 Ch 67 at 76-7, 79-80; Davies v Thomas [1900] 2 Ch 462 at 468. Deane J’s formulation has been often referred to extensively in subsequent authorities: see, Commissioner of Taxation v Government Insurance Office of NSW (1992) 36 FCR 314 at 324-5; 109 ALR 159 at 170-1; Lavery v R & I Bank of WA Ltd (SC (WA), Full Court, 7 September 1995); Australian Securities and Investments Commission v Lawrenson Light Metal Die Casting Pty Ltd (1999) 158 FLR 307 at 314; 33 ACSR 288 at 295; Re MAS Food Industries (Aust) Pty Ltd (in liq) [2000] WASC 155 per Anderson J. In Hewett v Court Gibbs CJ said at 149 CLR 645, quoting words of Isaacs J in Davies v Littlejohn (1923) 34 CLR 174 at 185, in relation to the doctrine of vendor’s lien, which Gibbs CJ said had general application, ‘Equitable lien does not depend either upon contract or upon possession. It arises by operation of law, under a doctrine of equity “as part of a scheme of equitable adjustment of mutual rights and obligations”’. In Lavery v R & I Bank of WA Ltd (SC (WA), Full Court, 7 September 1995) Malcolm CJ (with whom Franklyn and Owen JJ agreed) made it clear that the category of relationships giving rise to an equitable lien by operation of equity is not exhaustive. He exemplified the case of an intended lessee who enters land under a contract to grant a lease and expends money in repairing the premises, but the lessor fails to grant the lease. In such a case, the lessee will have an equitable lien for the recovery of the expenditure: Middleton v Magnay (1864) 2 H & M 233; 71 ER 452. As Gummow J said in (1993) 109 LQR 159 at 162: ‘The equitable lien has been somewhat a mysterious creature’. It is not limited to situations where equity would grant specific performance (see, for example, Hewett v Court (1983) 149 CLR 639 at 664-5), nor indeed is it limited to cases where the parties are in a contractual relationship. Thus a trustee has a lien over the trust property for indemnity against his liabilities: Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319 at 335; Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367. Again, the lien may operate in aid of a purely equitable relationship, as in Calverley v Green (1984) 155 CLR 242 at 263 and Muschinski v Dodds (1985) 160 CLR 583 at 598.

[page 56] Equitable liens include vendor’s lien (see 2.10–2.14), purchaser’s lien (see 2.15) and liens for expenditure on another’s property (see 2.16–2.17). The situations where such liens may arise are summarised in Sykes and Walker, pp 199–206. It has been said that the only feature linking these types of equitable liens is that they can be said to be ‘a right which may be said to be invented for the purpose of doing justice’: Whitebread & Co Ltd v Watt [1902] 1 Ch 835 at 838. Equitable liens may arise in various other situations, the most common being the lien of a partner or a company over the shares of the members, a beneficiary’s lien over the trust property and liens arising from right of indemnity: see 2.18. Equity will not always hold there to be a lien just because there is a situation where a party claims that it would be appropriate to confer a security on the basis that a lien would lie at law in analogous circumstances: Gladstone v Birley (1817) 2 Mer 993; 35 ER 993.

Vendor’s lien 2.10 A vendor has a lien for unpaid purchase money. Though of an equitable character, the lien was recognised in law as well as in equity. (However, in saying this it should be pointed out that an unpaid vendor has no common law lien over the title deeds once he has parted with them: Goode v Burton (1847) 1 Ex 189; 154 ER 80.) The lien arises as soon as a binding contract for sale is entered into and continues until the purchase money is paid. The lien arises by operation of law and does not depend on the subjective intention of the parties; thus it is irrelevant that the vendor was unaware of its existence: Barclays Bank plc v Estates and Commercial Ltd [1997] 1 WLR 415. The lien rests upon the plain principle of equity that a person who has obtained possession of property under a contract for payment of the value shall not keep it without payment: Mackreth v Symmons (1808) 15 Ves 329; 33 ER 778. If there is part payment, the lien remains for the unpaid balance: Re Birmingham [1959] Ch 523; [1958] 2 All ER 397 cited with approval in London and Cheshire Insurance Co Property Ltd v Laplagrene Co Ltd [1971] Ch 499 at 514; [1971] 1 All ER 766. It must be noted that, in Queensland, by statute, there can be no vendor’s

lien over Torrens System or Crown Lands Act lands, see, respectively Queensland Torrens Act s 178 and Land Act s 39. The vendor’s lien also arises for the purchase money of chattels (see, for instance, the provisions of the Sales of Goods Acts of the various states) but with the distinction that, inasmuch as there was not, as a general rule, any lien at law without possession, the vendor of land could have a lien at law for the purchase money, after execution of an absolute conveyance, either on the land or on the deeds (which, though they may actually be in the vendor’s possession, belong to the right of the owner of the property). Nor, for the same reason, had the vendor of chattels any lien for the price after he had parted with possession of them, but the vendor’s right in equity is independent of possession (see Langen & Wind Ltd v Bell [1972] Ch 685), does not depend on specific performance (Hewett v Court (1983) 149 CLR 639; Evans v McLean (1985) 14 ACLR 233), and exists as well after as before conveyance: Wrout v Dawes (1858) 25 Beav 369; 53 ER 678. Thus in Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210 Debelle J said (at para 34) that it is well established that an unpaid seller of personal estate has a lien for the unpaid purchase money in the same way as an unpaid vendor of real estate has a lien for the unpaid purchase money, and that lien gives rise to an equitable interest in the personalty. He cited Davies v Thomas [1900] 2 Ch 462 and Re Stucley [1906] 1 Ch 67. He then noted that the lien is not a mere personal equity but creates a charge upon and an interest in the property sold in the same manner as if that charge had been in writing: Rose v Watson (1864) 10 HLC 672 at 683 (11 ER 1187 at 1192) and Re Stucley (supra) at 83. [page 57] The unpaid vendor does not lose his lien by remaining in possession in some other capacity, for instance as a tenant under a sale and lease back transaction: London & Cheshire Insurance Co Ltd v Laplagrene Property Co Ltd [1971] Ch 499; [1971] 1 All ER 766. For a lien in respect of shares, see Musselwhite v C H Musselwhite & Sons Ltd [1962] Ch 964; [1962] 1 All ER 201 and Langen & Wind Ltd v Bell, above.

Contracts for the sale of land 2.11 The doctrine of ‘vendor’s lien’ is ‘one created by equity as part of a scheme of equitable adjustment of mutual rights and obligations applying, unless negatived, to every ordinary contract for the sale of land’: Davies v Littlejohn (1923) 34 CLR 174 at 185 per Isaacs J. It is part of the same scheme whereby ordinarily after a valid contract for sale the equitable interest in the land passes to the purchaser: see Re Thackwray and Young’s Contract (1888) 40 Ch D 34 at 38. See also Lysaght v Edwards (1876) 2 Ch D 499; Wossidlo v Catt (1934) 52 CLR 301 at 307-8 and Meyerhoff v Zed [1923] SASR 282. The Australian law was summarised in Reliance Finance Corp Pty Ltd v Heid [1982] 1 NSWLR 466 at 478, as follows: The correct view would seem to be that in theory the lien may arise when an enforceable contract is entered into, but that the nature of the remedies available to the vendor as a result of the lien varies depending upon the extent to which the contract has been performed. However, even though it may arise earlier, it certainly arises or exists when completion has taken place and part of the purchase price has not been paid, unless a contrary intention appears. A contrary intention may appear where the contract provides for the satisfaction of the purchase price by some means other than payment on completion.

This view was affirmed by the High Court on appeal: see (1984) 154 CLR 326. The requirement of a specifically enforceable contract for the sale of land as a prerequisite to any finding of an equitable lien in favour of the vendor was reaffirmed in Re MAS Food Industries (Aust) Pty Ltd (in liq) [2000] WASC 155. The vendor’s lien exists generally (the contract not being illegal) in respect of all freehold and leasehold land: Winter v Lord Anson (1827) 3 Russ 488; 38 ER 658; also in respect of personal chattels, as is explained in 2.12.

Vendor’s lien over chattels 2.12 The lien extends in respect of trade machinery (Re Vulcan Ironworks Co (1888) 4 TLR 312) and indeed in respect of personal property other than chattels. Examples are: Davies v Thomas [1900] 2 Ch 462, over a share of proceeds of sale of leaseholds; Re Stucley [1906] 1 Ch 67, a case involving the reversionary interest in a trust fund. Langen & Wind Ltd v Bell [1972] Ch 685 is an illustration of an unpaid vendor’s lien in respect of shares.

Extent of vendor’s lien 2.13 The lien extends not only to the unpaid price, but also to interest on it from the time the lien comes into existence: Rose v Watson (1864) 10 HLC 672; 11 ER 1187; Re Stucley [1906] 1 Ch 67. The lien exists whether the whole or part of the purchase price is unpaid, and even though a receipt may have been given for it and whether the consideration is a sum in gross or is payable by installments. See, generally, Lightwood, Williams on Vendor and Purchaser, 4th ed, Sweet & Maxwell, London, 1936, vol 2, pp 983 ff; Sugden, A Concise and Practical Treatise of the Law of Vendors and Purchasers of Estates, 14th ed, H. Sweet, London, 1862, p 676. The lien binds not only the purchaser and persons claiming under the purchaser’s volunteers, but also persons having equitable interests, and persons claiming under the original purchaser who acquired the legal estate with notice of the non-payment of the purchase money: Elliot v Edwards (1802) 3 Bos & P 181; 127 ER 100; Mackreth v Symmons (1808) 15 Ves 329; 33 ER 778. [page 58] Lien does exist over land under the Torrens system, but in such a case the lien may be defeated by the operation of the indefeasibility provisions of that Act: Reliance Finance Corp Pty Ltd v Heid [1982] 1 NSWLR 466; on appeal at (1983) 154 CLR 326. Where in the deed the consideration is expressed to be paid, but is in fact wholly or partly left unpaid, parol evidence may be given on the part of the purchaser of the actual transaction, because it is the vendor who, by claiming a lien, is the first to set up an equity against the written statement in the deed: Winter v Lord Anson (1827) 3 Russ 488; 38 ER 658, and compare Heid’s case, above. The lien extends to money advanced by the vendor to the purchaser for improvements: Ex parte Linden (1841) 1 Mont D & De G 428. A vendor’s lien may arise where the purchaser fails to perform acts, the obligation to perform which forms part of the consideration for the sale: Uziell-Hamilton v Keen (1971) 22 P & CR 655. Semble, the benefit of a vendor’s lien can be transferred, even by parol, to a person in possession of the deeds: Dryden v Frost (1838) 3 My & Cr 670;

40 ER 1084. A vendor who has such a lien is entitled to the title deeds and may retain them if already held: Dryden’s case at 672, 673 (ER 1085–6) and see Williams, Vendor and Purchaser, 3rd ed, Sweet & Maxwell 1922, vol 2, p 987. A vendor’s lien upon realty is enforceable by sale once the lien has been established by the court; and see Commonwealth Bank of Australia v Horvath [1996] ANZ ConvR 501, referring to this sentence in the first Australian edition. The court may also enforce the lien by appointing a receiver pending sale or by injunction operating to restore possession of the property. The lien of an unpaid vendor also gives the vendor the alternative right to rescind the contract and recover possession: Lysaght v Edwards (1876) 2 Ch D 499 at 506. A vendor cannot enforce the lien by foreclosure: Munns v Isle of Wight Railway Co (1870) 5 Ch App 414. The lien may never arise because the vendor may take a superior security. This will be the case, for example, where the vendor of property leaves the whole or part of the purchase money outstanding and secured by a mortgage of the property sold: see Wossidlo v Catt (1935) 52 CLR 301; Capital Finance Co Ltd v Stokes [1969] 1 Ch 261; Bank of Ireland Finance Ltd v Daly Ltd [1978] IR 79; Re Bond Worth Ltd [1980] Ch 228 at 251; Evans v McLean (1984) 9 ACLR 233; but cf Commonwealth Bank of Australia v Horvath, above, where it was held that a vendor’s lien existed independently of a mortgage of the property to a minor which was rendered void by s 49 of the Victorian Act, to which the bank was entitled by way of subrogation; and see Thurston v Nottingham Permanent Benefit Building Society [1902] 1 Ch 1; and Evandale Estates Pty Ltd v Keck [1963] VR 647.

Liens and invalid mortgages 2.14 By stipulating and obtaining a valid mortgage or charge, the vendor abandons any claim to the unpaid vendor’s lien, because the vendor has got what was bargained for, namely a mortgage or charge which was valid and enforceable at its inception. This is so even though it is later found that the charge is void for non-registration on the liquidation of the purchaser company: Re Molton Finance Ltd [1968] Ch 325; [1967] 3 All ER 843 (CA); Capital Finance Co Ltd v Stokes [1969] 1 Ch 261; [1968] 3 All ER 865 (CA); Burston Finance Ltd v Speirway Ltd [1974] 3 All ER 735; [1974] 1 WLR 1648; Cheltenham & Gloucester plc v Appleyard [2004] EWCA Civ 291, but

compare Coptic Ltd v Bailey [1972] Ch 446; [1972] 1 All ER 1242; note by Sunnucks on Molton’s case in (1970) 33 Mod LR 131. The sometimes important because had the vendor’s lien continued to would have ranked in priority to any such mortgage or charge subsequently.

and see point is exist it granted

If the mortgage or charge was void from the outset, the lien is not lost, for the vendor cannot be taken to have intended to give up the lien except on the basis of acquiring an [page 59] effective mortgage or charge: Thurstan v Nottingham Permanent Benefit Building Society [1902] 1 Ch 1, affirmed [1903] AC 6; Orakpo v Manson Investments Ltd [1978] AC 95; [1977] 3 All ER 1. However, if the mortgage or charge is merely unenforceable, the lien is lost, because the lender obtained a valid security, albeit it was unenforceable: see the Orakpo case at AC 114; All ER 16. These principles apply also to persons, such as mortgagees, advancing money for the purchase of a property to be mortgaged, succeeding to the vendor’s lien by subrogation and subsequent mortgagees whose advances are used to discharge prior mortgages, but there will be no lien if the intention was simply the creation of an unsecured loan: see Paul v Spierway Ltd [1976] Ch 220 and generally Boodle Hatfield & Co v British Films Ltd [1986] NLJ Rep 117; [1986] PCC 176.

Purchaser’s lien 2.15 Where a contract for sale of land goes off without any default of the purchaser, the latter is entitled to a lien on the vendor’s interest in the land for all sums paid under the contract on account of purchase money with interest: Burgess v Wheate (1757) 1 Eden 177 at 211; 28 ER 652 at 665; Wylkes v Lee (1855) 3 Drew 396 at 404; 61 ER 954 at 957; Rose v Watson (1864) 10 HLC 671; 11 ER 1187; Aberaman Ironworks v Wickens (1868) LR 4 Ch App 101 at 109-10; Lee-Parker v Izzet [1971] 1 WLR 1688 at 1692; [1971] 3 All ER 1099 at 1106; Frankcombe v Foster Investments Pty Ltd [1978] 2 NSWLR 41

at 57. A purchaser has a lien to secure repayment of the deposit where the purchaser has properly rescinded the contract (Whitbread & Co Ltd v Watt [1902] 1 Ch 835) but the right to a lien is dependent upon the purchaser being entitled to repayment of the deposit: Rizoto v Kaihatsu Gumi Ltd v Capital and Coastal Ltd (1998) Q ConvR 54-511. A purchaser’s lien is an interest in the land which may be protected by caveat: Frankcombe v Foster Investments Pty Ltd, above, at 57. The lien arises at the time when the contract of sale becomes incapable of performance: Rodger v Harrison [1893] 1 QB 161. A purchaser who desires to enforce the lien must submit to perform the contract, provided that it is still on foot: Ridout v Fowler [1904] 1 Ch 658 at 663 (on appeal [1904] 2 Ch 93). See, in general, Stonham, The Law of Vendor and Purchaser, Law Book Co, Sydney, 1964, [1334] ff.

Liens for expenditure on another’s property 2.16 It is clear that upon general considerations of justice, or upon the principle that a person who seeks the aid of equity must admit equitable rights of others directly arising out of the same subject matter, equity may raise liens over property. See Shirlaw v Taylor (1991) 31 FCR 222 at 228; 102 ALR 551 at 558 and see note ‘Equitable liens’ (1931) 31 Col LR 1335 at 1342-3. Illustrations of this principle are situations where a person has constituted a fund by his or her skill and efforts which is brought into court; the costs and expenses in amassing that fund are to be a first claim on the fund: Batten v Wedgwood Coal & Iron Co (1884) 28 Ch D 317 at 324-5; Re Universal Distributing Co Ltd (1933) 48 CLR 171 at 174-5. Another illustration is where a co-owner has expended money on property which benefits co-owners: for example, Calverley v Green (1984) 155 CLR 242 at 263 and Muschinski v Dodds (1985) 160 CLR 583 at 598. Expenditure on property does not of itself give rise to an equitable lien even though the expenditure preserves or improves the property: Burridge v Row (1842) 1 Y & CC 183; 62 ER 846; Re Leslie (1883) 23 Ch D 552; Strutt v Tippett (1889) 61 LT 460; 62 LT 475.

[page 60] A mortgagor of leasehold land who purchases the reversion is not entitled to a lien for the purchase money as against his mortgagee: Leigh v Burnett (1885) 29 Ch D 231. A second mortgagee who improves the property has no lien for that expenditure against the first mortgagee: Landowners West of England and South Wales Land Drainage and Inclosure Co v Ashford (1880) 16 Ch D 411 at 433. As can be seen from 2.30, the rule applied even if the payment was made to salvage or preserve the property. However, where the owner of the property has invited or expressly encouraged the expenditure of the money, an equitable lien may arise: Chalmers v Pardoe [1963] 1 WLR 677 at 682; [1963] 3 All ER 552 at 555. A modern example of this rule is where a ‘granny flat’ is built onto another’s house and then divorce or some other family rift makes living in that flat untenable: Morris v Morris [1982] 1 NSWLR 61; Baumgartner v Baumgartner (1985) 2 NSWLR 406, varied (1987) 164 CLR 137. Thus, the mere fact that a person builds on another’s land will be insufficient to raise a lien, but it will be otherwise if a belief was induced in the builder that it was in order for the erection to take place: Cawdor v Lewis (1835) 1Y & C Ex 427 at 433; 160 ER 174 at 176.

Salvage 2.17 The traditional rule was that no equitable lien arises from a person paying out money to salvage the subject property. Salvage, it was said, is a doctrine of admiralty that does not apply to the law of property: Nicholson v Chapman (1793) 2 H Bl 254 at 257; 126 ER 536 at 538; Atkinson v Lohre (1879) 4 App Cas 755 at 760. Thus a mortgagee who paid premiums on a policy of life assurance on the mortgagor’s life had no claim on the proceeds of the policy (Falcke v Scottish Imperial Insurance Co Ltd (1886) 34 Ch D 234), nor did a person who repaired a house decaying from dry rot have a lien for the cost of preservation: Re Teissier’s Settled Estates [1893] 1 Ch 153. These views were accepted by the High Court in Hill v Ziymack (1908) 7 CLR 352. A view more sympathetic to the payer was taken in Ireland, but even there, a salvage lien could only be obtained by a person with an interest in the

property salved, such as a sub-lessee who paid out the rent owing by his landlord to the head landlord: Locke v Evans (1823) 11 Ir Rep 52; Fetherstone v Mitchell (1848) 11 Ir Eq Rep 35; O’Geran v McSwiney (1874) IR 8 Eq 500; O’Loughlin v Dwyer (1884) LR Ir 13 Ch D 75. A payer might succeed on the basis of estoppel, such as the case where money was paid in the belief that he had title such as in the Ramsden v Dyson (1866) LR 1 HL 129 situation. ‘Salvage’ is a term also used in more modern cases to denote a claim made by a person for the skill and labour expended in preserving property, in which circumstances a lien is usually granted: see Re Berkeley Applegate (Investment Consultants) Ltd (in liq) [1989] Ch 32 at 51; [1988] 3 All ER 71 at 83; Shirlaw v Taylor (1991) 31 FCR 222 at 230-1; 102 ALR 551 at 560; see also Re Tharp (1852) 2 Sm & Giff 578; 65 ER 533; Re Universal Distributing Co Ltd (1933) 48 CLR 171. In more modern times, the revivified principles of the law of restitution make one approach these traditional rules with caution: see Sutton, ‘What Should be Done for Mistaken Improvers’ in Essays on Restitution in Finn (ed), Law Book Co, Sydney, 1990, pp 256 ff.

Other equitable liens 2.18 A partner on dissolution of partnership has a lien over the surplus assets for his share of the surplus: Ex parte King (1810) 17 Ves 115; 34 ER 45; Kelly v Hutton (1868) LR 3 Ch App 703; Mycock v Beatson (1879) 8 Ch D 384; Binney v Mutrie (1886) 12 App Cas 160 at 165. The lien is confined to the assets of the partnership at the date of dissolution: Payne v Hornby (1858) 25 Beav 280; 53 ER 643. In Thurston v Nottingham Permanent Benefit Building Society [1902] 1 Ch 1 it was established that a [page 61] lender is entitled to a lien upon real property and the title deeds for the purchase money paid by the lender for the borrower to the vendor with interest thereon; and see Evandale Estates Pty Ltd v Keck [1963] VR 647; and Commonwealth Bank v Horvath [1996] ANZ ConvR 501. The general

rule is that a person does not acquire any proprietary interest in or lien over the property of another unless the person expending the money has done so in the belief that a partial or entire interest in the property would be obtained as a result in circumstances where the true owner is estopped from denying the claim: see Lavery v R & I Bank of WA Ltd (SC (WA), Full Court, 7 September 1995); referring to Dillwyn v Llewellyn (1862) 4 De G F and J 517; 45 ER 1285; and Ramsden v Dyson (1865) LR 1 HL 219. See also Edlan No 54 Pty Ltd v McIntyre (2003) 47 ACSR 691; and UCB Group Ltd v Hedworth [2003] EWCA Civ 1717. It is not uncommon for the constitution of a limited company to impose a lien on shares for debts due to the company including unpaid calls. Such provisions will validly impose an equitable charge over the shares that will prevail over a later mortgage. Illustrations are found in Re Gippsland Steam Navigation Co; Ex parte Chuck (1875) 1 VLR (Eq) 141; Ex parte Trevascus; Re William McCulloch & Co Ltd (1879) 5 VLR (L) 195; Ex parte Stringer (1882) 9 QBD 436; Bradford Banking Co Ltd v Henry Briggs, Son & Co Ltd (1886) 12 App Cas 29; Everitt v Automatic Weighing Machine Co [1892] 3 Ch 506; Champagne Perrier-Jouet SA v HH Finch Ltd [1982] 3 All ER 713; [1982] 1 WLR 1359; Chase Corporation (Australia) Pty Ltd v North Sydney Brick and Tile Co Ltd (1994) 35 NSWLR 1; (1994) 14 ACSR 586, and see the note on this case at (1996) 4 APLJ 146 (Gray). Owners of a trade mark have no lien on goods which bear a fraudulent trade mark to secure the costs of proceedings to enforce their rights: Moet v Pickering (1878) 8 Ch D 372. An equitable lien may also arise from the right of a beneficiary to follow trust funds: see, for example, Re Pumfrey (1882) 22 Ch D 255; Re Brown (1886) 32 Ch D 597. Where a trustee makes an improper investment the beneficiary may elect to repudiate the investment. If he does so, he has a lien over the investment for the amount of trust funds invested: Francis v Francis (1854) 5 De G M & G 108 at 120; 43 ER 811 at 816; Trevillan v Exeter (1854) 5 De G M & G 828 at 834; 43 ER 1091 at 1094; Re Whitely (1886) 33 Ch D 347 at 354; Re City of Sydney Real Estate Co Ltd (1928) 29 SR (NSW) 80 at 88. A similar rule applies where a fiduciary improperly deals with property: see, for example, Harpham v Shacklock (1881) 19 Ch D 207 and Re Vernon,

Ewens & Co (1886) 33 Ch D 402. A trustee also has a lien over the trust property to secure moneys properly paid by him in the execution of the trust: Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319; Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367 and see Ford and Lee, Principles of Law of Trusts, 3rd ed, Law Book Co, Sydney, 1996, [14025] where there is an extensive discussion of the matter. The trustee’s interest, however, is not considered a security interest, but a beneficial interest under the trust: Chief Commissioner of Stamp Duties v Buckle (1998) 192 CLR 226; 151 ALR 1. Creditors may execute upon that equitable lien: see Ford, ‘Trading Trusts and Creditors’ Rights’ (1981) 13 MULR 1 at 14-18; see also Ex parte Garland (1803) 10 Ves 111; 32 ER 786; Ex parte Edmonds (1862) 4 De GF & J 488; 45 ER 1273; Re Johnson; Shearman v Robinson (1880) 15 Ch D 548; and Marginson v Potter (1976) 136 CLR 161 at 176; 11 ALR 64 at 75. Similar principles apply to liquidators and receivers, see 2.52. However, it must not be imagined that equity will create some equitable lien and charge whenever it sees some unfair conduct. There is, indeed, no general principle of equity to the effect that money expended by a person to preserve or benefit the property of another creates a lien on the property in his or her favour: Falcke and Scottish Imperial [page 62] Insurance Company (1886) 34 Ch D 234 per Bowen LJ at 248-9; Pettit v Pettit [1970] AC 777 and Lavery v R & I Bank of WA Ltd (SC (WA), 7 September 1995, unreported) per Malcolm CJ with whom Franklyn and Owen JJ agreed.

Extinction of equitable liens 2.19 An equitable lien will be lost by abandonment. The intention to abandon may be inferred from conduct and the surrounding circumstances: Bank of Africa v Salisbury Gold Mining Co [1892] AC 281 at 284. The taking of other security usually indicates that the lien has been abandoned: see Halsbury’s Laws of England, 5th ed, vol 68, [882]ff and

Nairn v Prowse (1802) 7 Ves 752; 31 ER 1291; Re Millear (1897) 22 VLR 542 at 547. However, this fact is not conclusive: Mackreth v Symmons (1808) 15 Ves 329 at 348; 33 ER 778 at 785. The lien will be lost if the parties agree to postpone payment until the property is resold: Re Parkes; Ex parte Parkes (1822) 1 Gl & J 228. See also Thompson v Palmer (1993) 49 CLR 507 and 2.14 ff. The lien will also be extinguished by operation of the Limitation Acts: Re Stucley [1906] 1 Ch 67.

C. Common Law Liens Liens generally 2.20 One of the most succinct definitions of lien was given by Grose J in Hammonds v Barclay (1802) 2 East 227 at 235; 102 ER 356 at 359: ‘A lien is a right in one man to retain that which is in his possession belonging to another till certain demands of him the person in possession are satisfied.’While this definition covers the vast majority of liens, it must be said that liens may arise in a heterogeneous number of ways at law and in equity. Many liens arise in special situations and have particular limitations. In its primary or legal sense, ‘lien’ means a right at common law in one person to retain that which is rightfully in his possession. In a secondary sense, the term may be applied to a right subsisting in a person who has no possession, but who has a right against the owner analogous to a legal lien: Halsbury’s Laws of England, 5th ed, vol 68, [801] ff; and see Pioneer Container (The) [1994] 2 AC 324; [1994] 2 All ER 250 and Premier Group Pty Ltd v Followmount Transport Pty Ltd (SC (Qld), Williams J, 19 March 1998, unreported). This work does not attempt to cover all liens, merely those with the closest nexus to the topics covered in the remainder of this section: artificers’ liens are considered in 2.21–2.27, accountants’ liens in 2.28, insurers’ liens in 2.29 and solicitors’ liens in 2.33–2.51. There may also exist a category of lien that is neither the creation of common law nor equity. The maritime lien of subfreight on cargo is the prime example: see Tagart, Beaton & Co v James Fisher & Sons [1903] 1 KB 391 at 395; Agnew v Commissioner of Inland Revenue [2001] 2 AC 710

at 727 and see The juridical nature of a lien of subfreight [1989] LMCLQ 191 (Oditah).

Artificers’ liens 2.21 A particular lien arises when a person expends labour and skill to improve a chattel: see, for example, Hatton v Car Maintenance Co Ltd [1915] 1 Ch 621. [page 63] An artificer’s lien will not arise unless certain conditions are fulfilled. These can be summarised as follows: 1. The work done must improve the chattel or increase its value. 2. The chattel must have been delivered to the person asserting the lien for the work to be done. 3. The work must have been authorised by the owner of the chattel or his or her authorised agents. 4. The work must be completely performed. It should be noted that circumstances may well show that the parties did not intend there to be any lien even though the case is one where the law would ordinarily imply a lien. Thus parties may agree that there be a set-off of fees against a future liability or that nothing shall be payable until a future date. In such cases, no lien will arise until the debt is actually payable: Raitt v Mitchell (1815) 4 Camp 146; 171 ER 47; Vered v Inscorp Holdings Ltd (1993) 31 NSWLR 290. See in general Elliott, The Artificer’s Lien, Law Book Co, London, 1967, chapter 3. These various requirements are dealt with in the succeeding four paragraphs.

Improvement 2.22 It is necessary that the person claiming the lien has actually improved the chattel or animal or increased their value. Thus there will be a lien by a garage proprietor for the cost of repairs, but not for the cost of mere

maintenance: Keene v Thomas [1905] 1 KB 136; Green v All Motors Ltd [1917] 1 KB 625; Hatton v Car Maintenance Ltd [1915] 1 Ch 621 at 624. A tailor will have a lien for making up a customer’s cloth or repairing his clothing, or a printer printing manuscripts on paper provided by the customer: Blake v Nicholson (1814) 3 M & S 167; 105 ER 573. Likewise a person making prints from a tracing will have a lien (Frew v Burnside (1925) 42 WN (NSW) 111); so will a person who packs goods into containers (Standard Electronic Apparatus Laboratories Pty Ltd v Stenner [1960] NSWR 447) and a person slaughtering cattle and preparing meat for market: Dinmore Meatworks Pty Ltd v Kerr (1962) 108 CLR 628 and Protean Enterprises (Newmarket) Pty Ltd v Randall [1975] VR 327. The same rule applies where the work is done with a live animal. Thus a person who is a horse breaker (Judson v Etheridge (1833) 1 CR & M 743; 149 ER 548) or a trainer (Bevan v Waters (1828) 3 Car & P 520; 172 ER 529 and Pegasus Leasing Ltd v Cofini (SC (NSW), Powell J, 13 November 1991, noted 67 ALJ 467)) has a lien. However a person who merely agists horses has no such lien: Jackson v Cummins (1839) 5 M & W 342; 151 ER 145 and Orchard v Rackstraw (1850) 9 CB 698; 137 ER 1066. This distinction may lead to logical difficulties. Thus in Re Southern Livestock Producers Ltd [1964] 1 WLR 24 at 28; [1963] 3 All ER 801 at 804, Pennycuick J said that if the matter were free from authority, ‘It seems to me to be illogical that a kennel keeper should have a lien for the expense of stripping a dog, but not for that of boarding it. However, it is quite impossible for me at this time of day to introduce that sort of modification into a well-established principle’. A person by whom a chattel has been improved has a possessory lien for the price of his labour, or of his skill though it be exercised without actual labour, and for his expenses incurred in the improvement thereof: Bevan v Waters (1828) 3 Car & P 520; 172 ER 529; Bleaden v Hancock (1829) 4 Car & P 152; 172 ER 648; Judson v Etheridge (1833) 1 Cr & M 743; 149 ER 548. A person to whom a mortgage deed is delivered as evidence of his title to apply for payment has no lien upon it for his charge for making the application: Sanderson v Bell (1834) 2 Cr & M 304; 149 ER 776. [page 64]

The lien will be a particular lien, that is, only to charge with respect to the particular work done in most cases. These include the lien of an accountant upon books of account for work done before the owner’s bankruptcy (Re Hill; Ex parte Southall (1848) 17 LJ Bktcy 21), that of an arbitrator upon his award (R v South Devon Rail Co (1850) 15 QB 1043; 117 ER 754; Re Coombs and Freshfield and Fernley (1850) 4 Ex 839; 154 ER 1456; Mason v Stokes Bay Pier & Rail Co (1862) 32 LJ Ch 110) and the lien of a conveyancer: Hollis v Claridge (1813) 4 Taunt 807; 128 ER 549; Steadman v Hockley (1846) 15 M & W 553; 153 ER 969. However, in respect of a few callings the lien has been held to be general, that is, a right of detainer for general balances. A solicitor has such a lien: see 2.33 ff.

Delivered to the artificer 2.23 Because a lien is the right to keep possession, it cannot exist unless the chattel has been lawfully delivered into the artificer’s possession. As Lord Ellenborough CJ said in Heywood v Waring (1815) 4 Camp 291 at 295; 171 ER 93 at 94: ‘Without possession there can be no lien. A lien is a right to hold; and how can that be held which was never possessed?’ Thus if a person calls an artificer into his or her home to repair goods there can be no lien. It will be otherwise if the artificer with the consent of the owner removes the goods to his own workshop. There is little purpose in a work of this nature in dealing with the detailed situations in which goods may or may not be held to be in the custody of the artificer. The matter is dealt with in Elliott, The Artificer’s Lien, pp 23–4.

Work done with owner’s authority 2.24 The work in respect of which a lien is claimed must have been performed at the request or by the authority of the owner of the chattel: Hiscox v Greenwood (1802) 4 Esp 174; 170 ER 681; Hollis v Claridge (1813) 4 Taunt 807; 128 ER 549; Castellain v Thompson (1862) 13 CB (NS) 105; 143 ER 41. Partners in a trade may have a lien for labour although one of the firm is a part owner of the chattel on which the work was done: Franklin v Hosier (1821) 4 B & Ald 341; 106 ER 962. It is sufficient that the work was done at the request of some person who has contracted with the owner to do the work — that is, a subcontractor has a lien: Bellamy v Davey

[1891] 3 Ch 540. It does not matter that the work was done on goods bearing an infringing trade mark: Moet v Pickering (1878) 8 Ch D 372.

Work completely performed 2.25 The work must be completely performed: Pinnock v Harrison (1838) 3 M & W 532 at 535; 150 ER 1256 at 1258. However, if the completion of the work was prevented by the owner of the chattel, a lien arises for the value of the work actually done: Lilley v Barnsley (1844) 1 Car & K 344; 174 ER 839. It would seem that a preferable way of stating this proposition is that the lien arises at the commencement of the work or the time at which the materials are furnished, the doing or furnishing of which gives rise to the lien. This is the statutory position in Canada: see Silver v R R Seeton Construction Ltd (1977) 74 DLR (3d) 212. However, if the contractor discharges himself, the lien will be discharged and, if there is no obligation to make immediate payment for the work or material, the lien will not arise until payment has become due: Chase v Westmore (1816) 5 M & S 180; 105 ER 1016; Crawshay v Homfray (1820) 3 B & Ald 50; 106 ER 856.

Extent of lien 2.26 The lien is upon the chattel whereon the labour or skill has been bestowed and not upon that by means whereof the improvement was wrought. Thus a conveyancer’s lien is upon the document drafted and not upon those he has made use of in preparing the [page 65] draft (Steadman v Hockley (1846) 15 M & W 553; 153 ER 969), and the lien of a printer is upon the printed work, not the printing plates (Bleaden v Hancock (1829) 4 Car & P 152; 172 ER 648), but see (Marks v Lahee (1837) 3 Bing NC 408; 132 ER 467); and see (Henry Walker Contracting Pty Ltd v Pegasus Gold (Aust) Pty Ltd (SC (NT), 1998, unreported)), where claims for battlers, drilling and loss of productivity were rejected in this context. The lien extends to every part of several chattels for the price of the labour

bestowed upon all. Thus the printer’s lien is upon all printed work in his hands for the printing of the whole and the lien of the tailor upon each part of a suit: Blake v Nicholson (1814) 3 M & S 167; 105 ER 573. If the goods which are subject to the lien belong to several owners, the whole may be detained, or the lien may be claimed rateably, but part cannot be allowed to go free to one owner and the lien be claimed against the residue: Grant v Humphery (1862) 3 F & F 162; 176 ER 73.

Priority of lien over mortgagee 2.27 Awkward questions may arise where work is done on chattels which are the subject of mortgage. Generally speaking, a person is not bound by a lien claimed by an artificer unless that person either ordered the work or impliedly authorised the mortgagor to have the work done: Williams v Allsup (1861) 10 CB (NS) 417; 142 ER 514; Keene v Thomas [1905] 1 KB 136; Green v All Motors Ltd [1917] 1 KB 625; Moyes v Magnus Motors Ltd [1927] NZLR 906; Fisher v The Automobile Finance Co of Australia Ltd (1928) 41 CLR 167; Bowmaker Ltd v Wycombe Motors Ltd [1946] 2 All ER 113; Lombard (Aust) Ltd v Wells Park Motors Pty Ltd [1960] VR 693; and Australian Guarantee Corp Ltd v Western Underwriters Insurance Ltd [1988] 2 Qd R 119. It is not uncommon for hire purchase and other chattel security documents to deny the hirer or mortgagor the right to create liens. The Australian position appears to be that, whether or not the artificer knows of this clause, his lien will not be effective against the mortgagee: Fisher v Automobile Finance Co Ltd (1928) 41 CLR 167; Lombard (Australia) Ltd v Wells Park Motors Pty Ltd [1960] VLR 693 and see Peden, ‘Common law Liens — an Anglo-Australian conflict’ (1968) 6 Syd L Rev 39. In England the position appears otherwise; see, for example, Albemarle Supply Co Ltd v Hind & Co [1928] 1 KB 307. If a person has a contractual right to a lien, but a receiver is appointed before possession is obtained, the lien will be enforceable: Barker (George) (Transport) Ltd v Eynon [1974] 1 All ER 900; [1974] 1 WLR 462 and see Re Papesch [1992] 1 NZLR 751 at 758. As to the conflict between a holder of a lien to remove and store furniture and the holder of a bill of sale: see Kilners Ltd v The John Dawson

Investment Trust Ltd (1935) 35 SR (NSW) 274 at 280.

Accountants’ liens 2.28 In Re Gleebs Pty Ltd [1933] VLR 293, it was held that an accountant’s lien in respect of work done upon the books and papers of a company attaches only to those books and papers which embody in themselves the result of the work and consequent added value: see also Re International Tyre Co Pty Ltd (1979) 4 ACLR 553. The English Court of Appeal in Woodworth v Conroy [1976] QB 884 at 890 suggested that accountants may have a wider lien especially where they have been handed papers for the purpose of negotiating with taxation authorities. See also Vered v Inscorp Holdings Ltd (1993) 31 NSWLR 290 and Re Hill; Ex parte Southall (1848) 17 LJ Bktcy 21. An accountant’s lien does not extend to statutory records required to be kept at a company’s registered office: DTC (NC) Ltd v Gary Sargeant & Co [1996] 2 All ER 369; [1996] 1 WLR 797. [page 66]

Insurers’ liens 2.29 The insurer’s lien was considered in Napier (Lord) v Hunter [1993] AC 713 at 752; [1993] 1 All ER 385 at 409 per Lord Browne-Wilkinson: The contract of insurance contains an implied term that the assured will pay to the insurer out of the moneys received in reduction of the loss the amount to which the insurer is entitled by way of subrogation. That contractual obligation is specifically enforceable in equity against the defined fund (ie the damages) in just the same way as are other contracts to assign or charge specific property, eg equitable assignments and equitable charges. Since equity regards as done that which ought to be done under a contract, this specifically enforceable right gives rise to an immediate proprietary interest in the moneys recovered from the third party. In my judgment, this proprietary interest is adequately satisfied in the circumstances of subrogation under an insurance contract by granting the insurers a lien over the moneys recovered by the assured from the third party. This lien will be enforceable against the fund so long as it is traceable and has not been acquired by a bona fide purchaser for value without notice. In addition to the equitable lien, the insurer will have a personal right of action at law to recover the amount received by the assured as moneys had and received to the use of the insurer.

See also Re Miller Gibb & Co Ltd [1957] 1 WLR 703; [1957] 2 All ER

266 and Gummow (1993) 109 LQR 159.

Liens over cash 2.30 There is ample authority for the proposition that, in the appropriate case, a person may have a lien over a holding of cash. As one cannot have a lien over one’s own property, a banker does not have a lien over funds in a bank account. The relation of debtor and creditor governs the relationship, the bank ‘owns’ the money and so has no lien: Halesowen Presswork & Assemblies Ltd v Westminster Bank Ltd [1971] 1 QB 1 at 46. Again, the person claiming the lien must actually hold the cash. Money in a solicitor’s bank account is not held by the solicitor, so there is no retaining lien over it: Shand v M J Atkinson Ltd [1966] NZLR 551 at 559-60. In Ex parte Mackay (1873) 8 Ch App 643, A sold a patent to B, B lent A some money and also agreed to pay A royalties. B was to retain half the royalties towards satisfaction of the debt. On A’s bankruptcy, B was held to have a lien over half the royalties. In Webb v Smith (1885) 30 Ch D 192, auctioneers had sold a brewery for a customer and held part of the proceeds of sale. It was held that they had a lien over this money which was good against the person to whom the customer had charged the proceeds of sale of the brewery. The lien cannot be claimed over a fund which is held, with the holder’s consent, for an agreed special purpose — for example, where a solicitor holds money pending perfection of a receivership order: Wickens v Townshend (1830) 1 Russ & My 361; 39 ER 140; Re Birt (1883) 22 Ch D 604; Gobinddas Bhattar v Gajanand Pandey 31 AIR (1944) Cal 189; WFM Motors Pty Ltd v Maydwell (1994) 6 BPR 13,381. To hold otherwise would be to allow tortious or unconscionable conduct to be rewarded by the grant of a lien.

Assignment of lien 2.31 The weight of authority supports the view that the benefit of a lien may be assigned, along with the debt in respect of which it arises: Bull v Faulkner (1848) 2 De G & Sm 772; 64 ER 346. Cases such as McCombie v Davies (1805) 7 East 5 at 6; 103 ER 3 and Tobin v Melrose [1951] SASR 139 at 143 do not decide the contrary: Vered v Inscorp Holdings Ltd (1993) 31

NSWLR 290.

Loss of lien 2.32 A possessory lien will be lost by tender of the amount due to the holder (Huth & Co v Lamport (1886) 16 QBD 735), by abandonment (Re Noble; Ex parte Douglas (1833) Deac & Ch 310), or by taking alternative security: Cowell v Simpson (1809) 16 Ves 275 at [page 67] 279; 33 ER 989 at 990. The lien is also lost if possession is lost, so that redelivery of goods to the owner or his agent destroys the lien and when once made, cannot be recalled, even if made by mistake: Sweet v Pym (1800) 1 East 4; 102 ER 2; Dieas v Stockley (1836) 7 C & P 587; 173 ER 258 and see Bligh v Davies (1860) 28 Beav 211; 54 ER 346; and also Ambir Pty Ltd v Paspalis Hotel Investments Pty Ltd (2003) 174 FLR 483. However the lien will revive if delivery was obtained by fraud or trick and the property is recovered even if by stratagem. The holder of a lien may not notionally retain possession of the goods while allowing the owner to physically possess them. However, a lien by agreement may be created, as in Albemarle Supply Co Ltd v Hind & Co [1928] 1 KB 307. See generally Halsbury’s Laws of England, 5th ed, vol 68, [850] ff. If the property is removed from the possession of the holder of the lien without consent, the lien usually will be considered to continue. Thus in Mason v Morley (1865) 11 Jur (NS) 459, there was a loss of possession through fraud; see also Wallace v Woodgate (1824) Ry & M 193; 173 ER 990; 1 Car & P 575; 171 ER 1323. In Carter v Carter (1885) 55 LJ Ch 230 deeds were stolen; see also Ex parte Bell; Re Tunstall & Cash (1847) De Gex 577. Where the chattel is a movable such as a car or boat, temporary release will not necessarily extinguish the lien. Thus in Albemarle Supply Co Ltd v Hind & Co, above, a repairer’s lien on taxi cabs was not lost because the cabs plied daily for hire; nor was it lost in Industrial Acceptance Corp Ltd v Tompkins Contracting Ltd (1967) 62 DLR (2d) 693, where a garage operator released a

repaired truck to permit the owner to use it to earn moneys on condition that it was brought back periodically. So too in Frontmond Pty Ltd v Rodgers (1993) 6 BPR 13,112, where a boat was taken from its moorings for a temporary purpose or without the consent of the repairer, the lien remained. See also Traders Finance Corp v Bond Motor Sales [1954] OWN 785 at 786; Industrial Acceptance Corp Ltd v Tompkins Contracting Ltd (1967) 60 WWR (NS) 546.

D. Solicitors’ Liens Solicitors’ liens 2.33 Solicitors’ liens fall into three classes, namely (1) a retaining lien on papers, deeds and other documents, (2) a retaining lien at common law on cash funds in the solicitor’s possession and (3) an equitable ‘lien’ over fruits of litigation even though such fruits are not in the solicitor’s possession. A solicitor has a lien for his general professional charges upon all documents or other property of the client which come into his hands in the character of a solicitor while conducting the business or for the purposes of the client: Ex parte Sterling (1809) 16 Ves 258; 33 ER 982; Ex parte Nesbitt (1805) 2 Sch & Lef 279; Friswell v King (1846) 15 Sim 191; 60 ER 590; Euro Commercial Leasing Ltd v Cartwright & Lewis [1995] 2 BCLC 618, 621-2; Withers LLP v Langbar International Ltd [2012] 2 All ER 616 at 621 [19](CA). Furthermore the solicitor also has a particular lien on a document placed in his hands for the price of the work done thereon: Hollis v Claridge (1813) 4 Taunt 807; 128 ER 549. The lien extends to letters of administration and other orders of the court: Re Goods of Martin (1883) 13 LR Ir 312. A solicitor’s lien over documents etc is merely passive and possessory — that is to say, the solicitor has no right of actively enforcing his demand. It confers upon him merely the right to withhold possession of the documents or other personal property of his client or former client (Re Llewellen [1891] 3 Ch 145 at 147; Barratt v Gough-Thomas [1951] Ch 242 at 250); and it is not essential that any bill of costs has been rendered to the client as long as the costs have been incurred (see Dixon v LyTyTran Cao (Federal Court of Australia, Beazley J, 10 April 1995, unreported)); but see Queensland Mushrooms Pty

[page 68] Ltd v Willemse Family Co Pty Ltd [2002] QSC 76 in relation to the need to comply with regulatory provisions in relation to the provision of bills of costs in assessable form. Thus a solicitor who takes a lien over title deeds after the sequestration order is made is not a secured creditor and has no interest in the land: McLeish v Palmer (1921) 21 SR (NSW) 382; affirmed in (1921) 22 SR (NSW) 53. ‘The solicitor’s possessory lien is “purely a protective right – a right to refuse to transfer to a claimant property for which the claimant would be entitled to a transfer were it not for the existence of a claim by the lienor which the latter is entitled to protect by means of the lien … [it] exists for the protection of the solicitor’s claim for costs and disbursements, and for no other purpose…”: per Mc Coll JA in Bechera v Alie [2005] NSWCA 268 at [48] and see Bolster v Mc Callum (1966) 85 WN (Pt 1) 281; [1966] 2 NSWR 660; Re a Barrister and Solicitor; Re Legal Practitioners Ordinance 1970 (ACT) (1979) 40 FLR 26 at 39. The lien subsists until the solicitor is satisfied’: Robins v Goldingham (1872) LR 13Eq 440 at 442 A solicitor’s lien differs from that of a banker or a stockbroker, each of whom has a power of sale: Brandao v Barnett (1846) 12 Cl & Fin 787; 8 ER 1622; Jones v Peppercorne (1858) John 430; 70 ER 490; Brereton v Nicholls [1993] BCLC 593 at 595. An undertaking by a solicitor to redeliver a document on completion of a sole purpose for which the document has been held is inconsistent with its retention under a general lien: Leeper v Primary Producers’ Bank of Australia Ltd (1935) 53 CLR 250.

Historical Development 2.34 Solicitors’ liens have appeared in the law reports from the 17th century. The earliest recognition of a solicitor’s general lien appears to be Peterborough (Earl) v Williams 1687) Comberbach 43; 90 ER 332. See also Ex parte Bush (1734) 2 Eq Cas Abr 109:22 ER 93. As Paul Collins points out in his ‘The Developments of Solicitors’ Possessory Liens’(2013) 87 ALJ 710, by the early 19th century, a number of

cases in Chancery in England and Ireland revealed a tendency to subordinate the lien to the general interests of justice by refusing injunctive relief against a client continuing a proceeding with a new solicitor. In effect, these cases recognised a client’s right to change solicitors and declined to interfere with proceedings continued by a client that effectively undermined the former solicitor’s lien. See Merrewether v Mellish (1806) 13 Ves 161; 33 ER 255 and Ross v Laughton (1813) 1 V & B 349; 35 ER 136. However in Lord v Wormleighton (1822) Jac 580; 37 ER 969, Lord Eldon after consultation changed his approach and thereafter the lien prevailed over the client’s interest in continuing the litigation.

Solicitor’s lien over documents etc 2.35 The lien does not arise where documents or other property have been deposited with the solicitor for a special purpose, and accordingly he cannot detain them beyond that purpose: In Withers LLP v Langbar International Ltd [2012] 2 All ER 616 (CA) the English Court of appeal stressed that every word of the rule was significant including that the money or papers must be the property of the client and must have come to the possession of the solicitor with the consent of the client and come into his hands as a solicitor. Money in the solicitor’s hands in trust does not fall into this category. In the Withers case, money was paid into the solicitor’s hands as part of a court order so that disputed funds could be held by a neutral person. There was no lien on the money. Older cases to the same effect include: Lawson v Dickenson (1724) 8 Mod 306; 88 ER 218; Young v English (1843) 7 Beav 10; 49 ER 965; Gibson v May (1853) 4 De GM & G 512; 43 ER 607; Re Clark; Ex parte Newland (1876) 4 Ch D 515; Stumore v Campbell [1892] 1 QB 314. But to deprive a solicitor of his general lien, there must normally [page 69] be a special agreement as to the purpose of the deposit. However, circumstances may show that the solicitor obtained the money or papers on the basis that no lien would arise, Withers’ case supra. If, in the usual course

of dealing, the client from time to time hands papers to his solicitor, and does not get them again when the occasion that required them is at an end, the conclusion is that they are left with the solicitor upon the general account: Ex parte Sterling (1809) 16 Ves 258; 33 ER 982; Colmer v Ede (1870) 40 LJ Ch 185. In Official Trustee in Bankruptcy v Kioussis (2000) 10 BPR 18,021, Young J cited the corresponding paragraph in the previous edition of this work and said that what is really being said by the relevant authorities is that one can infer from the client placing into the attorney’s hands papers in the course of business, that he has to have a general lien. However, if the circumstances under which the relevant property comes into a solicitor’s hands show the solicitor is not to have a lien, then no such lien will be inferred. The High Court considered the matter in Leeper v Primary Producers Bank of Australia Ltd (in liq) (1935) 53 CLR 250 at 256-7 and seems to have come to the view that even if documents come into a solicitor’s hands for a particular purpose, he may still have a lien while the particular purpose is still current. However, other facts and circumstances may show on the whole that there is no such lien. See also Duke Finance Ltd v Commonwealth Bank of Australia (1990) 22 NSWLR 236 at 245-6, where Giles J reviewed a series of the cases in this area of law and noted that it was rather hard to justify their reasoning logically. He then said: The cases can be explained as finding such particular purposes — the purpose of keeping the securities in safe custody and not otherwise dealing with them; the purpose of holding the securities as security on a specific advance and not otherwise and must have been such as to lead to the conclusion that the possession was so confined to the particular purpose as to exclude the implication of a lien.

The enforcement of the lien differs depending on whether the solicitor has been discharged by the client or has discharged himself. In the former case, the solicitor can refuse to hand over the file until the costs are paid or until a satisfactory security is given, such as a bank guarantee. In the latter case, the overriding principle that a solicitor discharging the client is not allowed to assert the lien so as to interfere with the course of justice (Gamlen Chemical Co (UK) Ltd v Rochem Ltd [1980] 1 WLR 614; [1980] 1 All ER 1049 (CA) Jankowski v Mastoris (1995) 7 BPR 14,589) and see Heslop v Metcalfe(1837) 3 My & Cr 183 at 188-190, 40 ER 894 where Lord

Cottenham said that the solicitor should have every security not inconsistent with the cause. However, in Gamlen, the Court of Appeal held that there exists an exceptional discretion that the court might impose terms where justice so required. This was further considered in Ismail v Richards Butler [1996] QB 711. However, in Rafferty v Time 2000 West Pty Ltd (No 3) (2009) 257 ALR 503, Besanko J, after surveying the authorities, held that in determining whether an exceptional order should be made, the question whether the client had negated an ability to pay is not the only question but is only one factor among the other factors identified in Gamlen. He pointed out that the precise borders of the exception have not been clearly identified. See generally, P Collins, ‘The Developments of Solicitors’ Possessory Liens’ (2013) 87 ALJ 710. Where deeds upon which a solicitor has no existing lien are deposited with him only for the purposes of litigation, an order directing them to be given up by him will be made unconditionally, since he cannot acquire a lien on them after the commencement of the proceedings: Baker v Henderson (1830) 4 Sim 27; 58 ER 11; Bell v Taylor (1836) 8 Sim 216; 59 ER 87; and see Smith v Chichester (1842) 2 Dr & War 393. It will be otherwise if the documents did not come into the solicitor’s possession for the purposes of the litigation only, but for that and other purposes or if the lien is claimed for other [page 70] matters besides the cost of the proceedings and for costs incurred prior to the right of the person who seeks delivery of the deeds: Warburton v Edge (1839) 9 Sim 508; 59 ER 454. The solicitor who claims the lien must be the same person to whom the costs, in respect of what is claimed, are due. This rule excludes from the lien documents held by partners in respect of costs due to one or more of them before the partnership began, and documents held by a member of a dissolved partnership after the dissolution, for costs which were due to the firm: Re Forshaw (1847) 16 Sim 121; 60 ER 818; Vaughan v Vanderstegen (Annesley’s case) (1854) 2 Drew 409; 61 ER 778. Re Carter (1885) 53 LT

630 seems to run contrary to this view, but is distinguishable because the retiring member had removed the deeds without the consent of his late partners. Similarly, it was held that a solicitor was not entitled to a lien on certificates of title in respect of fees claimed against a mortgagor where the mortgage had been repaid and discharged in circumstances where the certificates had been held on behalf of the mortgagee, for whom the solicitor had also acted: Franicevich v Strong [1997] 1 NZLR 460; and see 2.41 and 2.42.

Lien limited to professional matter 2.36 The lien arises out of the relation between the client and the solicitor (Pelly v Wathen (1851) 1 De GM & G 16; 42 ER 457); and only when the solicitor receives the property in that character and in the performance of his professional duty to his client: Stevenson v Blakelock (1813) 1 M & S 535; 105 ER 200 and Re Rapid Road Transit Co Ltd [1909] 1 Ch 96; and see Franicevich v Strong [1997] 1 NZLR 460. The lien is only held in respect of taxable costs thus it cannot be used as a security for advances made by the solicitor to the client: Re Taylor Stileman & Underwood [1891] 1 Ch 590; and see Queensland Mushrooms Pty Ltd v Willemse Family Co Pty Ltd [2002] QSC 76; and Hammerstone Pty Ltd v Lewis [1994] 2 Qd R 267 as to the need for a bill in taxable form. Thus the operation of the lien is excluded in the case of documents received by a solicitor as next friend of a minor (Anon (1810), cited Montagu, Law of Lien, J. & W.T. Clarke, London, 1821, p 53), trustee (Brandao v Barnett (1846) 12 Cl & F 787; 8 ER 1622; Re Gough; Lloyd v Gough (1894) 70 LT 755; Stumore v Campbell [1892] 1 QB 314), land agent (Re Walker; Meredith v Walker (1893) 68 LT 517), or if they are received for safe custody: Re Long; Ex parte Fuller (1881) 16 Ch D 617, but see Re Walker. The lien will not apply where the documents were received by the solicitor as transferee of a mortgage for money lent from his own money, not that of his client: Vaughan v Vanderstegen (Annesley’s case) (1854) 2 Drew 409; 61 ER 778; Pelly v Wathen (1853) 4 De GM & G 512; 43 ER 607; Sheffield v Eden (1878) 10 Ch D 291. But where the solicitor discharges the debt with his client’s money given to him for the purpose, and thereupon receives the deposited deeds, he receives them in the course of business, and in the performance of his duty to his client, and they become subject in his hands to

his general lien: Stevenson v Blakelock (1813) 1 M & S 535; 105 ER 200. A solicitor is not, by the mere holding of an office under his clients, deprived of his specific lien upon documents for the price of work done thereon as solicitor: R v Sankey (1836) 5 A & E 423; 111 ER 1226, and see Newington Local Board v Eldridge (1879) 12 Ch D 349.

Loss or displacement of solicitor’s lien 2.37 If a solicitor takes a security for his costs, that is, in the absence of evidence of contrary intention, an abandonment of his lien: Re Taylor, Stileman & Underwood [1891] 1 Ch 590; Re Douglas Norman & Co [1898] 1 Ch 199; see also Groom v Cheesewright [1895] 1 Ch 730; Bissill v Bradford Tramway Co [1893] WN 44 (UK), and distinguish Re Morris [1908] 1 KB 473. However the fact of the solicitor’s taking a security on the documents by way of securing an advance does not prejudice his lien (Re Harvey’s Estate [page 71] (1886) 17 LR Ir 65), nor is the lien lost by suing the client for the costs: Re Atkin’s Estate [1894] 1 IR 225. See also 13.33. The lien will only be lost if the security taken is inconsistent with the lien. Inconsistency here means that there is some feature of the security which is incompatible with the lien, Clifford Harris & Co v Solland International Ltd [2005] 2 All ER 334. The lien will not be lost if documents are removed from the solicitor’s office without consent (Mason v Morley (1865) 11 Jur (NS) 459; Carter v Carter (1855) 55 LJ Ch 230; Frontmond Pty Ltd v Rodgers (1993) 6 BPR 13,112) or if the documents are delivered for a limited, specific purpose with the intention of maintaining the lien (Albermarle Supply Co Ltd v Hind and Co [1928] 1 KB 307; Caldwell v Sumpters [1972] 1 Ch 478); and see (Ly Ty Tran Cao; Ex parte Dixon v Ly Ty Tran Cao (1995) 62 FCR 432) where it was held that a court order requiring production of the documents to a trustee in bankruptcy did not amount to any voluntary and unconditional parting with possession in the relevant sense. See also Hammerstone Pty Ltd v Lewis [1994] 2 Qd R 267 for a discussion of the authorities as to whether a lien may be lost (strictly and in practical effect) as a result of inspection of the

documents. A judgment creditor or other person with security over the fund without notice of the lien will usually be entitled to the fund in priority to the solicitor: Blunden v Desart (1842) 2 Dru & War 405 at 427-8; Gilshenan & Luton v Commissioner of Taxation [1984] 1 Qd R 199. A solicitor’s lien will not prevail over claims by a judgment creditor to garnishee the solicitor’s client: Hough v Edwards (1856) 26 LJ Ch 54.

Substitute security 2.38 Most modern courts are empowered to order that liens be discharged on proper substitute security being given. In NSW, s 74 of the Supreme Court Act 1970 and s 728 of the Legal Profession Act 2004 confer this authority on the Supreme Court. Additionally, there is power in equity to make such an order, Re Galland (1885) 31 Ch D 296. Usually, the lien will be lifted if there is a payment into court of the amount claimed by the solicitor or a proper substitute security is provided: Gamlen Chemical Co (UK) Ltd v Rochem Ltd [1980] 1 WLR 614; [1980] 1 All ER 1049 (CA); Jankowski v Mastoris (1995) 7 BPR 14,589.

Persons affected by solicitor’s lien 2.39 The lien binds those persons only by or on whose behalf the solicitor was property employed (Re Rapid Road Transit Co Ltd [1909] 1 Ch 96) and persons claiming under them. For this purpose, trustees of a marriage settlement made by the client are not persons claiming under him and the solicitor has no lien against them (Re Lawrance; Bowker v Austin [1894] 1 Ch 556), though the contrary was held in Re Gregson (1858) 26 Beav 87; 53 ER 829. A solicitor has a lien on a debenture trust deed as against the trustees and the debenture holders, notwithstanding the costs were incurred before the execution of the deed: Re Dee Estates Ltd [1911] 2 Ch 85. A solicitor will not lose his right of lien in respect of costs incurred by the client merely because he accepts a retainer from persons claiming under them: General Share Trust Co v Chapman (1876) 1 CPD 771. A solicitor cannot obtain a lien on books which under the Corporations Act 2001 (Cth) ought to be kept at a company’s registered office: Re Anglo-

Maltese Hydraulic Dock Co (1885) 54 LJ Ch 730; Re Capital Fire Insurance Assoc (1883) 24 Ch D 408. [page 72]

Lien only to extent of client’s interest 2.40 The lien is binding to the extent only of the client’s interest in the deeds, or in the property to which they relate: Hollis v Claridge (1813) 4 Taunt 807; 128 ER 549; Bell v Taylor (1836) 8 Sim 216; 59 ER 87. In other words, it gives against third parties no higher right than the client has: Rath v M’Mullan [1916] 1 IR 349. This rule excludes from the right to a lien: the solicitor of a tenant for life, though employed by him in matters relating to the estate, as against the remainderman (Ex parte Nesbitt (1805) 2 Sch & Lef 279; Davies v Vernon (1844) 6 QB 443; 115 ER 169; Lightfoot v Keane (1836) 1 M & W 745; 150 ER 634); the solicitor of one entitled to a part of a charge as against the other owners of the charge (Molesworth v Robbins (1845) 2 Jo & Lat 358); the solicitor of a partnership firm as against the private deed of one of the partners (Turner v Deane (1849) 3 Ex 836; 154 ER 1083); the solicitor of the official liquidator of a public company upon the proceedings and documents relating to the winding-up: Re Union Cement and Brick Co; Ex parte Pulbrook (1896) 4 Ch App 627. The solicitor of an executor has a lien upon the deeds of the testator for the executor’s costs of the suit, unless the executor is indebted to the testator’s estate: Turner v Letts (1855) 7 De GM & G 243; 44 ER 95. Similarly the lien of the solicitor is subject to any equities to which the deeds were subject in the hands of the client when the solicitor received them, although he had no notice thereof (Marsh v Bathoe (1744) Ridg Cas temp Hardwicke 256; 27 ER 822; Pelly v Wathen (1851) 1 De GM & G 16; 42 ER 457; Smith v Chichester (1842) 2 Dru & War 393; Re Llewellin [1891] 3 Ch 145; Sawyers v Kyte (1870) 1 VR 94 at 97; McLeish v Palmer (1921) 22 SR (NSW) 53 at 57; and see Dixon v Ly Ty Tran Cao (Federal Court of Australia, Beazley J, 10 April 1995, unreported), and is subject to any interests acquired by other persons as to costs incurred after the acquisition of their interests: Blunden v Desart (1842) 2 Dru & War 405.

The interest of a subsequent judgment creditor is a future interest within this rule (Blunden v Desart) and so, it would seem, is the interest of a trustee in bankruptcy of the client after the commission of an act of bankruptcy on which the client is adjudicated bankrupt: see and consider Re Pollitt; Ex parte Minor [1893] 1 QB 455. The lien will not rise against the owner of prior equities, though the costs have been partly incurred for his benefit, unless he actually employed the solicitor: Pelly v Wathen, above. However, the solicitor of a company can have a lien for costs incurred after the creation of a floating charge, but before the appointment of a receiver: Brunton v Electrical Engineering Corp [1892] 1 Ch 434.

Mortgagee’s solicitor 2.41 The rule that the lien binds only the solicitor’s own client excludes any lien in favour of a mortgagee’s solicitor on deeds of the mortgagor: Barratt v Gough-Thomas [1951] Ch 242. This is so whether the deeds have come to his hands for examination in view of a proposed mortgage, although the proposed mortgagor has promised to pay the costs of investigation of title; for the solicitor was employed by the proposed lender, and the borrower’s promise raised no privity between him and the solicitor: Pratt v Vizard (1833) 5 B & Ad 808; 110 ER 989. As to the mortgagor’s liability for costs to the lender, see Wales v Carr [1902] 1 Ch 860. Similarly, where the mortgagor delivers the deeds to his own solicitor so that he may obtain a loan or transfer, the solicitor cannot hold them against the mortgagee, by whom he was not employed (Hutchinson v Joyce (1836) 2 Jo Ex Ir 122), irrespective of whether the mortgage has been completed. In the latter case the solicitor is in practice paid out of the advance; but if this has not been done, he must look to the lender for payment, and there is no lien on the deeds as against the [page 73] mortgagor: Pratt v Vizard, above; Lawson v Dickenson (1724) 8 Mod 306; 88 ER 218; see, however, Re Wright [1906] Tas LR 1. It has been held that the mortgagee’s solicitor in possession of the deeds may hold them against a purchaser subject to the mortgage, for costs due in respect of the mortgage whether payable by the mortgagor or mortgagee, for

the purchaser should ascertain by whom the deeds are held before paying his purchase money: Ogle v Story (1833) 4 B & Ad 735; 110 ER 632, discussed and distinguished in Re Llewellin [1891] 3 Ch 145. The mortgagee’s solicitor cannot, after reconveyance (or even after discharge of the mortgage without reconveyance) hold the deeds as against the mortgagor as security for the mortgagee’s costs, because the mortgagee cannot, by handing the deeds to his solicitor, create a new lien against the mortgagor in respect of his own debt: Wakefield v Newbon (1844) 6 QB 276; 115 ER 107; Plumtre v O’Dell (1838) 1 Ir Eq R 113; Re Llewellin, above; Pelly v Wathen (1851) 1 De GM & G 16; 42 ER 457; and Franicevich v Strong [1997] 1 NZLR 460.

Solicitor for both parties 2.42 When the same solicitor acts for both parties, he holds the deeds, after completion, for the mortgagee; and loses his lien upon them for costs incurred on behalf of the mortgagor, unless it was expressly reserved: Re Snell (1877) 6 Ch D 105; Re Mason and Taylor (1878) 10 Ch D 729; Re Nicholson; Ex parte Quin (1883) 49 LT 811; and Franicevich v Strong [1997] 1 NZLR 460. But the mere fact that a solicitor acts for mortgagor and second mortgagee in a redemption suit against the first mortgagee does not disentitle him to a charge on the property for the costs of both these parties: see Macfarlane v Lister (1887) 37 Ch D 88. So, even where he would have a lien, or a right to a charge under the Solicitors Act 1860 (UK) for the costs of a redemption action, he may, by his conduct in assenting to an hypothecation of any balance which may become payable to his client, estop himself from claiming his lien or charge: Macfarlane v Lister. He retains it, however, as against the mortgagor and persons claiming under him: Re Messenger; Ex parte Calvert (1876) 3 Ch D 317. In the case of a deed the trusts of which provide for the costs of preparing it, the solicitor can obtain payment under such trusts irrespective of any lien: Worrall v Harford (1802) 8 Ves 4; 32 ER 250; see also Foster v Esley (1881) 19 Ch D 518 and Strickland v Symons (1884) 26 Ch D 245, and compare Re Sadd (1865) 34 Beav 650; 55 ER 786. Where the mortgagor obtained the deeds from the mortgagee and placed them in his solicitor’s hands to enable

him to sell in fraud of the mortgagee, it was held that the lien only covered the costs of the particular sale; since to extend it to general costs would be to enable the solicitor to profit by the fraud of his client: Young v English (1843) 7 Beav 10; 49 ER 965. As to the difficult questions which may arise where title deeds are in the custody of a solicitor who has acted for both the mortgagor and mortgagee and subsequently becomes the executor of the mortgagee, see Barratt v Gough-Thomas [1945] 2 All ER 650.

Documents required in litigation 2.43 In accordance with the rule that the special purpose for which a document is deposited limits the lien, the lien which the solicitor has in general upon documents delivered to him for the purpose of conducting a suit (see Balch v Symes (1823) Turn & Russ 87; 37 ER 1028 per Lord Eldon) is limited by the obligation to deliver them up if they are required for the purposes of the suit: Baker v Henderson (1830) 4 Sim 27; 58 ER 11. But he may retain such documents as he has received for general purposes, as well as for the purposes of the suit, if he had a lien thereon antecedent to the [page 74] rights of the persons claiming in the suit: Warburton v Edge (1839) 9 Sim 508; 59 ER 454. Where, however, he has ceased to be solicitor pendente lite, he will be ordered to deposit the documents with an officer of the court for a period, in order that the client may have access to them: Ex parte Scheyer (1888) 52 JP 183; affirmed, see note [1888]WN 136 (UK). If a client’s property is in danger of loss by the detention of papers, it seems the court will order delivery on the application of the client so that the property may be secured and brought into court: Richards v Platel (1841) Cr & Ph 79; 41 ER 419. The lien may not be exercised so as to embarrass the conduct of a suit, or to interfere with the management of an estate which is being administered by the court, or to intercept the completion of an order of the court: Belaney v French (1873) LR 8 Ch App 918; Re Boughton (1883) 23 Ch D 169; Gerty v

Mann (1891) 29 LR Ir 7; Hutchinson v Norwood (1886) 54 LT 842; Re Hawkes; Ackerman v Lockhart [1898] 2 Ch 1 and Re Conroy (1990) 103 FLR 233; but compare Re Capital Fire Insurance Association (1883) 24 Ch D 408; Boden v Hensby [1892] 1 Ch 101. In Re Davies (1843) 12 LJ Ch 456, committees of a lunatic were authorised to discharge a solicitor’s lien over title deeds in order to raise further money on the property. In Dunn v Dunn (1855) 1 Jur (NS) 122, deeds were produced to the court in proceedings brought in the name of an infant. On attaining majority, the infant repudiated the proceedings, which meant that they were incompetent from the beginning. The court ordered that deeds produced to it for the purpose of the proceedings be returned to the persons producing them free from any liens for costs that might have otherwise attached. The claimant will be declared entitled to a lien on any fund in court, or to be paid in the cause, for the amount of his bill of costs (Clifford v Turrill (1848) 2 De G & Sm 1; 64 ER 1; and see Benyon v Amphlett (1862) 8 Jur (NS) 759), unless the debt is statute-barred and the client claims the benefit of the statute: Re Carter (1885) 53 LT 630.

Production in a stranger’s litigation 2.44 The lien of the solicitor is only a right between his client and himself (Furlong v Howard (1804) 2 Sch & Lef 115; Ley v Barlow (1848) 1 Ex 800; 154 ER 340; Lockett v Cary (1864) 10 Jur (NS) 144); and if the client is bound to produce a deed for the benefit of a third person, so also must the solicitor, notwithstanding his lien. But although, for the purposes of evidence on subpoena, production of a deed will be ordered on behalf of a person whose interests are affected by it and who is not liable to pay the debt in respect of which the lien is claimed, such an order will not extend to delivery, or be made so as otherwise to prejudice the lien: Brassington v Brassington (1823) 1 Sim & St 455; 57 ER 182; Hope v Liddell (1855) 20 Beav 438; 52 ER 672; affirmed 7 De GM & G 331; 44 ER 129; Re Cameron’s Coalbrooke Rail Co (1857) 25 Beav 1; 53 ER 535; see Vale v Oppert (1875) LR 10 Ch 340. Where the solicitor’s lien is collateral to the cause, he must be served with a subpoena duces tecum: Busk v Lewis (1821) 6 Madd 29; 56 ER 1000; see

Fowler v Fowler (1881) 50 LJ Ch 686. The person who is liable to pay the debt, claiming the deed for his own purposes, may be denied access to it until payment of the claim: see Brassington v Brassington; Hope v Liddell; and Re Cameron’s Coalbrooke Rail Co, all above. However, the lien will not be a protection against the liability to produce a deed which it is the object of the suit to impeach: Balch v Symes (1823) Turn & Russ 87; 37 ER 1028; and see Beckford v Wildman (1810) 16 Ves 438; 33 ER 1050; Fencott v Clarke (1833) 6 Sim 8; 58 ER 498; Brougham v Cauvin (1868) 16 WR 688. [page 75]

Discharge of lien to enable production 2.45 Where a person is ordered to produce documents in the hands of his solicitor, who claims a lien upon them, the client must discharge the lien, and produce the deeds: Ex parte Shaw (1816) Jac 270; 37 ER 853; see Liddell v Norton (1853) Kay, xi; 69 ER 317. And if there is a difficulty in getting possession of them — for example if the person on whom the order is made is bankrupt and unable to discharge the claim — the order will still be made, with liberty to apply to the court for relief if it cannot be obeyed (Rodick v Gandell (1847) 10 Beav 270; 50 ER 586), or the court will from time to time enlarge the period for production, so as to enable the party to recover the possession of the deeds (Goodchap v Weaving (1853) 16 Jur 586), as in the case of an executor whose books are in a distant country: Freeman v Fairlie (1812) 3 Mer 29 at 44; 36 ER 12 at 17-18.

Deeds belonging to a trust 2.46 Goodchap v Weaving (1853) 16 Jur 586 is authority for the proposition that the course mentioned in 2.45 will be followed where deeds belonging to a trust have come to the solicitor’s hands, and he claims to hold them subject to a lien. But if a solicitor receives documents with notice that they belong to a trust, he incurs an immediate liability to those for whom his client was trustee, and is subject to the same remedies as the trustee himself for recovering possession of the deeds: Francis v Francis (1854) 2 De GM & G 73; 42 ER 798. In such a case it seems that the court has jurisdiction upon

petition to order delivery of the deeds; but in some cases, for example where the deeds are not in the solicitor’s hands by reason of his employment as trustee but in some other way, and without notice of the trust, it may be necessary to make the solicitor a party to the action: Goodchap v Weaving, above, and see Rider v Jones (1843) 2 Y & CCC 329; 63 ER 145.

Production in winding up 2.47 After an order has been made for winding up a company, the court may require any officer of the company, or any person whom it is empowered to summon for the purpose of giving information as to the affairs of the company, to produce any books and papers in his custody or power relating to the company, without prejudice to any lien claimed by him thereon; and the court has jurisdiction to determine all questions relating to such lien: Corporations Act s 483. The solicitors of the company are liable under this provision to produce documents relating to the company on the motion of the liquidator: Re South Essex Estuary & Reclamation Co (1869) 4 Ch App 215, though see Re Capital Fire Insurance Assoc (1883) 24 Ch D 408 and Re Hawkes; Ackerman v Lockhart [1898] 2 Ch 1. A valid lien existing at the date of the winding up order will not be defeated: Re Rapid Road Transit Co Ltd [1909] 1 Ch 96; Harrison v Lederman [1978] VR 590 and see Re Oxford etc Railway Co (1849) 1 De G & Sm 728; 63 ER 1270. Notwithstanding a claim to a lien on documents of a bankrupt for work done before the bankruptcy, the solicitor must produce them for the inspection of the trustee: Re Toleman & England; Ex parte Bramble (1880) 13 Ch D 885; see Bankruptcy Act 1966 (Cth) s 81.

Solicitor’s lien over fruits of litigation 2.48 A solicitor has a special type of lien over the fruits of litigation. This type of ‘lien’ may manifest itself in two ways. First, it may be that the solicitor has actually collected moneys as a result of litigation etc. Second, the solicitor having nothing in his possession may know that a third party is due to pay the client money (usually damages and costs) as a result of the solicitor’s efforts. This second situation is considered in 2.47 ff. The history of the first type of lien is traced by Jordan CJ in Ex parte Patience (1940) 40 SR (NSW) 96 at 102 ff: see also Birchall v Pugin (1875)

LR 10 CP 397; Re Born [page 76] [1900] 2 Ch 433; Shirlaw v Taylor (1991) 31 FCR 222; 102 ALR 551; Re Statewide Computer Services Pty Ltd [1992] 2 Qd R 647; Fairfold Properties Ltd v Exmouth Docks Co Ltd (No 2) [1993] Ch 196; and Carew Counsel Pty Ltd v French (2002) 4 VR 172 (CA). In Firth v Centrelink (2002) 55 NSWLR 451 at 462 ff, Campbell J summarised the basic principles established by the authorities which, is set out below augmented by reference to some later authority: 1. The solicitor’s right exists over money recovered through obtaining judgment in litigation, and also over money recovered through the settlement of litigation: Carew Counsel Pty Ltd v French (2002) 166 FLR 460 at 476 [33]; Roam Australia Pty Ltd v Telstra Corporation Ltd (Federal Court of Australia, Lehane J, 22 September 1997, unreported) at 4. 2. The solicitor’s right exists over both the amount of a judgment in favour of the client, and the amount of an order for costs in favour of the client: Re Fuld, Decd (No 4) [1968] P 727 at 736; Twigg v Keady (1996) 135 FLR 257 at 266-7 per Finn J; Re Blake; Clutterbuck v Bradford [1945] Ch 61 (a case concerning a statutory charging order rather than a lien arising in equity’s exclusive jurisdiction, but dependent on the same principle as the equitable right). 3. It exists over money which is in the possession of the solicitor, and also over money which is in court (Re Meter Cabs Ltd [1911] 2 Ch 557 at 562) and money which is owed to the client but not paid into court (Re Fuld, Decd (No 4), above; Re De Groot [2001] 2 Qd R 359 at 375). 4. The solicitor need not be still acting for the client at the time that the money was recovered: Re Fuld, Decd (No 4), above; Kelso v McCulloch (SC (NSW), Young J, 24 October 1994, unreported); Twigg v Keady, above (at 289) per Kay J; Roam Australia Pty Ltd v Telstra Corporation Ltd, above (at 4).

5. For the right to arise it must be shown that there is a sufficient causal link between the solicitor’s exertions and the recovery of the fund of money: Roam Australia Pty Ltd v Telstra Corporation Ltd, above (at 4-5); Carew Counsel Pty Ltd v French, above (at 476 [33]). The fund must have been ‘produced by the industry of the solicitor’. Grogan v Orr [2001] NSWCA 114 [62] per Sheller JA; Jackson v Richards [2005] NSWSC 630; 12 BPR 23091 at 23,099 [47]. This is not an exacting standard. 6. The quantum of money for which the solicitor has the equitable right is the amount which is properly owing to the solicitor by the client, whether that amount be ascertained by taxation of a bill of costs, or assessment, or pursuant to a costs agreement: Roam Australia Pty Ltd v Telstra Corporation Ltd, above (at 4). In relation to those situations where taxation is necessary to ascertain the quantum owing to the solicitor, the solicitor’s right exists in the fund prior to the occurrence of the taxation (Johns v Cassel (1993) 6 BPR 13,134 at 13,136 per Hodgson J; Twigg v Keady, above (at 289) per Kay J; Re Fuld, Decd (No 4), above (at 740); Roam Australia Pty Ltd v Telstra Corporation Ltd, above (at 6)). 7. The solicitor’s equitable right exists before the court is asked to intervene to protect it; it ‘arises immediately upon the recovery of monies through the exertions of the solicitor’: Carew Counsel Pty Ltd v French, above (at 476 [33]); if the lien is over the proceeds of an order for costs, it comes into existence at the time of making of that order for costs: Philippa Power & Associates v Primrose Couper Cronin Rudkin [1997] 2 Qd R 266; Kison v Papasian (1994) 61 SASR 567. If the lien is over the proceeds of a settlement, it arises when the settlement agreement is entered into: Re De Groot, above (at 368). (These statements concern when the lien comes into existence as an item of present property — they are not concerned with the ability of the solicitor to deal with the rights under the lien as future property before the fund is in existence.) [page 77] 8. The right of the solicitor is one which the solicitor can enforce against the client, entitling the solicitor to an injunction to prevent the payment of the fund to the client without notice to the solicitor until such time as the

quantum of the solicitor’s entitlement to be paid from the fund is ascertained: Re Fuld, Decd (No 4), above. If the quantum of the solicitor’s entitlement has been ascertained, the solicitor is entitled to an order that the amount of his or her entitlement be paid to him or her from the fund, notwithstanding opposition from the client: Leamey v Heath [2001] NSWSC 1095 (Campbell J). 9. The right can also be enforced against people other than the client in certain circumstances. When the money recovered takes the form of a debt owed to the client, which has been assigned, the right of the solicitor will prevail over the rights of an assignee of the debt save where the assignee is a bona fide purchaser for value without notice: Re De Groot, above. 10. If the client is a company which goes into liquidation, the solicitor is entitled, in relation to costs arising from work done before the start of the liquidation, to claim the full amount of the costs from the fund, and is not required to prove in the liquidation: Re Born; Curnock v Born [1900] 2 Ch 433; Re Meter Cabs Ltd, above. This has the same practical effect as enforcing the right against the other creditors of the company. The solicitor’s lien attaches to property recovered through his exertions, even if the actual recovery occurs after the client goes into liquidation: North West Construction Co Pty Ltd v Marian [1965] WAR 205 at 211. 11. Likewise, if the client is a natural person who becomes bankrupt, the solicitor is not required to prove in the bankruptcy for the amount of costs incurred, but can recover the costs from the debt which is the result of his efforts: Guy v Churchill (1887) 35 Ch D 489; Worrell v Power & Power (1993) 46 FCR 214. The trustee in bankruptcy takes that debt subject to the equitable right of the solicitor to be paid his costs, and if the amount of the solicitor’s costs exceeds the value of the debt, the debt does not vest in the trustee in bankruptcy at all; if the client is discharged from bankruptcy he can sue to enforce the debt as it never was property divisible among the creditors, and any amount that the client then receives is also subject to the solicitor’s lien: Kison v Papasian, above. 12. If the client is the liquidator of a company in liquidation, the solicitor’s lien over property recovered through his or her exertions is to be satisfied before the statutory order of priorities for distribution of the property of

the corporation comes into effect: Jeffcott Holdings Ltd v Paior (1995) 18 ACSR 213; 13 ACLC 1798. 13. If the money recovered is held in the solicitor’s trust account, and the solicitor is served with a garnishee notice, issued to enforce a debt which the client owes to another person, the garnishee notice is not effective to attach the money in the trust account, to the extent that the solicitor has a lien over it: Philippa Power & Associates v Primrose Couper Cronin Rudkin, above. Likewise if the money recovered is held by a third party, and a garnishee notice is served on that third party, the solicitor’s lien prevails over the garnishee notice: Dallow v Garrold; Ex parte Adams (1884) 14 QBD 543. 14. The lien extends to cover the costs of enforcing the lien: Oliveri v PM Sulcs & Associates Pty Ltd [2013] NSWSC 590; (2013) 16 BPR 28590. Rein J followed these guidelines in AMC Commercial Cleaning (NSW) Pty Ltd v Coade [2013] NSWSC 192; (2013) 16 BPR 28584 where he also said that the amount of the judgment recovered in relation to the costs incurred was an irrelevant factor. The Full Federal Court has said that the decision in Patience, Ex parte; Makinson v The Minister (1940) 40 SR (NSW) 96, ‘indicates that the lien involves more than a personal right of the solicitor to approach the Court to obtain a charging order, and that the lien [page 78] arises when the judgment for costs is obtained, and before there has been a taxation of the costs. The assistance of the Court is invoked not to create rights but to enforce them’: Worrell v Power & Power, above, at 224. The lien holds good against anyone: Re Meter Cabs Ltd, above (at 561) quoting Lord Romilly MR in Re Massey; Re Freehold Land and Brickmaking Co (1870) LR 9 Eq 367. Thus the equitable right which a solicitor has to be paid costs and disbursements from the fund which his efforts have recovered, is a kind of proprietary interest in that fund. The fact that the right of the solicitor can survive an insolvency administration of the client and is (as Sir

Frederick Jordan CJ held in Ex parte Patience, above) assignable, are strong indicia of it being a right of a proprietary nature. Although in Re Massey, above, the solicitor’s interest was referred to as a common law lien, more recent cases have referred to the lien as equitable. Thus in Twigg v Keady, above (at 259), Fogarty J described it as ‘an equitable interest in the fund’. In Color Point Pty Ltd v Markby’s Communication Group Pty Ltd (Federal Court of Australia, Weinberg J, 27 November 1998, unreported) at 23, Weinberg J said that the equitable right ‘confers upon the solicitor an equitable interest in the fruits of that litigation’.

Solicitor’s right to attach funds 2.49 In this type of case, the use of the word ‘lien’ is to some extent a misnomer (James Bibbey Ltd v Woods [1949] 2 KB 449 at 453) because the right does not have the characteristics of a lien; see also Mercer v Graves (1872) LR 7 QB 499 at 503. The solicitor merely has a right to claim the equitable interference of the court so that a judgment obtained by the solicitor’s client or some other property which has come into the solicitor’s hands will stand as security for costs: Barker v St Quentin (1844) 12 M & W 441 at 451; 152 ER 1270 at 1274; Mason v Mason [1933] P 199; Ex parte Patience; Makinson v The Minister (1940) 40 SR (NSW) 96; Re Fuld Decd (No 4) [1968] P 727 at 736; Shand v M J Atkinson Ltd [1966] NZLR 551; Worrell v Power (1993) 118 ALR 237; Re H & W Wallace Ltd [1994] 1 NZLR 235; see also Re Allied Glass Manufacturers Ltd (1936) 36 SR (NSW) 409 at 425. The lien will extend over all property except real property: Re H & W Wallace Ltd, above, at 237. As to this exception, see Shaw v Neale (1858) 6 HLC 580; 10 ER 1422. However, the lien will be maintainable against the proceeds of a resumption claim (Ex parte Patience, above) and the proceeds of sale of real estate where a wife is ordered by the Family Court to sell the real estate and to keep a percentage of the proceeds: Johns v Cassel (1993) 6 BPR 13,134; FLC 79,816. The most usual form of property becoming available for the solicitor’s lien other than documents is the fund of money paid or payable under a compromise, a judgment, or as the proceeds of execution; see, for example, Davies v Lowndes (1847) 3 CB 808 at 829; 136 ER 324 at 332; Re Bank of

Hindustan, China and Japan Ltd; Ex parte Smith (1867) LR 3 Ch App 125; Emden v Carte (1881) 19 Ch D 311; Ross v Buxton (1889) Ch D 190 at 195-6; Hall v Hall [1891] P 302; Campbell v Campbell [1941] 1 All ER 274; Ex parte Patience, above. See also Stewart v Strevens [1976] 2 NSWLR 321; Johns v Law Society of NSW [1982] 2 NSWLR 1 at 20; Re Jalmoon Pty Ltd [1986] 2 Qd R 264; Bowen v Wakim (SC (NSW), Smart J, 27 August 1990, unreported) and Johns v Cassel, above. The lien continues notwithstanding that the client has terminated the solicitor’s retainer before the fruits of the litigation are received: Kelso v McCulloch [1994] ACL Rep 185 NSW 31. In Carew Counsel Pty Ltd v French (2002) 4 VR 1172 (CA) a solicitor claimed an equitable lien in respect of costs incurred between the date of settlement of [page 79] the litigation and the date when the solicitor’s retainer was terminated. On appeal it was held that the work undertaken after settlement was outside the course of collecting the proceeds of settlement and so did not support a lien of this particular kind. If an order for costs is made in litigation and an act of bankruptcy is afterwards committed by the client, but before the solicitor collects his costs from the opponent, the solicitor will retain the money as against the trustee in bankruptcy because the lien arose when the order for costs was made: Worrell v Power & Power (1993) 118 ALR 237. See too Re H & W Wallace Ltd [1994] 1 NZLR 235, where part of the costs were paid before liquidation and the solicitor’s claim for lien of the judgment debt for the balance was upheld. The lien also extends to cover the costs of making the application to the court to declare the lien: Read v Dipper (1795) 6 TR 361; 101 ER 595; Re Hill (1886) 33 Ch D 266; Re Meter Cabs Ltd [1911] 2 Ch 557; Re Allied Glass Manufacturers (1936) 36 SR (NSW) 409 at 427; Johns v Cassel, above; Re H & W Wallace Ltd [1994] 1 NZLR 235 at 241. If money is paid into a solicitor’s trust account, the provision of legislation

governing the operation of such accounts usually has the effect of denying a lien: Official Assignee of Reeves & Williams v Dorrington [1918] NZLR 702; Stewart v Strevens [1976] 2 NSWLR 321; Johns v Law Society of NSW [1982] 2 NSWLR 1 at 18-21; Gilshenan & Luton v Commissioner of Taxation [1984] 1 Qd R 199; Kirk v Commissioner of Taxation (1988) 19 FCR 530; and WFM Motors Pty Ltd v Maydwell (1994) 6 BPR 13,381. Where the money is to be paid to a third party, the solicitor must give notice to the third party, but he may do so even while the lien is inchoate before the money is received: Twigg v Kung (2002) 55 NSWLR 485. Where the third party has paid the money to a fourth party and the solicitor proceeds against the fourth party, he or she must demonstrate that that party had clear notice of the solicitor’s claim: Firth v Centrelink (No 2) (2002) 55 NSWLR 494.

Examples 2.50 In Re Sullivan v Pearson; Ex parte Morrison (1868) LR 4 QB 153, a solicitor obtained a verdict for the plaintiff, but this was set aside on appeal and a new trial ordered. The plaintiff and the defendant then settled the case. The solicitor was not entitled to any part of the settlement monies. An example of liens of a case where the solicitor has collected the fund is provided by Commissioner of Taxation v Government Insurance Office of NSW (1992) 36 FCR 314; 109 ALR 159 (on appeal (1993) 45 FCR 284; 117 ALR 61) where a solicitor’s costs in obtaining damages for a personal injury on behalf of a taxpayer were a lien over the fund which took priority over the statutory claim of the Commissioner of Taxation. In Doyles Construction Lawyers v Harsands Pty Ltd (SC (NSW), McLelland CJ in Eq, 24 December 1996, unreported) solicitors had acted in certain District Court proceedings. The proceedings were settled by an agreement negotiated directly between the parties. The solicitors were not involved in that negotiated settlement. The agreement provided for payment to the solicitors’ client of $40,000. Shortly after the agreement was made, but before any payment was made pursuant to that agreement, the solicitors ceased to act. His Honour observed: It was submitted that there was no sufficient causal link between work that Doyles had done in relation to the proceedings and the ultimate settlement, since the March settlement agreement

was negotiated directly between the parties and Doyles had ceased to act before the ultimate settlement was negotiated. In my opinion it is unnecessary for Doyles to demonstrate that the settlement came about as the result of specific efforts by them. According to the statement of principle [in Patience] it is sufficient to give rise to the equitable right that the settlement

[page 80] resulting in payment to the client came about as a result of the legal proceedings and that the solicitor had acted for the client in those proceedings, this being treated as a sufficient causal link.

In Roam Australia Pty Ltd v Telstra Corporation Ltd [1997] FCA 480, Lehane J expressed some reservations about the width of this statement by McLelland CJ in Eq and observed that there would not necessarily be an entitlement in favour of solicitors to the equitable interest in the judgment or settlement proceeds commensurate with the amount they are owed for costs and disbursements no matter how slight or fleeting their participation may have been. As his Honour noted: In each case, in my view, it must be a question whether the requisite causal link is established, whether the judgment or compromise is, on the evidence, to be regarded as brought about (or partially brought about) by the efforts of the solicitors… Where solicitors have been actively involved over a considerable period in acting for a party to successful litigation, the conclusion is likely to follow that the solicitors have been instrumental in obtaining the result, or that the result is (at least in part) due to the solicitors’ efforts.

See also Carew Counsel Pty Ltd v French (2002) 4 VR 172; 190 ALR 690 and AMC Commercial Cleaning (NSW) Pty Ltd v Coade [2013] NSWSC 192; (2013) 16 BPR 28584. In Australian Receivables Ltd v Tekitu Pty Ltd (2012) 260 FLR 243; [2012] NSWSC 170, a solicitor established a lien over a successful cross claim.

Enforcement of the lien 2.51 Where a solicitor has a lien in respect of the fruits of litigation the lien is enforced by applying to a court with equitable jurisdiction. The principle is that ‘[t]he parties should not run away with the fruits of the cause without satisfying the legal demands of his attorney, by whose industry, and in many instances at whose expense, those fruits are obtained’: Read v Dupper (1795)

6 TR 361 at 362; 101 ER 595 at 596. See also Bowen v Wakim (SC (NSW), Smart J, 27 August 1990, unreported). In Johns v Cassel (1993) 6 BPR 13,134; [1993] FLC 79,816 it was held that the solicitor must show that there is a significant risk that the costs will not be paid unless an order is made enforcing his lien. See also Mercer v Graves (1872) LR 7 QB 499 at 503; H S Bird & Co v The Ship ‘Karu’ (1927) 27 SR (NSW) 476 at 479; Patience, Ex parte; Makinson v The Minister (1940) 40 SR (NSW) 96. There is no necessity to proceed to taxation before making an application to enforce the lien: Read v Dupper (1795) 6 TR 361; 101 ER 595; Re Allied Glass Manufacturers Ltd (1936) 36 SR (NSW) 409 at 427; Johns v Cassel, above. The form of the order will vary on the circumstances of each case. The court may consider it appropriate to grant an injunction restraining the client from receiving the fund or preventing the paying party from making a payment except subject to conditions which will protect the solicitor: Hobson v Shearwood (1845) 8 Beav 486; 50 ER 191; Lloyd v Jones (1879) 40 LT 514; Re Fuld, deceased (No 4) [1968] P 727. Alternatively the court may declare that the solicitor is entitled to a charge on the property: Campbell v Campbell [1941] 1 All ER 274. If the solicitor obtains payment of a debt that was otherwise statute-barred, his lien will still exist against the fund: Higgins v Scott (1831) 2 B & Ad 413; 109 ER 1196.

E. Liquidators’ Liens Liquidators’ liens 2.52 Liquidators not infrequently become involved in insolvency problems which involve companies and trusts and property in various people’s names as legal owner, subject to legal or equitable mortgages and charges. A question arises as to whether the [page 81] liquidator has or should be given a lien over the trust or charged assets for his or her costs and expenses.

By analogy with a trustee (see 2.18), a liquidator may have a lien over the relevant assets. It must be noted that in the 19th century it was thought that a liquidator who spent money to secure a fund had no claim against a mortgage (Re Asphaltic Wood Pavement Co (1883) 30 Ch D 216). However, cases such as Re Berkeley Applegate (Investment Consultants) Ltd [1989] BCLC 28 suggest a different result. See also Cadorange Pty Ltd v Tanga Holdings Pty Ltd (1990) 20 NSWLR 26. A provisional liquidator upon his discharge will normally have a lien to secure his costs and expenses: Booth v Thomson [1972] SLT 141; Nationwide News Pty Ltd v Samalot Enterprises Pty Ltd (1986) 5 NSWLR 227 at 230-1; Nationwide News Pty Ltd v Almona Pty Ltd (1985) 6 ACLC 84; Shirlaw v Taylor (1991) 31 FCR 222 at 231-2; 102 ALR 551 at 560-1. The provisional liquidator is entitled to satisfy his equitable lien out of the assets in his hands before accounting for the remaining balance to the company: Re Joseph Phillips Ltd [1964] 1 All ER 441 at 444; [1964] 1 WLR 369 at 373. For an analogous situation last century in the case of an equitable lien over compensation money paid in respect of freeing slaves, see Morrison v Morrison (1855) 2 Sm & Giff 564; 65 ER 527. A receiver who is invalidly appointed, but improves the company’s property, will have an equitable lien good against a mortgagee: Re Universal Distributing Co Ltd (1933) 48 CLR 171; Commonwealth Bank of Australia v Butterell (1994) 35 NSWLR 64 at 70-1; and see Scott v Nesbitt (1808) 14 Ves 438; 33 ER 589; Morrison v Morrison (1855) 2 Sm & Giff 564; 65 ER 527; and Shirlaw v Taylor (1991) 31 FCR 222; 102 ALR 551. The general rule is that a lien will be imposed for the special costs relating to the property concerned, but not for any part of the general costs of administering the liquidation: Re Regent’s Canal Ironworks Co (1875) 3 Ch D 411 at 427; Buchler v Talbot [2004] 2 AC 298; [2004] 1 All ER 1289 and see Pelonoy Pty Ltd v Donovan Oates Hannaford Mortgage Corp [2004] NSWSC 4. In Australian Securities and Investment Commission v John McKenny Consulting Pty Ltd (2002) 43 ASCR 458 the equitable lien of the liquidator attaching to the realisation of the assets in a winding up was given priority to the administrators’ statutory lien, the former having the better equity on the basis that it would be unconscionable for the administrators to benefit from the work of the liquidator.

[page 82]

Chapter 3

Mortgages of Land at Common Law A. Legal Mortgages Mortgages generally Legal mortgages of freehold land Legal mortgages of other interests in land Form of mortgage Mortgage as escrow B. Construction of Mortgages Construction as to the nature of the transaction Construction of the terms of the mortgage Mortgages employing wide language Recent examples of construction of all moneys clauses Mortgages with hair trigger clauses C. Contents of Mortgage Covenants for title Usual covenants Personal covenant to repay What is repayable Acceleration clauses Retardation clauses

3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 3.13 3.14 3.15 3.16

Interest Provisions for punctual payment of interest Covenant to repair Covenant to insure Covenants to pay mortgagee’s costs Covenant to pay rates and taxes Attornment clauses Mortgagor’s right to possession Covenants by the mortgagee D. Extent of the Security Fixtures Accretions Statutory accretion Alterations to mortgagor’s leasehold interests Relief against forfeiture

3.17 3.18 3.19 3.20 3.21 3.22 3.23 3.24 3.25 3.26 3.27 3.28 3.29 3.30

[page 83]

E. Custody of Deeds Mortgagee’s rights Production of deeds by mortgagee F. Variation of the Mortgage Generally Effecting the variation Effect on subsequent encumbrances G. Equitable Mortgages Mortgage by deposit of deeds Documents accompanying deposit Partial deposit of deeds

3.31 3.32 3.33 3.34 3.35 3.36 3.37 3.38

Co-owners Proof of intent to create equitable mortgage Documents remaining in debtor’s custody Property affected by the mortgage Debt secured by the mortgage Equitable mortgage by deposit and lien mutually exclusive Agreement to create mortgage Form of memorandum accompanying deposit Power of attorney Undertaking to execute legal mortgage Defective legal mortgage Title against trustee in bankruptcy H. Miscellaneous Strata titles Registration of mortgages Registration of mortgages by corporations Injunctions and actions at law Conversion

3.39 3.40 3.41 3.42 3.43 3.44 3.45 3.46 3.47 3.48 3.49 3.50 3.51 3.52 3.53 3.54 3.55

A. Legal Mortgages Mortgages generally 3.1 This chapter will deal with legal mortgages of land other property excepting mortgages of interests under the Torrens system. Torrens system mortgages are fully dealt with in Chapter 4. It would be unwise to assume that every principle stated in general words in this chapter is necessarily applicable to Torrens system mortgages, though often this will be the case.

Legal mortgages of freehold land

3.2 In the Australian states where land is not under the Torrens system, the usual method of mortgage of freehold land takes the form of a conveyance to the mortgagee with a requirement for reconveyance if the terms of the underlying loan transaction are carried out. Although it is true that this form of mortgage is similar to that used in England before 1926, there are some very real differences between the Australian practice and the English practice with respect to common law mortgages of land. [page 84] In England, it was fashionable to require the mortgagor to pay the moneys due under the mortgage to the mortgagee in an extremely short space of time, say six months. Once that period expired, any contractual or legal rights the mortgagor may have possessed ceased and the mortgagor merely had an equitable right, which has already been considered when discussing the term ‘equity of redemption’: see 1.14 and 1.15. In Australia, the mortgagor may have both contractual rights (or other legal rights) and equitable rights; this may be significant because the mortgagor will have proceedings available other than the mere equitable action to redeem the mortgage.

Legal mortgages of other interests in land 3.3 ‘Land’ includes easements, profits and other incorporeal hereditaments: see definition in NSW Act s 7, Victorian Act s 248. Such incorporeal hereditaments may be the subject of a mortgage. Generally, however, these rights will be mortgaged together with the land over which the right is enjoyed. Leaseholds may be mortgaged, though this is less common in Australia than in England. Mortgage of leasehold is made either by assignment of the term subject to a proviso for redemption, or by way of a sub-lease reserving to the mortgagor a nominal reversion out of the term. The sub-lease is usually for the balance of the term less one day. A mortgage by demise for a term concurrent with a term created by a first or other prior mortgage created a legal term: Re Moore & Hulm’s Contract [1912] 2 Ch 105. A mortgage in

either form was originally liable to destruction by forfeiture of the term for breach of covenant. Relief against forfeiture was later given by statute, originally in England by ss 210-212 of the Common Law Procedure Act 1852 and currently in New South Wales by s 73 of the Supreme Court Act 1970 and s 129 of the NSW Act, and by s 146 of the Victorian Act. If the whole term was assigned to the mortgagee, he became liable to be sued by the lessor for the rent and also on the covenants, whether or not he had entered into possession: Williams v Bosanquet (1819) 1 Bod & Bing 238; 129 ER 714. Accordingly, of the two methods, the usual practice was to mortgage by sub-lease, since the mortgagee thereby avoided direct liability to the lessor on the covenants in the lease. The mortgagor often declared that he held his nominal reversion or trust for the mortgagee or appointed the mortgagee as his attorney to convey it: see London and County Banking Co v Goddard [1897] 1 Ch 642; see also Bonner v Tottenham & Edmonton Permanent Investment Building Society [1899] 1 Ch 161. These devices ensured that the mortgagee could have the whole of the mortgagor’s interest vested in him if the need arose.

Form of mortgage 3.4 To take effect at law the mortgage must be by deed, to comply with the requirements of s 23B of the NSW Act and s 52 of the Victorian Act. A mortgage which fails to take effect as a legal mortgage because of some formal defect may nevertheless be valid as an equitable mortgage: see 3.49. In New South Wales, a mortgage of Old System land usually takes the form of a deed of conveyance in the form of Schedule 2 to the NSW Act. In Victoria a statutory form of deed of mortgage is provided in Schedule 8 to the Victorian Act. The conveyance includes a proviso for redemption and reconveyance and also covenants conditions and provisions which will govern the parties’ relationship. The covenants in the mortgage will almost always be given on the part of the mortgagor. These are discussed in 3.11–3.23. In some cases covenants may be given by the mortgagee: see 3.25. An example is where the loan is to be made by installments: see Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439, a case where the mortgagee was financially unable to make all the installments of a loan.

[page 85] In Queensland, unless a mortgage is by deed, it does not pick up the powers given in s 83(1)(a) of the Property Law Act 1974: Re J B Davies Enterprises Pty Ltd [1990] 2 Qd R 129, and see Sykes and Walker p 768, n 52.

Mortgage as escrow 3.5 An escrow is a deed delivered on the condition that it is not to take effect until the happening of some specified event. When that event happens, the deed takes effect as from the date of the original delivery but only for such purposes as are necessary to give efficacy to the transaction: Security Trust Co v The Royal Bank of Canada [1976] AC 503. See also Terrapin International Ltd v IRC [1976] 1 WLR 665; [1976] 2 All ER 461; Alan Estates Ltd v WG Stores Ltd [1982] Ch 511; Ansett Transport Industries (Operations) Pty Ltd v Comptroller of Stamps [1985] VR 70; Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361. There must be no obstacle to the deed taking effect on the happening of the specified event, thus where, in accordance with an oral agreement, a blank form of mortgage delivered by the borrower to the lender was to be completed and executed it was held that there was no escrow: Fisher v Westpac Banking Corporation (1993) 43 FCR 385. It will be rare that a mortgage will be delivered as an escrow. One recent instance is Wollam v Barclays Bank plc [1988] EGCS 22; 18 Fam Law (Eng) 381, where a husband gave a mortgage over the whole fee simple, intending that his wife should also sign. The wife declined to sign and Knox J in the English Chancery Division held that the husband was not bound. See also AIB Group (UK) plc v Hennelly Properties Ltd [2000] EGCS 63. Another possible instance is where a developer mortgages a site, the mortgage stipulating that the site will be developed. The mortgage will need to cover the possibility of development not taking place by allowing the lender to enter and complete the works himself. The same applies where the mortgage advance was offered on the terms that the borrower execute certain repairs to the property. In the absence of any covenant to execute the works or right of entry in the mortgage, the lender may be able to claim that the

mortgage deed was delivered in escrow, though it will rarely be advantageous to claim the ineffectiveness of the mortgage and the repayment of the advance. Another instance of delivery in escrow might be when a mortgage is delivered conditionally upon the discharge of an earlier mortgage.

B. Construction of Mortgages Construction as to the nature of the transaction 3.6 Whether a transaction is a mortgage or conveyance depends upon common sense, the fair construction of the documents from the actual language used and the evidence of the surrounding circumstances or factual matrix of the transaction: see 1.25 ff and Alderson v White (1858) 2 De G & J 97 at 105; 44 ER 924 at 928 and Prenn v Simmonds [1971] 3 All ER 327; [1971] 1 WLR 1381; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; Hayes Securities Ltd v Bambury [1991] 1 NZLR 304 at 307; Jageev Pty Ltd v Bank of New South Wales (SC (NSW), Sperling J, 26 March 1996, unreported) at BC9600343, pp 38–9); Ronan v Australia and New Zealand Banking Group Ltd (2000) 2 VR 531 (CA) at [52] (Ormiston and Batt JJA); Nunn v Wily (2001) 10 BPR 18,983, where Austin J said (at para 97) that: ‘The task of the Court is to ascertain the real intention of the parties to the transaction, looking beyond its written form to its real substance and object’; Oversea-Chinese Banking Corp Ltd (OCBC) v Malaysian Kuwaiti Investment Co (MKIC) and Aljade [2003] VSC 495 at [36] (Redlich J); and Creasy’s Grain Enterprises Pty Ltd v Clarke and Barwood Lawyers Colac Ltd [2004] VSC 77 at [13] (Habersberger J). [page 86] The nature of the transaction depends upon the construction of the relevant documents in the light of any admissible evidence, even though the parties may not have realised the consequences: Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584; [1981] 2 All ER 449 (HL).

Construction of the terms of the mortgage

3.7 No special rules apply to the construction of mortgages. They are to be construed as any other commercial document: see AIB Group (UK) plc v Martin [2002] 1 WLR 94; [2002] 1 All ER 353 (HL). For the purpose of the contra proferentem rule, the proferens is the mortgagee: see, for example, Knight v New England Credit Union Ltd (1992) 5 BPR 11,744. However, in Hall v Westpac Banking Corp (1987) 4 BPR 9578, the New South Wales Court of Appeal held that there is no rule of construction which reads wide general words down in favour of the mortgagor; and see Jageev Pty Ltd v Bank of New South Wales (SC (NSW), Sperling J, 26 March 1996, unreported), referring (BC9600343 at p 39) to Ankar Pty Ltd v National Westminster Finance (Aust) Pty Ltd 162 CLR 549. In Ayoub v Euphoric Pty Ltd [2004] NSWCA 457; (2004) 12 BPR 22,735 at 22,742 [41] McClellan AJA, giving the reasons of the New South Wales Court of Appeal, said: There is no doubt that care must be exercised when construing a security, particularly an all accounts security, to identify the debts which the parties intended to fall within it. Ambiguity should be construed in favour of the surety.

The judge referred to Ankar Pty Ltd v National Westminster Finance (Aust) Ltd (1987) 162 CLR 549 and Andar Transport Pty Ltd v Brambles Ltd (2004) 78 ALJR 907 and noted that the context would be important to resolve ambiguity. The terms of the mortgage will be construed in their natural meaning: Prenn v Simmonds [1971] 1 WLR 1381; [1971] 3 All ER 237. Clerical and obvious mistakes may be amended by the court without the need for formal rectification proceedings. Thus in Re United Pacific Transport Pty Ltd [1968] Qd R 517 ‘mortgagor’ was substituted for ‘mortgagee’. (For rectification see 13.42.) Extrinsic evidence will be admissible to resolve ambiguities: Prenn v Simmonds [1971] 1 WLR 1381; [1971] 3 All ER 237; Western Bank Ltd v Schindler [1977] Ch 1 at 9; Reardon Smith Line v Hansen-Targen [1976] 1 WLR 989; [1976] 3 All ER 570; Secured Income Real Estate (Australia) Ltd v St Martin’s Investments Pty Ltd (1980) 144 CLR 596; Gilberto v Kenny (1983) 48 ALR 620; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; National Bank of New Zealand Ltd v West [1978] 2 NZLR 451. As a general rule instruments made between the same parties and for the same transaction will be construed together: Smith v Chadwick (1882) 20 Ch D 27 at 62-3 (Jessel MR); and see Re Piccolo; McVeigh v

National Australia Bank Ltd [2000] FCA 187, particularly, Finkelstein J at [33]-[34] and Kenny J at [74]-[76]; and see Creasy’s Grain Enterprises Pty Ltd v Clarke and Barwood Lawyers Colac Ltd [2004] VSC 77. Where an agreement contains standard form general provisions which are inconsistent with provisions made by the parties with respect to the particular transaction the latter will prevail: see Oversea-Chinese Banking Corp Ltd (OCBC) v Malaysian Kuwaiti Investment Co (MKIC) and Aljade [2003] VSC 495 at [47] (Redlich J), referring to Gesellschaft Burgerlichen Rechts v Stockholms Rederiaktiebolag Svea (The Brabant) [1967] 1 QB 588; and see Re Piccolo; McVeigh v National Australia Bank Ltd at [40] (Finkelstein J), referring to the same case. If the document is silent on a point — interest periods for example — the practice of the parties may bind them. Many mortgages are made on printed forms and the blanks are often not filled in. In those circumstances the conduct of the parties may operate, as it were, to fill the blanks: see generally Amalgamated Investment and Property Co Ltd (in liq) v Texas Commerce International Bank Ltd [1982] 1 QB 84. [page 87]

Mortgages employing wide language 3.8 Mortgages often employ all-embracing terms such as ‘all moneys which at any time might become owing by the mortgagor or any company with which he is associated’. It will often appear that the parties could not have meant the words to be used in their strict literal sense and a search needs to be made for their meaning in the context of the mortgage document: see, for example, Fountain v Bank of America National Trust & Savings Association (1992) 5 BPR 11,187; Estoril Investments Pty Ltd v Westpac Banking Corp (1993) 6 BPR 13,146; Australia & New Zealand Banking Group Ltd v Comer (1993) 5 BPR 11,748; Re Modular Design Group Pty Ltd (1994) 35 NSWLR 96 sub nom Thomas v Silvia (1994) 14 ACSR 446; GWH Pty Ltd v Commonwealth Bank of Australia (1994) 6 BPR 14,073; Re Piccolo; McVeigh v National Australia Bank Ltd [2000] FCA 187; OverseaChinese Banking Corp Ltd (OCBC) v Malaysian Kuwaiti Investment Co

(MKIC) and Aljade [2003] VSC 495 and Creasy’s Grain Enterprises Pty Ltd v Clarke and Barwood Lawyers Colac Ltd [2004] VSC 77. In the United States such clauses are referred to as ‘dragnet clauses’. Although it is always a question of construction in each case, Nelson and Whitman, Real Estate Finance Law, 2nd ed, West, Minnesota, 1985, pp 899– 902, say that general guidelines can be gleaned from the American cases. In the United States, dragnet clauses are generally upheld, but because their apparent coverage is so broad and because the mortgagor is often unaware of their presence and implications, the courts tend to construe them narrowly against the mortgagee: see, for example, Everett Credit Union v Allied Ambulance Service Inc 424 NE (2d) 1142 (1981) (Mass); Badger State Agri-Credit & Realty Inc v Lubahn 365 NW (2d) 616 (1985) (Wis). However, where appropriate, a wide construction may be proper: see, for example, Smith v Australia & New Zealand Banking Group Ltd (1996) 7 BPR 15,069. An ‘all moneys’ clause must be construed with reference to the context of the transaction in which the clause appears and by reference to the commercial purpose of the transaction which the clause is intended to serve: Cuzeno RVM Pty Ltd v Overton Investments Pty Ltd (2002) 10 BPR 19,425 (and, on appeal, Overton Investments Pty Ltd v Cuzeno RVM Pty Ltd [2003] NSWCA 27); and see Ronan v Australia and New Zealand Banking Group Ltd (2002) 2 VR 531 (CA) at 547-54 (Ormiston and Batt JJA); OCBC v MKIC and Aljade [2003] VSC 495 and Creasy’s Grain Enterprises Pty Ltd v Clarke and Barwood Lawyers Colac Ltd [2004] VSC 77 and Chacmol Holdings Pty Ltd v Handberg (2005) 215 ALR 748 (Full Federal Court). There is nothing unjust or unconscionable for a mortgagee to rely on such a clause to secure a later indebtedness, especially if it made that intention clear, Zell v Commonwealth Bank of Australia [1998] NSW Conv R ¶55-835 (CA). As to the implication of a term that interest rates would not be set at unreasonable levels, see Paragon Finance plc v Staunton; Paragon Finance v Nash [2002] 1 WLR 685; [2002] 2 All ER 248 (CA). Although each mortgage will be construed according to its tenor, the following guidelines appear from American and Australian authorities: 1. Prima facie the mortgage only secures future advances: First National

Bank v Lygrisse 647 P (2d) 1268 (1982) (Kan). See, however, Johncorp Industries Pty ltd v Sussmann (2001) 10 BPR 18,975. 2. Only debts of the same character as the original debt are secured. Thus in Emporia State Bank & Trust Co v Mounhes 519 P (2d) 618 (1974) (Kan), where the mortgage was originally taken out to purchase land, a debt later incurred to set up a son in business was not secured. See also National Bank of Eastern Arkansas v General Mills Inc 283 F (2d) 574 (1960) (Ark); Freese Leasing Inc v Union Trust and Savings Bank, Stanwood 253 NW (2d) 921 (1977) (Iowa); AG-Chem Farm Services Inc v Coberly [page 88] 733 P (2d) 15 (1987) (NM); Onawa State Bank v Simpson 403 NW (2d) 791 (1987) (Iowa). Australian cases include Williams v State Bank of NSW (1993) ACL Rep 220 NSW 15; Estoril Investments Pty Ltd v Westpac Banking Corp (1993) 6 BPR 13,146; GWH Pty Ltd v Commonwealth Bank of Australia (1995) 6 BPR 14,073; and Cuzeno RVM Pty Ltd v Overton Investments Pty Ltd (2002) 10 BPR 19,425. 3. If the future debt is independently secured to the same lender, it may be assumed that the parties did not intend it to be caught by the dragnet clause: Moran v Gardemeyer 23 P 8 (1889) (Cal). 4. The clause does not apply to debts originally owed to a third party but which have been assigned to the mortgagee: Thorp Sales Corp v Dolese Brothers Co 453 F Supp 196 (1978) (WD Okla); Pongetti v Bankers Trust 368 So (2d) 819 (1979) (Miss); Re Clark’s Refrigerated Transport Pty Ltd (in liq) [1982] VR 989 at 995-6; Australia and New Zealand Banking Group Ltd v Comer (1993) 5 BPR 11,748; Williams v State Bank of NSW, above; Estoril Investments Pty Ltd v Westpac Banking Corp, above; Ayoub v Euphoric Pty Ltd [2004] NSWCA 457 [41], see also Re Modular Design Group Pty Ltd (1994) 35 NSWLR 96 sub nom Thomas v Silvia (1994) 14 ACSR 446. 5. If there are joint or several mortgages, only debts of which all were aware will be covered: Lomarto v Bank of America 99 Cal Repr 442 (1972); Williams v State Bank of NSW, above.

6. Once the original debt is fully discharged, the mortgage is extinguished: State Bank of Albany v Fioravanti 435 NYS (2d) 947; 417 NE (2d) 60 (1980) (NY). 7. If there is a transfer of the mortgagor’s interest subject to the mortgage, advances made thereafter to the original mortgagor are not secured: Walker v Whitmore 262 SW 678 (1924) (Ark). 8. If there is a transfer of the mortgagor’s interest subject to the mortgage, advances made thereafter to the transferee will not be chargeable to the original mortgagor: Trapp v Tidwell 4l8 So 786 (1982) (Miss); Burke v State Bank of NSW Ltd (1994) 37 NSWLR 53; 6 BPR 13,714. 9. An all moneys mortgage which affects a spouse or other third party may be unenforceable against the third party because of the principle in Yerkey v Jones (1939) 63 CLR 649 (see 13.26) or under statutes such as the Contracts Review Act 1980 (NSW) (see 13.36). Examples are provided in State Bank of NSW v Muir (1997) 8 BPR 15,483 and Williams v State Bank of NSW (1993) 6 BPR 13,552.

Recent examples of construction of all moneys clauses 3.9 There have been numerous good examples as to the way courts approach the construction of all moneys clauses in the last decade. In Re Bankrupt Estate of Murphy; Donnelly v Commonwealth Bank of Australia Ltd (1996) 140 ALR 46 at 55, Hill J refused to read down the extreme width of an ‘all moneys’ clause so it would not apply beyond the initial banking transaction which it secured. To so construe the clause would have been to treat paragraphs of the mortgage and memorandum as being redundant. Murphy’s case was cited with approval in Ronan v Australia & New Zealand Banking Group Ltd [2000] 2 VR 531. Similarly in McVeigh (Re Piccolo) v National Australia Bank Ltd [2000] FCA 187 Kenny and Heerey J found the terms of the mortgage wide enough to support a subsequent bank facility. Heerey J regarded the language of the guarantee contained within the mortgage as not confined to any particular form of bank facility or to the first one which had been put in place. Kenny J found that the subsequent agreements and financial accommodations to the company were intended by

the parties to be secured by the guarantee and mortgage. McDonald J in Commonwealth Bank of Australia v Aspenview Productions Pty Ltd [2001] VSC 444 reached the same conclusion [page 89] in relation to a mortgage containing similar terms. Each of these cases turned upon the language used, its context and the commercial purpose of the parties. The authorities with respect to ‘all moneys’ or ‘dragnet’ clauses were also considered in some detail by Redlich J in OCBC v MKIC and Aljade [2003] VSC 495. His Honour said at [32]: … [32] Such terms are frequently intended to provide a mortgagee with protection in respect to all monies which the mortgagee pays or becomes liable to pay for or on account of the mortgagor. As this case illustrates, the competition which arises is between the very broad language used in such a clause and the inclination to confine such provisions to the financial assistance and purpose that was within the parties’ contemplation at the time of their agreement. [35] Where the further debt was found to be for a commercial purpose of the same nature or kind as that originally secured by the terms of the mortgage there has been a disposition by the Courts to give effect to the literal meaning of the words of an ‘all monies’ clause. [Commonwealth Bank of Australia v Aspenview Productions Pty Ltd, above at 95 per McDonald J; McVeigh v The National Australia Bank Ltd, above at 84.]

His Honour then proceeded to apply the guidelines from Estoril (above; basically those in the preceding paragraph), noting, however, that each clause must be construed in the light of the actual language used and having regard to the context in which this mortgage came to be executed and its commercial purpose. The authorities in this respect were also reviewed in some detail by Kenny J in Re Piccolo; McVeigh v National Australia Bank Ltd [2000] FCA 187 at [82]-[85]. Her Honour said that there was no need to accept the entirety of the approach (and the guidelines) proposed by Young J in Estoril Investments Pty Ltd v Westpac Banking Corp (1993) 6 BPR 13,146 and other cases, in order to accept the proposition that, in many cases, an ‘all moneys’ clause will not be construed to secure a debt of a fundamentally different character from the

debt specifically contemplated by the parties at the time of entering the contract. In construing such a clause, a court confines its operation by reference to its context and commercial purpose. See also Jageev Pty Ltd v State Bank of New South Wales (SC (NSW), Sperling J, 26 March 1996, unreported); and the comments of Lindgren J in Radin v Commonwealth Bank of Australia [1998] FCA 1361 at [200]-[202]. In Ayoub v Euphoric Pty Ltd [2004] NSWCA; (2004) 457 12 BPR 22,735 the New South Wales Court of Appeal again applied a formula similar to that noted above to determine the scope of a mortgage. See also Chacmol Holdings Pty Ltd v Handberg (2005) 215 ALR 748 (Full Federal Court).

Mortgages with hair trigger clauses 3.10 A similar problem occurs with mortgages which list a number of events that enable the mortgagee to call up the principal or appoint a receiver and so on. The events chosen may include some beyond the control of the mortgagor, such as a third party filing a summons to wind up the mortgagor. One view of these clauses is that the parties must have intended there to be commercial certainty by merely looking to see if one of the chosen events has occurred and no further. Thus, if a summons to wind up has been filed vexatiously, the trigger will have been activated, notwithstanding that the proceedings were summarily dismissed the next day after filing. Cases such as Hughes Bros Pty Ltd v Trustee of Roman Catholic Church for the Archdiocese of Sydney (SC (NSW), Giles J, 21 September 1989, unreported) take this view; and see 16.8, 18.7. (Note that the Hughes Bros case was reversed on appeal: (1993) 31 NSWLR 91.) The prevailing view is, however, that if the winding up summons, writ of execution or the like is set aside ex debito justiciae, the trigger has not been activated: Permanent Trustee Co Ltd v Cormack (1920) 21 SR (NSW) 1 at 6; Renard Constructions (M E) Pty Ltd [page 90] v Minister for Public Works (1992) 26 NSWLR 234 at 259; and Paul Kennedy Transport Pty Ltd v Australia and New Zealand Banking Group Ltd

(1993) 6 BPR 13,883.

C. Contents of Mortgage Covenants for title 3.11 Section 78(1)(C) and (D) of the NSW Act and s 76 of the Victorian Act imply covenants for title in a mortgage. The NSW Act provisions apply when the conveyance is expressed to be as beneficial owner. The Victorian section uses the words ‘conveys and is expressed to convey as beneficial owner’. For the distinction see Pilkington v Wood [1953] Ch 770 at 777; Coronet Homes Pty Ltd v Bankstown Finance & Investment Co Pty Ltd [1966] 2 NSWR 351.

Usual covenants 3.12 A mortgage need not contain any express covenants at all. However, mortgages normally contain (1) a personal covenant to repay the loan (see 3.13–3.16); (2) covenants fixing the rate and payment of interest (see 3.17–3.18); (3) a covenant to repair (see 3.19); (4) a covenant to insure (see 3.20); (5) a covenant to pay the mortgagee’s costs (see 3.21); (6) a covenant to pay rates and taxes and comply with statutory requirements (see 3.22); and (7) often an attornment clause (see 3.23). Section 81 of the NSW Act and the 4th Schedule contain short forms of covenants which may be inserted in any mortgage by using the shorthand form of words set out in the Schedule. There is no comparable provision in Victoria. Other terms in the mortgage are a matter of choice, though some matters are dealt with in the legislation, such as the power to grant leases — for which see NSW Act s 106 and Victorian Act s 99. Note that there is no implied obligation on the mortgagee that it will cooperate with the mortgagor to achieve the mortgagor’s objectives: Estoril Investments Pty Ltd v Westpac Banking Corp (1993) 6 BPR 13,146. In order to cut down on the bulk of the Register Book, as well as for other economies, Torrens system mortgages are made subject, unless negatived, to (1) a general set of provisions, in New South Wales Memorandum Q860000

(reproduced at 4.41) and (2) the lender’s usual terms and conditions, which will have been previously registered in the Lands Titles Office. General law mortgages may incorporate these memoranda by reference or by setting out the terms in the mortgage verbatim. Statutory force is given to this procedure by s 80A of the NSW Torrens Act: McIntosh v Goulburn CC (1985) 3 BPR 9367. It should be noted that s 83 of the NSW Act and s 123 of the Victorian Act provide that implied covenants are made with the mortgagees jointly unless the amount lent by each mortgagee is separately specified, in which case the covenants will be several.

Personal covenant to repay 3.13 Many mortgages contain a covenant to repay the principal sum with interest, on a fixed day, and also to pay interest after default so long as the security shall subsist, but that is not, nor was it ever, a necessary part of a mortgage which, in itself, implies a loan, and therefore a debt recoverable by curial proceedings: Yates v Aston (1843) 4 QB 182; 114 ER 866; Sutton v Sutton (1882) 22 Ch D 511 at 515; NZI Capital Corp Pty Ltd v Child (1991) 23 NSWLR 481. Indeed, once the mortgaged property is sold, the action between the parties is a pure action in debt: Callachor v Moses (1931) 31 SR (NSW) 424. The debt bears interest even though none is expressly reserved: Anon (1813) 4 Taunt [page 91] 876; 128 ER 577; Mendl v Smith (1943) 112 LJ Ch 279; but see Cityland and Property (Holdings) Ltd v Dabrah [1968] Ch 166 and 39.42. The mortgage may, if clearly worded, provide that the loan is only to be repaid out of a particular fund: R v New Queensland Copper Co Ltd (1917) 23 CLR 495; Head v Kelk (1961) 63 SR (NSW) 340 at 345; NZI Capital Corp Pty Ltd v Child, above. Likewise, personal liability to repay may be negatived, as frequently occurs with executors and administrators. See also Muir v City of Glasgow Bank (1879) 4 App Cas 337; Re Anderson; Ex parte Alexander (1927) 28 SR

(NSW) 296; and see 11.12. Again, there may be no personal liability where a person charges his own property to secure the debts of another: Re Midland Bank’s Application [1941] Ch 350. One example is Baypoint Pty Ltd v Baker (1994) 6 BPR 13,687 where a wife who was a joint tenant of property excluded personal liability. As to ‘personal liability’, see also James v Abrahams (1981) 51 FLR 16. The extent to which the personal covenant applies to joint and several obligations is a matter of construction in the particular circumstances: AIB Group (UK) Ltd v Martin [2002] 1 WLR 94; [2002] 1 All ER 353 (HL). Where appropriate, provision should be made for rests; that is intervals at which the account is struck for the purpose of determining interest: see 39.36. A covenant for payment of principal and interest is customarily inserted in mortgages. In the absence of such a covenant the debt is only a simple contract debt: Ancaster v Mayer (1785) 1 Bro CC 454 at 464; 28 ER 1237 at 1242; Quarrell v Beckford (1816) 1 Madd 260 at 278; 56 ER 100 at 103; Sutton v Sutton (1882) 22 Ch D 511. As in law the principal secured by the mortgage and the interest thereon are distinct debts, which may be separately recovered (Dickenson v Harrison (1817) 4 Price 282; 146 ER 465), the covenant should be worded so that the principal and interest are to be construed as two distinct debts. A covenant for payment is not an essential part of a mortgage: English Scottish & Australian Bank Ltd v Phillips (1937) 57 CLR 302 at 308; Re Midland Bank Ltd’s Application [1941] Ch 350. The covenant may be omitted or negatived when the mortgagors are trustees or are charging property as collateral security for another’s debt. Whether or not the covenant is included, there will be implied a promise to repay the loan (Yates v Aston (1843) 4 QB 182; 114 ER 866; Sutton v Sutton (1882) 22 Ch D 511 at 515) together with interest, even though none is reserved: Anon (1813) 4 Taunt 876; 128 ER 577; R v New Queensland Copper Co Ltd (1917) 23 CLR 495; Mendl v Smith (1943) 143 LT 153; 112 LJ Ch 279; NZI Capital Corp Pty Ltd v Child (1991) 23 NSWLR 481; but see Cityland and Property (Holdings) Ltd v Dabrah [1968] Ch 166 and see 39.42. In Re Brennand (1843) NSW Sel Cas (Dowling) 619, the mortgagee’s conduct was held to be sufficient to show that he was confined to resort to the security. Unless there is a covenant to that effect or the case comes within s 93 of

the NSW Act (there is no equivalent in other states), there is no right for early repayment of a mortgage at law or in equity: O’Reilly v Heydon (1893) 14 LR (NSW) (Eq) 283; Knightsbridge Estates Trust Ltd v Byrne [1939] Ch 441 and Hyde Management Services Pty Ltd v FAI Insurances Ltd (1979) 144 CLR 541. Section 93 allows the mortgagor to redeem before time, but only on the basis of paying the interest up to the end of term unless the mortgagee has demanded payment or taken steps to realise the security: see in general Steindlberger v Mistroni (1992) 5 BPR 11,529. If no date is fixed for payment, the mortgagor must pay on demand. It follows that where a mortgagor covenants to pay all moneys owing on demand there can be no breach of covenant with respect to repayment until a demand is made: Commonwealth Bank of Australia v Saunders (1995) 64 SASR 428. [page 92]

What is repayable 3.14 Mortgages may take a number of forms. With a fixed term fixed interest mortgage the mortgagor may be obliged to pay the sum of the principal and total interest by equal instalments over the period of the mortgage with provision for acceleration on default. With an ‘interest only’ mortgage the interest is payable to the mortgagee on regular days and the principal is repayable at the end of the fixed term. Where inflation is an economic problem, a mortgage will usually provide for adjustment of interest according to some formula (see 3.17) and for regular payments to be adjusted. In the simplest case, the covenant provides for the repayment of the sum advanced and interest thereon. Even here problems may arise as to what is meant by ‘principal’ etc. Thus in Davidson v Sydney County Council Employees’ Credit Union Ltd [1979] 1 NSWLR 41 it was held that ‘principal’ did not cover liability to repay money obtained by the borrower by fraudulent misappropriation. See also Bevham Investments Pty Ltd v Belgot Pty Ltd (1982) 149 CLR 494 as to the expression ‘money secured by mortgage’; Burnes v Trade Credits Ltd [1981] 1 NSWLR 93; [1981] 1 WLR

805; [1981] 2 All ER 122 as to the meaning of ‘advance’. A mortgagor may not unilaterally appropriate any cross-claim or set-off, even if admitted and liquidated to discharge the mortgage debt: Keller (Samuel) (Holdings) Ltd v Martins Bank Ltd [1971] 1 WLR 43 at 47-8; Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161; United Dominions Corp Ltd v Jaybe Homes Pty Ltd [1978] Qd R 111; Mobil Oil Co Ltd v Rawlinson (1982) 43 P & CR 221 at 226; and Ashley Guarantee plc v Zacaria [1993] 1 All ER 254; [1993] 1 WLR 62. It is otherwise if the mortgage debt is the amount from time to time owing between the parties on a trading account: see, for example, Ronan v Australia and New Zealand Banking Group Ltd (2002) 2 VR 531 (CA). Alternatively, the mortgage may be an ‘all money’ security — that is, one which secures money on all accounts owing from time to time by the borrower to the lender. Bank mortgages usually take this form: see, for example, Re Rudd & Son Ltd (1986) 2 BCC 98,955; Hall v Westpac Banking Corp (1987) 4 BPR 9578 and Fountain v Bank of America National Trust & Savings Assn (1992) 5 BPR 11,817. In any case where there is an issue as to what is repayable, it is a matter of construction to be determined in the light of the particular words used: Katsikalis v Deutsche Bank (Asia) AG [1988] 2 Qd R 641; and Torre v Jonamill (2002) 10 BPR 19,417. Other examples are cases where moneys due under guarantees were included (such as Cambridge Credit Corp Ltd v Lombard Australia Ltd (1977) 136 CLR 608 and Catley Farms Ltd v ANZ Banking Group (NZ) Ltd [1982] 1 NZLR 430), or where foreign exchange dealings were included (Bank of India v Transcontinental Commodity Merchants Ltd [1982] 1 Lloyd’s Rep 506); and see (Ronan v Australia and New Zealand Banking Group Ltd) where it was said that it was not unusual use of language to describe the mortgagor as a surety for the debts of the firm of which he was a member where the mortgage was, in substance, given by way of collateral security for the firm’s debt. See also 3.8. An all money mortgage will usually be construed as not extending to enable the mortgagee to acquire an unsecured debt owed by the mortgagor to a third party and add that debt to the secured debt: Re Clark’s Refrigerated Transport Pty Ltd (in liq) [1982] VR 989 at 995-6; Australia and New Zealand Banking Group Ltd v Comer (1993) 5 BPR 11,748 at 11,757-8; and see Kerr v Ducey [1994] 1 NZLR 577.

As to the meaning of ‘contingent liability’ in an all moneys mortgage see Re Sutherland [1963] AC 235 at 249, 262-3; and Estoril Investments Pty Ltd v Westpac Banking Corp (1993) 6 BPR 13,146. [page 93]

Acceleration clauses 3.15 Unless provision is made in the mortgage, the parties may, except in cases where the statute provides an escape route, be locked into a transaction. It is thus customary to insert a clause that upon certain events occurring, the mortgagee may call in the mortgage. It is frequent, but less common, for the mortgage to provide that the mortgagor may redeem on giving certain notice and paying interest up to a set date: see Branwood Park Pastoral Co Pty Ltd v Willing & Sons Pty Ltd [1976] 2 NSWLR 149, affirmed by the Court of Appeal (1977) 1 BPR 9534 and Myross (NSW) Pty Ltd v Kahlefeldt Securities Pty Ltd (2003) 11 BPR 21,015. In the absence of such provision the mortgagor may only have the mortgage discharged by paying the interest for the whole of the term under the NSW Act s 93: O’Reilly v Heydon (1893) 14 LR (NSW) (Eq) 283; Knightsbridge Estates Trust Ltd v Byrne [1939] Ch 441; Hyde Management Services Pty Ltd v FAI Insurances Ltd (1979) 144 CLR 541; Steindlberger v Mistroni (1992) 5 BPR 11,529; Jay v United Building Society [1991] ANZ Conv R 124; and see Berry v Advance Bank Australia Ltd (1995) 6 BPR 14,046. The matter is further considered in 32.6. However where the mortgage provides for early repayment but does not give a discount on the total interest for such repayment, the interest to the end of the term may be considered an invalid collateral advantage: Cityland and Property (Holdings) Ltd v Dabrah [1968] Ch 166. Such a discount should be provided by reference to a scheduled table or the rule of 78 with the exception that there would appear to be no entitlement to a discount: Harvey v Municipal Permanent Investment Building Society (1884) 26 Ch D 273. The position is not like that in hire purchase, where the owner claims damages against the hirer on default. See also O’Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359. A clause providing for repayment on sale by the mortgagor does not

appear to constitute an invalid restraint on alienation: Briar Building Holdings Ltd v Bow West Holdings Ltd (1981) 126 DLR (3d) 566. A mortgagor can deliberately fail to pay and tempt the mortgagee to make a demand, but this ploy may visit an interest penalty on the mortgagor and if the mortgagee does not yield to the temptation the mortgagor is foiled: Branwood Park Pastoral Co Pty Ltd v Willing & Sons Pty Ltd [1976] 2 NSWLR 149, affirmed by the Court of Appeal (1977) 1 BPR 9534; see also Stocks & Enterprises Pty Ltd v McBurney (1977) 1 BPR 9521, but compare Re Eusanio and IACI (1982) 136 DLR (3d) 569. A clause permitting the mortgagee to demand early repayment is not bad as a penalty or otherwise: Sterne v Beck (1863) 1 De GJ & Sm 595; 46 ER 236; Wallingford v Mutual Society (1880) 5 App Cas 685; Protector Endowment Loan and Annuity Co v Grice (1880) 5 QBD 592; Lamson Store Service Co Ltd v Russell Wilkins & Sons Ltd (1906) 4 CLR 672; O’Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359. However if a substantial premium is payable on default the provision may be void as a penalty: Cityland and Property (Holdings) Ltd v Dabrah [1968] Ch 166; [1967] 2 All ER 639; Wanner v Caruana [1974] 2 NSWLR 301, but compare Branwood Park Pastoral Co Pty Ltd v Willing & Sons Pty Ltd (1977) 1 BPR 9534 at 9536 and see 32.7–32.9. A provision for interest on an overdue instalment or moderate premium or fine will not be so classified: General Credit & Discounts Ltd v Glegg (1883) 22 Ch D 549; C J Belmore Pty Ltd v AGC (General Finance) Ltd [1976] 1 NSWLR 507 and see 39.50. If the accelerating event is the issue of a writ of execution, the mortgagee may not rely on the event if the writ is set aside for irregularity: Permanent Trustee Co Ltd v Cormack (1920) 20 SR (NSW) 1 and see 3.10. Some states provide statutory relief against acceleration clauses: see, for example, Property Law Act 1974 (Qld) s 95, and Credit Act 1984 (NSW) s 105. [page 94] In the United States, the courts have sometimes imposed limitations on the

mortgagee’s right to accelerate. First, the election to accelerate must be made in good time and before waiver. This principle would be applicable in Australia. However, it is doubtful whether the rule adopted by some American courts, that the mortgagee may only activate an acceleration clause when the security is endangered and not merely for obtaining a commercial advantage or an increase in interest, would be applicable: see Mutual Federal Savings & Loan Association v Wisconsin Wire Works 205 NW (2d) 762 (1973) (Wis) noted 69 Am LR (3d) 702 at 747–9 (1973).

Retardation clauses 3.16 A mortgage may not be made irredeemable. Parties also may not contract out of the mortgagor’s rights under s 93 of the NSW Act. However, in the absence of fraud it is otherwise in order for the mortgagee to agree not to call in the mortgage even though the due date has passed. Such a provision, if absolute, will prevent foreclosure: Burrowes v Molloy (1845) 2 Jo & Lat 521; 8 Ir Eq R 482 and see 16.6. Usually, however, such a provision is conditional — for instance, on punctual and regular payment of interest — and the right to foreclose will arise on default of such payment: Seaton v Wyford (1870) LR 11 Eq 591; Tate v Crewdson [1938] Ch 869 and see Clark v Vile (1969) 209 EG 169. If ‘punctual payment’ is required, this is construed strictly: Leeds and Hanley Theatre of Varieties v Broadbent [1898] 1 Ch 343; Maclaine v Gatty [1921] 1 AC 376. The mere receipt of interest after the due date is not a waiver of the right to sue (Keene v Biscoe (1878) 9 Ch D 201; Re Taafe’s Estate (1864) 14 1 Ch R 347) though it is a circumstance to be taken into account in determining whether there has been a waiver: Seal v Gimson (1914) 110 LT 583.

Interest 3.17 Generally speaking there is no restriction on the rate of interest which may be charged, though from time to time statutes may stipulate maximum rates for particular lenders — for example, moneylenders — or for particular classes of transactions, such as home loans. Recent examples of cases where high interest was allowed include Takemura v National Australia Bank (2003) 11 BPR 21, 185 (interest in excess of 72% pa) and Guardian Mortgages Pty Ltd v Miller [2004] NSWSC 174% pa). Equity does not reform mortgage transactions merely because they are unreasonable:

Knightsbridge Estates Trust Ltd v Byrne [1939] Ch 441 at 457; Multiservice Bookbinding Ltd v Marden [1979] Ch 84. Where no rate of interest is fixed by the parties, the court can fix it: Re Drax [1903] 1 Ch 781; Mendl v Smith (1943) 169 LT 153; 112 LJ Ch 279, and see 39.57. In the absence of express provision in that behalf, the rate of interest cannot be varied although, if the mortgagee is in a position to call in the mortgage, this fact will usually be sufficient to make the borrower agree to a variation. Most commercial mortgages provide for variations: see, for example, Charmelyn Enterprises Pty Ltd v Klonis (1981) 1 BPR 9527. There should be some reference to some external yardstick, such as a statistical index or the base rate of a named bank (for example, First National Securities Ltd v Onwuegbuzie (1976) 120 Sol Jo 458) or the value of a foreign currency: Multiservice Bookbinding Ltd v Marden [1979] Ch 84; [1978] 2 All ER 489; Nationwide Building Society v Registry of Friendly Societies [1983] 1 WLR 1226; [1983] 3 All ER 296. If there is no such reference and no ceiling it is arguable that the power to vary fails as unreasonable: ANZ Banking Group (NZ) Ltd v Gibson [1981] 2 NZLR 513; and see Paragon Finance plc v Staunton; Paragon Finance plc v Nash [2002] 1 WLR 685; [2002] 2 All ER 248 (CA). See also note by Butt (1981) 55 ALJ 820. A mortgagee may lodge proof of debt in respect of interest accrued prior to the date of bankruptcy. However, pursuant to s 82(3B) Bankruptcy Act 1966 (Cth) a debt that consists of interest accruing on or after that date is not provable in the bankruptcy. [page 95] Payments received prior to the date of bankruptcy, representing part principal and part interest, shall be deemed to have been apportioned in satisfaction of principal and interest in the proportion that the principal bears to the amount payable as interest at the agreed rate: s 88. The same principle applies where the debt has been realised by the mortgagee: s 89 and see, generally Re Mangan; Ex parte Andrew (1983) 123 ALR 633, and 32.51 ff.

Provisions for punctual payment of interest

3.18 It is a well settled, if not an intelligible, rule that if the mortgagee wishes to stipulate for a higher rate of interest in default of punctual payment he must reserve the higher rate as the interest payable under the mortgage and provide for its reduction in case of punctual payment: Strode v Parker (1694) 2 Vern 316; 23 ER 804. An agreement to pay a higher rate for non-payment at the appointed time is considered to be a penalty against which equity may give relief: Wallingford v Mutual Soc (1880) 5 App Cas 685, and see 39.55. Lord Eldon criticised this distinction as preferring form over substance as early as 1802: Seton v Slade (1802) 7 Ves 265 at 273-4; 32 ER 108 at 111. The distinction is now too well entrenched to be altered: Meredith (1916) 32 LQR 420; O’Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359 at 366-7; David Securities Pty Ltd v Commonwealth Bank of Australia (1990) 23 FCR 1 at 29 (reversed on other grounds (1992) 175 CLR 353).

Covenant to repair 3.19 Apart from express or implied covenants, the mortgagor has no duty to the mortgagee to keep the property in repair. However, the mortgagee is entitled to have the property preserved from deterioration in the hands of the mortgagor or of any other person whose interest is inferior to the mortgagee, and any moneys expended by him in preserving the property are allowed in taking accounts: see 16.1. To overcome any difficulty, most mortgages contain a covenant by the mortgagor to keep the property in good repair and to repair on notice from the mortgagee with power to the latter, on default, to enter and effect repairs without becoming liable as mortgagee in possession, together with a provision for the mortgagor to pay the costs thereof with a charge of such moneys on the mortgaged property. Section 80 of the NSW Act and s 76 of the Victorian Act imply a covenant to keep all buildings or other improvements erected and made upon the land in as good and substantial repair as the same were at the date of the mortgage, with liberty to the mortgagee at all convenient times with or without surveyors to inspect. In New South Wales, s 82 negatives the implied covenant if short form 1 is included in the mortgage document and then struck out.

Covenant to insure 3.20 Section 109(1)(b) of the NSW Act and s 101 of the Victorian Act confer a statutory power on a mortgagee to keep the mortgaged property insured and to add the premiums to the principal; NSW s 114 and Victoria s 108 limit the amount of insurance to the full insurable value of the buildings upon the mortgaged land or the amount owing to the mortgagee in respect of the mortgage. Where insurance has been effected by the mortgagor prior to entering into the mortgage, and is renewed from time to time, the insurance will be considered as effected under the mortgage: Sinnott v Bowden [1912] 1 Ch 414. It is usual for a mortgage to provide that the mortgagor shall insure the property in the names of both mortgagor and mortgagee for their respective rights, titles and interests. [page 96] The person effecting such insurance can recover the whole and will hold the surplus for the other persons intended to be benefited: Waters v Monarch Fire & Life Assurance Co (1856) 5 E & B 870; 119 ER 705; Castellain v Preston (1883) 11 QBD 580; A Tomlinson (Hauliers) v Hepburn [1966] AC 451; Hordern v Federal Mutual Insurance Co of Aust Ltd (1924) 24 SR (NSW) 267; Reid v Fitzgerald (1926) 41 WN (NSW) 25; Goldsborough Mort & Co Ltd v Maurice (1938) 58 CLR 773; Re Pastoral Finance Assoc Ltd (1922) 35 SR (NSW) 43; Davjoyda Estates v National Insurance Co [1965] NSWR 1529. The Victorian Torrens Act s 76 implies a covenant to insure, but few other states have such a provision. A mortgagee has a charge over the proceeds of an insurance policy in order to secure the debt: Colonial Mutual Insurance Co Ltd v ANZ Banking Group (NZ) Ltd [1995] 1 WLR 1140; [1995] 3 All ER 987.

Covenants to pay mortgagee’s costs 3.21

It is usual for mortgages to contain a personal covenant by the

mortgagor to pay the mortgagee’s costs incurred in the investigation of title and the preparation, execution and registration of the mortgage document. The covenant usually provides that such costs shall be deemed principal moneys advanced under the mortgage and thus they will be subject to interest. To protect against a mortgagee being involved in negotiations for a mortgage which is unsuccessful, it is not uncommon for financial institutions to obtain the intended mortgagor’s agreement to charge an application fee which will cover the mortgagee’s expenses. Unless there is an agreement, the mortgagor has no legal obligation to pay such expenses: Re Cowburn; Ex parte Firth (1882) 19 Ch D 419 at 427. However, once the mortgage is entered into, a term will be implied that the mortgagor must pay the costs of investigating title and of the preparation, execution and registration of the mortgage document, though in the absence of an express covenant, this will only be a personal obligation and not charged on the property: Wales v Carr [1902] 1 Ch 860 and see 40.24. After default, the costs of the mortgagee by reason of the default are charged on the property: Re Wallis; Ex parte Lickorish (1890) 25 QBD 176; Sachs v Ashby & Co (1903) 88 LT 393 and see 40.3 and 40.23. The costs must be such as have been reasonably incurred: Re Adelphi Hotel (Brighton) Ltd [1953] 1 WLR 955; Shercliff v Engadine Acceptance Corp Pty Ltd (No 2) (1982) 3 BPR 9207 at 9210 and EMI Records Ltd v Ian Cameron Wallace Ltd [1982] Ch 59. For a case involving dispute over such costs see Parramatta River Lodge Pty Ltd v Sunman (1991) 5 BPR 12,038.

Covenant to pay rates and taxes 3.22 Although in England such a covenant is unusual, in Australia mortgages almost invariably contain a covenant by the mortgagor for the payment of rates, taxes, charges and outgoings that may become payable or chargeable upon the mortgaged land, with a provision that in case of default the mortgagee shall be at liberty, but not bound, to make the payments. The clause usually provides that if the mortgagee makes the payments the moneys paid shall be deemed principal money and carry interest. Care must be taken to draft such clauses in a wide fashion as a new tax or imposition may come into being during the term of the mortgage that the

mortgagee will wish the mortgagor to bear. The clause is important because most statutory charges are given priority even over a registered Torrens mortgage. A similar covenant is made, under which the mortgagor promises to comply duly and punctually with all statutory requirements, where noncompliance might impose some charge on the mortgaged property or otherwise prejudicially affect the security. Again, [page 97] it is usually provided that on the mortgagor’s default the mortgagee shall be at liberty, but shall not be bound, to comply with the statutory requirement, and that the cost of so doing shall be repayable by the mortgagor on demand and until repaid shall constitute part of the principal and carry interest accordingly.

Attornment clauses 3.23 Under these clauses, the mortgagor in possession acknowledges that he is tenant of the mortgagee, thus creating the relationship of landlord and tenant between them (see 12.10, 19.2, 19.10). Although these clauses have been in vogue for over a century, from time to time local statute law protecting tenants has meant that it was most undesirable to create a tenancy by the mortgagee: see, for example, Associated Securities Ltd v Adorjany [1964–5] NSWR 822. Again, the abolition of the right of distress has made the position of landlord less powerful. Indeed, in Steyning and Littlehampton Building Society v Wilson [1951] Ch 1018 at 1020, Danckwerts J said that such a clause ‘is entirely obsolete and at the present time performs no useful purpose’. However, in Regent Oil Co Ltd v J A Gregory (Hatch End) Ltd [1966] Ch 402, it was held that the clause operated to enable covenants to be enforced against successors in title of the mortgagor (see (1966) 82 LQR 21). The tenancy created by the clause will, of course, depend on its drafting. In a carefully drafted provision it will be greater than a tenancy at will and thus

does not cease on the assignment by a party of his interest or on the death of a party. The tenancy created is to continue during the continuance of the security, subject to the mortgagee’s right to determine it as provided by the mortgage document: see the Regent Oil case, above, at 438-9. The tenancy created by an attornment clause is commonly made determinable by re-entry by the mortgagee without notice after default by the mortgagor. The taking of proceedings for possession by the mortgagee is equivalent to re-entry and no notice terminating the tenancy is necessary before proceedings are begun: Woolwich Equitable Building Society v Preston [1938] Ch 129 at 131, 132; McKinnon v Portelli (1959) 60 SR (NSW) 343. However, if the clause provides for notice of a particular length, proceedings cannot be commenced until such a notice has been given and has expired: Hinckley and Country Building Society v Henny [1953] 1 WLR 352; [1953] 2 All ER 515. The clause is recognised as having been created for the purpose of giving an additional security to the mortgagee. Thus the existence of the clause does not derogate from his rights as mortgagee: Re Kitchen; Ex parte Punnett (1880) 16 Ch D 226 at 235. Where the land mortgaged is under the Torrens system, an attornment clause will operate by estoppel only: Partridge v Mcintosh & Sons Ltd (1933) 49 CLR 353; and see Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245. An attornment by the mortgagor to a second mortgagee is valid even though he has attorned tenant to the first mortgagee: Re Kitchin; Ex parte Punnett (1880) 16 Ch D 226. See, as to Torrens land, Ex parte Wilson; Re Bavister (1925) 25 SR (NSW) 375.

Mortgagor’s right to possession 3.24 It is not difficult to imply into a modern mortgage where nothing is said about possession that the mortgagor has the right to be in possession. Such a mortgagor is entitled to receive the rents without any obligation to account to the mortgagee: Moss v Gallimore (1729) 1 Doug 279; 99 ER 182; and see Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245. The matter is fully covered in 12.4.

[page 98]

Covenants by the mortgagee 3.25 Although most of the covenants in a mortgage will be made by mortgagor to mortgagee, the mortgage will from time to time contain covenants by the mortgagee. These will vary with the particular circumstances. One illustration is with a mortgage to finance building, the mortgagee may covenant to make further advances on production of a certificate from an architect or the like that a certain state of progress has been made in the erection of a building on the mortgaged land: see, for example, Sibbles v Highfern Pty Ltd (1987) 164 CLR 214. See also Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439, a case where the mortgagee was financially unable to make all the installments of loan. It is also not uncommon with mortgages of developmental land to include a covenant that the mortgagee is to consent to the lodging of plans of subdivision and the like with government authorities and to release individual lots as they are sold if a certain capital sum is paid: see, for example, Bank of New South Wales v Cadea (No 18) Pty Ltd (1995) 7 BPR 14,301. A mortgagee owes a duty to the mortgagor (and others) to perfect its security, for example by registering its bill of sale, Wulff v Jay (1872) LR 7 QB 556. This is because the mortgagee’s duty is to hand over the security on redemption: Yorkshire Bank plc v Hall [1999] 1 WLR 1713 at 1728; [1999] 1 All ER 879 at 893 (CA).

D. Extent of the Security Fixtures 3.26 A legal mortgage of land comprises the land including what is fixed to the land at the time of the mortgage and what is afterwards annexed to the land by the mortgagor, see Mather v Fraser (1856) 2 K & J 536; 69 ER 895; Walmsley v Milne (1859) 7 CB (NS) 115; 141 ER 759; Longbottom v Berry (1869) LR 5 QB 123; Holland v Hodgson (1872) LR 7 CP 328; Smith v Maclure (1884) 32 WR 459; Hobson v Gorringe [1897] 1 Ch 182; Reynolds v Ashby & Son [1904] AC 466; Ellis v Glover & Hobson Ltd [1908] 1 KB 388;

Vaudeville Electric Cinema v Muriset [1923] 2 Ch 74; Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700; Hulme v Brigham [1943] KB 152; Kay’s Leasing Corp Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VR 429; Sanwa Australia Leasing Ltd v National Westminster Australia (1988) 4 BPR 9514. This principle applies to Torrens system mortgages and to equitable mortgages. It also applies to mortgages of leaseholds and the principle applies so far as the mortgagee is concerned notwithstanding that the articles may be removable by the tenants. However, the mortgagee may not sell the fixtures separately from the land charged: Re Yates; Batcheldor v Yates (1888) 38 Ch D 112 at 125-6; Kay’s Leasing Corp case, above, at 435. Thus in North West Trust Co v Rezyn Developments Inc (1991) 81 DLR (4 th) 751, tenpin bowling alleys placed in the mortgaged building were held to be covered by the mortgage and the mortgagee was not bound by a custom of the industry that such things were regarded as chattels. See also in Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700. By s 8 of the Personal Property Securities Act 2009 (Cth) (PPSA), securities over fixtures are not subject to that Act.

Accretions 3.27 Everything that the mortgagor adds to the mortgaged property to improve its value is an accretion to the property for the benefit of the mortgagee, as are additions made by a second or subsequent mortgagee: Maxwell v Ashe (1752) 1 Bro CC 444n; [page 99] 28 ER 1229; Re Kitchen; Ex parte Punnett (1880) 16 Ch D 226 at 236; Landowners West of England Land Drainage & Enclosure Co v Ashford (1880) 16 Ch D 411 at 433. Similarly in the case of a mortgage of chattels: Webster v Power (1868) LR 2 PC 69 (sheep), and see Tucker v Farm & General Investment Trust Ltd [1966] 2 QB 421, a hire purchase case. Where a mortgagor acquires an interest in place of the interest mortgaged, the mortgagee will be entitled to it for the purpose of the security. As to shares,

see 6.17. If a sub-lessee becomes the lessee under s 130 of the NSW Act or s 146(4) of the Victorian Act, and his interest under the sub-lease had been mortgaged, the new lease becomes a substituted security: Chelsea Estates Investment Trust Co Ltd v Marche [1955] Ch 328, but see Hammersmith LBC v Tops Shop Ltd [1990] Ch 237. If a long-term lease is the subject of a mortgage and that is converted into a fee simple pursuant to s 134 of the NSW Act or s 153 of the Victorian Act, the fee will be subject to the mortgage by dint of the section. As to accessions connected to personal property, see PPSA Part 3.3.

Statutory accretion 3.28 A statute may make a demand on the mortgagee, but permit him to add the cost of compliance to the principal debt. Thus s 175 of the Rural Lands Protection Act 1989 (NSW) adds to the mortgage debt any moneys spent by a mortgagee in erecting or maintaining a rabbit-proof, dog-proof or marsupial-proof fence.

Alterations to mortgagor’s leasehold interests 3.29 In the case where the mortgage or charge is over leasehold, if a new lease or other interests of a like nature in the same property is obtained by the mortgagor, either on a forfeiture, by any contrivance or otherwise, of the original lease, or by other means, the proprietor of the mortgage or charge will have the benefit of the new lease or interest for the purpose of the security (Moody v Matthews (1802) 7 Ves 174; 32 ER 71; Hughes v Howard (1858) 25 Beav 575; 53 ER 756; Sims v Helling (1851) 21 LJ Ch 76; Leigh v Burnett (1885) 29 Ch D 231); and see Re Hill Pottery Co (1886) 15 WR 97, involving a situation where unfinished pottery had been completed at the cost of an execution creditor, who was allowed such cost when the property was sold by the liquidator. On the other hand, if the mortgagee of a term obtains a renewal the mortgagor will generally have the benefit of the new term upon redemption because the term comes from the same root, and is subject to the same equity: Rakestraw v Brewer (1729) 2 P Wms 511; 24 ER 839; Leigh v Burnett (1885)

29 Ch D 231; Re Biss; Biss v Biss [1905] 2 Ch 40 at 62. The rule applies with greater force where the new lease has been obtained by any improper practice: Fitzgerald v Rainsford (1804) 1 Ball & B 37n; though compare Nesbitt v Tredennick (1808) 1 Ball & B 29. Where a mortgagee has exercised an option contained in a lease to purchase the freehold, the mortgagor will have the benefit upon redemption: Nelson v Hannam [1943] Ch 59. If the mortgagor is given a right to acquire more property, such as the right to buy a closed road because he is an adjacent owner, the extra land will not be charged with the mortgage unless it is so consolidated with the mortgaged land that it cannot be conveyed separately: King v AGC (Advances) Ltd [1983] 1 VR 682. It should be noted that a surrender of mortgaged leaseholds does not extinguish the mortgagee’s interest — the mortgagee will thereupon be entitled to possession: Ushers Brewery Ltd v PS King & Co (Finance) Ltd (1969) 113 Sol Jo 815; E S Schwab & Co Ltd v McCarthy (1975) 31 P & CR 196 at 209 and see also London & County (A & D) Ltd v Wilfred Sportsman Ltd [1971] Ch 764. [page 100]

Relief against forfeiture 3.30 A mortgagee of leasehold is at risk of the lessee failing to meet its obligations to the landlord and the latter forfeiting the estate. That risk is lessened by the mortgagee’s ability to apply for relief against forfeiture under equitable principles or pursuant to statute. These matters are discussed in 37.10 ff.

E. Custody of Deeds Mortgagee’s rights 3.31 A legal mortgagee is entitled to possession of the title deeds as an incident of his estate. Failure to take custody of the deeds may clothe the mortgagor or another person with the indicia of title and may postpone the

mortgagee to other encumbrancers: see 24.41. The rationale is that the estate owner has the right to hold the deeds and muniments of title as against a stranger: Buckhurst’s Case (1595) Moore KB 687; 72 ER 713; Smith v Chichester (1842) 2 Dr & War 393; Clayton v Clayton [1930] 2 Ch 12 at 21. The right to deeds does not attach to a mortgagee of leasehold land apart from contract: Wiseman v Westland (1826) 1 Y & J 117 at 122; 148 ER 610 at 612. A first mortgagee’s right to the deeds will not prevail against an equitable mortgagee in possession of the deeds where the holder has a better equity: Cousins, The Law of Mortgages, 2nd ed, Sweet & Maxwell, London, 2001, 16.12, p 256; and see Agra Bank Ltd v Barry (1874) LR 7 HL 135. An equitable mortgagee, not having the legal estate, has no right to the deeds unless the mortgage provides that he shall have such a right. But an equitable mortgagee by deposit of deeds is entitled to retain the deeds until payment or tender of the amount due on his security assuming the mortgage is valid: see Re Molton Finance Ltd [1968] Ch 325 at 333. This right to retain the deeds is not a separate legal or common law lien: see Sunnucks (1970) 33 Mod LR 131 and see 3.44 ff. As to the mortgagee’s right to title deeds when the statutory power of sale has become exercisable, see 20.8.

Production of deeds by mortgagee 3.32 Section 96 of both the NSW Act and of the Victorian Act confers on the mortgagor a right ‘from time to time at reasonable times on his request, and at his own cost and on payment of the mortgagee’s costs and expenses in this behalf by himself or his solicitor, to inspect and to be supplied with copies or abstracts of or extracts from, the documents of title or other documents relating to the mortgaged property in the custody or power of the mortgagee’. The section applies notwithstanding any stipulation to the contrary. Section 96(2) applies the section to the Torrens system and provides that the mortgagee must produce documents to permit any authorised dealing by the mortgagor. ‘Mortgagor’ includes all persons entitled to redeem the mortgage; ‘Authorised’ means authorised under the security not just authorised under the Torrens system: Motor Auctions Pty Ltd v John Joyce Wholesale Cars Pty Ltd (1997) 8 BPR 15,565 at 15,573; Holley v

Metropolitan Permanent Building Society [1983] 2 Qd 786. In Hypec Electronics Pty Ltd v Registrar-General [2005] NSWSC 1213; (2005) 64 NSWLR 679 ‘authorised dealing’ was held to mean a dealing which is permitted or not forbidden between mortgagor and mortgagee. A transfer by the mortgagor is not an authorised dealing (Corin v Patton (1990) 169 CLR 540 at 561 192 ALR 1 at 15), nor is a transfer from one joint mortgagor to another: Motor Auctions Pty Ltd v John Joyce Wholesale Cars Pty Ltd (1997) 8 BPR 15,565 at 15,573. See also 4.31. As to which documents are in the power of the mortgagee, see Fenwick v Reed (1816) 1 Mer 114; 35 ER 618 (in possession of solicitor); Rogers v Rogers (1842) 6 Jur 497 [page 101] (sub-mortgage); Palmer v Wright (1846) 10 Beav 234; 50 ER 572. Query, where there are several mortgagors, whether all must join in a request under this section: see Holley v Metropolitan Permanent Building Society [1983] 2 Qd R 756 and Thames Guaranty Ltd v Campbell [1985] QB 210. This section altered the position under the general law that a mortgagee need only show the mortgagor the documents if he were paid his principal interest and costs: Chichester v Marquis of Donegall (1870) LR 5 Ch App 497; Bank of New South Wales v O’Connor (1889) 14 App Cas 273 at 283; and see Patch v Ward (1865) LR 1 Eq 436. In the case of a partial redemption, where the mortgagee retains the deeds relating to the remainder of his security he must covenant to produce those deeds or give an acknowledgment for production to the mortgagor: see Victorian Act s 64. In proceedings brought for sale by a subsequent mortgagee against the mortgagor, the prior mortgagee will not be ordered to lodge the deeds in court, if willing to produce them and let copies be taken under this section: Armstrong v Dixon [1911] 1 Ir R 435. The mortgagee’s liability for production is owed to the mortgagor and any person deriving title under the original mortgage or entitled to redeem a

mortgage according to his estate, interest or right in the mortgaged property, as such a person is a ‘mortgagor’ under the definition section: s 7(1) of the NSW Act, s 18 of the Victorian Act.

F. Variation of the Mortgage Generally 3.33 The provisions of a mortgage are frequently varied, for example, the rate of interest or the length of the mortgage term may be increased when there is a general increase in interest rates. A variation may however only be effected by agreement between the parties, either initially because the mortgage deed itself contains a provision for variation, or subsequently by mutual agreement between the parties. Without such agreement the mortgage cannot be varied unilaterally. Of course if there is nothing to restrict the lender from calling the loan in, he will be in a strong bargaining position to enforce a variation. Even where there is a provision for variation, the parties may prefer to have a complete replacement of the original mortgage. When this is done, care must be taken not to lose any priority. The effect of a variation on any guarantee must be carefully considered: see Burnes v Trade Credits Ltd [1981] 1 NSWLR 93; [1981] 1 WLR 805; [1981] 2 All ER 122. It seems that when an equitable mortgage is replaced by a legal mortgage there will be no merger if that result is necessary to preserve priority: Bank of New Zealand v Farrier-Waimak Ltd [1964] NZLR 9 at 19 (citing Whiteley v Delaney [1914] AC 132) and on appeal [1965] AC 376 (PC); E S Schwab & Co Ltd v McCarthy (1975) 31 P & CR 196 and see 36.2. Like any other contract a mortgage may, as regards its contractual elements, be varied, provided the variation complies with the rules as to variation of contracts. The rule in Pigot’s case (1614) 11 Co Rep 266; 77 ER 1177; [1558–1774] All ER Rep 50 may operate to avoid a deed if there is a unilateral alteration to its text: see, however, Armor Coatings (Marketing) Pty Ltd v General Credits (Finance) Pty Ltd (1978) 17 SASR 259; Mitchelson v Mitchelson (1979) 24 ALR 522 and Canadian Imperial Bank of Commerce v Skender [1986] 1 WWR 884. The rule in Pigot’s case has been abolished in some jurisdictions: see, for example, Conveyancing Act 1919 (NSW) s 184. As regards the proprietary aspects of mortgage, for example, the property

mortgaged, any variation will require the appropriate disposition, that is a release or mortgage or an agreement therefor, satisfying the necessary formalities, or the doctrine of part performance. [page 102] It is sometimes important to distinguish between rescission and a new contract on the one hand and mere variation on the other, especially where legislation requires formalities to create valid contracts. This question is to be answered by considering the intention of the parties: see Morris v Baron & Co Ltd [1918] AC 1 and New Hart Builders Ltd v Bradley [1975] Ch 342.

Effecting the variation 3.34 In New South Wales, a variation may be made to a mortgage by endorsement as provided by s 91 of the NSW Act. Subject to registration, such variation operates from the date of the memorandum of endorsement. The Fifth Schedule to the NSW Act sets out various short forms which may be used to effect the most common variations. Sometimes local legislation, such as moneylending legislation requiring the signing of agreements before money is lent, means that the only course open to the parties is to discharge the mortgage and enter into a fresh one, rather than enter into a variation. Where the subject matter of the mortgage is changed, by adding additional property or by substituting a different property or taking property out of the mortgage, the appropriate charge or release will be necessary. A variation of the amount of principal may be held to amount to a new mortgage, compounding the terms of the original mortgage plus the variation: see Scarel v City Loan & Credit Corp Pty Ltd (1986) 4 BPR 9226, citing Re Goldstone’s Mortgage [1916] NZLR 489 and Public Trustee v Mortleman [1928] NZLR 337. Between development companies and banks or other institutions the original mortgage is frequently varied as facilities are increased and in this context deeds of consolidation are frequently encountered: see 31.1.

Ordinarily where there are two mortgages of the same property, the mortgagees may agree to vary the order of priority without the mortgagor’s concurrence. The mortgage may exclude such a right: Cheah Theam Swee v Equiticorp Finance Group Ltd [1992] 1 AC 472.

Effect on subsequent encumbrances 3.35 Where the mortgage secures a fixed sum with interest at a fixed rate, a subsequent encumbrancer cannot be affected by an increase of the principal or of the rate of interest: Scottish and Newcastle Breweries Ltd v Liquidator of Rathbourne Hotel Co Ltd [1970] SLT 383 (as to further advances see 25.13). In such a case, where the equity is adequate, the subsequent encumbrancer will usually be willing to allow the increase, and there will be a deed of postponement, see 24.3. Where the prior mortgage provided for variation, for instance where it was security for such sum as shall be owing from time to time, or provided for an increase in the rate of interest, a subsequent encumbrancer takes subject to those terms and the first mortgagee has priority consistent with such terms. The terms of an equitable mortgage usually provide for the execution of a legal mortgage when called upon for such by the mortgagee: see 3.49. The subsequent legal mortgage may cause the prior equitable mortgage to disappear, by the latter merging in the former: see 36.13. However, assuming that the prior equitable mortgage was duly registered, it is not thought that there would be any loss of priority. For deeds of postponement see 24.3; for variation of priorities see Cheah Theam Swee v Equiticorp Finance Group Ltd [1992] 1 AC 472 (PC). [page 103]

G. Equitable Mortgages Mortgage by deposit of deeds 3.36 The delivery to the creditor or his agent of deeds or other documents of title with intent to create a security thereon constitutes an equitable mortgage: Russel v Russel (1783) 1 Bro CC 269; 28 ER 1121; Bank of New

South Wales v O’Connor (1889) 14 App Cas 273 at 282; R v Roget (1992) 7 WAR 356; see also 1.33 & 1.34. The court makes use of the doctrine of part performance to bring about this result: Ex parte Hooper (1815) 19 Ves 477 at 479-80; 34 ER 593 at 593-4; Maddison v Alderson (1883) 8 App Cas 467 at 480; Francis v Francis [1952] VLR 321 at 339. The delivery need not be of the debtor’s own deeds, but some third party’s: Re Wallis & Simmonds (Builders) Ltd [1975] 1 All ER 561; World Tech Pty Ltd v Yellowin Holdings Pty Ltd (1992) 5 BPR 11,729 at 11,732; see also 1.43 (collateral security) and 3.39 (co-owners). The deposit may be with or without a memorandum or other instrument of charge. Where there is an accompanying document, it is a question of construction whether the security is constituted by the deposit or by the document: Hari Sanker Paul v Kedar Nath Saha [1939] 2 All ER 737, and see Re White Rose Cottage [1965] Ch 940. Once a deed has been deposited as security for a loan, the lender is not bound by any limitations placed upon the transaction by the owner which are unknown to the lender: Heid v Reliance Finance Corp Pty Ltd (1983) 154 CLR 326 at 335; CNG Co (Aust) Pty Ltd v Australia & New Zealand Banking Group Ltd (1992) ACL Rep 185 NSW 3; (1992) 6 BPR 97,434. However, the owner of the deed must concur in the lodging of his deed as security: CNG Co (Aust) Pty Ltd v Australia & New Zealand Banking Group Ltd, above. In UTC Ltd v NZI Securities Australia Ltd (1991) 4 WAR 349 at 351, Malcolm CJ said: It is well settled that a mere deposit of title deeds as security for a loan constitutes an equitable charge over the subject matter to which the title deeds relate: see Matthews v Goodday (1861) 31 LJ Ch 282. Where a share certificate is deposited as security for a loan without any signed transfer, an equitable mortgage of the shares the subject of the certificate is created; see Harold v Plenty [1901] 2 Ch 314. In such a case, where there is an equitable mortgage so created, the court may order a sale on the application of the mortgagee, in the event of default; see Matthews v Goodday; Tennant v Trenchard (1869) 4 Ch App 537 at 542; Oldham v Stringer (1884) 51 LT 895; Re Owen [1894] 3 Ch 220; and Deverges v Sandeman Clark & Co [1902] 1 Ch 579. An equitable mortgagee by way of deposit of title deeds may obtain an order of the court for possession of the subject matter and may foreclose: see Re Postle; Ex parte Bignold (1835) 4 Deac & Ch 259; Garfitt v Allen (1887) 37 Ch D 48 at 50; Barclays Bank Ltd v Bird [1954] Ch 274 at 280 (possession); James v James (1873) LR 16 Eq 153; Backhouse v Charlton (1878) 8 Ch D 444; Jones v Davies [1940] WN (Eng) 174 (foreclosure). A deposit of a share certificate as security for a loan has been held to amount to an equitable mortgage by deposit, as distinct from a mere pledge and is, therefore, properly the subject of foreclosure: see Harrold v Plenty.

Thus in Westpac Banking Corp v Cronin (1990) 6 BPR 13,105 the parties each claimed that there was an express agreement as to how a bank should utilise title deeds left with it. As the plaintiff bank failed to prove the express agreement on which it relied, it failed to obtain a declaration of equitable mortgage. See also CNG Co (Aust) Pty Ltd v Australia and New Zealand Banking Group Ltd (1992) 6 BPR 13,101. In Theodore v Mistford Pty Ltd (2005) CLR 612; 219 ALR 296, the proprietor’s son deposited the title deeds. The proprietor denied his authority to do so, but the court held her authority sufficient. The fact that the son made the deposit was not a critical factor. There is a very detailed discussion of the cases affecting this topic in the annotations to Russel v Russel (above) in White and Tudor’s Leading Cases in Equity, 9th ed, Sweet & Maxwell, London, 1928, pp 77 ff; see in general 1.33 ff of this work. [page 104]

Documents accompanying deposit 3.37 Where there is a memorandum of charge, this will usually contain an agreement to execute a legal mortgage. Even in the absence of express agreement to this effect, the holder would be entitled to call for a legal mortgage unless the right is excluded: Birch v Ellames (1794) 2 Anst 427; 145 ER 924; Parker v Housefield (1834) 2 My & K 419 at 421; 39 ER 1004 at 1004 but see Sporle v Whayman (1855) 20 Beav 607; 52 ER 738 and Ryan v O’Sullivan [1956] VLR 99; see also 3.46, 16.2 and 21.3. The memorandum will also usually include a power of attorney to execute such a mortgage: see 3.46 and 3.47. Where there is no memorandum in writing, the charge created is prima facie unenforceable because of s 23C and 54A of the NSW Act (s 127 of Victorian Instruments Act), but its validity has long been recognised on the ground that the deposit of deeds implies an agreement to make a mortgage and also operates as part performance: Russel v Russel (1783) Bro CC 269; 28 ER 1121; Burgess v Moxon (1856) 2 Jur NS 1059; Re Wallis & Simmonds (Builders) Ltd [1974] 1 All ER 561; [1974] 1 WLR 391; Thames Guaranty

Ltd v Campbell [1985] QB 210; [1984] 2 All ER 585. Consequently, actual deposit of the deeds is essential: Re Beavan; Ex parte Coombe (1819) 4 Madd 249; 56 ER 698; Re Ridge; Ex Parte Halifax (1842) 2 Mont D & De G 544; Bank of New South Wales v O’Connor (1889) 14 App Cas 273 (note Lord Eldon’s report in Ex parte Haigh (1805) 11 Ves 403; 32 ER 1143). In the absence of actual deposit, the security must rest on a document in writing signed by the mortgagor or his authorised agent: Re Leathes (1833) 3 Deac & Ch 112. If there is such a document, the mortgage will be good even though the documents to be deposited pursuant to it are not executed at its date: Re Carter & Justins; Ex parte Sheffield Union Banking Co (1865) 13 LT 477. There is no equitable mortgage if documents are deposited by mistake: Wardle v Oakley (1864) 36 Beav 27 at 30; 55 ER 1066 at 1067. Parting with the deeds does not of itself constitute an abandonment of the security: UTC Ltd (in liq) v NZI Securities Australia Ltd (1991) 4 WAR 349. The charge created by the deposit is contractual, for, although it arises by presumption, it does not arise by operation of law: Re Wallis & Simmonds (Builders) Ltd [1974] 1 All ER 561; [1961] 1 WLR 391 and see article by Sunnucks (1970) 33 Mod LR 131.

Partial deposit of deeds 3.38 The mortgage may be valid if only some or one of the material documents of title to the property have been deposited: Re Daintry; Ex parte Arkwright (1864) 3 Mont D & De G 129; Lacon v Allen (1856) 3 Drew 579; 61 ER 1024. This is so even though a complete title is not thereby shown to the debtor’s interest in the property: Ex parte Wetherell (1804) 11 Ves 398; 32 ER 1141; Roberts v Croft (1857) 24 Beav 223; 53 ER 343 (affirmed (1857) 2 De G & J 1; 44 ER 887). It follows that if part of the material documents are deposited with one person and part with another, each may have a good security unless there is evidence of a contrary intention: Roberts v Croft, above; Re Price; Ex parte Pearse &Prothero (1820) Buck 525. An equitable mortgage may be created by deposit of a receipt for purchase money containing the terms of the agreement for sale, if there are no title deeds or conveyance in the depositor’s possession: Goodwin v Waghorn (1835) 4 LJ Ch 172. It may even be created by deposit of a map of the property (see Simmons v Montague [1909] 1 Ir R 87), but not by the deposit of an unattested copy of a deed: Re Borrow; Ex parte Broadbent (1834) 1

Mont & A 635. An equitable sub-mortgage of an equitable security may be created without a deposit of the memorandum given with the original security: Re Hildyard; Ex parte Smith (1842) 2 Mont D & De G 587. [page 105]

Co-owners 3.39 In England it has been held that a purported mortgage by deposit by one co-owner without the consent of the others will be ineffective, in the absence of facts giving rise to estoppel: see Thames Guaranty Ltd v Campbell [1985] QB 210; [1984] 2 All ER 585. This appears to be a result of the English legislation. In Australia, there is no such bar as is clear from cases such as Lyons v Lyons [1967] VR 169. The subject is closely examined in 11.4.

Proof of intent to create equitable mortgage 3.40 The intent to create an equitable mortgage by deposit of documents may be established by writing alone, or coupled with parol evidence: Casberd v AG (1819) 6 Price 411; 146 ER 850; Ede v Knowles (1843) 2 Y & CCC 172; 63 ER 76; Burgess v Moxon (1856) 2 Jur NS 1059; Re Boulter; Ex parte National Provincial Bank of England (1876) 4 Ch D 241. It may even be established by parol evidence alone: Russel v Russel (1783) 1 Bro CC 269; 28 ER 1121; Ex parte Kensington (1813) 2 Ves & B 79; 35 ER 249; Ex parte Haigh (1805) 11 Ves 403; 32 ER 1143; Ex parte Mountford (1808) 14 Ves 606; 33 ER 653. It may also be established by inference arising from the deposit, where the possession of the documents by the holder cannot be otherwise explained: Edge v Worthingon (1786) 1 Cox Eq Cas 211; 29 ER 1133; Ex parte Langston (1810) 17 Ves 227; 34 ER 88; Re Wallis & Simmonds (Builders) Ltd [1974] 1 All ER 561; [1974] 1 WLR 391; Thames Guaranty Ltd v Campbell [1985] QB 210; [1984] 2 All ER 585. (See also Re Alton Corp [1985] BCLC 27, where the first transaction was silent as to whether the deposit was security for the loan but a second deposit, expressed as security

for a loan, showed intention that the first deposit was not intended as security.) However, an inference that the deposit was made by way of equitable mortgage will not be made where it contradicts the parties’ correspondence (Thames Guaranty Ltd v Campbell, above) or it is otherwise inconsistent with other contemporaneous statements or has merged in a subsequent security: Ex parte Coombe (1810) 17 Ves 369; 34 ER 142; see also Shaw v Foster (1872) LR 5 HL 321 at 341; Re White Rose Cottage [1965] Ch 940. Further, the inference will not be made by reason of the possession by a solicitor of his client’s deeds, nor against a purchaser who does not enquire into the nature of the possession: Bozon v Williams (1829) 3 Y & J 150; 148 ER 1131; Lloyd v Attwood (1859) 3 De G & J 614 at 651; 44 ER 1405 at 1420. Nor will it be drawn where there is no evidence as to the origin of the possession from which a contract may be inferred: Re Oliver; Ex parte Jones (1837) 3 Mont & A 152; Chapman v Chapman (1851) 13 Beav 308; 51 ER 119; Burgess v Moxon (1856) 2 Jur NS 1059; Dixon v Muckleston (1872) LR 8 Ch App 155. Where deeds are delivered merely for the purpose of enabling a solicitor to prepare a legal mortgage, with no intention of giving an immediate security, an equitable mortgage is not usually created by the deposit: Norris v Wilkinson (1806) 12 Ves 192; 33 ER 73; Lloyd v Attwood (1859) 3 De G & J 614; 44 ER 1405. It is otherwise where there is an immediate advance or a forbearance from suing even though the deeds are deposited for the purpose of preparing security documentation as, in reality, the deeds are given as part of the security: Edge v Worthington (1786) 1 Cox Eq Cas 211; 29 ER 1133; Ex parte Wright (1812) 19 Ves 255 at 258; 34 ER 513 at 514; Ex parte Bruce (1813) 1 Rose 374; Hockley v Bantock (1826) 1 Russ 141; 38 ER 55; Keys v Williams (1838) Y & C Ex 55 at 61; 160 ER 612 at 614; Sun Hung Kai Bank Ltd v AG [1986] HKLR 587, affirmed sub nom Sun Tai Cheung Credits Ltd v AG [1987] 1 WLR 948 at 950 (PC); World Tech Pty Ltd v Yellowin Holdings Pty Ltd (1992) 5 BPR 11,729 at 11,732 and 1.29. [page 106] Where deeds had been deposited with a court in pursuance of an ultra vires order that a surety provided security for a prisoner’s bail, no equitable

mortgage resulted: AG (NSW) v Della Lucia (1983) 1 Butterworth NSW Conveyancing Casenotes [92208]. An intention to create an equitable mortgage may be inferred from a delivery of the documents to be held, or a direction to hold them, until the settlement of an account or the execution of a mortgage: Fenwick v Potts (1856) 8 De GM & G 506; Lloyd v Attwood (1859) 3 De G & J 614; 44 ER 1405. See also Westpac Banking Corp v Cronin (1990) 6 BPR 13,105 and Arnick Holdings & Ankar Pty Ltd v Australian Bank Ltd (SC (NSW), Bryson J, 4 December 1987, unreported). The question can arise as to whether the parties have reached the point of final contract. There are four possibilities where parties have shaken hands but intend that their deal will be documented, namely: 1. there is a binding agreement even though that agreement will be later documented in a fuller or more precise way; or 2. there is agreement conditional upon the execution of a formal document; or 3. there is no concluded contract at all; or 4. there is a provisional agreement intended to be superseded when the formal document is executed: see Masters v Cameron (1954) 91 CLR 353 at 360; Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628; 4 BPR 9315 at 9321. For an illustration of a case where on the facts there was held to be no binding agreement for mortgage before execution of the documentation, see Fischer v Elders Lensworth Finance Ltd (CA (NSW), 25 September 1992, unreported).

Documents remaining in debtor’s custody 3.41 Where a document remains in the possession of a debtor, a memorandum annexed to it, purporting to appropriate the proceeds to satisfy the debt, will not generally of itself create a charge: Adams v Claxton (1801) 6 Ves 226; 31 ER 1024. But a charge may be created where the document is in the actual keeping of the debtor, if it is in the legal custody of the creditor — for example where the debtor holds it as his solicitor (Middleton v

Pollock; Ex parte Elliott (1876) 2 Ch D 104; Sharp v Jackson [1899] AC 419; Taylor v London and County Banking Co [1901] 2 Ch 231; Re Pidcock; Penny v Pidcock (1807) 51 Sol Jo 514) — even though the creditor was not aware of the creation of the security: Re Beetham; Ex parte Broderick (1887) 18 QBD 766; Ex parte Coming (1803) 9 Ves 115; 32 ER 545. A verbal direction to a third party who has possession of the deeds to hold for the creditor is not a part performance and will not create an equitable mortgage; but it will be otherwise if there is a written memorandum: Lloyd v Attwood (1859) 3 De G & J 614; 44 ER 1405; see also UTC Ltd (in liq) v NZI Securities Australia Ltd (1991) 4 WAR 349 and 2.3.

Property affected by the mortgage 3.42 An equitable mortgage by deposit will prima facie affect the beneficial interest of the mortgagor in all the property comprised in the deposited documents (Ashton v Dalton (1846) 2 Coll 565; 63 ER 863) including accretions (Re Baker; Ex parte Bisdee (1840) 1 Mont D & De G 333; Re New; Ex parte Farley (1841) 1 Mont D & De G 683; Chissum v Dewes (1828) 5 Russ 29; 38 ER 938; see 1.19 ff), but the agreement, if any (which may be explained by other written evidence), will be the measure of security (Re Amner; Ex parte Hunt (1840) 1 Mont D & De G 139; Re Medley; Ex parte Glyn (1840) 1 Mont D & De G 29), as well with respect to the particular property included in the security: Re Leathes; Ex Parte Leathes (1833) 3 Deac & Ch 112; Wylde v Radford [page 107] (1863) 33 LJ Ch 51. The security will not, as against prior encumbrancers, be extended to property not included in the deposited documents, merely by reason of a false statement by the mortgagor to the mortgagee that such property is included therein (Jones v Williams (1857) 24 Beav 47; 53 ER 274), as to the extent to which the interest of the mortgagor therein is to be affected: Pryce v Bury (1853) 2 Drew 41; 61 ER 633. And if the memorandum of deposit refers to deeds which are not shown to have been deposited, and other deeds are deposited, the actual deposit will constitute the security: Re Moore; Ex parte Powell (1842) 6 Jur 490.

Debt secured by the mortgage 3.43 An equitable mortgage will, prima facie, be a security only for the debt specified in the agreement, and will not include debts previously due from the mortgagor to the mortgagee: Mountford v Scott (1823) Turn & R 274; 37 ER 1105; Re Cowderoy; Ex parte Martin (1835) 2 Mont & A 243. But it may include such debts, if an intention that it should do so appear from the circumstances: Re New; Ex parte Farley (1841) 1 Mont & De G 683; Re Hildyard; Ex parte Smith (1842) 2 Mont D & De G 587. An equitable mortgage by deposit, although accompanied by a written agreement, may be extended to further advances, even where changes have occurred in the depositee’s firm: Ex parte Kensington (1813) 2 Ves & B 79; 34 ER 249. The inference that this is so may be assisted by written or parol evidence: Ex parte Whitbread (1812) 19 Ves 209; 34 ER 496; Re Burkill; Ex parte Nettleship (1841) 2 Mont D & De G 124. The inference may arise simply from possession of the deeds: James v Rice (1854) 5 De GM & G 461; 43 ER 949 and see Barclays Bank Ltd v Taylor [1974] Ch 137 at 140. A legal security cannot be extended by such means to subsequent advances made on a parol agreement for a further mortgage, because, it is said, the legal mortgagee holds his mortgage on a contract for conveyance only, and not for deposit: Ex parte Hooper (1815) 19 Ves 477; 34 ER 593. Thus a person who has obtained a legal mortgage may, as to future advances, be in a worse position than an equitable mortgagee. And it would seem that the leaving of the documents in the custody of each successive firm is constructively a re-deposit: Ex parte Kensington, above; Re Gye; Ex parte Smith (1841) 2 Mont D & De G 314. It cannot, however, be shown by parol that the depositee holds the documents as security both for his own debt and that of another person (Ex parte Whitbread, above) though, if the depositee himself is not a creditor, but a trustee only, he may be shown to hold them for another’s benefit: Ex parte Whitbread. In order to connect a debt of long standing with the possession of the debtor’s deeds, the creditor must proceed upon a distinct allegation, supported by proper evidence, that they were delivered to him by way of security: Chapman v Chapman (1851) 13 Beav 308; 51 ER 119; Re McMahon; McMahon v McMahon (1886) 55 LT 763. Nor, if the plaintiff’s evidence of the deposit is defective at the hearing, will he be entitled to an

inquiry to enable him to establish his security, because a reference will not then be directed upon a matter which involves the very root of the plaintiff’s title: Holden v Hearn (1839) 1 Beav 445 at 456; 48 ER 1012 at 1016; Kebell v Philpot (1838) 7 LJ Ch 237. The rule in bankruptcy also requires that evidence can be given of the intention to effect a security by deposit. The usual order for sale in cases of an equitable mortgage has been refused after the lapse of 12 years from the date of the deposit, there being no memorandum, and the bankrupt being dead: Re Oliver; Ex Parte Jones (1837) 3 Mont & A 152,327. But an inquiry will sometimes be directed in bankruptcy as to the circumstances attending a deposit of doubtful effect: Re Lindon; Ex parte Clouter (1843) 7 Jur 135.

Equitable mortgage by deposit and lien mutually exclusive 3.44 When an equitable mortgage or charge is created by deposit of title deeds there is an implied contract that the mortgagee or chargee may retain the deeds until he is [page 108] paid. This implied contract is part and parcel of the equitable mortgage or charge. It is not a separate legal or common law lien. It has no independent existence apart from the equitable mortgage or charge. And when the mortgage or charge is avoided — for example, for non-registration — then everything which is ancillary to it is avoided also, so that the contractual right of retention is avoided too: Re Molton Finance Ltd [1968] Ch 325 at 332, 333; [1976] 3 All ER 843 at 845 (CA); Re Wallis & Simmonds (Builders) Ltd [1974] 1 All ER 561; [1974] 1 WLR 39, but note (1970) 33 Mod LR 131.

Agreement to create mortgage 3.45 An agreement to create a mortgage is unenforceable unless it is in writing or there is a proper note or memorandum of it to comply with s 54A of the NSW Act or s 127 of the Victorian Instruments Act: see Fenwick v Potts (1856) 8 De GM & G 506; 44 ER 485; Warner v Wellington (1856) 3 Drew 523; 61 ER 1002; Liverpool Borough Bank v Eccles (1859) 4 H & N 139; 157 ER 789; Mounsey v Rankin (1885) 1 Cab & El 496; Fullerton v

Provincial Bank of Ireland [1903] AC 309; Astor Properties Ltd v Tunbridge Wells Equitable Friendly Society [1936] 1 All ER 531; Williams v Burlington Investments Ltd (1977) 121 Sol Jo 424. The agreement may, of course, be saved under the doctrine of part performance, but it should be noted that of itself the mere payment of money is an equivocal act (Re Whiting; Ex parte Hall (1879) 10 Ch D 615), though when taken with other matters may be sufficient: see Steadman v Steadman [1976] AC 536. The agreement must be for valuable consideration: a voluntary agreement to create a security will not be enforced (see 1.27). The money must have been paid (Rogers v Challis (1859) 27 Beav 175; 54 ER 68; see also Lucia Heights Pty Ltd v Comptroller of Stamps [1985] VR 338), or, in the case of an antecedent debt, there must be an agreement to forbear from suing, or an actual forbearance: Alliance Bank v Broom (1864) 2 Dr & Sim 289; 62 ER 631; Fullerton v Provincial Bank of Ireland [1903] AC 309. It is not an infrequent occurrence for banks to include a clause in a loan agreement that the borrower will execute a mortgage ‘if so requested’. This will ordinarily be sufficient to create an equitable mortgage: Re Beetham; Ex parte Broderick (1886) 18 QBD 380 and 766; Rooker v Hoofstetter (1896) 26 SCR 41 (Can); Re Collins (1982) 140 DLR (3d) 755. However the mortgage will only come into being on the request for it being made: Penny Nominees Pty Ltd v Fountain (SC (NSW),Young J, 2 May 1989, unreported) and Canadian Imperial Bank of Commerce v Rehnby (1992) 22 RPC (2d) 93. As to specific performance of agreements to grant a mortgage, see 1.41.

Form of memorandum accompanying deposit 3.46 Where the memorandum accompanies a deposit of title deeds it should refer to the deposit and state that the deposit was made to the intent that the property should be equitably charged with the repayment of the moneys advanced. There should be express reference to the consideration or forbearance which, as mentioned in 3.45, is essential for a valid equitable mortgage. Express reference should also be made that the land is charged with the payment of interest, but an equitable mortgage by deposit of title deeds carries interest even in the absence of such a provision: Re Drax; Savile v Drax [1903] 1 Ch 781 at 794 and 796. Where the memorandum is under seal (thus giving the mortgagee the

statutory power to appoint a receiver and to sell: NSW Act s 115; see also 18.3 and 20.5) it should also contain a declaration by the mortgagor that he holds the property on trust for the mortgagee and in addition or alternatively a power of attorney for the mortgagee to convey the property in the name of the mortgagor. Notwithstanding that he sells in the name of the mortgagor, he sells as mortgagee and subject to the duty to obtain a proper price (see 20.21): Palmer v Barclays Bank Ltd (1971) 23 P & CR 30. Every memorandum should also contain an undertaking by the mortgagor to execute a legal [page 109] charge when called upon to do so, although an equitable mortgagee is entitled to call for a legal mortgage even in the absence of such a provision; see 3.37 ff and 16.2. Upon the execution of such a legal mortgage, it seems that the equitable mortgage continues in existence (for the purposes of priority, etc), notwithstanding the usual rule of merger of a lower in a higher security: see 36.13.

Power of attorney 3.47 It is not infrequent for a power of attorney by which the mortgagee is appointed to execute a legal mortgage in the name and on behalf of the mortgagor is included in the memorandum as additional protection to the mortgagee. It is desirable that such power should be expressed to be by way of security in the memorandum. If this is so, then unless the person dealing with the attorney knows that it was not in fact given by way of security, he is entitled to assume that the power is incapable of revocation except by the appointor acting with the attorney’s consent, and so the third person will be treated as having notice of the revocation only if he knows that the power has been revoked by the appointor acting with the attorney’s consent: see NSW Act s 161 now replaced by s 47 of the Powers of Attorney Act 2003.

Undertaking to execute legal mortgage 3.48 For the implied right of an equitable mortgagee to a legal mortgage, see 3.37. The undertaking should be to execute a mortgage in such form and containing such covenants and conditions as the mortgagee shall reasonably

require. It should be noted that a covenant for payment of principal and interest is reasonable: Saunders v Milsome (1866) LR 2 Eq 573. This would not entitle the right of consolidation: Farmer v Pitt [1902] 1 Ch 954. The undertaking should expressly refer to such provisions. Where there is no deposit of deeds the intention to create an equitable mortgage must be clear. The instrument should contain a charge on the land of principal and interest. The memorandum should be under seal if the mortgagee is to have the statutory powers and the same requirements and provisions are applicable as where the memorandum accompanies a deposit.

Defective legal mortgage 3.49 A document, which for some defect of form, fails to take effect as a legal mortgage will be a good equitable mortgage if otherwise valid: see Taylor v Wheeler (1706) 2 Salk 449; 91 ER 388, involving a defective mortgage of copyhold, and 1.34–1.35. The basis of this is the court’s power specifically to perform a contract to create a legal interest in land: see E Sugden, A Concise and Practical Treatise on the Law of Vendors and Purchasers of Estates, 14th ed, H Sweet, London, 1862, p 317; Basma v Weekes [1950] AC 441. Thus a document signed by a trustee admitting a breach of trust with the words ‘holding the deeds of my house and policies of assurance as a collateral security’ constituted an equitable mortgage: Baynard v Woolley (1855) 20 Beav 583; 52 ER 729. When such a transaction was commonplace, a memorandum by a husband to charge his interest in the future property of his wife, also operated as an equitable mortgage: Carew v Arundell (1861) 8 Jur NS 71. So too a defective warrant of attorney to confess to judgment in ejectment which was held to create a valid equitable charge: Dale v Smithwick (1690) 2 Vern 151; 23 ER 704. See also Mestaer v Gillespie (1805) 11 Ves 622; 32 ER 1230. Many of the examples given in the textbooks such as Ramsbotham, Coote’s Treatise on the Law of Mortgages, 9th ed, Stevens and Sons, Sweet & Maxwell, London, 1927, pp 80–5 belong to an age past, the age of settlements. In England there are current examples of the principle in cases where land is owned by husband and wife and a mortgage is made by only one: see Williams & Glyn’s Bank Ltd v Boland [1981] AC 487 at 507.

[page 110] However, the power specifically to perform contracts is discretionary and will not be exercised to prejudice the position of a third party such as a coowner of the land: Williams & Glyn’s Bank Ltd v Boland [1981] AC 487 at 507G, overruling Cedar Holdings Ltd v Green [1981] Ch 129 on this point; see also Ahmed v Kendrick (1987) 56 P & CR 120. (This passage from the first edition was applied in Nunn v Wily (2001) 10 BPR 18,983 at 19,009.) As to the possibility of the mortgage attaching to a beneficial share to which the mortgagor subsequently succeeds, see (1936) 9 ALJ 431. Where there are co-owners, it is usually held that if an instrument is prepared, to be signed by all the co-owners as mortgagors and only some sign, there is no effective mortgage at law or in equity. This is because it is usually taken to be the case that those signing first did so only on the basis that the others would sign as well: Luke v South Kensington Hotel Co (1879) 11 Ch D 121; Naas v Westminster Bank Ltd [1940] AC 366; Neill v Hewens (1953) 89 CLR 1. As to this principle with respect to guarantees, see Marston v Charles H Griffith & Co Pty Ltd (1982) 3 NSWLR 294 at 299-300. The matter is further discussed at 11.3. However, in some situations (such as where a husband informs the bank that his wife will sign a mortgage, and then forges his wife’s signature) the document will be held to be at least an equitable mortgage of the husband’s interest. See National Commercial Banking Corp of Australia Ltd v Hedley (1984) 3 BPR 9477; Katsaitis v Commonwealth Bank of Australia (1987) 5 BPR 12,049; and Westpac Banking Corp v Sansom (1994) 6 BPR 13,790. See also 4.15–4.20 and 13.43.

Title against trustee in bankruptcy 3.50 An equitable mortgage of property which is valid between mortgagor and mortgagee is equally valid as between the trustee in bankruptcy of the mortgagor and the mortgagee.

H. Miscellaneous Strata titles

3.51 Mortgages over strata titles are in general no different to mortgages over any other property. The nature of the enquiries to be made by a potential mortgagee, will, of course, be different but these are outside the scope of this work.

Registration of mortgages 3.52 All states have provisions relating to registration of deeds including mortgages. The principal statutes are: NSW: Pt XXIII of the Act (ss 184A-184J); Vic: ss 5-6, 13 and 15-17 of the Victorian Act; Qld: ss 44-48 Property Law Act 1974; SA: Registration of Deeds Act 1935; WA: Registration of Deeds Act 1856; Tas: Registration of Deeds Act 1935. All states except South Australia have adopted the basic rule that registration is not essential to validity of a deed or mortgage, but that, with certain provisos an unregistered deed or mortgage will lose priority to a deed or mortgage of later date which was duly registered. The operation of this legislation is considered in Chapter 27. [page 111]

Registration of mortgages by corporations 3.53 As will be seen in 11.38, the Corporations Act requires that certain charges be registered with the Australian Securities Commission and provides the consequences for failure to register: see 11.41. It is not necessary to register under the Corporations Act a simple mortgage of real property or fixtures thereon: Corporations Act s 262 (8,9).

Injunctions and actions at law

3.54 While the mortgagor is in at least de facto possession and is managing the property with the acquiescence of the mortgagee, the mortgagor has the right to insist, without reference to the mortgagee, on the observance of any obligation, the non-observance of which would injuriously affect the premises. To this end the mortgagor may seek an injunction or damages: Fairclough v Marshall (1878) 4 Ex D 37 especially at 48-9 per Cotton LJ. This right is now recognised by statute: see s 98 of the English Act which has been adopted in Australia. See 12.2 where the topic is covered in detail.

Conversion 3.55 A mortgagor in possession may sue in conversion even against the mortgagee: Bradley v Copley (1845) 1 CB 685; 135 ER 711; Fenn v Bittleston (1851) 7 Ex 152; 155 ER 895; Brierley v Kendall (1852) 17 QB 937; 117 ER 1540; Standard Electronic Apparatus Laboratories Pty Ltd v Stenner [1960] NSWR 447 at 450. A mortgagee who has never had possession cannot sue in conversion: White v Elder, Smith & Co Ltd [1934] SASR 56 at 61. A person holding a valid lien at law may sue in conversion: Lord v Price (1874) LR 9 Ex 54; Standard Electronic Apparatus Laboratories Pty Ltd v Stenner, above. Should, however, the holder of the lien act beyond the holder’s rights, that holder may become liable to be sued in conversion: Mulliner v Florence (1878) 3 QBD 484. An unauthorised sale of mortgaged goods will determine a mortgagor’s right to possession, revesting it in the mortgagee who will thereupon be able to bring proceedings for conversion: Fenn v Bittleston, above. Where goods are assigned to the mortgagee upon trust to permit the mortgagor to hold them until demand, possession is in the mortgagee, who can maintain proceedings for conversion even before demand: White v Morris (1852) 11 CB 1015; 138 ER 778, and see Barker v Furlong [1891] 2 Ch 172. During the continuance of a contract of pledge the pledgee is the only person entitled to bring proceedings: Ayers v South Australian Banking Co (1871) LR 3 PC 548 at 554; Glyn v East & West India Dock Co (1880) 6 QBD 475 at 490; Sewell v Burdick (1884) 10 App Cas 74 at 92. An assignee of a pledgee can sue in conversion even though the conversion took place prior to the assignment: Bristol & West of England Bank v Midland Railway

Co [1891] 2 QB 653. See, in general, Ashburner’s Concise Treatise on Mortgages, Pledges and Liens, Butterworths, London, 1911, and K Barker, P Cane, M Lunney and F Trindale, The Law of Torts in Australia, 5th ed, Oxford University Press, Melbourne, 2012, pp 109–10.

[page 112]

Chapter 4

Mortgages of Torrens System Land Generally Differences in incidental rights Practical matters Types of statutory charge under the Torrens Acts Form of mortgage Types of mortgage Equity of redemption Discussion in Victorian decisions Rights of mortgagors Rights of mortgagees The doctrine of indefeasibility Limits to indefeasibility Covenants and indefeasibility Statutory exceptions to indefeasibility Fraud and indefeasibility Forged mortgages Principles where Torrens mortgage forged Frauds analogous to forgery Fraud and false certification Husband and wife cases

4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 4.13 4.14 4.15 4.16 4.17 4.18 4.19 4.20

Differences in state Torrens legislation Volunteers Application of general law priorities rules Equitable mortgages and charges Second mortgages Second mortgages and caveats Unregistered mortgages — caveats When a security holder may caveat Covenants generally Variations of mortgage Custody of deeds Postponement of mortgages Transfer of mortgages Merger under the Torrens system Further advances and tacking

4.21 4.22 4.23 4.24 4.25 4.26 4.27 4.28 4.29 4.30 4.31 4.32 4.33 4.34 4.35

[page 113]

Position on default Exercise of power of sale Discharge of Torrens system mortgages General law principles applicable to discharges Limitation Act problems Standard clauses in Torrens system mortgages (New South Wales)

4.36 4.37 4.38 4.39 4.40 4.41

Generally 4.1

A major departure from the traditional forms of conveyancing was

made by the Torrens Statute with respect to mortgages. Under the general law (see 3.4) the ‘ordinary’ form of mortgage of real estate is by deed of conveyance. Under that form the title to the legal estate in the land passes to the mortgagee and the mortgagor merely retains an equity of redemption. However, where land under the Torrens system is mortgaged, the mortgagor retains the legal fee simple and the mortgagee obtains a legal interest in the land, a statutory interest brought about by the registration of the mortgage. Thus s 57(1) of the NSW Torrens Act (s 74(2) of the Victorian Torrens Act is similar) provides that a mortgage has effect as a security, but does not operate as a transfer of the land mortgaged. The statutory charge described as a mortgage is a distinct interest. It involves no ownership of the land the subject of the security. Like a lease, it is a separate interest in land which may be dealt with apart altogether from the fee simple or other estate or interest mortgaged: English Scottish & Australian Bank Ltd v Phillips (1937) 57 CLR 302 at 321; see also Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd (1993) V ConvR ¶54-487 at ¶65,653 and ¶65,655 (Brooking J), referred to at 25.16 and Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245 at 262. In Fink v Robertson (1907) 4 CLR 864 at 891, Higgins J said that the drafters of the Torrens Act assumed that the principles of the general law would apply unless inconsistent with the Act and gave numerous examples. They assumed that the Statute of Uses applied and so the early Victorian Torrens Act negatived it. They assumed, without saying so, that equitable mortgages by deposit of deeds would be enforced: see London Chartered Bank of Australasia v Hayes (1881) 2 VR (Eq) 104. Furthermore: ‘There is no enactment that a mortgagee in possession shall be liable for wilful default; for it is assumed that the ordinary equitable rule will apply’.

Differences in incidental rights 4.2 Although the basic theoretical position with respect to legal mortgages of real estate under the general law and under the Torrens system differ so markedly, in practice there is little difference in the rights of the parties thereunder. This is because contractual rights flow from standard documents and the philosophic approach to the Torrens system has been that only the system of conveyancing is altered: see Lewis v Keene (1936) 36 SR (NSW) 493; Barry v Heider (1914) 19 CLR 197; Tietyens v Cox (1916) 17 SR

(NSW) 48 at 54; Groongal Pastoral Co Ltd v Falkiner (1924) 35 CLR 157 at 163. So far as statutory rights are concerned, the source of the right differs, as the NSW Act and Victorian Act will often stipulate that a provision is not to apply to Torrens system land, but very frequently the Torrens Act will contain an almost identical provision. For instance, the provisions as to notice before sale by a mortgagee in s 57 of the NSW Torrens Act and s 111 of the NSW Conveyancing Act are virtually identical. Despite the fundamental juristic differences between Torrens and other mortgages of land, the courts have applied the same equitable doctrines to each so that, as a practical matter, one can assume that the general principles of the law of mortgages applies to [page 114] mortgages of Torrens system land: see Fink v Robertson (1907) 4 CLR 864 at 891. See also Citibank Savings Ltd v Stergiou (1996) 145 ALR 80 at 82 (Fed FC). This chapter will concern itself with a basic outline of the Torrens system and with the cases where there is an appreciable difference in the rights and obligations under the systems. Chapter 28 considers in greater depth basic principles of the Torrens system as they affect mortgages. Reference should be made to chapters dealing with particular aspects of mortgages as to the impact of the Torrens system. In particular, as to transfer of Torrens mortgages see 14.5.

Practical matters 4.3 Because the Torrens register is virtually conclusive of title, common prudence suggests that the first formal act of a prospective mortgagee is to search the title. Note Mills v Renwick (1901) 1 SR (NSW) (Eq) 173; Drulroad Pty Ltd v Gibson (1992) 5 BPR 11,878. From such a search, in most cases, an intending mortgagee is able to see the state of the title and can assess the risk in lending. The cases show that the system generally works well and the main problems are brought about by forgeries or by solicitors participating in frauds.

Types of statutory charge under the Torrens Acts 4.4 Three types of statutory charge are mentioned — a mortgage, a charge and a covenant charge. ‘Mortgage’ is defined as ‘any charge on land (other than a covenant charge) created merely for securing the payment of a debt’. ‘Charge’ is defined as ‘any charge on land created for the purpose of security the payment of an annuity, rent-charge or sum of money other than a debt’. The definition of ‘charge’ was considered in Avco Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679 at 682 as covering the liability to pay a periodical sum, but not the case where a principal sum is charged on land. This proposition was affirmed in Residential Housing Corporation v Esber (2011) 80 NSWLR 69 at 82 (CA). ‘Covenant charge’ is defined as ‘Any charge on land created under s 88F of the Conveyancing Act 1919 for securing the payment of money’. (See NSW Act s 3(1).) Section 88F of the Conveyancing Act deals with positive covenants in favour of public authorities. In dealing with securities under the Torrens system, the text will confine itself to mortgages strictly so called unless otherwise noted.

Form of mortgage 4.5 Section 56 of the NSW Torrens Act and s 74 of the Victorian Torrens Act specify that a mortgage under the Act is to be in the appropriate form which will be duly registered. However, in some states it has not been uncommon for a mortgage to take the form of an absolute transfer with the mortgagor being able to protect his interest by caveat. This was held to constitute a valid mortgage in Wright v Registrar of Titles [1979] Qd R 523; see also Currey v Federal Building Society (1929) 42 CLR 421; Lapin v Abigail (1930) 44 CLR 166 (HC); [1934] AC 491; 51 CLR 58 (PC); Haji Abdul Rahman v Mohomed Hassan [1917] AC 209; and Putz v Registrar of Titles [1928] VR 348. The Torrens Acts formerly set out in schedules the form that had to be used in dealings requiring registration under the Torrens Act. This was found

to be too restrictive and the statutes currently speak of an appropriate approved form. In New South Wales the Registrar-General’s approval is denoted by his seal on forms sold by law stationers. The [page 115] Registrar-General has a discretion to refuse to register a dealing in a form which he might reasonably consider would impede the ordinary and practical working of his department, such as a mortgage in foreign currency without a conversion formula: Bando Trading Co v Registrar of Titles [1975] VR 353. A mortgage instrument must be executed in duplicate. One copy is placed in the register; the other is returned, noted as having been registered, to the mortgagee together with the certificate of title. Failure to execute the dealing in duplicate will render it unregistrable: Re Skerrett (1868) 2 SALR 21. Problems often occur when a multiple instrument is presented for registration — that is, one instrument dealing with two distinct mortgages. In early days Registrars-General endeavoured to refuse to register such instruments. As to unsuccessful attempts by Registrars-General, see R v Registrar-General; Ex parte Roxburgh (1868) 1 QSCR 201; Perpetual Executors & Trustees Assoc of Australia Ltd v Hosken (1912) 14 CLR 286; and Drake v Templeton (1913) 16 CLR 153. See also Cambridge Credit Corp Ltd v Lombard Australia Ltd (1977) 136 CLR 608. Nowadays in borderline cases, the cost of extra effort by the department in dealing with such instruments is met by charging an extra fee. It is possible to create a Torrens system mortgage by transferring the fee simple to the mortgagee, with the mortgagor’s right of redemption being protected by caveat or a registered deed of defeasance. See, for example, Road Chalets Pty Ltd v Thornton Motors Pty Ltd (1986) 47 SASR 532, which distinguished Haji Abdul Rahman v Mahomed Hassan [1917] AC 209 as not representing the law of Australia. See also Sander v Twigg (1887) 13 VLR 765 and Watson v Royal Permanent Building Society (1886) 14 VLR 283.

Types of mortgage 4.6

A mortgage may be given over any interest in land under the Torrens

Act, including leaseholds and land under conditional certificates of title. With the latter a mortgage under the old form is also required. As to submortgages, s 52A of the NSW Torrens Act specifically confers upon a submortgagee all the rights that the mortgagee has under the head mortgage. Although there is no mention of sub-mortgages in the Victorian Torrens Act, it is clear that such a document may be registered: Lyons v Lyons [1967] VR 169 at 176. In McDonald v Lloyd (1931) 31 SR (NSW) 415, decided in New South Wales before the introduction of s 52A, it was held that a mortgagee who has sub-mortgaged may go into possession. Section 52A tends to tell against this now happening, but if, despite the section, the mortgagee were to go into possession the mortgagee would hold on trust the benefits of the possession for the sub-mortgagee. Some of the various state Acts treat sub-mortgages differently from others. In Tasmania they are provided for under s 75(1), in Western Australia they do not appear to be able to be registered, while in all other states they would appear registrable; see Sykes and Walker, Law of Securities, 5th ed, Law Book Co, Sydney, 1993, pp 305–6.

Equity of redemption 4.7 In Latec Investments Ltd v Hotel Terrigal Pty Ltd (1963) 113 CLR 265 at 275, Kitto J noted that, under the Torrens system, the mortgagor had a legal title not an equity of redemption. The Torrens system mortgagor has more than an equity of redemption. The mortgagor remains the proprietor of the fee simple in the land both at law and in equity: Windella (NSW) Pty Ltd v Hughes (1999) 49 NSWLR 158; 9 BPR 17,141; and see Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245 al 260 ff (Gaudron, Gummow and Callinan JJ). In Sandgate Corporation Pty Ltd v Ionnou Nominees Pty Ltd (2000) 22 WAR 172 at 184, Steytler J, basing himself on the 1st edition of this work, said: [page 116] … it seems plain that in Australia the expression ‘right of redemption’ has come to comprehend

the legal right to have the mortgage discharged as a matter of contractual right if the mortgagee is paid by the due date and also the truly equitable right to ‘have the land restored’ if there is a repayment after the due date but before foreclosure.

There are many other statements to the same effect: see, for example, Trust & Agency Co v Markwell (No 2) (1874) 4 QSCR 50 at 52; Matton v Lipscomb (1895) 16 LR (NSW) (Eq) 142 at 147; Quint v Robertson (1985) 3 NSWLR 398; Chant v Deputy Commissioner of Taxation (1991) 22 ATR 79 and, on appeal, Deputy Commissioner of Taxation v Chant (1991) 103 ALR 387 at 399; Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672; and Jensen v Guigni (1994) 6 BPR 13,667. Professor Butt in Halsbury’s Laws of Australia, vol 19, Mortgages and Securities, [295-6620] correctly says that ‘equity of redemption’ is an inaccurate description of the mortgagor’s interest in the mortgaged property and that the registered proprietor has the right to redeem only in the sense of a right to pay off the debt and have the mortgage removed from the register. The effect of these statutory provisions is that the mortgagee does not have vested in him any part of the registered title. As the Supreme Court of Canada said in Thompson v Yockney (1914) 6 WWR 1397 at 1398, there is no dismemberment of the mortgagor’s registered title so that, in that sense, the mortgagee has no estate or interest in the land. Despite this, it has been held that the mortgagee has sufficient interest to cause the benefit of a restrictive covenant to run with that interest: Re Bittar [1964] NSWR 438 at 441; [1964] 80 WN (NSW) 1597 at 1599. There are some authorities which use the term ‘equity of redemption’ for a mortgagor’s interest in Torrens system land (see Coleman v De Lissa (1885) 6 LR (NSW) Eq 104), but the majority of cases clearly recognise the distinction: see Robert Reid & Co v Minister of Public Works (1902) 2 SR (NSW) (L) 405 at 414–15; Quint v Robertson (1985) 3 NSWLR 398. In general, see also Stocks & Enterprises Pty Ltd v McBurney (1977) 1 BPR 9521 at 9526; Chant v Deputy Commissioner of Taxation (1991) 22 ATR 79, on appeal (1991) 103 ALR 387 at 399; and see 1.15, 33.1; and Sykes and Walker, p 241.

Discussion in Victorian decisions 4.8

Victorian courts have discussed the concept of ‘equity of redemption’

in connection with Torrens system land on a number of occasions, not always reaching the same conclusions. In Perry v Rolfe [1948] VLR 297 at 302, Fullagar J said that a Torrens system mortgagor did not have an equity of redemption in the real sense, so that proceedings for discharge were not in the strict sense a redemption suit. The mortgagor was seeking to enforce a right which, though doubtless equity alone can give a satisfactory remedy, is really a legal right. See also Greig v Watson (1881) 7 VLR (Eq) 79 and Elders Trustee & Executor Co Ltd v E G Reeves Pty Ltd (1988) 20 FCR 164. The mortgagor has the legal interest in the land, akin to a legal fee simple, and has the contractual right to rid the land of the encumbrance of the mortgage on the title by paying the agreed amount. However, as the mortgagor’s rights are analogous to an equity of redemption under the general law, this term is appropriately applied in ordinary legal parlance to the mortgagor’s interest. Thus in Ex parte National Trustees Executors & Agency Co (1898) 19 ALT 222, the Victorian Full Court said that redemption is not an accurate word to describe the discharge of a mortgage of land under the Torrens Act. See also Trust & Agency Co v Markwell (1874) 4 QSCR 50 at 52. As Sykes and Walker put it at p 230,‘it is when the concepts of foreclosure and redemption are introduced that the hypothetic character of [page 117] the security begins to get clouded’. For instance, foreclosure ‘converts a legal interest by way of charge into full beneficial ownership’. In Re Forrest Trust; Trustees Executors & Agency Co Ltd v Anson [1953] VLR 246 especially at p 250, the Victorian Full Court closely analysed the traditional redemption suit and held against submissions that a Torrens system mortgagor did not have a right to redeem in the traditional sense, but merely held a contractual right to a discharge. In Road Chalets Pty Ltd v Thornton Motors Pty Ltd (1986) 47 SASR 532 at 537, Zelling J noted that the cases including High Court and Privy Council

decisions had almost universally treated a mortgagor’s interest as equivalent to an equity of redemption under an Old System mortgage: see also O’Loughlin J at p 547. See also, in general, Addison v Billion [1983] 1 NSWLR 586 at 596 and Re Partnership Pacific Securities Ltd [1994] 1 Qd R 410 at 417-18. In Re Forrest Trust; Trustees Executors & Agency Co Ltd v Anson, above at 256, Herring CJ said that the Act ‘introduced a registered charge to take effect as a security, which conferred on the creditor merely a group of powers to secure the money lent … whilst leaving the owner what he is meant to be, owner subject to fulfilling his obligations’.

Rights of mortgagors 4.9 The mortgagor is the registered proprietor of the property and has the full right to it except in so far as he has circumscribed those rights by the mortgage or otherwise. The mortgagor is entitled to possession unless the documents state otherwise or the mortgagee exercises his right to take possession. Apart from rights given by the mortgage instrument or by the Equity Court rights are given to the mortgagor by the Conveyancing or Law of Property Acts such as the right to redeem the mortgage prematurely (NSW Act s 93) and the right to gain a discharge notwithstanding the absence of the mortgagee (NSW Act s 98). A mortgagor is the proprietor of a totality of rights which are appropriately diminished by the registration of a mortgage to the extent of the interests recorded on the register. Thus a mortgagee will prevail over the rights of the holder of a profit a prendre created by the mortgagor after the registration of the mortgage: Vukicevic v Alliance Acceptance Co Ltd (1987) 9 NSWLR 13. Section 81 of the Victorian Torrens Act (set out in full and analysed in 19.7 as between first mortgagee and mortgagor) notionally places the mortgagor in the same position as if there had been a demise by the mortgagee with a right of quiet enjoyment until default: see Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245. This section means that a vastly different result will be produced to the same fact situation arising in Queensland: Re Partnership Pacific Securities Ltd [1994] 1 Qd R 410 at 419.

Some judges in early Torrens cases considered that the proper order was that the mortgagee be required to register a discharge upon being paid the amount certified to be owing: see, for example, Greig v Watson (1881) 7 VLR (Eq) 79 at 85. See also Ex parte National Trustees Executors and Agency Co Ltd (1898) 19 ALT 222 and Elders Trustee & Executor Co Ltd v E G Reeves Pty Ltd (1988) 20 FCR 164 at 173.

Rights of mortgagees 4.10 As Herring CJ said in Re Forrest Trust; Trustees Executors &Agency Co Ltd v Anson [1953] VLR 246 at 256, although the Torrens Statutes do not spell out the rights of mortgagees: The general law mortgage was obviously very much in the draftsman’s mind when the relevant sections were penned, and they are obviously addressed to a rofession well acquainted with equity’s contribution to the law of mortgage under the general law, and well able, where the [page 118] Act was silent, to supply from that contribution a method of working out and adjusting the mutual rights of mortgagee and mortgagor. Thus, to take one example, provision is made to enable the mortgagee, on default by the mortgagor, to enter into possession, but not a word is said as to the basis on which the mortgagee in possession should account. Here clearly recourse must be had to the doctrines of equity on the matter The nature of a mortgage under the Act being what I have described, it necessarily follows that there was inherent in it a right on the part of the mortgagor, upon his fulfilling his obligations under the mortgage, to have the land freed from the mortgage and from all powers and rights of the mortgagee, which formed a substantial curtailment of the mortgagor’s dominion over the land. This is a right to redeem in the sense in which equity understood that term, and the effect of its exercise, by payment off of the money secured by the mortgage, is aptly described (by Lord McNaghten in Noakes & Co Ltd v Rice).

That passage from Noakes & Co Ltd v Rice [1920] AC 24 at 30 reads: It follows as a necessary consequence that, when the money secured by a mortgage of land is paid off, the land itself and the owner of the land in the use and enjoyment of it must be as free and unfettered to all intents and purposes as if the land had never been made the subject of a security.

See too the remarks of Higgins J in Fink v Robertson (1907) 4 CLR 864 at 891 and Cape v Trustees of Savings Bank of NSW (1893) 14 LR (NSW) Eq 33 and 204, where the equitable rule that a mortgagor must give six months’ notice or interest in lieu thereof on payment off, was held applicable to mortgages of land under the Real Property Act; and also Re Weiland (1945)

13 ABC 220 at 225 and Lyons v Lyons [1967] VR 169 at 175. Some statutory rights are given to the mortgagee by the statute but, often, the rights need to be read against the background of mortgages under the general law. Thus in United Starr-Bowkett Co-op Building Society (No 11) Ltd v Clyne (1967) 68 SR (NSW) 331, it was held that s 60 of the NSW Act operated to enable the mortgagee to bring ejectment in the same way as he could have done under the common law title when the legal fee simple would have been vested in the mortgagee: see particularly at 347-50 and 4.36. Section 64 of the NSW Torrens Act limits the liability of a mortgagee in possession of leasehold to the benefit, rents and profit received; see also Tooheys Ltd v Sydney MC (1946) 71 CLR 407 at 412; Commissioner for Government Transport v Pacific Acceptance Corp Ltd (1964) 82 WN (Pt 1) (NSW) 71. It should also be noted that, unlike the general law situation, the interest of a second or subsequent mortgagee who holds a registered mortgage is a legal statutory interest in the land: see 4.25 and 11.2. Of course a mortgagee holds his statutory interest subject to the same limitations as the registered proprietor of the fee simple: Colonial Bank v Roache (1870) 1 VR (L) 165.

The doctrine of indefeasibility 4.11 The basic principle of the Torrens system is that the title shown on the register is indefeasible subject only to a very limited number of defined exceptions. Essentially this means that the government guarantees that the persons named in the register have the title that is shown and that if they do not the government fund will pay compensation. Thus the situation virtually is that as each transfer is registered a new title is created: a registered proprietor’s title stems from the entry in the register, not on the validity or otherwise of the document which brought about that entry. See, generally, Frazer v Walker [1967] 1 AC 569; Breskvar v Wall (1971) 126 CLR 376. This holds good for mortgages and leases as well as transfers. The exceptions include those in the non-exhaustive list that appears in each of the Torrens Acts. Unfortunately, the list differs from state to state. The exceptions are considered in detail in succeeding paragraphs. The principal

exception is fraud which is briefly considered in 4.15. [page 119] For a long time there was a debate as to whether indefeasibility meant immediate indefeasibility or deferred indefeasibility. The former expression connoted that immediately on registration a person under a forged or defective instrument obtained an indefeasible title: the latter connoted that indefeasibilty only attached when the bona fide transferee from that person became registered: see Clements v Ellis (1934) 51 CLR 217 at 237. The overwhelming picture from modern authority is that immediate indefeasibility is the ruling principle in the 21st century. See Frazer v Walker [1967] AC 569; Breskvar v Wall (1971) 126 CLR 376; and Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 633; 78 ALR 1 at 20 (Wilson and Toohey JJ, cf Mason CJ at 613-14, and Dawson J). Immediate indefeasibility was also affirmed in Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR 32; PT Ltd v Maradona Pty Ltd; Garafano v Reliance Finance Corp Ltd (1992) 5 BPR 97,420; Arcadi v Whittem (1992) 59 SASR 515; Vassos v State Bank of South Australia [1993] 2 VR 316; (1992) V ConvR 54-443; Eade v Vogiazopoulos (1993) V ConvR 54-458 (Vic Full SC); Coomber v Curry (1993) V ConvR ¶54-464; Beatty v Australia and New Zealand Banking Group Ltd [1995] 2 VR 292; Bank of South Australia Ltd v Ferguson (1995) 66 SASR 77 (FC); Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd (1996) 136 ALR 166; and Koorootang Nominees Pty Ltd v ANZ Banking Group Ltd [1998] 3 VR 16. In Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 at 157 (CA) (per Tadgell JA, with whom Winneke P agreed), Koorootang Nominees, above, was distinguished on the basis that it dealt with a different situation, namely the potential liability as constructive trustee of one who receives trust property in respect of which there has been a breach of trust; but the principle of immediate indefeasibility was not doubted (see, particularly, at 146 (Tadgell JA)). The issue arose before the Victorian Court of Appeal once again in Horvath v Commonwealth Bank of Australia [1999] 1 VR 643, where the authorities were reviewed and the position in favour of

immediate indefeasibility as stated by Hayne J in Vassos, above, was expressly or impliedly affirmed: see at 649 (Tadgell JA); 658–9 (Ormiston JA); and 677 (Philips JA).

Limits to indefeasibility 4.12 The first question that must be asked when considering questions of indefeasibility is ‘indefeasibility for what?’ This question was first posed by Campbell J in Small v Tomassetti [2001] NSWSC 1112; (2001) 12 BPR 22, 253 and has been oft repeated: see Yazgi v Permanent Custodians Ltd [2007] NSWCA 240; 13 BPR 24,567. It may well be that the instrument is ineffective so that the fact that there is indefeasibility is immaterial. The indefeasibility provisions of the Torrens legislation will not cure invalidity in an instrument, other than in the sense of giving efficacy to an instrument otherwise wholly void: see Frazer v Walker [1967] AC 569; Breskvar v Wall (1971) 126 CLR 376. For example, in Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1 it was held that the registration of a lease under the NSW Torrens Act did not validate an option to renew a lease on registration of the lease under the Act where the option was rendered illegal by other legislation. A mortgage purportedly granted by a company that has been deregistered confers no interest in the relevant land in the ‘mortgagee’, much less any indefeasible title: see Australia and New Zealand Banking Group v Barns (1994) 6 BPR 13,739; 13 ACSR 592; (1995) ANZ ConvR 123; and see 42.22. On this theme Sykes and Walker, p 471, say that ‘it could not be validly argued that the registration of a mortgage would make valid a clause in the mortgage document which on general principles operated as an invalid clogging of the equity’. The line between void instruments and invalid or void parts of instruments may not always be particularly clear. [page 120] Indefeasibility of title does not deny ‘the right of a plaintiff to bring against a registered proprietor a claim in personam founded in law or equity, for such relief as a court acting in personam may grant’: Hillpalm Pty Ltd v Heaven’s

Door Pty Ltd [2004] HCA 59; (2004) 220 CLR 472; 211 ALR 588, and see Bahr v Nocolay (No 2) (1988) 164 CLR 604; 78 ALR 1 and Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd [2007] NSWSC 676; (2007) 13 BPR 24,969; 64 ACSR 31. This is often called the ‘personal equity’ exception to indefeasibility; however, it covers a legal right such as a cause of action at law in deceit: Garofano v Reliance Finance Corporation Lrd (1992) 5 BPR 11,941 at 11,945 and Grgic v ANZ Banking Group Ltd (1994) 33 NSWLR 202 at 222–3. The personal equity exception prevents a successful attack being made on the registered proprietor of an interest in land because of a contractual or equitable right that binds him: see, for example, Consolidated Trust Company Ltd v Naylor (1936) 55 CLR 423; Mercantile Mutual Fire Insurance Ltd v Gosper (1991) 25 NSWLR 32. However, there are limits and the mere fact that a company director may have breached his duty in granting the relevant mortgage is insufficient to attract the personal equity exception: Super 1000 Pty Ltd v Pacific General Securities Ltd [2008] NSWSC 1222; (2008) 221 FLR 427. In Sussman v AGC Advances Ltd (1995) 37 NSWLR 37 (CA), the rule in Otter v Lord Vaux (1856) 6 De GM & G 638; 43 ER 1381, which prevents a mortgagor setting up against his own encumbrancer any other encumbrance created by himself, was affirmed as a general equitable principle applicable to mortgages of Torrens system land and hence an exception to the general principle of indefeasibility. An equitable right to sever and remove fixtures once acquired may survive as an in personam exception to the registered title: see Cottee Dairy Products Pty Ltd v Minad Pty Ltd (1997) 8 BPR 15,611; applying Bahr v Nicolay (No 2) (1988) 164 CLR 604; 78 ALR 1. However, this type of case and cases of impersonation of the mortgagor and identity theft have now been made more difficult for a fraudster in New South Wales and Queensland. In New South Wales, s 56C of the NSW Torrens Act and in Queensland ss 11A and 11B of the Queensland Torrens Act provide that a mortgagee and a transferee of a mortgage must take reasonable steps to confirm that the person signing the mortgage or transfer is the registered proprietor of the interest concerned. The evidence that this has been done must be kept for seven years. Failure to comply with this requirement may mean that the registration of the dealing is cancelled and so loss of indefeasibility.

Covenants and indefeasibility 4.13 Indefeasibility is a principle concerned with title. It should not necessarily be assumed that every right connected with a title is also protected by statutory indefeasibility. It is important to note that indefeasibility of title by registration is conferred on an estate or interest in land but that contractual rights and obligations under the instrument registered are not affected: Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423; Travinto Nominees Pty Ltd v Vlattas [1972] 1 NSWLR 24 at 4850; affirmed in (1973) 129 CLR 1, especially at 17; and PT Ltd v Maradona Pty Ltd (1992) 25 NSWLR 643 at 677ff. To some extent what is protected will depend on the exact wording of the statute in each state: Caleo Bros Pty Ltd v Lyons Bros (Aust) Pty Ltd (1980) 1 BPR 9496. However, in all states a right that is so intimately connected with the estate the subject of the dealing as to be said to qualify it or define it will be indefeasible: Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326; Re Eastdoro Pty Ltd (No 2) [1990] 1 Qd R 424. See also Lereos Pty Ltd v Terara Pty Ltd (1992) 66 ALJR 399; 106 ALR 595. A guarantee is sufficiently close to the mortgage to be protected: Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423 at 434-5. A personal covenant to repay is so connected with the estate or interest of the mortgage that it also attains indefeasibility: PT Ltd v Maradona Pty Ltd (1992) 25 NSWLR 643 at 681. In Long Leys Co Pty Ltd v Silkdale Pty Ltd (1991) 5 BPR 11,512 at 11,520, the New South Wales Court of Appeal made [page 121] it clear that indefeasibility could not affect rights of equitable set-off that arose after the mortgage was registered. Indefeasibility may also affect mortgagees’ rights in other ways. Thus a prior registered lease will take priority over the mortgagee: see 12.7. Like a lease a mortgage involves, or usually includes, personal obligations. It is impossible to treat the personal obligations in the same way entirely as the interest in land is treated by the registration system. The register cannot be made the source of information as to the fulfilment or performance of such

obligations, and the question of what rights they continue to confer may depend upon such matters. Thus, although a proposing transferee of a mortgage may rely upon the register for the existence and validity of the mortgage, he may be unable to depend upon anything but inquiries from the parties to ascertain how much of the principal sum secured remains unpaid: Nioa v Bell (1901) 27 VLR 82 at 84. Nevertheless, the plan of the legislation is to enable the proprietor to transfer by registration not only the interest in the land, but all the accompanying personal obligations normally incident thereto: English Scottish & Australian Bank Ltd v Phillips (1937) 57 CLR 302 at 321-2; see also Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423 at 434.

Statutory exceptions to indefeasibility 4.14 The Torrens legislation of the various states and New Zealand provides a number of specific, statutory exceptions to indefeasibility, in addition to the general exception for fraud, as to which see 4.15. It is not proposed to consider these exceptions comprehensively or in detail and in this respect the reader is referred to one of the Torrens systems texts to which reference has been made. Indefeasible title does not stand against the estate or interest of a person in the same land claiming under a prior Crown grant or prior Certificate of Title: NSW Torrens Act s 42(a); Victorian Torrens Act 1958 (Vic) s 42(1)(a); Queensland Torrens Act ss 184-185; South Australian Torrens Act s 69V; Western Australian Torrens Act s 68; Tasmanian Torrens Act s 40(3)(b); and Land Transfer Act 1952 (NZ) ss 62(a) and 63(1)(e). All jurisdictions provide an exception in favour of certain easements that do not appear in the Torrens register. In New South Wales, Queensland, South Australia and New Zealand the Torrens legislation contains provisions which may be described generally as a provision to prevent the indefeasible title extending to any right of way or other easement (but not a profit a prendre): NSW Torrens Act s 42(b); and see Queensland Torrens Act ss 184185; South Australian Torrens Act s 69(d); Tasmanian Torrens Act s 40(3) (c). Both Victoria and Western Australia have legislation providing for much broader exceptions, in substance, subsisting over the land ‘howsoever acquired’ in Victoria (Transfer of Land Act 1958 (Vic) s 42(2)(d)) and the Western Australian Act acquired by enjoyment or user (Transfer of Land Act

1893 (WA) s 68). Under s 62(b) of the Land Transfer Act 1952 (NZ), indefeasibility yields to ‘the omission or misdescription of any right of way or other easement created in or existing upon the land’. The relevant provision (s 62(b)) does not extend to protect an omitted profit a prendre. As to the meaning of ‘omission’ for the purposes of this provision, see Wilkinson v Spooner [1957] Tas SR 121 at 134 per Burbury CJ; Sutton v O’Kane [1973] 2 NZLR 304 at 349 (CA) per Richmond J; Australian Hi-Fi Publications Pty Ltd v Gehl [1979] 2 NSWLR 618; Millns v Borck [1985] BCL para 981 (at p 20 of the judgment, per Bisson J); noted (1985) 3 BCB 86 (Hinde). The other exception of importance under the Torrens legislation is the interest of short-term tenants of the land (see 19.20). The most liberal statutory exception is contained in provisions such as s 42(2)(b) of the Transfer of Land Act 1958 (Vic) in favour of ‘the interest (but excluding any option to purchase) of a tenant in possession of the land’. Similar provisions are contained in NSW Torrens Act s 42; Queensland [page 122] Torrens Act s 185(1)(b); South Australian Torrens Act s 69 Pt VIII; Western Australian Torrens Act s 68; Tasmanian Torrens Act s 40(3)(d).

Fraud and indefeasibility 4.15 The principal exception to indefeasibility is where the person seeking indefeasibility has been guilty of fraud. As Sykes and Walker say at p 297, whatever result is attributed to fraud by the general law is not going to be altered by the fact that the fraudster obtained a registered title. ‘Fraud’ for the purpose of the exception, commonly referred to as ‘statutory fraud’, means actual fraud not mere equitable fraud: Assets Co Ltd v Mere Roihi [1905] AC 176 at 210. See also Butler v Fairclough (1917) 23 CLR 78 at 90, 97; Bahr v Nicolay (No 2) (1988) 164 CLR 604; Russo v Bendigo Bank Ltd [1999] 3 VR 376 (CA). As Hinde, McMorland and Sim point out in Butterworth’s Land Law in New Zealand, Butterworths, Wellington, 2003, vol 1, 9.018, statutory fraud ‘is (1) wider than the common law concept of fraud because it is not confined

to deceit or fraudulent misrepresentation; and (2) narrower than equitable fraud because dishonesty in the sense of moral turpitude is an essential element’. They cite Latec Investments Pty Ltd v Hotel Terrigal Pty ltd (1965) 113 CLR 265 as authority for proposition (1) and Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 616; 78 ALR 1 at 6 as authority for proposition (2). As to the definition of ‘equitable fraud,’ see Hart v O’Connor [1965] AC 1000 at 1005; [1965] 2 All ER 880 at 891–3. However, this does not mean that all species of equitable fraud stand outside statutory fraud, indeed this is far from the case: Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 614; 78 ALR 1 at 20. Furthermore, the fraud must be brought home to the registered proprietor or to his or her agent: Munro v Stuart (1924) 41 SR (NSW) 203 at 206; Davis v Williams [2003] NSWCA 371 [85]; (2003) 11 BPR 21,313. Fraud may take many forms. The principal problems with the exception have been forgery (see 4.16), cases analogous to forgery (4.18) and false certification cases (4.19). A number of leading cases have occurred through a spouse forging their partner’s signature and a witness falsely certifying and these cases are noted in 4.20. Ordinarily, mere notice does not constitute fraud: Oertel v Hordern (1902) 2 SR (NSW) (Eq) 37. Mere knowledge of an unregistered interest does not of itself amount to fraud (Waimiha Sawmilling Co Ltd (in liq) v Waione Timber Co Ltd [1926] AC 101 at 107; and Bride v Feehill Hollingdale and Page (1996) ANZ ConvR 593 (WA, FC)); but it is otherwise in relation to ‘reckless conduct to the point of dishonesty’: see Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd [1998] 3 VR 16. Mere notice of a prior unregistered interest is not fraud of itself, knowingly participating in a breach of trust may amount to fraud within the meaning of the Torrens legislation: see Templeton v Leviathan Pty Ltd (1921) 30 CLR 34 at 69 per Higgins J; see also Wicks v Bennett (1921) 30 CLR 80 at 94 per Higgins J; Mills v Stokman (1967) 116 CLR 61. In Paradise Constructions & Co Pty Ltd v Poyser [2007] VSCA 316: (2007) 20 VR 294 the court rejected the submission that a registered mortgage which had been altered after signing by the insertion of a date was void under the Rule in Pigot’s case (1614) 11 Co Rep 26b;77 ER 1177; [1558]–[1775] All ER. It did so on two bases: (1) the registration cured any

invalidity and (2) the rule in Pigot’s case does not apply where the alteration is made before the instrument takes effect.

Forged mortgages 4.16 Despite the rule that under the general law a forged instrument was a nullity for all purposes, a forged mortgage, when registered, will usually give the named mortgagee an [page 123] indefeasible title. That title is, of course, subject to any personal equity which may bind the mortgagee: Frazer v Walker [1967] 1 AC 569; Breskvar v Wall (1971) 126 CLR 376; and Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR 32, especially at 44. A person suffering loss by such registration may have recourse to the assurance fund. This result occurs because, under the Torrens system, registration is the act which gives title, and registration may be brought about by a forgery: see, for example, Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722 and Garofano v Reliance Finance Corp Ltd (1992) 5 BPR 11,941. There are a series of older authorities which contain a statement that a forged instrument purporting to deal with Torrens title land is void: see, for example, Davies v Ryan [1951] VLR 283 at 287. However, these are based on the discredited theory of deferred indefeasibility which lasted in Victoria longer than elsewhere until discarded by the judgment of Hayne J in Vassos v State Bank of South Australia [1993] 2 VR 316; (1992) V ConvR ¶54-443. A forged mortgage is not a nullity, but it may be fraud for a person to present a forged mortgage for registration in the absence of an honest belief that it is valid: Beatty v ANZ Banking Group [1995] 2 VR 301 at 314 ff per Mandie J. In recent times in NSW, a number of cases have occurred where the mortgagor has acquiesced in someone else signing his or her signature to the document. When there is default the mortgagors protest that the mortgage is forged so that they do not have to repay. If this acquiesence is established, the mortgagors will be bound. An example is Capital Access Australia Pty Ltd v

Hraiki [2011] NSWSC 109; (2011) 15 BPR 29,113. A significant number of cases involve the forging of a spouse’s signature and the negligent certification of that signature: see the discussion in 4.19.

Principles where Torrens mortgage forged 4.17 In Perpetual Trustees Victoria Ltd v English [2010] NSWCA 32; (2010) 14 BPR 27,339 at 27,341 [11], Sackville AJA, giving the reasons of the NSW Court of Appeal, said that the authorities made it clear that when it appears that a Torrens mortgage is forged, the Act confers indefeasibilty, but there is a further question to be addressed, namely, whether the indefeasibilty of the mortgagee’s title effectively validates all the terms of what otherwise would be a void instrument and, if not, what terms can be enforced against the estate or interest of the registered proprietor. This is a matter of construction of the mortgage, but, in NSW, the result is usually unfavourable to mortgagees. See also Yazgi v Permanent Custodians Ltd [2007] NSWCA 240; (2007) 13 BPR 24,567; Van Den Heuval v Perpetual Trustees Victoria Ltd [2010] NSWCA 171: (2010) 15 BPR 28,647 and articles by Stoljar (2008) 82 ALJ 28 and Vaughan (2008) 82 ALJ 671. A mortgagee when the mortgage is shown to have been forged may be able to show that the registered proprietor is estopped from denying the mortgage because of his or her conduct in permitting his or her agent in a transaction from committing a fraud. Perpetual Trustees Victoria Ltd v Menzies [2012] NSWSC 1066; (2012) 16 BPR 31,541 is a case where the mortgagee was unsuccessful in its attempt, but where the principles concerned are examined.

Frauds analogous to forgery 4.18 As Debelle J said in Arcadi v Whittem (1992) 59 SASR 515 at 537–8, the term ‘forgery’ might be used to cover a number of distinct frauds, from signing another’s signature without authority to altering a document without authority. Because of the wording of s 69 of the South Australian Torrens Act, there is some authority that deferred indefeasibility applies in forgery cases strictly so called (see Rogers v Resi-Statewide Corporation Ltd (1991) 29 FCR 219; 101 ALR 377), a decision of a

[page 124] single Federal Court judge which the South Australian Full Court held to be in error: Arcadi v Whittem (1992) 59 SASR 515. There is a difference between a document signed under a pseudonym which may be valid, a mortgage given by a fictitious person and a forged signature: see Allied Mills Ltd v Robinson (1981) 2 BPR 9353; Wicklow Enterprises Pty Ltd v Doysal Pty Ltd (1986) 45 SASR 247. It was thought that Gibbs v Messer [1891] AC 248 still governed the case where the mortgagor is a fictitious person, but few would so argue today. An allied question is how far a mortgage given by a corporation should be upheld where a director’s signature has been forged or the common seal affixed without authority. Such a mortgage will usually be held to bind the corporation where the mortgagee is not affected by any personal equity. This result follows under the ‘indoor management’ rule set out in Royal British Bank v Turquand (1856) 6 El & Bl 327; 119 ER 886; Northside Development Pty Ltd v Registrar General (1990) 170 CLR 146, or pursuant to ss 128 and 129 of the Corporations Act 2001 (Cth); Story v Advance Bank Australia Ltd, above; and see Sixty-Fourth Throne Pty Ltd v Macquarie Bank (1996) 130 FLR 411; and Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd (1996) 136 ALR 166. Where the mortgage is contrary to law (Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1) or the mortgagee or registered proprietor is nonexistent (Brady v Brady (1874) 8 SALR 219; Australia and New Zealand Banking Group Ltd v Barns (1994) 13 ACSR 592), the mortgage, despite its registration, will not confer any interest in the land.

Fraud and false certification 4.19 Fraud may well exist where a mortgagee or its agent, either through recklessness or wilfully, falsely certifies to the Registrar-General that the mortgage has been signed in his presence by the mortgagor who is personally known to him: National Commercial Banking Corp of Australia Ltd v Hedley (1984) 3 BPR 9477 at 9480-1; Australian Guarantee Corp Ltd v De Jager [1984] VR 483. It is fraud within the meaning of that term in the Torrens Acts ‘when a representation is made, contrary to fact, that a person is

personally known to the attesting witness and has signed the document in his/her presence’. ‘The purpose of the requirement that a registrable document should be signed by a person in the presence of another to whom he/she is personally known is, inter alia, to avoid the registration of forged documents’: per Rolfe J in Westpac Banking Corp v Sansom (1994) 6 BPR 13,790 at 13,796 (affirmed as Sansom v Westpac Banking Corp (1996) 7 BPR 14,615). See also Scallan v Registrar General (1988) 12 NSWLR 514; Demetrios v Gikas Dry Cleaning Industries Pty Ltd (1991) 22 NSWLR 561; Davis v Williams (2003) 11 BPR 21,213 (CA). A witness who, because the mortgagor’s family impersonate him, is tricked into asserting that the mortgagor has signed in his presence does not act recklessly: Grgic v Australian & New Zealand Banking Group Ltd (1994) 33 NSWLR 202. In any event, ‘personally known’ does not appear to signify that the witness need make any inquiry if a person claims to be the mortgagor and there is no reason to suspect otherwise: Kelly v Calhoun (1877) 95 US 710 at 713; Carolan v Yoran (1905) 93 NYS 935 at 936 and the Grgic case, above. However, s 56C of the NSW Torrens Act and ss 11A and 11B of the Queensland Torrens Act (see 4.12) have reversed this position in those states. A false representation by a person as a witness will only amount to statutory fraud if the witness is guilty of moral turpitude: Bank of South Australia v Ferguson (1998) 192 CLR 248; Russo v Bendigo Bank Ltd [1999] 3 VR 376; Davis v Williams (2003) 11 BPR 21,313 (CA). A mere failure to have an instrument properly witnessed will not, after registration, affect its validity: Arnold v State Bank of South Australia (1992) 38 FCR 484. Nevertheless in Hickey v Powershift Tractors Pty Ltd (1998) 9 BPR 17,339 it was held that the fraud did not extend to the substance of the transaction; it related only to whether or not [page 125] the mortgage was to be registered. Consequently the mortgage operated as a written agreement to mortgage which was enforceable in equity. It should be noted that where a solicitor wittingly or unwittingly subscribes as witness to a forged mortgage, he or she will almost certainly incur

liabilities (Eade v Vogiazopoulos (1993) ANZ ConvR 129; V ConvR ¶54-458 (Vic SC) per Smith J; see also National Commercial Banking Corp of Australia Ltd v Hedley, above), unless the facts show that he was an innocent party who subscribed to a document executed in his presence.

Husband and wife cases 4.20 It not uncommonly happens that where a husband and wife are coowners of property the husband will raise a loan on the property, without telling his wife, and forging her signature: see, for example, Eade v Vogiazopoulos (1993) V ConvR ¶54-458 and Van den Heuvel v Perpetual Trustees Victoria Ltd [2010] NSWCA 171; (2010) 15 BPR 28,647. The mortgage is usually a second or subsequent mortgage where the lender does not bother to investigate title. If such a lender took the trouble to investigate the title, a comparison of the relevant signatures on the disposition to the would-be borrowers and a first mortgage with those on the letter of acceptance would often disclose the true position. Where there is such a forgery, the mortgage would, under the Old System, not generally be binding on the wife. However, under the Torrens system, on registration, the wife will be bound subject to having a claim against the Assurance Fund: Van den Heuvel v Perpetual Trustees Victoria Ltd [2010] NSWCA 171; (2010) 15 BPR 28,647. See also Australian Guarantee Corp Ltd v De Jager [1984] VR 483 where the mortgagee knew his wife’s signature was unattested.

Differences in State Torrens legislation 4.21 Care must always be taken when relying on interstate decisions on the Torrens legislation to check to see that the local law is in the same terms. Curiously, there are vital differences in wording in the various pieces of legislation which may affect the result of a particular case. The differences between the Torrens legislation of the various states was highlighted by the reference in Vassos v State Bank of South Australia [1993] 2 VR 316; (1992) V ConvR ¶54-493 to some other decisions apparently at odds with the principle of immediate indefeasibility. In Rogers v ResiStatewide Corp Ltd (1991) 101 ALR 377 it was held that a person claiming title under a forged instrument, though innocent of the fraud, did not gain

indefeasible title by reason of the provisions of s 69 (b) of the Real Property Act 1886 (SA) (a decision which was not followed in Arcadi v Whittem (1992) 59 SASR 515, see below). Hayne J in the Vassos case found this decision of no assistance, on the basis that the South Australian provisions were very different from s 44 of the Victorian Act; see also the second Rogers case (Rogers v Resi-Statewide Corp Ltd (1991) 105 ALR 145), which was regarded as being of no assistance for the same reasons. Note that in Citibank Savings Ltd v Stergiou (1996) 145 ALR 80 at 83, the Full Federal Court carefully analysed the ACT legislation before feeling confident in following Victorian authority on slightly different legislation.

Volunteers 4.22 The extent to which a person who takes an interest in land as a volunteer and becomes registered as the proprietor of that interest is bound by a prior unregistered interest depends upon the terms of the ‘paramountcy’ provisions of the Torrens legislation: see NSW Torrens Act s 42; Victorian Torrens Act s 42; Queensland Torrens Act ss 184-185; South Australian Torrens Act s 69; Western Australian Torrens Act s 68; and Tasmanian Torrens Act s 40. [page 126] A volunteer is as much protected by the indefeasibility principle as any other registered proprietor: Bogdanovic v Koteff (1988) 12 NSWLR 472. In general a volunteer is in much the same position under the Torrens legislation as he or she would be with respect to general law land; see Sykes and Walker, p 453, referring to Biggs v McEllister (1880) 14 SALR 86; Crow v Campbell (1884) 10 VLR 186; and Gibbs v Messer [1891] AC 248 at 254 per Lord Watson.

Application of general law priorities rules 4.23 The general position is that there is considerable scope for the operation of the general law priorities rules with respect to Torrens title land. This is because there will be many situations where a contest will exist

between unregistered interests. As Meagher, Gummow and Lehane [8-090] note, as between unregistered interests — and most unregistered interests will on any view be equitable — the general law of priorities qui prior est tempore potior est iure prevails. Sykes and Walker also take a similar view at pp 463 ff saying that the general law principles apply so far as the nature of the case permits. It must be recognised, of course, that an interest in land which is not registered is not necessarily an equitable interest. There may, for instance, be unregistered short-term leases which are legal interests. Moreover, unregistered instruments of security retain their force even after sale of the property over which they are secured in that they will operate as a charge over the proceed of sale: Hope v Hope [1977] 1 NZLR 582; Avco Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679. The High Court has consistently taken the view that the general law priorities rules apply and has approached the determination of priorities questions based on characterisation of interests in Torrens title land in terms of whether they are legal or equitable interests according to these rules. This is particularly evident in the series of cases in which the High Court and the Privy Council considered the effect of the failure to lodge a caveat by a person to protect his unregistered, equitable, interest: see, for example, Butler v Fairclough (1917) 23 CLR 78; Abigail v Lapin [1934] AC 491; J & H Just v Bank of New South Wales (1971) 125 CLR 546; see also Burke v Dawes (1938) 59 CLR 1 and Barba v Gas and Fuel Corp of Victoria (1976) 136 CLR 120. Also, the statements in the advice of the Privy Council in Frazer v Walker [1967] 1 AC 569 on the preservation of rights in personam in law and in equity as persisting inter partes in spite of the indefeasibility of the registered proprietor’s interest appears to be based on an acceptance of the view that in general interests in Torrens title land are properly characterised as legal or equitable. Generally, the same rules as to priority of competing interests apply to Torrens system land as are applicable to land under Old System title. Of course, the statement just made is subject to the overriding principle that a registered interest is indefeasible unless one of the recognised exceptions is applicable.

It must also be recognised that where there are a series of equitable interests, it is not necessarily so that the first to be protected by caveat will prevail. The maxim ‘Where equities are equal, the first in time prevails’ still applies, though failure to caveat may mean that equities are not equal: see, for example, Abigail v Lapin [1934] AC 491 (PC) and J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 346. Again, there are special rules such as that set out in s 43(a) of the NSW Torrens Act: see 28.8. However, the general statement at the head of this paragraph is basically sound. [page 127]

Equitable mortgages and charges 4.24 Early in the history of the Torrens system there was some controversy in relation to the application of equitable rules to Torrens title land: see Robinson, Transfer of Land in Victoria, Law Book Co, Sydney, 1979. Whether the intention of the framers of the Torrens legislation (whether Attorney-General Torrens or the English Real Property Commissioners in effect, in their second report in 1830: see Whalan, The Torrens System in Australia, Law Book Co, Sydney, 1982, pp 4–5) was to exclude equitable rules, this has not been the approach adopted by the courts in the interpretation and application of the legislation. For example, in Barry v Heider (1914) 19 CLR 197 Isaacs J said (at 213): They [‘the Land Transfer Acts’: that is, the Torrens Acts] have long, and in every State, been regarded as in the main conveyancing enactments, and as giving greater certainty to titles of registered proprietors, but not in any way destroying the fundamental doctrines by which Courts of Equity have enforced, as against registered proprietors, conscientious obligations entered into by them.

This approach was reaffirmed by Isaacs ACJ and Gavan Duffy and Starke JJ in Groongal Pastoral Co Ltd (in liq) v Falkiner (1924) 35 CLR 157 at 163. Thus, although a literal reading of s 41(1) of the NSW Torrens Act and s 40(1) of the Victorian Torrens Act would, at first blush, appear to deny the possibility of equitable mortgages existing in Torrens land, the authorities clearly show that such interest will be upheld: London Chartered Bank of

Australia v Hayes (1871) 2 VR (Eq) 104; Re Nathan (1863) 1 SALR (App) 166; Richards v Jones (1865) 1 SALR (App) 167; Re Wildash; Ex parte Muskin (1877) 5 QSCR 46; Burrell v Hope (1871) 2 QSCR 155. See also Re Wadham (1879) 13 SALR 70; Colonial Bank of Australasia v Riddel (1893) 19 VLR 280; Plumpton v Plumpton (1886) 11 VLR 733. As to the general law, see 3.36 ff. Despite the form of a Torrens system mortgage, an unregistered mortgage can properly be described as an equitable mortgage: Windella (NSW) Pty Ltd v Hughes (1999) 49 NSWLR 158; 9 BPR 17,141. It is necessary to lodge a caveat to protect an equitable mortgage because failure to lodge a caveat to protect an equitable mortgage may cause the holder to lose priority: Barry v Heider (1914) 19 CLR 197; Abigail v Lapin [1934] AC 491; 51 CLR 58; J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546; Clark v Raymor (Brisbane) Pty Ltd (No 2) [1982] Qd R 790. Note that unregistered mortgages take priority according to date of creation (unless the later mortgage has the superior equity: see 24.44). The date on which caveats were lodged to protect unregistered mortgages is rarely significant. An equitable charge over Torrens land may be created by a simple agreement that a creditor has liberty to lodge a caveat over the debtor’s land: Troncone v Aliperti (1994) 6 BPR 13,291; see also Murphy v Wright (1992) 5 BPR 11,734. However, it should not be assumed that all such agreements will necessarily give rise to an equitable charge. There are sometimes some odd differences between Torrens and general law mortgages. Thus in Ryan v O’Sullivan [1956] VLR 99 it was held that no obligation on the part of a mortgagor of Torrens land to execute a mortgage in registrable form is implied in a deposit of title deeds. It is questionable as to whether this is really so: see Re Nairn’s Application [1961] VR 26 at 28. Note that in Queensland s 75 of the Torrens Act states that the deposit of title deeds will constitute an equitable mortgage charge.

Second mortgages 4.25 Because the mortgagor, even after a first mortgage is registered, continues to hold a legal fee simple in the land, second and subsequent

mortgages when registered will [page 128] be mortgages at law and not merely in equity. A registered proprietor may validly give a second mortgage although not in possession of the certificate of title: Clarkson v Mutual Life Association of Australasia (1879) 5 QSCR 165. However, for practical reasons, in the ordinary case a proposed second mortgagee will obtain the first mortgagee’s consent to the second mortgage and obtain production of the certificate of title so that the mortgage may be registered. Where this cannot be done, the second mortgage will remain unregistered and will need to be protected by caveat. The court will not, without special cause, order the first mortgagee to produce the certificate of title to enable registration of the second mortgage: Ex parte McDougall [1982] Qd R 553. A second mortgagee who pays out the first mortgage is entitled to transfer of the security: Gunn v Commonwealth Bank of Australia (1922) 18 Tas LR 26; see also (1929) 2 ALJ 80 (Watts). The general principle that a mortgagor cannot set up against his own encumbrance any other encumbrance created by himself (the rule in Otter v Lord Vaux (1856) 6 De GM & G 638; 43 ER 1381; and see 36.9) applies to Torrens system mortgages so that a mortgagor cannot defeat subsequent mortgages by purchasing the first mortgagee’s interest: Edwards v McDowell (1933) 50 WN (NSW) 244; R v Registrar of Titles; Ex parte Watson [1952] VLR 470; Sussman v AGC Advances Ltd (1995) 37 NSWLR 37; 7 BPR 14,312. See, however, the odd situation dealt with by the High Court in Bofinger v Kingsway Group Ltd [2009] HCA 44: (2009) 239 CLR 269; 260 ALR 71. Unless a first mortgagee with power to make further advances has actual notice of a second mortgage, the second mortgagee will not take priority over the further advances. The lodging of a caveat by the second mortgagee is insufficient to constitute actual notice: Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd [1984] 2 NSWLR 128. A second mortgagee may, subject to the rights of the first mortgagee, bring proceedings in ejectment: Croft v Kennaugh [1945] VLR 40; Associated

Securities Ltd v Adorjany [1964–5] NSWR 822; see also Bree v Scott (1904) 29 VLR 692 and Australia and New Zealand Banking Group Ltd v Comer (1993) 5 BPR 11,748; and see 10.11 where the matter is discussed in detail. As with a general law mortgage, sale by the first mortgagee destroys the mortgagor’s interest: see R v Registrar of Titles; Ex parte Watson [1952] VLR 470 at 476; and Baypoint Pty Ltd v Baker (1994) 6 BPR 13,687. These decisions applied the rule derived from South Eastern Railway Co v Jortin (1857) 6 HLC 425 at 435; 10 ER 1360 at 1365, for which see 20.43. Although in one sense it is appropriate to speak of the subsequent mortgagees and the mortgagor having identical interests in the fund represented by the surplus after sale (Hope v Hope [1977] NZLR 582 at 583; Avco Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679 at 683), such thinking must not be pressed too far. Proceeds of sale are not land (Re Sabine (1958) 18 ABC 188) and are subject to the trusts and statutory provisions referred to in this paragraph. Section 58 of the NSW Torrens Act and s 77(3) of the Victorian Torrens Act provide for the disposition of the surplus proceeds of sale. Those provisions are to be read in a manner consistent with the equitable duty of the first mortgagee to account to puisne mortgagees as a trustee for any surplus: Adams v Bank of NSW [1984] 1 NSWLR 285 at 289; Bofinger v Kingsway Group Ltd [2009] HCA 44: (2009) 239 CLR 269 at 287: 260 ALR 71 at 80 [35]. It is clear that a trust exists under the general law: Charles v Day (1887) 35 Ch D 544 at 549-550; Avco Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679; Lloyds Bank NZ Ltd v National Safety Council of Australia Victorian Division (1993) 115 ALR 93 at 102; Re Perpetual Trustees Co Ltd: Application of Chen [2010] NSWSC 808: 15 BPR 28,845; see also Baypoint Pty Ltd v Baker, above and the further discussion in 10.12. [page 129]

Second mortgages and caveats 4.26 A second mortgagee has only a limited interest in the land, an interest which cannot take priority over that of a first mortgagee. Accordingly, any

caveat lodged by a second or subsequent mortgagee cannot prevent proper action by a first mortgagee. A caveat that purports to do so will be removed. There are many cases where it has been held that absent some good evidence that a first mortgagee is not carrying out its duties when exercising power of sale, second mortgagees’ caveats will be removed almost as of course: Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222 at 228-9; Lewenberg and Pryles v Direct Acceptance Corporation Ltd [1981] VR 344 at 347-8; Dunecar Pty Ltd v Colbron (2001) 40 ACSR 342 at 345; 70 Pitt Street Pty Ltd v McGurk [2004] NSWSC 413; Business Australia Capital Mortgage Pty Ltd v Randwick Nominees Pty Ltd [2004] NSWSC 643. There does not appear to be any reported Australian case where a second mortgagee’s caveat was retained against opposition by a first mortgagee, but see in New Zealand MacDiarmid v Burton (1980) 1 NZCPR 238 where the caveat was allowed to remain for the time being until the mortgagee’s plans for sale had matured.

Unregistered mortgages — caveats 4.27 The general scheme of the Torrens legislation is that unless the interest is recorded on the register it may be assumed that for all intents and purposes it does not exist. This philosophy is over-simplistic and indeed this is recognised in the legislation itself, which permits unregistered interests to be protected by caveat. A caveat (from the Latin ‘beware’) is intended to act as a statutory injunction to prevent alteration to the Torrens register until the rights of the parties have been decided in the ordinary way by a court. The Torrens Acts provide summary methods of removing unwarranted caveats. In New South Wales, the usual approach is for the registered proprietor to cause the Registrar-General to issue a Lapsing Notice pursuant to s 74J of the NSW Torrens Act. Unless the caveator has the court extend the caveat under s 74K because it has or may have substance, the caveat will lapse. If time is short, the registered proprietor can apply to the court under s 74MA for an order that the caveat be withdrawn. In Victoria, an application may be made to the Registrar of Titles to remove the caveat under s 89A of the Victorian Torrens Act. The court may remove a caveat under s 90(3) of the Act. The court, when dealing with an application to remove or extend a caveat, does not usually enter into the underlying legal issues, but will usually extend the caveat, if need be on terms as to an undertaking as to damages or

otherwise, until the parties’ rights can be determined: Ex parte Muston (1903) 3 SR (NSW) 663; Evandale Estates Pty Ltd v Keck [1963] VR 647 at 652. The court has power to remove a caveat that is perfectly good if proper substitute security is provided or if the caveat is preventing the legitimate exercise of a right over the land which can be exercised without prejudicing the interests of the caveator. An illustration is Buchanan v Crown & Gleeson Business Finance Pty Ltd [2006] NSWSC 1465; 13 BPR 24,513 where the registered proprietor wished to refinance. The caveator was not affected by the caveat being lifted, the refinancing taking place and then a fresh caveat being lodged and the court permitted that to take place. A caveat may only be lodged by a person who has an interest in land: NSW Torrens Act s 74F; Victorian Torrens Act s 100. In New South Wales, the court is not inclined to rule on borderline cases as to what constitutes an interest in land on a summons to remove or extend a caveat: Permanent Trustee Australia Ltd v Shand (1992) 27 NSWLR 426; Jensen v Giugni (1994) 6 BPR 13,667. A stricter view seems to be taken in Victoria: see Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672. There is a debate as to whether the only interests in land that may be made subject to caveat are interests which may be registered under the Act. [page 130] Despite high authority (see Miller v Minister for Mines [1963] NZLR 560 (a Privy Council appeal from New Zealand) and Classic Heights Pty Ltd v Black Hole Investments Pty Ltd (1994) V ConvR ¶54-506), the prevailing view in New South Wales is that there is no such restriction: see, for example, Re Gamboola Cabonne Properties Ltd (1919) 19 SR (NSW) 227; Composite Buyers Ltd v Soong (1995) 38 NSWLR 286. More recent cases in Victoria would now seem to indicate a similar position: see Bunning Building Supplies Pty Ltd v Sgro (1995) V ConvR ¶54-535; and Crampton v French [1996] ANZ ConvR ¶156; (1995) V ConvR ¶54-529. This less restrictive approach is preferable as it allows notice to be given of a wide class of interests in land. The contrary view adopted in Miller is not a necessary consequence of the Torrens legislation if treated primarily as a

conveyancing statute. Failure to lodge a caveat to protect an unregistered interest may result in loss of priority: see Butler v Fairclough (1917) 23 CLR 78; Person-to-Person Financial Services Pty Ltd v Sharari [1984] 1 NSWLR 745; Double Bay Newspapers Pty Ltd v AW Holdings Pty Ltd (1996) 42 NSWLR 409; 7 BPR 14,858. See also Abigail v Lapin (1934) 51 CLR 58; [1934] AC 491; J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546. In Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210, it was a significant matter when assessing priorities that the holder of the earlier interest had filed a caveat and then had withdrawn it, a circumstance that the holder of a later equity had considered significant.

When a security holder may caveat 4.28 It is beyond the scope of this work to consider in depth what is a sufficient interest in land to support a caveat, but the following is a summary of the authorities affecting claims to maintain caveats in respect of security interests. A sufficient interest in land will exist in the following situations (this list is not exhaustive): 1. a claim to a second mortgage (subject to what has been said in 4.24 (Re The Victorian Farmers’ Loan and Agency Co Ltd (1897) 22 VLR 629); 2. a claim to a mortgage by deposit of deeds (Patchell v Maunsell (1881) 7 VLR 6; Re Elliot (1886) 7 LR (NSW) (L) 286); 3. a claim that the registered proprietor has undertaken to execute a mortgage (Re Dixon (1922) 39 WN (NSW) 89); 4. a vendor’s lien (Mihalic v Mihalic (1987) 73 ALR 304) or a purchaser’s lien (Ex parte Lord [1985] 2 Qd R 198); 5. a charge created under a building contract or other commercial contract (Griffith v Hodge (1979) 2 BPR 9474; Gibson v Co-ordinated Building Services Pty Ltd (1989) 4 BPR 9630; BridgeWholesaleAcceptance Corp (Aust) Pty Ltd v Burnard (1992) 27 NSWLR 415); 6. an equitable lien (Murphy v Wright (1992) 5 BPR 11,734; Troncone v

Aliperti (1994) 6 BPR 13,291); 7. a trustee’s lien for indemnification over real estate (Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42); 8. a claim to an interest because of a constructive trust (Morling v Morling (1992) 16 Fam LR 161). A sufficient interest is not afforded by the following (again, the list is not exhaustive): 1. a claim to a security interest where equity would not grant specific performance (Investment & Merchant Finance Corp Ltd v Kirkwood Estates Ltd (1975) 5 ALR 191); [page 131] 2. where the parties did not intend to create an interest in land (Evandale Estates Pty Ltd v Keck [1963] VR 647); 3. the claim is a mere right to raise a claim in litigation (Bethian Pty Ltd v Green (1977) 3 Fam LR 11,579; Re Pile’s Caveat [1980] Qd R 81; Morling v Morling, above); 4. the claim is to a purely contractual right (Depsun Pty Ltd v Tahore Holdings Pty Ltd (1990) 5 BPR 11,314); 5. the claim is to the surplus after sale or to the proceeds of sale (Re Robertson (1907) 24 WN (NSW) 94; Re Sabine (1958) 18 ABC 188; Epple v Wilson [1972] VR 440; Re Della-Franca’s Caveat [1993] 1 Qd R 382; Baypoint Pty Ltd v Baker (1994) 6 BPR 13,687); 6. the claim is to some collateral right associated with land such as the right of a lender to receive a share of the borrower’s profits from development of the land bought with the loan funds (Simons v David Benge Motors Pty Ltd [1974]VR 585; Cid v Cortes (1987) 4 BPR 9391). A registered proprietor may in some circumstances lodge a caveat over his or her own title. Section 74F of the NSW Act spells out the circumstances,

though there is some question as to what is ‘an improper dealing’ the fear of which may justify a caveat: see Jensen v Giugni (1994) 6 BPR 13,667. In Victoria, the right appears more restricted: see Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672. See, generally, Barry v Heider (1914) 19 CLR 197; Mardon v Holloway [1967] NZLR 372; Re Haupiri Courts Ltd (No 2) [1969] NZLR 353; Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870.

Covenants generally 4.29 The Australian Torrens Acts do not have a uniform approach to implied conditions in mortgages. Section 75 of the NSW Torrens Act implies a covenant for further assurance. There is no Victorian equivalent but there are similar provisions in Queensland, South Australia and Tasmania. The section only applies to registered instruments and no warranty of title is implied: West v Read (1913) 13 SR (NSW) 575; see also Renshaw v Moore (1917) 34 WN (NSW) 95 and Daniher v Fitzgerald (1919) 19 SR (NSW) 260. The Victorian Torrens Act by s 75 provides that there shall be implied in each mortgage covenants by the mortgagor to repay the principal on the due date, to repair and to insure. There is no New South Wales equivalent. The doctrine of indefeasibility of title means that some of the standard covenants used in general law mortgages of land are otiose. Section 80A of the NSW Torrens Act provides for memoranda of covenants to be filed in the Registrar-General’s office and the section then incorporates the provision of such memoranda if referred to in a registered mortgage as if they were incorporated into the mortgage: see 4.41. This provision saves time in preparation of mortgage documents and also assists in reducing the bulk of the register. Any provision of a memorandum whether strictly speaking it is a covenant will be deemed to be set out in the instrument: McIntosh v Goulburn City Council (1986) 3 BPR 9367; Re Westpac Banking Corp [1987] 1 Qd R 300. A person may be liable on a covenant in a mortgage even though the document is not registered: Mercantile Building Co v Murphy (1888) 4 WN (NSW) 105; Mathieson v Mercantile Finance Co (1891) 17 VLR 271. However, a person named in a mortgage, even though registered, may not be

liable on it if he or someone on his behalf has not executed it: Wellington & Manawatu Railway Co Ltd v Hazelden (1899) 18 NZLR 278. The same will apply if a forged mortgage only affects the registered proprietor [page 132] because of indefeasibility: Grgic v Australian & New Zealand Banking Group Ltd (1994) 33 NSWLR 202. A person may validly sign a mortgage before he has become registered proprietor and even though the certificate of title has been deposited elsewhere under an equitable mortgage: Royal Bank of Canada v Banque d’Hocheloga (1914) 7 WWR 817 (Alberta). A mortgage may validly be executed in blank (Trembatt v Carr (1897) 23 VLR 437; Arnot v Peterson (1912) 2 WWR 1 (Alberta)), though in Gilbert v Bourne (1895) 6 QLJ at 272, Harding J said such a document would be absolutely void. See also Scott on Torrens System Mortgages, The Carswell Co Ltd, Toronto, 1918, pp 19–20. There is no difficulty in a mortgagor attorning tenant to a second mortgagee: Ex parte Wilson; Re Bavister (1925) 25 SR (NSW) 375.

Variations of mortgage 4.30 Section 91(6) of the NSW Conveyancing Act makes it clear that that section permits variation of Torrens system mortgages by memorandum provided that the document is in the approved form and registered. Section 75A of the Victorian Torrens Act permits variation by registration of an appropriate approved form. Problems have occurred where the land is transferred to a new registered proprietor subject to an existing mortgage. If, after such registration, a variation of mortgage is registered without the signature of the original mortgagor, the latter will be released from liability. This is because the variation in effect makes a new contract: Re Gladstone’s Mortgage [1916] NZLR 489; Nelson Diocesan Trust Board v Hamilton [1926] NZLR 342; Paterson v Irvine [1926] NZLR 352; Perpetual Trustees Estate and Agency

Co of New Zealand Ltd v Elworthy [1926] NZLR 621; Public Trustee v Mortleman [1928] NZLR 337. If the original mortgagor signs the variation, he or she will be a surety: Grove v Public Trustee [1931] NZLR 1071. See also Dennis v Martin [1932] VLR 361 and McDonald v Gardiner [1933] VLR 129.

Custody of deeds 4.31 Although the mortgagor remains the registered proprietor of the fee simple even after a mortgage is registered on the title, in practice the mortgagee holds the certificate of title and other documents relating exclusively to the title of the property mortgaged. The term ‘title deeds’ comprehends all documents necessary to prove title: Cousins, The Law of Mortgages, 2nd ed, Sweet & Maxwell, London, 2001, 16.11, p 255, but see Clayton v Clayton [1930] 2 Ch 12. There is no rule of law to this effect; the right flows either from a term of the mortgage or invariable custom. Indeed it was held in Clarkson v Mutual Life Association of Australasia (1879) 5 QSCR 165 that the mortgagee was not entitled as of right to custody of the certificate of title. In Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR 32 at 49, Mahoney JA indicated that the position as to custody of the certificate of title was unclear. The right is recognised by the legislature when s 96(2) of the NSW Torrens Act makes the statutory right of a mortgagor to inspect the title deeds applicable to Torrens system mortgages: see Victorian Torrens Act s 96. Again, s 86 of the Victorian Torrens Act makes it clear that the mortgagor of Torrens system land is entitled to have the first mortgagee produce the deeds for registration of a subsequent instrument: see St Kilda Road Pty Ltd v Parker Simmonds Securities Ltd (2002) V ConvR ^54-652. These provisions would hardly make sense if the first mortgagee had no right to the deeds. Indeed, because of the dangers of permitting the mortgagor to retain the indicia of title, a mortgagee is almost bound to contract for custody of the certificate of title: see, for instance, Heid v Reliance Finance Corp Pty Ltd (1983) 154 CLR 326. Accordingly the principles set out in 3.32–3.33 apply to Torrens land. [page 133]

Postponement of mortgages 4.32 Section 56A of the NSW Torrens Act and s 75B of the Victorian Torrens Act provide for a mortgage to be postponed to a later interest or for the priority between mortgagees to be altered by registered memorandum. In New South Wales it has been held that postponement under such a memorandum reverses the order of registration: AMEV Finance Ltd v Auscott Ltd (1988) 5 BPR 11,386.

Transfer of mortgages 4.33 Section 46 of the NSW Torrens Act and s 45 of the Victorian Torrens Act provide for transfer of mortgages. Although the sections use language which is in form permissory or facultative, in effect the words are peremptory and exclusive: Crowley v Templeton (1914) 17 CLR 457 at 463; see also Smith v National Trust Co [1912] 1 DLR 698. The statutes give to the transfer the same effect as a statutory memorandum under the general law: see NSW Torrens Act ss 51 and 52, Victorian Torrens Act ss 45(2) and 46(1); and see 14.1–14.11. In Canada it has been held that the Torrens Acts do not change the law in respect of transfer of mortgages. Thus the assignee takes subject to equities and if no money was lent (see 1.7) or the mortgagee had a set-off against the transferor, the assignee will not be able to take advantage of the fact that it holds a registered mortgage: McCurdy Supply Co Ltd v Doyle (1956) 20 WWR 125 at 130–1; Toronto-Dominion Bank v Block Bros Contractors Ltd (1980) 118 DLR (3d) 311 at 319.

Merger under the Torrens system 4.34 In Beavan v Dobson (1906) 26 NZLR 69, it was held that the doctrine of merger of estates applied to Torrens system land. In Fink v Robertson (1907) 4 CLR 864 at 877, the High Court held that if a mortgagor transferred the mortgaged land to the mortgagee, the mortgage was extinguished: compare English Scottish and Australian Bank Ltd v Phillips (1937) 57 CLR 302, referred to in 36.11. Merger will occur when the registered proprietor of a lease becomes registered proprietor of the fee simple: Smith v Davy (1884) 2 NZLR (SC)

398. In Lewis v Keene (1936) 36 SR (NSW) 493 at 506, it was held that merger takes place even if the leasehold is land under the Torrens system while the fee simple is not so registered; and see Radin v Commonwealth Bank of Australia [1999] FCA 748.

Further advances and tacking 4.35 A Torrens mortgage may make provision for further advances and at least provided that at the time the further advance was made the mortgagee had no notice of any subsequent charges, the advance would be tacked onto, or covered by the security of, the mortgage: see Hopkinson v Rolt (1861) 9 HLC 514; 11 ER 829; and see 25.7–25.8. In Matzer v Clyde Securities Ltd [1975] 2 NSWLR 293, Holland J held that the rule in Hopkinson v Rolt applied to Torrens system mortgages. It has thereafter been assumed in the cases that the whole doctrine of tacking applies to Torrens mortgages: see, for example, Philos Pty Ltd v National Bank of Australasia Ltd (1976) 5 BPR 11,810 (Bowen CJ in Eq); Bank of New Zealand v Development Finance Corp of New Zealand [1988] 1 NZLR 495. This assumption raises the considerable theoretical difficulties expounded in Chapter 25, but as the basic principle is now established, these difficulties of detail need to be worked out in subsequent cases.

Position on default 4.36 The Torrens system mortgage does not confer on a mortgagee a right of possession as an incident of a transfer. The effect of s 60 of the NSW Torrens Act is, in the words [page 134] of Jordan CJ, ‘to put the mortgagee, but only upon default of the mortgagor, in the same position as regards the three matters mentioned as he would be under an old system mortgage’: Ex parte Jackson; Re Australasian Catholic Assurance Co Ltd (1941) 41 SR (NSW) 285 at 289. The Victorian provision s 78 is in different terms, but is essentially the same in operation. It empowers the mortgagee to enter into possession or to

bring an action in ejectment to ‘recover’ the land. In Falk v Haugh [1935] VLR 20 at 24, the Full Court held that there was no suggestion in the Torrens Act of any attempt to alter the general law governing the contract of mortgage. Thus the rights of the mortgagee on default are the same as with a general law mortgage. See also Croft v Kennaugh [1945] VLR 40; Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245; and 19.2 ff. The statutes generally put the Torrens system mortgagee in the same position as if he had a conveyance of the legal estate (see 19.5 ff and 28.4). In United Starr-Bowkett Co-op Building Society (No 11) Ltd v Clyne (1967) 68 SR (NSW) 331 at 347, Walsh JA said that ‘the notional legal estate thus treated as vested in him for this purpose must be regarded as subject to any prior legal interest in someone other than the registered proprietor by which the mortgagee is bound’. Thus (at 349): … although the mortgagee does not succeed to the estate of the mortgagor… he succeeds to, that is becomes entitled and subject to the mortgagor’s rights and duties as between himself and the tenant, under a lease granted by the mortgagor prior to the mortgagee. This does not mean that he automatically succeeds to those rights and duties as soon as his mortgage is registered. But, if, after default, he wishes to take steps to recover possession, he does so on the basis of a succession to the rights which the mortgagor formerly had against the tenant.

Where there is more than one mortgage, the Torrens Act operates so as to give the statutory right of an earlier mortgage priority over similar statutory rights given to subsequent mortgagees: Reliance Finance Corp Pty Ltd v Orwin (1964) 82 WN (NSW) (Pt 1) 11. It should be particularly noted that the procedure for foreclosure in respect of Torrens system land is completely different from that employed with respect to all other mortgages: see 22.53–22.56.

Exercise of power of sale 4.37 Legislation in all jurisdictions provides for a power of sale for a mortgagee under a Torrens system mortgage. In New South Wales s 58(1) of its Torrens Act gives power to the mortgagee or chargee to sell the land mortgaged or charged, or any part thereof, and all the estate and interest therein of the mortgagor or charger, and either together or in lots by public auction or by private contract, or both such modes of sale, and subject to such conditions as he may think fit, and to buy in and resell the same without

being liable for any loss occasioned thereby. The mortgagee or chargee may make and execute all such instruments as shall be necessary for effecting the sale, all which sales, contracts, matters and things authorised by the section shall be as valid and effectual as if the mortgagor or charger had made, done or executed the same, and the receipt or receipts in writing of the mortgagee or chargee shall be a sufficient discharge to the purchaser of such land, estate or interest, or of any portion thereof, for so much of his purchase money as may be thereby expressed to be received. Section 58(2) provides that no such purchaser shall be answerable for the loss, misapplication or non-application or be obliged to see to the application of the purchase money paid by him, nor shall he be concerned to inquire as to the fact of any default or notice having been made or served or referred to in s 57(2). By the latter provision a registered mortgagee or chargee may, subject to the Act, exercise the power of sale conferred by s 58 in circumstances similar to those set out above in s 111(2) of the Conveyancing Act 1919: see 20.12. [page 135] Notice may be dispensed with, except for defaults relating to payment, where the dispensation is by agreement expressed in the mortgage: see s 58A. By the same provision lapse of time may be dispensed with. Such dispensation must be in clear terms but a clearly expressed general dispensation may be effective: Khalid v Perpetual Ltd [2012] NSWCA 153; (2012) 16 BPR 31,225 and see Topfelt Pty Ltd v State Bank of NSW Ltd (1993) 6 BPR 13,209 (CA) and Notaras v Sly & Weigall (2005) 12 BPR 23,765 (CA). A different result may follow with a clause differently framed: see Farrow Mortgage Services Pty Ltd v Regatta Development Services Pty Ltd (1993) 32 NSWLR 333 at 340-1. In Victoria, if default is made in payment of the principal sum or interest secured or any part thereof, or in the performance or observance of any covenant, express or implied, in any registered mortgage or charge, and continues for one month or such other period as is therein expressly fixed, the mortgagee may serve on the mortgagor, or on such other persons as appear by the Register Book to be affected, notice in writing to pay the money owing or to perform and observe the covenants, as the case may be: Victorian

Torrens Act s 76(1). Where money secured by any such mortgage is made payable on demand, a demand in writing pursuant to the mortgage shall, for the purposes of the Act, be equivalent to serving such notice: s 76(2); see also WA Torrens Act s 107. If, within one month after the service of such notice or demand (or such other period as is fixed in such mortgage or charge) the mortgagor or other persons do not comply with the notice or demand, the mortgagee may, in good faith and having regard to the interests of the mortgagor or other persons, sell or concur with any other person in selling the mortgaged or charged land or any part thereof. The mortgagee may sell the land in one or several lots, by public auction or by private contract, at one or several times, and for a sum payable in one amount or by installments, subject to such terms and conditions as the mortgagee thinks fit, with power to vary any contract for sale and to buy in at any auction or to rescind any contract for sale and to resell without being answerable for any loss occasioned thereby. The mortgagee also has power to make such roads, streets and passages and to grant and reserve such easements as the circumstances of the case require and the mortgagee thinks fit, and may make and sign such transfers and do such acts and things as are necessary for effectuating any such sale: s 77(1) Victorian Torrens Act. Notice probably cannot be dispensed with in Victoria. In Queensland notice cannot be dispensed with: see Queensland Act s 84(3); see also 20.12. In South Australia and Western Australia notice probably cannot be dispensed with, for the same reason as in Victoria, namely that the power of sale is a direct power given by the legislation, not (as is the case for general land law mortgages) an implied power, and is not in terms capable of being excluded, though the period of the notice is in terms expressed to be capable of variation. In Tasmania notice or lapse of time may be dispensed with by agreement expressed in the mortgage or otherwise: Tasmanian Torrens Act s 80. For the legislation in other jurisdictions see Property Law Act 1974 (Qld) s 83(1)(a), applied to Torrens mortgages by Property Law Act 1974 s 77(1)(b) (i); Real Property Act 1886 (SA) s 133; Tasmanian Torrens Act s 78; WA Torrens Act s 108. It is important to note that, except in Queensland, only a mortgagee with a

registered mortgage can exercise the statutory power of sale: Midland Montagu Australia Ltd v Cuthbertson (1989) 17 NSWLR 309 at 313; Residential Housing Corporation v Esber (2011) 80 NSWLR 69 at 83, 85. However, the exercise of the power of sale may be commenced before the mortgage has been registered — for example a default notice may be given, but the interest of the mortgagor cannot pass to the purchaser unless the mortgage is registered: Mathieson v Mercantile Finance Trustees and Agency Co Ltd (1891) 17 VLR 271; Brunker v Perpetual Trustee Co Ltd (1937) 57 CLR 555 at 581; Mercantile Credits Ltd v Archbold [1970] QWN 9; Caretta Stud Nominees Pty Ltd v White (1982) 29 SASR 597; Midland Montague Australia Ltd v Cuthbertson. See, generally, Croft and Hay pp 47–51. [page 136]

Discharge of Torrens system mortgages 4.38 The Torrens system legislation provides for the discharge of registered mortgages and charges by an appropriate form of acknowledgment of payment and discharge. Section 65 of the NSW Torrens Act provides that whenever a mortgage or charge registered under that Act is intended to be discharged wholly or partially the mortgagee or chargee shall execute a discharge in the approved form: s 65(1). The form acknowledges receipt of the whole or part, as appropriate, of the mortgage money in full, or partial, satisfaction and discharge of the mortgage. Section 84 of the Victorian Torrens Act provides that upon production of a memorandum signed by the mortgagee discharging the land or part thereof from the whole or part of the moneys secured, the Registrar shall make an entry to that effect upon the certificate of title and duplicate thereof and upon the mortgage or charge and any duplicate thereof, and thereupon the land or the portion of land described in the memorandum shall cease to be subject to or liable for such moneys or for such part thereof: s 84(1). Notwithstanding that no memorandum of discharge is produced, where the Registrar is satisfied that all principal and interest has been paid to the person entitled and

that person is dead or absent from the state or cannot be found, he may make such entry as aforesaid discharging the mortgage: s 84(2). For discharge in other jurisdictions, see Queensland Torrens Act s 81; SA Torrens Act s 143; Tasmanian Torrens Act s 89; WA Torrens Act s 123. The memorandum, endorsement etc, of discharge can only be effectively signed by the registered proprietor: Re Nicholas (1951) 68 WN (NSW) 193. The discharge is not effective until the appropriate entry has been made on the register: Taylor v Wolfe & Co (1892) 18 VLR 727; Bree v Scott (1904) 29 VLR 692. Notwithstanding that the discharge was forged, upon registration of the discharge the land ceases to be charged with the moneys secured by the mortgage: Schulz v Corwill Properties Pty Ltd (1969) 90 WN (NSW) 529; Grundy v Ley [1984] 2 NSWLR 467; cf Clements v Ellis (1934) 51 CLR 217. This is also the case where the registration of the discharge occurs through a mistake or inadvertence on the part of the registered mortgagee (State Bank of New South Wales v Berowra Waters Holdings Pty Ltd (1986) 4 NSWLR 398; cf Trustees and Executor Co Ltd v Bagot’s Executor and Trustee Co Ltd [1964] SASR 306), which turns on the wording of s 64 of the South Australian Torrens Act. For correction of the register where a discharge was registered in error in disregard of a caveat, see FNCB-Walton Finance Ltd v Crest Realty Pty Ltd (1987) 10 NSWLR 621.

General law principles applicable to discharges 4.39 Most of the statutory provisions and rules of law set out in this work applicable to the discharge of mortgages under the Old System (see Chapter 32) apply to mortgages under the Torrens legislation. Most of the equitable rules as to discharge also apply. Thus the six months rule detailed in 32.36 ff applies to Torrens system mortgages: Friend v Mayer [1982] VR 941. Likewise, a binding contract of sale destroys the ‘equity of redemption’ under a Torrens system mortgage: Chia v Rennie (1997) 8 BPR 15,601.

Limitation Act problems 4.40 Under the general law, at the expiration of the specified period (and assuming an ordinary case where no special circumstances apply, such as the mortgaged land being held on trust for sale) the title of the mortgagor is

extinguished: Limitations Act 1969 (NSW) s 65 (on earlier limitation legislation, see Addison v Billion [1983] 1 NSWLR 586); Limitation of Actions Act 1958 (Vic) s 18. The title of subsequent mortgages is also extinguished: Young v Clarey [1948] Ch 191; [1948] 1 All ER 197. See 32.84 ff. [page 137] The Torrens system mortgagor may also lose his title after the expiration of the relevant limitation period. Section 45D of the NSW Torrens Act provides that where a person is in possession of land under the Act and the title of the registered proprietor would have been extinguished as against that person in possession of the land had the statutes of limitation applied, then that person may apply to be registered as proprietor. This provision applies to the mortgagee in possession to bar the mortgagor’s action for redemption: see Addison v Billion [1983] 1 NSWLR 586. In Victoria adverse possession is a specific exception to the paramountcy of the registered title: see Victorian Torrens Act s 42. The right of the mortgagor to redeem has been held to fall within an action to redeem or compel discharge for the purposes of s 15 of the Limitation of Actions Act 1958: Re Forrest Trust; Trustees, Executors & Agency Co Ltd v Anson [1953] VLR 246. For other jurisdictions, see Queensland Torrens Act ss 98–108, especially s 108; SA Torrens Act s 251 (see Re Kay [1969] SASR 1); Tasmanian Torrens Act s 40(3)(h); WA Torrens Act s 222. The topic is discussed in detail in Sykes and Walker, pp 941–51.

Standard clauses in Torrens system mortgages (New South Wales) 4.41 Section 80A of the NSW Torrens Act allows for the filing of standard memoranda of conditions which shall apply to all relevant mortgages. Memorandum Q860000, which is set out below, is a memorandum under this section composed by the Registrar-General himself. As to the effect of s 80A, see McIntosh v Goulburn City Council (1985) 3 BPR 9367. Clause 5 of the memorandum was construed by the Full Federal Court in Elders Trustee & Executor Co Ltd v E G Reeves Pty Ltd (1988) 20 FCR 164; 84 ALR 734.

Clause 7 overcomes the problem, dealt with in Ross v Victorian Permanent Building Society (1882) 8 VLR (Eq) 254 at 266 and Gesualdi v Serenar Nominees Pty Ltd [1993] V ConvR ¶54-478, that a mortgagee may not sell properties belonging to different mortgagors in the one sale. This problem is in fact cured for New South Wales by the power conferred on mortgagees by s 104 of the NSW Conveyancing Act, which applies also to Torrens system land. The provisions of Memorandum Q860000 are as follows: 1. Except with the written consent of the mortgagee the mortgagor will not apply for or obtain from the Crown or from any statutory authority any money or material or otherwise do or suffer to be done anything whereby any charge or liability shall or might be imposed on the mortgaged land or any part thereof in priority to or in derogation of this security. 2. The mortgagor will insure and keep insured against loss or damage by fire all buildings now or hereafter erected on the mortgaged land in the name of the mortgagee for indemnity of the mortgagee or of the mortgagee and the mortgagor in the full insurable value in some insurance office approved by the mortgagee, and in the event of loss the mortgagee alone shall have power to settle and compromise any claim against any insurance company (without being responsible for any loss occasioned thereby) and the sum received on account of such insurance shall be applicable either in or towards repair or rebuilding or in or towards repayment of the mortgage debt at the option of the mortgagee, and the mortgagor will hand the policy or policies evidencing such insurance and all receipts for moneys paid and other usual evidence of insurance to the mortgagee immediately upon the issue thereof. If at any time the mortgagor is entitled to the benefit of an insurance on the buildings for the time being comprised in the mortgage which is not effected or maintained in pursuance of his obligation aforesaid then all moneys received by virtue of such insurance shall, if the mortgagee so requires, be applied at the option of the mortgagee either in making good the damage or loss in respect of which the same shall have been received or be paid to the mortgagee and be applied by the mortgagee in or towards repayment of the mortgage debts. 3. The mortgagor will during the continuance of this security, whether the mortgagee shall or shall not have entered upon and taken possession of the mortgaged land, make such repairs as may be necessary for keeping the buildings now or hereafter to be erected on the mortgaged land in good and tenantable repair, order and condition, and in particular [page 138] will, whenever the mortgagee considers it necessary, paint in a proper and workmanlike manner to the satisfaction of the mortgagee such parts of the mortgaged premises as are usually painted and will, on being required by the mortgagee so to do, forthwith amend every defect in the repair and condition thereof, and will forthwith carry out all work that may be ordered by any competent public, local, shire or municipal authority in respect thereof, and pay all rates, taxes, charges, outgoings, and assessments (including any land or property tax) that may now or at any time be or become chargeable or be assessed or become due upon or in respect of the mortgaged land or any part thereof, under or in pursuance of the provisions of any Act or Ordinance of the Commonwealth of Australia or

the State of New South Wales, or any regulation thereunder now in force or that may come into operation during the continuance of this security, and will at all times indemnify and keep indemnified the mortgagee from the payment of such rates, charges, outgoings, and assessments, and every or any part thereof, and from all claims and demands in respect thereof, and the mortgagee shall at all reasonable times during the continuance of this security be at liberty with or without surveyors or others to enter into and upon the mortgaged land and view and inspect the state of repair of the buildings and improvements thereon. 4. In case the mortgagor shall at any time fail to keep the buildings so insured and in good tenantable repair, order and condition, or to carry out all work that may be ordered by any competent public, local, shire or municipal authority in respect thereof or of the mortgaged land or any part thereof, or to pay such rates, taxes, charges, outgoings and assessments as aforesaid or any part thereof it shall be lawful for but not obligatory upon the mortgagee to effect and maintain such insurance, repairs and order and to do such work and to pay such rates, taxes, charges, outgoings and assessments or part thereof, as the case may be, and all moneys or payments so expended or made shall be repayable by the mortgagor upon demand and be deemed principal moneys covered by this security, and shall carry interest until such repayment at such higher rate as may be shown in the schedule to the mortgage. 5. In addition to all costs and expenses which the mortgagor may be liable at law or in equity to pay in respect of this security, or otherwise in relation thereto, the mortgagor will upon demand pay all costs and expenses, including costs as between solicitor and client, incurred by the mortgagee in consequence or on account of any default on the part of the mortgagor hereunder or incurred by the mortgagee for the preservation of or in any manner in reference to this security, all of which costs and expenses shall from the time of payment or expenditure thereof respectively until repaid to the mortgagee by the mortgagor be deemed principal moneys covered by this security, and shall carry interest at such higher rate as may be shown in the schedule to the mortgage. 6. Upon default being made in payment at the respective times and in the manner shown in the mortgage of the principal sum or any part thereof, or of the interest thereon or any part thereof, or upon default being made in the observance or performance of any of the covenants contained herein or in the mortgage or implied therein by the Real Property Act, 1900, or the Conveyancing Act, 1919, the mortgagee shall (notwithstanding any omission, neglect or waiver of the right to exercise all or any of such powers on any former occasion) be at liberty to exercise all or any of the powers of a mortgagee under the said Acts immediately upon or at any time after default as hereinbefore mentioned, subject however to compliance with any requirements of the said Acts in respect of the exercise of such powers. If at any time default shall be made in the due payment of the interest on any of the days when the same respectively shall become payable or within the time thereafter mentioned in the schedule to the mortgage, or, if the power of sale given to the mortgagee under either of the said Acts shall become exercisable, then the principal sum shall immediately become due and the mortgagor will thereafter pay the same on demand. 7. Upon sale or lease by the mortgagee under the aforesaid powers the mortgaged land or any part thereof may be sold or leased together with other property in mortgage from the mortgagor to the mortgagee, whether (if land) under the Real Property Act or not, by one contract and one price or at one rent or in any other manner that the mortgagee may deem expedient. Provided that the mortgagee shall fairly and equitably apportion all costs, expenses. purchase moneys and rents between the several subjects of the sale or lease, but a failure to make such apportionment shall not affect the purchaser or lessee or the title to the land sold or leased.

[page 139] 8. Upon sale the mortgagee shall be at liberty to allow a purchaser any time for payment of the whole or any part of the purchase money with or without interest and either with or without taking security therefor. 9. In applying the purchase money towards satisfaction of the moneys for the time being owing on the security of the mortgage the mortgagor shall be credited only with so much of the said moneys available for that purpose as shall be received in cash by the mortgagee, such credit to date from the time of such receipt and all purchase money left outstanding on credit or otherwise shall, until actually received by the mortgagee in cash, be deemed a continuing unsatisfied part of the principal money secured by the mortgage, and carry interest accordingly, provided that any interest paid by the purchaser shall be set off pro tanto against the interest secured by the mortgage and the mortgagee shall be in no way liable for any such outstanding moneys or for any loss occasioned by the exercise of such power of sale. 10. The mortgagee shall, so long as any moneys shall remain owing on this security, have and retain possession of the Crown Grant or Certificate of Title for the mortgaged land and of any Certificate of Title for the mortgaged land and of any Certificate of Title to be hereafter issued in substitution therefor, whether to a purchaser of the equity of redemption or otherwise. 11. All powers, rights and remedies implied in favour of or conferred upon mortgagees by the Conveyancing Act, 1919, or the Real Property Act, 1900, shall be in enlargement and not in curtailment of the powers, rights and remedies conferred by these presents, and sub-sections 5, 6, 7 and 8 of section 106 of the Conveyancing Act, 1919, shall not apply to a lease by the mortgagee, and also the mortgagor shall not be entitled to exercise the power of leasing conferred by that section without the previous written consent of the mortgagee. 12. Service of any notice required or authorised by these presents may be effected in the manner permitted by section 170 of the Conveyancing Act, 1919. 13. Every covenant expressed or implied in these presents and by which more persons than one covenant shall, unless the contrary intention is expressed, bind such persons, and every two or greater number of them jointly and each of them severally, and every reference in these presents to the Real Property Act, 1900, or the Conveyancing Act, 1919, shall be construed as including every Act amending or in substitution for the Act referred to.

Note: If any provision is not intended to apply to a particular mortgage, the application of that provision to the mortgage should be expressly negatived, and, if desired, substitute provisions inserted in an annexure or schedule to the mortgage.

[page 140]

Chapter 5

Security Interests in Personal Property covered by the PPSA This chapter was written by Clare Langford LLB (Hons I). The author would like to thank David Lewis and Robert Turnbull for their helpful comments and support.

I

Background Terminology Statutory interpretation issues Comparative law Other interpretive aids II Application of the PPSA Connection with Australia Transitional provisions Property within the PPSA Classification of personal property Excluded transactions Interaction between the PPSA and the common law III Security interests under the PPSA A. ‘In substance’ security interests

5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 5.10 5.11 5.12 5.13 5.14

Transaction Interest in personal property Secures payment or performance Sale transactions Lease transactions Trusts B. ‘Deemed’ security interests Transferee of an account or chattel paper Consignor under a commercial consignment Lessor or bailor under a PPS lease Definition of PPS lease C. Characterisation of the PPSA security interest IV Creation and protection of security interests A. Attachment Value or an act by which the security interest arises Grantor has rights in the collateral

5.15 5.16 5.17 5.18 5.19 5.20 5.21 5.22 5.23 5.24 5.25 5.26 5.27 5.28 5.29 5.30

[page 141]

Automatic attachment After-acquired property Proceeds Returned collateral following transaction under which transferee took free Effect of attachment: fate of the floating charge B. Enforceability against third parties Security agreement evidenced by writing

5.31 5.32 5.33 5.34 5.35 5.36 5.37

Writing requirements Signature requirements Possession or perfection by control C. Perfection Perfection by possession Actual possession only Possession by third parties Possession for enforcement purposes Possession of certain kinds of personal property Possession of negotiable instruments Possession of chattel paper Possession of certificated investment instruments Perfection by control Control of ADI accounts Control of intermediated securities, investment instruments, letters of credit and uncertificated negotiable instruments Perfection by registration ‘Otherwise perfected’ Commingled goods Proceeds Goods in the possession of a bailee Goods repossessed by grantor or transferee of chattel paper Temporary perfection Proceeds Goods in the possession of a bailee returned to the grantor or debtor

5.38 5.39 5.40 5.41 5.42 5.43 5.44 5.45 5.46 5.47 5.48 5.49 5.50 5.51 5.52 5.53 5.54 5.55 5.56 5.57 5.58 5.59 5.60 5.61

Negotiable documents of title in transit Negotiable instruments and investment instruments returned to the grantor or debtor Collateral relocated to Australia Collateral transferred to transferee who does not take free Collateral returned following transfer under which transferee took free Returned collateral following transfer of a related account or chattel paper: the ‘deemed goods security interest’ V Priority rules A. Overview B. Default priority rules Perfected security interest versus unperfected security interest Unperfected security interest versus unperfected security interest Perfected security interest versus perfected security interest Security interests perfected by registration only Security interests perfected otherwise than by registration Mixed disputes

5.62 5.63

5.64 5.65 5.66 5.67 5.68 5.69 5.70 5.71 5.72 5.73 5.74 5.75 5.76

[page 142]

‘First perfects by possession or control’

5.77

Change in the mode of perfection C. Super-priority: the PMSI Definition of purchase money security interest (PMSI) Seller’s PMSI Lender’s PMSI Lessor or bailor’s PMSI and consignor’s PMSI Exemptions: s 14(2), (2A) Mixed PMSIs Refinancing PMSI versus non-PMSI Lender’s PMSI versus non-lender’s PMSI D. Super-priority: control E. Special priority rules and miscellaneous provisions Subordination agreements VI Loss of security interest A. Accessions and commingling Accessions Protection of security interests in accessions Interaction with priority rules Enforcement of interests in accessions Consequences for persons, other than secured parties, with an interest in the whole Commingling Conflict between interest in component and interest in mass Conflicts involving multiple interests in components B. Taking free rules Unperfected security interests

5.78 5.79 5.80 5.81 5.82 5.83 5.84 5.85 5.86 5.87 5.88 5.89 5.90 5.91 5.92 5.93 5.94 5.95 5.96 5.97 5.98 5.99 5.100 5.101 5.102 5.103

Buyer or lessee of goods in the ordinary course of business Liquid property Temporarily perfected security interests Low-value consumer property Serial-numbered goods Knowledge Residual protection for secured parties C. Insolvency Vesting of unperfected security interests on insolvency Future property Exceptions to vesting provision Amendments to the Corporations Act: deadline for the registration of filing statements The circulating asset Definition of circulating asset Control VII Enforcement of security interests A. Application of PPSA remedies Duty of good faith Limitation on rights of secured party

5.104 5.105 5.106 5.107 5.108 5.109 5.110 5.111 5.112 5.113 5.114 5.115 5.116 5.117 5.118 5.119 5.120 5.121 5.122

[page 143]

B. Remedies available to secured parties Seizure Default by the debtor

5.123 5.124 5.125

Notice? Secured party may seize by legal methods Obligation to retain or dispose of collateral Disposal Duty to obtain market value Sale to self Purchaser takes free on resale Distribution of proceeds Retention C. Rights of the grantor and other secured parties Redemption Reinstatement D. Miscellaneous provisions Enforcement of obligations secured by land and personal property Enforcement of security interests in liquid assets

5.126 5.127 5.128 5.129 5.130 5.131 5.132 5.133 5.134 5.135 5.136 5.137

5.138 5.139

I Background 5.1 The Personal Property Securities Act 2009 (Cth) (PPSA) is the latest manifestation of a form of Personal Property Securities legislation in force throughout much of the common law world. A brief history of this legislation appears below: see 5.3. For ease of reference, the key Acts upon which the Australian Act is based are: Personal Property Securities Act 1999 (NZ) (NZ PPSA); Personal Property Security Act SS 1993, c P-62 (Sask PPSA); Personal Property Security Act RSBC 1996, c 359 (BC PPSA); Personal Property Security Act RSA 2000, c P-7 (Alb PPSA);

Personal Property Security Act SNS 1995–6, c 13 (NS PPSA); Personal Property Security Act CCSM c P35 (Man PPSA); Personal Property Security Act RSO 1990, c P 10 (Ont PPSA); and Uniform Commercial Code (UCC) Article 9 – Secured Transactions. The ‘distinctive feature’ of these Acts is the ‘adoption of a unitary concept of security which replace[s] the complexity of security forms and devices that prevailed under the prior law’: Bridge, Macdonald et al, ‘Formalism, Functionalism and Understanding the Law of Secured Transactions’ (1999) 44 McGill LJ 567 at 567. The underlying philosophy is that all transactions which perform the same function should be subject to a single legal framework. ‘Consequently, a security interest is defined in purely functional terms as an interest in personal property which secures payment or performance of an obligation’: ibid. As Bridge, Macdonald et al note (at 572– 4), the original drafters of Article 9 of the UCC (from which all subsequent Personal Property Securities legislation derives) were in part merely: … codify[ing] Equity’s time-honoured willingness to look behind the form of a debtor-creditor property transfer in order to decide its true character … [However], their goal was also far

[page 144] more ambitious. They sought nothing less than to detach the legal entailments of security from conventional property analysis … Not only the form of the transaction but also the location of title to the collateral — and by implication its proprietary quality — where rejected as indicia of security. Functionalism, which respects the parties’ bargain and is sensitive, not to metaphysical property constructs, but to the interest of third parties, was henceforth to be the only reliable guide to modern secured financing law. This approach leads to the discouragement of sham transfers and the curing of ostensible ownership and ‘false wealth’ problems, the promotion of certainty and predictability in the resolution of priority disputes, and the protection of the interest of the debtor and any subordinate third parties in the collateral at the point of enforcement.

Thus the Act generally adopts a ‘functional’ definition of security: see s 12(1). Traditional forms of security over personal property (including chattel mortgages, pledges and charges) are treated as equivalent to forms previously recognised as ‘quasi-security’ (including conditional sale agreements and

hire-purchase agreements). Indeed, it has been suggested that the functional definition extends even beyond quasi-security transactions to relationships which at general law would have been characterised as purely contractual: see below 5.14 (‘In substance’ security interests). Additionally, the ancillary rationale of ‘curing ostensible ownership and ‘false wealth’ problems’ has led to the express inclusion of certain true ownership interests arising out of transactions that do not perform the function of security, but which cloak the obligee with the indicia of ownership: see s 12(3). Section 3 (Guide to this Act) provides a summary of the structure of the PPSA. While a helpful point of reference, the summary does not pick out which are the core or general provisions and which are the ancillary or specific provisions; the result is a rather daunting set of provisions whose relation to each other is not immediately clear. The scheme of the PPSA only emerges on closer inspection. A useful approach is to ‘attempt to formulate a series of questions directed at gaining an understanding of the nature, scope and operation of the personal property security interest (PPSI)’: McCracken, ‘Getting to Grips with the Reforms to Personal Property Securities Law’ (2011) 25(3) Commercial Law Quarterly 3 at 4. In that article, Professor McCracken suggests the following questions (also at p 4): Does a PPSI exist? [That is, does the transaction fall within the PPSA?] When is a PPSI effective? [That is, has the secured party taken the steps required to render its interest enforceable, and has it availed itself of modes of the protections offered by the Act?] What is the ranking of a PPSI? [That is, what is the priority of the PPSI?] What is the reach of a PPSI? [That is, has the PPSI been extinguished or lost?] What remedies does a PPSI confer? [That is, what may a secured party do on default?] The structure of this chapter loosely adopts this useful approach. The advent of the PPSA is likely to require a greater engagement with comparative law than most Australian practitioners may be used to. At the time of writing, only a handful of judgments relating to the PPSA have been handed down in this country. Most refer to the Act in a tangential fashion,

and only a couple discuss its core concepts: see Re Maiden Civil (P&E) Pty Ltd [2013] NSWSC 852 per Brereton J; Re Barclays Bank plc [2012] NSWSC 1095 per Black J. It will take many years for Australian case law to develop to such an extent that the Act can be interpreted without having regard to the experience of other common law countries. That said, the practice of comparative law presents both opportunities and challenges: see below 5.3. [page 145] In many ways, the Act turns pre-PPSA commercial law on its head. In some ways, however, the Act is designed to mimic, or make clearer, an outcome that would have prevailed at general law in any case. It is vitally important to keep an open mind when approaching each provision, and to bear in mind the scheme of the Act as a whole in carrying into effect a ‘functional’ concept of security. Early Canadian cases sometimes demonstrated a failure to appreciate the breadth of the changes wrought by the PPSA, particularly with respect to the floating charge and the operation of the rule nemo dat quod non habet: see, for example, Access Advertising Management Inc v Servex Computers Inc (1993) 15 OR (3d) 635 and Sprung Instant Structures v Caswan Environmental Services Inc [1998] 6 WWR 535. The teething period appears to have been somewhat shorter in New Zealand, no doubt thanks to the Canadian experience. In New Zealand Bloodstock Limited v Waller [2005] NZCA 254; [2006] 3 NZLR 629, the interest of a long-term lessor was held to rank below that of the lessee’s chargee, notwithstanding the former had title. The comments of Robertson and Baragwanath JJ at [18] are instructive: Cautionary cases which Mr Dale’s argument [for the debenture-holder] brings to mind include A Salomon & Co Ltd [1897] AC 22 where at levels below the House of Lords there had been a failure to put aside old learning and to recognise that the provision for separate legal identity of the company … must be given literal effect. Likewise in Frazer v Walker [1967] NZLR 1069; [1967] 1 AC 569 it was perhaps easier for the fifth member of the Board, Sir Garfield Barwick, to appreciate Sir Robert Torrens’ concept of registration as the root of title than for the English Law Lords, to whom the notion that a forged mortgage could by registration deprive a landowner of his title was no doubt counter-intuitive.

Terminology

5.2 The Act contains an array of defined terms; some are of little moment, but others, such as the ‘PPS lease’ and the ‘circulating asset’, are so important they enjoy their own section. For better or worse, the Act uses a number of familiar terms. Some of these are defined, and the definition often diverges from the general meaning of the term; ‘land’, for example, does not include fixtures: s 10 (‘land’). Some are not defined, such as ‘subrogation’, ‘redemption’, and ‘traceable’ property. In these cases, it is unclear whether, and to what extent, the Act seeks to import general law principles relating to these concepts: see s 254 (concurrent operation of other laws). The Act also contains terms that may be relatively unfamiliar to the Australian lawyer. Two important examples are ‘chattel paper’ and the ‘trust receipt’. The former is a new type of property, being a physical document that is the ‘embodiment’ of a transaction (typically, a lease or hire-purchase agreement). Both the debt and the underlying goods involved may be dealt with through dealing with the physical document, so that a person who takes a security interest over chattel paper (embodying, for example, a lease) takes an interest both in the obligations owed to the lessor and the lessor’s interest in the underlying goods: see Harris and Mirzai, Annotated Personal Property Securities Act 2009 (Cth) (2011), CCH Australia Limited, p 57 [12.5.3.1] and below 5.22. Transfers of chattel paper are a kind of ‘deemed’ security interest: s 12(3). The ‘trust receipt’, which is not a defined term, refers to a kind inventory financing in vogue in the United States prior to the introduction of Article 9. Under this transaction, the secured creditor releases collateral to the debtor in exchange for a trust receipt, signed by the debtor, indicating that he or she holds the collateral on trust for the secured creditor: see Duggan and Brown, Australian Personal Property Securities Law, LexisNexis Butterworths, 2012, p 47 [3.11]. The ‘trust receipt’ is listed in s 12(2) as an example of a transaction that gives rise to a security interest.

Statutory interpretation issues 5.3 The PPSA is the latest in a long series of Personal Property Securities legislation in force in common law jurisdictions since the 1950s. It has a distinct theoretical underpinning, as emphasised by the prominence of academic texts in many judgements

[page 146] in other jurisdictions. In light of these unique elements, it is useful to outline here the problems and opportunities associated with the practice of comparative law in the context of statutory interpretation. There will also be a brief discussion of the use of guides, notes and extraneous material in interpreting the PPSA.

Comparative law 5.4 The Australian Act is modelled on Personal Property Securities legislation in force in New Zealand, the Canadian Provinces and the United States. Movement towards a Uniform Commercial Code (UCC) began in the United States in 1940. The UCC, Article 9 of which deals with secured transactions, was first enacted in Pennsylvania in 1953, other American states following suit over the course of the 1950s and 1960s. Of the Canadian provinces, Ontario was the first to enact Personal Property Securities legislation, drawing on the scheme in UCC Article 9, in 1967. The other provinces (apart from Quebec) adopted various versions of such legislation in the next decades. New Zealand enacted its PPSA in 1999. For the legislative history of the foreign Acts, see Malcolm, ‘The Uniform Commercial Code in the United States’ (1963) 12 International & Comparative Law Quarterly 226; McCracken et al, Everett and McCracken’s Banking and Financial Institutions Law, 8th ed, Lawbook Co, Sydney, 2013 (Everett and McCracken), p 490 [13.010]; Mike Gedye, ‘The Development of New Zealand’s Secured Transactions Jurisprudence’ (2011) 34(2) UNSWLJ 696. Over time these precedential statutes have developed a rich surrounding jurisprudence, which will undoubtedly provide an important source of guidance in the early years of the Australian regime. Indeed, this has already proven to be the case: see Re Maiden Civil (P & E) Pty Ltd [2013] NSWSC 852. In that case, Brereton J interpreted s 19(5) of the Australian Act by reference to analogous provisions in the PPSAs of New Zealand and British Columbia as interpreted in the seminal cases of Re Giffen [1998] 1 SCR 91; (1998) 155 DLR (4th) 332, Graham v Portacom New Zealand Ltd [2004] 2 NZLR 528 and Waller v New Zealand Bloodstock Ltd [2006] 3 NZLR 629. His Honour commented (at [32]):

The Commonwealth Parliament, in enacting legislation that was modelled on the New Zealand and Canadian legislation, should be taken to have intended the same approach [to s 19(5)], which was by then well-established in Canada and New Zealand, to apply.

It is well established that Acts in pari materia, including from different jurisdictions, may be referred to when construing a piece of legislation: see, for example, Strachan v Brown and Visser (2000) 9 Tas R 291; [2000] TASSC 142 at [20]–[21]; PT Ltd Maradona Pty Ltd (No 2) (1992) 27 NSWLR 241 at 252; Collection Point Pty Ltd v Commissioner of Taxation (2012) 129 ALD 263; [2012] FCA 720 at [21], affd (2013) 212 FCR 184, [2013] FCAFC 67; ZL v R (2010) 208 A Crim R 325 at 329; see generally Pearce and Robert Geddes, Statutory Interpretation in Australia, 7th ed, LexisNexis Butterworths, Sydney, 2011, pp 101–3 [3.36]–[3.38]. The novelty, strangeness and pedigree of the PPSA will likely entail a much wider application of this principle, and a far greater engagement with North American authority, than in the past. The decision in Maiden Civil also heralds a broader application of the principle that, where an Act is passed in Australia that is in similar terms to another Act, then the legislature is presumed to know the judicial interpretation placed on the Act by other courts and to have intended that it should be followed in Australia. Previously, this principle had been applied with confidence only in relation to Acts passed in other Australian states or in England: Pearce and Geddes, above, p 114 [3.50]; National Mutual Life Association of Australasia Ltd v Godrich (1909) 10 CLR 1 at 13–14 (Griffith CJ) (decision of New York State Court); cf Warnecke v the Equitable Life Assurance Society of the United States [1906] VLR 482 at 487–8. As the decision in Maiden Civil demonstrates, foreign precedent will be of particular use in analysing the overall purpose and foundational concepts of the PPSA. Yet the [page 147] foreign Acts and surrounding case law may also prove useful in interpreting the finer details, as where a particular term is not defined in the Australian Act but is defined in another PPSA: see FCT v Henderson (1943) 68 CLR 29 at 44 (Latham CJ); Commissioner of Taxation v ICI Australia Ltd (1971–

1972) 127 CLR 529 at 581 (Gibbs J); Dampier Salt (Operations) Pty Ltd v Collector of Customs (1995) 133 ALR 502 at 509–10; affd (1996) 67 FCR 108; cf M Collins & Son Pty Ltd v Bankstown Municipal Council (1958) 3 LGRA 216. For example, in construing the word ‘default’, not defined in the Australian Act, one might have regard to the definition of that term in s 2(1) (n) of the Saskatchewan Act. Similarly, in the event an Australian provision is open to a number of possible constructions, it may be preferable to select that which best accords either with the wording of an analogous provision in another PPSA, or judicial interpretations of the same. So, although on its face s 21(2)(b) of the Australian Act allows secured parties to perfect a security interest in ‘any collateral’ by taking possession of it, this may be read down to mean ‘any collateral capable of being possessed’ in accordance with foreign case law: see below 5.42. In Danziger v The Hydro-Electric Commission [1961] Tas SR 20, Crisp J commented (at 24): One should not be astute to seek differences between statutes, even though of different jurisdictions, in pari materia. Though a breach of the draftsman’s golden rule it is not a necessary implication that a departure in drafting indicates a different intention from the precedent, and in this case I think, despite the formal differences, the Tasmanian provision is intended concisely, though with dangerous brevity, to achieve the same result as the Imperial subsection and it should be construed accordingly.

Of course, foreign case law does not bind Australian courts. Nor should judicial interpretations in other jurisdictions be adopted unthinkingly. In Marshall v Director General, Dept of Transport (2001) 205 CLR 603, McHugh J noted that the wording of Land Clauses Consolidation Act 1845 (UK) s 63 was identical to that of Acquisition of Land Act 1967 (Qld) s 20(1) (b). Despite this, his Honour went on to say (at 632–3): But that does not mean that the courts of Queensland, when construing the legislation of that State, should slavishly follow judicial decisions of the courts of another jurisdiction in respect of similar or even identical legislation. The duty of courts, when construing legislation, is to give effect to the purpose of the legislation. The primary guide to understanding the purpose is the natural and ordinary meaning of the words of the legislation. Judicial decisions on similar or identical legislation are guides to, but cannot control, the meaning of legislation in the court’s jurisdiction.

See also Coco v R (1994) 179 CLR 427 at 456 (Toohey J). A measure of caution is particularly necessary given the differences between the Australian PPSA and its predecessors, as well as among its predecessors: see Waller v

New Zealand Bloodstock [2006] 3 NZLR 629 at [16]. Generally speaking, the Australian Act bears closest resemblance to the New Zealand and Canadian Acts, particularly those of Saskatchewan, British Columbia and Ontario. It tends to differ more from UCC Article 9. However, this is not always the case: sometimes the Australian Act draws more from the UCC and diverges from the New Zealand and Canadian Acts. Sometimes it is entirely unique. It is accordingly difficult to make any meaningful generalisation regarding the utility of foreign precedent from some jurisdictions relative to that from others. Different wording between Acts may reflect specific policy choices, or simply result from particular drafting conventions, or attempts at ‘dangerous brevity’. In some cases the distinction is clear. For example, the Australian provisions relating to the vesting of unperfected security interests on insolvency, and those relating to perfection by control, diverge quite strikingly and deliberately from their Canadian and New Zealander counterparts. In other cases, it is less clear whether Parliament intended to make substantive or merely stylistic changes to the scheme as enacted elsewhere. One instance is s 24(6) of the Australian Act, which allows for the ‘possession’ of certificated investment [page 148] instruments. On a literal reading, this amenity is available only if the instruments are in registered form. By contrast, an analogous provision in many Canadian Acts applies to instruments in registered and bearer form: see Sask PPSA s 24(3); BC PPSA s 24(3); Alb PPSA s 24(3); Man PPSA s 24(3); Ont PPSA s 22(2); see Duggan and Brown, above at 5.2, pp 102–3, [5.19]– [5.20]. Did Parliament intend a narrower scope for s 24(6), or should the provision be taken to extend to instruments in bearer form as well? In Ory and Ory v Betamore Pty Ltd (1990) 54 SASR 331 at 345, Cox J made the following remarks while grappling with the interpretation of one provision that was identical in almost every respect to a corresponding provision in a prior statute: [T]he draftsman clearly had the earlier Act in front of him when he drafted the [later Act]. Why did he vary the wording of the corresponding par (a) …? Was he simply fiddling with the words

without intending to change their meaning …? Or did he want to narrow the scope of par (a) by using a different formula? I have found this question perplexing.

No doubt Australian judges, lawyers and academics will find similar questions similarly perplexing when construing the PPSA. As Marshall emphasises, a critical approach to foreign precedent is required not only where the wording of a provision differs between Acts, but also where the wording is identical. Opinions may differ between courts as to the natural and ordinary meaning of words. A differing statutory context or commercial environment may lead to differing interpretations. The fact that Australian courts have often take a different approach to the common law and, especially, equity, than their Canadian and New Zealander counterparts may also be a reason for caution — particularly when analysing the effect of the Act on the general law; see Loxton, ‘New Bottle for Old Wine? The Characterisation of PPSA Security Interests’ (2012) 23 JBFLP 163 at 164. This said, it remains vitally important for Australian practitioners to engage with the PPSA’s predecessors and associated case law. The PPSA is not a statute that can be readily understood after a bare reading. In light of the depth of jurisprudence surrounding the foreign Acts, it would be extremely facile to construe the PPSA as if it were unique to Australia and the problem of its construction were of merely parochial concern (paraphrasing Nettle JA in RJE v Department of Justice (2008) 192 A Crim R 156 at 171).

Other interpretive aids 5.5 It is useful to briefly consider here some domestic aids to interpretation. One distinctive feature of the Act is its use of statutory guides. There is a guide to the overall Act, guides to each Chapter, and guides to each Part of each Chapter: 49 in all. While these guides form part of the Act and should not be ignored in the process of construction, their utility in that process is limited: H v Minister for Immigration and Citizenship (2010) 188 FCR 393 at [88]. They will be a helpful introduction to the provisions of the PPSA for the uninitiated and may aid in resolving ambiguities. That said, it is unlikely that any of the guides will be useful in resolving complex issues of interpretation. Guides can be misleading in their simplicity, and certain guides in the PPSA can be criticised as obscuring rather than clarifying the operative provisions: cf Legal Services Board (Vic) v Gillespie-Jones [2012] VSCA 68 at [37]. See Herzfeld, Prince and Tully, Interpretation and the Use

of Legal Sources, 1st ed, Thomson Reuters, 2013, pp 181–2 [25.1.1560]; and In the matter of Maiden Civil (P & E) Pty Ltd [2013] NSWSC 852 at [61] for an example of the use of a PPSA statutory guide in the construction of the Act. Consistent with other modern statutes, the PPSA also contains a variety of ‘navigational’ and ‘explanatory’ notes, which form part of the Act and may be taken into account in its construction: Acts Interpretation Act 1901 (Cth) s 13; and see Herzfeld, Prince and Tully, above, pp 187–8 [25.1.1600]. The effect of a given statutory note depends on [page 149] its particular language and context: One.Tel Ltd (in liq) v Rich (2005) 190 FLR 443 at 459–60 per Bergin J. Material that does not form part of the PPSA, including explanatory memoranda, second reading speeches, and Law Reform Commission reports, may be used to confirm the meaning of a given provision, or to determine its meaning in the face of ambiguity, obscurity, absurdity or unreasonableness: Acts Interpretation Act 1901 (Cth) ss 15AB(1), (2); cf CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384. However, the text of the Act remains controlling and such materials may not be used to ascertain the subjective intention of the drafter, which is irrelevant: see South Australia v Commonwealth (1942) 65 CLR 373; Harrison v Melhem (2008) 72 NSWLR 380; Herzfeld, Prince and Tully, above, pp 299–300 [25.1.2660]. It is unlikely that Australian courts will make extensive use of the second reading speeches associated with the various Personal Property Securities Bills, although these do confirm that the Act was intended to simplify the law’s treatment of security interests in personal property without codifying it, and to focus the law ‘on the real or economic effect of the transaction’: Commonwealth, Parliamentary Debates, House of Representatives, 24 June 2009, 6960 (Robert McClelland, Attorney-General). The majority of parliamentary discussion focused on the establishment of a single national register and the doing away with the miscellany of Acts that previously governed security interests in personal property.

Of greater use are the explanatory memoranda accompanying each Bill, especially those associated with the Personal Property Securities Bill 2009 (Cth) and the Personal Property Securities (Corporations and Other Amendments) Bill 2010 (Cth). These may give some indication of the gist of undefined terms, such as ‘transaction’, or of the rationale underlying the introduction of new concepts, such as ‘control’. In other cases, a memorandum may assume that the Act will operate in a particular way notwithstanding the express terms do not necessarily lead one to that conclusion: see, for example, 5.72. The New South Wales Law Reform Commission (NSWLRC) and the Australian Law Reform Commission (ALRC) jointly prepared a report regarding the proposed PPSA over a decade before the reforms were carried into effect: Personal Property Securities, ALRC Report No 64 (1993). The Law Reform Commissions of Queensland and Victoria also prepared a joint discussion paper, believing themselves to have different ‘policy objectives’ to the ALRC: Personal Property Security Law: A Blueprint for Reform, QLRC Discussion Paper No 39 and VLRC Discussion Paper No 28 (1992). Both papers set out at length the mischief the PPSA is designed to address. However, perhaps unsurprisingly, the recommendations made in the second paper are radically different to those eventually acted upon by the drafters of the PPSA. The PPSA also diverges from a number of recommendations made by the ALRC and NSWLRC. The utility of these papers as interpretive aids diminishes accordingly, although they provide important background material.

II Application of the PPSA 5.6 For the PPSA to apply to a given transaction, the transaction must involve the granting of a security interest in personal property, have the requisite connection with Australia, and not fall within any of the excluded transactions listed in ss 8 and 12. Special provisions deal with security interests in personal property that were created prior to the PPSA, including those that were registered on the appropriate pre-PPSA register. The definition of a security interest is considered in Part C (Security interests under the PPSA). What follows is a brief discussion of the other factors to be considered when determining whether and how the PPSA applies to a

particular transaction. [page 150]

Connection with Australia 5.7 For the PPSA to apply to a transaction, it must have a sufficient connection with Australia. This is not to say that Australian law governs the transaction; this discussion should not be confused with the Act’s choice of law provisions (see Pt 7.2), which are outside the scope of this chapter. A relevant connection with Australia may arise in a number of ways depending on the nature of the collateral: see 5.9. The Act applies to security interests: in goods or financial property, if the property is located in Australia (s 6(1)(a)); in intermediated securities, if the intermediary is located in Australia (s 6(1A)(a)); in accounts, if the account is payable in Australia (s 6(2)(b)); being the interest of a transferor of an account or chattel paper, if the account or chattel paper is payable in Australia (s 6(2)(c)(ii)). The Act will also apply to security interests in intangible property, or any of the kinds of property above, where the grantor of the interest is an Australian entity: ss 6(1)(b), (1A)(b), (2)(a), (c)(i). Lastly, the Act applies to security interests in ADI accounts, and security interests provided for by Australian law, by virtue of their identity as such: s 6(2)(d), (e); see s 10 (‘ADI account’).

Transitional provisions 5.8 The PPSA seeks to preserve the priority of secured interests arising from agreements entered into prior to 30 January 2012, the ‘registration commencement time’. It does so by reference to the ‘transitional security agreement’ and the ‘transitional security interest’, both defined terms. A transitional security agreement is an agreement that was in force immediately

before 30 January 2012, and which has continued to be in force since that date: s 307; see also s 10 (‘security agreement’). A transitional security interest is one that is provided for by a transitional security agreement and otherwise meets the definitions in ss 12(1) and (3) of a PPSA security interest: s 308; see also s 310 (time at which Act begins to apply, and in relation to which matters it applies). It is immaterial whether the security interest came into existence after 30 January 2012, as long as the security agreement from which it derives was in force beforehand: s 321. A special regime applies to transitional security interests. Section 321 provides that all such interests are ‘taken to attach’ to the collateral immediately before 30 January 2012 for the purposes of the default priority rules (s 55, see 5.70 (Default priority rules)) and the definition of ‘perfection’ (s 21, see 5.41 (Perfection)): s 306. A transitional security interest is enforceable against third parties notwithstanding the writing requirements under s 20 of the Act have not been complied with, provided the interest was so enforceable under pre-PPSA law: s 311. Further, the Ch 4 enforcement provisions do not apply to transitional security interests, so that such secured parties must continue to rely on contractual enforcement provisions and any other remedies available outside the PPSA: s 314. The Act deems all transitional security interests to be perfected from the time immediately before 30 January 2012. Again, this is so whether or not the transitional security interest arose before, at or after this date: s 322(1). This automatic perfection status enures for the benefit of secured parties for all purposes under the Act, but is of limited duration. Specifically, it will come to an end at the earliest of the following times (see s 322(2)): when the security interest is perfected by registration under Div 6 (migration of personal property security interests); when the security interest is perfected by preparatory registration under Div 7; [page 151] when the security interest is otherwise perfected by registration, or is

perfected by possession or control; when the security interest is otherwise perfected by force of the Act, provided perfection is not by force of the temporary perfection provisions or s 322 itself; or the end of the month that is 24 months after 30 January 2012. Loosely speaking then, the Act provides a 24-month grace period for holders of transitional interests to perfect their interests by other means. If a secured party fails to do so, then its interest will still be ‘taken to [have] attach[ed]’ immediately before 30 January 2012: see above. However, the interest will be vulnerable in the context of priority disputes, insolvency and the operation of the taking free rules; see Part E (Priority rules), 5.102 (Taking free rules) and 5.111 (Insolvency). A subset of transitional security interests is accorded even greater protection. This is the ‘migrated security interest’, being a transitional security interest for which there was a registration in a ‘transitional register’ that was effective and ‘duly authorised by the law under which the register was maintained’: s 332. The PPS Registrar ‘migrated’ these interests to the PPS register, at which time they became perfected by registration under the PPSA: see ss 322(2)(a), 333. By virtue of s 322(1), such interests remain continuously perfected from immediately before 30 January 2012 onwards. Unlike other transitional security interests, no ‘sunset date’ applies to the perfection of migrated security interests. However, such interests may yet cease to be perfected under the PPSA, in circumstances where the original registration in the transitional register was temporally limited, or the registration becomes ineffective under Pt 5.4; see s 337 and 5.53; Duggan and Brown, above, p 340 [15.19].

Property within the PPSA 5.9 The word ‘property’ is undefined in the PPSA. Its meaning be ascertained in light of the particular context in which it appears, and the purpose of the Act as a whole: see Kirby (Inspector of Taxes) v Thorn EMI plc [1988] WLR 445 at 450 per Nicholls LJ; Yanner v Eaton (1999) 201 CLR 351 at 366–7. Canadian authority suggests that ‘property’ should be construed broadly in the context of the PPSA, given it seeks to facilitate the

raising of funds through secured transactions. In Re Gauntlet Energy Corp (2003) 45 CBR (4th) 46; 5 PPSAC (3d) 236, Kent J of the Alberta Court of Queen’s Bench held that confidential information was a kind of personal property within the PPSA, notwithstanding it was not considered property in other contexts. In Saulnier (Receiver of) v Saulnier (2008) 298 DLR (4th) 193, the Supreme Court of Canada held that a statutory fishing licence fell within the concept of ‘property’ under the Nova Scotia PPSA and the Bankruptcy and Insolvency Act RSC 1985 c B-3. Binnie J (with whom the other members of the court agreed) made the following comments (at [16]– [19], and [43]–[51]): The questions before the Court essentially raise a dispute about statutory interpretation. We are not concerned with the concept of ‘property’ in the abstract. The notion of ‘property’ is, in any event, a term of some elasticity that takes its meaning from the context. The task is to interpret the definitions in the BIA and PPSA in a purposeful way having regard to ‘their entire context, in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament’ (R. Sullivan, Sullivan and Driedger on the Construction of Statutes (4th ed. 2002), at p. 1). Because a fishing licence may not qualify as ‘property’ for the general purposes of the common law does not mean that it is also excluded from the reach of the statutes. For particular purposes Parliament can and does create its own lexicon … The PPSA … is designed to facilitate the creation of a security interest to enable holders of personal property to use it as collateral, and to enable lenders to predict accurately the priority of their claims against the assets in question …

[page 152] [T]he holder of a s. 7(1) licence acquires a good deal more than merely permission to do that which would otherwise be unlawful. The holder acquires the right to engage in an exclusive fishery under the conditions imposed by the licence and, what is of prime importance, a proprietary right in the wild fish harvested thereunder, and the earnings from their sale. While these elements do not wholly correspond to the full range of rights necessary to characterize something as ‘property’ at common law, the question is whether (even leaving aside the debate about the prospects of renewal) they are sufficient to qualify the ‘bundle of rights’ the appellant Saulnier did possess as property for the purpose of the statutes … I do not suggest that a fishing licence constitutes a profit à prendre at common law, for clearly there would be numerous conceptual objections to such a characterization. Our concern is exclusively with the extended definitions of ‘personal property’ in the context of a statute that seeks to facilitate financing by borrowers and the protection of creditors.

Under s 10 of the Australian Act, ‘personal property’ is defined positively to include a licence, and negatively to exclude ‘land’ and statutory rights

expressed not to be personal property for the purposes of the PPSA: see, for example, Fisheries Management Act 1994 (NSW) s 286A; Local Government Act 1993 (NSW) s 68B. Contrary to the common law, fixtures are categorised as ‘personal property’, although they remain expressly excluded from the Act under s 8(1)(j): see 5.2 and 5.11. Notably, the Act provides that a person who owes payment or performance to another may take a security interest ‘in’ the other person’s right to require payment or performance: see s 12(3A). This is designed to preclude the ‘conceptual impossibility’ debate surrounding charge-back transactions: see Ward, ‘Personal Property Securities Reform and the Conceptual Impossibility Doctrine’ (2009) 20 JBFLP 106.

Classification of personal property 5.10 Personal property at common law may be divided into tangible property and intangible property, or choses in possessions and choses in action. In the PPSA, however, two other main classes join ‘goods’ and ‘intangible property’: ‘intermediated security’ and ‘financial property’. Under this scheme, not every form of tangible property is a ‘good’ (currency, for instance, is ‘financial property’) and ‘intangible property’ is a residual category of property not falling under any other head. ‘Goods’ roughly accords with the notion of a chose in possession, although the two are not coterminous. ‘Currency’ is a species of ‘financial property’, along with ‘negotiable instruments’ (including but not limited to bills of exchange, cheques and promissory notes), ‘investment instruments’ (including but not limited to certificated shares, derivatives, debentures, government bonds, financial exchange contracts and options), and ‘chattel paper’: see 5.2. An ‘intermediated security’ refers to ‘the rights of a person in whose name an intermediary maintains a securities account’ and is defined with some particularity in s 15. However, securities held in the CHESS system are classified as ‘intermediated securities’ despite being directly held: see s 15(2); Duggan and Brown, above, pp 26–7 [2.18]–[2.20]. ‘Intangible property’ captures personal property that is not goods, financial property or an intermediated security. The Act draws other distinctions that cut across these boundaries, including a distinction between ‘consumer’ and ‘commercial’ property. ‘Commercial property’ is personal property other than ‘consumer property’,

which is defined as personal property held by an individual otherwise than in the course or furtherance (to any degree) of carrying on an enterprise with an ABN: s 10. The Act also frequently refers to property that is used or intended to be used ‘predominantly for personal, domestic or household purposes’. For the construction of this phrase other statutory contexts, see Jonsson v Arkway Ltd (2003) 58 NSWLR 451; Minchillo v Ford Motor Co of Australia Ltd [1995] 2 VR 594; Benjamin v Ashikian [2007] NSWSC 735; (2007) ASC ¶155-086; Carpet Call Pty Ltd v Chan (1987) ATPR ¶46-205; Crago v Multiquip [page 153] (1998) ATPR ¶41-620; Bunnings Group Ltd v Laminex Group Ltd (2006) 153 FCR 479; 230 ALR 269; Harris and Mirzai, above, pp 206–7 [47.4].

Excluded transactions 5.11 The PPSA does not apply to every commercial transaction involving personal property. Sections 8 and 12 provide a heterogeneous list of transactions that are excluded from the Act’s ambit for a variety of reasons. For convenience, what follows is a list of the most important exclusions: the interest of a seller who has shipped goods to a buyer under a negotiable bill of lading, or equivalent to the order of the buyer or the buyer’s agent (unless the parties have otherwise evinced an intention to create a security interest) (s 8(1)(a)); a lien, charge or any other interest in personal property that is created, arises or is provided for by operation of the general law (s 8(1)(c)); rights of set-off or combination of accounts (s 8(1)(d)); interests provided for by the creation or transfer of an interest in land (s 8(1)(f)(i)); interests created by the transfer of an account made solely to facilitate its collection (ss 8(1)(f)(vi), (vii)); interests under Quistclose trusts (s 8(1)(h));

interests in fixtures (s 8(1)(j)); certain interests taken by licensed pawnbrokers (ss 8(1)(ja), (6)); interests in superannuation funds and similar accounts (s 8(1)(jb)); licences (s 12(5)); interests created merely by subordination agreements (s 12(6)). Note that, although these (and more) interests are prima facie excluded from the Act, they may yet be subject to specific provisions: see the table in s 8(2).

Interaction between the PPSA and the common law 5.12 The introduction of the PPSA has been compared to the recognition of the separate legal personality of corporations and registration as the root of Torrens title: see Waller, above. Yet the common law relating to security interests as previously understood will likely be of continuing relevance. The Act itself provides indications of the continued importance of the common law. First, the PPSA is expressed not to intend to exclude the application of ‘general law’ provided it is capable of operating ‘concurrently’ with the Act: s 254. How far the common law is capable of operating concurrently with the PPSA is a matter for debate. Second, a number of interests are excluded from the ambit of the PPSA, whether because they fall outside the definitions of ‘security interest’ in ss 12(1) and (3) or because they are expressly excluded by ss 8, 12(5) and (6). Common law principles will continue to apply to disputes between these interests, and to mixed disputes involving an interest falling within the PPSA and one falling outside it; see also 5.26 (Characterisation of the PPSA security interest). Third, the Act does not prevent parties from drafting remedial provisions in security agreements that exclude or supplement the remedies offered by the PPSA; see Part G (Enforcement of security interests). Common law concepts and characterisations may remain relevant in the drafting of these alternate remedies, which are likely to continue to depend on the form of the transaction. Common law principles relating to property may also be relevant to the interpretation of the Act itself, although the strength of that proposition is yet to be tested. One of the most problematic aspects of the PPSA is its tendency

to use existing terms in a new context with little elaboration. In the absence of redefinition, terms such as ‘set off’ and [page 154] ‘lien’ are likely to be construed against the backdrop of the common law. This approach may be more controversial with respect to other phrases, such as ‘rights in the collateral’ or ‘interest in personal property’, which some commentators believe must be conceived of in broader terms than under the common law: see 5.28 (Attachment) and 5.16.

III Security interests under the PPSA 5.13 Although the PPSA is primarily concerned with transactions whose commercial function is to provide security, albeit not security strictly socalled at common law, it also extends to certain transactions irrespective of their function. There are therefore two categories of ‘security interest’, ‘in substance’ and ‘deemed’, which are defined in ss 12(1) and (3) respectively. The rationale underlying s 12(1) is that of the Act as a whole, namely, to take a functional approach to security. In its inclusion of the three interests listed in s 12(3) (a lessor under a PPS lease, a transferee of an account or chattel paper, and a consignor under a commercial consignment), the Act appears to be primarily concerned with avoiding ostensible ownership problems, although there may be other rationales.

A. ‘In substance’ security interests 5.14 The core concept of the PPSA is that of the ‘in substance’ security interest, defined in s 12(1) as ‘an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property)’. By this section, the Act equates with traditional forms of security those transactions that, commercially speaking, perform the same function. There is

no longer any distinction, for example, between those transactions by which the debtor grants title or possession to a creditor and those where the latter retains title to the subject property. Accordingly, the Act lists, as illustrations of the main definition, conditional sale agreements, hire-purchase agreements, and (financing) leases alongside mortgages, pledges and charges: see s 12(2). This may to an extent remove the raison d’être of such title retention arrangements, considering their prime attraction was to avoid the provisions of Bills of Sale legislation or the buyer in possession provision of the Factors Act, now subsumed by the PPSA; see Duggan and Brown, Australian Personal Property Securities Law, LexisNexis Butterworths, 2012, p 45 [3.6]. Other transactions, listed or otherwise, which may amount to a security interest within the Act, are discussed below at 5.16.

Transaction 5.15 The reference to ‘transaction’ in s 12(1) implies that security interests must arise by consent, although the Act does not expressly state this (cf Replacement Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) and Art 9-109(a)(1) of the UCC (‘by contract’)) and, if this is the case, the exclusion by s 8(1)(c) of interests arising by operation of law would appear to serve no useful purpose. Yet the widely held view that the PPSA is only intended to apply to consensual transactions has been judicially endorsed: see Canadian Imperial Bank of Commerce v 64576 Manitoba Ltd (1990) 1 PPSAC (2d) 1 at [56] (affirmed (1991) 77 DLR (4th) 190; 1 PPSAC (2d) 224 on different grounds); Bank of Montreal v iTrade Finance Inc (2009) 17 PPSASC (3d) 250 at [30]; D’Angelo and Busljieta, ‘The Trustee’s Lien or Charge over Trust Assets: A PPSA Security Interest or Not?’ (2011) 22 JBFLP 251 at 260–1. This analysis also implies the existence of a valid, enforceable contract: see Re Ellingsen (2000) 190 DLR (4th) 47; 1 PPSAC (3d) 307; 994814 Ontario Inc v RSL Canada Inc and [page 155] En-Plas Inc (2005) 14 CBR (5th) 134; cf Re Thomas (2002) 301 AR 373; see generally Everett and McCracken, above, p 499 [13.100].

Interest in personal property 5.16 The definition of security interest is designedly open-ended, encompassing ‘almost anything which serves the function of a security interest’: see Bank of Montreal v Innovation Credit Union [2010] 3 SCR 3 at [18] and Everett and McCracken, above, p 502 [13.110]. It is generally thought that to serve this function, the transaction must give rise to a proprietary interest, although this position is not beyond challenge. Most interests listed in s 12(2) involve proprietary rights as conventionally understood. Accordingly, the inclusion of flawed asset arrangements in s 12(2)(l) has caused considerable consternation, given the flawed asset merely provides the secured party (typically a bank) with a contractual right to withhold payment: see Duggan and Brown, above, p 48 [3.14]; L Gullifer (ed),Goode on Legal Problems of Credit and Security, 4th ed, Sweet & Maxwell, London, 2009, [1-21]. If a simple flawed asset is an illustration of a security interest, this raises the possibility that ‘interest in personal property’ embraces something less than a proprietary right. (It should be noted that this is an issue distinct from whether ‘property’ has a wider meaning under the Act than at common law, and what rights the grantor must have in property before a security interest can attach to it: see 5.9 and 5.28 (Attachment)). In light of s 12(2)(l), some commentators argue that transactions which give a creditor access to the property of the debtor, or allow the creditor to prohibit the debtor accessing certain property, in order to secure the debtor’s payment or performance, give rise to a sufficient ‘interest in property’ on the part of the creditor for the purposes of the PPSA notwithstanding there is no right in rem; see Tolhurst, Coburn and Peckham, ‘Security Interests at the Margins’ (2012) 40 ABLR 241 at 249. On this basis, certain powers of attorney, notations on insurance policies, retention of purchase price provisions, suspense accounts in guarantees, and certain step-in rights are said to be within the concept of ‘security interest’ under s 12(1). Whether this expansive approach is justified remains to be seen. It may make too much out of s 12(2)(l), given the opening words of the subsection and the fact that the reference is not to the flawed asset simpliciter but to a flawed asset ‘arrangement’. Such ‘arrangements’ commonly include provisions restricting dealings with the asset, ‘set-off’ clauses and/or charging clauses which may mean that the transaction, considered

holistically, affords the creditor proprietary rights; see Loxton, ‘One Flaw Over the Cuckoo’s Nest — Making Sense of the “Flawed Asset Arrangement” Example, Security Interest Definition and Set-Off Exclusion in the PPSA’ (2011) 34 UNSWLJ 472; Duggan and Brown, above, pp 48–9 [3.14]. See also Replacement Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) [2.6]. The question then becomes what ‘extras’ are needed before a flawed asset arrangement can be said to give rise to an interest in personal property: see Caisse Populaire Desjardin de l’Est v Drummond [2009] 2 SCR 94 (including the dissenting judgment of Deschamps J) and the discussion in Loxton, ‘One Flaw Over the Cuckoo’s Nest’, above, pp 513–16. If such contractual provisions are to be considered cumulatively, a further question arises; that is, what is the position where elements of the ‘arrangement’, such as set-off rights, are apparently excluded by s 8(1)? See Harris and Mirzai, above, p 55 [12.5.2.12] and see generally Glister,‘The Role of Trusts in the PPSA’ (2011) 34(2) UNSWLJ 628 at 635– 7. Contractual provisions which provide ‘security’ in a loose sense but which do not, on any analysis, give rise to an interest in personal property include negative pledges and simple guarantees: see Duggan and Brown, above, p 49 [3.15]–[3.16] and Cuming, Walsh and Wood, above, pp 86–7; Frado v Bank of Montreal (1984) 34 Alta LR (2d) 293; [page 156] Swiss Bank Corp v Lloyds Bank [1981] 2 All ER 449; Toronto Dominion Bank v Gottdank (2000) 1 PPSAC (3d) 67; cf Toronto Dominion Bank v McCowan (1995) 20 BLR (2d) 138.

Secures payment or performance 5.17 The Act applies to those transactions involving personal property that fulfil the function of security; that is, where the interest provided for by the transaction ‘in substance’ secures payment or performance. This factor is the cornerstone of the functional approach to security. Its presence or absence in a given case will be determined according to the ordinary principles of contractual construction. The New Zealand Court of Appeal commented that

the reference to ‘in substance’ means ‘the focus should be on what the transaction purports to do’, although this represents no great departure from the usual techniques: see JS Brooksbank and Co (Australasia) Ltd v EXFTX Ltd (in rec and liq) [2009] NZCA 122; (2009) NZCLC 264,520 at [51], Duggan and Brown, above, pp 51–2 [3.21]–[3.22]. Although undefined, the notion of security implies a limited (proprietary) right, which is ancillary to, and designed to ensure compliance with, a separate obligation owed to the right-holder. In cases involving traditional forms of security (such as the chattel mortgage, pledge or charge), this element will not be controversial. In other cases, a distinction will need to be drawn between those non-PPS leases, non-commercial consignments, trusts, sales, assignments and/or transfers of title, which do or do not secure a primary obligation.

Sale transactions 5.18 The requirement that a transaction ‘in substance secures payment or performance’ prevents sale and repurchase agreements (or ‘repos’), buy-back agreements and sale agreements with an option to repurchase being treated as security interests, notwithstanding such transactions may at first glance resemble a secured loan. Unlike the interest of a secured creditor, under such arrangements the interest of the buyer in the personal property is unlimited: see Duggan and Brown, above, pp 49–51 [3.17]–[3.20]; Kaak v Bank of Montreal (2003) 5 PPSAC (3d) 187 (affirmed (2003) 6 PPSAC (3d) 13). For the distinction between a sale and a sale on credit, compare JS Brooksbank v EXFTX (2009) NZCLC 264,520; [2009] NZCA 122 and Segard Masurel (NZ) Ltd v Nicol (2008) 10 NZCLC 264,386; [2008] NZHC 109; see generally Everett and McCracken, pp 499–50 [13.100].

Lease transactions 5.19 A lease that falls outside the definition of a PPS lease may still amount to a security interest provided they secure payment or performance of an obligation. The hire-purchase is the clearest example of a lease that functions as a security interest: see Duggan and Brown, above, p 45 [3.6]. More difficult is the distinction between a ‘financing’ or ‘security’ lease (contemplating an eventual transfer of title to the lessee) and an ‘operating’ or ‘true’ lease (where no such transfer is contemplated). Factors indicative of a

financing lease may include: a provision for the automatic vesting of ownership or an obligation to purchase on the expiry of the lease; a lengthy term and/or a term which roughly equates to the commercial life of the goods; payment obligations of the lessee which roughly equate to the commercial value of the goods; the price of any option to purchase being nominal relative to the value of the payments and of the goods; a distribution of risk between the parties consistent with the lessee being the true ‘owner’ (for example, the lessee is responsible for insuring against loss and maintaining the property); and contractual remedies such as accelerated payment clauses: see Cuming, Walsh and Wood, above, pp 70–5, cited in Accent Leasing & Sales Ltd v Babic (2007) 12 PPSAC (3d) 1 at [21]; Mirzai, ‘The Personal Property Securities Act and Commercial Lease Arrangements: A Practitioner’s Guide’ (2011) 22 JBFLP 3; Harris and Mirzai, above, [page 157] pp 51–3 [12.5.2.9]; Gedye, Cuming and Wood, above, pp 74–80 [17.2.2]. Frequently, a lease may include elements indicative of both an ‘operating’ and a ‘financing’ lease. It has been suggested that the PPSA should apply in such ambiguous cases: Adelaide Capital Corporation v Integrated Transportation Financial Incorporated (1994) 111 DLR (4th) 493 at [41]; 6 PPSAC (2d) 267; see also Mirzai, above, p 8, and Harris and Mirzai, above, p 52 [12.5.2.9]; however, this view has not passed without criticism: GMAC Commercial Credit Corp of Canada v TCT Logistics Inc (2004) 238 DLR (4th) 487; 6 PPSAC (3d) 163.

Trusts 5.20 Trusts, as distinct from trust receipts (see 5.2), are not listed in s 12(2) as an illustration of a transaction which may give rise to a security interest: cf NZ PPSA s 17(3); Sask PPSA s 3(1). However, trusts will fall under the general definition in s 12(1) where they perform the function of security. In most cases this will not be so: the trust relationship will not be ancillary to any separate debtor–creditor relationship: see Duggan and Brown, above, pp 47–8 [3.12]; Re Skybridge Holidays Inc (1998) 13 PPSAC (2d) 387 at [7]–[8] (affirmed (1999) 15 PPSAC (2d) 24; 173 DLR (4th) 33). The situation will

be different where a trust obligation is imposed merely to ensure payment of a debt; for example, where a debtor who on-sells the goods of the creditor is obliged to set aside and hold on trust the proceeds until the original purchase price is paid: North Shore City Council v Stiassny [2009] 1 NZLR 342 at [30]–[31]; Everett and McCracken, above, p 500 [13.100]. It has been suggested that, following the reasoning of the High Court in Associated Alloys Pty Ltd v ACN 001 106 Pty Ltd (2000) 202 CLR 588, certain proceeds trusts may fall outside the s 12(1) definition if they discharge the debtor/trustee’s obligation to pay. In such a case the trust constitutes the entirety of the parties’ relationship and secures no auxiliary obligation: see Glister, above, pp 632–4. See Duggan and Brown, above, p 48 [3.13] and Cuming, Walsh and Wood, above, pp 80–5 for further examples of trust structures that may provide security. Note that the Quistclose trust is expressly excluded from the Act by s 8(1)(h).

B. ‘Deemed’ security interests 5.21 In International Harvester Credit Corp of Canada v Bell’s Dairy (1986) 6 PPSAC 138; 50 Sask R 177, Tallis JA of the Saskatchewan Court of Appeal made the following comments (at [20]–[21]): The law has long been concerned with security transactions under which title to goods rests with one person (the true owner), while their possession is enjoyed by another (the ostensible owner). The potential for mischief in such arrangements is obvious, a fact which prompted legislation dealing with the two most frequently encountered instances: chattel mortgages and conditional sales. In enacting both the Bills of Sale Act and the Conditional Sales Act, the legislature was faced with a policy choice involving the competing interests, on the one hand, of the true owner, and on the other, of persons dealing in good faith with the ostensible owner. In both cases the legislature decided that the true owner should forfeit his title, if, having failed to register his contract in the public registry provided for that purpose, a third party for value, having no knowledge of the contract, acquired an interest in the goods through the ostensible owner. Neither Act applied, however, to a true lease of goods (as distinct from a security transaction in the form of a lease). This form of dealing — the true lease — in which title and possession are separated was left to the common law. And as a general rule the common law did not allow the lessor’s title to leased goods to be defeated through some dealing of the lessee. However, the Personal Property Security Act has effected far-reaching changes to the law.

Chief among these far-reaching changes is the inclusion within the Act of

certain long-term leases, consignments and transfers of accounts and chattel paper, whether or not the transaction in question in substance secures payment or performance under s 12(1). As Tallis JA indicates, the primary rationale for this is the avoidance of the [page 158] problems associated with ostensible ownership. Those that cloak a lessee, consignee or transferor with the appearance of ownership are made to publicise their interests, or be vulnerable to the intervening interests of third parties. Although the existence of ‘deemed’ security interests may seem out of keeping with the Act’s overall functional approach to security, it can be considered an extension of the functionalist philosophy: see Part A (Background). A secondary rationale for s 12(3) may be to capture transactions which are likely to give rise to ‘in substance’ security interests, but in relation to which it is difficult to prove that the transaction in fact ‘secures payment or performance’ under s 12(1). This reasoning applies most strongly to PPS leases, and to a lesser extent commercial consignments and transfers of accounts and chattel paper. Not surprisingly, there may be some overlap between the definitions in s 12(3) and the general definition in s 12(1). Plotting the precise scope of this overlap will be important in relation to provisions, such as the Ch 4 remedies, which only apply to ‘deemed’ security interests that also secure payment or performance: see 5.120 (Application of PPSA remedies).

Transferee of an account or chattel paper 5.22 An ‘account’ is defined as a monetary obligation arising from a disposal of property or through the granting of rights or the provision of services in the ordinary course of business: s 10 (‘account’). The concept is also defined negatively to exclude ADI accounts, chattel paper, intermediated securities, investment instruments, and negotiable instruments. An account therefore falls within the Act’s residual category of ‘intangible’ personal property: see 5.9. The concept of an account within the PPSA encompasses, but is broader than, book debts.

‘Chattel paper’ is a new kind of personal property adopted from American jurisprudence. It is writing which evidences both a debt and either a security interest in, or a lease of, specific goods. In the case of intellectual property, chattel paper is writing evidencing both a debt and a security interest in the intellectual property, or an intellectual property licence: s 10 (‘chattel paper’); cf UCC § 9-102(a)(11). The writing is said to be the ‘embodiment’ of the security interest or lease, so that one may deal with both the debt and the property in the specific goods by dealing with the paper itself. The holder of the chattel paper may in turn assign or grant a security interest over the paper in order to raise funds; this is referred to as ‘chattel paper financing’. Thus a transfer of chattel paper always involves at least three parties and at least two levels of transaction. At the first level, there is a dealing which gives rise to the chattel paper. Commonly, this will involve a dealer or retailer who purchases stock on short-term credit, and who leases or sells the stock on longer-term credit. At the second level, there is the assignment or security agreement over the chattel paper between the dealer or retailer and a financier. The financier and the dealer/retailer may agree to allocate the risk of non-payment under the first-level transaction in various ways. There may be an assignment ‘with recourse’ (or with limited recourse), so that the financier has rights against the dealer/retailer in the event of the customer’s default. Alternatively, the dealer/retailer may agree to bear a percentage of any credit loss, with the financier to bear the balance: see Joseph H Levie, ‘Security Interests in Chattel Paper’ (1968–1969) 78 Yale LJ 935. Where a security interest is granted over an account or chattel paper, the transaction falls within the PPSA by virtue of the s 12(1) definition. Where there is a transfer of the account or chattel paper, the transaction is deemed to be a security interest for PPSA purposes irrespective of whether it secures payment or performance: s 12(3)(a). Like the interests of consignors under commercial consignments or lessors under long-term leases, the interest of a transferee of an account or chattel paper is not readily apparent to the world at large. A third party dealing with the transferor may be unaware there has been a transfer, and come away with a skewed vision of its creditworthiness. [page 159]

The extension of the PPSA priority regime to the interest of the transferee encourages the latter to take the protective steps required by that regime, which serve to give notice to third parties of the transferee’s interest in the ‘collateral’: see Fairbanx Corp v Royal Bank of Canada (2010) 319 DLR (4th) 618 (Ont CA) at [11]–[14]; Cuming, Walsh and Wood, above, p 90. A secondary rationale may be to avoid the need for the drawing of fine distinctions when determining whether a transfer meets the s 12(1) definition. The inclusion of ‘with recourse’ provisions and the like means that some transfers of accounts or chattel paper may resemble an ‘in substance’ security interest or at least involve a similar allocation of risk: see Duggan and Brown, above, p 53 [3.24]. It should be noted that there are several kinds of transfers of accounts that neither resemble security interests nor tend to mislead third parties. Consistently with the rationales outlined above, the following kinds of transfers are excluded from the ambit of the PPSA (ss 8(f)(vi)–(ix); see also Harris and Mirzai, above, p 58 [12.5.3.1]): transfers of accounts made solely to facilitate the collection of the account on behalf of the transferor, and/or if the transferee’s sole purpose in acquiring the account is to collect it; transfers of accounts to satisfy (wholly or partly) a pre-existing debt; and the sale of accounts or chattel paper as part of the sale of a business (unless the seller remains in apparent control, within the ordinary meaning of that term, of the business after sale).

Consignor under a commercial consignment 5.23 The word ‘consignment’ is not defined in the PPSA. In Re Stephanian’s Persian Carpets Ltd (1980) 1 PPSAC 119, Saunders J of the Ontario Supreme Court offered the following definition (at 37–8): In its simplest terms, a consignment is the sending of goods to another. An arrangement whereby an owner sends goods to another on the understanding that such other will sell the goods to a third party and remit the proceeds to the owner after deducting his compensation for effecting the sale is an example of a consignment agreement.

A consignment may take place within a wider principal–agent relationship, and/or provide a mechanism for the supply of goods on credit similar to other

arrangements under which the supplier retains title. In Liebowitz v Vioiello 107 F 2d 914 (1939) at 916, Clark J of the Circuit Court of Appeals (2d Circ) observed that: It is not readily apparent why any consignment arrangement is not a secret lien against creditors of a shaky consignee, as harmful as an unfiled chattel mortgage or conditional sale.

Whether or not a consignment is intended as a tool for the defrauding of the consignee’s creditors, the consignee’s possession of goods does have the tendency to mislead third parties. As with the transferor of an account or chattel paper, the consignee appears to have more property than he, she or it in fact has. Certain consignments are therefore brought within the PPSA priority regime in order to encourage consignors to register a financing statement and thus notify third parties of their existence, or suffer the consequences. Section 12(3)(b) deems ‘the interest of a consignor who delivers goods to a consignee under a commercial consignment’ to be a security interest within the PPSA, whether or not the arrangement in fact secures payment or performance of an obligation. A ‘commercial consignment’ is a consignment pursuant to which the consignor retains an interest in the goods, and delivers the goods to the consignee for the purpose of disposal, where both parties deal with goods of that kind in the ordinary course of business: s 10 [page 160] (‘commercial consignment’). There is no carve-out for low-value or consumer goods: cf UCC § 9-102(a)(20). Again, there will transactions which meet both this definition and the definition in s 12(1) of an ‘in substance’ security interest: see Access Cash International Inc v Elliot Lake & North Shore Corp for Business Development 1 PPSAC (3d) 209 (2000) at [18]–[25] for a discussion of relevant indicia. It will be important to determine whether or not a given commercial consignment also fulfils the s 12(1) criteria in the context of the Ch 4 remedies, which apply only to ‘in substance’ security interests. Consistently with the rationale outlined above, the definition of ‘commercial consignment’ only extends to situations in which third parties

are likely to be misled by the consignee’s possession. An arrangement is not a ‘commercial consignment’ if it simply involves goods being delivered to an auctioneer for the purpose of sale, or to a consignee for the purpose of disposal in circumstances where this person is ‘generally known to the creditors of the consignee to be selling or leasing goods of others’: s 10; see also Sask PPSA s 2(1)(h); BC PPSA s 1(1); Alb PPSA s 1(1)(h); Man PPSA s 1; NS PPSA s 2(1)(h); cf NZ PPSA s 16 (no carve-out for consignees generally known to be disposing of others’ goods). It is somewhat unclear who bears the burden of proving that the consignee is generally known to his, her or its creditors to be selling or leasing the goods of others, although the weight of authority seems to locate the onus with the consignor: Re Valley Media, Inc 279 BR 105 (2002) at 124–5; Re Salander-O’Reilly Galleries, LLC 475 BR 9 (2012) at 24, n 18. In In re Valley Media, Inc, the court made the following comments (at 125, footnotes omitted): To satisfy the ‘generally known’ prong of the test, the Objecting Vendors [the consignors] must prove that a majority of the debtor-consignee’s creditors were aware that the consignee was … engaged in selling the goods of others, i.e. consignment sales. In re BRI Corp, 88 BR at 75. That majority is determined by the number of creditors, not by the amount of creditor claims. See In re Wicaco Mach. Corp., 49 B.R. at 344 (holding that one-fifth of creditors knowing of consignment relationship does not satisfy general knowledge requirement, notwithstanding that such creditors represented 63 % of claims against debtor). Testimony as to general knowledge in the industry is insufficient to prove knowledge by a majority of creditors. See Re Wedlow Holdings, 248 BR at 341–2.

Some United States courts have held that, consistently with the policy of the Code, a consignment is not to be treated as a ‘commercial consignment’ vis-à-vis secured creditors who have actual knowledge of the consignment arrangement, because such persons could not have been misled by the consignee’s possession: see ATG Aerospace, Inc v High-Line Aviation Ltd 149 BR 730 (1992) at 737; GBS Meat Industry Pty Ltd v Kress-Dobkin Co, Inc 474 F Supp 1357 (affd 622 F 2d 578) (1979); Re Key Book Service, Inc 103 BR 39 (1989) at 43; but cf Re State Street Auto Sales, Inc. 81 BR 215 (1988) at 218–20; Re Marcoly 32 BR 423 (1983).

Lessor or bailor under a PPS lease 5.24 Again, the inclusion of certain leases within the PPSA irrespective of whether they secure payment or performance may be due to more than one

policy consideration. The primary rationale is that prolonged possession of personal property gives the appearance of ownership, and in order to compel a long-term lessor to notify the possessor’s creditors of its existence, its ownership should be treated as a mere security interest competitive with that of the other creditors. Another rationale may be to avoid, in at least some cases, the difficulties associated with distinguishing operating leases from financing leases; see Harris and Mirzai, above, p 67 [13.5.1]; Rabobank New Zealand Ltd v McAnulty [2011] NZCA 212; [2011] 3 NZLR 192 at [40]; cf Duggan and Brown, above, p 56 [3.31]–[3.32]; see generally 5.17. Following this, the definition of the PPS lease could be designed to [page 161] capture those leases most likely to be financing leases by reference to the duration of the lease and the nature of the lessor’s business, such issues of fact being easier to determine than whether the lease secures payment or performance within s 12(1). The application of the PPSA priority rules to long-term leases is likely to represent one of the most dramatic changes to commercial practice effected by the Act. In the other PPSA jurisdictions it took some time for lessors and legal practitioners alike to accept that a PPS lessor could not retrieve its property in the event of a lessee’s insolvency simply by virtue of its title: see Re Giffen (1998) 13 PPSAC (2d) 255; 155 DLR (4th) 332; Graham v Portacom [2004] 2 NZLR 528; Waller v Bloodstock [2006] 3 NZLR 629 at [74]–[75]; Dunphy v Sleepyhead Manufacturing Co Ltd [2007] 3 NZLR 602 at [37]; Paccar Financial Services v Sinco Trucking Ltd (Trustee of) (1989) 9 PPSAC 7; 57 DLR (4th) 438; International Harvester Credit Corp of Canada v Bell’s Dairy Ltd (1986) 6 PPSAC 138; 30 DLR (4th) 387.

Definition of PPS lease 5.25 Although a PPS lease is often described as a lease for more than one year (see, for example, Graham v Portacom [2004] 2 NZLR 528 at [19]), the definition in s 13 is more complex. The lease must fulfil the duration requirements in s 13(1) and fall outside the exclusions in s 13(2). Lastly, in the case of bailments, s 13 captures only those bailments ‘for which the

bailee provides value’: s 13(3). The duration requirements appear to be designed to capture any lease that may run for a term greater than one year, or 90 days in the case of leases of serial-numbered goods. This includes: leases with a term of more than one year; leases for an indefinite term, even if determinable by any party within a year; leases for a term up to one year that are automatically renewable, or renewable at the option of a party, where the total terms might exceed one year; and leases for a term of up to one year if the lessor or bailor in fact retains substantially uninterrupted possession for more than a year after the lessee or bailee first acquired the property: s 13(1)(a)–(d); see s 13(1)(e) for similar provisions relating to serial-numbered goods, and see 5.9. See Gedye, Cuming and Wood, above, pp 83–4 [17.3.3] for an analysis of when the lease becomes a deemed security interest in the situations above. The lease or bailment is excluded from the definition of a PPS lease if the lessor or bailor is not ‘regularly engaged in the business’ of leasing or bailing goods: s 13(2)(a), (b). Canadian authority suggests that a lessor will be so engaged where leasing is ‘part’ or a ‘proper component’ of its business: see David Morris Fine Cars Ltd v North Sky Trading Inc (Trustee of) (1996) 38 Alta LR (3d) 428; 11 PPSAC (2d) 142; East Central Development Corp v Freightliner Truck Sales (Regina) Ltd (1997) 12 PPSAC (2d) 328 at [18] (where leasing was ‘part of [the lessor’s] business, even though a small part’ amounting to roughly 1 per cent of transactions); Paccar Financial Services Ltd v Sinco Trading Ltd (Trustee of) (1987) 7 PPSAC 176 (reversed on other grounds in (1989) 57 DLR (4th) 438) at p 194; cf Planwest Consultants Ltd v Milltimber Holdings Ltd (1995) 10 PPSAC (2d) 116. A lessor may be ‘regularly engaged’ in the business of leasing albeit it leases goods rarely, or has never leased goods before, as the number or frequency of leases is not determinative: David Morris Fine Cars Ltd v North Sky Trading Inc, above; Karklouas v Farm Credit Canada (2005) 8 PPSAC (3d) 249. On this approach, ‘regular’ qualifies ‘business’ and not ‘engaged’: Cuming, Walsh and Wood, above, p 95. The New Zealand Court of Appeal has doubted this line of authority, commenting that the characterisation of a lessor as ‘regularly engaged’ notwithstanding the lease is a ‘single, isolated transaction’ involves ‘some straining’ of the concept of regularity: Rabobank New Zealand Ltd v McAnulty [2011] NZCA 212; [2011] 3 NZLR 192 at [46]. A lessor ‘regularly

engaged in the business of leasing’ would generally undertake a ‘course of dealing involving a series of transactions’. This said, the fact that the lease is [page 162] unprecedented does not necessarily preclude this characterisation, if it was the first of a series and not a one-time event: Rabobank, above, at [47]; cf Bank of Montreal v Pachrite Inc (2006) 11 PPSAC (3d) 67. The court also added (at [40]–[42]) that, to be ‘regularly engaged in the business’ of leasing or bailing, a lessor or bailor would actually have to intend to profit from the lease or bailment. The meaning of ‘business’ will require an analysis of the context and purpose of this provision, about which there is some ambiguity: see 5.24 and compare ASIC v Cycclone Magnetic Engines (2009) 224 FLR 50 at [61]–[65]; NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 at 116; Re Australian Industrial Relations Commission; Ex parte Australian Transport Officers Federation (1990) 171 CLR 216 at 225–6; Federal Commissioner of Taxation v Whitfords Beach Pty Ltd (1982) 150 CLR 355 at 378–9; Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd (1982) 150 CLR 169 at 184; Hope v Bathurst City Council (1980) 144 CLR 1; Humberstone v Northern Timber Mills (1949) 79 CLR 389. The Australian PPSA expressly includes bailments within the concept of a PPS lease: see also NZ PPSA s 16(1) (‘lease for a term of more than 1 year’); cf Sask PPSA s 2(1)(y); BC PPSA s 1(1); Alb PPSA s 1(1)(z); NS PPSA s 2(1)(y); Ont PPSA s 1(1); Man PPSA s 1. A bailment is created when a person voluntarily takes possession of another’s goods: Pioneer Container (The) [1994] 2 AC 324 (PC); Commonwealth Bank of Australia v Hadfield [2004] NSWCA 350. Holt CJ outlined six categories of bailment in Coggs v Barnard (1703) 2 Ld Raym 909; 92 ER 107, in an oft-cited passage: The first sort of bailment is a bare naked bailment of goods delivered by one man to another to keep for the use of the bailor; and this I call depositum, and it is that sort of bailment which is mentioned in Southcote’s case [(1601) Cro Eliz 815; 78 ER 1041]. The second sort is, when goods or chattels that are useful, are lent to a friend gratis, to be used by him, and this is called commodatum, because the thing is to be restored in specie. The third sort is, when goods are left with the bailee to be used by him for hire; this is called locatio et conductio, and the lender is called locator and the borrower conductor. The fourth sort is when goods or chattels are

delivered to another person as a pawn, to be a security to him for money borrowed of him by the bailor; and this is called in Latin vadium, and in English a pawn or a pledge. The fifth sort is when goods or chattels are delivered to be carried, or something is to be done about them for a reward to be paid by the person who delivers them to the bailee, who is to do the thing about them. The sixth sort is when there is a delivery of goods or chattels to somebody, who is to carry them, or do something about them gratis, without any reward for such his work or carriage…

The spectrum of relationships outlined by Holt CJ is wide indeed, and even this statement is not comprehensive: see Palmer on Bailment, 3rd ed, 2009, p 182 [3-003]. The extension of the PPSA priority regime to all kinds of longterm bailments, many of which do not involve any sort of commercial relationship, would be a sweeping change even by the standards of the PPSA. For this reason, s 13(3) provides that only ‘a bailment for which the bailee provides value’ will fall within the definition of a PPS lease. In Rabobank, above, the New Zealand Court of Appeal made the following comments in relation to the requirement that the bailor be ‘regularly engaged in the business’ and s 13(3) of the Australian Act (at [40]–[42]): In our view, the words ‘in the business of leasing goods’ should be read as importing a requirement that the owner actually be intending to profit from the bailment or lease. This would exclude gratuitous bailments where the bailor was not receiving any payment for the use of the goods and bailments where the bailee is in the business of bailments, not the bailor. We see this as best reflecting the Parliamentary intention of treating some lease and bailment transactions as security interests, and requiring the bailor to perfect its interest in order to ensure its interest defeats that of any secured creditors of the bailee. The reason for the deeming provision is to ensure that lease/bailment transactions that are not easily distinguishable from finance leases are treated as if they are finance leases. Bailment transactions that could not possibly be confused for finance leases do not need to be drawn into that net, and there is nothing to indicate that Parliament intended that they should be.

[page 163] … The interpretation we favour has the practical effect of excluding from the definition of ‘lease for a term of more than 1 year’ all bailments in respect of which the bailor is not receiving (or intending to receive) consideration with a view to making a profit. Although it is not an aid to interpretation of the PPSA, it is interesting that the recently enacted Australian Personal Property Securities Act 2009 has express statutory language that yields that outcome.

By this reckoning, s 13(3) includes the bailments locatio et conductio within the definition of a PPS lease, but excludes most other categories. Yet the definition of ‘value’ does not stop at hire charges; it includes

consideration sufficient to support a contract: s 10 (‘value’). The definition of a PPS lease may thus extend beyond bailments by which a bailor intends to profit, to all contractual bailments. If so, it seems that bailments which are for reward and/or the product of consensus, but for which the bailee does not provide ‘value’ in the sense of consideration, will be excluded from the definition. In this connection, the position of sub-bailees is likely to prove particularly troublesome: consider Sandeman Comprimar SA v Transitos y Transportes Integrales SL [2003] EWCA Civ 113; [2003] QB 1270. The lease or bailment will be excluded from the main definition either if it is a lease of consumer property as part of a lease of land, where the use of the consumer property is incidental to the use and enjoyment of the land, or if it is so prescribed by the Regulations: s 13(c), (d); see Harris and Mirzai, above, p 72 [13.5.4]. At the time of writing, no other kinds of leases or bailments have been so excluded.

C. Characterisation of the PPSA security interest 5.26 An outstanding issue is whether the PPSA creates a collapsed category of ‘security interest’, or whether the variety of forms of security interest which existed prior to the PPSA continue still. That is, does the PPSA create a new kind of property? Are security interests now uniform, both within and without the Act? In Canada these questions appear to have been answered in the affirmative, with the Supreme Court characterising the PPSA security interest as a legal interest ‘in the nature of a fixed charge’: Bank of Montreal v Innovation Credit Union [2010] 3 SCR 3 at 29; Royal Bank of Canada v Radius Credit Union [2010] 3 SCR 38 at 56; Royal Bank of Canada v Sparrow Electric Corp [1997] 1 SCR 411 at 6–7; Bank of Montreal v iTrade Finance Inc [2011] 2 SCR 360 at [61]; although cf Canadian Imperial Bank of Commerce v 64576 Manitoba Ltd (1991) 77 DLR (4th) 190 at [7], where O’Sullivan JA commented that the PPSA had not ‘done away with the distinctions between security interests’ and that it was ‘still possible to have chattel mortgages in the ‘classical’ sense with a transfer of legal title from mortgagor to mortgagee’. In New Zealand reference has been made to the nature of the PPSA security interest as a ‘unitary’ interest (see NZ Bloodstock v Waller [2005] NZCA 254; [2006] 3 NZLR 629 at [13]), although whether this means

that security interests must be treated uniformly outside the Act as well as within it is unclear: see Everett and McCracken, pp 506–07 [13.130]. Radius Credit Union, Innovation Credit Union and Sparrow Electric all involved priority disputes between an interest arising under the pre-PPSA, federal Bank Act, and an interest covered by a provincial PPSA. Given the Australian PPSA is a Commonwealth Act, and that Australian Parliaments have been astute to incorporate the PPSA definition of security interest into other statutes, the issues which faced the Supreme Court of Canada will not arise in Australia to the same extent: see generally Stumbles, ‘The PPSA: The Extended Reach of the Definition of the PPSA Security Interest’ (2011) 34(2) UNSWLJ 448; International Harvester Credit Corp of Canada v Bell’s Dairy Ltd (Trustee of) (1986) 6 PPSAC 138; 50 Sask R 177 at [35] [page 164] But while the need to characterise PPSA security interests has been minimised, and is negligible in the context of disputes covered by the PPSA itself, the exercise will be critical in other contexts where form still matters. One such context, as demonstrated by Radius Credit Union and similar cases, is the regulation of disputes between interests in personal property only one of which falls within the PPSA definition of a ‘security interest’. If all security interests are now legal charges, a dispute between, for example, the beneficiaries of a trust (whose interest falls outside s 12(1)) and a secured creditor whose interest was granted by the trustee in breach of trust, will depend on whether the latter is a bona fide purchaser for value without notice. If security interests remain a spectrum, the outcome will depend on the form of the security transaction: see Wappett, Edwards and Whittaker, Personal Property Securities in Australia, [2.1000]. Another context in which the juridical nature of a ‘security interest’ is relevant is the drafting of security agreements. Practitioners may wonder whether a charging clause should simply provide for a ‘security interest’, or a ‘security interest by way of (for example) mortgage’ — perhaps with an eye to the risk of disputes such as that outlined above. The specification of a particular form of security interest may also be important where parties provide for remedial provisions supplementary to, or instead of, the remedies in Ch 4; see Part G

(Enforcement of security interests); Everett and McCracken, above, p 507 [13.130]. If the security interest is in the nature of a charge for all purposes, is it possible to contractually provide for ‘foreclosure’? The weight of commentary seems to currently favour the uniform approach: see Cuming, Walsh and Wood, Personal Property Security Law, Irwin Law, 2005, pp 58–9; Ziegel and Denomme, The Ontario Personal Property Security Act: Commentary and Analysis, 2nd ed, Butterworths, 2005, p 49; Widdup and Mayne, Personal Property Securities Act: A Conceptual Approach, LexisNexis, 2002; Gedye, Cuming and Wood, Personal Property Securities in New Zealand,Thomson Brooker, 2002; Duggan and Brown, Australian Personal Property Securities Law, LexisNexis Butterworths, 2012, p 44. From a policy perspective, this may be preferable to treating certain transactions as functionally equivalent in some contexts but not others: see Gedye, Cuming and Wood, above, and Stumbles, ‘The PPSA: The Extended Reach of the Definition of the PPSA Security Interest’ (2011) 34(2) UNSWLJ 448 at 455. Such an analysis does not necessarily prevent parties from drafting agreements with commercial consequences similar to those associated with traditional forms of security: see Credit Suisse Canada v 1133 Yonge Street Holdings Ltd (1998) 114 OAC 296; 14 PPSAC (2d) 61 (Ont CA) at [20]–[21]. Against this view, it has been pointed out that none of the PPSA rules require the imposition of a single form; indeed, the PPSA operates without reference to form: see Loxton, ‘New Bottle for Old Wine? The Characterisation of PPSA Security Interests’ (2012) 23 JBFLP 163 at 167– 70. Loxton suggests ‘it is not a characterisation in different ways or a ‘bifurcation’ to analyse the nature of a transaction only where it is necessary to do so’. Moreover, the rationale underlying the equal treatment of security interests within the PPSA may not hold in all contexts. Consider the comments of Bridge, Macdonald, Simmonds and Walsh in ‘Formalism, functionalism and understanding the law of secured transactions’ (19981999) 44 McGill LJ 567 at 567: A central issue in the law of security over movable property is the recognition of, and the regulatory implications of recognizing, a secured transaction. Systems of law derived from Article 9 of the United States Uniform Commercial Code take as their point of departure what at first sight is a unitary conception of such a transaction, which is described in terms of the ‘intention’ underlying it, or its ‘substance’. In the view of the authors, such a conception cannot be sustained except as a way of asking the question of whether a transaction is appropriately

viewed as a secured one for the purposes of the legal issue at hand. Indeed, the problems encountered in attempting to apply a purely functional analysis to title-based transactions such as conditional sale, bailment and trust — and to legal issues arising outside of, if closely connected to, the ones which Article 9 systems address — show that concepts which focus on the distinction between what is owned and what is owed may be unavoidable in the law.

[page 165] A distinct but related debate concerns the rights of the grantor to collateral covered by the PPSA. This is discussed below: see 5.29.

IV Creation and protection of security interests 5.27 The PPSA sets minimum requirements for the enforceability of security interests to which it applies, presumably in addition to the existence of a valid, enforceable contract between the grantor and secured party: see 5.15 and Duggan and Brown, above, p 78 [4.12]; cf Everett and McCracken, above, p 509 [13.190]. In addition, it provides mechanisms by which secured creditors may protect their security interests, along with strong incentives to do so. Thus the requirements of ‘attachment’ (s 19) and ‘enforceability’ (s 20) must be met before a security interest can be enforced against the grantor and third parties respectively, while ‘perfection’ (ss 21–22) affords the secured creditor optimal (not absolute) protection once this is achieved. See generally Everett and McCracken, above, pp 507–08 [13.180].

A. Attachment 5.28 A security interest must have attached to collateral before it can be enforced against the grantor: s 19(1). In other words, the requirements of s 19 must be met before the secured party can be said to have an interest in the relevant personal property. The time at which a security interest attaches to collateral is the key factor determining priority disputes between unperfected interests; see s 55(2) and 5.70 (Default priority rules). The requirements for attachment are twofold: the grantor must have ‘rights

in the collateral’ or the power to transfer rights; and value must be given for the security interest, or the grantor must do an ‘act by which the security interest arises’: see s 19(2).

Value or an act by which the security interest arises 5.29 ‘Value’ is defined as ‘consideration that is sufficient to support a contract’ and is expressed to include past consideration (‘an antecedent debt or liability’) (s 10); see also Asklepeion Restaurants v 791259 Ontario Ltd (1996) 11 PPSAC (2d) 320 at [36], [48], aff’d (1998) 13 PPSAC (2d) 295 (value given in the form of ‘antecedent debts’ and ‘forbearance to sue’). A binding loan agreement constitutes sufficient ‘value’ notwithstanding funds are yet to be transferred: Agricultural Credit Corporation of Saskatchewan v Pettyjohn (1991) 79 DLR (4th) 22; 1 PPSAC (2d) 273 at [42]–[44]; New Zealand Bloodstock Ltd v Waller [2006] 3 NZLR 629; (2005) 9 NZCLC 263,944 at [66]. The alternative to value, being an act of the grantor ‘by which a security interest arises’, is unique to the Australian Act. It is somewhat unclear what this phrase is intended to capture. It may refer to the making of security agreements under seal, although some Canadian cases seem to have construed ‘value’ to encompass deeds under seal in any case: see, for example, Heidelberg Canada Graphic Equipment Ltd v Arthur Andersen Inc (1992) 7 BLR (2d) 236 (where the corporate seal ‘import[ed]’ consideration and semble ‘value’ alongside actual forbearance). Such cases risk conflating the notion of sufficient consideration with the circumstances in which consideration is not required; the characterisation of deeds as acts ‘by which a security interest arises’ may avoid this: see Duggan and Brown, above, p 79 [4.13]; see generally Friedmann Equity Developments Inc v Final Note Ltd [2000] 1 SCR 842; (2000) 188 DLR (4th) 269 at [19]–[20]. It has been suggested that mere entry into any security agreement can be considered an act ‘by which a security interest arises’; if so, the secured party will in most cases be excused from proving value: see Everett and McCracken, above, p 509 [13.190]. [page 166]

Grantor has rights in the collateral 5.30 The grantor must have ‘rights in the collateral’ or the ‘power to transfer rights’ before the interest of the secured party can attach to the collateral: s 19(2)(a). Usually this would presume a prior transaction pursuant to which the grantor receives an interest in the subject property: 994814 Ontario Inc v RSL Canada Inc (2006) 20 CBR (5th) 163. The quantum of ‘rights’ required is unspecified; the drafters of UCC Article 9 thought the issue better left to the courts, and it appears that the PPSA jurisdictions have followed suit: see Anzivino, ‘When does a Debtor have Rights in the Collateral under Article 9 of the Uniform Credit Code?’ 61 Marq L Rev 23 at 26–7. On one level, a definition of ‘rights’ is unnecessary as the secured party’s interest will only attach to the rights the grantor actually enjoys, be it title or legal possession, or even something less: see Cuming, Walsh and Wood, above, p 165; Duggan and Brown, above, p 79 [4.15]. Thus a person who converts goods to his own use may grant a PPSA security interest over the goods, but such an interest will attach only to his possessory right and remain defeasible as against the true owner: Gray v Royal Bank of Canada (1997) 143 DLR (4th) 179; 12 PPSAC (2d) 126. This is not an issue of priority in the sense of the ranking of interests in identical property, but an instance of the rule nemo dat quod non habet (‘no one can give what they do not have’). On whether mere de facto possession is sufficient to support the attachment of any security interest at all, see Gray v RBC, above; Cuming, Walsh and Wood, above, p 165; Duggan and Brown, above, p 80 [4.16] (suggesting it is sufficient); cf En-Plas, above; JS Brooksbank, above; Scott, ‘The PPSA: The Continued Relevance of Conventional Legal Principles in Determining the Existence of a Security Interest’ (2009) 15 NZBLQ 205; Whittaker, ‘The Scope of ‘Rights in the Collateral’ in s 19(2) of the PPSA — Can Bare Possession Support Attachment of a Security Interest’ (2011) 34(2) UNSWLJ 524 (suggesting it is not sufficient); see generally Everett and McCracken, above, p 510 [13.190]. This said, the Act treats certain disputes as priority disputes where once they would have been resolved, as in Gray, by the application of nemo dat. For example, a lessor under a PPS lease may grant a security interest in the leased goods competitive with the interest of the lessor, notwithstanding the latter enjoys title at general law: see Re Giffen [1998] 1 SCR 91; (1998) 155

DLR (4th) 332 at [28]. Brereton J has explained the position as follows (Re Maiden Civil (P & E) Pty Ltd [2013] NSWSC 852 at [35]): The competing security interests of QES and Fast must then be resolved according to the system of priorities established by the PPSA. The Supreme Court of Canada explained in Re Giffen (at [28]) that such a dispute cannot be resolved through the determination of who has title to the collateral, because the dispute is one of priority, not ownership. That Court (at [38]) adopted the explanation of the theory of the Saskatchewan PPSA advanced by the Saskatchewan Court of Appeal in International Harvester (at 204–5), that a person with an interest rooted in title to property in the possession of another, once perfected, can, in the event of default by the debtor, look to the property ahead of all others to satisfy his claim; but if that interest is not perfected, it is vulnerable, even though rooted in title to the goods, because a third party may derive an interest in the same goods by virtue of some dealing with the person in possession of them, and may become entitled to priority, ahead of the person holding the unperfected security interest, to look to the goods to satisfy a claim.

Much ink has been split over how best to characterise the combined effect of these provisions, and especially the role of s 19(5). ‘Deemed ownership’ is a rationalisation that has gained currency, suggesting that the grantor enjoys ‘ownership’ and the secured party merely a limited interest in the collateral irrespective of the location of title at common law: cf Ford Credit Canada Ltd v Percival Mercury Sales Ltd (1984) 4 PPSAC 92 at [11]; Farm-Rite Equipment Ltd (Receiver of) v Robinson Alamo Sales Ltd (1986) 5 PPSAC 286 at [16]. In Re Maiden Civil, above, Brereton J made the following statements, which may be regarded as a summary of the ‘deemed ownership’ theory (at [73]): [page 167] … Maiden did not have only a mere right to possession under the QES leases. The Canadian and New Zealand cases already mentioned demonstrate that a PPS lessee on taking possession of the collateral acquires not only a possessory right but also proprietary rights to the extent that it can grant security interests to third parties, so that the lessor’s interest if unregistered is vulnerable to being defeated by security interests so granted to such third parties … Maiden acquired possessory and proprietary rights in the Caterpillars upon taking possession of them, and granted a security interest in them to Fast under the General Security Deed.

In the case of PPS leases, this result has been said to derive from the equivalent of s 19(5) which confers a new proprietary right on the grantor: Graham v Portacom [2004] 2 NZLR 528 at [29]; Re Giffen, above, at [36]; cf Rabobank v McAnulty [2010] NZHC 1534 at [36]–[39]. This interpretation may be extended to commercial consignments and conditional sales

agreements, also dealt with by s 19(5). An alternate view is that the need to treat the grantor as owner derives from the very fact that it holds collateral pursuant to a security interest within ss 12(1) or (3): see Rabobank New Zealand Ltd v McAnulty [2010] NZHC 1534 at [43]; Re Gauntlet Energy Corp (2003) 5 PPSAC (3d) 236 at [14]–[20]; Re Thomas (2002) 301 AR 373 at [11]. This is because it is in the nature of a security interest that the secured party’s interest be limited and the grantor have the ability to grant further security interests over the whole of the collateral: Cuming, Walsh and Wood, above, pp 166–8. On this interpretation, s 19(5) was inserted either for an abundance of caution or as a timing provision: see International Harvester Credit Corp of Canada Ltd v Bell’s Dairy Ltd (1986) 50 Sask R 268; 6 PPSAC 138 at [38]; Rabobank New Zealand Ltd v McAnulty [2010] NZHC 1534 at [36]–[43]. The matter is unresolved, although the latter appears to be the better view.

Automatic attachment 5.31 Notwithstanding s 19(2), security interests may automatically attach to collateral in certain circumstances. Generally speaking, these provisions complement other provisions in the Act to ensure that the regime works coherently. Occasionally, the combined effect of such provisions is to replicate an outcome that would otherwise have prevailed at general law.

After-acquired property 5.32 The Act expressly permits parties to provide for security interests in after-acquired property: s 18(2). In such a case, the security interest will attach to the property without the need for specific appropriation: s 18(3). Presumably the requirements of s 19(2) must otherwise be met: that is, the security interest will attach automatically once the grantor acquires the property, and provided that value has passed. This is no great change from to the equitable principles surrounding assignments of future property: see Norman v Federal Commissioner of Taxation (1962) 109 CLR 9 at 24–25 per Windeyer J; Palette Shoes Pty Ltd v Krohn (1937) 58 CLR 1 at 27; Holroyd v Marshall (1862) 10 HLC 191 at 220; 11 ER 999 at 1010. The Act contemplates that, where there is more than one security agreement that extends to after-acquired property, and in the absence of any postponement under s 19(3), multiple security interests may attach to an item

of property simultaneously the moment the grantor acquires it. This causes problems in relation to priority disputes between secured parties whose interests are unperfected: see Everett and McCracken, above, at p 521 [13.270] and 5.72.

Proceeds 5.33 Section 32(1) of the Act provides the secured party with two proprietary avenues of recourse in the event collateral is dealt with by the grantor. First, the security interest is deemed to continue in the collateral unless the secured party expressly or impliedly authorised either the disposal of the collateral, or dealings that would extinguish the security interest: s 32(1)(a). Second, the security interest attaches to the proceeds of [page 168] the collateral in the hands of the grantor, again unless the security agreement provides otherwise: s 32(1)(b). ‘Proceeds’ refers to ‘identifiable or traceable personal property … that is derived directly or indirectly from a dealing with the collateral (or proceeds of the collateral)’: s 31(1)(a). In addition to this general definition, the following kinds of personal property as considered ‘proceeds’ within the Act (see ss 31(1)(b)–(e)): a right to an insurance payment, or another payment designed to indemnify or compensate one against loss of or damage to the collateral (or its proceeds); a payment made in total or partial discharge or redemption of the collateral (or its proceeds), where the collateral (or its proceeds) is: chattel paper; an investment instrument; an intermediated security; a negotiable instrument; or intangible property; a right on the part of a licensor to receive payments under any licence agreement in relation to the collateral, where this is intellectual property or an intellectual property licence; rights arising out of an investment instrument or intermediated security;

property collected on an investment instrument or intermediated security; or property distributed on account of an investment instrument or intermediated security. ‘Proceeds’ may be the proceeds of original collateral, or the proceeds of the proceeds of original collateral, and so on. Outside the forms of property listed in ss 31(1)(b)–(e), proceeds must arise as the result of a ‘dealing’ with the collateral. Generally speaking, this means there must be an exchange of the collateral for something else: see Duggan and Brown, above, p 238 [11.10]–[11.11]. However, the ‘proceeds’ of crops expressly includes the harvested produce of the crops, provided these are identifiable and traceable, and notwithstanding the absence of a ‘dealing’: s 31(4). Similarly, the ‘proceeds’ of livestock include the products of livestock other than offspring or unborn young (for example, meat or wool), provided these are identifiable and traceable: s 31(5), (6). So expressed, the definition of ‘proceeds’ is capable of capturing an inordinately large class of personal property. Accordingly, s 31(3) of the Act provides that personal property is only to be considered the ‘proceeds’ of collateral if the grantor has an interest in the proceeds, or the power to transfer rights in the proceeds to the secured party: s 31(3)(a). Additionally, outside the kinds of property listed above, the proceeds must be either ‘identifiable’ or ‘traceable’. It is suggested that property is ‘identifiable’ as proceeds when it may be ‘pointed to’ as the result of dealing with collateral (or, of course, its proceeds), while property that is ‘traceable’ has been mixed with other property such that its identity is lost: see Cuming, Walsh and Wood, above, p 464. (It is important to distinguish the concept of traceability from the circumstances in which personal property has been commingled: see below 5.99.) The extent to which property is ‘traceable’ is not outlined in the Act. The rules relating to tracing at common law and in equity may be of some assistance, the latter particularly so where proceeds are deposited into a mixed fund: see Foskett v McKeown [2000] 3 All ER 97 at 120 per Lord Millet; see also Boscawen v Bajwa [1996] 1 WLR 328 at 334; Frith v Cartland (1865) 71 ER 525 at 526; James Roscoe (Bolton) Ltd v Winder [1915] 1 Ch 62; Re French Caledonia Travel Service Pty Ltd (in liq) (2003)

204 ALR 353; Scott v Scott (1963) 109 CLR 649 at 664; Heperu Pty Ltd v Belle (2009) 76 NSWLR 230; see also Devaynes v Noble (Clayton’s Case) (1816) 1 Mer 572; 35 ER 781; Re Hallet’s Estate (1879-80) LR 13 Ch D 696 at 711 per Jessel MR. Aspects of the equitable doctrine may need to be jettisoned for the purpose of the PPSA definition of ‘proceeds’; [page 169] for example, it may be that ‘proceeds’ under the Act are considered such notwithstanding the intervention of the rights of a bona fide purchaser for value without notice: cf Brady v Stapleton (1952) 88 CLR 322. Note that the Act specifically provides that proceeds may be ‘traceable’ whether or not there a fiduciary relationship exists between the secured party and the person with rights in, or who has dealt with, the proceeds: s 31(2); compare Commonwealth Bank of Australia [2007] NSWSC 903 at [29]–[30] per Einstein J.

Returned collateral following transaction under which transferee took free 5.34 Buyers or lessees of goods may take free of any security interest, perfected or otherwise, in the ordinary course of the grantor’s business, provided the sale or lease does not itself fulfil the definitions in ss 12(1), (3); see ss 42(b), 46(1) and 5.102 (Taking free rules). Prima facie, the secured party’s interest in the collateral is extinguished where this occurs. However, the sale or lease may be rescinded. The lease will, at some point, expire. The sale or lease may give rise to chattel paper, and the transferee of the chattel paper may seize the goods in order to enforce its security agreement. Alternatively, the grantor or debtor may repossess the goods pursuant to rights provided by the contract of sale or lease. In all of these circumstances, the interest of the secured party will reattach to the goods once they are repossessed by the grantor or debtor, without the need for further action by the secured party: s 37(1). The security interest may also be temporarily perfected by force of the Act: see s 37(2) and 5.59 (collateral returned following transfer under which transferee took free).

Effect of attachment: fate of the floating charge 5.35 The interest of the secured party in property is fixed the moment the requirements of attachment are met; see Everett and McCracken, above, at 511 [13.190]. In the case of after-acquired property, a security interest will attach (and become fixed) to the property upon acquisition by the grantor. Although parties may by agreement postpone attachment to a later time, merely providing for a ‘floating charge’ will be insufficient for this purpose: ss 19(3), (4); see also Affinity International Inc v Alliance International Inc (1994) 8 PPSAC (2d) 73; 96 Man R (2d) 200 at [29] (affirmed (1995) 9 PPSAC (2d) 174). In light of these provisions, the Act appears to leave no room for an interest that hovers over a changing pool of assets and becomes fixed only after a crystallising event (typically, the owner’s default): see Credit Suisse Canada v 1133 Yonge Street Holdings Ltd (1998) 41 OR (3d) 632; 14 PPSAC (2d) 61; Gedye, Cuming and Wood, above, pp 158–9 [40.6]; see also Canadian Imperial Bank of Commerce v Otto Timm Enterprises Ltd (1995) 130 DLR (4th) 91; 10 PPSAC (2d) 288 at [18]; Affinity International Inc v Alliance International Inc, above; Re Huxley Catering Ltd (1982) 2 PPSAC 22; Roynat Inc v United Rescue Services Ltd (1982) 2 PPSAC 49; cf Access Advertising Management Inc v Servex Computers Inc (1993) 15 OR (3d) 635 at 639. The redundancy of the concept of crystallisation means, for many commentators, that the floating charge has been abolished by the PPSA: see Duggan and Brown, above, pp 91–4 [4.44]–[4.54]; Paul U Ali, ‘The Floating Charge and Its Place Within Article 9, PPSA Security Regimes and Australian Law’ (2004) 22 C&SLJ 481 at 485. It is true that the distinction between fixed and floating charges has been largely abrogated: see Royal Bank v Sparrow Electric Corp [1997] 1 SCR 411. Yet certain aspects of the floating charge persist. In United Builders Pty Ltd v Mutual Acceptance Ltd (1980) 144 CLR 673 at 686, Mason J summarised the well known definition of a floating charge as stated by Romer LJ in In re Yorkshire Woolcombers Association Ltd [1903] 2 Ch 284 at 295: According to his Lordship, a charge is a floating charge if (1) it is a charge on a class of assets of a company present and future; (2) that class is one which in the ordinary course of business of the company would be changing from time to time; and (3) it is contemplated that, until some

[page 170] further step is taken by or on behalf of those interested in the charge, the company may carry on its business in the ordinary way as far as concerns the particular class of assets.

Under the PPSA, the need to take a further ‘step’ is removed; the secured party unequivocally has a proprietary interest in the subject collateral the moment it is acquired by the grantor: cf Wily v St George Partnership Banking Ltd (1999) 30 ACSR 204 at 209. Yet the grantor remains able to deal with the subject collateral in the ordinary course of business, either by virtue of express or implied authorisation by the secured party, or because of the operation of the Act’s ‘taking free’ rules: see s 46 and 5.102 (Taking free rules). The combined effect of these provisions has led at least one commentator to argue that the floating charge has been bolstered, not abolished, by the Act: see Lionel Meehan, ‘Circulating Security Interests under the Personal Property Securities Act 2009 (Cth) Compared to Floating Charges’ (2011) 22 JBFLP 322. The provisions mean that: secured parties may take interests in after-acquired property of the grantor; such secured parties have a proprietary interest in the property once acquired and notwithstanding the absence of any ‘crystallising’ event; and the grantor remains free to deal with the collateral in the ordinary course of business, or is at least able to pass good title to property even in the absence of any express authorisation. A second concern associated with the floating charge — namely, its propensity to take a company’s assets out of the reach of worthy creditors such as employees in the event of corporate insolvency — persists under the Act where security agreements extend to all the present and after-acquired property of the grantor. This concern is addressed in a manner similar to that applying to floating charges under pre-PPSA law, by reference to a new concept, the ‘circulating asset’: see 5.116. In light of these provisions, it may be that the discussion as to whether the floating charge is ‘abolished’ is ultimately somewhat unhelpful. It should also be noted that the Act generally preserves the parties’ freedom of contract: s 18(1). Thus a security agreement might include provisions the consequences of which may resemble those associated with the defunct floating charge: see 1133 Yonge Street Holdings, above. In that case, clause 7 of the security agreement provided that the mortgagor was entitled to the collateral (being rents due under a lease) on its own account

prior to default. At trial, Day J held that, notwithstanding clause 7, as the mortgagee’s security interest attached to the rents once acquired by the mortgagor, it had recourse to all the rent paid to the mortgagor prior to its default: Credit Suisse Canada v 1133 Yonge Street Holdings Ltd (1996) 28 OR (3d) 670; 11 PPSAC (2d) 375. On appeal, the respondent argued that to hold otherwise would ‘be tantamount to re-introducing the concepts of the floating charge and crystallization to PPSA matters’, contrary to cases such as Royal Bank v Sparrow Electric Corp [1997] 1 SCR 411 and CIBC v Otto Timm Enterprises, above: Credit Suisse Canada v 1133 Yonge Street Holdings (1998) 41 OR (3d) 632; 14 PPSAC (2d) 61 at [20]. Blair J responded, at [20]–[21]: I do not agree. It can be equally as misleading and confusing to suggest that a given security structure created by the parties should not be recognized because to do so would re-invoke the concepts of old forms of security. Such an argument … runs the risk of precluding the legitimate creativity of parties to tailor their agreements to meet their particular circumstances. There is ample scope within the provisions of the PPSA to permit debtors to deal with collateral in various fashions — including dealing with it on their own account — notwithstanding that the creditor’s security interest has attached and been perfected. It is not the purpose of the PPSA to render security transactions inflexible or, indeed, to prevent the parties from agreeing to security structures which may well accomplish the same kind of protection that older forms of security — such as floating charges — seek to provide… In each case, it is a matter of examining the terms of the security interest in question to determine what precisely are its terms as between the parties, because [the equivalent of s 18(1)] of the PPSA makes it clear that the security instrument is only effective in accordance with those terms. There is nothing which prevents commercial parties from negotiating terms which may, in practical terms, have similar consequences to those encompassed in older forms of security. Such flexibility is required.

[page 171]

B. Enforceability against third parties 5.36 A security interest is enforceable against the grantor if it has attached to the collateral: s 19(1). To be enforceable against third parties, the security interest must have attached and be corroborated through the secured party’s possession or control of the collateral (where such collateral is capable of being possessed or controlled) or the existence of a security agreement with the requisite coverage: s 20(1). The purpose of these extra steps is to enable creditors to establish whether another security interest exists in specific

collateral: see MacEwen Agriculture Centre Inc v Beriault (2002) 61 OR (3d) 63 at [31]. It is important to note the distinction between these provisions and those relating to perfection: s 20 sets minimum requirements for an interest to be enforceable against third parties, whereas perfection allows one secured party to maximise the strength of its interest relative to other secured parties: see Everett and McCracken, above, p 511 [13.200]. Equally, the writing requirements under s 20(1)(b)(iii), (2)–(5) should not be confused with the provisions relating to perfection by registration. There is no requirement to register a copy of any security agreement, and registration per se does not establish the existence of a security interest: cf Corporations Act 2001 (Cth) Ch 2K. Registration of a financing statement merely serves to warn secured creditors that there is a claim over certain collateral, without establishing or evidencing that claim: see First Bank v Eastern Livestock Co (1993) 837 F Supp 792 at p 799–800. This said, registration of a financing statement does not mean that a security interest is perfected; the interest must also have attached and be enforceable against third parties: s 21(1)(b). Accordingly, outside cases of personal property susceptible to possession or control, the secured party will need both a written security agreement and a registered financing statement to perfect its security interest. See generally Harris and Mirzai, above, p 110 [20.5.4]; Everett and McCracken, above, p 513 [13.120]. Additionally, the language of the financing statement may be incorporated into the security agreement as an aid to construction; for example, to clarify the collateral over which the security agreement extends: Re Nickerson & Nickerson, Inc 452 F 2d 56 (1971). However, while the language of the financing statement may restrict the description of the collateral in the security agreement, it cannot enlarge it: In re Amex-Protein Dev Corp (1974) 504 F 2d 1056 at p 1061; Dickason v Marine National Bank of Naples, NA (2005) 898 So 2d 1170 at 1174–5; see 5.37 (Writing requirements).

Security agreement evidenced by writing 5.37 To fulfil s 20(1)(b)(iii), the security agreement must be evidenced by writing which is either signed or ‘adopted or accepted by the grantor by an act, or omission, that reasonably appears to be done with the intention of

adopting or accepting the writing’, and which contains certain details: s 20(2). Note that, while signed writing affords important corroboration, the mere existence of documentation that purports to evidence a security agreement is not conclusive proof that there was such an agreement, in the absence of any underlying debtor–creditor relationship: see 1253174 Ontario Inc v Tarion Warranty Corp (2010) 17 PPSAC (3d) 373 at [35].

Writing requirements 5.38 ‘Writing’ has an extended meaning encompassing, inter alia, writing recorded electronically: s 10. The whole of the security agreement need not be reduced to a single piece of writing: it may be partially oral and/or spread across multiple writings: Atlas Industries Ltd v Federal Business Development Bank (1983) 3 PPSAC 39; MacEwen Agricentre Inc v Bériault (2002) 61 OR (3d) 63; Hongkong Bank of Canada v National Bank of Canada (1990) 1 PPSAC (2d) 73; 72 DLR (4th) 372; Re Miller 545 F 2d [page 172] 916 (1977) (USCA 5th Circ). No specific form of words is required: 674921 BC Ltd v Advanced Wing Technologies Corp (2006) 9 PPSAC (3d) 43; 263 DLR (4th) 290 at [28]; Harris and Mirzai, above, at 110 [20.5.4]. However, semble the writing must at least record the parties and the fact a security interest is granted. Otherwise, it is difficult to see how the writing can be said to evidence any larger security agreement: MacEwen Agricentre Inc v Bériault, above, at [31]; cf Garry v Sternbauer Estate (2000) 1 PPSAC (3d) 51; see also Cuming, Walsh and Wood, above, p 183. The writing must either state that a security interest is taken in all of the grantor’s present and after-acquired property (with or without exception), or contain a ‘description of the particular collateral’: s 20(2)(b). What will amount to an adequate ‘description’ is not entirely clear. The wording of the equivalent provision in other PPSAs varies substantially, such that foreign precedent may be of lesser value here than in other contexts: see Duggan and Brown, above, p 86 [4.30]. The definition of ‘description’ contemplates that collateral may be described by item or class. In the former case, the description may either identify an item or a class to which that item belongs,

such that ‘sheep’ sufficiently describes ‘(unshorn) sheep’s wool’ (given the products of livestock are themselves considered livestock before they become proceeds, within the PPSA’s classification of property). In the latter case, the description may either identify the specific class or a wider class encompassing it, so that ‘fruit’ is a sufficient description of ‘apples’: see generally s 10 (‘description’ and notes) and Affinity International Inc v Alliance International Inc (1994) 8 PPSAC (2d) 73; 96 Man R (2d) 200. Given the purpose of s 20, a description may be considered adequate if it enables a hypothetical secured creditor to identify the property to which the security interest relates: MacEwen Agricentre Inc v Bériault, above. However, the Australian Act does not make this explicit: cf NZ PPSA s 36(1) (b)(i) (‘an adequate description of the collateral by item or kind that enables the collateral to be identified …’); Ont PPSA s 11(2)(a)(i) (‘a description of the collateral sufficient to enable it to be identified …’). It is an open question whether a description of collateral may be adequate notwithstanding a third party must make further inquiries, or have regard to extraneous material, in order to determine the precise property to which the writing refers: see, however, Re Grogan (2012) 476 BR 270 at 279; In re Amex-Protein Dev Corp 504 F 2d 1056 (1974) at 1060–1 (‘[t]he description in the security agreement is sufficient … if it provides such information as would lead a reasonable inquirer to the identity of the collateral’); GE Capital Canada Acquisitions Inc v Dix Performance (1995) 8 PPSAC (2d) 197 (BCSC) (‘relatively low’ threshold adopted, partially because the BCPPSA did not contain the phrase ‘sufficient to enable it to be identified’); New World Screen Printing Ltd v Xerox Canada [2003] BCSC 1685; Clark Equipment of Canada Ltd v Bank of Montreal (1984) 8 DLR (4th) 424 (Man CA); Re Hickman Equipment (1985) Ltd (2003) 5 PPSAC (3d) 93 (NLSC); Citizens Bank and Trust v Gibson Lumber Co (1989) 96 BR 751; Nolin Production Credit Association v Canmer Deposit Bank 726 SW 2d 693 (1986) at 697; McLaren, Secured Transactions in Personal Property in Canada, 2nd ed, Westlaw International (Online) §2.01[2]; Cuming, Walsh and Wood, above, pp 190–3; Duggan and Brown, above, pp 86–7 [4.31]– [4.34]; cf In re Laminated Veneers Co, Inc 471 F 2d 1124 (1973) (USCA 2nd Circ) (‘It [the security agreement] is the primary source to which a creditor or potential creditor’s inquiry is directed and must be reasonably specific’); Harris and Mirzai, above, p 110 [20.5.4]. For an analysis of the description

requirements where the security agreement is spread over multiple documents, see Re Brown (2012) 479 BR 112. Any interpretation of s 20(2)(b) will need to strike a balance between competing policy objectives. On the one hand, the purpose of the section appears to be to enable third parties to accurately identify property the subject of a security interest. On the other [page 173] hand, one of the over-arching goals of the PPSA is to facilitate commercial transactions. A driving consideration behind the more liberal approach, adopted in many of the above cases, is the need to avoid undue compliance and litigation costs. In this connection, it has been noted that the PPSA permits certain ‘interested persons’ to obtain a copy of the security agreement and to send the secured party an itemised list of possible collateral to be approved or corrected: s 275; see GE Capital Canada Acquisitions Inc v Dix Performance, above. However, it appears that this mechanism is only available to actual, not potential, secured creditors: s 275(9). Quite aside from s 20, the subject matter of the agreement must be certain as a matter of contract law: see Upper Hunter County District Council v Australian Chilling & Freezing Co (1968) 118 CLR 429 at 436–7; Bridge Wholesale Acceptance Corp (Australia) Ltd v Burnard (1992) 27 NSWLR 415. If not, there will be no ‘transaction’ giving rise to a security interest: 994814 Ontario Inc v RSL Canada Inc and En-Plas Inc (2005) 14 CBR (5th) 134. The PPSA places limits on the use of the super-generic descriptors ‘consumer property’ and ‘inventory’. For the purposes of s 20, a description of collateral as ‘consumer property’ is not sufficient without further identification by item or class: s 20(4). A description of collateral as ‘inventory’ is likewise insufficient, unless the grantor actually holds or leases the collateral as inventory: s 20(5). A line will need to be drawn as to when collateral ceases to be held as ‘inventory’: see generally Harris and Mirzai, above, p 112 [20.5.6]. In Community Futures Development Corp of Howe Sound v Spargo (2000) 1 PPSAC (3d) 263 (BCSC), Harvey J made the

following comments in relation to grantors holding inventory on consignment, at [35]: Clearly, the mere use of the term ‘inventory’ cannot be used by a creditor to gain control over any items that have, even for a short time long in the distance past, been in the possession of the debtor in virtue of a consignment agreement. In my view, however, [the equivalent of s 20(5)] cannot be used to defeat the orderly scheme of priorities established by the Act. If [the consignor] were correct that in all cases consignment goods taken from the inventory of the debtor and returned to the consignor are no longer subject to the creditor’s security interest it would create a race to seize assets. Were the consignor of goods to win the race, it would then be allowed to say to holders of security interests in priority in accordance with the provisions of the Act, that the Act does not apply.

Again, a security agreement which states that a security interest is taken in all of the grantor’s present and after-acquired property, or that a security interest is taken in all property except specified items or classes of personal property, meets the requirements of s 20(2): see s 20(2)(b)(ii), (iii). A security interest which continues in the proceeds of collateral need not be specifically described in the security agreement for it to be enforceable against third parties: s 20(6); see also s 32(1). However, it may be advisable to include a reference to proceeds in any financing statement for the purposes of perfection by registration; see Harris and Mirzai, above, p 112 [20.5.7].

Signature requirements 5.39 To fulfil the evidentiary requirements under s 20(1)(b)(iii), (2), the grantor must either sign the writing evidencing the security agreement, or adopt or accept the writing: s 20(2)(a); see also Astral Communications Inc v 825536 Ontario Inc (Trustee of) (2000) 46 OR (3d) 477. The grantor may ‘sign’ the writing by, inter alia, applying writing (including a symbol) that it executes or otherwise adopts, or which is wholly or partly encrypted (or otherwise processed) by it, provided this is done with the intention of (1) identifying the grantor and (2) adopting or accepting the writing: s 20(3); note the extended definition of ‘writing’ in s 10. [page 174] The mere presence of writing signed by the grantor does not fulfil s 20(2) if it cannot be said to evidence any security agreement between the parties.

Accordingly, the signature must be authorised by the grantor: Atlas Industries Ltd v Federal Business Development Bank (1983) 3 PPSAC 39; 50 CBR (NS) 14; see also Toronto-Dominion Bank v Flexi-Coil (1993) 4 PPSAC (2d) 288; 107 Sask R 221 at [20]; Corporations Act 2001 (Cth) ss 126, 127. The signature must also be capable of being construed as authorising the creation of the security interest. Where the security agreement is allegedly contained in multiple documents or partially oral, semble such signed writing that exists must either set out or refer to the charging clause: see Capital Plymouth Chrysler Inc v Euro Sport Auto Sales Ltd (1998) 12 PPSAC (2d) 30; 224 AR 298; Province of Alberta Treasury Branches v Faja Bison Ranch Inc (1994) 6 PPSAC (2d) 205; 152 AR 112; Atlas Industries Ltd v Federal Business Development Bank, above; Universal Handling Equipment Co v Redipac Recycling Inc (1992) 4 PPSAC (2d) 15. See generally Harris and Mirzai, above, p 111 [20.5.5]. In Atlas Industries, above, a supplier delivered goods pursuant to work orders signed by an employee of the grantor. On discovering that the grantor was on the cusp of receivership, the supplier sent invoices containing a retention of title provision, and claimed that the unsigned invoices coupled with the signed work orders constituted a signed security agreement. Noble J rejected this contention (at [6]), given that ‘there [was] no evidence as to whether that person was in fact authorized to sign on behalf of the debtor company’ and that ‘[w]hile the signature authorizes the delivery of the goods, it would be absurd to suggest that it was intended to authorize delivery upon any terms the applicant chose to impose as to price, security or payment … it cannot be said that the signature on the work order somehow authorized the unknown condition in advance.’ See also Toronto-Dominion Bank v FlexiCoil, above; Siminot v Burlingham Associates Inc (1998) 165 Sask R 209. The alternative to signing under s 20(2), being an act or omission by the grantor that reasonably appears to be done with the intention of adopting or accepting the writing, is unique to the Australian Act. It appears to accommodate common practice in relation to conditional sale agreements, given suppliers often do not require the execution of the terms of individual orders. If the supplier in Atlas Industries had, for example, sent to the grantor a copy of its trading terms, which included a retention of title clause and provided that subsequent supply would be on those terms, then ordering goods would be considered an act indicating acceptance: see Duggan and

Brown, above, p 85 [4.29].

Possession or perfection by control 5.40 A security agreement may be entirely oral, see the s 10 definition and 977380 Ontario Inc v Roy’s Towing Co (1997) 13 PPSAC (2d) 201 at [6]. In such a case, or where any writing falls short of the requirements in s 20(2), the security interest will be enforceable against third parties only if it has been perfected by control, or if the secured party enjoys possession of the collateral: s 20(1)(b)(i), (ii); see below 5.42 for a discussion of the meaning of possession within the Act. In both cases, it will be clear to third parties that the secured party has an interest in the grantor’s property. Consistently with this policy, the secured party is deemed not to have ‘possession’ of property that is actually or apparently possessed by the grantor or debtor, or on that person’s behalf: s 24(1); cf Province of Alberta Treasury Branches v Faja Bison Ranch, above. The Act allows certain negotiable instruments, electronically recorded chattel paper and certificated investment instruments (including certificated shares) to be ‘possessed’ through possession of the instrument, record or certificate: ss 24(4)–(6); see 5.42. Types of personal property that are susceptible to ‘control’ include: ADI accounts; intermediated securities; investment instruments; letters of credit; and non-certificated negotiable instruments: see 5.50. [page 175] Note that s 20(1)(b)(i) does not require the secured party to perfect its interest via possession, whereas s 20(b)(ii) does require an act of perfection.

C. Perfection 5.41 Perfection has been described as ‘the process by which the holder of a security interest obtains the optimal level of protection offered by the Act’: Graham v Portacom [2004] 2 NZLR 528; (2004) 9 NZCLC 263,517 at [12]. The holder of a perfected security interest is better off, not invulnerable, in

the context of priority disputes, insolvency, and the taking free rules: see Cuming, Walsh and Wood, above, pp 200–01. Under the default priority rules, perfected interests rank ahead of unperfected interests: s 55(3); see also Bank of Montreal v Innovation Credit Union [2010] 3 SCR 3 at [21]–[22]. Unperfected interests generally vest in the grantor upon its insolvency, relegating the holder to the status of unsecured creditor: s 267(1); see also Corporations Act 2001 (Cth) s 588FL; 5.111 (Insolvency). Lastly, perfection minimises the chances of a third party taking the collateral free of the secured party’s interest: s 43(1). See generally Everett and McCracken, above, p 513 [13.120]. The main purpose of perfection is to put third parties on notice that a security interest exists over particular collateral, whereas the enforceability provisions in s 20 put third parties in a position to verify its existence: see Comment 2, UCC §9-402; Appeal of Copeland 531 F 2d 1195 (1976) at 1203–04. Possession and control of collateral suffice for both purposes, but an interest evidenced only by a security agreement is imperceptible to third parties unless referred to on the public register. The ‘publicity concern’ addressed by the perfection provisions has been present in commercial law since Elizabethan times: see Twyne’s case (1601) 3 Co Rep 806; 76 ER 809; Duggan and Brown, above, pp 97–8 [5.4]–[5.7]; Laurel Motors Inc v Airways Transportation Group of Companies Inc 284 Ill App 3d 312 (1996) at 317; Edibles Corporation v West Ontario Street Limited 273 Ill App 3d 550 (1995) at 554; Appeal of Copeland 531 F 2d 1195 (USCA 3d Circ) (1976) at 1203. The requirements for perfection are set out in s 21. In addition to the secured party taking one of three extra steps, the security interest must have attached and be enforceable against third parties: s 21(1)(b). The three extra elements are: possession, control, or an effective registration: s 21(2). The order in which these steps occur is immaterial: s 21(3). A secured party may, for example, register a financing statement with respect to a security interest that is yet to arise. When the interest attaches and becomes enforceable, it will be automatically perfected by the pre-existing registration. This is an advantageous course in the context of priority disputes between perfected security interests: see ss 55(4), (5) and 5.70 (Default priority rules). Given that the taking of possession and perfection by control also constitute acts of corroboration fulfilling the requirements of s 20, a security interest may

become enforceable against third parties and perfected at the same time: see 5.36 (Enforceability against third parties). Security interests in different kinds of property are susceptible to different modes of perfection; see State of Nebraska; ex rel Wagner v Amwest Surety Insurance Co 280 Neb 729 (2010) at 734; 790 NW 2d 866 at p 870. For some kinds of property, more than one method of perfection is available. In the context of priority disputes it is irrelevant that a secured party changes from one method of perfection to another, provided there is no gap between the two periods of perfection: see s 56(2). For example, A might perfect its security interest by possession on 1 January, register a financing statement on 5 January and relinquish possession to the grantor on 7 January. A’s ‘priority time’ would be 1 January, because its security interest was ‘continuously perfected’ (that is, perfected at all times) from this date. If B registered a financing statement on 2 January, A’s interest would rank ahead of B’s notwithstanding A registered after B. By contrast, [page 176] if A relinquished possession on 5 January and registered a filing statement on 7 January, its interest would not be ‘continuously perfected’. A’s new ‘priority time’ would be 7 January, and it would rank behind B: see s 56; 5.70 (Default priority rules).

Perfection by possession 5.42 Although s 21(2)(b) provides that a secured party may perfect by taking possession with respect to ‘any collateral’, semble this must be read down to mean ‘any collateral capable of being possessed’: see Everett and McCracken, above, p 515 [13.120]. The statute does provide that certain intangibles are capable of being possessed through possession of the documents evidencing them, including chattel paper evidenced by an electronic record, and certificated investment instruments: ss 24(5), (6); see below. This implies that other intangibles remain incapable of possession, either because the Act is not a code (s 254) and the general law relating to choses in action does not appear to be modified otherwise than by s 24(5), (6), or by virtue of the maxim expressio unius est exclusio alterius (albeit this

rule of construction is applied cautiously: Saunders v Evans (1861) 8 HL Cas 721; Colquhoun v Brooks (1888) 21 QBD 52; Houssein v Department of Industrial Relations and Technology (1982) 148 CLR 88; Ainsworth v Criminal Justice Commission (1992) 175 CLR 564). See also Replacement Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) p 21 [2.27] (‘It would not be possible to perfect a security interest in an intangible by possession’); In re K-Ram Inc (2011) 451 BR 154 at 173; Fairbanx Corp v Royal Bank (2009) 15 PPSAC (3d) 265 at [5]; Re Blouin; Caisse Populaire Desjardins de Val-Brillant v Métivier & Associés Inc [2003] 1 SCR 666; (2003) 225 DLR (4th) 577 at [23]; Cuming, Walsh and Wood, above, p 212. Other issues emerge when considering ‘possession’ under s 21(2)(b); namely, to what form and quality of possession does the section refer? Possession is not defined in the Act, although its meaning is ‘affected’ by certain provisions: see ss 10, 24. Predecessor provisions in other jurisdictions allowed a secured party to perfect by possession where property was ‘actually held as collateral’: see, for example, Personal Property Security Act, RSO 1980 c 375 s 24(1). ‘Possession’ under this provision was interpreted as actual or physical possession (that is, ‘actually held as collateral’): see Re Darzinskas (1981) 132 DLR (3d) 77 (Ont HCJ). In that case, the secured party had through its bailiff delivered a repossession notice to the grantor prior to the latter’s bankruptcy. The bailiff did not, however, remove the subject property (being some heavy manufacturing equipment). Steele J commented, at [7]: I am of the opinion that the intention of the Act is to provide notice to the persons dealing with the property or with the owner thereof that the secured party claims an interest in the goods … I am of the opinion that [the predecessor of Aust PPSA s 22] requires actual physical possession to be taken and the goods held by the secured party to perfect his security interest in order to give notice to all persons dealing therewith. This possession is required even more where the security interest was not perfected by registration.

Second,‘possession’ had to be for the purpose of securing the debtor/grantor’s primary obligation (that is, ‘actually held as collateral’): see generally Bank of Nova Scotia v Royal Bank of Canada (1987) 8 PPSAC 17; 42 DLR (4th) 636 (Sask CA). This excluded possession occurring as a result of a seizure or repossession, which would involve the secured party holding property for the purpose of enforcement and not ‘as collateral’. (There are

now express words in most PPSAs to this effect.) Semble, possession under a contractual right triggered by the debtor/grantor’s default would also be excluded on this basis: see Bank of Nova Scotia v Royal Bank of Canada, above. Unlike certain contemporary PPSAs, the Australian Act does not refer to property being ‘actually held as collateral’ by the secured party: see, for example, Alb PPSA s 24(1); Ont PPSA s 22(1); cf Aust PPSA s 21(2)(b); NZPPSA s 18; Sask PPSA s 24(1); [page 177] NSPPSA s 25(1); BCPPSA s 24(1); UCC § 9-313(a). The question becomes whether the same consequences flow from s 21 notwithstanding this omission.

Actual possession only 5.43 It has often been said that ‘possession’ within the Act refers to actual, physical possession and not constructive possession: see, for example, Duggan and Brown, above, p 99 [5.10]; Cuming, Walsh and Wood, above, p 212; see also Heinicke Instruments Company v Republic Corporation 543 F 2d 700 (1976) at 701–2; Re Staff Mortgage and Investment Corporation 550 F 2d 1228 (1977) at 1230–1. However, this is not made express by the Act. Section 24(1) provides that possession by the secured party of goods that are ‘actual[ly] or apparent[ly]’ in the possession of the grantor or debtor does not amount to ‘possession’ within the Act. ‘Apparent possession’ is a concept employed in the context of bills of sale, and suggests an objective standard; that is, who would a bystander believe to be in possession? See Robinson v Briggs (1870-1871) LR 6 Exch 1; Re Couston; Ex parte Watkins [1873] LR 8 Ch 520; Harris and Mirzai, above, p 126; Robert Nettlefold Pty Ltd v Schofield (1934) 29 Tas LR 93; cf Ramsay v Margrett [1894] 2 QB 18; French v Gething [1922] 1 KB 236; Koppel v Koppel [1966] 1 WLR 802. The main purpose of s 24(1) appears to be to ensure that secured parties disabuse others of the illusion of the grantor/debtor’s apparent ownership: compare Charlesworth v Mills [1892] AC 231; Auckland Milk Co Ltd v Levy

[1934] GLR 798; see also Plunketts Ltd v Harrods Ltd (in liquidation) (1942) 44 WALR 1 at 6–7. Yet the secured party’s possession is not expressly required to be actual or apparent, merely exclusive of such possession by the grantor: see generally MacPhee v SWS Fuels Limited (2011) 17 PPSAC (3d) 175; 84 CBR (5th) 206 at [44]–[45]; Kendrick v Headwaters Production Credit Association (1987) 362 Pa Super 1 at 8–9; 523 A 2d 395 at 398. Additionally, a security interest in goods will be perfected by possession where the goods are possessed by a bailee on behalf of the secured party, indicating that at least some form of constructive possession is permissible: s 22(1)(b); see The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400; cf Cuming, Walsh and Wood, above, p 213; see 5.57 (Goods in the possession of a bailee). Like the Australian Act, UCC Article 9 makes no reference to the secured party ‘actually holding’ the property. Nevertheless, the type of ‘possession’ required for perfection under the Code has been likened to the physical possession necessary to create a pledge — defined as an unequivocal delivery of possession leaving the possessor with absolute dominion and control, and the deliverer absolutely deprived of any control, over the property: Royal Bank of Pennsylvania v Selig 434 Pa Super 537 (1994) at 549; 644 A 2d 741 at 746; see also Kendrick v Headwaters Production Credit Association, above (debtor appeared to retain ‘dominion and control’ as chief operator of the premises); see Palgo Holdings Pty Limited v Gowans (2005) 221 CLR 249. (It should be remembered that, unlike a pledge, the security interest will not necessarily depend on possession for its existence: see Turbinator Inc v Superior Court of Riverside County 33 Cal App 4th 443 (1995) at 450–1; Raleigh Industries of America Inc v Tassone 74 Cal App 3d 692 (1977) at 698; see also Grossman v Saunders 237 Va 113 (1989) at 122; 376 SE 2d 66 at 71.) Accordingly, possession would in most cases refer to ‘actual or physical possession’ by the secured party or its agent, notwithstanding the absence of express words to this effect: see Heinicke Instruments Company v Republic Corporation, above; In re Staff Mortgage and Investment Corp 550 F 2d 1128 (1977); Laborers Pension Trust Fund-Detroit and Vicinity v Interior Exterior Specialists Co 824 F Supp (2d) 764 (2011) at 77. This construction accords with pre-Code law, which required ‘as open and notorious a change of possession as the nature of the property permitted in order to give plain and public notice to other creditors or purchasers of the

secured party’s claim against the [page 178] property’: Transport Equipment Company v Quaranty State Bank 518 F 2d 377 (1975) at 381. In Australia, this interpretation must be implied, if at all, by the role possession plays within the Act. It seems clear that the purpose of taking possession is to give third parties notice of a security interest. Quaere whether the possession must be such as to give notice that a specific secured party claims an interest, as would a registered financing statement, or whether it suffices that the possession indicates the debtor is not free to deal with the subject property. In any case, there may be circumstances outside s 22(1)(b) where the secured party need not take physical possession, provided that the grantor is deprived of actual or apparent possession. American jurisprudence provides us with some possible examples, notwithstanding the language in Royal Bank of Pennsylvania and similar cases: see 5.44. In Canadian Imperial Bank of Commerce v Melnitzer (Trustee of) (1993) 23 CBR (3d) 161; 6 PPSAC (2d) 5, a rogue granted a security interest in favour of the Bank over some shares in Champion Chemtech, which the Bank perfected by taking possession of the share certificates. Later, the defendant convinced the Bank to relinquish the share certificates in exchange for different share certificates ostensibly representing stock in IBM. In fact, the second lot of share certificates were forged. The Bank admitted that it had lost legal possession of the original certificates, but argued (at [140]) that ‘in equity, the court should deem the [Bank’s] legal possession to be continuous because, otherwise, the court would be permitting the PPSA to be used as an ‘instrument of fraud’’, relying on the equivalent of s 254 (concurrent operation of other laws). Killeen J rejected that argument, saying (at [144]): In my view, these cases cannot assist [the Bank] here. The PPSA permits perfection of carefully defined security interests by possession as a limited alternative to the registration system otherwise provided for in its provisions … the last line of s 22 makes it clear that once possession is gone, the security interest is gone:‘but only while it is actually held as collateral’. This language is broad and makes no exceptions for losses of possession arising from fraud.

Possession by third parties 5.44 The PPSA expressly contemplates that possession may be held by third parties on the secured party’s behalf: see s 22(1)(b); see 5.57 (Goods in the possession of a bailee). In line with the discussion above, there may be other circumstances where actual possession held on behalf of the secured party suffices for the purposes of perfection. Here, the question would often be whether the third party is the agent of the secured party, the grantor, both, or neither: see Jacobs, Leming et al, 68A Am Jur 2d Secured Transactions §418 (online). Difficulties arise where the third party is neutral, or acts on behalf of both the secured party and the grantor. Semble possession by a person who is formally the agent of the secured party, but is closely connected to or controlled by the debtor/grantor, will be insufficient for perfection purposes: Heinicke Instruments Company v Republic Corporation, above; see also Lawrence’s Anderson on the Uniform Commercial Code (3rd ed, 2012) Westlaw International (Online), §9-305:9. The converse may also be true. In Sperry Inc v Canadian Imperial Bank of Commerce (1985) 4 PPSAC 314; 17 DLR (4th) 236, the Ontario Court of Appeal held (at [30]–[32]) that possession by a receiver otherwise than for the purpose of realisation does not amount to possession by the secured party, because it is only ‘“in realizing” that the receiver acts as the creditor’s agent’ and, otherwise, the receiver was the agent of the debtor: cf Bank of Nova Scotia v Royal Bank, above, at [36]–[39] per Wakeling JA (in dissent) (‘to the extent that actual possession of the debtor’s goods was eventually taken by the receiver to enforce the Royal Bank’s security, such possession appears to me to be compliance with [the equivalent of s 21(2)(b)]’). [page 179] There is some disagreement as to whether possession by an escrow agent, who may be formally the agent of both secured party and debtor, but over whom the debtor exercises no real control, can be considered possession by the secured party for the purposes of perfection: see Barney v Rigby Loan & Investment Co 344 F Supp 694 (1972) (possession by an escrow agent also the attorney of the debtor sufficient); Appeal of Copeland 531 F 2d 1195

(1976) at 1204 (‘possession by a third party bailee, who is not controlled by the debtor, which adequately informs potential lenders of the possible existence of a perfected security interest’ sufficient); In re Rolain; Norwest Bank St Paul, NA v Bergquist 823 F 2d 198 (1987); Nichols v Stewart Title & Trust of Tucson 88 BR 871 (1988) at 876 (focus is on ‘whether the escrow arrangement protected the reliance interests of third parties dealing with the debtor and whether it serves the function of the possession exception in giving notice to the world that the secured party may have an interest in the collateral’); Mur-Ray Management Corporation v Founders Title Company 169 Ariz 417 (1991) at 422; 819 P 2d 1003 at 1008 (‘the secured party need not possess sole dominion and control over the individual in possession of the collateral’ provided he or she was not ‘wholly controlled’ by the debtor); cf In re Dolly Madison Industries, Inc 351 F Supp 1038 (1972); Stein v Rand Construction Company, Inc 400 F Supp 944 (1975). The better view appears to be that possession by such a person would be insufficient to fulfil s 21(2)(b). To hold otherwise could be to elevate the public notice function of the section above the express words of ss 21(2)(b) and 24(1). The fact that an escrow agent is formally the debtor’s agent fulfils the disqualifying factor within s 24(1) notwithstanding the debtor exerts no practical control: see Sperry Inc v Canadian Imperial Bank of Commerce, above; see also Stein, above, p 948; Lawrence’s Anderson and the Uniform Commercial Code, above, §9-305:9. For an alternate view, see Weise,‘Perfection by Possession: the Need for an Objective Test’ (1993) 29 Idaho L Rev 705 at 712–21. Some of the cases in favour of the alternate position (for example, Appeal of Copeland) concern a 1972 revision of the UCC with no Australian counterpart. That section deems a secured party to be in possession of property, other than goods covered by a negotiable document, where the property is held by a bailee who has notice of the security interest: UCC §9305. By contrast, the Australian Act provides that a security interest in goods held by a bailee will be perfected if the bailee issues the secured party with a document of title, or with a negotiable document of title in which the secured party also has a perfected security interest: ss 22(1)(c), (d); cf Sask PPSA s 27(1); Alb PPSA s 27(1); BCPPSA s 27(1); Ont PPSA s 26(1). This does not appear to be a form of perfection by possession: cf Cuming, Walsh and Wood, above, p 217. A security interest in goods held by a bailee (other than

an agent of the grantor or debtor) may also be perfected through registration or, if the bailee holds the goods on behalf of the secured party, by possession: s 22(1)(a), (b); see 5.57 (Goods in the possession of a bailee). It has been held that one secured party may possess collateral on behalf of itself and other secured parties, and that this will be sufficient to perfect every secured party’s interest in the collateral: In re Chapman 5 UCC Rep Serv 649 (1968).

Possession for enforcement purposes 5.45 Critically, actual or apparent possession that is obtained as a result of repossession or seizure does not perfect the security party’s interest: ss 21(2) (b), 123(4), 126(3). This is in contrast to the Ontario and Manitoba Acts, which provide that repossession and, in the case of Manitoba, seizure by a secured party will perfect its security interest: see Ont PPSA s 22(1); Man PPSA s 24(1). The rationale appears to be that possession, taken for whatever reason, will fulfil the publicity function of the perfection provisions: see generally Weise, above. By contrast, the Australian PPSA (and most others) appears to be concerned with maintaining the conceptual difference between possession for the purposes of enforcement and possession for the purposes of perfection. This approach requires some [page 180] inquiry into the motives of the possessor, although it may avoid nice questions as to the precise timing of repossession or seizure in an insolvency situation. More importantly, it encourages secured parties to take steps to protect themselves from the outset, and discourages ‘precipitous action and potential breaches of the peace’: Cuming, Walsh and Wood, above, pp 214– 17, Gedye, Cuming and Wood, above, p 165 [41.6]. A broader question remains as to whether property must generally be possessed ‘as collateral’; that is, whether possession must be ‘to secure or guarantee the payment or performance of an obligation’ and not obtained fortuitously or for the purpose of enforcement (by means other than repossession or seizure): see Bank of Nova Scotia v Royal Bank, above, at

[30]. Duggan and Brown give the example of a truck sold under a conditional sale, which is in the possession of the secured party for the purposes of a check-up pursuant to the manufacturer’s warranty. The authors consider that such possession would not perfect the security interest, by analogy with the repossession proscription. A fortiori, this proscription would prevent a secured party from relying on the possession of a receiver or manager to perfect its security interest, even if such a person were the agent of the secured party and not the grantor or debtor: see PPSA s 24(1); Sperry Inc v Canadian Imperial Bank of Commerce, above; Bank of Nova Scotia v Royal Bank of Canada, above (especially the dissenting judgment of Wakeling JA); Cuming, Walsh and Wood, above, pp 216–17.

Possession of certain kinds of personal property 5.46 The Act prescribes various methods by which certain kinds of personal property may be ‘possessed’. Loosely speaking, the provisions apply to items of tangible property that are either embodied in or evidenced by a physical document, and the provisions allow for possession of the property via possession of the document. This category of personal property includes negotiable instruments, chattel paper and certificated investments instruments (including, most notably, certificated shares).

Possession of negotiable instruments 5.47 A security interest in negotiable instruments may be perfected through possession, control or an effective registration. Secured parties may take possession of a negotiable instrument, not evidenced by an electronic record, only by taking physical possession of the instrument: s 24(4). Endorsement without actual delivery will be insufficient for this purpose. One advantage of perfecting a security interest in a negotiable instrument by possession is that it partially avoids the operation of s 70, which in certain circumstances gives priority to the interest of a person in a negotiable instrument provided they take possession of it. However, the second person may still obtain priority where the negotiable instrument is not certificated and they are able to obtain control. See 5.90 (Special priority rules and miscellaneous provisions) and Duggan and Brown, above, p 101 [5.15].

Possession of chattel paper

5.48 It is possible to have either a ‘deemed’ or ‘in substance’ security interest in chattel paper, which may be perfected by possession of the physical document. Chattel paper that is evidenced by an electronic record (and thus incapable of physical possession) may be ‘possessed’ under the Act if there is a single authoritative copy of the record which is unique and identifiable, is maintained by the secured party or its agent, and identifies the secured party as the transferee: s 24(5)(a)–(c). The copy must be unalterable unless with the participation of the secured party, and copies or revisions of the authoritative version must be readily identifiable as such: s 24(5)(d)–(f). It remains to be seen whether the existence of this legal framework will stimulate an Australian market for chattel paper financing, see Duggan and Brown, above, pp 101–2 [5.16]–[5.18]. The authors note that the interest of a chattel paper financier (being a [page 181] person who acquires an interest in chattel paper in the ordinary course of his or her business of acquiring interests of that kind) has priority over a perfected security interest, provided the former takes possession of the chattel paper without actual or constructive knowledge of the latter: see ss 71, 300 (third parties not attributed with constructive knowledge of an interest merely because it is the subject of a registered filing statement).

Possession of certificated investment instruments 5.49 The Act allows certificated investment instruments to be ‘possessed’ through possession of the relevant certificate. A person will be in possession of the investment instrument if he or she possesses the certificate, or a person (other than the grantor or debtor) possesses it on his or her behalf: s 24(6)(c) (i), (ii). Additionally, a person will be in possession of the investment instrument if the registered owner (who is not the grantor or debtor) acknowledges in writing that he or she has possession of the investment instrument on that person’s behalf: s 24(6)(c)(iii). This amenity is only available where the certificate in question specifies the person who is entitled to the investment instrument and any transfer of the instrument may be registered on books maintained for that purpose by the

issuer (or the certificate includes words to this effect): s 24(6)(a), (b). Accordingly, it seems that only certificated investment instruments in registered form, rather than those in bearer form, are able to be ‘possessed’ under the Act (cf Sask PPSA s 24(3)); Duggan and Brown, above, pp 102–3 [5.19]–[5.20].

Perfection by control 5.50 ‘Control’ is a new concept the content of which varies according to the type of property in question. Kinds of property that may be ‘controlled’ include: ADI accounts; intermediated securities; investment instruments; letters of credit; and uncertified negotiable instruments: see generally s 23. Broadly, a secured party will ‘control’ such property where it is able to realise collateral without the participation or consent of the grantor: see Replacement Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) p 22 [2.33]; Harris and Mirzai, above, pp 133–4 [26.5]; cf Official Comment to the UCC Article 8 (§8-106). Perhaps in recognition of this, parties who perfect by control are afforded a privileged position within the Act, especially in the context of priority disputes: see below 5.89 (Superpriority: control). This is another area where some caution must be exercised in referring to foreign precedent. In the Canadian provinces, perfection by control is not governed by the relevant PPSA but by Securities Transfer Statutes (where enacted); see Harris and Mirzai, above, p 129 [25.5]. Perfection by control does not exist at all in New Zealand. In this respect, the Australian Act bears closer resemblance to UCC Article 9 (and Article 8, dealing with investment securities). However, the Australian Act allows for ‘control’ to occur in a broader range of circumstances, and occasionally to entail greater advantages, than the United States Code. One rationale underlying the inclusion of ‘control’ appears to be to allow certain secured parties an alternate means of perfecting their security interests in circumstances where perfection by registration or possession is ‘impractical’: see Replacement Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) p 22 [2.34]. A further motive may be to avoid the potential confusion resulting from an application of the common law relating to possession, particularly constructive possession, to ‘modern securities holding practices’: see Official Comment to the UCC Article 8 (§8-

106); Harris and Mirzai, above, p 133 [26.5].

Control of ADI accounts 5.51 An ADI is an authorised deposit-taking institution within the meaning of the Banking Act 1959: s 10 (‘ADI’). An ADI account is an account ‘within the ordinary [page 182] meaning of that term’ kept by a person, either jointly or individually, with an ADI, which is payable either on demand or at some point in the future as agreed between the ADI and the account-holder(s): s 10 (‘ADI account’). A secured party has ‘control’ of an ADI account if, and only if, the secured party is the ADI: s 25. This provision complements s 12(4), which validates charge-back arrangements by providing that an ADI may take a security interest in an account kept by the ADI. By virtue of s 25, all charge-back arrangements with ADIs will be automatically perfected by control: see ss 20(1)(b)(ii), 21(1)(b), (2)(c)(i). Furthermore, such arrangements will take priority over other perfected security interests in the account regardless of the order in which the interests are perfected: s 75; see also s 57(2A) (clarifying that this special priority rule also extends to proceeds) and 5.89 (Superpriority: control). The combined effect of these provisions places the banking industry in an enviable position within the PPSA regime. The Australian Act is much more generous than the UCC in this respect: see Duggan and Brown, above, p 104 [5.24]. Under UCC Article 9, the secured party need not be the deposit-taking institution in order to obtain control over an account kept with that institution. A secured party may achieve control by entering into an agreement in the form of an authenticated record with the debtor and the institution, under which the institution agrees to comply with instructions from the secured party regarding the disposal of funds without further consent by the debtor: UCC §9-104(2). Alternatively, the secured party may become the institution’s customer with respect to that account: UCC §9-104(3). The PPSA as originally passed similarly allowed for perfection by control

of an ADI account by a secured party other than the ADI, if the secured party was the ADI’s customer with respect to that account, or able to direct the disposal of funds without the grantor’s consent: see s 25(1) as passed. Further, this did not limit the ways in which a secured party could have control of the account: see s 25(4) as passed. The Personal Property Securities (Corporations and Other Amendments) Act 2011 did away with the extended definition of ‘control’ for the purposes of perfection (although it was retained for the purposes of determining whether or not collateral amounts to a circulating asset: see 5.116. The change was apparently made with the design of ensuring that ‘… the ADI would not be vulnerable to other secured parties claiming the ADI account, so that the ADI account would be available to the ADI for prudential regulation purposes. Allowing the ADI to perfect the security interest by control, and obtain the highest priority would also be consistent with the ADI’s right of set-off and combination of accounts in relation to the ADI account’: Explanatory Memorandum to the Personal Property Securities (Corporations and Other Amendments) Bill 2010 (Cth) pp 28–9 [9.59].

Control of intermediated securities, investment instruments, letters of credit and uncertificated negotiable instruments 5.52 A secured party has control of an intermediated security if two conditions are met: s 26. First, there must be an agreement to the effect that the intermediary must not comply with instructions given by the grantor in relation to the intermediated security without seeking the consent of the secured party, or that the intermediary must comply with instructions given by the secured party in relation to the intermediated security without seeking the consent of the grantor: s 26(2)(b). Second, this agreement must be between one of the following sets of parties (s 26(2)(a)): the grantor, the secured party and the intermediary who maintains the securities account; the grantor and the intermediary; or the grantor and the secured party, where notice of the agreement is given to the intermediary.

[page 183] Note that shares held in the CHESS system are classified as intermediated securities, and not investment instruments: see Duggan and Brown, above, p 105; Personal Property Securities (Corporations and Other Amendments) Act 2011 (Cth) Sch 2, ss 13 and 14. The method of taking control of investment instruments varies according to whether the instrument is evidenced by a certificate. A person may take control of a certificated investment instrument in one of two ways. First, he, she or it may take possession of the instrument (see 5.46) and obtain the power to transfer or otherwise deal with the instrument: s 27(3). Second, the issuer may register the person as the owner of the instrument: s 27(2). Uncertificated investment instruments may be controlled in one of three ways. First, there may be an agreement between the person and the grantor to the effect that the former can initiate or control the sending of instructions relating to the manner in which the instrument may be dealt with: s 27(4). Second, in circumstances where the issuer registers another person (other than the grantor or debtor) as the owner of the instrument, or the registered owner (not being the grantor or debtor) acknowledges in writing that he, she or it holds the investment instrument on behalf of the controller, the latter has control of the instrument if he, she or it is able to, by agreement, initiate or control the sending of electronic communications relating to the manner in which the instrument may be dealt with: s 27(5). Third, the issuer may register the person as the owner of the instrument: s 27(2). In every case where the controller is not the registered owner, it is immaterial that the registered owner (who may be the grantor) retains the right to make substitutions for the instrument, originate instructions to the issuer, or otherwise deal with the instrument: s 27(6). A secured party has control of an uncertificated negotiable instrument if two criteria are met: s 29. First, the instrument must be able to be transferred in accordance with the operating rules of a clearing and settlement facility: s 29(1)(a). Second, there must be an agreement in force under which the secured party controls the sending of electronic communications by which the instrument could be transferred: s 29(1)(b). Again, it is immaterial that the registered owner (including the grantor) retains the right to make

substitutions for the instrument, originate instructions to the issuer, or otherwise deal with the instrument: s 29(2). For a secured party to obtain control of a right evidenced by a letter of credit, the issuer or nominated person that owes the obligation must have consented to the assignment of the proceeds of the letter of credit to the secured party: s 28.

Perfection by registration 5.53 A security interest will be perfected if there is ‘a registration [that] is effective with respect to the collateral’: s 21(2)(a). Here, the thing ‘registered’ is not the security interest, but a financing statement: s 10 (‘registration’). A financing statement is defined in a somewhat circular manner as ‘data registered (or that is to be registered) pursuant to an application for registration under s 150’: s 10 (‘financing statement’). It contains brief information relating to (s 153): the secured party; the grantor; how notices may be given to the secured party; the collateral and proceeds; the end time for the registration (if any); whether the security interest is subordinated to any other security interest; and whether the security interest is a purchase money security interest (see 5.79 (Super-priority: the purchase money security interest (PMSI)). Part 5.3 of the Act deals with the mechanics of registering financing statements. The registration of financing statements serves as a warning to third parties that a given secured party claims a security interest in specific collateral: Everett and McCracken, above, p 516 [13.210]. Searching the PPS register will not disclose all the details of the security agreement. Furthermore, financing statements may be registered before the security agreement is executed, and/or before the security interest has attached to the [page 184] collateral: s 161. This effectively allows secured parties to reserve a priority position in anticipation of being granted a security interest: see 5.70 (Default priority rules). To be ‘effective’ with respect to the collateral, the registration must

comply with the requirements of Pt 5.4 of the Act: s 10 (‘effective’). Part 5.4 details the circumstances in which a registration is effective or ineffective. A registration may become ineffective in a number of ways. First, the registration may specify its own end date: s 163(1)(a). Second, the financing statement may be amended to omit the collateral in questions, and the registration will cease to be effective with respect to that collateral as a result: s 163(1)(b). Third, and most importantly, a registration will become ineffective if a search of the register ceases to disclose a description of the collateral: s 163(1)(c). The PPS register is somewhat difficult to navigate, and registrations are liable to become ineffective under s 163(1) through trifling errors on the part of secured parties when entering the required information. Accordingly, the Act grants a measure of leeway in respect of defective registration. A registration will only be ineffective due to a defect in the register if there is a ‘seriously misleading defect’ in any data provided, or the defect falls within the list of particular defects in s 165: s 164(1). In each case, the defect must relate to the collateral in question; defects in relation to other collateral contained in the same financing statement are immaterial: s 164(3). Whether a defect is ‘seriously misleading’ is an objective inquiry, and it is unnecessary to prove that anyone was actually misled: s 164(2). The particular defects which will render a registration ineffective, notwithstanding the defect is not misleading, include (s 165): for serial-numbered collateral, a defect that means a search of the register by reference only to the serial number would not disclose the existence of the security interest in the collateral; for non-serial-numbered collateral, a defect that means a search of the register by reference only to the grantor’s details would not disclose the existence of the security interest in the collateral; for collateral that is not subject to a PMSI, a defect that means that the security interest is recorded as a PMSI on the register; and any other defect prescribed by the regulations. Extra leeway is afforded where defects do not arise solely because of ‘an irregularity, omission or error’ in the financing statement: s 166(1). The Replacement Explanatory Memorandum explains that this provision is ‘not

intended to give secured parties an opportunity to correct defaults of their own creation, but to provide a grace period for secured parties to correct registrations where events beyond their control have led a previously effective registration becoming defective’ (at [76]). Once circumstances arise that would otherwise cause the registration to become ineffective, it is temporarily deemed to be effective until the earliest of the following times (s 166(2)): the end time for the registration (as provided for in the registration immediately before the change); the end of the month that is 60 months after the change; and the end of five business days after the day the secured party acquires knowledge of the defect. Here, knowledge means actual knowledge, or knowledge that a person in the position of the secured party would have had after making all honest and prudent inquiries: s 297. Unless the defect is remedies by the earliest of the events listed above, the registration is ineffective thereafter: s 166(3). There may be an effective registration with respect to collateral notwithstanding the security interest in it becomes unperfected for other reasons. Where the collateral is used [page 185] predominantly for personal, household or domestic purposes, outdated registrations can be seriously prejudicial to the grantor: see Harris and Mirzai, above, p 455 [167.5]. Accordingly, s 167 obliges secured parties whose interests in such collateral have become unperfected to register a financing change statement ending the effectiveness of the original financing statement: ss 167(1), (2). This duty also exists with respect to certain serial-numbered goods: s 167(3). However, a secured party need not register a financing change statement if the end date for the original registration is within 5 business days of the security interest becoming unperfected: s 167(1)(c).

‘Otherwise perfected’

5.54 In limited circumstances, security interests are perfected simply by force of the Act regardless of any steps taken by the secured party to protect its interest. Interests may be perfected ‘temporarily’, giving the secured party a window of time in which to perfect its interest by registration, possession or control, or for longer periods. The temporary perfection provisions are discussed below. Here we are concerned with the instances of long-lasting automatic perfection. No overarching principle unites this miscellany; the provisions appear to have been inserted to protect certain secured parties from the full operation of other provisions. Often, the automatic perfection provisions work with other provisions relating to automatic attachment to maintain the position of certain secured parties in light of changed circumstances. Indeed, in all of the situations discussed below the Act provides for automatic attachment (or the ‘continuation’ or ‘reattachment’ of interests) as well as automatic perfection. Given attachment is not a prerequisite to perfection by force of the Act (s 21(1)(a)), automatic attachment would at first glance seem rather otiose. However, automatic perfection may be granted for limited purposes (for example, only in the context of the default priority rules) or for a limited duration (for example, while goods are in the possession of a bailee). If automatic perfection ceases to apply, automatic attachment will be vital to ensure the secured party’s interest continues to exist at all. This will allow secured parties to render their interests enforceable against third parties, and to perfect their interests, in the usual way.

Commingled goods 5.55 A security interest in goods that subsequently become processed so as to lose their identity in a product or mass will continue in the product or mass: s 99; 5.93 (Accessions and commingling). If the security interest in the goods was perfected, the security interest that continues in the product or mass is also treated as perfected. However, this advantage enures only for the purposes of the default priority rules: s 100; see also s 55. In relation to other priority rules, for example those relating to purchase money security interests, the perfection of the security interest in the original collateral does not appear to amount to perfection of the continuing security interest in the product or mass.

Proceeds 5.56 A security interest in collateral the subject of a dealing that gives rise to proceeds attaches to the proceeds, unless the security agreement provides otherwise: s 32(1)(b); see 5.33 (Proceeds). If the security interest in the original collateral was perfected by a registration with the appropriate coverage, the security interest in the proceeds is also perfected. To have the appropriate coverage, the registration must do any one of three things. If the description of the original collateral would encompass the proceeds, then a registration that covers the original collateral will suffice: s 33(1)(b). This is also the case where the proceeds consist of: currency, cheques, an ADI account, or a right to an insurance, indemnity or compensation payment in relation to loss or damage to the collateral or its proceeds: s 33(1)(c). Otherwise, there must be a description complying with any regulations made pursuant to item 4, paragraph (d) of the table in s 153 (Financing statements with respect to security interests): s 33(1)(a). [page 186] Where there is a registration complying with s 33(1), no further action need be taken by the secured party to perfect its interest in the proceeds. Where there is no such registration, the security interest may enjoy temporary perfection under s 33(2): see above.

Goods in the possession of a bailee 5.57 A security interest that has attached to goods in the possession of a bailee other than the grantor or debtor or their agents will be perfected by force of the Act in a number of circumstances. Such circumstances include where the security interest is perfected through registration, or through possession by virtue of the fact that the bailee possesses the goods on behalf of the secured party: ss 22(1)(a), (b). These provisions appear to have been inserted out of an abundance of caution, although s 22(1)(b) (perfection by possession) may have some significance if ‘possession’ under the Act is construed as ‘actual possession’ only: see 5.43, 5.44. The security interest will also be perfected where the bailee issues a

document of title to the goods in the name of the secured party, or a negotiable document or title to the goods if the secured party also has a perfected security interest in the document: ss 22(1)(c), (d); and see 5.44. Note that the Act offers a grace period, during which the security interest in the goods is perfected, while the negotiable document of title is in transit between the bailee and the secured party: s 22(2); and see 5.59–5.67. The words of the section indicate that the security interest in the goods will remain perfected for as long as they remain in the possession of the bailee. Afterwards, the secured party must rely on other forms of possession.

Goods repossessed by grantor or transferee of chattel paper 5.58 The grantor or debtor may sell or lease goods the subject of a security interest in such a way that the buyer or lessee takes free of the security interest, see 5.102 (Taking free rules). This transaction may also give rise to chattel paper in respect of the goods. Later, the grantor or debtor may reclaim possession of the goods. Alternatively, a transferee of the chattel paper may seize the goods pursuant to a security agreement. In these circumstances, the Act provides for the ‘reattachment’ and ‘reperfection’ of the original security interest. The security interest is deemed to reattach to the goods at the time of repossession by the grantor or debtor, where this is by reason of: the rescission of the sale or lease; the expiration of the lease; the enforcement of the contract of sale or lease; or any other circumstances prescribed by the regulations (at the time of writing, there are none): s 37(1)(a), (b), (d), (e). If goods have been seized for enforcement purposes by a transferee of chattel paper created by a sale or lease under which the buyer or lessee ‘took free’, the security interest is deemed to attach to the goods at the time they come into the transferee’s possession: s 37(1)(c). If a security interest has reattached to goods pursuant to s 37(1) then the status of the security interest as perfected or unperfected, as well as the time of the registration or perfection, are determined as if the sale or lease never happened — provided two conditions are met. First, the security interest must have been perfected by registration immediately before the time of acquisition by the buyer or lessee. Second, the registration must be effective at the time the goods are repossessed by the grantor or debtor, or possessed by the transferee of the chattel paper: s 37(2). Note that the simple

registration of a filing statement prior to acquisition will not suffice. Registration must be an act of perfection; in other words, the security interest must also have attached and be enforceable by the time of acquisition. [page 187] Special rules govern the priority of security interests in returned goods: see s 76 and 5.90 (Special priority rules and miscellaneous provisions).

Temporary perfection 5.59 ‘Temporary perfection’ is afforded in certain situations to security interests that are yet to be perfected, or have ceased to be perfected, seemingly in order to preserve existing commercial relationships and to allow secured parties a window of opportunity to protect themselves in light of changed circumstances: see Harris and Mirzai, above, p 168 [33.5.2]. This leeway is particularly valuable given the importance of continuous perfection in the context of priority disputes. In each case, close attention must be paid to the special circumstances in which temporary perfection is afforded, the start and end times of perfection, and the effect of the expiry of the perfection period.

Proceeds 5.60 A security interest in collateral that is dealt with so as to give rise to proceeds attaches to the proceeds, unless the security agreement provides otherwise: s 32(1)(b). However, the status of the security interest in the proceeds is not necessarily equal to that of the security interest in the original collateral. If the security interest in the original collateral was perfected at the time of the dealing, then in certain circumstances it will be perfected by force of the Act with no further action required on the part of the secured creditor: s 33(1); see 5.56 (Proceeds). Outside these circumstances, the Act provides only temporary protection. The security interest in the proceeds is temporarily perfected from the time the security interest in the original collateral attaches to the proceeds until the end of five business days later: s 33(2). The security interest in the proceeds becomes unperfected on the expiry of this period: s 33(3).

Goods in the possession of a bailee returned to the grantor or debtor 5.61 A security interest in goods in the possession of a bailee other than the grantor or debtor will be perfected by force of the Act in several different circumstances: see s 22(1) and 5.57 (Goods in the possession of a bailee). However, these provisions apply only as long as the bailee possesses the goods. In the absence of a valid registration, the security interest will be unperfected if the bailee relinquishes the goods even for a limited time or a limited purpose. The Act grants some leeway in this context. Specifically, if the goods have been returned to the grantor or debtor for the purpose of sale or exchange, or for any action in preparation for a sale or exchange, a security interest perfected under s 22(1) will remain temporarily perfected: s 35(1). Actions preparatory to a sale or exchange include: loading, unloading, storing, shipping, manufacturing, processing and packaging. The temporary perfection begins from the ‘action time’, being the time possession is given to the grantor or debtor for those purposes, and ends five business days later: s 35(2). The security interest is treated as unperfected from the end of the period onwards: s 35(3).

Negotiable documents of title in transit 5.62 A security interest in goods in the possession of a bailee will be perfected by force of the Act where the bailee issues a negotiable document of title to the goods and the secured party has a security interest in the document: s 22(1)(d); 5.57 (Goods in the possession of a bailee). Additionally, the Act provides for temporary perfection of the security interest in the goods while the document of title is in transit from the bailee to the secured party. The security interest in the goods is temporarily perfected from the time the bailee issues the negotiable document of title to the day the secured party takes possession of the document: s 22(2). [page 188] To enjoy this protection the secured party must have either taken possession of the document, or perfected its interest by some other means,

within five business days of the issue: s 22(4)(a), (b). If the secured party takes possession of the document within the five days but without creating and perfecting a security interest in it, then it will lose the protection of temporary perfection without gaining the protection of automatic perfection under s 22(1)(d). The security interest in the goods will be unperfected from the time it takes possession of the document: s 22(3). If the secured party does not take possession of the document within the five days, but perfects its interest in the goods within the five days, that interest will remain perfected even after the secured party takes possession without a break: s 22(3). The effect of the temporary perfection provisions here is merely to extend the period of continuous perfection by a maximum of five business days, although this may be significant in the context of priority, see Part E (Priority rules). If the secured party does not take possession of the document or perfect its interest in the goods within the five days, its interest in the goods is treated as never having been temporarily perfected: s 22(4).

Negotiable instruments and investment instruments returned to the grantor or debtor 5.63 A secured party that has perfected a security interest in a negotiable instrument or an investment instruction by possession or control may need to relinquish possession or control to the grantor/debtor for some purpose relating to the security agreement. If the secured party has not registered a valid financing statement, its interest will cease to be perfected as soon as it relinquishes possession or control. Again, the Act intervenes to provide a window of opportunity during which the secured party may take extra steps to maintain its original position. The security interest will be temporarily perfected from the time at which the grantor or debtor obtains possession or control of the instrument for the purpose of effecting a: sale; exchange; presentation; collection; renewal; or registration (other than under the PPSA) for the purposes of a transfer: s 36(1). This period of temporary perfection will end five business days later: s 36(2). Unless the security interest in the instrument is perfected by other means (typically, by registration of a valid financing statement) it will cease to be perfected at the end of the period: s 36(3). This section is unhappily drafted, occasionally using the terms ‘goods or document’ to refer, somewhat confusingly, to the negotiable instrument or

investment instrument.

Collateral relocated to Australia 5.64 A security interest in collateral that was located overseas and then relocated in Australia is deemed by the Act to be continuously perfected, provided that, immediately before the collateral was moved to Australia, the security interest was ‘effective’ and the security agreement enforceable against third parties: s 39(1). ‘Located’ is defined by s 235. ‘Effective’ appears to be a designedly neutral term, meaning effective under the laws of the foreign jurisdiction: see Harris and Mirzai, above, p 185 [39.4]. This period of continuous perfection starts from one of three commencement times depending on the nature of the personal property laws of the foreign jurisdiction: s 39(2)(a). If the foreign law deals with the perfection of security interests, the security interest is continuously perfected from the time it was last perfected under that jurisdiction (if it was never perfected, it will not be continuously perfected under s 39(1): s 39(2A)). If the foreign law does not deal with perfection but requires that security interests be notified on a public register (or similar), the security interest is continuously perfected from the last time it was notified on such a register (if it was never notified, it will not be continuously perfected under s 39(1): s 39(2A)). If there is no such register and the foreign law does not deal with perfection, the security interest is continuously perfected from the last time it became enforceable against third parties under that jurisdiction. [page 189] These provisions are critical in ensuring that secured parties who have complied with the laws of the place where the collateral is situated do not lose priority by virtue of the grantor relocating said collateral. The period of continuous perfection from the perspective of Australian law is extended back in time to the moment the secured party complied with the applicable foreign law. Consistently with this rationale, the period of continuous perfection ends when the property is located in Australia: s 39(2)(b). From that point, the secured party must take steps to comply with the Australian regime if it

wishes to maintain its position. In this context, the Act gives some leeway — once again through the mechanism of temporary perfection. Accordingly, if a security interest in collateral is continuously perfected under s 39(1), it will be temporarily perfected from the time the property is relocated to Australia until the end of five business days after the secured party has actual knowledge of the relocation, or, failing this, the end of 56 days after the relocation: s 39(3). If the security interest is not otherwise perfected before the expiry of this period, it is treated as though it was never perfected during the period: s 39(4). Similar provisions apply where foreign law originally governed a security interest in intangible or financial property, which was effective and enforceable against third parties under that law: s 40(1). If the grantor becomes located in Australia, or transfers the collateral to a person in Australia, as a result of which Australian law now governs the perfection (or otherwise) of the security interest, then the interest is deemed to be continuously perfected from the time it was last perfected, notified on a public register or enforceable against third parties (as the case may be) under the foreign law, up to the time the grantor or the collateral was relocated: s 40(2), see also s 40(2A) (both sections being in substantially the same terms as s 39(2) and (2A)). Temporary perfection is afforded until the end of five business days after the secured party has actual knowledge that the grantor and/or collateral has relocated to Australia, or, failing this, 56 days after the grantor/collateral is relocated: s 40(3). Unless the secured party perfects its interest by other means during this grace period, at the end of the grace period its interest will be treated as though it was never perfected: s 40(4). The second set of provisions does not apply to security interests in intellectual property, intellectual property licences, ADI accounts or negotiable instruments: s 40(5). The first set is not so limited.

Collateral transferred to transferee who does not take free 5.65 In many cases where collateral is sold or leased, the buyer or lessee will take free of any security interest subsisting at the time of the transaction, see below 5.102 (Taking free rules). Where this is not the case, and the secured party did not expressly or impliedly authorise the dealing, the original security interest continues in the collateral: s 32. If the original security interest was perfected at the time of the dealing, the continuing

security interest will be temporarily perfected from that time until the earliest of a number of events occurs: s 34(1), (3). If the security interest was perfected by registration at the time of the transfer, the end time for the registration (as it existed at the time of transfer; that is, regardless of posttransfer extensions) will be one of these terminating events: s 34(1)(b). The intervention of third party interests triggers one of two further terminating events depending on whether the secured party consented to the transfer. If the secured party did so consent, then the temporary perfection of its interest will end five business days after the transfer: s 34(1)(c)(i). If the secured party did not consent, then the temporary perfection of its interest will end five business days after it acquires the actual or constructive knowledge ‘required’ to perfect its interest by registration (or the amendment of an existing registration): s 34(1)(c)(ii). Failing any of these three terminating events, the temporary perfection will terminate at the end of the month [page 190] 24 months after the transfer: s 34(1)(a). After the temporary perfection comes to an end, the security interest is simply unperfected from that time: s 34(2). Note that this section refers to a ‘transfer’ of collateral, which is not defined in the Act.

Collateral returned following transfer under which transferee took free 5.66 As discussed above at 5.34 (Collateral returned following transfer under which transferee took free), a security interest in goods sold or leases in the ordinary course that is extinguished by the operation of the taking free rules (see s 46(1) and 5.104) will revive and reattach where the goods come back into the possession of the grantor or debtor in certain circumstances, including where: the sale or lease is rescinded; the lease expires; the transferee of chattel paper originating from the sale or lease seizes the collateral; or the grantor or debtor repossesses the goods in order to enforce the sale or lease: s 37(1). If the reattached security interest was perfected by registration immediately before ‘the time of acquisition’, and the registration is effective at the time

the goods are repossessed by the grantor or debtor, then the perfection status and registration time of the security interest is determined as if the goods had never been sold or leased: s 37(2); see also s 76 (priority of security interests in returned goods). Semble, the ‘time of acquisition’ refers to the time at which the transferee acquired the collateral free of the security interest.

Returned collateral following transfer of a related account or chattel paper: the ‘deemed goods security interest’ 5.67 A sale or lease of goods may create an account or chattel paper, which can be transferred. The transferee of the account or chattel paper has, by force of the Act, a ‘deemed goods security interest’ in the goods (as opposed to the account or chattel paper itself, see 5.21 (‘Deemed’ security interests)) in a number of circumstances where the goods come into the possession of the transferee or transferor: s 38(1). These circumstances include: where the contract of sale or lease (as the case may be) is rescinded; where the lease expires; where the transferee seizes the goods for the purposes of enforcing as security interest; where the transferor repossesses the goods for the purpose of enforcing a right in the contract of sale or lease; and any other circumstance prescribed by the regulations (at the time of writing, there are none so prescribed). The ‘deemed goods security interest’ attaches to the goods at the time they are repossessed by the transferee or transferor: s 38(2). Additionally, the ‘deemed goods security interest’ of the transferee will be temporarily perfected if the transferee had, at the time the goods were repossessed, a security interest in the account or chattel paper that was perfected by possession or registration: s 38(3). The period of temporary protection runs from the time the goods are repossessed, to the end of five business days afterwards: s 38(3). At the end of the period the ‘deemed goods security interest’ simply becomes unperfected: s 38(4).

V Priority rules 5.68 Consistently with the ‘functional’ approach to security, the PPSA priority rules do not operate by reference to the form of security interests (for example, whether or not the interests are title-based) or to the nature of security interests as legal or equitable: see Part A (Background). However, such factors remain vitally important to the determination of priority disputes

not governed by the PPSA: see 5.26 (Characterisation of the PPSA Security interest). Interestingly, unlike the priority regime formerly established under Ch 2K of the Corporations Act, the PPSA priority rules do not operate by reference either to the order [page 191] of registration per se or whether there was notice of an existing interest on the part of the secured creditor: see Everett and McCracken, above, pp 517–18 [13.260], 520 [13.1270].

A. Overview 5.69 This section deals with disputes between two security interests in the same collateral, both being security interests within the PPSA, having attached and become enforceable against third parties. Part 2.6 of the Act divides priority issues into five categories: the priority of security interests generally (Div 2); the priority of purchase money security interests (PMSIs) (Div 3); the priority of security interests in transferred collateral (Div 4); the priority of creditors and purchasers of negotiable instruments, chattel paper and negotiable documents of title (Div 5); and the priority of other interests (Div 6). This structure can be better understood as disclosing ‘three general priority positions’ (contained in Divs 2 and 3) and special rules dealing with more specific situations (contained in Divs 4, 5 and 6): see Everett and McCracken, above, p 518 [13.260]. Within the realm of the three generalised regimes, the first task will be to ascertain the status of each security interest: whether either is perfected or unperfected, whether either is a PMSI, or whether either is perfected by control. The status of each interest indicates which of the three regimes applies. When there is a dispute between two perfected security interests at least one of which is perfected by control, the super-priority rules under s 57 apply. When there is a dispute between a perfected security interest and a PMSI that is perfected by registration, or between two PMSIs, the super-

priority rules under ss 62 and 63 apply. When there is a dispute involving unperfected security interests, or perfected security interests not being PMSIs or perfected by control, then the default rules under s 55 apply. This scheme can be described as a spectrum extending from the ‘default position’ to ‘control trump[ing] all’, with an intermediate position relating to PMSIs: Everett and McCracken, above, p 518 [13.260]. The second task when considering the three generalised regimes is to identify that criterion which is used to determine priority. Often, this will be the status of each interest. Where both interests are of equal status, one might expect that their ranking would fall to be determined according to the order in which they arose. However, this is not the case. Depending on the regime, the determinative factor may be the order of attachment, the order of ‘priority time’, or the order of perfection by control. Again, the special rules in Divs 4 to 6 may alter the outcome that would otherwise prevail under the general rules in Divs 2 and 3, and it will always be necessary to check whether any special rule applies to the situation at hand. This section first discusses the general regimes: the default priority rules, the super-priority PMSI rules, and the super-priority control rules. It then addresses the special rules.

B. Default priority rules 5.70 The default rules apply, as the name suggests, in the absence of any other applicable rule: s 55(1). Together, they establish the default priority position in relation to disputes between unperfected security interests and perfected security interests.

Perfected security interest versus unperfected security interest 5.71 Irrespective of the time at which each interest arose, a perfected security interest ranks ahead of any unperfected security interest in the same collateral: s 55(3). [page 192]

A security interest may remain unperfected through imprudence. However, in the early years, it is more likely that the holder of an unperfected security interest was simply unaware that the PPSA applied to the transaction entered into with the grantor. The various equivalents of this provision have proved to be some of the most heavily litigated in other PPSA jurisdictions, particularly where the unperfected security interest does not take the form of a traditional security interest. Suppliers under retention of title agreements, and lessors of goods under what are now PPS leases, have historically tended to be taken by surprise: see, for example, Graham v Portacom New Zealand Ltd [2004] 2 NZLR 528; Waller v New Zealand Bloodstock Ltd [2005] 3 NZLR 629. This section (or s 55(2) below) is also likely to apply where a security interest has ceased to be perfected (as where a valid registration lapses) or there has been an unsuccessful attempt to perfect the security interest (as where a registration is defective from the outset): see, for example, Sperry Inc v Canadian Imperial Bank of Commerce (1985) 4 PPSAC 314; 17 DLR (4th) 236; Asklepeion Restaurants Ltd v 791759 Ontario Ltd (1996) 11 PPSAC (2d) 320, aff’d (1998) 13 PPSAC (2d) 295.

Unperfected security interest versus unperfected security interest 5.72 Where there are two unperfected security interests in the same collateral, the first interest to attach to the collateral will have priority: s 55(2). The use of the order of attachment as a determinant of priority creates difficulties in relation to after-acquired property. A security interest that extends to after-acquired property of the grantor will attach to the said property once the grantor acquires it, without the need for specific appropriation: s 18(3). Where there are two such security interests, they will attach at the same time. If neither interest is perfected at the time the priority dispute arises, the Act does not appear to provide an answer as to who ranks first. It has been suggested that, consistently with the PPSA’s express recognition of the continued application of general law principles (see s 254), the equitable rule qui est in tempore potior est jure should apply in the

absence of any governing statutory rule: Cuming, Walsh and Wood, above, p 312; Gedye, Cuming and Wood, above, pp 261–2 [66.4]. In equity, an assignment of future property is treated as effective from the time the agreement to assign was made: see Young, Croft and Smith, On Equity, Thomson Reuters, Sydney, 2009, pp 721–2 [10.400]; Re Puntoriero (1991) 104 ALR 523. Alternatively or additionally, Australian courts may adopt the analysis in Bank of Montreal v Innovation Credit Union [2010] 3 SCR and Royal Bank of Canada v Radius Credit Union [2010] 3 SCR 38. In those cases, the Canadian Supreme Court found that a secured party has an ‘inchoate’ interest in after-acquired property of the grantor from the moment the security agreement covering such property is executed. This analysis, if accepted, would justify the application of a first-in-time priority rule. By contrast, the Replacement Explanatory Memorandum envisages that ‘when two unperfected security interests attach at the same time, they would have the same priority’: Replacement Explanatory Memorandum to the Personal Property Securities Bill 2009, p 38 [2.110]; see also Ontario Dairy Cow Leasing v Ontario Milk Marketing Board (1993) 4 PPSAC (2d) 269 (where the Ontario Court of appeal prorated the collateral between two secured parties whose unperfected interests had attached simultaneously). A related issue is the time at which a priority dispute arises: Everett and McCracken, above, p 521 [13.270]. Consider the following example. On Day 1, A executes a security agreement in respect of certain collateral including after-acquired property with Grantor, who runs a car factory. On Day 2, B executes a security agreement with Grantor, which also covers after-acquired property. On Day 3, Grantor acquires a new piece of equipment. Presumably, the interests of A and B attach at the same time: s 18(3). On Day 4, Grantor is placed in receivership. If the dispute arises on Day 4, the Act provides no clear way of [page 193] determining priority between A and B and the discussion above becomes relevant. If the dispute arises at some later time, then either A or B may perfect its security interest and bring the dispute within the ambit of some

other rule. There is some authority for the proposition that a PPSA priority dispute arises at ‘the time when security interests come into conflict,’ which may be the time receivers are appointed: Gibbston Downs Wines Ltd v Perpetual Trust Ltd [2012] NZHC 1022 at [47]–[48]; Sperry Inc v Canadian Imperial Bank of Commerce (1985) 4 PPSAC 314; 17 DLR (4th) 236 at [37]; Asklepeion Restaurants Ltd v 791259 Ontario Ltd (1996) 11 PPSAC (2d) 320 at [58]–[60], affirmed (1998) 13 PPSAC (2d) 295; Canadian Imperial Bank of Commerce v Melnitzer (Trustee of) (1993) 23 CBR (3d) 161 at [201]; cf. Textron Financial Canada Ltd v Beta Ltée/Beta Brands Ltd (2007) 12 PPSAC (3d) 46; 37 CBR (5th) 107 at [37]–[39], [44]. An alternate view suggests that ‘the initiation of enforcement proceedings should have no effect on the determination of priorities’ and that ‘[i]t is not until enforcement proceedings are fully executed that priorities become fixed and crystallised: Cuming, Walsh and Wood, above, p 363; cf Gedye, Cuming and Wood, above, p 262 [66.5].

Perfected security interest versus perfected security interest 5.73 Where there is a priority dispute between two security interests, both of which are currently perfected, the time and mode of perfection becomes relevant: Everett and McCracken, above, p 519 [13.270]. In this case, the criterion determining priority is the order in which the ‘priority time’ of each interest occurs: s 55(4). The ‘priority time’ of an interest is the earliest of the following: the registration time; the time at which the secured party first perfects by possession or control; or the time the interest is perfected, temporarily or otherwise, by force of the Act: s 55(5). The security interest will continue to enjoy this ‘priority time’ for as long as it is continuously perfected: s 55(6) and 5.41 (Perfection). So, if A perfects a security interest in certificated shares by control on Day 1, registers an effective financing statement on Day 2, and loses control of the shares on Day 3 (thereby losing the super-priority associated with control, see 5.89 (Super-priority: control)), its priority time remains Day 1 assuming that the registration remains effective. It would be misleading to characterise ss 55(4), (5) and (6) as establishing a ‘firstto-register’ or ‘first-to-perfect’ rule of priority. However, in certain situations the sections will operate as if this was the case. In every situation it is best to characterise the ‘priority time’ of each security interest in isolation

before ascertaining which has the earlier. The operation of these rules in specific scenarios is discussed below.

Security interests perfected by registration only 5.74 In a competition between two security interests both of which are perfected by registration (and registration only), the first registered will take priority irrespective of the order of perfection: see s 55(5)(a). Subsections 55(4), (5) and (6) function as a ‘first-to-register’ rule only in this situation. Given parties may register a financing statement in anticipation of a security interest, s 55(4)–(6) allows a secured party to ‘reserve its priority position’ with respect to collateral before the execution of any security agreement, or indeed with respect to a class of collateral pending the execution of a number of security agreements: Duggan and Brown, above, p 146 [7.6]–[7.7]; see also s 151(1). For example, on Day 1 A could register a financing statement describing collateral as ‘commercial property’ and ‘motor vehicles’ in compliance with the Act and Regulations, pending the finalisation of negotiations with Grantor. On Day 2, Grantor agrees to grant A a security interest in collateral described in the security agreement as ‘all Grantor’s motor vehicles save utility vehicles’. On Day 3, Grantor grants a security interest in favour of B with respect to a specific utility vehicle, and B registers a valid financing statement [page 194] the same day. On Day 4, Grantor agrees to grant a second security interest in favour of A, this time in ‘all Grantor’s utility vehicles’. Because a single registration can perfect multiple security interests where, as here, the description in the financing statement covers the relevant collateral described in each security agreement (see s 21(4)), A’s interests were perfected as of Day 2 and Day 4 respectively. B’s security interest was perfected as of Day 3. Yet the priority time of each security interest in this scenario will be its registration time. Accordingly, both of A’s security interests will take priority over B’s security interest: the priority time for each is Day 1: s 55(5)(a); see

Duggan and Brown, above, p 146 [7.7].

Security interests perfected otherwise than by registration 5.75 In a competition between two security interests both of which are perfected by a mode other than registration, the first perfected takes priority. This applies whether the security interest is perfected by taking possession or control, or by force of the Act: see s 55(5)(b), (c). In this situation, ss 55(4), (5) and (6) operate as a ‘first-to-perfect’ rule. So, for example, A may have a security interest that is perfected under foreign law from Day 1, in collateral that is relocated to Australia on Day 5. By force of the Act, A’s security interest is deemed to have been perfected under the PPSA from Day 1 to Day 5. A becomes aware of the relocation on Day 6 and registers an effective financing statement on Day 8 (during the period of temporary perfection conferred by the Act: see 5.64 (Collateral relocated to Australia)). B takes possession of the collateral on Day 7 and thereby perfects its security interest. In this example, A’s priority time is Day 1, because it remained continuously perfected from that time: s 55(6). B’s priority time is Day 7, the day on which it perfected its interest by taking possession of the collateral. Accordingly, A will have priority over B. It is irrelevant that A’s registration post-dated B’s taking possession. In the case of Re Chapman 5 UCC Rep Serv 649 (1968), it was held that one secured party may possess collateral on behalf of itself and other secured parties, so that each security interest in the collateral is perfected: see 5.44. If this method of perfection is available under the Australian Act, then, presuming that none of the secured parties had earlier registered a valid financing instrument, it is possible that multiple interests in the same collateral will have the same priority time under s 55(5). If the default rules apply (so that, for example, there is no subordination agreement, and none of the interests are PMSIs or currently perfected by control), they seem to provide no answer to this problem. Some other rule may have to be applied, or the interests may be held to rank equally: cf 5.72.

Mixed disputes 5.76

In a competition between security interests, one of which is perfected

by registration and the other of which is perfected by some other means, priority will be decided according to which party managed to register, or perfect by possession or control, first. For example, A might register a valid financing statement on Day 1, but its security interest only attaches and becomes enforceable (and therefore perfected) on Day 3. B perfects its interest by taking possession of the collateral on Day 2. Although B perfected its interest before A, A has the earlier priority time, being its registration time. A takes priority: s 55(4). The outcome would be different if B had perfected its security interest by taking possession on Day 1, A validly registers on Day 2, and A’s security interest attaches and becomes enforceable (and therefore perfected) on Day 3. Here, B’s priority time is the time it perfected by possession, Day 1. A’s priority time is its registration time, Day 2. Thus B takes priority. [page 195]

‘First perfects by possession or control’ 5.77 For security interests perfected otherwise than by registration, the priority time is the time at which the secured party ‘first perfects the security interest by taking possession or control of the collateral’ (emphasis added): s 55(5)(b). The phrasing is different in most other Acts, which refer merely to the secured party taking possession: see, for example, NZ PPSA s 66(b)(ii); Sask PPSA s 35(1)(a)(ii); BC PPSA s 35(1)(a)(ii); Man PPSA s 35(1)(a)(ii); Alb PPSA s 35(1)(a)(ii) (‘possession or delivery of the collateral under section 24 [perfection by possession] without regard to the date of attachment of the security interest’ (emphasis added)). By contrast, the Australian provision appears to mean that a secured party’s priority time will be fixed from the moment it first has possession or control of the collateral and perfects its interest thereby. This difference has practical consequences, which may be illustrated by reference to the following scenario. Grantor and A are in the process of negotiating a secured loan. On Day 1, Grantor leaves the collateral in A’s possession pending the outcome of negotiations. On Day 2, Grantor grants a security interest in favour of B, who perfects by registration on the same day.

On Day 3, Grantor and A finalise their negotiations and enter into a security agreement. Under the Australian Act, A’s priority time is not the day it took possession, but the day its interest was perfected by possession. A prerequisite of perfection is attachment, which requires value to pass, or an act to be done that gives rise to a security interest: see D-I (Attachment); ss 19(2)(b), 21(1)(b)(i). This presumably occurred on Day 3. As a result, A’s priority time is Day 3 and not Day 1. By contrast, under many other PPSAs, the fact that A ‘has completed a perfection step’ by taking possession will mean that its priority time is Day 1 ‘even though it [did] not yet have an attached or perfected security interest’ on that date: Cuming, Walsh and Wood, above, p 311. In this respect, the Australian Act seems to better resemble the Ontario Act than the Acts prevailing in the other Canadian provinces and in New Zealand: see Ont PPSA s 30(1).

Change in the mode of perfection 5.78 As discussed, the priority time of a security interest is the earliest of: its registration time; the time it was first perfected by possession or control; or the time it was perfected by force of the Act whether temporarily or otherwise: s 55(5) and see above. This priority time is fixed for as long as the security interest remains continuously perfected, by whatever means: ss 55(6), 56. The practical effect of these provisions is that the order of registration disclosed by the PPS register does not necessarily reflect the ranking of claims in the collateral: see Everett and McCracken, above, at p 521 [13.270]; Cuming, Walsh and Wood, above, p 314. Consider the scenario discussed above (at 5.76) where B perfected its security interest by taking possession on Day 1, and A registered a valid financing statement on Day 2, but only perfected its interest on Day 3. Suppose B then registers a financing statement on Day 4 and relinquishes possession to Grantor on Day 5. Here, a search of the PPS register would disclose two registered interests: A’s from Day 2, and B’s from Day 4. However, as we have seen, B’s priority time is Day 1: the day it first perfected by possession. It does not matter that B subsequently lost possession, because its interest remained continuously perfected. Accordingly, B would take priority over A: s 55(4). Similarly, if A registers a valid financing statement on Day 1, perfects its interest by taking

possession of the collateral on Day 3, and allowed its registration to lapse on Day 4, its priority time remains Day 1 notwithstanding it now relies on another mode of perfection. If B perfects by registering a valid financing statement on Day 2, a search of the PPS register will only disclose B’s registration and not A’s lapsed registration. Yet A’s priority time is earlier and its interest will rank ahead of B’s. [page 196] A secondary effect of these provisions is to give the words ‘or control’ in s 55(5)(b) some work to do. Ordinarily, where there are two perfected security interests, one or more of which is currently perfected by control, the default priority rules are ousted by the special rules relating to control: see 5.89 (Super-priority: control) and s 57. Yet these rules only apply where the security interest is currently perfected by control. The default rules are likely to apply where a security interest was initially perfected by control, but then perfected by other means only. For example, A might take control of a certificated share on Day 1 by virtue of possessing the share certificate and enjoying the ability to deal with it: s 27(3): see 5.52 (Control of intermediated securities, investment instruments, letters of credit and uncertificated negotiable instruments). If for whatever reason A loses the ability to deal with the share certificate on Day 3, it may have lost control of the shares from that time. However, if A still possesses the share certificate, its security interest will be perfected by possession from Day 3: see s 24(6) and 5.46–5.49. So while A no longer has the benefit of super-priority under s 57, its priority time for the purposes of the default rules will remain Day 1, the time at which it first perfected its interest by control.

C. Super-priority: the PMSI 5.79 A longstanding concern of commercial law has been to curtail the potentially sterilising effect of the blanket floating charge. Suppose, as is commonly the case, a debtor grants a charge over all its present and afteracquired property in favour of A. Debtor then acquires a new asset thanks to finance extended by B, who takes security over the specific asset. All things

being equal, the new asset is captured by A’s security. From a policy perspective, this outcome is undesirable for at least two reasons. First, there is the unfairness associated with allowing A to derive an unearned advantage from B’s willingness to extend credit: see Sogelease Australia Ltd v Boston Australia Ltd (1991) 26 NSWLR 1 at 5; Composite Buyers Ltd v State Bank of NSW (1990) 3 ACSR 196 at 200 per Hodgson J. Second, if B is aware of its relegation, it will offer less favourable financing terms to the debtor. Debtor is correspondingly more likely to seek a further advance from A than the new financier. A either receives a windfall or enjoys a monopoly position with respect to Debtor’s finances. At general law, B could avoid such an outcome by retaining title to the asset until payment, for example under a conditional sale agreement or financing lease. Alternatively, B could claim subrogation to the unpaid vendor’s lien. Lastly, B could ensure, through a pre-acquisition security agreement, that its security interest would attach to the new asset the very moment it was acquired by the debtor. If there is no scintilla temporis between the grant of security and the debtor’s acquisition of the property, A’s charge attaches only to the encumbered property, which is all the debtor acquires: Wilson v Kelland [1910] 2 Ch 306; Re Connolly Brothers Ltd (No 2) [1912] 2 Ch 25; Mathieson v Wahlen (1928) 28 SR (NSW) 189 per Harvey CJ in Eq; Security Trust Co v Royal Bank of Canada [1976] AC 503; Abbey National Building Society v Cann [1991] 1 AC 56. In Sogelease Australia Ltd, above, Rogers CJ Comm D (at 5) stated the principle in fairly broad terms: … if a loan is made to enable completion of a purchase on the understanding that a charge or security will be given, the purchaser acquires legal title to the property subject to that security. The charge held by a prior chargee over the assets of the purchaser will rank behind the lender’s charge.

See also B & B Budget Forklifts Pty Ltd v CBFC Ltd (2008) 216 FLR 294 at 306–7 per Barrett J; Commissioner of Taxation v Gloxinia Investments (Trustee) (2010) 183 FLR 420; [2010] FCAFC 46. This somewhat anomalous principle can only be availed of where B’s interest in the asset secures the obligation incurred by the debtor in order to acquire it; that is, where B’s security interest is of the purchase-money type. Otherwise, to accord [page 197]

B priority would allow the debtor to commit a fraud on A by ‘whittling down the value of his security in future property acquired by the debtor with his own money’: see L Gullifer (ed), Goode on Legal Problems of Credit and Security, 4th ed, Sweet & Maxwell, London, 2008, for an excellent summary of these issues. On one view then, the super-priority provisions of the PPSA serve to plug a gap already filled by the common law. Yet the treatment of purchase money security interests at general law is unsatisfactory in a number of respects. For one thing, the reasoning in the cases above involves a somewhat creative application of the nemo dat rule which has not gone uncriticised: see Gerald Ng, ‘Built on Quicksand: The Purchase Money Security Interest Under the General Law’ (2006) 80 ALJ 53. Moreover, the insistence on the absence of a scintilla temporis requires minute factual analysis and invites the drawing of fine distinctions between different kinds of transaction: see Church of England Building Society v Piskor [1954] 1 Ch 553; cf Abbey National, above. Finally, the logic supporting the efficacy of pre-acquisition agreements extends equally to non-purchase money security interests, although policy dictates that the holders of such interests should not prevail over prior chargees. Craig Wappett made the following apt observations in 1996 (Wappett, ‘Reforming Personal Property Security Law in Australia’ (1996) 7 JBFLP 189 at 193): Notwithstanding that the weight of Australian authority now appears to recognise that priority should be afforded to a purchase money security interest it has been commented that the evolution of the common law in this manner, driven as it has been by policy reasons, may ultimately have created more problems than the benefits achieved. While such policy reasons may be able to be rationalised, it has been suggested that if changes in the law are considered necessary for policy or other reasons then it is perhaps best that this be achieved by legislation.

With this in mind, the policy of the Uniform Commercial Code was to both recognise the validity of the floating lien — historically a contested point in the United States — ‘and then to cut [it] down to size in situations where its unlimited and unrestricted application might lead to undesirable or unjust results’: Gilmore, ‘The Purchase Money Priority’ (1963) 76 Harvard Law Review 1333 at 1334–6; see also Dixon Fuels Ltd v SWS Fuels Ltd (2011) 17 PPSAC (3d) 175; 84 CBR (5th) 206 (NSCA) at [41] per Fichaud JA; Unisource Canada Inc v Laurentian Bank of Canada (2000) 15 PPSAC (2d) 105; 15 CBR (4th) 315 at [10]. In the above article, Professor Gilmore made the following comments of the UCC (at 1334):

No previous security statute has so warmly embraced the once-despised after-acquired property interest. It is also true that no previous statute has so sternly insisted on the priority for purchase money interests.

These observations apply equally to the Australian Act. Indeed, the PPSA embraces the after-acquired property interest to such an extent that its dominance is even more marked, and more in need of curtailment, than at general law. This is because no special status is accorded to suppliers who retain title to property: by virtue of ss 12(1) and (3), the interests of such titleholders are classed as limited interests competitive with the interests of other secured parties, including chargees of all the debtor’s present and afteracquired property. Recasting the example above, suppose A takes an interest in all the grantor’s present and after-acquired property and registers a filing statement on Day 1: see generally s 18(2). B then supplies the grantor with new equipment under a conditional sale agreement, registers a filing statement on Day 3. Assuming both A and B’s interests are continuously perfected, A’s interest ranks ahead of B’s by virtue of its earlier registration time: ss 55(4), (5)(a); see 5.75. It is irrelevant that B retains title to the new equipment. The PPSA reverses this tipping of the scales by affording super-priority to purchase-money security interests (or ‘PMSIs’) provided the PMSI-holder observes [page 198] certain procedural requirements: see ss 62, 63. The PMSI super-priority rules ensure that ‘vendors remain prepared to sell inventory and equipment to a business which has granted a general security agreement, because the business is nevertheless able to grant priority to those vendors in relation to the goods which are the subject of the sale’: Re DCD Industries (1995) Ltd (2005) 7 PPSAC (3d) 251; 253 DLR (4th) 171 at [9]. Although these provisions are primarily directed to situations in which a grantor acquires stock-in-trade or other goods necessary to the running of its business, the collateral subject to the PMSI may in theory be tangible or intangible. Different procedural requirements apply in the event that the subject property is intangible: 5.43. In practice, intangible property will rarely

be the subject of a PMSI, and several categories are explicitly excluded: see 5.84; Northwestern National Bank Southwest v Lectro Systems Inc 262 NW 2d 678 (1977). Note that although much of the commentary surrounding purchase money security interests in the UCC refers to the recognition of the floating lien, the PPSA’s attachment provisions leave little room for the concept of a security interest that hovers over a circulating pool of assets and becomes fixed only on the happening of a crystallising event: see 5.35 and 5.116–118.

Definition of purchase money security interest (PMSI) 5.80 Although a purchase money security interest may generally be defined as an interest created by a transaction that enables the acquisition of new property by the grantor, the Act specifies four species of interest that answer this description. These may be referred to in a shorthand fashion as the seller’s PMSI, the lender’s PMSI, the lessor/ bailor’s PMSI and the consignor’s PMSI. It is immaterial that the parties have chosen, or not chosen, to label the security interest a ‘purchase money security interest’ in the security agreement. However, the financing statement must describe the interest as a purchase money security interest in order for the secured party to take advantage of the super-priority conferred by the Act: s 62(2)(c), (3)(c).

Seller’s PMSI 5.81 A purchase money security interest includes ‘a security interest taken in collateral, to the extent that it secures all or part of its purchase price’: s 14(1)(a). In this situation, the grantor would not have been able to acquire the new property without its supply by the PMSI-holder. A paradigm example of this ‘seller’s PMSI’ is provided by the security interest created through a sale on credit terms or pursuant to a conditional sale agreement. Recall that, although at general law the seller under a conditional sale ‘takes’ no new interest in the property supplied, merely retaining title, from the perspective of the PPSA the grantor has granted a new security interest in the seller’s favour, and the latter thus ‘takes’ a security interest in the collateral within s 14(1)(a).

What obligations constitute the ‘purchase price’ of collateral? It has been suggested that the concept should be construed broadly, in order to give effect to the legislative policy of facilitating commercial transactions: see Re Peaslee 13 NY 3d 75; 69 UCC Rep Serv 2d 315 (2009) at 81. The Australian Act expressly provides that credit charges and interest payable in relation to the purchase, or loan credit, do fall within the term: s 14(8). The Official Comment to UCC §9-103 provides that the ‘price’ of collateral (or ‘value given to enable’: see 5.84) ‘includes obligations for expenses incurred in connection with acquiring rights in the collateral, sales taxes, duties, finance charges, interest, freight charges, costs of storage in transit, demurrage, administrative charges, expenses of collection and enforcement, attorney’s fees and other similar obligations.’ In [page 199] Re Peaslee, Pigott J opined that, in light of this expansive definition, the concept of ‘price’ was broad enough to encompass negative equity financing. However, it appears that the term does not encompass costs associated with insurance or obtaining an extended warranty: Re White (2006) 352 BR 633. The reference to ‘purchase price’ appears to exclude the application of this limb to PPS leases and commercial consignments, which are separately provided for in any case: ss 14(1)(c), (d). The reference may also be somewhat inapt to describe payments made under hire-purchase agreements or financing leases, although there is no reason in principle why suppliers of new property under such arrangements should not enjoy the same benefits as suppliers under conditional sale agreements and the like. Where such arrangements run for a term of more than one year, they will fall within s 14(1)(c) in any case. Otherwise, a looser reading of ‘purchase price’ in s 14(1)(a), to include instalments of rent, may be justified. Sale and lease-back transactions are expressly exempted from the definition of a PMSI: see 5.84. This exclusion is understandable; such transactions have the same economic effect as if the grantor had borrowed money on the strength of an existing asset and the justification for PMSIstatus is accordingly missing.

Lender’s PMSI 5.82 A purchase money security interest also includes ‘a security interest taken in collateral by a person who gives value for the purpose of enabling the grantor to acquire rights in the collateral, to the extent that the value is applied to acquire those rights’: s 14(1)(b). Therefore, to establish a ‘lender’s PMSI’, three conditions must be satisfied: first, the lender must have a security interest in the collateral acquired; second, the secured party must have provided value to the grantor for the purpose of acquiring rights in the collateral; and third, the value must be so applied by the grantor in practice: see Agricultural Credit Corp of Saskatchewan v Pettyjohn (1991) 1 PPSAC (2d) 273; 79 DLR (4th) 22 (Saskatchewan Court of Appeal) at [38] per Sherstobitoff JA. The second of these conditions focuses attention on the timing of the loan and the acquisition. If the grantor acquires the relevant rights in the collateral prior to the loan agreement, it would not in most cases be possible to characterise the loan as being for the purpose of enabling the acquisition. Note that ‘value’ means consideration to support a contract and includes an antecedent debt or liability: s 10 (‘value’).Value given in the form of a binding loan agreement may be said to enable a subsequent acquisition by the grantor, notwithstanding the latter only receives funds later: see Pettyjohn, above; Thet Mah and Associates, Incv First Bank of North Dakota 336 N W 2d 134 (1983); 36 UCC Rep Serv 649 (1983) (Supreme Court of North Dakota) at 138. By contrast, if the loan agreement post-dates the acquisition, the secured party will have some difficulty demonstrating the requisite purpose. In North Platte State Bank v Production Credit Association of North Platte 200 NW 2d 1 (1972) (Supreme Court of Nebraska), Grantor granted a security interest in all his present and after-acquired property in favour of secured party A, including all livestock later acquired (whether by purchase, natural increase or otherwise). Later, Grantor agreed to purchase a herd of cows from Supplier on unsecured credit terms. Grantor obtained title to the cows on delivery: see generally Sale of Goods Act 1923 (NSW) s 23(5); cf UCC § 2-401(2). After delivery, Grantor obtained a loan from secured party B and used it to pay off Supplier. Both A and B had registered valid financing statements, A enjoying the earlier registration time. On Grantor’s default, B argued that, notwithstanding this, its security interest ranked ahead of A’s by virtue of its

PMSI status: see UCC § 9-107(b). This argument was rejected (at p 6), because although the loan from B enabled Grantor to pay the purchaser price to Supplier, ‘it was not used by [Grantor] to acquire any rights [page 200] in the cows because he already had all the possible rights in the cows he could have with both possession and title.’ Usually, then, the loan agreement must precede the acquisition in order to characterise the former as enabling the latter. However, this is not universally the case. In Agricultural Credit Corp of Saskatchewan v Pettyjohn (1991) 1 PPSAC (2d) 273; 79 DLR (4th) 22, the Grantor sought to finance the acquisition of two herds of cattle. They approached A, which issued letters approving two loans for the purpose. Grantor purchased both herds, in reliance on the letters, but before it received any funds from A, or executed any security agreement in favour of A. In the case of the first herd, Grantor bought the cattle on credit and then used A’s advance to pay off the supplier. In the case of the second herd, Grantor obtained interim finance and then used A’s advance to pay off the other financier. The Saskatchewan Court of Appeal held that, even there was no binding agreement to advance funds prior to Grantor’s acquisitions, this was not fatal to the PMSI status of A’s security interests in the herds of cattle. Sherstobitoff JA commented (at [52]): The purpose of the PPSA as a whole is to simplify commercial transactions and to make the law governing them accord with practical commercial realities. Analyzed [sic] in this light, the second requirement for a P.M.S.I, whether value was given for the purpose of enabling the debtor to acquire rights in the chattels, does not present a problem. The whole series of events leading up to the [two loans] and purchases leads inexorably to the conclusion that the purpose of [A] in giving value to [Grantor] was to enable them to acquire rights in the [two herds of] cattle. That is how the loan application and approval were structured, and was the understanding under which both [A] and [Grantor] operated. The fact that value was given after the purchase does not lead inevitably to the conclusion that its purpose was not to enable the purchase, and looking at the entire series of transactions it is clear that this was in fact its purpose.

Accordingly, if the ‘entire series of transactions’ shows that the purpose of the loan was to enable the acquisition of rights by the grantor, the fact that the giving of value post-dates the acquisition is not necessarily fatal to the existence of a lender’s PMSI.

It does not matter whether the grantor already has some rights in the collateral, provided the value provided by the secured party enables it to acquire new or further rights. The possibility of a lender’s PMSI is excluded only if the grantor already has ‘all possible rights’ in the collateral: Greyvest Leasing Inc v Canadian Imperial Bank of Commerce (1991) 1 PPSAC (2d) 264 (Ont Gen Div) per Gotlib J at 269; North Platte, above, at 6. In Unisource Canada Inc v Laurentian Bank of Canada (2000) 15 PPSAC (2d) 105; 15 CBR (4th) 315, Grantor acquired a printing press and then entered into a sale and lease-back arrangement with X, with an option to purchase at the end of the term. X registered a valid financing statement with respect to its security interest in the press (which, as a sale and lease-back, would be exempt from the definition of a PMSI: see 5.84). Grantor later granted a security interest over all its assets in favour of Y, who also registered a valid financing statement. Z then stepped in to refinance the press, paying the outstanding amount due to X in return for Grantor executing a general security agreement in its favour. Critically, title to the press passed to the Grantor. Z then registered a valid financing statement. Had the default rules applied, Y’s security interest would have ranked ahead of Z’s by virtue of its earlier registration time: see ss 55(4), (5)(a); 5.75. However, C argued that its interest had super-priority as a lender’s PMSI. This was rejected at first instance, with the motions judge being of the opinion that ‘given the existing lease/option to purchase arrangement with [X], the acquisition of title by [Grantor] amounted to a distinction without a difference’ (at [10]). The Ontario Court of Appeal disagreed. Allowing such a refinancing arrangement PMSI status was ‘consonant with sound commercial policy’ because (at [13]): [i]f a difference between a lease/option arrangement and the acquisition of title is recognized [sic], it will be easier for the debtor to enter into a new financing arrangement to acquire further

[page 201] rights in collateral without the cooperation of the original lender being required. The debtor and its business will benefit. The proposed interpretation also accords with the original expectations of the parties in this case that the security interest granted to [Y] would rank second in priority. It would be unfair for [Y] to have added to the pool of its security the printing press purchased with funds from [Z]. To hold as the motions judge did results in [Y] receiving a windfall.

Clearly this is one area where, despite the functionalist thrust of the PPSA, the form of a given security agreement is still relevant; cf 5.26 (Characterisation of the PPSA security interest). The definition of a lender’s PMSI requires not only that funds be advanced in order to acquire new rights, but also that the grantor actually use the funds to acquire such rights. There is a risk, if the lender advances the funds to the grantor instead of paying the supplier directly, that the grantor will use an alternate source of funds to acquire the rights — before or after it receives the funds from the lender. Here, the analysis in Pettyjohn again affords some leeway (at [53]): The third requirement, that the value have been used to acquire such rights, presents greater difficulties. How can it be said that the moneys advanced were used to acquire rights when the purchase had already taken place and the rights already acquired? It is, however, commercially unreasonable to divide the transactions so minutely. The [Grantor] used the value given to them to pay off interim financing, but the interim financing had not been obtained as a separate transaction, but always with the view that it would be repaid through the moneys advanced by [A]. The [Grantor] used the value given as part of a larger, commercially reasonable transaction to acquire rights in [the two herds of] cattle. The fact that the use of the value given was, due to the nature of the transaction, after the acquisition of rights does not alter the conclusion that the value given was used to acquire those rights.

It is easy to imagine a situation in which Grantor receives loan funds from multiple sources into the one account, causing difficulties where one lender asserts that its funds were used to acquire new rights. The rules in s 14(6), outlined below at 5.85, may have some application in such a case. In Re Peaslee 13 NY 3d 75 (2009); 69 UCC Rep Serv 2d 315 (2009), a number of secured parties financed the purchase of new motor vehicles by various debtors. In each case, a portion of the loan was directed to paying off the negative equity payable by the given grantor to the seller on the trade-in of his or her previous vehicle. The New York Court of Appeals held that paying off the outstanding debt in respect of the old vehicle amounted to giving value for the purpose of enable the grantor to acquire rights in the new vehicle.

Lessor or bailor’s PMSI and consignor’s PMSI 5.83 The interest of a lessor or bailor of goods under a PPS lease, and that of a consignor under a commercial consignment, are defined as PMSIs by their very nature, without the need for the lessor, bailor or consignor to

demonstrate that the transaction enables the acquisition of new rights by the lessee or bailee: s 14(1)(c), (d). The possession obtained by the lessee, bailee or consignee will often be essential to the running of its business. Again, it is in the interest of all parties that such lessors or bailors remain willing, in light of their relegation under the PPSA to the status of secured creditor, to give possession of equipment and the like to grantors who have previously executed a security agreement covering all their property, including after-acquired property.

Exemptions: s 14(2), (2A) 5.84 Three classes of transaction are incapable of giving rise to a PMSI under the Act. The first are transactions that give rise to an interest in the following kinds of property as original collateral: chattel paper; investment instruments; intermediated securities; monetary obligations or negotiable instruments: s 14(2)(b). Special priority [page 202] rules already operate in relation to security interests in these kinds of property. Their exclusion means that only interests in the following kinds of collateral will fall within the PMSI super-priority rules: goods; documents of title; and intangible property other than ‘monetary obligations’, or accounts: see above 5.79 (Super-priority: the purchase money security interest (PMSI)). The second class of excluded transaction is the sale and lease-back arrangement: s 14(2)(a). Such arrangements, pursuant to which the grantor sells property to the secured party, who in turn leases it back to the grantor, may technically fulfil the requirements of s 14(1) without adding in substance to the grantor’s pool of assets. These arrangements do not further the purpose behind PMSI super-priority. Quaere whether sale and resale arrangements (under which the grantor sells existing property to the secured party, who in turn resells the property to the grantor on credit terms) should be excluded from PMSI super-priority on the same basis notwithstanding no mention is made of such arrangements in s 14(2)(a): see Duggan and Brown, above, p 165 [8.11]; Cuming, Walsh and Wood, above, p 331 and the cases there

cited. The final class of excluded transactions may loosely be described as transactions involving consumer goods that are not serial-numbered goods. Specifically, security interests in goods that, at the time of attachment, the grantor intends to use predominantly for personal, domestic or household purposes are prima facie excluded from PMSI status: s 14(2)(c); see 5.9–5.10. However, such a security interest may achieve PMSI status if the goods are of a kind required or permitted by the regulations to be described by serial number: s 14(2A); see 5.94 for a list of serial-numbered goods. This may be justified on the basis that consumer goods are generally of insubstantial value to the creditor ‘except as a means of coercing payment by threatening repossession’ and, accordingly, there is no justification for affording such creditors super-priority: see In re Coomer 8 BR 351 (1980) at 354. It has been suggested that the purpose of the carve-out with respect to serial numbered goods may be to facilitate the financing of motor vehicles (perhaps to a lesser extent, watercraft and aircraft): Duggan and Brown, above, p 166 [8.12].

Mixed PMSIs 5.85 The PPSA contains specific rules to deal with the refinancing of PMSI-financed acquisitions, and also what it calls ‘mixed securities’. The latter rules cover two situations: first, where a security interest in purchased collateral secures other obligations in addition to a purchase-money obligation; and, second, where the purchase-money obligation that is secured by a security interest in the purchased collateral is also secured by other collateral. A security interest in purchased collateral does not lose its PMSI status merely because it secures other obligations of the grantor in addition to the purchase-money obligation. Rather, its PMSI status is preserved to the extent of the purchase-money obligation and, after that point, it is treated as a regular security interest: s 14(3). Suppose that A sells goods to Grantor under a conditional sale agreement, which provides that A retains title to the goods until Grantor pays both the purchase price of $ 100 and discharges all other obligations owing to A, totalling $ 500. Here, A has a security interest in the goods that is treated as a PMSI to the extent of $ 100, and as an ordinary security interest thereafter.

Section 14(3) is closely analogous to UCC § 9-103(f)(1) (2000 revision), which provides that ‘in a transaction other than a consumer goods transaction, a purchase-money security interest does not lose its status as such, even if … the purchase-money collateral also secures an obligation that is not a purchase-money obligation.’ Under the 1972 revision of the Code, there was some controversy between American courts as to the effect of ‘all liabilities’ clauses on the PMSI status of a security interest. Some courts followed a ‘transformation’ rule, pursuant to which the addition of [page 203] non-purchase money obligations destroyed PMSI status absolutely: see, for example, Re Matthews 724 F 2d 798 (1984). The concern was to avoid secured parties taking advantage of the benefits of PMSI-status by ‘overloading’ the purchased collateral with other obligations: Re Ford 574 F 3d 1279 (2009) (Kansas Court of Appeal) at 1288; Re Simpson 4 UCC Rep Serv 243. Other courts followed a ‘dual status’ rule, pursuant to which a security interest was treated as a PMSI to the extent it secured a purchase money obligations, and not otherwise: Re Freeman 956 F 2d 252 (1992) at 254–5; Re Conn 16 BR 454 at 457. The 2000 revision makes clear that the ‘dual status’ rule is to be adopted, at least in respect of transactions not involving consumer goods. However, certain American states apply the rule to all secured transactions: see In re Ford, above. Section 14(3) follows the lead of the 2000 revision and enacts a ‘dual status’ rule. No distinction is drawn between transactions involving consumer versus non-consumer goods, although transactions involving consumer goods other than serial-numbered goods are excluded from PMSI status in any case by s 14(2)(c). The adoption of a ‘dual status’ rule requires some method for determining the order in which payments made in relation to the purchased collateral are to be allocated to the various obligations that it secures: Re Coomer 8 BR 351 (1980) at 353–4; cf Re Conn, above, at 458–9. To this end, the PPSA contains specific rules governing the order in which payments to a secured party are to be applied to the various obligations secured by the purchased collateral: s 14(6); see UCC § 9-103(e) (2000 revision). Section 14(6)

provides that ‘if the extent to which a security interest is a purchase money security interest depends on the application of a payment to a particular obligation’ the payment must be applied in accordance with any method of application to which the parties agree: s 14(6)(a); cf § 9-103(e)(1) (referring to any ‘reasonable’ method). In the absence of this, payments are applied according to any intention of the ‘debtor’ manifested at or before the payment was made: s 14(6)(b). In the absence of either agreement or intention, the payments are applied as follows: first, to any unsecured obligations; secondly, to the non-PMSI obligations in the order in which they were incurred; and finally, to the PMSI obligations in the order in which they were incurred: s 14(6)(c). Suppose that Grantor purchases equipment from A subject to a conditional sale agreement that provides that A retains title to the equipment until its purchase price of $6000 is paid and ‘all present and future liabilities’ are discharged. Grantor borrows a further $4000 from A to meet the day-to-day costs of business. Grantor later repays $3000 to A. Here, A enjoys a PMSI to the extent of $6000: s 14(3). In the absence of agreement between Grantor and A, or any intention manifested at the time of paying the $3000, that payment will first be applied to the non-PMSI obligation: s 14(6). That is, of the remaining $7000 owing to A, $6000 will be treated as secured by a PMSI, and $1000 will be treated as secured by a regular security interest. A security interest does not lose its PMSI status merely because the purchase-money obligation is secured by other collateral in addition to the purchased collateral: s 14(4); see UCC § 9-103(f)(2). However, its PMSI status is again preserved only with respect to the purchased collateral; with respect to the other collateral, the secured party’s interest is treated as a regular security interest.

Refinancing 5.86 A PMSI does not lose its status as such merely because the purchase money obligation is renewed, refinanced, consolidated or restructured: s 14(5); see UCC § 9-103(f)(3). This provision prevents an argument that such factors per se destroy ‘the purchase money character of the original loan because the proceeds of the new loan are not used to acquire rights in the collateral’: cf Re Matthews 724 F 2d 798 (1984). Interestingly, the rule applies whether or not the party doing the refinancing is the

[page 204] original lender or a second lender: s 14(5). Compare the reasoning of the Bankruptcy Court of Kentucky in Re Conn, above, at 459–60: … a refinancing loan results in the cancellation of one note and the replacement of it with another. The outstanding balance on the first note is, on paper at least, paid off with funds from the second note. At least one court … has held … that terminating the initial loan also results in the termination of the purchase money security interest taken under it. Once terminated, the purchase money security interest cannot be revived. The refinancing is disqualified from treatment as a purchase money loan because it is made not to enable the creditor to acquire rights in the collateral, but it is used instead to pay an antecedent debt. [This] result ignores, however, the substance of the refinancing transaction. Though in form the original note is cancelled, its balance is absorbed into the refinancing loan. To the extent of that balance, the purchase money security interest taken under the original note likewise survives, because what is owed on the original note is not eliminated, it is merely transferred to, and increased in amount by, another obligation. The refinancing changes the character neither of the balance due under the first loan nor the security interest taken under it. For that reason, the effect of refinancing on a security interest is not, as the court in In re Mulcahy [3 BR 454], the same as if a debtor borrowed money from a third party to pay off a secured debt. Mulcahy reasoned that a creditor’s security interest does not survive refinancing because the creditor merely ‘(transfers) money from its right pocket to its left’. We find the transfer from one pocket to another to be wholly permissible, so long as both pocket belong to the same creditor. (footnotes omitted)

In some refinancing transactions, the grantor may in fact obtain further rights than those acquired thanks to the original loan: see Unisource Canada Inc v Laurentian Bank of Canada, above. Outside such cases, it is difficult to see how a third party who refinances a purchase-money obligation can be said to enable the acquisition of ‘new rights’ within s 14(1)(b). Third parties who refinance purchase-money obligations may also find it difficult to surmount the procedural requirements necessary to secure super-priority; see below.

PMSI versus non-PMSI 5.87 Section 62 sets out the circumstances in which a PMSI will rank ahead of a non-PMSI in the same collateral, and what happens where there are multiple PMSIs in the same collateral. It must be emphasised that PMSIstatus alone is insufficient to gain super-priority: the secured party must also meet certain procedural requirements, which vary according to the type of personal property in question. In all cases, the PMSI(s) must be perfected;

otherwise, the default rules apply: see 5.70 (Default priority rules). Dealing first with conflicts between a perfected PMSI and a perfected nonPMSI, the PMSI must be perfected by registration in order to secure superpriority, and the registered financing statement must describe the security interest as a PMSI (in accordance with item 7 of the table in s 153): s 62(2) (c), (3)(c). The PMSI-holder must achieve this within a certain time frame, the length of which depends on the personal property involved: for interests in goods which are part of the grantor’s inventory, the interest must be perfected by registration at the time the grantor, or someone on the grantor’s behalf, obtains possession (s 62(2)(b)(i)); for interests in goods which are not part of the grantor’s inventory, the interest must be perfected by registration before the end of 15 days after the grantor, or someone on the grantor’s behalf, obtains possession (s 62(3)(b)(i)); for interests in intangibles which are part of the grantor’s inventory, the interest must be perfected by registration at the time the interest attaches to the collateral (s 62(2)(b)(ii)); for interest in intangibles which are not part of the grantor’s inventory, the interest must be perfected by registration before the end of 15 days after the grantor, or someone on the grantor’s behalf, obtains possession (s 62(3)(b)(ii)). [page 205] In the list above, ‘intangibles’ refers not only to the residual category of ‘intangibles’ under the PPSA’s classification of property, but to all forms of personal property that are not goods: see 5.9–5.10. The times listed above may be termed the ‘triggering event’: Citizens Bank of Americus v Federal Financial Services, Inc 235 Ga App 482 (1998) at 482 per Beasley J. For goods, the triggering event will be the obtaining of possession by the grantor or someone else on the grantor’s behalf. For non-goods, the triggering event is the attachment of the PMSI to the collateral. Understandably, a shorter grace period — rather, no grace period — is afforded with respect to personal

property that is part of the grantor’s inventory. Thus a secured party with a PMSI in inventory of the grantor must ensure that its interest is perfected by registration at the time of the triggering event, and no later. By contrast, a secured party with a PMSI in collateral that is not part of the grantor’s inventory has 15 business days from the time of the triggering event to perfect its interest by registration. Like many other provisions of the Act, the procedural requirements in ss 62 and 63 serve a publicity or notification function. The super-priority afforded to PMSIs is an exception to the default priority rules governing disputes between perfected security interests. Where both security interests have been perfected by registration, the interest with the earlier registration time would ordinarily have priority: s 55(4), (5)(a); 5.70 (Default priority rules). A secured party examining the register will assume that its interest ranks ahead of other interests with a later registration time. It may make further advances to the grantor on that basis. In light of this, it is critical that the PMSI-status of subsequent security interests be notified on the register, so that other secured parties can better assess what interests rank ahead of their own, and adjust their dealings with the grantor accordingly: see Guaranty State Bank & Trust Co v Van Diest Supply Company 30 Kan App 2d 1108 (2002) at 1115. In First National Bank of Steeleville, NA v Erb Equipment Co, Inc 921 S W 2d 57 (1996), the court commented at 63: [T]he treatment of purchase money security interests is an exception and as an exception the interest claiming that status must clearly appear to meet the requirements imposed.

If the triggering event is the time of attachment, and reference may be had to other provisions in the Act to determine when this occurs: see s 19; 5.28 (Attachment). It will be more difficult to determine when, both factually and legally, the grantor (or another at the grantor’s request) receives possession within s 62(2)(b)(i) and (3)(b)(i). In Citizens Bank of Americus, above, Beasley J commented that ‘several variables must be considered’ when analysing the when this ‘time-triggering event’ occurs (at 484): Identification must be made of the parties and their roles, the legal relationship of the parties insofar as the transaction or transactions is concerned, and the whereabouts of the collateral … The purchaser may gain possession before, at, or after the sale and before, at, or after it becomes obligated for the purchase money loan. The lender of the purchase money may lend the purchase money before, at, or after its debtor acquires possession of the property.

With respect, this is good advice. In Citizens Bank of Americus, the

relevant triggering event was ‘the time the debtor receives possession of the collateral or within 15 days thereafter’ (now extended to 20 days under UCC § 9-324(a)). This was held (at 486) to mean that the ‘running of the grace period [was not] triggered before the debtor owed performance of the secured obligation’; that is, the debtor had to possess the collateral as debtor. Simplifying the facts of that case, on Day 1 Grantor began negotiations to purchase a ‘logging skidder’ from A. On Day 5, A delivered the skidder to Grantor purely for demonstration purposes. On Day 10, Grantor decided to purchase the skidder and used funds advanced for this purpose by B, who took a PMSI in the skidder. B filed a valid financing statement with respect to the skidder on Day 21. The Court of Appeals of Georgia held that B, although it had filed its statement over 15 days after Grantor actually received possession of the collateral, it had complied with [page 206] the procedural requirements for super-priority. This was because its initial possession on Day 5 was for a specific purpose and in the capacity of bailee. On Day 10, the Grantor went from bailee to purchaser and thereby incurred the purchase-money debt: it was on this day that ‘the two factors (indebtedness for purchase price and possession) first coincided’ (at 484). Accordingly, B had 15 days from Day 10 in which to register a valid financing statement. For similar sale-on-approval cases, see Brodie Hotel Supply v United States 431 F 2d 1316 (9th Cir) (1970); Re Ultra Precision Industries 503 F 2d 414 (9th Cir) (1974); Re Miller 44 BR 716 (1984) (Bankruptcy Court of Ohio); Re Hooks 40 BR 715 (1984); Re Prior Bros 29 Wash App 905 (1981); cf North Platte, above; Re Automated Bookbinding Services 471 F 2d 546 (4th Cir 1972); James Talcott Inc v Associated Capital Company 491 F 2d 879 (6th Cir) (1974); Re Ivie & Associates Inc 84 BR 882 (1988); see generally Color Leasing 3 v Federal Deposit Insurance Corporation 975 F Supp 177 (DRI) (1977) at 185; cf Cornman, ‘When is a Debtor “In Possession” Under UCC § 9-312(4)?’(1987) 19 Ariz St LJ 261. In any case, the critical factor is the coincidence of the purchase-money obligation and possession. It seems that the purchase-money obligation need

not be owed to the PMSI-holder; it may be owed to the original supplier or an interim financier, for example, and time will still start to run. Quaere whether the obligation must not only relate to the property purchased, but also be secured by the property: Citizens Bank of Americus and similar cases suggest so, but the facts of North Platte, where the initial purchase obligation was unsecured, suggest otherwise. For the meaning of ‘possession’ in this context, see Guaranty Trust Co of Canada v Canadian Imperial Bank of Commerce [1989] OJ No 1081 (Ont HC); appeal dismissed [1993] OJ No 2152 (Ont CA); Dixon Fuels Ltd v SWS Fuels Ltd (2011) 17 PPSAC (3d) 175; 84 CBR (5th) 206 at [37]–[38]; Cuming, Walsh and Wood, above, p 340; see also 5.40. In Dixon, it was remarked (at [41]) that: The Legislature has not conditioned the PMSI’s super-priority on the date the debtor ‘first possesses collateral as a debtor to each new creditor, despite that the debtor earlier had obtained his possession of this collateral as a debtor with another creditor. Whether s 35(1)(a) should embody that language is a policy choice for the Legislature.

Note that a special priority rule applies in relation to disputes between PMSIs and non-PMSIs where the collateral is an account: see s 64.

Lender’s PMSI versus non-lender’s PMSI 5.88 The PMSI of a lender ranks behind any other PMSI in the same collateral, where both are perfected and certain procedural requirements are met by the non-lender: s 63. The procedural requirements resemble those upon which the super-priority of a PMSI over non-PMSIs is preconditioned. However, while a PMSI must be perfected by a registration that complies with s 153 of the Act in order to achieve super-priority under s 62, under s 63 the interest need only be perfected by the applicable deadline. The deadlines are as follows: for interests in goods which are part of the grantor’s inventory, the interest must be perfected at the time the grantor, or someone on the grantor’s behalf, obtains possession (s 63(a)); for interests in goods which are not part of the grantor’s inventory, the interest must be perfected before the end of 15 days after the grantor, or someone on the grantor’s behalf, obtains possession (s 63(c)); for interests in intangibles which are part of the grantor’s inventory, the interest must be perfected at the time the interest attaches to the collateral

(s 63(b)); for interest in intangibles which are not part of the grantor’s inventory, the interest must be perfected before the end of 15 days after the grantor, or someone on the grantor’s behalf, obtains possession (s 63(d)). [page 207] Klebuc J of the Saskatchewan Court of Queen’s Bench discussed the rationale for this provision in Royal Bank v Russell Food Equipment Ltd (2001) 28 CBR (4th) 111; 211 Sask R 81 at [12]–[14]: In my view, the priority between the two purchase-money security interests is governed by s 34(5) [the equivalent to s 63] of the PPSA … Ronald C C Cuming and Roderick J Wood in Saskatchewan and Manitoba Personal Property Securities Handbook (Toronto: Carswell, 1994) at pp. 270–71 illustrated how s. 34(5) operates by means of the following example: (1) D, wanting to buy an automobile, obtains a loan from a bank (SP1) sufficient for the down payment and obtains credit from the seller (SP2) for the balance of the purchase price. If D gives to both SP1 and SP2 a security interest in the automobile, each has a purchase-money security interest in the automobile since each has supplied value to enable D to acquire rights in it. At p. 271 they concluded that s 34(5) gives priority to the seller secured party over the lender secured party when both have purchase-money security interests, and further noted: … This special priority rule reflects the pre-PPSA law and commercial practice. Under pre-PPSA law, SP2 (generally a seller under a conditional sales contract) retained title to the goods until the full purchase price and credit charge were paid. Consequently, SP2 could never have lost priority to someone who held a chattel mortgage on the goods, even though the mortgage may have been executed before the date of the sales contract. The mortgage could only obtain the status of an equitable mortgage on the interest of a buyer in possession under a conditional sales contract. SP2 had priority because he held legal title. In my view, the analysis of Cuming and Wood of the operational effect of s 34(5) is correct and applies in the instant case.

In the event of a conflict between two PMSIs, neither or which is a lender’s PMSI, or both of which are lender’s PMSIs, the default priority rules apply.

D. Super-priority: control 5.89 The priority rules that follow override any other applicable priority rule, giving rise to the expression ‘control trumps all’: s 57(3). The control rules apply exclusively where there is a dispute between two perfected security interests, one or both of which are perfected by control. Where there is a dispute between a security interest perfected by control, and one which is unperfected, then the default rules apply: s 55(3) and see 5.70 (Default priority rules). A security interest currently perfected by control takes priority over a security interest in the same collateral that is perfected by other means: s 57(1). It is difficult to imagine when such a conflict would arise, given the steps that must be taken by the secured party in order to achieve control: see 5.54–5.58. Nevertheless, the Act provides a rule to resolve such a dispute. So, where there are two security interests in the same collateral currently perfected by control, they rank in the order in which they were perfected by control, provided this status has been continuous: s 57(2). Note that the relevant time is not the time from which each interest is continuously perfected, as under the default priority rules, but the time from which each interest is continuously perfected by control. Presumably, regard should be had to the definition of continuous perfection contained in s 56, although it makes no mention of control.

E. Special priority rules and miscellaneous provisions 5.90 In addition to the three main regimes outlined above, Pt 2.6 of the Act contains special priority rules dealing with: [page 208] the priority of security interests in transferred collateral (Div 4, ss 66–68); the priority of creditors and purchasers of negotiable instruments, chattel

paper and negotiable documents of title (Div 5, ss 69–72); and the priority of ‘other interests’, including ‘declared’ security interests, security interests in returned goods and security interests for which there is no foreign register, as well as the security interests of ADIs and the interests of execution creditors (Div 6, ss 73–77). Regard should be had to these specific rules to check whether they apply to the situation at hand, before proceeding by reference to the core priority regimes. The Act also contains a miscellany of rules that supplement the main priority provisions outlined above. Out of this assortment, four provisions in particular warrant mention. The first is s 61, which deals with subordination agreements and is discussed in more detail below. The second is s 58, which states that a security interest provided for by a security agreement has the same priority with respect to all advances (including future advances) and the performance of all obligations secured by the agreement. The third complements s 32(1), which provides that a security interest in collateral, which has been the subject of a dealing that gives rise to proceeds, attaches to the proceeds. Section 32(5) provides that for the purpose of the default priority rules, the time of registration, possession or perfection in relation to the proceeds is the same as for the original collateral. The fourth is s 60, which provides that a security interest that is transferred from one secured party to another has the same priority immediately after the transfer as it did immediately beforehand.

Subordination agreements 5.91 Despite the above priority rules, secured parties may by agreement alter the outcome of priority disputes between themselves. Section 61 provides: (1) A secured party may (in a security agreement or otherwise) subordinate the secured party’s security interest in collateral to any other interest in the collateral. (2) The subordination: (a) is effective according to its terms between the parties; and (b) may be enforced by a third party if the third party is the person, or one of a class of persons, for whose benefit the subordination is intended.

In Gibbston Downs Wines Ltd v Perpetual Trust Ltd [2012] NZHC 1022; [2012] 2 NZLR 574, Chisholm J commented (at [24]): While subordinations by agreement are recognised by [the equivalent to s 61] of the PPSA, they are not governed by it. Registration to disclose the existence of a subordination agreement is not mandatory, and failure to register does not have any effect on the validity of the subordination agreement. Nor does registration of the subordination notice override the contractual arrangements between the parties.

In that case, a financing statement recorded that one secured party had subordinated its interest to another. The first secured party argued that the subordination ceased to be effective when the financing statement became ineffective on its specified end date. Chisholm J rejected this in the absence of any evidence that the parties intended their subordination agreement to expire at the same time as the financing statement. Subsection (2)(b) is an important exception to the doctrine of privity. As Everett and McCracken point out, the challenge facing parties seeking to take advantage of s 61 is to properly identify the class of creditors who are the intended beneficiaries of the subordination clause: Everett and McCracken, above, p 525 [13.360]; see also Transamerica Commercial Finance Corp, Canada v Imperial TV & Stereo Centre Ltd (Receiver of) (1993) 146 AR 31. It will also be important to distinguish clauses that intend to subordinate [page 209] the interest of the secured party from those which merely permit the grantor to grant other interests in the collateral: see Chiips Inc v Skyview Hotels Ltd (1994) 155 AR 281; Euroclean Canada Inc v Forest Glade Investments Ltd (1985) 16 DLR (4th) 289; Sperry Inc v Canadian Imperial Bank of Commerce (1985) 50 OR (2d) 267; Canadian Imperial Bank of Commerce v International Harvester Credit Corp of Canada (1986) 6 PPSAC 273. It may be possible to prove a subordination in fact without the existence of a specific subordination agreement: Greyvest Leasing Inc v Canadian Imperial Bank of Commerce (1993) 5 PPSAC (2d) 187; Royal Bank v Tenneco Canada Inc (1990) 72 OR (2d) 60.

VI Loss of security interest 5.92 What follows is a discussion of the circumstances in which a secured party’s security interest may be postponed vis-à-vis other secured creditors or third parties, or be extinguished altogether, irrespective of whether the secured party has taken all the steps required by the Act to protect its security interest.

A. Accessions and commingling 5.93 Parts 3.3 and 3.4 of the PPSA deal with ‘accessions’ and ‘commingling’, two words familiar to common law lawyers. Despite the terminology, the provisions do not draw on the common law in any meaningful fashion. Rather, they provide rules dealing with security interests in goods that have been affixed to other goods, but which can be separated, and security interests in goods that have become part of a product or mass so as to lose their separate identity: see generally Everett and McCracken, above, pp 526–9 [13.370]. These rules stipulate when and to what extent a security interest in the original goods will continue in the accession, or the product or mass. Although the Act uses the language of ‘priority’, the situations dealt with in Pts 3.3 and 3.4 are not strictly priority disputes. The interest of a person in the original goods and the interest of another person over the whole of the goods, or the mass, compete in relation to overlapping but distinct property. This said, given the rules determine the ranking of interests in a broad sense, the use of the term ‘priority’ is understandable. The interaction between these rules and the PPSA priority rules is discussed below. The Australian provisions relating to accessions and commingling are identical to those found in the NZPPSA, almost identical to those found in the Sask PPSA, BC PPSA, Man PPSA, and Alb PPSA, and similar to those found in the Ont PPSA. Key differences will be noted as they become relevant. The Uniform Commercial Code is somewhat in a league of its own in this area, although it does deal with accessions and commingling and at one point contained a definition of accession identical to the definition in the Australian Act.

These provisions, although broad in scope, do not appear to be intended to completely oust the common law as to accessions and commingling: see generally s 254(1)(c) and 5.12. A contrary indication might be furnished by the Guide to Pt 3.3 (Accessions), which states that the Part ‘sets out the priority between an interest (whether or not a security interest) in an accession and the goods to which the accession is affixed’ (emphasis added): s 87. However, the detailed provisions protect only security interests in accessions: see, for example, ss 88, 89. Similarly, both the Guide and the detailed provisions of Pt 3.4 (Commingling) are expressed to apply only to security interests in goods that become part of a product or mass: see s 98. Accordingly, it appears that the common law will continue to apply where the interest in the original goods the subject of accession or commingling is not a security interest: see Bancorp Leasing and Financial Corp v Stadeli Pump &Construction Inc 303 Or 545, 739 P 2d 548 (1987) at 551. [page 210]

Accessions 5.94 The common law doctrine of accession determines when and whether one chattel has become so attached to another that the property in it is lost: see Appleby v Myers (1867) LR 2 CP 651 at 659–60. The previous owner may be entitled to compensation, but has no ability to repossess or demand a return of the chattel in specie: McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303 at 309; Thomas v Robinson [1977] 1 NZLR 385 at 392. Given this dramatic outcome, the doctrine applies only where practically necessary: Sims v SPM Business Consultants Pty Ltd (2002) 43 ACSR 633 at 645–6; National Bus Co Ltd v FCT (1998) 98 ATC 4170 at 4174. In applying the doctrine, two things must be ascertained: first, whether or not accession has occurred; and second, which is the minor chattel that has lost its identity in a larger whole. Various tests have been used to determine the former issue. These include: the test of ‘injurious removal’, which asks whether the chattels can be separated without serious damage; the test of ‘separate existence’, which asks whether a chattel has been so incorporated into the whole that it has lost any

separate identity; the test of ‘destruction of utility’, which asks whether the chattel if separated from the whole would thereby lose its commercial utility; and the test of ‘the degree and purpose of annexation’, which, analogously to the law of fixtures, looks to the degree of annexation, the nature of the chattel, and the intention of the parties: Thomas v Robinson [1977] 1 NZLR 385 at 389–90 (Speight J); Guest, ‘Accession and confusion in the law of hire-purchase’ (1964) 27 Mod L Rev 505. The test of ‘injurious removal’ has gained the greatest currency in Australia: see Sims v SPM Business Consultants, above, at 645–6; Rendell v Associated Finance Pty Ltd [1957] VR 604 at 607; McKeown v Cavalier Yachts Pty Ltd, above, at 311. In deciding which is the minor chattel and which is the dominant chattel, the courts have regard to the manner in which the chattels were attached to each other as well as their relative worth, although this latter factor may not be determinative: McKeown v Cavalier Yachts Pty Ltd, above, at 311–12. The application of these tests has occasionally been tempered by considerations of justice and the relative position of the owners of the dominant and minor chattels: see Thomas v Robinson, above, at 930, McKeown v Cavalier Yachts, above, at 309; Cuming, Walsh and Wood, above, pp 499–00. The concept of ‘accession’ under the PPSA is markedly different. An ‘accession’ is defined under the Act as ‘goods that are installed in, or affixed to, other goods’: s 10. However, goods will not amount to an accession if they, and the goods to which they are affixed, are both required or permitted to be described by serial number under the Regulations: s 10. At the time of writing such goods include: motor vehicles, watercraft, and aircraft (including helicopters and aircraft engines): Personal Property Securities Regulations 2010 (Cth) r 1.6 and Sch 1 Pt 2.2. Accordingly, an engine installed in a motor vehicle would appear to be an accession under the Act, while an engine installed in an aeroplane is not: see Replacement Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) p 54 [3.9]. The Act sets a much lower threshold than the common law doctrine, and encompasses many situations that would not be regarded as cases of accession at general law. Indeed, the provisions dealing with ‘accessions’ under the Act are premised on the ability to remove the accession without destroying it or the principal good. If goods are so attached to one another that removal is impracticable, the Act’s commingling rules are likely to apply instead: see Cuming, Walsh and Wood, above, p 500; Kulchyski v Shuswap

Ventures Corp (1994) 7 PPSAC (2d) 216. In light of this, statements to the effect that the Act ‘reverses the common law principle that under certain circumstances goods that are attached to other goods lose their separate identity and become part of the gods to which they are attached’ (see Kulchyski [page 211] v Shuswap Ventures Corp (1994) 7 PPSAC (2d) 216 at [17]) seem somewhat misleading. True, the Act provides that a security interest in goods which become an accession continues in the accession, whereas at common law the property in goods the subject of accession is extinguished: see s 88 and 5.94. Yet the statutory concept of accession and the common law concept may be like ships in the night, and the Act will only alter the outcome that would have prevailed under the common law doctrine where they meet. Indeed, the position of secured parties with interests in goods may be slightly worse under the Act than at common law. If the doctrine of accession did not apply, a secured party with title to goods (for example, under a conditional sale) could seek their return in specie. Under the PPSA, the interest of the secured party in the goods will be subject to other interests in certain circumstances: see 5.94. It should be noted that a somewhat different analysis to the above prevailed in certain American states prior to the 2000 revision of UCC Article 9. Under the 1972 revision, an accession was defined simply as goods that were ‘installed in or affixed to other goods’. The question of whether goods had become an accession was considered a matter for local pre-Code law, because the Code did not indicate ‘the degree to which one chattel must be affixed to another in order to constitute an accession’: Mixon v Georgia Bank & Trust Company 154 Ga App 32 at 33 (1980), 267 S E 2d 483 at 484. In Mixon, the court took the common law test as a guide in determining the degree of affixation necessary: see also Stratton Industries Inc v Northwest Georgia Bank 191 Ga App 683 at 688, 832 S E 2d 721 (1989) at 726; State of New Mexico v Woodward 100 NM 708 at 712–3, 675 P 2d 1007 (1983) at 1011–2. Under the common law test so formulated, the chattel had to be an integral part of the greater whole so as to constitute ‘one and the same thing’,

although this language did not ‘need [to] be taken literally’: see Mixon, above, and Passieu v BF Goodrich Co 58 Ga App 691, 199 SE 775 (1938). Under the 2000 revision, an accession is defined as goods that are ‘physically united with other goods in such a manner that the identity of the original goods is not lost’: UCC § 9-102(a)(1). Notwithstanding the above, it is reasonably clear that the Act adopts a lower threshold for accession than that prevailing under the Australian common law. However, it is unclear just how low the threshold is. The impetus for a restricted definition deriving from the extinguishing effect of the common law doctrine is gone. It has been suggested that goods will not be considered an accession within the Act if their attachment is ‘so slight and temporary’ that neither can be said to be affixed to or installed in the other, as is the case, for example, with the joining of a television to a DVD player via a cable: Cuming, Walsh and Wood, p 500. Consistently with the removal provisions (see below), The decided cases under other PPSAs provide some clues. In GMAC Leaseco Ltd v Tomax Credit Corp (2001) 3 PPSAC (3d) 15, Cameron J construed the word ‘repair’ under the Repair and Storage Liens Act, RSO 1990 c R 25 (Ont) by reference to the definition of ‘accession’ under the Ontario PPSA (identical to the Australian definition) with a view to giving the latter some work to do. He held that the installation of a car radio was not a ‘repair’, because it did not ‘alter, improve or restore’ the vehicle, was not ‘an integral part’ of the vehicle, and could ‘exist and operate separate from the vehicle’ (at [9]). By implication, the presence of any of these factors would not prevent the radio from amounting to an ‘accession’ under the PPSA. Similarly, in Kulchyski v Shuswap Ventures Corp (1994) 7 PPSAC (2d) 216, a backhoe and loader attached were held to be accessions to a tractor notwithstanding their ready detachability. In Pratt & Whitney Canada Leasing Inc v Ellis Air Inc (2002) 6 PPSAC (3d) 84; 3 CBR (5th) 81, a helicopter engine provided a clear example of an accession to a helicopter (although it would not be an accession under the Australian Act because both the aircraft and the aircraft engine would be permitted by the Regulations to be described by serial number, see above). See generally Harris and Mirzai, above, pp 296–8 [88.3].

[page 212]

Protection of security interests in accessions 5.95 The Act provides that a security interest ‘in’ goods, which become an accession to a larger whole, continues in the original goods; it is neither lost nor extended to the whole: s 88. Although the security interest has to be ‘in’ the goods, it does not need to have attached to the goods at the time of the accession: see generally s 91. The continuation of security interests in accessions envisages a conflict between the interest of secured party A in an accession and that of person B in the whole of the goods, including the accession. The Act balances these competing interests depending on whether A’s interest attached before, at or after the goods became an accession, and whether A forewarned intervening parties making financing decisions on the strength of the whole of the goods: see Gedye, Cuming and Wood, above, p 299 [78.2]. If A’s security interest is attached at the time the goods became an accession, generally it will prevail over the interest of B: s 89, see also NZ PPSA s 79; cf Sask PPSA s 38(2); BC PPSA s 38(2); Man PPSA s 38(2); Alb PPSA s 38(2) (‘before or at the time when the goods become an accession’). The rationale appears to be the avoidance of a windfall to B, who will be subject to A’s interest whether or not it consented to the affixation, see Gedye, Cuming and Wood, above, pp 301–2 [79.1]. Notably, B need not be another secured party; the ambit of these provisions is wider than the resolution of conflicts between PPSA security interests. This general rule is subject to four exceptions that operate in circumstances where B is likely to expect that the whole of the goods, including the accession, is available as collateral (although B need not show it had such an expectation): see generally Everett and McCracken, above, p 527 [13.370]. These exceptions apply only where A has not perfected, and therefore publicised, its interest in the accession. Under the first exception, A will lose to B if B acquired its interest in the whole after the goods became an accession (and before A perfects): s 90 (a). If goods the subject of A’s security interest become an accession on Day 1, B acquires a security interest in the whole on Day 2, and A perfects on Day 3,

A will be subordinate to B. The position is the same if B is an assignee of a person with an interest in the whole at the time the goods became an accession, where the assignment occurred after the accession (and before perfection by A): s 90(b). In both of these situations B must have acquired its interest ‘for value’. Additionally, A will lose to a person with a perfected security interest in the whole, who makes a further advance (before A perfects) under a preexisting security agreement: s 90(c). Thus if goods the subject of A’s security interest become an accession to other goods (already the subject of B’s security interest) on Day 1, B makes a further advance on Day 2, and A only perfects on Day 3, A will be subordinate to B. However, A will only be subordinated to the extent of the further advance: s 90(c). Lastly, A will lose to a person with a perfected security interest in the whole, who acquires the right to retain the whole for enforcement purposes after the goods become an accession (and before A perfects): s 90(d). If goods the subject of A’s security interest become an accession to other goods (already the subject of B’s security interest) on Day 1, B obtains a right to retain the whole on Day 2, and A only perfects on Day 3, then A will be subordinate to B. (Compare s 35(3) of the Ont PPSA, and s 38(6) of the Sask PPSA, BC PPSA, Man PPSA and Alb PPSA, which give special protection to a secured party with a PMSI in an accession that is perfected within a number of days of the debtor receiving possession.) There is no requirement that B make its further advance, or acquire its right of retention, without knowledge of A’s interest. This is consistent with the New Zealand [page 213] Act: see NZ PPSA s 80; cf Sask PPSA s 38(3)(b); BC PPSA s 38(3)(b); Man PPSA s 38(3)(b); Alb PPSA s 38(3)(b). In Pratt & Whitney Canada Leasing Inc v Ellis Air Inc (2002) 6 PPSAC (3d) 84; 3 CBR (5th) 81, Smith J of the British Columbia Supreme Court considered the ambit of the exception under the equivalent of s 90(d) in circumstances where B was a secured party with a ‘deemed’ security interest

and therefore had no access to the equivalent of the Ch 4 remedies, see below 5.120 (Application of PPSA remedies). In that case, B had leased a helicopter to Grantor under a PPS lease and had also registered a filing statement. Later, A sold Grantor a helicopter engine under a conditional sale agreement but did not perfect its resulting security interest. It was not in dispute that the engine was an accession; as it would have been under the Australian Act but for the fact that both the engine and the helicopter are serial-numbered goods within the Regulations: see 5.94 and s 10. Ordinarily, A’s interest in the engine could expect to prevail over B’s in the helicopter, because it had attached prior to the installation: see s 89. However, B later repossessed the helicopter, including the engine, pursuant to a court order lifting a general stay on the realisation of the grantor’s assets as it applied to B. B argued that it had accordingly acquired a right to retain the helicopter (within the equivalent of s 90(d)) albeit this was a contractual or common law right rather than a statutory right under the equivalent of Ch 4. Smith J held (at [21]): Although the December 20, 2000 order states that the respondents may repossess the helicopters together with the engines, it is silent on the subject of priorities among competing security interests. It does not state that the respondents will take the helicopters and engines free of all encumbrances. It does not use the language of vesting regarding the helicopters or engines. It does not use the wording of s 38(3)(b)(ii) [the equivalent of s 90(d)] and state that the respondents are to retain the whole in satisfaction of the obligation secured by their lease, nor does it use words to that effect. The wording of the order is consistent with the contention of [A], that the order gave [B] permission to retake possession of the helicopter as their contract permitted … Their priority vis-à-vis [A] was not advanced by the December 20, 2000 order.

Accordingly, the usual rule under the equivalent of s 89 applied. Notably, the decision left open the question of whether the exception could operate in circumstances where B acquires its right to retain the collateral otherwise than by virtue of Ch 4. If not, the s 90(d) exception will not be available to those with ‘deemed’ security interests, or who have contracted out of the Ch 4 remedies: see Part G (Enforcement of security interests). If A’s interest attached after the goods became an accession, different rules apply to determine whether it will prevail over the interest of B that extends over the whole. Although there appears to be no default rule, A is specifically subordinated to B in two situations. The first arises where B is a person who already had an interest in the other goods at the time of the affixation of the accession. If B did not consent to the creation of a security interest in the

accession, disclaim an interest in the accession, or enter into an agreement whereby a third party may remove the accession, and is otherwise entitled to prevent Grantor from removing the accession, then its interest will prevail over A’s: s 91(a). The second situation arises where B is a person who acquires an interest in the whole after the affixation of the accession. If B does so before A perfects its interest in the accession, its interest will prevail over A’s: s 91(b). It does not matter whether B acquires its interest ‘for value’; cf Ont PPSA ss 35(1)(b), (2)(a)(i), pursuant to which it appears that only buyers take ‘priority’. Again, following the New Zealand position, there is no requirement that B acquire its interest in the whole without knowledge of A: see NZPPSA s 81; cf Sask PPSA s 38(4)(b); BC PPSA s 38(4)(b); Man PPSA s 38(4)(b); Alb PPSA s 38(4)(b). [page 214] It is interesting to note that, under the statutory definition, there is no need to identify which is the minor and which is the dominant chattel; that is, which of the goods has lost its identity. Yet the Act is premised on there being ‘other goods’ to which an accession is affixed or in which an accession is installed. In cases where goods have been ‘installed’, as for example an engine in a car, or a motor in a pump, it is fairly clear which is the accession and which is the ‘other goods’. In cases where goods have been ‘affixed’ to one another, as for example two skins attached to make a coat, this may be more difficult to determine. Close attention may have to be paid to the manner in which the goods were attached: cf McKeown v Cavalier Yachts, above. In Mixon v Georgia Bank & Trust Company 154 Ga App 32 (1980) at 33, 276 S E 2d 483 at 484, the Georgian Court of Appeals stated that, ‘Whether a chattel is an “accession” depends upon the relationship that such chattel bears to another’ and not the relationship between the parties to the action.

Interaction with priority rules 5.96 It has been noted that a conflict between a secured party with an interest in an accession and a secured party with an interest in the whole is not a ‘priority dispute’ strictly so-called: the interests are competing, but they

do not extend to the same collateral. Yet the Act, consistently with its foreign predecessors, classifies the interest of a secured party in an accession as a ‘priority interest’. This may create confusion in the context of what may be termed the PPSA priority rules proper. It seems anomalous, for example, that the interest of secured party A in an accession should lose ‘priority’ to secured party B in the whole even where A’s interest is perfected and B’s is unperfected; cf s 55; 5.70 (Default priority rules), and see Gedye, Cuming and Wood, p 304 [80.2]. Gedye, Cuming and Wood also observe the potential for circularity in circumstances where A has an unperfected security interest in an accession, which nevertheless takes ‘priority’ over the perfected interest of B in the whole, because B acquired its interest prior to the affixation (under s 89). If C acquires a security interest in the whole after affixation occurs, and does not perfect, then C will lose priority to B (under s 55) but gain ‘priority’ over A (under s 90(a)). The authors suggest that in such circumstances A should lose any right to remove the accession (see 5.97), and that the proceeds of the whole should be distributed first to B, then to C and finally to A.

Enforcement of interests in accessions 5.97 Under Ch 4, a secured party may seize collateral if the ‘debtor’ is in default under the security agreement: s 123(1); see 5.124–5.128. The secured party must then choose whether to retain or dispose of the collateral. The Act regulates the exercise of these enforcement rights in circumstances where collateral is made up of goods to which an accession is affixed. In order to seize an accession as a preliminary step to its retention or disposal, a secured party may need to remove the accession from the whole of the goods. Here, the removing party will be under a duty to remove the accession ‘in a manner that causes no greater damage to the other goods, or that puts the person in possession of the whole to no greater inconvenience, than is necessarily incidental to the removal of the accession’: s 92; see also NZ PPSA s 125. This provision emphasises that the threshold of accession is much lower under the Act than at common law, pursuant to which an accession, by definition, cannot be removed without causing serious damage: see McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303 at 311; Thomas v Robinson [1977] 1 NZLR 385 at 391.

Semble the duty under s 92 does not apply where a secured party has a right to seize the whole of the goods and wishes to remove the accession as a step preliminary to the disposal of either the accession or the whole. Rather, the section appears to regulate [page 215] the removal of accessions by secured parties with interests in the accession only. It is unclear whether such parties must have a first-ranking interest in the accession: the Act merely equates those entitled to remove accessions with those entitled to seize collateral under s 123; cf Gedye, Cuming and Wood, above, p 429 [125.1]. (Compare s 38(7) in the Saskatchewan, British Columbia, Manitoba and Alberta Acts, which broadly refers to a secured party who ‘pursuant to this Act, has the right to remove the accession’, and s 35(4) in the Ontario Act, which narrowly refers to a secured party having an interest in the accession ‘that has priority over the claim of any person having an interest in the whole’.) Given s 123 does not indicate precisely when the right to remove an accession arises, it would be prudent to include such a right in any security agreement, see Gedye, Cuming and Wood, above, p 429 [125.1]. A secured party must give notice of its intention to remove, in conformity with certain substantive and formal requirements, a certain number of days beforehand (usually, 10 business days): see ss 95(1)–(4). This notice must be given to the grantor and other secured parties with higher ‘priority’ to the accession, but not to secured parties who merely have an interest in the other goods (that is, a component of the whole distinct from the accession): ss 95(1), (7); cf Ont PPSA s 35(6); Sask PPSA s 38(12); BC PPSA s 38(12); Man PPSA s 38(12); Alb PPSA s 38(12). Such persons appear to include secured parties who acquire (by assignment or otherwise) an interest in the whole; make a further advance on the strength of the whole; or acquire a right to retain the whole prior to the removing party perfecting its interest in the accession: see 5.94. A notice is not required in three circumstances: first, where the person otherwise entitled to receive the notice gives, after the default, written consent to a removal carried out without notice; second, where the secured

party believes on reasonable grounds that the accession will substantially decline in value if it is not disposed of immediately; and third, where the costs that are associated with the retention of the accession as part of the whole, and are secured against the accession, are disproportionately large compared to its value: s 95(5), (6). Persons with an interest in goods from which an accession is removed (other than the grantor or, semble, the debtor) have a right to be reimbursed for any damage done to that interest: s 93(1). (However, there is no entitlement to be reimbursed for a reduction in the value of the whole caused by the removal of the accession, or by the need to replace the accession: s 93(2).) These persons may refuse to give their permission to remove the accession until the secured party provides them with ‘adequate security’ for the reimbursement: s 94. Furthermore, a court may postpone the removal of the accession on the application of any person entitled to receive notice under s 95: s 97(a). A secured party with an interest in an accession only must remove the accession before it can retain or dispose of it. Person X with an interest in the whole of the goods, which is not subordinate to any interests in the accession (see 5.94), may retain it without reference to such interests. If the interest of X in the whole of the goods is subject to the interest of secured party Y in the accession, then one of two things must happen before X can retain the whole. Either the obligation owed to Y must be performed, or Y must be paid the value of the accession (assessed as if the accession were removed at the time of payment). If both Y and Z have an interest in the accession that prevails over X’s interest in the whole, and Z’s interest ranks first of all, then the obligation owing to Z must be discharged, or Z must be paid the value of the accession: s 96; cf NZ PPSA s 130; Sask PPSA s 38(11); BC PPSA s 38(11); Man PPSA s 38(11); Alb PPSA s 38(11) (requiring X to pay the lesser of these two amounts). On the face of it, it appears that X need not pay out Y as well as Z: the provision requires a discharge of the obligation owing to the secured party ‘with a security interest that has priority over all other security interests in the accession’, or payment to that person of the stand-alone value of the accession. [page 216]

By contrast, the other Acts identify the payee merely as a person whose interest prevails over that of X: NZ PPSA s 130; Sask PPSA s 38(11); BC PPSA s 38(11); Man PPSA s 38(11); Ont PPSA s 35(8). It has been suggested that, where X is subordinate not only to Z but also to Y and perhaps other secured parties, with interests either in the accession or the whole, it is more prudent to take an assignment of these interests than to rely on the Act to provide a first-ranking claim to the accession: Gedye, Cuming and Wood, above, p 138 [130.1].

Consequences for persons, other than secured parties, with an interest in the whole 5.98 A security interest in goods that become an accession to other goods continues in the accession, and generally prevails over the interest of a person in the whole of the goods, whether or not the latter is also a secured party within the PPSA: ss 88, 89; see 5.94. Consider a situation in which X bails an unframed painting to Grantor, an art gallery, under an arrangement that is neither a commercial consignment nor a PPS lease within s 12(3): see 5.21 (‘Deemed’ security interests). Y then sells a frame to Grantor under a conditional sale agreement. Its interest attaches and becomes enforceable against third parties: see 5.28 (Attachment) and 5.36 (Enforceability against third parties). The canvas is framed and the frame becomes an accession both at common law and under the Act. Grantor becomes insolvent. At common law, X could repossess the framed painting without regard to the interest of Y, which was lost when the frame became an accessory to the painting: compare McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303 at 311– 2. However, under the Act, X will be subject to Y’s interest, it being a moot point whether the ‘continued’ interest is the same as the original, or a new interest: s 89. Furthermore, if s 96 is interpreted to mean that X (a person other than the grantor) may retain the frame in certain circumstances and not otherwise, then in practice X may have to pay out Y before it can repossess the framed painting. The above example is intended to illustrate that the PPSA’s rules relating to accessions extend well beyond disputes between secured parties in overlapping collateral. However, it presumes that goods may be considered an accession both at common law and under the statutory definition. In reality, many (perhaps all) cases of accession at common law will amount to

cases of commingling under the Act, the definition of which encompasses goods that have been so assembled that it is ‘not commercially practical to restore the goods to their original state’: s 99(1), (2); cf the common law definition of accession, discussed in Sims v SPM Business Consultants Pty Ltd (2002) 43 ACSR 633 at 645 [66]; see 5.94.

Commingling 5.99 The rules as to commingling under the Act apply where goods have been so ‘manufactured’, ‘processed’, ‘assembled’ or ‘commingled’ that their identity is lost in the resulting product or mass: s 99(1). Among other things, goods will have lost their identity ‘if it is not commercially practical to restore the goods to their original state’: s 99(2). Evidently, this definition captures many cases of accession at common law, see 5.94. Similar to the rule pertaining to accessions, the Act provides that a security interest in goods which have lost their identity in a product or mass in the above manner continues in the product or mass: s 99(1). The ‘priority’ afforded to this continued interest depends on the nature of the interests with which it conflicts. The conflict may be between a secured party with an interest in the product as original collateral and a secured party with an interest in a component of the product. Alternatively, the conflict may be between two or more secured parties each claiming interests in different components. [page 217]

Conflict between interest in component and interest in mass 5.100 In this case, the interest of a secured party in a component is deemed to continue in the product or mass: s 99(1). It is thus competitive with later security interests taken over the whole. Furthermore, for the purpose of the default priority rules, the perfection of a security interest in a component is treated as perfection of the continued security interest in the product: s 100. So where A perfects its security interest in collateral by registering an effective financing statement, and the collateral is then commingled, A enjoys a perfected security interest in the product notwithstanding the original

financing statement makes no reference to the product. If, after the commingling, B takes a security interest in the product and registers an effective financing statement, then its interest will rank behind A’s: s 55(4), (5). Under the default rules, A enjoys the earlier registration time notwithstanding its registration does not refer to the product and no search of the register could have disclosed its interest therein. Critically, the protection afforded to secured parties with interests in commingled goods is limited in two ways. First, the ranking of the continued security interest is limited to the value of the component on the day it became part of the product or mass: s 101. Recasting the example above, suppose A is owed $5000 and has a security interest in collateral worth $2000. The collateral is commingled to form a product worth $6000. B, who is owed $1000, then takes a security in the product. Each interest is perfected in the manner outlined above, so that A’s interest ranks ahead of B’s. However, A’s interest will only prevail to the extent of $2000: s 101. If the position were otherwise, A would receive a windfall by virtue of the commingling. The rules preserve the position of secured parties whose collateral has been commingled, but do not improve that position. Second, although a security interest in a component continues in the product or mass for all purposes (s 99(1)), the perfection of an interest in a component amounts to perfection of the continued interest in the product or mass only for the purposes of the default priority rules: s 100. Perfection of the original interest does not amount to perfection of the continued interest in the context of insolvency or the taking free rules: see below 5.103 and 5.112–5.114.

Conflicts involving multiple interests in components 5.101 Where there is a competition between two or more secured parties each of whom has an interest in different components of the product or mass, a special priority regime applies. The outcome of the conflict will depend on whether any of the security interests are perfected, and whether any are PMSIs. In a dispute between A, with a perfected interest in a component, and B, with an unperfected interest in another component, A takes priority over B: s 102(1). If A and B both enjoy perfected interests in the components, or both

enjoy unperfected interests, then ‘each perfected [or unperfected] security interest is entitled to share in the product or mass according to the ratio that the obligation secured by the perfected [or unperfected] security interest bears to the sum of the obligations secured by all perfected [or unperfected] security interests in the same product or mass’: s 102(2), (3). However, each obligation is deemed not to exceed the value of the given component on the day it became part of the product or mass: s 102(4). An example may clarify how these provisions operate in practice. Suppose that A has a security interest in a component worth $10,000 to secure an obligation worth $20,000, and that B has a security interest in a different component worth $15,000, which secures an obligation also worth $20,000. Each of A and B has perfected its interest in the particular component. Grantor processes both components into a new product worth just $8000. [page 218] The security interests of A and B are deemed to continue in the new product notwithstanding their original collateral has been destroyed: s 99(1). Applying s 102(3), A is entitled to 40% (10,000/[10,000 + 15,000]) and B is entitled to 60% (15,000/ [10,000 + 15,000]) of the available kitty. Assuming there are no other secured parties with priority to the product, this means that A is entitled to $3200 and B is entitled to $4800. Now suppose that, in the example above, the ultimate product was worth $35,000 and not $8000. In this case, prima facie A and B would be entitled to $14,000 and $21,000 respectively. Yet the entitlement of each is capped at the value of the particular component on the day it was processed: s 101, see above. Accordingly, A may recover up to $10,000 and B may recover up to $15,000. Section 102(1)–(3) work in tandem in circumstances where there are multiple secured parties with interests in components, some of which are perfected and some of which are not. Suppose that A and B each have a security interest that continues in the new product to the extent described above, and that the new product is again worth $35,000. Suppose also that C has a security interest in a different component worth $7000, which secures

an obligation worth $10,000, and that D has a security interest in another component worth $5000, which secures an obligation worth $1000. Neither D nor C has perfected its security interest in the particular component. In this case, A and B are still entitled to share in the new product in the ratio 2:3, as between themselves. This leaves $10,000, which may be split between C and D in the ratio 7:5. That is, C is entitled to 58.% (7,000/[7,000+5,000]) and D is entitled to 41.% (5,000/[7,000+5,000]), or about $5833 and $4167 respectively. Different rules apply where a security interest in a component is a purchase money security interest that has been perfected. Section 103 provides that: Despite section 102, a perfected purchase money security interest in goods that continues in the product or mass has priority over: (a) a non-purchase money security interest in the goods that continues in the product or mass; and (b) a non-purchase-money security interest in the product or mass given by the same grantor.

Thus if, in the example above, B’s security interest was a PMSI, it would rank ahead of A’s. If the new product were worth $ 20,000, B would be entitled to $15,000, and A would receive $5000 (with nothing left for C and D). Quaere the position where there is a conflict between A, B, C and D, as above, and E, who takes a security interest in the product as original collateral. If the conflict were between A and E, or B and E (and so on), then the default priority rules would almost certainly apply. However, in the event of multiple security interests in components the sharing regime in s 102 would appear to supplant the default rules. If so, the priority of E’s security interest depends on whether it is perfected or unperfected. If perfected, E’s entitlement is assessed collectively with that of A and B. If unperfected, E’s entitlement is assessed collectively with C and D. Admittedly, this interpretation requires some straining of the language of s 102, which refers to security interests ‘continuing’ in the product or mass (and is therefore, perhaps, limited to disputes between those security interests preserved by ss 99 and 100). Yet s 103(b) may provide some indication that s 102 was intended to apply in such circumstances. So, if B’s interest is a PMSI, it will rank ahead of the interests of A and E (valued collectively), which in turn rank ahead of the interests of C and D (also valued collectively). In the absence of a regime such as that applying to accessions, in circumstances

where a secured party takes an interest over the whole goods, it is difficult to see any other mechanism through which disputes of this nature may be resolved. [page 219]

B. Taking free rules 5.102 The Act provides that, in certain situations, transferees of collateral will ‘take free’ of security interests. The fact of taking free extinguishes the secured party’s interest in the collateral, although an interest may persist in the proceeds and the original interest may be revived in certain circumstances: see above 5.31–5.34, 5.59–5.67. The taking free rules apply whether or not the security interest in the transferred collateral is perfected, but do not apply where the interest of the transferee is also a security interest (s 42); however, see 5.105. The existence of these rules is a further reminder that the PPSA does not afford secured parties total protection, even where such parties have taken all the available steps to protect themselves: see Camco Inc v Frances Olson Realty (1979) Ltd (1986) 50 Sask R 161; 6 PPSAC 167 at [17]. In approaching this part, it is useful to first ask whether the situation at hand comes within the relevant rule. Particular attention should be paid to: the identity of the person taking free; whether this person must provide value or new value; the nature of the property to which the rule applies; and from what kinds of security interest the person takes free. Second, one needs to check whether the situation falls within any exception to the rule; almost every rule comes with its own specific exception. Often, a transferee will not take free if he or she took with knowledge of a certain fact. Here, particular attention should be paid to whether the exception refers to ‘actual’ or ‘constructive knowledge’ or ‘belief’, and to the facts of which the person must have knowledge or believe to be true. See Everett and McCracken, above, p 533 [13.400].

Unperfected security interests 5.103

A buyer or lessee of personal property for value takes free of all

unperfected security interests in the property: s 43(1). ‘Value’ means consideration that is sufficient to support a contract and includes an antecedent debt or liability: s 10 (‘value’). However, the buyer or lessee will not take free if the unperfected security interest was created or ‘provided for’ by a transaction to which the buyer or lessee is a party: s 43(2).

Buyer or lessee of goods in the ordinary course of business 5.104 A buyer or lessee of personal property takes free of security interests granted by the seller or lessor if the property was sold or leased in the ordinary course of its business of selling or leasing goods of that kind: s 46(1). The provision applies equally to proceeds arising under s 32: see 5.33 (Proceeds). Interestingly, the buyer or lessee appears to take free only of security interests granted by the seller or lessor and those granted not by other persons, if any: cf Ocean National Bank v Palmer 457 A 2d 1225 (1938) (Superior Court of New Jersey) at 1228–9; Martin Bros Implement Co v Diepholz 440 NE 2d 320 (1982) at 325. Like many other provisions of the PPSA, this provision reflects, with some modification, familiar principles of commercial law. In Camco, above, the Tallis JA of the Saskatchewan Court of Appeal made the following comments (at [18]): In our commercial law the holder in due course of negotiable instruments, the bona fide purchaser of negotiable instruments, the bona fide purchaser of investment securities and various other bona fide purchasers have been accorded privileges — with the result that they sometimes acquire rights better than the rights of some kinds of claimants who did not authorize or approve of the sale or transfer. Thus a special kind of bona fide purchaser of goods is described in [the equivalent of s 46(1)] — he must buy goods sold in the ordinary course of business of the seller. Under such circumstances the secured party has no claim against the buyer: he must look to the seller only for satisfaction. The statutory protection extended to such a buyer undoubtedly rests on principles of justice and commercial utility.

Often, secured parties will leave collateral in the possession of the grantor so that the latter can continue its business as a going concern. Such persons run the risk of [page 220] having their interests defeated by a buyer in the ordinary course of that

business: Camco, above, at [18]. The policy of the PPSA is to protect sales transactions over security transactions in such a case, to allow ‘commerce to proceed expeditiously without the need for purchasers of goods to check [the] titles of sellers in the ordinary course of their businesses’: Fairline Boats Ltd v Leger (1980) 1 PPSAC 218 at [8]; Tubbs v Ruby 2005 Limited [2010] NZCA 353 at [38]. Whether a sale or lease is in the ordinary course of the seller or lessor’s business (of selling or leasing goods of that kind) is a question of fact: Royal Bank of Canada v 212600 Alberta Ltd (1983) 3 PPSAC 113; Ford Motor Credit Company of Canada Limited v Centre Motors of Brampton Limited (1982) 2 PPSAC 63. New Zealand courts have developed a two-step process of inquiry to determine this question: see Everett and McCracken, above, p 534 [13.400]; cf the process used in Walker v European Electronics Pty Ltd (in liq) (1990) 23 NSWLR 1. The first step is to determine what the ‘ordinary course of business’ of the seller or lessor is: Orix v Milne [2007] NZHC 507; [2007] 3 NZLR 637 per Rodney Hansen J at [66]; Stock Co v Gibson [2012] NZCA 330; (2012) 10 NZBLC ¶99-709 at [51]. The second step is to determine whether the particular sale or lease was in the ordinary course of that business. As this process makes clear, one must consider ‘the business of the particular seller [or lessor]’, rather than the ordinary course of business in the trade or industry as a whole: Camco Inc v Frances Olson Realty (1979) Ltd (1986) 50 Sask R 161; 6 PPSAC 167 at [25]. Section 46(1) also makes clear that the inquiry is as to the seller or lessor’s business of selling or leasing goods of that kind. The concept of the ‘ordinary course of business’ has been the subject of numerous decisions in various contexts. In the bankruptcy context it has been described as ‘transactions regularly taking place in a sustained course of activity or some usual process passing without examination’, or ‘part of the undistinguished common flow of business done … calling for no remark and arising out of no special or particular situation’: Taylor v White (1964) 110 CLR 129 at 136 per Dixon CJ; Downs Distributing Co Pty Ltd v Associated Blue Star Stores Pty Ltd (1948) 76 CLR 463 at 477 per Rich J. In the context of partnership law, Deane J has said (in National Commercial Banking Corporation of Australia Ltd v Batty (1986) 160 CLR 251 at 290): The notion of the ordinary course of business presupposes a flow of transactions and activities within a common course. It will usually comprehend all those transactions and activities which

would normally be involved in carrying on a business of the kind carried on by the particular firm: ‘all things that it is part of the business of [an accountant] to do’: cf. Rich, Dixon, Evatt and McTiernan JJ. in Polkinghorne [(1934) 51 CLR at p 156].

See also Walker v European Electronics Pty Ltd (in liq) (1990) 23 NSWLR 1. For a consideration of the meaning of ‘ordinary course of business’ in the context of floating charges, see Ashborder BV v Green Gas Power Ltd [2005] BCC 634 at 665–6; Fire Nymph Products Pty Ltd v Heating Centre Pty Ltd (in liq) (1992) 7 ACSR 365 at 370–1; Reynolds Bros (Motors) Pty Ltd v Esanda Ltd (1983) 8 ACLR 422. Such decisions will no doubt provide some loose guidance when interpreting s 46(1). However, some caution should be exercised given the peculiar context of the PPSA, and the express qualifications to the concept contained in the section. In many of the above contexts, the inquiry as to what is ‘ordinary’ is more general than ‘what is in fact done in the course of the particular business of the company’: see, for example, Reynolds Bros (Motors) Pty Ltd v Esanda Ltd, above, at 428; Taylor v White, above, at 136 per Dixon CJ; Robertson v Grigg (1932) 47 CLR 257 at 267 per Gavin Duffy CJ and Starke J, at 273 per Evatt J. Consider the observations of Street J in Re Bradford Roofing Industries Pty Ltd (in liq) and Companies Act [1966] 1 NSWR 674 at 680: There are other statutory fields where one finds references to ‘ordinary course of business’ — for example, the bills of sale legislation, the sale of goods legislation and the factors legislation. Again there are cases dealing with the type of transactions permissible as being in the ordinary

[page 221] course of a company’s business in circumstances where a company has given a floating charge to a debenture holder … There is a marked difference between the correct meaning to be given to the concept of ordinary course of business where it appears in these different contexts; one of the widest meanings is that applicable in the floating charge cases; one of the narrowest is in the Factors Act cases; yet a different meaning again is apparent in the s 95 [bankruptcy] cases. I take the view that I must approach the construction of the phrase ‘in the ordinary course of the company’s business’ … as an independent problem, and that it not correct to apply to [the section at hand] decisions which have been given upon similar words appearing in other contexts.

See also Country Banking Corporation v Dean [1998] AC 338 (PC) at 346 and 349. It may be that the policy of the PPSA taking free rules in protecting the ordinary flow of commerce requires a liberal interpretation of what is in the ordinary course of a seller or lessor’s business: Nichibo Trading Company

New Zealand Ltd v Lucich HC Auckland [2011] NZHC 722; (2011) 9 NZBLC ¶103,253 at [57], citing Fairline Boats Ltd v Leger (1980) 1 PPSAC 218 (Ont HC) at [8] per Lindgren J; cf Stock Co v Gibson, above, at [49]. Whether the person taking free is a buyer or lessee, and whether the grantor is a seller or lessor, is also a question of fact: Camco, above. Neither ‘buyer’ nor ‘seller’ is a defined term, and it is unclear whether it is permissible to have regard to Sale of Goods legislation to determine whether there has been a ‘sale’. The point has proved controversial in the other PPS jurisdictions, and the waters may be further muddied by the Australian Act’s referring to a sale of ‘personal property’ rather than ‘goods’. In Camco, a secured party argued that there had been no ‘sale’ because the ‘seller’ (grantor) held the property pursuant to a conditional sale agreement and was therefore unable to transfer title to the ‘buyer’. The Saskatchewan Court of Appeal rejected this line of argument (at [29]) because ‘grafting such a concept [as nemo dat quod non habet] on this statutory provision would undermine the purpose of the legislation’. With respect, this holding must be correct given the policy of the Act in treating alike those interests which perform the function of security or otherwise imbue the grantor with ostensible ownership. However, it does not follow that the concept of a ‘sale’ as it exists under Sale of Goods legislation is entirely irrelevant to whether there is a ‘buyer’ or a ‘seller’ under the PPSA: see Royal Bank v 216200 Alberta Ltd (1987) 6 PPSAC 277; 51 Sask R 146; Orix v Milne [2007] NZHC 507; 3 NZLR 637; Chrysler Corp v Adamatic Inc 208 NW 2d 92 (1973) (overruled 425 NW 2d 416). It may be that this is another circumstance in which the grantor must be considered, at least in some respects, the ‘owner’ of the collateral: see 5.29. On the other hand, it has been said that focusing on whether title has passed is out of keeping with the substance-over-form philosophy underpinning the Act, and the consumer protection considerations particularly relevant to equivalents of s 46: see Spittlehouse v Northshore Marine Inc (1994) 7 PPSAC (2d) 67; 144 DLR (4th) 500; Daniel v Bank of Hayward 425 NW 2d 416 (1988). In Bank of Hayward, the Wisconsin Supreme Court considered (at 422) that: Courts have overwhelmingly rejected a definition of buyer in the ordinary course that focuses on whether title has passed. These courts reason that the inventory financier is better able to guard against the risks inherent in this type of financing than is the average retail buyer because the financier is more knowledgeable and has the resources to guard against the risks. These courts conclude that placing the burden on the buyer would inhibit retail sales.

Furthermore, focusing on the words ‘in the ordinary course’, these courts reason that a court must consider the substance of the transaction; a court must look at the customary manner in which sales are made in the seller’s business and to the expectations of the buyer under the contract. The language ‘in ordinary course’ [sic] indicates deference to commercial practice and is consistent with the purposes and policies of the Code ‘[t]o permit the continued expansion of commercial practices through custom, usage and agreement of the parties.’ … If it is customary in the seller’s business to sell goods in a particular manner (e.g., seller and purchaser enter into a contract for sale and purchaser makes a down payment), then the court may find that the purchaser who makes a down payment without taking title is a ‘buyer in ordinary course of business [sic].’

[page 222] Under the latter approach, the ‘seller’ takes the collateral free of the security interest at a point in time earlier than the time title is transferred. In Bank of Hayward, it was suggested that the appropriate point in time was either when the contract is made (for goods already in existence and identified) or, where the contract relates to future goods, when the goods are shipped, marked or otherwise designated by the seller as goods to which the contract refers.

Liquid property 5.105 The Act contains special taking free rules in relation to what may be referred to as ‘liquid’ property: currency, investments instruments, and intermediated securities. The provisions give effect to the public interest in preserving the ready exchangeability of these kinds of property. Thus a person who holds currency takes free of any security interest in the currency provided the holder acquires the currency without actual or constructive knowledge of the security interest: s 48. Similarly, a transferee of an investment instrument (other than a secured party) takes free of any security interest, if the transferee gives value and takes possession or control of the instrument: s 50(1), (3); see 5.46–5.52 for the manner in which possession or control may be taken of investment instruments. A transferee (other than a secured party) who takes an interest in an intermediated security will also take free of any security interest provided: value is given; and the credit of the interest in the relevant financial product (in relation to which the intermediated security arises) is made with the

consent of the relevant parties: s 51(1). In both these cases, the transferee will not take free if it takes with knowledge, actual or constructive, that the transfer constitutes a breach of the security agreement: ss 50(2), 51(2). Transferees of investment instruments and intermediated securities also take free of security interests where the transfer occurs ‘in the ordinary course of trading on a prescribed financial market (within the meaning of the Corporations Act 2001)’: s 49. At the time of writing, prescribed financial markets include: Asia Pacific Exchange Limited; ASX Limited; Chi-X Australia Pty Ltd; National Stock Exchange of Australian Limited; and SIM Venture Securities Exchange Ltd: Corporations Act 2001 (Cth) s 9, Corporations Regulations 2001 (Cth) r 1.0.02A. There is no equivalent provision in the UCC of any of the other PPSAs. The considerations outlined above in relation to the phrase ‘ordinary course of business’ may be of some assistance in construing the Australian section. Note, however, that while under s 46 the inquiry is focused on the ordinary course of business of a particular seller or lessor, in selling or leasing goods of the kind in question, s 49 is more objectively worded. The section does not direct attention to the ordinary course of trading as conducted by any particular trader. Note also that there is no knowledge-based exception in relation to s 49; a transferee of instruments and securities traded via such systems may take free notwithstanding he, she or it has constructive or actual knowledge that the transaction constitutes a breach of the transferor’s security agreement. The rationale behind this is to preserve the integrity of the official trading systems. A secured party may prevent the grantor trading with such collateral by taking possession or control. There appears to be a conflict between s 42 (application of part) and ss 50 and 51. Section 42(b) provides that the taking free rules do not apply to the acquisition of an interest in personal property free of a security interest if the interest taken ‘is itself a security interest (except in sections 50 (investment instruments) and 51 (intermediated securities)’. The Note to the section provides: Some acquisitions to which section 50 applies, and all acquisitions to which section 51 applies, consist of the taking of security interests (see subsections 50(3) and 51(1)).

Section 50(3) provides that, under the main rule, the ‘purchaser’ of an investment instrument includes ‘a person who takes the instrument by sale,

lease, discount, [page 223] assignment, negotiation, mortgage, pledge, lien, issue, reissue or any other consensual transaction that creates an interest in personal property’. Yet s 50(1) provides that ‘[a] purchaser … of an investment instrument, other than a secured party, takes the instrument free’ in the circumstances described. Similarly, s 51(1) provides that ‘[a] person (the transferee) who takes an interest in an intermediated security’ takes free of security interests in the circumstances set out. However, the first requirement is that ‘the transferee gives value for the interest (unless the interest acquired is itself a security interest)’: s 51(1)(a). Does this mean the a transferee who takes a security interest in an intermediated security need not provide value in order to take free of all prior security interests, whether or not perfected? Or are the words parenthesis intended to indicate, despite s 42(b) and its associated Note, that s 51 does not apply to transferees whose interests are themselves security interests? It is submitted that, despite these unhappily worded provisions, the taking free rules should apply exclusively to conflicts between a secured party and a transferee who is not a secured party, and that the PPSA priority regime should apply to all disputes between secured parties; see, however, Replacement Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) at [99], [100].

Temporarily perfected security interests 5.106 Certain security interests are perfected by force of the Act, without the need for action on the part of the secured party; see 5.54–5.67. Such perfection may be temporary or permanent. It appears that the Act affords temporary perfection in order to maintain the status quo in light of changed circumstances (for example, where collateral is relocated to Australia, or a bailee returns collateral to the grantor or debtor for a specific purpose), at least until the secured party has had an opportunity to protect itself. However, a security interest that is only temporarily perfected is, like unperfected interests, more vulnerable in the context of the taking free rules. This is in line with the purpose of the temporary perfection provisions, which

are designed to provide the secured party with a grace period in which to protect itself by other means. Accordingly, a buyer or lessee will take free of a security interest that is temporarily perfected by force of the Act (other than a transitional security interest perfected by force of s 322), if the security interest is not also perfected by other means immediately before the sale or lease: s 52(1); compare NZ PPSA s 56; Sask PPSA s 30(5); BC PPSA s 30(5); Alb PPSA s 30(5). The operation of this provision is restricted to the following kinds of property: proceeds of personal property; negotiable documents of title; and goods: s 52(1). This excludes currency, investment instruments and intermediate securities, which are already amply provided for by ss 48–51: see above. However, it also excludes chattel paper, negotiable instruments and the residual category of ‘intangible’ property: see 5.9–5.10. Again, a buyer or lessee of personal property cannot take advantage of this section if he, she or it had actual or constructive knowledge that the sale or lease constitutes a breach of the security agreement: s 52(2). The time at which the knowledge or ignorance of the transferee is judged varies according to whether the collateral is predominantly used for personal, domestic or household purposes: see 5.9–5.10. If so, the buyer or lessee must be without the relevant knowledge at the time new value is first given for the sale or lease: s 52(2)(a). If not, the buyer or lessee must be without the relevant knowledge at the time of sale or entry into the agreement for the lease: s 52(2)(b).

Low-value consumer property 5.107 A buyer or lessee of personal property who gives new value of no more than $5000 (or any greater amount prescribed by the Regulations) takes free of any security interest if he, she or it intends to use it predominantly for personal, domestic or [page 224] household purposes at the time of the sale or lease: s 47(1); 5.9–5.10. This provision serves a consumer protection purpose: ordinary consumers cannot

be expected to search the PPS register, and should not suffer the consequences of failing to do so where the goods are in fact subject to a security interest and the sale or lease is outside the ordinary course of business of the grantor. There are three exceptions to this taking free rule. First, the rule does not operate where the goods leased or purchased are ones that may or must be described by serial number in any financing statement: s 47(2)(a); see 5.94 for a list of such goods. Second, the rule does not apply where the buyer or lessee takes with actual knowledge that the transaction constitutes a breach of the security agreement: s 47(2)(b). Third, the consumer does not take free where he, she or it believed, at the time of entering into the contract sale or lease, that the personal property was not of low value (that is, where the consumer believed its value to be greater than $5000): s 47(2)(c).

Serial-numbered goods 5.108 A buyer or lessee of goods that may or must be described by serialnumber in any financing statement takes free of any security interest therein, if searching the PPS Register immediately beforehand by reference only to the serial number would not disclose the existence of the security interest: s 44(1); see 5.94 for a list of serial-numbered goods; Personal Property Securities Regulation 2010 (Cth) r 2.2. As Harris and Mirzai point out, this gives effect to the policy of the taking free rules in favouring consumer transactions over secured transactions: Harris and Mirzai, above, p 196 [44.5.1]. Thus an inaccurate registration may result in the extinguishment of a secured party’s interest vis-à-vis a third party purchaser or lessee, whereas defects in registration are inconclusive in the context of disputes between secured parties. This rule does not apply if the buyer or lessee holds the serial-numbered goods as its own inventory, or as the inventory of another: s 44(2)(a). Additionally, the rule does not operate where the security interest arises out of a transaction to which the buyer or lessee is a party (unless the Regulations prescribe otherwise which, at the time of writing, they do not): s 44(2)(b). Lastly, the provision will not apply to transitional security interests in the two years following the 30 January 2012 (the ‘registration commencement time’), other than interests that are migrated security interests in motor vehicles or watercraft: s 44(3).

Note that, although these constitute a subset of serial-numbered goods, the Act provides two specialised taking free rules in relation to motor vehicles. The first operates in circumstances where, as above, there is an incorrect or missing serial number in relation to the financing statement that covers the motor vehicle. The second operates where the buyer or lessee takes the motor vehicle from certain prescribed persons. Under the first rule, a buyer or lessee for new value of a motor vehicle takes free of any security interest in it if the seller is the grantor (or another person in possession if the grantor has lost the right to possess the vehicle, or is estopped from asserting an interest in it) and at some point between the time of the sale or lease and the start of the previous day a search of the PPS register using only to the vehicle’s serial number would not disclose the existence of the security interest in it: s 45(1). Under the second rule, a buyer or lessee for new value of a motor vehicle takes free of any security interest in it if the seller or lessor falls within a class of persons prescribed by the Regulations: s 45(3). At the time of writing, this means persons who hold a licence (however described) to deal or trade in that kind of motor vehicle, provided the licence is used by a licensing authority in the state or territory in which the sale or lease of the vehicle takes place: Personal Property Securities Regulations 2010 (Cth) r 2.2. In each case, the motor vehicle must be one that the Regulations require to be described by serial-number in any financing statement, and that the Regulations prescribe for the [page 225] purpose of s 45: s 45(1), (1)(a), (3), (3)(a). At the time of writing, these are simply the motor vehicles that meet one of two sets of mechanical requirements listed in r 1.7 of the Regulations. Exceptionally, the buyer or lessee will not take free under these provisions if: the secured party is in possession immediately before the time of the sale or lease; the vehicle is bought at a sale conducted on behalf of an execution creditor; the buyer or lessee holds the vehicle as its own inventory, or the inventory of another; or the buyer or lessee takes with actual or constructive knowledge of the security interest: ss 45(2), (4). Note also that certain motor vehicles subject to transitional security interests will be exempted from s

45(1) if, before the 30 January 2012, it was impossible to register the interest by serial number on the applicable transitional register in the relevant state or territory: Personal Property Securities Regulation 2010 (Cth) r 2.1.

Knowledge 5.109 Many of the exceptions to the taking free rules above operate in circumstances where the transferee took with actual or constructive knowledge of a particular fact. In Baden v Société Générale pour Favoriser le Dévelopment du Commerce et de l’Industrie en France SA [1993] 1 WLR 509; [1992] 4 All ER 161, counsel agreed on the existence of the following categories of knowledge (at WLR 575–6, 582; 235, 242–3): (i) actual knowledge; (ii) wilfully shutting one’s eyes to the obvious; (iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make; (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable man; (v) knowledge of circumstances which would put an honest and reasonable man on inquiry.

Under the PPSA, ‘constructive’ knowledge is a defined term, whereas ‘actual’ knowledge is not. A person has ‘constructive knowledge’ of a fact where it would have been disclosed had the person made all the inquiries an honest and prudent person would have made in his, her or its position (and/or with the actual knowledge that she, he or it had): s 297. The definition may be considered to roughly accord with category (iv) as outlined by Peter Gibson J in Baden, and may even extend to (v), although the general law’s perception of constructive knowledge should not control the meaning of the term. It is more legitimate to have regard to the general law when construing ‘actual’ knowledge, given this is not defined by the Act. In this connection, the first three categories of knowledge in Baden ‘have generally been taken to involve ‘actual knowledge’, as understood both at common law and in equity’: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at 163; Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437 at 454 per Nourse LJ. The Act contains presumptions as to actual or constructive knowledge in specific circumstances, including where the transferee and transferor are associated entities, or members of the same household, or where the transferee is a director or officer of the transferor (and vice versa): s 299. There are also specific provisions dealing with the imputation of knowledge to a corporate entity based on the knowledge of its directors, employees or

agents: s 298.

Residual protection for secured parties 5.110 A security interest in collateral that has been dealt with by the grantor continues in the collateral, unless the secured party expressly or impliedly authorises a disposal, or dealings that have the effect of extinguishing the security interest: s 32(1)(a). However, as we have seen, a secured party’s interest in collateral may be extinguished even where it refuses to authorise such dealings with the collateral. If the secured party’s interest is extinguished by the operation of the taking free rules (and not by virtue of an authorisation within s 32(1)(a)), the Act affords the secured party some residual protection in the form of a statutory right of ‘subrogation’: s 53. Section 53(2) provides: [page 226] The rights of the secured party are subrogated, in relation to the property, to the rights (if any) of the transferor and any predecessor of the transferor (including the right to receive any part of the purchase price for the property which has not been paid).

In other words, the secured party may enforce the grantor/transferor’s right to be paid by the transferee. However, if the latter has already made payments to the grantor/ transferor before receiving notice of the secured party’s subrogation right, then the obligation owed by the transferee is diminished to that extent vis-à-vis the secured party: s 53(3). Note that, if a secured party does authorise dealings with the collateral, its security interest will nevertheless attach to the proceeds of the collateral: s 32(1)(b); see 5.33, 5.56 and 5.60 (Proceeds). As with many other provisions of the Act which employ terms familiar to the general law, it is unclear whether the Act intends to incorporate the equitable principles relating to subrogation.

C. Insolvency 5.111 The PPSA provisions relating to insolvency apply where one of a number of insolvency events has occurred in relation to the grantor: s 267(1). With respect to corporate grantors, these events include the making of a

winding up order, or the passing of a resolution to similar effect, and the commencement of a voluntary administration under Corporations Act 2001 (Cth) Pt 5.3A. With respect to individual grantors, these events include the making of a sequestration order or a voluntary filing for bankruptcy under the Bankruptcy Act 1966 (Cth). However, the provisions discussed below do not apply to receiverships, or to alternatives to bankruptcy under the Bankruptcy Act such as debt or personal insolvency agreements: see Duggan and Brown, above, p 290 [13.3].

Vesting of unperfected security interests on insolvency 5.112 An unperfected security interest vests in the grantor immediately before the relevant insolvency event: s 267(2). This provision is designed to provide the grantor with unencumbered title to the collateral, which enures for the benefit of the liquidator or administrator, and so on. In the event of a liquidation, the status of the security interest as perfected or unperfected is judged as of the day on which the winding up is deemed to have commenced under the Corporations Act: s 267(1)(b)(i). If the security interest is unperfected as of that day, then it vests in the grantor immediately before the order is made, or the resolution is passed, for the winding up of the company. In the case of a company subject to a deed of company arrangement, the security interest vests in the grantor immediately before the company executes the deed: s 267(1)(a)(i), (iii), (2). In the case of an administration, the status of the security interest is judged as of the day which is deemed to be the s 513C day for the company under the Corporations Act: s 267(1)(b)(ii). If the security interest is unperfected on that day, it vests in the grantor immediately before the administrator is appointed: s 267(1)(a)(ii), (2). In the case of an individual bankruptcy, that status of the security interest is judged as of the day the sequestration order is made against the bankrupt, or the day on which he or she becomes bankrupt by force of Bankruptcy Act ss 55, 56E or 57: s 267(1)(b)(iii). If the security interest is unperfected on that day, then it vests in the grantor immediately before the happening of this event: s 267(1)(a)(v). The time immediately before which the security interest vests in the grantor is referred to as the ‘critical time’. These provisions deliberately diverge from the precedent set by the Canadian Acts, which provide that an unperfected security interest is ‘not effective’ against the grantor’s trustee in bankruptcy or liquidator: see, for

example, Sask PPSA s 20(2); Ont PPSA s 20(1)(b). The phrase ‘not effective’ makes no reference to the scope of the rights that the grantor’s liquidator, administrator or trustee has in the collateral. [page 227] Although the Australian provisions achieve the same result as that intended by the Canadian provisions, the wording of the latter has invited arguments, based on the rule nemo dat quod non habet, that the interest of the trustee (etc), or those taking from the trustee, could not prevail against the superior rights of the secured party. The problem is particularly acute in the case of the PPS lease, under which the grantor’s interest, the interest to which its insolvency administrator succeeds, is possessory only. In Re Giffen (1998) 155 DLR (4th) 322, the Canadian Supreme Court held that although the language of the provision did not elevate the rights of the trustee in bankruptcy to common law title, which remained in the PPS lessor, it prevented the lessor from exercising its superior rights as against the trustee. Canadian courts have also found that the trustee in bankruptcy is able to give clear title to collateral, either because the PPSA’s functional approach to security requires the grantor to be considered the ‘owner’ of collateral, or by virtue of certain provisions of the federal Bankruptcy and Insolvency Act RSC 1985 c B-3: see Re Perimeter Transportation Ltd (2010) 71 CBR (5th) 134; 17 PPSAC (3d) 337; Re Bell’s Dairy Limited; International Harvester Credit Corporation of Canada Ltd v Touche Ross Limited (1986) 50 Sask R 177; 6 PPSAC 138; Percival Mercury Sales Ltd v Touche Ross Ltd (1984) 4 PPSAC 65; cf Ford Credit Canada Ltd v Percival Mercury Sales Ltd (1984) 4 PPSAC 92. Section 267(2) of the Australian Act precludes such controversy by expropriating the security interest from the secured party immediately before the relevant critical time. In the case of PPS leases, commercial consignments, transfers of accounts or chattel paper, conditional sale agreements and other arrangements involving a retention of title, the ‘security interest’ expropriated is title. The harshness of this result is mitigated by the exceptions to the vesting provision, outlined below. Because the PPSA insolvency provisions do not apply to receivers or receiver-managers, the

analysis in the cases cited above may be relevant to determining the scope of the rights of receivers in property covered by the PPSA, and their ability to transfer clear title to third parties. The New Zealand Act does not contain a provision equivalent to s 267(2). A secured party may enforce its interest against a liquidator notwithstanding it is unperfected: Re King Robb Ltd (in liq); Sleepyhead Manufacturing Co Ltd v Dunphy (2006) 9 NZCLC ¶264,000 (NZ HC) (affirmed Dunphy v Sleepyhead Manufacturing Co Ltd [2007] 3 NZLR 602 (NZ CA)). The courts in those cases further held that the security interest need not be enforceable against third parties to be enforceable against the liquidator, who is not, strictly speaking, a third party. To be enforceable as against the grantor, and therefore the liquidator, the security interest need only have attached.

Future property 5.113 The vesting provisions extend to security interests which attach to the collateral after the ‘critical time’, if where the security interest is not also perfected by that time: s 267A. The secured party can avoid the vesting of its security interest in the grantor under s 267A by registering a valid financing statement prior to the relevant critical time. If this registration has the effect of perfecting the security interest automatically on its attachment, then the interest is immune from the vesting provision notwithstanding the attachment occurs after the critical time.

Exceptions to vesting provision 5.114 Despite the above, certain security interests will not vest in the grantor on insolvency. These include ‘deemed’ security interests created by transfers of accounts and chattel paper, and commercial consignments, where these do not in substance secure payment or performance of an obligation: s 268(1)(a)(i), (iii). A subset of PPS leases is also immune from vesting under ss 267(2) and 267A. These are leases which only fall within the definition of a PPS lease by virtue of s 13(1)(e); that is, leases of serial-numbered goods for a term that may be more than 90 days, but will not exceed [page 228]

one year. Where such leases do not in substance secure payment or performance, the lessor’s interest does not vest in the grantor on insolvency: s 268(1)(a)(ii). Also exempt are security interests the perfection status of which is governed by foreign law at the critical time, and security interests created pursuant to certain subordination agreements: s 268(1)(aa), (b), (2). PPS lessors and commercial consignors who fall outside these exceptions, and therefore within the vesting provisions, are afforded a statutory right of compensation as against the grantor: s 269. This right to compensation may be the only claim against the grantor available to such parties, if the transaction was a true lease or consignment.

Amendments to the Corporations Act: deadline for the registration of filing statements 5.115 Prior to the introduction of the PPSA, Corporations Act 2001 (Cth) s 263 obliged a company to lodge a notice of any registrable charge it had created within 45 days of creating it. Similarly, s 264 obliged a company that had acquired property already the subject of a charge, which would have been registrable by the company had the company created it, to ensure that a notice had been lodged with respect to the charge and to give notice of its acquisition to the chargee, both within 45 days of the acquisition. Although ss 263 and 264 imposed a duty on the chargor, in reality it was generally up to the chargee to ensure that appropriate notices had been filed. This was because of s 266, which rendered company charges void as against the liquidator or administrator of the company, or the administrator of the deed of company arrangement (as the case may be), if not registered, loosely speaking, before the expiry of the period outlined above: see s 266(1), (2) (repealed) for the details of the deadlines. The deadlines contained in s 266 were able to be extended by court order where the failure to lodge a notice ‘was accidental or due to inadvertence or some other sufficient cause’, or was ‘not of a nature to prejudice the position of creditors or shareholders’, or on other grounds where it was ‘just and equitable’: Corporations Act 2001 s 266(4) (repealed). These sections were repealed on 30 January 2012 by the Personal Property Securities (Corporations and Other Amendments) Act 2010 (Cth). That Act also inserted a new Div 2A into the Corporations Act, which sets up a scheme roughly similar to that of the old s 266 while taking into account the changes

wrought by the PPSA. Now, Corporations Act s 588FL establishes the applicable deadlines for the registration of ‘security interests’, in circumstances where an external administrator has been appointed to the corporate grantor: s 588FL(1). For the deadlines to apply, three criteria must be met (s 588FL(2)): first, Australian law must govern the enforceability of the interest against third parties; second, registration must be the only means by which the secured party has attempted to perfect its interest; and third, the registration time of the interest must be after the latest of the following times: six months before the critical time; 20 business days after the security agreement giving rise to the interest comes into force, or the critical time (whichever is earlier); where the security agreement came into force under a foreign law, but it first became enforceable against third parties under Australian law within the six months preceding the critical time — 56 business days after the security interest became so enforceable, or the critical time (whichever is earlier) (see 5.64 (Collateral relocated to Australia)); or a later time that is ordered by the court under s 588FM. If the security interest is not registered in time, and the court does not grant an extension under s 588FM, then the interest vests in the company: s 588FL(4). If the [page 229] security interest becomes enforceable against third parties before the critical time, then vesting occurs immediately before the order is made (or resolution passed) for the winding up of the company, the voluntary administrator is appointed, or the deed of company arrangement is executed (as the case may be): s 588FL(4)(a). If the security interest becomes enforceable against third parties only after the critical time, then it vests in the company when it becomes so enforceable: s 588FL(4)(b). As under the old s 266, the court may extend the deadline for registration where: the failure to register was accidental, due to inadvertence, or due to some other sufficient cause; the extension is not of such a nature as to prejudice the position of creditors or

shareholders; and/or it is otherwise just and equitable to grant relief: s 588FM. For a recent application of this provision, see Re Barclays Bank plc [2012] NSWSC 1095 per Black J (failure to register due to inadvertence). Further, some transactions are exempted from these registration deadlines. Sections 588FN(1) and (2) of the Corporations Act, which resemble s 268 of the PPSA, protect transfers of accounts and chattel paper, commercial consignments, a subset of PPS leases over serial-numbered goods, and certain subordination agreements from the consequences of s 588FL. Additionally, s 588FN(3) gives protection to secured parties where collateral the subject of the security interest has been transferred. If the transfer occurred with the secured party’s consent, the latter has five business days from the transfer in which to re-register its security interest. If the transfer did not occur with the secured party’s consent, the secured party must re-register within five business days of receiving actual or constructive knowledge of the transfer: s 588FN(4)(a). Recourse to this exception is only available where the reregistration occurs before the commencement of the administration or winding up: s 588FN(4)(b).

The circulating asset 5.116 In Re Brightlife Ltd [1987] Ch 200, Hoffman J made the following comments (at 214): The floating charge was invented by Victorian lawyers to enable manufacturing and trading companies to raise loan capital on debentures. It could offer the security of a charge over the whole of the company’s undertaking without inhibiting its ability to trade. But the mirror image of these advantages was the potential prejudice to the general body of creditors, who might know nothing of the floating charge but find that all the company’s assets, including the very goods which they had just delivered on credit, had been swept up by the debenture-holder. The public interest requires a balancing of the advantages to the economy of facilitating the borrowing of money against the possibility of injustice to unsecured creditors. These arguments for and against the floating charge are matters for Parliament rather than the courts and have been the subject of public debate in and out of Parliament for more than a century.

The extent to which the Act abolishes or preserves the concept of a floating charge is discussed earlier in this chapter: see 5.35. In summary, while secured parties may take security over after-acquired property of the grantor, the interest attaches to the property automatically the moment the grantor acquires it: ss 18(2), (3). Once attached, the interest is fixed notwithstanding the absence of any crystallising event. Parties may by contract postpone the

attachment of interests and/or structure their relations in a way that resembles a floating charge, although merely classifying the interest as a ‘floating charge’ in the security agreement will be insufficient to achieve this: s 19(4); Credit Suisse Canada v 1133 Yonge Street Holdings (1998) 41 OR (3d) 632; 14 PPSAC (2d) 61 at [20]–[21]. These provisions arguably strengthen the position of a secured party with an interest in after-acquired property. Such creditors unequivocally enjoy a proprietary interest in the collateral from the moment the grantor acquires it, and the grantor remains able to deal with the collateral in the ordinary course of business (either by virtue of authorisation from the secured party, or the operation of the Act’s taking free rules: s 46(1), 5.104). Paul Ali has pointed out that, in erasing the distinction between the floating charge and [page 230] other forms of security, the UCC and similar statutes have ‘[p]aradoxically … secured the place of the floating charge within their regimes’: Paul U Ali, ‘The Floating Charge and Its Place Within Article 9, PPSA Security Regimes and Australian Law’ (2004) 22 C&SLJ 481 at 481. In light of this, the mischief identified by Hoffman J persists under the PPSA. The PPSA balances the interests of holders of ‘all assets’ security interests that extend to after-acquired property against the interests of certain creditors whose claims should be preferred as a matter of public policy. Such creditors include secured creditors who directly finance acquisitions of new property by the grantor; these are afforded a special position within the PPSA priority regime: see 5.79 (Super-priority: the purchase money security interest (PMSI)). The PPSA also protects the certain unsecured claims, including: claims by beneficiaries of third party liability insurance policies taken out by the grantor; certain employee entitlements; and administrators’ costs. See generally Lionel Meehan, ‘Circulating Security Interests Under the Personal Property Securities Act 2009 (Cth) Compared to Floating Charges’

(2011) 22 JBFLP 322. Prior to the enactment of the PPSA, the Corporations Act 2001 (Cth) gave such claims special priority in the event of a corporate insolvency vis-à-vis floating chargees. The major issue for determination was the nature of the security interest as a fixed or a floating charge. Since the enactment of the PPSA, and the abrogation of the fixed/floating distinction to a great degree, the nature of the inquiry has changed. The Corporations Act now operates by reference to the ‘circulating security interest’, defined as a security interest taken over a ‘circulating asset’ under the PPSA. The inquiry is no longer directed at the nature of the security interest, but the nature of the personal property the subject of the security interest.

Definition of circulating asset 5.117 Personal property may fall within the definition of a ‘circulating asset’ in one of two ways. Personal property is a ‘circulating asset’ if ‘the secured party has given the grantor express or implied authority for any transfer of the personal property to be made, in the ordinary course of business, free of the security interest’: s 340(1)(a). In other words, personal property is a circulating asset if it is the subject of a trading power on the part of the grantor. Certain kinds of personal property are also deemed to be circulating assets irrespective of whether they are the subject of a trading power: s 340(1)(b). These include (s 340(5)): an account that arises from granting a right or providing services in the ordinary course of a business involving such rights or services, whether or not the account debtor is the recipient of the rights or services; an account that is the proceeds of inventory; an ADI account, other than a term deposit; currency; inventory; a negotiable instrument. In this context, ‘inventory’ bears its ordinary meaning instead of the special meaning contained in s 10: s 341(1B).

[page 231] Secured parties may prevent these types of personal property from being classified as circulating assets in one of two ways. First, if the personal property is goods, the secured party may perfect its interest by possession and so take the goods out of the grantor’s pool of circulating assets: s 340(1)(b), (3). Second, the secured party may take ‘control’ of the personal property, and ensure that there is an effective registration which discloses this fact in accordance with the regulations: s 340(1)(b), (2). Where this requirement is met, the mere fact that the secured party has given express authority to transfer specific personal property, or a specific class of personal property, is insufficient to re-establish its status as a circulating asset: s 340(4). The inquiry required under s 340 somewhat resembles that undertaken when determining whether a charge is fixed or floating at general law. This distinction was summarised by Romer LJ in Re Yorkshire Woolcombers Association Ltd [1903] 2 Ch 284 (affirmed [1904] AC 355) at 295, in an oftcited passage: I certainly do not intend to attempt to give an exact definition of the term ‘floating charge,’ nor am I prepared to say that there will not be a floating charge within the meaning of the Act, which does not contain all the three characteristics that I am about to mention, but I certainly think that if a charge has the three characteristics that I am about to mention it is a floating charge. (1.) If it is a charge on a class of assets of a company present and future; (2.) if that class is one which, in the ordinary course of the business of the company, would be changing from time to time; and (3.) if you find that by the charge it is contemplated that, until some future step is taken by or on behalf of those interested in the charge, the company may carry on its business in the ordinary way as far as concerns the particular class of assets I am dealing with.

On appeal, Lord Macnaghten (with whom Lord James and Lord Lindley agreed) affirmed and expanded upon this statement of principle: A specific charge, I think, is one that without more fastens on ascertained and definite property or property capable of being ascertained and defined; a floating charge, on the other hand, is ambulatory and shifting in its nature, hovering over and so to speak floating with the property which it is intended to affect until some event occurs or some act is done which causes it to settle and fasten on the subject of the charge within its reach and grasp: Illingworth v Houldsworth [1904] AC 355 at 358.

See also United Builders Pty Ltd v Mutual Acceptance Ltd (1980) 144 CLR 673 at 682 per Stephen J, 686 per Mason J; Stein v Saywell (1969) 121 CLR 556. The requirement in s 340(1)(a) approximates the third factor

identified by Romer LJ, although under the Act there is no room for a security interest that is ‘ambulatory and shifting’ until a crystallising event occurs: see 5.35. The kinds of property listed in s 340(5) are ones which ‘in the ordinary course of business of the company, would be changing from time to time’. These are presumed to be the subject of a trading power unless the secured party takes possession or imposes sufficient restrictions on the grantor’s ability to deal with the collateral.

Control 5.118 The Act provides that, in this context, ‘control’ generally bears its ordinary meaning: s 341(1A)(a). However, the term bears a specific meaning in relation to inventory, certain accounts, and ADI accounts. A secured party has ‘control’ of inventory within s 340(2) if the grantor has agreed in writing that it will specifically appropriate the inventory to the security interest, and will not remove the inventory without the prior approval of the secured party, in circumstances where the grantor’s usual practice is to comply with the agreement: s 341(1)(b). The final caveat is designed to avoid secured parties from obtaining ‘control’ (and its associated benefits) of inventory merely through, for example, inserting a standard term in a supply agreement which is routinely flouted and never enforced. [page 232] A person may take ‘control’ of an account that is the proceeds of inventory, or that arises from the granting of rights or the provision of services in the ordinary course of business, in one of two ways: s 341(2). If the secured party is a transferee of the relevant account, the secured party may control it if payment by the account debtor discharges the account obligation under s 80(8) to the extent of the payment (section 80 dealing with the rights of the transferee and/or account debtor after the transfer of an account or chattel paper): s 341(4). Alternatively, the secured party can control the relevant account if the following requirements are met (s 341(3)): there is an agreement in writing between the secured party and the person to whom the relevant account is owed, to the effect that amounts paid in

discharge of the relevant account must be deposited in a specified ADI account; the usual practice is for such amounts to be deposited in this account; the secured party controls the ADI account (see below); and the depositing of such amounts into the ADI account does not result in any person coming under a present liability to pay either the person to whom the account is owed, or a related body corporate. Part 2.3 of the Act prescribes a special meaning of ‘control’ in relation to ADI accounts for the purpose of the perfection system within the PPSA priority regime. In this context, ‘control’ has a broader meaning. A secured party has ‘control’ of an ADI account if any of the following requirements are met (s 341A(1)(a)): the secured party is the ADI; the secured party is able to direct disposition of the funds from the account without further consent from the grantor; or the secured party becomes the ADI’s customer with respect to the account. If the secured party is not the ADI, it must also ensure that the depositing of an amount in the ADI account does not result in any person becoming liable to pay the debtor or a related body corporate: s 341A(1)(b). The fact that the grantor retains the right to direct the disposition of funds from the account does not on its own prevent the secured party from having control of it: s 341A(2); cf National Westminster Bank plc v Spectrum Plus Ltd [2005] UKHL 41; see also Siebe Gorman & Co Ltd v Barclay’s Bank Ltd [1979] 2 Lloyd’s Rep 142 per Slade J. Under pre-PPSA law, it was routinely presumed that the grantor could deal with certain kinds of property (most notably, book debts) in the ordinary course of business, although the chargee could rebut this by demonstrating a sufficient degree of restraint placed on the grantor’s ability to deal with the property: see National Westminster Bank plc v Spectrum Plus Ltd [2005] UKHL 41; Agnew v Commissioner of Inland Revenue [2001] 2 AC 710. This line of authority may be of some assistance in determining whether a secured

party has ‘control’ of the kinds of personal property the circulating nature of which is otherwise presumed by s 340(5), and for which a special meaning of ‘control’ is not prescribed. Note that many of these cases concern book debts, for which, as a species of account, the Act prescribes a specific means of control.

VII Enforcement of security interests 5.119 Chapter 4 contains ‘general rules about the rights and remedies available to a party to a security agreement for enforcing a security interest in personal property’: s 108 (guide to part). Importantly, the remedies provided for by Ch 4 do not in any way derogate from any additional remedies provided for by the security agreement: s 110. Additionally, where the collateral is not predominantly for personal, domestic or household uses (see [page 233] 5.9–5.10), the parties may contract out of the majority of the provisions in Ch 4: s 115. Only three key provisions are mandatory in relation to nonconsumer property: s 111, which imposes a duty of honesty and commercial reasonableness; s 131, which imposes a duty to make reasonable attempts to obtain a market price on the disposal of collateral; and s 140, which prescribes the order in which the proceeds of sale are to be distributed among interested parties. Each of these provisions is discussed in more detail below. In the event the parties have not contracted out of the Ch 4 remedies, those remedies are cumulative: s 114. Furthermore, s 133 provides that ‘[t]he fact that a secured party has recovered judgment, or issued execution, against a grantor in relation to collateral does not extinguish the security interest in the collateral’. In other words, the doctrine of merger does not operate to prevent a secured party from both pursuing proprietary remedies and enforcing its personal rights against the grantor.

A. Application of PPSA remedies

5.120 Not all secured parties have access to the Ch 4 remedies. Holders of ‘deemed’ security interests are excluded where the interest in question does not also secured payment or performance within s 12(1): s 109(1). A lessor under a true lease for a term of more than one year would not, for example, have recourse to the Act’s enforcement mechanisms: see 5.19 (Leases). The interests of such persons are deemed to be security interests only for the purpose of converting any dispute between them and the secured creditor of the lessee into a priority dispute. It would pile fiction upon fiction to treat such persons as secured creditors for the purposes of enforcement, which presupposes that there is a secured debt to be enforced. Also excluded are holders of security interests in investment instruments or intermediated securities, which interests are perfected by possession or control: s 109(3), (4). Such persons are already in a position to deal these kinds of collateral via official trading systems, and the integrity of those systems requires that they be exempted from compliance with the Ch 4 procedures. However, these secured parties remain subject to the following provisions of the chapter, which are discussed in more detail below: Section 110, which provides that the PPSA does not derogate from rights the parties might otherwise have against each other in relation to defaults under the security agreement; Section 111, which imposes a statutory duty of honesty and commercial reasonableness in relation to enforcement; Section 113, which provides that the recovery of judgment or issuing of execution does not extinguish security interests in collateral; and Section 140, which deals with the distributions of proceeds after disposal. Likewise, Ch 4 does not apply in circumstances where a receiver or a receiver-manager is in control of the collateral and the grantor is a legal entity (rather than an individual): s 116. The rights, duties and liabilities of such persons are already regulated by Corporations Act 2001 (Cth) Pt 5.2. Lastly, the Act expressly provides that the remedies are not available with respect to collateral that is located outside Australia, although this may have followed as a matter of statutory interpretation in any case: s 109(2); Barcelo v Electolytic Zinc Co of Australasia Ltd (1932) 48 CLR 391 at 422 per Dixon

J; cf J Gleeson SC,‘Extraterritorial Application of Australian statutes proscribing misleading conduct’ (2005) 79 ALJ 296 at 299–300. Security interests in collateral that is predominantly used for personal, domestic or household purposes are also exempted from certain Ch 4 provisions; most notably, s 129 (dealing with the disposal of collateral by purchase) and s 134 (dealing with the retention [page 234] of collateral by the secured party): see 5.9–5.10. The rationale of these exemptions is presumably consumer protection.

Duty of good faith 5.121 The PPSA expressly provides that all rights, duties and obligations that arise under Ch 4 must be exercised or discharged honestly and in a commercially reasonable manner: s 111(1); see also s 140(7). In essence, this is a statutory duty of good faith. An intriguing question is how this duty compares with the duty of good faith pertaining to the general law of contract. Arguably, the general law duty like the statutory duty requires reasonableness as well as honesty, although this view is not universally accepted: see Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234; Burger King Corp v Hungry Jack’s Pty Ltd [2001] NSWCA 187; Australian Energy Regulator v Stanwell Corporation Ltd (2011) 197 FCR 429 at [68]; J W Carter, Elisabeth Peden and G J Tolhurst, Contract Law in Australia, 5th ed, 2007, pp 26–8 [2-12]–[213]; Jane Stapleton, ‘Good Faith in Private Law’ (1999) 52(1) Current Legal Problems 1. The Australian Act provides that merely acting with actual knowledge of the interests of another person does not amount to dishonesty: s 111(2). Thus ‘bad faith’ under the PPSA has been said to require ‘some form of positive action such as a representation amounting to a waiver or leading to an estoppel’: Gibson v Stock Co Ltd [2010] NZHC 2398; [2011] NZCCLR 29 at [201]–[203]; see also Canadian Imperial Bank of Commerce v AK Construction (1998) Ltd (1995) 171 AR 326; 518718 Alberta Ltd v Canadian

Forest Products Ltd [1993] 3 WWR 672. The concept of ‘honesty’ encompasses conduct that is recognised by the perpetrator to be morally wrong, and conduct that is classified as morally wrong according to the standards of others in light of what the perpetrator knew at the time: Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 387 at 390-1; Twinsectra Ltd v Yardley [2002] 2 AC 164; James Allsop, ‘Good Faith and Contract Law: A Practical Issue and a Question of Theory and Principle’ (2011) 85 ALJ 341. A lack of reasonableness coupled with other factors may indicate that a person has not in fact behaved honestly, but this still involves making an inference as to that person’s state of mind. By contrast, in judging whether conduct is ‘commercially reasonable’ no reference need be made to the perpetrator’s state of mind. Thus the injunction in s 111 may be breached where a person acts honestly, but is inadvertently unreasonable. This is a point of distinction between the PPSA definition and the definition of good faith under the Sale of Goods Acts, pursuant to which ‘[a] thing is deemed to be done ‘in good faith’… when it is in fact done honestly, whether it be done negligently or not’: see, for example, Sale of Goods Act 1923 (NSW) s 5(2); Goods Act 1958 (Vic) s 3(2); Sale of Goods Act 1896 (Qld) s 3(2); Sale of Goods Act 1895 (SA) s 2(2); Sale of Goods Act 1895 (WA) s 60(2); Sale of Goods Act 1896 (Tas) s 3(2); Sale of Goods Act 1954 (ACT) s 4(a); Sale of Goods Act 1954 (NT) s 5(2). The Australian provision draws on, but is not identical to, the general duty of good faith provided for in the PPSAs of many Canadian provinces and New Zealand: see NZ PPSA s 25(1); Sask PPSA s 63(3); BC PPSA s 68(2); Alb PPSA s 66(1); Man PPSA s 65(3); NS PPSA s 66(2). Under the Acts of most Canadian Provinces, and the New Zealand Act, the duty extends to the exercise of rights under the PPSA in its entirety, and under the security agreement. By contrast, the standard of ‘commercial reasonableness’ under the Uniform Commercial Code and the Ontario PPSA applies specifically to disposals of collateral: UCC § 9-610, Ont PPSA s 63(2). Section 9-610 of the UCC provides that ‘every aspect of a disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable …’: cf Ont PPSA s 63(2); and see Greyvest Leasing Inc v Merkur (1994) 8 PPSAC (2d) 203 (Ontario Court of Justice) at [44]–[48]. The Australian provision applied to the exercise of all remedies under Ch 4;

[page 235] it is broader in scope than the UCC and the Ontario PPSA, and narrower in scope than the PPSAs of New Zealand and the other Canadian provinces. These differences should be kept in mind when considering the case law. In the United States, whether a disposal is commercially reasonable is said to be a question of fact to be determined on a case-by-case basis: Edgewater Growth Capital Partners LP v HIG Capital Inc 68 A 3d 197 (2013) (Court of Chancery of Delaware). It is an inquiry that ‘balances two competing policies: (1) protecting debtors against creditor dishonesty; and (2) minimizing interference in honest dispositions’: Tex Star Motors Inc v Regal Finance Company Ltd 401 SW 3d 190 at 196. In Mallicoat v Volunteer Finance & Loan Corp 415 SW 2d 347 (1966), the Court of Appeals of Tennesee said (at 111): The requirement that property be disposed of in a ‘commercially reasonable’ manner seems to us to signify that the disposition shall be made in keeping with prevailing trade practices among reputable and responsible business and commercial enterprises engaged in the same or a similar business.

A disposal will be commercially reasonable if it is ‘in conformity with reasonable commercial practices among dealers in the type of property that was the subject of the disposition’: §9-627(b)(3); see Edgewater, above, at 214–5. However, compliance with an industry standard is not conclusive proof that conduct was commercially reasonable: In Regal Financial Co Ltd v Texstar Motors 355 SW 3d 595 (2010). See also Maine Family Federal Credit Union v Sun Life Assurance Co of Canada 727 A 2d 335 (1999) at [28] (discussing the definition of ‘good faith’ in UCC § 9-102(a)(43), which requires ‘honesty in fact and the observance of reasonable commercial standards of fair dealing’). Whether a disposal is commercially reasonable is said to require a consideration of the following factors (see also UCC § 9627): (1) whether the secured party endeavoured to obtain the best price possible; (2) whether the collateral was sold in bulk or in piecemeal; (3) whether it was sold via private or public sale; (4) whether it was available for inspection before the sale; (5) whether it was sold at a propitious time; (6) whether the expenses incurred during the sale were reasonable and necessary; (7) whether the sale was advertised; (8) whether multiple bids were received; (9) what state the collateral was in; and (10) where the sale was conducted … As these factors imply, commercial reasonableness is a fact-based inquiry that requires a balance of Article 9’s two competing

policies: (1) protecting debtors against creditor dishonesty and (2) minimizing interference in honest dispositions …

Clearly, there is an overlap between the duty of commercial reasonableness in relation to disposal and the duty in s 131 to exercise reasonable care in obtaining a market price for the collateral, see below. The party alleging a want of good faith (or, a lack of honesty and commercial reasonableness) bears the onus of proving it: Canadian Imperial Bank of Commerce v AK Construction (1988) Ltd (1995) 9 PPSAC (2d) 257 at [42]; but cf Mason Logging Co v General Electric Capital Corporation 13 FC DR 2117.

Limitation on rights of secured party 5.122 In exercising the Ch 4 remedies, the Act expressly provides that the secured party may only deal with the collateral to the same extent the grantor would be entitled to deal with it: s 112(1). The section emphasises that, although the operation of the rule nemo dat quod non habet has been curtailed for the purposes of determining priority disputes, the rule persists in other contexts. Here, the Act is concerned to preclude the secured party from giving to third parties (in the event of a disposal) or receiving for itself (in the event of it retaining or purchasing the collateral itself) more than the grantor has to give. This limitation may appear to cause difficulties where title is in fact located with the secured party, as under a chattel mortgage or conditional sale agreement. For this reason, s 112(2)(a) provides that the limitation in subs (1) does not apply if ‘the secured party had title to the collateral immediately before starting to exercise any right or remedy provided by this Part’. [page 236] In the absence of this provision, the ‘deemed ownership’ theory might be called upon to support the analysis that, to give effect to the purpose of the Act in treating functionally equivalent transactions alike, the grantor must be treated as ‘owner’ and the secured party merely the holder of a limited interest in the collateral: cf Duggan and Brown, above, p 266 [12.25]. The limitation in subs (1) is also inapplicable to the extent that it would prevent

the secured party from dealing with the collateral, because the grantor was proscribed from so dealing by the security agreement: s 112(2)(b). The Act does not seek to cut down the interest that the secured party has, but to prevent the transmission of property that does not exist. In summary, the secured party may deal with the collateral to the extent of the grantor’s rights in the collateral, or its rights in the collateral, whichever are greater.

B. Remedies available to secured parties 5.123 To invoke the Ch 4 remedies, a secured party must first seize the collateral. It must then choose whether to dispose of the collateral, or ‘retain’ it (an avenue resembling the remedy of foreclosure). If it chooses to dispose of the collateral, it may do so by selling the collateral via either a public or a private sale, leasing it (where the security agreement permits), or licensing it (where the collateral is intellectual property and the security agreement permits). Alternatively, the secured party may purchase the collateral itself; although this avenue is strictly regulated.

Seizure 5.124 If the debtor is in default under the security agreement, the secured party may seize the collateral by any method permitted by law: s 123(1). A secured party must effect a seizure under s 123 before exercising any of the other Ch 4 remedies. Both tangible and intangible property may be seized. To seize intangible property, the secured party may give notice to the grantor or, if the property is a licence, to the licensor or the licensor’s successor. The notice must state that the giving of the notice constitutes seizure of the property: s 123(2). Alternatively, intangible property may be seized by any other method agreed upon by the parties: s 123(3). Similarly, secured parties that have perfected their security interests in collateral by possession or control, whether or not by other means as well, may also ‘seize’ the collateral by giving notice to the grantor, the licensor or the licensor’s successor, as the case may be: s 124. Given the PPSA’s extended concept of ‘possession’, this provides another means by which intangible property may be seized: see 5.42. The Act contains rules dealing with the situation in which a second or

subsequent-ranking secured party (SP2) seizes the collateral ahead of a prior ranking party (SP1), who would also be entitled to seize. SP2 must give notify SP1 of its intention to sell the collateral: s 130. SP1 is thus given an opportunity to require, by written notice, SP2 to give up possession — although SP1 need not wait for a s 130 notice from SP2 to do this: s 127(2), (3). If the collateral is intangible property, SP1 is taken to have complied with the ‘seizure’ requirements outlined above when it gives written notice to SP2 requiring the latter to relinquish possession: s 127(5). SP2 must comply with the notice to relinquish within five business days, or longer if the delay is reasonable in the circumstances: s 127(4). SP1 must also pay SP2’s reasonable expenses, which become enforceable as a debt due: see s 127(5)– (11).

Default by the debtor 5.125 The power to seize under s 123 presupposes that there has been a ‘default’ by the debtor under the security agreement. Unlike many of its predecessors, the PPSA does not define ‘default’: cf NZ PPSA s 16(1); Sask PPSA s 2(1)(n); Alb PPSA s 1(1)(n); BC PPSA s 1(1); Ont PPSA s 1(1); Man PPSA s 1. The term will fall to be interpreted [page 237] according to its natural and ordinary meaning in light of the purpose and context of the Act. In determining this meaning, regard might be had to the definitions contained in the Acts in pari materia, consistently with the principles outlined above: see 5.3–5.5. Note that the default must be that of the debtor, who is not necessarily the same person as the grantor. Consider the following common situation: a Debtor Company is controlled by an individual Grantor, who guarantees the obligations owed by Debtor Company to Bank and grants Bank a security interest in his or her personal property. Upon default by Debtor Company, Bank may seize the personal property of Grantor, whether or not Grantor has defaulted under the guarantee.

Notice?

5.126 If the personal property in the example above were intangible, Bank would need to give notice to Grantor (not Debtor Company) in order to seize the collateral: s 127(2), see above. In this case, the giving of the notice constitutes the seizure. However, there is no express requirement that the enforcing secured party give notice of its intention to seize, whether the property is tangible or intangible, although the duty of ‘commercial reasonableness’ may require such a notice to be given in the circumstances: Tex Star Motors Inc v Regal Finance Company Ltd 401 SW 3d 190 (2010). Additionally, the Act requires the enforcing secured party to give notice of its intention to dispose of the collateral to certain interested parties: s 130; see 5.129–5.133.

Secured party may seize by legal methods 5.127 A seizure may be carried out ‘by any method permitted by law’: s 123(1). Obviously, secured parties must avoid breaches of the peace and the law of trespass. The National Credit Code imposes further restrictions, where it applies: see Duggan and Brown, above, p 269 [12.34]. If the collateral is not readily removable from the grantor’s premises, or there are no adequate storage facilities for the collateral, then the secured party may effect a seizure by taking ‘apparent possession’ of the collateral: s 126(1). Seizure by this method does not perfect the secured party’s interest in the collateral: s 126(3); see also s 24 and 5.45. ‘Apparent possession’ is not defined by the Act. It is a phrase commonly used in relation to bills of sale, and the case law in that area may provide some guidance: see the cases cited above at 5.43. The purpose of seizing collateral is, like many other provisions of the Act, to put third parties on notice of the secured party’s rights. With this in mind, whatever action that is said to constitute the taking of apparent possession should be sufficient to provide third parties with ‘notice of the transfer of the collateral from the grantor to the secured party’: see [4.47] of the Replacement Explanatory Memorandum.

Obligation to retain or dispose of collateral 5.128 Where a seizure has been made under s 123, the seizing party must either dispose of, or retain, the collateral after a reasonable period in which to secure, store and value the collateral, and to determine how to deal with it: s 125(1), (2). Any delay after this reasonable period must be contemplated by

the security agreement, or be otherwise reasonable in the circumstances: s 125(3). As the authors of Everett and McCracken, above, say, the secured party ‘cannot simply “sit on it”’: p 538 [13.470] (and see p 537 [13.460] for a graphical representation of the choices open to secured parties once they have seized collateral under s 128).

Disposal 5.129 In most cases, a secured party will elect to dispose of collateral rather than retain it. It may do so by selling to a third party under a private or public sale, including an auction or closed tender, or by purchasing the collateral itself: ss 128(2), 129. In cases where a secured party has seized collateral situated on the grantor’s premises by taking [page 238] ‘apparent possession’, the collateral may be disposed of on the premises, provided the grantor is not put to any greater cost or inconvenience than necessarily incidental to the disposal: s 126(2). A disposal of collateral via lease or licence (where the collateral is intellectual property) must be effected in accordance with the terms and conditions of the security agreement: s 128(3). Where the collateral is a licence, the power to dispose must be exercised subject to the terms and conditions of the licence and any other applicable Commonwealth, state or territory law: s 128(6). A notice is not required in certain circumstances: s 144. These include where the secured party has failed to locate the recipient after making all reasonable attempts to find them, and where the grantor waives in writing his, her or its right to receive a notice (which must be given after the default of the debtor). Additionally, a court may ex parte relieve a secured party from the notice obligation if satisfied that a notice is not required ‘for any other reason’: s 144(d).

Duty to obtain market value 5.130

A secured party who disposes of collateral under s 128 is obliged to

exercise all reasonable care to obtain at least the market value of the collateral, or (if there is no market value at the time of disposal) the best price reasonable obtainable at the time of the disposal in the circumstances then existing: s 131. The duty is owed not only to the grantor, but also to other parties with security interests in the collateral. Case law interpreting Corporations Act 2001 (Cth) s 420A (dealing with controllers exercising a power of sale) may be of some assistance in interpreting this provision: Harris and Mirzai, above, p 380 [131.5]; Florgale Uniforms Pty Ltd v Orders (2004) 11 VR 54; Investec Bank (Australia) Ltd v Glodale Pty Ltd (2009) 71 ACSR 615; 24VR 617.

Sale to self 5.131 For personal property that is not used predominantly for consumer, domestic or household purposes, an enforcing secured party may dispose of collateral under s 128(1) by purchasing the collateral itself: s 129(1) and see s 109(5), discussed above. This course of action is all but prohibited at general law and heavily regulated under the Act. It may only be taken after meeting certain procedural requirements, and the taking of it triggers a veto power on the part of the grantor. As with disposals to third parties, the secured party who intends to purchase collateral for itself must give notice under s 130. However, in this case the notice must state that the secured party proposes to purchase the collateral itself: s 129(2)(a). The persons entitled to notice under s 130 are given an opportunity to object to this proposal: s 137(1), (2). Such persons must give any notice of objection before the end of the day specified in the notice sent by the enforcing party (which must, in the absence of written agreement as to a shorter period, be at least ten business days from the day the notice was given): ss 137(2), 130(3). The enforcing secured party is entitled to request the objector for proof of its interest, where this person is not the grantor, failing which the objection is deemed not to have been made: s 138. If there is a valid objection, then the secured party cannot purchase the collateral: s 129(2)(b). It must instead proceed to dispose of the collateral under s 128, to a third party: s 137(3). If there is no valid objection, then the secured party may proceed with the purchase, subject to two conditions. The first is that the purchase must be by public sale, which includes an auction or

a closed tender: s 129(3)(a). The second is that the secured party must pay at least the market value of the collateral at the time of the purchase: s 129(3) (b). The secured party generally bears the onus of proving that the purchase price was at least equal to the market value: s 296(f). [page 239]

Purchaser takes free on resale 5.132 In the event collateral is disposed of under s 128, the purchaser takes free from the interests of: the grantor; the enforcing secured party; and all other secured parties whose ranking is lower than that of the enforcing secured party: s 133(1). This is the case even where not all of the requirements of the Chapter have been complied with, and the provision applies equally to sales-to-self under s 129 and sales to third parties: s 133(2). Note that the purchaser remains subject to the security interests of parties whose ranking is higher than that of the enforcing secured party.

Distribution of proceeds 5.133 Where a secured party receives an amount, personal property or proceeds as a result of enforcing a security interest, those funds must be applied in the following order (see s 140(2), (3)): first, to persons with interests (other than security interests) in the collateral with higher priority (whether or not this priority is bestowed by the PPSA); second, to the payment of reasonable expenses incurred by the secured party in enforcing the security interest, if such expenses are also secured; third, to persons with security interests in the collateral with higher priority (whether or not this priority is bestowed by the PPSA); fourth, to the payment of the debts owing to the secured party enforcing its interest; fifth, to persons with interests (including security interests) with lower priority; and

lastly, to the grantor. Note that, unless the security agreement provides otherwise, the reasonable expenses of enforcement are presumed to be secured by the security agreement: s 18(5). Proceeds of sale must be distributed in this fashion notwithstanding the purchaser takes free of the security interest under s 133: s 140(4), see below. However, the Act absolves the enforcing secured party from liability under an ‘action, suit or proceeding in relation to an application of proceeds in accordance with this section’ provided the secured party applies the proceeds honestly and in a commercially reasonable manner: s 140(7). As s 140 makes clear, the secured creditor is not authorised to retain the surplus equity in the collateral after sale: see National Operating, above, at 860 [42]. The grantor in default has the right to the surplus, and it cannot waive this right: s 115; see also Major’s Furniture Mart, Inc v Castle Credit Corp 602 F 2d 538 (1979); Bill Fitts Auto Sales, Inc v Daniels 325 Ark 51 (1996).

Retention 5.134 Secured parties may choose to ‘retain’ collateral rather than dispose of it: s 134. Once a secured party has ‘retained’ the collateral, any right of the grantor to redeem it is extinguished: see 5.136. Thus retention under the Act performs a similar role to the remedy of foreclosure. A secured party who proposes to retain collateral must give notice of its intention to the grantor: s 135(1)(a). If the secured party’s interest in the collateral is a purchase money security interest, then it must give notice to other secured parties over whom it has priority by virtue ss 62 or 63 (see 5.79 (Super-priority: the purchase money security interest (PMSI))), provided the latter have registered a financing statement describing the collateral: s 135(1)(c). If the secured party’s interest is not a PMSI, then it must give notice to all other secured parties that have registered a financing statement describing the collateral: s 135(1)(b). In each case, the notice must given at least 10 business days before the secured party takes any step towards retaining the collateral (or a shorter period, where the recipient has given written notice of its [page 240]

consent): s 135(2). The notice must comply with the approved form and contain the following information (s 135(3), (4)): the name of the secured party giving the notice; a description of the collateral; the fact that the secured party proposes to retain the collateral unless a certain obligation is performed by a specific day (being at least 10 business days after the notice is given); the nature of the obligation to be performed in order to satisfy the obligation secured by the security interest in the collateral; the details of the rights of objection under Div 5; the address to which a notice of objection may be sent under s 137; any other matter prescribed by the Regulations. Again, notice is not required in certain circumstances: s 144; see 5.129–5.133. The choice by the secured party to retain the collateral triggers the same objection mechanism as that outlined above in relation to purchases of the collateral by the secured party. If a person entitled to a s 135 notice gives the secured party a notice of objection within time (ordinarily, within 10 business days), then the secured party must not proceed with its proposal to retain the collateral and must instead dispose of it under s 128: s 137, see above. Quaere whether, in this case, the secured party must dispose of the collateral to a third party, or whether it may elect to purchase the collateral itself. If so, then the notice requirements and objection mechanism is triggered once again.

C. Rights of the grantor and other secured parties 5.135 The Act provides two important rights to grantors who are in default. Such persons may either redeem the collateral by tendering performance of all the obligations under the security agreement, or reinstate the security agreement by remedying the specific default. The right to redeem is also available to persons with security interests in the collateral, other than the enforcing party, in addition to the grantor. By contrast, the right to reinstate

appears to be available to any person, whether or not a party to the security agreement the subject of the reinstatement. Parties may contract out of both the right of redemption and the right to reinstate the contract: s 115(1).

Redemption 5.136 Section 142 of the Act affords the grantor a statutory right of redemption, which may be exercised at any time before a secured party disposes of collateral under s 128. This right of redemption is also available to other parties with security interests in the collateral, although the grantor’s right to redeem has priority over that of any other person: s 142(1), (3). The grantor or other secured party may redeem the collateral by performing the obligations secured by the collateral and paying the costs of enforcement, to the extent these are secured by the collateral: s 142(1)(a), (b); see also s 18(5) (reasonable expenses of enforcement are presumed to be so secured unless the parties agree otherwise); Howard v Lud 119 Mich App 55 (1982) at 62–3. The exercise of the right requires ‘actual, present, unconditional, physical production of payment, and a mere willingness, readiness, or proposition to pay is not enough’: Task Enterprises Inc v Pratt Adjustment Company 695 P 2d 762 (1985) at 763 per Babcock J. The grantor (or other secured creditor) must not exercise its right to redeem if he, she or it so agrees in writing after the default: s 142(2). The grantor (or other secured creditor) may waive the right to redeem the collateral, but only by agreement in writing and only after default: In Indianapolis Morris Plan [page 241] Corporation v Karlen 28 NY 2d 30 (1971), Breitel J of the Court of Appeals of New York made the following comments (at 33–5): There is no doubt that, since the Chancellor first intervened, an equity of redemption as a right in the borrowing debtor might not be waived in advance, however formal or framed the writing and however weighty the consideration … In accordance with the old equity rule … the right of redemption may not be waived in advance but only after default, and that rule, it is seen, is carried into the code [UCC § 9-506].

See also National Operating, LP v Mutual Life Insurance Company of New York 244 Wis 2d 389 (2001) at 862. In Lewis Broadcasting Corporation v Phoenix Broadcasting Partners 232 Ga App 94 (1998) Blackburn J of the Court of Appeals of Georgia held that the inclusion of an option to purchase for a fixed price upon default in the original security agreement ‘constitutes an impermissible attempt to defeat the debtor’s right to redeem the collateral’ (at 95); see also Bromley v Bromley 106 Ga App 606 (1962). In coming to this conclusion, his Honour drew upon the general law’s proscription against fetters or clogs on the equity of redemption. Prosser J of the Wisconsin Supreme Court made similar remarks in National Operating, above (at 862– 3): The purpose of these restrictions on the ability to waive or vary the debtor’s rights in default is explained in Official Comment 4 to UCC § 9-501, which states in part: In the area of rights after default our legal system has traditionally looked with suspicion on agreements designed to cut down the debtor’s rights and free the secured party of his duties: no mortgage clause has ever been allowed to clog the equity of redemption. The default situation offers great scope for overreaching; the suspicious attitude of the courts has been grounded in common sense. Subsection (3) of this section [UCC § 9-501, Wis Stat § 409.501] contains a codification of this longstanding and deeply rooted attitude: the specified rights of the debtor and duties of the secured party may not be waived or varied except as stated. … The purpose of Article 9 protections for debtors is further explained in Walker v Grant County Savings and Loan Ass’n, 304 Ark 571, 803 S W 2d 913, 916 (1991): ‘One clear policy reason underlying Article 9 default provisions is the protection of post default debtors from the potential of overbearing tactics and intimidation by secured parties.

The Australian provision provides that the grantor, or other secured creditor, may redeem the collateral at ‘any time before a secured party disposes of collateral under section 128’. It makes no reference to the position where the secured party chooses to retain rather than dispose of the collateral: cf NZ PPSA s 132(1); Alb PPSA s 63(1); Sask PPSA s 62(1); Man PPSA s 62(1); Ont PPSA s 66(1); and see Angelkovski v Trans-Canada Foods Ltd (1986) 6 PPSAC 1. Notwithstanding this, it is submitted that the right in s 142 does not disappear merely because the secured party elects to retain collateral rather than dispose of it. Further, the right to redeem does not persist indefinitely if the secured party retains the collateral and thus never invokes s 128. The effect of retention under s 136 is to allow the secured

party to take free of the grantor’s interest in the collateral, and to extinguish the obligation which was secured by the collateral: s 136(5). If the obligation is extinguished, the grantor cannot redeem by tendering performance under s 142(1).

Reinstatement 5.137 At any time before a secured party disposes or retains collateral, whether or not pursuant to Ch 4, a person may ‘reinstate’ the security by: paying the amounts in arrears (not including arrears which are due only because of an acceleration clause) and any expenses secured by the security interest; and ‘remedying any other default as a result of which the secured party proposes to dispose of, or retain, the collateral’: s 143(1); compare NZ PPSA s 133; Sask PPSA s 62(1)(b); BC PPSA s 62(1)(b); Man [page 242] PPSA s 62(1)(b); Alb PPSA s 63(1)(b); Ont PPSA s 66(2); and see Glenn v General Motors Acceptance Corp of Canada Ltd (1992) 3 PPSAC (2d) 203 (failure to cure default precluded reinstatement by the grantor). The section allows for the forestalling of enforcement by the secured party where the default of the grantor or debtor is ‘minor, temporary and atypical’: Replacement Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) at [4.96]. However, the security agreement may be reinstated only once, so that this right on the part of the grantor is only really a second chance: s 143(2). In this respect the Australian Act better resembles the Ontario Act — although under the latter this right is even more restricted, being available only to grantors whose collateral is consumer goods. By contrast, under the New Zealand Act the debtor may reinstate the agreement twice, where the debt is due within a year, or twice in each year, where the loan is for a longer term: NZ PPSA s 134. The ‘one shot’ afforded by the Australian Act balances the rights of the grantor against the rights of innocent purchasers and the need to facilitate the flow of commerce without undue delay or interruption. In Rapid Transit Mix Ltd v Commcorp Financial Services Inc (1998) 156 DLR (4th) 366, the

Alberta Court of Appeal reviewed a decision by the trial judge (reported at (1997) 49 Alta LT (3d) 222) to allow the reinstatement of a conditional sale agreement after the collateral had been sold to a third party (pursuant to s 64 of the Alberta Act, which provides among other things that the court may on application by a debtor ‘make any order … that is necessary to ensure protection of the interests of any persons in the collateral’. There is no equivalent provision in the Australian Act. Reversing the decision, Côté JA made the following comments (at [23]–[25]): The scheme of the PPS Act is to allow the best realization possible when defaulted collateral is to be sold. This Act now allows a private sale without hesitation (unlike predecessor legislation), and the parties must act in a commercially reasonable manner. Anything which impairs that objective gets less money for both the creditor and the debtor. In the long run it hurts all creditors and debtors. Especially debtors, for they ordinarily are liable for any deficiency on such a sale … What if it becomes known that the court can erase a binding re-sale contract? Then even the most hardy bidder will deduct 10 or 205 % from his or her bid for contingencies. What is more, anyone who wants certainty, or a reasonably expeditious delivery of what he has bought, will deal elsewhere, or not at all …

The Australian Act allows for reinstatement to be effected by ‘a person’. By contrast, the right of redemption in s 142 is available only to the grantor or another secured party. It is also in contrast to the analogous provisions in the foreign Acts, which provide that only the ‘debtor’ may achieve reinstatement. This limitation appears to have caused difficulties in relation to guarantors who attempt to reinstate the security agreement, and the generality of the Australian provision may be an attempt to avoid such problems: see, for example, HSBC Bank Canada v. Kupritz (2011) 18 PPSAC (3d) 322 at [15]–[16].

D. Miscellaneous provisions Enforcement of obligations secured by land and personal property 5.138 Where a single obligation of the grantor is secured by security interests in both land and personal property, the first-ranking secured party may decide to enforce the latter either through the remedies in Ch 4, or in the same way that the security interest in land may be enforced under the applicable land law: s 117. This facility is open to second and subsequent-

ranking secured parties only if they obtain the written agreement by those who rank ahead of them, and it does not apply to personal property that is predominantly used for personal, domestic or household purposes: s 117(1) (b)(ii); s 109(5); 5.9–5.10. Where the secured party gives the appropriate notice of its decision to the grantor, and certain other secured parties (s 118(1)(b)), it may ‘enforce the security interest in the [page 243] same way, with any necessary modification, as the interest in the land may be enforced under the land law’ and the terms of the land law apply mutatis mutandis for the purpose of enforcing the security interest: s 118(3), (4). The Note to the provision says: The effect of this subsection is not to adopt the land law as such, but to apply law to the same effect as the land law (with any necessary modification, and subject to this section).

Semble the ‘land law’ the terms of which are incorporated into Ch 4 is the land law applicable to the interest in land, and not the law that would be applicable to the personal property were it an interest in land: see s 177(5). So, if the land is in New South Wales and the personal property is located in Queensland, then New South Wales land law applies to the enforcement of the interest in the personal property and not the land law of Queensland. In making its decision to proceed under Ch 4 or the terms of the applicable land law, the Act provides that the secured party must ‘act reasonably’ and only consider the following matters: the respective values of the personal property and the land; whether there is any connection between, and the nature of the connection between, the personal property and the land; whether the land and the personal property are both located in the same state or territory; and ‘such other matters as are relevant to the efficient enforcement of the security interest and the interest in land’: s 117(3). The consequence of taking into account irrelevant considerations is unclear.

Enforcement of security interests in liquid assets

5.139 In the event that the collateral is an account, chattel paper or a negotiable instrument, and one or more persons owe an amount to the grantor pursuant to the collateral, then a secured party may do either or both of the following on the debtor’s default: s 120(1). First, it may seize any proceeds of the collateral to which it is entitled under s 32: s 120(2)(b). Second, it may issue a garnishee notice to any third parties in debt to the grantor pursuant to the collateral: s 120(2)(a). The notice must be in the approved form and meet certain content requirements. The recipient of such a notice must pay the amount owing pursuant to the account, chattel paper or negotiable instrument directly to the secured party within five business days of the day the notice is received, or the day the amount becomes due and payable (whichever is later): s 120(3). The secured party must apply the funds received to the discharge of the secured obligation and, where the amount is paid in currency, must distribute the funds in accordance with s 140: s 120(4), (5). Notice must also be given to the grantor and to secured parties whose interests rank higher than that of the enforcing secured party: s 121(1), (4). The notice to the grantor must be issued within five business days of the secured party enforcing its rights through the mechanism(s) in s 120 (or a shorter period if the grantor consents in writing): s 121(5). By contrast, the notice to higher-ranking parties must be given at least 10 business days before any action is taken under s 120 (or a shorter period if the recipient consents in writing): s 121(2)(e). In the case of higher-ranking parties, the notice must contain the following information (s 121(2)(a)–(d)): the name of the secured party giving the notice; a description of the collateral; the fact that the enforcing party proposes to proceed under ss 120(2)(a) or (b) (whichever is applicable); and the address to which a notice under ss (3) may be given. Section 121(3) gives a higher-ranking party the right to issue a written notice to the enforcing party declaring that it intends to proceed under s 120. If so, the enforcing party is precluded from proceeding under that section.

[page 244]

Chapter 6

Mortgages of Personal Property Not Affected By PPSA PPSA Exemptions Scheme of this Chapter How choses in action mortgaged or charged Statutory assignment Requirements for statutory assignment Effect of statutory assignment Notice requirements for statutory assignment Priorities Effect of failure to meet statutory requirements Comparison between statutory and equitable assignments Equitable assignment — creation Essentials of equitable assignment Charge on particular fund must be clear Effect of equitable assignment Mortgage of policies of life insurance Mortgage of shares Ancillary aspects to mortgage of shares

6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.11 6.12 6.13 6.14 6.15 6.16 6.17

Mortgage of partnership share Mortgage of debts Mortgage of book debts Statutory Provision Profit-sharing loans Expectancies and future things in action Mortgage of interest in trust funds Mortgage of copyright Mortgage of patents Mortgage of registered trade marks and designs

6.18 6.19 6.20 6.21 6.22 6.23 6.24 6.25 6.26 6.27

[page 245]

PPSA Exemptions 6.1 Section 8 of the PPSA sets out a series of exemptions from its operation. This is a heterogenous list which is impossible to summarise. The difficulty is compounded by the fact that s 12 which defines the concept of a ‘security interesty’ interacts with it. However, s 8 exempts most cases of lien, set-off, interests created under the Bankruptcy Act 1966 (Cth) and the interest of a seller who has shipped goods under a negotiable bill of lading. Duggan and Brown, Australian Personal Property Securities Law, LexisNexis Butterworths Australia, 2012, at 3.37ff deal with exceptions in addition to those already noted can be summarised under the following headings are: Licences, Subordination agreements, Security interests arising by operation of law, Land dealings, Fixtures, Insurance contracts and annuities, pawnbroking contracts, water rights, and the Quistclose trust: see 5.11. However, the statutory provisions are so convoluted that it is wise to research each particular topic when it is presented to a lawyer for advice.

Scheme of this chapter

6.2 It has been difficult to deal with the problems caused by the introduction of the PPSA as that legislation is not completely comprehensive and usually does not affect transactions before its commencement. Chapter 5 dealt with its operation. Chapter 6 deals with transactions outside the operation of the PPSA both pre PPSA transactions which have continuing operation and transactions to which PPSA does not apply. Readers should not be confused by the reference in this chapter to provisions of Ch 2K of the Corporations Act (ss 261–282) which, at first sight, appear to have been repealed from 30 January 2012. However, s 1502 of that Act provides that with the modifications in ss 1503–1510, Ch 2K continues to apply for seven years from 30 January 2012 with respect to charges created before that date. Thus, this chapter continues to deal with the traditional law as to those charges: Chapter 5 deals with the current law. As a reminder, in most cases where there is reference to a section of Ch 2K of the Corporations Act in the text the warning ‘conditionally repealed, see 6.2’ will appear.

How Choses in action mortgaged or charged 6.3 Insurance policies, shares, stocks, book and other debts, personalty and other things in action, legal or equitable, are frequently mortgaged. So too are equitable interests in land, though not strictly things in action: it is convenient to deal with these here, as the same principles apply. Save where some special method of disposition is provided by statute, a mortgage of a thing in action is effected by an assignment of the thing. At common law, things in action, with certain exceptions, notably negotiable instruments (see Hopkinson v Forster (1874) LR 19 Eq 74 at 76), were incapable of being assigned without the express or implied consent of the holder of the fund to apply it in accordance with the assignment: Lampet’s Case (1612) 10 Co Rep 46b at 48a; 77 ER 994 at 997. Therefore, except where particular classes of things in action were made assignable by statute, mortgages of even legal things in action were necessarily purely equitable; equity regarding an assignment of a thing in action as valid, and operating as an agreement to permit the assignee to sue for the thing in action in the name of the assignor: Crouch v Credit Foncier of England (1873) LR 8 QB 374.

The present law is that apart from mortgage by assignment securities by way of charge over choses in action may exist, though only in equity. The principles were recently summarised by Emmett JA and Ball J in Chubb Insurance Co of Australia Ltd v Moore [2013] NSWCA 212 at [61]. [page 246] ‘The law recognises the assignment of a presently existing legal chose in action by way of charge or hypothecation as distinct from the transfer or assignment of a chose in action by way of legal mortgage. A security by way of charge over a presently existing chose in action is effective only in equity. Similarly a security by way of charge over only part of a presently existing chose in action is effective only in equity. Where the subject matter is the future ‘fruit’ rather than the whole or part of the presently existing ‘tree’, the charge will be effective in equity when given for value.’

The judges referred to Bailey v NSW Medical Defence Union Ltd [1995] HCA 28: (1995) 184 CLR 399 at 446; 132 ALR 1 at 34. As to modes of classifying choses in action, see Starke, Assignments of Choses in Action in Australia, Butterworths, Sydney, 1972, pp 5 and 7–9; see also ‘Drafting Comments’ in (1989), ANZ ConvR 224-8 and 306-10.

Statutory assignment 6.4 During the course of the 19th century the exceptions were extended. Thus, by the Companies Act 1862 (UK), shares, stocks, and debentures in public companies were made freely assignable by registered transfer and public funds were made transferable by mere entry in the transfer books at the Bank of England: National Debt Act 1870 (UK) s 22. The Judicature Act 1873 (UK) (s 25(6)) introduced a general form of statutory assignment and those provisions were replaced by the Law of Property Act 1925 (UK). Section 136(1) of the 1925 English Act has been re-enacted in almost identical form in all jurisdictions: see NSW Act s 12; Victorian Act s 134; Queensland Act s 199 (and see s 200); South Australian Act s 15; Western Australian Act s 20 (note s 20(3) for assignment of part of a debt);Tasmanian Act s 86; Property Law Act 1952 (NZ) s 130. Express mention is made in the New Zealand provision of both legal and equitable choses in action. Choses in action were assignable in equity but not at common law, so that

prior to the enactment of s 25(6) of the Judicature Act, and the provisions enacted subsequently, an assignee of a legal chose in action, for example a debt, could not bring an action to recover the debt in his own name in an action against the debtor: Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 27–8; see also Tolhurst v The Associated Portland Cement Manufacturers (1900) Ltd [1903] AC 414 at 424 (Lord Lindley); Torkington v Magee [1902] 2 KB 427 at 430; Adcock v Jolly (1893) 19 VLR 609; Cossill v Strangman (1962) 80 WN (NSW) 628; Hume v Munro (No 2) (1943) 67 CLR 461 at 483 per Williams J; Compania Colombiana de Seguros v Pacific Steam Navigation Co [1965] 1 QB 101. The effect of s 25(6) of the Judicature Act 1873 was considered, relatively soon after its enactment, by the Court of Appeal in Read v Brown (1888) 22 QBD 128. Lord Esher MR (with whom the other members of the court agreed) said (at 132): In construing s 25, subs 6, we must adopt the ordinary rule as to the construction of Acts of Parliament, that of giving, if possible, a meaning to each word. Now the defendant’s argument comes to this, that the ‘legal right’ to a debt is the same thing as the ‘legal and other remedies’ for it; but if that is a correct argument, the provision that the assignment shall transfer ‘the legal right to the debt’ is mere tautology, and the section must be read as if the words were not there. That is a wrong rule of construction; the words mean what they say; they transfer the legal right to the debt as well as the legal remedies for its recovery. The debt is transferred to the assignee and becomes as though it had been his from the beginning; it is no longer to be the debt of the assignor at all, who cannot sue for it, the right to sue being taken from him; the assignee becomes the assignee of a legal debt and is not merely an assignee in equity, and the debt being his, he can sue for it, and sue in his own name. We must give that meaning to the language of the subsection; and, that being so, an assignee in order to shew that the debt is his and that he may sue upon it must prove the assignment; he must, if suing, prove the assignment to himself in order to recover judgment, and the fact of the assignment is therefore part of his cause of action. [emphasis added]

Referring to the emphasised words in this part of Lord Esher’s judgment, Derham comments (in Derham on the Law of Set-Off, 4th ed, Oxford University Press, Oxford, 2010 [17.61]): [page 247] If therefore the assignment to the intermediate assignee complies with the statute and the ultimate assignee is an equitable assignee, the ultimate assignee would sue in respect of the intermediate assignee’s legal title, which should have as a consequence that the ultimate assignee takes subject to equities available against the intermediate assignee that arose before

the debtor had notice of the second assignment. It has been said that the statutory form of assignment relates to procedures, but at least in relation to the rights of a sub-assignee it may have substantive effect.

Derham refers to Re Richard Smith & Co Ltd [1901] 1 Ir R 73; Van Lynn Developments Ltd v Pelias Construction Co Ltd [1969] 1 QB 607 at 613; and Tolhurst v The Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660 at 676–7 (and see the further appeal in this case: [1903] AC 414 at 424 (Lord Lindley)). Section 136 of the English Act and corresponding provisions in the other jurisdictions do not affect equitable assignments: see William Brandt’s Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454 at 461–2. As to the rights that are assignable under the statutory provisions which fall within the general expression ‘legal chose in action’, see Starke, Assignments of Choses in Action in Australia, Butterworths, 1972, pp 40–1. For convenience, reference is made to the provisions of s 134 of the Victorian Act: 134 Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, shall be and shall be deemed to have been effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice — (a) the legal right to such debt or thing in action; (b) all legal and other remedies for the same; and (c) the power to give a good discharge for the same without the concurrence of the assignor: Provided that, if the debtor, trustee or other person liable in respect of such debt or thing in action has notice — (d) that the assignment is disputed by the assignor or any person claiming under him; or (e) of any other opposing or conflicting claims to such debt or thing in action — he may, if he thinks fit, either call upon the persons making claim thereto to interplead concerning the same, or pay the debt or other thing in action into court under the provisions of the Trustee Act 1958.

Requirements for statutory assignment 6.5 The provisions require an absolute assignment, whatever form the assignment may take: see Lloyds and Scottish Finance Ltd v Cyril Lord Carpet Sales Ltd (1979) 129 NLJ 366; see (1980) 130 NLJ 207 (Giddins). There must be an intention to transfer: Coulls v Bagot’s Executor and Trustee

Co Ltd (1967) 119 CLR 460. The mortgage of a debt or thing in action made in the ordinary form of an assignment with a proviso for redemption (express or implied) is an absolute assignment (Tancred v Delagoa Bay Co (1889) 23 QBD 239 (CA); Hughes v Pump House Hotel Co [1902] 2 KB 190 (CA)), as is also an assignment by way of trust: Comfort v Betts [1891] 1 QB 737 (CA). See also Durham Bros v Robertson [1898] 1 QB 765 (CA); Jones v Humphreys [1902] 1 KB 10; Interstate Investment Co Ltd v Mobbs (1928) 28 SR (NSW) 572 (contingent on acceptance of title); Re Kent and Sussex Sawmills Ltd [1947] Ch 177; [1946] 2 All ER 638; Re Interview Ltd [1975] Ir R 382; Contemporary Cottages (NZ) Ltd v Margin Traders Ltd [1981] 2 NZLR 114; Re Welsh Irish Ferries Ltd [1986] Ch 471; (1985) 6 Co Law 224 (Milman). For an assignment that was held a sale and not a charge, see Welsh Development Agency v Export Finance Co Ltd [1991] BCLC 936; [1992] BCLC 148 (CA); see also Re Marwalt [1992] BCC 32. Any effective form of assignment will suffice for the purpose of these provisions, so long as it is absolute (Harding v Harding (1886) 17 QBD 442), subject to compliance [page 248] with any other statutory requirements as to form. An ineffectual attempt to assign by deed does not prevent the document being a good assignment in writing: Marchant v Morton, Down & Co [1901] 2 KB 829 at 832. A consideration need not be stated in the instrument of assignment: Victorian Producers’ Co-operative Co Ltd v Leng (1918) 24 ALR 35; Re Westerton [1919] 2 Ch 104; Norman v Federal Commissioner of Taxation (1963) 109 CLR 9. A voluntary assignment is effective provided it is absolute (Nanney v Morgon (1887) 37 Ch D 346 at 352 (Cotton LJ)), but the assignment must be complete: Olsson v Dyson (1969) 120 CLR 365. The words ‘of any debt’ in s 136(1) do not authorise the legal assignment of part of a debt: Re Steel Wing Co Ltd [1921] 1 Ch 349; Williams v Atlantic

Assurance Co Ltd [1933] 1 KB 81 at 100, 108; Walter & Sullivan Ltd v J Murphy & Sons Ltd [1955] 2 QB 584; Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 29; Sandford v DV Building and Constructions Co Pty Ltd [1963] VR 137; Shepherd v Federal Commissioner of Taxation (1965) 113 CLR 385 at 390, 396; Federal Commissioner of Taxation v Everett (1980) 143 CLR 440 at 447; but cf Ramsey v Hartley [1977] 2 All ER 673; [1977] 1 WLR 686 (CA). An assignment of part of the debt, however, may be a good equitable assignment: Walter and Sullivan Ltd v J Murphy & Sons Ltd [1955] 2 QB 584; [1955] 1 All ER 843 (CA); and see generally (1959) CLJ 99 (Hall); (1966) 30 Conv (NS) 286 (Cullity and Ford). In spite of the expression ‘or other legal thing in action’ it has been held that equitable things in action are within the section: Re Pain; Gustavson v Haviland [1919] 1 Ch 38; and see Torkington v Magee [1902] 2 KB 427 at 430, 431. However, it is generally considered that the section does not apply to future things in action; but see Sykes and Walker, pp 769–71.

Effect of statutory assignment 6.6 Under paragraph (b) of the primary provisions of s 134 and its equivalents, statutory assignment passes ‘all legal and other remedies for the same’. These have been held to include rights of set-off: Robbie (NW) & Co Ltd v Witney Warehouse Co Ltd [1963] 3 All ER 613; [1963] 1 WLR 1324 (CA). See also Rother Iron Works Ltd v Canterbury Precision Engineers Ltd [1974] QB 1; [1973] 1 All ER 394 (CA); George Barker (Transport) Ltd v Eynon [1974] 1 All ER 900; [1974] 1 WLR 462 (CA); Security Trust Co v Royal Bank of Canada [1976] AC 503; [1976] 1 All ER 381 (PC); Business Computers Ltd v Anglo- African Leasing Ltd [1977] 2 All ER 741; [1977] 1 WLR 578; Tony Lee Motors Ltd v M S MacDonald & Son (1974) Ltd [1981] 2 NZLR 281; and see Goode, Legal Problems of Credit and Security, 4th ed, Sweet & Maxwell, London, 2008, chapter VII. See also Meagher, Gummow and Lehane’s chapter 37; Derham, Derham on the Law of Set-Off, 4th ed [17.17], [17.18] and [17.61] and Wood, English and International Set-Off, Sweet & Maxwell, London, 1989. It follows that a debtor may not counterclaim for any excess of the assignor’s indebtedness above the assigned debt as the assignor is not a party

to the proceedings: Young v Kitchin (1878) 3 Ex D 127; Mitchell v Purnell Motors Pty Ltd [1961] NSWR 165 at 168.

Notice requirements for statutory assignment 6.7 Notice in writing is essential to enable the assignee to sue in his own name: see Property Law Act 1958 (Vic) s 134. This is so even if the debtor is unable to read and other means are used to bring the assignment to his attention: Hockley and Papworth v Goldstein (1920) 90 LJKB 111. A payment on account does not estop the debtor from relying on the statutory requirement for notice in writing: Hockley and Papworth v Goldstein. [page 249] If the assignee is to be able to take action in his own name, notice in writing should be given at any time before an action in respect of the thing has begun (Bateman v Hunt [1904] 2 KB 530 (CA); Compania Colombiana de Seguros v Pacific Steam Navigation Co [1965] 1 QB 101 at 129; [1964] 1 All ER 216 at 235–6; Weddell v J A Pearce & Major [1988] Ch 26; [1987] 3 All ER 624), and note the discussion, in this case, of the Compania Colombiana decision on the effect of an action commenced by an equitable assignee only: see [1988] Ch at 41 ff; [1987] 3 All ER at 636–8, and see 6.9; see also Pincus v Ord Minett Ltd (SC (Vic), Hedigan J, 5 May 1994, unreported) and Jennings v Credit Corp Australia Pty Ltd (2000) 48 NSWLR 709. The notice is good if it indicates with sufficient certainty that the assignment has been executed, and the name of the assignee is sufficiently disclosed if there is a reference to the deed of assignment: Denney, Gasquet and Metcalfe v Conklin [1913] 3 KB 177. If a date is stated, it must be correctly stated: Harrison (WF) & Co Ltd v Burke [1956] 2 All ER 169; [1956] 1 WLR 419 (CA). (This case also suggests that the amount of the debt must be correctly stated. See (1956) 72 LQR 321 (REM), but a date need not be stated: Van Lynn Developments Ltd v Pelias Construction Co Ltd [1969] 1 QB 658; [1968] 3 All ER 824 (CA).)

The notice may be given by either the assignor or the assignee or their successors in title: Bateman v Hunt, above. In the case of joint debtors notice must be given to both: Josselson v Borst [1938] 1 KB 723; [1937] 3 All ER 722. For the service of notices: see 20.14. Notice under these provisions is a statutory prerequisite to the acquisition of legal title to the assigned property and as such differs from notice for the purpose of the rule in Dearle v Hall (1828) 3 Russ 1; 38 ER 475, which merely regulates the priority of competing titles and does not by its application confer any title: see Ward v Duncombe [1893] AC 369 at 392. The assignment takes effect on receipt of the notice thereof by or on behalf of the debtor: Holt v Heatherfield Trust Ltd [1942] 2 KB 1; [1942] 1 All ER 404. Registration of an assignment of a mortgage has, under the NSW Torrens Act, been held to constitute sufficient notice to the world to perfect an assignment for present purposes of the mortgaged property, the personal covenant and also any guarantee contained in the document which was an integral part of the mortgage, without the need for notice of assignment to be given to either the mortgagor or any guarantor: Gilmour v Pyramid Building Society (in liq) (1995) 6 BPR 13,979 at 13,982–3; Meagher JA referring to Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423.

Priorities 6.8 The priority of assignments is determined by the date of notice under the rule in Dearle v Hall, above (which is extended by s 137 (1) of the Law of Property Act 1925 (UK), but has no Australian equivalents — see 26.8.): see Ward v Duncombe [1893] AC 369 at 392–4 (HL); Marchant v Morton, Down & Co [1901] 2 KB 829 at 831; see also 26.1, and (1975) 39 Conv (NS) 261 (Kloss). Section 137 preserves the rule governing assignments of things in action other than negotiable instruments (see London Joint Stock Bank v Simmons [1892] AC 201 (HL); Lloyds Bank v Swiss Bankverein (1913) 108 LT 143) — namely, that the assignee takes them subject to all equities, whether he has notice of the equities or not. See, generally, Roxburghe v Cox (1881) 17 Ch D 520; Read v Brown (1888) 22 QBD 128 at 132; Biggerstaff v Rowatt’s Wharf Ltd [1896] 2 Ch

93; Popular Homes Ltd v Circuit Developments Ltd [1979] 2 NZLR 642. The parties may, however, agree to the assignment being without set-off or counterclaim: see First National Bank of Chicago Ltd v Moorgate Properties Ltd (1975) Times, [page 250] 21 October; but a claim to damages for fraud in a contract is not prior to the claim of an assignee of the contract where the debtor is not in a position to rescind the contract: Stoddart v Union Trust Ltd [1912] 1 KB 181; cf Lawrence v Hayes [1927] 2 KB 111. Upon a claim by mortgagees in possession for rent, the tenant was not allowed to set off a claim for damages on a covenant by the mortgagor, since this claim was not an interest in the land by which the mortgagee was bound: Reeves v Pope [1914] 2 KB 284 (CA) (but cf MEK Nominees Pty Ltd v Billboard Entertainment Pty Ltd (1993) V ConvR ¶54–468). For contractual exclusion of set-off, see Hongkong and Shanghai Banking Corp v Kloeckner & Co AG [1990] 2 QB 514. For exclusion of set-off and the Uniform Contract Terms Act 1977 (UK), see Stewart Gill Ltd v Horatio Myer & Co Ltd [1992] QB 600 (CA); Reeves v Pope, above, followed in Citibank Pty Ltd v Simon Fredericks Pty Ltd (1991) V ConvR ¶54–408. Thus an assignee of shares or debentures takes them subject to all equitable claims of the company, such as the company’s lien on the shares of its members, but this only extends to cover claims arising before notice of the assignment, and the company cannot, after such notice, create fresh equities (Bradford Banking Co v Briggs (1886) 12 App Cas 29), and an assignee from a trustee-beneficiary can claim nothing from the trust estate until any default of the trustee has been made good: Doering v Doering (1889) 42 Ch D 203.

Effect of failure to meet statutory requirements 6.9 An assignment which fails to fulfil the requirements of the section may take effect as a good equitable assignment: see Camp v King (1887) 14 VLR 22; Adcock v Jolly (1893) 19 VLR 609; William Brandt’s Sons & Co v

Dunlop Rubber Co Ltd [1905] AC 454; Re Warde; Ex parte Official Trustee in Bankruptcy v Dabnas Pty Ltd (1984) 55 ALR 395; Commercial Factors Ltd v Maxwell Printing Ltd [1994] 1 NZLR 724. Equitable assignments are dealt with in the following pages. Two points will be mentioned here. First, the equitable assignee of a legal chose cannot sue in his own name; nor can the original creditor sue without joining the assignee: Walter and Sullivan Ltd v J Murphy & Sons Ltd [1955] 2 QB 584; [1955] 1 All ER 843 (CA). See Warner Bros Records Inc v Rollgreen Ltd [1976] QB 430 at 435; [1975] 2 All ER 105 (CA). The equitable assignee must join the assignor either as plaintiff, if the assignor consents, or, if he does not, as defendant: Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1 (HL); Holt v Heatherfield Trust Ltd [1942] 2 KB 1; Weddell v J A Pearce & Major [1988] Ch 26; [1987] 3 All ER 624 at 636-7 per Scott J; cf Compania Colombiana de Seguros v Pacific Steam Navigation Co [1965] 1 QB 101 at 127–9; [1964] 1 All ER 216 at 235-6 per Roskill J, which Scott J in Weddell’s case declined to follow ([1988] Ch at 44; [1987] 3 All ER at 637); also Pincus v Ord Minnett Ltd (SC (Vic), Hedigan J, 5 May 1994, unreported). However, if, even after the commencement of the proceedings, the notice is actually given, the equitable assignee will become the legal owner by statutory assignment so that no joinder of the assignor will be required: Weddell v J A Pearce & Major [1987] 3 All ER 624 at 638; also Pincus v Ord Minnett Ltd (SC (Vic), Hedigan J, 5 May 1994, unreported) at transcript pp 14–17; and see 6.7. Also, where it is seen to be unnecessary to protect the defendant debtor from claims by the assignor as legal owner of the chose in action, joinder of the assignor will not be required: see William Brandt’s Sons & Co v Dunlop Rubber Co Ltd, above; Weddell v J A Pearce & Major, above, referring to Brandt’s case in this respect at [1988] Ch 43; [1987] 3 All ER 637. Second, quite apart from the statutory notice, it is necessary in all assignments of things in action to give notice of the assignment to the debtor, trustee or other person [page 251] liable to pay the debt or distribute the fund. This is, first, for the purpose of

preventing such person from paying the debt or handing the fund to the assignor; second, to prevent a subsequent encumbrancer or purchaser without notice of the assignment from gaining priority over it: Spencer v Clarke (1878) 9 Ch D 137 (for priorities, see 26.1); and third, to prevent any equities or further equities arising. Not all equitable assignments are within the ambit of s 134 and its equivalents: see Cossill v Strangman (1962) 80 WN (NSW) 628 at 631; Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 21, 28.

Comparison between statutory and equitable assignments 6.10 On one of the BCCI cases in the Court of Appeal, Deposit Protection Board v Dalia [1994] 2 AC 367 at 385; [1994] 1 All ER 539 at 553 (note this decision was reversed in the House of Lords [1994] 2 AC 367; [1994] 2 All ER 557), Simon Brown LJ said that the differences between legal and equitable assignments, though in one sense, narrow, can be real and in the end decisive. The first difference is that after a legal assignment only the assignee has any entitlement against the debtor; with an equitable assignment some right also remains in the assignor. Second, as the debtor owes but one discrete debt, there can be no legal assignment of part of it. This legislation does not authorise the legal assignment of part of a debt (Re Steel Wing Co Ltd [1921] 1 Ch 349; but cf Ramsey v Hartley [1977] 2 All ER 673; [1977] 1 WLR 686 (CA)); but an assignment of part of the debt may be a good equitable assignment: Walter and Sullivan Ltd v J Murphy & Sons Ltd [1955] 2 QB 584; [1955] 1 All ER 843 (CA), and see generally (1959) CLJ 99 (Hall); (1966) 30 Conv (NS) 286 (Cullity and Ford). Other differences appear in the following text.

Equitable assignment — creation 6.11 An equitable assignment by way of security may be made, for example: 1. by an agreement between a debtor and his creditor that a specific thing in action which is, or will be, in the hands of or due from a third person and

which belongs to the debtor, shall be applied in discharge of the debt (Row v Dawson (1749) 1 Ves Sen 331; 27 ER 1064; Brice v Bannister (1878) 3 QBD 569; Palmer v Carey [1926] AC 703; 37 CLR 545 (PC). See Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584; [1981] 2 All ER 449 (HL); Re Welsh Irish Ferries Ltd [1986] Ch 471 and 1.19–1.23; for sub-mortgages, see Chapter 15); or 2. by an order given by the debtor whereby the holder of a fund is directed or authorised to pay it to the creditor (Row v Dawson; Burn v Carvalho (1839) 4 My & Cr 690; 41 ER 265; Rodick v Gandell (1852) 1 De GM & G 763 at 777; 42 ER 749 at 754; Diplock v Hammond (1854) 5 De GM & G 320; 43 ER 893; Palmer v Carey; Cotton v Heyl [1930] 1 Ch 510; Re Warren; Ex parte Wheeler v The Trustee in Bankruptcy [1938] Ch 725; [1938] 2 All ER 331; William Brandt’s Sons & Co v Dunlop Rubber Co [1905] AC 454 (HL)). (Such an equitable assignment will not be a bill of exchange: see Brice v Bannister; Tibbets v George (1836) 5 Ad & El 107; 111 ER 1107.) The assignment may, generally, be made either by writing or orally (Gurnell v Gardner (1863) 4 Giff 626; 66 ER 857), no particular words being necessary (William Brandt’s Sons & Co v Dunlop Rubber Co, above, at 462; IRC v Electric and Musical Industries Ltd [1949] 1 All ER 120 at 126), provided that the intention is sufficiently expressed: William Brandt’s Sons & Co v Dunlop Rubber Co, above, at 462; Weddell v J A Pearce & Major [1988] Ch 26; [1987] 3 All ER 624; Elders Pastoral Ltd v Bank of New Zealand (No 2) [1990] 1 WLR 1478 (PC); Pincus v OrdMinnett Ltd (SC (Vic), Hedigan J, 5 May 1994, unreported). [page 252] (It was suggested in Re Richardson; Shillito v Hobson (1885) 30 Ch D 396 that an assignment of a debt had to be effected in writing. As to when writing is required by statute, see 6.4.) An equitable assignment out and out, and an equitable assignment which is intended to operate as a security only, in most respects resemble each other. A mere charge on a fund or debt operates, indeed, as a partial equitable

assignment (Durham Bros v Robertson [1898] 1 QB 765 at 769 (CA)), but while an equitable assignment which merely gives a charge on property (Re Earl of Lucan; Hardinge v Cobden (1890) 45 Ch D 470; Squib v Wyn (1717) 1 P Wms 378; 24 ER 432) and an equitable assignment of property not yet in existence both require valuable consideration to support them (since they operate by way of contract), an absolute assignment of existing property is effective although voluntary. See Squib v Wyn, above; Nanney v Morgan (1887) 37 Ch D 346; German v Yates (1915) 32 TLR 52; Re Westerton [1919] 2 Ch 104; Holt v Heatherfield Trust Ltd [1942] 2 KB 1; [1942] 1 All ER 404; Re McArdle [1951] Ch 669; [1951] 1 All ER 905 (CA); Re Wale; Wale v Harris [1956] 3 All ER 280; [1956] 1 WLR 1346; and see Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 16, 28 and Shepherd v Federal Commissioner of Taxation (1965) 113 CLR 385; Olsson v Dyson (1969) 120 CLR 365. See also (1943) 59 LQR 58, 208 (REM); ibid, 129 (Hollond); (1951) 67 LQR 295 (REM); (1955) 33 Can BR 284 (Sheridan); Corin v Patton (1990) 169 CLR 540; and Sykes and Walker, pp 765–7. This does not authorise the legal assignment of part of a debt (Re Steel Wing Co Ltd [1921] 1 Ch 349; but cf Ramsey v Hartley [1977] 2 All ER 673; [1977] 1 WLR 686 (CA)); but an assignment of part of the debt may be a good equitable assignment: Walter and Sullivan Ltd v J Murphy & Sons Ltd [1955] 2 QB 584; [1955] 1 All ER 843 (CA), and see generally (1959) CLJ 99 (Hall); (1966) 30 Conv (NS) 286 (Cullity and Ford). The equitable assignee of a debt is not in the same position as to the obligation of using diligence, as the holder of a bill of exchange or promissory note; but, like a mortgagee in possession, he is chargeable with wilful default: Glyn v Hood (1860) 1 De GF & J 334; 45 ER 388.

Essentials of equitable assignment 6.12 The classic statement was made by Truro LC in Rodick v Grandell (1852) 1 De GM & G 763 at 777–8; 42 ER 749 at 754 that the authorities showed that: … an agreement between a debtor and a creditor that a debt owing shall be paid out of a specific fund coming to the debtor … will create a valid equitable charge upon such fund; in other words will operate as a valid equitable assignment of the fund.

The Privy Council applied this passage in Palmer v Carey [1926] AC 703 at 706; 37 CLR 545 at 548, and said: An agreement for valuable consideration that a fund shall be applied in a particular way may found an injunction to restrain its application in another way. But if there be nothing more, such application will not amount to an equitable assignment. It is necessary to find further, that an obligation has been imposed in favour of the creditor to pay the debt out of the fund.

An equitable assignment will not be valid, unless there is an obligation to pay the debt owing by the assignor and to pay it out of a particular fund (Watson v Duke of Wellington (1830) 1 Russ & M 602 at 605; 39 ER 231 at 232; Percival v Dunn (1885) 29 Ch D 128; Re Gunsbourg; Ex parte Trustee (1919) 88 LJKB 479), and to the person who claims under the assignment: Bell v L & NW Rly Co (1852) 15 Beav 548; 51 ER 651. Therefore [page 253] the assignment of the benefit of a contract to make a loan is not good as an equitable assignment, since there is no particular fund bound by the original contract (Western Wagon etc Co v West [1892] 1 Ch 271; May v Lane (1894) 64 LJQB 236 (CA)), but it is not necessary that the exact amount, either of the debt to be paid or of that out of which it is directed to be paid, should be ascertained: Riccard v Prichard (1855) 1 K & J 277; 69 ER 462; and see Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584; [1981] 2 All ER 449. The parties must have agreed that the debtor would keep the fund separate from his or her other assets Moseley v Cressey’s Co (1865) LR 1 Eq 405 at 409; Jackson v Richards [2005] NSWSC 630; (2005) 12 BPR 23,091.

Charge on particular fund must be clear 6.13 The obligation that the particular fund shall be made liable to the debt must be clear: Brown, Shipley & Co v Kough (1885) 29 Ch D 848 (CA). A letter to the holder of the fund, stating that a particular person is a claimant upon it may be an assignment (Re Kent and Sussex Sawmills Ltd [1947] Ch 177; [1946] 2 All ER 638); but a promise to pay the debt out of the particular fund is not, if such an arrangement is under the circumstances countermandable (Malcolm v Scott (1843) 3 Hare 39; 67 ER 288); nor, for

the same reason, a direction to apply the fund where no consideration is proved: Re Whitting; Ex parte Hall (1879) 10 Ch D 615 (CA). Nor is an assignment created by giving an authority to a person without interest in the debt to receive it, though he promises to pay it to the creditor of the person who gives the authority, because such a transaction comprises neither a direction to the person who owes the money, nor a direct agreement between the debtor and the creditor: Rodick v Gandell (1852) 1 De GM & G 763; 42 ER 749. If, however, there is a sufficient indication that the supposed assignee is to have the benefit of the fund or thing in action in question, in addition to relying on the credit of the assignor — or, as it is sometimes put, is to be paid ‘out of the fund’ as distinguished from ‘when the assignor gets the fund’ — a valid equitable assignment is created, provided that the transaction is for value. The intention must be that the property shall pass: Gorringe v Irwell India Rubberand Gutta Percha Works (1886) 34 Ch D 128 (CA); Re Casey’s Patents; Stewart v Casey [1892] 1 Ch 104 (CA). A cheque is not an equitable assignment of the drawer’s balance at his bankers, being in the nature of a bill of exchange: Hopkinson v Forster (1874) LR 19 Eq 74.

Effect of equitable assignment 6.14 We have seen (see 6.3) that a thing in action was formerly not capable of being assigned at law without the express or implied consent of the holder of the fund to apply it in accordance with the assignment, except in the case of assignments made valid by custom, such as transfers of bills of exchange, or by statute. In equity, however, the assignee of a legal thing in action (that is, a thing recoverable in a court of law) could sue under an authority enabling him to sue in the name of the assignor, and the assignee of an equitable thing in action (that is, a thing recoverable in a court of equity only) could sue in equity in his own name, provided he had given notice to the holder of the fund: Row v Dawson (1749) 1 Ves Sen 331; 27 ER 1064. (On the effect of equitable assignments see Weddell v JA Pearce and Major [1988] Ch 26 at 38–43; Deposit Protection Board v Dalia [1993] Ch 243 at 252–3; [1993] 1 All ER 599 at 606 (note this decision was reversed in the House of Lords

[1994] 2 AC 367; [1994] 2 All ER 557).) [page 254] Such an assignment would stand, though the assignor became bankrupt, or died before the notice reached the holder of the fund, or could otherwise be acted upon (Smith v Everett (1792) 4 Bro CC 64; 29 ER 780; Burn v Carvalho (1839) 4 My & Cr 690; 41 ER 265; Gurnell v Gardner (1863) 4 Giff 626; 66 ER 857; Walker v Bradford Old Bank (1884) 12 QBD 511), since it was effective between assignor and assignee without notice of the holder of the fund: Rodick v Gandell (1852) 1 De GM & G 763; 42 ER 749; Gorringe v Irwell India Rubber and Gutta Percha Works (1886) 34 Ch D 128 (CA). Notice is not necessary to complete the title of the assignee: Ward v Duncombe [1893] AC 369 at 392 (HL). Nevertheless, notice should be given since notice prevents a subsequent assignee from gaining priority by himself giving notice: Dearle v Hall (1828) 3 Russ 1; 38 ER 475; Re Dallas [1904] 2 Ch 385 (CA). In England, where the notice is in respect of an assignment of an equitable interest in real or personal property it must be in writing: Law of Property Act 1925 (UK) s 137(3) — a provision, having no Australian counterparts, which extends the rule in Dearle v Hall; see 26.8. Notice also prevents the holder of the fund from obtaining a good discharge by afterwards paying the fund to the assignor (Stocks v Dobson (1853) 4 De GM & G 11; 43 ER 411), and it prevents any or further equities being set up against the assignee. Moreover the giving of notice in writing may give a right to sue at law under s 134 of the Victorian Property Law Act 1958 and its equivalents, see above. When a debtor has received notice of an equitable assignment of the debt he is bound to pay it to the assignee, although the latter refuses to give him indemnity: Magee v UDC Finance Ltd [1978] NZLR 438 (CA); and see Barclays Bank plc v Willowbrook International Ltd [1986] BCLC 45. It is no excuse for refusal and payment to the assignor that he has brought an action to which the debtor has no legal defence, for the court will indemnify him by

making the wrongful claimant pay the costs, and the fact that, after the assignment, the assignor has become bankrupt, or has made a composition with his creditors, makes no difference: Hutchinson v Heyworth (1838) 9 Ad & El 375; 112 ER 1254; Jones v Farrell (1857) 1 De G & J 208; 44 ER 703. Where the mortgage is of a fund in court a stop order should be obtained, and this is equivalent to a notice given to the trustees: Pinnock v Bailey (1883) 23 Ch D 497; Montefiore v Guedalla [1903] 2 Ch 26 (CA); see also 26.23. Express notice should also be given to the trustees. Where government stock — or the stock or shares or debentures of any public company — are equitably mortgaged, a stop notice may be given instead of notice to the company. A stop notice was formerly called a notice in lieu of distringas: see further 26.23. For a form of affidavit and stop notice, see English, Encyclopaedia of Forms and Precedents, 4th ed, Butterworths, London, vol 14, pp 869–70. Unless by the instrument creating the thing in action it is made assignable by the creditor free from equities between himself and the debtor, the assignee takes subject to rights of set-off and otherwise between the debtor and the assignor existing before notice of the assignment (see 6.8).

Mortgage of policies of life insurance 6.15 A distinction should be drawn between an assignment of an insurance policy and assignment of the right to receive the proceeds of a policy of insurance. The latter right is a chose in action that is assignable in the same manner as choses in action generally: see Randall v Lithgow (1884) 12 QBD 525; and English and Scottish Mercantile Investment Co Ltd v Brunton [1892] 2 QB 700. [page 255] Policies of life insurance are assignable either in equity or under the Life Insurance Act 1945 (Cth) to the extent that the life insurance business is not carried on by a state within the limits of the state: s 8. The provisions of this Act are not affected by the Property Law Act 1958 (Vic) s 134 and its equivalents: see 7.2. These legislative provisions do, however, offer an

alternative method of legal assignment. An equitable assignment of a policy of life insurance is subject to the rules governing equitable assignments generally. An assignment under the insurance legislation referred to is a legal assignment subject to certain formalities. Section 87(1) of the Life Insurance Act 1945 (Cth) requires (subject to the provisions of s 91, which relates to policies held by trustees) an assignment of a policy to be by memorandum of transfer in accordance with, or substantially in accordance with, the form in Schedule 5 to the Act signed by the transferor and the transferee endorsed on the policy or upon an annexure to the policy referred to in or in an endorsement on the policy. Until an assignment is registered by the insurer in its register the assignment is not valid: ss 87(1)(b) and 87(2). An assignment by way of mortgage requires a separate instrument of defeasance which is not to be noted on the register: s 88. The insurer may safely pay the mortgagee only if it has received written notice of the assignment; otherwise the insurer, acting in good faith, is not affected by notice, express, implied or constructive, of the mortgage: ss 88,89. No assignment of an ‘industrial policy’ (see s 4(1)) is valid without the consent of the insurer: s 90. A mortgage of a life policy has usually taken the form of an assignment with a ‘proviso’ for re-assignment (whether or not contained in a separate instrument of defeasance). It commonly includes covenants by the mortgagee not to permit the policy to become void, to pay premiums and produce the receipts therefor to the mortgagee, with power in case of default for the mortgagee to pay premiums and for any such payments to be a charge on the policy. There will be a right to keep the policy on foot and a charge even if there is not express provision: Gill v Downing (1874) LR 17 Eq 316. The mortgage should also provide for a sale (the statutory power of sale under general law property legislation (see 20.5) applies to mortgages by deed of policies and other choses in action except in Queensland (see Re J B Davies Enterprises Pty Ltd (in liq) [1990] 2 Qd R 129), surrender or exchange of the policy by the mortgagee and other usual powers. The Act does not prevent a mortgage of a life policy by informal memorandum or deposit: see Maughan v Ridley (1863) 8 LT (NS) 309; Re Crothers [1930] VLR 49. The mortgagee will usually take possession of the policy: Spencer v Clarke (1878) 9 Ch D 137. He takes subject to equities: for example, a contract of insurance is a contract uberrimae fidei, so that the policy may be avoided by the company if there has been non-disclosure or misrepresentation by the

insured: see Kelly and Ball, Principles of Insurance Law in Australia and New Zealand, 2nd ed, Butterworths, Sydney, 2001, [3.0010]. If there are several mortgages their priority will generally be regulated by the order in which notice of the assignments was given, save that a second mortgagee with notice, whether actual, imputed or constructive (Re Weniger’s Policy [1910] 2 Ch 291; cf Re Lake; Ex parte Cavendish [1903] 1 KB 151), of a first mortgagee cannot gain priority over the first mortgage by giving notice before the first mortgagee: Newman v Newman (1885) 28 Ch D 674; Re Wallis; Ex parte Jenks [1902] 1 KB 719. Under the Life Insurance Act the insurer is not affected by notice, express, implied or constructive of any mortgage or trust (s 88); but this provision is subject to s 89(1), which removes this protection if the insurer has not acted in good faith or has received written notice of ‘any trust, right, equity or interest of any person’. Thus protection would be afforded in the case of a mortgage by registered assignment with an instrument of defeasance and an unregistered mortgage. Subject to these provisions the equitable rules apply, save that as [page 256] between mortgages by way of registered assignment priority is determined by the time of registration. Where a mortgage of a life assurance policy is to be taken as collateral security an assignment is sometimes rendered unnecessary by the creditor taking out a policy on the life of the debtor. The policy should not be taken out by the borrower in the name of the creditor because the creditor would have no rights under the policy, not being a party thereto: see Re Sinclair’s Life Policy [1938] Ch 799; [1938] 3 All ER 124. In the absence of express contract, the policy will, on the discharge of the debt, belong to the mortgagor if he pays the premiums, or is with his own knowledge charged with them in account: Morland v Isaac (1855) 20 Beav 389; 52 ER 653; Drysdale v Piggot (1856) 8 De GM & G 546; 44 ER 500; Freme v Brade (1858) 2 De G & J 582; 44 ER 1115; Bruce v Garden (1869) LR 5 Ch App 32; Salt v Marquess of Northampton [1892] AC 1 (HL); and see 32.67. In other cases the policy will belong absolutely to the mortgagee: Bruce v Garden.

Unless the terms of a life policy provide to the contrary, the policy will be avoided by the suicide of the insured: Beresford v Royal Insurance Co Ltd [1938] AC 586; [1938] 2 All ER 602 (HL). It has not been decided whether, if the policy has been mortgaged, the security is avoided: Beresford v Royal Insurance Co Ltd [1938] AC at 600, but see Hardy v Motor Insurers’ Bureau [1964] 2 QB 745; [1964] 2 All ER 742 (CA). Express provision is usually made in the policy for it not to become void in such circumstances against the assignee. Where a policy contains a clause to the effect that it shall be valid notwithstanding the suicide of the assured, a mortgagee, whether legal or equitable, can enforce it against the company in that event, even where the mortgagee could recover the debt from another source, and the company has no claim for indemnity or repayment against the estate of the assured: Moore v Woolsey (1854) 4 E & B 243; Solicitors Life Assurance Society v Lamb (1864) 2 De GJ & Sm 251; 46 ER 372. And this is so, although the company is itself the mortgagee: White v British Empire Mutual Life Assurance Co (1868) LR 7 Eq 394, and see Royal London Mutual Insurance Society v Barrett [1928] Ch 411. A legal mortgage of a policy is discharged by re-assignment or receipt (see 32.63), an equitable mortgage by cancellation. The policy must be returned to the mortgagor or handed over to a subsequent mortgagee, if any. Notice of the discharge should be given to the company (see 32.63). See, generally, Legh-Jones, Birds and Owen (eds), MacGillivray on Insurance Law, 10th ed, Sweet & Maxwell, London, 2003, pp 663 ff. For assignment of policies of marine insurance, see Hardy, Chalmers’ Marine Insurance Act 1906, 10th ed, Butterworths, London, 1993, pp 73–5. Mortgages of life insurance policies are principally effected as collateral security to mortgages of land.

Mortgage of shares 6.16 The nature of shares is expressly provided for in s 1070A of the Corporations Act 2001 (Cth): 1070A(1) [Nature of shares] A share, other interest of a member in a company or interest of a person in a registered scheme: (a) is personal property; (i)

is transferable or transmissible as provided by:

(i)

the company’s or scheme’s constitution; or

(ii) the operating rules of a prescribed CS facility if they are applicable; and (ii) is capable of devolution by will or by operation of law. (2) Paragraph 1 (c) has effect subject to: (iii) in the case of a company: a.

the company’s constitution (if any); and

b.

any replaceable rules that apply to that company; and

c.

the operating rules of a prescribed CS facility, if they apply to that share or interest;

[page 257] (iv) in the case of a scheme: (v) the scheme’s constitution; and (vi) the operating rules of a prescribed CS facility if they apply to the interest. (3) Subject to subsection (1): (a) the laws applicable to ownership of and dealing with personal property apply to a share, other interest of a member in a company or interest of a person in a registered scheme as they apply to other property; and (b) equitable interests in respect of a share, other interest of a member in a company or interest of a person in a registered scheme may be created, dealt with and enforced as in the case of other personal property. [Subsection 4 then deals with the situs of shares and interests]

Under the definitions in s 761A of the Corporations Act, a ‘prescribed CS facility’ is a licensed Clearance and Settlement facility that is authorised under the regulations made under the Corporations Act. These provisions sufficiently describe the nature of a share for the purposes of this work and it is not necessary to delve into the more academic questions involved, as to which see, for example, McConvill, ‘Do Shares Constitute Property?’ (2005) 79 ALJ 251. These provisions thus make it clear that the ordinary principles of law and equity apply to shares as personal property, and that they may be dealt with accordingly. Under s 1071B of the Corporations Act, a company must not register a transfer of shares unless a proper instrument of transfer has been delivered to the company. This applies notwithstanding anything in the

company’s constitution or in a deed relating to debentures. For companies incorporated prior to 1 July 1998, had a Memorandum of Association setting out the company’s objects and capital and Articles of Association containing its internal rules. A company could merely adopt Table A in the Schedule to the Companies Act then in force which contained standard provisions. For companies formed after that date, the Corporations Act contains a series of replaceable rules, which bind the company unless its constitution varies them. The relevant replaceable rules as to transmission and transfers of shares are to be found in ss 1072A, 1072B, 1072D, 1072F and 1072G of the Corporations Act. Section 1072F provides that the transferor remains the holder of the shares until the transfer is registered and defines the circumstances in which the directors may decline to register a transfer. Section 1072G augments these provisions for proprietary companies. A legal mortgage of shares is effected by a transfer of the shares to the mortgagee subject to an agreement for their re-transfer on repayment of the loan. The manner of transfer will be governed by the company’s articles of association constitution. Shares are excluded from the definition of personal chattels for the purpose of the Bills of Sale Acts: see 5.17. The company is not concerned with the agreement accompanying the transfer. It is not usual to mortgage shares by means of a registered transfer of them, particularly if the shares are not fully paid up, as such a transaction makes the mortgagee a shareholder, and gives him the rights and imposes upon him the liabilities, where they exist, of a shareholder. As to the disadvantages of a legal mortgage of shares, see Lingard, Bank Security Documents, 2nd ed, Butterworths, London, 1988, pp 218–24. Where the shares have been transferred to the mortgagee, a mandatory injunction may be granted to enforce an agreement by him to vote in accordance with the wishes of the mortgagor: Puddephatt v Leith [1916] 1 Ch 200; Musselwhite v C H Musselwhite & Son Ltd [1962] Ch 964 at 981–4; [1962] 1 All ER 201 at 206– 7. A mortgage of shares is most commonly effected by a deposit of the share certificates with the mortgagee accompanied by a memorandum of deposit. While the mortgagor

[page 258] remains the registered holder of the shares he must vote as the mortgagee directs: Wise v Landsell [1921] 1 Ch 420. Express provisions are usually included in the mortgage to this effect. This is not a mere pledge, but effects a true equitable mortgage entitling the mortgagee to foreclosure: Harrold v Plenty [1901] 2 Ch 314; Adelaide Building Co Pty Ltd (in liq) v ABC Investments Pty Ltd (1990) 8 ACLC 445. On the difference between pledge and charge see Askrigg Pty Ltd v Student Guild of the Curtin University of Technology (1989) 18 NSWLR 738; Re City Securities Pte; Ho Mun-Tuke Don v Dresdner Bank AG [1990] 2 MLJ 257, on appeal sub nom Dresdner Bank AG v Ho Mun- Tuke Don (1993) 3 MSCL 95,876; [1993] 1 SLR 114 (Sing CA); Australia and New Zealand Banking Group Ltd v Curlett, Cannon and Galbell Pty Ltd [1992] 2 VR 647; Chase Manhattan Bank NA v Wong Tui San (1992) 11 ACLC 3112. The memorandum usually contains, inter alia, a statement that the deposit is by way of security, a covenant for payment of principal and interest, a proviso for redemption, a power for the mortgagee to sell the shares, a covenant by the mortgagor not to incur a forfeiture, and an undertaking by the mortgagor to execute a registered transfer. There is an implied power to sell on reasonable notice (see 20.2), and an express power if the memorandum is under seal (see, for example, NSW Act s 109; Victorian Act s 101; English Act s 101). For foreclosure, see 21.1.

Ancillary aspects to mortgage of shares 6.17 A mortgage of shares would not, it is submitted, extend to a bonus issue based on the original holding (cf accretions to the security in relation to mortgages of land: see 3.27). Accordingly the memorandum should contain an express provision extending the security to a bonus issue. Where a rights issue is offered, the mortgagee should consult the borrower. It is submitted that the mortgagee can only disclaim or sell the rights if the borrower refuses to pay the price of the shares or to allow the price to be added to the security: see Waddell v Hutton [1911] SC 575. The mortgagee does not lose his security by handing over the shares to facilitate a takeover and the mortgagee is entitled to claim delivery of the new shares: UTC Ltd (in liq) v NZI

Securities Australia Ltd (1991) 4 WAR 349 (FC). For failure to get in share certificates on questions of priority see Cash Resources Australia Pty Ltd v BT Securities Ltd [1990] VR 576. It is further submitted that the mortgagee cannot on his own initiative take up the issue and add the shares and the price to the security. Sometimes the deposit is accompanied by a form of transfer executed by the mortgagor, but leaving the name of the transferee and the date blank: see, for example, Barclay v Prospect Mortgages Ltd [1974] 2 All ER 672; [1974] 1 WLR 837. This method, however, has the disadvantage that the transfer, if required to be by deed, cannot be validly completed without re-execution by the mortgagor: Powell v London and Provincial Bank [1893] 2 Ch 555 (CA); Ireland v Hart [1902] 1 Ch 522. The principle has been applied to a mortgage of a ship (Burgis v Constantine [1908] 2 KB 484), though a person who executes a deed of transfer in blank may be estopped from denying its validity as against bona fide purchasers from the grantee without notice (Earl of Sheffield v London Joint Stock Bank (1888) 13 App Cas 333; Waterhouse v Bank of Ireland (1891) 29 LR Ir 384; London Joint Stock Bank v Simmons [1892] AC 201 (HL); Fuller v Glyn Mills Currie & Co [1914] 2 KB 168), but a blank transfer will be effective in the case of shares which are transferable by writing under hand only: Ortigosa v Brown Janson & Co (1878) 47 LJ Ch 168; cf France v Clark (1884) 26 Ch D 257 (CA). Such an instrument, when filled in, might pass the legal property, for by delivering it to the mortgagee the mortgagor must be presumed to have authorised him to act as his agent for the purposes of completing the transfer (Colonial Bank v Cady (1890) 15 App Cas 267 at 286 (HL)), but this cannot apply where the transfer is required to be by a deed, which can only be executed by an agent appointed by instrument under [page 259] seal: Powell v London and Provincial Bank [1893] 2 Ch at 558; see Fitch Lovell Ltd v IRC [1962] 3 All ER 685. Even in such cases, however, a person dealing with the mortgagee ought to make enquiries, and cannot claim the benefit of being purchaser for value without notice so as to acquire a better

right than the person from whom he received the instrument: France v Clark, above. Accordingly it is usual for the memorandum to include a provision whereby the mortgagor appoints the mortgagee his attorney to complete and redeliver the transfers: Hibblewhite v M’Morine (1840) 6 M & W 200; 151 ER 380; Société Générale de Paris v Walker (1885) 11 App Cas 20 (HL); Re Seymour; Fielding v Seymour [1913] 1 Ch 475 (CA). Notice of the deposit of share certificates should be given to the company. This is not for the purpose of priorities for no trust may be entered on the register of a company: Société Générale de Paris v Walker. Accordingly the rule in Dearle v Hall (1828) 3 Russ 1; 38 ER 475 (see 26.1 ff) does not apply to equitable mortgages of shares. Priorities of mortgages of shares are governed by the same rules of priority as apply to mortgages of general law land; as to which see Chapter 24. Nevertheless, notice is advisable. If the company has notice it will generally not register another person as owner while there are conflicting claims: see Ireland v Hart [1902] 1 Ch 522; and see Roots v Williamson (1888) 38 Ch D 485 at 493. Also, while the mortgagee takes the shares subject to all equitable claims of the company, such as the company’s lien on the shares of its members, this only extends to claims arising before notice of the mortgage, and the company cannot, after such notice, create fresh equities: Bradford Banking Co Ltd v Briggs & Co Ltd (1886) 12 App Cas 29 (HL); Mackereth v Wigan Coal and Iron Co Ltd [1916] 2 Ch 293; Champagne Perrier-Jouet SA v H H Finch Ltd [1982] 3 All ER 713; [1982] 1 WLR 1359; and see Chase Corporation (Australia) Pty Ltd (Scheme Administrators Appointed) v North Sydney Brick and Tile Co Ltd (1994) 35 NSWLR 1; 14 ACSR 586, and see the note on this case at (1996) 4 APLJ 146 (Gray). The limited effect of notice could be overcome by giving the company a stop notice: see 26.23. This entitles the mortgagee to notice from the company of an application to transfer, and gives the mortgagee an opportunity of obtaining a restraining order or an injunction: see Société Générale de Paris v Tramways Union Co (1884) 14 QBD 424 at 453 (CA). This procedure is, however, rarely used.

Mortgage of partnership share 6.18 A mortgage of a share in a partnership is a mortgage of a chose in action, and is not generally required to be registered as a bill of sale: Re

Bainbridge; Ex parte Fletcher (1878) 8 Ch D 218; and see 5.17 as to exceptions. As to the nature of a partner’s interest, Mason J (with whom Barwick CJ, Gibbs and Wilson JJ agreed) said in United Builders Pty Ltd v Mutual Acceptance Ltd (1980) 144 CLR 673 at 688: The vital consideration is that the partner’s interest is in truth a chose in action, which, as Everett acknowledged, ‘consists of a right to a proportion of the surplus after the realization of the assets and payment of the debts and liabilities of the partnership’ [(1980) 143 CLR at 446]. A mortgage or charge is considered to vest rights over that chose in action but it is not considered to carry any title to the specific assets until dissolution. It follows that so long as the partnership business is carried on, its assets may be disposed of in the ordinary course of that business free of any claim to title by the holder of a mortgage or charge over a partner’s share in the partnership. What I have said applies to an individual who is a partner as well as to a corporate partner.

The partners in this case were both companies. The question arose whether a charge given by one of them in respect of its interest in the partnership constituted a floating charge which would have required registration under the Companies Act 1961 (Qld) s 100(3)(d). Mason J held that it was a fixed charge and did not require registration. His Honour continued (at 688): [page 260] A fixed charge is appropriate to create a security over a partner’s share. It gives rise to a present security over the chose in action which is the partner’s share. Although it creates no specific interest in the partnership assets until dissolution, this is not because the charge is dormant, it is because the rights conferred by the charge relate to the existing chose in action and that the security over the chose in action confers no entitlement to the assets of the partnership until dissolution. A fixed charge is equally appropriate to secure to a lender rights over a corporate partner’s share in a partnership.

As to whether the partnership or any individual is the debtor, see Custom Credit Corp Ltd v Heard and Raphael (1983) 33 SASR 45. The whole of the interest of a partner may be assigned at law under the statutory provisions considered at 7.2 but a part is only assignable in equity: Federal Commissioner of Taxation v Everett (1980) 143 CLR 440 at 447; and see 7.3. The High Court in Everett’s case drew no distinction between the partner’s interest in the partnership and the partner’s right to receive partnership profits with the result that the assignment was not to be characterised as an assignment of future property.

Under the Partnership Act 1890 (UK) s 31 and its equivalents (Partnership Act 1892 (NSW) s 31; Partnership Act 1958 (Vic) s 35; Partnership Act 1891 (Qld) s 34; Partnership Act 1891 (SA) s 31; Partnership Act 1895 (WA) s 42; Partnership Act 1891 (Tas) s 36), an assignment by a partner of his share in the partnership, either absolute or by way of mortgage, does not, as against the other partners, entitle the assignee during the continuance of the partnership to interfere in the management of the partnership business or affairs (see, for example, Re Garwoods’s Trusts; Garwood v Paynter [1903] 1 Ch 236) or to require accounts or inspection of books: Bonnin v Neame [1910] 1 Ch 732. It only entitles the assignee to receive the assignor’s share of the profits. But on a dissolution, the assignee is entitled to receive the assignor’s share of the assets, and for the purpose of ascertaining the share, he is entitled to an account as from the date of dissolution: see Watts v Driscoll [1901] 1 Ch 294 (CA). Under s 33 of the English legislation (NSW s 33; Vic s 37; Qld s 36; SA s 33; WA s 44; Tas s 38) the partnership may, at the option of the other partners, be dissolved if any partner suffers his share of the partnership property to be charged under the Act, for his separate debt. Such mortgages, therefore, without the consent of the other partner, afford a very unsatisfactory security. If the mortgage is by deed the mortgagee will generally have the statutory powers of sale and appointing a receiver (see 20.6), and, whether by deed or not, may enforce his security by foreclosure: Whetham v Davey (1885) 30 Ch D 574. Notice of the mortgage should be given to the firm.

Mortgage of debts 6.19 As to mortgages of debts, generally, see Contemporary Cottages (NZ) Ltd v Margin Traders Ltd [1981] 2 NZLR 114. Every submortgage involves a mortgage of a debt: see Chapter 15. Such a mortgage may be effected by either a legal or equitable assignment of the debt in the manner already mentioned with a proviso for redemption: see 7.2; and see Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85; [1993] 3 All ER 417 (HL). If the assignment is a legal assignment, the mortgagee will be able to sue the debtor without joining the mortgagor. The assignee of a judgment debt has the same rights of enforcing the judgment as the assignor had: Goodman v Robinson (1886) 18 QBD 332; cf Forster v Baker [1910] 2 KB 636 at 642.

An assignee of part of a judgment debt cannot issue execution for the part assigned to him: Forster v Baker. For prohibitions on the assignment of debts, see Helstan Securities Ltd v Hertfordshire County Council [1978] 3 All ER 262. The mortgage should relieve the mortgagee of any liability should the debt become irrecoverable: see Ex parte Mure (1788) 2 Cox Eq Cas 63; 30 ER 30; Williams v Price (1824) 1 Sim & St 581; 57 ER 229. There cannot be a legal assignment of a future [page 261] debt. An assignment of a future debt if made for valuable consideration is treated as a contract to assign: Holroyd v Marshall (1862) 10 HL Cas 191; 45 ER 752, and see 6.20. Accordingly a mortgage of all the book debts due and owing, or which may, during the continuance of the security, become due and owing to the mortgagor, has been held to be sufficiently definite, and to pass the equitable interest in book debts incurred after the assignment, whether in the business carried on by the mortgagor at the time of the assignment or in any other business: Tailby v Official Receiver (1888) 13 App Cas 523 (HL). For fixed charges over book debts, see Siebe Gorman & Co Ltd v Barclays Bank Ltd [1979] 2 Lloyd’s Rep 142; and see below. (For the difference between a book debt and cash at bank, see Northern Bank v Ross [1991] BCLC 504 (NZ CA).) A mortgage of payments to become due under contracts entered into by the mortgagor, but not completed at the date of the commencement of the mortgagor’s bankruptcy, is void against the mortgagor’s trustee in bankruptcy: Re Collins [1925] Ch 556. Note the distinction between an assignment of a debt and an assignment of the proceeds of a debt: see Palette Shoes Pty Ltd (in liq) v Krohn (1937) 58 CLR 1 at 13; Loc-tex International Pty Ltd v Bolfox Pty Ltd (1990) 8 ACLC 1146. Until notice of the mortgage is given to the debtor the assignment is merely equitable: see Law of Property Act 1925 (UK) s 136 (1) and its equivalents; see also 7.2. In the absence of notice, payment by the debtor to the mortgagor or a release by the mortgagor will be good as against the mortgagee: Stocks v

Dobson (1853) 4 De GM & G 11; 43 ER 411. The priority of such mortgages is governed by the date of the receipt by the debtor of notice of the mortgages: see 26.1 ff.

Mortgage of book debts 6.20 A mortgage of or charge upon book debts, present and/or future, is more commonly found as forming part of a mortgage of or charge upon other assets, as, for example, in a bill of sale over the plant, equipment, stock-intrade, goodwill and book debts of a business. Such a mortgage or charge will, however, on occasions be required in relation to book debts alone and independently of any other assets. In either case where the book debts are those of a business which is to continue and where the security is taken by way of assignment, the assignment will rarely be completed by the giving of notice to the debtors, since the giving of such notice would in most cases be prejudicial to the future conduct of the business. The security instrument therefore will ordinarily require to be of such a flexible character as to permit of the completion of the assignment by notice if this should prove necessary, and also to afford alternative means of control by the lender over the security taken. ‘Book debts’, in general, are the debts owing to the proprietor or proprietors of a business, which have become owing to him or them in the course of the conduct of that business, and which would ordinarily be recorded in the books of account of that business. The Corporations Act s 262(4) (now conditionally repealed: see 6.2) refers to book debts in the context of the provisions of s 262 as to registered charges in the following terms: a charge on a debt due or to become due to the company at some future time on account of or in connection with a profession, trade or business carried on by the company, whether entered in a book or not, and includes a reference to a charge on a future debt of the same nature although not incurred or owing at the time of the creation of the charge, but does not include a reference to a charge on a marketable security, on a negotiable instrument or on a debt owing in respect of a mortgage, charge or lease of land.

These provisions, like similar provisions which were contained in s 83 of the Victorian Instruments Act 1958 (now repealed), draw a distinction between debts which become due in the ordinary course of business and those which are only incidental to the conduct of the business.

[page 262] ‘Business’, in s 83 of the previous Victorian legislation was found to mean engagement in a particular kind of transaction continuously, and with the intention of continuing that line of transaction for the purpose of profit: Lesser v Shire of Wannon (1897) 23 VLR 446; Schroder v Hebbard [1907] VLR 107; Kirkwood v Gadd [1910] AC 422; cf Mildura Co-operative Fruit Co Ltd v Noyce [1928] VLR 390. An assignment of rights under a hire-purchase agreement by an owner to a financier was held to be an assignment of book debts: Australian Guarantee Corp Ltd v Balding (1930) 43 CLR 140. There is some doubt whether, at common law, a book debt can even be charged in favour of the debtor: Re Charge Card Services Ltd [1987] Ch 150 at 175–6; [1986] 3 All ER 289 at 308–9; [1989] Ch 497; [1988] 3 All ER 702 (CA) (the issue not raised on appeal); Wily v Rothschild Australia Ltd (1999) 47 NSWLR 555 at 564 and cases there cited. These doubts have been brushed aside by the House of Lords in Re Bank of Credit and Commerce International SA No 8 [1998] AC 214 at 225–8; [1997] 4 All ER 568 at 575– 8. In New South Wales, the Court of Appeal has ruled that, whatever the position at law, equity recognised such a charge: Cinema Plus Ltd v ANZ Banking Group Ltd (2000) 49 NSWLR 513 at 521; 157 FLR 204 at 210. Accordingly, one way or another, the better view now is that such a charge may exist. However, decisions to the contrary are Broad v Commissioner of Stamp Duties [1980] 2 NSWLR 40; Jackson v Esanda Finance Corporation Ltd (1992) 59 SASR 416 at 418 (FC) and Griffiths v Commonwealth Bank of Australia (1994) 123 ALR 111 at 120 (FCA, Lee J); and see Welsh Development Agency v Export Finance Co Ltd [1992] BCLC 148 at 166–7. Generally as to book debts, see Shipley v Marshall (1863) 14 CB (NS) 566; 143 ER 567; Independent Automatic Sales Ltd v Knowles and Foster [1962] 3 All ER 27 at 34; [1962] 1 WLR 974 at 983; Paul and Frank Ltd v Discount Bank (Overseas) Ltd [1967] Ch 348; [1966] 2 All ER 922; and Orion Finance Ltd v Crown Finance Management Ltd [1996] 2 BCLC 78 at 84–5. The term ‘book debts’ is now used in PPSA, but they are probably covered within the expression ‘circulating asset’: see 5.64.

Statutory Provisions 6.21 The Victorian Instruments Act requires the registration, by the lodgment with the Registrar-General of a copy verified by affidavit, of any assignment or transfer of book debts defined as above, after a notice of intention to register the same has been lodged at least 14 days prior to the proposed date of application for registration. The provisions extend to an equitable assignment: Savage v Thompson (1903) 29 VLR 436; see also Fosbery v Burdekin [1937] VLR 165; Re Lawson Constructions Pty Ltd [1942] SASR 201. The Act only applies to writing which itself effects an assignment of book debts; it does not apply to an oral assignment: Palette Shoes Pty Ltd (in liq) v Krohn (1937) 58 CLR 1; cf Goodwyn v Steeles-Glacier Home Delivery Freezer Food Service Pty Ltd (1987) ASC ¶55-597. Also, an agreement that does not deal with debts owed to the creditor but rather deals with moneys actually received is not an assignment of book debts: see Palette Shoes, above, at 13 per Latham CJ. Until so registered, no assignment or transfer of book debts, whether absolute or conditional, shall have any validity in law or in equity: ss 84, 85, Schedule 9. The invalidity is as to the assignment only and does not extend to a covenant for payment: National Bank of Australasia Ltd v Falkingham [1902] AC 585. The Act provides for the right of any creditor of the assignor to lodge at any time prior to the proposed date of application for registration, a caveat against such assignment as being prejudicial to the interests of such creditor, with provisions similar to those relating to a caveat against the registration of a bill of sale regarding notice to assignor and assignee, and withdrawal or removal of caveat: ss 87–92. Part IX does not apply to an assignment or transfer of book debts made by any person for the benefit of his creditors [page 263] generally: s 95; see Seidel v Kohn (1894) 20 VLR 145; see also General Furnishing and Upholstery Co v Venn (1863) 2 H & C 153; 159 ER 64. As to the form of a security in respect of book debts, it is suggested that this should be a security of the mortgage type, incorporating an assignment of

specified book debts and effected by deed, with a proviso for redemption, and including such further covenants and provisions as the parties may agree. It is suggested too that these covenants and provisions should include an appointment of the lender as the attorney of the borrower to demand, sue for, receive and give effectual discharges for any or all of the assigned book debts, so that, where notice of the assignment has not been given, the assignee will nevertheless be in a position to take steps, including legal proceedings if necessary, in the name of the assignor, to recover the debts. Where notice is not intended to be immediately given, it will be prudent also to include a covenant by the assignor for the payment of moneys collected for or on account of the debts assigned into a special bank account in the name or wholly or partly under the control of the assignee. Some further comment should be added on the question of future book debts. In Tailby v Official Receiver (1888) 13 App Cas 523; [1886–90] All ER Rep 486 (HL), Macnaghten LJ said (at 546): An assignment of future property of value operates in equity by way of agreement, binding the conscience of the assignor, and so binding the property from the moment when the contract becomes capable of being performed, on the principle that equity considers that done which ought to be done.

See also Norman v Federal Commissioner of Taxation (1963) 109 CLR 9, considered in FCT v Everett (1980) 143 CLR 440. It is well established that an assignment of ‘all the book debts due and owing, or which may during the continuance of this security become due and owing, to the said mortgagor’ is a good assignment and operates to pass the equitable interest in book debts acquired after the assignment, either in the business then carried on by the mortgagor or in any other business: Tailby v Official Receiver, above. In the case of an equitable assignment ‘the mode or form of assignment is absolutely immaterial provided the intention of the parties is clear’, but the future property must be of such a nature and so described as to be capable of being ascertained when it does come into existence or into the ownership of the assignor, and there must be consideration for the assignment. In the case of the assignment of all the book debts to become due and owing to the assignor, the class of property assigned is clear, and no further act is necessary to identify it than its coming into being. But if some further act is necessary to identify the property, then it seems that the nature of the

action necessary for the identification of the future property must be clearly defined in the original instrument of mortgage or charge. If this is done, then it seems that when that action is subsequently performed, the mortgage or charge will operate as from the date of the original instrument (cf Montagu v Earl of Sandwich (1886) 32 Ch D 525; see also Holroyd v Marshall (1862) 10 HL Cas 191; [1861–73] All ER Rep 414; Akron Tyre Co Pty Ltd v Kittson (1951) 82 CLR 477; and Reeves v Barlow (1884) 12 QBD 436), although in equity the property passes when the subject matter comes into existence or is acquired, and is so identified. It does, however, seem to be necessary to guard against the possibility that, in establishing the means by which future book debts are to be identified as subject to the mortgage or charge, the mortgagor’s discretion in their selection might be left so wide as to be inconsistent with the existence of any contract at all, since the equitable doctrine rests on the basis of contract. This difficulty will not ordinarily arise, since most mortgages of future book debts will involve all future book debts, or at least all those of a [page 264] described class, such as, for example, amounts to become payable under contracts of sale of land, or under hire–purchase agreements, or under credit sale agreements.

Profit-sharing loans 6.22 The book debts and goodwill of a business are sometimes mortgaged on the terms of the lender receiving a share of the profits in lieu of interest, or of the interest varying with the profits. Under the Partnership Act 1890 (UK) s 2(3), such an arrangement, if made under a contract in writing signed by, or on behalf of, all parties, does not of itself constitute a partnership, but there may be further terms which indicate a partnership, and the substance of the transaction will be looked at. If the transaction is in reality a partnership, ‘no phrasing of it by dexterous draftsmen will avail to avert the legal consequences of the contract, namely, full liability for the debts of the firm’ (Adam v Newbigging (1888) 13 App

Cas 308 (HL)); as to the Australian statutory equivalents see the Partnership Acts referred to at 7.14 and the sections as follows: NSW s 2(III); Vic s 6(3); Qld s 6(3); SA s 2(III); WA s 8(3); Tas s 7(c). An express declaration that no partnership is to be constituted is not conclusive: ibid, at 313, 316; Weiner v Harris [1910] 1 KB 285 at 290. In all such transactions, therefore, there must be a bona fide loan, one necessary ingredient of which is personal liability on the part of the borrower to repay the loan. An arrangement by which the lender is only to be repaid out of the assets of the business can never be a loan, but must be a partnership: Re Megevand; Ex parte Delhasse (1878) 7 Ch D 511 (CA). Again, the lender must not take an interest in or share of the capital of the business in specie, because thereby he becomes jointly interested in capital and profits, or in other words becomes part owner of (that is, partner in) the business. Nor must his share of the profits vary in the proportion which his loan may from time to time bear to the rest of the capital, for that shows that he is not lending his money on the security of a definite share of the profits, but is really contributing to a joint speculation, in which he and the other speculators are to take profits pari passu. A provision for the return by the lender of a proportion of the profits received by him in one year, in case of subsequent losses, would be an almost certain mark of partnership, for no bona fide lender would submit to such a provision. For the same reason arbitration clauses must be avoided (see Cox v Hickman (1860) 8 HL Cas 268; 11 ER 431; Syers v Syers (1876) 1 App Cas 174 (HL); Pooley v Driver (1876) 5 Ch D 458; Re Howard; Ex parte Tennant (1877) 6 Ch D 303 (CA); Davis v Davis [1894] 1 Ch 393; Re Young; Ex parte Jones [1896] 2 QB 484), and clauses giving the lender a right to interfere or take part in the management of the business. Even a covenant by the borrower to employ the loan exclusively in the business is not to be lightly introduced: see Badeley v Consolidated Bank (1888) 38 Ch D 238 (CA). A lender under such a contract as is mentioned in s 2 of the English Partnership Act is not entitled to recover anything in respect of his loan or his share of profits in the event of a bankruptcy or insolvency of the borrower until all the claims of the other creditors have been satisfied (Partnership Act 1890 (UK) s 3, and see Re Abenheim; Ex parte Abenheim (1913) 109 LT 219 at 221), but if he has security he will nevertheless have his rights as a secured creditor: Badeley v Consolidated Bank, above. As to Australian legislation

see NSW ss 2, 3;Vic ss 6, 7; Qld ss 6, 7; SA ss 2, 3; WA ss 8, 9; Tas ss 7, 8.

Expectancies and future things in action 6.23 A mortgage of a future thing in action, such as an expectancy under a will, being an assignment for value of a future thing in action, operates as a contract to assign property answering the description of the property mortgaged when it comes into the mortgagor’s possession, and passes an interest which will attach to the property when [page 265] acquired: Holroyd v Marshall (1862) 10 HL Cas 191; 11 ER 999; see also Winn v Burgess (1986) Times, 8 July. But until the property is acquired, there is only a liability on a contract, which is provable in the bankruptcy of the mortgagor, and from which he is released by the order of discharge: Collyer v Isaacs (1881) 19 Ch D 342; Wilmot v Alton (1897) 1 QB 17; Bank of Scotland v Macleod [1914] AC 311 (HL); Re Collins [1925] Ch 556. The assignment is unenforceable if purely voluntary (Meek v Kettlewell (1843) 1 Ph 342; 41 ER 662); and the property must be sufficiently described to be ascertainable: Tailby v Official Receiver (1888) 13 App Cas 523 (HL); see also Elders Pastoral Ltd v Bank of New Zealand (No 2) [1990] 1 WLR 1478 and EPfeiffer Weinkellerei-Weineinkauf GmbH v Arbuthnot Factors Ltd [1988] 1 WLR 150. As to the nature of a future chose in action, see Norman v Commissioner of Taxation (1963) 109 CLR 9; Shepherd v Commissioner of Taxation (1965) 113 CLR 385. An expectant share in the estate of the living person transfers the share and does not impose a mere personal liability which is affected by the bankruptcy of the mortgagor: Re Lind; Industrial Finance Syndicate Ltd v Lind [1915] 2 Ch 345 (CA). As to the acquisition of expectancies at an undervalue, see the Law of Property Act 1925 (UK) s 174 and its equivalents: see 13.13.

Mortgage of interest in trust funds

6.24 Such an interest is necessarily equitable (see Chapter 1). As has already been stated (see 76.4), it has been held that equitable things in action are within s 136 of the Law of Property Act 1925 (UK) and its equivalents, and capable of legal assignment: Re Pain [1919] 1 Ch 38; cf Torkington v Magee [1902] 2 KB 427 at 430–1. However, the generally accepted view is that a mortgage of an equitable interest must be an equitable mortgage (see the discussion on these cases and others in Marshall, Assignment of Choses in Action, Pitman, London, 1950, pp 162ff). Nor, generally, is there any need for a statutory assignment, for if the whole interest is assigned the assignee can sue in his own name, without joining the original creditor: Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1 (HL). As to the form of the assignment in such cases, s 53(1)(c) of the Law of Property Act 1925 (UK) (which replaces s 9 of the Statute of Frauds 1677) provides: 53 (1)(c) A disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing, signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will.

(For the Australian counterparts of s 53(1)(c), see the Table of Comparable Sections in the Introduction.) Such a mortgage is, as a rule, created by a formal deed, and where it is desired to incorporate the statutory power of sale and other powers a deed is essential (see 20.5). The mortgage takes the form of an assignment of the interest with a proviso for re-assignment on payment of the loan. In view of the hazardous nature of such securities in such a case the mortgagee will generally insist on the mortgagor effecting a policy of insurance on his own life and mortgaging the policy as collateral security. Where there are several such mortgages their priority depends upon the rule in Dearie v Hall (1828) 3 Russ 1; 38 ER 475 (see 26.1; as to stop orders etc, where the fund is in court, see 26.23). The mere giving of notice of the assignment does not constitute the taking of possession of the interest. To do that the notice must also require payment of the income to the mortgagee: Re Pawson’s Settlement; Higgins v Pawson [1917] 1 Ch 541. Where the

[page 266] interest in a fund is a reversionary one, the trustees may, when the interest falls into possession, pay the whole fund over to the mortgagee (Jones v Farrell (1857) 1 De G & J 208; 44 ER 703), but they are not bound to do so and they may pay over only so much as suffices to discharge the principal, interest, and costs due on the mortgage: Re Bell; Jeffery v Sayles [1896] 1 Ch 1 (CA); Hockey v Western [1898] 1 Ch 350 (CA).

Mortgage of copyright 6.25 The law relating to copyright in Australia is governed by the Copyright Act 1968 (Cth). By s 196 of that Act copyright is personal property and is assignable by writing signed by or on behalf of the assignor, and an assignment thereof may be limited in any way. As assignable personal estate, copyright may be the subject of a mortgage. A legal mortgagee of copyright takes the usual form of a mortgage of a chose in action — that is, a covenant to pay, an assignment of the copyright with a proviso for redemption, and the appropriate covenants and provisions. The legal assignee of copyright by way of mortgage is entitled to sue in his own name in respect of an infringement, and an equitable assignee is entitled to obtain an injunction against an infringement of his right in an action in which the legal owner of the copyright is a party: Performing Right Society Ltd v London Theatre of Varieties [1924] AC 1; Clayton v Vincent’s Products Ltd (1934) 34 SR (NSW) 214. An equitable assignee cannot sue for infringements in his own name, but must make the assignor a party to the action and his rights will be postponed to those of a subsequent assignee, unless such assignee acquired his rights with notice of the prior equitable assignment: Macdonald v Eyles [1921] 1 Ch 631. Copyright in work yet to come into existence may be assigned, hence mortgaged, according to the usual rules applying to future property: see Tailby v Official Receiver (1888) 13 App Cas 523, and see 6.19.

Mortgage of patents

6.26 The rights granted to a patentee by a patent are personal property and are capable of assignment, such assignment to be in writing signed by or on behalf of the assignor and assignee, and a patent may be assigned for a place in or part of Australia: Patents Act 1990 (Cth) ss 13(2), 14. No special form of assignment is prescribed by the Act, but there is provision for the registration of an assignee as the proprietor of a patent and for the notation in the register of the interest of a person who has become entitled to an interest in a patent as mortgagee: s 187; Patents Regulations 1991 (Cth) reg 19.1(a). Under s 189 a patentee may deal with the patent as absolute owner, subject only to any rights as appear in the register to be vested in any other person: s 189(1). However, this does not protect a person who deals with the patentee otherwise than as a purchaser in good faith for value and without notice of any fraud on the part of the patentee: s 189(2). Finally, s 189(3) provides expressly that: ‘Equities in relation to a patent may be enforced against the patentee except to the prejudice of a purchaser in good faith for value.’ Section 188 provides that notice of any kind of trust relating to a patent or licence is not receivable by the Commissioner and must not be registered, but it seems this does not apply to an equitable assignment: Stewart v Casey [1892] 1 Ch 104. Equities are also protected by s 196(b)(ii) which provides, inter alia, that a document in respect of which particulars have not been entered in the register is not admissible in any proceedings in proof of the title to a patent or to an interest in the patent unless the proceedings are to enforce equities in relation to a patent or licence. Since a patent can be assigned, it can also be mortgaged, either in whole or in part or, it seems, in respect of a particular place. A licence to manufacture a patented invention may also be the subject [page 267] of a mortgage, provided that the grant of the licence does not forbid mortgaging, and that, when necessary, the consent of the grantor of the licence has been obtained. Where a mortgage of a patent is effected by deed, the powers of the mortgagee conferred by the general conveyancing statutes in New South

Wales, Victoria, Queensland, South Australia and Tasmania will be implied. A mortgagee of a patent, registered as such, cannot sue for infringement, and it is doubtful whether a mortgagor need join his mortgagee in such an action: Van Gelder, Apsimon & Co v Sowerby Bridge United District Flour Society (1890) 44 Ch D 374 (CA). It may therefore be prudent to include in a mortgage of a patent an appointment by the mortgagor of the mortgagee as the attorney of the mortgagor, at the cost of the mortgagor, to do such acts, matters and things, and to institute and carry on such actions and proceedings as the mortgagee at his discretion may deem necessary for the protection of the patent.

Mortgage of registered trade marks and designs 6.27 A registered trade mark is personal property in which equities may be enforced in the same way as equities in respect of any other personal property: Trade Marks Act 1995 (Cth) s 21. The assignment of registered trade marks, either with or without the goodwill of the business concerned in the goods in respect of which the trade mark is registered or of some of those goods, is governed by s 106 of the Trade Marks Act 1995. The registered owner of a trade mark has, subject to any rights vested in some other person, power to deal with the trade mark as its absolute owner (s 22). The registered owner may thus assign or otherwise deal with the trade mark and give good discharges for any consideration for such assignment or dealing (s 22). Where a person becomes entitled by assignment to a registered trade mark, ss 107 and 108 of the Act provide for application to be made to change the register and for such change to be made by the Registrar. The Designs Act 2003 (Cth) provides that a person may apply for the registration of a design (s 21); and that the registered owner of a registered design has exclusive rights in respect of it which is personal property (s 10(2)) and is capable of assignment by writing signed by the registered owner of the design (s 11). Notifications of assignments may be entered in the register: see s 114. Having regard to the foregoing provisions, a design, whether registered or unregistered, may be the subject of a mortgage, and it seems that a mortgagee by assignment from the author of an unregistered design would be entitled to

make application for its registration. Registration of a design is in force for five years from the date of filing the application, but may be renewed for a further five years: ss 46, 47. It follows from the foregoing provisions that a registered trade mark may, subject to the Act, be mortgaged, either by assignment of the legal title or by equitable mortgage.

[page 268]

Chapter 7

Statutory Charges and Judgments A. Statutory Charges Generally Enforcement of statutory charges Enforcement of statutory obligations B. Judgments Judgments generally Charging orders Registration of writs and orders affecting land Ancillary matters with respect to charging orders Effect of charging order Enforcement of charging orders Worker’s/Contractors’ Liens Acts Appointment of receiver by way of equitable execution Charging a share in a partnership Attachment orders (Stop orders) Garnishment

A. Statutory Charges

7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 7.9 7.10 7.11 7.12 7.13 7.14

Generally 7.1 It is commonplace for statutes providing for supply of services by statutory authorities to proprietors of land or for statutes taxing land to provide that the land will be charged with any unpaid tax or service charge. In a federation it is of little assistance to list the statutes in this category, though an example will illustrate the situation. The standard provision in New South Wales used to be that if an owner does not pay certain charges imposed by the Act, the relevant board may obtain a judgment and if it does, ‘the amount of any judgment that a board has recovered under this section and of any costs awarded to the board in respect of its claim are a charge on the land concerned’ with a provision that the charge may be registered in the Registrar-General’s Register of Causes, Writs and Orders. However, latterly the formula as is used in Sch 4 of the Rural Land Protection Act 1998 (NSW) has replaced it. This is that the authority may lodge a copy of its compliance notice with the Registrar-General who may register it in such manner as he considers appropriate. The registration operates as a charge and everyone is deemed to have notice of the charge. [page 269] Another common form which is more onerous is exemplified in s 47(1) of the NSW Land Tax Management Act 1956, namely ‘Land tax shall until payment be a first charge upon the land taxed in priority over all other encumbrances whatever …’. It is necessary to look to the statute creating the charge in each instance to see the extent of the statutory charge. For an English example, see Westminster City Council v Haymarket Publishing Ltd [1981] 2 All ER 555; [1981] 1 WLR 677. Statutory charges are not limited to rating and taxing Acts. It is common in statutes providing for legal aid for provision to be made for a charge over verdict moneys: see, for example, Access to Justice Act 1999 (UK) s 10(7); and Hanlon v Law Society [1981] AC 124; [1980] 2 All ER 199 and Curling v Law Society [1985] 1 WLR 470; [1985] 1 All ER 705.

Enforcement of statutory charges

7.2 The usual method of enforcing a statutory charge is for the person seeking enforcement to commence proceedings for an order appointing trustees for sale: Metropolitan Water Sewerage & Drainage Board v Aston Investment Pty Ltd (1978) 4 BPR 9728. The usual form of order can be found in that case and in Sutherland Shire Council v Glendon Court Ltd (1934) 12 LGR 20. It is a weakness of the Torrens system that the statutory charges, even though not appearing on the register, may take priority over all other registered mortgages. This is one of the reasons why, especially in New South Wales, great care is taken in time-consuming searches with statutory authorities before a purchaser’s solicitor permits his or her client to complete a purchase or lend money on mortgage.

Enforcement of statutory obligations 7.3 Sometimes legislation imposes an obligation on a land owner without charging the land with the cost of enforcement. When land is mortgaged and the mortgagor defaults in his statutory obligations and is impecunious, the question arises as to how far, if at all, the community can enforce the duties owed to it as against the mortgagee. There is little authority on the point. In King (Township) v Rolex Equipment Co (1992) 23 RPR (2d) (Can) 313, In King (Township) v Rolex Equipment Co (1992) 23 RPR (2d) (can) 313, Wright J, in the Ontario Court of Justice, General Division, held that a receiver could be appointed to remove construction site garbage on the land which was placed on it in contravention of zoning laws. It was further held that although, in general, the mortgagee would prevail, expenses paid by the receiver for preservation or improvement of the property would take priority over the mortgage. It was thus just and convenient to appoint a receiver, unless the mortgagee itself removed the waste within 30 days.

B. Judgments Judgments generally 7.4 The distinction between a lien and a mortgage has already been considered: see 1.10–1.12. A lien is an obligation which by implication of law, and not by express contract, binds both real and personal property for the discharge of a debt or other obligation. A judgment does not of itself create

any lien or other security interest. Not even the grant of a Mareva Order will operate of itself to give the plaintiff a charge or security over the assets the subject of the injunction: Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd (1985) 1 NSWLR 545 at 558–9. However, where parties have agreed to the court making a secured maintenance order and have subsequently reached agreement as to the subject matter to be provided as security, the order will be secured accordingly: Hyde v Hyde [1948] P 198. See also [page 270] Re Richardson’s Will Trusts [1958] Ch 504; Re Walker (1969) 90 WN (Pt 1) (NSW) 273 at 280 and Platt v Platt (1976) 120 Sol Jo 199, for situations where the conduct of the parties, together with the judgment, creates an equitable charge. In Western Australia and Tasmania, legislation operates so that a judgment may of itself create a charge. This comes about in Western Australia through the adoption of the Judgments Act 1838 (UK); see Sykes and Walker, p 219. However, under the Western Australian Act, the equitable charge that arises on registration is only in aid of execution and is not an equitable charge at large and does not prevail over a prior mortgage nor does it affect Torrens system land: Bank of Western Australia v Connell (1996) 16 WAR 483. In Tasmania, the Registration of Deeds Act 1935 provides by s 11 that a judgment when registered shall be a charge on the land.

Charging orders 7.5 Under s 14 of the Judgments Act 1838 (UK) a creditor could obtain an order that any stocks or shares or equity of redemption or other equitable interest held by a debtor could, by order of the Supreme Court, be charged with a judgment debt. The provision operated to give the debtor a charge rather than a mortgage so that the remedy was sale not foreclosure: United Travel Agencies Pty Ltd v Cain (1990) 20 NSWR 566. The provision was adopted by the Australian states (see, for example, NSW Civil Procedure Act, 2005 s 126; Rules of Supreme Court (Vic) rr 73.02–73.09).

A charging order may only be made in respect of an ascertained sum: A and M Records Inc v Darakdjian [1975] 3 All ER 983; [1975] 1 WLR 1610. Only equitable interests in land can be made subject of an order, an ‘equity of redemption’ under the Torrens system is not such an interest: Quint v Robertson (1985) 3 NSWLR 398. The court has discretion as to whether it will make an order, and in exercising that discretion will consider all the circumstances of the case. Thus in Roberts Petroleum Ltd v Bernard Kenny Ltd [1983] 2 AC 192; [1983] 1 All ER 564, the House of Lords considered that the compulsory winding up of a company, or a resolution of a company in general meeting for a voluntary winding up was, without more, sufficient cause for not making a charging order. See also Harman v Glencross [1986] Fam 81; Austin-Fell v Austin-Fell [1990] Fam 172; [1990] 2 All ER 455 and Pickering v Wells [2002] FLR 798 (UK) at 812.

Registration of writs and orders affecting land 7.6 State legislation provides for registers to be kept of causes, writs and orders affecting land; see, for example, NSW Act ss 185–194, Victorian Act ss 209–218. The Victorian legislation envisages that no judgment or lis pendens shall become a charge on land until it is registered in the register: see Victorian Act, ss 209 and 213 respectively. The effect of the NSW Act is not so clear, however, some statutory dealings may be effective without registration. As to the rights of judgment creditors with respect to mortgaged property, see also 24.4–24.53.

Ancillary matters with respect to charging orders 7.7 Because the practice and procedure differs in the various states, there is no real purpose to be served in dealing with the detailed procedures involved in obtaining a charging order. Usually the process involves a two-stage application: in the first instance, an order to show cause, and in the second instance, an order absolute. The legislation usually provides that a charging order may be discharged. However, the authorities on the section are to the effect that the order cannot be discharged after it has become absolute: Jeffryes v Reynolds (1882) 52 LJQB 55; Drew v Willis [1891] 1 QB 450 and Ex parte Pierce (1925) 42 WN (NSW) 23; see also Hawks v McArthur [1951] 1 All ER 22 at 25.

[page 271]

Effect of charging order 7.8 A charging order puts the judgment debtor in the same plight as if the debtor had charged the property personally: Daponte v Schubert and Roy Nominees Ltd [1939] Ch 958 and United Travel Agencies Pty Ltd v Cain (1990) 20 NSWLR 566. The judgment creditor is entitled to all remedies he would have been entitled to had the judgment debtor given the charge, and likewise is subject to every liability under which the debtor holds the property: see Langton v Horton (1842) 1 Hare 549; 66 ER 1149; Whitworth v Gaugain (1844) 3 Hare 416 at 427; 67 ER 444 at 448; affirmed (1846) 1 Ph 128; 41 ER 809; Abbott v Stratton (1846) 3 Jo & Lat 603; Eyre v McDowell (1861) 9 HLC 619; 11 ER 871 and Chung Khiaw Bank Ltd v United Overseas Bank [1970] AC 767. In Gill v The Continental Union Gas Co Ltd (1872) LR 7 Ex 332, it was held that if a company registers a transfer of shares after notice of an order nisi for a charging order but before it is made absolute it is a good answer to show that the judgment debtor in whose name the shares stood had no beneficial interest in them. Before the Judicature Act, the court would sometimes make the order absolute on the basis that only the beneficial interests of the judgment debtor could be charged and then leave it to a court of equity to work out priorities: see, for example, Rogers v Holloway (1843) 5 Man & G 292; 134 ER 576; Cragg v Taylor (1866) LR 1 Ex 148 and Blow v Constable (1886) 3 WN (NSW) 24. A judgment debtor’s interest in stock or shares held by a third person for the benefit of the debtor may be charged by a charging order: Southwestern Loan & Discount Co v Robertson (1881) 8 QBD 17 and Service v Flatau (1900) 16 WN (NSW) 248. However, if the shares are merely part of a partially administered estate, no such order can be made (Dixon v Wrench (1869) LR 4 Ex 154) although, in Union Bank of Australia v O’Leary (1897) 13 WN (NSW) 124, Cohen J did appear to make such an order in respect of such property. Part only of the debtor’s stock may be charged: Stanley v Bond (1844) 14 LJ Ch 51.

Enforcement of charging orders 7.9 Although not all the authorities are consistent, the better view is that a charging order is enforced by an order for judicial sale and not an order for foreclosure: see United Travel Agencies Pty Ltd v Cain (1990) 20 NSWLR 566. This view stems from D’Auvergne v Cooper [1899] WN 256 (UK). This case has been very skimpily reported, but, in Daponte v Schubert and Roy Nominees Ltd [1939] Ch 958, it was said to represent the law. The same view was taken in Western Australia in Dalston Development Pty Ltd v Dean [1967] WAR 176. Compare Hosack v Robbins [1917] 1 Ch 142 and 332 and see Sykes and Walker, p 792. A person who has a charging order against one of a set of co-owners has been held in England to be entitled to an order for sale of the whole estate: Midland Bank plc v Pike [1988] 2 All ER 434.

Worker’s/Contractors’ Liens Acts 7.10 Most states have legislation giving a statutory charge to workers or contractors, but the Acts are different in their effect. In New South Wales and Tasmania, the Contractors Debts Act 1997 and the Contractors’ Debts Act 1939 respectively permit a worker or subcontractor to attach a fund owing to a contractor before judgment: see Re Dossi (1905) 5 SR (NSW) 204; Costain Australia Ltd v Superior Pipe Installations Pty Ltd [1975] 1 NSWLR 491. The NSW Act uses the term ‘Attachment Order’. In Western Australia, the Workmen’s Wages Act 1898 confers a charge in a worker over moneys due by a third party to the contractor who engaged the claimant. [page 272] In Queensland the Industrial Relations Act 1999 gives a similar right to a worker as is conferred by the Western Australian legislation. Additionally the Subcontractors’ Charges Act 1974 confers a similar charge for subcontractors. However, the provisions only apply where a liquidated sum is due to the subcontractor: Groutco (Aust) Pty Ltd v Thiess Contractors Pty Ltd [1985] 1 Qd R 238; Milgun Pty Ltd v Austco Pty Ltd [1988] 2 Qd R 670 at

672. In South Australia and the Northern Territory a worker or subcontractor is given a charge over moneys due to the employer/contractor: Workers Liens Act 1893 (SA). The charge given by this Act is a genuine security: Re Williams; Ex parte The Official Assignee (1899) 17 NZLR 712; Jackson v Barnett (1903) 23 NZLR 17; Godber v Manning (1914) 33 NZLR 603; Penketh v Midword (1914) 33 NZLR 1399; Pitt Ltd v Glenelg Corp [1927] SASR 501; Miller’s Lime Ltd v Royal Agricultural & Horticultural Society of South Australia [1936] SASR 306; Re Mason (1953) 16 ABC 132; Re Buckley; Ex parte Arkell [1954] QWN 11; Stapleton v F T S O’Donnell, Griffin & Co (Qld) Pty Ltd (1961) 108 CLR 106 at 115; Re Dalle Nogare (1964) 6 FLR 277; Albert Del Fabbro Pty Ltd v Wilckens & Burnside Pty Ltd [1970] SASR 121; Re RGP Constructions Pty Ltd (1982) ACLR 233; and Marriott Industries Pty Ltd v Mercantile Credits Ltd (1990) 55 SASR 228. See also Blythe Green and Jordain Pty Ltd v Sienna Pty Ltd (1986) 82 FLR 291; Jennings Constructions Ltd v Burgundy Royale Investments Pty Ltd (No 2) (1987) 162 CLR 153; Pipeline Properties Pty Ltd v Leichhardt Development Co Pty Ltd (1989) 58 NTR 17; Re Trademark Homes (Aust) Pty Ltd (1996) 131 FLR 201; 67 SASR 107; Gino and Associates Pty Ltd v Accordent Pty Ltd (1998) 201 LSJS 60 (SA, FC); and Ambir Pty Ltd v Paspalis Hotel Investments Pty Ltd (2003) 174 FLR 483. A further detailed discussion occurs in Sykes and Walker, pp 774ff and see (1999) 11(3) ACLB 17.

Appointment of receiver by way of equitable execution 7.11 Although it is common to refer to ‘equitable execution’ it is more a question of equitable relief being granted because there is a hindrance in the way of execution at law: Re Shephard (1889) 43 Ch D 131. The Supreme Courts of the various states will, if the property in the judgment debtor is such as to prevent a judgment creditor from obtaining execution at law, appoint a receiver to aid the judgment creditor. In Westhead v Riley (1883) 25 Ch D 413, it was said that before a receiver was appointed there should be no way of getting at the fund except by the appointment of a receiver. See also Maclaine Watson & Co Ltd v International Tin Council [1988] Ch 1 at 20–1, where the authorities are discussed, and the same case on appeal: [1989] Ch 253 and [1990] 2 AC 418. The appointment of a receiver does not create a

charge over the property (Re Potts; Ex parte Taylor [1893] 1 QB 648 at 659; Re Pearce; Ex parte Official Receiver [1919] 1 KB 354 at 363 and 364; Giles v Kruyer [1921] 3 KB 23), and is subject to the rights of prior encumbrances, but the judgment creditor’s position is preserved by being able to obtain an injunction to prevent the property being received by a subsequent assignee to the creditor’s prejudice: Ideal Bedding Co Ltd v Holland [1907] 2 Ch 157 at 169 and 170 and Stevens v Hutchinson [1953] Ch 299.

Charging a share in a partnership 7.12 Each of the Uniform Partnership Acts, following s 23 of the English statute, provides that no writ of execution shall issue against partnership property except on a judgment against the firm, but that a Supreme Court may make an order charging a partner’s interest in partnership property and profits with payment of a judgment debt and interest thereon. The Act further provides that such charge is as valid as if it had been made by the partner who is the judgment debtor. [page 273]

Attachment orders (Stop orders) 7.13 The Supreme Court Rules of the various states — see, for example, Uniform Civil Procedure Rules 2005 (NSW) r 41.16 provide for a Supreme Court making an order prohibiting the transfer, sale, delivery out, payment or other dealing with the whole or any part of funds in court without notice to the applicant. A stop order does not have the effect of deciding the rights of any of the parties, nor itself creating a charge, though the court may, in addition, make an order charging the funds in court in favour of the judgment credit: see Brereton v Edwards (1888) 21 QBD 488. In some states, such as Victoria — see Supreme Court Rule 73.13 — there is a further provision establishing a procedure by which a person who claims a beneficial interest in the stock of a corporation can receive notice of any proposed transfer of the stock. Such a procedure operates in much the same way as the caveat procedure does under the Torrens system: see Williams, Supreme Court Civil Procedure, Butterworths, Sydney, 1987, 23.52. See also

26.23.

Garnishment 7.14 Where a judgment creditor has obtained an order for the payment by a judgment debtor and any other person within the jurisdiction is indebted to the judgment debtor, then the judgment creditor may cause the court to issue a garnishment notice on such person who is referred to as the garnishee. The word ‘debt’, under relevant legislations and court rules etc, is one of wide application: see Coshott v Learoyd [2001] FCA 88. The exact procedure varies from state to state, but usually a garnishment notice issues out of the court office under the authority of a Registrar, but any dispute on the return of the garnishment notice is dealt with by a judge or master. The judgment creditor does not become a creditor of the garnishee upon the issuing of the garnishment notice: Norton v Yates [1906] 1 KB 112 and see Re Combined Weighing & Advertising Machine Co (1889) 43 Ch D 99. Service of a garnishment notice attaches the debts therein mentioned so that the garnishee is prevented from dealing with any part of the debt for any purpose even though the garnishee’s liability to the judgment debtor may exceed that of the latter to the garnishor. Thus if a bank account is garnisheed, the whole of the amount of the judgment debt in the bank is attached and the bank may dishonour any further cheques: Rogers v Whiteley [1892] AC 118. However, the debt is not assigned by service of the garnishment notice, the effect of which is merely to create a charge over it: Chatterton v Watney (1881) 17 Ch D 259 and Galbraith v Grimshaw and Baxter [1910] 1 KB 339 at 343. On the nature of garnishee proceedings and the effect of the order see Re Barrier Reef Finance and Land Pty Ltd (1988) 13 ACLR 708; Relwood Pty Ltd v Manning Homes Pty Ltd (No 2) [1992] 2 Qd R 197 (FC); M G Charley Pty Ltd v FH Wells Pty Ltd [1963] NSWLR 22. A garnishee order has no proprietary effect: Bond v McClay [1903] St R Qd 1; and see DM & BP Wiskich v Drivehard Pty Ltd (SC (NSW), Giles J, 13 December 1993, unreported). On crystallisation of a floating charge, the floating charge holder had priority to the judgment creditor under an order nisi for garnishment: Relwood Pty Ltd v Manning Homes Pty Ltd (No 2), above.

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Chapter 8

Debentures Debentures generally Form Bearer debentures Trust deeds Open-end debenture trust deeds Debenture trustees Remedies of debenture holders Debenture holders’ action Statutory definitions Floating charges Logical difficulties with floating charges Historical development of the floating charge Characteristics of the floating charge Creation of floating securities Fixed and floating charges Ordinary course of business Convertible charges Floating charges generally Crystallisation of floating charges Automatic crystallisation

8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 8.9 8.10 8.11 8.12 8.13 8.14 8.15 8.16 8.17 8.18 8.19 8.20

Effect of crystallisation Charges in favour of officers Undue preferences Avoidance of certain floating charges Preferential creditors

8.21 8.22 8.23 8.24 8.25

Debentures generally 8.1 The word ‘debenture’ is a very old one and appears to have derived from the Latin debentur mihi (‘I am indebted’), with which acknowledgments of debt formerly commenced: Levy v Abercorris Slate and Slab Co (1887) 37 Ch D 260 at 264. Thus the root meaning of debenture is ‘indebtedness’, and the word may be used in a very general sense in this way: see Lemon v Austin Friars Investment Trust Ltd [1926] Ch 1; Re Bauer Securities Pty Ltd (1990) 4 ACSR 328; Re Austral Mining Construction Pty Ltd [1993] [page 275] 1 Qd R 358. See also Edmonds v Blaina Furnaces Co (1887) 36 Ch D 215. On the meaning of ‘debenture’ for stamp duty purposes, see Burns Philp Trustee Co Ltd v Commissioner of Stamp Duties (NSW) (1983) 14 ATR 482; Handevel Pty Ltd v Comptroller of Stamps (Vic) (1985) 157 CLR 177. In commercial matters the term ‘debenture’ is nowadays usually associated with evidence of a loan made to a company. Its constitution together with the powers conferred by the Corporations Act usually empower a company to raise money by borrowing: see 11.33 and Knightsbridge Estates Trust Ltd v Byrne [1940] AC 613; [1940] 2 All ER 401 (HL). In the Corporations Act s 9, the word is currently defined by saying that the: debenture of a body means the chose in action that includes an undertaking by the body to repay as a debt money deposited with or lent to the body. The chose in action may (but need not) include a charge over the property of the body to secure repayment of the money …

with specified exceptions. As Robson says in his Annotated Corporations Act, 7th ed, CCH Australia, 2002, despite changes to the definition, ‘the meaning of debenture is as elusive as ever’. See as to the definition, Australian Securities and Investment Commission v Karl Suleman Enterprises Pty Ltd (2003) 45 ACSR 401. However, securities may only be publicly described as debentures if certain preconditions are met: see Corporations Act s 283BH. The term ‘debenture’ is usually associated with companies although it is also sometimes used in relation to an unincorporated club: see Wylie v Carlyon [1922] 1 Ch 51. An issue of mortgage debentures or secured debenture stock is in substance a contributory mortgage (see 11.2) with a large number of contributors. A mortgage debenture consists basically of an acknowledgment of indebtedness by the company and a charge on the company’s property, generally a fixed charge on the company’s land and a floating charge on the rest of its undertaking. Debenture stock is of the same nature as ordinary debentures, except that, instead of each debenture securing a definite and generally equal amount, the whole sum secured is treated as a single stock and certificates are issued in respect of multiples of the stock. The great advantage of debenture stock is its divisibility. In a previous edition of the Corporations Law, s 1049 provided for specific performance of contracts to issue debentures. That section was repealed seemingly because the general rules of equity as to when specific performance of a contract to give a mortgage which caused the enactment of the section (see particularly, South African Territories Ltd v Wallington [1898] AC 309) have been loosened (see Wight v Haberdan Pty Ltd [1984] 2 NSWLR 280. See Explanatory Memorandum to CLERP Bill 1998, para 8.129, Australian Corporation Law — Pending Legislation, Butterworths, March 1999, and Ford, Austin and Ramsay, Ford’s Principles of Corporations Law, 11th ed, Butterworths, Australia, 2003, [19.050] for the history. There does not appear to be any reported instance of such an order for specific performance being made. Specific performance is normally awarded for a contract to convert notes or debentures into shares (ANZ Executors and Trustees Ltd v Humes Ltd [1990] VR 615) and associated matters (Humes Ltd v PS (Enterprises)

Nominees Pty Ltd (1989) 7 ACLC 944) (appeals in both matters heard together and dismissed: (1989) 7 ACLC 992); see also 1.41. No attempt is made in this chapter to cover the whole of the law relevant to debentures. For further detail, refer to the specialist texts on company charges and debentures and securities. [page 276]

Form 8.2 A single instrument may be a mortgage debenture (see Robson v Smith [1895] 2 Ch 118), but often a debenture will be one of a series of short contemporaneous instruments. It is usually, but not necessarily, under the company’s seal: Lemon v Austin Friars Investment Trust Ltd [1926] Ch 1. The traditional form of debenture usually contained the following provisions: 1.

a covenant for repayment by the company; (a) to pay a person named or the registered holder or sometimes the bearer of the debenture. Where a debenture, not payable to bearer, is issued to a person with his name left blank, the debenture, as such, is void, but where it forms one of a series of debentures secured by a trust deed, the lender will have an equitable security, and can share pari passu with the holders of valid debentures in the property comprised in the trust deed (Re Queensland Land & Coal Co; Davis v Martin [1894] 3 Ch 181); (b) a specified sum; (c) on a specified day or such earlier day as the debt might become payable under conditions specified in the instrument (for the effect of the absence of a covenant for payment see 3.13). Payment will nevertheless become due on a winding up before that date: Wallace v Universal Automatic Machines Co [1894] 2 Ch 547. Where the principal moneys have become immediately payable by reason of a winding up, the company or the guarantors of the loan are entitled to redeem and the debenture holders can only refuse payment if the conditions so provide (Consolidated Goldfields of South Africa v

Simmer and Jack East Ltd (1913) 82 LJ Ch 214); 2.

a covenant to pay interest in the meantime at the specified rate;

3.

a charge of such payments on the company’s undertaking and all its property, present and future, including (sometimes) uncalled capital, or on some specified property. An exception of a certain class of assets means assets of the class from time to time, and not only at the date of the debenture: Imperial Paper Mills of Canada v Quebec Bank (1913) 83 LJ PC 67; and

4.

a statement that it was issued subject to certain conditions endorsed thereon or otherwise annexed thereto.

The conditions provided, for example, that the debenture was one of a series, all of which were to rank pari passu as a first (or, as the case may be, a second or subsequent) charge on the property charged without any preference or priority of one over another (as to debentures ranking pari passu, see Re Mersey Rail Co [1895] 2 Ch 287). Where interest on some debentures has been paid to a later date than on others, the interest will not, in the absence of special provision, be equalised in a winding up, but the principal and interest due to each debenture holder will be calculated, and the assets distributed rateably according to the amounts due (Re Midland Express Ltd [1914 ] 1 Ch 41); and (very commonly) that such charge was to be a ‘floating security’. The conditions would also provide that the money secured should become payable if default were made in payment of interest, or if an order were made, or an effective resolution passed, for the winding up of the company or for another specified event; and, usually, included power to appoint a receiver. They generally also provided in detail for the assignment or transmission of the debenture, sometimes by registered assignment, sometimes by mere delivery. No form of instrument of transfer is prescribed by the Corporations Act. [page 277] A debenture also usually provided for the transfer thereof to be free from equities: see Re Palmer’s Decoration and Furnishing Co [1904] 2 Ch 743.

As to the effect of this provision see Hilger Analytical Ltd v Rank Precision Industries Ltd [1984] BCLC 301; as to equities see 7.7. The conditions also provided for meetings of the debenture holders and for the validity of resolutions passed at such meetings so as to bind a dissentient minority — for example a resolution modifying the rights of the debenture holders. Such a power must be exercised bona fide and must not amount to an oppression of the minority: British American Nickel Corp Ltd v O’Brien Ltd [1927] AC 369 (PC). The power given to the court by s 411 of the Corporations Act to sanction schemes between a company and its creditors extends to debenture holders, and the court has jurisdiction to deprive them of their security and to force fully paid- up shares on them in lieu thereof, if satisfied that the scheme is fair and equitable, but not otherwise: Re Alabama; New Orleans etc Rly Co [1891] 1 Ch 213. But, except under the provisions of the Corporations Act or under the express conditions of the debentures themselves, no majority of the debenture holders can bind a dissentient minority even where the effect of their dissent is to ruin the securities: Hay v Swedish and Norwegian Railway Co (1889) 5 TLR 460. The conditions also provided for the place of payment (see Fowler v Midland Electric Corp etc Ltd [1917] 1 Ch 656) and the service of notices; if there is no express provision, newspaper advertisement is sufficient: Mercantile Investment and General Trust Co v International Co of Mexico [1893] 1 Ch 484n. This form of debenture is still used when a company borrows from one lender or only a few lenders, but in other cases a trust deed securing debenture stock is generally used: see 8.4. For a recent example of a debenture to a single lender see Re Rick Cobby Haulage Pty Ltd (1992) 7 ACSR 456; 10 ACLC 1251, reversed sub nom Esanda Finance Corp Ltd v Jackson (1992) 11 ACLC 138. (Such a debenture was a marketable security and the charge over the debenture moneys required to be registered as a company charge.) Contrary to the general rule that a mortgage cannot be made irredeemable (see 32.8–32.9), it is provided by the Corporations Act s 124(1)(b) that a corporation has the capacity to issue debentures that are irredeemable or redeemable only on the happening of a contingency however remote or at the

end of a period however long: see Knightsbridge Estates Trust Ltd v Byrne [1940] AC 613. As to the meaning of redeemable and irredeemable debentures, see Re Joseph Stocks & Co Ltd (1909) [1912] 2 Ch 134n. As to the conversion of redeemable into irredeemable debentures see Northern Assurance Co Ltd v Farnham Breweries Ltd [1912] 2 Ch 125. As to the reissue of redeemed debentures and the maintenance of the same priority see Corporations Act s 563AAA. Otherwise the rules as to collateral advantages and clogs on the equity (see 32.12ff) apply to debentures. As stated above, the debenture generally creates a floating charge, but it may also or alternatively create a legal charge or a fixed equitable charge. Where there is a power to create a charge and an intention to do so, a good equitable charge will be created notwithstanding any mistake in the attempt to effect it: Re Strand Music Hall Co Ltd (1865) 3 De G J & S 147 at 158; 46 ER 594 at 598; Re Fireproof Doors Ltd; Umney v Fireproof Doors Ltd [1916] 2 Ch 142 at 150. A floating charge on assets situated abroad in a country which does not recognise floating securities may nevertheless be a valid equitable charge: Re The Anchor Line (Henderson Bros) Ltd [1937] Ch 483 at 487; [1937] 2 All ER 823 at 827. For provisions applicable to prospectuses in relation to debentures see Corporations Act Pt 6D.

Bearer debentures 8.3 Debentures payable to bearer are negotiable instruments, so as to pass by delivery free from equities: Edelstein v Schuler & Co [1902] 2 KB 144; for equities see 7.7. Hence [page 278] the bearer can sue the company in his own name: Mowatt v Castle Steel and Iron Works Co (1886) 34 Ch D 58. However, there is some uncertainty whether bearer debentures may be issued in Australia; there is no specific statutory authority authorising their issue and the Corporations Act s 171 requires a register of debenture holders. However, based on the fact that s 271(2)(e) of the Corporations Act speaks in terms of the person whom the company believes holds a charge, some think that bearer debentures are possible so long as the first holder is recorded in the register — see Ford,

Austin and Ramsay, Principles of Corporations Law, [21.231].

Trust deeds 8.4 Debentures, though complete in themselves, may also be further secured by a covering trust deed, and such a deed is ordinarily used to secure debenture stock. The Corporations Act s 283AA mandates a trust deed in any case where that Act requires disclosure to be made to investors. In any event, there is advantage in employing a trust deed to separate the debenture holders from the security holders, that is, the debenture trustees or trustee (generally a trust corporation). This separation is to the advantage of the company in that it will only have to deal with the trustees or trustee instead of with a large number of debenture holders. If property is mortgaged, rather than any transfer or charge in favour of all the debenture holders, the property can conveniently be vested in or charged to the trustees or trustee. The separation is to the advantage of the debenture holders in that the trustees, who will generally have expert knowledge, can watch over their interests and the taking of any steps to protect the debenture holders’ interests is thereby facilitated: see generally State Superannuation Board v Trustees Executors and Agency Co Ltd (1963) 38 ALJR 1 at 2 per Dixon CJ. The typical form of trust deed contains the following elements: 1. a covenant to repay the principal either on a fixed date or on some earlier date on the happening of certain specified events, or by installments, or by the sinking fund method (that is, by provision out of the profits of the company, with the tax consequences receiving consideration, or by the company effecting a sinking policy with an insurance company); 2. a covenant to pay interest in the meantime at a specified rate; 3. a specific charge of the company’s freehold or leasehold property; as to the expression ‘fixed assets’ see Tudor Heights Ltd v United Dominions Corp Finance Ltd [1977] 1 NZLR 532 and Re Hi Fi Equipment (Cabinets) Ltd [1988] BCLC 65; 4. a floating charge over all the company’s other assets; 5. provisions for enforcing the duties owed to debenture holders. The trust deed will give the trustees rights similar to those which each

debenture holder would have in the case of ordinary debentures. The Corporations Act s 283AB sets out the requirements for trust deeds when required by that legislation. Where debentures are issued by a listed company the listing rules will be relevant.

Open-end debenture trust deeds 8.5 A debenture trust deed may secure a fixed amount only or may be security also for further advances and may provide for further issues of debentures or debenture stock. An open-end debenture trust deed is used when it is intended that there should be several issues of debenture stock which will rank pari passu with the original stock. It is a question of the construction of the principal trust deed whether that deed, in addition to any supplemental deed, secures the further issues or whether they are secured only by the supplemental deed. [page 279]

Debenture trustees 8.6 The trustees should have no interest, whether as shareholders or otherwise, which might conflict with their duty as trustees: Re Dorman Long & Co Ltd; Re South Durham Steel and Iron Co Ltd [1934] Ch 635 at 670 and 671. For qualifications of trustees under the Corporations Act see s 283AC. The trust deed should provide for remuneration to the trustees. The trustees are entitled to the remuneration provided by the trust deed, not withstanding the appointment of a receiver: Re Anglo-Canadian Lands (1912) Ltd [1918] 2 Ch 287; Re British Consolidated Oil Corp Ltd [1919] 2 Ch 81. In the absence of express provision the remuneration is not payable in priority to the claims of stockholders: Re Accles Ltd; Hodgson v Accles Ltd (1902) 51 WR 57. Any provision in a debenture trust deed or in any contract with the holders of debentures secured by a trust deed that exempts a trustee from (or indemnifies it against) liability for breach of trust where it fails to show the degree of care and diligence required of it as trustee is void: Corporations Act s 283DB(1). But the trustee may claim protection under the trustee legislation (see Trustee Act 1925 (NSW) s 85; Trustee Act 1958 (Vic) s 67), and a

release is permissible under the Corporations Act s 283DB (2).

Remedies of debenture holders 8.7 Every debenture trust deed should contain provisions for the enforcement of the security without the aid of the court, such as by the appointment of a receiver, and, in appropriate cases, the remedies of sale and foreclosure will be available. Goode doubts whether foreclosure is available to the holder of a floating charge which has crystallised unless there is express provision to convert the charge into a mortgage: see Legal Problems of Credit and Security, 3rd ed, Sweet & Maxwell, London, 2003, pp 151–2. Apart from such remedies the debenture holders may have remedies available with the aid of the court. Furthermore, a debenture holder whose interest is in arrears, or whose principal is due and unpaid, may make a creditor’s application to wind up the company in insolvency, but such a debenture holder must be owed the debt at law; one who is only a cestui que trust cannot petition to wind up a company: Re Dunderland Iron Ore Co Ltd [1909] 1 Ch 446. A debenture holder may sue on the personal covenant, as may the trustees of a trust deed. A trust deed will usually contain provisions for the appointment by the trustees of a receiver and manager and for the sale of the mortgaged property, and apart from such express provision, where the mortgage is by deed, the statutory power to appoint a receiver will apply: see 18.4. Where a debenture deed contains a mortgage of specific property the debenture holder has a mortgagee’s powers of sale and foreclosure in respect thereof: see 20.5 and Chapter 21. See, generally, Halsbury’s Laws of England, 5th ed, vol 15, [1333]ff.

Debenture holders’ action 8.8 In modern times, most proceedings to assert the rights of debenture holders are brought by the trustees. However, where the company is in default as regards principal or interest, a debenture holder may bring an action on behalf of all the rest of the debenture holders to realise the security: see, for example, Parkinson v Wainwright & Co (1895) 64 LJ Ch 493. In any such action, the trustees must be added as defendants: Mortgage Insurance

Corp Ltd v Canadian Agricultural, Coal and Colonization Co Ltd [1901] 2 Ch 377. The court will give leave to commence or continue such an action as a matter of course, notwithstanding winding up. The originating process seeks, inter alia, the appointment [page 280] of a receiver, or a receiver and manager, and contemporaneously with that process, the plaintiff usually files a notice of motion for the appointment of a receiver: generally, Halsbury’s Laws of England, vol 7(2), [1366]ff. Frequently it is agreed to treat this motion as the trial of the action and the usual order in a debenture holders’ action is taken on the motion.

Statutory definitions 8.9 An amount of confusion is caused in the area of company charges because of the terminology used to describe various interests and securities. The legislation often uses common terms such as ‘charge’ in extended senses. As Spigelman CJ said in Cinema Plus Ltd v Australia and New Zealand Banking Group Ltd (2000) 49 NSWLR 513 at 521; 35 ACSR 1 at 6; 157 FLR 204 at 210, the word ‘charge’ in a statute does not necessarily bear the meaning which that word is given under the general law. Its statutory meaning is a matter of the construction of the statute in question. Section 9 of the Corporations Act defines ‘charge’ thus: ‘ “Charge” means a charge created in any way and includes a mortgage and an agreement to give or execute a charge or mortgage, whether on demand or otherwise’. As Spigelman CJ said in Cinema Plus Ltd (NSWLR at 521; ACSR at 7; FLR at 211), ‘the use of a definition which incorporates the word being defined, suggests that the meaning of the word is to be determined without reference to the uses of the word in the statute itself’. The word in the Corporations Act is not used in any special sense, subject to the words of inclusion in the definition: Cinema Plus Ltd NSWLR at 512; ACSR at 7; FLR at 211; and see Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588; 171 ALR 568.

See also 41.5 as to statutory definitions used in revenue statutes.

Floating charges 8.10 Although floating charges have been a fundamental concept for over 100 years, the term has now been abolished by PPSA: see the discussion in 5.35. This paragraph and succeeding paragraphs refer to the floating charges created before PPSA. Mortgage debentures almost invariably create a floating security. Such a security is an immediate equitable charge on the assets of the company for the time being, but it remains unattached to any particular property and leaves the company at liberty to deal with its property in the ordinary course of its business as it thinks fit until the charge crystallises or becomes fixed to the assets charged (including future assets of the description of the assets charged which come into existence after the crystallisation of the charge: see Ferrier v Bottomer (1972) 46 AJLR 148). The debenture holder receives priority over the general creditors. The classic definition adopted in Australia was given by Cozens-Hardy J in Wallace v Evershed [1899] 1 Ch 891 at 894: A floating security gives an immediate equitable charge on the assets, subject to a right to the company in the ordinary course and for the purposes of the business of the company, and not otherwise, to dispose of assets as though the charge had not existed.

This definition has been cited in many subsequent cases: see, for example, Landall Holdings Ltd v Caratti [1979] WAR 97 at 103; Electrical Enterprises Retail Pty Ltd v Rodgers (1988) 15 NSWLR 573 at 495. There are, of course, other classic statements to the same effect: see Driver v Broad [1893] 1 QB 744 at 748 per Kay LJ and Government Stock and Other Securities Investment Co Ltd v Manila Railway Co Ltd [1897] AC 81 at 86 per Lord Macnaghten. [page 281]

Logical difficulties with floating charges 8.11

The logical difficulties with the now accepted category of floating

charge were well expressed by Giles CJ Comm Div in DM & BP Wiskich Pty Ltd v Drivehard Pty Ltd (SC (NSW, 13 December 1995, unreported): The nature of the charge prior to crystallisation must accommodate statements to the effect that the floating charge is a present security or gives an immediate equitable charge (See Note (1) below) with statements to the effect that the charge does not attach to or specifically affect any particular item of property until crystallisation, lies dormant until that time, and permits the disposal of the property earlier mentioned (See Note (2) below). Sometimes the statements are made in the same case, even in the same sentence [Evans v Rival Granite Quarries Ltd (1910) 2 KB 979; Luckins v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR 164]. On one view the chargee obtains an immediate equitable interest in the mortgaged property, albeit a defeasible equitable interest liable to be defeated, released, or in some other manner lost upon disposal of the property. (This view has gained currency in recent years. (See Note (3) below.) On another view the dormancy precludes an immediate equitable interest [Based on statements to the effect secondly summarised above, and supported by questioning how an equitable interest can be lost and in particular how involuntary disposal by execution of a judgment prior to crystallisation can defeat the equitable charge: see the cases later considered and the discussion by Gough in Company Charges, 1st ed, 1978, Chapter 8 and Finn, Equity and Commercial Relationships, 1987, pp 252-4].

The cases in Note (1) are Re Victoria Steamboat Ltd [1897] 1 Ch 158 at 163: Wallace v Evershed [1899] 1 Ch 891 at 894; Evans v Rival Granite Quarries Ltd [1910] 2 KB 979 at 999; Barcclo v Electrolytic Zinc Co of Australasia Ltd (1932) 48 CLR 391 at 420; Luckins v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR 164 at 173; in Note (2) are Government Stock and other Securities Investment Co v Manila Railway Co [1891] AC 81 at 86; Evans v Rival Granite Quarries Ltd [1910] 2 KB 979 at 999; Stein v Saywell (1969) 121 CLR 529 at 556; Luckins v Highway Motel (Carnarvon) Pty Ltd, above, at 173; and in Note (3) are Landall Holdings Ltd v Caratti [1979] WAR 97 at 103, 168; Hamilton v Hunter (1982) 7 ACLR 295; Re Margart Pty Ltd (1984) 79 FLR 330; Moodemere Pty Ltd v Waters [1988] VR 215; Re Bartlett Estates Pty Ltd (1989) 14 ACLR 512. There is no longer any doubt that a floating charge creates a present security: see per Dixon J in Barcelo v Electrolytic Zinc Co of Australasia Ltd (1932) 48 CLR 391 at 420; see also Atkins v Mercantile Credits Ltd (1986) 4 ACLR 125. As Sackville J said in Wily v St George Partnership Bank Ltd (1999) 84 FCR 423 at 425; 161 ALR 1 at 3; 30 ACSR 204 at 205, there are different views expressed in the cases showing a longstanding controversy concerning the juridical nature of a floating charge. However, the judge considered that much of the difference of opinion can be dependant on points of construction

of a statute or the terms of a particular charge: Evans v Rival Granite Quarries Ltd [1910] 2 KB 979 at 999–1000; Transcontinental Corporation Ltd v Commissioner of Taxation (1987) 87 FLR 453 at 462–3; [1988] 1 Qd R 474 at 480–1. The matter is also considered in the following cases additional to those cited by Giles J in the above notes where the view is taken that a floating charge creates an immediate equitable interest in the property charged: Driver v Broad [1893] 1 QB 744; United Builders Pty Ltd v Mutual Acceptance Ltd (1980) 144 CLR 673 at 686; Clyne v FCT (1981) 150 CLR 1; Torzillu Pty Ltd v Brynac Pty Ltd (1983) 8 ACLR 52; Atkins v Mercantile Credits Ltd, above; Tricontinental Corp Ltd v FCT [1988] 1 Qd R 474; (1987) 73 ALR 433. As Gough, Company Charges, 2nd ed, Butterworths, London, 1996 says at p 354, the small number of cases supporting the opposite view suggests it is hard to maintain. Recent analyses of the concept of a floating charge include, in England, Re Bank of Credit and Commerce International SA [1998] AC 214 at 226; [1997] 4 All ER 568 at 576 and Re Cosslett (Contractors) Ltd [1998] Ch 495 at 508; [1997] 4 All ER 115 at [page 282] 125 and, in Australia, Cinema Plus Ltd v Australia and New Zealand Banking Group Ltd (2000) 49 NSWLR 513 at 522–3; 35 ACSR 1 at 8; 157 FLR 204 at 212; see, generally, Ferrar (1988) 47 CLJ 213; Gough, Company Charges, chapter 13; and Gough’s essay in The Floating Charge: Traditional Themes and New Directions, in Finn (ed), Equity and Commercial Relations, Law Book Co, Sydney, 1987, pp 239–83. An attempt to make a deep analysis into the definition of floating charge will encounter frustration. There are many loose uses of the term and in occasions the floating charge is spoken of in terms of an equitable mortgage: Re Gregory Love & Co [1916] 1 Ch 203 at 209 and, more recently, Buchler v Talbot [2004] 2 AC 298; [2004] 1 All ER 1289: it is difficult to see how this really can be the case.

Historical development of the floating charge 8.12 As Lord Nicholls said in Buchler v Talbot [2004] 2 AC 298 at 303; [2004] 1 All ER 1289 at 1292-3 floating charges are a judge-made or judgeapproved type of security. They originated in the early days of the development of company law in the 1870s: Re Panama, New Zealand and Australian Royal Mail Co (1870) 5 Ch App 318; Re General South American Co (1876) 2 Ch D 337; Re Florence Land and Public Works Co; Ex parte Moor (1878) 10 Ch D 530; Re Hamilton’s Windsor Ironworks; Ex parte Pitman and Edwards (1879) 12 Ch D 707; Re Colonial Trusts Corporation; Ex parte Bradshaw (1879) 15 Ch D 465. Pennington, in his ‘The Genesis of the Floating Charge’ (1960) 23 Mod L Rev 630, notes that there had been some pale equivalent of the floating charge recognised before 1850 in connection with railway companies (Russell v East Anglian Railway Co (1850) 3 Mac & G 104 at 144–5; 42 ER 201 at 216); the doctrinal foundation of the floating charge was the change of attitude of equity judges which was manifested in Holroyd v Marshall (1862) 10 HLC 191; 11 ER 999; [1861–73] All ER Rep 414 and Reeve v Whitmore (1863) 33 LJ Ex 63. As Gough (Company Charges, 2nd ed, p 102) notes, this was a very significant development compared to cases decided in the 1860s such as King v Marshall (1864) 33 Beav 565; 55 ER 488 and Re Marine Mansions Co (1867) LR 4 Eq 601. In Gough’s words at p 106: ‘The truly significant historical factor in the conceptual development of the floating charge was the formulation in equity of its doctrine permitting the present assignment of future property’. Even as late as 1903, Romer LJ was able to say that the word ‘floating’ was one that until recently was a popular term: see Re Yorkshire Woolcombers Association Ltd [1903] 2 Ch 284 at 294. As the 20th century progressed, equity refined the nature of a floating charge, but its roots were never forgotten and are often referred to in the leading judgments: see, for example, Agnew v Commissioner of Inland Revenue [2001] 2 AC 710 at 717 (PC). The PPSA abolishes the floating charge concept with respect to the property over which it extends, see ss 19 and 32 and Chapter 5. The regime is

replaced by one of a fixed security with a licence for the user to deal with the assets in the ordinary course of business. Until the administration of the new system settles down, it is wise for this work to continue to expound the traditional law.

Characteristics of the floating charge 8.13 The usual starting point for an examination of the characteristics of a floating charge is the judgment of Romer LJ in Re Yorkshire Woolcombers Association Ltd [1903] 2 Ch 284 at 295 where he noted that, ordinarily, a floating charge will have three characteristics, viz: [page 283] 1. it is a charge on a class of assets of a company present and future; 2. that class is one which, in the ordinary course of the business of the company, would be changing from time to time; and 3. by that charge it is contemplated that, until some future step is taken by or on behalf of those interested in the charge, the company may carry on its business in the ordinary way as far as concerns the particular class of assets. This case was affirmed on appeal sub nom Illingworth v Houldsworth [1904] AC 355, see especially Lord Macnaghten at 358. This formulation has been basically adopted ever since: see, for example, Barcelo v Electronic Zinc Co of Australasia Ltd (1932) 48 CLR 391 at 420; Luckins v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR 164 at 173– 4; United Builders Pty Ltd v Mutual Acceptance Ltd (1980) 144 CLR 673 at 686. See also Re Bond Worth Ltd [1980] Ch 228; [1979] 3 All ER 919; Siebe Gorman & Co Ltd v Barclays Bank Ltd [1979] 2 Lloyd’s Rep 142; Clough Mill Ltd v Martin [1984] 3 All ER 982; [1985] 1 WLR 111; Re ASRS Establishment Ltd [2000] 2 BCLC 631 at 635–6; Arthur D Little Ltd v Ableco Finance LLC [2003] Ch 217 at 232; and many of the cases referred to in earlier sections of this chapter. However, as Lord Millett pointed out in Agnew v Commissioner of Inland

Revenue [2001] 2 AC 710 at 719, Romer LJ offered the formulation as a description, not a definition, and it is the third characteristic which provides the real distinction between a fixed and a floating charge. There have been many attempted analyses of the juridical nature of a floating charge, many with little result; see, however, Evans v Rival Granite Quarries Ltd [1910] 2 KB 979 and Re Cosslett (Contractors) Ltd [1998] Ch 495 at 510; [1997] 4 All ER 115 at 127. In England, it has been common for charges to allow the borrower company to deal with its book debts on condition that the same are paid into a certain bank account when collected. In Siebe Gorman & Co Ltd v Barclays Bank Ltd, above, this was held to be a fixed charge. In Agnew v Commissioner of Inland Revenue, above, the Privy Council in a New Zealand appeal in which Lord Millett gave the judgment refused to follow the Siebe Gorman case. The point arose again in Re Spectrum Plus Ltd [2004] Ch 337; [2004] 4 All ER 995 (CA). The Court of Appeal felt bound to follow Siebe Gorman. However, the House of Lords reversed this decision, Re Spectrum Plus Ltd [2005] 3 WLR 58 handed down after this manuscript had passed to the publishers. The Lords overruled Siebe Gorman and Re New Bullas Trading Ltd [1994] 1 BCLC 485 and approved Agnew. The problem referred to in the preceding paragraph has not been of concern in Australia where each charge is construed on its text in accordance with the intention of the parties: see (2005) 79 ALJ 149 and 217. However, the decision of the Lords in Re Spectrum Plus Ltd is inconsistent with Whitton v ACN 003 266 886 Pty Ltd (1996) 42 NSWLR 123 which followed the English authorities now overruled.

Creation of floating securities 8.14 The use of the words ‘floating security’ is not essential to the creation of a security of this nature: see, for example, Re Bond Worth Ltd, above; Siebe Gorman & Co Ltd v Barclays Bank Ltd, above. It has been created by a debenture purporting to bind all the company’s ‘estate property and effects’: Re Florence Land and Public Works Co (1878) 10 Ch D 530; Re Panama, New Zealand and Australia Royal Mail Co (1870) 5 Ch App 318; National Provincial Bank of England Ltd v United Electric Theatres Ltd [1916] 1 Ch 132; Corozo Pty Ltd v Total Australia Ltd [1987] 2 Qd R 11, affirmed [1988]

2 Qd R 366. [page 284] Although the floating charge was developed to allow a company to raise finance on the security of its stock in trade, it is not limited to such assets. For a ‘lightweight’ floating charge on non-trading assets see Re Croftbell Ltd [1990] BCLC 844; [1990] BCC 781; see further, on the extent of a floating charge, 2.3. Where the debenture is a charge on specific assets, words to the effect that the company is not to be at liberty to create any mortgage or charge in priority to the debentures (words which are commonly to be found in a floating charge) do not turn the specific charge into a floating charge: Grigson v Taplin and Co (1915) 85 LJ Ch 75. Whatever label, if any, the parties may put upon the charge, its classification will depend upon what provisions, if any, there are in the charge document preventing the chargor from disposing of an unencumbered title to the subject matter of the charge: United Builders Pty Ltd v Mutual Acceptance Ltd (1980) 144 CLR 673; Hart v Barnes [1983] 2 VR 517; Deputy Commissioner of Taxation (Cth) v AGC (Advances) Ltd [1984] 1 NSWLR 29; Waters v Widdows [1984] VR 503; Norgard v Deputy Commissioner of Taxation (1987) 85 FLR 220; and see Re Armagh Shoes Ltd [1982] NI 59; Re Lakeglen Construction Ltd [1980] Ir R 347; Re Keenan Bros Ltd [1986] BCLC 242; discussed in (1985) 135 NLJ 443 (Byrne and Tomkin) and (1985) 6 Co Law 9 (Pennington); and see Re Atlantic Computer Systems plc [1992] Ch 505; [1992] 1 All ER 476. Uncalled capital may be charged if the documents of the company so permit, but, where a company has by special resolution declared that a part of its capital shall only be capable of being called up for purposes of liquidation, it cannot create a charge on that part: Re Mayfair Property Co; Bartlett v Mayfair Property Co [1898] 2 Ch 28; Re Irish Club Co Ltd [1906] WN 127.

Fixed and floating charges 8.15 Fixed and floating charges fulfill different commercial purposes. This has been summed up by the modern maxim, ‘the fixed charge for priority; the

floating charge for control’ (Westbrook, ‘The Control of Wealth in Bankruptcy’ (2004) 82 Tex L Rev 795). The fixed charge gives immediate priority over the debtor’s unsecured creditors. The floating charge will rank behind other securities given over the relevant property within the ordinary course of business. However, the fact that the floating charge is in place and registered gives certain control in management to the holder and puts some brakes on the directors’ entrepreneurial endeavours. It not infrequently happens that there is an ambiguity as to whether the parties have created a fixed or a floating charge. In such a case, the court must determine the intention of the parties. The test is whether the ‘mortgagor’ is to be considered as having the capacity to deal with the assets covered by the charge. If that state of affairs exists, the charge is floating: Re Yorkshire Woolcombers’Association Ltd [1903] 2 Ch 284 at 294 per Vaughan Williams LJ; Fire Nymph Products Ltd v Heating Centre Pty Ltd (1992) 7 ACSR 365 at 376 per Sheller JA.

Ordinary course of business 8.16 It will have been observed that the licence given to the company is to use the goods in the ordinary course and for the purposes of the business of the company: see Wallace v Evershed [1899] 1 Ch 890 at 894. Sometimes the limitation is more broadly expressed such as ‘so long as the company is a going concern’ (Hubbuck v Helms (1887) 56 LJ Ch 536 at 537– 8) or ‘until the undertaking charged ceases to be a going concern’ (Government Stock and Other Securities Investment Co Ltd v Manila Railway Co Ltd [1897] AC 81 at 86); see the discussion in Hamilton v Hunter (1982) 7 ACLR 295 at 304–5. [page 285] The limitation has been broadly interpreted (see, for example, Re Borax Co [1901] 1 Ch 326), but it is not so unlimited that the licence continues until in some way the company’s operations are brought to a halt by the company: Hamilton v Hunter, above, at 305.

The ‘ordinary course of business’ was considered in that case and in Reynolds Bros (Motors) Pty Ltd v Esanda Ltd (1983) 8 ACLR 422. In Hamilton v Hunter a transaction was held not to be in the ordinary course of business, because it was undertaken to put the assets of the company beyond the reach of the receiver of the company. In the latter case an extraordinary transaction undertaken to maintain the business as a going concern was held to be in the ordinary course of business. The ordinary course of business for present purposes is not confined to what is in fact ordinarily done in the course of the ordinary business of the company: transactions will be within the principle even though they be in relation to the company, exceptional and unprecedented: Reynolds Bros (Motors) Pty Ltd v Esanda Ltd, above, at 428. Examples are Willmott v London Celluloid Co (1886) 34 Ch D 147 (where the company’s business was destroyed by fire and directors garnisheed the insurance proceeds for the company’s debts owing to them) and Re Vivian (HH) & Co Ltd [1900] 2 Ch 654 (where the company had three businesses and sold one; in neither case did the charge crystallise). See further on ‘ordinary course of business’: Re Borax Co; Foster v Borax Co [1901] Ch 326; Re Bartlett Estates Pty Ltd (1989) 14 ACLR 512; Fire Nymph Products Ltd v The Heating Centre Pty Ltd (1988) 14 ACLR 274, on appeal (1992) 10 ACLC 629; and see DM & BP Wiskich Pty Ltd v Drivehard Pty Ltd (SC (NSW, 13 December 1995, unreported) Giles CJ Comm Div, above. The sale of all the assets of the company would not be in the ordinary course of business and such sale would not confer a good title on a purchaser with notice of the charge (Hubbuck v Helms (1887) 56 LT 232; Hamilton v Hunter, above) although it would be effectual if the purchaser had no notice of it: English and Scottish Mercantile Investment Co v Brunton [1892] 2 QB 700. A company may as part of its ordinary business charge its assets under a fixed charge without the floating charge crystallising: Cox Moore v Peruvian Corporation Ltd [1908] 1 Ch 604 and the discussion in 8.18.

Convertible charges 8.17 Parties may agree that a charge may convert from a fixed to a floating charge or vice versa on the happening of specified events: Re CCG

International Enterprises Ltd [1993] BCLC 1428 and Re New Bullas Trading Ltd [1994] 1 BCLC 485; 12 ACLC 3203. Note the problems associated with charges which appear to float conditionally: Re Spectrum Plus Ltd [2004] Ch 337; [2004] 4 All ER 995 (CA).

Floating charges generally 8.18 Authorities support the view that prior to the crystallisation of the security the mortgagee holding a floating charge obtains an interest in the res, but is liable to be deprived of its value as a security by the extinguish ment of the subject matter — as, for example, when prior to crystallisation the company, in the ordinary course of its business, alienates its legal or equitable right in the subject matter to a third party: see per Brinsden J in Commissioner of Taxation v Lai Corp Pty Ltd (1986) 83 FLR 63 at 81; Cinema Plus Ltd v Australia and New Zealand Banking Group Ltd (2000) 49 NSWLR 513 at 522–3; 35 ACSR 1 at 8; 157 FLR 204 at 212. See also Goode, Legal Problems of Credit and Security, pp 111–18; McLelland J’s commentary to Gough, in Finn (ed), Equity and Commercial Relationships, pp 278–83. So long as the security remains a floating security, the property of the company may be dealt with, and even a part thereof sold (see Re Vivian (HH) & Co [1900] 2 Ch 654) [page 286] in the ordinary course of business as if the security had not been given. Any such dealing with a particular property will be binding on the debenture holders, provided that the dealing is completed before the charge ceases to be a floating security: Robson v Smith [1895] 2 Ch 118 at 124. There is some debate on the nature of this right: see the discussion on the ‘licence’ and ‘mortgage of future assets’ theories in Gough, Company Charges, Chapter 8, and Gough in Finn (ed), Equity and Commercial Relationships. The licence theory was referred to in Hamilton v Hunter (1982) 7 ACLR

295. In England, where only notice of the grant of a charge is registered, it has been held that registration of the charge in the register of company charges constitutes constructive notice of the charge, but not its terms: Re Standard Rotary Machinery Co Ltd (1906) 95 LT 829; Wilson v Kelland [1910] 2 Ch 306. In Australia and New Zealand, the whole document is registered (see Corporations Act s 263) and one would have thought that the English decisions were distinguishable, yet they were followed in New Zealand (see Dempsey v Traders’ Finance Co Ltd [1933] NZLR 1258 at 1290) on the basis that constructive notice should not apply beyond this point to floating charges. The Privy Council seemed to have approved this view in Elders Pastoral Ltd v Bank of New Zealand [1990] 1 WLR 1478 at 1484; [1991] 1 NZLR 385 at 390; Gough (in Company Charges, p 391) agrees that the doctrine of constructive notice should not be extended in this area. See also Re Dehy Fodders (Australia) Ltd (1973) 4 SASR 538 at 549; (1974) 38 Conv (NS) 315 (Farrar); (1980) 1 Coy Lawyer 83 (Farrar); and Ford’s Principles of Corporations Law, [19.270]. Up until July 1998, the Corporations Law provided by s 165(1) that a person did not have constructive notice of a document or its contents merely because of its registration with the Commission administering the Act. Section 165(2) provided that that exemption did not apply to a document relating to a registered charge. In 1998, that section was repealed and replaced by what is now s 130 of the Corporations Act 2001 (Cth) which despite its source in a ‘Simplification Act’ makes the position more obscure. Probably the situation is that, however illogical it may be, one has constructive notice of the fact that there is a registered charge, but not of its terms. It is problematical whether a subsequent mortgagee or chargee will be fixed with constructive notice of a negative pledge clause. Up until the time that the charge crystallises (see 8.13), the company may, within the terms of the document granting the charge, deal with its property as if it were free of the charge. However, even before crystallisation, the chargee may take action to protect its interest by injunction or even obtain an order for foreclosure: Re Gregory Love & Co [1916] 1 Ch 203 at 209. Where there is jeopardy to the assets, the holder of a floating charge may appoint a manager: Edwards v Standard Rolling Stock Syndicate [1893] 1 Ch 574 and see Gough, Company Charges, pp 132–4. See also Re Woodroffes (Musical

Instruments) Ltd [1986] Ch 366 at 378; [1985] 2 All ER 908 at 914 and Re Bartlett Estates Pty Ltd (1988) 14 ACLR 512 at 517. Unless prohibited by the conditions of the debenture, this power of disposition extends to the creation of fixed charges: English and Scottish Mercantile Investment Co v Brunton [1892] 2 QB 700; Re Valletort Sanitary Steam Laundry Co Ltd [1902] 2 Ch 654; Cox Moore v Peruvian Corporation Ltd [1908] 1 Ch 604. The priority of the subsequent fixed charge, whether legal or equitable, is not affected by notice of the floating charge, but the subsequent mortgagee, to gain priority, would need to register its charge under the Corporations Act provisions, if so registrable, or under other legislation providing for registration. Reference should be made to the company law texts for the details of the company charges registration provisions, particularly Ford’s Principles of Corporations Law and Goode, Legal Problems of Credit and Security, 2.21ff. [page 287] The power of disposition by the floating charge holder does not extend to the creation of further general floating securities so as to give these priority: Re Benjamin Cope & Sons Ltd [1914] 1 Ch 800. But where a company has reserved power to charge specified assets it may create a floating charge on those assets in priority to the general floating charge: Re Automatic Bottle Makers Ltd [1926] Ch 412. For these reasons it is usual to provide in the debenture deed a negative pledge clause — that is, a provision that no mortgage or charge ranking pari passu with or in priority to that debenture shall be created by the company without the prior written consent of the lender: Siebe Gorman & Co Ltd v Barclays Bank Ltd [1979] 2 Lloyd’s Rep 142. On the nature of a negative pledge clause, see Pullen v Abalcheck (1990) 20 NSWLR 732 and 2.5.

Crystallisation of floating charges 8.19 The company’s right to deal with its property in the ordinary course of its business ceases upon any of the following: 1. the appointment of a receiver (Re Panama, New Zealand and Australia

Royal Mail Co (1870) 5 Ch App 318; Re Florence Land and Public Works Co; Ex parte Moor (1878) 10 Ch D 530; Australian Mutual Provident Society v Geo Myers & Co Ltd (1931) 47 CLR 65 at 83), but not upon merely taking steps to appoint a receiver (Re Colonial Trusts Corp; Ex parte Bradshaw (1879) 15 Ch D 465 at 472; Government Stock and Other Securities Investment Co v Manila Rly Co [1897] AC 81 (HL)). For rights of set-off against the receiver see Biggerstaff v Rowatt’s Wharf Ltd [1896] 2 Ch 93; Robbie (NW) & Co Ltd v Witney Warehouse Co [1963] 3 All ER 613; [1963] 1 WLR 1324 (CA); Rother Iron Works Ltd v Canterbury Precision Engineers Ltd [1974] QB 1; [1973] 1 All ER 394 (CA); Barker (George) (Transport) Ltd v Eynon [1974] 1 All ER 900; [1974] 1 WLR 462 (CA); and, generally, Goode, Legal Problems of Credit and Security, Chapter VII; 2. the commencement of the winding up of the company (see Wallace v Evershed [1899] 1 Ch 891 at 894); 3. the company ceasing business or ceasing to be a going concern. In Re Woodroffes (Musical Instruments) Ltd [1986] Ch 366; [1985] 2 All ER 908, Nourse J appears to have accepted that crystallisation on the cessation of the company’s business was well established. He also thought that the phrases ‘ceasing to carry on business’ and ‘ceasing to be a going concern’ were used interchangeably in the cases. See Hamilton v Hunter (1982) 7 ACLR 295; Re Margart Pty Ltd (1984) 79 FLR 330; 9 ACLR 269; 4. the happening of some agreed event; 5. the taking of an unequivocal step by way of enforcement of the charge (National Australia Bank Ltd v Finlay (1995) 13 ACLC 1175 (NSW SC, Cohen J)); note the discussion in 8.21. The charge will indicate whether it is to crystallise automatically (see 8.20) or upon notice or otherwise. As a matter of construction, crystallisation may not occur without some prior notice or demand: see Re Bismark [1981] VR 527; Re Bartlett Estates Pty Ltd (1989) 14 ACLR 512; but see Firona Pty Ltd v Commonwealth Bank of Australia [1991] ACL Rep 295 Vic 11. A purchaser from or mortgagee of a company which has created a floating

charge will require evidence that the floating charge has not crystallised. This is usually supplied by a letter to this effect from an officer of the company or the company’s solicitor. Where a company which has issued floating debentures purchases property with money advanced by a person who is to have a charge on the property, the purchase is, in effect, the purchase of an equity of redemption and the charge has priority over the debentures: Re Connolly Bros Ltd (No 2); Wood v Connolly Bros Ltd [1912] 2 Ch 25; [page 288] Security Trust Co v The Royal Bank of Canada [1976] AC 503; [1976] 1 All ER 381 (PC); Composite Buyers Ltd v State Bank of New South Wales [1991] ACL Rep 295 NSW 1. The subsequent dealing, in order to confer rights prior to those of the holder of the floating security, need not be a voluntary act on the part of the company. A garnishee order gives no priority in itself (Cairney v Back [1906] 2 KB 746) and the title of a receiver subsequently appointed under a debenture prevails over that of an execution creditor unless the money has been actually paid over under the garnishee order: Robson v Smith [1895] 2 Ch 118; Norton v Yates [1906] 1 KB 112; Taunton v Sheriff of Warwickshire [1895] 2 Ch 319; Relwood Pty Ltd v Manning Homes Pty Ltd (No 2) [1992] 2 Qd R 197. See, however, Haddad v AMH Import & Export Co Pty Ltd [1993] ACL Rep 295 SA 1; and Sykes and Walker pp 962–6; (1982) 10 NZULR 111 (Calnan). The debenture holders have priority even if the debentures were irregularly issued: Duck v Tower Galvanising Co [1901] 2 KB 314. Payment made to the sheriff to get him out of possession have been held to be good as against debenture holders: Robinson v Burnell’s Vienna Bakery Co [1904] 2 KB 624; Heaton and Dugard Ltd v Cutting Bros Ltd [1925] 1 KB 655. A distress levied by a landlord under a power in a lease conferred either before the creation of the debentures or while they were still floating, and levied before the debenture ceased to be a floating charge, is valid against the debenture holders: Re Roundwood Colliery Co Ltd; Lee v Roundwood

Colliery Co [1897] 1 Ch 373; Re Bellaglade Ltd [1977] 1 All ER 319; Rhodes v Allied Dunbar Pension Services Ltd [1989] 1 All ER 1161; [1989] 1 WLR 800.

Automatic crystallisation 8.20 If the charge provides for automatic crystallisation should a certain event occur, no action on the part of the chargee is required. Such a provision is called an automatic crystallisation clause. The effectiveness of automatic crystallisation clauses is now generally accepted: see Stein v Saywell (1969) 121 CLR 529 (receiver appointed under prior floating charge); Re Obie Pty Ltd (No 2) (1983) 8 ACLR 574 (provisional liquidation); Deputy Commissioner of Taxation v Horsburgh [1984] VR 773; Norgard v Deputy Federal Commissioner of Taxation (1987) 85 FLR 220; Fire Nymph Products Ltd v The Heating Centre Pty Ltd (1988) 14 ACLR 274, on appeal (1992) 10 ACLC 629 (where the clause was expressed to have retrospective effect to immediately prior to the crystallising event). Automatic crystallisation has been accepted in England (Re Woodroffes (Musical Instruments) Ltd [1986] Ch 366; [1985] 2 All ER 908; Re Brightlife Ltd [1987] Ch 200; [1986] 3 All ER 673); in Australia, see, for example, Fire Nymph Products Ltd v Heating Centre Pty Ltd (1992) 7 ACSR 365; Deputy Federal Commissioner of Taxation v Horsburgh, above; and in New Zealand, Re Manurewa Transport Ltd [1971] NZLR 909; Covacich v Riodan [1994] 2 NZLR 502. See generally Gough, Company Charges, Chapter 11, and Gough in Finn (ed), Equity and Commercial Relationships; Goode, Legal Problems of Credit and Security, pp 133–51; (1992) 20 ABLR 125 (Burns), but see the contrary argument in 3.10. See also 16.8. Courts tend to interpret such clauses strictly so that, generally, unless the contrary is clearly stated, a clause providing for crystallisation on the happening of an event will only operate upon the actual intervention of the holder of the charge: Government Stock and Other Securities Investment Co Ltd v Manila Railway Co [1897] AC 81; Re Bismarck Australia Ltd (1980) 4 ACLR 962. Although automatic crystallisation clauses were fashionable in the 1970s, as Goode says (in Legal Problems of Credit and Security, para 4-51, p 145), in more modern times, there has been an increasing awareness of the

problems that may occur if such clauses are included in the charge. The principal problem is that crystallisation may occur without the knowledge of either party so that it will attach to the assets held at some past date [page 289] rather than when the creditor intended. As Goode says, in Legal Problems of Credit and Security, at p 148, the legal battlefield is strewn with the corpses of creditors who have followed their natural instinct to ignore automatic crystallisation when it suits them.

Effect of crystallisation 8.21 Although there is some authority for the proposition that there is no transfer of property on the crystallisation of a floating charge (see, for example, Re Margart Pty Ltd (1984) 79 FLR 330; 9 ACLR 269; [1985] BCLC 314), the better view is that, on crystallisation, the chargee’s rights change from a limited proprietary interest to full legal ownership: Tricontinental Corp Pty Ltd v Commissioner of Taxation [1988] 1 Qd R 474 at 480; 73 ALR 433 at 441 (said to be based on the views of Mason CJ in Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1 at 16); Buchler v Talbot [2004] 2 AC 298 at 309; [2004] 1 All ER 1289 at 1298, quoted below. Here again, there is some jurisprudential difficulty as, normally, no property passes to a chargee as opposed to a mortgagee. Nonetheless, it appears that the equitable charge is here virtually equated with the equitable mortgage: see Re Gregory Love & Co [1916] 1 Ch 203 at 209. Most modern crystallisation clauses will operate so that crystallisation occurs immediately before the event which brought about the crystallisation: Fire Nymph Products Ltd v Heating Centre Pty Ltd (1992) 7 ACSR 365 (NSW CA). Naturally, crystallisation fixes the charge on that specific property within the terms of the charge then in existence and the contractual right of the mortgagor to deal with the property comes to an end: Fire Nymph at 373, and see Cretanor Maritime Co Ltd v Irish Marine Management Ltd [1978] 3 All ER 164 at 173; [1978] 1 WLR 966 at 978.

In Buchler v Talbot [2004] 2 AC 298 at 309; [2004] 1 All ER 1289 at 1298 [29], Lord Hoffmann said: When a floating charge crystallises, it becomes a fixed charge attaching to all the assets of the company which fall within its terms. Thereafter the assets subject to the floating charge form a separate fund in which the debenture holder has a proprietary interest.

Mokal in [2004] L1 MCLQ 387 criticises the second sentence of that quotation as rank heresy. However, their Lordships appear to be using the word ‘fund’ in a metaphorical sense; cf Re Universal Distributing Co Ltd (1933) 48 CLR 171 at 174. In DM & BP Wiskich Pty Ltd v Drivehard Pty Ltd (SC (NSW), 13 December 1995, unreported, BC9506799), Giles CJ Comm Div said: Upon crystallisation the floating charge fixes and attaches to the mortgaged property, undoubtedly giving the chargee an equitable interest in the property, and on the second view has been said to take its priority from the date of the creation of the floating charge: ‘Upon the fixing of the security by crystallisation, the prior equitable charge is freed of its dormancy and takes its rightful priority over other equities which may have come into being after it’. This must be understood, however, in a modified sense. The chargee’s equitable interest does not have priority over legal interests obtained by disponees prior to crystallisation, and unless prohibited by the terms of the instrument the power of disposition extends to the creation of fixed equitable charges and the chargee’s equitable interest does not have priority over a fixed equitable charge even though the floating charge was created prior to the fixed equitable charge.

Giles J referred to English and Scottish Mercantile Investment Co v Brunton [1892] 2 QB 700; Re Valletort Sanitary Steam Laundry Co Ltd [1902] 2 Ch 654: and Re Automatic Bottle Makers Ltd [1926] Ch 412 as a case of a floating charge with priority over the general floating charge if power to deal with specified assets is reserved. He also referred to Relwood Pty Ltd v Manning Homes Pty Ltd (No 2) (1991) 2 Qd R 197 at 203 and 206– 10 per Derrington J. [page 290] It is sometimes appropriate to include in the documentation provision for crystallisation by notice to the debtor: Dovey Enterprises Ltd v Guardian Assurance Publications Ltd [1993] 1 NZLR 540. Decrystallisation may also occur by waiver: Campbell v Michael Mount PPB (1995) 16 ACSR 296 at 299–300; Gough, Company Charges, pp 406–7. See also Goode, Legal

Problems of Credit and Security, pp 150–1.

Charges in favour of officers 8.22 Where a company creates a charge on property of the company in favour of a person who is, or in favour of persons at least one of whom is, an officer of the company or an officer’s associate and, within six months after the creation of the charge, the chargee purports to take a step in the enforcement of the charge with leave of the court, the charge and powers purported to be conferred by the instrument creating or evidencing the charge are, and shall be deemed always to have been, void: Corporations Act s 267(1). ‘Taking a step in enforcement of the charge’ includes appointing a receiver or entering into possession or taking control of property of the company for the purposes of enforcing the charge: s 267(2). The chargee may apply to the court for leave to enforce the charge and the court, if satisfied that immediately after the creation of the charge the company was solvent and in all the circumstances it is just and equitable so to do, may give such: s 267(3). Provision is made to protect a purchaser in good faith and without notice from the operation of the avoidance of such a charge: s 267(5). This section was inserted to prevent insiders unfairly obtaining secured creditor status where the liquidator did not have the funds to argue otherwise: Jesseron Pty Ltd v Middle East Trading Pty Ltd (1994) 13 ACSR 455; and see Re Solfire Pty Ltd (in liq) (1998) 25 ACSR 160. Section 267 has been conditionally repealed from 30 January 2013: See 6.2.

Undue preferences 8.23 For transactions on and after 23 June 1993, if there is an insolvent transaction, uncommercial transaction, unfair loan or unfair preference as defined in those sections, the transaction is voidable against certain persons: Corporations Act s 588FAff. For transactions that occurred before 23 June 1993, the provisions of the Bankruptcy Act 1966 (Cth) s 122 as to the avoidance of preferences are applied, with appropriate modification, to certain transactions, including charges, by a company: see Corporations Act s 565.

Avoidance of certain floating charges

8.24 A floating charge on the undertaking or property of a company created on or after 23 June 1993 within six months before the commencement of the winding up of the company in insolvency is invalid, unless it is proved that the company was, immediately after the creation of the charge, solvent. This does not apply, however, to the amount of any moneys paid to the company at the time of or subsequently to the creation of and in consideration for the charge, together with interest on that amount and a limited number of other situations: Corporations Act s 588FJ. The section covers a charge which was a floating charge at the time of its creation but has crystallised since: Re Eastern Retreads Wholesale Pty Ltd (1979) 4 ACLR 136. On the test of solvency, see Expo International Pty Ltd v Chant [1979] 2 NSWLR 820. There is similar provision for charges created prior to 23 June 1993 in s 566 of the Act. For the exception to apply, money must have been paid to the company or the company must have benefited by the equivalent of money: Re Matthew Ellis Ltd [1933] Ch 458; M Hoffman Nominees Pty Ltd v Cosmas Fish Processors Pty Ltd (1982) 7 ACLR 65; Pennywise Smart Shopping Australia Pty Ltd v Sommer & Co Pty Ltd (1992) 9 ACSR 557. The mere supply of goods on credit does not bring the exception into play: Re Peruss Pty Ltd (1980) 5 ACLR 176. Where a company has an overdrawn account with a bank, cheques paid into that account constitute cash paid to the company: Re Yeovil Glove Co Ltd [1965] Ch 148; [1964] [page 291] 2 All ER 849; Commissioners of the State Bank of Victoria v Judson (1985) ACLC 576. The payment must be made at the time of or subsequent to the creation of and in consideration of the charge. Where the payment precedes the charge it may be possible to prove that the payment was made against a promise to give the charge, in which case the lender will be able to claim the benefit of the exception: see Re Destone Fabrics Ltd [1941] Ch 319; [1941] 1 All ER 545; Pennywise Smart Shopping Australia Pty Ltd v Sommer & Co Pty Ltd, above. Only the floating charge is invalidated — the covenant to pay is still valid: Re Parkes Garage (Swadlincote) Ltd [1929] 1 Ch 139; Mace Builders

(Glasgow) Ltd v Lunn [1987] Ch 191 (CA). If the sum secured is repaid before the commencement of the winding up, the liquidator or administrator cannot recover the sum so paid unless the repayment is set aside as a preference (Re Parkes Garage (Swadlincote) Ltd), and transactions effected under the authority of the charge which have been completed before the commencement of the winding up of the company are unaffected. If, for example, a receiver appointed by the debenture holder realises the mortgaged property by sale before the commencement of the winding up, he is not required to pay the proceeds to the liquidator: Mace Builders (Glasgow) Ltd v Lunn.

Preferential creditors 8.25 The basic rule for administration of a liquidation is that unsecured creditors rank pari passu. This rule is enshrined in the Corporations Act s 555 though the modern term is ‘they must be paid proportionately’. However, the Corporations Act s 556ff makes provision for priority of particular claims such as employees’ claims. Under s 561 of the Corporations Act, if in a winding up, so far as the property of a company available for payment of creditors other than secured creditors is insufficient to meet employees’ priority claims, payment of such claims shall be made in priority over the claims of a chargee in relation to a floating charge created by the company (including a charge that conferred a floating security at the time of its creation but has since become a fixed or specific charge: Corporations Act s 9) and may be made accordingly out of any property comprised in or subject to that charge. Where a receiver is appointed on behalf of holders of any debentures of a company secured by a floating charge, as defined above, or where possession is taken or control assumed by or on behalf of those debenture-holders of any property comprised in or subject to the charge, then, if the company is not at the time in the course of being wound up, certain debts and claims which in a winding up are given priority to all other unsecured debts shall be paid out of property coming into the hands of the receiver or other person taking possession, in priority to any claim for principal or interest in respect of the debenture: Corporations Act s 433(2), (3). This priority is given to amounts received by a company in respect of a third party liability policy effected by the company (see s 562) and in respect of certain fees and expenses of an

auditor and in respect of certain employees’ claims which have priority under ss 556 and 560. The priority applies only to debts and claims accrued due by the date of the appointment of the receiver or the taking of possession or assumption of control: s 433(9). As to the liability of a receiver for preferential payments, see IRC v Goldblatt [1972] Ch 498; [1972] 2 All ER 202.

[page 292]

Chapter 9

Special Securities I Consumer Credit Securities Australian statute law Mortgages to which the Code applies Effect of the Code on mortgages Power of sale External dispute resolution scheme II Crown Lands Act Mortgages Crown Lands Act tenures Mortgages of interests in Crown lands Mortgages of Crown lands in Queensland Crown land mortgages in Tasmania III Mortgages of Agricultural Lands Agricultural lands Mortgages over rights associated with farms Farm mortgages IV Mortgages of Ships and Aircraft A. Ships Ships Legislative background Mortgages of registered ships

9.1 9.2 9.3 9.4 9.5 9.6 9.7 9.8 9.9 9.10 9.11 9.12

9.13 9.14 9.15

Ancillary aspects of a registered ship mortgage Unregistered mortgages Caveats Maritime liens, hypothecation and bottomry Marshalling of maritime securities Priority over shipping mortgages Priority between mortgages over ships Priorities in Australian law Other Australian cases on priorities Rights of mortgagee in possession of ship Shipping mortgagee’s power of sale Loss or destruction of the ship Discharge of registered shipping mortgage B. Aircraft Mortgages of aircraft

9.16 9.17 9.18 9.19 9.20 9.21 9.22 9.23 9.24 9.25 9.26 9.27 9.28 9.29

[page 293]

I Consumer Credit Securities Australian statute law 9.1 In the 1970s and 1980s, packages of legislation were enacted by most states in more or less identical form to regulate consumer credit and to make special provisions with respect to securities involved in a credit transaction. The effect of this legislation in mortgages and charges was considered in Chapter 9 of the first edition of this work. In 1996, the Australian jurisdictions other than Western Australia adopted a uniform Consumer Credit Code. A major series of amendments were passed in 1998 and there have been further amendments from time to time.

Western Australia in separate legislation adopted very similar provisions. For transactions before 1 November 1996, the law as noted in the first edition remains applicable including the matter relating to the New South Wales Credit (Home Finance Contracts) Act 1984. For transactions on or after 1 November 1996, the law as summarised in this chapter applies. The Code has been enacted by each state in adopting legislation (in Western Australia by corresponding legislation). It is analysed in detail in McGill and Willmott, Annotated Consumer Credit Code, Law Book Co, Sydney, 1999. It is not necessary in this work to delve into the legislation in great detail and this chapter is restricted to the effect of the Code on mortgages and securities.

Mortgages to which the Code applies 9.2 Section 6 of the Code makes it clear that it applies only where credit is being provided or intended to be provided wholly or predominantly for personal, domestic or household purposes and not for investment purposes and the credit provider provides the credit in the course of a business of providing credit whether or not it also carries on other business. Section 8 of the Code is as follows: (1) This Code applies to a mortgage if — (a) it secures obligations under a credit contract or a related guarantee; and (b) the mortgagor is a natural person or a strata corporation. (2) If any such mortgage also secures other obligations, this Code applies to the mortgage to the extent only that it secures obligations under the credit contract or related guarantee. (3) The regulations may exclude, from the application of all or any of the provisions of this Code, a mortgage specified in the regulations.

Regulation 7 provides that the Code does not apply to: (a) apart from ss 14 & 15, to any mortgage relating to perishable goods, livestock, primary produce or food stuffs; (b) a banker’s right to combine accounts; (c) a lien or charge arising by operation of any Act or law or by custom.

Further, s 83 which restricts repossession does not apply where the goods are lawfully in the possession of the credit provider.

Under s 5 of the Code, a ‘credit contract’ is a contract under which credit is or may be provided, being the provision of credit to which the Code applies. Section 7 exempts certain short-term credit and other minor provisions of credit from the operation of the Code, but otherwise it applies generally.

Effect of the Code on mortgages 9.3 Apart from all account mortgages under s 43 of the Code, s 45 of the Code makes a mortgage to which the Act applies void to the extent that it secures an amount, in relation to any credit contract which it secures, that exceeds the sum of the amount of [page 294] the liabilities of the debtor under the credit contract and the reasonable enforcement expenses of enforcing the mortgage. Furthermore, the mortgage is void to the extent that it purports to secure an amount, in relation to any guarantee which it secures, that exceeds the limit of the guarantor’s liability under the guarantee and the reasonable enforcement expenses of enforcing the mortgage relating to a regulated contract. Section 44 prohibits third party mortgages; that is, mortgages where the mortgagor is not either a debtor or a guarantor. Section 40 makes void any mortgage that does not describe or identify the property to which it applies and vitiates any provision which purports to charge all of the property of the mortgagor. Generally, mortgages of future property are made void by s 41 of the Code. Section 46 prohibits mortgages over an employee’s remuneration or superannuation entitlements. Sections 47 and 48 allow the mortgagor to assign the mortgaged property but only with the consent of the credit provider. Section 91 makes any provision in a regulated mortgage permitting the mortgagee or its agent to enter upon premises for the purpose of repossessing goods to be void and s 92 requires a court order before such entry can be made.

There are numerous provisions requiring the giving of notice to the mortgagor before the credit provider can take serious steps in and about enforcement of its rights under the mortgage. Usually the Code not only makes void a provision that is contrary to its policy, but also imposes a criminal penalty on a mortgagee who includes an offending provision in a mortgage. In South Australia, under the former legislation, Debelle J in Spence v Roberts (1995) ASC ¶56-312 awarded damages for breach of the repossession provisions being the difference in the value of the goods repossessed and the price received plus loss of income for the borrower being deprived of the use of the goods.

Power of sale 9.4 A mortgagee under a mortgage to which the Code applies may not exercise a power of sale, or other power of or proceedings for enforcement of or under the mortgage unless the mortgagor is in default, the mortgagee has given at least one month’s notice of intention to exercise the right unless the default is remedied and the mortgagor fails to comply with the notice: see s 80 of the Code. Such notice may be combined with a notice which is required to be given under any other Act: for example in New South Wales, under the Conveyancing Act 1919 (see 20.11) or the Real Property Act 1900 (see 4.37), ss 80(6) and 161(2) of the Code and see CBFC Finance v Dickinson [1992] ACL Rep 295 NSW 19.

External dispute resolution scheme 9.5 The Code compels lenders whose mortgages come within the Code to have disputes referred to external dispute resolution. Usually this is done through the Credit Ombudsman Service or the Financial Ombudsman Service. The standard reference includes provisions staying enforcement action until the dispute is resolved and for the decision in the reference to be final. Whether there can be judicial review under the Datafin principle (R v Panel on Take-overs & Mergers; Ex parte Datafin plc [1987] 1 QB 815: [1987] 1 All ER 564) is doubtful. There is more chance of this happening in [page 295]

Victoria than New South Wales: see Kyrou, ‘Is Datafin part of Australian Law’ (2012) 86 ALJ 20. It appears to be the habit of mortgagors under the Code to find some dispute or other which will have to be resolved and thus gain valuable time for refinancing the loan etc. There is little the mortgagee can do about this. Details as to the operation of such schemes may be found in Bransgrove and Young, The Essential Guide to Mortgages in NSW, 2nd ed, LexisNexis Butterworths, 2013, Ch 10.

II Crown Lands Act Mortgages Crown Lands Act tenures 9.6 Each of the Australian states has special provisions relating to interests in unalienated Crown land. These are dealt with in New South Wales by the Crown Lands Act 1989; in Victoria by the Land Act 1958; in Queensland by the Land Act 1994; in South Australia by the Crown Lands Act 1929; in Western Australia by the Land Act 1933; and in Tasmania by the Crown Lands Act 1976. The types of interests which may exist vary from state to state, but will usually fall into the following classes (though not all of these classes will be available in each state): (a) incomplete purchases; (b) perpetual leases; (c) leases for a term or from year to year.

Mortgages of interests in Crown lands 9.7 It is quite clear that, even if the relevant legislation is silent as to the ability of a holder to mortgage an interest in Crown land, a bona fide mortgage may be given over the land: Hayward v Smith (1887) 9 LR (NSW) (Eq) 11 at 26. The position since 1989 in New South Wales and in all states other than Queensland and Tasmania is that mortgages of Crown land are dealt with under the Torrens system. In New South Wales before 1980, mortgages under the Crown Lands Consolidation Act 1913 were dealt with both under the ‘old

system’ as well as by a statutory recording in the Department of Lands. The current NSW Act has little to say about mortgages. The Minister’s consent to a mortgage or a discharge of a mortgage is not required. Under Crown Lands Act 1989 s 40, the Minister may take a mortgage from a purchaser of land from the Crown in respect of any part of the purchase price of the land or other money due to the Crown. By virtue of the provisions of the Crown Lands (Continued Tenures) Act 1987 (NSW) Sch 7, cl 17, where there is a mortgage over a Crown lease which is converted into an incomplete sale, the mortgagee retains all the rights that he had under the mortgage over leasehold in respect to the new tenure.

Mortgages of Crown lands in Queensland 9.8 The Land Act provides for a statutory form of mortgage which must be registered in the Department of Lands: s 300. Section 341 of the Act expressly says that this instrument operates as a charge on the lease or sublease. Power to sell is given by ss 345–347. If the mortgagee goes into possession it must notify the Minister and sell within two years: s 347. Generally speaking, the mortgage is similar to a mortgage under the Torrens system: Simpson v Forrester (1973) 132 CLR 499 at 513. There does not appear to be any power to foreclose: Tannock v North Queensland Securities [1932] St R Qd 285 at 298; see Sykes and Walker, p 347. [page 296]

Crown land mortgages in Tasmania 9.9 It would seem that a mortgage of an interest under the Act must be by deed as per ‘old system’ land and that the Minister must consent to the deed because this is a dealing with Crown land within the meaning of Crown Lands Act 1976 s 25. However, it may be that a mortgage of a leasehold interest may only be made by assignment: see Sykes and Walker, p 350.

III Mortgages of Agricultural Lands

Agricultural lands 9.10 Generally speaking there is no need to distinguish between mortgages over agricultural lands in Australia and mortgages over any other land. The various states have enacted Agricultural Holdings Acts or Agricultural Tenancies Acts, the effect of which is generally to provide that a tenancy with agricultural holding cannot be summarily terminated and that the tenant is given a statutory right to compensation for improvements. Depending on the terms of the relevant state Act, these rights of a tenant may affect the rights of the mortgagee under the mortgage. Again, legislation dealing with pest eradication, pastoral improvement, etc may impose statutory charges on the land which will take priority over the repayment of the principal and interest due under a mortgage.

Mortgages over rights associated with farms 9.11 Mortgages over agricultural quotas or specific crops raise no specific problems. Most fall under PPSA and are considered in Chapter 5. For a recent decision with respect to security over a milk quota, see National Australia Bank v Blacker (2000) 104 FCR 288. Many ancillary rights are obtained by farmers in order to operate their land. Some of these, such as a water licence in New South Wales under the Water Act 1912, are extremely valuable; others less so. Most may be mortgaged, though care must be taken to comply with any specific statutory provisions. In New South Wales, mortgages of water rights are significant. Securities over such rights must be registered in the Access Register kept under the Water Management Act 2000: see s 71D. Ancillary rights generally are considered in 1.23.

Farm mortgages 9.12 In New South Wales, a private member’s bill which was drafted on the basis of legislation in Iowa, USA passed into law as the Farm Debt Mediation Act 1994. The principal purpose of the Act was to prevent any enforcement action with respect to a mortgage over a farm property until the mediation process had been properly exhausted. As to the genesis of the Act,

see Varga v Commonwealth Bank of Australia (1996) 7 BPR 15,052 and Waller v Hargraves Secured Investments Ltd (2012) 245 CLR 311 at 322; 285 ALR 41 at 49–50. Victoria also has a Farm Debt Management Act 2011 in similar but not identical terms. There is no reported authority on its operation at the time of writing. When ‘the Act’ is referred to, the reference is to the NSW Act. The Act defines a ‘farmer’ as a person who, at the date of the enforcement action has a person who is wholly or principally engaged in a farming operation notwithstanding that the person may also have other activities: Varga v Commonwealth Bank (1996) 7 BPR 15,052; see also Miles v Ficuga Pty Ltd (1996) 20 ACSR 156; 131 FLR 171. ‘Farming’ operation is defined as meaning ‘a farming (including dairy farming, poultry farming [page 297] and bee farming), pastoral, horticultural or grazing operation or such other operation as is prescribed by regulation’. Logging and other forestry activities are not ‘farming’ (Miles v Ficuga Pty Ltd (1996) 20 ACSR 156; 131 FLR 171), nor is a fish hatchery (Craigie v Champion Mortgages Pty Ltd [2007] NSWCA 15) nor is a property operated as a tourist ranch with horse riding: Lowloan Mortgages Pty Ltd v Hancock [2001] NSWSC 607. As to the definition of ‘farm mortgage’ and ‘enforcement action’, see Westpac Banking Corporation v Hodgson Pastoral Co (Torry Plains) (1995) 7 BPR 14,540; Commonwealth Bank of Australia v Trellis Holdings Ltd (1995) 19 ACSR 319; 14 ACLC 65; Miles v Picuga Pty Ltd (1996) 131 FLR 171; 20 ACSR 156. A ‘farm mortgage’ includes certain securities given by a farmer which are not mortgages in the strict sense. The Act prevents a statutory demand being presented and pressed against a company under the Corporations Act in respect of a mortgage given with respect to a farm debt: Australian Cherry Exports Ltd v Commonwealth Bank of Australia (1996) 39 NSWLR 337; 132 FLR 266 (CA). However, this prohibition only applies if there is a mortgage to secure the farm debt: Commonwealth Bank of Australia v Trellis Holdings Ltd (1995) 19 ACSR

319. The Act was considered by the High Court in Waller v Hargraves Secured Investments Ltd (2012) 245 CLR 311; 285 ALR 41. In that case, where a dispute was settled and a new arrangement was entered into, it was held that a new farm mortgage was created and thus there must be a new mediation. This argument, however, failed on the facts in Permanent Custodians Ltd v McMahon (2013) 17 BPR 32,177. Other recent examples of the operation of the Act are Rural Bank Ltd v Merriba Pty Ltd (2012) 16 BPR 31,217 and Permanent Custodians Ltd v McLanders [2013] NSWSC 627, (2013) 17 BPR 32,101.

IV Mortgages of Ships and Aircraft A. Ships Ships 9.13 As both ships and aircraft are ‘goods’ under PPSA, mortgages over them after the commencement of that legislation is governed by PPSA: see Chapter 5. This section deals with such mortgages before the operation of PPSA as it has no retrospective operation. However, there are complications. The register maintained by the Australian Maritime Safety Authority (AMSA) under the Shipping Registration Act 1981 (Cth) will still record ownership of registered vessels. It will thus be necessary to search both this register to ascertain ownership and the PPSA register for security interests. It should be noted that if a salvage agreement involves the acquisition of an interest in an Australian ship, the PPSA will apply. If a foreign ship, the law of the foreign jurisdiction will govern.

Legislative background 9.14 As was the case with British ships registered under the Merchant Shipping Act 1894 (UK), the property in a ship is divided into 64 shares for the purpose of registration under the Shipping Registration Act 1981 (Cth): s

11(1)(a). The Shipping Registration Act repealed the Merchant Shipping Act Pt I to the extent that legislation was part of the law of the Commonwealth: see s 3(1), the definition of ‘previous law’ and s 4. Under transitional provisions, a ship which is entitled to be registered under the [page 298] Shipping Registration Act is deemed to have been registered under that Act as from its commencement date where that ship was registered in accordance with the previous law: see s 86(1) and also s 89. It is not possible for a person to be the owner of a fraction or part of a share of a ship (see s 11(1)(e) of the Act), and a joint owner of a share or shares of a ship or of the whole of a ship is not entitled to dispose of that interest separately: see s 11(1)(d). Subject to Shipping Registration Act Pt II, every Australian-owned ship must be registered under the Act (see s 12(1)) and, unless an exemption is applicable, a registrable ship may under s 12(3) be detained until registration is effected: see also s 71 and note the provisions of ss 63, 68 and 69. If a ship is registered under the law of a foreign country it cannot be registered under the Shipping Registration Act: see s 17(1). Nevertheless, if a ship is required to be registered under the Shipping Registration Act the fact that it may be registered in a foreign country provides no defence to a prosecution for a breach of the Commonwealth legislation: see s 12(4). As might be expected, the Shipping Registration Act is not applicable to any ships which belong to the naval, military or air force of a foreign country or to part of the defence forces of the Commonwealth: see s 7. Further, government ships, fishing vessels, pleasure craft and small craft are exempt from the registration requirements of s 12: see s 13. Under Shipping Registration Act s 8(1), a ship is regarded as an Australian-owned ship if owned exclusively by an Australian national or Australian nationals. If three or more persons jointly own the ship, provided that the majority are Australian nationals (or, where two or more persons own the ship in common, that more than half the shares are owned by an Australian national or Australian nationals) then the ship is regarded as an Australian-owned ship: s 8(1). A body corporate established by or under a

law of the Commonwealth or of a state or a territory is an Australian national for these purposes: s 3(1). Section 14 permits (but does not require) registration of ships referred to in s 13 which are Australian-owned: s 14(a). Registration of small craft owned or operated by Australian residents or nationals is also permitted (s 14(b), (c)) as is registration of ships on demise charter to Australian-based operators. As to other requirements in relation to the ownership and registration of ships, see The Australian Encyclopaedia of Forms and Precedents, 3rd ed, vol 14, D Cremean and D James, Shipping Documents, pp 10,012–13.

Mortgages of registered ships 9.15 Prior to the operation of PPSA, a ship or a share in a ship registered under the Shipping Registration Act 1981 (Cth) may be mortgaged, and provided the instrument of mortgage is in accordance with the Regulations it may be registered under the Act: see s 38(1), (2) and (3). Section 38(3) provided for registration of a mortgage by entry of mortgage particulars in the register kept under the Act: see Household Financial Services Ltd v Island and River Trading Pty Ltd (1993) 6 BPR 13,312; and see 6.3. No form is prescribed. The misnomer of the ship will not invalidate registration so long as the identity of the ship is clear: Bell v Bank of London (1858) 28 LJ Ex 116; see also The Benwell Tower (1895) 8 Asp MLC 13; 72 LT 664. A mortgage of an unregistered and merely equitable interest in a ship cannot itself be registered: Chasteauneuf v Capeyron (1882) 7 App Cas 127. On discharge of a registered mortgage by entry of the discharge in the register the interest of the mortgagee vests in the mortgagor: s 44(2). [page 299] ‘Mortgage’ is defined in s 3(1) of the Act as meaning a mortgage registered under s 38 of the Act. Somewhat analogously to the Torrens system legislation, the Act does not provide for unregistered mortgages of registered ships but it does provide for the holders of equitable interests to protect their interest by the lodgment of a caveat: see ss 47 and 47A.

Priorities as between registered mortgages are regulated by the provisions of s 39, which provides that priority is to be accorded to registered mortgages in accordance with the order of their registration. Section 38(4) provides that mortgages are to be registered under the Act in the order of their lodgment. In General Credits (Finance) Pty Ltd v Registrar of Ships (1982) 44 ALR 571; 61 FLR 329, it was held that the rules of common law or equity which may otherwise apply may be displaced by the priority or power of a registered mortgagee of a ship: cf Household Financial Services Ltd v Island and River Trading Pty Ltd, above; and see 9.17. Under s 40 of the Act the mortgage takes effect as a charge in the sense that the mortgagee does not become the owner of the ship or share, nor does the mortgagor cease to be the owner of the ship or share, ‘except to the extent necessary to make the ship or share available as security under the mortgage’: see Ex parte North Brisbane Finance and Insurances Pty Ltd [1983] 2 Qd R 684 at 688. Provisions in similar form have been held to permit the mortgagee to take possession if the security is endangered, even if no part of the debt secured has become due (The Blanche (1887) 58 LT 592; Law Guarantee & Trust Society v Russian Bank for Foreign Trade [1905] 1 KB 815; The Manor [1907] P 339); and to prevent seizure of the ship by a creditor of the mortgagor: Dickinson v Kitchen (1858) 8 E & B 789; 120 ER 293. On taking possession of a ship, a mortgagee assumes liability for the expenses of working the ship and must perform any contracts the mortgagor has entered into; but the mortgagee is entitled to all freight then payable: see Keith v Burrows (1877) 2 App Cas 636. As to the rights of a mortgagee in possession of a ship, see 9.25. Where the cargo belongs to the owner of the ship it will not in the absence of any special agreement pass to the mortgagee: Alexander v Simms (1854) 18 Beav 80; affirmed 5 De GM & G 57; 43 ER 791; Keith v Burrows, above. Otherwise all articles necessary to the navigation of the ship, or to the prosecution of the adventure, for example, oil in bunkers (The Span Terza (No 2) [1983] 1 WLR 632; reversed on other grounds [1984] 1 WLR 27), pass to the mortgagee under the word ‘ship’, including articles afterwards substituted for them: Coltman v Chamberlain (1890) 25 QBD 328. But ‘appurtenances’ did not include bunker oil in The Pan Oak [1992] 2 Lloyd’s

Rep 36. Whether bunkers were mortgaged depended on the construction of the mortgage deed in Den Norske Bank AG v Owners of Ships Eurosea and Eurostar and Euro Marine Carriers BV [1993] 1 Lloyd’s Rep 106. Under s 41(1), a second or subsequent mortgagee who does not have an order of a court of competent jurisdiction may not dispose of the ship or share mortgaged without the consent of every prior mortgagee. A first mortgagee or a second or subsequent mortgagee who has the consent of prior mortgagees (if any), or a court order in the absence of such consent, may dispose of the ship or share absolutely and give effectual receipts: s 41(1) (the power of sale provision without which the assistance of the court would be required in all cases — see Ex parte North Brisbane Finance and Insurances Pty Ltd [1983] 2 Qd R 684 at 688). This statutory power of sale does not stipulate any default as a precondition for its exercise but it may only be exercisable on default under the terms of the mortgage: [page 300] see The Cathcart (1867) LR 1 A & E 314 at 329. General principle, if not authority, commends this position, which suggests that the power of sale would not be exercisable merely because the security is threatened: cf Sykes and Walker, p 730. Notice to the Registrar must be given by any mortgagee who intends to dispose of a mortgaged ship or share (s 41(2)) but the disposal is not invalidated by a failure to give such notice: s 41(4). Section 45 of the Act contains a general provision that the owner of a ship or a share in a ship has power absolutely to dispose of the ship or share and to give effectual receipts, but subject to the Act and any rights and powers as appear from the register to be vested in any other person. The Act does not confer any rights of foreclosure on a mortgagee. By analogy with the Torrens system legislation it does not seem that such a right would exist in the absence of express provision.

Ancillary aspects of a registered ship mortgage

9.16 Mortgages of a registered ship or a share of a registered ship may be transferred by instrument of transfer in accordance with the Regulations: s 42(1); see Shipping Registration Regulations 1981 reg 26. They may also be transmitted to another person: s 43(1); see Shipping Registration Regulations 1981 reg 27. Particulars of any transfer or transmission are to be entered into the register: ss 42(2A), 43(2). An agreement to transfer a ship, and by analogy an interest by way of mortgage, need not be registered and may be enforced by the registered owner: see Batthyany v Bouch (1881) 4 Asp MLC 380; 50 LJQB 421. It appears that, in Queensland, ship mortgages involving a transfer of property in any non-British ship in that state are prima facie subject to the provisions of the Bills of Sale and Other Instruments Act 1955 (Qld) and should be registered under that Act: see Australian Encyclopaedia of Forms and Precedents, 3rd ed, vol 14, p 10,016. This is not the position in the other states where the Bills of Sale legislation is not applicable to ships: see Sykes and Walker, pp 676, 728. In Ex parte North Brisbane Finance and Insurances Pty Ltd [1983] 2 Qd R 684, it was held that the provisions of Companies Act 1961–1981 (Qld) s 100(1) which rendered a mortgage of a ship void as against the liquidator by reason of its non-registration under that Act were invalid by reason of the operation of Constitution s 109 because there was a direct inconsistency between the Shipping Registration Act 1981 (Cth) and the state Act. It was held that the state Act, if valid, would impair the operation of ss 39 and 41 of the Commonwealth Act. In a ship mortgage the right of a mortgagee to insure and add the cost of the debt must be expressly stipulated: The Basildon [1967] 2 Lloyd’s Rep 134. On insurance, see Glafki Shipping Co SA v Pinios Shipping Co (No 1), The Maira (No 2) [1985] 1 Lloyd’s Rep 300 (CA). On insurance to cover the interest of the mortgagee, see Schiffshypothekenbank zu Luebeck AG v Norman Phillip Compton, The Alexion Hope [1987] 1 Lloyd’s Rep 60; and [1988] JBL 176 (Powles). On the duty of an insurer to inform a mortgagee that he has ceased to be liable under an insurance policy effected by the mortgagor, see Bank of Nova Scotia Hellenic Mutual War Risks Association (Bermuda) [The Good Luck] [1992] 1 AC 233 (HL). Although a registered shipping mortgage has many similarities with a

Torrens system mortgage, there are very real differences. First, the doctrine of indefeasibility does not apply: indeed, the mortgage is not even entered on the register. Second, ships, unlike land, can be lost or destroyed. Third, mercantile practice has brought about some rules which run contrary to the general law of mortgage. [page 301] Thus a mortgagor of a ship may, within limits, deal with the ship in a way which might affect the mortgagee’s security: The Heather Bell [1901] P 143 at 151 and, on appeal, [1901] P 272. The test is whether the security is materially impaired: The Celtic King [1894] P 175. If it is, the mortgagee may usually be able to take possession. Whether or not this point has been reached is often a difficult matter to determine. It will be reached in a case where the mortgagor’s conduct has threatened the insurability of the ship, as when it is chartered to carry contraband: Law Guarantee and Trust Society v Russian Bank for Foreign Trade [1905] 1 KB 815. Where the mortgagor has made a contract materially impairing the security, the mortgagee may, upon taking possession, repudiate it: Collins v Lamport (1865) 34 LJ Ch 196 at 200; The Myrto [1977] 2 Ll Rep 243 at 254 (on appeal [1978] 1 Ll Rep 11) and note Brown v Tanner (1868) 3 Ch App 597. Shipping law is a complex branch of the law and this work does not purport to deal exhaustively with the subject of mortgages and charges over ships. Reference should be made to the textbooks on shipping law, particularly Davies and Dickey, Shipping Law, 3rd ed, Lawbook Co, Sydney, 2004 (especially Chs 7–10); Butler and Duncan, Maritime Law in Australia, Legal Books, Sydney, 1992 (especially Ch 2.10);White (ed), Australian Maritime Law, Federation Press, Sydney, 1991 (especially Ch 6 by R Cooper J; and McDermott and Meeson, Ship and Aircraft Mortgages, Lloyd’s of London Press, London, 1989. Note should be made of the argument in Davies and Dickey at p 126 that the combined effect of Shipping Registration Act 1981 (Cth) ss 40 and 45 might be to empower the mortgagor to dispose of a mortgaged ship without the mortgagee’s consent.

Unregistered mortgages 9.17 The Shipping Registration Act 1981 (Cth) in general does not allow for the registration of a mortgage of an unregistered ship or a share in an unregistered ship: see ss 34, 38(2) and 47A. This is subject to the exemptions in the Act from the requirements of registration: see s 13. Ships not required to be registered may be mortgaged as chattels; for example, by an absolute transfer with a deed of defeasance to operate when the debt is paid: see Australian Encyclopaedia of Forms and Precedents, 3rd ed, vol 14, p 10,017; and Sykes and Walker, p 731. A good equitable mortgage may be created by a deposit of a registered mortgage of a ship: Lacon v Liffen (1862) 4 Giff 75; 66 ER 626; on appeal (1863) 32 LJ Ch 315. Similarly, the deposit of a builder’s certificate for a ship in an unfinished state will create a good equitable mortgage: Re Softly; Ex parte Hodgkin (1875) LR 20 Eq 746; Black v Williams [1895] 1 Ch 408. In Household Financial Services Ltd v Island & River Trading Pty Ltd (1993) 6 BPR 13,312, it was held that a ‘lease purchase agreement’ which identified HFS as the owner of the boat and the registered owners as lessees and a subsequent hire–purchase agreement amounted to the grant of a charge over the ship to HFS. Hodgson J said at 13,318: ‘In an appropriate case, an equity court might assist HFS in enforcing its rights, by recognising a charge over the ship, and empowering HFS to sell it. In that sense, HFS had an equitable interest in this ship’.

Caveats 9.18 Under Shipping Registration Act 1981 (Cth) s 47A(1), a caveat may be lodged with the Registrar by a person claiming an interest in a registered ship or a share in a registered ship under an unregistered instrument, such as an unregistered mortgage. The caveat must be in a form that complies with the provisions of s 47A(2) and (3). The effect of the caveat is to forbid entry in the register of any instrument dealing with the ship or the relevant share of the ship until notice of the dealing is given to the [page 302]

caveator: s 47A(1). In this respect the system is not dissimilar from the caveat system under Torrens system legislation. Section 47B(1) requires notification to be given to any person or persons entered in the register as owner or part owner or mortgagee of a ship or share in question upon the entry of the caveat in the register. Under s 47D(1), no dealing with the ship or a relevant share in the ship may be entered in the register while a caveat remains in force unless the dealing is consented to by the caveator or by some person authorised by the caveator. In particular, s 47A(6) provides that any person entitled to withdraw the caveat may give consent to such a dealing. A caveat may lapse (see s 47C) or it may be withdrawn: see s 47A(6). A procedure is provided in s 47B(2) whereby a caveator may be summoned to attend before the court to show cause why the caveat should not be removed. Under s 47E a person lodging a caveat without reasonable cause may be liable to pay compensation to any person sustaining damage. Again, this provision is similar to those found in the Torrens system legislation: see, for example, Transfer of Land Act 1958 (Vic) s 118.

Maritime liens, hypothecation and bottomry 9.19 English law recognises maritime liens in respect of bottomry and respondentia bonds, salvage of property, seamen’s wages and damage: see further Thomas, Maritime Liens, Stevens, London, 1980; Jackson, Enforcement of Maritime Claims, 3rd ed, LLP, London, 2000; Butler and Duncan, Maritime Law in Australia; and Sykes and Walker, pp 753–8. In circumstances of unforeseen necessity or distress the master may pledge the ship and freight to raise the necessary funds for the voyage, by a contract called ‘bottomry’. It was usual for this contract to take the form of a bond whereby the master stated the occasion for resorting to bottomry, and pledged himself, the ship and the freight, and sometimes the cargo, for the repayment of the principal and interest on the safe arrival of the ship at the end of her voyage, on such condition as to risk as may be agreed upon. Where the cargo alone is hypothecated, the instrument is called a respondentia bond. Bottomry created a debt (generally treated as only nominal) against the master, but none against the owner: The Atlas (1827) 2 Hag Adm 48; 166 ER 162; The Mary Ann (1865) LR 1 A & E 8 at 13.

Respondentia is the separate hypothecation of the cargo of a ship as security for the repayment of a debt contracted about the necessary cost of transhipping and forwarding the cargo to its destination: The Atlas, above. For a lien on sub-freight as an equitable mortgage, see Re Welsh Irish Ferries Ltd [1986] Ch 471. Bottomry and respondentia are obsolete in practice: see Carver’s Carriage by Sea, 13th ed, Stevens & Sons, London, 1982, vol 2, p 916; see also The Halcyon Isle [1980] 2 Lloyd’s Rep 325 at 328. Otherwise, because of their nature as maritime liens both forms of charge have priority over all mortgages: see Butler and Duncan, Maritime Law in Australia, p 50.

Marshalling of maritime securities 9.20 Maritime securities will be marshalled so far as may be consistent with the rules of maritime priority, a qualification which enables the owner of a cargo which is included in a bottomry bond, with the ship and freight, to resist a claim to throw the debt upon the cargo for the purpose of leaving the ship and freight to satisfy the debt of another bondholder, whose security was confined to them, because by the maritime law the cargo is not liable until the ship and freight are exhausted: The Priscilla (1859) 1 Lush 1; 167 ER 1; The Edward Oliver (1867) LR 1 A & E 379. [page 303] Demands for wages, pilotage and towage, to which the ship and freight are liable pro rata, will not be thrown upon the freight, for the benefit of a bondholder on the ship only, so as to prejudice the owner of the cargo, by diminishing the residue of the freight which would otherwise be available for another encumbrancer upon the cargo: The La Constancia (1846) 2 Wm Rob 460; 166 ER 829. Nor will the equity be applied where both funds are not under the control of the court. Therefore, seamen will not be compelled to proceed on their personal remedy for wages against the shipowner, that the ship may be left to satisfy the bondholder: The Arab (1859) 5 Jur NS 417.

Priority over shipping mortgages

9.21 In shipping law, the mortgagee is considered to be the assignee of the owner’s rights. It is considered that the mortgagee has left the owner in possession with liberty to adventure. Again, the mortgagee takes his security subject to such encumbrances as the law may impose upon the ship for the benefit of third persons. Thus, generally speaking, the mortgagee takes subject to liens incurred before or after the date of the mortgage: The Dowthorpe (1843) 2 W Rob 73; 166 ER 682; The Tagus [1903] P 44; The Fairport (No 4) [1967] 1 WLR 964; [1967] 2 All ER 914n; and see Carver’s Carriage by Sea, vol 2, [1255]. Liens may arise ex contractu (contractual liens), ex delicto (tort liens) or for salvage. The general rule is that all rank before the mortgage over the ship: The Aline (1839) 1 W Rob 111; 166 ER 514. In Hope v Winter (1709) 2 Eq Cas Abr 690; 22 ER 580, ransom for a captured ship ranked before a mortgage. Contractual and salvage liens generally rank in inverse order to their attachment upon the res: The Veritas [1901] P 304 at 312 and see The Sydney Cove (1815) 2 Dods 1; 165 ER 1396; The Hope (1873) 1 Asp MLC 563; The Steam Fisher [1927] P 73; Todd Shipyards Corp v Altema Compania Maritima SA; The Ioannis Daskalelis [1974] 1 Ll Rep 174. Tort liens, which in general occur in collision cases, take precedence over prior securities and contractual and salvage liens: The Veritas, above, at 311– 15. A person advancing money or rendering services does so at his own will; he can exercise his discretion as to whether he will assist the ship, but an injured party has no such option, and his claim for damages must be satisfied first: The Aline. Even the lien for mariners’ wages ranks after a claim for damages: The Linda Flor (1857) Sw 309; 166 ER 1150; The Elin (1883) 8 PD 129; The Veritas, above. As between several damage claims in respect of collisions with the same vessel, no one claim is allowed priority. Apart from laches, the claims rank pari passu, and not in order of the dates of the several collisions: The Steam Fisher, above. The general rules noted in this paragraph are in some cases varied either by statute or because of the nature of the claim. Thus the statutory lien for the salvage of human life has priority over other salvage liens: The Coromandel (1857) Sw 205; 166 ER 1097; The Eastern Monarch (1860) Lush 81; 167 ER

43. The benefit of a maritime lien may be lost by negligence or delay: The Brown Buccleugh (1851) 7 Moo PCC 367; 13 ER 884; The Europa (1863) Brown & Lush 89; 167 ER 313; The Fairport (1882) 8 PD 48. On the other hand, it has been said that diligence in instituting and prosecuting the action may be rewarded with priority of claim against the fund: The Saracen (1846) 4 Notes of Cases 512, on appeal (1847) 6 Moo PCC 75; 13 ER 604; The William F Safford (1860) Lush 69; 167 ER 37. The court, however, holds the property not only for the plaintiff who first institutes the action and obtains the arrest of the ship, but at least for all creditors of the same class who make their claims in due course: The Africano [1894] P 141 and see The Veritas, above, at 307. [page 304] A repairer or supplier of necessities for a ship who is not in possession will fall behind other lienholders and also behind the mortgagee, even where the mortgagee had notice. The rights against the ship and against the proceeds when it has been sold are the same: Watkinson v Bernardiston (1726) 2 P Wms 367; 24 ER 769; The New Eagle (1846) 2 W Rob 441; 166 ER 822; The Neptune (1835) 3 Knapp 94; 12 ER 584; The Scio (1867) LR 1 A & E 353; The Russland [1924] P 55; and see, as to when repairers are considered to be in possession, The Rellim (1922) 39 TLR 41.

Priorities between mortgages over ships 9.22 Different law areas have differing rules as to the priorities between mortgages and charges over ships. Ships being mobile, questions not infrequently arise as to the law which should govern priorities between competing interests. It is clear that the lex fori governs: The Halcyon Isle [1981] AC 221; [1988] 3 All ER 197 (PC) and see The Colorado [1923] P 102; The Betty Orr [1992] 1 NZLR 655; and Fournier v The Ship Margaret Z [1999] 3 NZLR 111. The point may be of great importance as the governing law even within the British Commonwealth may not be the same.

The English law was stated thus in [6.9] of the 11th English edition of this work (a passage not reproduced in the 13th edition): The rights of an unregistered mortgagee are postponed to those of a registered mortgagee even where the unregistered mortgage predates its registered counterpart, Coombers v Mansfield (1855) 3 Drew193; 61 ER 877 … Equitable mortgages do not have priority over or equality with legal mortgages and their recognition does not introduce the equitable doctrines as to constructive notice into such transactions. Consequently, a legal registered mortgagee of a ship has priority over an earlier unregistered equitable charge, even though he had notice of that charge when he made his advance: Black v Williams [1895] 1 Ch 408 and see also Barclay & Co Ltd v Poole [1907] 2 Ch 284.

The English law position applies in New Zealand: The Betty Orr, above. One cannot make such a categorical statement for Australia. There is some support for it as noted in 9.23, but the better view is that stated by Hodgson J in Household Financial Services Ltd v Island & River Trading Pty Ltd (1993) 6 BPR 13,312 at 13,318 that ‘a prior equitable estate will be defeated by a mortgage only if the mortgagee can rely on the doctrine of bona fide purchaser of the legal estate for value without notice’.

Priorities in Australian law 9.23 The question of priorities in this context under the Australian Act was considered with reference to the provisions of the Imperial Act in General Credits (Finance) Pty Ltd v Registrar of Ships (1982) 44 ALR 571; 61 FLR 329. McPherson J said, with reference to the Registrar’s power to rectify the register under the Australian Act (at ALR 574–5; FLR 333–4): There is an additional power granted by s 60 and vested in the Registrar to correct a clerical or obvious mistake in the register. But it is plainly not within the scope of the authority conferred by this section to alter by expunging the registration which has here taken place. According to the editors of McLachlan on Merchant Shipping (7th ed) at p 62: ‘This integrity of the register being of the utmost importance to society, it is of equal moment that the keeper of it should use caution and refuse to make an entry save upon such evidence only, as, being within the requirements of the Act, would satisfy a court of justice. Nor should he, after acting on the evidence of documents which prima facie satisfy the Act endeavour to undo it on the face of the register, although convinced that the title is not in the person registered but in some other; that kind of rectification of a public document of title is the function of a court of justice.’ This statement expresses, in my opinion accurately, the function and the powers of the Registrar, as well as their limits, both in registering and in altering the register under s 60, of the Registrar under the Act of 1981. It is clear that the Registrar understands what they are.

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Section 59 itself appears to have no direct analogue in the provisions of the Imperial Act. That is no reason for supposing that a court acting under that section did or does not possess a power to rectify the register established by that Act and the passage from McLachlan is supported by citation of English and Scots authority. Section 59 makes it unnecessary to refer to such authority because the power it confers is express. But what is said by McLachlan with respect to the ‘integrity of the register’ is equally applicable to the Australian Register of Ships established by s 56 of the Act. The register and the process of registration under the Imperial Act is commonly believed to have been one of the examples which prompted the adoption of the Torrens system of registration of title in Australia. Although, unlike the latter, it contains no provisions for ‘paramountcy’ or for indefeasibility of title, the Imperial Act does contain certain provisions regulating the priority of instruments both inter se and in relation to unregistered and unregistrable equitable interests in ships. Noteworthy among these are s 35, conferring on a registered mortgagee a power ‘absolutely’ to dispose of a ship or share in respect of which he is registered; and s 56 conferring a similar power on a registered owner. Section 33 regulates priority among successive mortgages according to the dates of their registration and not the dates of execution. Section 56 prohibits entry on the register of any trust, but s 57, which is expressed to be ‘without prejudice’ to the provisions referred to, states, in terms which are immediately comparable with those of s 51 of the Queensland Real Property Act of 1877, the principle that personal ‘equities’ are nevertheless enforceable against owners and mortgagees. A series of decisions, both in England and elsewhere, has established that the foregoing provisions give to a registered owner or mortgagee of a ship a priority or power which in a number of respects displaces the rules of common law and equity which would otherwise regulate their rights. Examples are to be found in Barclay & Co Ltd v Poole [1907] 2 Ch 284 (purchaser from registered owner prevailing over unregistered mortgagee); and Black v Williams [1895] 1 Ch 408 at 421; Luffman v Luffman (1898) 25 Ont AR 48; and Hoover Owens Remscher v Gulf Navigation (1923) 54 OLR 483 at 486, all of which may be taken to indicate that registration, even with notice of a prior equity, confers a superior title. Most if not all of these statutory provisions are represented, although with minor differences, in the Act of 1981. Thus, the terms of ss 35 and 56 (power of disposal) of the Imperial Act are now to be found in ss 41 and 45 respectively. The substance of s 33 of the Imperial Act (priority between mortgagee) emerges in s 39 of the 1981 Act. The prohibition against entering notice of trusts is to be found in s 56, and, subject to ss 41, 45 and 46, the provisions of s 47 maintain the enforceability of personal equities as declared in s 57 of the Imperial Act. It is not, in my opinion, possible to compare the provisions of the two enactments without concluding that the draftsman of the recent Act deliberately adopted the form of many of the provisions of the earlier statute with the intention that they should be constructed in the light of existing decisions on similar provisions of the Imperial Act. The conclusion that follows is that, in establishing an Australian Register of Ships and a process of registration therein, the legislative intention was to impute to them a purpose, function, and effect similar to those of the Imperial legislation. The register and registration are likewise intended in particular respects to displace rules of the general lay by which questions of legal and equitable ownership of ships and interests therein are to be determined. It is in this context that the statutory power of rectification under s 59 of the Act is to be viewed. It is inherently improbable that the power to rectify the register was or is intended to be exercised in derogation of what McLachlan describes as the ‘integrity of the register’. The occasions for invoking that power which are specified in s 59(1) themselves suggest that this is so. Priorities and other rights attained under the Act are not to be overridden lightly, if at all, in the exercise of the power which the section confers; otherwise, much of the utility of a public register of the kind in question would be removed.

It must always be remembered that PPSA may trump these provisions.

Other Australian cases on priorities 9.24 In 695113 Ontario Ltd v Commissioner of Stamps (1990) 53 SASR 274; 20 ATR 1807, the issue was whether or not title to a registered ship passed on the signing or execution of a bill of sale under s 36 of the Australian Act or only on its registration under the Act. The General Credits case was distinguished on the basis that the cases referred to by McPherson J (above, at 44 ALR 574–5; 61 FLR 333–4) and the General Credits case itself were: ‘concerned with things happening or consequence realized after registration and not with how title passes’ (Bollen J at 53 SASR 278). It should be observed that these [page 306] priorities issues did not arise in the Ontario case so these comments are strictly obiter. Further, they are not easily reconciled with the statements of McPherson J with respect to the cases referred to in the General Credits case. Some older Victorian cases, not cited by McPherson J, decided under the Imperial Act, also held that a legal mortgagee of a ship in statutory form and registered has priority over an equitable charge previously given, even where the legal mortgagee takes with notice of the equitable charge: see Jardine v Hoyt (1871) 2 VR(E) 152; Steamship Boveric Co Ltd v Howard Smith & Sons Pty Ltd (1901) 27 VLR 347. A different view from that taken in the General Credits case as to the effect of the priorities provisions of the Australian Act was taken in Household Financial Services Ltd v Island & River Trading Pty Ltd (1993) 6 BPR 13,312. Hodgson J said, at 13,318, with reference to a mortgage registered under the Act: Mr Cashion submitted that the mortgage given to Peter Curtis was ineffective, because the statutory power under s 45 [see 6.2] did not extend to the grant of a mortgage. I think that the latter point is correct, but in my view ss 38–40 make it clear that a registered owner can give an effective mortgage over a ship. In any event, I have found that Ian Curtis and Ms Saffin were the true owners, subject to HFS’ equitable interest, and that is a further reason for holding, as I do, that the [registered] mortgage to Peter Curtis passed the legal title to the ship. It would appear (having regard to s 47 [see 6.4]) that the only limitations on enforcing equitable interests

against registered owners are those arising from ss 41, 45 and 46; and since ss 41 and 45 relate only to absolute disposal, there seems to be nothing in the Shipping Registration Act giving any particular protection to a mortgagee against equitable interests, of the kind given by ss 42 and 43 of the Real Property Act [1900 (NSW)]. Accordingly, it seems that a prior equitable estate will be defeated by a mortgage only if the mortgagee can rely on the doctrine of bona fide purchaser of the legal estate for value without notice.

On the basis of these decisions, the rules to be applied to resolve priorities between a registered interest under the Act and an unregistered equitable interest must be regarded as unsettled. However, the approach of Hodgson J in the latter case is consistent with that of the High Court to similar priorities issues under the Torrens system legislation (see Chapter 28) and for this reason, and the implication in the High Court’s approach that equitable principles are not to be ousted merely by inference, is to be preferred rather than an approach based on application of authorities on the operation of the Imperial Act. The approach of Hodgson J is also consistent with the general approach in Ontario Ltd v Commissioner of Stamps, above, which was to recognise rights of ownership as a result of the execution of a bill of sale transferring title under the Australian Act prior to its registration. It is also consistent with the distinction drawn in that case with the General Credits case (referred to above) but, as has been noted, the comments in relation to the distinction are strictly obiter. As to priorities between the holders of equitable interests, it seems that the equitable rules apply subject to the possible adoption of the same reasoning in the cases on the Torrens system in relation to caveats and the effect on the operation of these rules of failing to lodge a caveat (see 28.16; and 9.18 in relation to the caveat provisions of the Australian Act). Section 39 of the Act would not assist an equitable mortgagee by conferring any power to protect the security by taking possession or otherwise (the equitable mortgage being unregistered) so the assistance of the court would be necessary. However, s 47 of the Act does provide expressly that beneficial interests may be enforced by or against the owner or a mortgagee of a ship or a share in a ship in the same manner as any other personal property, subject to ss 41, 45 and 46. Section 46 provides that notice of any trust, express, implied or constructive, shall not be entered by the Registrar or be receivable by the Registrar. As to ss 41 and 45, see 6.2 and 6.3. The court will, moreover, enforce equities between the owner and the mortgagee, and in estimating the rights of the mortgagee will

[page 307] not consider only the registered documents, but all the transactions between the parties relative to the mortgage loan: The Cathcart (1867) LR 1 A & E 314. See also Davies and Dickey, Shipping Law, p 137 and Sykes and Walker, p 868. As to priorities with respect to shipping mortgages generally, see 9.21.

Rights of mortgagee in possession of ship 9.25 A mortgagee of a ship who takes possession is entitled to freight then in course of being earned but not due: Brown v Tanner (1868) LR 3 Ch App 597; Keith v Burrows (1877) 2 App Cas 636 (HL); Shillito v Biggart [1903] 1 KB 683. An assignee of such freight will be postponed to an earlier mortgagee of the ship, or to a later mortgagee, who first takes or claims from the master, possession of the ship, provided in either case that the mortgagee had no notice of the assignment: Brown v Tanner; Wilson v Wilson (1872) LR 14 Eq 32 at 39. However, a mortgagee is not entitled to freight accrued due and payable before he took possession, although it may then remain unpaid, as against a subsequent assignee: Shillito v Biggart, and see Liverpool Marine Credit Co v Wilson (1872) 7 Ch App 507. If the mortgagee does not actually or constructively take possession, the mortgagor or subsequent assignee can receive the freight and will not be liable to account: Cato v Irving (1852) 5 De G & Sm 210; 64 ER 1084; Brown v Tanner, above; Liverpool Marine Credit Co v Wilson, above. The arrival of the ship in the docks is not such a completion of the voyage as will deprive a mortgagee of his right to the freight, if he does not take possession until the happening of that event. It is enough if he takes possession before the complete discharge of the cargo; for the right to freight does not accrue until the delivery of the goods, unless there is a stipulation to the contrary. Thus so long as the goods remain on board undelivered, the possession of them is as much within the reason of the rule while the ship is in, as while she is on her way to, the docks: The John (1849) 3 W Rob 170; 166 ER 926; Brown v Tanner, above. As to the position of a mortgagee of a part only of a ship, see Cato v Irving, above.

Shipping mortgagee’s power of sale 9.26 The Shipping Registration Act 1981 (Cth) s 41 empowers a mortgagee of a ship or of a share in a ship absolutely to dispose of the ship or share and to give effectual receipts in respect of the disposal. Where there are two or more mortgages of the same ship or share, a subsequent mortgagee shall not, except under an order of a court of competent jurisdiction, dispose of the ship or share without the consent of every prior mortgagee: Shipping Registration Act 1981 (Cth) s 41. Section 41 does not refer to a default or notice as a precondition to the exercise of the power of sale, but some indication that the power should only be exercised to protect the mortgagee’s security may be found in s 40 which provides that a mortgagee does not become owner of a ship or share and the mortgagor does not cease to be owner except to the extent necessary to make the ship or share available as security under the mortgage. In any event the matter of sale by the mortgagee is invariably dealt with specifically in the mortgage. Although the general rule for shipping mortgages is that the power of sale is only exercised when a sum is still due under the mortgage (The Cathcart (1867) LR 1 A & E 314; Fletcher & Campbell v City Marine Finance Ltd [1968] 2 Ll Rep 520), the mortgage instrument might provide otherwise as in The Maule [1997] 1 WLR 528 (PC). For damages for improper sale after tender of debt, see Fletcher and Campbell v City Marine Finance [1968] 2 Lloyd’s Rep 520. For an order for sale, see The Basildon [1967] 2 Lloyd’s Rep 134. [page 308] The first step taken by the mortgagee will often be the arrest of the ship and the order ultimately sought will be appraisement and sale. The sale is usually by the direction of the court, but in exceptional cases the court might permit the mortgagee to sell: see The Monmouth Coast (1922) 12 L1 L Rep 22. A court sale in Admiralty proceedings in rem transfers the mortgagee’s contractual or statutory rights to the proceeds of sale in court: The Queen of the South [1968] 1 Lloyd’s Rep 182 at 192.

A shipping mortgage is not inherently different to a mortgage over land. The mortgagee may choose the time he sells and may dispose of perishable cargo in the way that suits such sale: Den Norske Bank ASA v Acemex Management Co Ltd (The Tropical Reefer) [2005] 1 BCLC 274; [2004] 1 Ll Rep 1; [2004] 1 All ER (Comm) 904 (CA). The mortgagee owes the same duty of care as mentioned in 20.18: see Gulf and Fraser Fishermen’s Union v Calm C Fish Ltd [1975] 1 Lloyd’s Rep 188. The Act, as has already been noted, contains no express direction as to the disposal of the purchase money and on the principles already stated the selling mortgagee holds any surplus for subsequent mortgagees (if any) and the owner. For priorities of ship mortgages, see 9.21. For equitable mortgages of ships, see 9.17. The statutory power of sale, referred to above, is not restricted to registered ship mortgages and the same principles apply as stated above. In proceedings by a bank against the guarantors of a loan facility for the shortfall on recovery on the mortgage of a ship following the sale of the vessel it was held that the bank, as mortgagee, had an unfettered discretion to sell when it liked to achieve payment of the debt, whether or not the exercise or non-exercise of the power would cause damage to the mortgagor: Den Norske Bank ASA v Acemex Management Co Ltd (The ‘Tropical Reefer’) [2004] 1 Lloyd’s Rep 1 (CA).

Loss or destruction of the ship 9.27 As noted in 37.2, the benefit of a security may be lost by the destruction or loss of the property of which it is subject; see Story on Bailment, 7th ed, Little, Brown and Co, Boston, 1863, p 363. Where a ship is the security and it is captured as a prize in war, the mortgagees’ interest will be extinguished. It is the custom of the Crown of its bounty to make ex gratia payments to legitimate interests, forfeited under prize law: The Marie Glaeser [1914] P 218; see also The Aina (1854) 1 Sp Ecc & Ad 313; 164 ER 181 and The Tobago (1804) 5 C Rob 218; 165 ER 754. However, the total loss or destruction of the ship, but nothing less, will discharge the condition of a bottomry bond: Stephens v Broomfield; The Great Pacific (1869) LR 2 PC 516.

Discharge of registered shipping mortgage 9.28

Where a mortgage registered under Shipping Registration Act 1981

(Cth) s 38 is discharged, the mortgage instrument, together with such evidence of the discharge of the mortgage as is prescribed, should be lodged by the mortgagor with the Registrar of Ships within 14 days after the discharge or such longer period as the Registrar, in special circumstances, allows: see Shipping Registration Act 1981 s 44(1). The prescribed evidence for the purpose of discharge is a memorandum to that effect endorsed on the mortgage and duly signed by each mortgagee under the mortgage: Shipping Registration Regulations reg 28; see General Credits (Finance) Pty Ltd v Registrar of Ships (1982) 44 ALR 571; 61 FLR 323. The Registrar shall, as soon as practical after the lodgment by the mortgagor of the mortgage instrument and memorandum of discharge, make an entry in the register to the effect that the mortgage has been discharged and, on that entry being made, any interest of the mortgagee under the mortgage vests in the mortgagor: Shipping Registration Act 1981 s 44(2). When the mortgage instrument cannot, for any reason, be lodged with the Registrar, the mortgagor shall lodge with the Registrar, in substitution for the mortgage instrument and the memorandum of discharge, a declaration by the mortgagee setting [page 309] out such particulars relating to the ship in respect of which the mortgage was given, the mortgage and its discharge as are prescribed for this purpose: s 44(3). No particulars have been prescribed. For the above purposes, ‘mortgagor’ in relation to a ship or share in a ship includes any person in whom, having regard to any intervening acts and circumstances, the interest of the mortgagee would have been vested if the mortgage had not been made: s 44(4). Under the above provisions, where the first of two mortgages is paid off, the entry of discharge of the first mortgage made the first mortgagee’s interests vest in the second mortgagee, as the person in whom it would have been vested by an intervening act (namely, the second mortgage) if the first mortgage had not been made. Under the former legislation, the Merchant Shipping Act 1894 (Imp), it was held that the entry when made was

conclusive as to the discharge of the mortgage; the mortgage could not be revived by an entry on the register that the former entry was erroneous where the priorities or other mortgagees were affected: Bell v Blyth (1868) 4 Ch App 136. Where they were not so affected the court has ordered a receipt endorsed on a mortgage by mistake to be set aside: The Rose (1873) LR 4 A & E 6. It was also decided that the Registrar had no power to erase entries of mortgages (Chasteauneuf v Capeyron (1882) 7 App Cas 127 (PC)), but he might be ordered to do so by the court: see, for example, Burgis v Constantine [1908] 2 KB 484.

B. Aircraft Mortgages of aircraft 9.29 An aircraft is a chattel and should be mortgaged as a chattel in accordance with any applicable legislation. The covenants in an aircraft mortgage should include provisions requiring compliance with the Air Navigation Act 1920 (Cth) and the Civil Aviation Act 1988 (Cth) and regulations made thereunder. Also, the mortgage should contain a covenant by the mortgagor not to remove or allow the aircraft to be removed from within Australia without the prior consent in writing of the mortgagee, which may be given generally or in any particular case. Generally, see Australian Encyclopaedia of Forms and Precedents, 3rd ed, vol 2, Civil Aviation, pp 18,001ff and vol 9, form 10.170.

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Chapter 10

Second and Subsequent Mortgages Ability to create second mortgages Second mortgages under the Torrens system Form under the general law Contractual restraints Title deeds Notice Covenants in second mortgages Remedies of second mortgage — Torrens mortgage Remedies of second mortgagee — general law mortgages Sales by second mortgagee Discharge of a second or subsequent mortgage Right to surplus Second mortgages generally Postponement of mortgages Subordinated debt

Ability to create second mortgages

10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 10.9 10.10 10.11 10.12 10.13 10.14 10.15

10.1 Even though there has been carved out of the fee simple the rights held by the mortgagee, the mortgagor still holds property which can be the subject of mortgage: Nia v Phuong (1993) 6 BPR 13,141. The effect of a second or subsequent mortgage will be to transfer to the second mortgagee the right to redeem the first mortgage. The original mortgagor then has the right to redeem both the first mortgage and the second mortgage. The creation of a third mortgage will then create the situation where the third mortgagee will have transferred to him the right to redeem the second mortgage, with the original mortgagor having the right to redeem the first, second and third mortgages. See also 32.24 and 32.55. The legal and equitable rights that will be created or assigned differ depending on whether the mortgage is under the Torrens system (see 10.2) or the general law: see 10.3. It is possible for the first mortgagee at law to become also a second mortgagee in equity. As to this, see GWH Pty Ltd v Commonwealth Bank of Australia (1994) 6 BPR 14,073. [page 311]

Second mortgages under the torrens system 10.2 Under the Torrens system, a second or subsequent mortgage is effected in the same form as a first mortgage. The first mortgage is mentioned in the memorandum of prior encumbrances. This is because the mortgagor still retains the legal interest in the land and a second mortgagee obtains not an equitable interest in the land, but rather a statutory legal interest in the land with priority after the first mortgagee’s interest: see 4.24.

Form under the general law 10.3 As the effect of the first mortgage is to transfer the legal fee simple from the mortgagor to the mortgagee, only the first mortgage can be a mortgage at law. Subsequent mortgages can only be a mortgage of the mortgagor’s equity of redemption. Thus it follows that apart from certain exceptional circumstances where a person who is in fact a second mortgagee advances money without notice of the first mortgage and gains priority

because the first mortgagee has failed to register, a second mortgage will always be an equitable mortgage. A second or subsequent mortgage of land must be by deed and will ordinarily recite the grant of the first mortgage and the amount then owing thereunder and the conveyance is then made subject to the recited prior mortgage and the moneys thereby secured. The proviso for redemption likewise is made subject to the recited prior mortgages and the moneys thereby secured.

Contractual restraints 10.4 It is relatively common for mortgages to contain clauses prohibiting the mortgagee from creating a subsequent mortgage or charge without the mortgagee’s consent. Such clauses do not have the effect of making the mortgagor’s equity of redemption unassignable, but merely operate to confer contractual rights on the mortgagee or, in appropriate cases, may permit the mortgagee to obtain an injunction against both the mortgagor and the proposed assignee: Nia v Phuong (1993) 6 BPR 13,141; but see Helstan Securities Ltd v Hertfordshire CC [1978] 3 All ER 262; (1979) 42 Mod LR 553 (Goode); and Linden Gardens Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 at 104–5; [1993] 3 All ER 417.

Title deeds 10.5 The first mortgagee will usually have the title deeds, but if that is not the case the second mortgagee should obtain them. The second mortgagee will almost certainly have examined the necessary deeds and the prior mortgage before lending the money. However, a mortgagor has a statutory right under NSW Act s 96 and under Victorian Act s 96 to inspect the deeds held by the first mortgagee, at the mortgagor’s own expense, and the potential second mortgagee can take the benefit of this statutory right.

Notice 10.6 On completion, the second mortgagee should give notice of the second mortgage to the first mortgagee. The purpose of such a notice is to prevent the first mortgagee from making further advances to the mortgagor which might rank in priority to the second mortgagee.

It will be seen in Chapter 25 that there are difficulties with the law of tacking as to what notice is given to a first mortgagee of a second mortgage merely because the latter is registered, the principles applicable being rather vague, namely ‘whatever is just between the mortgagees’: see Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293 at 299. [page 312] Whatever may be the legal situation, in practice actual notice to the first mortgagee will ensure that the first mortgagee in fact has notice so that there will be no excuse for the first mortgagee to deliver the title deeds and the excess proceeds of sale on discharge of the first mortgage to a person other than the second mortgagee.

Covenants in second mortgages 10.7 It is desirable to insert a covenant by the mortgagor in a second or subsequent mortgage that he will duly and punctually observe and perform the covenants, conditions and provisions expressed or implied in any prior mortgage and that failure to observe and perform any such covenant etc shall be deemed to be a breach of a covenant etc in the subsequent mortgage. It is also customary to include a provision enabling the mortgagor to produce to the mortgagee evidence of payment of rates, taxes, insurance etc in lieu of producing the actual receipts for such payments, since it may well be that these actual receipts will be required to be delivered to the first mortgagee. The mortgage should also include a power for the mortgagee to settle with the prior mortgagees and to redeem their securities and a charge of the costs of so doing upon the mortgaged property. Otherwise the terms and conditions of the second and subsequent mortgage are similar to those of a first mortgage.

Remedies of second mortgage — Torrens mortgage 10.8 A second mortgage under the Torrens system is a legal interest, so that different principles apply as to whether a second mortgagee has standing to obtain possession on default. In Bree v Scott (1904) 29 VLR 692 at 699,

Madden CJ seemed to think that a second mortgagee did not have such status. However, Lowe J in Croft v Kennaugh [1945] VLR 40 at 42 concluded that a second mortgagee could bring ejectment. This view was followed in Queensland in Australia and New Zealand Bank Ltd v Hathaway [1957] QWN 49. The matter was considered in New South Wales in Reliance Finance Corp Pty Ltd v Orwin (1964) 82 WN (Pt 1) (NSW) 11 at 15 and in Australia and New Zealand Banking Group Ltd v Comer (1993) 5 BPR 11,748. In the latter case it was held that in New South Wales a second mortgage is probably not entitled to obtain possession as of right by action in ejectment, but must seek possession as a matter of equity. A mortgagee with an unregistered Torrens system second mortgage may have an order for judicial sale. However, the sale will only be ordered with the consent of the first mortgagee or subject to that mortgage and after the court has been provided with evidence of the value of the property concerned: King Investment Solutions Pty Ltd v Hussain [2005] NSWSC 1076; (2005) 64 NSWLR 441; 13 BPR 25,077; Sood v Christianos [2008] NSWSC 1087; (2008) 14 BPR 26,101; and see generally the discussion in 4.24.

Remedies of second mortgagee — general law mortgages 10.9 A second mortgagee has all the remedies of the first mortgagee. However, except for bringing proceedings on the personal covenant, a second mortgagee will not generally be able to exercise the remedies of a mortgagee while the first mortgagee is exercising the same remedies. Thus a second mortgagee cannot take possession if the first mortgagee is already in possession or has appointed a receiver. In England it has been said that the existence of an order for possession in favour of a prior mortgagee does not prevent a court from ordering possession in favour of a subsequent mortgagee subject to the first mortgagee’s rights. This is, however, an oversimplification. The real rule is that a second mortgagee has no legal right to possession and may only obtain the appointment of a receiver: Garfitt v Allen (1887) 37 Ch D 48 at 50; Vacuum Oil Co Ltd v Ellis [1914] 1 KB 693 at 703; Barclays Bank Ltd v Bird [1954] Ch 274 at 280; Australia and New Zealand Banking Group Ltd

[page 313] v Comer (1993) 5 BPR 11,748. See also (1908) 24 LQR 161 (Willoughby); (1955) 71 LQR 264 (Wade); Croft and Hay, [4.7]; Cousins, The Law of Mortgages, 2nd ed, Sweet & Maxwell, London, 2001, pp 272 ff.

Sales by second mortgagee 10.10 A second mortgagee may sell or otherwise dispose of his interest as with any piece of property. The second mortgagee does not usually have to obtain the concurrence of the first mortgagee (not, at least, if he sells subject to the mortgage): Manser v Dix (1857) 8 De GM & G 703; 44 ER 561; Universal Showcards & Display Manufacturing Ltd v Brunt (1984) 128 Sol Jo 581. If the second mortgagee sells it must be subject to the first mortgage unless the first mortgagee agrees to join in the conveyance and receive part of the purchase moneys sufficient to discharge the first mortgage. In such a case it may be that the first mortgagee is entitled to rely on the six months interest rule: see 32.36; also the discussion in Croft and Hay, The Mortgagee’s Power of Sale, pp 52–4; and Manser v Dix (1857) 8 De GM & G 703 at 712–13; 44 ER 561 at 565. Alternatively, the second mortgagee could take a transfer of the first mortgage.

Discharge of a second or subsequent mortgage 10.11 A second or subsequent mortgage is discharged in the same manner as a first mortgage.

Right To Surplus 10.12 On the sale of the property by the first mortgagee, the second mortgagee has a statutory right to have the surplus held in trust to satisfy his mortgage and, in turn, will hold any surplus moneys in his hands for the next encumbrancer or for the mortgagor: see NSW Act s 112(4); Victorian Act s 105. The same will apply where the mortgagee goes into possession and the property produces sufficient income to pay out the mortgage. In either case, the mortgagee becomes ‘merely a trustee holding a legal estate in the estate

of another person, with whom he is bound, by the nature of his trust, faithfully to account’, per Plumer VC, Quarrell v Beckford (1816) 1 Madd 269 at 279; 56 ER 100 at 103. In Charles v Jones (1887) 35 Ch D 544 at 549–50, Kay J endorsed this view in a passage that was approved by the High Court in Bofinger v Kingsway Group Ltd (2009) 239 CLR 269 at 287; 260 ALR 71 at 80 [35]. See also Re Perpetual Trustees Co Ltd: Application of Chen [2010] NSWSC 808; 15 BPR 28,845. The trust is discussed in Banner v Berridge (1881) 38 Ch D 254; Adams v Bank of New South Wales [1984] 1 NSWLR 285 at 295; Lloyds Bank NZA Ltd v National Safety Council of Australia Victorian Division (1993) 115 ALR 93 at 99–100; 10 ACSR 572 at 577–8; and Murphy v Westpac Banking Corp [1994] 1 NZLR 187. This matter is further considered at 1.46, 20.26 and 40.17. The position under the Torrens system is governed by NSW Torrens Act s 58(3) and by Victorian Torrens Act s 77(3): see 4.24.

Second mortgages generally 10.13 The disadvantages of second mortgages are generally stated to be the risks of tacking (see Chapter 25); and, where it has not been abolished, consolidation (see Chapter 31), the absence of title deeds and the fact that the first mortgagee may sell or foreclose the property. [page 314] In the ordinary second mortgage of a private dwelling house the first risks are slight and the second mortgagee can be protected by registering the second mortgage and giving notice to the first mortgagee. The risks attendant on a sale of the property can be minimised by a proper valuation, proper searches, and by ascertaining the amount due under a previous mortgage or mortgages. There is generally a sufficient equity in such a mortgage to enable a second mortgage for an appropriate advance to be taken.

Foreclosure is rarely employed as a remedy today, and the rights of subsequent mortgagees where a prior mortgagee is claiming foreclosure are dealt with in 22.20–22.21.

Postponement of mortgages 10.14 A mortgage may be postponed to take priority after a subsequent mortgage in point of time if the conduct of the holder makes such postponement fit and proper. This matter is considered extensively in Chapter 24. Such postponement may also take place by agreement. Under the Torrens system this agreement may be registered with the effect of a deemed reversal in the order of registration: AMEV Finance Ltd v Auscott Ltd (1988) 5 BPR 11,386; see 4.31. Under the general law, the form of the postponement will vary depending on the type of mortgage and whether registration or notification is required.

Subordinated debt 10.15 It should be noted, though it is really beyond the scope of this work, that a debt, whether secured or unsecured, may be subordinated to another debt. The form of such a transaction must be carefully considered: see in general Wood, Law of Subordinated Debt, Sweet & Maxwell, London, 1989. One method is to involve a subordination trust. Wood says (at p 38): ‘A subordination trust is in economic substance a collateral charge by the junior creditor over the junior creditor’s debt or the proceeds of that debt to secure the senior debt, but without imposing any personal liability on the junior creditor to pay the senior debt himself’. Wood considers (at p 39) that although the question is undecided the stronger view is that a ‘properly drafted subordination trust of proceeds should not create a security interest’. Problems arise in respect of subordination agreements respecting unsecured debts upon insolvency as to whether they offend against the statutory principle that unsecured debts should be paid proportionately: see Corporations Act 2001 (Cth) s 555; Bankruptcy Act 1966 (Cth) s 108. The better view is that a contractual deferment which does not prejudice the equal ranking of creditors not bound by the contract is effective: Re Walker Construction Co Ltd [1960] NZLR 523; RN Home v Chester Fein Property Developments Pty Ltd [1987] VR 913; 11 ACLR 245; Re Maxwell Communications Corp [1993] 1 WLR 1402; [1994] 1 All ER 7 37; United

States Trust Co of New York v Australia & New Zealand Banking Group Ltd (1993) 11 ACSR 7; Re NIAA Corp Ltd (1993) 12 ASCR 141; and see British Eagle International Airlines Ltd v Air France [1975] 1 WLR 758; [1975] 2 All ER 390.

[page 315]

Part II

Parties to Mortgages

[page 317]

Chapter 11

Parties to Mortgages A. Individuals Absolute owner Mortgage by all co-owners Imperfect mortgages Mortgage by some co-owners only Co-mortgagees of undivided shares Partition by co-owners of mortgaged land Powers of limited owners or donees of powers of attorney Exercise of a power to mortgage Effect of unauthorised security The unauthorised borrowings — discharge of borrower’s valid liability Limited owners Trustees — general rule as to borrowing Trustees — statutory powers Trustees’ power to lend on mortgage Form of mortgage by executors and trustees Executors and administrators — statutory powers Executors and administrators — general law

11.1 11.2 11.3 11.4 11.5 11.6 11.7 11.8 11.9 11.10 11.11 11.12 11.13 11.14 11.15 11.16 11.17

When mortgage by executor invalid Minors Mentally disabled persons Mortgages on behalf of protected or incapable persons Bankrupts Mortgages by bankrupt’s trustee Agents Agency of partners re borrowing General power to mortgage personal property Mortgage of real property Mortgage of partnership share Partner’s power to lend on mortgage Change in constitution of firm Co-mortgagees Mortgages on joint account B. Corporations Corporations generally Mortgages by agents of corporations Liquidators

11.18 11.19 11.20 11.21 11.22 11.23 11.24 11.25 11.26 11.27 11.28 11.29 11.30 11.31 11.32 11.33 11.34 11.35

[page 318]

Specific loan not a company asset Form of mortgage Registration of company charges Illustrations of registrable charges Other aspects of registration of charges Effect of non-registration

11.36 11.37 11.38 11.39 11.40 11.41

Special cases Extension of time Company’s register of charges Building societies Public authorities

11.42 11.43 11.44 11.45 11.46

A. Individuals Absolute owner 11.1 Generally, an absolute owner of property who is not under any incapacity can, in exercise of the power of alienation incident to ownership, mortgage the property. However, by statute there is usually certain property, such as government salaries, which cannot be mortgaged: see 13.35ff.

Mortgage by all co-owners 11.2 Where more persons than one own land they may be beneficially interested in the land either jointly or in common. In each case the whole of the co-owners may mortgage the property in the same way as any other absolute owner. Likewise, the mortgagee may be a group of people who take either in common or as joint tenants. Where the mortgage indicates that the money owing has been advanced belonging to persons on a joint account, then under NSW Act s 99, Victorian Act s 112, the money is due to the mortgagees on joint account and the receipt in writing of the last survivor is a complete discharge to the mortgagor: see 11.32. Persons dealing in good faith with several mortgagees may assume, unless the contrary is expressed in the instruments relating to the mortgage, that the mortgagees are entitled to the mortgage moneys on joint account. When one of the co-owners is the wife of the other co-owner, there sometimes arises a special equity which was recognised by the High Court in Yerkey v Jones (1940) 63 CLR 649. If the wife obtains no substantial benefit from the mortgage, the onus is on the mortgagee to show why it should be

enforced against her: see also Warburton v Whiteley (1989) 5 BPR 11,628; Barclays Bank plc v O’Brien [1994] 1 AC 180; and Williams v State Bank of NSW (1993) 6 BPR 13,552. A 49 per cent interest is a substantial interest: National Australia Bank Ltd v Mangos [1993] ACL Rep 295 Vic 9. Where the covenants in the mortgage are in favour of the mortgagees jointly, all must join in any proceedings to enforce those covenants. However, if the covenants are several, any mortgagee may sue in respect of his several share: Doyle v Doyle [1992] 3 NZLR 170, following Roberts v Holland [1893] 1 QB 665. Sometimes difficult questions of construction arise where there is a mortgage by co-owners. Two examples follow. In Caldwell v Bridge Wholesale Acceptance Corp (Aust) Pty Ltd (1993) 6 BPR 13,539, Mrs Caldwell held a moiety as tenant in common with Mr and Mrs Thomson who held [page 319] the other moiety as joint tenant inter se. All three mortgaged the land to Westpac to secure a debt of the Thomsons. The co-owners were described as mortgagees, the Thomsons as the debtors. The property was sold and over half the proceeds passed to Westpac. The surplus was held to belong in equity to Mrs Caldwell and thus was not available to meet a second mortgage by the Thomsons of their share to Bridge. In Fraser v Power [2000] NSWSC 257; (2001) ACL Rep 295 NSW 4, a mortgage granted by a husband and wife was held on its true construction only to cover joint debts (of which there were none), not the parties’ several debts.

Imperfect mortgages 11.3 A mortgage purporting to be by or to all co-owners may be defective because of non-compliance with statutory requirements or otherwise. A mortgage purporting to be of the entirety by one co-owner will be treated as a mortgage of that co-owner’s share only: National Commercial

Banking Corp of Australia Ltd v Hedley (1984) 3 BPR 9477 at 9482–3; First National Securities Ltd v Hegerty [1985] QB 850; Guthrie v ANZ Banking Group Ltd (1991) 23 NSWLR 672 at 679. Where it is intended that all coowners sign a mortgage, but only some do so, the general guidelines applied by the courts are that the document is taken to be signed subject to the precondition that it will operate only when all the intending mortgagors have signed it: National Commercial Banking Corp of Australia Ltd v Hedley (1984) 3 BPR 9477 at 9482–3; Katsaitis v Commonwealth Bank of Australia (1987) 5 BPR 97,435; Wollam v Barclays Bank (1988) 18 Fam Law (Eng) 381; and Westpac Banking Corp v Sansom (SC (NSW), Rolfe J, 22 November 1994, unreported) but appeal dismissed by Court of Appeal (Sansom v Westpac Banking Group (1996) 7 BPR 14,615). However, there are cases where the non-signing party has received money as a result of signing the document where such party will be bound by estoppel or in conscience: Taylor v Wheeler (1706) 2 Vern 564; 23 ER 968; Mestaer v Gillespie (1805) 11 Ves 621; 32 ER 1230; [1803-13] All ER Rep 594; National Commercial Banking Corp Ltd v Hedley, above; Katsaitis v Commonwealth Bank of Australia, above. See also 3.48. In Ireland, where a husband and wife jointly mortgaged their jointly held lands to a bank and the bank handed the proceeds to the husband alone, it was held that the wife’s interest was not effectively charged. She had mortgaged her interest on a condition which had not occurred — namely the handing to the jointure of the proceeds of sale: O’Keeffe v O’Flynn Exhams & Partners (Irish High Court, Costello J, 31 July 1992, noted in an article by Doyle (1994) I LT 10). Where money is lent under an incomplete, ineffective or forged mortgage, it may be recovered back under a count for money had and received in addition to any other appropriate claim: Re Vassis; Ex parte Leung (1986) 9 FCR 518 at 528.

Mortgage by some co-owners only 11.4 Any co-owner’s interest in the property, whether the property be held jointly or in common with others, is property which may be mortgaged. Where the co-owners are tenants in common the mortgage by some coowners will give a valid security over their undivided shares. Where the co-

owners are joint tenants, and the land is Torrens land or personalty is involved, the security will be valid only in respect of the mortgagor’s interest. Thus if the mortgagor survives the other co-owners, the mortgage will be effective over the whole fee simple. If the mortgagor dies before the other coowners, the security will fail. However, if the mortgaged property is land under the general law, the mortgage will effect a severance of the joint tenancy and the same situation will arise as with a tenancy in common: York v Stone (1709) 1 Salk 158; 91 ER 146; Lyons v Lyons [1967] VR 169 at 173. See in general Warburton v Whiteley [page 320] (1989) 5 BPR 11,628; Penny Nominees Pty Ltd v Fountain (No 3) (1990) 5 BPR 11,284 and (1936) 9 ALJ 431 (Baird). A first mortgage under the old system takes the form of a conveyance. A first old system mortgage by all the joint tenants does not sever the jointure: Schmeliong v Stankovic (1984) 3 BPR 9325. However, where there is a mortgage by fewer than all the joint tenants, there is a conveyance to a stranger and so a severance of the joint tenancy: Thames Guaranty Ltd v Campbell [1985] QB 210 and note (1967) 41 ALJ 61, but see First National Securities Ltd v Hegerty [1985] QB 850 and Clark v Raymor (Brisbane) Pty Ltd [1982] Qd R 479. If, the mortgage is a second mortgage or the mortgage is a Torrens system mortgage, the better view is that the joint tenancy is not severed and the effect of the transaction is that the mortgagee obtains an interest which will succeed only against the mortgagor: Capital Finance Australia Ltd v Struthers [2008] NSWSC 440; 14 BPR 26,179. Thus if the mortgagor predeceases the other co-owners the mortgagee’s interest will cease. However, if the mortgagor becomes entitled to the whole fee simple because he outlives his co-owners then the mortgagee becomes the mortgagee of the whole fee: Lyons v Lyons [1967] VR 169 at 176; Corin v Patton (1990) 169 CLR 540; and Penny Nominees Pty Ltd v Fountain (No 3) (1990) 5 BPR 11,284. See also Abergavenny’s Case (1607) 6 Co Rep 78b; 77 ER 373 and Guthrie v ANZ Banking Group Ltd (1991) 23 NSWLR 672 at 676; Capital Finance Australia Ltd v Struthers [2008] NSWSC 440; (2008) 14 BPR

26,179 and 680, but compare Clark v Raymor (Brisbane) Pty Ltd (No 2) [1982] Qd R 790. The complications that arise in these cases are discussed in articles by Da Costa (1961) 3 MULR 137, 306 and 433 and Crown, ‘Partial Alienation by One Co-owner of Land’ (2000) SJLS 92. The latter article at p 96 asks whether the doctrine derived from Lyons v Lyons, above, might be precarious because the judge did not consider cases such as Williams v Hensman (1861) 1 John & H 546; 70 ER 862. This criticism is reinforced by the fact that it was partly for this reason Lyons v Lyons was not followed on another aspect in Public Trustee v Pfeiffle [1991] 1 VR 19 at 35. However, after full discussion, Crown agrees with the statement of the law in the preceding paragraph.

Co-mortgagees of undivided shares 11.5 Some schemes which the Corporations Act would call ‘prescribed management schemes’ involve a plantation owner selling to investors small undivided shares (such as one five-hundredth share) in the land on which the plantation is sown as tenants in common with all other investors. It is not uncommon for those undivided shares to be mortgaged. The problems that occur in this sort of situation are illustrated by Burton v Arcus (2004) 51 ACSR 683 at 691 (WASC), where Johnson J said that each mortgagee had independent rights which were not subject to any fiduciary duty owed inter se. Each mortgagee has the right to have its loan repaid in full and not have its rights disturbed in the meantime regardless of the rights of mortgagees of other undivided shares: Burton v Arcus at 687. However, it may be possible by use of NSW Act s 66G, Queensland Act s 38 to have the underlying land sold having regard only to encumbrances affecting the whole: Crocombe v Pine Forests of Australia Pty Ltd [2005] NSWSC 151 and Crocombe v Pine Forests of Australia Pty Ltd (No 2) [2005] NSWSC 245. In other states, a similar legislative provision appears in an earlier and less expansive form: see Victorian Act Pt IV, especially ss 221–223; South Australian Act Pt 8; Western Australian Act Pt XIV; Partition Act 1869 (Tas).

Partition by co-owners of mortgaged land

11.6 The legislation referred to at the end of the preceding paragraph enables a co-owner to move to have the land partitioned or sold by trustees. A mortgagee of a share has a like [page 321] right, though not the mortgagee of all the shares aliquot or undivided: Penny Nominees Pty Ltd v Fountain (No 3) (1990) 5 BPR 11,284 at 11,293; ANZ Banking Group Ltd v Scott (1993) 6 BPR 13,217; and see also Davenport v King (1883) 49 LT 92 at 93. Proceedings between tenants in common cannot affect the interest of the mortgagee of the entirety, for, before partition, he is entitled to the security of the whole: Fulton v 523 Nominees Pty Ltd [1984] VR 200 at 205, a statement based on Swan v Swan (1820) 8 Price 578; 146 ER 1281; Sinclair v James [1894] 3 Ch 554; Eagles v Eagles [1960] VR 400; and see Jackson v Pierce (1813) 10 Johnson (Ch) 413 at 416–17 (NY); Baring v Nash (1813) 1 V & B 551; 35 ER 214; Wotten v Copeland (1823) 7 Johnson (Ch) 140 at 141; Harwood v Kirby (1829) 1 Paige Chancery 469 at 471 (NY). The same applies to lesser encumbrances such as a rent charge: Cooke v Poole [1885] WN (Eng) 15. Thus it is inappropriate to join the mortgagee as a party to the proceedings: see the above and also Martin-Smith v Woodhead [1990] WAR 62. The partition is thus subject to the mortgage: Wilkinson v Joberns (1873) LR 16 Eq 14; Waite v Bingley (1882) 21 Ch D 674. If the mortgagee consents to the partition, the mortgage will, after partition, affect each severed portion held by the previous co-tenants. If the mortgagee does not consent, he must be redeemed: Gibbs v Haydon (1882) 30 WR 726; Fulton v 523 Nominees Pty Ltd [1984] VR 200 at 205. Where what is mortgaged is only an undivided share, the other shares being unencumbered, the proprietor of the mortgaged share may have partition as if the entirety was mortgaged. However, he must offer to redeem the mortgage unconditionally and must satisfy the court that the mortgage will be paid off at once: it is immaterial that the mortgagee is a co-tenant in common: Oatley v Oatley (1898) 19 LR (NSW) (Eq) 129 (FC). The mortgagee must be made a party to the proceedings and, unless the

mortgagee consents, the mortgage must be redeemed: Fulton v 523 Nominees Pty Ltd [1984] VR 200 at 205. The above applies equally to cases where trustees for sale are appointed in lieu of partition. The mortgages will either be discharged out of the proceeds, or, if the mortgagee insists, the appropriate portion of the sale proceeds will be invested at interest to provide the mortgagee as nearly as possible with the same return and security. In McMahon v AF Wade Pty Ltd [1983] WAR 152 at 155, Pidgeon J considered the situation where there was a mortgage by one co-owner and ordered sale of the entirety free from encumbrances. He held that the indefeasibility provisions of the Torrens Acts did not prevent this result. The McMahon case is not completely compatible with Fulton v 523 Nominees Pty Ltd, above. It would seem that no report of it was available in Melbourne when Fulton was decided. Where there is a difference, the Fulton approach is to be preferred: see Robinson, The Property Law Act Victoria, Law Book Co, Sydney, 1992, pp 469–70.

Powers of limited owners or donees of powers of attorney 11.7 A person who is not the absolute owner of a property can only create a security on it that will last beyond his own beneficial interest (if any) under some power or authority conferred upon him. This may be (a) by statute, (b) by the party beneficially entitled (such as under power of attorney), or (c) by some will or settlement by which the property was and remains settled. A power by which it is intended to authorise the raising of money on mortgage should specify the intention. Nevertheless, a mortgage may be made under a general power, such as a power of attorney, the terms of which are sufficiently extensive: Willis v Palmer (1859) 7 CB NS 340; 141 ER 847; and see also Mostyn v Lancaster (1883) 23 Ch D 583. However, the general words may be restricted by the particular purpose of the [page 322] instrument: see, for example, Lewis v Ramsdale (1886) 55 LT 179. A general

power to sell, assign and transfer is not sufficient to authorise a mortgage: Australian Auxiliary Steam Clipper Co v Mounsey (1858) 4 K & J 733; 70 ER 304; Jonmenjoy Coondoo v Watson (1884) 9 App Cas 561. One joint tenant cannot grant a general power of attorney to another joint tenant to sell as trustees the legal estate vested in them: Green v Whitehead [1930] 1 Ch 38, but see Walia v Michael Naughton Ltd [1985] 1 WLR 1115; [1985] 3 All ER 673. The donor of a power of doubtful sufficiency may, however, by direction as to its exercise, preclude himself from disputing the validity of a security made under the power: see Perry v Holl (1860) 2 Giff 138; 66 ER 59 and Davies v R Bolton & Co [1894] 3 Ch 678.

Exercise of a power to mortgage 11.8 The power, even where explicit, must be exercised subject to the general terms of the instrument in which it is contained. Thus a corporation, having a general power by statute to mortgage its land, cannot mortgage the land by which by the same act it is bound to sell within a limited time. Where a mortgage is made under a provision that all mortgages shall be on an equal footing, an undue advantage cannot be given to a creditor by a security upon other property belonging to the donees of the power: De Winton v Brecon Corp (1859) 26 Beav 533; 53 ER 1004. A power, whether special or general, must be exercised only for the purposes consistent with the object of the trusts or undertaking for the furtherance of which it was given. Thus a building society may only be able to exercise its borrowing powers for the legitimate purposes of the society: Sinclair v Brougham [1914] AC 398. (See also, as to improper exercise, Rigall v Foster (1853) 18 Jur 39; Eland v Baker (1861) 29 Beav 137; 54 ER 579.) A mortgage purporting to be executed according to, but which is in contravention of, statutory powers, will be good by estoppel in favour of a purchaser for value without notice of the infirmity: Webb v Herne Bay Commissioners (1870) LR 5 QB 642; Re Romford Canal Co (1883) 24 Ch D 85. A mortgage is not invalid only because it is made to secure a debt originally contracted on an improper security, provided it is clear that the mortgage is to secure the money, and not to secure the invalid transaction. A

security made in excess of power, but by which an estate passes, will be treated as valid in foreclosure proceedings, and must be set aside, if at all, by an independent proceeding: Scott v Colburn (1858) 26 Beav 276; 53 ER 904. A special power to mortgage is not inconsistent with the existence of a general right to mortgage property if the donees of the power are not prohibited from so doing, and if they hold the property in a capacity, and mortgage it for purposes, not affecting the exercise or the objects of the power. Thus the directors of a company who have power to borrow on mortgage to a certain amount may mortgage the property of the company by debenture or deposit of deeds to secure a past debt: Re Patent File Co; Ex parte Birmingham Banking Co (1870) 6 Ch App 83; Re Inns of Court Hotel Co (1868) LR 6 Eq 82; Re General Provident Assurance Co; Ex parte National Bank (1872) LR 14 Eq 507. Again, they may secure payment of purchase money: Seligman v Prince [1895] 2 Ch 617. Upon the principle that in equity whatever is agreed to be done, is done, effect will be given to an intention to create a security where the maker is of capacity to contract the debt, notwithstanding any mistake in the manner of doing it or that it was done informally: Re Queensland Land & Coal Co [1894] 3 Ch 181; Webb v Herne Bay Commissioners (1870) LR 5 QB 642 at 654. [page 323]

Effect of unauthorised security 11.9 If the maker of the security is not of capacity to contract the debt — as where borrowing is expressly forbidden or is authorised only subject to the performance of certain conditions which have not been performed, or within a certain limit which has been exceeded, no doubt will arise at law — there is no effective security: Chambers v Manchester & Milford Railway Co (1864) 10 Jur NS 700; Re Pooley Hall Colliery Co (1869) 18 WR 201; Landowners West of England and South Wales Land Drainage and Enclosure Co v Ashford (1880) 16 Ch D 411; Firbank’s Executors v Humphreys (1886) 18 QBD 54. However, money borrowed or contracted to be paid irregularly on behalf

of a corporation, but shown to have been bona fide applied in payment of the corporation’s liabilities, may be treated as an equitable debt bearing interest. The principle is either that, as the money was applied in payment of recoverable debts, no addition is made to the liabilities of the corporation, or that the lender should stand by subrogation in the place of the creditor who was paid: Sinclair v Brougham [1914] AC 398 at 441, but compare Re Wrexham; Mold & Connah’s Quay Railway Co [1899] 1 Ch 440. In the absence of evidence, which must be adduced by the lender, that the money was so applied, the advance will not be recognised: Re National Permanent Benefit Building Society; Ex parte Williamson (1870) 5 Ch App 309; Blackburn Benefit Building Society v Cunliffe, Brooks & Co (1882) 22 Ch D 61. Thus if a trustee properly raises money by a mortgage, although the security will be void against a mortgagee with notice, the latter may nevertheless be a creditor of the proceeds of the trust property to the extent to which the money lent was properly applied in administration: Devaynes v Robinson (1857) 24 Beav 86; 55 ER 289, where trustees mortgaged property instead of selling it. See also Paul v Speirway Ltd [1976] Ch 220.

The unauthorised borrowings — discharge of borrower’s valid liability 11.10 If a security is void, the question often arises as to the right to recover the money lent from third parties because the borrower is impecunious. If the borrowed funds have been used to discharge another security, the principle in Ghana Commercial Bank v Chandiram [1960] AC 732 at 745 applies so that the earlier mortgage is kept alive for the benefit of the person who paid its mortgagee; and see Chase Corporation (Australia) Pty Ltd (Scheme Administrators Appointed) v North Sydney Brick and Tile Co (1994) 35 NSWLR 1; Australia and New Zealand Banking Group Ltd v Constikidis (SC (Vic), Hansen J, 22 December 1994, unreported); and UCB Group Ltd v Hedworth [2003] All ER (D) 71 (CA). Similarly, subrogation may apply where a contract for loan provides for the payment out of a secured creditor. Thus in Chase Corporation (Australia) Pty Ltd (Scheme Administrators Appointed) v North Sydney Brick and Tile Co, above, Cohen J observed at 35 NSWLR 15 that an implication of subrogation may be displaced by express terms which are inconsistent with

that implication. A term of the contract that the borrower will create a legal charge over the property does not in itself displace the implication of subrogation pending the execution of the charge, but upon that execution the charge by subrogation will merge in the higher ranking charge of the new lender. Again the court may require repayment of the sum lent in order to be satisfied that the borrower is ‘doing equity’ before granting relief. The doctrine of subrogation may provide relief, but see Goff and Jones, The Law of Restitution, 7th ed, Sweet & Maxwell, London, 2007, [3.048]. However, public policy or particular statutes may mean that relief can be obtained. [page 324] As Goff and Jones say at [3.052], the invalid loan cases are difficult to categorise. They fully discuss the issues at [3.048] ff.

Limited owners 11.11 It goes almost without saying that a limited owner may mortgage his own limited interest provided that a lender can be found who will accept such security. In England, where there was a considerable amount of settled land with persons holding legal life estates, provision needed to be made to empower by statute the life tenant to raise money on the security of the land for limited purposes. See Settled Land Act 1925 (UK) s 71. There is no corresponding provision in New South Wales or Victoria.

Trustees — general rule as to borrowing 11.12 Trustees have no power to raise money on mortgage unless they are expressly or impliedly authorised to do so by the instrument creating the trust, or unless power is conferred on them by statute: Stroughill v Anstey (1852) 1 De GM & G 635; 42 ER 700; Devaynes v Robinson (1857) 24 Beav 86; 53 ER 289, though see Re Symon [1944] SASR 102, where the trust instrument allowed an encumbrance if it were for the benefit of the trust. A power to sell does not ordinarily imply a power to mortgage: Walker v Southall (1887) 56 LT 882; Devaynes v Robinson (1857) 24 Beav 86; 53 ER

289; Re Pearce [1936] SASR 137. However, it may be so implied where an absolute conversion of the property is not necessary for the purpose of effecting the object of the power, such as raising money to satisfy a particular charge: Mills v Banks (1724) 3 P Wms 1; 24 ER 943; Stroughill v Anstey, above; Permanent Trustee Co Ltd v Angus (1917) 17 SR (NSW) 364. A power for trustees to carry on a business will enable a power to mortgage to be implied: Devitt v Kearney (1883) 13 LR Ir 45; Southwell v Martin (1901) 1 SR (NSW) Eq 32; Re Hammond (1903) 3 SR (NSW) 270. The same implication may be made from powers of management which necessitate the expenditure of capital: Re Bellinger; Durrell v Bellinger [1898] 2 Ch 534. However, no such implication can be made if the trust instrument forbids a sale, as a mortgage may cause the loss of the property by foreclosure: Bennett v Wyndham (1857) 23 Beav 521; 53 ER 205. Where trustees are empowered to raise money for particular purposes at their absolute discretion, the court will not interfere with their discretion as to the occasion, or the manner of exercising the power, or the refusal to exercise it in any particular manner, though they are bound to effect the general purpose: Tempest v Lord Camoys (1882) 21 Ch D 571, distinguished in Re Courtier; Coles v Courtier (1886) 34 Ch D 136.

Trustees — statutory powers 11.13 The Trustee Acts of New South Wales and Victoria empower trustees to enter into mortgages in certain situations either with or without the authority of the court. Trustee Act 1925 (NSW) s 82(4) enables the court to authorise the trustee to raise money by mortgage to effect repairs or improvements to land (see s 84 in respect to minors). New South Wales Act s 82A enables the trustee to mortgage and expend up to $50,000 or 30 per cent of the value of the land, whichever is the greater. Pursuant to NSW Act s 34, a trustee who has an equity of redemption of not greater value than a mortgage debt may release that interest to be discharged of the mortgage. In Victoria, Trustee Act 1958 s 20 confers power on trustees to raise money on mortgage in certain situations. As to these provisions and the position in other states, see Meagher and Gummow, Jacobs’ Law of Trusts in Australia, 7th ed, LexisNexis Butterworths, Sydney,

2006, [2027] ff. [page 325] Particular statutes may also empower trustees to mortgage to enable them to carry out their statutory obligations. For instance, in New South Wales, under former Rural Lands Protection Act 1989 s 176 and Re Wentworth (1915) 15 SR (NSW) 384 at 386, a trustee may mortgage to raise funds to erect a rabbit-proof fence. By NSW Trustee Act s 39, no mortgagee is to be concerned that the money raised is actually wanted, or is no more than is wanted or to see to the application thereof. Trustees should endeavour to ensure that they only covenant to pay the money borrowed out of money coming to their hands as trustee: Re Robinson’s Settlement; Grant v Hobbs [1912] 1 Ch 717 at 729.

Trustees’ power to lend on mortgage 11.14 Trustees may lend money on mortgage only where they are expressly empowered to do so by the trust instrument or by statute: Holmes v Dring (1788) 2 Cox 1; 30 ER 1; Forbes v Ross (1782) 2 Bro CC 430; 29 ER 240; Paddon v Richardson (1855) 7 De GM & G 563; 44 ER 219; and see KWA v Bank of Western Australia [2003] WASCA 227. It is insufficient authority merely to empower a trustee to place out money at interest on good security: Pocock v Reddington (1801) 5 Ves 794; 31 ER 862; Wilkes v Steward (1801) G Coop 6; 35 ER 457; and see AG v Higham (1843) 2 Y & CCC 634; 63 ER 284; Mills v Osborne (1834) 7 Sim 30; 58 ER 748; and Westover v Chapman (1844) 1 Coll 177; 63 ER 372. Even if otherwise authorised, trustees must not lend money to one of themselves on mortgage: Stickney v Sewell (1835) 1 My & Cr 8 at 14, 15; 40 ER 280 at 282; Francis v Francis (1854) 5 De GM & G 108; 43 ER 811; Fletcher v Green (1864) 33 Beav 426; 55 ER 433.

Form of mortgage by executors and trustees

11.15 A problem with mortgages granted by trustees is to determine how far, if at all, the trustees are to be personally liable on personal covenants. If the trustees mortgage ‘as beneficial owner’ the almost irresistible inference is that the covenant is limited to property beneficially owned by the covenantor: Custom Credit Corp Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42 at 53. If the mortgage is clearly as trustee the covenants will apply to the property held by the trustee including the right of indemnity against the assets of the trust. Such a mortgage may contain a limited covenant by the personal representatives for repayment: see Muir v City of Glasgow Bank (1879) 4 App Cas 337; R v New Queensland Copper Co Ltd (1917) 23 CLR 495; Boag v Ross (1922) 22 SR (NSW) 242; Re Anderson; Ex parte Alexander (1927) 28 SR (NSW) 296; and Head v Kelk (1961) 63 SR (NSW) 340 at 345. See also 3.13. A covenant by the personal representatives as such will not enable the mortgagee to prove against the estate for the debt where the representative has exceeded power (Farhall v Farhall (1871) 7 Ch App 123) but the personal representative will be liable.

Executors and administrators — statutory powers 11.16 Under NSW Act s 153, executors and administrators without the leave of the court may sell or mortgage the deceased’s real estate for the purpose of administrations. Similar legislative provisions occur in all states except Queensland and South Australia. See Administration and Probate Act 1958 (Vic) s 46; Administration Act 1903 (WA) s 10; and Administration and Probate Act 1935 (Tas) s 39. New South Wales Act s 153(3) is as follows: No purchaser, nor the Registrar-General, Crown Solicitor, or other person registering or certifying a title under any sale, mortgage, or lease under this section, shall be bound to inquire whether

[page 326] the powers abovementioned or any of them are being or have been exercised for the purposes abovementioned, and the receipt of the executor or administrator shall be a sufficient discharge, and shall exonerate the persons paying the same from any responsibility for the application of

the moneys expressed to have been so received.

A mortgagee is thus entitled to assume unless he or she has notice to the contrary that the money being raised by the executor or administrator will be properly applied in administration: Corser v Cartwright (1875) LR 7 HL 731 at 736. Once a person has completed administration, he or she becomes a trustee of the property and ceases to have any power over it as executor: George Attenborough & Son v Solomon [1913] AC 76; Wise v Whitburn [1924] 1 Ch 460, but see Burke v Dawes (1938) 59 CLR 1. It would thus seem strongly arguable that a mortgagee should inquire to see whether a person purporting to mortgage as executor has fully administered the estate. In practice this appears not to occur, the popular construction of ‘executor or administrator’ in the section being ‘person who purports to sell or mortgage as executor or administrator’.

Executors and administrators — general law 11.17 An executor or administrator has always had power by virtue of that office to raise money by sale or mortgage of the personal property of the testator, including leaseholds, for the payment of debts and other purposes of administration: Mead v Lord Orrery (1745) 3 Atk 235; 26 ER 937; Scott v Tyler (1788) Dick 712; 21 ER 448; Vane v Ryden (1870) 5 Ch App 663. The power enables an executor to mortgage even property specifically bequeathed, but it ceases to be property specifically bequeathed as soon as the executors have assented to the bequest, even though the bequest is to the executors themselves as trustees: George Attenborough & Son v Solomon [1913] AC 76; Wise v Whitburn [1924] 1 Ch 460. A mortgage from an executor need not have any recital of the purpose for which the money is raised (Bonney v Ridgard (1784) 1 Cox Eq Cas 145; 29 ER 1101) and is equally protected whether the mortgage be legal or equitable: Scott v Tyler (1788) Dick 712; 21 ER 448. The power of disposition is not affected by a mere administration order, if no receiver has been appointed nor any injunction granted to restrain the personal representative from dealing with the assets: Berry v Gibbons (1873) LR 8 Ch App 747; Re Barrett;Whitaker v Barrett (1889) 43 Ch D 70.

A power to mortgage real estate, unless conferred by the will, has a statutory basis: see 11.16.

When mortgage by executor invalid 11.18 Prima facie, when a personal representative is raising money on the property of the deceased, the presumption is that the money is required to pay debts or for some other purpose of administration (Re Venn & Furze’s Contract [1894] 2 Ch 101; Re Henson; Chester v Henson [1908] 2 Ch 356) if there are no circumstances to raise an inference to the Contrary; Ricketts v Lewis (1882) 20 Ch D 745. If the transaction is consistent with the duty of a personal representative, it will be supported: Nugent v Gifford (1738) 1 Atk 463; 26 ER 294; Mead v Lord Orrery (1745) 3 Atk 235; 26 ER 937; Scott v Tyler (1788) Dick 712; 21 ER 448; McLeod v Drummond (1810) 17 Ves 152; 34 ER 59; Keane v Robarts (1819) 4 Madd 332; 56 ER 728; Re Whistler (1887) 35 Ch D 561. However, if the nature of the transaction affords intrinsic evidence that the executor is not acting in the execution of his duty, but is committing a breach of trust, as where the mortgage is given to secure the personal debt of the executor, the mortgagee, being a party to the breach of trust, does not hold the property discharged from the trusts, [page 327] but it remains subject to the requirements of administration just as in the hands of the executor: McLeod v Drummond (1810) 17 Ves 152; 34 ER 59; Keane v Robarts, above. The same applies in the case of an advance made for the private purposes of the executor if notice of that fact is brought home to the mortgagee at or before the time the advance is made: Bonney v Ridgard (1784) 1 Cox Eq Cas 145; 29 ER 1101; Scott v Tyler (1788) Dick 712; 21 ER 448; McLeod v Drummond (1810) 17 Ves 152; 34 ER 59. Circumstances showing gross negligence on the part of the mortgagee are sufficient to defeat his mortgage, though there is no direct fraud: Hill v Simpson (1802) 7 Ves 152; 32 ER 63. However, a claim to set aside such a mortgage will be barred after a great

length of time: Bonney v Ridgard, above. A mortgage of the estate to secure the private debt of an executor who is beneficially interested will be good to the extent of his beneficial interest, provided that the security is effected in terms which show an intention to charge that interest and not merely to mortgage in a representative capacity: Farhall v Farhall (1871) 7 Ch App 123. However, if the executor is indebted to the estate, the mortgagee will be postponed to the claim of the estate: Cole v Muddle (1852) 10 Hare 186; 68 ER 892. If the executor, on borrowing the money, represents that ‘part of it’ is required for executorship purposes, the onus of showing how much was so required is on the borrower: Carter v Sanders (1854) 2 Drew 248; 61 ER 714.

Minors 11.19 At common law, a loan to an infant could not be enforced, but upon attaining majority, the former infant could ratify the contract. Further, in equity, the lender could recover such part of the loan as was actually utilised by the infant to discharge his liability for necessities supplied to him: Treitel, The Law of Contract, 13th ed, Sweet & Maxwell, London, 2011, [12-010] p 571; Marlow v Pitfeild (1719) 1 P Wms 558; 24 ER 516; Re National Permanent Building Society (1869) 5 Ch App 309 at 313. The position is usually now governed by statute. In New South Wales, the Minors, Property and Contracts Act 1970 makes binding on a minor any contract, including a contract of loan, where a court has granted capacity to the minor to enter into the contract — otherwise such a contract will bind only if affirmed by the minor after attaining 18 years. In Victoria, the common law applies with the modification by Supreme Court Act 1986 s 50 that a promise after majority to pay a debt incurred during minority is absolutely void.

Mentally disabled persons 11.20 The validity of a mortgage entered into by a person who was apparently of sound mind, but who in fact was suffering at the time of the contract from such mental disorder as rendered him incapable of entering into the mortgage, is to be judged by the same standards as a mortgage made by a person of sound mind: Hart v O’Connor [1985] AC 1000; [1985] 2 All ER

880 (PC). If the contract is to be avoided, the persons denying its validity must prove that the person alleged to be mentally disordered at the time of the giving of the mortgage was so disordered as to be incapable of contracting and that the other party was aware or ought to have been aware of that fact: Hart v O’Connor, above; Broughton v Snooh [1938] Ch 505. The mortgage is not avoided by unfairness short of equitable fraud. A mortgage granted by a person mentally disordered during a lucid interval is binding whether or not the other party knew of his intermittent incapacity: Selby v Jackson (1844) 6 Beav 192; [page 328] 49 ER 799. See generally McLaughlin v Daily Telegraph Newspaper Co Ltd (1904) 1 CLR 243 and City Bank of Sydney v McLaughlin (1909) 9 CLR 615.

Mortgages on behalf of protected or incapable persons 11.21 In New South Wales the Protected Estates Act 1973 and in Victoria the Guardianship and Administration Act 1986 empowers the Protective Commissioner in New South Wales, or an administrator of a represented person in Victoria, to enter into a mortgage either as a borrower or a lender. In some cases, the NSW statute provides that the Protective Commissioner is only to enter into the mortgage if so authorised by the judge sitting in the Protective List of the Equity Division. For an illustration of a case where a loan on mortgage of the protected persons’ money was authorised, see Re Ridgeways (1825) Hog 309. From time to time, mortgage brokers engineer a loan at high interest from a mortgagee and hand the money (less a sizable commission) to an incapable person. If the person does not have capacity, the transaction is void at law: PT Ltd v Maradona Pty Ltd (1992) 25 NSWLR 643 at 673–5. If the person has limited capacity he may be able to set it aside if it can be proved that the mortgagee took unconscientious advantage of the incapacity: Hart v O’Connor [1985] AC 1000 at 1027; [1985] 2 All ER 880 at 894.

If the mortgage is over Torrens land and has been registered, it will be indefeasible, unless it can be shown that the mortgagee was privy to the broker’s fraud or is otherwise subject to a personal equity.

Bankrupts 11.22 Where a person’s estate is sequestrated under the Bankruptcy Act 1966 (Cth), this property, with certain exceptions, vests in the Official Trustee or a nominated trustee under s 58 of that Act. Thus the bankrupt can neither mortgage that property nor redeem it if already mortgaged. The bankrupt may mortgage any excepted property which remains vested in him, or property acquired after the commencement of his bankruptcy, if the trustee has not intervened to exercise his rights thereto and the transaction is with a person dealing with him in good faith and for valuable consideration: Bankruptcy Act 1966 (Cth) s 126; Cohen v Mitchell (1890) 25 QBD 262; and see Bird v Philpott [1900] 1 Ch 822 and Re Wallman (1981) 60 FLR 453.

Mortgages by bankrupt’s trustee 11.23 The bankrupt’s trustee, with the permission of the committee of inspection or with the leave of the court, may mortgage any part of the property of the bankrupt which has passed to him under the bankruptcy for the purpose of raising money to pay the bankrupt’s debts: Bankruptcy Act 1966 (Cth) s 135(1)(da).

Agents 11.24 As a general rule, an agent who is placed in temporary control of his principal’s property has no authority to pledge or mortgage it. Thus a solicitor cannot, without authority (express or to be implied from strong circumstances), do anything to prejudice the estate or interest of his client: Cory v Eyre (1863) 1 De GJ & Sm 149 at 168; 46 ER 58 at 66. See also Keith Murphy Pty Ltd v Custom Credit Corp Ltd (1992) 6 WAR 332. There is no rule that subjects a client to answer for every act of his agent just because that agent is the person he usually retains as solicitor: Finch v Shaw (1854) 19 Beav 500 at 514; 52 ER 445 at 450 (reversed sub nom Colyer v Finch (1856) 5 HL Cas 905; 10 ER 1159) and Jensen v Giugni (1994) 6 BPR 13,667. Where a principal hands his title deeds to an agent to raise a specific sum,

and the agent uses them for the purpose of raising a larger sum, the principal will not be able [page 329] to redeem without paying the entire sum for which they were pledged. The authority to borrow in fact existed and the lender was not aware of the limitation on it: Brocklesby v Temperance Permanent Building Society [1895] AC 173 (HL). Exceptions to the rule in so far as it relates to goods and documents of title thereto and to negotiable instruments have arisen from necessity and by the custom of trade. See, for example, the Factors Act 1889 (UK), which has been adopted by the Australian states, and the powers of bankers to pledge customers’ negotiable instruments and of stockbrokers to pledge customers’ negotiable securities. In Spina v Conrad Associates Pty Ltd [2008] NSWSC 326; (2008) 13 BPR 25,435, a woman granted her son a power of attorney to act on her behalf. The power allowed the son to perform acts which conferred a benefit on the son. The son mortgaged the mother’s house solely for his own business purposes. The court held that the power did not authorise the mortgage as it was not on behalf of the donor. For agents of corporations, see 11.34.

Agency of partners re borrowing 11.25 The Partnership Act 1890 (UK), which has been adopted by each Australian state, provides that every partner is an agent of the firm and his other partners for the purpose of the business of the partnership; and the acts of any partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which he is a member bind the firm and his partners, unless the partner so acting has in fact no authority to act for the firm in the particular matter, and the person with whom he is dealing either knows that he has no authority, or does not know or believe him to be a partner: s 5.

General power to mortgage personal property 11.26 Accordingly, one of several partners may make a security affecting the personal property of the partnership for a loan or debt contracted for the ordinary purposes of the undertaking, where there is no notice of fraud or want of authority: Re Litherland; Ex parte Howden (1842) 2 Mont D & de G 574. For the purposes of winding up its affairs and completing contracts entered into during its continuance, this power continues after the dissolution of the partnership: Butchart v Dresser (1853) 4 De GM & G 542; 43 ER 619; Re Bourne; Bourne v Bourne [1906] 2 Ch 427 (CA). The partnership will not be bound by a security given by one of the firm to a person who knowingly makes advances for extraordinary purposes (such as raising additional capital for payment of the share of a deceased partner, or making new arrangements for carrying on the business: Fisher v Tayler (1843) 2 Hare 218; 67 ER 91), and, a fortiori, one member of the firm cannot bind the others by a security for the payment of his separate debt, unless the creditor can prove a direct assent by the other partners, or unless there are circumstances from which such assent may reasonably be inferred. The presumption is, that such a security was known by the creditor to have been given without the authority of the firm, and he takes the onus of proving the authority: Snaith v Burridge (1812) 4 Taunt 684; 128 ER 499; Leverson v Lane (1862) 13 CB NS 278; 143 ER 111. If such a security is made by a partner knowing his firm is insolvent it is a fraud on the creditors of the firm and an act of bankruptcy: Re Douglas; Ex parte Snowball (1872) 7 Ch App 534 at 542.

Mortgage of real property 11.27 Partners may hold the legal estate in freehold or leasehold property as joint tenants or as tenants in common. A single partner cannot give a legal mortgage on the [page 330] property without express authority given under seal so to do (Steiglitz v

Egginton (1815) Holt NP 141; 171 ER 193), but where the mortgage does not require to be effected by deed (or, for instance, in the case of an equitable mortgage made by deposit of the deeds, whether with or without a memorandum in writing) it seems that the same rule applies as in the case of any other transaction entered into by a partner on behalf of the firm, and the mortgage is valid and binds the firm, provided it is effected for carrying on in the usual way business of the kind carried on by the firm: Partnership Act 1890 (UK) s 5; see 11.25.

Mortgage of partnership share 11.28 An assignment by a partner of his share in the partnership, either absolute or by way of mortgage, does not, as against the other partners, entitle the assignee during the continuance of the partnership to interfere in the management of the partnership business affairs (see, for example, Re Garwood’s Trusts; Garwood v Paynter [1903] 1 Ch 236), or to require accounts or inspection of books: Bonnin v Neame [1901] 1 Ch 732, and see United Builders Pty Ltd v Mutual Acceptance Ltd (1980) 144 CLR 673. (As to whether the debt is a partnership debt or the debt of a partner or partners, see Custom Credit Corp Ltd v Heard and Raphael (1983) 33 SASR 45 (FC).) It only entitles the assignee to receive the partner’s share of profits (Partnership Act 1890 (Imp) s 31; see 7.14), but on the dissolution the assignee is entitled to receive the assignor’s share of the assets and, for the purpose of ascertaining the share, is entitled to an account as from the date of dissolution: Watts v Driscoll [1901] 1 Ch 294 (CA). If any partner suffers his share of the partnership property to be charged under the Partnership Act, for his separate debt, the partnership may, at the option of the other partners, be dissolved: Partnership Act 1890 (UK) s 33.

Partner’s power to lend on mortgage 11.29 A partner has authority to lend the moneys of the firm on mortgage when such a transaction is part of the ordinary business of the firm: Re Land Credit Co of Ireland; Weikersheim’s Case (1873) 8 Ch App 831; Niemann v Niemann (1889) 43 Ch D 198.

Change in constitution of firm

11.30 The change in constitution of a firm by death or retirement or the admission of fresh partners can cause considerable problems generally with respect to both past and continuing transactions: see, for example, Re Burton Marsden Douglas [2004] 3 All ER 222. These problems also occur where there is reconstitution of a firm after it has granted a mortgage, though a welldrawn mortgage will cover the situation: see, for example, Ronan v Australia & New Zealand Banking Group Ltd (2000) 2 VR 531 especially at 551. After the death of a partner the surviving partners have power to mortgage the partnership property, whether real or personal, to secure a partnership debt, and such mortgage takes priority over the lien of the personal representatives of the deceased partners on the partnership assets: Re Bourne; Bourne v Bourne [1906] 2 Ch 427.

Co-mortgagees 11.31 Statute in most jurisdictions now provides that co-mortgagees lend on joint account unless this provision is excluded. As to the consequences, see 11.32. Where the statute does not apply and there are two or more mortgagees, there is a rebuttable presumption in equity that they are tenants in common: Petty v Styword (1631) 1 Rep Ch 57; 21 ER 506; Rigden v Vallier (1751) 2 Ves Sen 252; 28 ER 163; Morley v Bird (1758) 3 Ves 628 at 631–2; 30 ER 1192 at 1193; Robinson v Preston (1858) 4 K & J 505; 70 ER 211; Re Jackson (1887) 34 Ch D 732 at 737. [page 331] If the mortgagees are tenants in common, all must join in any discharge or reconveyance including the legal personal representatives of a deceased comortgagee: Vickers v Cowell (1839) 1 Beav 529; 48 ER 1046; Matson v Dennis (1846) 4 De GJ & Sm 345; 46 ER 952; Steeds v Steeds (1889) 22 QBD 537 at 541; and see Halsbury’s Laws of Australia, vol 19, P Butt et al, Mortgages and Securities [295-1025]. As to the position where the mortgagees hold as joint tenants, see 11.32.

As between themselves, if one co-mortgagor pays more than his proportionate share of the mortgage debt or interest, there may be equalisation on taking of accounts, but the person who pays the greater share does not obtain a greater equity in the property as would have occurred had there been unequal contribution to its purchase: Forgeard v Shanahan (1994) 35 NSWLR 206 at 225; Ryan v Dries (2002) 10 BPR 19,497 at 19,499, 19,501 and 19,511–12.

Mortgages on joint account 11.32 Unless excluded, statute in most jurisdictions provides that where there are co-mortgagees, the mortgagees’ money is lent jointly both at law and in equity: NSW Conveyancing Act 1919 s 99(1); Victorian Property Law Act 1958 s 112(4); other state equivalents are tabled in the Table of Comparable Sections in the Introduction (p 3). There is no ACT equivalent; see also Re Jackson (1887) 34 Ch D 732. The effect so far as the mortgagor is concerned is that only the surviving mortgagees need sign the discharge or reconveyance. The joint account provision, whether express or implied, does not alter the presumption of tenancy in common, nor other rights of the mortgagees amongst themselves: Re Harman and Uxbridge and Rickmansworth Railway Co (1883) 24 Ch D 720; Re Jackson (1887) 34 Ch D 732. Accordingly, as between the mortgagees, the legal personal representatives of the deceased co-mortgagee are prima facie entitled to his share or interest in the mortgaged property.

B. Corporations Corporations generally 11.33 In 1984, the Companies Code 1981 was amended to include provision that an incorporated company had legal capacity to do all the things that a natural person could do. This provision has been continued by the Corporations Act 2001 (Cth), the current provisions being ss 124 and 125. Prior to 1984, the powers of a company formed under the Companies Act were limited by reference to the objects and purposes specified in the

memorandum of association: Ashbury Railway Carriage & Iron Co v Riche (1875) LR 7 HL 653. This was known as the ultra vires doctrine in the narrow sense. There is no longer any need to look to the cases dealing with the pre-1984 position as to when a mortgage was ultra vires a corporation. The ultra vires doctrine applies to companies created by statute for a particular purpose: Baroness Wenlock v River Dee Co (1885) 10 App Cas 354 at 360. Where a company is incorporated by special Act of Parliament, that Act will usually indicate the powers that the company is to possess. Corporations created by statute and incorporated will have the powers in the statute creating them. However, a corporation created by Royal Charter has, prima facie, the power to do with its property all such acts as an ordinary person can do: Jenkin v Pharmaceutical Society [1921] 1 Ch 392 at 398. It should be noted that the term ‘ultra vires’ is used in two senses. The narrow doctrine dealt with corporate capacity; the wider doctrine was concerned with abuse of power where directors and other agents of the company exceeded the authority conferred on [page 332] them by the company: Rolled Steel Products (Holdings) Ltd v British Steel Corp [1982] Ch 478 at 497–9; [1982] 3 All ER 1057 at 1076–7. This decision was reversed in the Court of Appeal; however, the distinction was maintained: see [1986] Ch 246 at 276–7, 286–7, 302–4; [1985] 3 All ER 52 at 68–9, 79–80, 90–2; and ANZ Executors & Trustee Co Ltd v Qintex Australia Ltd (1990) 2 ACSR 676 at 686; 8 ACLC 980 at 987(Qd SC (FC)). It is only the narrow doctrine that has been abolished by Corporations Act 2001 (Cth) s 124. It is still necessary to determine whether the persons purporting to act on behalf of a corporation had authority to do so: see 11.34. The abolition of the doctrine of ultra vires does not, however, operate to validate a mortgage which is a legal nullity because it is not executed by the appropriate ordinance of the company such as the case where the common seal is not affixed by the directors: compare Northside Development Pty Ltd v Registrar General (1990) 170 CLR 146. The mortgagee will, however, in many cases be protected by what is known as the ‘indoor management rule’(the rule in Royal British Bank v Turquand (1856) 6 E & B 327; 119 ER

886). This rule allows persons dealing with a company to assume that everything that needs to be done as a matter of internal administration in a company has been properly done unless circumstances or the nature of the transaction itself would call upon a reasonable person to make inquiries: Northside Development Pty Ltd v Registrar General, above, at 189. Formerly, where the borrowing powers of directors had been limited to a certain amount it was doubted as to whether the directors would bind the company: see Re Pooley Hall Colliery Co (1869) 21 LT 690. In such a circumstance the directors might be sued for breach of warranty of authority: Chapleo v Brunswick Permanent Benefit Building Society (1881) 6 QBD 696; Whitehaven Joint Stock Banking Co v Read (1886) 54 LT 360. In many cases, however, even before 1984, the company would be bound if the borrowing was within the ordinary ambit of directors’ authority: see, for example, Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 and Hely- Hutchinson v Brayhead Ltd [1968] 1 QB 549; cf Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd (1996) 136 ALR 166; and see 11.24.

Mortgages by agents of corporations 11.34 All corporate acts are, in one sense, performed by its agents. In earlier times, it was customary for the corporate seal to be placed on all important documents after a resolution of the board approving its affixation. In more recent times, however, more and more documents are executed under some form of delegated authority. Corporations Act s 126 permits a corporation to appoint an agent to execute a contract and does not mandate that that appointment be under seal. Section 127 of that Act then provides that a corporation may execute a contract by a document signed by two directors or a director and the secretary, or in the case of a company with a single director, by the signature of that director. As to what is meant by ‘signing’, see s 52A. A corporation may confer the necessary actual authority on one of its directors, the conferral of which may be implied as a result of the conduct of the company: Equiticorp Finance (in liq) v Bank of New Zealand (1993) 32 NSWLR 50; Pico Holdings Inc v Turf Club Australia Pty Ltd [2002] QSC 86

(affirmed on appeal, Pico Holdings Inc v Wave Vista Pty Ltd [2003] QCA 204) and L K Bros Pty Ltd v Collins [2004] QSC 26; cf Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd (1996) 136 ALR 166.

Liquidators 11.35 The prime duty of the liquidator is to realise the company’s property and to distribute it among the persons entitled as soon as possible: see Re GA Listing and Maintenance Pty Ltd (1994) 15 ACSR 308. Thus in the ordinary case one will not find liquidators entering [page 333] into mortgage transactions. Further, under Corporations Act s 477(2B) a liquidator cannot without leave of the court or permission of a committee of inspection enter into any agreement or lease that will last more than three months. The court may confer power on the liquidator to lease where the evidence shows that the liquidator in his commercial judgment considers that a lease is appropriate. The most common situations are where the lease is in aid of a sale or the relevant property is presently unsaleable for a fair price (Re Premier Building Society (1890) 16 VLR 643; Re Federal Bank of Australia Ltd (1895) 6 BC (NSW) 3) or where the liquidation process is, of necessity, likely to be long and drawn out: Re CIC Insurance Ltd (2001) 38 ACSR 181. Corporations Act s 477(2)(g) empowers a liquidator to obtain credit whether on the security of the property of the company or otherwise. Where a liquidator uses this power, he will not confer upon the lender a security in priority to existing secured creditors unless the latter consent to that priority or are estopped from saying that they did not consent: Re Regents Canal Ironworks Co; Ex parte Grissell (1875) 3 Ch D 411; Re Allied Glass Manufacturers Ltd (1936) 36 SR (NSW) 409.

Specific loan not a company asset 11.36 Where a loan of money was made to a company for a specific purpose, but that purpose failed, the money may be held to be on resulting

trust for the lender and will not be considered a general asset of the company: Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567; [1968] 3 All ER 651; Re EVTR Ltd [1987] BCLC 646.

Form of mortgage 11.37 A mortgage by a company takes the usual form of mortgage by an absolute owner. Such a mortgage may also include a specific charge of future acquired freehold and leasehold property and a floating charge over the company’s other assets. Often a prudent mortgagee will require the directors of the company to guarantee repayment. Note that Corporations Act s 191(2) (a)(iv) makes it clear that a director who has guaranteed an overdraft or other advance to the company of which he is a director has no obligation to disclose that fact.

Registration of company charges 11.38 38 Sections 262 and 272 of the Corporations Act only apply to Charges created before January 2012: see 6.2. The Corporations Act by ss 262ff requires certain charges to be registered with the consequence that nonregistered charges will be void against a liquidator or official manager. The duty is on the company to lodge the charge for registration, but any interested person may effect registration and that person may recover from the company the amount of the fee: Corporations Act s 270(4). The situations which give rise to equitable charges are discussed in 1.42, 2.2–2.8 and 8.9ff. The types of charge which require to be registered are set out in s 262(1)(a)–(j) as follows: (a) a floating charge on the whole or a part of the property, business or undertaking of the company; (b) a charge on uncalled share capital or share premiums; (c) a charge on a call, whether in respect of capital or share premiums, made but not paid; (d) a charge on a personal chattel, including a personal chattel that is unascertained or is to be acquired in the future, but not including a ship registered in an official register kept under an Australian law relating to title to ships; (e) a charge on goodwill, on a patent or licence under a patent, on a trade mark or service mark or a licence to use a trade mark or service mark, on a copyright or a licence under a copyright or on a registered design or a licence to use a registered design; (f)

a charge on a book debt;

[page 334] (g) a charge on a marketable security, not being: (i)

a charge created in whole or in part by the deposit of a document of title to the marketable security; or

(ii) a mortgage under which the marketable security is registered in the name of the chargee or a person nominated by the chargee; (h) a lien or charge on a crop, a lien or charge on wool or a stock mortgage; (i)

a charge on a negotiable instrument other than a marketable security.

Section 262(2) specifically exempts the following charges: (a) a charge, or a lien over property, arising by operation of law; (b) a pledge of a personal chattel of a marketable security; (c) a charge created in relation to a negotiable instrument or a document of title to goods, a charge by way of pledge, deposit, letter of hypothecation or trust receipt; (d) a transfer of goods in the ordinary course of the practice of any profession or the carrying on of any trade or business; or (e) a dealing, in the ordinary course of the practice of any profession or the carrying on of any trade or business, in respect of goods outside Australia.

Under Corporations Act s 272(2), a certificate issued by the Australian Securities and Investments Commission (ASIC) is prima facie evidence of the matters stated in the certificate.

Illustrations of registrable charges 11.39 First, it should be noted that oral charges are registrable: Re FLE Holdings Ltd [1967] 1 WLR 1409; [1967] 3 All ER 553. A charge is created at the date of execution (Esberger & Son Ltd v Capital & Counties Bank [1913] 2 Ch 366), and, in the case of a trust deed to secure debentures, not when the debentures are issued thereunder: Transport & General Credit Corp Ltd v Morgan [1939] Ch 531. Where a charge is created by escrow then it dates from the time the deed takes effect: Re C L Nye Ltd [1971] Ch 442 and Security Trust Co v Royal Bank of Canada [1976] AC 503. Any charge on any book debt is to be registered not merely a charge on book debts as a whole. A book debt is a debt ‘due and growing due’ in the

course of business to the proprietor: see Gough, Company Charges, 2nd ed, Butterworths, London, 1996, p 677, and Shipley v Marshall (1863) 14 CB NS 566; 143 ER 567. Book debts are debts which in the ordinary course of business would be represented by entries in the books such that the owner of the business can tell from them what moneys are to become payable, when they should be paid, and to what extent they are paid: Re WF Cornu Ltd [1931] SASR at 440. See Gough, Company Charges, p 678; Re W T & M E Peterie Pty Ltd (1981) 6 ACLR 65; and Welsh Development Agency v Export Finance Co Ltd [1992] BCLC 148. An agreement may provide for the creation of a fixed charge over the book debts of a company while the debts are uncollected and a floating charge over the proceeds once paid into a specified bank account: Re New Bullas Trading Ltd [1994] 1 BCLC 485; 12 ACLC 3203 and see Tailby v Official Receiver (1888) 13 App Cas 523 at 543. A bank deposit does not constitute a book debt: Re Brightlife Ltd [1987] Ch 200; Re Permanent Houses (Holdings) Ltd [1988] BCLC 563; Northern Bank Ltd v Ross [1991] BCLC 504; Re Old Inns of NSW Pty Ltd [1994] ACL 120 NSW 27. A contractual lien on sub-freights is a charge on book debts: Re Welsh Irish Ferries Ltd [1986] Ch 471; Annangel Glory Compania Naviera SA v M Golodetz Ltd [1988] 1 Lloyd’s Rep 45; and Care Shipping Corp v Itex Itagrani Export SA [1993] QB 1. The exemptions from registration include charges arising by operation of law, transfers of goods in the ordinary course of trade or business and charges created by way of [page 335] deposit of documents of title or letters of hypothecation. This last expression probably means to indicate a type of trust receipt which a bank takes when releasing bills of lading held under a documentary credit in order to enable the merchant to take delivery of the goods from the ship’s side: NV Slavenburg’s Bank v Intercontinental Natural Resources Ltd [1980] 1 All ER 955 at 977; [1980] 1 WLR 107 at 110.

Other aspects of registration of charges 11.40 Corporations Act s 269 provides for a creditor on request to issue a company with a prescribed form of memorandum of discharge which may be lodged with ASIC. When the memorandum is lodged, ASIC amends its records. A decision of ASIC to register or not to register a charge may be reviewed by the Administrative Appeals Tribunal pursuant to Corporations Act s 1317B. For overseas cases on review, see Ex parte Central Bank of India [1986] QB 1114 and Sun Tai Cheung Credits Ltd v AG (Hong Kong) [1987] 1 WLR 948. Before a method of review was set out in the statute, review was by the prerogative writs such as mandamus: see R v Registrar of Companies [1912] 3 KB 23 and R v Registrar of Companies (ACT); Ex parte Ganke (1960) 1 FLR 109. It should be noted that the Corporations Act provides for a system of provisional registration in certain cases: see s 265. This is mainly to allow time for curing defective documents or for stamp duty to be paid. If the condition on which provisional registration was granted is fulfilled, registration usually takes effect from the date of first lodgment. Problems concerning the status of provisional registration were considered in Enterprise Colorvideo Productions Pty Ltd v Corporate Affairs Commission (NSW) (1984) 8 ACLR 767; Dunn v Oakminster Ltd (1994) 13 ACSR 76; 12 ACLC 264, reversed sub nom Wilson v Dunn (1994) 15 ACSR 156. The sections referred to were conditionally repealed from January 2012: see 6.2.

Effect of non-registration 11.41 It should be clearly noted that the scheme of the Corporations Act differs significantly from that of the English Companies Acts and the scheme which was common in Australia before 1981. The vital differences were summarised in Vector Capital Ltd v SNS Software Network Systems Pty Ltd (1988) 12 ACLR 723 at 727 as follows: 1.

The notice of charge may be lodged at any time and will be valid unless having been lodged outside the permitted time; winding up of the chargor commences within six months of lodgment.

2.

If winding up commences before the expiration of the prescribed time for lodgment the charge is not invalidated against the liquidator.

3.

Provision is made for priority between registered and unregistered charges inter se.

4.

The avoidance of the charge is only an avoidance against a liquidator or official manager not against any creditor of the company.

Corporations Act s 266(1) (now conditionally repealed: see 6.2) provides that where an order is made or a resolution passed for the winding up of a company or an official manager is appointed in respect of a company, a registrable charge on property of the company is void as a security on that property as against the liquidator or official manager, as the case may be, unless the appropriate notice was lodged within the relevant period or at least six months before the commencement of the winding up or the appointment of the official manager, as the case may be. It is to be noted that it is the security only which is void against any liquidator or official manager; the money itself becomes immediately repayable. It is to be noted that [page 336] the Australian provision does not follow the corresponding English provision and make the security void against creditors. Thus it is only upon the appointment of a liquidator or similar that the section comes into play though it has been held that for certain purposes one must treat the transaction as precarious for the six months’ period: see Dodlot v Hartogen Energy Ltd (1991) 6 ACSR 397. Thus any step taken by the mortgagee by way of enforcement of security such as a sale is valid and cannot later be upset by a liquidator of the company subsequently appointed: Mercantile Bank of India Ltd v Chartered Bank of India, Australia and China and Strauss & Co Ltd [1937] 1 All ER 231; Re Row Dal Constructions Pty Ltd [1966] VR 249. The company itself cannot have a cause of action arising out of nonregistration: Independent Automatic Sales Ltd v Knowles and Foster [1962] 1 WLR 974; [1962] 3 All ER 27. It is not, of course precluded from suing its

own solicitors or accountants in negligence. Where a mortgage or charge is avoided as against the liquidator, everything ancillary to it, such as a lien, is also avoided: Re Molton Finance Ltd [1968] Ch 325. Accordingly, it would seem that the avoidance provision extends to and invalidates security rights acquired by subrogation: see Mount Burnett Ltd v Chambers [1929] NZLR 609 (which did not decide the point). A registered security may itself be vulnerable if it was executed pursuant to a power of attorney to execute further assurances contained in an unregistered security: Re Dittmer Goldmines Ltd [1954] QSR 255. See also Gough, Company Charges, 2nd ed, pp 734–5. Other contractual rights which are not by way of security and do not require registration remain unaffected by non-registration: Re North Wales Produce and Supply Society Ltd [1922] 2 Ch 340; Mount Burnett Ltd v Chambers [1929] NZLR 609 at 613; Motor Credits Ltd v WF Wollaston Ltd (1929) 29 SR (NSW) 227 at 245; RE Dittmer Gold Mines Ltd (No 2) [1954] QSR 266; Re Cosslett (Contractors) Ltd [1998] Ch 495; [1997] 4 All ER 115 (for later proceedings see Smith v Bridgend CBC [2000] 1 BCLC 775). Section 266(3) (now conditionally repealed: see 6.2) provides that where a variation of a registrable charge takes effect without being appropriately lodged then only the increase in liability is avoided. A solicitor or accountant who is retained to attend to the perfection of the charge and fails to do so may be sued in contract or negligence: Re Foster (1985) 129 Sol Jo 333; Bell v Peter Browne & Co [1990] 2 QB 495.

Special cases 11.42 Where property subject to a mortgage is sold and the proceeds are invested in other property which is conveyed to the company and then mortgaged by the company to the mortgagee, the latter mortgage, if of one of the prescribed kinds, requires registration: Cornbrook Brewery Co Ltd v Law Debenture Corp Ltd [1904] 1 Ch 103 and see Bristol United Breweries Ltd v Abbot [1908] 1 Ch 279. The registration of a trust deed securing debentures containing specific equitable charges on property is sufficient to cover subsequent legal mortgages of that property to complete the security, and also mortgages of further property substituted under the powers of the deed for property

comprised in the original charge: Cunard SS Co Ltd v Hopwood [1908] 2 Ch 564.

Extension of time 11.43 The court may, if satisfied that failure to lodge a notice in respect of a charge (a) was accidental or due to inadvertence or some other sufficient cause or (b) is not of a nature to prejudice the position of creditors or shareholders, or that on other grounds it is just and equitable to do so, extend the time for lodging the notice. The application may be made by the company or any person interested and the order may be made [page 337] on such terms and conditions as the court considers just and expedient: Corporations Act s 266(4). This provision does not confer power on the court to grant interim relief: Re Heathstar Properties Ltd [1966] 1 WLR 993; [1966] 1 All ER 628. Section 266 was repealed as of 30 January 2012 (see 6.2; however, ss 588Fl and 588FM of the Corporations Act now make the same provisions). The court will not as a rule on an application for extension of time for registration decide the question whether the charge requires registration: Re Cunard SS Co Ltd [1908] WN (Eng) 160 and see also Re Heathstar Properties Ltd (No 2) [1966] 1 WLR 993; [1966] 1 All ER 1000. There are a number of cases dealing with the situation where an application for extension of time is made where the company is on the verge of insolvency. The court requires evidence of solvency and in the absence of such evidence will include terms in the order to protect the interests of unsecured creditors: Re Guardian Security Ltd [1984] 1 NSWLR 95; Re Drum Reconditioners (NSW) Pty Ltd (1992) 7 ACSR 82; Re Wilson Tyres Pty Ltd (1992) 7 ACSR 318. See also Re Dudley Engineering Pty Ltd [1968] 1 NSWR 483; 87 WN (Pt 1) (NSW) 326; Re Fablehill Ltd [1991] BCLC 830 and Re Chantry House Development plc [1990] BCLC 813. The general rule is sometimes said to be that ‘[w]hen liquidation has commenced one creditor should not be assisted by the court to improve its

position vis-a-vis other creditors’: Commercial Banking Co of Sydney Ltd v George Hudson Pty Ltd (1973) 131 CLR 605 at 613. If the evidence does not show any sufficient reason for departing from this rule, the application may be declined: see, for example, Re Rick Cobby Haulage Pty Ltd (1992) 7 ACSR 456; 10 ACLC 1251, reversed (1992) 11 ACLC 138. Insolvency is not necessarily fatal to an application. The cases are reviewed in Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd [1991] 2 Qd R 456; 2 ACSR 692. A significant consideration is whether failure to lodge the notice was prejudicial to the position of the unsecured creditors: Re Sandwell Pty Ltd (1991) 4 ACSR 478. See also Wilde v Australian Trade Equipment Co Pty Ltd (1980) 145 CLR 590; Re Ashpurton Estates Ltd [1983] Ch 110; Re Arnold & Co Ltd [1984] BCLC 535; Bloodstock Airservices of Australia Pty Ltd v Roadrunner Equipment Pty Ltd (1985) 10 ACLR 36. An order granting an extension is usually qualified in accordance with the order made in Re Guardian Securities Ltd [1984] 1 NSWLR 95 at 99. Because of the alterations to the registration scheme noted in 11.40, it is now often unnecessary to make an application for extension of time to register a charge: Re Guardian Securities Ltd (1984) 8 ACLR 822 at 825.

Company’s register of charges 11.44 Corporations Act s 271 requires a company to keep a register of charges which shall be open to inspection. A copy of every document which is lodged with ASIC must also be kept with the register. Under s 1505 of the Corporations Act, these requirements stopped applying in relation to registrable charges at 30 January 2012. The court may, upon application, rectify the register under Corporations Act s 274.

Building societies 11.45 These societies are largely subject to special provisions by which their powers to borrow and lend are governed by the Financial Institutions Code which has been adopted by the states: see, for example, Financial Institution Act 1992 (NSW). Apart from any special provision made by that Code, mortgages by

building societies to their members are subject to the ordinary law of mortgages: Provident Building Society v Greenhill (1878) 9 Ch D 122; Bell v London and South Western Bank [1874] [page 338] WN (Eng) 10. The principal difference between a building society mortgage and other mortgages is the incorporation in the former of the society’s rules. As to the relationship between those rules and the mortgage, see Lloyd, Waters and Ovey, Wurtzburg and Mills’ Building Society Law, 15th ed, Stevens, London, 1989, [6.21]. That work quotes unreported English authority to the effect that, generally speaking, a mortgagor who is a member of a society cannot escape liability under an express covenant in a mortgage by relying on a contrary provision in the society’s rules. The mortgage usually provides that any alteration of the rules will be binding on the mortgagor. See also Love v Geelong Building Society [1995] 2 VR 112 and Farrow Mortgage Services Pty Ltd v Edgar (1993) 114 ALR 1.

Public authorities 11.46 The power of local authorities to borrow is generally conferred by statute, but it may be implied where the borrowing is necessary to execute statutory powers: see, for example, Wenlock (Baroness) v River Dee Co (1883) 36 Ch D 675n. Because of the large number of authorities in Australia and their diverse constitutions, there is little point in examining concrete cases. In each case the statute must be examined. Borrowing without statutory authority is ultra vires and may be restrained by injunction: AG v Oldham Corp [1936] 2 All ER 1022. While some statutes will provide that a person advancing moneys to a public authority is not bound to inquire as to whether the borrowing was legal or regular or whether the money borrowed was properly applied, other statutes will purport to validate transactions notwithstanding procedural defects. For an example, see Local Government Act 1993 (NSW) s 729.

[page 339]

Part III

The Mortgagor’s Rights

[page 341]

Chapter 12

Mortgagor’s Rights A. Mortgagor’s Rights Generally Generally Mortgagor’s right to sue Rule in Spencer’s case Mortgagor’s right to possession Mortgagor’s use of the land B. Leases by Mortgagor in Occupation Mortgagor or tenant in occupation Leases by mortgagors — generally Obligations of mortgagee when bound by mortgagor’s lease Relation of mortgagee and mortgagor Creation of tenancy in mortgagor Attornment Liability of mortgagor in possession C. Tenancy before the Mortgage Reversion vests in the mortgagee Notice of mortgage to tenant Rent of furnished house Leases granted by prospective purchasers

12.1 12.2 12.3 12.4 12.5 12.6 12.7 12.8 12.9 12.10 12.11 12.12 12.13 12.14 12.15 12.16

D. Tenancy after the Mortgage Lease by mortgagor Mortgage under the Torrens System New tenancy under mortgagee Estoppel in favour of mortgagor Feeding the estoppel Statutory power of leasing Exegesis Further on statutory power to lease Torrens leases Restrictions on or exclusion of statutory powers Extension of statutory powers Effect of leases under statutory powers Leases by mortgagor and mortgagee together Surrender of lease Surrender of Torrens leases

12.17 12.18 12.19 12.20 12.21 12.22 12.23 12.24 12.25 12.26 12.27 12.28 12.29 12.30 12.31

[page 342]

A. Mortgagor’s Rights Generally Generally 12.1 Under the traditional form of English real property mortgage, the mortgagee possessed virtually every legal right and the mortgagor had only that which the mortgagee permitted him to have or rights in equity under the equity of redemption. The modern economic climate would not tolerate such an imbalance. Today, the mortgagor may indeed be in a sounder financial position than the mortgagee, but wishes to borrow for tax reasons or so as to deploy its capital elsewhere.

In 21st century Australia, the mortgagor has far more rights cognisable at law than a mortgagor in England had under the traditional mortgage. This chapter deals with the more significant of those rights. Most real property mortgages in Australia are under the Torrens system. Under that system, the mortgagor has a legal interest in the land, not merely an equitable interest. Again, even under the old system of land title, because Australian mortgages fix a real time for the repayment of the loan and not the English artificial six months, the mortgagor has a legal right to recover the land on repayment of the debt in accordance with the mortgage instrument. These and other factors add up to the fact that the Australian mortgagor has substantial rights at law even before redemption: see, for example, Windella Pty Ltd v Hughes (1999) 49 NSWLR 158; 9 BPR 17,141.

Mortgagor’s right to sue 12.2 While the mortgagor is in at least de facto possession of the land and managing the property with the acquiescence of the mortgagee, the mortgagor has the right to insist, without any reference to the mortgagee, on the observance of any obligation, the non-observance of which would injuriously affect the premises. To this end, the mortgagor may seek an injunction or damages: Fairclough v Marshall (1878) LR 4 Ex D 37 especially at 48–9. He may sue anyone at law save the mortgagee. This right is now reinforced by statute. Before the mortgagee has taken possession, the mortgagor has a statutory right to sue in his own name for possession or damages for trespass. Victorian Act s 98 (which reflects the corresponding provision, s 98, of the English Act) provides: 98(1) A mortgagor for the time being entitled to the possession or receipt of the rents and profits of any land, as to which the mortgagee has not given notice of his intention to take possession or to enter into the receipt of the rents and profits thereof, may sue for such possession, or for the recovery of such rents or profits, or to prevent or recover damages in respect of any trespass or other wrong relative thereto, in his own name only, unless the cause of action arises upon a lease or other contract made by him jointly with another person. (2) This section does not prejudice the power of a mortgagor independently of this section to take proceedings in his own name only, either in right of any legal estate vested in him or otherwise. (3) This section applies whether the mortgage was made before or after the commencement of this Act.

These provisions are reflected in substantially similar terms in NSW Act s 11; Queensland Act s 81; South Australian Act s 14; Western Australian Act s 19(1); and Supreme Court Civil Procedure Act 1932 (Tas) s 11(5). These provisions, however, only mean that, so long as the mortgagor is allowed to remain in possession, the mortgagor may recover the rents, and as against trespassers may recover possession or obtain an injunction without joining the mortgagee: Fairclough v Marshall (1878) 4 Ex D 37; 27 WR 145. [page 343] Section 98(1) of the English legislation is a procedural provision copied from Judicature Act 1873 (UK) s 25(5): see Re Ind, Coope & Co Ltd; Fisher v Ind, Coope & Co Ltd [1911] 2 Ch 223. At common law a mortgagor, even though in actual possession or receipt of the rents and profits, could not sue because the mortgagor did not have the legal estate. The section merely assists a mortgagor by enabling him to exercise any pre-existing legal or equitable rights of the type referred to, at law in the mortgagor’s own name: Farmer & Co v Inland Revenue Commissioners [1898] 2 QB 141; Re Fergusson (1882) 3 LR (NSW) 43; Matthews v Usher [1900] 2 QB 535; McDonald v Lloyd (1931) 31 SR (NSW) 415. ‘So far as regards the mortgagor the intention is to prevent any one but the mortgagee from setting up that the mortgagor has not the legal estate’: Re Fergusson (1882) 3 LR (NSW) 43 at 49 per Martin CJ (referring to a provision of very similar effect). It has been held that, as Judicature Act 1873 (UK) s 25(5) was a procedural provision it does not alter the rules in Moss v Gallimore (1779) 1 Doug KB 279; 99 ER 182; [1775]-[1802] All ER Rep 102 or Rogers v Humphreys (1835) 4 Ad & El 299; 111 ER 799: see Re Ind, Coope & Co Ltd; Fisher v Ind, Coope & Co Ltd [1911] 2 Ch 223 at 231–2. The section does not create rights, nor does it enable the borrower to do anything that might affect the mortgagee’s interests prejudicially: see Molyneux v Richard [1906] 1 Ch 34. In some cases where the interests of the mortgagor and the mortgagee are involved it may be possible to do justice to both by allowing the mortgagor to proceed with the action on condition that he pay any damages recovered into

court; no part to be paid over to the mortgagor pending the mortgagee’s discharge: see Bennett v Higgs (1886) 2 TLR 715, an action for damages for obstruction to easements of light and air. Thus, it does not enable the mortgagor to forfeit a lease under a power of the re-entry for a breach of covenant (Matthews v Usher, above; see Molyneux v Richard, above), or to enforce a right which would involve the taking of accounts in which the mortgagee is interested: Van Gelder,Apsimon & Co v Sowerby Bridge United District Flour Society (1890) 44 Ch D 374 at 392 (CA). If in any such case the mortgagee refuses to be a plaintiff, he may be made a defendant; but in that case, it seems, the mortgagor must offer to redeem: see Hughes v Cook (1865) 34 Beav 407; 55 ER 692. But the idea that a mortgagor should be precluded from protecting the mortgaged property from destruction unless he redeems the mortgage or persuades the mortgagee to concur in suing is contrary to the view of a court of equity that the mortgagor does not cease to be the owner of the property: see Van Gelder,Apsimon & Co v Sowerby Bridge United District Flour Society (1890) 44 Ch D 374 at 392–3 (Lindley LJ); see also Fairclough v Marshall (1878) 4 Ex D 37; 48 LJ QB 14 and, more generally, Robert Reid & Co v Minister of Public Works (1902) 2 SR (NSW) 405 at 415. Thus a mortgagor alone may enter into a restrictive covenant for the advantage of the mortgaged property and the benefit will run with the land in equity: see Rogers v Hosegood [1900] 2 Ch 388. These provisions do not enable the mortgagor to sue on the covenants in the lease, but the mortgagor can do so under the provisions restating the Rule in Spencer’s case detailed in the following paragraph.

Rule in Spencer’s case 12.3 The modern restatements of the Rule in Spencer’s case are to be found in NSW Act s 117; Victorian Act s 141; Queensland Act s 117; in South Australia, see Grantees of Reversions Act 1540 (UK); Western Australian Act s 77; Supreme Court Civil Procedure Act 1932 (Tas) s 10; Property Law Act 1952 (NZ) s 112; English Act (UK) s 141, which entitle the mortgagor to enforce the covenants so long as he is in receipt of the income of the land leased.

[page 344] Rent reserved by a lease and the benefit of every covenant or provision therein contained, having reference to the subject matter thereof, and on the lessee’s part to be observed or performed, and every condition of re-entry and other condition therein contained, is annexed and incident to and goes with the reversionary estate in the land, or in any part thereof, immediately expectant on the term granted by the lease, notwithstanding severance of that reversionary estate, and without prejudice to any liability affecting a covenantor or his estate (see the provisions reflecting s 141(1) of the English Act). The references in the subsection to the severance of the reversionary estate suggest that the provision was aimed primarily at the difficulties formerly caused by such severance, but while this is one effect, the provisions are not restricted to cases of severance and they enable a mortgagor in possession to sue in his own name on the covenants in the lease whether the lease is by deed or not, and whether made before or after the commencement of the Act: see Turner v Walsh [1900] 2 KB 484 (CA). Any such rent, covenant or provision is capable of being recovered, received, enforced, and taken advantage of, by the person from time to time entitled to the income of the whole or any part, as the case may require, of the land leased: see s 141(2) of the Victorian and English Acts; and Rhodes v Allied Dunbar Pension Services Ltd [1989] 1 All ER 1161; [1989] 1 WLR 800 (CA). Where that person becomes entitled by conveyance or otherwise, such rent, covenant or provision may be recovered, received, enforced or taken advantage of by him, notwithstanding that he becomes so entitled after the condition of re-entry or forfeiture has become enforceable; but this subsection does not render enforceable any condition of re-entry or other condition waived or released before such person becomes entitled as aforesaid: see Victorian and English Acts s 141(3), which reproduced Conveyancing Act 1911 (UK) s 2. Section 141 of the English Act and the Australian provisions that reflect it generally apply to leases made before or after the commencement of the relevant Act, but not so as to affect the operation of (a) any severance of the reversionary estate; or (b) any acquisition by conveyance or otherwise of the

right to receive or enforce any rent, covenant, or provision; effected before the commencement of the relevant Act (see Victorian Act s 141(4), which uses the commencement of the Property Law Act 1928 as the critical time; see also English Act s 141(4)). NSW Act s 117(4), in general, fixes the commencement of that Act as the critical time (but see s 117(4)(b)). The mortgagor of Torrens system land, as the registered proprietor of the freehold estate, derives his right to possession as against a mortgagee from his legal ownership. In Victoria and Western Australia, the position is altered in relation to first registered mortgagees by Victorian Torrens Act s 81(1) and Western Australian Torrens Act s 116, which vest in the mortgagee (in Victoria, the first mortgagee only; cf Western Australia) the same rights and remedies at law and in equity as if the mortgagee was possessed of the legal estate: see Farrington v Smith (1894) 20 VLR 90; Connolly v Ryan (1922) 30 CLR 498; Gunnion v Ardex Acceptance Corp Pty Ltd [1968] VR 547; City Mutual Life Assurance Society Ltd v Lance Creek Meat Works Pty Ltd [1976] VR 1; Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245; 162 ALR 382; see also Bank of New South Wales v Hartman (1955) 72 WN (NSW) 382; McDonald v Lloyd (1931) 31 SR (NSW) 415; and see 19.4 and 19.7. Under Torrens system legislation a mortgagee has no claim to rents or profits until default in payment of all or part of the principal sum or any interest (see NSW Torrens Act s 60;Victorian Torrens Act s 78(1); Queensland Torrens Act 1861 (Qld) ss 74 and 78; South Australian Torrens Act s 137; Western Australian Torrens Act s 111; Tasmanian Torrens Act s 82); or breach of any covenant: see Victorian Torrens Act s 81(1) and Western Australian Torrens Act s 116; and see 19.2 and 19.6–19.8. [page 345] As to whether a mortgagee may enter into possession against a mortgagor without bringing an action of ejectment, see Camfield Pastoral Co v Dixon [1972] Qd R 289, following Lysnar v National Bank of New Zealand Ltd (No 2) [1936] NZLR 541; and see 19.5; and see Slack v Atkinson (1875) 1 VLR (E) 335 in relation to a mortgagee collecting rents as agent for the mortgagor.

Mortgagor’s right to possession 12.4 Under a Torrens system mortgage, the mortgagor has the right to possession unless there is something inconsistent with such right in the mortgage document. Under a general law mortgage, unless something appears in the mortgage, the mortgagee is entitled to possession. However, there may be implied from the documents and surrounding circumstances that the mortgagor is to have possession: see 19.15. Where the mortgagor is in possession with the acquiescence of the mortgagee, the mortgagor is entitled to the rents and profits of the land without any obligation to account to the mortgagee: Moss v Gallimore (1779) 1 Doug KB 279; 99 ER 182; [1775]–[1802] All ER Rep 102; SEAA Enterprises Pty Ltd v Figgins Holdings Pty Ltd [1998] 2 VR 90 (CA) (reversed on other grounds (1999) 196 CLR 245; 162 ALR 382). The mortgagor’s rights include: the rights of receiving rents for his own use (Moss v Gallimore, above; Rogers v Humphreys (1835) 4 Ad & El 299; 111 ER 799; Re Ind, Coope & Co Ltd; Fisher v Ind, Coope & Co Ltd [1911] 2 Ch 223); being able to bring actions in respect of the mortgaged property against anyone save the mortgage (NSW Act s 11;Victorian Act s 98(1); Queensland Act s 81; South Australian Act s 14;Western Australian Act s 19(1); Supreme Court Civil Procedure Act 1932 (Tas) s 11(5); and see Selleck v Smith (1826) 3 Bing 603; 130 ER 646 also reported sub nom Sellick v Smith (1826) 11 Moore CP 459; and 12.2); the right to grant leases subject to certain restrictions (see the provisions based on the UK Act s 99; see 12.22ff). However, under a general law mortgage, the mortgagor is in an odd position because although he has the above rights, he is liable at the option of the mortgagee to be treated either as a tenant or as a trespasser, in the one character to be sued for injuring the reversion (King v Smith (1843) 2 Hare 239; 67 ER 99; Bagnall v Villar (1879) 12 Ch D 812), in the other to be ejected without notice, demand for possession, or claim to rents in arrears or

accruing or to the growing crops: Doe d Roby v Maisey; Doe d Griffith v Mayo (1828) 7 LJ (OS) KB 84; Jolly v Arbuthnot (1859) 4 De G & J 224; 45 ER 87; Re Gordon; Ex parte Official Receiver (1889) 61 LT 299; and see Breathour v Brown (1885) 1 WN (NSW) 140. Generally, see (1969) 22 Current Legal Problems 129 (Ryder). For relevant Torrens system legislation as to the mortgagee’s right to possession upon default, see 19.2ff.

Mortgagor’s use of the land 12.5 Although the mortgagor is in possession under an old system mortgage as he has parted with his immediate estate, he remains in possession at the pleasure and consistently with the right of the mortgagee. He is entitled to exercise the ordinary rights of property. Thus he is not liable to pay any occupation rent until a demand or order for possession has been made: Heath v Pugh (1881) 6 QBD 345 at 359 (CA) (affirmed as [page 346] Pugh v Heath (1862) 7 App Cas 235 (HL)); Yorkshire Banking Co v Mullan (1887) 35 Ch D 125. The mortgagor’s rights are, of course, limited by the terms of the mortgage. While in possession the mortgagor must not diminish or prejudice the security, for example by committing waste such as by felling timber or demolishing a house. The mortgagor may be sued by the mortgagee for injuring the property and putting the security at risk and, if it acts in due time, the mortgagee may obtain an injunction to prevent such conduct: King v Smith (1843) 2 Hare 239; 67 ER 99; Bagnall v Villar (1879) 12 Ch D 812. Waste by a mortgagor is further considered in 42.20. Upon the mortgagee taking possession, the mortgagor is not entitled to the crops growing on the land at the time the mortgagee takes possession nor to rents in arrears or accruing (Re Gordon; Ex parte Official Receiver (1889) 61 LT 299; Ex parte Temple (1822) 1 Gl & J 216), where the mortgagor was held entitled to the crops as tenant at will by express contract: Doe d Roby v

Maisey (1828) 8 B & C 767; 108 ER 1228; Doe d Griffith v Mayo (1828) 7 LJ (OS) KB 84; Jolly v Arbuthnot (1859) 4 De G & J 224; 45 ER 87; see also Crocombe v Pine Forests of Australia Pty Ltd [2005] NSWSC 151.

B. Leases by Mortgagor in Occupation Mortgagor or tenant in occupation 12.6 In considering the mortgagee’s right to possession, the occupation of the mortgaged premises by the mortgagor or a tenant under a lease made before or after the mortgage is relevant as to whether the mortgagee’s right is exercisable at all, and, if it is, as to who should be made a defendant to the proceedings for possession.

Leases by mortgagors — generally 12.7 A registered lease of Torrens system land will be binding on the mortgagee under the paramountcy and priority provisions of the Torrens system legislation. An unregistered Torrens system lease or a lease under the general law by the mortgagor made before the mortgage is binding on the mortgagee: Moss v Gallimore (1779) 1 Doug KB 279 at 283; 99 ER 182 at 184; Thomson and Chipp v Finlay (1887) NZLR 5 SC 203. Considerable problems may arise where the mortgagor leases the land or part of it before or during the currency of the mortgage. The problems mostly arise with unregistered short-term leases which are legal interests under the Torrens system and with leases of old system land. The analysis differs between the case where the lease precedes the mortgage (which is considered in Part C of this chapter) from situations where the mortgage precedes the lease (considered in Part D of this chapter.) Generally speaking, in the former case, the evidence will be available to show that the mortgagee had constructive notice of the lease. If this can be shown, the mortgagee will be bound by the lease and by any collateral agreements made under it: Green v Rheinberg (1911) 104 LT 149; Grace Rymer Investments Ltd v Waite [1958] Ch 831; [1958] 2 All ER 777 (CA). In such a case, the tenant need only pay the mortgagor to get a full discharge. However, if the tenant of old system land has notice that the mortgagee is

entitled to possession, it may no longer be safe to pay the mortgagor. In Re Ind Coope & Co Ltd [1911] 2 Ch 224 at 231,Warrington J said that the rent payable under a lease bearing date anterior to the mortgage is only received by the mortgagor in possession by leave and licence of the mortgagee. [page 347] Difficult cases occur where rent is paid in advance: see, for example, De Nicholls v Saunders (1870) LR 5 CP 589; Cook v Guerra (1872) LR 7 CP 132; Ashburton (Lord) v Nocton [1915] 1 Ch 274 especially at 290–1; and see SEAA Enterprises Pty Ltd v Figgins Holdings Pty Ltd [1998] 2 VR 90 at 99 ff (CA) (reversed on other grounds (1999) 196 CLR 245; 162 ALR 382). These are more fully considered in 12.13. Where the lease is after the mortgage, the lease under the old system is not binding on the mortgagee unless the mortgagee expressly or impliedly consents, but is binding as between the mortgagor and lessee: Thanes Pty Ltd v Custom Credit Corporation Ltd (1985) 5 BPR 11,955. Where the mortgagee had not consented to the lease, but sold subject to the tenancy, he was bound by the lease: Thomson and Chipp v Finlay (1886) NZLR 5 SC 203. These matters are considered in greater detail in the remainder of this chapter.

Obligations of mortgagee when bound by mortgagor’s lease 12.8 If a mortgagee consents to a lease by the mortgagor or is otherwise bound by it, that mortgagee is not bound by all the lessor’s covenants, nor is the mortgagee bound to perform them. All that occurs is that the mortgagee’s interest is subject to that of the lessee under the lease: Elite Promotions & Management Pty Ltd v SA Investments Pty Ltd (2011) 80 NSWLR 686 at 708 [107].

Relation of mortgagee and mortgagor 12.9

The relation of mortgagee and the mortgagor where the mortgagor is

in occupation has been the subject of much discussion, less from any real question as to the relative rights of the parties, than from the embarrassment which led one learned judge to declare that it was very dangerous to define the precise relation in which the mortgagor and mortgagee stand to each other in any other terms than those very words (Doe d Higginbotham v Barton (1840) 11 Ad & El 307 at 314; 113 ER 432 at 434); another, that one is much at loss as to the proper term in which to describe the relation (Doe d Jones v Williams (1836) 5 Ad & El 291 at 297; 111 ER 1175 at 1177); and a third, that it is sufficient to call them mortgagor and mortgagee, without having recourse to any other description of persons or to what they are most like: their rights, powers and interests being as well settled as any in the law: Birch v Wright (1786) 1 Term Rep 378 at 383; 99 ER 1148 at 1151–2; [1775-1802] All ER Rep 41; and see Williams v Coleman (1936) Tas LR 1 at 26–9; Parker-Tweedale v Dunbar Bank plc (No 1) [1991] Ch 12; [1990] 2 All ER 577 (CA); and Turner, The Equity of Redemption, Cambridge University Press, 1931, pp 88–110 (‘The Nature of the Mortgagor’s Possession’), especially at pp 94ff. It will, therefore, be sufficient to say that the mortgagor in possession, under such circumstances, is not, as he is sometimes called, tenant at will to the mortgagee. Unlike a tenant at will (see Ex parte Temple (1822) 1 GL & J 216, where the mortgagor was held entitled to the crops as tenant at will by express contract), the mortgagor in possession is not entitled to the crops growing on the land at the end of the tenancy (Re Gordon; Ex parte Official Receiver (1889) 61 LT 299), and he may be ejected without notice or demand for possession (Birch v Wright, above; Doe d Roby v Maisey (1828) 8 B & C 767; 108 ER 1228; see also Keech v Hall (1778) 1 Doug KB 21; 99 ER 17) unless the terms of the mortgage require notice: Commonwealth Trading Bank of Australia v Inglis [1966] Tas SR 104 (writ without demand); cf Austin Construction Co (Australia) Ltd v Becketts Holdings Pty Ltd (1958) 75 WN (NSW) 444. Subject to the terms of the mortgage the appointment of a receiver by the mortgagee has the effect of terminating the rights of the mortgagor with respect to possession: Woolston v Ross [1900] 1 Ch 788; Visbord v Federal Commissioner of Taxation (1943) 68 CLR 354.

[page 348] Nor is the mortgagor the mortgagee’s bailiff or receiver, because the mortgagor is not obliged to account to the mortgagee for rents: Birch v Wright, above. The mortgagor has, however, been called a tenant at will quodam modo (per Lord Mansfield, Moss v Gallimore (1779) 1 Doug KB 279 at 282; 99 ER 182 at 183; [1775]–[1802] All ER Rep 102 at 103. The mortgagor has also been said to be a tenant by, as distinguished from a tenant at, sufferance (see also Keech v Hall, above; and Moore v Shelley (1883) 8 App Cas 285), but these definitions barely mark, without explaining, the distinctions which they imply. The likeness of the mortgagor’s interest to that of a tenant at sufferance is so far correct, that it agrees with his position as one who comes in by right, and holds over without right: Thunder d Weaver v Belcher (1803) 3 East 449; 102 ER 669; Doe d Roby v Maisey, above; Bagnall v Villar (1879) 12 Ch D 812; Heath v Pugh (1881) 6 QBD 345 at 359. Accordingly, the mortgagor in possession may be described as one who, having parted with his immediate estate, remains in possession at the pleasure and consistently with the right of the grantee, exercising the ordinary rights of property as noted in 12.2ff.

Creation of tenancy in mortgagor 12.10 At general law the mortgagor may become tenant to the mortgagee either by virtue of a provision in the mortgage qualifying the mortgagee’s prima facie right to possession or under an attornment clause. The position with respect to general law mortgages cannot be applied uncritically to registered mortgages of Torrens title land because of the different nature of Torrens mortgages, as statutory charges; but the effect of the provisions of Victorian Torrens Act s 81(1) and Western Australian Torrens Act s 116 and common conveyancing devices, such as the use of attornment clauses, tends to produce an analogous result: see Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245; 162 ALR 382; 19.2 and also Chapter 4. Further, the provisions of a mortgage of Torrens title land may prevent the parties, or estop them, from denying an analogous general law

position: see 19.17 and 19.18. An equitable, unregistered, mortgage of Torrens land is to be equated more closely with a mortgage of general law land (rather than by analogy), and general law principles applied: see 19.11 and Chapter 4. Thus, as a matter of general law, a tenancy arises where there is a provision that the mortgage shall not be called in until the expiration of a given term, and that until default in payment it shall be lawful for the mortgagor peaceably to enjoy and receive the rents: Wilkinson v Hall (1837) 3 Bing NC 508; 132 ER 506; Gibbs v Cruickshank (1873) LR 8 CP 454 at 461; and see Moore v Lee (1871) 2 VR (L) 4. This amounts to a re-demise by the mortgagee to the mortgagor during the term fixed. This produces the same position as would be expected to apply to a Torrens mortgage, subject to the possible complication produced by the operation of the provisions of Victorian Torrens Act s 81(1) and Western Australian Torrens Act s 116; and see Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245; 162 ALR 382; 19.4 and also Chapter 4. In general terms the result is not the same where the covenant states that the mortgagee may enter after default, which is held not to imply that the mortgagor may remain in possession until default, but only to leave the mortgagee up to that time to rest upon his title under the mortgage, and afterwards to give him also the benefit of the covenant: Doe d Roylance v Lightfoot (1841) 8 M & W 553; 151 ER 1158. While the words used imply some right to possession in the mortgagor, they will not amount to a redemise to him, unless, as in Wilkinson v Hall, above, some certain time is fixed during which the [page 349] mortgagor is to hold: Doe d Parsley v Day (1842) 2 QB 147; 114 ER 58; and see Clowes v Hughes (1870) LR 5 Ex 160. It follows that no demise is created by a covenant that the mortgagee shall not sell or lease without a month’s notice demanding payment and default thereon, and although a tenancy may be created by sufficient words in the mortgage deed, it will not be allowed where the effect would be inconsistent

with the general object of the deed: Walker v Giles (1848) 6 CB 662; 136 ER 1407; Pinhorn v Souster (1853) 8 Exch 763; 1 WR 336; Thorn v Croft (1866) LR 3 Eq 193; cf Moore v Lee, above. Where the mortgagor is tenant to the mortgagee the nature of the tenancy will depend upon the language and intention of the deed or the mortgage instrument. The reservation of a yearly rent will not necessarily create a tenancy from year to year. A covenant for quiet enjoyment by the mortgagor, as tenant at will to the mortgagee and on payment of a yearly rent, will create only a tenancy at will at a yearly rent, even though coupled with a proviso that no possession shall be taken till the expiration of 12 months after notice of such intention to the mortgagor, no certain term being thereby created: Doe d Dixie v Davies (1851) 7 Exch 89; 155 ER 868. An agreement by the mortgagor to become tenant during the will and pleasure of the mortgagee at a rent payable on certain days in every year, will also create a tenancy at will, with rent payable at the rate of so much a year: Doe d Bastow v Cox (1847) 11 QB 122; 116 ER 421. The same effect has been said to be produced by a power for the mortgagee to enter at any time without notice, although the tenancy was nominally created for a term of years: Morton v Woods (1869) LR 4 QB 293; but see Re Threlfall; Ex parte Queen’s Benefit Building Society (1880) 16 Ch D 274. Where the mortgagor is tenant at will he cannot determine the tenancy by transferring his interest to another, without notice to the mortgagee (Pinhorn v Souster, above), but the death of the mortgagor determines it and his successor is not tenant to the mortgagee (Scobie v Collins [1895] 1 QB 375), and it seems that a tenancy at will which existed before the mortgage will not be determined by the mortgage: Doe d Goody v Carter (1847) 9 QB 863; 115 ER 1505. Generally, see (1969) 22 Current Legal Problems 129 (Ryder).

Attornment 12.11 A tenancy is also created where the mortgagor, being in occupation, attorns tenant to the mortgagee. The nature and purpose of an attornment clause are dealt with elsewhere: see 3.23 and 19.2. It is sufficient to state here that the tenancy created, while artificial in some respects, may nevertheless

have a use and the clause is in any case commonly inserted in mortgage deeds and instruments of mortgage of land under the Torrens system. The type of tenancy created will depend on the terms of the mortgage deed or instrument of mortgage. ‘The attornment is the act of the tenant’s putting one person in the place of another as his landlord’: Cornish v Searell (1828) 8 B & C 471 at 476; 108 ER 1118 at 1119 per Holroyd J — in this case, an act which was necessary at common law to complete an assignment of the reversion after the statute Quia Emptores 1289–90 (18 Edw 1). Today, ‘attornment’ is not used in this technical sense. It means, in mortgages, an acknowledgment or admission by the mortgagor that the relationship of landlord and tenant exists between them. Whether an actual tenancy is created between mortgagor and mortgagee at general law is open to doubt. Brett LJ, in Ex parte Voisey; Re Knight (1882) 21 Ch D 442 (CA) at 457, described an attornment clause as a ‘contract’ whereas Jessel MR at 456 said: ‘In this case we have an attornment to the legal owner by deed executed [page 350] by the tenant in possession and delivered to the legal owner — very good evidence of a tenancy — evidence, therefore, of an agreement for a tenancy, and, as was said in Ex parte Punnett; Re Kitchin (1880) 16 Ch D 226 (CA), that is an estoppel in pais which would prevent the tenant from denying the tenancy. Therefore, there is in this case a well created tenancy.’ Ramsbotham, Coote’s Treatise on the Law of Mortgages, 9th ed, Stevens and Sons, Sweet & Maxwell, London, 1927, p 668 says, in relation to general law mortgages: ‘The attornment creates a tenancy by estoppel’; and see Cole on Ejectment, H Sweet, London, 1857, pp 219, 230. Second or subsequent mortgagees of general law land would appear to be in the same position as first mortgagees in relation to attornment clauses. As to this, Dixon J in Partridge v Mcintosh and Sons Ltd (1933) 49 CLR 453 at 467–8 said: Under the general law a mortgagor in possession who gives a second mortgage assigns to the second mortgagee his equitable estate and, as between themselves, confers upon the second mortgagee, subject to the covenants contained in the mortgage, the right to possession. No difficulty arises, therefore, in conceiving the second mortgagee as first assuming possession and

then letting the mortgagor back into possession as his tenant.

While a true tenancy may arise under attornment clauses in general law mortgages, this is not the case in registered mortgages: Partridge v Mcintosh and Sons Ltd. In that case, Dixon J said at 468: … a statutory mortgagee under the Real Property Act has no immediate right to possession of the mortgaged premises as against the mortgagor. He cannot be considered as having let the mortgagor into possession under him. The estoppel between the parties is, therefore, entirely conventional. It is not the consequence of the acceptance by one party of possession from another, actual or notional. It depends altogether upon the acknowledgment expressed in the attornment clause.

And see Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245; 162 ALR 382 and also 19.2. Reference might also be made to Ex parte Wilson; Re Bavister (1925) 25 SR (NSW) 375; Ex parte Jackson; Re Australian Catholic Assurance Co Ltd (1941) 41 SR (NSW) 285; Australian Express Pty Ltd v Pejovic [1963] NSWR 954; also Tropical Traders Ltd v Goonan [1964] WAR 234, reversed by (1963) 111 CLR 41 (cf Australia and New Zealand Bank Ltd v Strelitz [1964] NSWR 401); Regent Oil Co Ltd v J A Gregory (Hatch End) Ltd [1966] Ch 402; [1965] 3 All ER 673 (CA); Permanent Finance Corp Ltd v Flavel; Ex parte Flavel [1968] Qd R 84; and City Mutual Life Assurance Society Ltd v Lance Creek Meat Works Pty Ltd [1976] VR 1; and see also Woodfall’s Law of Landlord and Tenant, loose leaf ed, Sweet & Maxwell, London, 1994, [6.079]–[6.084]. Attornment clauses were originally included in mortgages to enable the mortgagee to distrain for rent: Woolwich Equitable Building Society v Preston [1938] Ch 129; Partridge v Mcintosh and Sons Ltd (1933) 49 CLR 453. This purpose is no longer served, as distress for rent has been abolished in most jurisdictions: see 19.27. The main purpose now served is to render available summary ejectment procedure in, for example, Local Courts (NSW) and Magistrates Courts (Vic): see Ex parte Wilson; Re Bavister (1925) 25 SR (NSW) 375; Australian Express Pty Ltd v Pejovic [1963] NSWR 954; Australia and New Zealand Bank Ltd v Strelitz [1964] NSWR 401; Perpetual Executors and Trustees Assoc of Australia Ltd v Eades (No 1) and (No 2) [1925] VLR 82 and 224 respectively; Dudley and District Benefit Building Society v Gordon [1929] 2 KB 105; and City Mutual Life Assurance Society Ltd v Lance Creek Meat Works Pty Ltd [1976] VR 1. In Victoria, a first mortgagee may take proceedings to recover possession

in a Magistrates Court under Transfer of Land Act (1958) s 81(1) (which is to the same effect as Transfer of Land Act 1893 (WA) s 116): Farrington v Smith (1894) 20 VLR 90; Equity Trustees Executors and Agency Co Ltd v Lee [1914] VLR 57; Perpetual Executors and [page 351] Trustees Assoc of Australia Ltd v Eades (No 1) and (No 2), above; Commissioners of the State Savings Bank of Victoria v Millane [1931] VLR 18; and City Mutual Life Assurance Society Ltd v Lance Creek Meat Works Pty Ltd [1976] VR 1 at 11; but see Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245; 162 ALR 382 and also 19.2. Attornment clauses may also enable the mortgagee to sue assignees of the mortgagor for breach of covenant: see Regent Oil Co Ltd v J A Gregory (Hatch End) Ltd [1966] Ch 402 (CA); and Robinson, Drafting, Butterworths, Sydney, 1973, p 302. However characterised, an attornment clause will preclude the mortgagee taking actual possession as long as the ‘term’ created subsists: see Commonwealth Trading Bank of Australia v Inglis [1966] Tas SR 104. Although a mortgagor may not be regarded as a ‘protected’ tenant (see Australian Express Pty Ltd v Pejovic [1963] NSWR 954), regard should be had to the provisions of legislation such as Residential Tenancies Act 1987 (NSW) Pt 5; Residential Tenancies Act 1997 (Vic) Pt 6; Residential Tenancies Act 1975 (Qld) Pt 3; Property Law Act 1969 (WA) s 72. Whether or not the mortgage contains an attornment clause, where the term of the mortgage has expired the mortgagee seeking to recover possession need not comply with Property Law Act 1958 (Vic) s 146 or its equivalents: Gunnion v Ardex Acceptance Pty Ltd [1968] VR 547.

Liability of mortgagor in possession 12.12 While in possession the mortgagor may not diminish the security so as to make it insufficient. Waste, for example, by felling timber or pulling down a house, or other conduct which would prejudice the security, will be restrained by injunction: generally see 16.1 and 42.20.

C. Tenancy before the Mortgage Reversion vests in the mortgagee 12.13 A registered lease of Torrens system land will be binding on the mortgagee under the paramountcy and priority provisions of the Torrens system legislation. An unregistered lease will affect a subsequent registered mortgagee only if it falls within the exceptions to the indefeasibility principles, as to which see: NSW Torrens Act s 42(1)(d); Victorian Torrens Act s 42(2)(e); Queensland Torrens Act s 185(1)(b); South Australian Torrens Act s 69 Pt VIII;Western Australian Torrens Act s 68;Tasmanian Torrens Act s 40(3)(d); cf the position where the tenancy is granted after the mortgage, see Independent Order of Oddfellows of Victoria Friendly Society v Telford (1991) V ConvR ¶54-419; Commonwealth Bank of Australia v Baranyay [1993] 1 VR 589; Commonwealth Bank of Australia v Figgins Holdings Pty Ltd [1994] 2 VR 505 at 510; (1994) V ConvR ¶54-492 at ¶65,691 and ¶65,693 (Hayne J) (and see, on appeal in related, but other, proceedings, Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245); and see 12.17ff and 19.2ff. Whether a registered mortgagee is bound by the special rights in Tenant Protection legislation (see, for example, Landlord and Tenant (Amendment) Act 1948 (NSW) s 8(1); Landlord and Tenant Act 1958 (Vic) s 43(1)), the position may depend on whether or not the mortgagee had notice of the tenancy at the time of the mortgage: see Cambridge Acceptance Pty Ltd v Fetherston [1965] NSWR 1513; United Starr-Bowkett Co-operative Building Society Ltd (No 11) v Clyne [1968] 1 NSWR 134; Australia and New Zealand Bank Ltd v Sinclair [1968] 2 NSWR 26. The result may be different depending upon whether or not proceedings for ejectment are necessary. Under a freehold mortgage of general law land the entire reversion in the land subject to the lease passes to the mortgagee, and with it the right to receive the future rents, and the other rights incident to the estate which belonged to the mortgagor: Rogers [page 352]

v Humphreys (1835) 4 Ad & El 299 at 314; 111 ER 799 at 805; Trent v Hunt (1853) 9 Exch 14; 156 ER 7. Arrears of rent do not pass without express words: Salmon v Dean (1851) 3 Mac & G 344; 42 ER 293. Where owners of a property sold it, retaining a right to reside therein for life, this created a tenancy which was binding on a subsequent mortgagee: Skipton Building Society v Clayton [1993] TLR 172 (CA). The mortgage operates as a concurrent lease and carries the reversion upon the existing term with the rights: Neale v Mackenzie (1836) 1 M & W 747; 150 ER 635; Harmer v Bean (1853) 3 Car & Kir 307; 175 ER 566: cf Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245 at 282–3; 162 ALR 382 at 406 (Mc Hugh J); and see 19.4. See NSW Act s 117;Victorian Act s 141; Queensland Act s 117; in South Australia, see Grantees of Reversions Act 1540 (UK); Western Australian Act 1969 s 77; Tasmanian Act s 10; Property Law Act 1952 (NZ) s 112 and the liabilities incident thereto: NSW Act s 118; Victorian Act s 142; Queensland Act s 118; in South Australia, see Grantees of Reversion Act 1540 (UK);Western Australian Act s 78;Tasmanian Act s 11; Property Law Act 1952 (NZ) s 113; English Act s 142(1), replacing 32 Hen 8, c 34 (1540) (Grantees of Reversions) s 2; and see the Conveyancing Act 1881 (UK) s 11(1). The tenant may nevertheless safely pay the rent to the mortgagor, provided it is rent due and not a payment in anticipation on account of rent (De Nicholls v Saunders (1870) LR 5 CP 589; Cook v Guerra (1872) LR 7 CP 132), so long as the mortgagor is allowed by the mortgagee to receive it, for although the assurance is effective as to the mortgagee’s rights against the tenant, without an attornment by the latter, the tenant is not prejudiced by payment of the rent to the mortgagor, nor does the tenant thereby incur liability for breach of any covenant for non-payment of rent before notice of the mortgage: see NSW Act s 125;Victorian Act s 151; Property Law Act 1952 (NZ) s 113. If the tenant pays rent to the mortgagor after notice to pay to the mortgagee and is afterwards compelled to pay the latter, the payment, being voluntary, cannot afterwards be recovered from the mortgagor: Higgs v Scott (1849) 7

CB 63; 137 ER 26. If at the time of the mortgage the tenant has paid rent in a lump sum in advance under an arrangement with the mortgagor, this binds the mortgagee, since the mortgagee should inquire as to the terms on which the tenant holds: Green v Rheinberg (1911) 104 LT 149; Grace Rymer Investments Ltd v Waite [1958] Ch 831 at 847; [1958] 2 All ER 777 at 781, 782 (CA). For an example of a mortgagee allowing the mortgagor to continue to receive rents from sub-tenants, see Rhodes v Allied Dunbar Pension Services Ltd [1989] 1 All ER 1161; [1989] 1 WLR 800 (CA). The appointment of a receiver by the mortgagee did not affect the position, since the receiver was the agent of the mortgagor (as to this see 18.5). If the mortgagee goes into possession and gives notice to the tenant, the tenant cannot set off against the rent a personal claim the tenant has against the mortgagor: Reeves v Pope [1914] 2 KB 284; Citibank Pty Ltd v Simon Fredericks Pty Ltd (1991) V ConvR ¶54-408; and see 19.3. If the mortgagor himself is in possession of the mortgaged property under a lease made to him before the mortgage, the mortgagor is not estopped from setting up the lease merely because in a conveyance of the legal estate in fee simple of the mortgage property it was recited that he was seised in unencumbered fee simple in possession: District Bank Ltd v Webb [1958] 1 All ER 126; [1958] 1 WLR 148. [page 353]

Notice of mortgage to tenant 12.14 If the mortgagee takes possession or gives notice to the tenant holding under a tenancy prior to the mortgage, his title relates back to the date when his right first accrued. (The expenses of drafting more than one notice cannot be charged as mortgagee’s costs, however many tenants there may be: Re Tweedie (1908) 53 Sol Jo 118.) Thus, a mortgagee can sue a trespasser for a trespass committed before he took possession (Ocean Accident and Guarantee Corp Ltd v Ilford Gas Co [1905] 2 KB 493 (CA)); and he becomes entitled to and may sue for the rent in arrears since the mortgage, and also for that which subsequently accrues: Moss v Gallimore

(1779) 1 Doug KB 279; 99 ER 182; [1775]–[1802] All ER Rep 102. (But distress for rent has now been abolished in most Australian jurisdictions: see 19.12. This is so whether the tenant holds under a lease, or from year to year.) The mortgagee may sue a tenant, claiming under an agreement for a lease made by the mortgagor, for use and occupation (Rawson v Eicke (1837) 7 Ad & El 451; 112 ER 539); and he may do so even though, after the mortgage, the terms of the holding have, by agreement between the tenant and the mortgagor, been varied so as to increase the rent, such an agreement being considered not to alter the relative positions of the mortgagee and the tenant, but to be adopted by the former as the act of an agent, and to entitle him to recover for the additional as well as the original rent: Burrowes v Gradin (1843) 1 Dowl & L 213; 12 LJ QB 333. (Compare the position in relation to surrender of leases by operation of law by reason of their alteration: see Bradbrook, Croft and Hay, Commercial Tenancy Law, 3rd ed, LexisNexis Butterworths, Sydney, 2009, [16.1]; see also Pascoe-Webbe v Nusuna Pty Ltd (1985) 3 BPR 9620 at 9622–3 (Young J).) The mortgagor, after the mortgagee has taken possession, has no remedy against the tenant in respect of rent alleged to be due from him (Underhay v Read (1887) 36 WR 75, affirmed 36 WR 298 and 20 QBD 209), even where the mortgagee has refused to apply for it: Salmon v Dean (1849) 14 Jur 235; see, on appeal, at (1851) 3 Mac & G 344; 42 ER 293. In the latter case, the mortgagor’s only remedy is against the mortgagee on taking the accounts. A registered mortgagee of Torrens title land is not entitled to possession until default: see 19.2.

Rent of furnished house 12.15 As to property to which the mortgagee has no claim (such as furniture in a mortgaged house, which has become vested in the mortgagor’s assignees in bankruptcy), if the tenant of a house and furniture, after notice from the mortgagee, pays the whole rent to the mortgagee, then the tenant may be sued again for the use of the furniture in which the mortgagee had no interest; for either the rent may be apportioned, or, upon the entry of the mortgagee, a new agreement may be inferred, for the letting of the different kinds of property at several rents: Salmon v Matthews (1841) 8 M & W 827; 151 ER 1275; and see Hoare (Charles) & Co v Hove Bungalows Ltd (1912)

56 Sol Jo 686. In relation to the disposal of furniture and other chattels left on the premises and the abolition of the remedy of distress for rent in most jurisdictions, see 19.26 and 19.27.

Leases granted by prospective purchasers 12.16 If a person purports to grant a lease of land in which he has no legal estate, he is estopped from repudiating the tenancy. If the lessor later acquires the legal estate in the land, the estoppel is fed and the tenancy becomes a legal tenancy. This matter is dealt with subsequently: see 12.21. [page 354]

D. Tenancy after the Mortgage Lease by mortgagor 12.17 As a matter of general law the mortgagor being unable to confer upon another a greater right than he himself possesses, it follows that a tenant of the mortgagor, claiming under a lease made after the mortgage, without the privity of the mortgagee, was (and, in cases outside the mortgagor’s statutory powers of leasing (see 12.22ff), still remains) like his lessor, liable to be ejected without notice. (See, for example, Dudley and District Benefit Building Society v Emerson [1949] Ch 707; [1949] 2 All ER 252 (CA); Parker v Braithwaite [1952] 2 All ER 837; Wilson v Kelly [1957] VR 147; Taylor v Ellis [1960] Ch 368; [1960] 1 All ER 549; Stroud Building Society v Delamont [1960] 1 All ER 749; Baring Bros & Co Ltd v Hovermarine Ltd (1971) 219 Estates Gazette 1459; Quennell v Maltby [1979] 1 All ER 568; [1979] 1 WLR 318 (CA); Commonwealth v Orr (1981) 40 ACTR 21 at 23; affirmed (1981) 37 ALR 653.) See also Britannia Building Society v Earl [1990] 2 All ER 469 at 472; [1990] 1 WLR 422 at 425, where the corresponding part of the 10th English edition of this work is cited. A tenant ordinarily has no remedy except against the mortgagor: Keech v Hall (1778) 1 Doug KB 21; 99 ER 17; Rogers v Humphreys (1835) 4 Ad & El 299; 111 ER 799; Trent v Hunt (1853) 9 Exch 14; 156 ER 7; United StarrBowkett Co-operative Building Society (No 11) Ltd v Clyne (1967) 68 SR

(NSW) 331 at 338; Britannia Building Society v Earl [1990] 2 All ER 469 (see at 472, citing the corresponding passage of the 10th English edition of this work); Citibank Pty Ltd v Simon Fredericks Pty Ltd (1991) V ConvR ¶54-408; Commonwealth Bank of Australia v Baranyay [1993] 1 VR 589; and see 19.3. A tenant ejected without notice in these circumstances is entitled to redeem the mortgage: Tarn v Turner (1888) 57 LJ Ch 452; affirmed 39 Ch D 456 (CA). Such a lease is binding on the mortgagor by estoppel (see 12.20), and the tenant is estopped from disputing the mortgagor’s title. The mortgagor’s power to grant a lease binding between himself and the tenant is not affected by the statutory leasing provisions (as to which, see 12.24): Iron Trades Employers Insurance Association Ltd v Union Land and House Investors Ltd [1937] Ch 313; [1937] 1 All ER 481. Unless there is an express assurance of the mortgagee’s rights against the mortgagor, a lease which is void as between the mortgagee and lessee is void against a purchaser on the mortgagee exercising the mortgagee’s power of sale: Rust v Goodale [1957] Ch 33 at 44; Wilson v Kelly [1957] VR 147. However, the tenancy will be effective against the mortgagee if he treats the tenant as his own: see 12.21; see also Bradbrook Croft & Hay, Commercial Tenancy Law in Australia, 3rd ed, [1.14]. Consent to the lease may be found from positive affirmative acts of the mortgagee: Harman & Co Solicitor Nominee Company v Secureland Mortgage Investment Nominees Ltd [1992] 2 NZLR 416. Where there are two successive mortgages and the first is discharged there is no moment of time in which a tenancy created contrary to the terms of the subsequent mortgage becomes binding on the subsequent mortgagee: Walthamstow Building Society v Davies [1990] 22 HLR 60; (1989) Times, 9 November.

Mortgage under the Torrens System 12.18 The mortgagor of Torrens system land, as the registered proprietor of the freehold estate, derives the right to possession as against a mortgagee from his legal ownership. In Victoria and Western Australia the position is altered in relation to first registered mortgagees by Victorian Torrens Act s 81(1) and Western Australian Torrens Act s 116, which vest in the mortgagee (in Victoria, the

first mortgagee only; cf Western Australia) the same rights and remedies at law and in equity as if the mortgagee was possessed of the legal estate: see Farrington v Smith (1894) 20 VLR 90; Connolly v Ryan (1922) 30 CLR 498; Gunnion v Ardex Acceptance Corp Pty Ltd [1968] VR 547; City Mutual Life [page 355] Assurance Society Ltd v Lance Creek Meat Works Pty Ltd [1976] VR 1; Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245; 162 ALR 382; see also Bank of New South Wales v Hartman (1955) 72 WN (NSW) 382; McDonald v Lloyd (1931) 31 SR (NSW) 415; and see 19.4 and 19.7. It follows that once the mortgagee does become entitled to possession of the mortgaged land the position at general law is applicable; particularly as a lease granted subsequently to a registered mortgage would not attract the indefeasibility exception provisions of the Torrens legislation which are directed to protecting the interests of existing tenants in possession as against subsequent registered dealings: see NSW Torrens Act s 42(1)(d); Victorian Torrens Act s 42(2)(e); Queensland Torrens Act s 185; South Australian Torrens Act s 69 Pt VIII; Western Australian Torrens Act s 68; Tasmanian Torrens Act s 40(3)(d). As to the position where the tenancy is granted after the mortgage, see Corbett v Plowden (1884) 25 Ch D 678; Independent Order of Oddfellows of Victoria Friendly Society v Telford (1991) V ConvR ¶54-419; Commonwealth Bank of Australia v Baranyay [1993] 1 VR 589; Commonwealth Bank of Australia v Figgins Holdings Pty Ltd [1994] 2 VR 505 at 510; (1994) V ConvR ¶54-492 at ¶65,691 and ¶65,693 (Hayne J) (and see, on appeal in related, but other, proceedings, Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245); 162 ALR 382 and Epsworth Group Holdings Pty Ltd v Permanent Custodians Ltd [2010] SASC 327; 108 SASR 536; see 12.22ff. In Balanced Securities Ltd v Bianco [2010] VSC 201; (2010) 27 VR 599, the tenancy was created after the mortgage was created, but before its registration. The mortgagee was held entitled to possession. The vital date

was the date of creation of the mortgage, not the date of its registration. Additionally, NSW Torrens Act s 53(4) invalidates as against a mortgagee a lease to which he has not consented prior to its registration: see also the other Torrens Acts, namely Victoria s 66(2); Qld s 65; SA s 118; WA s 91; and see Commonwealth v Orr (1981) 58 FLR 219. This applies to a lease which need not be registered, that is, to a lease for less than three years (Parkinson v Braham (1962) 62 SR 663): Perpetual Finance Corp Ltd v Blain (1996) 9 BPR 16,243 (Giles CJ Com D); but cf Daniher v Fitzgerald (1919) 12 SR (NSW) 260 where it was held that the New South Wales provisions do not apply to oral or implied leases; and see Bradbrook Croft & Hay, Commercial Tenancy Law, 3rd ed, [5.16]. Only the Victorian provisions,Transfer of Land Act s 66(2), make it clear they only apply to a registered lease and such lease must in fact be registered: see Wilson v Kelly [1957] VR 147; see also 12.23. It has been held that these provisions do not operate, by negative implication, to make binding upon a mortgagee an unregistered lease not requiring registration and entered into after the date of the mortgage: English Scottish and Australian Bank Ltd v City National Bank Ltd [1933] St R Qd 81; see also Parkinson v Braham (1962) 62 SR (NSW) 663, discussed (1962) 35 ALJ 383. The same principles were applied where the mortgagor purported to grant a profit á prendre after registration of a mortgage: Alliance Acceptance Co Ltd v Ellison (1986) 5 NSWLR 102, affirmed as Vukicevic v Alliance Acceptance Co Ltd (1987) 9 NSWLR 13. It should also be noted that the paramountcy provisions of the Torrens legislation which protect the position of a tenant in possession refer to the interest of such a tenant at the time the mortgage is taken, and not at any subsequent time (as, for example, the time at which the power of sale is exercised: see Chapter 20).

New tenancy under mortgagee 12.19 The mortgagee may treat the mortgagor’s tenant as his own. Until the relation of landlord and tenant has been established between the mortgagee and the occupier, [page 356]

the mortgagee cannot bring an action for rent and the mortgagee is not entitled to arrears of rent due at the date of his taking possession: Corbett v Plowden (1884) 25 Ch D 678; Kitchen’s Trustee v Madders [1950] Ch 134; [1949] 2 All ER 1079 (CA); and see 19.27 in relation to the abolition of the remedy of distress for rent in most jurisdictions. However, if the mortgagee recognises the occupier as his own tenant, the mortgagee cannot afterwards treat the occupier as a trespasser: Birch v Wright (1786) 1 Term Rep 378; 99 ER 1148; [1775]–[1802] All ER Rep 41. With land under the old system, the effect of recognition by the mortgagee is not to set up the lease made by the mortgagor, but to create a new tenancy (Corbett v Plowden (1884) 25 Ch D 678 at 681, 682 (CA)); hence it follows that no claim the tenant may assert against the mortgagor with respect to the previous tenancy between the tenant and the mortgagor would be maintainable against the mortgagee. However, the position is probably different under the Torrens system: Thomson and Chipp v Finlay (1886) NZLR 5 SC 203. Where the tenancy of a dwelling-house is effective against the mortgagee, Tenants’ Protection legislation may apply: Barclays Bank plc v Zaroovabli [1997] Ch 321; [1997] 2 All ER 19; and see Bolton Building Society v Cobb [1965] 3 All ER 814; [1966] 1 WLR 1 and Royal Bank of Scotland plc v Miller [2002] QB 255. Neither a mere notice to the tenant requiring him to pay rent to the mortgagee (without an attornment or other evidence of the tenant’s consent), nor an authority to him from the mortgagor to pay rent to the mortgagee (though communicated to and acted upon by the tenant) would make him the tenant of the mortgagee, or entitle the latter to distrain for the subsequent rent (in jurisdictions where such relief is available: see 19.2): Evans v Elliot (1838) 9 Ad & El 342; 112 ER 1242; Towerson v Jackson [1891] 2 QB 484 (CA). A subsequent attornment by the tenant would not set up the mortgagee’s title by relation from the time at which a previous notice was given: Evans v Elliot. Nor was the change of tenancy established only by proof of payment of interest, as such, by the person in possession of the land (Doe d Rogers v Cadwallader (1831) 2 B & Ad 473; 109 ER 1218); but it was held to be effected if the mortgagee or his agent called on the mortgagor’s tenant to pay (and the latter did pay) the interest of the mortgagee instead of rent to the mortgagor: Doe d Whitaker v Hales (1831) 7 Bing 322; 131 ER 124. As to

evidence of the recognition of the tenancy, see Keech v Hall (1778) 1 Doug KB 21; 99 ER 17; Smith v Eggington (1874) LR 9 CP 145. As to a lease contemporaneously with the mortgage, see Rogers v Humphreys (1835) 4 Ad & El 299; 111 ER 799; and see Kitchen’s Trustee v Madders [1949] Ch 588; [1949] 2 All ER 54. Actual payment of rent to the mortgagee will create a tenancy between the tenant and the mortgagee: Keith v R Gancia & Co Ltd [1904] 1 Ch 774 (CA); Parker v Braithwaite [1952] 2 All ER 837; Stroud Building Society v Delamont [1960] 1 All ER 749; Chatsworth Properties Ltd v Effiom [1971] 1 All ER 604 (CA); Baring Bros & Co Ltd v Hovermarine Ltd (1971) 219 Estates Gazette 1450. See (1976) 120 Sol Jo 497 (Markson); (1978) 128 NLJ 773 (Waite); cf National Australia Ltd v Flair Realty Pty Ltd (1992) ANZ ConvR 241 at 242. The bare fact of receipt of rent by a receiver who, though appointed by the mortgagee, is the agent of the mortgagor does not create a tenancy by estoppel against the mortgagee: Commonwealth Bank of Australia v Baranyay [1993] 1VR 589 at 599–600. Such tenancy will usually be a yearly or periodic one and not necessarily on the terms of the old tenancy: Keith v R Gancia & Co Ltd, above. In the absence of any statutory power or right conferred on the mortgagor to lease under the terms of the mortgage, a mortgagee is not restricted in the conditions that may be imposed on giving its consent to a lease by the mortgagor: but see Thanes Pty Ltd v Custom Credit Corporation Ltd (1985) 5 BPR 97,422, where it was held that such conditions could not amount to a clog on the equity of redemption; see also Commonwealth v Orr (1981) 40 ACTR 21 at 23; affirmed (1981) 37 ALR 653. [page 357]

Estoppel in favour of mortgagor 12.20 Although the lease made after the mortgage was thus void against the mortgagee, yet, since the tenant would not dispute his landlord’s title, the lease was good against the mortgagor until the mortgagee interfered: Trent v Hunt (1853) 9 Exch 14; 156 ER 7; and see Hutchinson v Scott (1905) 3 CLR 359; Commonwealth v Orr (1981) 40 ACTR 21 at 23, affirmed (1981) 37

ALR 653; Thanes Pty Ltd v Custom Credit Corporation Ltd (1985) 5 BPR 97,422. After the mortgagee has obtained payment of the rent, the tenant, in defending himself against a subsequent action by the mortgagor, was still not allowed to deny the mortgagor’s title; he must admit it and then show that it had been determined and that he had been compelled to make the payment to the mortgagee: Underhay v Read (1887) 20 QBD 209 (CA). The tenant’s interest by estoppel might be converted into a lease in interest by the consent of the mortgagee; so that a purchaser from the mortgagor, making a conveyance in which the mortgagee concurred, would have a remedy against the lessee on his covenants: Webb v Austin (1844) 7 Man & G 701; 135 ER 282. The mortgagor’s interest by estoppel also passed by descent to his heir, and by purchase to an assignee who might sue the tenant on the covenants in the lease (Cuthbertson v Irving (1859) 4 H & N 742; 157 ER 1034; affirmed (1860) 6 H & N 56; 158 ER 56), but there was no estoppel where the lease disclosed that the land was mortgaged, and that the lessor had only an equity of redemption. The lessee’s covenants were then only in gross and could not be sued upon by the assignee of the mortgagor: Pargeter v Harris (1845) 7 QB 708; Saunders v Merryweather (1865) 3 H & C 902; 159 ER 790; but cf Morton v Woods (1869) LR 4 QB 293 at 303, referring to Jolly v Arbuthnot (1859) 4 De G & J 224; 45 ER 87. As to the creation of leases by estoppel generally, see Bradbrook and Croft, Commercial Tenancy Law in Australia, 2nd ed, [1.15] (and see [5.16] in relation to mortgagors and mortgagees); and see the discussion of Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; 76 ALR 513.

Feeding the estoppel 12.21 It not uncommonly happens that, after contract but before completion, a purchaser of land will purport to grant a lease of the land he has agreed to purchase. This creates a tenancy by estoppel. The ‘lessor’ is estopped from repudiating the tenancy and the ‘tenant’ is estopped from denying its existence: see Cuthbertson v Irving (1859) 4 H & N 742; 157 ER 1034; affirmed (1860) 6 H & N 56; 158 ER 56; Iron Trades Employers Insurance Association Ltd v Union Land and House Investors Ltd [1937] Ch

313; [1937] 1 All ER 481; Commonwealth v Orr (1981) 40 ACTR 21; affirmed (1981) 37 ALR 653; see 19.27. On completion the estoppel created by the grant is fed by the legal interest acquired by the purchaser on conveyance and the tenancy becomes a legal tenancy: Webb v Austin (1844) 7 Man & G 701 at 724; 135 ER 282 at 291; and see Hughes v Waite [1957] 1 All ER 603; City Permanent Building Society v Miller [1952] Ch 840 (CA); Grace Rymer Investments Ltd v Waite [1958] Ch 831; Whitehorn Bros v Davison [1911] 1 KB 463 at 481; Lucas v Smith [1926] VLR 400 at 403–4 and Allsop v Marshall (1942) 59 WN (NSW) 159 at 161–2. Where the purchase is made with the assistance of an advance on mortgage, although the conveyance and mortgage may, and often will, be executed simultaneously, it was held that there are two separate transactions: see Church of England Building Society v Piskor [1954] Ch 553; [1954] 2 All ER 85. On this approach it was thought that the conveyance must precede the mortgage for a short period of time, for the purchaser-mortgagor must have the legal estate vested in him free from the mortgage for the mortgage to be [page 358] effective. This moment of time was sufficient to feed the estoppel created by the grant of the tenancy, with the result that the lease was binding on the mortgagee even if the mortgage excluded the statutory power of leasing. This doctrine applied where there was a valid grant at a time when the purchasermortgagor had some interest in the property. The House of Lords in Abbey National Building Society v Cann [1991] 1 AC 56; [1990] 1 All ER 1085 rejected this approach. Lord Oliver said (at AC 93; All ER 1100): The reality is that the purchaser of land who relies on a building society or bank loan for the completion of his purchase never in fact acquires anything but an equity of redemption, for the land is, from the very inception, charged with the amount of the loan without which it could never be transferred at all and it was never intended that it should be otherwise. The ‘scintilla temporis’ is no more than a legal artifice …

His Lordship adopted the reasoning of the Court of Appeal in Re Connolly Bros Ltd (No 2) [1912] 2 Ch 25 and of Harman J in Coventry Permanent Economic Building Society v Jones [1951] 1 All ER 901 and held that Piskor’s case was wrongly decided.

Lord Jauncey also agreed that Piskor’s case was wrongly decided in this respect and adopted the reasoning of Harman J in the Coventry case (see AC 101; All ER 1107). The other members of the House agreed. Similar reasoning had been applied by the New South Wales Supreme Court in relation to Torrens title land in Allsop v Marshall, above. As appears from the judgment of Brereton J in Austin Construction Co (Australia) Ltd v Becketts Holdings Pty Ltd (1958) 75 WN (NSW) 444 at 447, the special nature of a Torrens mortgage (as a statutory charge, see Chapter 4) made no difference: It is not contested that a lease, prior in date to that of the mortgage, which fell within the exceptions to the Real Property Act, 1900, s 42, and of which the mortgagee had notice, would be binding as against the mortgagee. There is, however, no allegation of notice in the pleadings. Moreover, even assuming that a lease valid contra mundum took effect as from the date of completion, it is beyond question that the mortgage, which does not involve the passing of any estate to the mortgagee, took effect as a charge on the land the same instant, registration being necessary only for protection. It was therefore certainly not a prior lease, and pending registration of the transfer, it was equitable only. There were therefore, till registration, competing equitable interests simultaneous in origin, and on registration the mortgage, in the absence of notice, was protected by s 42, even though eo instanti the lease became a legal one. If on the other hand one regards the lease not as a prior dealing, but as having been made by a mortgagor, it was ultra vires by virtue of the Conveyancing Act, 1919-1954, s 106 (11) and cl 16 of the mortgage.

See generally (1964) 80 LQR 370 (Prichard); [1991] Conv 116 (Baughen); [1991] Conv 155 (Evans).

Statutory power of leasing 12.22 The inconvenience (in the absence of express provision in the mortgage deed: Carpenter v Parker (1857) 3 CBNS 206; 140 ER 718) of neither the mortgagor nor the mortgagee alone being able to make a lease which would be valid against the other, was remedied, in relation to mortgages of general law land, by Conveyancing Act 1881 (UK) s 18, which is now replaced by s 99 of the English Act and its equivalents (NSW Act s 106; Victorian Act s 99; Tasmanian Act s 19). The Victorian section provides that, if and so far as a contrary intention is not expressed in the mortgage deed, or otherwise in writing, and subject to the terms of the mortgage deed or of any such writing, and the provisions therein contained, leases may be made as follows: 99(1) A mortgagor of land while in possession shall, as against every incumbrancer, have power to make from time to time any such lease of the mortgaged land, or any part thereof, as is by this section authorized.

(2) A mortgagee of land while in possession shall, as against all prior incumbrancers (if any) and as against the mortgagor, have power to make from time to time any such lease as aforesaid. (3) The lease which the section authorizes is a lease for a term not exceeding seven years [cf s 106(3) of the NSW Act which provides for five years].

[page 359] (4) Every person making a lease under this section may execute and do all assurances and things necessary or proper in that behalf. (5) Every such lease shall be made to take effect in possession not later than three months after its date [similarly NSW Act s 106(5) which provides for three months]. (6) Every such lease shall reserve the best rent that can reasonably be obtained, regard being had to the circumstances of the case, but without any fine being taken or rent made payable in advance [cf NSW Act s 106(6)]. (7) Every such lease shall contain a covenant by the lessee for payment of the rent, and a condition of re-entry on the rent not being paid within a time therein specified not exceeding thirty days [cf NSW Act s 106(7) which provides for thirty days in a similar context but which also provides that the covenants implied by s 84 of that Act shall not be excluded]. (8) A counterpart of every such lease shall be executed by the lessee and delivered to the lessor, of which execution and delivery the execution of the lease by the lessor shall, in favour of the lessee and all persons deriving title under him, be sufficient evidence. (9) In case of a lease by the mortgagor, he shall, within one month after making the lease, deliver to the mortgagee, or, where there are more than one, to the mortgagee first in priority, a counterpart of the lease duly executed by the lessee, but the lessee shall not be concerned to see that this provision is complied with. (10) A contract to make or accept a lease under this section may be enforced by or against every person on whom the lease if granted would be binding. (11) This section shall apply only if and as far as a contrary intention is not expressed by the mortgagor and mortgagee in the mortgage deed, or otherwise in writing, and shall have effect subject to the terms of the mortgage deed or of any such writing and to the provisions therein contained. (12) The mortgagor and mortgagee may, by agreement in writing, whether or not contained in the mortgage deed, reserve to or confer on the mortgagor or the mortgagee, or both, any further or other powers of leasing or having reference to leasing; and any further or other powers so reserved or conferred shall be exercisable, as far as may be, as if they were conferred by this Part, and with all the like incidents, effects and consequences: Provided that the powers so reserved or conferred shall not prejudicially affect the rights of any mortgagee interested under any other mortgage subsisting at the date of the agreement, unless that mortgagee joins in or adopts the agreement. (13) Nothing in this Part shall be construed to enable a mortgagor or mortgagee to make a lease for any longer term or on any other conditions than such as could have been granted or

imposed by the mortgagor, with the concurrence of all the incumbrancers, if this Part and the corresponding previous enactments had not been passed: Provided that, in the case of a mortgage of leasehold land, a lease granted under this section shall reserve a reversion of not less than one day. (14) Subject as aforesaid, this section shall apply to any mortgage made after the thirty-first day on January One thousand nine hundred and five, but the provisions of this section, or any of them, may, by agreement in writing made after that date between mortgagor and mortgagee, be applied to a mortgage made before that date, so nevertheless that any such agreement shall not prejudicially affect any right or interest of any mortgagee not joining in or adopting the agreement. (15) The provisions of this section referring to a lease shall be construed to extend and apply, as far as circumstances admit, to any letting, and to an agreement, whether in writing or not, for leasing or letting. (16) For the purposes of this section ‘mortgagor’ shall not include an incumbrancer deriving title under the original mortgagor. (17) The powers of leasing conferred by this section shall, after a receiver of the income of the mortgaged property or any part thereof has been appointed by a mortgagee under this Part, and so long as the receiver acts, be exercisable by such mortgagee instead of by the mortgagor, as respects any land affected by the receivership, in like manner as if such mortgagee were in possession of the land, and the mortgagee may, by writing, delegate any of such powers to the receiver.

[page 360]

Exegesis 12.23 For the purposes of this and s 100, only the word ‘mortgagor’ does not include an ‘incumbrancer’ deriving title under the original mortgagor English Act ss 99(18) and 100(12) — that is, a subsequent encumbrancer: cf s 205(1)(xvi); see also Victorian Act s 99(16); and Re Cripps [1946] 1 Ch 265. A prospective purchaser, who is also a prospective mortgagor, is not in possession: Hughes v Waite [1957] 1 All ER 603; [1957] 1 WLR 713. These provisions apply to a lease of part of the premises: Rhodes v Dalby [1971] 2 All ER 1144; [1971] 1 WLR 1325; but cf Brown v Peto [1900] 2 QB 653, in relation to an incorporeal hereditament. The word ‘possession’ includes being in the receipt of rents and profits or the right to receive the same: see Victorian Act s 18(1); English Act s 205 (1)(xix). If the mortgagor is in possession he has the statutory powers (unless they are excluded) to the exclusion of the mortgagee and vice versa: see Meah v Mouskos [1964] 2 QB 23 at 40; [1963] 3 All ER 908 at 914 (CA); and to the exclusion of a

subsequent mortgagee, see Berkshire Capital Funding Pty Ltd v Street (1999) 78 P & CR 321 (CA), both at common law and in accordance with s 99(2). Rents and profits must be actually received; the mortgagee is not in possession if he merely intercepts rents after they have been received by the mortgagor’s agents, no notice having been given to the tenants on behalf of the mortgagee: Noyes v Pollock (1885) 32 Ch D 53. A mortgagee who has appointed a receiver under statutory powers can exercise the powers of leasing as if he were in possession; and may by writing delegate any of the powers to the receiver: Victorian Act s 99(17); English Act s 99(19). The inclusion in the lease of chattels and sporting rights over other land comprised in the mortgage, but not in the lease, does not take a lease out of the description of ‘an occupational lease’ under English Act s (3)(i): Brown v Peto [1900] 2 QB 653. Section (3)(ii) of the English Act makes provision for building leases (see also English Act ss 99(9) and (10)), provisions which are not reflected in the Victorian Act. The Victorian section (s 99(3)) provides that the lease which its provisions authorise is a lease for a term not exceeding seven years to take effect in possession not less than three months after its date (s 99(5); NSW Act s 106(3) and (5): five years — to take effect not less than three months after its date). A lease may be validly granted under these provisions containing an option for the tenant to determine the term, or to renew on expiration of the term; but it may not include land other than the mortgaged land at one unapportioned rent, which may not be apportioned by subsequent agreement: King v Bird [1909] 1 KB 837. Conveyancing Act 1881 (UK) s 18(3)(i) (see now English Act s 99(3)(i)) allowed the mortgagor to create a term not exceeding 21 years; a term which was not exceeded in King v Bird for the original term was seven years with an option for a further seven. It is implicit in the reasoning in that case, and on general principles, that the original term plus options cannot together exceed the maximum term grantable (see [1909] 1 KB at 845). As to the best rent that can reasonably be obtained having regard to the circumstances of the case, see Municipal Permanent Investment Building

Society v Smith (1888) 22 QBD 70 (CA); Green v Rheinberg (1911) 104 LT 149 (CA); Rust v Goodale [1957] Ch 33; [1956] 3 All ER 373; Coutts & Co v Somerville [1935] Ch 438; Hughes v Waite [1957] 1 All ER 603; [1957] 1 WLR 713; Grace Rymer Investments Ltd v Waite [1958] Ch 831; [1958] 2 All ER 777 (CA); Hurburg v Perpetual Trustee (Tas) Pty Ltd (SC (Tas), Slicer J, 6 November 1998, unreported); quaere whether the rent can be left to be fixed by a valuer later: Lloyds Bank v Marcan [1973] 3 All ER 754 at 761; [1973] 1 WLR 1387 at 1392–3. [page 361] It will be necessary to determine the rack rent, the full annual value of the property: see Re C R Sawyer & Whithall, Solicitors [1919] 2 Ch 333. It does not follow that the rent that may reasonably be obtained, the ‘best rent’, is equivalent to the rack rent; there may also be other factors; for example it may be prudent to discount the rent to secure a good tenant (see generally, in relation to these considerations, Dowager Duchess of Sutherland v Duke of Sutherland [1893] 3 Ch 169).

Further on statutory power to lease 12.24 Although a lease under the statutory power may contain an option for renewal, the rent reserved on the further term must, at its commencement, be the ‘best rent’: see King v Bird [1909] 1 KB 837 at 845. In inflationary times it might be argued that the lease should make provision for rent reviews at fairly regular intervals, certainly on the commencement of any further terms. An unusual covenant in a lease may have the effect of reducing the rent below the best rent in the absence of the covenant: see Coutts and Co v Somerville [1935] Ch 438: a landlord’s covenant to pay rates on a long-term lease. There must be a valid reservation of the sum agreed to be paid; the reservation of a nominal sum with some unenforceable arrangement to pay more (probably to avoid a statutory restriction) is not sufficient, indeed, it is proof that the sum reserved is not the ‘best rent’: Pumford v W Butler & Co Ltd [1914] 2 Ch 353. If the rent reserved is less than the ‘best rent’ the tenant’s title is voidable by persons interested, other than the landlord, for example the mortgagee: see Booth v A’Beckett (1863) 1 Moore NS 201; 15

ER 676. A purchaser will not be forced to accept such a title, where the vendor has notice (Booth v A’Beckett), or even where he claims he did not: Re Handman & Wilcox’s Contract [1902] 1 Ch 599. The corresponding provision of the English Act ends with the word ‘taken’ (cf variations in Australian provisions — for example NSW Act s 106(6) and Victorian Act s 99(6) which make express reference to rent payable in advance). Nevertheless, in Hughes v Waite [1957] 1 All ER 603 at 607; [1957] 1 WLR 713 at 719, it was held that the payment of ‘rent’ in advance constituted the taking of a fine for the purposes of this subsection (with reference to rent as defined: English Act s 205(i)(xxiii), which corresponds with Victorian Act s 18(1); see also Booth v A’Beckett, above; but cf Grace Rymer Investments Ltd v Waite [1958] Ch 831; [1958] 2 All ER 777 (CA)). Although a bribe is not the same thing as a fine it appears that a lease granted in consideration of the former is probably void: cf Chandler v Bradley [1897] 1 Ch 315; Re Handman and Wilcox’s Contract, above; and see Gillett v Burke [1996] 1 VR 196 (FC), more generally, as to the nature of a fine. It seems that a condition of re-entry for the purposes of English Act s 99(7) (see also Victorian Act s 99(7)) is not required in the case of an oral tenancy agreement: see Rhodes v Dalby [1971] 2 All ER 1144; [1971] 1 WLR 1325; cf Pawson v Revell [1958] 2 QB 360; [1958] 3 All ER 233 (CA); and see Wolstenholme and Cherry, Conveyancing Statutes, 13th ed, vol 1, p 198. In the case of a lease by the mortgagor, he shall, within one month after making the lease deliver to the mortgagee, or, where there are more than one, to the mortgagee first in priority, a counterpart of the lease duly executed by the lessee, but the lessee shall not be concerned to see that this is complied with: Victorian Act s 99(9); English Act s 99(11). The provision that the lessee shall not be concerned to see that the provision for delivery of the counterpart lease is complied with applies also to a lease granted under an extended statutory power: Public Trustee v Lawrence [1912] 1 Ch 789. Failure to deliver a counterpart to the mortgagee does not invalidate the lease, although it would cause the statutory power of the sale to become immediately exercisable: Public Trustee v Lawrence. The provisions of the section referring to a lease shall be construed to extend and apply, as far as circumstances admit, to any letting, and to an agreement

[page 362] whether in writing or not for leasing or letting (Victorian Act s 99(15); English Act s 99(17)); but the provision as to a counterpart lease does not apply to an oral tenancy: Rhodes v Dalby; cf Pawson v Revell, both above. A clause excluding the statutory leasing powers does not deprive the mortgagor of the power of creating a lease valid as between the mortgagor and the tenant by estoppel: Iron Trades Employers Insurance Association Ltd v Union Land and House Investors Ltd [1937] Ch 313; [1937] 1 All ER 481; Rust v Goodale [1957] Ch 33; [1956] 3 All ER 373; Bolton Building Society v Cobb [1965] 3 All ER 814; [1966] 1 WLR 1; Commonwealth v Orr (1981) 37 ALR 653; 58 FLR 219; Commonwealth Bank of Australia v Baranyay [1993] 1 VR 589. A mortgagor who has bound himself not to exercise the statutory power of leasing cannot authorise a second mortgagee to do so. Section 99 (or its equivalent) does not confer on a mortgagee rights which the mortgagor does not have: see Julian S Hodge & Co Ltd v St Helen’s Credit Ltd [1965] EGD 143. Where a lease fails to comply with the requirements of the statutory power of leasing, if it was made in good faith and the lessee has entered thereunder, it takes effect in equity as a contract for the grant, at the request of the lessee, of a valid lease of like effect as the invalid lease, subject to such variations as may be necessary in order to comply with the terms of the power (Victorian Act s 152; English Act s 152(1)): see Pawson v Revell; Rhodes v Dalby, both above; and (1971) 87 LQR 338 (Elliott). The mortgagor and mortgagee may, by agreement in writing, whether or not contained in the mortgage deed, reserve to or confer on either party, or both, any further or other powers of leasing or having reference to leasing, but without prejudice to the rights of other mortgagees, and these will be exercisable, so far as may be, as if they were conferred by the Act: Victorian Act s 99(12); English Act s 99(14).

Torrens leases 12.25 The New South Wales provision applies with respect to mortgages of Torrens title land (NSW Act s 106 (17)) but the Victorian provision does not (Victorian Act s 86).

The Torrens statutes also contain provisions and restrictions as to the leasing powers of a mortgagor. A registered mortgage of Torrens title land does not operate as a transfer of the land charged, but has effect as a security only leaving the mortgagor as the legal owner of the land subject to a statutory charge by way of mortgage: see Chapter 4. It follows that, if there is no statutory power of leasing, the mortgagor’s power to lease flows from his ownership of the land or, additionally, from specific contractual rights. If a lease were registered on the title at the time of the giving of the mortgage, then the mortgage would be subject to the registered lease, since such lease would clearly be a registered interest, subject to which the mortgagee would take the statutory estate or interest which the statutes afford him: NSW Torrens Act s 42; Victorian Torrens Act ss 42, 74, Sch 13; Queensland Torrens Act ss 181, 184–185; South Australian Torrens Act ss 69, 129; Western Australian Torrens Act ss 68, 105, Sch 14;Tasmanian Torrens Act ss 40, 72.

Restrictions on or exclusion of statutory powers 12.26 In practice, the mortgagor’s powers of leasing under s 99 and its equivalents (see 12.22) are generally restricted or excluded by the mortgage deed. (This restriction or exclusion is so common that the Northern Ireland Land Law Working Party (see Survey of the Land Law of Northern Ireland, HMSO, 1971) proposed that any new provision in Northern Ireland should be to the effect that any lease granted by the mortgagor would not be binding on the mortgagee unless made with his consent. It is particularly important in the case of building leases. Without a check on the statutory powers there would be nothing to prevent a reckless mortgagor from making the security [page 363] valueless by granting building leases to persons of insufficient means and throwing the property upon the mortgagee’s hands covered with half-finished buildings. As to the extent of the restriction, see Westbourne Park Building Society v Levermore [1955] CLY 1703.)

If not excluded, it is usual that the consent of the mortgagee is required before the statutory powers are exercised. If consent is not obtained there will be a breach of the terms of the mortgage. Where there is a provision that the statutory power shall not be exercised without the mortgagee’s consent and the mortgagor leases without consent such lease is a lease outside the statute and there is therefore no breach of the above-mentioned provision (Iron Trades Employers Insurance Association Ltd v Union Land and House Investors Ltd [1937] Ch 313; [1937] 1 All ER 481) (unless, as is usually the case nowadays, the mortgage expressly makes it a breach), and this is not a defective exercise of the statutory power which the English Act s 152 (and its equivalents — for example Victorian Act s 152) will cure; and see Commonwealth v Orr (1981) 37 ALR 653; Australia & New Zealand Bank Ltd v Sinclair [1968] 2 NSWR 26; Commonwealth Bank of Australia v Baranyay [1993] 1 VR 589. If the mortgage permits the mortgagor to exercise the statutory leasing powers with the consent of the mortgagee, the onus is on the lessee to prove that the mortgagee consented: Taylor v Ellis [1960] Ch 368; [1960] 1 All ER 549. If the mortgage deed provides that an intending lessee shall not be concerned to inquire as to such consent the mortgagee is estopped from denying the lease was made with his consent: Lever Finance Ltd v Needleman’s Property Trustee [1956] Ch 375; [1956] 2 All ER 378. Furthermore, if a lease is made without consent and the mortgagee then accepts the lessee as his own, the lease will be binding on him: Stroud Building Society v Delamont [1960] 1 All ER 749; [1960] 1 WLR 431; and see 12.21. Besides restricting or excluding the statutory powers it is not uncommon for the deed to expressly exclude all powers of leasing (though, of course, leases not made under statutory or express powers would not generally be binding on the mortgagee anyway) or for the mortgagor to covenant not to grant any lease without the mortgagee’s consent, and the clause is usually extended to cover any parting with possession. In Rhodes v Dalby [1971] 2 All ER 1144; [1971] 1 WLR 1325, a ‘gentleman’s agreement’ was not a letting and therefore no breach. The English Law Commission has recommended wide powers of leasing by the mortgagor, but any leave granted by the mortgagor without the written consent of the mortgagee would not be binding on the latter: see English Law Commission Report No 204,

Transfer of Land — Land Mortgages, HMSO, London, 1991, [6.17]–[6.21].

Extension of statutory powers 12.27 The statutory powers are only exercisable by a mortgagee when the mortgagee is in possession: see Victorian Property Law Act 1958 s 99(2); Law of Property Law Act 1925 (UK) s 99(2), and their equivalents (see 12.22); and see Berkshire Capital Funding Pty Ltd v Street (1999) 78 P & CR 321 (CA). Accordingly, the mortgage deed may provide not only that the statutory powers of leasing shall not be exercisable by the mortgagor, but that such powers may be exercised by the mortgagee without going into possession. The statutory leasing powers are fairly restrictive. In particular, they do not permit the taking of premiums: see Victorian Act s 99(6) and English Act s 99(6), and their equivalents. In suitable cases, as in the mortgage of a building development, the mortgagee’s powers of leasing should be extended so as to enable the mortgagee to grant leases at ground rents taking a premium. [page 364]

Effect of leases under statutory powers 12.28 A lease granted under s 99 of the Victorian Act or the English Act and their equivalents has the same effect as if both mortgagor and mortgagee were parties to it, so that if a mortgagor grants such a lease the assignees of the mortgagee cannot obstruct the lessee’s rights: Wilson v Queen’s Club [1891] 3 Ch 522; Turner v Walsh [1909] 2 KB 484 (CA). On the same ground, the mortgagee (on default being made by the mortgagor) becomes lessor, and may enforce payment of the rent and performance and observance of the covenants: Municipal Permanent Investment Building Society v Smith (1888) 22 QBD 70 (CA); but see Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245; 162 ALR 382 and 19.2. A lease under the statutory power is not invalidated by reason of its containing an option for determination or renewal, but it is invalidated as against the mortgagee by the inclusion of other land not comprised in the

mortgage at a single rent: King v Bird [1909] 1 KB 837; cf Dundas v Vavasour (1895) 39 Sol Jo 656.

Leases by mortgagor and mortgagee together 12.29 Where the lease is not granted under the statutory or some other power of leasing, both mortgagor and mortgagee should concur, and then, in the case of a mortgage by demise, it will operate as a demise by the mortgagee and a confirmation by the mortgagor: Doe d Barney v Adams (1832) 2 Cr & J 232; 149 ER 101. To make the lessee’s covenants run with the reversion, they should be with the owner of the immediate reversion — that is, with the mortgagee in the case of a mortgage by demise, but, it would seem, with the mortgagor in the case of a charge by way of legal mortgage: Webb v Russell (1789) 3 Term Rep 393; 100 ER 639. A mortgagee is not obliged to lease or permit the occupation of premises at any particular time on any basis: see Westpac Banking Corp Ltd v Kingsland (1991) 26 NSWLR 700 at 707.

Surrender of lease 12.30 In England up until the coming into force of Conveyancing Act 1911 s 3 (now English Act s 100), a surrender of a lease granted under the statutory power could not be made to the mortgagor without the joinder of the mortgagee: Robbins v Whyte [1906] 1 KB 125. A mortgagor or mortgagee in possession may accept a surrender of a lease to enable another lease to be granted: Barclays Bank Ltd v Stasek [1957] Ch 28; [1956] 3 All ER 439; 73 LQR 14 (REM). As to the effect on a surrender of an invalid fresh grant, see Rhyl UDC v Rhyl Amusements [1959] 1 All ER 257 at 267–8; [1959] 1 WLR 465 at 475–7. Without these provisions a mortgagor in possession would have no power to accept a surrender of a lease granted under the power conferred by English Act s 99 and its equivalents. The difficulty was caused by the fact that the reversion remained in the mortgagee and ‘the surrender of a lease is good only if made to the person in whom the reversion expectant on the determination of that lease is vested, otherwise there will be no merger of the term’ (Robbins v Whyte [1906] 1 KB 125 at 130 per Warrington J); thus the concurrence of the mortgagee was required, but in relation to mortgages of

Torrens system land, see Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245; 162 ALR 382 and see 12.24 and 19.2. The equivalent section of the Victorian Act 1958 provides: 100(1) For the purpose only of enabling a lease authorized under the last preceding section, or under any agreement made pursuant to that section, or by the mortgage deed (in this section referred to as an authorized lease) to be granted, a mortgagor of land while in possession shall, in

[page 365] like manner as if the legal estate was vested in him and as against every incumbrancer, have, by virtue of this Part, power to accept from time to time a surrender of any lease of the mortgaged land or any part thereof comprised in the lease, with or without an exception of or in respect of all or any of the mines and minerals therein, and, on a surrender of the lease so far as it comprises part only of land or mines and minerals leased, the rent may be apportioned. (2) For the same purpose, a mortgagee of land while in possession shall, in like manner as against all prior or other incumbrancers (if any) and as against the mortgagor, have, by virtue of this Part power to accept from time to time any such surrender as aforesaid. (3) On a surrender of part only of the land or mines and minerals leased, the original lease may be varied, provided that the lease when varied would have been valid as an authorized lease if granted by the person accepting the surrender; and, on a surrender and the making of a new or other lease, whether for the same or for any extended or other term, and whether subject or not to the same or to any other covenants, provisions or conditions, the value of the lessee’s interest in the lease surrendered may, subject to the provisions of this section, be taken into account in the determination of the amount of the rent to be reserved, and of the nature of the covenants, provisions and conditions to be inserted in the new or other lease. (4) Where any consideration for the surrender, other than an agreement to accept an authorized lease, is given by or on behalf of the lessee to or on behalf of the person accepting the surrender, nothing in this section shall authorize a surrender to a mortgagor without the consent of the incumbrancers, or shall authorize a surrender to a second or subsequent incumbrancer without the consent of every prior incumbrancer. (5) No surrender shall, by virtue of this section, be rendered valid unless: (a) an authorised lease is granted of the whole of the land or mines or minerals comprised in the surrender to take effect in possession immediately or within one month after the date of the surrender; and (b) the term certain or other interest granted by the new lease is not less in duration than the unexpired term or interest which would have been subsisting under the original lease if that lease had not been surrendered; and (c) where the whole of the land, mines and minerals originally leased has been surrendered, the rent reserved by the new lease is not less than the rent which would have been payable under the original lease if it had not been surrendered; or where part only of the land or mines and minerals has been surrendered, the aggregate rents respectively

remaining payable or reserved under the original lease and the new lease are not less than the rent which would have been payable under the original lease if no partial surrender had been accepted. (6) A contract to make or accept a surrender under this section may be enforced by or against every person on whom the surrender, if completed, would be binding. (7) This section shall apply only if and as far as a contrary intention is not expressed by the mortgagor and mortgagee in the mortgage deed, or otherwise in writing, and shall have effect subject to the terms of the mortgage deed or of any such writing and to the provisions therein contained. (8) This section shall apply to a mortgage made after the twenty-seventh day of September One thousand nine hundred and fourteen, but the provisions of this section, or any of them, may, by agreement in writing made after that date, between the mortgagor and mortgagee, be applied to a mortgage made before that date, so nevertheless that any such agreement shall not prejudicially affect any right or interest of any mortgagee not joining in or adopting the agreement. (9) The provisions of this section referring to a lease shall be construed to extend and apply, as far as circumstances admit, to any letting, and to an agreement, whether in writing or not, for leasing or letting. (10) The mortgagor and mortgagee may, by agreement in writing, whether or not contained in the mortgage deed, reserve or confer on the mortgagor or mortgagee, or both, any further or other powers relating to the surrender of leases; and any further or other powers so conferred or reserved shall be exercisable, as far as may be, as if they were conferred by this Part, and with all the like incidents, effects and consequences: Provided that the powers so reserved or conferred shall not prejudicially affect the rights of any mortgagee interested under any other mortgage subsisting at the date of the agreement, unless that mortgagee joins in or adopts the agreement.

[page 366] (11) Nothing in this section shall operate to enable a mortgagor or mortgagee to accept a surrender which could not have been accepted by the mortgagor with the concurrence of all the incumbrancers if this Part and any corresponding previous enactment had not been passed. (12) For the purpose of this section ‘mortgagor’ shall not include an incumbrancer deriving title under the original mortgagor. (13) The powers of accepting surrenders conferred by this section shall, after a receiver of the income of the mortgaged property or any part thereof has been appointed by the mortgagee, under this Part, and so long as the receiver acts, be exercisable by such mortgagee instead of by the mortgagor, as respects any land affected by the receivership, in like manner as if such mortgagee was in possession of the land; and the mortgagee may, by writing, delegate any of such powers to the receiver.

The other equivalent Australian provisions are NSW Act s 107; Tasmanian Act s 20.

Surrender of Torrens leases 12.31 The New South Wales provision applies with respect to mortgages of Torrens title land (Conveyancing Act 1919 s 107(12)) but the Victorian provision does not (Property Law Act 1958 s 86). In relation to the granting of leases and the acceptance of surrenders of lease by mortgagors and mortgagees of Torrens system land, see 20.22ff. Section 100(3) of both the Victorian and English Acts deals with variation of the lease on a surrender of part and provides that the value of the lessee’s interest shall be taken into account in determining the rent and covenants under the new lease. Section 100(4) provides that if a consideration is given for the surrender, the consent of prior encumbrancers is required. Section 100(6) of both Acts provides that a contract to make or accept a surrender may be enforced by or against every person on whom the surrender, if completed, would be binding. Section 100(8) applies the section to mortgages made after 27 September 1914 (Vic) (31 December 1911 (UK)), but the provisions of the section may, by agreement in writing made after the relevant date between mortgagor and mortgagee, be applied to a mortgage made before that date, without prejudice to the interests of persons not parties to or adopting such agreement. Section 100(9) of both Acts extends the provisions of the section to any letting and agreement for a lease. Section 100(11) provides that the statutory powers do not authorise a surrender which could not have been accepted by the mortgagor with the concurrence of all the encumbrancers if this Part and any corresponding previous enactment had not been passed. (The New South Wales provision is also to this effect.) A subsequent mortgagee who exercises the statutory powers of leasing and accepting surrenders of leases exercises the powers as mortgagee and not because he derives title under the mortgagor: see Wilson v Queen’s Club [1891] 3 Ch 522; Turner v Walsh [1909] 2 KB 484 (CA). It follows from the position that a mortgagee is not obliged to lease or permit the occupation of premises at any particular time that the mortgagee is not obliged to exercise any power to accept a surrender of lease at any

particular time: see Westpac Banking Corp Ltd v Kingsland (1991) 26 NSWLR 700 at 707.

[page 367]

Part IV

Void or Imperfect Securities

[page 369]

Chapter 13

Void or Imperfect Securities I

Securities Void Against Third Parties A. Generally Classification Voidable mortgages generally Replacement mortgages B. Transactions at an Undervalue and Preferences Transactions at undervalue etc C. Transactions Defrauding Creditors Conveyances in fraud of creditors Intention State Acts in general Family Law Act Conveyances in fraud of subsequent purchasers II Securities of an Oppressive Nature A. Clogging the Equity Clogging the equity B. Securities by Expectant Heirs Securities granted by expectant heirs and reversioners The poor and the ignorant Inequitable sale treated as a mortgage

13.1 13.2 13.3 13.4

13.5 13.6 13.7 13.8 13.9

13.10

13.11 13.12 13.13

Statutory protection for dealings with reversions C. Consumer Credit Securities Consumer and other special credit mortgages D. Securities Made under Undue Influence General Categories of undue influence Influence by a third party Availability of relief Onus of proof Presumption of undue influence Influence presumed Concerns of the court Rebutting the presumption Husband and wife cases The Garcia/Yerkey principle The wife as volunteer Barclays v O’Brien in Australia Does Garcia/Yerkey extend beyond wives?

13.14

13.15 13.16 13.17 13.18 13.19 13.20 13.21 13.22 13.23 13.24 13.25 13.26 13.27 13.28 13.29

[page 370]

E. Unconscionable Dealing — Catching Bargains General jurisdiction Onus of proof Inadequacy of consideration Independent advice Borrower must ‘do equity’ Statutory jurisdiction

13.30 13.31 13.32 13.33 13.34 13.35

III

IV

V

VI

Contracts Review Act 1980 (NSW) F. Economic Pressure Securities obtained by threats Economic compulsion Duress Misrepresentation and Mistake Misrepresentation Mistake Rectification Forgeries Generally Particular problems with forgeries Illegality Generally Effect of illegal agreements Loan for payment of bets Securities Affected by the Nature of the Security A. Public Pay and Pensions Public offices Officers’ pensions and pay B. Property Forbidden to be Encumbered Restraint on alienation Forfeiture on alienation When forfeiture is incurred Restraints on alienation in leases

13.36 13.37 13.38 13.39 13.40 13.41 13.42 13.43 13.44 13.45 13.46 13.47

13.48 13.49 13.50 13.51 13.52 13.53

I Securities Void Against Third Parties

A. Generally Classification 13.1 As already stated, securities on personal chattels may be void by reason of non-compliance with the provisions of PPSA or other relevant statute. A security which is not malum in se, but is only prohibited, is not necessarily void for all purposes, but only so far as it is expressly forbidden. Thus a security which is, by statute, void as a charge may be good for other purposes: see Re Richardson; Ex parte Jones (1832) 2 Cr & J 513; 149 ER 217; cf Wynne v Robinson (1830) 4 Bli NS 27; 5 ER 10. We have seen the effect of non-registration of company charges (see 11.41) and we will see in due course the effect of failure to register a deed (see Chapter 27) and failure to register or protect a mortgage of Torrens title land (see Chapter 28), but in addition to these special statutory dangers, there are others of a more general nature arising under the provisions of the Bankruptcy Act 1966 (Cth). Generally, in relation to Australia, reference should [page 371] be made to McDonald, Henry and Meek, Australian Bankruptcy Law and Practice, 5th rev ed, Law Book Co Information Services, Sydney, 1996–, (loose leaf service).

Voidable mortgages generally 13.2 This chapter deals with a heterogeneous group of situations where a mortgage or charge may be set aside for breach of statute or breach of equitable obligation. It must always be remembered that a voidable instrument is to be treated as valid until it is set aside: see Duncan v Dixon (1890) 44 Ch D 211 at 213 where Kekewich J said that such transactions were valid until repudiated and not invalid until confirmed. Under the Torrens system, warning of an attack on an instrument may be foreshadowed by the lodgment of a caveat. If the right to set aside a mortgage is conferred by statute, the plaintiff will need to be the person whom the statute invests with the right to set it aside and that plaintiff must comply with any statutory conditions.

If the right to set the mortgage aside is an equitable right, then the plaintiff must offer to do equity by giving up all advantages he has received through the transaction. Thus, if the plaintiff received money under the mortgage being attacked, whether to discharge an earlier mortgage or otherwise, this must be repaid with appropriate interest: Langman v Handover (1929) 43 CLR 334 at 356; Maguire v Makaronis (1997) 188 CLR 449 at 476, both of which refer to the seminal words of Kent Ch in Fanning v Durham (1821) 5 Johnson Ch 122 at 142–4; 9 Am Dec 292. The transaction will not be set aside against persons who obtained rights for value against the property without notice of the plaintiff’s equity to set aside the transaction: Bainbridge v Browne (1881) 18 Ch D 188. However, it may be set aside against volunteers even though the volunteer took without notice (Bridgeman v Green (1757) Wilm 58 at 65; 97 ER 22 at 25) and also against purchasers with notice: Maitland v Irving (1846) 15 Sim 437; 60 ER 688; Lancashire Loans Ltd v Black [1934] 1 KB 380. The court will not give relief if it is satisfied that despite the undue influence or misrepresentation or the like, the plaintiff would still have entered into the transaction: Abram v Bank of New Zealand [1996] ATPR ¶41-507 and see Commonwealth Bank of Australia v Graham [1995] ATPR ¶41-387. The right to have the transaction set aside will be lost if the plaintiff affirms the transaction after full knowledge of the facts: Peyman v Lanjani [1985] Ch 457; [1984] 3 All ER 703 (CA).

Replacement mortgages 13.3 If a mortgage is void or voidable for undue influence or the like, a replacement or substitute mortgage, at least one to the same lender, will generally also be void or voidable notwithstanding that the undue influence had ceased at the time the replacement mortgage was given: Yorkshire Bank plc v Tinsley [2004] 3 All ER 411; [2004] 1 WLR 2380; and see Crowe v Ballard (1740) 1 Ves 215; 30 ER 308; Kempson v Ashbee (1874) LR 10 Ch App 15.

B. Transactions at an Undervalue and Preferences

Transactions at undervalue etc 13.4 Transactions at an undervalue may be attacked in a limited number of situations. A transaction that is at an undervalue is not necessarily able to be attacked as void or voidable. The mere fact that a sale is at an undervalue is not itself sufficient evidence of undue influence or other unconscionable behaviour. However, that fact when associated [page 372] with other facts may show undue influence: see Blomley v Ryan (1956) 99 CLR 362. These matters are considered in Section D below. It is not always necessary for the court to make precise findings as to the value of the consideration given and received as it may be sufficient to find what were the maximum and minimum values for the purpose of comparing them: Re Thoars [2005] 1 BCLC 331. What is an undervalue in any particular case is a question of fact. Most of the recent authorities were decided under the English Insolvency Act 1996 s 339. Where a mortgagor sells mortgaged property, the value of the consideration provided by the mortgagor is the value of the land free from the mortgage and not the value of the equity of redemption: Re Brabon [2001] 1 BCLC 11 at 36. A wife’s assumption of sole liability for a mortgage was a transfer at an undervalue where the value of the wife’s consideration was significantly less than that provided by her husband: Re Kumar [1993] 1 WLR 224; [1993] 2 All ER 700. A transaction at undervalue may be an uncommercial transaction within the meaning of Corporations Act s 588FF which may make it voidable against a liquidator: see 8.23. Other cases of uncommercial transaction occur when a creditor received a preferential payment. With personal insolvency, Bankruptcy Act 1966 ss 120ff may make a transaction within the prescribed period before sequestration void as against

the trustee; see also Chapter 23 of this work.

C. Transactions Defrauding Creditors Conveyances in fraud of creditors 13.5 In relation to Bankruptcy legislation, see McDonald, Henry and Meek, Australian Bankruptcy Law and Practice, pp 4353–4656. Bankruptcy Act 1966 (Cth) s 120 contains provisions for the avoidance of voluntary transfers if the settlor becomes a bankrupt and the settlement came into operation after or within five years before the commencement of the bankruptcy. Section 121 makes void transfers to defeat creditors: see also Chapter 23. The Bankruptcy Act is not intended to cover the field and various pieces of state legislation also affect the present type of transfer: Re McCauley (1995) 61 FCR 251 at 255 (affirmed as Fraser v Deputy Commissioner of Taxation (1996) 69 FCR 99; 138 ALR 689, though this point was not considered on appeal); Houvardes v Zaravinos (2004) 202 ALR 535 at 562; affirmed [2004] NSWCA 421. The most significant legislation in addition to the provisions of the Bankruptcy Act (that is, to those dealing with the circumstances of the person ‘alienating’ not being a bankrupt), is state legislation based on English Law of Property Act 1925 s 172, which provides that any alienation of property with intent to defraud creditors is voidable at the instance of any person prejudiced: NSW Act s 37A(1); Victorian Act s 172(1); Queensland Act s 228; South Australian Act 1936 s 86(1); Western Australian Act s 89(1); and Tasmanian Act s 40(1). The English provision, which has not been replaced by Insolvency Act 1986 (UK) s 423(2), was said to have replaced, rather than effected any substantive changes to, the statute of 1571, 13 Eliz 1 c 5: Re Eichholz; Eichholz’s Trustee v Eichholz [1959] 1 Ch 708 at 721–7; [1959] 1 All ER 166 at 173–8. Victorian Act s 172 provides: 172(1) Save as provided in this section, every alienation of property made, whether before or after the commencement of this Act, with intent to defraud creditors, shall be voidable, at the instance of any person thereby prejudiced.

[page 373]

(2) This section shall not affect the operation of a disentailing assurance, or the law of bankruptcy or insolvency for the time being in force. (3) This section shall not extend to any estate or interest in property alienated for valuable consideration and in good faith or upon good consideration and in good faith to any person not having, at the time of the alienation, notice of the intent to defraud creditors.

The NSW Act s 37A does not contain any reference to valuable or good consideration; the Queensland Act s 228 has no reference to ‘good consideration’. These provisions are very broad and are not limited in their application to any particular type of property, including real and personal property, which would include a chose in action: but see Robinson, The Property Law Act (Victoria), Law Book Co, Sydney, 1992, pp 405–6. The person seeking to avoid the particular transaction bears the onus of proving the requisite elements of the relevant provision, including an actual intent to defraud: Williams v Lloyd (1934) 50 CLR 341; and see Noakes v Harvy Holmes & Son (1979) 26 ALR 297; Re Wise; Ex parte Mercer (1886) 17 QBD 290 (CA); Swann v Secureland Mortgage Investment Nominees Ltd [1992] 2 NZLR 144 at 151–3.

Intention 13.6 A fraudulent intention on the part of the grantor may be inferred from various circumstances. His indebtedness at the time of the transaction is an important consideration, though not absolutely decisive on the validity of the conveyance, for there may be insolvency without fraud, and the deed may be good though the grantor is indebted: Re Holland; Gregg v Holland [1902] 2 Ch 360 (CA). The mere fact that the conveyance (or mortgage) is voluntary is not conclusive evidence of an intention to defeat or delay creditors within the section: Re Wise; Ex parte Mercer, above; Godfrey v Poole (1888) 13 App Cas 497 (PC); Lloyds Bank Ltd v Marcan [1973] 3 All ER 754; [1973] 1 WLR 1387 (CA) (a dishonest intention is required; cf Pennycuick V-C at [1973] 2 All ER 359; [1973] 1 WLR 339 generally on the history of the section). See (1975) 91 LQR 86. As a general rule the transaction will be avoided if it appeared that there was an intention to defeat or delay the creditors, though no actual delay was caused; or if the debtor knew that delay would be the consequence of the transaction: Townsend v Westacott (1840) 2 Beav 340; 48 ER 1212;

Thompson v Webster (1859) 4 Drew 628; 62 ER 241; French v French (1855) 6 De GM & G 95; 43 ER 1166; Holmes v Penney (1856) 3 K & J 90; 69 ER 1035. There will be a prima facie inference of such an intention where the settlement is voluntary and the plaintiff was a creditor at its date, if the effect of it was to take from the grantor’s property an amount without which his debts cannot be paid: Freeman v Pope (1870) 5 Ch App 538; Ideal Bedding Co Ltd v Holland [1907] 2 Ch 157. (As to avoidance by creditors subsequent to the settlement, see Spirett v Willows (1865) 3 De GJ & S 293; 46 ER 649.) So, too, where a mortgagor granted a lease to his wife after the mortgagee had commenced proceedings for possession, the transaction was made with intent to defraud: Lloyds Bank Ltd v Marcan, above. The insolvency of the grantor shortly after the date of the conveyance will throw upon those who uphold it the burden of showing that the grantor was in a position to make it: Crossley v Elworthy (1871) LR 12 Eq 158; Mackay v Douglas (1872) LR 14 Eq 106. But when the conveyance is for valuable (or, in Victoria or states with like legislation, for valuable or good) consideration, evidence must be given of circumstances which show an intention to defeat or delay creditors: Freeman v Pope, above; Re Bamford; Ex parte Games (1879) 12 Ch D 314 (CA); Re Johnson; Golden v Gillam (1881) 20 Ch D 389; affirmed (1882) 51 LJ Ch 503 (CA). [page 374] In Marcolongo v Chen [2011] HCA 3; (2011) 242 CLR 546; 274 ALR 634, the High Court made it clear that it is not necessary for a plaintiff to establish dishonesty in the defendant nor that the intention to delay creditors was a primary intention behind the defendant’s actions. A conveyance made for ‘good consideration’, sometimes expressed as ‘meritorious consideration’, refers to an alienation, in consideration of natural love and affection or in consideration of marriage. Under the repealed English section and in Victoria and states with like legislation, the distinction between a voluntary conveyance and one made for good consideration may be significant. As to this, see Re Eichholz [1959] Ch 708 at 720–1; [1959] 1

All ER 166 at 172 and Lloyds Bank Ltd v Marcan [1973] 2 All ER 359 at 368; [1973] 1WLR 339 at 345; affirmed, this point not considered [1973] 3 All ER 754; [1973] 1 WLR 1387. A conveyance to secure the repayment of an existing debt has been held to be a conveyance for sufficient consideration: Re Bamford; Ex parte Games (1879) 12 Ch D 314 at 325 (CA) and see also Alton v Harrison (1869) 4 Ch App 622; Martindale v Booth (1832) 3 B & Ad 498; 110 ER 180 and Gregg v Bromley [1932] 3 KB 474 (CA); cf Sykes and Walker, p 436. As noted earlier, the legislation in New South Wales and Queensland is narrower than that of the other states and would appear to require ‘valuable consideration’, either in money or under a marriage settlement, with respect to the equivalent of s 172(3) (Vic) (see NSW s 37A(3) and the definition of ‘purchaser’ in s 7(1); and see Stuckey and Needham, The Conveyancing Act, 1919–1969, 2nd ed, Law Book Co, Sydney, 1969, p 15. The intention which will avoid the conveyance must be an intention to defeat or delay creditors generally. A deed of assignment made in good faith in favour of a creditor is not invalid by reason of its being made with the express intention of defeating another particular creditor or creditors: Glegg v Bromley [1912] 3 KB 474; see Alton v Harrison (1869) LR 4 Ch App 622. But the question is always whether, looking at the whole of the circumstances surrounding the execution of the conveyance, it was in fact executed with the intent to defeat or delay creditors: Re Holland; Gregg v Holland [1902] 2 Ch 360 (CA); see Re Wise; Ex parte Mercer (1886) 17 QBD 290 (CA).

State Acts in general 13.7 A settlement of the whole of the settlor’s property, or of the whole of his property with certain exceptions, is not void in the absence of an intention to defraud his creditors: Cadogan v Kennett (1776) 2 Cowp 432; 98 ER 1171; Re Reis; Ex parte Clough [1904] 2 KB 769 (CA); on appeal sub nom Clough v Samuel [1905] AC 442 (HL). Though possession and reputed ownership by the debtor of chattels, after an alleged absolute assignment by him or after they have been taken in execution by a creditor, was from an early period treated as a badge or as evidence of fraud (because possession is the chief test of the ownership of chattels and by its means the debtor acquires a credit to which his real circumstances do not entitle him: Twyne’s Case (1602) 3 Co Rep 80b; 76 ER 809), it is not so where retention of the chattels was

consistent with the nature of the transaction: Cadogan v Kennett, above. The inference of fraud arises also in relation to real estate, where the grantor retains possession of the title deeds or duplicate certificate of title. But there is no such inference, as to both real estate and chattels, where, the transaction being a mortgage, the mortgagor remains in possession, for this is usual in mortgages: Martindale v Booth (1832) 3 B & Ad 498; 110 ER 180. And if a mortgage deed is duly executed and delivered, the mere retainer of it by the mortgagor without fraud will not affect its validity: Exton v Scott (1833) 6 Sim 31; 58 ER 507. It is unnecessary that an assignment of chattels should be followed by possession in order to make it valid against the assignor himself, or against his creditors who are cognisant of and take part in the arrangement under which it is made, or which [page 375] proceeds upon the assumption of its validity; or against strangers: Steel v Brown (1808) 1 Taunt 381; 127 ER 881; Robinson v M’Donnell (1818) 2 B & Ald 134; 106 ER 316. As to a stranger afterwards becoming a creditor, see Holmes v Penney (1856) 3 K & J 90, 100; 69 ER 1035. A transaction caught by this provision is, by reason of the language of s 172(1) (see 13.5), voidable only, not void: see Re Country Stores Pty Ltd [1987] 2 Qd R 318 at 328. The same position was reached under the 1571 statute which contained no such express provision: see Noakes v Harvy Holmes (on appeal from Norfolk Island) at 26 ALR 303 ff; see also Brady v Stapleton (1952) 88 CLR 322 at 333ff. As to the application of these provisions to land under the operation of the Torrens legislation, see Robinson, Property Law Act Victoria, p 405; and see 13.9.

Family Law Act 13.8 Family Law Act 1975 (Cth) ss 79 and 90AE entitle a party to proceedings under that Act to make an application to the court to prevent the other party, or a party acting on his behalf, from disposing of property, where

such disposition has the effect of defeating an existing or anticipated order in the court proceedings. Where a disposition has already been made, the Family Court of Australia has the power to set aside that disposition (and see Family Law Act s 85A). In exercising its discretion, the court will have regard to the interests of the disponee, and will particularly consider whether or not that person is a bona fide purchaser of the property for value without notice. It should be noted that these provisions of the Family Law Act operate irrespective of the intention of the disponor. A not infrequent manoeuvre by a party to the mortgage looking bankruptcy in the eye is to consent to an order under the provisions of the Family Law Act that property vest solely in the other party. The Federal and Family Courts take the view that, until set aside, the court’s order stands and cannot be overruled under Bankruptcy Act s 121: Official Trustee in Bankruptcy v Mateo (2003) 202 ALR 571. The key point is that these courts do not classify an order under the Family Law Act as a transfer. However, they acknowledge that there may be an ‘alienation’ under the state legislation (at 586). State courts, particularly in New South Wales, have exercised jurisdiction to reverse an alienation by means of a Family Court Order: see, for example, Silvera v Savic (1996) 46 NSWLR 124; 9 BPR 16,881; Green v Schneller (2002) 29 Fam LR 346; Houvardas v Zaravinos (2004) 202 ALR 535 (appeal dismissed [2004] NSWCA 421).

Conveyances in fraud of subsequent purchasers 13.9 Law of Property Act 1925 (UK) s 173, which reproduces the Voluntary Conveyances Act 1893, has been re-enacted as NSW Act s 37B; Victorian Act s 173; Queensland Act s 229; South Australian Act s 87; Western Australian Act ss 90, 91; Tasmanian Act s 41; and Property Law Act 1952 (NZ) s 61. Victorian Act s 173 provides: 173. Every voluntary disposition of land made with intent to defraud a subsequent purchaser is voidable at the instance of that purchaser.

Thus, to avoid a settlement, conveyance or security under this provision, actual intent to defeat or defraud a subsequent purchaser is essential: Moore v Kelly [1918] 1 Ir R 169. Under these provisions a fraudulent disposition is

only subject to attack by a subsequent purchaser, which includes a mortgagee, legal or equitable: Dolphin v Aylward (1870) LR 4 HL 486 at 499; Lister v Turner (1846) 5 Hare 281; 67 ER 919. The onus of proving that the conveyance was made bona fide and without fraudulent intent lies on the party seeking to uphold it: National Bank v Behan [1913] 1 IR 512; Moore v Kelly, above (both [page 376] cited for this proposition in Chitty, Denning and Hardy, Smith’s Leading Cases, 13th ed, Sweet & Maxwell, London, 1929, vol I, p 28). A disposition voluntary in its inception may become a disposition for consideration if the donee spends money erecting buildings on the land with the knowledge of the disponer: Goodbody v Miller (1893) 19 VLR 581; and see also O’Connell v O’Connell (1894) 20 VLR 253 (ex post facto consideration supplied by marriage). These provisions should be read with the provisions which correspond to Law of Property Act 1925 (UK) s 174: see 13.12. Broadly, the effect of those provisions is to avoid the inference of an ‘intent to defraud’, under the equivalents of s 173, by reason only of an acquisition or disposition of property for less than full value. The Victorian Act s 174 provides expressly that ‘dispositions’ of property include every mode of disposition mentioned or referred to in the Transfer of Land Act 1958. In principle there seems no reason why these provisions should not apply to Torrens land, and very compelling public policy reasons why they should. Hinde, McMorland and Sim, Land Law in New Zealand, Butterworths, Wellington, 1997, p 217 argue for this position in relation to the corresponding New Zealand legislation: Consistently with the theory that the intention of the legislature expressed in the Land Transfer Act is that on registration of a voluntary transfer the transferee should be in no better position than his transferor [Kerr, The Principles of the Australian Lands Titles (Torrens) System, p 225 n 184], s 61 of the Property Law Act 1952 applies to Land Transfer land [Baalman, The Torrens System in NSW, (2nd ed 1974), p 5; Hogg, Registration of Title to Land Throughout the Empire (1920), pp 109–110; Kerr, pp 224–5; Moss v Williamson (1877) 3 VLR (E) 221; Colechin v Wade (1878) 3 VLR (E) 266; Droop v Colonial Bank (1881) 7 VLR (E) 71; Thompson v Boyd (1888) 14 VLR 594, FC]. The result is that any transfer to which s 61 of the Property Law Act 1952 applies is voidable at the instance of the subsequent purchaser [Kerr, p 225 comments: ‘A volunteer will be ordered to transfer to a subsequent purchaser for value, or a vesting order will

be made’]. It would seem, however, that if a volunteer whose title was voidable under s 61 transferred to a bona fide purchaser for value without fraud, that purchaser would be fully protected by ss 182 and 183 of the Land Transfer Act 1952 [Hogg, p 110].

This position would not seem to be at odds with a registered proprietor of an interest in Torrens land, whether a volunteer or for value, enjoying the benefit of the indefeasibility provisions (see Bogdanovic v Koteff (1988) 12 NSWLR 472) subject to the effect of the advent of a bona fide purchaser for value: see Hinde, McMorland and Sim, above, referring to ss 182 and 183 of the New Zealand legislation (the ‘notice’ section and the ‘protection of purchasers’ section, respectively); and see O’Connell v O’Connell (1894) 20 VLR 253; cf Robinson, Property Law Act Victoria, pp 409–10.

II Securities of an Oppressive Nature A. Clogging the Equity Clogging the equity 13.10 From the doctrine of the courts of equity, that a mere security for a debt cannot be forfeited for non-payment on the stipulated day, was deduced the corollary — that not only should no stipulation to the contrary in or contemporaneously with the mortgage be valid (see Reeve v Lisle [1902] AC 461 H(L), where an agreement made subsequently to the mortgage giving the mortgagee an option to purchase was upheld), but any attempt to clog or fetter the right of redemption by a provision which would encumber the property, or give the mortgagee any beneficial interest in it after redemption, should be equally void. [page 377] As regards collateral advantages it is now settled, contrary to the older cases, that in certain circumstances such stipulations are permissible. This matter is dealt with in more detail in 32.12ff and see further 32.6 in relation to redemption.

B. Securities by Expectant Heirs Securities granted by expectant heirs and reversioners 13.11 In the exercise of its equitable jurisdiction the court will interfere in regard to securities taken from expectant heirs or reversioners, or persons in great straits for money, especially if in weak health: see Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125; 28 ER 82 (Lord Chancellor Hardwicke); and see Fletcher, ‘Review of unconscionable transactions’ (1973) 8 UQLJ 45; Cope, ‘The Review of Unconscionable Bargains in Equity’ (1983) 57 ALJ 279; Browne, Ashburner’s Principles of Equity, 2nd ed, Butterworths, London, 1933, pp 296–9; Croft v Graham (1863) 2 De GJ & Sm 155; 46 ER 334. (Cope suggests that equity would now apply the principles applicable to general relief from unconscionable bargain to expectant heirs and reversioners: see 57 ALJ at 294.) In this, courts of equity have gone far beyond the original principle of protecting young and improvident persons whose expectations made them subject to impositions (see remarks of Lord Hardwicke LC in Walmsley v Booth (1741) 2 Atk 25; 26 ER 412), in so much that, in case of inadequate consideration, a mortgage will be reduced to a security for the actual advance, with interest (in the older cases, at the rate of £5 per cent per annum (Croft v Graham, above; Miller v Cook (1870) LR 10 Eq 641; Tyler v Yates (1871) 6 Ch App 665; Beynon v Cook (1875) LR 10 Ch App 389); but no doubt a higher rate would be awarded nowadays: see 39.57ff). This rule has been applied although the expectant heir with whom the transaction was made was of full — even of mature — age, and was independently advised, and understood the nature of the bargain; and the onus of showing that the transaction was reasonable and provident is thrown on the mortgagee (not the onus of the showing the contrary thrown upon the mortgagor): Davis v Duke of Marlborough (1819) 2 Swan 108 at 139; 36 ER 555 at 566; Emmet v Tottenham (1865) 12 LT 838; Bromley v Smith (1859) 26 Beav 644; 53 ER 1047; Tottenham v Green (1863) 32 LJ Ch 201; Langdon v Reuss (1883) 4 LR (NSW) Eq 21; Fry v Lane (1888) 40 Ch D 312; Sinclair v Elderton (1900) 21 LR (NSW) Eq 21; King (J) Ltd v Hay Currie (1911) 28 TLR 10; and see Withers on Reversions, 2nd ed, Butterworths, London, 1933, p 401.

The poor and the ignorant 13.12 A contract, including a mortgage, may be set aside at law if one party lacked mental capacity and that fact was known to the other party: see, for example, Manches v Trimborn (1946) 115 LJKB 305. A contract, including a mortgage, may be set aside in equity if one party lacked sufficient mental capacity even where the lack of capacity was unknown to the other party, but where there is in the conduct of the latter, unfairness amounting to equitable fraud which would have entitled the former to rescind the contract even if he or she had mental capacity: Hart v O’Connor [1985] AC 1000; [1985] 2 All ER 880; and see Peeters v Schimanski [1975] 2 NZLR 328, a case of drunkenness. While equity will not set aside a transaction merely on the ground that it is improvident, equity will set aside a purchase from a poor and ignorant vendor at a considerable undervalue, where the vendor has acted without independent advice, unless the purchaser satisfies the court that the transaction was fair, just and reasonable: Fry v Lane (1888) 40 Ch D 312 at 322. An analogous situation applies where the poor and ignorant grants an oppressive mortgage: Morrison v Coast Finance Ltd (1965) 55 DLR (2d) 710. (See also for the Canadian law in general (1966) 44 Can Bar Rev 142 (BE Crawford) and (1972) [page 378] 50 Can Bar Rev 296 (I Davis) but see Portman Building Society v Dusangh [2000] 2 All ER (Comm) 221 (CA).) It has been said that the term ‘poor and ignorant’ may now be understood as being ‘a member of a lower income group’ and ‘less highly educated’, the latter requirement being applied, in particular to the person’s understanding of property transactions: Cresswell v Potter (1968) [1978] 1 WLR 255n at 257, 258 (Megarry J). Compare Backhouse v Backhouse [1978] 1 WLR 243; [1978] 1 ALL ER 1158; and see also Watkin v Watson-Smith [1986] CLY 424; (1971) 121 NLJ 1159 (Ross-Martyn); [1973] NILQ 171 (Lawson); (1976) 39 MLR 369 (Waddams); and (1986) 6 Oxford J of Legal Studies 123 (Beale).

Inequitable sale treated as a mortgage

13.13 Where the transaction takes the form of a sale, the conveyance will be directed to stand as a security for the amount actually found due, with interest, and in ordinary cases with costs, on the footing of a mortgage: Davis v Duke of Marlborough (1819) 2 Swan 108; 36 ER 555; Douglas v Culverwell (1862) 4 De GF & J 20; 45 ER 1089. A security under the like circumstances will be ordered to stand for the sums actually advanced to, or for the benefit of, the owner of the expectancy, with interest at five per cent, and the purchaser from the owner of the expectancy would be required to account as a mortgagee in possession for the rents and profits: see Edwards v Burt (1852) 2 De GM & G 55 at 64; 42 ER 791 at 795; Langdon v Reuss (1833) 4 LR (NSW) E1 28. Where the case is tainted with fraud and misrepresentation, and it is not shown that the money was applied for the plaintiff’s benefit, the security may be set aside unconditionally: Smith v Kay (1859) 7 HL Cas 750; 11 ER 299.

Statutory protection for dealings with reversions 13.14 Subject, however, to the jurisdiction of the court as regards unconscionable bargains, mere undervalue is not a ground for setting aside the acquisition of a reversionary interest. The Law of Property Act 1925 (UK) s 174 re-enacts the Sales of Reversions Act 1867 (UK), and has itself been re-enacted as NSW Act s 37C; Victorian Act s 175; South Australian Act s 88; Western Australian Act s 92; Tasmanian Act s 42; and Property Law Act 1952 (NZ) s 62. Victorian Act s 175 provides: 175(1) No acquisition made in good faith, without fraud or unfair dealing, of any reversionary interest in real or personal property, for money or money’s worth, shall be liable to be opened or set aside merely on the ground of under value. In this sub-section ‘reversionary interest’ includes an expectancy or possibility. 175(2) This section shall not affect the jurisdiction of the Court to set aside or modify unconscionable bargains.

Subsection (2) incorporates the restriction placed by the courts on that Act: Earl of Aylesford v Morris (1873) LR 8 Ch App 484; and see O’Rorke v Bolingbroke (1877) 2 App Cas 814; Permanent Trustee Co of NSW Ltd v Bridgewater [1936] 3 All ER 501. The provision is carefully limited to purchases made in good faith and without fraud or unfair dealing, and leaves undervalue still a material element

in cases in which it is not the sole equitable ground for relief: Brenchley v Higgins (1900) 70 LJ Ch 788. The jurisdiction of the court was not affected by the repeal of the usury laws (Croft v Graham (1863) 2 De GJ & Sm 155; 46 ER 334; Miller v Cook (1870) LR 10 Eq 641), and an exorbitant rate of interest agreed to be paid by a young and needy man on the security of an indefeasible reversionary interest shows unfair dealing: Tyler v Yates (1871) LR 6 Ch App 665. In such a case the charge will stand as security only for the sums actually advanced and interest at five per cent per annum (Tyler v Yates; Beynon v Cook [page 379] (1875) LR 10 Ch App 389; Croft v Graham; Miller v Cook ); but presumably a higher rate of interest would be awarded: see 39.57. However, the doctrine does not apply to mere cases of a high rate of interest, where extraordinary risk is incurred. This justifies the taking of a security for interest beyond the usual rate, and even for a much larger principal sum than was really lent, the surplus being treated as a bonus (Potter v Edwards (1857) 26 LJ Ch 468; Mainland v Upjohn (1889) 41 Ch D 126; see now Cityland and Property (Holdings) Ltd v Dabrah [1968] Ch 166; [1967] 2 All ER 639), and the doctrine does not apply to the ordinary case of a loan by a moneylender: Gordon v Fowler (1901) 17 TLR 243.

C. Consumer Credit Securities Consumer and other special credit mortgages 13.15 As noted in Chapter 9, mortgages to certain credit providers in connection with domestic and consumer transactions are specially regulated and non-observance of the special statutory provisions by a credit provider may lead to penalties or unenforceability.

D. Securities Made under Undue Influence

General 13.16 It was Lord Chancellor Hardwicke who apparently coined the expression ‘undue influence’ in Morris v Burroughs (1737) 1 Atk 399 at 403; 26 ER 253 at 255. Undue influence is a species of fraud and falls within the third category specified by Lord Hardwicke in Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125 at 155–6; 28 ER 82 at 100 (Hewitt and Richardson, White & Tudor’s Leading Cases in Equity, 9th ed, Sweet and Maxwell, 1928, vol 1, p 248 at 261): … presumed from the circumstances and conditions of the parties contracting … to prevent taking surreptitious advantage of the weakness and necessity of another: which knowingly to do is equally against the conscience as to take advantage of his ignorance: a person is equally unable to judge for himself in one as the other.

In Symons v Williams (1875) 1 VLR (Eq) 199, Barry J said (at 216): Undue influence is only one of the instances of fraud and undue influence itself is manifested in a variety of ways … but still it is in all cases bottomed in fraud.

Lord Hardwicke did not specify the circumstances or relationships which would raise the presumption in favour of the party seeking to set the transaction aside as he had expressed the view that it was dangerous to attempt to define the various classes of fraud (see Lord Hardwicke’s letter to Lord Kames of 30 June 1759: Tyler, Memoirs of Lord Kames, 2nd ed, Edinburgh, 1814, vol 1, pp 329–45 at p 341; the text also is reproduced in Young, Croft and Smith, On Equity [1.240]), as the definition would itself invite its circumvention. The cases do provide guidance (see Meagher, Gummow and Lehane, [15-001] et seq), but the general approach is to avoid attempts at definition. In considering the authorities, the distinction between the equitable jurisdiction in cases of undue influence and the equitable jurisdiction in relation to unconscionable dealings or catching bargains should be kept in mind. The distinction was stated by Davey JA in Morrison v Coast Finance Ltd (1965) 55 DLR (2d) 710 (at 713): The equitable principles relating to undue influence and relief against unconscionable bargains are closely related, but the doctrines are separate and distinct. The finding here against undue influence does not conclude the question whether the appellant is entitled to relief against an unconscionable transaction. A plea of undue influence attacks the sufficiency of consent; a plea that a bargain is unconscionable invokes relief against a unfair advantage gained by an

[page 380] unconscientious use of power by a stronger party against a weaker. On such a claim the material ingredients are proof of inequality in the position of the parties arising out of the ignorance, need or distress of the weaker, which left him in the power of the stronger, and proof of substantial unfairness of the bargain obtained by the stronger. On proof of those circumstances, it creates a presumption of fraud which the stronger must repel by proving that the bargain was fair, just and reasonable.

The judge cited Earl of Aylesford v Morris (1873) LR 8 Ch 484 per Lord Selborne LC at 491 for that last proposition. This statement was adopted in K v K [1976] 2 NZLR 31 at 36 and cited in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 474 (Deane J), see also Mason J (at 461); and see Louth v Diprose (1992) 175 CLR 621, especially at 626–8 (Brennan J); Warburton v Whiteley (1989) 5 BPR 97,388 (CA); (1989) NSW ConvR ¶55453 (CA); Teachers Health Investments v Wynne (1994) 6 BPR 13,499; cf Atkins v National Australia Bank (SC (NSW), CA, 5 August 1994, unreported). In summary, undue influence is concerned with the sufficiency of consent: ‘The main objection is not that the agreement entered into was harsh in its terms but rather that it was not entered into with a freely consenting mind’: Cope, ‘The Review of Unconscionable Bargains in Equity’ (1983) 57 ALJ 279 at 286 (and see generally Cope, Duress, Undue Influence and Unconscientious Bargains, Law Book Co, Sydney, 1985). Continuing, Cope says:‘Since the mental element is the core of the matter the doctrine of undue influence does not require that the transaction be unconscionable, improvident or oppressive on its face for its application’ (quoting Pilcher, ‘The Separation Agreement as an Unconscionable Transaction’ (1972) 1 Queens LJ 441 at 448–9); see also Union Fidelity Trustee Co v Gibson [1971] VR 573 at 576; Brusewitz v Brown [1923] NZLR 1106 at 1109–10; Lloyds Bank Ltd v Bundy [1975] QB 326; Barclays Bank plc v O’Brien [1993] 4 All ER 417; CIBC Mortgages plc v Pitt [1994] 1 AC 200; [1993] 4 All ER 433; and see 13.20.

Categories of undue influence 13.17 In a classic judgment in Barclays Bank plc v O’Brien [1994] 1 AC 180; [1993] 4 All ER 417 (see also CIBC Mortgages plc v Pitt [1994] 1 AC

200; [1993] 4 All ER 433 (HL)), Lord Browne-Wilkinson (with whom all other members of the House agreed) said (at AC 189–90; All ER 423–4): Undue influence A person who has been induced to enter into a transaction by the undue influence of another (‘the wrongdoer’) is entitled to set that transaction aside as against the wrongdoer. Such undue influence is either actual or presumed. In Bank of Credit and Commerce International SA v Aboody (1988) [1992] 4 All ER 955 at 964; [1990] 1 QB 923 at 953 the Court of Appeal helpfully adopted the following classification. Class 1: actual undue influence. In these cases it is necessary for the claimant to prove affirmatively that the wrongdoer exerted undue influence on the complainant to enter into the particular transaction which is impugned. Class 2: presumed undue influence. In these cases the complainant only has to show, in the first instance, that there was a relationship of trust and confidence between the complainant and the wrongdoer of such a nature that it is fair to presume that the wrongdoer abused that relationship in procuring the complainant to enter into the impugned transaction. In Class 2 cases therefore there is no need to produce evidence that actual undue influence was exerted in relation to the particular transaction impugned: once a confidential relationship has been proved, the burden then shifts to the wrongdoer to prove that the complainant entered into the impugned transaction freely, for example by showing that the complainant had independent advice. Such a confidential relationship can be established in two ways, viz: Class 2(A). Certain relationships (for example solicitor and client, medical advisor and patient) as a matter of law raise the presumption that undue influence has been exercised.

[page 381] Class 2(B). Even if there is no relationship falling within Class 2A, if the complainant proves the de facto existence of a relationship under which the complainant generally reposed trust and confidence in the wrongdoer, the existence of such relationship raises the presumption of undue influence. In a Class 2(B) case therefore, in the absence of evidence disproving undue influence, the complainant will succeed in setting aside the impugned transaction merely by proof that the complainant reposed trust and confidence in the wrongdoer without having to prove that the wrongdoer exerted actual undue influence or otherwise abused such trust and confidence in relation to the particular transaction impugned. As to dispositions by a wife in favour of her husband, the law for long remained in an unsettled state. In the 19th century some judges took the view that the relationship was such that it fell into Class 2A, ie as a matter of law undue influence by the husband over the wife was presumed. It was not until the decisions in Howes v Bishop [1909] 2 KB 390 and Bank of Montreal v Stuart [1911] AC 120 that it was finally determined that the relationship of husband and wife did not as a matter of law raise a presumption of undue influence within Class 2A. It is to be noted therefore that when Turnbull v Duval [1902] AC 429 was decided in 1902 the question whether there was a Class 2A presumption of undue influence as between husband and wife was still unresolved.

This statement with respect to the Class 2(B) classification should be read in light of the judgment of Isaacs J in Watkins v Coombes (1922) 30 CLR 180 at 193–4 (set out at 13.21). If the position with respect to the Class 2(B) classification is read as excluding ‘the mere fact’ of reposing confidence, in terms of the judgment of Isaacs J, then the law as stated by the High Court and the House of Lords is consistent in this respect. This seems implicit in this and other parts of the speech of Lord Browne-Wilkinson in Barclays Bank plc v O’Brien, above. See also Yerkey v Jones (1939) 63 CLR 649; Midland Bank plc v Shephard [1988] 3 All ER 17 at 21; Bank of Credit and Commerce International SA v Aboody [1990] 1 QB 923; Peters v Commonwealth Bank of Australia (1992) NSW ConvR ¶55-629; and see 13.18. The possibility of relief being available to a mortgagor under the broad jurisdiction conferred by the Contracts Review Act 1980 (NSW) should not be overlooked (see, for example, Garcia v National Australia Bank Ltd (1993) NSW ConvR ¶55-662); and note the operation of the Fair Trading Acts of the states and the Trade Practices Act 1974 (Cth) now re-enacted as the Competition and Consumer Act 2010 (Cth): now re-enacted as the Competition and Consumer Act 2010 (Cth) generally see 13.35.

Influence by a third party 13.18 The doctrine of undue influence also applies where the undue influence is exerted by a person other than the person who is the direct recipient of the property of the ‘weaker’ party. This is of particular relevance to a mortgagee taking a guarantee or security in support of the obligations of a mortgagor where the mortgagor is in a position of influence over the proposed guarantor or further mortgagor. The current position is conveniently summarised by Meagher, Gummow and Lehane, [15-150]: There has been much litigation concerning the position of financiers who take a guarantee or other security from a third party in support of indebtedness to them of a debtor who exercises undue influence over the third party. If the financier had actual knowledge of what was happening between the debtor and the surety (in a case of ‘actual’ undue influence) or of the circumstances from which a presumption is said to arise, or ought to have been put upon inquiry that impropriety might occur, then the creditor is subject to the equitable rights of the surety: Lancashire Loans Ltd v Black [1934] 1 KB 380; Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 467–8, 477, 485; Bank of Credit and Commerce International SA v Aboody [1990] 1 QB 923 at 973. But there is in general no obligation upon the financier to ensure that the third party has independent legal advice before giving security in support of the

debtor: Coldunell Ltd v Gallon [1986] QB 1184 at 1201. In Bank of Baroda v Shah [1988] 3 All ER 24, the Court of Appeal held that the bank was entitled to assume that the solicitors for the debtor, who (contrary to the fact) represented that they were acting also for the third party in the matter, would give the third party proper advice. The transaction will also be liable to be set aside at the instance of the third party if the financier appoints the debtor its agent (or holds the debtor out as its agent) to procure the securities

[page 382] in question from the third party and the financier could or should have been aware that the relationship between the debtor and the third party was such that the debtor could be expected to exercise influence over the third party, for example as a husband over a wife: Coldunell Ltd v Gallon [1986] QB 1184; Midland Bankplc v Perry (1989) 58 P & CR 221.

Where a creditor, or a potential creditor, of a husband entrusts to the husband the task of obtaining the execution of a guarantee or some other security document, the creditor cannot be in any better position than the husband himself. It follows that the creditor cannot enforce the guarantee or other document if it is established that the execution of the document by the wife was procured by undue influence by the husband and the wife had no independent advice: Kingsnorth Trust Ltd v Bell [1986] 1 All ER 423 (CA); cf Coldunell Ltd v Gallon [1986] QB 1184; [1986] 1 All ER 429 (CA); and see Peters v Commonwealth Bank of Australia (1992) NSW ConvR ¶55-629; also (1986) 102 LQR 351; [1986] CLJ 194 (Andrews). It formerly seemed that the husband must have acted as the lender’s agent (Midland Bank plc v Perry (1988) 56 P & CR 202 (CA)), but it is clear now on the authorities that the agency of the husband is only one basis upon which the creditor, the mortgagee, may be unable to enforce the mortgage: see Contractors Bonding Ltd v Snee [1992] 2 NZLR 157 (CA) (which contains a comprehensive review of the cases on imputing undue influence); Garcia v National Australia Bank Ltd (1993) NSW ConvR ¶55-662 at 59,789–90 (affirmed (1998) 194 CLR 395); and Barclays Bank plc v O’Brien [1993] QB 109; [1992] 4 All ER 983 (CA); [1994] 1 AC 180; [1993] 4 All ER 417 (HL). Reference should also be made to O’Donovan, Company Receivers and Administrators, 2nd ed, Law Book Co, Sydney, 1992, pp 145ff.

Availability of relief 13.19 Where the third party is held to have had notice of the wrongdoer’s undue influence, then, subject to the usual discretionary bars such as affirmation, delay or acquiescence, the plaintiff who has received no benefit from the transaction, is entitled to have it set aside: TSB Bank plc v Camfield [1995] 1 All ER 951; [1995] 1 WLR 430. The burden of proving any discretionary bar is on the person asserting the same, usually the lender.

Onus of proof 13.20 In Class 1, the onus of proof is clearly on the plaintiff to make out his or her case. Where there is no relationship of influence, presumed influence must be proved by the person alleging it: Howes v Bishop [1909] 2 KB 390 (CA); Bank of Montreal v Stuart [1911] AC 120 (PC); Spong v Spong (1914) 18 CLR 544; Brusewitz v Brown [1923] NZLR 1106; Mackenzie v Royal Bank of Canada [1934] AC 468 (PC); Johnson v Buttress (1936) 56 CLR 113; Bank of New South Wales v Rogers (1941) 65 CLR 42; Whereat v Duff [1972] 2 NSWLR 147, affirmed (1973) 1 ALR 363; Goldsworthy v Brickell [1987] 1 All ER 853 at 865; Bank of Credit and Commerce International SA v Aboody [1990] 1 QB 923 at 953; Contractors Bonding Ltd v Snee [1992] 2 NZLR 157; and see Meagher, Gummow and Lehane, [15-015] for other Australian decisions where the relationship of influence was established. Once actual undue influence is proved the party asserting it is not under the further burden of proving that the transaction induced by the undue influence was manifestly disadvantageous but is entitled, as of right, to have it set aside as against the person exercising the undue influence since actual undue influence is a species of fraud: CIBC Mortgages plc v Pitt [1994] 1 AC 200; [1993] 4 All ER 433. In Class 2, once the presumption is raised in favour of the weak or necessitous party, the evidentiary burden will shift to the party seeking to uphold the transaction: see Johnson [page 383]

v Buttress (1936) 56 CLR 113 at 134–5 (Dixon J); Powell v Powell [1900] 1 Ch 243 at 245–6; Lancashire Loans Ltd v Black [1934] 1 KB 380 at 404.

Presumption of undue influence 13.21 The presumption will not be raised unless the influence is ‘undue’, as is clear from the judgment of Isaacs J in Watkins v Coombes (1922) 30 CLR 180 at 193–4: It is not the law, as I understand it, that the mere fact that one party to a transaction who is of full age and apparent competency reposed confidence in, or was subject to the influence of, the other party is sufficient to cast upon the latter the onus of demonstrating the validity of the transaction. Observations which go to that extent are too broad. The first thing to ascertain in such a case is the true character of the transaction impeached. Is it a gift to the ‘confidant’ of importance? If so, the burden at once is cast on the confidant to satisfy the Court that the transaction was free from ‘undue influence’ but was the free outcome of the donor’s uninfluenced will (Spong v Spong (1914) 18 CLR 544 and cases there cited). Is it an ordinary sale for full value? If so, no such burden rests on the ‘confidant’ but the party impeaching it has to show affirmatively the exercise of undue influence. The cases on the subject are not always consistent in their statement of the position. Without specifying illustrations, it is sufficient to say that varying expositions by judges of eminence leave problems somewhat indecisive. This arises from the circumstance that conclusions of fact sometimes become intermingled with what are properly directions in law by the tribunal which has to determine both. At times that leads to difficulty, and, as I view it, the present case is an instance.

Isaacs J then quoted from the judgment of Lord Shaw in giving the decision of the Privy Council in Poosathurdi v Kanappa Chettiar (1919) LR 47 Ind App 1 at 3–4: It is a mistake (of which there are good many traces in these proceedings) to treat undue influence as having been established by a proof of the relations of the parties, having been such that the one naturally relied upon the other for advice, and the other was in a position to dominate the will of the first in giving it. Up to that point ‘influence’ alone has been made out. Such influence may be used wisely, judiciously and helpfully. But, whether by the law of India or the law of England, more than mere influence must be proved so as to render influence, in the language of the law, ‘undue’. It must be established that the person in a position of domination has used that position to obtain unfair advantage for himself, and so to cause injury to the person relying upon his authority or aid. And where the relation of influence as above set forth, has been established, and the second thing is also made clear, viz, that the bargain is with the ‘influencer’ and in itself unconscionable; then the person in a position to use his dominating power has the burden thrown upon him, and it is a heavy burden, of establishing affirmately that no domination was practised so as to bring about the transaction, but that the grantor of the deed was scrupulously kept separately advised in the independence of a free agent. These general propositions are mentioned because, if laid alongside of the facts of the present case, then it appears that one vital element — perhaps not sufficiently relied on in the Court below, and yet essential to the plaintiff’s case — is wanting. It is not proved as a fact in the present case that

the bargain of sale come to was unconscionable in itself, or constituted an advantage unfair to the plaintiff; it is, in short, not established as a matter of fact that the sale was for undervalue.

What Issacs J said in Watkins v Coombes was endorsed by Starke J in Harris v Jenkins (1922) 31 CLR 341 at 367–8; see also Union Bank of Australia Ltd v Whitelaw [1906] VLR 711; cf Barclays Bank plc v O’Brien [1994] 1 AC 180 at 189–90; [1993] 4 All ER 417 at 423–4, set out at 13.17. It follows that gifts of small value accountable on the grounds of some relationship, including friendship, are not within the presumption: see the cases cited, Meagher, Gummow and Lehane, [15-030]. Not all relationships which involve influence raise the presumption. The other elements were explained by Dixon J in Yerkey v Jones (1939) 63 CLR 649 (at 675): In the relations comprised within the category to which the presumption of undue influence applies, there is another element besides the mere existence of an opportunity of obtaining ascendency or confidence and of abusing it. It will be found that in none of those relations is it

[page 384] natural to expect the one party to give property to the other. That is to say, the character of the relation itself is never enough to explain the transaction and to account for it with suspicion of confidence abused.

Influence presumed 13.22 Where there was an inadequate consideration, or none at all, and where there was a fiduciary or other relation between the parties such that the maker of the security might be assumed to have been misled, to have been unable to form a correct judgment, or to have been under the influence of the person in whose favour an assurance was made, the assurance is liable to be set aside by the court, or to be treated as a security for only so much money as can be proved to have been advanced, with interest at a reasonable rate. Where the grantor commences proceedings to have the transaction set aside, he must do so within a reasonable time of the influence ceasing: Allcard v Skinner (1887) 36 Ch D 145 (CA); Bullock v Lloyds Bank Ltd [1955] Ch 317; [1954] 3 All ER 726; and see Goldsworthy v Brickell [1987] Ch 378; [1987] 1 All ER 853 (CA).

The presumption arises when an inadequate consideration is given to a person who is of weak intellect, or to a person who is subject to the influence which arises out of the relation of parent and child or guardian and ward (even though the wardship may have ended: Espey v Lake (1852) 10 Hare 260; 68 ER 923), and the presumption continues after the child’s marriage and for a time after attaining majority, On weakness of intellect, compare Hart v O’Connor [1985] AC 1000; [1985] 2 All ER 880 (PC); on drunkenness, see Peeters v Schimanski [1975] 2 NZLR 328; on fiancés, see Re Lloyds Bank Ltd [1931] 1 Ch 289; cf Zamet v Hyman [1961] 3 All ER 933; [1961] 1 WLR 1442 (CA). Generally, see Bainbrigge v Browne (1881) 18 Ch D 188; Lancashire Loans Ltd v Black [1934] 1 KB 380; Kerr v WATrustee Executor and Agency Co Ltd (1937) 39 WALR 34; Lamotte v Lamotte (1942) 42 SR (NSW) 99; West v Public Trustee [1942] SASR 109; Phillips v Hutchinson [1946] VLR 270; Bullock v Lloyds Bank Ltd [1955] Ch 317; Re Pauling’s Settlement Trusts [1964] Ch 303 at 337; [1963] 3 All ER 1 at 10; Johnson v Buttress (1936) 58 CLR 113 at 134 (Dixon J); Yerkey v Jones (1939) 63 CLR 649 at 675 (Dixon J). In a transaction with the person under whose influence the child is or is supposed to be (that is, in a transaction with religious, medical or other advisers, but not with a banker, unless a relationship of trust has been built up over a period of time — ‘crossing the line’), or in a transaction with a person who, by reason of superior knowledge of the property or other circumstances, is likely to have an advantage over him, the child is entitled to be relieved from the consequences as against the grantee and the volunteers claiming under the grantee, and all other persons who claim with notice of the equity or with notice of the circumstances under which it arose. See Huguenin v Baseley (1807) 14 Ves 273; 33 ER 526, and see (1940) 3 Conv (NS) 274 at 284–5; Allcard v Skinner (1887) 36 Ch D 145 (CA); Morley v Loughnan [1893] 1 Ch 736; Inche Noriah v Shaik Allie Bin Omar [1929] AC 127 (PC); Tufton v Sperni [1952] 2 TLR 516; Haskew v Equity Trustees Executors and Agency Co Ltd [1918] VLR 634; affirmed (1919) 27 CLR 231 — religious, medical or other advisers. As to the presumption not arising in a transaction between banker and customer, see National Westminster Bank plc v Morgan [1985] AC 686; [1985] 1 All ER 821 (HL); Bank of Credit and Commerce International SA v

Aboody [1990] 1 QB 923; James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347; Cornish v Midland Bank plc [1985] 3 All ER 513 (CA). For ‘crossing the line’, see (1986) 65 Can Bar Rev 37 (Waters); Lloyds Bank Ltd v Bundy [1975] QB 326; [1974] 3 All ER 757 (CA); McKenzie v Bank of Montreal (1975) 55 DLR (3d) 641; cf Barclays Bank plc v O’Brien [1994] 1 AC 180; [page 385] [1993] 4 All ER 417 and CIBC Mortgages plc v Pitt [1994] 1 AC 200; [1993] 4 All ER 433; and see 13.17. See generally re entitlement against grantee and others claiming with notice of equity, Bainbrigge v Browne (1881) 18 Ch D 188; De Witte v Addison (1899) 80 LT 207; Inche Noriah v Shaik Allie Bin Omar, above. There are dicta concerning the possibility of the presumption arising as between a trustee and a beneficiary under an express trust: see, for example, Bruzewitz v Brown [1923] NZLR 1106 at 1110. Meagher, Gummow and Lehane, [15-095] take the view, with which the present authors concur, that the proper analysis of the authorities shows that unless the trustee also takes on another role such as guardian or confidant there will not be any presumption flowing from the mere fact of trusteeship. As to the position of a solicitor with respect to securities granted by his client, see 42.2ff.

Concerns of the court 13.23 The court’s intervention is not based on a general notion of public policy, but upon the victimisation of one party by another (manifestly disadvantageous transaction): National Westminster Bank plc v Morgan [1985] AC 686; [1985] All ER 821 (HL); Woodstead Finance Ltd v Petrou [1986] FTLR 267; Midland Bank plc v Phillips (1986) Times, 28 March (CA); [1985] Conv 387 (Barton and Rank); (1986) 83 LS Gaz 1712 (Jacobs) and 2407 (Stratton); Midland Bank plc v Shephard [1988] 3 All ER 17 (CA). It is not necessary for the plaintiff to prove that he had been dominated by

the defendant: Goldsworthy v Brickell [1987] Ch 378; [1987] 1 All ER 853 (CA). On the other hand, in cases of undue influence depending not on relationship, but on express influence or threats, the onus of proof lies on the plaintiff (see Williams v Bayley (1866) LR 1 HL 200, where a mortgage executed by a father to prevent the prosecution of his son by the mortgagee was set aside): Public Service Employees Credit Union Co-operative v Campion (1984) 56 ACTR 39. It is for the other party to show that the grantor had such professional advice (though not necessarily from another solicitor than the solicitor who acted for the grantee — Inche Noriah v Shaik Allie Bin Omar [1929] AC 127) as to enable him to exercise a proper judgment: Allcard v Skinner (1887) 36 Ch D 145 at 171; Inche Noriah v Shaik Allie Bin Omar [1929] AC 127 at 135 (PC); Zamet v Hyman [1961] 3 All ER 933; [1961] 1 WLR 1442; Lloyds Bank Ltd v Bundy [1975] QB 326; [1974] 3 All ER 757 (CA). The other party must also show that the grantor was not misled by artifice or contrivance, as to the existence of which any false recital or suggestion in the security will tend to show: Baker v Bradley (1855) 7 De GM & G 597; 44 ER 233. Mere inadequacy of consideration, inequality of bargaining power or an improvident bargain gives no right to relief under the doctrine of undue influence: see Maynard v Moseley (1676) 3 Swanst 651; 36 ER 1009; Borell v Dann (1843) 2 Hare 440; 67 ER 181; Harrison v Guest (1860) 8 HL Cas 481; ER 517; Middleton v Brown (1878) 47 LJ Ch 411; Allcard v Skinner (1887) 36 Ch D 145 at 157–8 (Kekewich J), affirmed CA; Brusewitz v Brown [1923] NZLR 1106 at 1109–10. See further the cases cited by Meagher, Gummow and Lehane, [15-120] in relation to adequacy of consideration, particularly Johnson v Buttress (1936) 56 CLR 113 at 135–6 and Bester v Perpetual Trustee Co Ltd [1970] 3 NSWR 30 at 35. See also Cresswell v Potter [1978] 1 WLR 255n; Watkin v WatsonSmith (1986) Times, 3 July; and, generally, [1973] 24 NILQ 171 (Lawson); (1971) 121 NLJ 1159 (Ross-Martyn); (1976) 39 MLR 369 (Waddams); (1986) 6 OJLS 123 (Beale). [page 386]

Rebutting the presumption 13.24 In principle the presumption must be rebutted by evidence that indicates that the consent of the weaker party was real and not subject to influence (which follows from the basis of the equitable jurisdiction with respect to undue influence: see 13.16). The evidence required to discharge the burden depends on a number of important factors, among which will be the nature of the relationship between the plaintiff and the defendant, the nature of the undue influence which is alleged, the personalities of the persons involved and ‘the extent to which the transaction cannot be readily accounted for by ordinary motives of ordinary persons in that relationship and all the circumstances of the case’: Hogg v Hogg [2007] EWHC 2240 (Ch); [2007] All ER (D) 54 (Oct) per Lindsay J at [42ix]. Referring to the situation where the presumption is raised, Dixon J in Johnson v Buttress (1936) 56 CLR 113 (at 134) said: When they stand in such a relation, the party in the position of influence cannot maintain his beneficial title to property of substantial value made over to him by the other as a gift, unless he satisfies the court that he took no advantage of the donor, but that the gift was the independent and well-understood act of a man in a position to exercise a free judgment based on information as full as that of the donee. This burden is imposed upon one of the parties to certain wellknown relations as soon as it appears that the relation existed and that he has obtained a substantial benefit from the other.

As appears from the cases to which reference has been made, independent advice may be critical in rebutting the presumption, but does not appear to be essential in all cases: see Barclays Bank plc v O’Brien [1994] 1 AC 180; [1993] 4 All ER 417 (HL); and see 13.19. Gillard J summarised the state of the authorities in Union Fidelity Trustee Co v Gibson [1971] VR 573 at 577– 8 (omitting reference to authority): Although there is no rule of law that where such a relationship exists the donor should have independent advice at the time of making the gift in order to rebut the Presumption and, particularly if the court is of opinion that independent advice would not have had any effect on the transaction or that the gift was trifling or of a simple character, nevertheless independent advice is an important factor in determining whether the gift is the pure voluntary and wellunderstood act of the donor. This is particularly so if the gift should be of a large sum of money, or the circumstances of the relationship, however proper the court may regard them, strongly suggest that the donor was in a position of grave inequality in relation to the donee, or where the transaction may be of a complicated character.

His Honour then noted that the Privy Council in Inche Noriah v Shaik Allie Bin Omar [1929] AC 127 had pointed out that the donee may rebut the presumption in any manner open to him on the facts which enables him to persuade the court that the gift was really the spontaneous act of a party, comprehending what he did and as a result of his own free will. But His Honour added: … it is undoubtedly true that in many authorities the presence or absence of independent advice has had a great influence on the court’s decision on this vital question. If the donor, however, should receive independent advice, and either misunderstands the advice or is given possibly erroneous advice whereby he fails to appreciate or realize the financial implications and the detriment to himself involved in the gift, a court of equity will not set aside the gift if the donor otherwise understood the nature of the transaction and acted therein in the full exercise of his will.

He cited Jenyns v Public Curator (1953) 90 CLR 113 for this last proposition. The principal authorities cited by Gillard J were Kali Bakhsh v Ram Gopal Singh (1913) 30 TLR 138; Haskew v Equity Trustee Executor & Agency Co Ltd [1918] VLR 634; Bank of New South Wales v Rogers (1921) 65 CLR 42 especially at 87; Tufton v Sperni (1952) 2 TLR 516; Linderstam v Barnett (1915) 19 CLR 528; Barr v Union Trustee Co of Aust Ltd [1923] VLR 236; 29 ALR 67; Rhodes v Bate (1866) 1 Ch App 252; Haskew’s [page 387] Case (1919) 27 CLR 231 at 235; 25 ALR 350; Johnson v Buttress (1936) 56 CLR 113 at 120; [1936] ALR 390; Allcard v Skinner (1887) 36 Ch D 145; Powell v Powell [1900] 1 Ch 243; Lancashire Loans v Black [1934] 1 KB 380; [1933] All ER Rep 201; Zamet v Hyman [1961] 3 All ER 933; [1961] 1 WLR 1442. The advice given must be independent and adequate. A solicitor, for example, acting for both parties would not be giving independent advice for present purposes: see Powell v Powell [1900] 1 Ch 243. Further, the advice must be given by an adviser fully aware of all the material facts and must be advice as to the desirability or propriety of the proposed transaction, not merely a reading or ‘narrow’ explanation of the effect of a relevant

document; on this aspect, with respect to solicitors, see Powell v Powell; Brusewitz v Brown [1923] NZLR 1106; Permanent Trustee Co of NSW Ltd v Bridgewater [1936] 3 All ER 501; Bullock v Lloyds Bank Ltd [1955] Ch 317; Bester v Perpetual Trustee Co Ltd [1970] 3 NSWR 30. There is no reason why the adviser need be a lawyer or any other particular professional as long as he or she is possessed of knowledge and expertise relevant to the particular proposed transaction: cf Demerara Bauxite Co Ltd v Hubbard [1923] AC 673. Indeed, an accountant may be more appropriate to many financing arrangements, with or without a solicitor. The fact that the donor stated in a witness statement, that he had not been put under any pressure by the donee was held in Goodchild v Bradbury [2006] All ER (D) 247 (CA) to be insufficient to rebut the presumption.

Husband and wife cases 13.25 There is no presumption of undue influence between husband and wife: see Bank of Montreal v Stuart, above (influence); Mackenzie v Royal Bank of Canada, above (no influence); Bank of Victoria v Mueller [1925] VLR 642; Re Lloyds Bank Ltd [1931] 1 Ch 289 at 302; Yerkey v Jones (1939) 63 CLR 649; European Asian of Australia Ltd v Kurland (1985) 8 NSWLR 192 at 200; Kingsnorth Trust Ltd v Bell [1986] 1 All ER 423; [1986] 1 WLR 119 (CA); Midland Bank plc v Shephard [1988] 3 All ER 17 at 21; Bank of Credit and Commerce International SA v Aboody [1990] 1 QB 923 at 952; Barclays Bank plc v O’Brien [1994] 1 AC 180; [1992] 4 All ER 983; Shepherd v Silvia (1993) NSW ConvR ¶55-660; Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 409; 155 ALR 614 at 623 [33]. However, Dixon J pointed out in Yerkey v Jones, above, at 675–6 that: While the relation of a husband to his wife is not one of influence, and no presumption exists of undue influence, it has never been divested completely of what may be called equitable presumptions of an invalidating tendency. In the first place, there is the doctrine, which may now perhaps be regarded as a rule of evidence, that, if a voluntary disposition in favour of the husband is impeached, the burden of establishing that it was not improperly or unfairly procured may be placed upon him by proof of circumstances raising any doubt or suspicion. In the second place, the position of strangers who deal through the husband with the wife in a transaction operating to the husband’s advantage may, by that fact alone, be affected by an equity which as between the wife and the husband might arise from his conduct. In the third place, it still is or may be a condition of the validity of a voluntary dealing by the wife for the advantage of her husband that she really obtained an

adequate understanding of the actual nature and consequences of the transaction.

Yerkey v Jones was considered in a series of English cases culminating in Barclays Bank plc v O’Brien [1994] 1 AC 180; [1993] 4 All ER 417. Lord Browne-Wilkinson, who gave the leading judgment, specially rejected any special equity as arising in the husband and wife situation (see AC 195; All ER 428), noting that the doctrine of notice properly applied would cover this class of case. [page 388] However, the High Court in Garcia v National Australia Bank Ltd (1998) 194 CLR 395; 155 ALR 614, reaffirmed the Yerkey v Jones approach and said that the principle had nothing to do with notice. Notwithstanding the absence of undue influence, the court held (at CLR 408–9; ALR 623) that it was unconscionable for a creditor to enforce a guarantee against a wife when (a) the wife did not understand the purport and effect of the transaction; (b) the transaction was voluntary, in the sense that the wife obtained no gain from the contract the performance of which was guaranteed; (c) the creditor understood that the husband in whom the wife had confidence may not have fully and accurately explained the purport and effect of the transaction to her; and (d) the creditor did not take steps to explain the transaction to the wife or to ascertain that a stranger had explained it to her. For cases dealing with the situation where a husband forges his wife’s signature on a mortgage, see 13.44.

The Garcia/Yerkey principle 13.26 The ratio of the decision in Garcia v National Australia Bank Ltd (1998) 194 CLR 395; 155 ALR 614 is found in the joint judgment of Gaudron, McHugh, Gummow and Hayne JJ at CLR 408 [31]; ALR 623. Callinan J, in a separate judgment, basically agreed with the majority. Those judges at CLR 404 [23]; ALR 620 referred to the two cases considered by Dixon J in Yerkey v Jones (1936) 63 CLR 649 at 684–6, namely a first in which there is actual undue influence by a husband over a wife and a second in which there is no undue influence, but a failure to explain adequately and

accurately the surety transaction into which the wife is entering. Those judges then said at [31]: The principles applied in Yerkey v Jones do not depend upon the creditor having, at the time the guarantee is taken, notice of some unconscionable dealing between the husband as borrower and the wife as surety. Yerkey v Jones begins with the recognition that the surety is a volunteer: a person who obtained no financial benefit from the transaction, performance of the obligations of which she agreed to guarantee. It holds, in what we have called the first kind of case, that to enforce that voluntary transaction against her when in fact she did not bring a free will to its execution would be unconscionable. It holds further, in the second class of case, that to enforce it against her if it later emerges that she did not understand the purport and effect of the transaction of suretyship would be unconscionable (even though she is a willing party to it) if the lender took no steps itself to explain its purport and effect to her or did not reasonably believe that its purport and effect had been explained to her by a competent, independent and disinterested stranger. And what makes it unconscionable to enforce it in the second kind of case is the combination of circumstances that: (a) in fact the surety did not understand the purport and effect of the transaction; (b) the transaction was voluntary, in the sense that the surety obtained no gain from the contract the performance of which was guaranteed, (c) the lender is to be taken to have understood that, as a wife, the surety may repose trust and confidence in her husband in matters of business and therefore to have understood that the husband may not fully and accurately explain the purport and effect of the transaction to his wife; and yet (d) the lender did not take steps to explain the transaction to the wife or find out that a stranger had explained it to her.

Kirby J agreed with the majority that the appellant wife succeeded. However, he rejected the Yerkey v Jones principle as outlined by the majority. He said at CLR 430–1 [73]; ALR 641 that he favoured a reformulation of the principle expressed in Barclays Bank plc v O’Brien [1994] 1 AC 180; [1993] 4 All ER 417 that where a credit provider ought to know that there is a relationship of emotional dependence on the part of the proposed surety towards the debtor and there is in fact undue influence, misrepresentation or the like, the credit provider will be fixed with notice of the surety’s right to set aside the transaction. A credit provider, except in special circumstances, can avoid that risk by ensuring that the surety is warned that she should obtain independent legal advice. He called this the ‘Modified O’Brien Principle’. [page 389] Many academics have found the view of Kirby J more appealing. Whether that be correct or not, the majority view represents the law.

Because of the High Court’s decision in Garcia, there is no purpose in considering the decisions of the New South Wales Court of Appeal and English decisions which were analysed in the corresponding paragraph of the 1st edition of this work. A good collection of these is found in Collier’s article in (1996) 4 APLJ 181 which contains a digest of all the relevant cases on this subject prior to 1996. It should be noted that although in some of these cases (and indeed Kirby J’s view expressed in Garcia itself at CLR 427–30; ALR 638–40) the view was that the principle in Yerkey v Jones was out of date and discriminatory, the majority at CLR 403 [19]; ALR 619 said that many wives still need economic protection. The Court of Appeal in the O’Brien case ([1993] QB 109 at 139; [1992] 4 All ER 983 at 1008) and the House of Lords in the same case ([1994] 1 AC 180 at 188; [1993] 4 All ER 417 at 422) said much the same thing. Where the circumstances referred to in Garcia exist, the evidentiary onus is on the lender to show why the transaction should be enforced: Williams v State Bank of NSW (1993) 6 BPR 13,552.

The wife as volunteer 13.27 A wife will not be considered to have taken a gain from a transaction if she in fact received no real benefit, even though on paper she might have done so: Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 412; 155 ALR 614 at 625–6. The High Court there affirmed the trial judge (Young J) who had said in Garcia v National Australia Bank Ltd (1993) NSW ConvR ¶55-662 that where the wife does have a financial interest in the company it depends on the circumstances, particularly the extent of the wife’s interest, whether the principle of Yerkey v Jones is applicable. His Honour said (at p 59,787): In Warburton v Whiteley [(1989) NSW ConvR ¶155–451; (1989) 5 BPR 97,388], it is clear that the Court of Appeal thought that the rule would apply to a company which was the mere alter ago of a husband. However Clarke JA went further at 58,291 as follows: There would appear to me to be no reason in principle why the doctrine should not apply equally in respect of loans to … organisations in which the husband had, but the wife had not, a substantial interest. Nor do I see any reason why the doctrine should be limited to the guaranteeing of past indebtedness. He referred to the judgment of Needham J in Bawn v Trade Credits Ltd (1986) NSW ConvR 155-290. That was indeed a case where relief was given under the Yerkey v Jones principle where the company was the borrower and the woman involved was both a director and

shareholder of the corporate borrower. It is significant that Needham J who decided Bawn’s case was referred to Kurland’s case [European Asian of Australia Ltd v Kurland (1985) 8 NSWLR 192, which was followed in Warburton v Whiteley ] but still came to the decision he did. In Broadlands International Finance Ltd v Sly (1987) 4 BPR 9420, Foster J applied Yerkey v Jones to a case where a husband had purchased the property in respect to which the wife gave a guarantee via a shelf company. In Re Halstead; Ex parte Westpac Banking Corporation (1991) 31 FCR 337, Heerey J said at 353 that even if the wife was a shareholder in the company if she was not apparently involved in the day to day running of the company in the absence of evidence that she had a direct or indirect interest in the debt, she could rely on the principle in Yerkey v Jones. In Carrington Confirmers Pty Ltd v Akins — 23 April 1991 unreported — Giles J at 46–48 of his judgment says that the principle does not apply where the dealing ‘is in a real sense for the benefit of the wife’. He recognized that there may be situations where there would be a guarantee of a company interest in which the wife held shares provided that her interest was not sufficiently substantial. See also Shephard v Silvia — Hodgson J, 18 December 1992 [(1993) NSW ConvR 155-660]. Accordingly in my view the mere fact that the loan in the instant case was made to a company does not necessarily exclude the application of the principle of Yerkey v Jones. It will be a matter of considering the facts to see whether the plaintiff’s interest was sufficiently substantial for it to be said that she had voluntarily guaranteed the debt of an entity in which her husband was virtually the sole beneficiary.

[page 390] It should also be noted that in Warburton v Whiteley (1989) NSW ConvR 155-453, Kirby P at 58,286 and McHugh JA at 58,288 held that the onus is on the bank to show that the wife did have a substantial interest in the benefit of the transaction.

Further, the loan, even one made to a company in which the wife has a substantial interest, may be so extraordinary in purpose or amount or in the manner in which it was arranged as to be liable to be set aside: see Shephard v Silvia, above. In National Australia Bank v Savage [2013] NSWSC 1718, Adamson J said at [74] that for the wife to show that equitable intervention is warranted, proof is required of four matters: (1) She did not understand the purport and effect of the transaction; (2) The transaction was voluntary, in that there was no direct or immediate gain for her from the transaction; (3) The creditor, the Bank, knew that she was Mr Savage’s wife and could be expected to repose trust in him in financial matters; (4) The Bank did not itself take steps to explain the transaction to her, or find out that a stranger had explained it to her.

See also Bank of Western Australia v Abdul [2012] VSC 222 (Croft J). See also European Asian of Australia Ltd v Kurland (1985) 8 NSWLR 192 at 200; European Asian of Australia Ltd v Lazich (1987) ASC 155-564; Peters v Commonwealth Bank of Australia (1992) Aust Contract Reports 190-012; National Australia Bank Ltd v Mangos (1993) V ConvR ¶54-475 at ¶65,561; and the cases digested in Collier’s article in (1996) 4 APLJ 181.

Barclays v O’Brien in Australia 13.28 The majority in Garcia v National Australia Bank Ltd (1998) 194 CLR 395; 155 ALR 614 made it clear that they did not agree with the House of Lords in Barclays Bank plc v O’Brien [1994] 1 AC 180; [1993] 4 All ER 417 that the whole of the problems in this area of the law could be solved by reference to principles of constructive notice. The court specifically said that it would not follow Lord Browne-Wilkinson’s conclusion at AC 195; All ER 428 that the key to the problem is to identify the circumstances in which the creditor will be taken to have had no notice of the wife’s equity to set aside the transaction. Thus, what is said in O’Brien about wives has no force in Australia. Furthermore, agency, discarded by the House of Lords, may form the basis for decision in Australia: see, for example, Burke v State Bank of NSW (1994) 37 NSWLR 53 (affirmed by NSWCA, 4 April 1997, unreported). The High Court expressed sympathy with those who had said that the basis of the O’Brien principle was jurisprudentially uncertain (see CLR 402; ALR 618, citing Wilkinson v ASB Bank Ltd [1998] 1 NZLR 674 at 689). The O’Brien principle has been applied in Australia in Alderton v Prudential Assurance Company Ltd (1993) 41 FCR 435 at 448, but this was before Garcia. As noted in 13.26, even Kirby J considered that there had to be modification to the O’Brien principle before it could apply in Australia.

Does Garcia/Yerkey extend beyond wives? 13.29 The plurality in Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 414; 155 ALR 614 at 620 considered that the principle might extend beyond wives, but that it was not necessary to decide this. Callinan J

at CLR 442; ALR 649 rejected this possibility. Kirby J at CLR 435; ALR 645 would extend the principle. He said that [page 391] the broader equitable doctrine protects vulnerable parties in a relationship and ensures that in proper cases they have full protection before they put at risk the major asset in the relationship for the primary advantage of the one to whose pressure they may be especially vulnerable. In State Bank of NSW Ltd v Hibbert (2000) 9 BPR 17,543 at 17,557–8, Bryson J held that the principle did not cover a de facto wife, but acknowledged that it might extend to some cases where the creditor was aware of an emotional relationship between cohabitees. See also Watt v State Bank of NSW Ltd [2003] ACTCA 7 at [20] and Hillston v Bar Mordecai [2003] NSWSC 89 at [45]. The matter was also discussed, without decision, in Australian Regional Credit Pty Ltd v Mula [2009] NSWSC 325; 14 BPR 26,779. However, in Liu v Adamson [2003] NSWSC 74 at [13]–[23], the Garcia principle was applied in a de facto marriage situation which had produced multiple children. See the discussion in Dal Pont and Chalmers, Equity and Trusts in Australia, 3rd ed, Lawbook Co, Sydney, 2004, [7.180]. The approach of the High Court in Bank of New South Wales v Rogers (1941) 65 CLR 42 supports the view of Kirby J in Garcia. In that case the respondent was a niece residing with her uncle who had obtained security from her. See also Geelong Building Society v Thomas (1996) V Conv R ¶54545, a case where a daughter-in-law succeeded. While the principle may extend to cover persons to whom the principal debtor is in loco parentis, it does not apply in reverse. It thus does not apply where children persuade elderly parents to back their business ventures: see, for example, Avon Finance Co Ltd v Bridger [1985] 2 All ER 281 (CA). This decision was approved by Lord Browne-Wilkinson in Barclays Bank plc v O’Brien [1994] 1 AC 180 at 198; [1993] 4 All ER 417 at 431. In England the rule is not restricted to husband and wife cases. It applies to ‘all other cases where there is an emotional relationship between cohabitees’ (Barclays Bank plc v O’Brien AC at 198; All ER at 431), that is whether

married or unmarried, whether heterosexual or homosexual. In Burke v State Bank of NSW (1994) 37 NSWLR 53 at 76 (affirmed by NSWCA, 4 April 1997, unreported), it was held that generally the court will not force a transaction at the suit of a creditor where the creditor has knowingly entrusted to someone with a motive for or an interest in the execution, the execution of the security documents by the person now being sued.

E. Unconscionable Dealing — Catching Bargains General jurisdiction 13.30 The jurisdiction in equity to relieve against unconscionable dealing, or catching bargains, is distinct from the jurisdiction with respect to undue influence (see 13.16ff) but is also based on the general equitable jurisdiction in fraud. The nature of the jurisdiction and its essential elements were stated in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 by Deane J, with whom Wilson J agreed, as follows (at 474): The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or ‘unconscientious’ that he procure, or accept, the weaker party’s assent to the impugned transaction in the circumstances in which he procured or accepted it. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction

[page 392] was fair, just and reasonable: ‘the burthen of shewing the fairness of the transaction is thrown on the person who seeks to obtain the benefit of the contract’ (see per Lord Hatherley, O’Rorke v Bolingbroke [(1877) 2 App Cas at 823]; Fry v Lane [(1888) 40 Ch D 312 at 322]; Blomley v Ryan [(1956) 99 CLR 362 at 428–9].

See also Louth v Diprose (1992) 175 CLR 621, especially at 626–8 (per Brennan J). These elements are discussed in detail in O’Donovan, Company Receivers and Administrators, pp 152–7; see also Meagher, Gummow and Lehane,

Equity: Doctrines and Remedies, pp 525–33. In Bowkett v Action Finance Ltd [1992] 1 NZLR 449 (at 460–1), Tipping J, having reviewed the authorities, stated the circumstances that would normally be present for a finding of an unconscionable bargain. In Blomley v Ryan (1956) 99 CLR 362 at 415, Kitto J stated, in general terms, the circumstances in which the jurisdiction is attracted: It applies whenever one party to a transaction is at a special disadvantage in dealing with the other party because illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands.

Fullagar J was more specific as to circumstances (99 CLR 405–6): One other general observation may be made before proceeding to the facts of the present case. The circumstances adversely affecting a party, which may induce a court of equity either to refuse its aid or to set a transaction aside, are of great variety and can hardly be satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary. The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis-à-vis the other. It does not appear to be essential in all cases that the party at a disadvantage should suffer loss or detriment by the bargain. In Cooke v Clayworth [(1811) Ves Jun 12], in which specific performance was refused, it does not appear that there was anything actually unfair in the terms of the transaction itself. But inadequacy of consideration, while never of itself a ground for resisting enforcement, will often be a specially important element in cases of this type. It may be important in either or both of two ways — firstly as supporting the inference that a position of disadvantage existed, and secondly as tending to show that an unfair use was made of the occasion. Where, as here, intoxication is the main element relied upon as creating the position of disadvantage, the question of adequacy or inadequacy of consideration is, I think, likely to be a matter of major, and perhaps decisive, importance. It will almost always, I think, be ‘… an important ingredient in considering whether a person did exercise any degree of judgment in making a contract, or whether there is a degree of unfairness in accepting the contract …’ (per Page Wood VC in Wiltshire v Marshall [(1866) 14 LT 396 at 397].

Subsequent cases indicate that ‘illiteracy’ is to be broadly viewed, to include lack of familiarity with English, written or spoken: see Carello v Jordan [1935] St R Qd 294; Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447. Also included in the list are lack of business experience or acumen: National Australia Bank Ltd v Nobile (1988) ATPR 140-856 at 49,240. A mere hard and unreasonable bargain will not attract the jurisdiction: see Alec Lobb Ltd v Total Oil GB Ltd [1983] 1 All ER 944 at 961; Walmsley v Christchurch City Council [1990] 1 NZLR 199 at 206. For the purposes of the rule, ‘special disadvantage’ does not include the mere fact

that the guarantor is the wife of the debtor — other circumstances must exist if such disadvantage is to be established: European Asian of Australia Ltd v Kurland (1985) 8 NSWLR 192 at 200; Warburton v Whiteley (1989) 5 BPR 11,628 at 11,631–2; Garcia v National Australia Bank Ltd (1993) NSW ConvR ¶155-662; National Australia Bank Ltd v Mangos (1993) ConvR ¶54475 at ¶65,562–3; and see Atkins v National Australia Bank (SC (NSW), CA, 5 August 1994, unreported); Teachers Health Investments Pty Ltd v Wynne (1994) 6 BPR 13,499; and Westpac Banking Corp v Sansom (1994) 6 BPR 13,790. [page 393]

Onus of proof 13.31 The onus of showing that a transaction was fair, just and reasonable falls upon the stronger party once the weaker party has shown that a beneficial bargain was obtained as a result of the stronger party taking advantage of the position: see Fry v Lane (1888) 40 Ch D 312. The onus shifts by reason of the evidence led by the weaker party in this respect; it does not shift by reason of any presumption being raised as a result of any existing relationship of influence (as is the position with undue influence: see 13.16), the distinction between this doctrine and unconscionable dealing or catching bargains having been referred to previously. As appears from the statement of essential elements of the jurisdiction made in Amadio’s case (see above) the special disadvantage must be ‘sufficiently evident’ to the stronger party to make the conduct of that party ‘unconscientious’: see Melverton v Commonwealth Development Bank of Australia (1989) ASC ¶155-921 at 58,459; National Australia Bank Ltd v Nobile (1988) ATPR 140-856 at 49,252–4. Unconscientious bargains in similar circumstances may be relieved against at law but on the basis of non est factum — that a person’s mind does not go with his deed: see Blomley v Ryan (1956) 99 CLR 362 at 401–2 (per Fullagar J). The common law, rather like equity in relation to undue influence, focused on the reality of assent rather than the terms of the bargain and its unconscionability or not (see Fullagar J at 401–2).

The extent to which a creditor mortgagee is bound by the unconscionable conduct of its debtor must be considered. It is difficult to see that the issues raised in relation to the extent to which the equity raised by the unconscionable conduct is binding on third parties differ from the same issues with respect to the equity raised by undue influence: see 13.27 and Barclays Bank plc v O’Brien [1994] 1 AC 180; [1993] 4 All ER 417, where the House of Lords dealt with the matter in terms of agency and notice; cf Yerkey v Jones (1939) 63 CLR 649. A similar approach with respect to unconscionable conduct had already been taken by the High Court in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; and see Contractors Bonding Ltd v Snee [1992] 2 NZLR 157 at 174, which also indicates that the positions are similar. A mortgagee would in this context also be bound by the unconscionable conduct of the debtor if the debtor was at the relevant times acting as its agent: see National Australia Bank Ltd v Mangos (1993) V ConvR ¶54-475 and the reference (at 65,562–3) to the unreported judgment of Tadgell J in Australia and New Zealand Banking Group v Lefkovic (24 June 1992). However, unless agency is to be used as a ‘device’ to fix the mortgagee with the consequences of such conduct such agency will be encountered only rarely: see Barclays Bank case (at 428). In Garcia v National Australia Bank Ltd (1993) NSW ConvR ¶55-662, Young J said (at 59,790): Were I not of the view that the plaintiff is entitled to invoke the Yerkey v Jones principle, I do not think she would be entitled to relief under the unconscionability principle. That principle seems to apply in the present situation only if the plaintiff can satisfy two tests, viz (1) was the conduct of the plaintiff’s husband unconscionable; and (2) if the answer to (1) is yes, did the Bank know, or at least be in a position where knowledge would be imputed to it, of such unconscionability. Unless the plaintiff can satisfy both limbs, she cannot succeed: Contractors Bonding Ltd v Snee [1992] 2 NZLR 157.

See Warburton v Whiteley (1989) 5 BPR 11,628 at 11,631–2, referring at 11,631 to the fact that it was shown in Commercial Bank of Australia Ltd v Amadio, above, that the bank was aware that the transaction was an improvident one for the parents (as mortgagors) and that this was ‘an important factor in fixing the bank with constructive notice of the parents’ special disabilities’; see also European Asian of Australia Ltd v Lazich (1987) ASC ¶55-564. [page 394]

In Commercial Bank of Australia Ltd v Amadio, Mason J (reflecting the same views expressed by other members of the High Court in this respect) said (at 151 CLR 467): Indeed, the inquiry by Mr Amadio Senior as to the duration of the arrangement should have alerted [the bank manager] to the likelihood that [the son] had not adequately or accurately explained the intended transaction to them, let alone the possible or probable consequences which attended it. Whether it be correct or incorrect to attribute to [the bank manager] knowledge of this possibility, the facts known to him were such as to raise in the mind of any reasonable person a very real question as to the respondents’ ability to make a judgment as to what was in their own best interests. In Owen and Gutch v Homan ((1853) 4 HL Cas 997 at 1035; 10 ER 752 at 767) Lord Cranworth LC said: … it may safely be stated that if the dealings are such as fairly to lead a reasonable man to believe that fraud must have been used in order to obtain [the concurrence of the surety], he is bound to make inquiry, and cannot shelter himself under the plea that he was not called on to ask, and did not ask, any questions on the subject. In some cases wilful ignorance is not to be distinguished in its equitable consequences from knowledge. The principle there stated applies with equal force to this case. The concept of fraud in equity is not limited to common law deceit; it extends to conduct of the kind engaged in by the respondents’ son when he took advantage of the confidence and reliance reposed in him to induce his parents to enter into a transaction in order to serve his ends, thereby depriving them of the ability to make a judgment as to what was in their interests.

In the circumstances, the knowledge of the bank manager was the knowledge of the bank. In Hoghton v Hoghton (1852) 15 Beav 278; 51 ER 545, Lord Romilly expressed the view that when a person has made a large voluntary disposition, the burden is thrown on the party benefiting to show that the disposition was made fairly and honestly and in full understanding of the consequences of the transaction. This view was said to be heretical by the House of Lords in Barclays Bank plc v O’Brien [1994] 1 AC 180 at 193; [1993] 4 All ER 417 at 426–7 and it was noted that Bank of Victoria v Mueller [1925] VLR 642 had been wrongly decided because of that heresy. However, Mueller’s case has been approved by the High Court in Garcia v National Australia Bank Ltd (1998) 194 CLR 395; 155 ALR 614 so it may well be that Lord Romilly’s views are now to be considered as correct, but this is speculation.

Inadequacy of consideration

13.32 As is indicated by Fullagar J in Blomley v Ryan (1956) 99 CLR 362 at 405–6 (referred to above; cf Carello v Jordan [1935] St R Qd 294), inadequacy of consideration may be an important circumstance but it is not decisive in itself. Mere inadequacy of consideration is not itself a sufficient basis to attract the jurisdiction (Wilton v Farnworth (1948) 76 CLR 646 at 655) and nor will sufficient consideration of itself exclude the possibility of attracting the jurisdiction: Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; and see 13.31.

Independent advice 13.33 Independent advice, or the lack of it, will be an important circumstance to be considered but will not be relevant either way if the transaction is found to be fair and reasonable: see Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; Guthrie v ANZ Banking Group Ltd (1989) ANZCR 221; cf Re Levey (1894) 15 LR (NSW) (B & P) 30 at 36. However, no prudent mortgagee would rely on establishing that an agreement was fair, just and reasonable and not insist on a mortgagor having independent advice. In this respect, see the statement as to the reasonable steps a creditor must take by the House of Lords in Barclays Bank plc v O’Brien [1994] 1 AC 180 at 196–7; [1993] 4 All ER 417 at 429–30 taking into account the modifications expressed by Kirby J in Garcia v National Australia Bank Ltd (1998) 194 CLR 395; 155 ALR 614. [page 395]

Borrower must ‘do equity’ 13.34 The usual requirement for a person seeking to set aside a contract under which he or she has received moneys is that the pleading must offer to restore the moneys and submit to an order accordingly as a term of relief. This often comes as a shock to people who have spent the money advanced but wish to resist the mortgagee’s enforcement action. This requirement flows from the maxim ‘They who seek equity must do equity’. The most common case is where a parent has a mortgage on his or home for $100,000 to a bank and is then unduly influenced to borrow $250,000.

The lender of the $250,000 pays the bank its $100,000 in order to get title and pays the balance to the borrower or as directed. If relief is to be given, the borrower must offer to repay the $100,000. See, however, the exceptional case mentioned in 13.19. The rule also applies to matters under statutory provisions relieving against unfair contracts etc: see Collier v Morlend Finance (Victoria) Pty Ltd [1989] NSW Conv R 55-473; [1989] ASC 55-716 (NSWCA).

Statutory jurisdiction 13.35 Regard should be had to legislation which empowers courts or tribunals to grant relief with respect to unconscionable conduct under the broad provisions of Competition and Consumer Act 2010 (Cth) Pt 2.2. Section 20 of Sch 2 provides that ‘A person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time’. Section 21(1) of Sch 2 contains an express prohibition that a person including a corporation shall not in trade or commerce in connection with the supply or possible supply of goods or services to a person engage in conduct that is, in all the circumstances, unconscionable. Section 21(3) then provides for matters to which the court may or may not have regard for the purpose of determining whether there has been a breach of subs (1). Section 20 does not apply to conduct that is prohibited by s 21. The effect of s 20 (which is not limited with respect to goods and services, as is s 21) appears to be to reinforce state and territory common law by a Commonwealth legislative prohibition. This may be of significance in terms of remedies and forum but does not in itself affect the relevant common law. Generally, as to the meaning of ‘unconscionable conduct’, see Finn, ‘Unconscionable conduct’ (1994) 8 JCL 37. The term ‘unconscionable’ is not defined by the Act but has been construed very broadly: see Zoneff v Elcom Credit Union Ltd (1990) ATPR ¶41-009. Nevertheless, in Abram v Bank of New Zealand (1996) ATPR ¶41507 (FCA, FC), it was held that Trade Practices Act s 51AB did not apply because it was found that the mortgagors would have executed the mortgage in any event, even if its terms had been explained to them comprehensively.

This Commonwealth legislation is also reflected in state Fair Trading legislation. Depending on their subject matter, securities may also be affected by specific legislation dealing with that subject matter. Leases may also be affected by the Industrial Relations Act 1996 (NSW) which, in s 106, empowers the State Industrial Relations Commission to declare void, wholly or partly, or vary any contract whereby a person performs work in any industry if the Commission finds that that contract is an unfair contract. This provision has been held to apply to service station leases: De Lange v Eastman Pharmaceutical Co Ltd [1972] AR 551; Caltex Oil (Aust) Pty Ltd v Feenan [1981] 1 NSWLR 169; P & M Thompson Pty Ltd v Total Australia Ltd [1980] 2 NSWLR 1. Also, more general legislation, such as the Contracts Review Act 1980 (NSW), may [page 396] be relevant: see Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256; Garcia v National Australia Bank Ltd (1993) NSW ConvR ¶55-662 (and see 13.26ff in relation to the High Court appeal in Garcia ); and see also Greig and Davis, The Law of Contract, Law Book Co, Sydney, 1987, pp 981–4. The decision of State Bank of NSW v Muir (1997) 8 BPR 15,483 should be noted as a case where some relief was given to the wife of a borrower under the NSW Contracts Review Act 1980 in circumstances similar to where equity would give relief under the Yerkey/Garcia principle.

Contracts Review Act 1980 (NSW) 13.36 This legislation empowers the New South Wales Supreme or District Court to invalidate or modify transactions which are held by the court to be unfair. The statute in s 8 gives guidelines as to how the court might find unfairness. Essentially the test is much the same as that for unconscionability under the general law. Most lawyers consider that it is usually preferable to bring a claim under this Act rather than under the general law as the court’s discretion to give relief is broader

In West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 620–1, McHugh JA said: It is in my opinion a mistake to think that a contract or one of its terms is only unjust when it is unconscionable, harsh or oppressive. Contracts which fall within any of those categories will be ‘unjust’. But the latter expression is not limited to the so-called ‘tautological trinity’. The Contracts Review Act 1980 is revolutionary legislation whose evident purpose is to overcome the common law’s failure to provide a comprehensive doctrinal framework to deal with ‘unjust’ contracts.

However, as Rothman J said in Permanent Custodians Ltd v McLanders [2013] NSWSC 627; (2013) 17 BPR 32,101, notwithstanding, the Act ‘is not an anodyne — soothing every ill caused by contract’. The court must conduct an evaluation to ascertain, with the statutory criteria in mind, whether the contract should be held to be unjust: Nguyen v Taylor (1992) 27 NSWLR 48 at 71; Beneficial Finance Corporation v Karavas (1991) 23 NSWLR 256 at 260, 270; Elkofairi v Permanent Trustee Company Limited [2002] NSWCA 413; (2002) 11 BPR 20,841. A contract may be unjust in one of two basic ways; first, the contract: … may be unjust in the circumstances existing when it was made because of the way it operates in relation to the claimant or because of the way in which it was made or both. Thus a contractual provision may be unjust simply because it imposes an unreasonable burden on the claimant when it was not reasonably necessary for the protection of the legitimate interests of the party seeking to enforce the provision. … In other cases the contract may not be unjust per se but may be unjust because in the circumstances the claimant did not have the capacity or opportunity to make an informed or real choice as to whether he should enter into the contract … [West’s case at 620].

Section 9 of the Act requires the court to consider the public interest As to this, Allsop P, with whom Bathurst CJ and Campbell JA agreed, said in Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389; 15 BPR 29,699 at 29,758 [269] ff that one important aspect of the public interest is that people should keep to their bargains. Another is that protection needs to be given to those not able fully to protect themselves and those preyed upon by dishonesty, trickery and other forms of predation. The Act applies to mortgages, but, as noted in 38.8, special provisions are made to ensure that orders under the Act do not interfere with the administration of the Torrens system. For an example of a case where a mortgage was set aside under the Act where a third party mortgage was given by an elderly person after inadequate

information and advice, see Moray v Scandinavian Pacific Ltd (1992) 5 BPR 11,902. See also Schrader v Glassen [page 397] (1975) ANZ ConvR 464; (1995) NSW ConvR ¶55-748; Sansom v Westpac Banking Corporation (1996) 7 BPR 14,615; Roberts v Goldenberg (1997) ANZ ConvR 405; (1997) NSW ConvR ¶55-809; Mahlo v Westpac Banking Corp (1998) NSW ConvR ¶55-844; and Resich v Commonwealth Bank of Australia (1998) ANZ ConvR 628, which cases are, in many respects, aspects or examples of the principle that the Act requires conduct which deprives the claimant of any real or informed choice as to whether to enter into a contract before that contract can be said to be unjust for the purpose of its provisions: Citicorp Australia Ltd v O’Brien (1996) 40 NSWLR 398 (CA) at 420. In Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; (2008) 77 NSWLR 205; 229 FLR 4, 14 BPR 26,565, the New South Wales Court of appeal held that it was not necessarily unjust for a loan to be made on a mortgage contrary to the lender’s guidelines nor because the rate of interest was abnormally high. However, the court gave relief under the Act where the default interest rate (96–120 per cent compounded monthly) coupled with a provision that the mortgagor would reimburse the mortgagee for all losses occasioned by the default overcompensated the mortgagee for loss occasioned by the default.

F. Economic Pressure Securities obtained by threats 13.37 The court may grant relief when the security has been obtained from the mortgagor by threat of physical violence: see Barton v Armstrong [1976] AC 104; [1975] 2 All ER 465 (PC); Dandoroff v Rogozinoff [1988] 2 NZLR 588; also Greig and Davis, The Law of Contract, pp 942–6.

Economic compulsion 13.38

The court may also give relief in cases of economic compulsion

where the pressure is such that the victim’s consent to the contract was not a voluntary act on his part (Pao On v Lau Yiu Long [1980] AC 614; [1979] 3 All ER 65 (PC)), particularly on coercion of the will: Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40; Equiticorp Financial Services Ltd (NSW) v Equiticorp Financial Services Ltd (NZ) (1992) 29 NSWLR 260. There are two elements to duress: first, pressure amounting to compulsion of the will of the victim (for the rejection of the overborne will theory of duress in criminal law, see (1982) 98 LQR 197; (1983) 99 LQR 353 (Atiyah); cf (1983) 99 LQR 188 (Tiplady)); and second, the illegitimacy of the pressure exerted: Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366; [1982] 2 All ER 67 (HL). On threats as economic duress, see North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] 1 QB 705; Atlas Express Ltd v Kafco (Importers and Distributors) Ltd [1989] QB 833. For consumer credit securities, see Chapter 9. A threat merely to exercise rights and powers in accordance with the law and existing contractual arrangements does not amount to economic compulsion, or duress: see Wardley Australia Ltd v McPharlin (1984) 3 BPR 9500; cf NZI Capital Corp Ltd v Ianthe Pty Ltd (1991) ACL 185 NSW 22. However, threats of a different kind may amount to economic duress: see North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] 1 QB 705; Atlas Express Ltd v Kafco (Importers and Distributors) Ltd, above; B & S Contracts & Design Ltd v Victor Green Publications Ltd [1984] ICR 419; cf Pao On v Lau Yiu Long [1980] AC 614.

Duress 13.39 The practical effect of pressure is compulsion or the absence of choice. It is not that the weaker party cannot make a choice at all, but the victim’s intentional submission arising from the realisation that there is no other practical choice open to him: Universe [page 398] Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 at 400; [1982] 2 All ER 67 at 88 per Lord Scarman.

Inequality of bargaining power is not enough: see 13.20. In Australia a wider concept of unconscionable dealing appears to be accepted: see Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; and see 13.30. Commercial pressure, in some degree, exists wherever one party to a commercial transaction is in a stronger bargaining position than the other, but even though such pressure amounts to coercion of the will of a party in the weaker bargaining position, it may not be treated as illegitimate and, therefore, not give rise to any legal right of redress: Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 at 384 per Lord Diplock, and see National Westminster Bank plc v Morgan [1985] AC 686 at 707–8; [1985] 1 All ER 821 at 830 per Lord Scarman; Alec Lobb (Garages) Ltd v Total Oil GB Ltd [1985] 1 All ER 303 at 312–13 per Dillon LJ; cf Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; Hayward v Bank of Nova Scotia (1984) 7 DLR (4th) 135. See generally Hardingham, ‘Unconscionable Dealing’ in Finn (ed), Essays in Equity, Law Book Co, 1985, Ch 1. As to unconscionable conduct and catching bargains, see 13.30ff.

III Misrepresentation and Mistake Misrepresentation 13.40 A person who is induced to advance money on account of a misrepresentation may be entitled to have the security set aside: see generally Halsbury, 5th ed, vol 76. In equity, the maxim ‘They who seek equity must do equity’ and equity’s powers to impose conditions mean that the security might be set aside only if the purported mortgagor reimburses the putative mortgagee for the latter’s outlay, for instance what it has paid to discharge a prior mortgage. Thus, equity may, in effect, give partial rescission where there has been a misrepresentation. Instances are Tutt v Doyle (1997) 42 NSWLR 10; Vadaz v Pioneer Concrete (SA) Pty Ltd and see Australia and New Zealand Banking Group Ltd v Petrik [1996] 2 VR 638 at 642 and 644. See also the article by Poole and Keyser (2005) 121 LQR 273. This entitlement may arise under statutory provisions such as s 52 of the

Trade Practices Act 1974 (Cth), Consumer Credit legislation (see Chapter 9), s 18 of Sch 2 of the Competition and Consumer Act 2010 (Cth) or in equity. This will generally be so (there can be no rescission where innocent third parties have acquired rights in the property) whether the misrepresentation is fraudulent (Lee v Angus (1866) 15 LT 380; and see Bloomfield v Blake (1833) 6 C & P 75; 172 ER 1152; Lake v Brutton (1856) 8 De GM & G 440; 44 ER 460 (untrue misrepresentation that representor liable as representee’s surety)) or innocent. Before the Misrepresentation Act 1967 (UK) there could be no rescission for an innocent misrepresentation not forming part of the contract once the contract was completed by conveyance or execution (the rule in Seddon v North Eastern Salt Co Ltd [1905] 1 Ch 326). Section 1 of the 1967 English Act removed this bar, but damages may be awarded in lieu of rescission in this situation: Misrepresentation Act 1967 (UK) s 2(2); see also Misrepresentation Act 1971 (SA); Law Reform (Misrepresentation) Act 1977 (ACT). In other jurisdictions the rule in Seddon’s case remains: see Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, [13-075] et seq, particularly at [14-085] where, after criticising the rule, the authors say: It is to be remembered that in Australia and New Zealand all rights to rescission of conveyances will require consideration in light of the impact of the registration and indefeasibility provisions of the Torrens system. In Montgomery v Continental Bags (NZ) Ltd [1972] NZLR 884 Speight J held that as regards land under the Torrens system in New Zealand the commonly described

[page 399] practice of ‘settlement’ of a transaction does not amount to conveyance under old system title, so that the contract of sale will govern the relationship of the parties until registration of the transfer. Thus the rule in Seddon’s case will not apply, and rescission will be possible, until registration has taken place. Further, the Privy Council in Senanayake v Cheng [1965] 3 All ER 296 held that the so-called rule in Seddon’s case did not apply to rescission of a contract whereby the respondent had purchased a partnership in a firm of stock and share brokers. It was ‘quite inapposite’ to use the term ‘executed’ to describe the continuing contractual association as partners which followed payment of the purchase money and acceptance of the respondent as a partner. Seddon’s case was concerned with cases where property was transferred and ‘contracts to sell no longer operate as contracts’.

This view of the position in relation to the Torrens system appears to be supported by the judgment of Joyce J in Seddon’s case in relation to the basis

of the rule. His Honour said ([1905] 1 Ch at 332), quoting from Lord Campbell in Wilde v Gibson (1 HLC 632; 9 ER 897): If there be, in any way whatever, misrepresentation or concealment, which is material to the purchaser, a Court of Equity will not compel him to complete the purchase; but where the conveyance has been executed, I apprehend, my Lords, that a Court of Equity will set aside the conveyance only on the ground of actual fraud.

Lord Campbell’s statement was approved by the High Court in Svanosio v McNamara (1956) 96 CLR 186 at 198, 208. Thus the rule in Seddon’s case is a product of the refusal of equity to intervene in the absence of fraud or to compel completion of an uncompleted contract. Applying this to the Torrens system it would follow that registration of an instrument, such as a mortgage or transfer, would not be compelled in circumstances where Seddon’s case applied but once registered equity would not intervene — and there would be no right in personam to undo registration on the basis of Frazer v Walker [1967] 1 AC 569 (and subsequent decisions, see Chapter 28). And such a person may also or alternatively be entitled to damages as a result of statutory intervention but only in South Australia and the Australian Capital Territory (see Misrepresentation Act 1971 (SA); Law Reform (Misrepresentation) Act 1977 (ACT); and see Misrepresentation Act 1967 (UK)); otherwise the remedy in equity for fraudulent misrepresentation is rescission of the contract: Mackenzie v Royal Bank of Canada [1934] AC 468.

Mistake 13.41 In certain situations, where a person has mistakenly signed a document which turns out to be radically different from that which the signor thought he was signing, the document will be set aside. The defence of the person who signed the document to any action on the document is non est factum: see generally Halsbury’s, 5th ed vol 9, [284]; vol 32, [10]; Saunders v Anglia Building Society [1971] AC 1004; [1970] 3 All ER 961 (HL); applied by the High Court in Petelin v Cullen (1975) 132 CLR 355 at 359–60; and see Yerkey v Jones (1939) 63 CLR 649 at 663 where Latham CJ indicated that the defence of non est factum must be specifically pleaded: Broadlands International Finance Ltd v Sly (1987) ANZ ConvR

329; see also PT Ltd v Maradona Pty Ltd (1992) 25 NSWLR 643. The doctrine will only rarely be established by a person of full capacity; however, pleas of incapacity and non est factum are not incompatible: Ford v Perpetual Trustees Victoria Ltd [2009] NSWCA 186; (2008) 75 NSWLR 42; 14 BPR 26,895. Although it is not confined to the blind and illiterate, any extension of the scope of the plea will be kept within narrow limits. In particular it is unlikely that the plea will be available to a person who signed a document without informing himself of its meaning. [page 400] The party raising the plea must have acted with reasonable care. Carelessness or negligence will preclude him from later pleading non est factum, but this is not an instance of negligence operating by way of estoppel: see generally Saunders v Anglia Building Society, above; United Dominions Trust Ltd v Western [1976] QB 513; [1975] 3 All ER 1017 (CA) (document incomplete when signed) and see Avon Finance Co Ltd v Bridger [1985] 2 All ER 281 (CA). For a case where the plea was unsuccessful, see Norwich and Peterborough Building Society v Steed [1993] Ch 116 (CA). Such a plea succeeded in Lloyds Bank plc v Waterhouse (1991) 10 Trin LR 161 (CA). The distinction formerly drawn between the character and the contents of the document has been rejected: see Saunders v Anglia Building Society, above. The non est factum principle was recently examined in detail in Ford v Perpetual Trustees Victoria Ltd [2009] NSWCA 186; (2009) 75 NSWLR 42; 14 BPR 26,895. For the plea to succeed there must be a radical (fundamental, serious or very substantial) difference between what the party signing signed and what he thought was being signed. There may be no binding contract where there has been a unilateral mistake known to the other party: see Watkin v Watson-Smith (1986) Times, 3 July. The plea of non est factum should be distinguished from a contract being

void at law having been entered into by the parties labouring under a common mistake as to ‘an essential and integral element of the subject matter’: Bell v Lever Bros Ltd [1932] AC 161 at 235–6; cf McRae v Commonwealth Disposals Commissioner (1951) 84 CLR 377, discussed by Meagher, Gummow and Lehane, [14-080]. Alternatively, the document may be set aside in equity. In Taylor v Johnson (1983) 151 CLR 422, the High Court indicated circumstances in which equity would intervene (at 432): It is that a party who has entered into a written contract under a serious mistake about its contents in relation to a fundamental term will be entitled in equity to an order rescinding the contract if the other party is aware that circumstances exist which indicate that the first party is entering the contract under some serious mistake or misapprehension about either the content or subject matter of that term and deliberately sets out to ensure that the first party does not become aware of the existence of his mistake or misapprehension.

Reference should also be made to Meagher, Gummow and Lehane, Ch 14, ‘Mistake in Equity’.

Rectification 13.42 The mortgage may be rectified where its terms fail to record the common intention of the parties: see Vaudeville Electric Cinema Ltd v Muriset [1923] 2 Ch 74 at 80; Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 and see Hooker Town Developments Pty Ltd v Director of War Service Homes (1973) 47 ALJR 320 at 323–4, approving the summary of the authorities by Street CJ in Eq in Australasian Performing Right Association Ltd v Austarama Television Pty Ltd [1972] 2 NSWLR 467; also Ramsbotham, Coote’s Treatise on the Law of Mortgages, 9th ed, Stevens and Sons, Sweet & Maxwell, London, 1927, p 84; and generally McGhee, Snell’s Equity, 32nd ed, Sweet & Maxwell, London, 2010, Ch 16; Meagher, Gummow and Lehane, Ch 26, ‘Rectification’. In the absence of mutual mistake, the deed will only be rectified on the ground of inequitable conduct: Riverlate Properties Ltd v Paul [1975] Ch 133; [1974] 2 All ER 656 (CA); Leighton v Parton [1976] 1 NZLR 165; Merbank Corp Ltd v Cramp [1980] 1 NZLR 721. [page 401]

IV Forgeries Generally 13.43 Except under the Torrens system, a forged mortgage will generally be of no effect (but for a forged legal mortgage by a co-owner taking effect as an equitable mortgage of his share, see below). For what it is worth, there may be a right of action against the recipient of the money for the money advanced and, in appropriate cases, the payer may be able to rely on estoppel against the true owner (because of his conduct) (see Re Cooper; Cooper v Vesey (1882) 20 Ch D 611 (CA); Re De Leeuw; Jakens v Central Advance and Discount Corp Ltd [1922] 2 Ch 540; Rowe v B & R Nominees Pty Ltd [1964] VR 477), or a lien on the deeds of the property, for example if the moneys are used on the property. Generally, see Wurtzburg and Mills, Building Society Law, 14th ed, Stevens, London, 1976, pp 222–3; (1975) 119 Sol Jo 690 (Greene); (1984) 81 LS Gaz 641 (Kenny); and Re Vassis: Ex parte Leung (1986) 9 FCR 518; 64 ALR 407. Because of the doctrine of indefeasibility of title, a forged mortgage of Torrens system land if registered may prevail. This is discussed in detail in 4.11.

Particular problems with forgeries 13.44 Two problems should be mentioned here, though they also appear in other parts of this work. First, is the problem where a husband and wife jointly appear as mortgagors, but the husband has forged his wife’s signature to the document. Under the old system, there is no claim against the wife, but the mortgage may operate as a mortgage of the husband’s beneficial interest: First National Securities Ltd v Hegerty [1985] QB 850; [1984] 1 All ER 139 (CA); Thames Guaranty Ltd v Campbell [1985] QB 210; [1984] 1 All ER 144, affirmed [1985] QB 210; [1984] 2 All ER 585; cf Cedar Holdings Ltd v Green [1981] Ch 129; [1979] 3 All ER 117 (CA) (dictum of Lord Wilberforce in Williams & Glyn’s Bank Ltd v Boland [1981] AC 487 at 507; [1982] 2 All ER 408 (HL) explained in Thames Guaranty Ltd v Campbell); National Commercial Banking Corp of Australia Ltd v Hedley (1984) 3 BPR 9477; Katsaitis v

Commonwealth Bank of Australia (1987) 5 BPR 12,049; Westpac Banking Corp v Sansom (1994) 6 BPR 13,790, affirmed as Sansom v Westpac Banking Corp (1996) 7 BPR 14,615 and see 3.49. The position is quite different under the Torrens system: see 4.16. There may be a remedy available against a witness who knew or ought to have known of the forgery on the ground of warranty that the wife had signed when clearly she had not: in relation to representations of authority or by way of warranty in this general context, see Eade v Vogiazopoulos [1993] ANZ ConvR 129;V ConvR ¶54-458. However, the legal title and the wife’s beneficial interest will remain unaffected by the mortgage. It may be that, in appropriate cases — for example where the wife was party to the earlier negotiations — she may be estopped from relying on the forgery. In some cases the husband may be deemed to have acted as agent for both himself and his wife, so that the mortgage could be treated as an effective equitable mortgage or equitable charge by both of them. Where the money has been used to purchase property, or for a permanent and substantial improvement to property, if the mortgage is ineffective, the lender may (except in Queensland) be able to claim a lien or equitable charge over the property purchased or improved: see 2.14ff. [page 402] Second, there are what might be termed pseudo forged mortgages, that is, the mortgagor’s signature on the document is not his or her signature, but the forged signature has been placed on the document with the mortgagor’s acquiescence. As noted in 4.16, the mortgage binds the mortgagor.

V Illegality Generally 13.45 As any text on contract law will demonstrate, the legal principles governing illegal contracts are complex and often apparently illogical.

Contracts may be rendered illegal by statute or rendered void, but not illegal. Other contracts have been rendered illegal or void at common law. The law is too detailed to be set out here and the reader should refer to Seddon and Ellinghaus, Cheshire and Fifoot’s Law of Contract, 10th Australian ed, LexisNexis Butterworths, Sydney, 2012, ch 18 and the leading case of Yango Pastoral Co Pty Ltd v First Chicago (1978) 139 CLR 410; 21 ALR 565. See also Halsbury’s, 5th ed, vol 22, [424]ff and Selangor United Rubber Estates Ltd v Cradock (No 3) [1968] 2 All ER 1073 at 1149ff; Heald v O’Connor [1971] 2 All ER 1105; [1971] 1 WLR 497; Belmont Finance Corp Ltd v Williams Furniture Ltd [1979] Ch 250; [1979] 1 All ER 118 (CA); Belmont Finance Corp Ltd v Williams Furniture Ltd (No 2) [1980] 1 All ER 393 (CA); Patterson v Roden (1972) 223 Estates Gazette 945; Sidmay v Wehttam Investments (1967) 61 DLR (2d) 358; Williams v Fleetwood Holidays Ltd (1974) 41 DLR (3d) 636. On financial assistance for the purchase of shares, see Steen v Law [1964] AC 287; see also Firmin v Gray & Co Pty Ltd [1985] 1 Qd R 160; Field v Abdurahman [1984] 3 NSWLR 402.

Effect of illegal agreements Acts 13.46 A mortgage which is given in respect of a debt or other obligation arising out of an illegal transaction is not enforceable by a party who was also a party to the illegal transaction and who would be unable to enforce that transaction: Fisher v Bridges (1854) 3 E & B 642; 118 ER 1283. The security is tainted by the illegality of the original transaction: Cannan v Bryce (1819) 3 B & Ald 179; 106 ER 628; but see Carney v Herbert [1985] AC 301; [1985] 1 All ER 438 (PC) (severance of guarantee from illegal mortgages, which would apply to collateral securities generally); and Pont Data Australia Ltd v ASX Operations Pty Ltd (1990) 93 ALR 523 at 562 ff (severance of an illegal term), applying Carney v Herbert. So too where the mortgage secures a loan to discharge an illegal transaction (Spector v Ageda [1973] Ch 30; [1971] 3 All ER 417, considering Fisher v Bridges, above and Cannan v Bryce, above), but a party to a security may be able to enforce his rights thereunder if at the time of the execution of the security he had no knowledge of the illegality of the original transaction:

Cannan v Bryce, above; Spector v Ageda, above; Re Mortgage Management Ltd [1978] 1 NZLR 494. Knowledge of the facts alone will suffice; it is not necessary to know of their illegal consequences: Ninety Five Pty Ltd (in liq) v Banque Nationale de Paris [1988] WAR 132 at 177, 178; see also Williamson v Diab [1988] 1 Qd R 210. Where the original transaction is not wholly unenforceable, the security will be unenforceable only in so far as it is related to or connected with the original transaction; if, for example, there are distinct considerations, it may be possible to sever the considerations: Sheehy v Sheehy [1901] 1 IR 239; see Robinson v Marsh [1921] [page 403] 2 KB 640. See also, on illegal transactions, Shackell v Rosier (1836) 2 Bing NC 634; Williams v Bullmore (1863) 33 LJ Ch 461; Re Onslow’s Trusts (1875) LR 20 Eq 677; Herman v Jeuchner (1885) 15 QBD 561; Moulis v Owen [1907] 1 KB 746 at 753 (CA); Tinsley v Milligan [1994] 1 AC 340; [1993] 3 All ER 65 (HL). Where a mortgagee has actual knowledge of a dishonest and fraudulent design behind an illegal transaction, or knowledge of circumstances that would put a reasonable, honest person on inquiry, then the mortgagee may be liable as a constructive trustee: Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 412–13 (per Stephen J). A mortgage may be enforceable even if the underlying transaction is unenforceable (Southwestern Mineral Water Co Ltd v Ashmore [1967] 1 WLR 1110 at 1120; Firmin v Gray & Co Pty Ltd [1985] 1 Qd R 160; Carney v Herbert [1985] AC 301; [1985] 1 All ER 438 (PC); Williamson v Diab [1988] 1 Qd R 210) or if the mortgagee can establish title without relying on his own illegality, even if it emerged that the title upon which the mortgagee relied was acquired in the course of carrying through an illegal transaction (Tinsley v Milligan [1994] 1 AC 340; [1993] 3 All ER 65); but if the mortgagee knows of the illegality of the underlying transaction and has any part in it when the mortgage was made, the mortgage itself may be tainted: see Spector v Ageda [1973] Ch 30 at 45; [1971] 3 All ER 417 at 428. But all

the circumstances must be considered: Portland Holdings Ltd v Cameo Motors Ltd [1966] NZLR 571; Re Mortgage Management Ltd [1978] 1 NZLR 494. As to the effect of a mortgage being rendered void or illegal in terms of Torrens title legislation, see the reference to the Torrens system in relation to forgeries: see 4.16.

Loan for payment of bets 13.47 If a loan is made by a lender to a borrower under an agreement that bets should be paid out of the loan, any security for the repayment of the loan will be bad: Hill v Fox (1859) 4 H & N 359, 157 ER 879; MacDonald v Green [1951] 1 KB 594 (CA). However, such a security will be good if the borrower can dispose of money lent as he pleases: Re O’Shea [1911] 2 KB 981 at 987–8 (CA); MacDonald v Green [1951] 1 KB 594 at 605–6 (CA).

VI Securities Affected by the Nature of the Security A. Public Pay and Pensions Public offices 13.48 A public office is deemed to be a position of public trust and the sale or other assurance of such offices is, even apart from statute, contrary to public policy: Stackpole v Earle (1761) 2 Wils 133; 95 ER 727; and see Hopkins v Prescott (1847) 4 CB 578; 136 ER 634.

Officers’ pensions and pay 13.49 The assignment of the pay or half-pay of public officers is contrary to public policy: Flarty v Odlum (1790) 3 Term Rep 681; 100 ER 801; Stone v Lidderdale (1795) 2 Anst 533; 145 ER 958. (A mortgage of the profits of a college fellowship is not contrary to public policy: Feistel v King’s College Cambridge (1847) 10 Beav 491; 50 ER 671; cf Berkeley v King’s College Cambridge (1830) 10 Beav 602; 50 ER 714.)

This applies to officers in the armed forces (Stone v Lidderdale, above), public servants (see Lucas v Lucas [1943] P 68; [1943] 2 All ER 110), among others, but to come within the rule the pay must come out of national and not out of local funds (Re Mirams [page 404] [1891] 1 QB 594; but the reasoning in this decision has little to commend it today); see, however, Lynch v Subjic (1988) Times, 18 May (assignment of a dentist’s salary paid out of public funds not illegal). It would be expected that the rule would now apply to any office the funding for which was provided directly or indirectly by government, be it national, state or local. By statute the alienation of many pensions etc is prohibited, but pensions given entirely as compensation for past services may be assignable (Willcox v Terrell (1878) 3 Ex D 323), unless this is prohibited by the statute under which they are paid: see Walker v Walker [1983] Fam 68; [1983] 2 All ER 909 (CA); Roberts v Roberts [1986] 2 All ER 483; [1986] 1 WLR 437; Michael v Michael [1986] 2 FLR 389; [1986] Fam Law 334. As to family allowance as security, see R v Curr [1968] 2 QB 944; [1967] 1 All ER 478 (CA). See also Ranson v Ranson [1988] 1 WLR 183 (CA) (pension already received assignable); Bank Mellat Kazmi (1988) Times, 27 December (CA); Happé v Happé [1991] 4 All ER 527; [1990] 1 WLR 1292 (CA); Cotgrave v Cotgrave [1992] Fam 33; [1991] 4 All ER 537 (CA) (naval pension assignable).

B. Property Forbidden to be Encumbered Restraint on alienation 13.50 Property cannot be given to a person beneficially with a proviso that he or she shall not have the power of alienating or encumbering it. Such a proviso would be repugnant to the gift and void: Re Leahy’s Estate [1975] 1 NSWLR 246 at 250; see also Caldy Manor Estate Ltd v Farrell [1974] 3 All ER 753; [1974] 1 WLR 1303 (CA); Reuthlinger v MacDonald [1976] 1 NSWLR 88, affirmed [1977] ACLD 069. In Australia, but according to

Caldy Manor Estate Ltd v Farrell not in England, contractual restraints to the same effect are also invalid. It is also noteworthy that the English Court of Appeal in its brief judgment in Caldy did not consider the issue in any great depth, and was not referred to Hall v Busst (1960) 104 CLR 206, where Dixon CJ and others gave a rather more thorough review of the principles involved. See also Johnston and Halliday v Halliday (1984) ANZ ConvR 652 (SC (SA)). Statutory restraints on alienation are, naturally, an exception to this rule. They range from all-embracing restraints on alienation (see, for example, the restraints on alienation of land granted under the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth)) to more limited restraints on alienation of land set aside for a particular public purpose (see, for example, Geelong Market Site Act 1990 (Vic) as amended). Restraints of this kind are of a different nature from restraints or restrictions that may be imposed on or suffered by a corporation, statutory or otherwise, as the owner of land. As to the power of corporations to mortgage land, see 11.33.

Forfeiture on alienation 13.51 Although a person cannot be restrained from alienating property which is his, property may be settled in trust for a person until that person alienates or encumbers it, or attempts to do so, or becomes bankrupt or the like, and then in trust for some other person or class of persons. ‘Protective trusts’ received statutory recognition in Trustee Act 1925 (UK) s 33, but this does not validate trusts which apart from this recognition would be invalid: subs (3); see Trustee Act 1925 (NSW) s 45; Trustee Act 1958 (Vic) s 39; Trusts Act 1981 (Qld) s 64; Trustees Act 1962 (WA) s 61; Trustee Act 1898 (Tas) s 30; Trustee Act 1956 (NZ) s 42. However, a person cannot settle his own property so as to confer on himself an interest determinable on the settlor’s own bankruptcy, and if the settlor in these circumstances becomes bankrupt, the forfeiture clause is void against the trustee in bankruptcy: see Mackintosh v Pogose [1895] 1 Ch 505; Re Brewer’s Settlement; Morton v Blackmore [1896] [page 405]

2 Ch 503; Re Burroughs-Fowler [1916] 2 Ch 251. Nonetheless, a clause defeating the settlor’s interest takes effect in the event of voluntary alienation: Brooke v Pearson (1859) 27 Beav 181; 54 ER 70. And it has been held that such a clause takes effect in the event of voluntary alienation at the instance of a particular creditor (Re Detmold; Detmold v Detmold (1889) 40 Ch D 585) but notwithstanding this decision, it appears still open to contend that the settlement is void as a fraud upon creditors: Re Holland; Gregg v Holland [1902] 2 Ch 360.

When forfeiture is incurred 13.52 Where the prohibition extends to an attempt to encumber, forfeiture is only operative if the act would, but for the prohibition, have the effect of an assignment or security upon the property. An offer to give a security will not create a forfeiture, much less the expression of a desire to create an encumbrance, and the taking of advice as to the power to do so: Graham v Lee (1857) 23 Beav 388; 53 ER 152; Jones v Wyse (1838) 2 Keen 285; 48 ER 638; and, as to ‘attempting’ to assign, see Re Porter [1892] 3 Ch 481; Re Tancred’s Settlement [1903] 1 Ch 715.

Restraints on alienation in leases 13.53 Restraints on alienation in respect of leasehold property are frequently imposed by a covenant in the lease against subletting, assigning, mortgaging or parting with the property: see Bradbrook and Croft, Commercial Tenancy Law, 3rd ed, pp 202ff. Such a covenant is broken by a mortgage by sub-demise (Sergeant v Nash, Field & Co [1903] 2 KB 304 (CA)), but not by a deposit of the lease by way of equitable mortgage, the object of the covenant being only to restrain the alienation of the legal interest: Doe d Pitt v Hogg (1824) 4 Dow & Ry KB 226 at 229; Ex parte Drake (1841) 1 Mont D & De G 539. A covenant against assigning is not broken by a mortgage by sub-demise: Crusoe d Blencowe v Bugby (1771) 3 Wills 234; 95 ER 1030; Grove v Portal [1902] 1 Ch 727. Similarly, a mortgage by way of legal charge is probably not a breach of a covenant against sub-letting, etc (Gentle v Faulkner [1900] 2 QB 267 (CA); Grand Junction Co Ltd v Bates [1954] 2 QB 160 at 168; [1954] 2 All ER 385 at 388), on the basis that no term is created.

Where the covenant is against ‘charging’ the property, any mortgage or charge — including a floating charge (see Fell v Charity Lands Official Trustee [1898] 2 Ch 44) — will be a breach of such covenant.

[page 407]

Part V

Transfer and Devolution of Mortgages

[page 409]

Chapter 14

Transfer and Devolution of Mortgages A. Transfer by Mortgagee Concurrence of mortgagor Position of transferee Form of transfer under the general law system Necessity for deed or statutory memorandum Transfer of Torrens system mortgage Transfer by payment Transfer of part of a mortgage Transfer of trust mortgages Transfer on appointment of new trustees Transfer of collateral securities Notice of transfer Assignment at an undervalue B. Devolution of Mortgages on Death or Bankruptcy of Mortgagee Death Bankruptcy Dissolution of company mortgagee

14.1 14.2 14.3 14.4 14.5 14.6 14.7 14.8 14.9 14.10 14.11 14.12

14.13 14.14 14.15

C. Transfer and Dealings by Mortgagor Assignment by mortgagor Transfer between co-owners Substitute mortgages

14.16 14.17 14.18

A. Transfer by Mortgagee Concurrence of mortgagor 14.1 A mortgagee is entitled to transfer the security either absolutely or by way of sub-mortgage with or without the concurrence of the mortgagor: Re Tahiti Cotton Co; Ex parte Sargent (1874) LR 17 Eq 273 at 279; France v Clark (1883) 22 Ch D 830 (affirmed (1884) 26 Ch D 257); and see 15.1. Note, however, that after a mortgagee has been in possession he or she will remain liable even after a transfer, unless that transfer is by the direction of the court: see 19.34. It is always desirable that the mortgagor should be a party to the transfer and where this occurs the mortgagor enters into a new covenant for payment of the mortgage debt and interest with the transferee, even though the transferee would have a right to sue [page 410] under the general and statute law. The advantage of the new covenant is that it starts time running for the purposes of the Limitation Acts: see Limitation Act 1969 (NSW), Limitation of Actions Act 1936 (SA), Limitation Act 1935 (WA), Limitation of Actions Act 1958 (Vic), Limitation of Actions Act 1974 (Qld), Limitation Act 1974 (Tas) and 16.11 ff. A new covenant which is inconsistent with the covenant in the original mortgage extinguishes the latter. A fresh covenant for payment at a new date with corresponding proviso for redemption amounts to a new mortgage: Boulton v Buckingham [1891] 1 QB 298. Any surety should also join in any new covenant: Boulton v Buckingham. When the mortgagor has not created further encumbrances the transfer may also contain a new demise or charge, thus implying new

covenants for title; as to which see 3.11. If the mortgagor does not join in the transfer, the transferee is bound by the state of accounts between the mortgagor and the transferor (De Lisle v Union Bank of Scotland [1914] 1 Ch 22; Parker v Jackson [1936] 2 All ER 281; Nioa v Bell (1902) 27 VLR 82; and see Corello v Jordan [1935] St R Qd 294), whatever may have been the representations of the latter to the transferee and though the transferee has no notice of the discharge of any part of the debt: see 39.20. However the transferee may apparently rely on the face value of the mortgage where in fact a lesser sum was advanced: Elders Rural Finance Ltd v Westpac Banking Corp (1988) 4 BPR 9383. In Chambers v Goldwin (1804) 9 Ves 254 at 264; 32 ER 600 at 604, Lord Eldon said that it was settled that if an assignment of a mortgage is taken without the intervention of the mortgagor, whatever the assignee pays, he can claim nothing under the assignment, but what is actually due between the mortgagor and mortgagee. See also Brennan v Pitt, Son & Badgery Ltd (1899) 20 LR (NSW) Eq 179 at 190. As the amount of the debt and not the nature of the estate — which is only the security for it — is the relevant consideration, the possession by the transferee of the legal estate does not strengthen the transferee’s possession: Chambers v Goldwin, above. Where, however, the mortgagor has enabled the transferor to deceive the transferee (for instance, by allowing it to be stated in the mortgage deed that a larger sum was advanced than was actually the case), the mortgagor may be estopped from denying it as against the transferee: Bickerton v Walker (1885) 31 Ch D 151; Powell v Brown (1907) 97 LT 854. Arrears of interest will be capitalised where the transfer is made with the concurrence of the mortgagor: Chambers v Goldwin, above, but not where the transfer takes place without such concurrence: Cottrell v Finney (1874) 9 Ch App 541; see 39.53. A transfer does not, without express provision, pass the right to arrears of rent: Salmon v Dean (1851) 3 Mac & G 344; 42 ER 293.

Position of transferee 14.2 In general, the transferee steps into the shoes of the transferor but cannot stand in a better position than the transferor: Ashenhurst v James (1745) 3 Atk 270; 26 ER 958.

The transferee is bound by such equities and accounts as would bind the transferor: Earl of Macclesfield v Fitton (1683) 1 Vern 168; 23 ER 392; Matthews v Wallwyn (1798) 4 Ves 118; 31 ER 62; Williams v Sorrell (1799) 4Ves 389; 31 ER 198; Turner v Smith [1901] 1 Ch 213; Jacobson v Williams (1918) 48 DLR 51; Magee v UDC Finance Ltd [1983] NZLR 438; Elders Rural Finance Ltd v Westpac Banking Corp (1988) 4 BPR 9383. The transferee is also in no better position than the mortgagee, when the mortgage deed is absolutely void from the beginning, although the transferee took for valuable consideration and without notice of the fraud, but where the security was originally only voidable, a transferee for value may have the better equity and be entitled to the security: Judd v Green (1875) 45 LJ Ch 108; Nant-y-glo & Blaina Ironworks Co v Tamplin (1876) 35 LT 125. [1874]–[1880] All ER Rep 1168. Note, however, that some writers consider [page 411] these decisions run counter to the mainstream of authority and are of doubtful worth: see Halsbury 5th ed, vol 77 [580] n1. Halsbury also points out in that footnote that the reason for the rule is that originally a debt was only assignable in equity and the assignee had to sue in the name of the assignor and was thus subject to any defence of set-off or the like which could be pleaded against the assignor. Thus, the assignee of a debt was not in the position of a bona fi de purchaser for value without notice: Cockell v Taylor (1882) 15 Beav 475; 51 ER 475. Section 12 of the NSW Act and s 134 of the Victorian Act when permitting a transfer of the chose in action at law, expressly made the assignment subject to prior equities: see Re Just Juice Corp Ltd; James v Commonwealth Bank of Australia (1992) 37 FCR 445 at 461; 109 ALR 334 at 351. As between successive assigns of a chose in action, defects in title are transmitted: Southern British National Trust Ltd v Pither (1937) 57 CLR 98 at 112, but see Latham CJ at 103 and Redman v Permanent Trustee of NSW Ltd (1916) 22 CLR 84 at 91-2. See also Silkdale Pty Ltd v Long Leys Co Pty Ltd (1995) 7 BPR 14,414, with respect to the Farm Debt Mediation Act 1994 (NSW); and the cases referred to in 14.5.

A so-called mortgagee who knows that the deed is absolutely void, as in the case where it is a forgery, is liable to the transferee unless that fact is disclosed: Marnham v Weaver (1899) 80 LT 412. In contrast, in Bendigo Sandhurst Mutual Permanent Land and Building Society Ltd v Tefeti Pty Ltd (1995) 17 ACSR 463 it was held that although there was illegality involved in the transfer of mortgage (under the Securities Industry Act 1980 (Cth)) it was not the legislative intention of that Act that contracts of this nature should be struck down.

Form of transfer under the general law system 14.3 The transfer of a mortgage under the general law (not Torrens system) consists of the assignment of the debt and the conveyance of the mortgagee’s estate which is the security for the debt. Prior to the conveyancing reforms, these two parts of the transfer were separate. Thus it was usual in the deed of transfer first to assign the debt absolutely and then to convey the property subject to the equity of redemption. In New South Wales and Victoria and in certain other states there is provision to transfer the mortgage by memorandum. Section 91(4) of the NSW Act and s 115 of the Victorian Act set out that should the form of transfer be used then there will be vested in the transferee all the rights of the transferor (see 14.10 ). There is no direct Australian equivalent to s 114 of the English Act.

Necessity for deed or statutory memorandum 14.4 Because under the general law system the fee simple is vested in the mortgagee, it is necessary that the conveyance from the transferor to the transferee be made by way of deed in order to comply with the statutory requirements for conveyancing: NSW Act s 23B, Victorian Act s 52. In states where there are provisions for transfer of mortgage by memorandum the statute normally vests the equivalent rights in the transferor. In the case of the mortgage of an equitable interest in either land or personalty the transfer must be in writing: see NSW Act s 23C, Victorian Act 1958 s 53. Even in the case of an equitable mortgage the right to sue at law for the debt transferred can only be transferred by writing under the hand of the transferor accompanied by notice to the debtor: NSW Act s 12, Victorian

Act s 134. Where the transfer is a voluntary transfer, all formalities necessary for the complete transfer of the mortgage at law must be complied with, otherwise the transfer will be an [page 412] incomplete gift and void, even where the deeds have been handed over: Re Richardson (1885) 30 Ch D 396. Where there has been valuable consideration for the transfer, the fact that legal formalities have not been complied with will be immaterial as between transferor and transferee inasmuch as equity in such cases treats the transaction as an agreement to make over the benefit of the mortgage which will be specifi cally enforced. Thus where there is an equitable mortgage by deposit of deeds, a transfer is effected by delivery of the deeds to the transferee either with or without a memorandum: Brocklesby v Temperance Permanent Building Society [1895] AC 173 at 182, 183.

Transfer of Torrens system mortgage 14.5 The Torrens Acts provide for a statutory method of transferring the mortgage: see NSW Act s 46, Victorian Act s 45. Queensland Land Titles Act s 62. This is more fully considered at 4.33. Sections 51 and 52 of the NSW Torrens Act and ss 45 and 46 of the Victorian Torrens Act flesh out the rights that pass to the transferee of a Torrens system mortgage. These include a statutory vesting at law of the debt in the transferee. An unregistered transfer of mortgage has no effect except as an equitable assignment or because of the operation of some form of estoppel: Silkdale Pty Ltd v Long Leys Co Pty Ltd (1995) 7 BPR 14,414 at 14,422. These sections are not well drawn, but it is clear that they do not preserve as against the transferee anything outside the original instrument: Long Leys Co Pty Ltd v Silkdale Pty Ltd (1991) 5 BPR 11,512 at 11,520; PT Ltd v

Maradona Pty Ltd (1992) 25 NSWLR 643 at 676; Showa Shoji Australia Pty Ltd v Oceanic Life Ltd (1994) 34 NSWLR 548 at 561; Silkdale Pty Ltd v Long Leys Co Pty Ltd (1995) 7 BPR 14,414; Queensland Premier Mines Pty Ltd v French [2007] HCA 53; (2007) 235 CLR 81; 240 ALR 234. Thus in the absence of clear agreement from the mortgagor an equitable assignee from the mortgagee cannot exercise default remedies derived from a contract collateral to the original instrument: see Dwyer v Derek (Dwyer v Warpan Pty Ltd (t/as Elders Real Estate)) [2004] 1 Qd R 371 (particularly at paras 12-16 where McMurdo J discusses these two ‘chapters’ of Long Leys and the Showa Shoji case in this respect, which are themselves an application of the authorities in relation to equitable assignments of choses in action). Subject to the possibility of the mortgagor’s agreement, these sections do not usually operate to vest collateral rights in the transferee. Thus, a transfer of mortgage does not give the transferee the right to sue a guarantor or a guarantee contained in the mortgage instrument: Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423 at 432 and 434-5 and PT Ltd v Maradona Pty Ltd, above at 679-80; and see Gilmour v Pyramid Building Society (in liq) (1995) 6 BPR 13,979 (CA); Pyramid Building Society (in liq) v Chen [1999] FCA 58; and French v Queensland Premier Mines and Beckinsdale [2004] VSC 294; see also 33.16. Because of the provisions of s 52, the debt vests in the transferee and there is no requirement to perfect any assignment under s 12 of the Conveyancing Act 1919: Property Builders Pty Ltd v Adelaide Bank Ltd [2011] NSWCA 266; (2011) 15 BPR 29,411.

Transfer by payment 14.6 If a person pays another person’s mortgage it is presumed that the fi rst person did not intend to discharge the mortgage but to have it transferred to himself. See Ghana Commercial Bank v Chandiram [1960] AC 732. See also Chetwynd v Allen [1899] 1 Ch 353; Butler v Rice [1910] 2 Ch 277; Re H & S Credits Ltd; Tucker v Roberts [1969] Qd R 280; Financial and Investment Services for Asia Ltd v Baik Wha International Trading Co Ltd [1985] HKLR 103; Re Tramways Building & Construction Co Ltd (1987) Times,

[page 413] 21 August; and see Cochrane v Cochrane (1985) 3 NSWLR 403, but compare Re Peake’s Abattoirs Ltd [1986] BCLC 73. The presumption is one of equity and is applied by analogy in cases of subrogation as to which see 42.18.

Transfer of part of a mortgage 14.7 A mortgage transaction has two aspects: the contractual — that is, the covenant to pay; and the proprietary — that is, the mortgage or charge. These two elements — the debt and the security — may be transferred together in whole or in part, or separately and independently, but since the mortgagee’s remedies qua mortgagee are indivisible (otherwise the mortgagor might have to face a multiplicity of proceedings), a transfer of part of the mortgage security cannot be satisfactorily effected by direct transfer of part thereof. In practice, the transaction will be effected in one of three ways: (1) by the mortgagee declaring himself a trustee or transferring the security to a trustee, for himself and the transferee of part in their respective shares; (2) by joinder of the mortgagor and the consequent severance of the mortgage into two or more separate mortgages; or (3) by sub-mortgage. Great care needs to be used if the first of these methods is to be employed. In the Estate Mortgage liquidation there was great inconvenience caused because mortgages held by one of the trusts were in part transferred to another one of the trusts and then there were further transfers between seven different trusts with the one trustee with inadequate documentation. In the end the beneficiaries resolved to treat the seven different trusts involved as if they were the one (see in particular BC9201683, also BC9101592, BC9101420, BC9300670, BC9000783 and BC9000778). The second alternative speaks for itself. The third will be dealt with in Chapter 15. A transfer of the security without an assignment of the debt, in the absence of provision to the contrary (which would be unlikely), carries the benefit of the debt, so far as it is charged on the mortgaged property, because the mortgagor cannot redeem without paying the debt to the transferee, but the transferee cannot sue on the covenant: Jones v Gibbons (1804) 9 Ves 407; 32

ER 659; see also 26.7. There may be a valid equitable assignment of part of a debt ( Re Steel Wing Co Ltd [1921] 1 Ch 349; Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 16 and 29; Shepherd v Federal Commissioner of Taxation (1965) 113 CLR 385 at 390 and 396) but the assignee will have to sue in the name of the assignor. Because of this, a transfer of part of a mortgage is usually effected by the mortgagee declaring himself a trustee of so much of the debt as is intended to be assigned or by the assignor assigning the benefit of the whole of the debt to a trustee for himself and the assignee of part. As to whether consideration is necessary for a valid equitable assignment of part of a debt, see Re Smyth’s Trust [1970] ALR 919 at 922. If the whole or part of the debt is assigned without the transfer of any of the security for the debt, the assignor remains the person entitled to exercise the powers and remedies qua mortgagee, but he is a trustee thereof and must hand over to the assignee the appropriate part of any moneys he receives by exercising such power and remedies: Morley v Morley (1858) 25 Beav 253; 53 ER 633. If part of the security is transferred, there is the problem, mentioned above, as to the indivisibility of the mortgagee’s powers and remedies. This problem disappears if the whole of the security is transferred. [page 414]

Transfer of trust mortgages 14.8 In the case of a mortgage to trustees, it is the usual and convenient practice to take and transfer the mortgage without disclosing the trusts and, in particular, on the appointment of new trustees, the transfer to the new trustees is made by a separate deed. Where no trust is disclosed, and all that appears is that the mortgage money has been advanced on joint account, this gives no notice of a trust: Re Harman and Uxbridge and Rickmansworth Railway Co (1883) 24 Ch D 720; Re Balen and Shepherd’s Contract [1924] 2 Ch 365. Formerly where a trust was disclosed in the course of examination of title, the purchaser had to satisfy himself that the trustee had been properly

appointed: Re Blaiberg and Abrahams [1899] 2 Ch 340. Statutory provisions now make this unnecessary: see NSW Act s 96A and Victorian Act s 113.

Transfer on appointment of new trustees 14.9 On an appointment of a new trustee, the trust property in many cases automatically vests in the new and continuing trustees under the provisions of the relevant Trustee Act: see Trustee Act 1925 (NSW) s 9, Trustee Act 1958 (Vic) s 45. However, land conveyed by way of mortgage for securing money subject to a trust (except land conveyed on trust for securing debentures or debenture stock) is excluded from the operation of this section, but the mortgage debt itself is not so excluded. On the appointment of a new trustee it is convenient for the mortgage debt to be excluded from the implied vesting declaration and transferred together with the mortgaged land by a separate transfer of the benefit of the mortgage.

Transfer of collateral securities 14.10 Collateral securities must be expressly assigned; they do not pass under general words giving the transferee the benefi t of the mortgage security. However, where there is a transfer under s 91 of the NSW Act by virtue of s 91 (4) collateral securities pass, but there is no actual reported case on the point. In Victoria, s 115 and in Tasmania s 31A give the same result. On the corresponding English [provision, see Paragon Finance plc v Pender [2005] EWCA Civ 760; [2005] 1 WLR 3412; [113] Meretz Investments NV v ACP [1997] Ch 197; [2006] 3 All ER 1029 [362] (Lewison J); [2008] Ch 244 [79](CA).;

Notice of transfer 14.11 Notice of the transfer should be given to the mortgagor by the transferee so that payment of the mortgage interest will be made to the transferee. In this regard notice to a solicitor is notice to the solicitor’s client: Magee v UDC Finance Ltd [1983] NZLR 438. After notice to the mortgagor or his solicitor there will only be a good discharge to the mortgage by paying the transferee: Dixon v Winch [1900] 1 Ch 736; Turner v Smith [1901] 1 Ch 213; Nioa v Bell (1902) 27 VLR 82. Where the transfer takes the form of an express assignment of the mortgage debt, if the assignment is to have effect at law, notice must be given under s 12 of the NSW Conveyancing Act 1919,

s 134 of the Victorian Act. If the mortgage is of an equitable interest in land or personalty the notice should be in writing: see 26.18. No notice need be given to the mortgagor of the registered transfer of a Torrens system mortgage: Gilmour v Pyramid Building Society (1995) 6 BPR 13,979 (CA).

Assignment at an undervalue 14.12 In the usual case, a bona fide purchaser of the mortgage at an undervalue is entitled to the right to be paid the full amount of the debt by the mortgagor: Davis v Barrett (1851) 14 Beav 542; 51 ER 394; see Equuscorp Pty Ltd v Westpac Banking Corp Ltd [2003] VSC 241; and see the full discussion in 39.16. For the exceptions to the [page 415] general rule, see Elders Rural Finance Ltd v Westpac Banking Corp (1988) 4 BPR 9383 at 9385-6. There is no fiduciary duty on a first mortgagee to give either the second mortgagee or the mortgagor the first right of refusal before transferring the mortgage to a stranger: Elders Rural Finance Ltd v Westpac Banking Corp, above.

B. Devolution of Mortgages on Death or Bankruptcy of Mortgagee Death 14.13 Since the reform of probate law in the late 19th century, it is immaterial to consider whether, on intestacy, a mortgagee’s interest passed to his heir at law or next of kin. The mortgagee’s interest, like any other piece of property, will pass upon death in accordance with the will of a testate person or in accordance with the laws of intestacy. Where there is more than one mortgagee, if the advance is or is deemed to

be on joint account, the remaining mortgagees may give a full discharge, but will hold the proceeds of redemption for themselves and the representatives of the deceased mortgagee in the appropriate shares. As to death of a member of a partnership, see 11.30.

Bankruptcy 14.14 On the bankruptcy of the mortgagee, all the mortgagee’s interest in the property vests in the trustee in bankruptcy: see Bankruptcy Act 1966 (Cth) s 58. However, by virtue of the Torrens Acts (NSW s 90, Vic s 51), the trustee must become registered before he gets an indefeasible title and can exercise the mortgagee’s statutory rights to enforce the mortgage. With Old System land, at any time after bankruptcy the trustee can exercise the right to take proceedings for foreclosure: Waddell v Toleman (1878) 9 Ch D 212.

Dissolution of company mortgagee 14.15 On the dissolution of a corporation (including the case where a corporation has been deregistered) all property and rights whatsoever vested in or held on trust for the company immediately before its dissolution, shall pass to the Australian Securities Commission under s 601AD of the Corporations Act 2001 (Cth). An application can be made to the court to declare the dissolution void pursuant to s 601AH of the Act. Alternatively the Commission may give a discharge under s 601AF of the Corporations Act.

C. Transfer and Dealings by Mortgagor Assignment by mortgagor 14.16 The mortgagor’s interest is properly capable of assignment. The terms of the mortgage may, however, mean that the assignment constitutes a breach which will enable the mortgagee to call in the mortgage. When the mortgagor’s interest is assigned with the consent of the mortgagee, or, as it is sometimes said, the land is transferred subject to the mortgage, the original mortgagor will continue to be liable on his covenants so that he is in effect a surety: see, for example, Grove v Public Trustee [1931] NZLR 1071; Dennis v Martin [1932] VLR 361; and McDonald v Gardiner [1933] VLR 129. Thus an extension of time granted to the

transferee by the mortgagee may operate to avoid the original mortgagor’s liability: Bando Trading Co Ltd v Registrar of Titles [1975] VR 353. The transferee of the equity of redemption is personally liable to pay the principal and interest: Re Burton; Ex parte Union Bank of Australia Ltd (1901) 27 VLR 437. [page 416]

Transfer between co-owners 14.17 It not infrequently occurs that one co-owner who has mortgaged his or her share of mortgaged property transfers that share to the other: this particularly happens at time of divorce. The rule in (Lord) Abergavenny’s Case (1607) 6 Co Rep 78b: 77 ER 373; [1558]–[1774] All ER Rep applies so that, despite the merger of the two shares, the mortgage remain a charge on the original share only, but not on the whole property. See also Guthrie v Australia and New Zealand Banking Group Ltd (1991) 23 NSWLR 672: 14 Fam LR 773. For a case where the wife was unaware of the fact that her spouse had mortgaged his share when the divorce took place when she obtained the whole property, see Capital Finance Australia Ltd v Struthers [2008] NSWSC 440; (2008) 14 BPR 26,179: Hamilton J applied the rule in Abergavenny’s Case.

Substitute mortgages 14.18 The mortgagor may be compelled, or may choose, to refinance his affairs and replace one mortgage with another. In such a case, if a person with an equitable interest has consented to the earlier mortgage, a later mortgage on no less favourable terms will also take priority over that equitable interest: Equity and Law Home Loans Ltd v Prestidge and Brown (1991) 63 P & CR 403.

[page 417]

Chapter 15

Sub-mortgages Generally Form of sub-mortgage — general law Effect of sub-mortgage Dealings with sub-mortgagee’s interest Discharge of sub-mortgage

15.1 15.2 15.3 15.4 15.5

Generally 15.1 A sub-mortgage is a mortgage of a mortgage. Woodhouse in (1948) 12 Conv (NS) 171 simply describes it as ‘in effect a transfer of the benefit of the principal mortgage and the moneys thereby secured’. A sub-mortgage for $60,000 of a mortgage for $100,000 consists in substance of a covenant to pay $60,000 and interest, and a transfer of the mortgage for $100,000, subject to redemption on payment of $60,000 and interest; see Woodhouse, above. A mortgagee has, by implication of law, the right to mortgage the security without an express agreement to that effect: Re Tahiti Cotton Co; Ex parte Sargent (1874) LR 17 Eq 273; France v Clark (1884) 26 Ch D 257. A submortgage transfers the original mortgage debt and mortgaged property subject to the right of redemption: City Mutual Life Assurance Society Ltd v Smith (1932) 48 CLR 532 at 539. A sub-mortgage is, perhaps, the easiest way of effecting a transfer of part of a debt. As to sub-mortgages under the Torrens system see Atlantic 3-Financial

(Aust) Pty Ltd v Deskhurst Pty Ltd [2005] 1 Qd R 1 and 4.6.

Form of sub-mortgage — general law 15.2 A mortgage of a mortgage of real property is effected by deed because of s 23B of the NSW Act, s 52 of the Victorian Act. A sub-mortgage of several properties should not be effected by a single deed, as such a deed would be brought onto the title of each mortgagor. An equitable sub-mortgage may be made by deposit of the mortgage deed or, where the principal mortgage is an equitable mortgage, by redeposit of the deposited title deed or deeds: Re Hildyard; Ex parte Smith (1842) 2 Mont D & De G 587. An equitable sub-mortgage for a bill of sale need not be registered: Re Parker; Ex parte Turquand (1885) 14 QBD 636. The deposit may be made with or without an accompanying memorandum. As the sub-mortgagee is in the position of transferee of the mortgage debt, he or she takes subject to equities: De Lisle v Union Bank of Scotland [1914] 1 Ch 22; Parker [page 418] v Jackson [1936] 2 All ER 281; Nioa v Bell (1902) 27 VLR 82. This may be displaced by the principal mortgagor’s conduct: Bickerton v Walker (1885) 31 Ch D 151 and see Atlantic 3-Financial (Aust) Pty Ltd v Deskhurst Pty Ltd [2005] 1 Qd R 1 at 7. Notice of the sub-mortgage should be given to the mortgagor to prevent fresh equities, which arise after the sub-mortgage, being enforceable against the submortgagee: Reeve v Whitmore (1863) 4 De GJ & Sm 1 at 19; 46 ER 814 at 821; Bateman v Hunt [1904] 2 KB 530; UTC Ltd v NZI Securities Australia Ltd (1991) 4 WAR 349; and see Popular Homes Ltd v Circuit Developments Ltd [1979] 2 NZLR 642 at 660. At the same time, or preferably before completion, the mortgagor should be asked to confirm the amount due under the principal mortgage. If the mortgage is of an equitable interest, notice in writing of the sub-mortgage should be given to the trustees: see NSW Act s 12, Victorian Act s 134.

Woodhouse’s article referred to in 15.1 sets out in detail the matters to be considered when drafting a sub-mortgage.

Effect of sub-mortgage 15.3 The effect of a formal sub-mortgage is to put the sub-mortgagee in the position of the transferee of the principal mortgage. The sub-mortgagee may exercise rights under the principal mortgage or under the sub-mortgage. He may exercise the power of sale under the principal mortgage, on default being made thereunder, and in that case he extinguishes both the right of redemption under that mortgage and the right of redemption under the submortgage. In the 19th century, a doubt existed as to whether a sub-mortgagee could exercise an express power of sale contained in the principal mortgagee (see, for example, Cruse v Nowell (1856) 25 LJ Ch 709), but it seems clear that if, as in most well-drawn powers and as in the case of the statutory power, the power is expressly made exercisable by any person entitled to give a receipt for the mortgage debt, the sub-mortgagee would be capable of exercising it: Re Burrell (1870) LR 7 Eq 399. An informal sub-mortgagee generally would need to seek an order for sale from the court. If the sub-mortgagee receives the principal mortgage money he must reconvey to the principal mortgagor for the surplus: NSW Act ss 112, 113, Victorian Act ss 104–106. If the sub-mortgagee realises the security by exercising the power of sale under the principal mortgage, he must set aside the amount due thereunder and pay the surplus to the mortgagor; out of the amount so set aside he will retain the sub-mortgage debt and pay the remainder to the mortgagee. Since the mortgagee is liable to the sub-mortgagor for the debt due to the latter he can require him to sue for the mortgage debt; compare Gurney v Seppings (1846) 2 Ph 40; 41 ER 856. Every well-drawn sub-mortgage should contain a provision that the sub-mortgagee shall be under no obligation to take steps to enforce the security and shall not be liable for any loss arising from any omission on his part to take any such steps. For an illustration of the doctrine of indefeasibility with a Torrens system submortgage see Atlantic 3-Financial (Aust) Pty Ltd v Deskhurst Pty Ltd [2005] 1 Qd R 1.

Dealings with sub-mortgagee’s interest 15.4 As the sub-mortgagee’s interest is an interest in property it may be transferred. The transfer will be by deed under the old system, by transfer under the Torrens system; or, in New South Wales, Torrens system land may be further sub-mortgaged pursuant to s 52A. In the example given in 15.1, there would be (a) an assignment of the covenant to pay $60,000 and interest; (b) an assignment of the debt of $100,000 subject to redemption under the sub-mortgage; and (c) a conveyance of the mortgage property subject to redemption under the mortgage and the sub-mortgage. [page 419]

Discharge of sub-mortgage 15.5 A sub-mortgage is discharged in the same way as a mortgage. If a statutory form of discharge is used of common law system land under the NSW Act s 91, the Victorian Act ss 114–119, then the fee simple will vest in the mortgagee. If a Torrens form is used then the charge created by the submortgage over the mortgage will be extinguished and the mortgagor will remain the proprietor of the fee simple subject to the mortgagee’s interest. An informal sub-mortgage may be discharged by redelivery if there is no accompanying document, or where there is an accompanying document by redelivery and cancellation or by receipt. Notice of the discharge should be given to the mortgagor under the principal mortgage.

[page 421]

Part VI

The Mortgagee’s Remedies

[page 423]

Chapter 16

The Mortgagee’s Remedies I

The Exercise of the Remedies A. Protection of the Security Preservation of the mortgaged property Completion of security As against third parties B. Enforcement of the Security The mortgagee’s remedies The date for legal redemption Covenant not to call in the money Exercise of remedies Events of default Administration action II Restrictions on Suing A. Restraint of Proceedings in General Where action would be inequitable Where mortgagee cannot return the security Encumbrancer not bound to pursue simplest remedy Conditional agreement not to sue Rights of third parties

16.1 16.2 16.3 16.4 16.5 16.6 16.7 16.8 16.9

16.10 16.11 16.12 16.13 16.14

Staying proceedings on payment or tender B. Statutory Restrictions Statutory restrictions III Limitation of Actions A. Earlier Legislative Developments Statute of 1623 Statute of 1833 Present law B. New South Wales New South Wales C. Victoria Victoria D. Queensland Queensland E. South Australia South Australia F. Western Australia Western Australia

16.15 16.16

16.17 16.18 16.19 16.20 16.21 16.22 16.23 16.24

[page 424]

G. Tasmania Tasmania H. The Territories The territories I. Common Law Position Generally Period of limitation Date from which time runs

16.25 16.26 16.27 16.28 16.29

Arrears of interest Foreclosure Possession Part payment and acknowledgment Acknowledgment Effect of expiry of limitation period Fraud and mistake IV Proof of the Security Proof of execution Lost document Payment of consideration Validity of the security

16.30 16.31 16.32 16.33 16.34 16.35 16.36 16.37 16.38 16.39 16.40

I The Exercise of the Remedies A. Protection of the Security Preservation of the mortgaged property 16.1 From the time of lending the money, the mortgagee, whether in or out of possession, is entitled to have the mortgaged property preserved from deterioration in the hands of the mortgagor or of any other person whose interest is inferior to that of the mortgagee. Generally speaking, the mortgagor is entitled to use the mortgaged property as a full owner subject to the terms and conditions of the mortgage. However, a point may be reached where the mortgagor’s conduct or the conduct of a person with inferior title threatens to reduce the value of the reversion. At that point, the mortgagee may seek an injunction or take possession. Instances of acts to preserve the mortgaged property are: the payment of rent to prevent forfeiture, the payment of a premium to keep a policy on foot (see 40.3, 40.25) and the taking of possession to prevent vandalism or other

forms of waste that might damage the reversion: Western Bank Ltd v Schindler [1977] Ch 1 at 10; [1976] 2 All ER 393 at 396; Campion v Randwick Municipal Council (1933) 34 SR (NSW) 167. Waste generally is considered in Chapter 42. The mortgagee may also seek similar protection if the threat to the security comes from a third party. Thus, a debenture holder may obtain the appointment of a receiver before the debentures fall due, if the company’s assets are endangered, for example by threatened executions by unsecured creditors (Wildy v Mid-Hants Railway Co (1868) 16 WR 409; Re Carshalton Park Estate Ltd; Graham v Carshalton Park Estate Ltd [1908] 2 Ch 62; Higginson v German Athenaeum Ltd (1916) 32 TLR 277); and on the same [page 425] principle the Admiralty Court will order the arrest of a mortgaged ship before the debt falls due if the mortgagor is using her for a purpose likely to injure the security: The Blanche (1887) 58 LT 592. If the mortgaged property comprises licensed premises, the mortgagee may take part in proceedings to obtain a renewal of the licence: Garrett v St Marylebone Middlesex Justices (1884) 12 QBD 620. The mortgagee’s right to the preservation of the security has also been asserted by restraining the trustees of a turnpike road from reducing the tolls which formed the subject of the mortgage: Crewe (Lord) v Edleston (1857) 3 Jur NS 128, 1061; 1 De G & J 93; 44 ER 657. A judgment creditor has been restrained, at the suit of the prior mortgagee, even before the mortgage debt has become due, from taking possession of the property under the legal right acquired by the former writ of elegit: Legg v Mathieson (1860) 2 Giff 71; 66 ER 31; Wildy v Mid-Hants Railway Co, above. On the same principle, where a company mortgaged a call upon its shareholders, and, before it was received, made another call, it could not prejudice the mortgagees by getting in the second call at the expense of the first: Re Humber Ironworks Co (1868) 16 WR 474. The principle is also applied where the security itself is the subject of

litigation. The liquidator of a company has, therefore, been restrained, at the suit of a person who claimed a lien for unpaid purchase money, from selling part of the property, the destruction or removal of which would have affected the plaintiff’s interest: Blakely v Dent (1867) 15 WR 663. The mortgagee’s rights are not unlimited. Unreasonable attempts at preservation will not be allowed on accounts: Estoril Investments Pty Ltd v Westpac Banking Corporation (1993) 6 BPR 13,146. Not only may the mortgagor be restrained from the sort of conduct above mentioned, but he may also be liable as mortgagor in possession as the tenant of the mortgagee: see 12.11. As to repairs, see 19.36. The mortgagee has, however, no duty to preserve the security unless and until he takes possession of it: AIB Finance Ltd v Debtors [1998] 2 All ER 924 (CA). As to the position where the mortgaged property is compulsorily acquired, see 32.35.

Completion of security 16.2 Unless the agreement were merely for an equitable mortgage, the mortgagee may also at any time, until the arrival of the day of payment fixed in a redemption action, compel the creation in his favour of a legal estate, or otherwise for the perfecting of his security (this is so even after notice or tender, if improper notice or insufficient notice is given: Grugeon v Gerrard (1840) 4 Y & C Ex 119; Malone v Geraghty (1843) 3 Dru & War 239; 1 HL Cas 81; see also Sporle v Whayman (1855) 20 Beav 607; 52 ER 738), and for the purpose of enforcing the security upon the interest of his mortgagor in an agreement, the mortgagee may sue for specific performance of the agreement: Browne v London Necropolis and National Mausoleum Co (1857) 6 WR 188; and see 1.41. Indeed, the mortgagee has a duty to the mortgagor and perhaps to others as well to complete his security, for instance by registering the bill of sale: Wulff v Jay (1872) LR 7 QB 756. That is because of the mortgagee’s duty to hand over the security on redemption to the mortgagor or as the case may be: Yorkshire Bank plc v Hall [1999] 1 WLR 713 at 728; [1999] 1 All ER 879 at 893.

As against third parties 16.3 The mortgagee is entitled, as against third parties, to protect his own or the mortgagor’s title to the mortgaged property: see 40.23. A mortgagee is not liable for [page 426] interference with a contract between the mortgagor and a third party where a mortgagee required a borrower developer to change the architects for the development as a term of advancing further funds: see Edwin Hill and Partners (a firm) v First National Finance Corp plc [1988] 3 All ER 801; [1989] 1 WLR 225 (CA).

B. Enforcement of the Security The mortgagee’s remedies 16.4 The mortgagee’s remedies for the recovery of the debt are either against the mortgagor personally, or by enforcement of the security (for the meaning of ‘enforcement’ of the security, see Chapter 9, and 19.6). On the defects in the enforcement of mortgages, see English Law Commission Working Paper No 99, Land Mortgages, HMSO, London, 1986, paras 3.46ff; Law Reform Commission of Victoria, Mortgagee Sales and Judgment Debts (Report No 8); Ontario Law Reform Commission, Report on the Law of Mortgages (1987), pp 156ff; and Law Reform Commission of British Columbia, Report on Personal Liability under a Mortgage or Agreement for Sale (1985). The remedy against the mortgagor personally is by an action for the debt. Usually the mortgage contains a covenant for payment, and the action is on the covenant. As just stated, the mortgagee is entitled to preservation of the security, and in general, he is entitled to enter into possession immediately upon the execution of the mortgage but subject to relevant statutory provisions, particularly with respect to Torrens system land: see 19.2. In the case of entry into possession the mortgagee may obtain repayment out of the rents and profits. Alternatively, without entering into possession, the

mortgagee can appoint a receiver. Realisation of the security is effected by sale, or the mortgagee may, by foreclosure, deprive the mortgagor of his equity of redemption, and become the owner of the property. Thus, the mortgagee’s remedies are: (1) action on the debt; (2) appointment of a receiver; (3) possession; (4) sale; and (5) foreclosure. The remedies by action for the debt, or by a receiver, or by sale, or by foreclosure do not arise until the debt has become due and there has been default in payment; and even then the remedies by a receiver and by sale are subject to restrictions: see Chapter 18; also 20.11 and 20.12. As to foreclosure, it should be noticed that the mortgagor has two rights of redemption. Until the day fixed for payment arrives, the mortgagor has a legal right of redemption, and, where there is an express proviso for redemption, of this the mortgagor cannot be deprived (Twentieth Century Banking Corp Ltd v Wilkinson [1977] Ch 99; [1976] 3 All ER 361), but on default in payment at that day the mortgagor’s legal right to redeem ceases and thenceforth the right of redemption is only equitable. Foreclosure consists in depriving the mortgagor of this equitable right; the mortgagee thereupon acquires a new title as owner: see Heath v Pugh (1881) 6 QBD 345 (CA); on appeal sub nom Pugh v Heath (1882) 7 App Cas 235 (HL); and see Westpac Banking Corp v Daydream Island Pty Ltd [1985] 2 Qd R 330. Sale may be ordered by the court in lieu of foreclosure: see 21.9. These remedies are available to both mortgagees of general law and Torrens title land. The nature of a Torrens mortgage as a statutory charge and of the mortgagor’s interest as registered proprietor of the mortgaged land changes the nature of the ‘equity of redemption’ by comparison with mortgages of general law land (see Chapter 4; and see Greig v Watson (1881) 7 VLR (E) 79) but these remedies remain available, sometimes with adaptations by statute or common law. The most significant modification is in relation to the foreclosure of a Torrens mortgage (see 21.1) but there are other variations (for example the statutory power of sale provisions [page 427]

generally vary as between general law and Torrens mortgages (see Chapter 20) and the Torrens legislation, of necessity, contains provisions empowering the mortgagee to take possession of the mortgaged land in specified circumstances: see 19.2.

The date for legal redemption 16.5 In the classical form of general law mortgage the date for redemption is specified in the proviso for redemption — usually six months from the date of the mortgage and the same date as the date fixed by the covenant for payment. On default in payment at the end of the period, the right of foreclosure arises, but a later date may be agreed upon, with consequent postponement of foreclosure, and the effect is the same where, although the period of six months is fixed for redemption, there is a stipulation that the money shall not be called in until a later date. Such a postponement is not subject to the same restriction as a postponement of the right to redeem (see 32.6ff), for the mortgagee does not require the same protection as the mortgagor. There is, therefore, no objection to an agreement that the debt shall not be called in during the lifetime of any particular person (Bonham v Newcomb (1684) 1 Vern 232; 86 ER 488), and unless fraud is proved, no objection probably would be made to a postponement whatever its length. In the modern form of instalment mortgage there is generally no provision for redemption, but it seems to be accepted that the right of foreclosure nevertheless arises when the mortgage moneys become due, on default or otherwise: Twentieth Century Banking Corp Ltd v Wilkinson [1977] Ch 99; [1976] 3 All ER 361. If the postponement is contained in the proviso for redemption, and this is expressed so that there is a right to redeem on payment of principal at a distant date with interest in the meantime, the failure to pay interest periodically does not accelerate the right to foreclosure; and this is so, even where there is a covenant to pay interest periodically, for the proviso for redemption is treated as independent of the covenant (Re Turner; Turner v Spencer (1894) 43 WR 153; Williams v Morgan [1906] 1 Ch 804), but it is otherwise where the condition for periodical payment is contained in the proviso itself; where, for example, the proviso is for redemption on payment

of principal with interest half-yearly in the meantime, or on payment of principal and interest in accordance with the covenant for payment: Burrowes v Molloy (1845) 2 Jo & Lat 521 at 526; Edwards v Martin (1856) 25 LJ Ch 284; Kidderminster Mutual Benefit Building Society v Haddock [1936] WN 158; Twentieth Century Banking Corp Ltd v Wilkinson, above. See also Mohamedali Jaffer Karachiwalla v Noorally Rattanshi Rajan Nanji [1959] AC 518; [1959] 1 All ER 137 (PC). As has been indicated, the Torrens title mortgage is of a different nature to a mortgage of general law land, as it is a statutory charge rather than a conveyance by way of mortgage: see above. As a consequence the statutory provisions for foreclosure are substantially different: see 21.1.

Covenant not to call in the money 16.6 A similar distinction arises where a proviso for early redemption in the usual form is accompanied by a covenant that the money shall not be called in until a later date. It has been held that such a covenant by the second mortgagee prevents the mortgagee from redeeming the first mortgage, because he cannot bring the mortgagor before the court (Ramsbottom v Wallis (1835) 5 LJ Ch 92), but this seems to be straining a technicality too far. If the covenant is absolute, default in payment of interest pending the day for redemption will not entitle the mortgagee to foreclosure (Burrowes v Molloy (1845) 2 Jo & Lat 521), but if, as is usually the case, the covenant is expressed to be conditional on regular payment of interest, the right to foreclose arises on default in such payment: Stanhope v Manners (1763) 2 Eden 197; 28 ER 873; Seaton v Twyford (1870) LR 11 Eq 591. [page 428] If ‘punctual’ payment is required, this word is construed strictly: Leeds and Hanley Theatre of Varieties v Broadbent [1898] 1 Ch 343 (CA); Maclaine v Gatty [1921] 1 AC 376 (HL). The mere receipt of interest after the due date is not a waiver of the right to sue (Keene v Biscoe (1878) 8 Ch D 201), though it is a circumstance to be taken into account in determining whether there has been a waiver: Seal v Gimson (1914) 110 LT 583.

A covenant not to call in the money also affects the right to sue in respect of any moneys to which the mortgagee becomes entitled in that character (Burrowes v Molloy, above) but not in respect of injury to the security: Dugdale v Robertson (1857) 3 K & J 695; 69 ER 1289.

Exercise of remedies 16.7 As soon as the mortgagor has made default (Bonham v Newcomb (1684) 1 Vern 232; 23 ER 435) in payment of the mortgage debt (Burrowes v Molloy (1845) 2 Jo & Lat 521; Wilkes v Saunion (1877) 7 Ch D 188) — that is, where a time for payment is fixed, by non-payment on that day; or where no time is fixed, by non-payment on demand (Cas & Op II, 51; Glanv Lib 10, c 8; for implied demand, see The Halcyon Skies (No 2) [1977] 1 Lloyd’s Rep 22) — or, where the mortgage so provides, as soon as there is some other breach of the terms thereof, the mortgagee is entitled to pursue any or all of his remedies against the debtor, or the debtor’s assets, or the encumbered estate (Lockhart v Hardy (1846) 9 Beav 349; 50 ER 378; Paynter v Carew (1854) Kay App xxxvi; 69 ER 331; Palmer v Hendrie (1859) 27 Beav 349 at 351; Alliance and Leicester v Slayford [2001] 1 All ER (Comm) 1); and is not prevented from so doing by any implied duty of reasonableness and good faith: see Varangian Pty Ltd v OFM Capital Ltd [2003] VSC 444. As regards the appointment of a receiver, and the power of sale, the entitlement to pursue the available remedies is subject to the restrictions imposed by the mortgage deed (if the powers are conferred by that deed) or by statute (if the powers are statutory). (As to the extent to which statutory powers may be varied by agreement, see 4.36 and 20.6.) Concerning default, it was formerly the case that it was allowed to be shown by parol evidence that an omission to pay did not amount to default within the meaning of the deed; the consent of the person entitled to payment to enlarge the time, though made without consideration, being held to show that there was no default: Albert v Grosvenor Investment Co (1867) LR 3 QB 123. In Williams v Stern (1879) 5 QBD 409, however, the Court of Appeal held that a consent so given was no evidence of waiver of the mortgagee’s rights to take possession at any time. On waiver of remedies, see Barns v Queensland National Bank Ltd (1906) 3 CLR 925 at 937–8. Contrary to the general rule that a person liable to be sued is not to be

harassed by a multiplicity of actions, it is the right of the mortgagee or other secured creditor, so long as any part of the debt remains unpaid, to pursue any or all of his remedies at the same time; and in the sequence of his choice: China and South Sea Bank Ltd v Tan Soon Gin [1990] 1 AC 536 (PC); Re McCann [1985] 2 Qd R 381. Hence the mortgagee may at the same time sue for payment on the covenant to pay principal and interest, for possession of the mortgaged property and for foreclosure, and these claims may be combined in the same action. A mortgagee who has sold the property under his power of sale can sue the mortgagor for any deficiency (Rudge v Richens (1873) LR 8 CP 358), and the same applies where the sale is a sale by the court: Gordon Grant & Co Ltd v Boos [1926] AC 781 (PC). A mortgagee who has taken possession may appoint a receiver (Refuge Assurance Co Ltd v Pearlberg [1938] Ch 687; [1938] 3 All ER 231), but, nevertheless, after obtaining a judgment nisi for foreclosure, the mortgagee cannot sell without the leave of the court before the judgment is made absolute: Stevens v Theatres Ltd [1903] 1 Ch 857. If after foreclosure absolute the mortgagee sues on the personal covenant, this will open the [page 429] foreclosure (Perry v Barker (1806) 13 Ves 198; 33 ER 269: see 22.38; but reopening of the foreclosure is not possible in all jurisdictions: see 21.5), but a mortgagee who has sold the property after foreclosure cannot sue on the personal covenant: Lloyds and Scottish Trust Ltd v Britten (1982) 44 P & CR 249; and see 22.38. As to the position where the mortgagee has sold the property for an undervalue, see 20.24, 20.25 and 20.37. If the mortgagee had been paid all that was claimed in an action, the mortgagee could not sue in equity for a further sum unclaimed by mistake in the action (Darlow v Cooper (1865) 34 Beav 281; 55 ER 643; as to estoppel against taking further proceedings in such circumstances, see Port of Melbourne Authority v Anshun Pty Ltd (No 2) (1981) 147 CLR 589 at 602 and Commonwealth of Australia v Verwayen (1990) 170 CLR 394), nor can a building society which has in error given the usual statutory receipt: Harvey v Municipal Permanent Investment Building Society (1884) 26 Ch D 273; see

32.64. As to the specific statutory provisions for foreclosure of Torrens title mortgages, see Chapters 21 and 22. Since a mortgagee is entitled to pursue all his remedies, the court will not interfere with the mortgagee’s action on the covenant, on the ground that a contract, still incomplete, has been made by the mortgagee to sell the mortgaged property for a larger sum than is due on the mortgage: Willes v Levett (1847) 1 De G & Sm 392; 63 ER 1119. Nor will the court interfere with the mortgagee’s right to recover possession, because, after contracting to sell, he has brought an action on the covenant, and has compromised it on payment of a sum of money by another person whom the original mortgagee afterwards redeemed for the purpose of completing his contract for sale: Davies v Williams (1843) 7 Jur 663. Similarly, the court will not interfere with the mortgagee’s proceedings by reason of an order made in another action in his absence: Crowle v Russell (1878) 4 CPD 186. A prior encumbrancer may also bring an action after a judgment has been obtained in another action by the owner of a later charge; for he is not bound to come in under that judgment at the risk of losing his rights by the suspension of the proceedings in the later encumbrancer’s action: Arnold v Bainbrigge (1860) 2 De GF & J 92; 45 ER 557. A subsequent mortgagee, as assignee of the equity of redemption, is entitled to all rights available to the mortgagor (in addition to any rights as mortgagee): see Westpac Banking Corp v Daydream Island Pty Ltd [1985] 2 Qd R 330. It should be noted that NSW Act s 92 and Qld Act s 96 (there are no equivalents in other states) provide that a mortgagee shall not call up an overdue mortgage without three months’ notice if the mortgagee has accepted interest after default. The section probably only applies to a mortgage where the principal has to be repaid after a fixed term: Miles v Hussey (1909) 28 NZLR 382. A mortgagee will be taken to have accepted interest if he receives the interest into his solicitor’s trust account and does not immediately return it: Watson v Brown [1919] NZLR 60. See also Turner v Barton [1918] NZLR 107; Re Kennedy and Cheesman [1923] GLR 577; and Wallace McLean Bawden & Partners Nominees Ltd v Fish [1980] 1 NZLR 540; and 1.53 and 32.37.

Events of default 16.8 In addition to default in payment of the principal, mortgages and particularly mortgage debentures usually include a list of events on the happening of which the mortgagee may call up the mortgage debt or put in a receiver. Examples are provided in clause 6 of precedent 10.0 and clause 6 of precedent 10.5 in The Australian Encyclopaedia of Forms and Precedents, K I N Rose, LexisNexis Australia, Mortgages (updated May 2009); however, a wide variety of events may be chosen. It is a question of construction whether any prior demand is necessary to found the cause of action for repayment: Ogilvie v Adams [1981] VR 1041; Golding v Russell [1983] Qd R 53; and Julong Pty Ltd v Fenn [2002] QSC 26. [page 430] Often these clauses will be strictly construed. Thus, in Canberra Advance Bank Ltd v Benny (1992) 38 FCR 427 at 435, it was held that the words ‘upon default’ did not mean ‘at any time after an event of default’. In some states there is a statutory requirement that notice be given (in accordance with the relevant statutory provisions) of the occurrence of an event of default, otherwise the default provision is inoperative: see Wombat Nominees Pty Ltd v De Tullio (1990) 98 ALR 307; and see Lamshed v Plakakis (1988) 47 SASR 316. There are two schools of thought as to whether the mortgagee need merely look to see whether a triggering event has occurred or whether it may or must look behind the event. If the event is the levying of execution on the property of the mortgagor, there are authorities to say that if the execution is irregular, so that it could be set aside ex debito justiciae, then there has been no triggering event: Permanent Trustee Co Ltd v Cormack (1920) 21 SR (NSW) 1 at 6. The New South Wales Court of Appeal takes a similar view in Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 259. See also Paul Kennedy Transport Pty Ltd v Australia and New Zealand Banking Group Ltd (1993) 6 BPR 13,883. On the other hand, judges in the New South Wales Commercial List tend

to take the view that if the event has occurred, no matter how technical a matter, there is a default and the power to call up the mortgage debt or to appoint a receiver is dully triggered: see, for example, Hughes Bros Pty Ltd v Trustee of Roman Catholic Church for the Archdiocese of Sydney (SC (NSW), Giles J, 21 September 1989, unreported). If a technical breach has occurred, there is no room for any application of equitable principles of relief against forfeiture: Westminster Properties Pty Ltd v Comco Constructions Pty Ltd (1991) 5 WAR 191 and see the judgment of Brinsden J at first instance (1990) 2 WAR 335. If the mortgagee purports to appoint a receiver because of a certain default and it is doubtful whether that default has occurred, the mortgagee may defend the appointment on any of the defaults which were in fact available to it, whether it was aware of them at the time of appointment or not: Union Bank v Downes (1896) 12 WN (NSW) 131; McMahon v State Bank of NSW (1990) 8 ACLC 315; Retail Equity Pty Ltd v Custom Credit Corp Ltd (1991) 4 ACSR 23; and Canberra Advance Bank Ltd v Benny (1992) 38 FCR 427.

Administration action 16.9 The mortgagee, whether the mortgage is legal or equitable, may also proceed against the assets of the deceased mortgagor: King v Smith (1843) 2 Hare 239; 67 ER 99. Formerly the mortgagee had to sue on behalf of himself and all other creditors, but this is no longer so: Re James; James v Jones [1911] 2 Ch 348. Alternatively, the mortgagee may prove in an administration action for his debt, less the value which the mortgagee sets upon the security, or may apply for a sale with liberty to prove for any deficiency: see Probate and Administration Act 1898 (NSW) s 46C; Administration and Probate Act 1958 (Vic) s 39; Succession Act 1981 (Qld) s 57;Administration and Probate Act 1919 (SA) ss 60, 61; Administration and Probate Act 1935 (Tas) s 34(1); Administration Act 1903 (WA) s 10A; Administration Act 1969 (NZ) s 31. If after the mortgagee has valued the security, the property is sold at the mortgagee’s instance, and realises less than the valuation, the mortgagee cannot prove for more than the deficiency as originally estimated: Re Hopkins; Williams v Hopkins (1881) 18 Ch D 370 (CA). A mortgagee is even allowed to prove as a creditor, in an action for administration of the mortgagor’s estate, after obtaining an order of foreclosure, and contracting to

sell the property; but upon the terms of rescinding the contract and reconveying. The proof will be limited in such a case to the amount recoverable under the mortgage covenant, and therefore will not include the costs of the foreclosure action: [page 431] Haynes v Haynes (1857) 3 Jur NS 504. As to the mortgagee’s rights in the mortgagor’s bankruptcy, see Chapter 23.

II Restrictions on Suing A. Restraint of Proceedings in General Where action would be inequitable 16.10 In certain cases, encumbrancers will be restrained from pursuing one or more of their remedies; as to restraining a sale, see 20.37. The inherent jurisdiction has been considered more in New Zealand than elsewhere: see Clark v National Mutual Life Association of Australasia Ltd [1966] NZLR 196; Development Consultants Ltd v Lion Breweries Ltd [1981] 2 NZLR 258 (CA); and see generally Croft and Hay, The Mortgagee’s Power of Sale, 3rd ed, LexisNexis Butterworths, 2013, [11.5]. Thus, a mortgagee’s action for possession has been dismissed where the right to possession was being exercised improperly (Quennell v Maltby [1979] 1 All ER 568; [1979] 1 WLR 318 (CA)), and a mortgagee’s action for possession has been stayed (security having been given to redeem) on the ground of entangled accounts, where an action for an account was also pending against the mortgagee, and it was considered beneficial to all parties to keep the possession in suspense in the meantime: Booth v Booth (1742) 2 Atk 343; 26 ER 609. The owner of property subject to a charge, upon paying the amount of it with interest into court in an action to raise the charge, has been protected by injunction from proceedings by the mortgagee of the charge to obtain possession of the land: Duncombe v Greenacre (1860) 28

Beav 472; 54 ER 447. The mortgagee may also be prevented from using the mortgagee’s remedies if he has neglected to furnish a proper account, and has refused a proper and sufficient tender: Herries v Griffiths (1854) 2 WR 72.

Where mortgagee cannot return the security 16.11 If a creditor holding security sues for the debt he must, on payment of the debt, return the security. If it cannot be returned, having been improperly made away with, the creditor cannot have judgment for the debt (Ellis & Co’s Trustee v Dixon-Johnson [1925] AC 489 (HL)), a statement approved by Dixon J in the High Court in O’Day v Commercial Bank of Australia Ltd (1933) 50 CLR 200 at 220. A mortgagee has been restrained from proceeding on his collateral security, where, the title deeds being out of his power, the mortgagee was unable effectually to reconvey the estate, the amount due being directed to be ascertained and paid into the bank, there to remain until the title deeds would be secured, and a reconveyance had: Schoole v Sall (1803) 1 Sch & Lef 176. So a mortgagee who has foreclosed one mortgage, and afterwards sold the property comprised in it for less than was due (though he sold it fairly), will not be allowed to proceed on his collateral securities, the sale having made it impracticable for the foreclosure to be reopened (Lockhart v Hardy (1846) 9 Beav 349; 50 ER 378); and the same result follows where a mortgagee, having transferred the mortgage without the collateral securities, afterwards proceeds to sue the mortgagor on the latter: Walker v Jones (1866) LR 1 PC 50. But reopening of the foreclosure is not possible in all jurisdictions: see 21.5. Similarly, if the mortgagee joins with the transferee of the equity of redemption in a sale, and allows the transferee to receive the purchase money, the mortgagee, since he [page 432] is no longer able to reconvey the estate, will not be allowed to sue the

mortgagor on the covenant to pay: Palmer v Hendrie (1859) 27 Beav 349; 54 ER 136. However, a mortgagee who has sold the property under the power of sale can sue the mortgagor for the deficiency, since the sale was a proper dealing with the security: Rudge v Richens (1873) LR 8 CP 358; Gordon Grant & Co v Boos [1926] AC 781 (PC); Coast Realties Ltd v Nolan (1972) 20 DLR (3d) 96.

Encumbrancer not bound to pursue simplest remedy 16.12 An encumbrancer is not generally prevented from using such remedies as are open, on the ground that the encumbrancer has easier mode of relief, or on the ground of interference with the rights of other persons claiming under the same security (though this may be a ground for staying execution: Bolckow v Herne Bay Pier Co (1852) 1 E & B 74; 118 ER 364), unless the pursuit of the remedy in question would be contrary to the spirit and intention of the contract, and in breach of good faith: Sherborn v Tollemache (1863) 13 CB NS 742. There would be similar impropriety in an action by a mortgagee on the security after proving for the whole debt, when the estate was to be divided as in bankruptcy: Kingsford v Swinford (1859) 4 Drew 705; 62 ER 270; cf Quennell v Maltby [1979] 1 All ER 568; [1979] 1 WLR 318 (CA).

Conditional agreement not to sue 16.13 Where a collateral agreement has been entered into that the security shall not be enforced if the debtor observes certain conditions, the creditor will not be prevented from enforcing the security if the debtor has failed to observe such conditions: Parry v Great Ship Co (1863) 4 B & S 556; 122 ER 568. Thus a mortgagee was not restrained from exercising his remedy under a mortgage, on the ground of an agreement that it should contain a clause postponing the mortgagee’s right to call in the money, where a corresponding condition for punctual payment of interest had not been observed by the mortgagor: Seaton v Simpson [1870] WN 261.

Rights of third parties 16.14

The mortgagee will be restrained from doing acts in disregard of the

rights of third persons which are superior to the mortgagee’s rights: a mortgagee of a ship has been restrained from so dealing with her as to prevent the performance of a charter party of which the mortgagee had notice: De Mattos v Gibson (1859) 4 De G & J 276; 45 ER 108; Lord Strathcona SS Co Ltd v Dominion Coal Co Ltd [1926] AC 108 (PC); cf Port Line Ltd v Ben Line Steamers Ltd [1958] 2 QB 146; [1958] 1 All ER 787; and see Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584; [1980] 2 All ER 419 (CA); affirmed [1982] AC 584; [1981] 2 All ER 449 (HL). The mortgagee will be compelled to respect rights which third persons have acquired from the mortgagor since the date of the security, if the mortgagee has done acts which amount to an acknowledgment of such rights, or if the security was taken with the knowledge that the granting of such rights was incident to the purposes to which the property was devoted: Mold v Wheatcroft (1859) 27 Beav 510; 54 ER 202. The mortgagee will not be allowed to cause unnecessary injury to the property, as by cutting timber, when the security is not shown to be defective: Withrington v Banks (1725) Cas t King 30; 25 ER 205.

Staying proceedings on payment or tender 16.15 Under its inherent powers, the court will stay proceedings upon payment or tender by a defendant encumbrancer to the plaintiff (who is always liable to be paid off) of his principal, interest, and costs, and upon bringing into court a sum sufficient [page 433] to cover the costs of the other defendants, so far as the plaintiff is liable to them, until the amount has been ascertained: see form of order in France v Cowper [1871] WN 76. However, the court will refuse to make such an order, where it would affect the interests of the other defendants, by interfering with questions as to priorities of the encumbrances; or with the order of the court made in another action relating to the same securities. Though even in such a case it will anticipate the order at the hearing by directing inquiries as to the priorities of,

and the amounts due to, the encumbrancers, and if proper, by directing a sale: Paine v Edwards (1862) 6 LT 600. The court can also, under its inherent powers, make such an order before the hearing as it might have made at the hearing (Aberdeen v Chitty (1839) 3 Y & C Ex 379 at 382; 160 ER 749 at 750), that is, for accounts and for foreclosure in default of payment on a given day; or for a stay with a proviso that on default of payment it should be deemed that no order had been made on the application: Jones v Tinney (1845) Kay App XLV; 69 ER 336.

B. Statutory Restrictions Statutory restrictions 16.16 Under the Bankruptcy Act 1966 (Cth) in the case of individual insolvency and under the Corporations Act 2001 (Cth) with respect to corporate insolvency, for the most part, a secured creditor is left to realise his security. However, both Acts make provision for the secured creditor to surrender his security and prove in the bankruptcy or winding up and to prove for any shortfall. These matters are considered in Chapter 23. Under Consumer Credit legislation, mortgagees are obliged to comply with additional formalities before enforcement action. This is considered in Chapter 9.

III Limitation of Actions A. Earlier Legislative Developments Statute of 1623 16.17 The provisions of the English Statutes of Limitations have been adopted, and, with or without modification, are still in force, in all of the Australian states and New Zealand. Of these the earliest, and first to be considered, is the Statute of Limitations of 1623 (21 Jac 1 c 16), s 3 of which provided, inter alia, that all actions of debt grounded upon any lending or contract without specialty should be

commenced and sued within the time and limitation therein expressed, namely within six years next after the cause of such actions, and not after. By s 7 it was provided that, if any person entitled to any such action for debt were, at the time of any such cause of action given or accrued, fallen or come, within the age of 21 years, feme covert, non compos mentis, imprisoned or beyond the seas, then such person should be at liberty to bring the same action, within such time as before limited, ‘after their coming to or being of full age, discovert, of sane memory, at large and returned from beyond the seas, as other persons having no such impediment should have done’. ‘The word “specialty” is sometimes used to denote any contract under seal, but it is more often used in the sense of meaning a specialty debt, that is, an obligation under seal securing a debt, or a debt due from the Crown or under statute’ (R v Williams [1942] AC 541 at 555 (PC)); but perhaps should be confined now to deeds or contracts under seal: Leivers v Barber,Walker & Co Ltd [1943] 1 KB 385 at 398 per Goddard LJ (CA). The provisions of the Torrens legislation which deem a registered instrument to have [page 434] the same efficacy as if it were under seal have the effect of creating a ‘specialty’: see Payne v R [1902] AC 552 at 560; Visbord v Irvine [1921] VLR 562; Kelly v Fuller (1867) 1 SALR 15. (This case indicates that it does not necessarily follow that a registered instrument attracts all the incidents of a deed: see at 19. See, however, Karovnos v The Official Trustee in Bankruptcy (1992) ACL [295 SA 1] (FC (SA), 26 November 1991, unreported, Zelling AJ at 4.) As to the relevant Torrens legislation, see NSW Torrens Act s 36(11); Victorian Torrens Act s 40(2); Queensland Torrens Act s 176; SA Torrens Act s 57; WA Torrens Act s 85; Tasmanian Torrens Act s 48(7). Conversely, an unregistered instrument under the Torrens legislation does not take effect as a deed (Visbord v Irvine, above); although it may, nevertheless, create an interest at law: see Chapters 4 and 28. These two sections of the English Act (ss 3 and 7) were still in force in New South Wales in their original form until 1 January 1971, upon which

date the Limitation Act 1969 (NSW) came into operation. In South Australia the Limitation of Actions Act 1936 s 35(a) adopts the provisions of s 3 of 21 Jac 1 c 16 in respect of debts without specialty; in Western Australia, the Limitation Act 1935 s 38(1)(c)(v) (now repealed and replaced with the Limitation Act 2005) contained similar provisions. Victoria, Queensland and Tasmania have legislation based on the English Limitation Act 1939 (2 & 3 Geo 6 c 21), and the statutory provisions in those states likewise prescribe a period of limitation of six years for the bringing of an action ‘founded on simple contract’: Limitation of Actions Act 1958 (Vic) s 5(1); Limitation of Actions Act 1974 (Qld) s 10(1)(a); Limitation Act 1974 (Tas) s 4(1)(a). Even though the debt may be charged on land, if it is a simple contract debt, the period of limitation will be six years as provided by these Acts: Barnes v Glenton [1899] 1 QB 885.

Statute of 1833 16.18 The next English Act which requires consideration is the Real Property Limitation Act of 1833 (3 & 4 Wm 4 c 27). This Act was intituled ‘An Act for the limitation of Actions and Suits relating to Real Property and for simplifying the Remedies for trying the Rights thereto’. The principal sections of this Act which should be noted are: 2. And be it further enacted That after the thirty-first day of December one thousand eight hundred and thirty-three no persons shall make an entry or distress or bring an action to recover any land or rent but within twenty years next after the time at which the right to make such entry or distress or to bring such action shall have first accrued to any person through whom he claims or if such right shall not have accrued to any person through whom he claims then within twenty years next after the time at which the right to make such entry or distress or to bring such action shall have first accrued to the person making or bringing the same. 24. And be it further enacted That after the said thirty-first day of December one thousand eight hundred and thirty-three no person claiming any land or rent in equity shall bring any suit to recover the same but within the period during which by virtue of the provisions hereinbefore contained he might have made an entry or distress or brought an action to recover the same respectively if he had been entitled at law to such estate interest or right in or to the same as he shall claim therein in equity. 28. And be it further enacted That when a mortgagee shall have obtained the possession or receipt of the profits of any land or the receipt of any rent comprised in his mortgage the mortgagor or any person claiming through him shall not bring a suit to redeem the mortgage but within twenty years next after the time at which the mortgagee obtained such possession or receipt unless in the meantime an acknowledgment of the title of the mortgagor or of his right of redemption shall have been given to the mortgagor or some person claiming his estate or to the agent of such mortgagor or persons in writing signed by the mortgagee or the person claiming through him and in such case no such suit shall be brought but within twenty years next after the

time at which such acknowledgment or the last of such acknowledgments if more than one was given … 34. And be it further enacted That at the determination of the period limited by this Act to any person for making an entry or distress or bringing any writ of quare impedit or other action or

[page 435] suit the right and title of such person to the land rent or advowson for the recovery whereof such entry distress action or suit respectively might have been made or brought within such period shall be extinguished. 40. And be it further enacted That after the said thirty-first day of December one thousand eight hundred and thirty-three no action or suit or other proceeding shall be brought to recover any sum of money secured by any mortgage judgment or lien or otherwise charged upon or payable out of any land or rent at law or in equity or on any legacy but within twenty years next after a present right to receive the same shall have accrued to some person capable of giving a discharge for or release of the same unless in the meantime some part of the principal money or some interest thereon shall have been paid or some acknowledgment of the right thereto shall have been given in writing signed by the person by whom the same shall be payable or his agent to the person entitled thereto or his agent and in such case no such action or suit or proceeding shall be brought but within twenty years after such payment or acknowledgment or the last of such payments or acknowledgments if more than one was given. 42. And be it further enacted That after the said thirty-first day of December one thousand eight hundred and thirty-three no arrears of rent or of interest in respect of any sum of money charged upon or payable out of any land or rent or in respect of any legacy or any damages in respect of such arrears of rent or interest shall be recovered by any distress action or suit but within six years next after the same respectively shall have become due or next after an acknowledgment of the same in writing shall have been given to the person entitled thereto or his agent signed by the person by whom the same was payable or his agent Provided nevertheless that where any prior mortgagee or incumbrancer shall have been in possession of any land or in the receipt of the profits thereof within one year next before an action or suit shall be brought by any person entitled to a subsequent mortgage or other incumbrance on the same land the person entitled to such subsequent mortgage or incumbrance may recover in such action or suit the arrears of interest which shall have become due during the whole time that such prior mortgagee or incumbrancer was in such possession or receipt as aforesaid although such time may have exceeded the said term of six years.

In the same session, and just three weeks after the passing of this statute, the Imperial Parliament enacted the Civil Procedure Act of 1833 (3 & 4 Wm 4 c 42), of which s 3 provided: That all actions … of covenant or debt upon any bond or other specialty … that shall be sued or brought at any time after the end of the present session of parliament, shall be commenced and sued within the time and limitation hereinafter expressed, and not after; that is to say, the said actions of debt … upon any bond or other specialty … within twenty years after the cause of such actions, or suits, but not after …

Since a covenant for the payment of interest contained in an instrument of mortgage or charge is a covenant upon a specialty, it will be observed that there was a seeming conflict or inconsistency between the provisions of the two statutes with regard to the recovery of interest, the former limiting the period to six years and the latter to 20 years. This was considered by Cottenham LC in Hunter v Nockolds (1850) 1 Mac & G 640; 41 ER 1413, who observed in relation to the Real Property Limitation Act 1833 3 & 4 Wm 4 c 27: The object of the Act being to relieve land from arrears of charges beyond six years, but the enactment creating a bar to all actions and suits for money charged upon or payable out of land, the question probably arose, whether, in protecting the land, the Act had not relieved the debtor from his personal liability, which formed no part of its objects. If so, this must have been soon discovered, for by section 3 of the Act chapter 42 of the same session (passed only three weeks after the former Act), it is provided that all actions of covenant or debt upon any specialty shall be sued and brought within twenty years after the cause of such actions or suits, but not afterwards. This provision does not profess to deal with the land upon which any demand might be secured, but with the personal action only; and the former Act professed to deal with the land only; and so considered, there could be no inconsistency between their provisions, the subject matter of each being different, and no question could have arisen but from the generality of the words ‘action or suit’ in the 42nd section of the earlier Act; but whether the provision in the later Act (section 3) was framed without reference to the section 42 of the earlier Act, but intended to provide for a different subject matter, namely personal liability and not the land charged, or whether it was intended to limit the generality of the former provisions by confining them to what was the

[page 436] subject of that Act, namely the land, is not material: the provisions of the two must, if possible, be reconciled, which can only be done by considering the first Act as applicable only to the land and the latter as applicable only to the person. If, as by the order under review, the remedy against the land is to be considered as extended to twenty years in all cases in which there is also the security of a personal covenant, the two Acts would be wholly inconsistent, and the legislature must be supposed within three weeks of the first enactment to have repealed it, in by far the greater part of the cases to which it could apply. In some of the cases which have arisen under these Acts, the Courts have treated this provision of the second Act as an exception out of the enactment of the former: the conjoined enactments would in that case be, that no more than six years’ arrears of rent or interest in respect of any sum charged upon or payable out of any land or rent shall be recovered by any distress, action, or suit, other than and except in actions upon covenant or debt upon specialty, in which cases the limitations shall be twenty years. This appears to me to be the only mode of reconciling the two enactments, and to have been the intention of the legislature.

This decision having resolved — not, it seems, without some doubts — the

seeming inconsistency in relation to the recovery of interest, the problem became further complicated by the repeal of 3 & 4 Wm 4 c 27 and its reenactment, in an amended form, in the Real Property Limitation Act 1874 (UK) (37 & 38 Vict c 57), of which s 8 provided that no action, suit or other proceeding should be brought to recover any sum of money secured by any mortgage or charge upon or payable out of any land or rent, at law or in equity, or any legacy, but within 12 years next after a present right to receive the same should have accrued to some person capable of giving a discharge for or release of the same, subject to provisions as to part payment or written acknowledgment. This enactment raised an identical question in relation to the recovery of the principal under a mortgage, the period of limitation for which had now been reduced to 12 years. In Sutton v Sutton (1882) 22 Ch D 551, the Court of Appeal held that the effect of Real Property Limitation Act 1874 (UK) s 8 was that the expiry of the period of 12 years brought about the ‘presumed payment’ of the debt and extinguished any right of action on the personal covenant. The court considered Hunter v Nockolds, above, but Cotton LJ felt that, since the section before the court was contained in an Act passed in 1874, there was no necessity to follow in this case the way in which Lord Cottenham dealt with the two Acts passed almost simultaneously.

Present law 16.19 The provisions of the English Acts, and of these two decisions thereon, have been considered in some detail in the belief that this consideration will facilitate — indeed, is essential to — the comprehension of the varying provisions as to limitation of actions in respect of securities which are now in force in some of the Australian states. There is a useful discussion of these earlier provisions by Wootten J in Addison v Billion [1983] 1 NSWLR 586. As to the application of the limitation period for a negligence action with respect to the duty of a selling mortgagee, see Raja v Lloyd’s TSB Bank plc [2001] EWCA Civ 210; (2001) 82 P & CR 191.

B. New South Wales New South Wales

16.20 The problems in this state have been clarified by the enactment of the Limitation Act 1969 which was proclaimed to come into operation on 1 January 1971. By s 27 of that Act it is provided that: (1) An action on a cause of action to recover land is not maintainable by the Crown if brought after the expiration of a limitation period of thirty years running from the date on which the cause of action first accrues to the Crown or to a person through whom the Crown claims. (2) Subject to subsection (3) an action on a cause of action to recover land is not maintainable by a person other than the Crown if brought after the expiration of a limitation period of twelve

[page 437] years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom he claims. (3) Subsection (2) does not apply to an action brought by a person claiming through the Crown and brought on a cause of action which accrues to the Crown. (4) Where a cause of action to recover land accrues to the Crown, an action on that cause of action is not maintainable by a person claiming through the Crown if brought after the expiration of the first to expire of — (a) the limitation period fixed by or under this Act for an action on that cause of action by the Crown; and (b) a limitation period of twelve years running from the date on which the cause of action first accrues (on or after the date of accrual to the Crown) to a person claiming through the Crown.

A mortgagee (other than the Crown) therefore can take no action for the recovery of possession of the mortgaged land after the expiration of 12 years from the date of accrual of his cause of action, but if he is claiming through or under the Crown, this period of 12 years could be shortened. The remainder of Limitation Act 1969 Pt 2 Div 3 deals with the times when a cause of action accrues and related matters. Division 4 of Pt 2 of the Act, headed ‘Mortgages’, commences with s 40 which specifically applies the Act to an action on a cause of action founded on a mortgage registered under the Real Property Act 1900 (NSW) to recover from any person any debt, damages or other money payable under the mortgage, but provides that ‘otherwise … this Act does not affect the right title or remedies under a mortgage so registered of a registered proprietor under that Act of the mortgage or of the mortgaged land’. Since the remedies

of a mortgagee or chargee upon default in payment of the principal sum or any part thereof or of any interest, annuity, or rent-charge secured by any mortgage or charge include, by virtue of Real Property Act 1900 (NSW) s 60, a right to bring an action of ejectment for possession of the mortgaged land, Limitation Act s 40 operates so as to except from the limitations imposed by s 27 of the same Act the case of a mortgagee bringing an action of ejectment for possession of the mortgaged land pursuant to a mortgage registered under the Real Property Act. See also Addison v Billion [1983] 1 NSWLR 586, where it was held that the right of a mortgagor against a registered mortgagee of land under the Real Property Act was ‘a suit to redeem the mortgage’ for the purposes of the provisions of Real Property Limitation Act 1833 (UK) s 28(3); applying Re Forrest [1953] VLR 266 and Van Den Bosch v APA Association Ltd (1968) 88 WN (Pt 1) (NSW) 357. Section 41 imposes a limitation period of 12 years on an action on a cause of action to redeem mortgaged property in the possession of a mortgagee, the period running from the only or later of (a) the date on which that mortgagee or a person through whom he claims last went into possession of the mortgaged property, or (b) the date on which that mortgagee or a person through whom the mortgagee claims last received a payment of principal or interest secured by the mortgage from the plaintiff or from a person through whom he claims. This section of itself does not operate to deprive a mortgagor of his right against a mortgagee in possession to an account, but s 15 of the Act bars an action on a cause of action founded on a liability at law to account in respect of any matter if brought after the expiration of a limitation period of six years running from the date on which the matter arises. Thus it seems that a mortgagor will lose his right against a mortgagee in possession or after the last accounting, whichever is the later, and his right against a mortgagee in possession to redeem on the expiry of 12 years after the last entry into possession [page 438] or the last receipt by the mortgagee of a payment of principal or interest from

the mortgagor, whichever is the later; but if the mortgagee has not entered into possession, the mortgagor’s right to redeem is not affected by the Limitation Act, and an action for redemption can in that case be maintained by the mortgagor at any time. It must be borne in mind that the right to redeem is not a right conferred by the Real Property Act in the case of a mortgage of land registered under that Act, but is a right given by the principles of equity to a mortgagor of land under that Act or of any other property. Limitation Act s 42(1) fixes a like period of 12 years running from the date of first accrual of the cause of action as a bar to the maintenance of an action: (a) to recover principal money secured by mortgage; (b) to recover possession of mortgaged property from a mortgagor; or (c) to foreclose the equity of redemption of mortgaged property.

Subsection (2) of the same section applies the bar in subs (1)(a) to a cause of action: (a) to recover principal money from any person, whether as principal, surety or otherwise; or (b) to recover principal money by way of: (i)

the appointment of a receiver of mortgaged property or of the income or profits of mortgaged property;

(ii) the sale, lease or other disposition or realisation of mortgaged property; or (iii) other remedy affecting mortgaged property.

By virtue of s 40, Limitation Act s 42 will not affect the powers of sale, entry into possession by receipt of rents and profits, bringing an action of ejectment or foreclosure which are conferred on a mortgagee by Real Property Act 1900 (NSW) ss 57, 58, 60, 61 and 63 in the case of a mortgage registered under that Act. By Limitation Act s 43(1): An action on a cause of action to recover interest secured by a mortgage is not maintainable by a mortgagee under the mortgage if brought after the expiration of: (a) a limitation period of six years running from the only or later of such of the following dates as are applicable: (i)

the date on which the cause of amction first accrues to the plaintiff or to a person through whom he claims; and

(ii) where a mortgagee under a prior mortgage is, on the date mentioned in subparagraph

(i), in possession of all or any of the property comprised in the mortgage securing the interest, and after that date discontinues his possession — the date of discontinuance; or (b) the limitation period fixed by or under this Act for an action between the same parties on a cause of action to recover the principal money bearing the interest, whichever limitation period first expires.

Section 43(2) contains a like extension to a cause of action to recover interest secured by mortgage as is contained in s 42(2) in respect of an action to recover principal money so secured, and this extension is also, by virtue of s 40, subject to the same qualifications as is mentioned above in the case of a mortgage registered under the Real Property Act. Limitation Act s 44 deals with adjustment of interest in an action for redemption or otherwise in respect of a mortgage of property including an action in respect of the proceeds of sale or other realisation of property subject to a mortgage, and s 45 prohibits a mortgagee from exercising a power of sale, lease or other disposition of the mortgaged property, the appointment of a receiver or any power otherwise affecting the mortgaged property, after the date on which an action on a cause of action to recover principal money secured by the mortgage within the meaning of s 42 by him against any person is barred by the Act. This section, like ss 42(2) and 43(2), could not affect the exercise by a [page 439] mortgagee under a mortgage registered under the Real Property Act of powers conferred by that Act. The final section in Div 4 of Pt 2 of the Limitation Act is s 46, which provides that Div 4 does not apply to a mortgage registered under the Merchant Shipping Act 1894 (UK). Limitation Act Pt 3 deals with postponements of the bar, s 51 fixing an ultimate bar of 30 years running from the date from which any limitation period for that cause of action fixed by or under Pt 2 runs. Subject to that ultimate bar, suspensions of the limitation periods on account of disability, confirmation, fraud and mistake are dealt with in ss 52–56 inclusive of the Act.

Reference should also be made to Limitation Act Pt 4 Div 1 (ss 63–68A) dealing with ‘Extinction of Right and Title’, bearing in mind that these sections also, by reason of s 40, do not affect the right, title or remedies under a mortgage registered under the Real Property Act of a registered proprietor under that Act of the mortgage or of the mortgaged land. Any ‘acknowledgement’ of the existence of a mortgage must in order to comply with Limitation Act s 54(2)(a)(i) be made to ‘a person … having the cause of action’: see General Credits Ltd v Wenham (1989) 18 NSWLR 570 (CA); and see 16.33–16.35.

C. Victoria Victoria 16.21 In Victoria, the statute presently in force is the Limitation of Actions Act 1958, of which s 8 prohibits the bringing by any person of any action to recover any land after the expiration of 15 years from the date on which the right of action accrued to that person or, if it first accrued to some person through whom he claims, to that person: provided that if the right of action first accrued to the Crown the action may be brought at any time before the expiration of 15 years from the date on which the right of action accrued to some person other than the Crown. Under that Act a right of action shall be deemed to have accrued: (a) where the person bringing the action or some person through whom that person claims has been in possession and has while entitled to possession been dispossessed or discontinued his possession, on the date of dispossession or discontinuance; (b) where any person brings an action to recover land of a deceased person whether under a will or an intestacy, and the deceased person was on the date of his death in possession of the land and was the last person entitled to the land to be in possession on the date of his death; (c) where any person brings an action to recover land, being an estate or interest in possession assured otherwise than by will to that person or to some person through whom he claims by a person who at the date when the assurance took effect was in possession, and no person has been in

possession by virtue of the assurance, on the date when the assurance took effect (s 9); (d) in a case where the estate or interest claimed was an estate or interest in reversion or remainder or any other future estate or interest and no person has taken possession by virtue of the estate or interest claimed, on the date on which the estate or interest became an estate or interest in possession (s 10). An action for foreclosure of a mortgage of land is an action to recover land within the meaning of these provisions and is governed by the principles of such provisions: Heath v Pugh (1881) 6 QBD 345 at 364; Limitation of Actions Act s 20(4). It is otherwise in relation to foreclosure of a mortgage of personalty: see below. At the time limited therefore [page 440] for the enforcement of actions to recover land (including an action for foreclosure) the right and interest in the land of the person possessing legal title (including in this context a mortgagee) is extinguished: Limitation of Actions Act s 18. When a mortgagee has been in possession of any of the mortgaged land for 15 years, no action to redeem or compel discharge of the mortgage of the land of which the mortgagee has been in possession shall thereafter be brought by the mortgagor or any person claiming through the mortgagor: Limitation of Actions Act s 15. Although an action for redemption of a mortgage over land is not an action to recover land, the like provisions as to extinction of title (in this case the title of the mortgagor) are applicable and the mortgagor’s title to the land is at the expiration of the period then extinguished: Limitation of Actions Act s 18. Note that the Act applies to applications for foreclosure under the Transfer of Land Act 1958 (Vic) in like manner as it applies to foreclosure actions: s 29. In Re Forrest [1953] VLR 266, it was held by Herring CJ, Gavan Duffy and Dean JJ, unanimously, that the form of procedure open to a mortgagor under the Transfer of Land Act 1958 could be described as a ‘suit to redeem the mortgage’: applied by Wootten J in Addison v Billion [1983] 1 NSWLR 586; and see 16.20.

Special provisions are included with respect to actions to recover money secured by a mortgage or charge. No action is to be brought to recover any principal sum secured by a mortgage or charge on property, whether real or personal, after the expiration of 15 years from the date when the right to receive it accrued, nor shall any foreclosure action in respect of mortgaged personal property be brought more than 15 years after the right to foreclosure accrued: Limitation of Actions Act s 20. Actions for the recovery of interest are limited to six years after they become due (Limitation of Actions Act s 5(7)), and this limitation applies also to interest recoverable on the exercise of powers against or in respect of the land itself: Limitation of Actions Act s 3(7). If on the date when a right of action accrued the person to whom it accrued was under a disability, the action may be brought at any time before the expiration of six years after the disability ceased, or the person died, notwithstanding that the period of limitation has expired: Limitation of Actions Act s 23(1). The several exceptions to this general provision are contained in provisos to the subsection and should be noted. ‘Disability’ includes minority and unsoundness of mind: Limitation of Actions Act s 3(2), (3). The running of time is postponed during war or circumstances arising out of war which make it not reasonably practicable for a person to commence any action: Limitation of Actions Act s 23(2). Acknowledgments in writing signed by the person making the acknowledgment or that person’s agent and part payment affect the time at which the right of action is deemed to have accrued: Limitation of Actions Act ss 24–26. The limitation periods will also be postponed in certain cases of fraud or mistake: Limitation of Actions Act s 27.

D. Queensland Queensland 16.22 The principal statute now governing the limitation of actions in Queensland is the Limitations of Actions Act 1974. No action is to be brought by any person to recover any land after the expiration of 12 years from the date on which the right of action accrued to that person, or, if it first accrued to some person through whom he claims, to that person: Limitation

of Actions Act 1974 s 13; see Cameron v Blau [1963] Qd R 421. The like provisions (save as regards the length of the period of limitation applicable) as in the case of Victoria apply to actions for foreclosure of mortgages over land and to the extinction of title after the period has elapsed: Limitation of Actions Act ss 24, 26(4). [page 441] Again, in relation to a mortgagor’s action for redemption it is provided that when a mortgagee of land has been in possession of any of the mortgaged land for a period of 12 years, no action to redeem the land of which the mortgagee has been so in possession shall thereafter be brought by the mortgagor or any person claiming through the mortgagor: Limitation of Actions Act s 20. It is also provided that actions for the recovery of the principal secured by a mortgage of property real or personal, or of the proceeds of the sale of land and foreclosure actions in respect of mortgaged personal property, are statutebarred after the expiration of 12 years from the date when the right to receive the money, or to foreclose, accrued: Limitation of Actions Act s 26(1), (2). No action to recover arrears of interest payable under a mortgage is to be brought after the expiration of six years from the date on which the interest became due, provided that where a prior mortgagee has been in possession of the property charged an action may be brought within one year of the discontinuance of such possession by the subsequent mortgagee who may recover all the arrears of interest that fell due during the period of possession by the prior mortgagee, and provided also that interest shall be deemed not to have become due before the right to receive the principal sum has accrued or is deemed to have accrued in mortgages of future interests or life policies in which there is a term that arrears of interest be treated as part of the principal sum. These provisions in s 26 do not apply to any mortgage or charge on a ship: Limitation of Actions Act s 26(6). The Act contains detailed provisions, to which reference should be made, regarding the accrual of rights of action to recover land in the case of present and future interests in land, settled land and land held in trust, forfeiture or

breach of condition and tenanted land: Limitation of Actions Act ss 14–19. There are also provisions for the extension of the limitation period in case of disability and for the fresh accrual of a right of action on acknowledgment or part payment; acknowledgments are required to be in writing signed by the person making the acknowledgment or his agent to the person (or his agent) whose title or claim is being acknowledged; or in respect of whose claim the payment is being made: Limitation of Actions Act ss 29, 35–37. Fraud or mistake will also operate to postpone the limitation period: Limitation of Actions Act s 38.

E. South Australia South Australia 16.23 The equivalent South Australian provisions are contained in the Limitation of Actions Act 1936. Here actions for the recovery of land are limited to the period of 15 years after the accrual of the cause of action: Limitation of Actions Act s 4. The Act prescribes, in various cases such as where the claimant has been in possession and discontinued possession, where the person in possession has died, where the land has been alienated and in a number of other cases, the time at which the cause of action is deemed to have accrued: Limitation of Actions Act ss 5–17. Redemption actions are barred when a mortgagee has been in possession or receipt of profits or rent for 15 years: Limitation of Actions Act s 27. The provisions of this section and of s 28 do not apply to land under the provisions of the Real Property Act 1886 (SA): Re Kay [1969] SASR 1. No action or other proceeding is to be brought to recover any money secured by any mortgage but within 15 years next after a present right to receive it has accrued to some [page 442]

person capable of giving a discharge for or release of the money, unless there has been part payment or a written acknowledgment: Limitation of Actions Act s 33. Actions on specialty are to be commenced and sued within 15 years after the accrual of the cause of action or the giving of a written acknowledgment or the making of a part payment: Limitation of Actions Act s 34. Actions on simple contract are limited to six years from the accrual of the cause of action, as are actions to recover arrears of interest in respect of any money charged upon any land: Limitation of Actions Act s 35. Section 35 operates ‘save as otherwise provided in this Act’, and it seems that these words, having regard to the provisions of s 34, operate to enlarge the period of limitation of the right to sue for arrears of interest under the personal covenant in a mortgage effected by deed to 15 years, this being an ‘action on specialty’; while in an action against the land, only six years’ interest could be recovered: cf the reasoning in Hunter v Nockolds (1850) 1 Mac & G 640; 41 ER 1413; see 16.18. The provisions of the Act as to persons under disability are to be found in s 45, and s 39 provides that, if any person against whom there is any such cause of action as is referred to in ss 35, 36 or 37 was at the time when the cause of action accrued, absent from the state, the party entitled to the action may commence it within the time limited by the Act after the return of that person from beyond the seas as if that had been the time at which the cause of action accrued.

F. Western Australia Western Australia 16.24 On 15 November 2005 the Limitation Act 2005 of Western Australia commenced operation. The Limitation Act 1935 is repealed, but continues to apply to causes of action that accrued before 15 November 2005. The Limitation Act 1935 of Western Australia derives in the main from the English Real Property Limitation Act of 1833 (3 & 4 Wm 4 c 27) and the later English Real Property Limitation Act of 1874 (37 & 38 Vict c 57). By s 4, no person is to make an entry or distress or bring an action to recover any land or rent but within 12 years next after the right of action first accrued to

that person or to some person through whom he claims. By s 5, the right of action is deemed to have first accrued: (a) when the claimant or some person through whom he claims has been in possession or in receipt of profits or rent, and while entitled has been dispossessed or has discontinued possession, at the time of dispossession or discontinuance of possession or at the last time at which any such profits or rent were received; (b) when the claimant claims the estate or interest of some deceased person who has continued in such possession or receipt in respect of the same estate or interest until the time of his death and has been the last person entitled who has been in such possession or receipt, at the time of such death; (c) when the claimant claims in respect of an estate or interest in possession granted, appointed or otherwise assured by any instrument (other than a will) to him or some person through whom he claims by a person being, in respect of the same estate or interest, in the possession or receipt of the profits or rent, and no person entitled under such instrument has been in such possession or receipt at the time the claimant or person through whom he claims became entitled to such possession or receipt by virtue of such instrument; (d) when the estate or interest claimed has been an estate or interest in reversion or remainder or other future estate or interest, and no person has obtained possession of the land or receipt of the profits or rent, at the time the estate or interest became an estate or interest in possession; [page 443] (e) when the claimant or person through whom he claims has become entitled by reason of any forfeiture or breach of condition, when such forfeiture was incurred or such condition was broken. Section 15 provides for an acknowledgment in writing to be equivalent to

possession or receipt of rent, and s 16 for a period of six years to be allowed from the termination of a disability such as infancy, coverture, idiocy, lunacy or unsoundness of mind, notwithstanding the prior expiry of the limitation period otherwise provided, but s 18 limits the utmost allowance for disabilities to 30 years, and s 19 prohibits the allowance of any further time for a succession of disabilities. A mortgagor is barred from a redemption suit at the expiry of 12 years after his mortgagee obtained possession or receipt of the profits or rent, unless in the meantime an acknowledgment in writing of the mortgagor’s title or of the mortgagor’s right to redemption has been given to the mortgagor or some person claiming through him or to the agent of the mortgagor or such person, in which case the period for bringing action is limited to 12 years from the date of acknowledgment or the last of such acknowledgments, if more than one: Limitation Act 1935 s 29. At the determination of a period limited by the Act for making an entry or distress or bringing an action or suit the right and title to the land of the person who might have made such entry or distress or brought such action within that period is extinguished: Limitation Act 1935 s 30. A period of 12 years after the accrual of a present right to receive is also limited for the bringing of an action to recover money secured by a mortgage judgment or lien or otherwise charged on or payable out of any land or rent, in the absence of a payment on account or acknowledgment in writing (Limitation Act 1935 s 32) and, with similar qualification, no arrears of rent or interest may be recovered for more than six years; but if a prior mortgagee has been in possession, a subsequent mortgagee may recover interest for the period of the prior mortgagee’s possession, notwithstanding that it may exceed six years: Limitation Act 1935 s 34. The period within which a mortgagee may make entry or bring action to recover the mortgaged land is made 12 years after the last payment of any principal or interest money secured by the mortgage, notwithstanding that the right to make such entry or bring such action first accrued more than 12 years before the entry or bringing of the action: Limitation Act 1935 s 35. Actions for the recovery of specialty debts may be brought within 20 years after the cause and of simple contract debts within six years after the cause: Limitation Act 1935 s 38. Interest payable under a covenant is nevertheless

limited to the period provided by s 34. The termination of infancy or insanity is deemed, for the purposes of these provisions, to be the time at which the cause of action arose: Limitation Act 1935 s 40, but see also Age of Majority Act 1972 (WA). See also s 41 as to absence beyond the seas, and s 44 as to the effect of acknowledgments or part payments. The Limitation Act 2005 commenced operation on 15 November 2005. Subject to exceptions, s 13 of the Act applies a general limitation period of six years for commencing an action after it has accrued. Division 3 of Pt 2 sets out a number of exceptions to the general limit of six years, many of which relate to mortgages. An action on a cause of action founded on a deed cannot be commenced if 12 years have elapsed since the cause of action accrued: Limitation Act 2005 s 18. An action to recover land cannot be commenced if 12 years have elapsed since accrual, though the Crown can commence such an action at any time: Limitation Act 2005 s 19. Similarly, an action to recover from a mortgagor possession of [page 444] real property secured by a mortgage cannot be commenced if 12 years have elapsed since the cause of action accrued: Limitation Act 2005 s 23. An action to foreclose the equity of redemption is also subject to a 12-year limitation period: Limitation Act 2005 s 24. Section 25 provides that an action to redeem mortgaged property in the possession of a mortgagee cannot be commenced if 12 years have elapsed since the occurrence of the only or later of: (a) the most recent possession by the mortgagee of the property in respect of which the action is brought; (b) the receipt by the mortgagee of the most recent payment of principal money or interest secured by the mortgage from the person wishing to redeem the property.

Actions to recover principal moneys secured by a mortgage of real property are also subject to a 12-year limitation period: Limitation Act 2005 s 20. Section 22 provides that an action to recover interest secured by a

mortgage of real property cannot be commenced: (a) after the occurrence of the only or later of such of the following events as are applicable (i)

the elapse of 6 years since the cause of action accrued;

(ii) in the case where a mortgagee under a prior mortgage is in possession of all or any of the property comprised in the mortgage securing the interest when the cause of action accrued, and after that time discontinues possession, the elapse of one year since the discontinuance; or (b) if the limitation period provided for under section 20 for an action between the same parties on a cause of action to recover the principal money bearing the interest has expired.

Extension or shortening of limitation periods is provided for in Pt 3 of the Act. Generally, a minor or a person suffering a mental disability will not receive an extended limitation period unless the person is without a guardian during the relevant period: see Limitation Act 2005 Divs 1 and 2 of Pt 3. Division 3 and 4 of Pt 3 provide for the extension of a limitation period in various cases including where there has been fraud or improper conduct, when there has been agreement, or when there has been confirmation. The Act prescribes, in various cases such as where the claimant has been in possession and discontinued possession, where the person in possession has died, when there is a future interest in land and in a number of other cases, the time at which the cause of action is deemed to have accrued: Limitation Act 2005 ss 65–73. The Limitation Act does not affect the operation of a limitation provision in another written law: Limitation Act 2005 s 9.

G. Tasmania Tasmania 16.25 The Tasmanian provisions are now contained in the Limitation Act 1974, of which s 10(2), following the New South Wales Act, prohibits the bringing by any person of any action to recover any land after the expiration of 12 years from the date on which the right of action accrued to that person or, if it accrued to some person through whom he claims, to that person: provided that if the right of action first accrued to the Crown the action may be brought at any time before the expiration of the period during which the action could have been brought by the Crown, or of 12 years from the date on

which the right of action accrued to some person other than the Crown, whichever period first expires: Limitation Act 1974 s 10(3). In the subsection dealing with the Crown, and corresponding to s 10(2), no action shall be brought after the expiration of 30 years from the date of accrual of the right of action: Limitation Act s 10(1). Sections 11 and 12 declare when rights of action in the [page 445] cases of present and future interests in land shall be deemed to have accrued and follow broadly the Victorian scheme: see 16.21. When a mortgagee of land has been in possession of any mortgaged land for a period of 12 years, no action to redeem that land shall thereafter be brought by the mortgagor or any person claiming through the mortgagor: Limitation Act s 18. At the expiration of the prescribed period for any person to bring an action to recover land (including a redemption action or an action to compel discharge of a mortgage) the title of that person to the land shall be extinguished: Limitation Act s 21. The provisions of the Act apply to equitable interests in land in like manner as to legal estates but subject to the special rules as to commencement of the limitation period contained in the section: Limitation Act s 13. By s 23(1) of the Act no action may be brought to recover any principal sum secured by a mortgage on real or personal property, or to recover proceeds of the sale of land, after the expiration of 12 years from the date when the right to receive the money accrued, notwithstanding that the money is by any Act or instrument expressed to be a charge until paid. No foreclosure action shall be brought in respect of mortgaged personal property after the expiration of 12 years from the date on which the right to foreclosure accrued (Limitation Act s 23(2)), but if the mortgagee was then in possession of the mortgaged property, the right to foreclosure shall not be deemed to accrue for the purposes of the subsection until the date on which his possession is discontinued: Limitation Act s 23(3). The Act applies to applications for foreclosure under the Land Titles Act 1980 (Tas) in like manner as it applies to foreclosure actions: Limitation Act s 34.

An action shall not be brought after the expiration of six years after the moneys become due to recover any arrears of interest in respect of any sum of money whether payable in respect of a specialty, judgment, legacy or otherwise, or any damages in respect of any such arrears (Limitation Act s 4(5)), nor may an action for an account be taken in respect of any matter that arose more than six years before the commencement of the action: Limitation Act s 4(2). The disability provisions (ss 26 and 27) are similar to those in the Victorian Act discussed above, while Divs 2 and 3 of Pt III deal with fresh accrual of action on acknowledgment or part payment, the formal provisions of acknowledgment and its effect, and the postponement of the limitation period in case of fraud or mistake.

H. The Territories The territories 16.26 The Limitation Act 1985 of the Australian Capital Territory s 24(1) (b) and (c) and the Limitation Act 1981 of the Northern Territory s 27(1)(b) and (c) produce a similar result to the NSW Act.

I. Common Law Position Generally 16.27 The statutory provisions in all states and territories having been considered, attention is now directed to the common law position in relation to a number of matters of significance. However, this is not common law in vacuo but in the context of particular Limitation of Actions legislation (much of it English) at various stages of development (as to which see the discussion of legislative development, above). Decisions from other jurisdictions are generally useful but given the complexity and, often, divergence in the drafting and content of provisions, care should be taken in considering the cases in the context of current, local, legislative provisions. [page 446]

Period of limitation 16.28 The remedies on the contract and against the land have their separate periods (London and Midland Bank Ltd v Mitchell [1899] 2 Ch 161) which have previously been considered. Money is charged upon land when the land can only be enjoyed subject to its payment, even though there is no direct remedy against the land itself: Payne v Esdaile (1888) 13 App Cas 613. The charge may be one imposed by statute: Hornsey Local Board v Monarch Investment Building Society (1889) 24 QBD 1 (CA); Poole Corporation v Moody [1945] 1 KB 350; [1945] 1 All ER 536 (CA). For an example of money charged on property other than land, see Re Compania de Electricidad de la Provincia de Buenos Aires Ltd [1980] Ch 146; [1978] 3 All ER 668. There must be land on which the charge can take effect. The action on the covenant has been held to be an action to recover money charged on land (Sutton v Sutton (1882) 22 Ch D 511 (CA)), even when the covenant is contained in a separate deed: Re Powers (1885) 30 Ch D 291 at 297 (CA).

Date from which time runs 16.29 Time begins to run from the date when the right to receive the money accrued: Cotterell v Price [1960] 1 WLR 1097; West Bromwich Building Society v Wilkinson [2005] 1 WLR 2303 (HL). The right to receive probably means the same as the expression ‘a present right to receive’ used in Real Property Limitation Act 1874 (UK) s 8. A present right to receive is an immediate right without waiting for the happening of any future event: Farran v Beresford (1842) 10 Cl & Fin 319 at 334; 8 ER 764 at 769. Time runs where there is a present right, notwithstanding that there may be no means of immediately enforcing it: Hornsey Local Board v Monarch Building Society (1889) 2 QBD 1; Dennerley v Prestwich UDC [1930] 1 KB 334 (CA). The requirement that notice shall be given before suing does not postpone the running of time: Hervey v Wynn (1905) 22 TLR 93. Note that time runs from the time when the lender could first sue: Barclays Bank plc v Walters

(1988) Times, 20 October (CA). It is a question of construction whether any prior demand is necessary to found the cause of action for repayment: Ogilvie v Adams [1981] VR 1041.

Arrears of interest 16.30 The recoverability of arrears of interest will be more or less affected by the Limitation Act depending on the situation in which the mortgagee finds himself. If the mortgagee has sold the mortgaged property under the power of sale and has the proceeds in his hands, the mortgagee can get the whole of the arrears: Edmunds v Waugh (1866) LR 1 Eq 418; Banner v Berridge (1881) 18 Ch D 254; Holmes v Cowcher [1970] 1 All ER 1224; [1970] 1 WLR 834. Likewise if the mortgagor seeks to redeem: Dingle v Coppen [1899] 1 Ch 726; Holmes v Cowcher. The reason for this is that there is a vital difference between what a mortgagee could obtain in an action at law for debt against the mortgagor and what is required to be paid to ‘do equity’ when a mortgagor is seeking to redeem: see, for example, Ex parte Fewings; Re Sneyd (1883) 25 Ch D 338 at 348 and 352. Where the mortgagee is entitled to the rents of the mortgaged property — for example if he is tenant for life of the equity of redemption — time does not run against the mortgage title: see 39.14. Where there is no covenant for payment of interest after the due date, in a redemption or foreclosure suit, interest is allowed for the whole period until the hearing: Mellersch v Brown (1890) 45 Ch D 225. [page 447] Otherwise, the Limitation Act generally prevents the collection of arrears owing for more than the prescribed period if the statute is pleaded. In particular it should be noted that a receiver appointed by the mortgagee under the statutory power is the agent of the mortgagor: see Chapter 18. Hence, in applying rents and profits received by him in payment of the interest accruing due, he cannot pay interest which is statute-barred; nor, if he

pays the rents and profits to the mortgagee, can the mortgagee appropriate thereto arrears of interest which are barred. In such circumstances the doctrine of retaining full arrears does not apply: Hibernian Bank v Yourell (No 2) [1919] 1 IR 310. See generally 39.42ff.

Foreclosure 16.31 Time commences to run upon default in payment at the date fixed for redemption (Samuel Johnson & Sons Ltd v Brock [1907] 2 Ch 533 at 536; Purnell v Roche [1927] 2 Ch 142), or, where the principal is payable on demand and, on a proper construction of the terms of the mortgage, the sum is not recoverable until it has been demanded, from the demand; at least where the security is collateral: Lloyds Bank Ltd v Margolis [1954] 1 All ER 734 at 737–8; [1954] 1 WLR 446 at 648–9; and see Re Brown’s Estate; Brown v Brown [1893]. 2 Ch 300; Wakefield and Barnsley Union Bank Ltd v Yates [1916] 1 Ch 452 (CA); Habib Bank Ltd v Tailor (1982) 44 P & CR 365; and 17.6. However, the question is always one of construction of the instrument in question: see Ogilvie v Adans [1981] VR 1041, where the authorities are discussed and distinguished. It has been held at first instance that where the remedy is foreclosure time does not run until the interest falls into possession: Hugill v Wilkinson (1888) 36 Ch D 480. A foreclosure action, being an action to recover land, had the benefit, where the mortgaged property was a future interest in land, of Real Property Limitation Act 1874 (UK) s 2, which postponed the running of time until the interest fell into possession. On the other hand, it was subsequently held by the Court of Appeal that where the mortgagee has a right of foreclosure his estate is not turned into a future estate with the consequent postponement of the time for bringing foreclosure: Wakefield and Barnsley Union Bank Ltd v Yates, above, where Hugill v Wilkinson was referred to without disapproval; and see Re Witham [1922] 2 Ch 413. A payment of interest made after the statutory period has expired does not revive the mortgagee’s right: Sanders v Sanders (1881) 19 Ch D 373 (CA); Nicholson v England [1926] 2 KB 93 (DC).

Where there are two successive mortgages, and no payment is made by the second mortgagee, time runs against that mortgagee (Kibble v Fairthorne [1895] 1 Ch 219); and this is so even though the first mortgagee is in possession: Johnson (Samuel) & Sons Ltd v Brock [1907] 2 Ch 533. In Re Bermingham’s Estate (1870) IR 5 Eq 147, it was considered that on the first mortgagee taking possession, the second mortgagee ceased to have a right of entry, and his interest became for the purpose of Limitation Acts a future interest, but he can enter if he pays off the first mortgagee, and in any case he has an immediate right of foreclosure. Where a stranger is in possession of the land, so that time is running in his favour as against both mortgagor and mortgagee, payment of interest by the mortgagor keeps alive the right of the mortgagee: Doe d Palmer v Eyre (1851) 17 QB 366; Ludbrook v Ludbrook [1901] 2 KB 96 (CA). This is so where the mortgage was created before the adverse possession began (Kibble v Fairthorne, above), but if at the date of the mortgage time was already running against the mortgagor, payment of interest does not operate to give [page 448] the mortgagee a new right of entry and so stop time running: Thornton v France [1897] 2 QB 143 (CA).

Possession 16.32 The right of a mortgagee to enter upon the mortgaged land or to bring an action for possession will be barred at the expiration of the limitation period after the right of action accrued to the mortgagee or, if it first accrued to some person through whom he claims, to that person: see Wright v Pepin [1954] 2 All ER 52; [1954] 1 WLR 635; Cotterell v Price [1960] 3 All ER 315; [1960] 1 WLR 1097. This is, of course, only where there had been no acknowledgment, part payment, etc; as to which, see 16.33–16.34. Since a legal mortgagee of general law land has a right of entry on the execution of the mortgage, time prima facie begins to run from the execution of the mortgage, but if the mortgagee’s right to possession is qualified, time begins to run from default in payment on the date fixed for payment. This

will be so where there is a provision that the mortgage shall not be called in until the expiration of a given term and that, until default in payment, it shall be lawful for the mortgagor peaceably to enjoy and receive the rents. This amounts to a re-demise by the mortgagee to the mortgagor during the term fixed: Wilkinson v Hall (1837) 3 Bing NC 508; 132 ER 506; see 12.10. An equitable mortgagee has no right to possession without an order of the court, unless the mortgage expressly gives the mortgagee such a right: see 19.14. An order absolute for foreclosure vests in the mortgagee a new right to the land and accordingly the mortgagee’s right to possession, he having obtained such an order, accrues on the date of the order: Heath v Pugh (1881) 6 QBD 345 (CA); on appeal (1882) 7 App Cas 235 (HL) (and in relation to the procedure for foreclosure of both general law and Torrens mortgages, see Chapter 22).

Part payment and acknowledgment 16.33 Payment of rent by a tenant of the mortgaged property in pursuance of a notice by the mortgagee will not preserve the debt: Harlock v Ashberry (1882) 19 Ch D 539. A mere voluntary payment by a third person will not suffice (Chinnery v Evans (1864) 11 HL Cas 115; Harlock v Ashberry, above; Newbould v Smith (1889) 14 App Cas 423), even where it is paid by the third party to conceal his own fraud: Thorne v Heard [1895] AC 495 (HL). Payment by a person interested to pay will suffice: Roddam v Morley (1857) 1 De G & J 1; 44 ER 622. A payment by a person entitled to pay, such as a surety, is effective (Lewin v Wilson (1880) 11 App Cas 639); so is payment by a person, for example, a trustee (Alston v Mineard (1906) 51 Sol Jo 132), bound to pay as between himself and the mortgagor: Bradshaw v Widdrington [1902] 2 Ch 430. Payment by a devisee for life of interest on the testator’s specialty debt will keep alive the right of action against the remainderman (Roddam v Morley, above; Barclay v Owen (1889) 60 LT 220), and payment of interest in respect of a simple contract debt of the testator by a tenant for life keeps the debt alive against the remainderman: Re Hollingshead (1888) 37 Ch D 651; Re Chant [1905] 2 Ch 225. Payment may be made by an agent (for example, a solicitor with authority

to make an acknowledgment: Wright v Pepin [1954] 2 All ER 52; [1954] 1 WLR 635), but where agency is set up, it must be shown that the agency was continuing at the time of payment: Newbould v Smith (1889) 14 App Cas 423. A tenant is not the implied agent of the mortgagor to make acknowledgments or payments to the mortgagee (Harlock v Ashberry (1882) 19 Ch D 539), but a payment by a tenant to the mortgagee on the mortgagor’s express instructions will make him an agent. A receiver appointed by the court (Chinnery v Evans (1864) 11 HL Cas 115), or by the mortgagee under the power conferred on the mortgagee by the mortgage (Re Hale [1899] 2 Ch 107 (CA)) or by [page 449] statute (see Chapter 18), is treated as the agent of the person liable to pay, and payment by him is effectual. On the other hand, the realisation, after the expiration of the relevant limitation period, of a policy of assurance which forms a collateral security is not a part payment of principal or interest so as to revive a title to land which the Act has previously extinguished: Re Clifden (Lord);Annaly v Agar-Ellis [1900] 1 Ch 774. Nor is there an effective payment when a beneficiary mortgages his interest in a trust fund and the trustees make a payment to the mortgagee: Re Edward’s Will Trusts [1937] Ch 553; [1937] 3 All ER 58. Where a mortgagor has assigned the equity of redemption and the assignee has paid interest on the mortgage, he has been held to be the agent of the mortgagor with like result: Forsyth v Bristowe (1853) 8 Ex 716; 155 ER 1540; Dibb v Walker [1893] 2 Ch 429. On the other hand, although the mortgagor has parted with the equity of redemption, payment by the mortgagor will still be effectual to keep alive the mortgage against the land: Chinnery v Evans, above; Bradshaw v Widdrington [1902] 2 Ch 430. The contrary seems to have been assumed by the Court of Appeal in Newbould v Smith (1886) 33 Ch D 127. The House of Lords reserved their opinion on this point: (1889) 14 App Cas 423.

Acknowledgment

16.34 There must be an admission made to the person entitled to make the demand or his agent, with a view, on the part of the person acknowledging, of making himself liable to the demand (Wright v Pepin [1954] 2 All ER 52; [1954] 1 WLR 635; see Good v Parry [1963] 2 QB 418; [1963] 2 All ER 59 (CA); Dungate v Dungate [1965] 3 All ER 393; [1965] 1 WLR 1447 (CA); Kamouh v Associated Electrical Industries International Ltd [1980] QB 199; General Credits Ltd v Wenham (1989) 18 NSWLR 570 (CA)), or an admission, whether express or implied (see Edginton v Clark [1964] 1 QB 367; [1963] 3 All ER 468 (CA)), of the title of the person to whom it is made or of the person whose agent the latter is: see Re Gee & Co (Woolwich) Ltd [1975] Ch 52; [1974] 1 All ER 1149 (balance sheet); Re Compania de Electricidad de la Provincia de Buenos Aires Ltd [1980] Ch 146; [1978] 3 All ER 668; Re Overmark Smith Warden [1982] 3 All ER 513; [1982] 1 WLR 1195; and Stage Club Ltd v Millers Hotels Pty Ltd (1981) 150 CLR 535. The acknowledgment of the right of the mortgagor to redeem the mortgage serves to acknowledge the existence of the mortgage, as the right to redeem is inherent in the concept of a mortgage: General Credits Ltd v Wenham, above. In Bradford & Bingley plc v Rashid [2006] 1 WLR 2066 (HL), Lord Hope of Craighead said (at 2073–4): In Surrendra Overseas Ltd v Government of Sri Lanka [1977] 1 WLR 565, 575E-F Kerr J said that the debtor can only be held to have acknowledged the claim if he has in effect admitted his legal liability to pay that which the plaintiff seeks to recover. Diplock LJ said in Dungate v Dungate [1965] 1 WLR 1477, 1487E-F, his acknowledgement will be sufficient if the amount for which he accepts legal liability can be ascertained by extrinsic evidence.

The acknowledgment may also be made by the agent of the person by whom it is required to be made: see Re Lloyd [1911] 1 IR 153 and Bradford & Bingley plc v Rashid [2006] 1 WLR 2066 (HL). The acknowledgment will also be sufficient if made by a trustee of the estate, whether he is devisee in trust for the debtor (Lord St John v Boughton (1838) 9 Sim 219; 59 ER 342), or a trustee appointed by the court: Toft v Stephenson (1851) 1 De GM & G 28; 42 ER 461. Where an acknowledgment is made by a person who fills a double character, as that of executor and beneficial devisee of the debtor, it is a general acknowledgment, and will not be applied to one character more than to the other, and the interest of the person making it as beneficial devisee will be affected (Fordham v Wallis (1853) 10 Hare 217; 68 ER 905); but if he is executor of one debtor, and is also a debtor individually, in respect of the

same debt, an act done by him which he was bound to do in his individual character, and which amounts to an acknowledgment, [page 450] will not prima facie be considered to have been done as executor: Thompson v Waithman (1856) 3 Drew 628; 61 ER 1043. He fills the place of two persons, and the first question is, by whom the promise was made, and not what is the extent or effect of it. A payment by one of two mortgagors who covenant jointly and severally to pay the mortgage debt prevents time running in favour of the other mortgagor: Baillie v Irwin [1897] 2 IR 614; and see Re Kingston’s (Earl) Estate [1869] 3 IR 485. A surety is a person liable in respect of the debt which he has guaranteed and a payment of interest by the principal debtor makes the cause of action accrue afresh against the surety: Re Powers; Lindsell v Phillips (1885) 30 Ch D 291 (CA); Re Frisby; Allison v Frisby (1889) 43 Ch D 106 (CA). Payment of interest by the surety makes the cause of action accrue afresh against the principal debtor: Re Seager’s Estate; Seager v Aston (1857) 26 LJ Ch 809.

Effect of expiry of limitation period 16.35 At the expiration of the period prescribed by the Act for any person to bring an action to recover land, the title of that person to the land is extinguished: see Lewis v Plunket [1937] Ch 306; [1937] 1 All ER 530. The mortgagor is then entitled to recover the mortgage and other title deeds. A second mortgagee whose rights against the mortgagor are barred cannot claim to redeem a prior encumbrancer: Cotterell v Price [1960] 3 All ER 315; [1960] 1 WLR 1099. Accordingly, a payment or acknowledgment made after the expiration of the period of limitation does not revive the right of the mortgagee of land against the security (Sanders v Sanders (1881) 19 Ch D 373 (CA); Kibble v Fairthorne [1895] 1 Ch 219; Nicholson v England [1926] 2 KB 93 (DC)), but there is no corresponding provision in the English legislation extinguishing the title of the mortgagee of personalty.

A payment made in respect of any debt or other liquidated pecuniary claim binds all persons liable in respect thereof (for example, sureties: see Re Powers; Lindsell v Phillips (1885) 30 Ch D 291 (CA)). Acknowledgments and part payments made after the period of limitation has expired are effective where, although the remedy is barred (see Re Frisby;Allison v Frisby (1889) 43 Ch D 106 (CA)), the debt is not extinguished. Thus the remedy on the personal covenant may be revived by a subsequent acknowledgment or payment: Re Clifden (Lord) [1900] 1 Ch 774.

Fraud and mistake 16.36 Where, in the case of any action for which a period of limitation is prescribed by the Limitation Acts, the English position is that: (a) the action is based upon the fraud of the defendant (including unconscionable conduct) (Beaman v ARTS Ltd [1949] 1 KB 550 at 558; [1949] 1 All ER 465 at 467 (CA); Clark v Woor [1965] 2 All ER 353 at 355–6; [1965] 1 WLR 650 at 653–5); (b) any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant (Eddis v Chichester Constable [1969] 2 Ch 345; [1969] 2 All ER 912 (CA); Bartlett v Barclays Bank Trust Co Ltd (No 1) [1980] Ch 515; [1979] 1 All ER 139); or (c) the action is for relief from the consequences of a mistake (Re Jones’ Estate [1914] 1 IR 188; Phillips-Higgins v Harper [1954] 1 QB 411 at 420; [1954] 2 All ER 51n (CA)); the period of limitation does not begin to run until the plaintiff has discovered the fraud, concealment or the mistake (as the case may be) or could with reasonable diligence [page 451] have discovered it. (References to the defendant include references to the defendant’s agent and to any person through whom the defendant claims and his agent: ibid, and see Thorne v Heard [1894] 1 Ch 599, (CA).)

The Australian position is that the exception for fraud or deliberate concealment only applies where there has been moral turpitude: Hamilton v Kaljo (1989) 17 NSWLR 381, which deliberately declined to follow the English cases cited above. Hamilton v Kaljo has since been followed in New South Wales v McCloy Hutcherson Pty Ltd (1993) 116 ALR 363 at 380 (FCA). These provisions do not, however, enable any action to be brought to recover, or recover the value of, any property, or to enforce any charge against, or set aside any transaction to be brought against, the purchaser of the property, or any person claiming through the purchaser in a case where the property has been purchased for valuable consideration by an innocent third party since the fraud or concealment or (as the case may be) the transaction in which the mistake was made took place: Limitations Act (UK) 1980 s 32(3); see similar provision in Australia, for example Limitations Act 1969 (NSW) s 55. A purchaser is an innocent third party for the purposes of these provisions: (1) in the case of fraud or concealment of any fact relevant to the plaintiff’s right of action, if he was not a party to the fraud or (as the case may be) to the concealment of that fact and did not at the time of the purchase know or have reason to believe that the fraud or concealment had taken place; and (2) in the case of mistake, if he did not at the time of the purchase know or have reason to believe that the mistake had been made: Limitations Act (UK) 1980 s 32(4); see similar provision in Australia, for example Limitations Act 1969 (NSW) s 56.

IV Proof of the Security Proof of execution 16.37 The mortgagee can have no relief, unless the mortgage deed or security is admitted or proved: Jacobs v Richards (1854) 18 Beav 300; 52 ER 118. Like other instruments, in the establishing of which proof of the handwriting of the person subscribing is necessary, the mortgage may be proved at the hearing — where its execution is not controverted, though its

validity may be in question (Booth v Creswicke (1844) 8 Jur NS 323; 13 LJ Ch 217) — either viva voce, or by affidavit when the evidence is taken in that form, but it cannot be proved as an exhibit at the hearing if it is impeached for fraud, especially if one of the attesting witnesses is alleged to have been concerned in the fraud by which the execution of the deed was obtained: Hitchcock v Carew (1853) Kay App xiv; 69 ER 319.Where the execution and the payment of the consideration are contested by a person who is not a party to the deed, it must be proved by the witness, though the mortgagor admits its execution, in order that there may be an opportunity for cross-examination: Leigh v Lloyd (1865) 35 Beav 455; 55 ER 972. In Charter Finance Pty Ltd v Abou-Antoun [2009] NSWSC 247, it was held that there was no entitlement to recover money under a loan agreement executed by a mortgage broker in circumstances where it was not established that the broker was authorised to sign the loan agreement. A mortgage executed under a power of attorney must be within the scope of authority granted by the power of attorney: see Williams v Turner [2009] 1 Qd R 296, where the mortgage was held to be void in these circumstances. If the security is attested by one witness only, who afterwards becomes entitled to the mortgage, proof of his handwriting, by a third person, will be sufficient evidence of the execution of the security: Inman v Parsons (1819) 4 Madd 271; 56 ER 706. [page 452]

Lost document 16.38 In the case of the loss of the security it may be established by secondary evidence, for example copy, draft, offer, payment book, etc, and by proof of its existence as a security: Abington v Green (1866) 14 WR 852; Heath v Crealock (1874) 10 Ch App 22 (CA).

Payment of consideration 16.39 The payment of the advance need not generally be proved, unless the fact is put in issue on the pleadings, the security being sufficient evidence of such payment (Minot v Eaton (1826) 4 LJ OS Ch 134); but cf Wandsworth

Norton Solicitors Nominee Co Ltd v Edmonds [1992] 1 NZLR 596; [1992] ANZ ConvR 188, where the mortgage did not contain the usual provision acknowledging receipt of the principal sum; and see Sims v Lowe [1988] 1 NZLR 656 at 663. Where the fact is pleaded and no money was actually lent, the mortgage is worthless. However, a person claiming to be transferee of an equitable mortgage must not only prove payment of the debt, but that it was his own money, or that he was to stand in the place of the original mortgagee: Pandoorung Bullal Pundit v Balkrishen Hurba-Jee Mahajun (1838) 2 Moo Ind App 60; 18 ER 224. In the case of a security given by a client to his solicitor, strict evidence of the payment of the money may be required: Lawless v Mansfield (1841) 1 Dr & War 557 at 605; and see 42.3. Where the security does not express the real nature of the transaction, it must also be supported by extrinsic evidence: per Lord Eldon in Lewes v Morgan (1817) 5 Price 42 at 143; 146 ER 530 at 563.Where there is room for the exercise of undue influence, the mortgagee must show that the transaction was fair and not procured by false representation, but this is only as between the parties giving and taking the benefit of the transaction, for no such duty is cast upon a purchaser of the security for valuable consideration, not privy to the fraud: Cobbett v Brock (1855) 20 Beav 524; 52 ER 706. As to the effect of a recital in the mortgage deed of the advance and a receipt of the principal sum, see 17.1.

Validity of the security 16.40 Where, from the circumstances under which the mortgage was executed (Melland v Gray (1843) 2 Y & C Ch Cas 199; 63 ER 87; Wynne v Styan (1847) 2 Ph 303; 41 ER 959) or for other reasons, there are doubts whether it ever subsisted as a mortgage, its validity may be ascertained by the court, or an inquiry may be directed. This also applies where the security is not proved on the one side or admitted on the other: Guardner v Boucher (1850) 13 Beav 68; 51 ER 26. If a mortgage is made without notice of the mortgagor’s mental disability, and the advance is duly made (as to which, if there are any suspicious circumstances, the court will direct an inquiry), the security will be ordered to stand for the amount advanced, though it is admitted at the hearing that the

mortgagor was at the date of the execution of the mortgage of unsound mind: Kirkwall v Flight (1855) 3 WR 529; Campbell v Hooper (1855) 3 Sm & G 153; 65 ER 603. It is immaterial in such cases whether the action is by the mortgagee for foreclosure, or by persons claiming under the mortgagor to set aside the deed (Campbell v Hooper, above), and where an illegal agreement has been added to a security, an order for foreclosure may be made upon non-payment of what shall be found due on the original mortgage, if general relief is asked for, though the action will be dismissed, so far as it seeks relief founded on the illegal agreement: Powney v Blomberg (1844) 14 Sim 179; 60 ER 325. If an action to deliver up securities on account of fraud, and for further relief, fails, the court does not order redemption: Johnson v Fesenmeyer (1858) 25 Beav 88; 53 ER 569; on appeal 3 De G & J 13; 44 ER 1174.

[page 453]

Chapter 17

The Personal Remedy Action on the covenant to pay What may be recovered Miscellaneous matters Implied covenant Assignment of equity of redemption Recovery of insurance premiums Conclusive evidence clause When the right of action accrues Notices of demand Loss of the right of action Mistaken discharges The Anshun principle

17.1 17.2 17.3 17.4 17.5 17.6 17.7 17.8 17.9 17.10 17.11 17.12

Action on the covenant to pay 17.1 Every mortgage implies a loan, and every loan implies a debt for which the borrower is personally liable, though he has entered into neither bond nor covenant for payment of it, but the debt is of the nature of simple contract only, unless there is a bond or an express or implied covenant to give it the character of specialty: Meynell v Howard (1696) Prec Ch 61; 24 ER 30; King v King (1735) 3 P Wms 358; 24 ER 1100; Sutton v Sutton (1882) 22 Ch

D 511 (CA); Hennessy v Rourke (1893) 15 LR (NSW) 33; Corbett v Sullivan (1898) 19 ALT 177; 4 ALR 38; DeGaris v Dalgety & Co Ltd [1915] SALR 102; National Bank of Tasmania Ltd v McKenzie [1920] VR 411. Covenants for payment are implied in Torrens system mortgages by various statutory provisions: see Transfer of Land Act 1958 (Vic) s 75(a); Queensland Property Law Act 1974 (Qld) s 78 (which also applies to Torrens land); Transfer of Land Act 1893 (WA) s 113; cf Conveyancing Act 1919 (NSW) ss 80–83 which applies to mortgages under the Real Property Act 1900 (NSW) (see also Hall v Hubbard [1931] VLR 197). The limitation period may differ according to whether there is a covenant: see Limitation Act 1969 (NSW) s 14(1)(a) (six years for claims against a mortgagor for money), s 42(2) (12 years for actions to recvover the ‘principal money’ secured — see s 11(1)); and see the Limitation of Actions Act 1958 (Vic) s 5(1) (six years for actions in contract), s 5(3) (15 years for an action upon a bond or other specialty). The effect of provisions such as Transfer of Land Act 1958 (Vic) s 40(2) (which provides that any instrument when registered under the Act shall be of the same efficacy as if under seal) should be noted, as it has been held that the effect is to apply the longer period which applies to a specialty to a claim under a registered instrument but not to an [page 454] unregistered instrument: Visbord v Irvine [1921] VLR 562; and see Kelly v Fuller (1867) 1 SALR 15; and see 16.39. Evidence may be adduced of the actual sum advanced where there is an error in the mortgage deed as to the sum repayable: Broughton v Rodd (1866) 4 SCR (NSW) Eq 54. A recital in a mortgage deed of the advance and receipt of the principal sum raises an estoppel by deed at law, although equity would go behind the estoppel if the receipt clause proved to be wrong. But the onus of proving the mistake lies on the party alleging it: Karovnos v The Official Trustee in Bankruptcy (Full Court (SA), 3 October 1991, unreported) see at p 4, Zelling AJ, referring to Brooke v Haymes (1868) LR 6 Eq 25 and Meagher, Gummow and Lehane JJ, [3.185] referring to Greer v Kettle [1938] AC 156

at 171. As to the necessity for proof of consideration for the mortgage, payment of the advance, see 16.39.

What may be recovered 17.2 The principal secured by the mortgage and the interest thereon, are distinct debts, and may be separately recovered: Dickenson v Harrison (1817) 4 Price 282; 146 ER 465. The meaning of the word ‘principal’ and related expressions has been considered in Davidson v Sydney County Council Employees’ Credit Union Ltd [1979] 1 NSWLR 41; Midland Credit Ltd v Hallad Pty Ltd (1977) 1 BPR 9570 (‘advances’); Burnes v Trade Credits Ltd [1981] 1 NSWLR 93; (1981) 34 ALR 459; Teaktrim Pty Ltd v Lewis (SC (Qld), McPherson J, 14 December 1989, unreported) (‘advance’, ‘further advance’); Bevham Investments Pty Ltd v Belgot Pty Ltd (1982) 149 CLR 494; 42 ALR 353 (‘money secured by mortgage’). On the construction of repayment clauses generally, see Cambridge Credit Corp Ltd v Lombard Australia Ltd (1977) 136 CLR 608; 14 ALR 420; Re Clark’s Refrigerated Transport Pty Ltd (in liq) [1982] VR 989; Katsikalis v Deutsche Bank (Asia) AG [1988] 2 Qd R 641. If the principal is not paid on the due date the mortgagee may sue the mortgagor immediately under the personal covenant to recover it: O’Brien v Skidmore [1951] NZLR 884. As to a mortgagee’s entitlement to interest on the mortgage debt, see 39.42. As to whether, in a mortgage by co-owners, the mortgage catches the liability of one mortgagor alone, see Richards v The Commercial Bank of Australia (1971) 18 FLR 95; National Commercial Banking Corp of Australia Ltd v Hedley (1984) 3 BPR 9477; Conveyancing Service (NSW) [91566] and [91808]. The action on the covenant is only for principal and interest and any other sums which the mortgagor has covenanted to pay, not for expenses incurred by the mortgagee outside the covenant, though he may be entitled to these in a redemption or foreclosure action. Nevertheless, the sum advanced may be less than the amount payable as a result of additions such as interest being added to principal as a premium (cf Cityland and Property (Holdings) Ltd v Dabrah [1968] Ch 166) or the mortgage may provide for an increase in the principal to take account of inflation: see Multiservice Bookbinding Ltd v Marden [1979] Ch 84; Charmelyn Enterprises Pty Ltd v Klonis (1981) 2 BPR 9527; Nationwide Building Society v Registry of Friendly Societies [1983] 3

All ER 296; also Thurson, ‘Equity or Index-linked Mortgages: Are They Enforceable?’ (1989) 133 Sol Jo 349; Wilkinson,‘Index-linked mortgages’ [1978] Conv 346.

Miscellaneous matters 17.3 Upon the breach of an absolute covenant for payment of the debt on a certain day, the mortgagee and those claiming under the mortgagee by devolution on death or alienation inter vivos may maintain an action on the covenant, whether the covenantor is principal or surety (Evans v Jones (1839) 5 M & W 295; Esso Petroleum Co Ltd v Alstonbridge Properties Ltd [1975] 3 All ER 358), or where a person merely agrees to charge his property as collateral security for the debt of another: Re Midland Bank Ltd’s [page 455] Application [1941] Ch 350; sub nom Franklin v Midland Bank Ltd [1941] 2 All ER 135. But this does not apply if the qualified form of the covenant implies that there is no personal contract for repayment, upon which an action can be brought, for example where the covenantor, borrowing in the character of a trustee, covenants for repayment only out of money coming to his hands as trustee: Mathew v Blackmore (1857) 1 H & N 762; 156 ER 1409; Re Robinson’s Settlement [1912] 1 Ch 717. As to the right of one of several comortgagees to sue on the debt, see Doyle v Doyle [1992] 3 NZLR 170, following Roberts v Holland [1893] 1 QB 665; and see the statutory provisions referred to at 11.2. Where there is an absolute covenant for payment, a clause excluding personal liability is repugnant and therefore void (Watling v Lewis [1911] 1 Ch 414; Re Tewkesbury Gas Co [1912] 1 Ch 1 (CA)), and where, although the covenant is absolute in form, the mortgage was really given to secure the balance of a current account, that fact may be proved and only so much as is due on the account can then be recovered: Trench v Doran (1887) 20 LR Ir 338. Where a claim is made on the basis of an alienation inter vivos the right to sue on the covenant vests in the transferee on the giving of notice in writing of the transfer to the mortgagor. The personal covenant contained in a mortgage is not enforceable where the mortgage is forged: see Grgic v

Australian and New Zealand Banking Group Ltd (1994) 33 NSWLR 202 at 224 (Powell JA; Meagher and Handley JJA agreeing); Perpetual Trustees Victoria Limited v Tsai (2004) 12 BPR 22,281 at [16] (Young CJ in Eq); and Sabah Yazgi v Permanent Custodians Ltd [2007] NSWCA 240 at [13] (Beazley JA; Ipp and Tobias JJA agreeing); and see 4.17. If the requirements of the NSW Act s 12 or the Victorian Act s 134 or their equivalents are fulfilled, the transferee can sue in his own name; otherwise the original mortgagee must be joined. (The mortgagor cannot, without the mortgagee’s consent, relieve himself of his liability under the covenant by transferring the equity of redemption: see 17.5; and West Bromwich Building Society v Bullock [1936] 1 All ER 887.) A covenant may, nevertheless, be qualified; so that a covenant by a trustee may limit his liability to the time the person is a trustee: Williams v Hathaway (1877) 6 Ch D 544. A guarantor under a guarantee which makes him liable without more for the full indebtedness of the mortgagor cannot rely on a cross-claim for damages or the claim as an equitable set-off which may be available to the mortgagor: Indrisie v General Credits Ltd [1985] VR 251.

Implied covenant 17.4 A covenant for payment will be implied by an admission of the debt coupled with an agreement to execute a security which would create a specialty debt (Saunders v Milsome (1866) LR 2 Eq 573), or even by a mere admission of liability in a deed, provided an intention to enter into an engagement to pay appears on the face of the deed; but it is otherwise where the acknowledgment appears to have been made solely for a collateral purpose, as by way of recital in an appointment of a new trustee: Courtney v Taylor (1843) 6 Man & G 851; 134 ER 1135; Jackson v North Eastern Railway Co (1877) 7 Ch D 573. Where the mortgage contains no covenant for payment the mortgagee may sue for the debt, if the security is collateral to it, and was not taken in satisfaction of an existing debt (Yates v Aston (1843) 4 QB 182), but if it was so taken, the contract will have merged in the security which is of a higher nature; as (under like circumstances) the remedy on simple contract will merge in a bond or covenant: Price v Moulton (1851) 10 CB 561; 138 ER 222; and see 36.13.

The effect of provisions such as Victorian Torrens Act s 40(2), to which reference has been made (see 17.1), should be noted. [page 456]

Assignment of equity of redemption 17.5 The burden of the covenant for payment does not run with the equity of redemption, and therefore the mortgagee cannot sue the assignee of that equity either for principal or interest; the mortgagor remains liable (Hall v Heward (1886) 32 Ch D 430 (CA); and see Foster v Woolvett (1963) 39 DLR (2d) 532), but liability under a running account is limited to the amount outstanding at the date when the mortgagee had notice of the change of ownership. (Accordingly, the purchaser of the equity of redemption in a farm was liable for the price of goods supplied after that date and not the original mortgagor: Edwards v OttawaValley Grain Products Ltd (1970) 11 DLR (3d) 137.) Nor may the mortgagee prove for principal or interest in the bankruptcy of the assignee: Re Errington; Ex parte Mason [1894] 1 QB 11. However, the assignee is liable to indemnify the mortgagor (Waring v Ward (1802) 7 Ves 332; 34 ER 915; Simpson v Forrester (1973) 47 ALJR 149), and this liability survives assignment: Re Windle; Ex parte Trustee of Bankrupt v Windle [1975] 3 All ER 987 at 995; [1975] 1 WLR 1628 at 1637–8. So the survivor of joint tenants must indemnify the estate of the deceased joint tenant. Statutory indemnity provisions such as Victorian Torrens Act s 46(2) should also be noted (and see Robinson, The Property Law Act (Victoria), Law Book Co, Sydney, 1992, pp 222–4, 304–5). The assignment usually contains an express proviso to this effect; the express covenant then excludes implied liability: Mills v United Counties Bank Ltd [1912] 1 Ch 231 (CA). The benefit of the covenant of indemnity is not assignable (Rendell v Morphew (1914) 84 LJ Ch 517); but see British Union and National Insurance Co v Rawson [1916] 2 Ch 476 (CA). The assignee may make himself directly liable by entering into a fresh covenant with the mortgagee (Shore v Shore (1847) 2 Ph 378; 41 ER 989; see Esso Petroleum Co Ltd v Alstonbridge Properties Ltd [1975] 3 All ER 358; [1975] 1 WLR 1474), but

such liability is not implied from the mere payment of interest: Re Errington; Ex parte Mason, above. While on assignment the mortgagor ceases to be entitled to redeem, his right to do so revives if he is sued for the mortgage debt. The mortgagor is then, in effect, a surety for the assignee, and may redeem notwithstanding that the assignee has created fresh charges in favour of the mortgagee: Kinnaird v Trollope (1888) 39 Ch D 636; and see 32.21. The position at common law appears to have been affected, at least in some states, by provisions in Torrens legislation such as NSW Torrens Act ss 51 and 52, and Victorian Torrens Act s 46. The New South Wales provisions were considered in Measures v McFadyen (1910) 11 CLR 723. It was held by the High Court that the provisions did not have the effect of passing with the transfer of the reversion expectant on a lease the right to sue for damages for a breach of covenant which was not a continuing breach and which was completed before the date of the transfer. Generally, the effect of these provisions is to transfer the right to sue on the personal covenant to a transferee from the mortgagee: Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423; English Scottish & Australian Bank Ltd v Phillips (1937) 57 CLR 302. (In the latter case the assignee bank was an assignee from an assignee from the original mortgagee.) Nevertheless, these provisions do not operate to pass all rights that have any connection with the mortgage. In the Consolidated Trust case Dixon and Evatt JJ said, at 434–5 (applied in English Scottish & Australian Bank Ltd v Phillips 57 CLR at 322): Such language is not incapable of including among the rights which pass to the transferee the benefit of the covenant by a surety who joins as a party in the instrument of mortgage for the purpose of giving the covenant. But, in our opinion, the language should not be so interpreted.

[page 457] The statute is concerned with dealings in land and it is because a mortgage involves such a dealing that the statute prescribes how mortgages may be transferred and with what consequences. It is concerned with the mortgage transaction in its entirety as it affects the land, and, therefore, extends to the personal liability of the mortgagor for the mortgage debt because that liability is intimately connected with the rights of property arising out of the mortgage transaction. A surety’s obligation stands in a different relation to the dealing. His liability is

introduced by way of additional security. It is personal and, except as a result of subrogation, does not directly or indirectly affect the land. Rights of subrogation are not of a kind falling within the scope of the Real Property Act. A guarantee is thus collateral to the mortgage transaction, and the circumstance that the obligation is expressed in the mortgage instrument must be regarded as accidental to the mortgage transaction and not as characteristic of the dealing contemplated by the legislation. In relation to transfers of mortgage secs 51 and 52 should be understood as dealing only with rights, powers, privileges, debts and sums of money affecting the mortgage transaction as between mortgagor and mortgagee.

It does not appear that general provisions of this nature will be construed as imposing personal liability on a transferee of the equity of redemption from the mortgagor in favour of a mortgagee or a transferee from the mortgage: Hall v Hubbard [1931] VLR 197 (FC); and see Australian Deposit and Mortgage Bank v Lord [1876] 2 VLR (L) 31; McDonald v Gardiner [1933] VLR 129 at 136; cf Re Burton (1901) 27 VLR 437 at 442. Notice to pay interest and other moneys to the transferee has been held necessary in spite of statutory provisions of this kind: Nioa v Bell (1901) 27 VLR 82.

Recovery of insurance premiums 17.6 Where the mortgagor of a policy of insurance (the insurers being the mortgagees) covenants with them to keep up the policy or, in default, that the insurers may pay and add the premiums to the mortgage debt, but there is no covenant to repay them the premiums, then the mortgagees, in an action against the mortgagor for breach of the covenant to keep up the policy, are entitled only to nominal damages, the addition of the premiums to the debt being the remedy provided. Under a covenant to repay, however, the amount paid would be given as damages: Browne v Price (1858) 4 CBNS 598; 140 ER 1225. It has been held that a covenant ‘not to do or suffer anything whereby the policy may become voidable or void’ is not broken by the mortgagor allowing the insurance company to take over a fully paid-up policy at surrender value: Sapio v Hackney (1907) 51 Sol Jo 428.

Conclusive evidence clause 17.7 It is quite common to find a provision in the mortgage by which a certificate of some officer of the lender as to the amount due shall be conclusive. Such clauses are not contrary to public policy and, in the absence

of good evidence of mistake, are binding: see Bache & Co (London) Ltd v Banque Vernes et Commerciale de Paris SA [1973] 2 Lloyd’s Rep 437 (CA); Dobbs v National Bank of Australasia Ltd (1935) 53 CLR 643; ANZ Banking Group (NZ) Ltd v Gibson [1981] 2 NZLR 513 at 524; Papua and New Guinea Development Bank v Manton [1982] VR 1000; Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] 2 VR 279 at 348–9; and St George Bank v Emery [2004] WASC 35. But see Julong P/L v Fenn [2002] QCA 529 where, under the terms of the mortgage, the certificate was only prima facie evidence of default and indebtedness; and also Bank of Western Australia v Abdul [2012] VSC 222, where the provisions of the facility agreements which were secured provided that the certificate was ‘sufficient evidence’ of the amount. Further, it was held in this case that the certificate provisions, properly construed, would, in terms of the ‘amount payable’ take into account the realisation proceeds actually remitted to Bank of Western Australia from the receivers and managers which, it followed, included the costs and expenses of receivership: see [27] (Croft J). [page 458] Care must be taken to observe strictly the requirements of the mortgage as to who may give the certificate and the form it should take: National Australia Bank Ltd v Sampson (No 2) (SC (NSW),Young J, 9 September 1991, unreported); Shomat Pty Ltd v Rubinstein (1995) 124 FLR 285. As to slight departures, see State Bank of NSW v Chia (2000) 50 NSWLR 587 at 544 ff and also Jenkins v National Australia Bank Ltd [1999] V ConvR ¶54602; [1999] ANZ ConvR 544 (CA). If the certificate can only be given by persons holding particular offices, the fact that the person signing holds that office must appear in the certificate: Shomat Pty Ltd v Rubinstein (1995) 124 FLR 285 at 290. The debtor who suffers any loss by virtue of such a certificate may have a claim against the maker. In Cook v Bank of New South Wales (1982) 2 BPR 9580,Wootten J indicated, in considering a conclusive evidence provision of this kind in light of the decision in Dobbs v National Bank of Australasia Ltd, above, that the provision was likely to be strictly construed against the bank and, further, that the estoppel raised against the bank by reason of its dealings

with the mortgagor may prevent the bank relying upon it. In any event it was held that the court’s jurisdiction under the Contracts Review Act 1980 (NSW) will prevent reliance upon such a provision in an appropriate case. A certificate of this kind is not conclusive against a claim of equitable setoff by the mortgagor which operates to absolve the mortgagor, in whole or in part, from liability: Long Leys Co v Silkdale (1991) 5 BPR 11,512 (CA), referring (at 11,520) to AWA Ltd v Exicom Australia Pty Ltd (1990) 19 NSWLR 705 at 711, where the cases are usefully collected.

When the right of action accrues 17.8 This depends on the form of the covenant and whether there is a preexisting debt: D & J Fowler (Australia) Ltd v Bank of New South Wales [1982] 2 NSWLR 879. Where the covenant fixes a date for repayment, the right of action arises upon non-payment on that date (Bolton v Buckenham [1891] 1 QB 278 (CA)) and the mortgagee cannot sue before that date or exercise the power of sale: Twentieth Century Banking Corp Ltd v Wilkinson [1977] Ch 99; [1976] 3 All ER 361. Where the covenant is to pay on or after a certain date, the mortgagee cannot sue until after a demand for payment has been made (Re Tewkesbury Gas Co [1911] 2 Ch 279, affirmed [1912] 1 Ch 1 (CA)); in other words, where a mortgagor covenants to pay all moneys owing on demand there can be no breach of covenant with respect to repayment until a demand is made: Commonwealth Bank of Australia v Saunders (1995) 64 SASR 428. For an example of implied demand, see The Halcyon Skies (No 2) [1977] 1 Lloyd’s Rep 22. If the principal is payable on demand, and there is no provision, express or implied, for notice to be given, the right of action accrues on the execution of the mortgage (Evans v Jones (1839) 5 M & W 295; 151 ER 126; Re Brown’s Estate; Brown v Brown [1893] 2 Ch 300 at 304; Esso Petroleum Co Ltd v Alstonbridge Properties Ltd [1975] 3 All ER 358; Lakshmijit v Sherani [1974] AC 605 at 617–18 (PC); Young v Queensland Trustees Ltd (1956) 99 CLR 560 at 566; Golding v Russell [1983] Qd R 53), unless the covenant is collateral, for example to secure the debt of another or to secure a current account between the covenantor and the covenantee, when demand must first be made: Re Brown’s Estate; Lloyds Bank Ltd v Margolis [1954] 1 All ER

734; [1954] 1 WLR 644; and Habib Bank Ltd v Tailor [1982] 3 All ER 561; [1982] 1 WLR 1218 (CA). For an instalment mortgage, where the balance of money due becomes payable on default, a demand is necessary before the right of action accrues, because of the change in the nature of the debtor’s obligation from instalments to lump sum: Esso Petroleum Co Ltd v Alstonbridge Properties Ltd, above; and Murphy v Lawrence [1960] NZLR 772. If [page 459] the covenant provides, expressly or impliedly, for notice to be given, actual demand in writing must be made before the right of action arises: Lloyds Bank Ltd v Margolis, above. The issue of proceedings does not constitute a demand (Esso Petroleum Co Ltd v Alstonbridge Properties Ltd, above), and any other condition prescribed as a preliminary to suing on the covenant must be observed: Rogers & Co v British and Colonial Colliery Supply Association (1898) 68 LJQB 14. A mortgagee may, of course, sue on the personal covenant after sale. However, the mortgagee has no entitlement to have the amount of its judgment secured or protected in any manner superior to any other creditor of the mortgagor: Scandinavian Pacific Ltd v Burke (1991) 5 BPR 11,846.

Notices of demand 17.9 The notice given must be sufficient to allow the mortgagor a reasonable time to implement the mechanics of payment: Bank of Baroda v Panessar [1987] Ch 335; [1986] 3 All ER 751; and see Brighty v Norton (1862) 3 B & S 305; 122 ER 116; Massey v Sladden (1868) LR 4 Exch 13; Fitzgerald’s Trustee v Mellersh [1892] 1 Ch 385 at 390; [1891–4] All ER Rep 979; Cripps (Pharmaceuticals) Ltd v Wickenden [1973] 2 All ER 606; [1973] 1 WLR 944; cf Ronald Elwyn Lister Ltd v Dunlop Canada Ltd (1982) 135 DLR (3d) 1; [1982] 1 SCR 726; ANZ Banking Group (NZ) Ltd v Gibson [1981] 2 NZLR 513; Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 153 CLR 491; 51 ALR 609; 58 ALJR 199; Mister Broadloom Corp (1968) Ltd v Bank of Montreal (1984) 4 DLR (4th) 74.

Any mode of service is sufficient which brings home to the mortgagor the fact that the demand has been made: Worthington & Co Ltd v Abbott [1910] 1 Ch 588. A notice is still an effective demand even if it does not state the amount due (Bank of Baroda v Panessar, above; Bunbury Foods Pty Ltd v National Bank of Australasia Ltd, above), or if it overstates the amount due: Fox v Jolly [1916] 1 AC 1 (HL); Campbell v Commercial Banking Co of Sydney (1879) 2 LR (NSW) (L) 375; 40 LT 137 (PC); Clyde Properties Ltd v Tasker [1970] NZLR 754; Stanley v Auckland Co-operative Terminating Building Society [1973] 2 NZLR 673; Bunbury Foods Pty Ltd v National Bank of Australasia Ltd, above; Bank of Baroda v Panessar, above. See also Parker v Rock Finance Corp Ltd [1981] 1 NZLR 488; Commodore Pty Ltd v Perpetual Trustees Estates Agency Co of New Zealand Ltd [1984] 1 NZLR 324 (CA); Mir Bros Projects Pty Ltd v 1924 Pty Ltd [1980] 2 NSWLR 907; Mediservices International Pty Ltd v Stocks and Realty (Security Finance) Pty Ltd [1982] 1 NSWLR 516; Clarke v Japan Machines (Australia) Pty Ltd [1984] 1 Qd R 404; Network Finance Ltd v Lane (1984) ANZ ConvR 571; Indrisie v General Credits Ltd [1985] VR 251; Clare Morris Ltd v Hunter BNZ Finance Ltd [1988] ACLD 416; (1990) 64 ALJ 135 (Butt); Websdale v S & JD Investments Pty Ltd (1991) 24 NSWLR 573 (CA) (Mir Bros Projects Pty Ltd v 1924 Pty Ltd, above, not followed; and see (1992) 66 ALJ 595 (Butt)); National Australia Bank Ltd v Zollo (1992) 59 SASR 76. In Jaffe v Premier Motors Pty Ltd [1960] NZLR 146, the notice was held to be invalid as it claimed that the mortgagor had to pay the whole principal due rather than remedy the specific matters required to be remedied. On acquiescence in the notice by the borrower, see Orr v Ford (1989) 167 CLR 316. In Lombard North Central plc v Stobart [1990] TLR 171, a finance company was held to be bound by its settlement figures. See also 20.14–20.15. Where there is a facility letter subject to normal banking terms and conditions this does not of itself make the loan repayable on demand: see Cryne v Barclays Bank plc [1987] BCLC 548 (CA) and Williams & Glyn’s Bank Ltd v Barnes [1981] Com LR 205 (Gibson J) (discussed in Parsons, Lingard’s Bank Security Documents, 5th ed, LexisNexis, London, 2011, [7.10]).

[page 460]

Loss of the right of action 17.10 The right to sue on the covenant may be lost where the mortgagee cannot reconvey the mortgaged property. A mortgagee will be restrained from suing on the covenant if, by his own conduct, he cannot hand back the title deeds, because he has parted with the mortgaged property (Walker v Jones (1866) LR 1 PC 50), for example because a solicitor had a lien on the property, or for any other reason: Schoole v Sall (1803) 1 Sch & Lef 176 (Ir). This principle applies also to personalty. So where shares have been deposited as security with a broker and he wrongfully sells them he cannot sue for the balance due: Ellis & Co’s Trustee v Dixon-Johnson (1925) AC 489 (HL). (Though if the shares are readily purchasable their money value may be substituted and the mortgagee then entitled to sue on the covenant.) However, a mortgagee is not prevented from suing if his inability to restore the property is due to the intervention of a third party (as in the case of a forfeiture of leasehold property by the lessor), which is not due to the mortgagee’s default: Re Burrell; Burrell v Smith (1869) LR 7 Eq 399; generally, see McDonald v Gardiner [1933] VLR 129 at 136. The right to sue on the personal covenant may also be lost where the equity of redemption has been assigned and the assignee renews the mortgage for a further period and agrees to vary the rate of interest payable, whether or not the renewal is registered: Nelson Diocesan Trust Board v Hamilton [1926] NZLR 342; Robertson v White [1923] NZLR 1275; Rouse v Bradford Banking Co Ltd [1894] AC 586. The same result follows if the assignee merely agrees to increase the rate of interest payable: Paterson v Irvine [1926] NZLR 352. Similarly, Mortleman v Public Trustee [1928] NZLR 337 and Invercargill Savings Bank v George [1929] NZLR 375; but cf Dennis v Martin [1932] VLR 361 where, in a deed between the assignee and the mortgagee, a higher rate was agreed, but the deed provided for the revival of the obligations under the original mortgage between the parties on default. A mortgagee who has foreclosed and subsequently sold the property is precluded from suing on the covenant (see 22.38), but a mortgagee who has sold the property under his power of sale (Rudge v Richens (1873) LR 8 CP

358; Re McHenry; McDermot v Boyd (Barker’s Claim) [1894] 3 Ch 290 (CA)) or under an order of the court (Gordon Grant & Co v Boos [1926] AC 781 (PC)) can sue the mortgagee for the deficiency, since the sale was a proper dealing with the security. The right to sue is not prejudiced by a subsequent mortgagee submitting to a judgment for foreclosure at the suit of a prior mortgagee: Worthington v Abbott [1910] 1 Ch 588. An action on the covenant after foreclosure reopens the foreclosure (see 22.38); but reopening of the foreclosure is not possible in all jurisdictions: see 21.5. The right of action for principal money is liable to be barred by lapse of time; the period applicable is generally longer where the mortgage is by deed than where it is not a mortgage by deed: see 16.17; see also 17.1. It goes without saying that no personal action will lie if the mortgage itself excludes personal liability (Baypoint Pty Ltd v Baker (1994) 6 BPR 13,687) or the mortgagee’s conduct estops him from bringing an action: see, for example, Re Brennand (1843) NSW Sel Cas (Dowling) 619.

Mistaken discharges 17.11 The execution of a memorandum of discharge of mortgage under the Torrens statutes (for example Victorian Torrens Act s 84(1)) may have the effect of discharging both the land and the mortgagor from the personal obligation under the covenant to pay. (As to forms of memorandum of discharge, see The Australian Encyclopaedia of Forms [page 461] and Precedents, David de Jersey, Acknowledgements and Receipts (updated Nov 2012), [5.15] and [5.240]–[5.255].) In Groongal Pastoral Co Ltd (in liq) v Falkiner (1924) 35 CLR 157, the High Court held that both the land and the personal obligation was discharged by a memorandum in the following form: ‘Received from Ralph Sadlier Falkiner this first day of September 1921, the sum of one hundred and twenty thousand pounds, being in full satisfaction and discharge of the within obligation’: see also Toohey v Gunther (1928) 41 CLR 181 (a trading covenant); Broad v Public Trustee [1939] NZLR 140 (considered in

Perpetual Trustees Estate & Agency Co of NZ Ltd v Morrison (1980) 2 NZLR 447); DFC New Zealand Ltd v Poulopoulos (1992) ANZ ConvR 22 (HC, NZ); Industrial Acceptance Corp Ltd v Tarulli [1974] WAR 125; Associated Securities v Perry [1978] Qd R 13 and Santen v Felix (SC (SA), Duggan J, 25 February 1993, unreported). Nichols in ‘Personal Covenants and Discharges of Mortgages under Torrens Title’ (1980) ANZ ConvR 423, reviews the authorities to 1980 and concludes that: ‘The effect of discharge upon personal covenants therefore, seems to remain very much a matter of construction of such discharge.’ At 425 it is suggested that subsequent difficulties may be overcome by executing a separate document (preferably a deed) incorporating the covenant where its operation is intended to extend beyond the discharge of the mortgage. A discharge registered by mistake may be cancelled by order of the court directed to the Registrar: Elders Trustee and Executor Co Ltd v Bagot’s Executor and Trustee Co Ltd [1964] SASR 306. Moreover, there may be grounds for rectification on equitable principles provided that no third party had intervened: see Greer v Kettle [1938] AC 156 at 171. The principle of estoppel by deed does not extend to preclude recovery by a mortgagee: see Thompson v Palmer (1933) 49 CLR 507 (a case concerned with a transfer of mortgage); and see Robinson, Transfer of Land in Victoria, p 346. In New South Wales, a discharge of mortgage in the approved form will not release the personal liability of the mortgagor: Grundy v Ley [1984] 2 NSWLR 467; and see Industrial Acceptance Corp Ltd v Tarulli, above. Similar considerations apply with respect to the execution of a deed of reconveyance or a statutory receipt by way of discharge of a mortgage of land under the operation of the general law: see The Australian Encyclopaedia of Forms and Precedents, David de Jersey, Acknowledgements and Receipts (updated November 2012), [5–15]; see also 34.3. Generally speaking, with Torrens system land no proceedings based on a personal equity will survive the registration of a discharge: State Bank of NSW v Berowra Waters Holdings Pty Ltd (1986) 4 NSWLR 398.

The Anshun principle 17.12 In most litigation, a litigant is estopped from bringing a second action for a matter that he could well have included in a former action. This is

an oversimplified summary of the Anshun principle named from the High Court’s decision in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. The Anshun principle does not apply to actions by mortgagees. In Alliance & Leicester plc v Slayford (2000) 33 HLR 743 [20] (also noted [2000] TLR 886), Gibson J, giving the judgment of the English Court of Appeal, said: It would not help mortgagors, mortgagees or the courts if mortgagees had to claim and pursue to judgment all their possible claims at one and the same time. Mortgagees usually only go for a possession initially and pursue other remedies later if they have to, and that practice is entirely sensible and to the advantage of all concerned.

That passage was applied in Cheltenham & Gloucester plc v Appleyard [2004] EWCA Civ 291, where at [94]–[95] the Court of Appeal said that possession applications should be kept as simple as possible and a mortgagee was not to be penalised for doing so.

[page 462]

Chapter 18

The Appointment of a Receiver Generally A. The Appointment of a Receiver by the Mortgagee Express power of appointment Statutory power of appointment Receivers and managers Receiver is agent of the mortgagor Appointment of a receiver Other matters re appointment of receivers Effect of appointment Powers of receiver Receivers’ powers of sale Receivers and the Corporations Act Section 420 of the Corporations Act Section 420A of the Corporations Act Liability of receiver Remuneration of receiver Distribution by receiver of moneys received Termination of receivership B. The Appointment of a Receiver by the Court Power of court to appoint receiver

18.1 18.2 18.3 18.4 18.5 18.6 18.7 18.8 18.9 18.10 18.11 18.12 18.13 18.14 18.15 18.16 18.17 18.18

Purpose of appointment Security Who may apply for the appointment of a receiver Where prior mortgagee is in possession Over what property a receiver may be appointed Appointment of a manager Status of the receiver Powers of receiver Committal for contempt

18.19 18.20 18.21 18.22 18.23 18.24 18.25 18.26 18.27

[page 463]

Generally 18.1 This chapter covers only particular aspects of receivership. On receivers generally, see O’Donovan, Company Receivers and Administrators, 2nd ed, Law Book Co, Sydney, 1992; Blanchard, The Law of Company Receiverships in New Zealand and Australia, 2nd ed, Butterworths, Wellington, 1994; Australian Commentary on Halsbury’s Laws of England, 4th ed, Butterworths, Sydney, 1974–1993, Ch 135; (1973) 47 ALJ 438 (Stevenson) and (1978) Aus Bus LR 203 (O’Donovan); Australian Corporations Law; Principles and Practice, vol 2, R Lindwall (updated by Farid Assaf); Receivers and Controllers of Corporate Property, Butterworths, Sydney, 1991, [5.2.0005]–[5.2.0155]; and Halsbury’s Laws of Australia, James P Hambrook, Corporations (Part V(2)), [120-12500]ff.

A. The Appointment of a Receiver by the Mortgagee Express power of appointment 18.2 A mortgage may contain an express power of appointment, or indeed an appointment, of a person as receiver or receiver and manager, of the

mortgaged property. The powers and authority of the receiver will be determined by the terms of the mortgage deed. Express powers are less common now that there is a statutory implied power to appoint a receiver: see 18.3. For an example of an express power, see Medforth v Blake [2000] Ch 86; [1999] 3 All ER 97 (CA). But the statutory power is often modified, so that what has to be considered is, for all practical purposes, an express power: see Isherwood v Butler Pollnow Pty Ltd (1986) 6 NSWLR 263; and Argyle Developments Pty Ltd v Australia and New Zealand Banking Group Limited (1994) 4 Tas R 172 (FC). An express power may allow a joint and several appointment of receivers and managers: Kendle v Melsom (1998) 193 CLR 46; Gwembe Valley Development Co Ltd v Koshy [2000] 2 BCLC 705 and see 72 ALJ 280 (PWY). It is a matter of construction: see, for example, Kerry Lowe Management Pty Ltd v Isherwood & Sherlock (1989) 15 ACLR 615 (NSWCA) (no power to appoint joint and several receivers); and NEC Information Systems Australia Pty Ltd (1991) 22 NSWLR 518; 101 ALR 95 (NSWCA) (appointment held valid); and see Sanyo Australia Pty Ltd v Componere Information Systems [1999] NSWCA 389. Where statutory notice of default is a prerequisite to the exercise of remedies on default, including the taking of possession, the statutory provisions as to notice must be fully and properly complied with: Lamshed v Plakakis (1988) 47 SASR 316; Wombat Nominees Pty Ltd v De Tullio (1990) 98 ALR 307; see also 16.7.

Statutory power of appointment 18.3 Statutory implied powers of appointment of a receiver in favour of the mortgagee and persons deriving title under the original mortgagee are granted by the general law land legislation where the mortgage is by deed (or in Queensland by instrument); thus the equitable assignee of a mortgage debenture may appoint a receiver: Harpur v Ariadne Aust Ltd (SC (Qld), Williams J, 5 December 1994, unreported). The power applies to any mortgage, legal or equitable, made by deed. For the definitions of mortgage and mortgagee, see NSW Act s 7(1),Victorian Act s 18(1). In New South Wales, the implied power is expressed as a power to appoint a receiver of the income of the mortgaged property or any part thereof: NSW Act s 109(1)(c). The power does not arise until default has been made: NSW Act s 115A(2); for default see s 115A(1); and see Isherwood v Butler

Pollnow Pty Ltd (1986) 6 NSWLR 363. In Victoria, the implied power is in similar terms, but is expressed to arise when the mortgage money has become due (as to which, see 20.6). The provision adds that if the mortgaged property consists of an interest in income or of a rent charge or an annual or other periodical payment then a receiver may be appointed of that property or any part [page 464] thereof: Victorian Act s 101(1)(c). No appointment may be made until the mortgagee has become entitled to exercise the statutory power of sale: Victorian Act s 109(1). For power to appoint a receiver in other jurisdictions, see Queensland Act s 83(1)(c), South Australian Act s 47(1)(c) (and note s 55A, which requires a prior notice of default), Tasmanian Act s 21(1)(c) and Western Australian Act s 57(1)(c). In Victoria, where the statutory power — or an express power — to appoint a receiver is made exercisable by reason of the mortgagor being adjudged a bankrupt, such power is not exercisable only on account of such adjudication without the leave of the court: Victorian Act 1958 s 111. In respect of regulated mortgages under the National Credit Code a default notice is required before a receiver may be appointed: see National Credit Code s 88(2). Such notice may be combined with any other statutory notice that is required: s 88(4). The statutory power is to appoint a receiver of the income of the mortgaged property. Accordingly, unless the power is extended, as it usually will be, the receiver has no power of sale. For a power of sale implied from mutual intention, see Re J B Davies Enterprises Pty Ltd [1990] 2 Qd R 129. The appointment of a receiver is not the exercise of any power of sale within the meaning of Property Law Act 1974 (Qld) s 96(1): Golden Dew Pty Ltd (rec apptd) v Toweran Holdings Pty Ltd [1996] 1 Qd R 235. Previously, the provisions of Property Law Act 1974 (Qld) s 85 were only intended to impose duties on a selling mortgagee: Muirhead v Commonwealth Bank of Australia (1996) 139 ALR 561 (Qld, CA). Since amendments made in 2008 the duties are also imposed on receivers.

In New South Wales, where there is a power of sale of land the receiver cannot exercise that power unless the mortgagee is entitled to exercise a power to sell the land: NSW Act s 115A(3) (this applies also to express powers). The statutory power may be varied or extended by the mortgage deed and as so varied or extended operates as far as may be as if the variations or extensions were contained in the Act: NSW Act s 109(2); Victorian Act s 101(3). The statutory power applies only if and so far as a contrary intention has not been expressed in the mortgage deed and has effect subject to the terms of the mortgage deed: NSW Act s 109(3); Victorian Act s 101(4). The statutory power applies to Torrens system mortgages: see NSW Act s 109(5); Victorian Act s 102. Receivers of the property of a corporation are subject to the relevant provisions of Corporations Act 2001 (Cth) Pt 5.2 (ss 416–434G): see 18.11.

Receivers and managers 18.4 A receiver is a person who receives rents or other income and pays outgoings. Unless given power to do so, a receiver cannot manage the property in the sense of buying or selling: see Re Manchester and Milford Rly Co; Ex parte Cambrian Rly Co (1880) 14 Ch D 645 at 653; Marshall v Cottingham [1982] Ch 82; [1981] 3 All ER 8; North City Developments; Ex parte Walker (1990) 20 NSWLR 286. The older view was that a receiver, particularly a court-appointed receiver, should not carry on a business: Graham v Graham (1871) 2 VLR (Eq) 145 at 151. But a receiver and manager was appointed with a view to a sale: Re Newdigate Colliery Ltd [1912] 1 Ch 468 at 472. While the appointment of a receiver may well be a preliminary step towards the liquidation of a company mortgagor, it does not necessarily follow, and a receiver or a receiver and manager may succeed in restoring the fortunes of a business, that is, the company doctor role: see Duffy v Super Centre Development Corp Ltd [1967] 1 NSWR 382. On the interaction of winding up and receivership, see (1979) 53 ALJ 264 (O’Donovan). [page 465]

Receiver is agent of the mortgagor 18.5 A receiver appointed by the mortgagee is, generally, the agent of the mortgagor. Accordingly, the mortgagee will not be potentially liable for wilful default as he might be if he pursued the alternative remedy of taking possession himself. For the potential liability of a mortgagee in possession, see 19.34 ff. A receiver appointed under the statutory implied power is deemed to be the agent of the mortgagor: NSW Act s 115(2); Victorian Act s 109(2). A receiver appointed under an express power is generally expressed, or expressly deemed to be the agent of the mortgagor (see Australian Mutual Provident Society v Geo Myers & Co Ltd (1932) 47 CLR 65); for an example of an express power in this respect, see Medforth v Blake [2000] Ch 86; [1999] 3 All ER 97 (CA); and see State Bank of New South Wales v Chia (2000) 50 NSWLR 587; and Bank of Western Australia v Abdul [2012] VSC 222, referred to below. However, the courts have recognised that the agency is not an ordinary agency: see Gomba Holdings UK Ltd v Minories Finance Ltd [1988] 1 WLR 1231 at 1233. As to the character and incidents of such a receiver’s agency, see Silven Properties Ltd v Royal Bank of Scotland plc [2004] 1 WLR 997 (CA) at 1006–9, [21]–[29] (Aldous, Tuckey LJJ and Lightman J). The position was well summarised by Nicholls VC in Re Leyland DAF Ltd [1994] 1 BCLC 264 at 269 (NB: appeal dismissed [1994] 2 BCLC 106): In bringing these proceedings the receivers are acting in the right of the debenture holder which appointed them rather than in right of Leyland. This is so, even though the receivers are, at any rate for some purposes, the agents of Leyland. This agency is not an ordinary agency; it is primarily a device to protect the mortgagee or debenture holder, and the relationship is tripartite, involving the company, the receiver and the debenture holder … The receiver is a piece of administrative machinery designed to enforce the charge … Thus the courts have shown a readiness to have regard to the reality of the receiver’s functions.

See also Robbie (NW) & Co Ltd v Witney Warehouse Co Ltd [1963] 3 All ER 613 at 622; [1963] 1 WLR 1324 at 1328. Einstein J considered the general position of a receiver as agent of the mortgagor, the secured debtor, and the duties owed by the receiver in that context in State Bank of New South Wales Ltd v Chia at [868]–[870] as follows:

The purpose of the appointment of a receiver out of court is somewhat different; they are not appointed for the benefit of the company but for the purpose of realising the security held by the appointer: see Re B Johnson & Co (Builders) Ltd [1955] 1 Ch 634 at 644 per Evershed MR, Ostrander v Niagra Helicopters Ltd (1973) 20 DLR (3d) 161 at 167 per Stark J (Ontario High Court). The appointment of such a receiver is performed by the mortgagee, however, it is invariably the case, and is here the case, that the instrument under which the receiver is appointed provides that the receiver is the agent of the mortgagor. It has been said that the agency is ‘a very special’ and ‘limited’ one: see W R D Stevenson, ‘Receivers’ (1973) 44 ALJ 438 at 444. The purpose and effect of rendering the receiver the agent of the mortgagor is to relieve the mortgagee from the liabilities which the law casts upon a mortgagee going into possession and to place upon the mortgagor the liability for the acts and defaults of the receiver: Gaskell v Gosling [1896] 1 QB 669 at 692–693, per Rigby LJ (dissenting), approved on appeal: Gosling v Gaskell [1897] AC 575 at 589, 590, 595; Visbord v Commissioner of Taxation (Cth) [1943] HCA 4; (1943) 68 CLR 354 at 368, per Latham CJ. To make the receiver the agent of the mortgagor is, of course, something of a contrivance. As Starke J said in Visbord v Federal Commission of Taxation (supra at 376) ‘[w]e must not lose sight of the substance of the appointment. It was made for the benefit of the mortgagee and to protect the mortgagee from liability as mortgagee in possession or as principal.’ Yet it is a contrivance which has the effect of removing a receiver appointed out of court from those classes of persons who may be said to be fiduciaries. As Professor Finn explained in his work [Fiduciary Obligations (1977, p 12)], there are no reasons for the imposition of fiduciary obligations where, although one party agrees to act for or on behalf of another, the other party is able to control what powers

[page 466] are exercised for or on his or her behalf or able to control the manner of its exercise. Because the receiver is made the agent of the mortgagee, ‘the receiver-mortgagor relationship becomes one founded upon agreement and escapes the imposition of general fiduciary obligations’ [see p 13]. Accordingly, it is said in [Meagher, Gummow and Lehane, Equity: Doctrines and Remedies (3rd edition, para 2845)] that the receiver appointed out of court is the only genuinely non-fiduciary agency: see also Ostrander v Niagara Helicopters Ltd (supra, at 167). To say that a receiver appointed out of court is not, generally, a fiduciary, is not to say that they are in no circumstances a fiduciary nor to say they owe no duties in the conduct of their receivership. Outside of those imposed by Statute, the general law imposes at least three duties upon a receiver. In the first place, the receiver has a duty to the mortgagee to collect and realise the assets of the company for the purpose of discharging the security: Re B Johnson & Co (Builders) Ltd (supra, at 645 per Evershed MR), Expo International Pty Ltd v Chant [1979] 2 NSWLR 820 at 831 per Needham J. In the second place, the receiver holds in trust for the mortgagor, any proceeds from the sale of the company’s assets after the satisfaction of the claims of the mortgagee and subsequent creditors: Visbord v Federal Commissioner for Taxation (supra, at 384 per Williams J), Expo International Pty Ltd v Chant (supra, at 830). In the third place, and most relevantly for these proceedings, the receiver, as the donee of a power, must exercise the powers and duties granted to him or her in good faith and for a proper purpose.

The relationship between the receiver and the mortgagee, the second creditor, was also explained in detail by Einstein J in State Bank of New South Wales Ltd v Chia, above, where the authorities and academic writing on the subject was reviewed and considered (at (2000) 50 NSWLR 587 at 630–1, [881]–[886]): The first point to make is that a mortgagee has no power to direct the receiver in the performance of the receiver’s task: Medforth v Blake (supra, at 94–95 per Scott V-C); Knight v Lawrence [1993] BCLC 215 at 223 per Browne-Wilkinson V-C. But there is no doubt that the law allows, and even requires, interaction between a receiver and his or her appointors. The receiver occupies a fiduciary relationship with his or her appointors, one aspect of which is the duty of the receiver to keep his or her appointors informed about the progress of the receivership: Re Magadi Soda Co, Ltd (1925) 41 TLR 297 at 302 per Eve J; Gomba Holdings UK Ltd v Minories Finance Ltd [1988] 1 WLR 1231 at 1233 per Fox LJ. However, there is authority for the proposition that where a mortgagee directs the exercise of the powers of the receiver, it comes under the duties of the receiver: American Express International Banking Corporation v Hurley [1985] 3 All ER 564 at 571 per Mann J; Standard Chartered Bank v Walker [1982] 1 WLR 1410 at 1416 where Lord Denning MR said: … The debenture holder, the bank, is not responsible for what the receiver does except in so far as it gives him directions or interferes with his conduct of the realisation. If it does so, then it too is under a duty to use reasonable care towards the company and the guarantor. (Emphasis added.) The authority of these two cases is weakened by the fact that they were decided upon the discredited premise that the receiver’s duty lay in negligence because of the ‘proximity’ between the receiver and mortgagor. To decide that an intermeddling mortgagee was similarly proximate was a short step. Another possibility is that by directing the receiver on certain matters, the mortgagee constitutes the receiver as its agent on those matters, notwithstanding that generally the receiver is the agent of the mortgagor. However, in the judgment of Somers J in R A Price Securities Ltd v Henderson [1989] 2 NZLR 257 at 262, the following passage occurs: As between the receiver on the one hand and the company and third parties on the other, directions given to the receiver by the debenture holder will not render the latter liable at the suit of the company or such third parties. Such directions are taken as emanating from the company … I do not think it possible that a receiver can be the agent of the debenture holder in the sense that he is agent of the company when the debenture so provides. After quoting part of this passage Blanchard and Gedye [The Law of Company Receiverships in Australia and New Zealand (2nd ed, 1984 at 52)] go on to say that: ‘… in agency law generally, an agent can have two principals and it should not be thought that a receiver could never be the agent of the debenture holder in relation to particular matters whilst generally being the agent of the company.’ The matter was also the subject of discussion by the Ontario Court of Appeal in Peat Marwick Ltd v Consumers’ Gas Co (1980) 113 DLR (3d) 754 at 762 where Houlden JA considered that, notwithstanding the language of a debenture which clearly made the receiver

[page 467] the agent of the mortgagor, in performing acts such as exercising the power of sale, the receiver acts as agent for the mortgagee while, in performing acts such as occupying the premises and carrying on the business, the receiver acts as agent for the mortgagor. Conversely, in Robinson Printing Co, Ltd v Chic, Ltd [1905] 2 Ch 123 at 132,Warrington J, in considering a debenture that did not constitute the receiver the agent of the mortgagor, said that although such a receiver was generally the agent of the mortgagee, ‘he is also for some purposes the agent of the company, and certainly to such an extent as may be necessary to enable him to exercise the powers conferred upon him by the debenture’. Certainly, as Blanchard and Gedye say (supra at p 52), the intervention of a mortgagee will have to be serious before that mortgagee is found liable for the defaults of the receiver and in particular it will have to go beyond mere consultation or the communication of preferences by the mortgagee. Nevertheless, the position is, to my mind, correctly stated by Scott V-C in Medforth v Blake (supra at 95) as follows: If a mortgagee establishes a relationship with the receiver he has appointed under which the receiver exercises his powers in accordance with instructions given by the mortgagee, I can see the force of an argument that if the receiver is liable to the mortgagor then so will the mortgagee be liable. … If the mortgagee chooses to instruct the receiver to carry on the business in a manner that is a breach of the receiver’s duty to the mortgagor, it seems to be quite right that the mortgagee, as well as the receiver, should incur liability. This conclusion does not in the least undermine the receivership system. What it might do is to promote caution on the part of mortgagees in seeking to direct receivers as to the manner in which they (the receivers) should exercise their powers. I would regard that as salutary. Here the evidence clearly reveals that the Bank was heavily involved in the performance of the Receiver’s duties, even to the extent of directing when and to whom the Receiver was to exercise his power of sale. In those circumstances, it is proper that the Bank be held to account in the same manner as the Receiver and to the same standards.

Referring to these passages in Chia, Croft J said in Bank of Western Australia v Abdul at 41–2: It is clear from Chia and the authorities to which reference was made that a receiver has a duty to keep the mortgagee, the secured creditor, informed as to the progress of the receivership. [(2000) 50 NSWLR 557 at 630, [881]] This process of keeping the mortgagee, the secured creditor, informed is not to be confused with direction, interference and instruction necessary to displace the agency relationship with the mortgagor, the secured debtor. Communication between the receiver and the mortgagee, the secured creditor, is entirely proper and will not lead to displacement of the agency relationship unless it goes beyond mere consultation or the communication of preferences by the mortgagee, the secured creditor. [See State Bank of New South Wales v Chia (2000) 50 NSWLR 587, at [631], [885] (Einstein J); and South Johnstone v Dennis (2007) 163 FCR 343 at 364, [110] (Middleton J).] This position is unsurprising, as it is the mortgagee, the secured creditor, that appoints the receiver and pays the receiver’s fees during the course of the receivership. In general terms, both parties, the mortgagor and the mortgagee, have a direct interest in the outcome of the receivership, but the mortgagee

significantly more so where the secured assets are unlikely to realise sufficient funds to meet the principal, interest and costs associated with default and realisation of assets. The present circumstances are just such a case. It is for these practical and commercial reasons that more than mere consultation or the communication of preferences by the mortgagee, the secured creditor, is required.[36]. As is indicated by the judgment in Chia, [see (2000) 50 NSWLR 587 at 631, [885] (Einstein J)] it is necessary to establish in a case like the present that the mortgagee, the secured creditor, was ‘heavily involved’ in the performance of the activities of the receiver. The evidence must show that the mortgagee, the secured creditor, was so intimately involved in the performance of the receiver’s activities as to transform the character of the relationship between the mortgagee, the secured creditor, and the receiver into one of principal and agent. It is in this context that I turn to consider the evidence relating to the sale of the assets of the businesses of the Abdul Companies by the receivers and managers. The degree of communication and interaction generally between a receiver and a mortgagee, as secured creditor, depends very much on the nature of the secured property, hence the size, nature and complexity of the receivership task. In the present circumstances, the receiverships were undoubtedly complex, involving 17 separate operating businesses with significant sensitivity in terms of statutory, regulatory and licensing issues. For example, two of the companies (BNA and Shamrock) … operated businesses which were aged care facilities and which, for their continued

[page 468] operation, required maintenance of licensing from the Commonwealth government which, in turn, required maintenance of prescribed standards for service providers and for facilities and services. Any loss of the ability to maintain licences and to continue to operate business of this kind is likely to convert the asset realisation process to one of merely selling fixtures and fittings; having lost the value of the goodwill of the particular business, an asset that may be the most valuable, and of considerable worth.

The receiver’s position as agent of the mortgagor does not necessarily mean that there are no other parties to be considered: see also Bride v Freehill Hollingdale and Page (1996) ANZ ConvR 593 (WA, FC) (Pidgeon, Anderson and Owen JJ). It must also be remembered that the receiver owes fiduciary duties to the debenture holder who has a right, as against the receiver, to be put in possession of all the information concerning the receivership available to the receiver: see Re Magadi Soda Co Ltd (1925) 41 TLR 297. The result is that the receiver, in the course of the receivership, performs duties on behalf of the debenture holder as well as the mortgagor. And these duties may relate closely to the affairs of the entity which is the subject of the receivership: Gomba Holdings UK Ltd v Minories Finance Ltd [1988] 1 WLR 1231 at 1233. If not expressed or deemed to be agent of the mortgagor, the receiver will

be agent of the mortgagee: Deyes v Wood [1911] 1 KB 806. On the status of a receiver generally, see Re B Johnson & Co (Builders) Ltd [1955] Ch 634; [1955] 2 All ER 775; Visbord v Federal Commissioner of Taxation (1943) 68 CLR 354; Expo International Pty Ltd v Chant [1979] 2 NSWLR 820; (1991) 9 C & SLJ 395 (Adenwala). The agency of the receiver has been expressed to be a real one (see Ratford v Northavon District Council [1987] QB 357 at 372; [1986] 3 All ER 193 at 203 and Rhodes v Allied Dunbar Pension Services Ltd [1989] 1 All ER 1161; [1989] 1 WLR 800), but it is nevertheless of a special or limited nature. This is apparent from the duty of a receiver to account to the mortgagee: Leicester Permanent Building Society v Butt [1943] Ch 308; [1943] 2 All ER 523. (As to the date from which a receiver appointed by a second mortgagee must account to a receiver appointed by a first mortgagee, see Re Belbridge Property Trust Ltd [1941] Ch 304; [1941] 2 All ER 48.) On the right of the receiver of a company to the books and records of the company, see Re Geneva Finance Ltd; Quigley v Cook (1991) 7 ACSR 415. For the duty of a receiver of a company to provide accounts to the company, see Gomba Holdings UK Ltd v Homan [1986] 3 All ER 94; [1986] 1 WLR 1301; Corporations Act s 421(1)(d), (2). The special nature of the agency is also illustrated by the duty of care owed by a receiver in relation to the exercise of a power of sale. Although nominally the agent of the mortgagor, the receiver’s primary duty is to realise the assets of the mortgagor in the interests of the mortgagee: Expo International Pty Ltd v Chant [1979] 2 NSWLR 820; Gomba Holdings UK Ltd v Homan, above; Medforth v Blake, above; Silven Properties Ltd v Royal Bank of Scotland plc [2004] 4 All ER 484; [2004] 1 WLR 997 (CA); and see 18.14 and 20.21ff. Further, it has been held that solicitors retained by the receiver owe no duties to the mortgagor of a solicitor–client nature: see Bride v Freehill Hollingdale and Page (1996) ANZ ConvR 593 (WA, FC). For the fiduciary duty of the receiver to keep the debenture holder informed of the progress of the receivership, see Gomba Holdings UK Ltd v Minories Finance Ltd [1988] 1 WLR 1231; Downsview Nominees Ltd v First City Corp Ltd [1993] AC 295; [1993] 3 All ER 626 (PC). The receiver ceases to be the agent of a mortgagor company upon the company being wound up, but the receiver does not thereupon automatically

become the agent of the mortgagee: Gosling v Gaskell [1897] AC 578 (HL); Expo International Pty Ltd v Chant, above; Mercantile Credits Ltd v Atkins (1985) 1 NSWLR 670, affirmed (1985) [page 469] 10 ACLR 153; Moodemere Pty Ltd v Waters [1988] VR 215. The liquidation does not affect the receiver’s power to hold and dispose of the company’s property comprised in the mortgage: Sowman v David Samuel Trust Ltd [1978] 1 All ER 616; [1978] 1 WLR 22; Re Leslie Homes (Aust) Pty Ltd (1984) 8 ACLR 1020. The winding up of a mortgagor company does not terminate the receiver’s right to carry on the business of the company, where the receiver has such right under the mortgage: Mercantile Credits Ltd v Atkins. A receiver who, although originally appointed by the mortgagee, is subsequently appointed by the court, ceases to be agent of the mortgagor: Hand v Blow [1901] 2 Ch 721 at 732; cf Lever Finance Co Ltd v Needleman’s Property Trustee [1956] Ch 375; [1956] 2 All ER 375.

Appointment of a receiver 18.6 Under an express power the receiver may be appointed in the events specified in the mortgage deed, subject to any statutory provision extended to express powers (for example, NSW Act s 115A(2)): see 18.3. It will be a matter of construction whether the power is exercisable in the particular circumstances: see Canberra Advance Bank Ltd v Benny (1992) 38 FCR 427; 9 ACSR 179. There is no implied power to appoint a receiver on the ground that the security is in jeopardy: Cryne v Barclays Bank plc [1987] BCLC 548. But the court may make an appointment in such circumstances: see 18.18. Under the statutory power a receiver may be appointed when the mortgagee becomes entitled to exercise the power: see 18.3. The appointment of a receiver may be restrained where it is claimed that the power is not exercisable. But the mortgagor may be required to pay what is due under the mortgage into court: see Goldcorp Pty Ltd v Schmierer [1992] ACL Rep 295 Qld 11. For the principles as to payment in relation to

injunctions to restrain sale, see 20.37. A mortgagee is under no duty to refrain from exercising a power of appointment of a receiver, when that power has become exercisable, on the ground that to do so might cause loss to a company mortgagor or its unsecured creditors or that to do so would be a duplication of the efforts of any liquidator of the company: Re Potters Oils (No 2) [1986] 1 All ER 890; [1986] 1 WLR 201; Shamii v Johnson Matthey Bankers Ltd [1991] BCLC 36. A receiver may be appointed even though the triggering event is fairly minor such as failure to file quarterly financial statements (Canberra Advance Bank Ltd v Benny (1992) 38 FCR 427; 9 ACSR 179), even if no money appears to be owing at the time of the event: Sue Dwyer Real Estate Pty Ltd v Histcote Pty Ltd (2001) 161 FLR 413 (QSC). There is no implied term that the appointor will only be reasonable about the appointment of a receiver: Paul Kennedy Transport Pty Ltd v ANZ Banking Group Ltd (1993) 6 BPR 13,883; Sue Dwyer Real Estate Pty Ltd v Histcote Pty Ltd, above, at 417. Dicta in some recent cases concerning court-appointed receivers stress the serious consequences of the appointment of a receiver and indicate some reluctance to make an appointment save in extreme circumstances: see 18.18. In the case of an out-of-court appointment, there is authority that the mortgagee is entitled to exercise his rights strictly. (There are also authorities the other way: see 3.10.) So a mortgagee may take advantage of technical breaches which trigger off the right to appoint. On technical breaches, see McMahon v State Bank of New South Wales (1990) 8 ACLC 315; Canberra Advance Bank Ltd v Benny (1992) 38 FCR 427; 9 ACSR 179; Shalhoub Holdings Pty Ltd v Donnelly [1992] ACL Rep 295 NSW 20. The mortgagee may rely on subsequently discovered facts which existed at the time of the appointment to justify the appointment as long as the facts fall under any type of default specified: see Canberra Advance Bank Ltd v Benny. But a receiver should not be appointed for an improper purpose (Downsview Nominees Ltd v First City Corp Ltd [1993] AC 295; [1993] 3 All ER 626 (PC)) — for example merely to disrupt the receivership of a receiver appointed by another mortgagee. If this [page 470]

is done, the appointor and the receiver may be liable to the other mortgagee and the mortgagor: see Downsview Nominees Ltd v First City Corp Ltd. The right to appoint a receiver may be lost by waiver: see Canberra Advance Bank Ltd v Benny, above; Butler Pollnow Pty Ltd v Garden Mews St Leonards Pty Ltd (1988) 13 ACLR 656. Save in the case of a company mortgagor, there is no restriction upon who may be appointed receiver. Indeed, this has been one of the criticisms of the system of receivership that receivers are often persons associated with the mortgagee and therefore more concerned with the interests of the mortgagee than the general body of creditors of the mortgagor. The Corporations Act s 418 lists the persons who may not act as a receiver of a corporation. For a trust company as receiver in New South Wales, see NSW Act s 115(6A). Where two or more persons are appointed receiver, the question will often arise as to whether both must join in the exercise of their power or whether they can act severally. In the absence of any clear expression in the charge, the answer will depend on the nature of the duties the charge authorises the receivers to perform: Kendle v Melsom (1998) 193 CLR 46 at 51; 151 ALR 740 at 742. See also Gwembe Valley Development Co Ltd v Koshy (No 2) [2000] 2 BCLC 705 at 720–2. Since the validity of the acts of a receiver depend upon the validity of his appointment (so that if the appointment is invalid the receiver will be at risk from the mortgagor or a trustee in bankruptcy or liquidator of the mortgagor and other interested parties, such as other mortgagees) it is very much in the receiver’s interest to check carefully that the mortgage creating the power of appointment is a valid one and that the power to appoint has arisen: see 18.14. A well-drafted power of appointment of a receiver should contain an indemnity in favour of the person appointed receiver against any liability arising solely by reason of the invalidity of the appointment. For indemnities in respect of receivers of corporations, see 18.15.

Other matters re appointment of receivers 18.7 Where a mortgagee has appointed a receiver on a ground which it later transpires was not open to him, the appointment will be valid if some

other ground was available at the time of the appointment: Union Bank v Downes (1896) 12 WN (NSW) 131; McMahon v State Bank of NSW (1990) 8 ACLC 315; Canberra Advance Bank Ltd v Benny (1992) 38 FCR 427; 9 ACSR 179. Where the mortgage debt is repayable on demand, upon the demand being made the mortgagee must allow the mortgagor a reasonable opportunity to comply with the demand before enforcing the security: Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 153 CLR 491; 51 ALR 609. But if the mortgagor obviously cannot pay, there is no need to wait: Murray Bros (Parramatta) Pty Ltd v Commercial Bank of Australia Ltd (1983) Conveyancing Service (NSW) [92204]; and see French v Capple [2001] NSWSC 574 at [19] (Windeyer J). A notice demanding payment of all moneys due under the mortgage is probably sufficient and the notice will not be bad if it incorrectly states the amount due: see Bunbury Foods Pty Ltd v National Bank of Australasia Ltd; Bank of Baroda v Panessar [1986] 3 All ER 751; NRG Vision Ltd v Churchfield Leasing Ltd [1988] BCLC 624. The mortgagee may appoint a receiver even where he himself has already gone into possession of the mortgaged property (and thus relieve himself of the potential liability of mortgagee in possession referred to in 18.1): Refuge Assurance Co Ltd v Pearlberg [1938] Ch 687; [1938] 3 All ER 231. In the case of a mortgage of Torrens system land the statutory power to appoint a receiver is exercisable even though the mortgage has not been registered: Isherwood v Butler Pollnow Pty Ltd (1986) 6 NSWLR 363. [page 471] A receiver is appointed by writing under the hand of the mortgagee: Vic Act s 109(1). The NSW Act s 115(5) deals with the replacement of a receiver and the appointment of a new receiver by writing under the hand of a mortgagee, but does not require any particular formality for the initial appointment. But s 115A(2)(c) provides that the powers of a receiver shall not be exercisable unless there has been default in respect of the mortgage and the appointment was made by an instrument in writing which has been registered: see Isherwood v Butler Pollnow Pty Ltd, above.

The terms of the manner of appointment must be observed. A power to appoint a receiver and manager and a separate power to appoint an additional receiver and manager did not permit the appointment of two receivers and managers jointly and severally: Wrights Hardware Pty Ltd v Evans (1988) 13 ACLR 631. A receiver is appointed when the document of appointment is handed to him by a person having authority to appoint, or his agent, and in circumstances from which it may fairly be said that the appointor was appointing the receiver and the receiver accepted the appointment: Cripps (Pharmaceuticals) Ltd v Wickenden [1973] 2 All ER 606; [1973] 1 WLR 944; Re Gabriel Controls Pty Ltd (1982) 6 ACLR 684. In the case of the appointment of the receiver of a corporation, notification of the appointment must be lodged and gazetted: Corporations Act s 427. A statement that a receiver has been appointed must be set out in every public document and every eligible negotiable instrument of the corporation: Corporations Act s 428. A receiver appointed on and after 1 July 2000 must also notify the appointment to the Australian Taxation Office within 14 days of appointment and must not part with assets without the approval of that office, until the commissioner has notified the receiver of his claim. Thereafter the tax claim must be given attention as required by the formula in the Act: Taxation Administration Act 1953 (Cth) Sch 1 260.75. Similar provisions for receivers appointed prior to that date were contained in the Income Tax Assessment Act 1936 (Cth) s 215.

Effect of appointment 18.8 The appointment does not bar the right of the mortgagee to sue for the mortgage debt: Lynde v Waithman [1895] 2 QB 180. The receipt of rent by a receiver who is agent of the mortgagor does not create a tenancy by estoppel binding on the mortgagee, but if the receiver is the agent of the mortgagee the demand and receipt of rent by such a receiver is an unequivocal recognition of the existence of the tenancy, but not necessarily of a tenancy on the terms of the lease under which the tenant holds the premises: Lever Finance Co Ltd v Needleman’s Property Trustee [1956] Ch 375; [1956] 2 All ER 375; Chatsworth Properties Ltd v Effiom

[1971] 1 All ER 604; [1971] 1 WLR 144. Where a receiver is appointed to receive rents for the mortgagee and the mortgagor is later allowed to receive the rents, the mortgagee’s rights are not affected, except as to later encumbrances of whose claims he had notice: Juggeewundas-Keeka Shah v Ramadas Brijbookundas (1841) 2 Moo Ind App 487; 18 ER 386. The receiver must not be interfered with by the mortgagor and any attempt to do so, such as by distraining on the tenants, will be restrained: Bayly v Went (1884) 51 LT 764. As to the right of a third party (who had a management agreement with the mortgagor) to restrain the receiver interfering with its business operations, see Hyatt Australia Ltd v LTCB Australia Ltd [1996] 1 Qd R 260 (CA). The death of the mortgagor does not operate as a revocation of the power to appoint a receiver: Re Hale; Lilley v Foad [1899] 2 Ch 107 at 117. The receiver may be permitted to sue in the name of the mortgagor’s personal representatives on giving indemnity: Fairholme and Palliser v Kennedy (1892) 24 LR Ir 498. [page 472]

Powers of receiver 18.9 The powers of a receiver are those given by the power of appointment, whether express or implied: see Harold Meggit Ltd v Discount and Finance Ltd (1939) 56 WN (NSW) 23; Re Gabriel Control Pty Ltd (1982) 6 ACLR 684; Bufalo Corp Pty Ltd v Leone (2001) 40 ACSR 327. The effect of a joint and several appointment of receivers and managers is not to confer any power on the individual appointees to act independently: Kendle v Melsom (1998) 193 CLR 46; 151 ALR 740, and see 72 ALJ 280 (PWY). A receiver of a corporation is given specific powers: see Corporations Act s 420. A receiver appointed under the statutory power has power to demand and recover all the income of the property of which he is appointed receiver, by action or otherwise, in the name either of the mortgagor or of the mortgagee, to the full extent of the estate or interest which the mortgagee could dispose of, and to give effectual receipts accordingly for the same and to exercise any powers which may have been delegated to him by the

mortgagee under the legislation (for example, the power of leasing): NSW Act s 115(3); Victorian Act s 109(3). A person paying money to the receiver is not concerned to inquire whether any case has happened to authorise the receiver to act: NSW Act s 115(4); Victorian Act s 109(4). For the receiver’s power to insure property comprised in the mortgage, see NSW Act s 115(7),Victorian Act s 109(7). A receiver appointed to do something has an incidental power to do what is necessary to effect that object: Wheeler (M) & Co Ltd v Warren [1928] Ch 840. For receivers of corporations, see Corporations Act s 420(1). A receiver appointed under the statutory power is not entitled to grant leases without the sanction of the court (see Re Cripps [1946] Ch 265) unless the mortgagee has delegated to him the mortgagee’s leasing powers.

Receivers’ powers of sale 18.10 A receiver is usually given an express power of sale and without such express power he will have no power to sell: Marshall v Cottingham [1982] Ch 82; [1981] 3 All ER 8. But unless the statutory power (see 20.5) applies (in which case the mortgagee can sell under the statutory power, or the receiver as his agent), on a sale by a receiver the mortgagor will have to join the sale, as the property will remain vested in the mortgagor. Accordingly, the security document should appoint the lender, and any receiver appointed, attorneys of the borrower to convey or otherwise transfer any property which forms security. On the form of execution in such circumstances, see Industrial Development Authority v Moran [1978] IR 159. A receiver with power of sale will be subject to the same obligations as a mortgagee (as to which see Chapter 20, particularly 20.21ff) and, in addition, will be liable under Corporations Act s 420A: see 18.13. In Kinjella Pty Ltd v Jay (1996) 18 ATPR 41-514, the New South Wales Supreme Court granted an injunction against a receiver from selling a motel without proper advertisement. The property over which the receiver is appointed does not vest in the receiver: Re Scottish Properties Pty Ltd (1972) 2 ACLR 264; Wilton v Commonwealth Bank of Australia [1974] 2 NSWLR 96.

Receivers and the Corporations Act 18.11 Corporations Act 2001 (Cth) Pt 5.2 applies to receivers and other controllers of the property of a corporation. The application of this Part is generally limited to the [page 473] property of a corporation (see s 417); and see the definition of ‘property’ in relation to a corporation in s 416. ‘Corporation’ is broadly defined in s 57A and includes any body corporate or a company except an exempt public authority and a corporation sole. Section 66A provides for exempt bodies which are bodies corporate, not being companies, which are incorporated under state or territorial legislation. Part 5.2 has a broader application than to receivers as it applies to a ‘controller’ of the property of a corporation. ‘Controller’ is defined in s 9 as: ‘Controller’, in relation to the property of a corporation, means: (a) a receiver, or receiver and manager, of that property; or (b) anyone else who (whether or not as agent for the corporation) is in possession or has control, of that property for the purpose of enforcing a charge.

On its face this is a very broad definition and would include a mortgagee in possession and the agent of a mortgagee in possession (but see s 419(2)). However, by reason of the breadth of these and other provisions (see s 420(1) and (2)) it may be thought that they do not apply to a receiver (or controller) other than in circumstances where that person has control and management of the whole property and undertaking of the corporation — and not to a receiver appointed for the purposes of a particular mortgage. See Prioris Pty Ltd v Inscorp Ltd (SC (NSW), 4 February 1994,Young J), where it was pointed out that there was a very real difference between the case of a receiver over the whole of a corporation’s property and a receiver over a specified piece of mortgaged property. The differences between a receiver appointed for limited purposes or property and a receiver and manager of the whole property of a corporation are acknowledged in sections such as 420B, 421, 421A, which only apply to a ‘managing controller’.‘Managing controller is defined in s 9 as:

‘managing controller’, in relation to property of a corporation, means: (a) a receiver and manager of that property; or (b) any other controller of that property who has functions or powers in connection with managing the corporation; …

Under s 418A, the court (defined to mean the Federal Court or a State Supreme Court: ss 9 and 58AA) may, where there is doubt on a specific ground, declare whether the purported appointment of a person as receiver was valid or whether a person validly entered into possession or assumed control of property of a corporation. Sections 434D–434G apply Pt 5.2 to situations where there are two or more receivers, receivers and managers, controllers or managing controllers. Powers can be performed or exercised by one of them or by two or more of them unless the order or appointing instrument says otherwise. That a power can be performed or exercised by one receiver does not mean that such actions are authorised: see below 18.14.

Section 420 of the Corporations Act 18.12 Section 420 confers power on a receiver with respect to the property of the corporation in relation to which the receiver was appointed: s 420(4). Section 420(1) confers broad general powers and s 420(2) specific powers: 420(1) Subject to this section, a receiver of property of a corporation has power to do, in Australia and elsewhere, all things necessary or convenient to be done for or in connection with, or as incidental to, the attainment of the objective for which the receiver was appointed. 420(2) Without limiting the generality of subsection (1), but subject to any provision of the court order by which, or the instrument under which, the receiver was appointed, being a provision that limits the receiver’s powers in any way, a receiver of property of a corporation has, in addition to any powers conferred by that order or instrument, as the case may be, or by any other law, power, for the purpose of attaining the objectives for which the receiver was appointed:

[page 474] (a) to enter into possession and take control of property of the corporation in accordance with the terms of that order or instrument; (b) to lease, let on hire or dispose of property of the corporation; (c) to grant options over property of the corporation on such conditions as the receiver thinks

fit; (d) to borrow money on the security of property of the corporation; (e) to insure property of the corporation; (f)

to repair, renew or enlarge property of the corporation;

(g) to convert property of the corporation into money; (h) to carry on any business of the corporation; (j)

to take on lease or on hire, or to acquire, any property necessary or convenient in connection with the carrying on of a business of the corporation;

(k) to execute any document, bring or defend any proceedings or do any other act or thing in the name of and on behalf of the corporation; (m) to draw, accept, make and indorse a bill of exchange or promissory note; (n) to use a seal of the corporation; (o) to engage or discharge employees on behalf of the corporation; (p) to appoint a solicitor, accountant or other professionally qualified person to assist the receiver; (q) to appoint an agent to do any business that the receiver is unable to do, or that it is unreasonable to expect the receiver to do, in person; (r)

where a debt or liability is owed to the corporation — to prove debt or liability in a bankruptcy, insolvency or winding up and, in connection therewith, to receive dividends and to assent to a proposal for a composition or a scheme of arrangement;

(s) where the receiver was appointed under an instrument that created a charge on uncalled capital or uncalled premiums of the corporation: (i)

in the name of the corporation, to make a call in respect of money unpaid on shares in the corporation (whether on account of the nominal value of the shares or by way of premium); or

(ii) upon the giving of a proper indemnity to a liquidator of a corporation in the name of the liquidator, to make a call in respect of money unpaid on account of the nominal value of shares in the corporation; (t)

to enforce payment of any call that is due and unpaid, whether the calls were made by the receiver or otherwise;

(u) to make or defend an application for the winding up of the corporation; and (w) to refer to arbitration any question affecting the corporation.

Various duties are imposed on managing controllers (the definition of which includes receivers and manages: see s 9, above), including duties in relation to bank accounts and accounting records (s 421) and reporting about the corporation’s affairs: ss 421A, 422. All receivers (controllers) have obligations in relation to the duty of care in exercising any power of sale (s 420A) and an obligation to report certain matters: s 422. A receiver (or controller) of the property of a corporation may apply to the court (see above)

for directions as to the performance or exercise of any functions and powers: s 424.

Section 420A of the Corporations Act 18.13

Section 420A provides:

420A(1) In exercising a power of sale in respect of property of a corporation, a controller must take all reasonable care to sell the property for: (a) if, when it is sold, it has a market value — not less than that market value; or (b) otherwise — the best price that is reasonably obtainable, having regard to the circumstances existing when the property is sold.

[page 475] 420A(2) Nothing in subsection (1) limits the generality of anything in section 180, 181, 182, 183 or 184.

Sections 180–184 are a group of sections making it clear that directors must exercise their powers in good faith and with due diligence and that they are criminally liable if they are intentionally dishonest or are reckless. The effect of the reference to these provisions may be thought to impose a requirement on a receiver exercising a power of sale in respect of the property of a corporation subject to a mortgage a duty of care similar to that imposed by the Queensland Property Law Act 1974 s 85 or at common law in England in Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949; [1971] 2 All ER 633 (CA); but see Florgale Uniforms Pty Ltd (Receivers and Managers Appointed) (in liq) v Orders (2004) 11 VR 54; and see 20.21 and 20.22 where the nature of the duty arising from these provisions is discussed further. The section has been examined in depth on a few occasions: see Artistic Builders Pty Ltd v Elliot & Tuthill (Mortgages) Pty Ltd (2002) 10 BPR 19,565; GE Capital Australia v Davis (2002) 180 FLR 250; Ultimate Property Group Pty Ltd v Lord (2004) 60 NSWLR 646; Florgale Uniforms Pty Ltd v Orders (2004) 11 VR 54; Jovanovic v Commonwealth Bank of Australia (2004) 87 SASR 570 (FC); and Fortson Pty Ltd v Commonwealth Bank of Australia [2008] SASC 49 (FC). In Florgale Uniforms, it was

emphasised by Dodds-Streeton J that all the circumstances existing at the time the property was sold must be considered (at (2004) 11 VR 82, [442]– [443]): The expert evidence establishes that the exercise of all reasonable care by a receiver would entail a process of selecting the method of realising the highest net return, by considering the different available means of sale and weighing the prices likely to be achieved against the likely costs and expenses entailed and the relative risks of the various methods in all the circumstances. The process is informed by the objective of securing the best possible return for the secured creditor, subject to the obligations imposed by general law doctrines and s 420A. It necessarily involves the exercise of judgment, taking into account all the relevant variables and circumstances of the particular case. It does not depend on matters of price or revenue alone, or any single factor in isolation. In my opinion, the process of evaluating and balancing the competing costs and benefits and the associated risks of various methods of sale will not, in every case, require a formal comparative analysis or documented calculations. All will depend on the circumstances of the individual case, including the scale of the receivership, the value and nature of the property involved, the receiver’s expertise in relation to the type of property, relevant expert advice, the advice or input of proprietors and staff, the trading history and marketing of the company, including during the receivership, and other relevant variables in a realistic commercial context.

The authorities are not uniform in relation to the remedy flowing from a breach of s 42A(1). In Ultimate Property Group v Lord it was held the appropriate remedy was an award of equitable damages ((2004) 60 NSWLR 646 at 659, [94]; and see Investec Bank (Australia) Ltd v Glodale Pty Ltd (2009) 24 VR 617 at 639–40, [96], [101]) but in other cases an accounting in equity has been ordered: see GE Capital Australia v Davis (2002) 11 BPR 20,529 at 20,540–3; Mijac Investments Pty Ltd v Graham (No 2) (2009) 72 ACSR 684 at [15], [172]; Jovanovic v Commonwealth Bank of Australia (2004) 87 SASR 570 (FC). The term ‘market value’ as used in the section has been discussed on many occasions: see Emerson v Custom Credit Corporation Ltd [1994] 1 Qd R 516; Jeogla Pty Ltd v ANZ Banking Group Ltd (1999) 150 FLR 359 at 445 ff, the appeal from that decision reported as Skinner v Jegola Pty Ltd (2001) 37 ACSR 106 at 112 ff and Ultimate Property Group Pty Ltd v Lord (2004) 60 NSWLR 646. In Lord’s case at 659, it was said that the term probably derived from the reasons of Salmon LJ in Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949 at 965; [1971] 2 All ER 633 at 643 where his Lordship had used it in its normal sense. In the Skinner case, Spigelman CJ said that the section was premised on the basis that one could have property with no market value. This is odd

because the leading case of [page 476] Spencer v The Commonwealth (1907) 5 CLR 418 is authority for the proposition that property always has a market value even though it may be difficult to determine in some cases. On this basis the provisions of s 420A may make little difference to the present general law position in Australia with respect to a mortgagee’s duties on exercising a power of sale, statutory or express. These provisions impose no requirement that the property be sold at any particular time, which is consistent with the general law position. There is no requirement that the price obtained be the better of (a) or (b), even assuming that the price (b) contemplates is less than that contemplated by (a), which does not necessarily follow. Thus if a receiver chose not to wait for the market but to sell quickly (but nevertheless consistent with the common law duty on sale), the best price in the circumstances may be obtained and so paragraph (b) complied with. Additionally, it should be noted that s 420B empowers the court (see above) to authorise a ‘managing controller’ to dispose of property despite a prior charge. The court may impose conditions including that a specified amount of money be applied in payment of specified amounts secured by the prior charge: s 420B(6)(b).

Liability of receiver 18.14 As has been seen, a receiver is generally the agent of the mortgagor and as such the mortgagor will be solely responsible for the receiver’s acts or defaults, unless the mortgage deed otherwise provides: NSW Act s 115(2); Victorian Act s 109(2). So it has been held that the mortgagor was bound by the acts of the receiver where the receiver paid statute-barred debts: see Hibernian Bank v Yourell (No 2) [1919] 1 IR 310; Portman Building Society v Gallway [1955] 1 All ER 227; [1955] 1 WLR 96. Nevertheless, the receiver has a duty to manage the mortgagor’s property with due diligence, and to take reasonable steps to manage the property profitably: Medforth v Blake

[2000] Ch 86; [1999] 3 All ER 97 (CA). For the recent developments in relation to sale by a receiver where the receiver may be held to be agent of the mortgagee who has interfered in the receivership, see 20.21ff. For the liability of a receiver of a corporation, see Corporations Act s 419. On the concurrent liability of the company, see West St Properties Pty Ltd v Jamison [1974] 2 NSWLR 435. On the duty of a receiver of a corporation as an officer of that corporation to act in good faith and with reasonable care and diligence, see Corporations Act ss 180 ff. An appointment of receivers and managers jointly and severally necessarily involves their accepting joint and several liability for breach of their duties: Kendle v Melsom (1998) 193 CLR 46; 151 ALR 740 and see 72 ALJ 280 (PWY). It follows that an individual who is appointed with others jointly and severally has no authority to act alone and will suffer the same fate as an individual acting without a valid appointment; and see Bride v Australian Bank Ltd [2000] WASC 116 where damages for trespass were awarded against a person who entered land and took possession without a valid appointment as receiver.

Remuneration of receiver 18.15 The receiver is entitled to retain out of any money received by him for his remuneration and in satisfaction of all costs, charges and expenses incurred by him as receiver, a commission at such rate, not exceeding five per cent on the gross amount of all money received, as is specified in his appointment and, if no rate is specified, then at the rate of five per cent on that gross amount, or at such higher rate as the court thinks fit to allow, on application made by him for that purpose: NSW Act s 115(6); Victorian Act s 109(6). Costs of realisation should be made payable by the mortgage deed out of the proceeds of sale, not out of the receiver’s commission: Marshall v Cottingham [1982] Ch 82; [1981] 3 All ER 8; and see this case on applications under the above provisions. Doubts have [page 477] been expressed as to whether a rate higher than five per cent can be provided

for in the mortgage deed by way of extension of the statutory power. There seems no reason why the general power of variation or extension should not apply, but, to avoid such doubt, it is probably preferable to have an express power of appointment of a receiver and to include a provision for remuneration in accordance with a professional scale. For a claim by a receiver for a rate of remuneration in excess of that fixed by the mortgage deed, see Re Odessa Promotions Pty Ltd (1979) ACLC 40523. A liquidator may apply to the court to fix a receiver’s remuneration: Corporations Act s 425. Any order made by the court prevails over the terms of the mortgage deed or appointment: see Re Potters Oils Ltd (No 2) [1986] 1 All ER 890; [1986] 1 WLR 890. In the absence of any provision for remuneration a receiver is entitled to proper remuneration as a quantum meruit: Re Vimbos Ltd [1900] 1 Ch 470. A receiver of a company is entitled to costs and expenses referable to the realisation of the mortgaged property notwithstanding that the floating charge under which the receiver was appointed has been avoided under the Corporations Act s 566: see Moodemere Pty Ltd v Waters [1988] VR 215. For the right of a receiver appointed under an invalid mortgage to reasonable remuneration for acts for the benefit of the mortgagor, see Monks v Poynice Pty Ltd (1987) 8 NSWLR 662. For the indemnity of the receiver in respect of liability incurred in the course of his duties when acting properly, see Jennings v Mather [1902] 1 KB 1 at 6; Savage v Union Bank of Australia Ltd (1906) 3 CLR 1170 at 1186. The receiver has a lien securing remuneration, costs and expenses reasonably incurred. The principles and authorities were considered by Barrett J in Dean-Willcocks v Nothingtoohard Pty Ltd (in liq) (2005) 53 ACSR 587 at 589–90, [6]–[10]: I begin by considering some legal principles. The plaintiffs point to the judgment of Dixon J in Re Universal Distributing Co Ltd (in liq) (1933) 48 CLR 171; [1933] ALR 107 for the proposition that if remuneration, costs and expenses are reasonably incurred by a receiver (or, as in that case, a liquidator) in realising a fund out of which a secured creditor is entitled to satisfaction, the remuneration, costs and expenses are to be charged upon the fund before it is applied towards satisfaction of the secured creditor’s debt. As it applies to receivers, the principle was stated by Tadgell J in Moodemere Pty Ltd (in liq) v Waters [1988] VR 215 at 229 as follows: Both a receiver appointed by the Court and (subject to the terms of his appointment) a receiver appointed out of Court have a right to resort for their

proper out-of-pocket expenses and remuneration to the proceeds of realisation of the fund that they are required to realise. In either case, it seems, the right might be characterised as a lien on the relevant fund; and it is limited by reference to the interest in the fund that is enjoyed by the beneficiary or beneficiaries for whom the realisation is made or attempted. So, where a receiver is appointed by the Court and is working for the benefit of all who have a legitimate interest in the fund, his lien may be correspondingly more extensive than it is in the case where the receiver is appointed out of Court by an individual creditor whose interest in the fund is limited. It must be appreciated, however, that the limitation is expressed not in terms of the quantum of the individual’s debt but in terms of his interest in the fund that affords the security for the debt. In the same case at 221, Murphy J, after reviewing cases up to and including Universal Distributing, said: I think it follows that where a company charges its assets, and a default occurs so that the creditor becomes entitled in equity to the assets charged, a person, validly appointed to realise the assets so as to provide a fund to satisfy the debt, is entitled to look to the fund itself to reimburse his proper costs, charges and expenses of realisation and his just remuneration attendant on the realisation, before even the creditor is paid his secured debt out of the fund. In my opinion, this principle applies whether the receiver is appointed by the court or not, and even if he be also the liquidator of the company. So that even if the fund is

[page 478] insufficient to pay both the just costs of realisation of the receiver, and the debt owed to the debenture holder, the receiver remains entitled to deduct and retain his moneys first. Any such lien enjoyed by a receiver is an equitable lien. As Gillard J observed in Re Lawrenson Light Metal Die Casting Pty Ltd; Australian Securities and Investments Commission v Lawrenson Light Metal Die Casting Pty Ltd (1999) 33 ACSR 288 at 295; [1999] VSC 500 (a case concerning a receiver appointed by the court), the particular form of lien in respect of a receiver’s remuneration, costs and expenses ‘is based upon an equity, namely, that it is just in all the circumstances that he should have a lien’. As his Honour also observed, the lien arises by operation of law in the manner described by Gibbs CJ in Hewett v Court (1983) 149 CLR 639 at 645; 46 ALR 87 at 90: Equitable lien does not depend either upon contract or upon possession. It arises by operation of law, under a doctrine of equity ‘as part of a scheme of equitable adjustment of mutual rights and obligations’; those words of Isaacs J were used in Davies v Littlejohn (1923) 34 CLR 174 at 185 in relation to the doctrine of vendor’s lien, but they have a general application. In Shirlaw v Taylor (1991) 31 FCR 222 at 230; 102 ALR 551 at 559; 5 ACSR 767 at 775, the

Full Federal Court regarded it as: … well settled that a receiver or receiver and manager appointed by the court has an indemnity over the assets of the company in question and is a secured creditor with a lien for his expenses, remuneration and costs. That case involved a provisional liquidator. The principle with respect to a court appointed receiver was traced back to the decision of Lord Eldon LC in Scott v Nesbitt (1808) 14 Ves 438; 33 ER 589. The equitable nature of the lien and its source in principles discussed in Hewett v Court, above, were recognised. Characteristics of the particular kind of equitable lien were mentioned by Austin J in Weston v Carling Construction Pty Ltd (2000) 175 ALR 202; 35 ACSR 100; [2000] NSWSC 693, a case concerning voluntary administration. His Honour said (at ALR 206; ACSR 104): An equitable lien which arises in this way does not depend upon possession: Hewett v Court (1982) 149 CLR 639; 46 ALR 87, see J O’Donovan, ‘The Administrator’s Priority and Statutory Lien in a Winding-up’ (1994) 12 Companies & Securities Law Journal 382 at 383. The lien does not place its holder in the same position as a mortgagee with a power of sale, but enables the lienee to make an application for the judicial sale of the assets to which the lien pertains.

For the receiver’s lien over the charged assets for liabilities incurred in the course of his duties, see National Australia Bank v Composite Buyers Ltd (1991) 6 ASCR 94.

Distribution by receiver of moneys received 18.16 The receiver must apply all money received by him: (a) in discharge of all rents, taxes, rates and outgoings whatever affecting the mortgaged property, (b) in keeping down all annual sums or other payments and interest on all principal sums having priority to the mortgage in right of which he is receiver, (c) in payment of his commission and of the premiums of all insurances properly payable under the mortgage deed or under the legislation and the costs of executing necessary or proper repairs directed in writing by the mortgagee, (d) in payment of the interest due and unpaid and accruing due in respect of any principal due under the mortgage and (e) in or towards the discharge of the principal due under the mortgage if so directed in writing by the mortgagee: NSW Act s 115(8); Victorian Act s 110. Though not specifically expressed as such, these provisions set out an order of priority of payments. On the liability of the receiver for tax, see 18.7. On repairs, see White v Metcalf [1903] 2 Ch 567. Interest payable out of moneys received includes arrears due at the time of appointment: National

Bank v Kenny [1898] 1 IR 197. The receiver must pay the residue, if any, of the money received by him to the person who, but for the possession of the receiver, would have been entitled to receive the income of which he was appointed receiver or who is otherwise entitled to the mortgaged property: NSW Act s 115(8); Victorian Act s 110. For preferential creditors where a [page 479] receiver is appointed in respect of property of a company subject to a floating charge, see Corporations Act s 433.

Termination of receivership 18.17 A receiver is functus officio upon the payment of any preferential or other debts ranking ahead of the debt secured by the charge under which he was appointed and as soon as the interests of his appointor have been satisfied: Expo International Pty Ltd v Chant [1979] 2 NSWLR 820. He is then under a duty to terminate the receivership and hand over any surplus assets to the mortgagor or the next subsequent encumbrancer. Prior to completion of the receiver’s duties, the receivership may be terminated by the receiver’s death, the resignation of the receiver, where the terms of the mortgage or appointment allow this, and the removal of the receiver under the terms of the mortgage deed or the appointment or under NSW Act s 115(5),Victorian Act s 109(5) or a court order. For removal by the court, see Re Neon Signs (Australasia) Ltd [1965] VR 125. The appointment of a receiver may be terminated by mutual agreement between the mortgagee and the receiver. Such termination, where it takes place before any realisation of assets, is sometimes called the ‘uplifting’ of the receivership. The effect of such uplifting is as if the receiver had not been appointed. The mortgage deed should make express provision for the termination of the receivership in the events referred to above and others and should also provide for the release of and indemnity for the outgoing receiver, on

appropriate terms. Any indemnity will not protect the receiver against liability incurred by the receiver through personal default or neglect: James v Commonwealth Bank of Australia (1992) 8 ACSR 444. For the avoidance of provisions indemnifying officers of a company, see Corporations Act s 199A. Any change in the receivership of a company must be notified and gazetted: Corporations Act s 427.

B. The Appointment of a Receiver by the Court Power of court to appoint receiver 18.18 In all jurisdictions there is a general power in the court to appoint a receiver in all cases in which it appears to the court to be just or convenient to do so: Supreme Court Act 1970 (NSW) s 67; Supreme Court Act 1986 (Vic) s 37(1), (2); Supreme Court Act 1995 (Qld) s 246; Supreme Court Act 1935 (SA) s 29; Supreme Court Civil Procedure Act 1932 (Tas) s 11(12); Supreme Court Act 1935 (WA) s 25(9). A similar power is usually given expressly or by extension of the above to any local intermediate court. The statutory implied power of a mortgagee to appoint a receiver has made this jurisdiction one that is rarely exercised today in relation to mortgages and debentures.

Purpose of appointment 18.19 The power is exercisable where there has been a breach of the mortgagor’s obligations or where, without such breach, the security is in jeopardy or derelict: see Re Prytherch; Prytherch v Williams (1889) 42 Ch D 590; Re Victoria Steamboats Ltd; Smith v Wilkinson [1897] 1 Ch 158. The basic object of receivership is to assist the preservation of the assets: see AIDC v Co-operative Farmers & Graziers Direct Meat Supply Ltd [1978] VR 633. It is appreciated by the courts that the appointment of a receiver is a drastic remedy and that an appointment should only be made in extreme cases and where there is no other way of protecting the assets. In considering making an appointment the court should take care for the borrower’s position: see Bond Brewing Holdings Ltd v National Australia Bank Ltd (1990) 1 ACSR 445 at 457; 8 ACLC 330 at 341, referring to Owen v Homan (1851)

[page 480] 3 Mac & G 378; 42 ER 307. A similarly restrictive view was taken in Barry Plant Real Estate (Doncaster & Templestowe) Pty Ltd v Pamacorp Consulting Services Pty Ltd [1991] ACL Rep 295 Vic 1 (out-of-court appointment); and in the context of Corporations Act s 1323, see Beach Petroleum NL v Johnson (1993) 9 ACSR 404; 11 ACLC 75. If such extreme circumstances are not present a receiver will not be appointed and the applicant will be left to his other available remedies: see, for example, Haywood v Martin (1883) 9 VLR (E) 143, where a mortgagee in possession was charged with mismanagement and the mortgagor was left to the taking of an account. In the limited circumstances mentioned above, and on the application of some or one of the parties interested in the mortgaged property, but not a stranger, the court will appoint a receiver, whose duty it is to get in and take charge of the mortgaged property and any outstanding parts thereof and the rents and profits and to see to the management of the property, applying the moneys received according to the directions of the court and accounting to the court for such application. The application for the appointment of a receiver by the court may be the only relief sought or one of several heads of relief sought. In either case such appointment may be a matter of urgency, in which case the appointment of an interim receiver may be sought by interlocutory application. For an application for an interim receiver, see McLellan v Halsey [1955] QWN 61. The application for a receiver may be made to the court by summons or motion or, where necessary, ex parte on affidavit: New South Wales Uniform Civil Procedure Rules 2005 Pts 6, 18 and 26; Victorian Supreme Court Rules O 39. Normally, notice of intention to apply should be given and an ex parte order should only be made in cases of emergency: see Bond Brewing Holdings Ltd v National Australia Bank Ltd, above. An undertaking in damages is an essential condition to the appointment of a receiver on an ex parte application: see National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 169 CLR 271; 92 ALR 49.

Security

18.20 Where an order is made by the court directing the appointment of a receiver the receiver is required to give security (usually by guarantee) duly to account for what he will receive on account of rents and profits for the receipt of which he is appointed, or to be answerable for what he will receive in respect of the personal estate which he is to get in, and to account for and pay the same respectively as the court shall direct. The court will not usually dispense with security, even by consent of the parties interested: Bainbrigge v Blair (1841) 3 Beav 421; 49 ER 165. The receiver is not legally clothed with, or able to perform, the duties of his office until it is certified that the security has been completed, so until that time no contempt is committed by interfering with the property: Edwards v Edwards (1876) 2 Ch D 291. But where a direct appointment is made by the court such as under the former Supreme Court Rules Pt 29(2) (NSW) (see now Uniform Civil Procedure Rules 2005 r 26.3), security is not required: McIntyre v Perkes (1987) 15 NSWLR 417. In any event the receiver may be permitted by the court to act at once on the applicant undertaking to be responsible for him.

Who may apply for the appointment of a receiver 18.21 The court may appoint a receiver even though the applicant has power to appoint a receiver out of court under an express or the statutory power and, where an action is pending, a judicial appointment is preferable: Tillett v Nixon (1883) 25 Ch D 238. But the court will not, as a rule, assist a mortgagee in possession to get rid of his liabilities by appointing a receiver: Re Prytherch; Prytherch v Williams (1889) 42 Ch D 50; National [page 481] Bank of Australasia v United Hand-in-Hand and Band of Hope Co (1879) 4 App Cas 391 (PC). An equitable mortgagee and a chargee are entitled to apply for the appointment of a receiver by the court. The appointment may be made, in appropriate circumstances, for the purpose of keeping down the interest, even though the applicant is unable at the time to enforce the usual mortgagee’s remedies — for example if he has

covenanted not to call in the mortgage debt for the specified period: Burrowes v Molloy (1845) 2 Jo & Lat 521. The appointment is made without prejudice to the rights of prior encumbrancers. So where a prior mortgagee is not in possession, the appointment is made subject to his right to take possession: Cadogan v Lyric Theatre Ltd [1894] 3 Ch 338. Where this is done, the prior mortgagee can take possession without the leave of the court, though usually an application for leave will be made: Preston v Tonbridge Wells Opera House Ltd [1893] 2 Ch 323. If, however, the order contains no express reservation of the prior mortgagee’s rights, he must obtain leave before going into possession.

Where prior mortgagee is in possession 18.22 In this case a receiver will not be appointed so long as anything remains due to the prior mortgagee. In order to save his possession the prior mortgagee must satisfy the court that something, however small the amount, is due to him upon his security. If he can do so, no receiver will be appointed against him and the only course is to pay him off according to his own statement of his debt: Berney v Sewell (1820) 1 Jac & W 647; 37 ER 515.

Over what property a receiver may be appointed 18.23 A receiver may be appointed over any property that may be taken in execution (on the analogy of which remedy the mortgagee’s right to a receiver is founded, see Davis v Duke of Marlborough (1819) 2 Swans 108; 36 ER 555). Where the property consists of payments, no receiver can be appointed until the amounts of the payments are determined. The source of the payments or, as appropriate, the property must be certain: see Clydesdale v McManus (1934) 36 WALR 89. A receiver may be appointed over a right of action: Garden Mews-St Leonards Pty Ltd v Butler Pollnow Pty Ltd (1984) 9 ACLR 91. The appointment of a receiver may be the only remedy available to holders of debentures in public utility undertakings, sale and other remedies usually having been denied in the public interest: see Blaker v Herts and Essex Waterworks Co (1889) 41 Ch D 399; Marshall v South Staffordshire Tramways Co [1895] 2 Ch 36. The property over which the receiver is appointed does not vest in the

receiver: Bolton v Darling Downs Building Society [1935] St R Qd 237. A receiver may be appointed over personal property and rents and profits of realty outside the jurisdiction, if the owner is within the jurisdiction: see Mercantile Investment and General Trust Co v River Plate Trust, Loan and Agency Co [1892] 2 Ch 303; Ballabil Holdings Pty Ltd v Hospital Products Ltd (1985) 1 NSWLR 155. The court will recognise a person in the position of a receiver appointed by a foreign court: Re Young [1955] St R Qd 254. A receiver may be appointed in respect of property within the jurisdiction, notwithstanding the fact that a receiver has already been appointed by a court in a foreign jurisdiction: Alliance Bank Ltd v Irving (1865) 4 SCR (NSW) (Eq) 17 at 53. [page 482]

Appointment of a manager 18.24 The statutory power in the court to appoint a receiver includes power to appoint a manager. A manager is only appointed where the security includes a business and then only for the purpose of selling the business as a going concern. A receiver may be appointed receiver and manager. For the distinction between a receiver and a manager, see AIDC v Co-operative Farmers & Graziers Direct Meat Supply Ltd [1978] VR 633.

Status of the receiver 18.25 A receiver appointed by the court is an officer of the court. The receiver is appointed for the benefit of all parties and is neither agent nor trustee for either the mortgagor or the mortgagee: McMeehan v Aitken (1895) 21 VLR 65; Co-operative Farmers & Graziers Direct Meat Supply Ltd v Smart [1977] VR 386; Evans v Clayhope Properties Ltd [1988] 1 All ER 444; [1988] 1 WLR 358 (CA). The court has no power before the rights of the parties are determined at trial to order a party to meet any deficit in the sums coming into the hands of the receiver: see Evans v Clayhope Properties Ltd, following Boehm v Goodall [1911] 1 Ch 155.

For lodgment and publication of notice of order of appointment of a receiver of property of a corporation, see Corporations Act s 427.

Powers of receiver 18.26 As an officer of the court the receiver has a right to apply to the court at any time for directions and should do so before taking any step beyond getting in the assets in respect of which he was appointed receiver. So he should obtain leave of the court before commencing or continuing any legal proceedings. A receiver cannot sell assets without leave of the court and though a manager is appointed to sell a business as a going concern, his appointment as such does not necessarily confer a power of sale: AIDC v Cooperative Farmers & Graziers Direct Meat Supply Ltd [1978] VR 633. Upon giving notice of his appointment to the tenants, the receiver is entitled to receive all rents in arrears at the date of his appointment and to all rent accruing due thereafter. The possession of the receiver is the possession of the court, without whose authority no one may interfere with the receiver or with the property of which he has taken or has been directed to take possession. For the right to indemnity of a court-appointed receiver, see Expo International Pty Ltd v Chant (No 2) (1980) 5 ACLR 193; Rosanove v O’Rourke [1987] 1 Qd R 275.

Committal for contempt 18.27 Where any person has interfered with the receiver of the property the receiver should move to have that person committed for contempt: see Freeman v Trimble (1906) 6 SR (NSW) 133; Horne v Leigh (1906) 7 SR (NSW) 51. The court uses its powers of committal sparingly, and only when it is necessary to vindicate its authority. On an application to commit the person interfering with the receiver’s office the court may order the contemnor to make good to the receiver the loss or expense occasioned by the interference: McIntyre v Perkes (1988) 15 NSWLR 417. (This case also deals with the issue of costs.)

[page 483]

Chapter 19

The Mortgagee’s Right to Possession I

Mortgagee’s Right to Possession of Land Introduction Torrens title legal mortgagee’s right of entry Mortgagee’s veto on leases Victoria and Western Australia Mortgagee entering into possession The NSW Act The Victorian Act Other states and territories Mortgagor’s right to an account Second mortgagee’s action for possession Torrens title equitable mortgagee’s right of entry General law legal mortgagee’s right of entry Second mortgagee’s right to possession — general law mortgage General law equitable mortgagee When the right arises

19.1 19.2 19.3 19.4 19.5 19.6 19.7 19.8 19.9 19.10 19.11 19.12 19.13 19.14 19.15

II

Exercise of the right Mortgagor cannot set up jus tertii Estoppel Taking actual possession Present law on taking possession physically Possession Possession action Second mortgagee’s action in ejectment Defences Issues in Victoria and Western Australia Furniture on the premises Modern replacement of law of distress Effect of limitations of action legislation Ejectment notwithstanding tenancy Mortgagee in Possession A. Rights of Mortgagee in Possession Rents and profits Carrying on of business

19.16 19.17 19.18 19.19 19.20 19.21 19.22 19.23 19.24 19.25 19.26 19.27 19.28 19.29

19.30 19.31

[page 484]

Leasing Application of receipts B. Liabilities of Mortgagee in Possession To account Amount of rent to be accounted for Maintenance of the property — repairs Mortgagee’s liability for negligence Improvements

19.32 19.33 19.34 19.35 19.36 19.37 19.38

Outgoings Liability on covenants No allowance for personal trouble Agent’s salary C. Limitation Possession by mortgagee III Mortgagee’s Right to Possession of Other Property Mortgages of chattels Taking possession under mortgages of choses in action

19.39 19.40 19.41 19.42 19.43

19.44 19.45

I Mortgagee’s Right to Possession of Land Introduction 19.1 Under the traditional form of mortgage, the mortgagor parted with almost all the legal title to the land and his rights to possession depended upon the terms of the mortgage. This is out of kilter with modern ideas. Under a Torrens system mortgage, the mortgagee only has statutory rights and these do not include the right to possession until he is entitled to take possession under the mortgage. Under an Old System mortgage in Australia, the mortgagor is usually contractually entitled to possession until certain events occur. The mortgagors’ rights are considered in Chapter 12.

Torrens title legal mortgagee’s right of entry 19.2 A registered mortgagee of Torrens title land as a mere statutory chargee has no right to possession of the land until default: NSW Torrens Act s 60; Victorian Torrens Act s 78(1); Queensland Torrens Act ss 74, 78; South

Australian Torrens Act s 137; Western Australian Torrens Act s 111; Tasmanian Torrens Act s 82; Land Transfer Act 1952 (NZ) s 100, see also s 109. See also Victorian Torrens Act s 81 and Western Australian Torrens Act s 116 (which apply to first registered mortgagees of Torrens system land only); see also Tropical Traders Ltd v Goonan [1964] WAR 234. A notice under NSW Torrens Act s 57(2)(b) is not necessary where the mortgagee’s claim is for possession: Long Leys Co Pty Ltd v Silkdale Pty Ltd (1991) 5 BPR 97,374 (CA); and see Silkdale Pty Ltd v Long Leys Co Pty Ltd (1995) 7 BPR 14,414; Natwest Markets Australia Ltd v Mannix (1995) NSW ConvR ¶55-743; Abram v Bank of New Zealand (1996) ATPR 41-507; Citibank Savings Ltd v Stergiou (1996) 145 ALR 80 (SC, ACT); and Perpetual Ltd v Treloar (2009) 14 BPR 27,699. The position is the same in Victoria [page 485] by reason of the terms of Victorian Torrens Act s 78: Commonwealth Bank of Australia v Jackson (1992) V ConvR ¶54-447; but cf the position in South Australia under Law of Property Act 1936 s 55A: see Lamshed v Plakakis (1988) 47 SASR 316; Wombat Nominees Pty Ltd v De Tullio (1990) 98 ALR 307 at 318–19; and Commonwealth Bank of Australia v Saunders (1995) 64 SASR 428. The terms of the mortgage may nevertheless require prior notice by the mortgagee, whether for the purpose of terminating a tenancy created by an attornment clause or otherwise (on the other hand, see, for example, a provision for attornment which dispenses with the need for any prior demand: Law Institute of Victoria, Memorandum of Common Provisions cl 24): Commonwealth Bank of Australia v Saunders, above; and see 12.10. Under Victorian Torrens Act s 78 the mortgagee has a right conferred by that section to the rent due under a lease of the mortgaged property, a statutory right which is not subject to any personal obligation owed by the mortgagor to the tenant: see Citibank Pty Ltd v Simon Fredericks Pty Ltd (1991) V ConvR ¶54-408, with reference to a claim for damages for breach of the covenant for quiet enjoyment which was described as ‘a consequential

personal right and not an interest in land’. The position would be otherwise if an equitable set-off were established which had the effect of absolving the tenant, in whole or in part, from liability: see the Citibank case, above, at ¶64-919–21; see also Long Leys Co Pty Ltd v Silkdale Pty Ltd (1991) 5 BPR 11,512 at 11,519–20; and MEK Nominees Pty Ltd v Billboard Entertainments Pty Ltd (1993) V ConvR ¶54-468. In circumstances where the mortgage is registered prior to the grant of a lease and the tenant carrying out work on the premises, no claim or equity is raised against the mortgagee by reason of the expenditure of money on the work unless the mortgagee invited or encouraged the expenditure of the money by the tenant: see Piazza Grande Pty Ltd v Portis Pty Ltd (1993) V ConvR ¶54-460. As to the possibility of a set-off being raised by the mortgagor as a defence to an action for possession, see 19.24.

Mortgagee’s veto on leases 19.3 The Torrens statutes in all states provide that no lease of land subject to a registered mortgage or charge shall be valid and binding against the mortgagee or chargee unless the mortgagee or chargee shall have consented to the lease prior to its registration (NSW Torrens Act s 53(4);Victorian Torrens Act s 66(2); Queensland Torrens Act s 66; South Australian Torrens Act s 118; Western Australian Torrens Act s 91; Tasmanian Torrens Act s 64(3)); although the Victorian section (s 66(2)) makes it clear that it applies only to a lease which is in fact registered: see 12.16; see also Wilson v Kelly [1957] VR 147. Where, however, a mortgagor of land under the New South Wales Real Property Act orally let to the defendant the land which was subject to a registered mortgage, it was held that the defendant was not entitled to dispute an action for rent on the ground that the mortgagee had never consented to the lease, and it was observed that the provisions of s 53(4) of the Act do not apply to an unregistered oral lease. It has been held that these provisions do not operate, by negative implication, to make binding upon a mortgagee an unregistered lease not requiring registration and entered into after the date of the mortgage: English Scottish and Australian Bank Ltd v City National Bank Ltd [1933] St R Qd 81; see also Parkinson v Braham (1962) 62 SR (NSW) 663, discussed 35 ALJ 383.

Victoria and Western Australia 19.4 The paramountcy provisions of Victorian Torrens Act s 42(2)(e), which protect the interest of a tenant in possession, refer to the interest of a tenant in possession of the land when the interest of the mortgagee is created and not at any subsequent time, such as when the power of sale is exercised: Independent Order of Oddfellows of [page 486] Victoria Friendly Society v Telford (1991) V ConvR ¶54-419; and see Commonwealth Bank of Australia v Baranyay [1993] 1 VR 589; also Commonwealth Bank of Australia v Figgins Holdings Pty Ltd (1994) V ConvR ¶54-492 at ¶65,690; [1994] 2 VR 505 at 510 (Hayne J) (and see, on appeal in related, but other, proceedings, Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245). Where a mortgagee has given his consent to a lease by the mortgagor, as required by these provisions, and the approved lease is subsequently registered, the lease must be treated in exactly the same way as a lease made by the mortgagor under the old law before the date of the mortgage: Bacchus Marsh Brick and Pottery Co Ltd (in liq) v Federal Building Society (in liq) (1895) 22 VLR 181. It should be borne in mind, however, that this view was taken in relation to Victorian Transfer of Land Act 1890 s 99, and under the Victorian Acts then and presently in force, a first mortgagee has the same rights and remedies at law and in equity ‘as he would have had if the legal estate in the mortgaged land had been vested in him as mortgagee with a right in the mortgagor of quiet enjoyment until default in payment of any principal or interest or a breach in the performance or observance of some covenant’: Transfer of Land Act 1958 (Vic) s 81(1) (which is similar to Transfer of Land Act 1893 (WA) s 116; and see Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245; and see 19.7). In no other state (apart from Victoria and Western Australia) is a mortgagee given the benefit of the legal title of a mortgagee under the general law. For this reason it is arguable that the decision in the Bacchus Marsh case can apply only in Victoria and Western Australia, and that in other

jurisdictions ‘the position is similar, not to that under a lease made before the date of the mortgage under the general law, but to such a lease made in relation to Torrens land, that is the mortgagee is in the same position (subject to some necessary transpositions) as if the lease were one subsisting at the date of the mortgage’: Sykes and Walker, Law of Securities, 5th ed, Law Book Co, Sydney, 1993, p 266. However, it is suggested that there is little practical difference between the two positions. In Victoria and Western Australia, by virtue of the respective sections (ss 81(1) and 116) and the right of quiet enjoyment afforded thereby to the mortgagor, the effect was thought to be equivalent to a re-demise by the mortgagee to the mortgagor until default or breach by the mortgagor. However, in Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245 at 281–2 (McHugh J referring to Doe d Parsley v Day (1842) 2 QB 147; 114 ER 58) and 295 (Kirby J), the view that s 81(1) created an implied demise or reversion was explicitly rejected. Gaudron, Gummow and Callinan JJ (in a joint judgment) appeared to doubt the views of Higgins J in Connolly v Ryan (1922) 30 CLR 498 at 504–7 in favour of a demise, but did not find it necessary to determine the question (see at 273); and see 19.7. Thus, in Victoria and Western Australia the position would, subject to the doubts raised by Figgins, appear to be that the immediate reversion expectant upon the lease granted by the mortgagor, and to which the mortgagee has consented, is vested in the mortgagor until default or breach, whereupon the mortgagor’s term is terminated, and the ‘deemed legal estate’ of the mortgagee becomes the reversion expectant upon the approved lease, although, of course, the ‘actual legal estate’ has remained in the mortgagor. In the remaining states, again subject to these doubts, the position would appear to be that where no such ‘deemed legal estate’ is vested in the mortgagee, the interest of the mortgagee remains the statutory interest created by the registration of the mortgage, and the legal estate remains in the mortgagor as registered proprietor. In those states, therefore, in respect of such an ‘approved’ lease by the mortgagor, the reversion, even after default, remains with the mortgagor, and the mortgagee, although bound by the lease, is dependent upon his statutory (see 19.2–19.5) and contractual powers for any

[page 487] rights against the lessee. It is submitted that there is little practical difference between these two positions. Finally, it should also be noted that a mortgagee is not obliged to lease or permit the occupation of premises at any particular time, that is, exercise any of these statutory powers: see Westpac Banking Corporation Ltd v Kingsland (1991) 26 NSWLR 700 at 707.

Mortgagee entering into possession 19.5 A mortgagee may enter into possession pursuant to a contractual provision contained in the mortgage but only as against the original mortgagor unless a new contract has been made with the relevant transferee of that mortgage. The NSW Torrens Act ss 60(a) and 63(1) apply and should be read together: Bank of New South Wales v Palmer (1881) 2 LR (NSW) (L) 125 (cited with approval by Jordan CJ in Ex parte Jackson; Re Australian Catholic Assurance Co Ltd (1941) 41 SR (NSW) 285 at 289). Under these statutory provisions the mortgagee may either enter into possession by receiving the rents and profits of the land or may take proceedings for ‘ejectment’ (now to be taken as a reference to the modern actions for the recovery of land). Express provision is made empowering a mortgagee to take proceedings for ejectment: NSW Torrens Act s 60(c);Victorian Torrens Act s 78(1)(b); Queensland Torrens Act s 78; South Australian Torrens Act s 137; Western Australian Torrens Act s 111; Tasmanian Torrens Act s 146 (provision for special proceedings for obtaining possession from the mortgagor). A subsequent registered mortgagee of Torrens system land takes subject to the rights of any prior mortgagee: Croft v Kennaugh [1945] VLR 40; Reliance Finance Corp Pty Ltd v Orwin [1964–65] NSWR 970; Associated Securities Ltd v Adorjany [1964–65] NSWR 822; and Australia and New Zealand Banking Group Ltd v Comer (1993) 5 BPR 11,748 at 11,755–6; Cronin v State Bank of South Australia (1995) ANZ ConvR 119. A mortgagee of Torrens system land may not eject a legal tenant who is in possession at the date of the mortgage without terminating the tenancy:

United Starr-Bowkett Co-operative Building Society (No 11) v Clyne [1968] 1 NSWR 134. Where the adverse possession is that of the mortgagor, or that of a lessee under a lease by which the mortgagee is not bound (in Queensland such as a lease for a term not exceeding three years granted by the mortgagor subsequently to the mortgagee; see English Scottish and Australian Bank Ltd v City National Bank Ltd [1933] St R Qd 81), or that of a mere trespasser, the mortgagee will probably require recourse to ejectment proceedings to secure physical possession of the mortgaged land. It has been held that the predecessor of Queensland Torrens Act ss 74 and 78 does not make it necessary for a registered mortgagee to bring an action for ejectment in order to obtain possession of the mortgaged land, provided that the mortgagee entered peacefully and did not attempt to use force: Camfield Pastoral Co v Dixon [1972] Qd R 289. A Torrens mortgagee’s right to bring ejectment is not dependent upon the mortgagee establishing a right to exercise the power of sale: Citibank Savings Ltd v Stergiou (1996) 66 FCR 587; 145 ALR 80.

The NSW Act 19.6 The following two important points emerge from the New South Wales provisions. First, s 60 only applies to default in payment of all or part of the principal sum or interest; and second, that section does not refer to the taking of physical possession, merely the taking of possession by ‘receiving the rents and profits’. From the second point arise two questions: first, does the mortgagee only have the right to take possession when the property is occupied by a tenant; and second, if the taking of actual possession is not precluded (by, for example, a tenancy which ranks in priority to the mortgage), may it be taken without a court order? There is no direct [page 488] authority on the matter. However, if ss 60 and 63(1) are read together the better view appears to be that when the mortgaged property is occupied by a tenant possession may only be taken pursuant to an order of a court. This is

not inconsistent with the approach of the New Zealand Court of Appeal in Lysnar v National Bank of NZ Ltd (No 2) [1936] NZLR 541. In that case the second question arose in relation to Land Transfer Act 1915 (NZ) s 105 (a provision almost identical to s 60) which provided that: The mortgagee, upon default in payment of the principal sum, interest, annuity, or rent-charge secured by any mortgage, or of any part thereof, may enter into possession of the mortgaged land by receiving the rents and profits thereof, or may bring an action for possession of the said land either before or after entering into the receipt of the rents and profits thereof, and either before or after any sale of such land is effected under the power of sale given or implied in his mortgage.

Reed ACJ and Ostler J, in a joint judgment, said at 543–4: It is difficult to see how [the mortgagee] could receive the profits of land without entering into possession of the land. Why should it be necessary for a mortgagee to incur the unnecessary expense, all of which would be chargeable to the mortgagor, and the delay in bringing an action for possession, when he can obtain possession peaceably without the necessity of an action. In our opinion, s 105 confers an express authority on a mortgagee, upon default by his mortgagor, to enter into possession of the mortgaged land and to receive the profits without the necessity of first bringing an action for possession, provided that he enters peaceably and does not attempt to use force.

Kennedy J said at 544: Section 105 does not merely give a right to enter into possession by taking what was in argument termed constructive as distinct from actual possession by the receipt of the rents from a person, other than the mortgagor, who was in actual occupation. The provision entitling the mortgagee to enter into possession by receiving the rents and profits does, as it says, authorize an entry into possession. It permits possession by receiving the rents, but it goes further and permits an entry into possession by receiving the profits of the mortgaged land, and this permits an entry into possession and the receipt of the profits of the land. The juxtaposition of a provision entitling a mortgagee to bring an action for possession, either before or after entry into the receipt of the rent and profits, does not indicate an intention that by this means only can actual possession be obtained. The need for this provision follows from the fact that a mortgage under the Land Transfer Acts does not operate as a conveyance under what is now usually termed the old or Deeds system, but confers merely a charge. A mortgagee might find it necessary to recover possession not only from the mortgagor, but also from a stranger and that even at a time subsequent to his original entry into possession.

As the phrase ‘person in possession’ in a statute would include a person in actual possession so would the phrase ‘person in receipt of the rents and profits’. Therefore s 60(a) should be read as though ‘receiving’ describes the possession but does not qualify ‘entry’. How this interpretation reconciles s 63(1) is not clear. Second or subsequent registered mortgagees may avail themselves of s 60 or its equivalents: see Croft v Kennaugh [1945] VLR 40 at

42; Australia and New Zealand Bank Ltd v Hathaway [1957] QWN 49; and Australia and New Zealand Banking Group Ltd v Comer (1993) 5 BPR 11,748. Regard should also be had to the requirements of the Farm Debt Mediation Act 1994 (NSW) where a mortgagee seeks to take possession of the mortgaged land: see National Australia Bank Ltd v Chen-Conway [2008] NSWSC 448; Secure Funding Pty Ltd v Coughlin (2009) 74 NSWLR 687; Lawloan Mortgages Pty Ltd v Young [2009] NSWSC 1180; Commonwealth Bank of Australia v Bird (2011) 15 BPR 29,471; Waller v Hargraves Secured Investments Ltd (2012) 86 ALJR 229.

The Victorian Act 19.7 The position in Victoria is similar to that in New South Wales and the other states in that a Torrens title mortgagee has no right to possession before default. However, the mortgagor’s right of possession until default as against a first mortgagee depends on the provisions of Victorian Torrens Act s 81(1) rather than the fact that he remains the [page 489] legal owner (see also a similar position in Western Australian Torrens Act s 116). The Victorian subsection provides: 81(1) In addition to and concurrently with any rights and powers aforesaid a first mortgagee shall, until a discharge from the whole of the money secured or a transfer upon a sale or an order for foreclosure has been registered, have the same rights and remedies at law and in equity (including proceedings before justices of the peace) as he would have had if the legal estate in the mortgaged land had been vested in him as mortgagee with a right in the mortgagor of quiet enjoyment until default in payment of any principal or interest or a breach in the performance or observance of some covenant.

The ‘right in the mortgagor of quiet enjoyment until default’ has been held to operate, as have similarly worded covenants in general law mortgages, as a re-demise until default: see Wilkinson v Hall (1837) 3 Bing (NC) 508 at 532– 3; 132 ER 506 at 515; Commercial Bank v Breen (1889) 15 VLR 572 at 579; Farrington v Smith (1894) 20 VLR 90; Connolly v Ryan (1922) 30 CLR 498 at 504–7. The matter was not free from some doubt in view of the possible

application of the rule in Doe d Parsley v Day (1842) 2 QB 147; 114 ER 58 — namely, that a covenant for quiet enjoyment until default in a mortgage does not operate as a demise of the land to the mortgagor unless a definite certain date is fixed for payment. However the mortgagor’s right is characterised, it is a statutory right which should not be restricted by general law rules applicable to covenants. In Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245 at 281–2 (McHugh J referring to Doe d Parsley v Day, above) and 295 (Kirby J), the view that s 81(1) created an implied demise or reversion was explicitly rejected. Gaudron, Gummow and Callinan JJ (in a joint judgment) appeared to doubt the views of Higgins J in Connolly v Ryan (1922) 30 CLR 498 at 504–7 in favour of a demise, but did not find it necessary to determine the question (see at 273). A second or subsequent mortgagee is outside the operation of s 81 so prior to default is in the same position as a registered mortgagee in New South Wales. On default, first or subsequently registered mortgagees may obtain possession pursuant to s 78 of the Act: Croft v Kennaugh [1945] VLR 40 at 42 per Lowe J; and see Australia and New Zealand Bank Ltd v Hathaway [1957] QWN 49 and Australia and New Zealand Banking Group Ltd v Comer (1993) 5 BPR 11,748. That subsection provides: 78(1) The mortgagee or annuitant upon default in payment of the principal sum or interest or annuity or any part thereof respectively at the due time — (a) may enter into possession of the mortgaged or charged land by receiving the rents and profits thereof; or (b) may bring an action of ejectment to recover the land, either before or after entering into the receipt of the rents and profits and either before or after any sale of the land as aforesaid.;

Section 78(1) is drafted similarly to Real Property Act 1900 (NSW) s 60 and it appears that the same doubts arise. Section 63(1) of that Act does not have any counterpart in the Victorian Act. Although such doubts may exist in relation to s 78 the position is more satisfactory in Victoria, at least for first mortgagees, because of the operation of s 81. Section 81 does not qualify or limit the right of a first mortgagee to bring an action of ejectment under s 78(1)(b): City Mutual Life Assurance Society Ltd v Lance Creek Meat Works Pty Ltd [1976] VR 1 at 10; and see Commonwealth Bank of Australia v Figgins Holdings Pty Ltd [1994] 2 VR

505 at 510; (1994) V ConvR ¶54-492 at 65,690 and 65,693 per Hayne J (and see, on appeal in related, but other, proceedings, Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245). Of a section from which s 81 was derived, Holroyd J said: ‘The section is providing for the remedies of the mortgagee, and care is taken that he shall lose no advantage which he might have enjoyed under the old system of conveyancing’ (Farrington v Smith (1894) 20 VLR 90 at 92); and see Commercial [page 490] Bank v Breen, above; National Trustees Executors and Agency Co v Tindall [1933] VLR 369 at 375. But these rights are subject to any other provisions in the Act: Greig v Watson (1881) 7 VLR (E) 79 at 84–5; and Perry v Rolfe [1948] VLR 297. The matter was further considered in Gunnion v Ardex Acceptance Corp [1968] VR 547; and Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245 at 272–3 (Gaudron, Gummow and Callinan JJ). Thus the first mortgagee enjoys a right to possession on ‘default in payment of any principal or interest or a breach in the performance or observance of some covenant’ which he would have enjoyed had he been a legal mortgagee of general law land. However, second or subsequent mortgagees are left to the mercy of s 78 which only allows them to take possession upon default in payment of all or part of the principal sum or interest. No notice is required to be given to the mortgagor before an action of ejectment is brought under s 78(1)(b), nor is it required before a mortgagor who is in default is ejected by a first mortgagee under s 81(1): City Mutual Life Assurance Society Ltd v Lance Creek Meat Works Pty Ltd, and see Commonwealth Bank of Australia v Figgins Holdings Pty Ltd and Citybank Savings Ltd v Stergiou, all referred to above. Notice may, however, be required under the terms of the mortgage: Commonwealth Bank of Australia v Jackson (1992) V ConvR ¶54-447. In the City Mutual case, Newton J accepted (at [1976] VR 10) that notice may be necessary when the land is in the possession of a tenant of the mortgagor where possession was taken prior to the mortgage and the tenant could not be ejected by the mortgagor without a prior demand for possession.

Regard should also be had to the requirements of the Farm Debt Mediation Act 2011 (Vic) where a mortgagee seeks to take possession of the mortgaged land: see 19.6 in relation to the treatment of similar legislation in New South Wales.

Other states and territories 19.8 In Queensland, South Australia and Tasmania, the mortgagee under the Torrens statutes who, on default, wishes to receive the rents and profits does not receive quite as much statutory assistance.While, as previously noted, the right is given to the mortgagee, upon default, ‘to enter into possession of the mortgaged or encumbered land by receiving the rents and profits thereof’ (in South Australia to ‘enter into possession and receive the rents and profits thereof’; see Queensland Torrens Act s 78; South Australian Torrens Act s 137; but see Law of Property Act 1936 (SA) s 55A;Tasmanian Torrens Act s 82), the ancillary provisions to be found in the Acts of New South Wales,Victoria and Western Australia are not included. Where statutory notice of default is required as a prerequisite to the exercise of remedies on default, including the taking of possession, the statutory provisions as to notice must be properly complied with: see, for example, Law of Property Act 1936 (SA) s 55A; and see Lamshed v Plakakis (1988) 47 SASR 316; Wombat Nominees Pty Ltd v De Tullio (1990) 98 ALR 307; and Assured Funding Pty Ltd v Gentzsch (2007) 247 LSJS 447; [2007] SASC 101; also 16.8. Although there is nothing to prevent the mortgagee from giving notice to the lessee requiring the lessee to pay the rents to him, there is no provision as in New South Wales that the mortgagee’s receipt shall be a sufficient discharge (consider, however, Law of Property Act 1936 (SA) s 52 as to general law land and Property Law Act 1974 (Qld) s 90 as to both unregistered (that is, general law) and Real Property Act (Torrens system) land. The sufficiency of a mortgagee’s receipt under those sections may protect a tenant paying rent to a mortgagee who has entered into possession, but it does not appear that the rights afforded by the Acts go so far as to enable the mortgagee to sue the lessee for the recovery of the rents. The ACT legislation was considered by the Full Federal Court in Citibank Savings Ltd v Stergiou (1996) 145 ALR 80. The Land Titles Act 1925 (ACT) s 96 confers on a Torrens mortgagee the same right to bring ejectment as a general law mortgagee.

[page 491]

Mortgagor’s right to an account 19.9 There is no doubt that the mortgagee may compel the mortgagor to account to him for rents received, and it may well be that he could sue the lessee for rent if he were to join the mortgagor, either as plaintiff or defendant. These difficulties can be overcome by the insertion of appropriate provisions in the mortgage instrument itself, such as an agreement and acknowledgment by the mortgagor that the mortgagee’s receipt for rent shall be a good and sufficient discharge for rent paid by a lessee, and an appointment of the mortgagee as the attorney of the mortgagor for the purposes, inter alia, of demanding, suing for, recovering and receiving the rents and profits of the mortgaged land: see The Australian Encyclopaedia of Forms and Precedents, K I N Rose, LexisNexis Australia, Mortgages (updated May 2009). Even in the absence from the instrument of such provisions as these, it seems that the mortgagee who wishes to enter into receipt of the rents and profits will have no other course available to him than to give the lessee a notice requiring him to pay all rent to the mortgagee.

Second mortgagee’s action for possession 19.10 As to the right of a second or subsequent mortgagee of Torrens title land to bring an action for possession, see 19.23. As to the possibility of a set-off being raised by the mortgagor as a defence to an action for possession, see 19.24. In view of provisions such as NSW Torrens Act s 60 and Victorian Torrens Act s 78, discussed above, it may be thought that no notice to quit would be required to determine any tenancy created by attornment in cases where the attornment clause requires a notice to quit as neither section requires that notice be given to the mortgagor before the rights conferred by those sections are exercised. The few authorities that exist support the view that provisions in substantially the same terms do not have the effect of dispensing with the requirement of notice pursuant to any attornment clause contained in the mortgage. In Crosthwaite v Hopkins (1895) 1 ALR 33, the mortgage

contained an attornment clause which allowed the mortgagee to determine the tenancy created by the attornment clause and to take possession upon leaving seven days’ previous notice upon the premises to this effect. The mortgagees sought to recover possession of the mortgaged land on the basis of a notice which had been left on the premises which stated, in effect, that the tenancy ‘had been determined’. Hodges J said at 34: ‘I think the notice is insufficient … It should be shown that the tenancy of the mortgagor to the mortgagees was determined at the commencement of the action’. In Hinckley and Country Building Society v Henny [1953] 1 All ER 515; [1953] 1 WLR 352, it was held (by Upjohn J) that a mortgagee could not recover possession under an attornment clause requiring seven days’ notice to quit until such notice had been given: see also Regent Oil Co Ltd v J A Gregory (Hatch End) Ltd [1966] Ch 402; [1965] 3 All ER 673 (CA) where the question arose in relation to Law of Property Act 1925 (UK) s 87(1); and generally Colonial Bank v Roache (1870) 1 VR (L) 165. However, the provisions of the mortgage may preserve the operation of these sections despite the notice requirement of the attornment clause. The mortgage, the subject of City Mutual Life Assurance Society Ltd v Lance Creek Meat Works Pty Ltd [1976] VR 1 at 10, contained a provision ‘that nothing herein contained shall negative or in anywise prejudice any of the rights of the mortgagee under or by virtue of any of the provisions of the Transfer of Land Act 1958 but that the mortgagee shall be entitled to the full benefit of all rights under or by virtue of any of the provisions of the said Act …’. Newton J held that, as a result of this provision, the rights conferred on the mortgagee by s 78 or s 81 were exercisable without determination of the tenancy created by the attornment clause. It is clear that in the absence of this provision a notice to quit would have been necessary [page 492] in a form appropriate to or as required by the attornment clause. For an example of a similar provision, see the reference to the Law Institute of Victoria Memorandum of Common Provisions, above. From the decision in Gunnion v Ardex Acceptance Pty Ltd [1968] VR 547

it appears that when the term of a mortgage has expired it is not necessary to comply with Property Law Act 1958 (Vic) s 146(1) (see Conveyancing Act 1919 (NSW) s 129(1); and see Bradbrook, Croft and Hay, Commercial Tenancy Law, 3rd ed, LexisNexis Butterworths, Sydney, 2009, [18.3]ff) even though the attornment clause may provide for termination on breach. In Gunnion’s case, above, the mortgagor contended that s 146(1) of that Act applied to a mortgage which contained an attornment clause (cl 10) which provided that (at 549): The mortgagor hereby attorns and becomes tenant to the mortgagee of the said land from quarter to quarter at a rent equal to and varying in amount with the interest from time to time payable by the mortgagor under this mortgage on the days hereinbefore provided for payment of interest: such tenancy in the event of breach by the mortgagor of any of his obligations under this mortgage to be determinable by the mortgagee without notice. The due payment by the mortgagor of the interest payable hereunder shall however be accepted by the mortgagee in lieu of rent.

Menhennitt J rejected the mortgagor’s contention at 549–50, relying on Farrington v Smith (1894) 20 VLR 90. If the mortgagee had been relying on a re-entry of forfeiture condition in the attornment clause it appears that notice as required by the Property Law Act 1958 (Vic) s 146(1) would have been required.

Torrens title equitable mortgagee’s right of entry 19.11 Any mortgage of Torrens title land which is registered is a legal mortgage rather than an equitable mortgage, despite the fact that there may be one or more prior registered mortgages; see, for example, NSW Torrens Act s 57(1); Victorian Torrens Act s 74(2); and Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245. These matters are fully dealt with in Chapter 4. All registered mortgagees enjoy statutory remedies consistent with the relative priority of their mortgages: see Chapter 28. The orthodox view is that statutory remedies are not available to equitable mortgagees of Torrens title land: see Kerr, Principles of the Australian Lands Title (Torrens) System, LawBook Co, Sydney, 1927, p 447. This view accords with the general scheme of Torrens title legislation (for example Real Property Act 1900 (NSW) Pt 7 Div 3 and Transfer of Land Act 1958 (Vic) Pt IV Div 9). There is little judicial authority to support this view, except perhaps Ryan v O’Sullivan [1956] VLR 99, in which it was held that the

statutory procedure of foreclosure available under the Victorian Act was not available in the case of a mortgage by deposit, the proper relief being a curial decree of foreclosure. The court, however, has an inherent power to order judicial sale: Yarrangah Pty Ltd v National Australia Bank Ltd (1999) 7 BPR 17,061; Guardian Mortgages Pty Ltd v Miller [2004] NSWSC 1236 [121]. The fact the statutory remedies are not available does not mean that an equitable mortgagee of a legal interest in Torrens title land cannot resort to the general law. This view is supported by the fact that recognition has been given to equitable mortgages of Torrens title land according to the wellestablished principle of Walsh v Lonsdale (1882) 21 Ch D 9 (CA) (and see, as to the ambit of this general principle, Chan v Cresdon Pty Ltd (1998) 168 CLR 242). The right of an equitable mortgagee of Torrens title land to take possession of the mortgaged land would appear to be consistent with this general principle. However, this view cannot be supported by direct authority except the [page 493] decision of Hanger J in Mercantile Credits Ltd v Archbold [1970] QWN 9, which is not very satisfactory as the judgment is very short and no authority is cited. As between the mortgagee and the mortgagor express powers may be conferred by contract, contained in the mortgage deed, to enter into possession of the property: see Ocean Accident and Guarantee Corp Ltd v Ilford Gas Co [1905] 2 KB 493 (CA); Barclays Bank v Bird [1954] Ch 274; and Mercantile Credits Ltd v Archbold, above. If the equitable mortgage is made by deed the mortgagor may rely upon the implied statutory power of appointing a receiver (see, for example, Victorian Act s 109) which will, effectively, confer upon the mortgagor an enforceable power to take possession of the property: see Ocean Accident and Guarantee Corp Ltd v Ilford Gas Co and Mercantile Credits Ltd v Archbold, both above. The comment is made in Halsbury’s Laws of England, 5th ed, Butterworths, London, 2010, vol 77, Mortgages, [403] that ‘an encumbrancer who has no legal mortgage has no right to enter into possession of the land

until he obtains a court order’ (citing Barclays Bank Ltd v Bird [1954] Ch 274: cf Vacuum Oil Co Ltd v Ellis [1914] 1 KB 693 (CA); Garfitt v Allen, Allen v Longstaffe (1887) 37 Ch D 48 at 50; but see Spencer v Mason (1931) 75 Sol Jo 295). It is suggested that the more correct statement is, perhaps, that an equitable mortgagee cannot bring ejectment proceedings: Croft v Kennaugh [1945] VLR 40; Mills v Lewis (1985) 3 BPR 9421; cf Wade, ‘An equitable mortgagee’s right to possession’ (1955) 71 LQR 204.

General law legal mortgagee’s right of entry 19.12 Because a legal mortgagee of general law land is the owner of the legal fee simple estate in the mortgaged land, subject only to the mortgagor’s right to redeem, the mortgagee is entitled to possession, independently of default, on the execution of the mortgage deed unless provision is made to the contrary or can be implied: Doe d Roylance v Lightfoot (1841) 8 M & W 553; 151 ER 1158; Four-Maids Ltd v Dudley Marshall (Properties) Ltd [1957] Ch 317; Western Bank Ltd v Schindler [1977] Ch 1; [1976] 2 All ER 393 (CA); Centrax Trustees Ltd v Ross [1979] 2 All ER 952; and see Williams and Glyn’s Bank Ltd v Boland [1981] AC 487; [1980] 2 All ER 408. The mortgagee is similarly entitled to the receipt of rents and profits: Pope v Biggs (1829) 9 B & C 245; 109 ER 91. Equity will not interfere with the mortgagee’s right (Cholmondeley (Marquis) v Clinton (Lord) (1817) 2 Mer 171; 35 ER 905; London Permanent Benefit Building Society v De Baer [1969] 1 Ch 321; [1968] 1 All ER 372) even though there has been no default on the part of the mortgagor (Doe d Roylance v Lightfoot, above; Rogers v Grazebrook (1846) 8 QB 895; 115 ER 1111; Green v Burns (1879) 6 LR Ir 173; Western Bank Ltd v Schindler, above); or where a bill of exchange has been given for the debt (Bramwell v Eglinton (1864) 5 B & S 39; 122 ER 747); or where considerable time has elapsed, short of an action for possession having become statute-barred: Wright v Pepin [1954] 2 All ER 52; [1954] 1 WLR 635; General Credits Ltd v Wenham (1989) 18 NSWLR 570 (CA). The inclusion of an attornment clause in a mortgage will bar the immediate right of the mortgagee to possession subject to termination of the tenancy thereby created in accordance with the terms of the mortgage; and see 19.2. After the execution of a mortgage of general law land, the mortgagor is usually allowed to retain possession of the property, until, upon default in

payment of interest, the mortgagee finds it necessary to use the remedies given him by the security. A mortgagee might want to take possession before the power of sale has arisen, for example to prevent vandalism to the property (see Twentieth Century Banking Co Ltd v Wilkinson [1977] Ch 99; [1976] 3 All ER 361; see also Western Bank Ltd v Schindler [1977] Ch 1), but for the liability of the mortgagee in possession to account, see 19.33, 39.24. Generally, see (1977) 41 Conv (NS) 76, and English Law Commission Working Paper No 99, Land [page 494] Mortgages, paras 3.23–4 and English Law Commission Report No 204, Transfer of Land — Land Mortgages, paras 7.28–38. A right to retain possession is sometimes specially secured to the mortgagor. The wording of the implied statutory covenants for title in the Victorian Act Sch 4 Pt III (which is in the same form as Sch 2 Pt III (now repealed) of the English Act) seems to assume that such a right is given. The right may also be secured by an attornment clause (as to which, see 3.23, 12.10 and 19.2, or by the mortgagor becoming tenant of the mortgagee: see 12.9. Where the advance is repayable by instalments the mortgage deed usually provides that the mortgagee will not be entitled to possession until default (see 3.12–3.16) and such a provision may be implied — for example where the mortgagor is already in possession at the date of the mortgage (Birmingham Citizens Permanent Building Society v Caunt [1962] Ch 883 at 890; [1962] 1 All ER 163 at 168; Esso Petroleum Co Ltd v Alstonbridge Properties Ltd [1975] 3 All ER 358 at 367; [1975] 1 WLR 1474 at 1483; Western Bank Ltd v Schindler, above); a mere power of sale on default does not give a right of entry except on default and then only for the purposes of sale: Watson v Waltham (1835) 2 Ad & El 485; 111 ER 188. In the absence of any such provision and subject to the statutory restrictions (for example under Consumer Credit legislation: see Chapter 9), the legal mortgagee may enter into possession immediately after the execution of the mortgage by virtue of the estate thereby vested in him: Doe d Roylance v Lightfoot; Four-Maids Ltd v Dudley Marshall (Properties) Ltd; Western Bank Ltd v Schindler (all above); Mobil Oil Co Ltd v Rawlinson

(1982) 43 P & CR 221. See, generally, (1961) 25 Conv (NS) 278 (Rudden); (1969) 22 CLP 129 (Ryder); [1979] Conv 266 (Smith); (1983) 127 Sol Jo 431 (Davey). If there is any restriction, an injunction restraining the mortgagee from taking possession contrary thereto will be granted (Doe d Parsley v Day (1842) 2 QB 147; 114 ER 58), and the right is, of course, only exercisable so long as an action to enforce it may be brought: see Wright v Pepin [1954] 2 All ER 52; [1954] 1 WLR 635; see Chapter 16.

Second mortgagee’s right to possession — general law mortgage 19.13 A second or subsequent mortgagee is similarly entitled to possession, except as against prior mortgagees: see Universal Showcards & Display Manufacturing Ltd v Brunt (1984) 128 Sol Jo 581 (CA); (1985) 136 NLJ 120. The order may be made subject to the rights of the prior encumbrancer or alternatively there may be a declaration of entitlement to possession with liberty to apply. This also applies to a legal charge and to a registered charge: Cityland and Property (Holdings) Ltd v Dabrah [1968] Ch 166 at 171, 172; [1967] 2 All ER 639 at 649, 651. Accordingly, the mortgagor may remain in possession only until possession is demanded by the mortgagee or he is ordered to give up possession, and he is not liable to pay any occupation rent until such demand or order has been made: Heath v Pugh (1881) 6 QBD 345 at 359 (CA), affirmed Pugh v Heath (1882) 7 App Cas 235 (HL); Yorkshire Banking Co v Mullan (1887) 35 Ch D 125. However, an order for possession might not be made if there were a substantial question as to the validity or right to enforcement of the mortgage (Mobil Oil Co Ltd v Rawlinson (1982) 43 P & CR 221) or if the right to possession were being exercised improperly: see Quennell v Maltby [1979] 1 All ER 568; [1979] 1 WLR 318 (CA) where the power of sale was used by the mortgagee for an ulterior motive. For criticism of dicta in the case suggesting a wider jurisdiction to restrain sale, see (1983) 127 Sol Jo 431 (Davey). A guarantor of a mortgage debt who has paid off the debt and to whom the benefit of the mortgage has been transferred is entitled to possession of the mortgaged property: Spector v Applefield Properties Ltd (1968) 206 Estates Gazette 537. The assignment of rights under a mortgage to a sub-mortgagee does not destroy the right of the head mortgagee to go into possession:

[page 495] Owen v Cornell (1967) 203 EG 29. As to the possibility of a set-off being raised by the mortgagor as a defence to an action for possession, see 19.24.

General law equitable mortgagee 19.14 An equitable mortgagee of general law land, having no legal right to the mortgaged land (see, for example, Vacuum Oil Co Ltd v Ellis [1914] 1 KB 693 at 703 (CA)), has no right to possession against the mortgagor, and those claiming under the mortgagor, in the absence of express provision in the mortgage deed: Vacuum Oil Co Ltd v Ellis at 703; Ocean Accident and Guarantee Corp Ltd v Ilford Gas Co [1905] 2 KB 493 (CA); Mercantile Credits Ltd v Archbold [1970] QWN 9; and see Croft v Kennaugh [1945] VLR 40; Australia and New Zealand Banking Group Ltd v Comer (1993) 5 BPR 11,748 at 11,754–7. There is similarly no right to possession without the permission of the mortgagor, or without the appointment of a receiver (Vacuum Oil Co Ltd v Ellis at 703, 708 (CA) (by the court or out of the court)), or without an order of the court entitling the equitable mortgagee to possession: Barclays Bank Ltd v Bird [1954] Ch 274; [1954] 1 All ER 449; Re Postle; Ex parte Bignold (1834) 4 Deac & Ch 259. In Spencer v Mason (1931) 75 Sol Jo 295, where the mortgage contained an express right to a legal mortgage, the mortgagor apparently let the mortgagee into possession and this was held to be effective against a successor in title of the mortgagor. An equitable mortgagee is not to be confused with an equitable chargee. Even according to the principle of Walsh v Lonsdale (1882) 21 Ch D 9, an equitable chargee could not be treated as being in the same position as an equitable mortgagee as there is no contract to grant a mortgage. An equitable chargee has no right to possession without a court order: Garfitt v Allen (1888) 37 Ch D 48; see 2.7. North J appears to have wrongly equated equitable charges with equitable mortgages in this case: see Croft and Hay, The Mortgagee’s Power of Sale, 3rd ed, LexisNexis Butterworths, Chatswood, New South Wales, 2013, [4.4]–[4.12]; (1955) 71 LQR 204 (Wade). Irish courts have reached the same conclusion: see National Bank Ltd v Hegarty (1901) 1 NIJR 13; Northern Banking Co Ltd v Devlin [1924] 1 IR 90, Ch D; Bank of Ireland v Feeney [1930] IR 457.

The rationale for the equitable mortgagee not having a general right to possession was based on the ground that a person with an equitable title only could not bring ejectment (see Waldock, Law of Mortgages, 2nd ed, Stevens, London, 1950, p 55), but it has been argued that even before the Judicature Acts this was not always so (see (1955) 71 LQR 204, 216) and that this reason cannot have survived the Judicature Acts, reliance being placed on Walsh v Lonsdale (1882) 21 Ch D 9 (CA). (See (1955) 71 LQR 204; Sykes and Walker, pp 161–3; Croft and Hay, The Mortgagee’s Power of Sale, [4.4]; and Antrim County Land Building and Investment Co v Stewart [1904] 2 IR 357 (CA); and see Maio v Piro [1956] SASR 233 at 239; compare Croft v Kennaugh [1945] VLR 40 at 43.) In Lord Mansfield’s time it appeared that a liberal view was taken in relation to lack of legal title: see Yale, Nottingham’s Chancery Cases, vol II, Selden Society, London, 1961–62, vol 79 at p 158. In Mills v Lewis (1985) 3 BPR 9421 (NSW, CA), it was held that an equitable mortgagee may obtain an order for specific performance which will entitle it to an order for possession of the land although an equitable mortgagee has no right to obtain ejectment (applying General Finance Co v Liberator Benefit Building Society (1879) 10 Ch D 15). Both Re Gordon; Ex parte Official Receiver (1889) 61 LT 229 and Ocean Accident and Guarantee Corp Ltd v Ilford Gas Co [1905] 2 KB 493 give some support to those who argue that the equitable mortgagee has the same right to possession as a legal mortgagee. For a criticism of Barclays Bank Ltd v Bird [1954] Ch 274; [1954] 1 All ER 449, and generally of the view as expressed above, see Croft and Hay, The Mortgagee’s Power of Sale, [4.9]; (1954) 70 LQR 161 (REM); (1955) 71 LQR 204 (Wade). However, an equitable mortgagee is entitled to call for a legal mortgage (see 16.2), so an equitable mortgagee could obtain a right to possession by enforcing his right to a legal [page 496] mortgage, but until such mortgage were executed, it would seem that he would have no right to possession qua legal mortgagee. It appears, however, that a mortgagee who has taken possession may

defend his possession (relying on Walsh v Lonsdale, above; and see Spencer v Mason (1931) 75 Sol Jo 295) and may keep rents paid to him by the mortgagor’s tenants: Finck v Tranter [1905] 1 KB 427. For the equitable mortgagee’s right to rents, see 39.15. For the right of the equitable mortgagee in possession to growing crops, see Re Postle; Ex parte Bignold (1834) 4 Deac & Ch 259; and 39.16. Although, today, possession is rarely taken under any mortgage without an order of the court (see generally Chapter 19) the existence or non-existence of such a right is of some significance. This is so because, if a right exists, an order for possession is, on an application to the court, a matter of course (subject to the powers of adjournment etc, where they apply — see 19.22). Also, the equitable mortgagee’s entitlement to rents will depend on his right to possession. As to the right of an equitable mortgagee to bring an action for possession, see 19.23.

When the right arises 19.15 As has already been stated (see 19.12) a legal mortgagee of general law land is entitled to possession (as owner of the legal fee simple estate in the mortgaged land, subject only to the mortgagor’s right to redeem) independently of default on execution of the mortgage deed unless the mortgage contains a provision to the contrary or such a provision can be implied. (As to the implication of terms, see generally BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 16 ALR 363; 52 ALJR 20 and the cases in which the principles stated by the Privy Council in this advice have been considered and applied; see also Greig and Davis, The Law of Contract, Law Book Co, Sydney, 1987, especially at pp 551–60.) In Fourmaids Ltd v Dudley Marshall (Properties) Ltd [1957] Ch 317 at 320; [1957] 2 All ER 35 at 36, Harman J said that the right of the mortgagee to possession in the absence of some specific contract has nothing to do with default on the part of the mortgagor. The mortgagee may go into possession before the ink is dry on the mortgage unless by a term expressed or necessarily implied in the contract he has contracted himself out of that right. He has the right because he has a legal term of years in the property. If there is an attornment clause, he must give notice. If there is a provision express or to be implied that, so long as certain payments are made he will not go into possession, then he has contracted himself out of his rights. Apart from that,

possession is a matter of course. However, it is not uncommon, where the principal is repayable by instalments, for the mortgage to contain a provision that the mortgagee is not entitled to possession until default: Birmingham Citizens Permanent Building Society v Caunt [1962] Ch 883 at 890; [1962] 1 All ER 163 at 168. Moreover, as Harman J pointed out in the Fourmaids case, the last thing that the average bank or building society wants to do is to take possession of somebody’s home; it is really only interested in getting regular payments from the mortgagor in possession. In Esso Petroleum Co Ltd v Alstonbridge Properties Ltd [1975] 3 All ER 358 at 367; [1975] 1 WLR 1474 at 1484,Walton J said that while the court would, if possible, imply such a provision in an instalment mortgage, there must be some material apart from the mere fact that there was an instalment mortgage to enable it to do so. In the Birmingham case, above, having regard to the particular clauses in the mortgage instrument, Russell J implied a provision restricting the mortgagee’s right to possession until there was default on the part of the mortgagor. [page 497] However, in National Westminster Bank plc v Skelton [1993] 1 All ER 242; [1993] 1 WLR 72 (CA), a case where the mortgage instrument did not contain any provision restricting the mortgagee’s right to possession, Slade LJ said (All ER at 248;WLR at 77) that the court will not readily imply any such restriction. The Court of Appeal approved what Buckley LJ said in Western Bank Ltd v Schindler [1976] 2 All ER 393 at 396; [1977] Ch 1 at 9: A legal mortgagee’s right to possession is a common law right which is an incident of his estate in the land. It should not, in my opinion, be lightly treated as abrogated or restricted.

See also Ashley Guarantee plc v Zacaria [1993] 1 All ER 254 at 257; [1993] 1 WLR 62 at 65–6. Thus it seems that the position at general law is affected by an express provision which has the effect of restricting the mortgagee’s right to

possession by reference to the mortgagor’s default: see Slade LJ in National Westminster Bank plc v Skelton, above, at All ER 249; WLR 77–8. In these circumstances the legal mortgagee of general law land would appear to be in the same position as a mortgagee of Torrens title land as discussed above. The mortgagee may exercise this right by entry without recourse to the courts provided the use of force is not required. Otherwise the mortgagee must obtain a court order or risk civil and criminal liability: see 19.19–19.20. Possession also includes receipt of the rents or income from land: see NSW Act s 7(1) and Victorian Act s 18(1). Where the right of entry is to arise only on default on payment on demand, a reasonable time must be given to the mortgagor to comply with the demand before the right is exercised (Toms v Wilson (1862) 4 B & S 442; 122 ER 524; ANZ Banking Group (NZ) Ltd v Gibson [1981] 2 NZLR 513; Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 153 CLR 491; 51 ALR 609); and if the demand is made by an agent the mortgagor must be given a reasonable time to ascertain if the agent is duly authorised to receive the money: Moore v Shelley (1883) 8 App Cas 285 (PC); Cripps (Pharmaceuticals) Ltd v Wickenden [1973] 2 All ER 606; [1973] 1 WLR 944; ANZ Banking Group (NZ) Ltd v Gibson; cf Ronald Elwyn Lister Ltd v Dunlop Canada Ltd (1982) 135 DLR (3d)1; [1982] 1 SCR 726.

Exercise of the right 19.16 Where the mortgagor is in possession (and is not a tenant of the mortgagee (see 12.8), or where a tenant of the mortgagor, whose tenancy is not binding on the mortgagee is in possession, the right is exercised by taking physical possession of the land, if that can be done peaceably (see 19.19–19.20), or by bringing an action for possession, the modern equivalent of an action for ejectment. The mortgagee need not give notice either before entering (Birch v Wright (1786) 1 Term Rep 378 at 383; 99 ER 1148 at 1151) or commencing proceedings: Jolly v Arbuthnot (1859) 4 De G & J 224 at 236; 45 ER 87 at 92. An action for possession alone is simply an action for the recovery of land and is not proceedings for enforcing the mortgage: Esso Petroleum Co Ltd v Alstonbridge Properties Ltd [1975] 3 All ER 358 at 365; [1975] 1 WLR 1474 at 1481; Western Bank Ltd v Schindler [1977] Ch 1 at 7; [1976] 2 All

ER 393 (CA). (Both Quennell v Maltby [1979] 1 All ER 568; [1979] 1 WLR 318 (CA) and Mobil Oil Co Ltd v Rawlinson (1982) 43 P & CR 221 assume that the claim for possession was an enforcement of the mortgage; and see Martin v Watson and Egan [1919] 2 IR 534.) Mortgages sometimes refer to the lender being able to enforce the mortgage or security on default. However, there may be procedural consequences by reason of the fact that the [page 498] action for recovery of land arises out of a mortgage: see, for example,Victorian Supreme Court Rules Ch 1 O 53 (based on English RSC O 113) which provides a summary procedure for the recovery of land, which is not available to a mortgagee (O 53.01(2)). If a tenant of the mortgagor, whose tenancy is binding on the mortgagee, is in possession, the right is exercised by notice to the tenant to pay the rent to the mortgagee: Horlock v Smith (1842) 6 Jur 478; 11 LJ Ch 157; Davies v Law Mutual Building Society (1971) 219 Estates Gazette 309. If a receiver appointed by the court is in possession, and the rights of prior encumbrancers have not been preserved (see Chapter 18), the mortgagee wishing to go into possession must apply in the action in which the receiver was appointed for the discharge of the receiver (Thomas v Brigstocke (1827) 4 Russ 64; 38 ER 729; Searle v Choat (1884) 25 Ch D 723 (CA); Custom Credit Corp Ltd v Heard and Raphael (1982) 31 SASR 101; and see Chapter 18), or for leave to bring an action for the recovery of the land: Doe d Roby v Maisey (1828) 8 B & C 767; 108 ER 1228. A mortgagee is not entitled to rents collected by the receiver prior to the application to the court by the mortgagee: Re Metropolitan Amalgamated Estates Ltd; Fairweather v Metropolitan Amalgamated Estates Ltd [1912] 2 Ch 497. If the rights of prior encumbrancers are preserved, as they usually will be, the mortgagee is entitled to possession as against the receiver and accordingly should give the tenant notice to pay rent to him: Underhay v Read (1887) 20 QBD 209 at 219 (CA).

Mortgagor cannot set up jus tertii 19.17 Since no one is allowed to dispute a title which he himself has granted, the mortgagor cannot set up as against his mortgagee the title of a third person, even though such third person may have a right to receive possession: Doe d Bristowe v Pegge (1785) 1 Term Rep 758n; 99 ER 1362; and see Australia and New Zealand Banking Group Ltd v Comer (1993) 5 BPR 11,708 at 11,756.

Estoppel 19.18 Where a mortgage contains a recital that the mortgagor is seised in fee simple this operates as an estoppel in favour of the mortgagee, and if the mortgagor, having then only an equitable interest — for example under a contract to purchase — subsequently acquires the legal estate, this will feed the estoppel, and the mortgagee’s estate will become legal: Doe d Christmas v Oliver (1829) 10 B & C 181; 109 ER 418; cf Heath v Crealock (1874) 10 Ch App 22; Onward Building Society v Smithson [1893] 1 Ch 1. But in the absence of such precise averment the mortgagee will not obtain the legal estate, and the mortgagor can create a legal estate in favour of a subsequent mortgagee, so that, if such subsequent mortgagee took without notice, he will have priority: Right d Jefferys v Bucknall (1831) 2 B & Ad 278; 109 ER 1146. This, of course, is subject to any applicable Registration of Deeds legislation: see Chapter 27. Under the indefeasibility provisions of Torrens system legislation a registered mortgagee takes free from any defects in the mortgagor’s title, subject to certain exceptions: see NSW Torrens Act ss 42, 43, 45, 118; Victorian Torrens Act ss 42, 43, 44; Queensland Torrens Act ss 184, 185; South Australian Torrens Act ss 69–70, 72, 186, 187, 207; Western Australian Torrens Act ss 68, 134, 199, 202; and Tasmanian Torrens Act ss 40, 41, 42, 47.

Taking actual possession 19.19 A mortgagee who is presently entitled to possession of the mortgaged property may take possession without recourse to the courts but there are risks in so doing (although there is an argument that a statutory provision which gives to the court jurisdiction to

[page 499] postpone the granting of an order for possession where the mortgage would otherwise be so entitled may abrogate this right): see Clarke, ‘Further Implications of Section 36 of the Administration of Justice Act 1970’ [1983] Conv 293. For a discussion of the operation of these provisions, see the English edition of this work (13th ed), [29.41]ff. Apart from any civil consequences a mortgagee may commit the crime of forcible entry. This crime was created by the statutes of forcible entry, the most important of which was the Forcible Entry Act (1381) 5 Ric II 2 Stat 1 c 7, which made entry ‘with strong hand’ an indictable offence. The crime may be committed even by a person wrongfully dispossessed: R v Waugh (1935) 52 WN (NSW) 20; Prideaux v DPP (Vic) (1987) 163 CLR 483. As to the period for which an intruder must possess the premises to enable him to resist forcible ejection, see McPhail v Persons Unknown [1973] Ch 447 (CA) at 456. Forcible entry remains an indictable offence in many states: see Imperial Acts Application Act 1969 (NSW) ss 18–20; Criminal Code Act 1899 (Qld) ss 70, 71; Criminal Code Compilation Act 1913 (WA) ss 69, 70; and Criminal Code Act 1924 (Tas) s 79. The crime is committed by an entry in which outer doors or windows are broken or one accompanied by threats of or by actual personal violence: Edwick v Hawkes (1881) 18 Ch D 199 at 211– 12; R v Robinson [1971] 1 QB 156 (CA); R v Mountford [1972] 1 QB 28 (CA). However, the crime is not committed by lifting off the roof of a house: Jones v Foley [1891] 1 QB 730; see also R v Robinson and R v Mountford. It is essential that the entry be made with the intention of taking possession of the property: see Prideaux v DPP (Vic), above, where the history of the legislation and the authorities are discussed in detail. The effect of the statutes on the civil rights of an owner of land remained unsettled for many years. It was held that, if no greater force than was necessary was used to eject a person in possession, an owner could not be liable in trespass for entering, as no right of the possessor had been infringed, nor had he suffered any injury that would entitle him to compensation: Turner v Meymott (1823) 1 Bing 158; 130 ER 64; Harvey v Brydges (1845) 14 M & W 437; 153 ER 546; Pollen v Brewer (1859) 7 CB (NS) 371; 141 ER

860; Clifton Securities Ltd v Huntley [1948] 2 All ER 283. The right to enter is not lost if law is resorted to up to a certain point provided the possessor has not been induced to alter his position by the owner’s resort to law: Aglionby v Cohen [1955] 1 QB 558; [1955] 1 All ER 785. The position was complicated by two 19th-century decisions (namely, Newton v Harland (1840) 1 Man & G 644; 133 ER 490; Bedall v Maitland (1881) 17 Ch D 174) which held that while an owner may use force to recover his land he was liable to compensate the possessor for any ‘independent wrongful act’ such as personal violence against, or the removal of chattels of, the occupier in the course of forcible entry and his removal: see Sappideen and Vines, Fleming’s The Law of Torts, 10th ed, Lawbook Co, Sydney, 2011, pp 103–05. The effect was that a cause of action for assault could be manufactured by a show of resistance by the occupier, having no right to possession against the true owner: see Pollock, The Law of Torts, 15th ed, Stevens, London, 1951, p 292. Presumably the policy considerations behind these decisions were that in a society with an efficient legal system self help was not to be encouraged.

Present law on taking possession physically 19.20 The distinction between ‘privileged’ entry and ‘unprivileged’ collateral wrong was removed by the Court of Appeal in the leading case of Hemmings v Stoke Poges Golf Club [1920] 1 KB 720 (CA); an action for trespass assault and battery: see Fleming’s The Law of Torts, above, pp 104– 5. The plaintiff in that case was employed by the Stoke Poges Golf Club. He, with his wife, occupied a house owned by the club partly for the better [page 500] performance of his work and partly as an additional benefit to supplement his wages. Hemmings left the employment of the club and although his licence to occupy the house then determined he was allowed to remain in occupation for a short time in order to find other housing. After a little time the club required him to leave but he stayed on and the club sent ‘… people to take

possession. They entered without any disturbance or violence. Mr and Mrs Hemmings declined to leave. Thereupon they carried Mrs Hemmings out sitting in a chair. They led Mr Hemmings out. They carried the furniture out and put it in a garage with one side open to the weather. The weather was showery, and part of the furniture was wet. All these operations were carried out with no more force than was necessary to remove people who did not actively resist but declined to go unless carried’ (per Scrutton LJ at 738–9). At the trial it was found that no unnecessary force was used nor was any appreciable damage done to the furniture. These findings of fact led to the failure of the plaintiffs’ action in the Court of Appeal. The state of the law and its application appears in the judgment of Banks LJ at 737: In the present case the defendants were undoubtedly entitled to possession of the cottage. The plaintiffs had no right and did not pretend they had any right to remain there. Assuming, but without deciding that the entry by the defendants was a forcible entry, the right to possession was in the defendants, and the acts which are alleged as giving the plaintiffs a right of action were done in defence of their right to possession: Blades v Higgs (1861) 10 CB (NS) 713; 142 ER 634; and of the possession which they had acquired by the alleged forcible entry. I have no fear that the present decision will encourage lawlessness as was suggested for the respondent. A person who makes a forcible entry upon lands and tenements renders himself liable to punishment, and he exposes himself to the civil liability to pay damages in the event of more force being used than was necessary to remove the occupant of the premises, or in the event of any want of proper care in the removal of his goods.

A note of caution was sounded by Scrutton LJ at 747: It will still remain the law that a person who replies to a claim for trespass and assault that he ejected a trespasser on his property with no more force than was necessary may be successfully met by the reply that he used more force than was necessary if the jury can be induced to find it. The risk of paying damages and costs on this finding, and the danger of becoming liable to a prosecution under the statutes of forcible entry may well deter people from exercising this remedy except by order of the court. But I see no reason to add to the existing privileges of trespassers on property which does not belong to them by allowing them to recover damages against the true owner entitled to possession who uses a reasonable amount of force to turn them out.

As Hemmings indicates, the statutes only prohibit entries that are forcible: ‘that is, such as use or show force calculated to prevent resistance’: see Prideaux v DPP (Vic) (1987) 163 CLR 483 at 488, referring to R v Smyth (1832) 5 Car & P 201; 172 ER 939. The decision in Hemmings was applied in Clifton Securities Ltd v Huntley [1948] 2 All ER 283 and Aglionby v Cohen [1955] 1 QB 558; [1955] 1 All ER 785, where it was held that the right to take the law into one’s own hands

was not lost by obtaining a judgment for possession. However, in McPhail v Persons Unknown [1973] Ch 447; [1973] 3 All ER 393 (CA), Lord Denning MR, with whom Orr LJ agreed, held that a tenant whose tenancy had been determined by notice to quit or otherwise could not be forcibly removed by the owner (even using no more force than reasonably necessary) without incurring criminal liability under the statute of forcible entry. As to civil liability, Lord Denning said at 459: ‘He may not be liable to a civil action for damages; see Hemmings v Stoke Poges Golf Club. But, nevertheless, his conduct is unlawful and should not be countenanced by the courts of law.’ With respect, it appears doubtful whether the decision, in so far as it relates to removal of tenants generally, will be adopted in Australia as it is strictly obiter and in conflict [page 501] with the Court of Appeal decision in Hemmings v Stoke Poges Golf Club, above, which is equally applicable to a tenant whose tenancy has been determined. Hemmings was referred to with approval in Prideaux v DPP (Vic) (1987) 163 CLR 483, but McPhail was not mentioned. Subject to the weight accorded McPhail v Persons Unknown, above, the law since Hemmings v Stoke Poges Golf Club appears to be that a person who enters upon lands forcibly renders himself liable, civilly and criminally, if he uses more force than necessary to remove the occupant; and civilly only if his only fault is not to exercise proper care in the removal of goods. Clearly there are considerable practical difficulties involved in a mortgagee taking possession of the mortgaged land without the aid of a court. If neither the mortgagor nor his tenant (if any) is present on the land, the mortgagee may re-enter and prevent re-entry by them — for example by changing the locks. The use of force to expel the mortgagor or his tenant carries considerable risk of civil and criminal proceedings being taken against the mortgagee. Consequently, save where the mortgagor consents to the mortgagee taking actual possession, the occasions where a physical taking of possession is possible will be rare. It will generally only be possible where the mortgagor

has totally abandoned the premises.

Possession 19.21 Where the mortgagee has taken actual possession this possession is beyond doubt and he thereby assumes the liabilities of a mortgagee in possession (as to which, see 19.34 ff), and may be required to comply with the requirements of Corporations Act 2001 (Cth) Pt 5.2: see 18.11. Entry on to part of the mortgaged property, where it has a defined area or is a unit, will be regarded as entry on the whole (Low Moor Co v Stanley Coal Co Ltd (1876) 34 LT 186 (CA); Lord Advocate v Young (1887) 12 App Cas 544 at 556 (HL)), but the mortgagee may limit his possession to part: Soar v Dalby (1852) 15 Beav 156; 51 ER 496; Simmins v Shirley (1877) 6 Ch D 173. Injunctive relief will lie to prevent any disturbance to the mortgagee’s possession, which amounts to a trespass, including against third parties including, for example, a director of the mortgagor company: see ANZ Banking Group Ltd v Wright (SC (NSW), Bryson J, 9 September 1998, unreported). The mortgagee’s intention is also clear when he gives notice to the mortgagor’s tenants to pay rent to him or his agent, as this is equivalent to taking possession: see Horlock v Smith (1842) 11 LJ Ch 157; Bank of New South Wales v Hartman (1955) 72 WN (NSW) 382. As to acts which amount to taking possession, see Noyes v Pollock (1886) 32 Ch D 53; Kirby v Cowderoy [1912] AC 599 (PC); Davies v Law Mutual Building Society (1971) 219 Estates Gazette 309. The mere demand for rent without obtaining payment is not sufficient: Ward v Carttar (1865) LR 1 Eq 29. Notice to a tenant not to pay rent to the mortgagor suffices: Heales v M’Murray (1846) 23 Beav 401; 53 ER 157; Mexborough UDC v Harrison [1964] 2 All ER 109 at 111; [1964] 1 WLR 733 at 737. In the case of a mortgage by assignment of an interest in personalty, giving notice to the trustees is not equivalent to going into possession, unless the notice also requires payment of income to the mortgagee: Re Pawson’s Settlement; Higgins v Pawson [1917] 1 Ch 541; see 19.45. In other cases the position might not be so clear.

The mere fact that the mortgagee is in receipt of the rents does not necessarily make him accountable as a mortgagee in possession. The question depends on whether he has taken out of the mortgagor’s hands the power and duty of managing the mortgaged [page 502] property and dealing with the tenants: Noyes v Pollock at 61; Bank of New South Wales v Hartman (1955) 72 WN (NSW) 382 at 386; Mexborough UDC v Harrison; Park v Brady [1976] 2 NSWLR 329 at 339, 340; Elders Rural Finance Ltd v Westpac Banking Corp (1990) 5 BPR 11,790; and see SEAA Enterprises Pty Ltd v Figgins Holdings Pty Ltd (No 2) [1996] V ConvR ¶54- 538 (and, on appeal, Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245). Merely to receive from the mortgagor’s agent a sum equal to the rents which the agent has to collect, while the agent has not served on the tenants any notice on behalf of the mortgagee, is not enough to render the mortgagee chargeable as a mortgagee in possession (Noyes v Pollock, above); neither was collection of moneys for agistment held to be enough to render the mortgagee chargeable as a mortgagee in possession in Elders Rural Finance Ltd v Westpac Banking Corp, above. However, it will be otherwise if the mortgagee takes control of the rents and profits including agistment fees in such a way that it can be properly said that the mortgagee has chosen to intercept the power of the mortgagor to manage the estate: Elders Rural Finance Ltd v Westpac Banking Corp and see note (1994) 68 ALJ 812. Where a receiver appointed by the court is discharged and thereafter pays the rents to the mortgagee, his possession will be treated, as from his discharge, as the possession of the mortgagee: Horlock v Smith (1842) 11 LJ Ch 157. In Mercantile Credits Ltd v Atkins (1985) 1 NSWLR 670, it was held that a mortgagee entered into possession by authorising a receiver to carry on a business conducted from the mortgaged premises as agent of the mortgagee. There must be a clear taking of dominion and control: Southpac Custodian Ltd v Bank of New Zealand [1993] 1 NZLR 663 (CA). A receiver is generally the agent of the mortgagor: see Chapter 18.

As to the circumstances in which a mortgagee may receive interest out of the income of the mortgaged property without being regarded as a mortgagee in possession, see Visbord v Federal Commissioner of Taxation (1943) 68 CLR 354. A mortgagee who is in possession of the mortgaged property will not be liable to account as mortgagee in possession unless he entered as mortgagee, and the court will not treat possession as being held by the mortgagee as such unless it is satisfied that he took possession in his capacity of mortgagee without reasonable grounds for believing himself to hold in another capacity: Gaskell v Gosling [1896] 1 QB 609 at 691; Vacuum Oil Co Ltd v Ellis [1914] 1 KB 693; Re Colnbrook Chemical and Explosives Co; A-G v Colnbrook Chemical and Explosives Co [1923] 2 Ch 289. Further, a mortgagee is not under any duty to preserve the security unless and until possession is taken; thus a mortgagee whose security included a business conducted on the property charged was under no duty to take any steps to preserve the business before entering into possession: AIB Finance Ltd v Debtors [1998] 2 All ER 929. Once a mortgagee has taken possession as such and thereby assumed the liabilities of a mortgagee in possession he cannot easily give up possession and will remain liable even after he has transferred the mortgage, unless the transfer is by order of the court: Hall v Heward (1886) 32 Ch D 430 (CA). While he is not prevented from appointing a receiver under an express or the statutory power (see Chapter 18), in the absence of special circumstance the court will not assist him to give up possession: Refuge Assurance Co Ltd v Pearlberg [1938] Ch 687; [1938] 3 All ER 231 (CA). Because of this liability a mortgagee will not generally want to take possession, and, if it is a question of intercepting rents, he will do better to appoint a receiver under the statutory power, who will be the agent of the mortgagor: Anchor Trust Co v Bell [1926] Ch 805 at 817; followed in Refuge Assurance Co v Pearlberg, above; see Chapter 18. A mortgagee exercising an express or statutory power of sale will generally want to [page 503]

sell the mortgaged property with vacant possession. The mortgagor or other person in possession will not normally voluntarily give up possession and an order of the court will usually be required: see, for example, Hughes v White [1957] 1 All ER 603 at 604; [1957] 1 WLR 713 at 715; and see above in relation to forcible entry.

Possession action 19.22 The nature of the old action of ejectment is set out in Bradbrook, Croft and Hay, Commercial Tenancy Law, [22.1]ff. In Commonwealth Bank of Australia v Jackson (1992) V ConvR ¶54-447, the nature of the modern action for possession appears in a useful statement by Tadgell J of the necessary allegations and proofs (at ¶65,225): The circumstances being as they have been proved, that is to say default having been made in the way I have indicated, and no demand being necessary under the mortgages as a prerequisite to the mortgagee’s entitlement to possession, s. 78 of the Transfer of Land Act made the mortgagee’s task a comparatively simple one. It merely needed to allege in the statement of claim and prove upon an application for summary judgment the execution of the mortgages, the advances, default by the failure of the mortgagors to pay anything under the mortgages, and that the defendants as mortgagors were in possession. As it is, the appellant has chosen to allege in the statements of claim also that the moneys were payable on demand, and has chosen further to allege that demands were made on such and such a date and not met.

An action for possession of land is a common law proceeding and as such there is no room for any rule of equity or statutory injunction that a person who disputes the amount of the debt to the mortgagee has to pay into court the admitted balance before the court will listen to the mortgagor’s defence; or that the court has a discretion whether it will require payment into court before hearing the defendant mortgagor (Australia and New Zealand Banking Group Ltd v Comer (1993) 5 BPR 11,748); as to the extent of the ‘pay into court’ rule in equity, see the review of the authorities at 11,749–54; and Young, ‘A Mortgagor’s Right to Approach the Court’ (1993) 1 APLJ 61; and see 20.38. Nevertheless, a court may grant an order for possession with a stay of execution in order to allow the mortgagor to sell the mortgaged property to pay the mortgagee: see, for example, Croney v Nand [1999] Qd R 342; Commonwealth Bank of Australia v Bowman [2003] WASC 205; and ANZ Banking Group Ltd v Pearce [2003] VSC 49.

Second mortgagee’s action in ejectment

19.23 Although there are many theoretical problems about a second mortgagee bringing ejectment without adding the first mortgagee as a party to the proceedings (see Australia and New Zealand Banking Group Ltd v Comer (1993) 5 BPR 11,748 at 11,756–7), the preponderance of authority is now that this may be done. In Croft v Kennaugh [1945] VLR 40, Lowe J said (at 42) that there was nothing in the Transfer of Land Act 1958 (Vic) that would prevent a second mortgagee suing in ejectment: cf Bree v Scott (1904) 29 VLR 692 (Madden CJ at 699). Croft v Kennaugh was followed in Australia and New Zealand Bank Ltd v Hathaway [1957] QWN 49; see also Reliance Finance Corp Pty Ltd v Orwin (1964) 82 WN (Pt 1) (NSW) 11. In Zanzoul v Westpac Banking Corp (1995) 6 BPR 14,142 at 14,145, Croft v Cavanagh was followed ‘despite the doubts expressed in Comer’. See also Silkdale Pty Ltd v Long Leys Co Pty Ltd (1995) 7 BPR 14,414. The court might refuse to order possession when there is a substantial question as to the existence or enforceability of the mortgage (Mobil Oil Co Ltd v Rawlinson (1981) 43 P & CR 221, referred to Lidco Investments Ltd v Hale (1971) 219 Estates Gazette 715 (a decision under the Moneylenders Acts); and see Patterson v Roden (1972) 223 Estates Gazette 945 (where the mortgage was alleged to form part of a fraud on the Revenue); Andrew Garrett Wine Resorts Pty Ltd v National Australia Bank Ltd (2004) 206 [page 504] ALR 69 (SC, SA) (as to the validity of the notice of default)) or if the default has been waived (Hughes v Birks [1958] EGD 341; Ushers Brewery v Alro Club Holdings Ltd (1970) 213 Estates Gazette 1537) or some estoppel can be raised against the mortgagee (see Manson Finance v Oliso-Emosingoit [1975] CLY 273 (repairs — defendant should have been allowed to answer affidavit); Mobil Oil Co Ltd v Rawlinson, above), but an alleged counterclaim or set-off (at least at general law) is no ground for an adjournment: Mobil Oil Co Ltd v Rawlinson; Barclays Bank plc v Tennet [1984] CA transcript p 242; Citibank Trust Ltd v Ayivor [1987] 3 All ER 241 (as to the position with respect to Torrens title mortgages, see below).

Even an admitted liquidated claim in the nature of a counterclaim which exceeds the mortgage does not per se discharge the mortgage and is no reason for adjourning the application (Keller (Samuel) (Holdings) Ltd v Martins Bank Ltd [1970] 3 All ER 950; [1971] 1 WLR 43 (CA); followed by the High Court (Walsh J) in Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 and by the English Court of Appeal in National Westminster Bank plc v Skelton [1993] 1 All ER 242; [1993] 1 WLR 72 and Ashley Guarantee plc v Zacaria [1993] 1 All ER 254; [1993] 1 WLR 62); and as appears from these decisions the same principle applies whether the mortgagor is the principal debtor of the mortgagee and where he is only a guarantor: see Ashley Guarantee plc v Zacaria [1993] 1 All ER 254 at 260; [1993] 1 WLR 62 at 69; see also United Dominions Corp Ltd v Jaybe Homes Pty Ltd [1978] Qd R 111 (where the sum alleged due to the mortgagor arose out of a transaction independent of the mortgage); and [1982] Conv 453 (Jackson). In National Westminster Bank plc v Skelton and Ashley Guarantee plc v Zacaria, both above, the Court of Appeal considered whether the position was different where there was an equitable set-off.

Defences 19.24 An important question arising out of the cases on whether a counterclaim or an equitable set-off is any defence to a claim for possession by the mortgagee is whether the principles established are applicable to mortgages of Torrens title land by reason of the fact that, unlike a legal mortgagee of general law land, a registered mortgagee of Torrens title land is a mere statutory chargee with no right to possession until default, the right being conferred by the statutory provisions considered at 19.2. On general principle the position with respect to a counterclaim would appear to be the same, as the counterclaim does not affect the existence of the mortgage debt, hence any default in its payment: see Keller (Samuel) Ltd v Martins Bank Ltd [1970] 3 All ER 952; [1971] 1 WLR 43 and Town and Country Bank v Inverarity (SC (WA), Murray J, 29 March 1995, unreported). Support for this view is also provided by Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161, in which the Samuel Keller case was followed, although the reference to ‘title deeds’ and to ‘an indenture of mortgage’ indicates that the relevant mortgage was not of Torrens title land:

see also Tasmanian Development Authority v Booth (1992) ACL [295 Tas 1]. Nevertheless, this does not affect the application of the general principle. The position would appear to be different in relation to an equitable set-off which has the effect of ‘impeaching’ the mortgagee’s claim to the mortgage debt to the extent that there cannot be said to be any default by the mortgagor in repayment of the debt or interest thereon upon which the mortgagee’s entitlement to possession could be said to arise under the statutory provisions considered: see 19.2. For the mortgage debt to be ‘impeached’ in this sense there must be a very close nexus between it and the claim of the mortgagor, to the extent that the mortgagor’s claim goes to its very foundation (a general requirement of equitable set-off of this nature, as appears from the discussion of the relevant principles in British Anzani (Felixstowe) Ltd v International Maritime [page 505] Management (UK) Ltd [1980] 1 QB 137, especially at 151–2; [1979] 2 All ER 1073 at 1073–4 and see Eagle Star Nominees Ltd v Merrill [1982] VR 557 at 560–1 and the cases there cited; Indrisie v General Credits Ltd [1985] VR 251 at 254): see Triantafillidis v National Australia Bank Ltd (1995) V ConvR ¶54-536. In MEK Nominees Pty Ltd v Billboard Entertainments Pty Ltd (1993) V ConvR ¶54-468, Tadgell J reviewed the authorities on the requirements for an equitable set-off at 65,466. He noted that the term ‘impeachment’ seems to derive from the dictum of Lord Cottenham in Rawson v Samuel (1839) Cr & Ph 161 at 179; 41 ER 451 at 458, that ‘the equity of the bill impeached the title to the legal demand’. In Re KL Tractors Ltd [1954] VLR 505 at 508, O’Bryan J observed, citing Story’s Equity Jurisprudence, that: ‘… equity did not interfere to give a better right of set off than that given by the common law Courts unless special natural equities between the parties were disclosed’.

This is a useful key to a proper understanding of what is meant by ‘impeachment’ in the context, for it indicates that the cross-claim must afford an equity which calls in question, impugns, disparages or impedes the title to

the plaintiff’s demand. The cross-claim need not necessarily destroy the plaintiff’s claim but, if it is to afford an equitable set-off, it must admit of being taken necessarily into account in a determination of the plaintiff’s title to relief. The range of the equitable jurisdiction is most surely discerned (to borrow some words of Lord Simonds LC) ‘… by seeing what jurisdiction the great equity judges of the past assumed and how they justified that assumption’. As to the operation of equitable set-off in New South Wales in mortgage cases, see GE Capital Australia v Davis (2002) 180 FLR 250 (Bryson J). In general terms, where all issues before the court have been explored and the evidence reveals that the plaintiff has a right to possession the appropriate order should be made, even where the court has a discretion whether or not to make the order: see Rodgers v Moonta Town Corporation (1981) 37 ALR 49; 55 ALJR 710, a decision of the High Court on a landlord and tenant summons for possession, but subject to the preceding comments, a decision thought to have a broader application. While it may have been useful to consider the more modern proceedings now available for the recovery of possession of land, space does not permit satisfactory coverage of the substantive and procedural law in this respect in Australia’s eight major legal systems. Reference should be made to the general principles applied in the modern proceedings which are apparent in the treatment of these proceedings, at various English jurisdictional levels, in the 13th English edition of this work, [29.28] ff. Otherwise reference should be made to the various state and territory texts on civil procedure. See also Croft and Hay, The Mortgagee’s Power of Sale, Chs 4 and 5.

Issues in Victoria and Western Australia 19.25 A further issue that arises is whether the provisions of Victorian Transfer of Land Act 1958 s 81(1) and Western Australian Transfer of Land Act 1893 s 116 make any difference to the position in relation to set-off (as to these provisions, see 19.4). Both provisions purport to place the first registered mortgagee of Torrens title land in the same position with respect to rights and remedies at law and in equity as he would have enjoyed as legal mortgagee of general law land — with a right in the mortgagor to quiet enjoyment until default.

It may have been thought to have been established by the authorities that this reservation in favour of the mortgagor operates, as have similarly worded covenants in general law mortgages, as a re-demise to the mortgagor until default: see 19.4. Doubt has, however, been cast in this respect by the High Court because in Figgins Holdings [page 506] Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245 at 281–2 (McHugh J referring to Doe d Parsley v Day) and 295 (Kirby J) the view that s 81(1) created an implied demise or reversion was explicitly rejected. Gaudron, Gummow and Callinan JJ (in a joint judgment) appeared to doubt the views of Higgins J in Connolly v Ryan (1922) 30 CLR 498 at 504–7 in favour of a demise, but did not find it necessary to determine the question (see at 273); and see 19.4. Applying the authorities referred to in the same way as applied to the preceding statutory provisions conferring on a Torrens title mortgagee a right to possession only on default (s 78 (Vic) and s 111 (WA): see 19.2), the position appears to be that equitable set-off may in appropriate circumstances be relied upon by the mortgagor to impeach the mortgagee’s claim that there is a default which has the effect of terminating any re-demise under ss 81 or 116 — which would leave the mortgagor entitled to possession. (See National Westminster Bank plc v Skelton [1993] 1 All ER 242 at 248–9; [1993] 1 WLR 77–8, as to the effect on the usual position of a legal mortgagee of general law land where the mortgagee’s right to possession is restricted.) In City Mutual Life Assurance Society Ltd v Lance Creek Meat Works Pty Ltd [1976] VR 1 at 10, it was held that s 81 does not qualify or limit the right of a first mortgagee to bring an action for ejectment under s 78(1)(b): see Commonwealth Bank of Australia v Figgins Holdings Pty Ltd [1994] 2 VR 505 at 510; (1994) V ConvR ¶54-492 at ¶65,691 and ¶65,693 (Hayne J); and see, on appeal in related, but other, proceedings, Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245. However, this is not inconsistent with the statutory re-demise having the effect of making the operation of ss 81 and 116 the same with respect to equitable set-off as the

position produced by ss 78 and 111, as discussed above, rather than producing the same result as applies to a legal mortgagee of general law land.

Furniture on the premises 19.26 Where the mortgagee takes possession, either by taking physical possession or under an order of the court, questions may arise as to his rights and duties in respect of the mortgagor’s (or his tenant’s) chattels left on the premises. Where the mortgagee takes possession under an order of the court, the order for possession means vacant possession: Norwich Union Insurance Society v Preston [1957] 2 All ER 428; [1957] 1 WLR 813. If furniture and other effects are left on the premises the mortgagee may obtain an order for the removal of the goods: see Norwich Union Insurance Society v Preston. On notice before removal, see Haniotis v Dimitriou [1983] VR 498 at 503 (a landlord and tenant case). If the mortgagor fails to obey such an order he may be committed or attached for contempt. Alternatively, if an order for payment under the personal covenant is obtained and not satisfied, execution may be levied against the furniture. This may be in conjunction with taking possession or separately from it. It is submitted that the mortgagee who goes into possession without an order of the court (such cases, as has been stated, will be rare) has the same right to vacant possession and accordingly is entitled to an order for removal. The position is rather more difficult where the owner of the chattels is not to be found, or has died, and there are no personal representatives. There are three possible courses of action in this situation. The presence of the chattels on the premises constitutes a trespass to the mortgagee’s possession which he is entitled to take steps to end, but to turn furniture out on to the street is not really a practical solution. The mortgagee could arrange for the property to be stored. It is doubtful whether expenses of removal and storage could be properly added to the mortgage debt. As to those expenses which may be allowed to the mortgagee, see 40.3. If there is or will be an [page 507]

outstanding balance of the proceeds of sale of the premises, the storage expenses could, it is submitted, be paid out of these where the balance has not been paid into court (under provisions such as Trustee Act 1925 (NSW) s 95; Trustee Act 1958 (Vic) s 69; or Trustee Act 1925 (UK) s 63), and if and when the mortgagor appears the balance should only be handed over on terms that the expenses were a proper deduction, but if the proceeds of sale of the premises will not satisfy what is due to the mortgagee who is selling, there is no reason, it is submitted, why he should incur an expense which he will not be able to recoup and in this case (but this case only) the mortgagee would probably be justified in selling the furniture and putting the proceeds on deposit account. These difficulties may be provided for by the terms of the mortgage deed, but unless carefully drawn such a provision may infringe Bills of Sale or Chattel Securities legislation: see Chapter 5. A mortgagee who has taken possession is not obliged to look after chattels left on the premises pending their removal (see Jones v Foley [1891] 1 QB 730); but the mortgagee’s duty on sale may require care in the preservation of chattels, as to which see National Australia Bank Ltd v Jenkins (1999) V ConvR ¶54-601 (and, on appeal, (1999) V ConvR ¶54-602) and 20.21ff. As noted earlier in this chapter, the mortgagee may also at the time he is seeking to remove and to dispose of chattels left on the mortgaged premises stand in some tenancy relationship with the mortgagor as a result of a tenancy created by the terms of the mortgage. It follows that if the mortgagee seeks to rely also on his capacity as a landlord, and therefore the terms of the tenancy agreement contained in the mortgage, the tenancy must then subsist. If there were any doubt as to its subsistence the mortgagee’s reliance on his capacity as landlord and the terms of the tenancy would involve acknowledgment of the subsistence of the tenancy, an acknowledgment that may raise an estoppel, or preclude reliance upon any repudiation (as far as the tenancy is concerned) by the mortgagor-tenant: see Bradbrook, Croft and Hay, Commercial Tenancy Law, [1.15] and [16.26], [16.27]. One of the reasons for the use of attornment clauses in mortgages was to enable the mortgagee, as landlord, to take advantage of the remedy of distress for rent. Distress for rent has now been abolished in all states except Tasmania, and to a limited extent in South Australia: see Bradbrook, Croft and Hay, Commercial Tenancy Law, [11.1].

Modern replacement of law of distress 19.27 It follows that in those jurisdictions in which the remedy of distress for rent has been abolished the remedy is not to be obtained by other means. In this context it is helpful to consider, briefly, the nature of the remedy. In Foa’s General Law of Landlord and Tenant,Thames Bank, London, 1951, it is epitomised as follows (p 480): 753. Nature of the right of distress. — If rent reserved upon a demise be in arrear, the person legally entitled to it may distrain for it. That is to say, he may, without previous legal process, and without even a previous demand of the rent (for the distress itself operates as a demand), seize upon goods or cattle, whether the property of the tenant or not — subject to any privilege that may be claimed for them — which he may find on the premises; and, after selling them, satisfy his claim for rent out of the proceeds. Covenants indeed are sometimes met with in leases by which the lessee undertakes to keep on the premises at all times during the term goods or machinery to a named value as security for the rent.

Previously in Victoria, there were specific rules dealing with the removal and disposal of goods left on vacated premises: Landlord and Tenant Act 1958 ss 42A–42F (repealed). These provisions were contained in Pt IVA of the Act and are discussed in Bradbrook, Croft and Hay, Commercial Tenancy Law at [16.36]. The new provisions of general application to disposal of uncollected goods are found in Australian Consumer Law and Fair Trading Act 2012 (Vic) Pt 4.2. This Part does not apply to tenancies under the [page 508] Residential Tenancy Act 1997 (Vic): s 56(2)(a). The Part does not apply to the extent that there is an agreement between the parties about the disposal of uncollected goods: s 56(4). Part 4.2 of the Act applies to the possession of goods under a bailment: s 56. The definition of bailment in the Act ‘includes bailment for reward, bailment in the course of business, gratuitous bailment, involuntary bailment and any sub-bailment’: s 3. It appears this definition is intended to capture a landlord who involuntarily takes possession of goods when taking possession of the relevant land. However, if a court finds that no bailment applies the consequence seems to be that landlords left in possession of goods will be left to their rights at common law.

Uncollected goods are goods under a bailment that have not been collected by the provider (bailor) from the receiver (the bailee) in circumstances when the goods are available for collection or the provider has not paid the relevant charge to the receiver: s 54. The relevant charge is the amount payable by the provider to the receiver, payment of which entitles the provider to take delivery of the goods: s 55(1). This includes payment for work done to the goods and storage costs: s 55(2). A receiver must not dispose of uncollected goods if a dispute exists regarding the relevant charge or if there has been an application to a court in regard to the relevant charge: s 58(2). Sections 60–62 set out the requirements before a receiver can dispose of the goods, including notice, time limits and mode of sale. Similar legislation, the Uncollected Goods Act 1995, covers the situation in New South Wales. There seems no reason why provisions of this nature could not be expressly agreed between mortgagor and mortgagee and incorporated in the mortgage (hence they are set out in full), in jurisdictions where distress for rent has been abolished. The terms of these provisions could be modified or extended for the purposes of such an express agreement, but could not be extended to provide for a remedy in the nature of distress for rent. There is no such inhibition in jurisdictions where distress for rent is available. Depending upon the nature of the provisions adopted, they may result in the mortgage also being a security over chattels, as to which see Chapter 5 in relation to mortgages of chattels and Chapter 9 in relation to consumer credit securities.

Effect of limitations of action legislation 19.28 Actions for recovery of possession of mortgaged property are subject to Limitation of Actions legislation: see 16.17 ff.

Ejectment notwithstanding tenancy 19.29 Notwithstanding the existence of apt words for the creation of a tenancy the mortgagee may retain his ordinary power of ejectment qua mortgagee, if the mortgagee’s ordinary rights are reserved: Doe d Garrod v Olley (1840) 12 Ad & El 481; 113 ER 894; Doe d Snell v Tom (1843) 4 QB

615; 114 ER 1030. When the mortgagee, having covenanted not to take possession until default is made, seeks possession before default it is possible that an order for delivery of possession might be refused to the mortgagee on the ground that his covenant operated to estop him from asserting his legal right to possession. If the court considered that the mortgagee was, in spite of his covenant, still entitled to possession, the mortgagor would presumably be entitled to damages for breach of covenant: Doe d Parsley v Day (1842) 2 QB 147; 114 ER 58. In this respect regard should be had to the provisions of Victorian Torrens Act s 81(1) and the [page 509] corresponding Western Australian Torrens Act provision, s 116; and see Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245; and also 19.4.

II Mortgagee in Possession A. Rights of Mortgagee in Possession Rents and profits 19.30 The mortgagee in possession as such is entitled, as a matter of general law, to the rents and profits of the mortgaged property by virtue of the legal or equitable ownership which the mortgage confers: Cockburn v Edwards (1881) 18 Ch D 449 at 457 (CA); and see English Act s 141; and the counterparts in, for example, NSW Act s 117; Victorian Act s 141; Property Law Act 2007 (NZ) s 233. In the case of mortgages of Torrens system land the entitlement flows from the mortgagee’s right to possession on default under the provisions of the Torrens legislation to which reference has been made: see 19.2 ff. Where the tenancy was created before the mortgage or is otherwise binding on the mortgagee, the mortgagee will take possession by giving notice to the tenant requesting payment of the rent to himself (see 12.13 and 12.14), and

thereafter the mortgagee will be entitled to the rents and profits accruing. The mortgagee may demand payment of all arrears of rent due at the date of taking possession (Moss v Gallimore (1779) 1 Doug KB 279; 99 ER 182; Rogers v Humphreys (1835) 4 Ad & El 299 at 314; 111 ER 799 at 805), and may claim an increased rent, although the variation effecting the increase had been agreed between the mortgagor and the tenant after the mortgage: Burrowes v Gradin (1843) 1 Dow & L 213; 12 LJ QB 333; and Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245. Where rent has been paid in advance to the mortgagor, the mortgagee on going into possession may demand payment over again (Reeves v Pope [1914] 2 KB 284 (CA)), unless the payment were made before the mortgage, in which case the payment binds the mortgagee since he should inquire as to the terms on which the tenant holds: De Nicholls v Saunders (1870) LR 5 CP 589. The tenant cannot set off against the rent claimed by the mortgagee in possession a personal claim he had against the mortgagor: Green v Rheinberg (1911) 104 LT 149 (CA). Where the tenancy is not binding on the mortgagee, a new tenancy may be created under the mortgagee. Even if this does not occur, after notice from the mortgagee the tenant should pay the rent to the mortgagee, since the mortgagee will in any case be entitled to an equivalent amount as mesne profits (Ocean Accident and Guarantee Corp Ltd v Ilford Gas Co [1905] 2 KB 493 (CA)), but the mortgagee is not entitled to arrears of rent under such a tenancy due at the date of his taking possession (Corbett v Plowden (1884) 25 Ch D 678; Kitchen’s Trustee v Madders [1950] Ch 134; [1949] 2 All ER 1079 (CA)); and see 19.2 and 19.4 in relation to the provisions of the Torrens legislation with respect to the mortgagee’s entitlement to possession.

Carrying on of business 19.31 Where the mortgaged property includes a business carried on upon mortgaged premises the mortgagee in possession is entitled to carry on the business for a reasonable time with a view to a sale: Cook v Thomas (1876) 24 WR 427; County of Gloucester Bank v Rudry Merthyr Steam and House Coal Colliery Co [1895] 1 Ch 629; Mercantile Credits Ltd v Atkins (No 1) (1985) 9 ACLR 757; and see Stockland (Macquarie) Pty Ltd v Australia and New Zealand Banking Group Ltd (1991) ACL [295 Qld 9]. As to his

[page 510] position, see Chaplin v Young (1864) 33 Beav 330; 55 ER 395. Because of the liability of the mortgagee in possession (see 19.34–19.42), it will usually be more convenient to appoint a receiver who will be agent of the mortgagor (see Chapter 18): see generally (1976) 120 Sol Jo 497. The terms of the mortgage in such a case should provide for this eventuality. A mortgagee does not render himself liable on the existing contracts of the business by carrying on the business unless he adopts them so as to effect a novation (Reid v Explosives Co (1887) 19 QBD 264 at 267, 269 (CA); cf International Harvester Export Co v International Harvester Australia Ltd [1983] 1 VR 539 at 544); but the mortgagee is personally liable on any new contracts he enters into: cf Burt, Boulton and Hayward v Bull [1895] 1 QB 276 (CA). The mortgagee becomes the owner of the business and stands, as regards his powers, in the place of the mortgagor: Chaplin v Young, above. Trade Practices Act 1974 (Cth) s 74(1) (now repealed) does not apply to a mortgagee in possession letting, managing or selling the mortgaged property under the powers conferred by Real Property Act 1900 (NSW) ss 58 and 60: National Australia Bank Ltd v Sproule (1989) 17 NSWLR 505. It is expected that the same result would be reached under Competition and Consumer Act 2010 (Cth) Sch 2 s 60.

Leasing 19.32 At general law a mortgagee of land while in possession has the same statutory power of leasing and of accepting surrenders of leases as a mortgagor in possession: Property Law Act 1958 (Vic) and Law of Property Act 1925 (UK) ss 99(2), 100(2); see 12.20 and 12.25; and see 19.11. If the mortgagor’s statutory power of leasing has been excluded a second mortgagee in possession will not have the statutory powers. The UK Act s 99(13) and Victorian Act s 99(11) apply as much to subs (2) as to (1) (see above for references to the Australian counterparts): Julian S Hodge & Co Ltd v St Helen’s Credit Ltd [1965] EGD 143. Such a lease by a mortgagee in possession binds all prior encumbrancers and the mortgagor himself (Victorian Act s 99(2); UK Act s 99(2)), but for the purposes of s 99 ‘mortgagor’ does not include an encumbrancer deriving title under the

original mortgagor: UK Act subs (18);Victorian Act subs (16).A mortgagee who has appointed a receiver has, while the receiver is acting, the same powers, and may delegate the power of leasing to the receiver:Victorian Act s 99(17); UK Act s 99(19). The position of whether a registered mortgagee of Torrens system land may have power to lease is dependent upon the extent of the statutory rights to possession on default conferred by the various Torrens Acts (see 19.2); but the extent of any such power to lease is not as clear as at general law: see 12.20; and see Sykes and Walker, p 267.

Application of receipts 19.33 Receipts should be applied in discharging outgoings and in paying the interest due under the mortgage. Any surplus may be applied in partial discharge of the principal, but the mortgagee is not bound to accept payment by driblets (Nelson v Booth (1858) 3 De G & J 119 at 122; 44 ER 1214 at 1215; Wrigley v Gill [1905] 1 Ch 241 at 254; affirmed [1906] 1 Ch 165; as to accounts in respect of the surplus, see 39.28, 39.37) and he may, if he prefers, hand over the surplus to the mortgagor.

B. Liabilities of Mortgagee in Possession To account 19.34 A mortgagee who as such goes into possession of the mortgaged property is bound to account to the mortgagor, in redemption or in other proceedings: see Banning [page 511] Holdings Pty Ltd v Webster [2001] WASC 12 (Anderson J), where there was a failure to prove that possession was taken as mortgagee rather than as lessor. He is not obliged to pay any surplus yearly or otherwise: Western Bank Ltd v Schindler [1977] Ch 1 at 23; [1976] 2 All ER 393 at 408. The account usually directed against the mortgagee in possession is of what he has received, or without wilful default might have received, from the time of

his taking possession: see 39.24. The rule applies whether the possession be of land, tangible property, or of a business: Williams v Price (1824) 1 Sim & St 581; 57 ER 229; Chaplin v Young (1864) 33 Beav 330; 55 ER 395; Bompas v King (1886) 33 Ch D 279 (CA). The mortgagee is liable to account for the rents and other profits during the mortgagee’s possession, and if the mortgagee goes into and remains in occupation himself he is liable to pay an occupation rent (Marriott v Anchor Reversionary Co (1861) 3 De GE & J 177 at 193; 45 ER 846 at 852), unless from its ruinous state, or for any other reason, the property is incapable of making a return: Marshall v Cave (1824) 3 LJ OS Ch 57; Fyfe v Smith [1975] 2 NSWLR 408; (1979) 129 NLJ 334 (Markson); and see 39.31. However, the mortgagee is not liable to account for any notional rent if the mortgagee’s possession is only for the purposes of sale within a reasonable time: Norwich General Trust v Grierson [1984] CLY 2306; see English Law Commission Working Paper No 99, Land Mortgages, [3.25]; and see English Law Commission Report No 204, Transfer of Land — Land Mortgages, [7.37]– [7.38]. The mortgagee’s liability to account includes the receipts of any person whom the mortgagee has put into possession without a just title, and in derogation of the rights of the mortgagor: National Bank of Australasia v United Hand-in-Hand and Band of Hope Co (1879) 4 App Cas 391 (PC). If the mortgagee in possession has sold the property, he will be liable to account for the proceeds of sale received by him, or which without wilful default he might have received, but if no special case is made (Mayer v Murray (1878) 8 Ch D 424; Farrar v Farrars Ltd (1888) 40 Ch D 395; and see Commonwealth Bank of Australia v Hadfield (2001) 53 NSWLR 614; Ultimate Property Group Pty Ltd v Lord (2004) 60 NSWLR 646; 11 BPR 21,477 and see 20.21–20.23 and 39.1), there will be no inquiry into the propriety of the sale or the adequacy of the price. The mortgagee’s liability to account extends in favour of all those who are interested in the equity of redemption, whether or not the mortgagee has assigned the mortgage: Hinde v Blake (1841) 11 LJ Ch 26; Hall v Heward (1886) 32 Ch D 430 (CA); and see Venables v Foyle (1661) 1 Cas in Ch 2; 21 ER 789. After receiving notice of a later mortgage (Parker v Calcraft (1821) 6 Madd 11; 56 ER 992) the mortgagee in possession becomes liable to account to the later encumbrancer for so much of the surplus rent as the mortgagee has paid to the mortgagor or his representatives.

The mortgagee in possession cannot by any dealing with the estate discharge himself of his liability to account: Hinde v Blake; Re Prytherch (1889) 42 Ch D 590. Nor, in the absence of special circumstances, will the court assist the mortgagee to give up possession by appointing a receiver (County of Gloucester Bank v Rudry Merthyr Colliery Co [1895] 1 Ch 629), but the mortgagee may relieve himself by appointing a receiver under an express or the statutory power: Refuge Assurance Co Ltd v Pearlberg [1938] Ch 687; [1938] 3 All ER 231 (CA). It appears that a mortgagee who enters as agent of a prior encumbrancer may escape the liabilities of a mortgagee in possession but not if he enters as agent for the mortgagor: Re M’Kinleys Estate (1873) 7 Ir Eq 467 at 470. The mortgagee will remain liable after a transfer of the mortgage unless the transfer is made with the consent of the court or the concurrence of the mortgagor: Hall v Heward (1886) 32 Ch D 430 (CA); and see 39.20. A mortgagee in possession may be required to comply with the provisions of the Corporations Act 2001 (Cth) Pt 5.2: see 18.11. [page 512]

Amount of rent to be accounted for 19.35 Where a mortgagee enters into receipt of rents he accounts at the rate of the rent reserved (Lord Trimleston v Hamill (1810) 1 Ball & B 377 at 385; Metcalf v Campion (1828) 1 Mol 238) and where the mortgagee enters into actual possession, it has been said that he will be charged with the utmost value the lands are proved to be worth (see 39.30), but this liability is limited by the circumstances of the case, and the mortgagee will not usually be required to account for more than he has received, unless it is proved that, but for the mortgagee’s gross default, mismanagement or fraud, he might have received more: Hughes v Williams (1806) 12 Ves 493; 33 ER 187; Wragg v Denham (1836) 2 Y & C Ex 117; 160 ER 335. If there is included in a lease by the mortgagee land mortgaged not to him, but to another who concurred in the lease, there will be an apportionment: Harryman v Collins (1854) 18 Beav 11; 52 ER 5. This may be evidenced by the mortgagee’s refusal or removal of a satisfactory tenant, who offered or

paid a certain rent (Noyes v Pollock (1886) 32 Ch D 53 at 61; White v City of London Brewery Co (1889) 42 Ch D 237 (CA)), or his making an improper use of his security, by allowing the mortgagor himself to take the profits to the prejudice of his other creditors or, where he is bankrupt, his trustee: Loftus v Swift (1806) 2 Sch & Lef 642 at 656. In these cases the proof must be distinct. The mortgagor is not allowed to bring in the mortgagee, and ask him how much rent he could have got when in possession, nor to involve the mortgagee in a minute inquiry, whether some person was ready, unknown to him, to have given a greater rent. The mortgagee may be excused for refusing a higher offer from a creditworthy person, where, for example, the tenant in possession is in arrears, and by removing him the arrears might have been lost. It is the duty of the mortgagor, if he has the opportunity, to give notice to the mortgagee that the mortgaged property can be made, and to assist him in making it, more productive. If the mortgagor fails to do this and stands by, making no objection to the mortgagee’s conduct, the mortgagor cannot afterwards charge the mortgagee with mismanagement: Hughes v Williams, above; Metcalf v Campion, above; Brandon v Brandon (1862) 10 WR 287. An act to prevent the letting will not be chargeable as wilful default if the mortgagor was a party to it: Lord Trimleston v Hamill; Metcalf v Campion, both above. Mortgagees of a public house with a covenant that all beer should be purchased from them are, if they take possession, liable to account for such rent as they might have received if the house were let as a free (as distinguished from a tied) house, but they are not liable to account for profits made by them by selling beer on the premises: White v City of London Brewery Co, above. Similarly, a co-owner of a patent who takes a mortgage of his co-owner’s share is not bound to bring his profits into account as mortgagee in possession: Steers v Rogers [1893] AC 232 (HL). Where the mortgagee employs an agent to collect the rents, he must account for all the rents received by that agent, and not merely for what the agent has paid to him: Noyes v Pollock, above. A mortgagee in possession may be required to comply with the provisions of the Corporations Act 2001 (Cth) Pt 5.2: see 18.11.

Maintenance of the property — repairs

19.36 The mortgagee in possession is not judged by the degree of care which a person is supposed to take of his own property. The mortgagee need not rebuild ruinous premises (Moore v Painter (1842) 6 Jur 903), and will not be charged with deterioration of the property arising from ordinary decay by lapse of time: Russel v Smithies (1794) 1 Anst 96; 145 ER 811; Wragg v Denham (1836) 2 Y & C Ex 117; 160 ER 335. The mortgagee will be allowed the cost of proper and necessary repairs (Sandon v Hooper (1843) 6 Beav 246; [page 513] 49 ER 820; affirmed 14 LJ Ch 120), and ought to do such repairs as can be paid for out of the balance of the rents after the mortgage interest has been paid: Richards v Morgan (1753) 4 Y & C Ex 570; Moore v Painter, above; Tipton Green Colliery Co v Tipton Moat Colliery Co (1877) 7 Ch D 192. However, the mortgagee need not increase the debt by laying out large sums beyond the rents: Moore v Painter, above. In the case of business premises it has been held that the measure of deterioration is the amount necessary to be spent on the mortgaged property to enable the business conducted on those premises to reopen: see National Australia Bank Ltd v Jenkins (1998) V ConvR ¶54-601. If buildings are incomplete, or have become unfit for use, the mortgagee may complete them or pull them down and rebuild: Marshall v Cave (1824) 3 LJOS Ch 57; Midland Credit Ltd v Hallad Pty Ltd (1977) 1 BPR 9570. The rebuilding or repairing may be done in an improved manner, and more substantially than before (Marshall v Cave), so long as the work be done providently, and that no new or expensive buildings be erected for purposes different from those for which the former buildings were used: Moore v Painter, above; Jortin v South Eastern Rly Co (1854) 2 Sm & G 48; 65 ER 296 (reversed on other points sub nom South Eastern Rly Co v Jortin (1857) 6 HL Cas 425); Southwell v Roberts (1940) 63 CLR 58. This right of the mortgagee is founded on the principle that the mortgagor, whose right to redeem is only equitable, must repay all that is equitably due. The mortgagee should not enter into possession merely for the sake of

effecting repairs, because, if the mortgagee goes into possession, he becomes liable on the footing of wilful default. If the property is income-producing the better course is to appoint a receiver and direct the receiver to effect repairs. However, if the mortgagee goes too far in directing or interfering with the activities of a receiver the receiver will be held to be the agent of the mortgagee rather than the mortgagor: see Standard Chartered Bank Ltd v Walker [1982] 3 All ER 938; [1982] 1 WLR 1410; American Express International Banking Corp v Hurley [1985] 3 All ER 564 at 568. The welldrafted mortgage will generally contain a covenant by the mortgagor to repair, with power for the mortgagee to enter and effect repairs in case of default and in effecting repairs under this provision the mortgagee will not be a mortgagee in possession, but such a provision only covers the execution of necessary and proper repairs. Otherwise the mortgagee will be liable as mortgagee in possession. The terms of the mortgage should contain a covenant by the mortgagor to pay the cost of repairs effected by the mortgagee and a charge of such costs on the mortgaged property: see 3.19. The liability of a mortgagee in possession for waste is considered in 42.20.

Mortgagee’s liability for negligence 19.37 The mortgagee will be liable to the mortgagor for gross or wilful negligence resulting in damage to the mortgaged property arising out of the mortgagee’s possession of the mortgaged property: Russel v Smithies (1792) 1 Anst 96; 145 ER 811; and see Midland Credit Ltd v Hallad Pty Ltd (1977) 1 BPR 9570 at 9577 and Boronia Park Properties Pty Ltd v Arramunda Airways Pty Ltd [1995] NTSC 16. It must be noted, however, that these are allowances made on taking accounts, not common law damages for the tort of negligence. This will be so, for example, if mortgaged mines are flooded by improper working (Taylor v Mostyn (1886) 33 Ch D 266 (CA)), or mortgaged chattels are injured by negligent removal: Johnson v Diprose [1893] 1 QB 512 (CA). The mortgagee will be liable for loss due to alterations injurious to the value of the property, such as the pulling down of cottages on an estate or the cutting of timber. In such a case he will be charged with the value thereof with interest, or be liable to pay such rent as would otherwise have been received (Wragg v Denham (1836) 2 Y & C Ex 117; 160 ER 335; Sandon v Hooper (1843) 6 Beav 246; 49 ER 820; Batchelor v Middleton

[page 514] (1848) 6 Hare 75; 67 ER 1088), and the same applies if, being in possession under a mortgage of unfinished leasehold buildings, the mortgagee neither sells the property nor completes the building, and so the leases are forfeited: Perry v Walker (1855) 24 LJ Ch 319; Taylor v Mostyn, above; and see Midland Credit Ltd v Hallad Pty Ltd (1977) 1 BPR 9570 at 9577–8; Kennedy v General Credits Ltd (1982) 2 BPR 9456; Wenham v General Credits Ltd (1989) 18 NSWLR 570 (CA). The mortgagee of a debt is liable for its loss, if it becomes irrecoverable through the mortgagee’s wilful default (Williams v Price (1824) 1 Sim & St 581; 57 ER 229), but the mortgagee in possession is not obliged to incur the cost and risk of defending doubtful rights in respect of the mortgaged property: Cocks v Gray (1857) 1 Giff 77; 65 ER 831. The mortgagee will also be liable if, after an order for possession has been made in his favour, the mortgagee fails to take reasonable steps to protect the premises, for example against vandals, and damage to the premises ensues: Norwich General Trust v Grierson [1984] CLY 2306. In relation to allowance for outgoings, see 19.39. As to liability to persons other than the mortgagor, the mortgagee in possession will be subject to liability for loss or injury through nuisance, disrepair, etc as any other person who has control of property. For liability to third parties in nuisance and negligence, see (1954) 98 Sol Jo 377; and see Kennedy v General Credits Ltd; Wenham v General Credits Ltd, both above.

Improvements 19.38 Though the mortgagee may, under appropriate circumstances, make improvements, these must always be reasonable having regard to the nature and value of the security: see Sandon v Hooper (1843) 6 Beav 246; 49 ER 820, affirmed 14 LJ Ch 120; Shepard v Jones (1882) 21 Ch D 469 at 479 (CA); Southwell v Roberts (1940) 63 CLR 581; Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293; Midland Credit Ltd v Hallad Pty Ltd (1977) 1 BPR 9570. Generally, the mortgagee is under no obligation to take steps which may increase the value of assets: see Duggan v Commonwealth Bank of Australia (SC (NSW), Cohen J, 28 April 1995, unreported); and see National Australia Bank Ltd v Jenkins (1998) V ConvR ¶54-601.

The mortgagee should inform the mortgagor as soon as possible of the necessity or the intention to incur extraordinary expenses; but a reasonable improvement which produces a benefit may be made without notice: Shepard v Jones (1882) 21 Ch D 469 at 479; Network Finance Ltd v Deposit and Investment Co Ltd [1972] QWN 19 (and see (1972) 46 ALJ 413). If he does so, and the mortgagor agrees, expressly or by acts which show consent or acquiescence, the mortgagee need not show that the outlay was reasonable. If the mortgagor does nothing, he will not be charged with an unreasonable outlay, merely because he has notice. Nor, on the other hand, will the mortgagee lose his right to repayment for want of giving notice, if the improvement was reasonable and beneficial. If the property has been sold, the mortgagee will have a stronger claim than in a redemption action, and will be repaid whatever is shown to have been added to the selling value of the property by the expenditure: Shepard v Jones; Matzner v Clyde Securities Ltd, both above. As to estimating the value of improvements to buildings, see Robinson v Ridley (1821) 6 Madd 2; 56 ER 988.

Outgoings 19.39 The mortgagee will be allowed (that is, will be able to bring into account) what he has expended in preserving the security, for example rent, where the security is leasehold, and the cost of preserving the property from deterioration: Burrowes v Molloy (1845) 2 Jo & Lat 521; Brandon v Brandon (1862) 10 WR 287. (For ‘allowed’, see Mellick v Mellick [1939] QSR 251.) With regard to the mortgages of ships, outgoings are not allowed unless incurred with the sanction of the court: The Fair Haven (1866) LR 1 A & E 67. The mortgagee will [page 515] be allowed the amount of compensation payable to an outgoing tenant (Oxenham v Ellis (1854) 18 Beav 593; 52 ER 233) and the cost of renewing a lease, even though there is no covenant by the mortgagee to renew (Woolley v Drage (1795) 2 Anst 551; 145 ER 964), but he cannot compel the mortgagor to renew. The mortgagee will generally be allowed fines for the renewal of leases (Manlove v Bale and Bruton (1688) 2 Vern 84; 23 ER 664; Lacon v

Mertins (1743) 3 Atk 1 at 4; 26 ER 803 at 805; Woolley v Drage, above; Bishop v Mantell (1807) 3 Seton’s Judgments and Orders (7th ed) 1886; Hamilton v Denny (1809) 1 Ball & B 199 at 202) and ground rent: Hill v Browne (1844) Drury t Sug 426; Brandon v Brandon, above; and Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd [1984] 2 NSWLR 128. The right to recover salvage payments out of the property will be postponed if the right to recover the principal debt is postponed: Burrowes v Molloy (1845) 2 Jo & Lat 521. All such moneys will be added to the principal debt and, like it, carry interest. The mortgagee in possession is treated as owner for the purpose of various statutes, for example for notices under the Highways Act (UK) (Maguire v Leigh-on-Sea UDC (1906) 95 LT 319); under the Public Health Act 1936 (UK) (Davies v Law Mutual Building Society (1971) 219 Estates Gazette 309); under the London Buildings Acts (Amendment) Act 1939 (UK) (Solomons v R Gertzenstein Ltd [1954] 2 QB 243; [1954] 2 All ER 625); for the rating surcharge under General Rate Act 1967 (UK) 17A and 17B: Banister v Islington London Borough Council (1972) 71 LGR 239 (see (1976) 40 Conv (NS) 222 (I’Anson Banks)); Westminster City Council v Haymarket Publishing Ltd [1981] 2 All ER 555; [1981] 1 WLR 677 (CA). Any liability in respect of the premises arising as such will be allowable. See also Local Government Act 1989 (Vic) s 156(1) and the definition of ‘owner’ in s 3(1): see Leary v City of Geelong West [1914] VLR 370; City of South Melbourne v Taylor (1891) 17 VLR 167. Where such sums are laid out by a subsequent mortgagee in possession, they will not be allowed as against a first mortgagee: Landowners West of England and South Wales Drainage and Inclosure Co v Ashford (1880) 16 Ch D 411. Subject to any contrary intention in the mortgage deed, fire insurance premiums paid by the mortgagee will be allowed and will enjoy the same priority and bear interest at the same rate as the mortgage money: see NSW Act s 109(1)(b);Victorian Act s 101(1)(b); Queensland Act s 83(1)(b); South Australian Act s 47(1)(b); Western Australian Act s 57(1)(b);Tasmanian Act s 21(1)(b); and English Act s 101(1)(ii), (4). A mortgagee may not insure and charge the premiums against a second mortgagee where the mortgagor has covenanted to insure but failed to do so

except by virtue of a statutory or express power: Brooke v Stone (1865) 34 LJ Ch 251. A mortgagee is not deprived of the right to add the premiums to his debt because he has covenanted to pay the premiums: Shaw v Scottish Widows’ Fund Assurance Society (1917) 87 LJ Ch 76.

Liability on covenants 19.40 The liability of the mortgagee in possession to the burden of covenants running with the mortgaged land will depend upon general principles applicable to such covenants: see, for example, Halsbury’s Laws of England, 5th ed, vol 77, [432]–[433]; and for leasehold covenants, vol 64, [719]. The mortgagee takes possession qua mortgagee, that is, as a successor in title of the mortgagor. Subject to enforcement by certain indirect methods (for example the principle in Halsall v Brizell [1957] Ch 169; [1957] 1 All ER 371; Law Debenture Trust Corp plc v Ural Caspian Oil Corp Ltd [1993] 2 All ER 355 at 364–5; Rufa Pty Ltd v Cross [1981] Qd R 365; Lyus v Prowsa Developments Ltd [1982] 1 WLR 1044, approved by the High Court in Bahr v Nicolay (No 2) 164 CLR 604; cf Government Insurance Office (NSW) v KA Reed Services Pty Ltd [1988] VR 829 especially Brooking J at 840, which was criticised strongly by Robinson, Property Law Act Victoria, Law Book Co, Sydney, 1992, pp 171–2, the burden of a covenant does not run at law [page 516] against a successor in title of the mortgagor, but, subject to certain conditions, the burden of restrictive covenants runs in equity and such covenants will in those circumstances be enforceable against a mortgagee by a person who has the benefit thereof. For restrictive covenants binding on an underlessee, see, for example, Wilson v Hart (1866) 1 Ch App 463; Feilden v Slater (1869) LR 7 Eq 523; and, on other occupiers, Mander v Falcke [1891] 2 Ch 554 (CA). The real problem arises in respect of positive covenants (such as for repayment of bonds on termination of a lease) in those jurisdictions where mortgage by assignment of leasehold land is permitted. The issue then is whether the covenant is one touching and concerning the land: see, for example, Re Dollar Land Corp Ltd and Solomon (1963) 39 DLR (2d) 221;

Hua Chiao Commercial Bank Ltd v Chiaphua Industries Ltd [1987] AC 99; [1987] 1 All ER 1110 (PC); and see Kumar v Dunning [1987] QB 193; [1987] 2 All ER 801 (CA); approved and applied by the House of Lords in Swift (P & A) Investments (a firm) v Combined English Stores Group plc [1989] AC 632; [1988] 2 All ER 885 (see, particularly, the observations of Lord Oliver at AC 642, All ER 890–1 on when a covenant touches and concerns the land); and see Coronation Street Industrial Properties Ltd v Ingall Industries plc [1989] 1 All ER 979 at 981 ff; [1989] 1 WLR 304 at 306 (HL) (the observations of Lord Oliver in Swift (P & A) were applied); and see Bradbrook, Croft and Hay, Commercial Tenancy Law, [15.19]. See also on surety covenants (1986) Conv 50 (Murdoch). A covenant to take up a lease if the existing tenant does not renew does not run with the land: Showa Shoki Australia Pty Ltd v Oceanic Life Ltd (1994) 34 NSWLR 548, in which Giles J distinguished the Swift case at 556.

No allowance for personal trouble 19.41 The mortgagee in possession is generally not allowed anything for personal care or trouble in receiving rents, even though he might have appointed a receiver: Bonithon v Hockmore (1685) 1 Vern 316; 23 ER 492; Nicholson v Tutin (No 2) (1857) 3 K & J 159; 69 ER 1063. Upon taking possession he becomes quasi-owner of the property, and, being in uncontrolled management without power of interference by the mortgagor, unless some act is done which calls for the interference of the court, no allowances are made to him, either directly or indirectly in respect of his personal trouble: Cholmondeley v Clinton (1820) 2 Jac & W 1, 184 and 191; 37 ER 527, 593 and 598; Leith v Irvine (1833) 1 My & K 277; 39 ER 686; Robertson v Norris (1857) 1 Giff 421; 65 ER 983. Previously this rule prevailed even where there was an express agreement between mortgagor and mortgagee that a commission should be allowed to the mortgagee. Now the general principles applicable to collateral advantages apply to such an agreement: see 32.12. Even before the change of policy introduced by Biggs v Hoddinott [1898] 2 Ch 307 (CA), it was recognised that some such agreements might be binding: Eyre v Hughes (1876) 2 Ch D 148. A solicitor-mortgagee may charge remuneration, whether or not there is an agreement for remuneration at the appropriate rate. The mortgagee will be

allowed the expenses of a sale of the mortgaged property or part of it: Farrer v Lacy, Hartland & Co (1885) 31 Ch D 42 (CA); and see 20.43. A commission will be allowed only if it constitutes a valid collateral advantage: see 32.12–32.13; and see Browne v Ryan [1901] 2 IR 653. The general prohibition extends to the partnership of which the mortgagee is a member: Matthison v Clarke (1854) 3 Drew 3; 61 ER 801; Furber v Cobb (1887) 18 QBD 494 at 509. The rule is otherwise where the mortgagee is employed to sell by the court: Arnold v Garner (1847) 2 Ph 231; 41 ER 931. [page 517]

Agent’s salary 19.42 If the mortgagee in possession manages the property by his agent or employees he may charge for the agent’s or employees’ salary: Union Bank of London v Ingram (1880) 16 Ch D 53 (CA). The mortgagee may agree with the mortgagor for the appointment of a receiver to be paid by the latter, or may appoint one under the statutory power: see Chapter 18.

C. Limitation Possession by mortgagee 19.43 When a mortgagee has been in possession of the mortgaged land as mortgagee, and not in any other character, for 12 years, he will thereby extinguish the title of the mortgagor or any person claiming through him: Limitations Act 1980 (UK) ss 16, 17. As to registered land, see Land Registration Act 1925 (UK) ss 34(2), 75 (and see Young v Clarey [1948] Ch 191; [1948] 1 All ER 197), and the title of a subsequent mortgagee is extinguished with that of the mortgagor through whom he claims. The time required to extinguish the title of the mortgagor may be extended in the case of disability, acknowledgment, part payment, fraud or mistake: see 32.88 ff.

III Mortgagee’s Right to Possession of

Other Property Mortgages of chattels 19.44 In relation to mortgages of chattels and consumer credit securities, see Chapters 5 and 9 respectively.

Taking possession under mortgages of choses in action 19.45 In the case of a mortgage of an interest in a trust fund mere notice to the trustees of the assignment is not in itself equivalent to taking possession of the interest. Possession is taken by the mortgagee giving the trustees notice to pay over the income to him: Re Pawson’s Settlement; Higgins v Pawson [1917] 1 Ch 541.Where a mortgaged reversionary interest falls into possession the mortgagee is not entitled to receive the whole of the mortgagor’s interest, but only so much as suffices to discharge the principal, interest, and costs due on the mortgage: Hockey v Western [1898] 1 Ch 350 (CA). A mortgagee in possession may be required to comply with the provisions of Corporations Act 2001 (Cth) Pt 5.2: see 18.11. The mortgagor of a patent can sue for infringement without joining the mortgagee even where the latter is registered as assignee: Van Gelder,Apsimon & Co v Sowerby Bridge United Flour Society (1890) 44 Ch D 374 (CA). As to issues which may arise where machinery is left on the mortgaged land, particularly in relation to an action in detinue by the mortgagor, see Reynolds v Aluma-Lite Products Pty Ltd [2009] QSC 379; and as to conversion, see Florgale Uniforms Pty Ltd (Receiver and Manager Appointed) (in liq) v Orders (2004) 11 VR 54.

[page 518]

Chapter 20

The Mortgagee’s Power of Sale General introduction Liability of property to be sold Mortgages of chattels and choses in action Express power of sale Statutory power of sale — generally General law mortgages Incidental powers Further points on the statutory power Devolution of the statutory power Right of sale between successive encumbrances When the statutory power of sale is exercisable: general law mortgages Torrens system mortgages To whom notice given Form of notice Object of the notice Service of the notice Further points on the notice Waiver Protection of purchaser

20.1 20.2 20.3 20.4 20.5 20.6 20.7 20.8 20.9 20.10 20.11 20.12 20.13 20.14 20.15 20.16 20.17 20.18 20.19

Investigation of title by purchaser Mortgagee’s duty — in general To whom duty owed Time of sale Dealings with the mortgagor The preparation for sale Conditions of sale Description of the property Valuation of the property Fixing the reserve Advertising The property to be sold Private treaty or auction Auction Exploiting the competition Appointment of professional agents Stopping the sale

20.20 20.21 20.22 20.23 20.24 20.25 20.26 20.27 20.28 20.29 20.30 20.31 20.32 20.33 20.34 20.35 20.36

[page 519]

When mortgagee might be restrained from selling Requirement of payment into court Mortgagor has no action at law Mortgagee may not purchase The sale Setting the sale aside Application of sale moneys — generally The trust of the surplus Subsequent encumbrancers

20.37 20.38 20.39 20.40 20.41 20.42 20.43 20.44 20.45

Receipt of sale moneys Surplus purchase money and execution creditors Interest after sale Effect of conveyance, etc Sale by equitable mortgagee Sale by receiver Sale of a mortgaged business Particular mortgages Measure of compensation for default

20.46 20.47 20.48 20.49 20.50 20.51 20.52 20.53 20.54

General introduction 20.1 The exercise of the mortgagee’s power of sale probably promotes more litigation than any other aspect of the law of mortgages. The survey of the law in this chapter is complicated because there is a marked difference between the culture with respect to mortgages in Australia and that of England from whence the principles of law evolved. For instance, traditionally, English lenders on mortgage are more conservative than Australian lenders. On a mortgagee’s sale in England, there may well be a surplus. In Australia, there will rarely be a surplus after sale. Thus, in Australia, delay in sale prejudices the mortgagee. Then there is the fact that English law took a turn away from the traditional law with the adoption of the principle in Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949; [1971] 2 All ER 633. These principles have not been adopted in Australia, with occasional exceptions. Additionally, there has been a paradigm shift from the view that a mortgage is a transfer of almost every right in the mortgaged property to the concept of mortgage as a commercial transaction which benefits both parties. This paradigm shift has led to the relaxation of the principle (still entrenched in the cases) that a mortgagor will receive no assistance from the court unless the whole amount due under the mortgage is paid into court: see 20.38. One of the most useful considerations of the nature of the mortgagee’s

power of sale was given by Jordan CJ in Coroneo v Australian Provincial Assurance Association Ltd (1935) 35 SR (NSW) 391 at 394: The power of sale, where it occurs in a legal mortgage, is not a common law power. It is an equitable power which is inserted to enable the mortgagee to convey a title which is not only good at common law but good in equity to defeat the equitable rights of the mortgagor. The purpose of this equitable power is to cut down the jealously guarded equity of redemption. Such powers do not appear to have been recognized as valid by the Court of Chancery until the end of the 18th century; and it was only then that the practice of inserting them in mortgages began

[page 520] … The operation of the equitable power of sale is simply this, that if it is exercised in a way that a Court of Equity regards as unexceptionable, that Court will not treat the title of the purchaser as being encumbered by any equity of redemption in the mortgagor.

The Chief Justice supported his historical remarks with reference to McFadden v Allt (1888) 4 WN (NSW) 174 at 175; Corder v Morgan (1811) 18 Ves 344 at 346; 34 ER 347 at 348; Stevens v Theatres Ltd [1903] 1 Ch 857 at 860 and Holdsworth, History of English Law, 1937, vol VII, pp 160–1. It is important always to remember that a power of sale in a mortgage ‘is nothing but an authority to defeat the equity of redemption, and when the mortgagee sells, he transfers the legal title not by means of a power, but by virtue of his legal ownership’: Re Harwood (1887) 35 Ch D 471 at 472 (CA) per Cotton LJ; and see Croft and Hay, The Mortgagee’s Power of Sale, 3rd ed, LexisNexis Butterworths, Chatswood, New South Wales, 2013, [2.1]. The power is irrevocable because it was given for value.

Liability of property to be sold 20.2 The property comprised in the security may become liable to be sold for the purpose of discharging the debt either by the mortgagee himself or by judicial process. In the former case the sale may take effect either under a power which the law annexes to his security as a legal incident thereof (see 20.3) or under an express or statutory power. For restrictions on the mortgagee’s remedies, see 16.10 ff. See generally Croft and Hay, The Mortgagee’s Power of Sale.

Mortgages of chattels and choses in action

20.3 The mortgagee of a personal chattel who has possession of the chattel has an implied power of sale as a legal incident of the security: Re Morritt; Ex parte Official Receiver (1886) 18 QBD 222. Similarly, the mortgagee of stocks and shares of a policy of insurance or other thing in action has an implied power of sale. As to sale by mortgagees of stocks and shares, see Stubbs v Slater [1910] 1 Ch 632. This right is exercisable on non-payment on the day fixed for payment, or, where no day has been fixed, after a proper demand and notice and the lapse of a reasonable time: Peters v Thornton (1868) 7 SCR (NSW) (L) 298; France v Clark (1883) 22 Ch D 830, affirmed 26 Ch D 257; Re Morritt; Re Fada (Australia) Ltd [1932] SASR 134. A mistake in the notice as to the amount due does not invalidate the notice: Stubbs v Slater, above; and 20.15. The notice must give the mortgagor a reasonable time to pay: Deverges v Sandeman, Clark & Co [1902] 1 Ch 579. If shares are sold without notice, where such is required, the mortgagor is entitled to set off the value of the shares on the day preceding the date of the master’s certificate in an action on the account: Ellis & Co’s Trustee v Dixon-Johnson [1925] AC 489 (HL). The mortgagee of chattels, who sells either under an express or implied power, is bound to account for the proceeds, to pay over to the mortgagor the surplus proceeds beyond what is due under the mortgage and the necessary charges and expenses, and to return any unsold part of the security to the mortgagor. If the mortgagee attempts to dispose of the proceeds of sale so as to prejudice any persons entitled to receive them, an order for payment of the proceeds into court may be made, and a receiver may be appointed of any part of the property which may remain unsold: see Wilson v Tooker (1714) 5 Bro Parl Cas 193; 2 ER 622. The mortgagor’s right of redemption ceases upon a contract to sell being made after the power of sale has arisen: The Ningchow (1916) 31 TLR 470; and see 20.4.

Express power of sale 20.4 An express power of sale was essential if the mortgagee was to have a power of sale prior to the introduction of the statutory power of sale. In England, a statutory power of [page 521]

sale was first given in its present form by the Conveyancing Act 1881. The development of the express power was considered in Stevens v Theatres Ltd [1903] 1 Ch 857 at 860. The statutory power of sale has made it less important to have an express power. However, the statutory power is often varied to such an extent that for all practical purposes the power is in effect an express power. An express power of sale does not necessarily exclude the statutory power: Emerald Securities Pty Ltd v Tee Zed Enterprises Pty Ltd (1981) 28 SASR 214. Where an express power of sale is granted under a mortgage document it is not necessary for the mortgagee to rely on the power of sale provided by the Victorian Act: Mijac Investments Pty Ltd v Graham (No 2) (2009) 72 ACSR 684; [2009] FCA 77. In that case Gordon J said (at 629, [29]): In other words, the power of sale under the PLA does not replace the power of sale under the mortgage document — it provides an alternate source of power and regulates how it is used.

Similarly, an express power may be included in a mortgage document with respect to Torrens system land and will be enforceable by an action for specific performance: Whild v GE Mortgage Solutions Ltd (2012) VConvR ¶58-816. As to the possible bases of such a power of sale, Croft J said in Whild (at [66] (footnotes omitted)): … it is well established that the inclusion of power of attorney provisions in mortgages has been used successfully as a means of enabling an equitable mortgagee of a legal estate of general law land to convey the fee simple estate in the exercise of a power of sale … The position would not, however, appear to be any different in relation to land under the Torrens system provided the mortgagee held a power of attorney which enabled it to procure registration of the transfer of the mortgaged property as a result of the exercise of the contractual power — as it would not have the benefit of the TLA provisions designed to effect this.

There is nothing in the statutory power of sale which inhibits or restricts the use of an express power: The Maule [1997] 1 WLR 520 (PC). As to the possibility of the mortgagee’s entitlement to exercise the power of sale being inhibited by a contractual provision in a collateral agreement, see Meretz Investments NV v ACP Ltd [2008] Ch 244 (CA). In some jurisdictions some of the statutory provisions applicable to the statutory power apply also to an express power. For an example of an express power, see Slack v Burt (1862) 1 QSCR 50. It is important to designate who may exercise an express power of sale: see Re Crunden and Meux’s Contract [1909] 1 Ch 690 at 695. An assign of a

mortgagee cannot sell under an express power, unless the power is expressed to be given to the mortgagee and his assigns: Re Rumney and Smith [1897] 2 Ch 351; Perpetual Trustee Co Ltd v Cowan (No 2) (1920) 21 LR (NSW) (Eq) 278. But a transferee can take advantage of a power to sell existing at the date of the transfer: Bailey v Barnes [1894] 1 Ch 25 at 32. An express power is not extinguished by an ineffective attempt to exercise it: Henderson v Astwood [1894] AC 150 at 162 (PC). If in an express power demand for payment is a precondition to the exercise of the power, but no length of time to pay is specified, a reasonable length of time must be given. Notice to pay on the day on which notice is given is not reasonable: Massey v Sladden (1868) LR 4 Exch 13; Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 153 CLR 491; 51 ALR 609. As to notice where the mortgage is an equitable mortgage of stocks and shares, see Stubbs v Slater [1910] 1 Ch 632; see also 20.3. A provision in an express power that a purchaser shall not be bound to inquire whether a case has arisen to authorise the sale applies in favour of a purchaser of an equitable interest in the mortgaged property without notice that the power of sale has not properly arisen: Brigers v Orr (1932) 32 SR (NSW) 634. The valid exercise of the power of sale puts an end to the mortgagor’s equity of redemption. [page 522]

Statutory power of sale — generally 20.5 As indicated in 20.4, reliance is usually placed on the statutory implied power of sale, though this will often be modified. Legislation in all jurisdictions in Australia provides for a statutory power of sale of general law land and other property and also for Torrens system land. As to mortgaged property other than Torrens system land, such legislation is based upon earlier legislation in England and Wales (now the Law of Property Act 1925 (UK) s 101(1)(i)): see NSW Act s 109(1)(a); Victorian Act s 101(1)(a). As to Torrens system land in New South Wales,

the Conveyancing Act power is applied to mortgages under the Real Property Act 1900 by the Conveyancing Act 1919 s 109(5). In Victoria, there is a specific power of sale conferred by the Transfer of Land Act 1958 s 77(1). In New South Wales, the power of sale in the Conveyancing Act 1919 applies to a transfer by way of mortgage of Crown land and to an unregistered Torrens system mortgage: Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361. Where a mortgage contains both general law and Torrens system land a notice under the Torrens system Act is sufficient: see Manton v Parabolic Pty Ltd. Where a Torrens system mortgage was substantially varied by an unregistered deed it was held to constitute a new mortgage under the general law: Scarel v City Loan and Credit Corp Pty Ltd (1986) 4 BPR 9226. In Victoria, it seems that under both general law and Torrens title a mortgagee cannot consolidate parcels of land which he has under different mortgage instruments: Ross v The Victorian Permanent Property Investment and Building Society (1882) 8 VR 254; Gesualdi v Serenar Nominees Pty Ltd (1993) V ConvR ¶54-478; but cf Commonwealth Bank of Australia v Duggan [2003] FCAFC 64; Irani v St George Bank (No 2) [2005] VSC 403; Irani v St George Bank [2007] VSCA 33; Glodale Pty Ltd v Investec Bank (Australia) Ltd [2007] VSC 276; and Investec Bank (Australia) Ltd v Glodale (2009) 24 VR 617; 256 ALR 104 (CA); see also 20.6. In New South Wales, the mortgagee is specifically empowered to do this: see NSW Act s 104; and see also the standard Torrens system conditions set out in 4.41.

General law mortgages 20.6 The statutory power of sale applies only where the mortgage is by deed (or, in Queensland, by instrument) (NSW Act s 109(1)(a); Victorian Act s 101(1)(a); Queensland Act s 83(1)(a); South Australian Act s 47(1)(a); Tasmanian Act s 21(1)(a); Western Australian Act 1969 s 57(1)(a)); on deed, see Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361. Thus the statutory power of sale applies to an equitable mortgage by deed: National Bank of Tasmania Ltd v McKenzie [1920] VLR 411. But without more, the equitable mortgagee will not be able to convey the legal estate: see 9.13. The statutory power applies to all property other than that for which specific provision is made by other legislation, for example ships (see 9.13ff

and 20.53): Re Morritt; Ex parte Official Receiver (1886) 18 QBD 222. For the definition of property, see NSW Act s 7(1),Victorian Act s 18(1). Nor does the statutory power apply to debentures issued by a statutory public utility company: see Deyes v Wood [1911] 1 KB 806 at 818. The power applies to the like extent as if it had been in terms conferred by the mortgage deed: NSW Act s 109(1); Victorian Act s 101(1). It applies only so far as a contrary intention is not expressed in the mortgage deed: NSW Act s 109(3); Victorian Act s 101(4). The mere fact that the mortgage contains an express power exercisable at a future date does not show a contrary intention so as to negative the earlier exercise of the statutory power: Life Interest and Reversionary Securities Corp v Hand-in-Hand Fire and Life Insurance Society [1898] 2 Ch 230. An express power of sale does not necessarily exclude the statutory power: see Emerald Securities Pty Ltd v Tee Zed Enterprises Pty Ltd (1981) 28 SASR 214. The statutory power may be excluded for a specified period: [page 523] Twentieth Century Banking Corp Ltd v Wilkinson [1977] Ch 99. But this exclusion does not prevent the mortgagee applying for a judicial sale: Western Bank Ltd v Schindler [1977] Ch 1. It has been held that the power conferred by NSW Act s 109 applied to and enabled an unregistered second mortgagee to sell the mortgaged land; but it did not empower a sale free of the interest of the first mortgage: see King Investment Solutions Pty Ltd v Hussain (2005) 64 NSWLR 441; 13 BPR 25,077. As such a mortgage was characterised as an equitable charge, the court in King Investment Solutions also held that it had power to order a sale at the suit of an unregistered mortgagee, as it would in the enforcement of an equitable charge: see (2005) 64 NSWLR 441; 13 BPR 25,077; and see Mango Media Pty Ltd v Mertes (2006) 14 BPR 26,971; see also 21.12 as to judicial sale. The statutory power provisions may be added to or varied by the mortgage deed: NSW Act s 109(2); Victorian Act s 101(3). An express power may be extended by reference to a collateral security:

Ashworth v Mounsey (1853) 9 Exch 175; 156 ER 75. But the statutory power being only applicable where the mortgage is by deed and to property mortgaged by that deed, it seems doubtful whether it would extend to any collateral security not itself made by deed: Re Thomson and Holt (1890) 44 Ch D 492 at 499. The statutory or implied power of sale in New South Wales is a power to sell or concur with any other person in selling the mortgaged property or any part thereof, either subject to prior charges or not, and either together or in lots, in subdivision or otherwise, by public auction or by private contract, subject to such conditions respecting title or evidence of title or other matter as the mortgagee thinks fit, with power to vary any contract for sale and to buy in at auction or to rescind any contract for sale, and to resell without being answerable for any loss occasioned thereby: NSW Act s 109(1)(a). As to when the power is exercisable, see 20.11. In Victoria, the power is substantially similar (see Victorian Act s 101(1) (a)), though it is expressed to apply when the mortgage money has become due and no specific mention is made of subdivision. Also, the Victorian provision expressly permits sale with the price payable by instalments and adds the power to make roads and grant rights of way or drainage over the same (which power in other jurisdictions appears under powers incidental to the power of sale). As to when the power is exercisable, see 20.11. The Queensland Act confines the general law statutory power of sale to land: Re J B Davies Enterprises Pty Ltd (in liq) [1990] 2 Qd R 129. In other jurisdictions the power is substantially similar to New South Wales or Victoria. On what is meant by ‘mortgage money’ (where that expression appears in this context), see NSW Act s 7(1), Victorian Act s 18(1); and Bevham Investments Pty Ltd v Belgot Pty Ltd (1982) 149 CLR 494. The mortgage money becomes due when the legal date for redemption has passed (see 32.6) and the mortgagee’s right to sue for the mortgage money has arisen: see 17.8.Where there is a direct covenant for repayment by instalments the power of sale arises as soon as each instalment is due: Payne v Cardiff Rural District Council [1932] 1 KB 241. As to sale of part of the mortgaged property, see Champagne Perrier-Jouet SA v H H Finch Ltd [1982] 3 All ER 713; [1982] 1 WLR 1359.Where there

are several properties included in the mortgage, the mortgagee is entitled to sell all of them, notwithstanding the sale of one or more only would raise sufficient to discharge the mortgage. But where there are several properties or items in the security, the mortgagee, in selling what he does sell, must not deliberately destroy the value of the whole or the set. In MBF Investments Ltd v Nolan [2011] VSCA 114 (and see (2011) 85 ALJ 539 (Butt)), the trial judge held that the mortgagee’s duty under s 77(1) required an attempt to preserve [page 524] a ‘home occupation interest’ of the mortgagor, a notion which the Court of Appeal rejected (at [87]–[90]): Where a mortgagee holds security over several lots of land and is aware or ought to be aware that it is unnecessary to sell all of the lots because the sale of some of those lots would be sufficient to satisfy the mortgage debt and the costs of sale (described below as ‘the full amount’), the sale of more lots than required would conflict with the purpose of the power of sale, which is limited to recouping the mortgagee’s loss. Such a conflict would arise regardless of whether the mortgagee became aware that this was the case either before the sale or after one or more of the lots have been sold. Where it is unnecessary to sell all of the lots held as security, to recoup the amount owed, the choice as to which lots were to be sold could not be driven by an ulterior purpose, such as disrupting the mortgagor’s business or evicting the mortgagor from a home on one of the lots. Such behaviour would be an unconscionable exercise of the mortgagee’s power to sell the property in order to realise the debt. In such a case, even if there were no direct evidence of the mortgagee’s subjective intention, the facts might permit a court to infer that the mortgagee had an ulterior purpose in selecting the order in which the lots were sold. The selection, in such circumstances, of a lot or lots contrary to the wishes of the mortgagor, rather than an equally saleable lot or lots which would be sufficient to satisfy the full amount, might also provide the basis for an inference that the mortgagee acted in reckless disregard of the interests of the mortgagor, thus breaching the duty to sell in good faith. To that extent, the duty imposed on the mortgagee by s 77(1) to have regard to the mortgagee’s interests is not confined to a duty of obtaining the best price. However, where there are genuine doubts about the saleability of some lots or whether the sale of a particular lot or lots will be sufficient to satisfy the full amount, we do not consider that the mortgagee’s duty requires it to take account of the mortgagor’s preference as to the order of sale. The mortgagee’s duty has never been recognised as extending so far.

As to whether the (English) statutory power of sale is inconsistent with the European Convention of Human Rights, see Horsham Properties Group Ltd v Clark [2009] 1 WLR 1255 (Ch); [2009] All ER Rev, pp 309–13, [17.24]– [17.37].

Mortgagees may join in selling together different properties, or different interests in the same property, where it is clearly beneficial to do so, but they must see that the purchase money is properly apportioned by their own valuers before completion of the sale (see Hiatt v Hillman (1871) 19 WR 694; Re Cooper and Allen’s Contract (1876) 4 Ch D 802); but see Ross v Victoria Permanent Property Investment and Building Society (1882) 8 VLR 254 where it was held that general law land and Torrens system land could not be sold together. (See also Midland Credit Ltd v Hallad Pty Ltd (1977) 1 BPR 9570 and Gesualdi v Serenar Nominees Pty Ltd (1993) V ConvR ¶54478.) This issue has, however, been considered further in more recent times. In Irani v St George Bank Ltd (No 2) [2005] VSC 403, Whelan J said (at [169]) that ‘confining Ross to cases where there is a combined sale of Torrens land and general law land is, it seems to me, unsatisfactory. It does not reflect the process of reasoning in the decision’. Continuing, his Honour said (at 170): 1.

Ross does reflect a different approach to the approach in Cooper & Allen’s Contract. The Master of the Rolls in Cooper & Allen’s Contract emphasised the need to obtain the best available price. Ross emphasised the uncertainties and the potential for abuse in combined sales. In the modern context, the reasoning in Cooper & Allen’s Contract is more consistent with s 420A than is the reasoning in Ross. Where s 420A applies, the duty it provides for must prevail. The duty it provides for is very similar to the principle enunciated by the Master of the Rolls. In particular circumstances, s 420A might require a mortgagee to realise a secured property in a combined sale, provided, of course, it had the requisite power to do so.

2.

It is necessary to distinguish between the question whether there is power to enter into a combined sale and the question whether it is prudent to do so. Ross is authority for the proposition that a mere power to sell a property under a mortgage does not authorise a [page 525] combined sale with another property. But it is also authority for the proposition that such a power can be properly conferred by the mortgage instrument.

3.

As to the prudence of a combined sale, the concerns raised in Ross and in Gesualdi are valid, but, if the power exists, the commercial prudence of each combined sale will have to be assessed on its own merits. Such an issue can also arise where there is only one security, as was the case in Midland Credit Ltd v Hallad Pty Ltd (1977) 1 BPR 9570.

4.

The Master of the Rolls’ suggestion that where there is a combined sale, apportionment is the responsibility of the mortgagee, provided it is reasonable, is inconsistent with Commonwealth Bank of Australia v Duggan [2003] FCAFC 64. The principle applied in Commonwealth Bank of Australia v Duggan is that, if challenged, the mortgagee must account under s 58(3) of the Real Property Act 1900 (NSW) (equally, under s 77(3) of the

Transfer of Land Act 1958) in accordance with the apportionment as found by the court, regardless of any private arrangements or apportionments not involving the mortgagor or other affected parties. This approach does create the possibility of litigation, one of the concerns raised in Ross and Gesualdi, but it seems to me that the statutory obligation to account must require an accounting in accordance with the facts as found by the court, not on some other basis.

On appeal the Court of Appeal in Irani was (at [40]) ‘inclined to agree with Whelan J’s analysis’ but found it unnecessary to decide whether Ross was good law, generally or, more particularly, where the duty of the selling mortgage was the subject of Corporations Act 2001 (Cth) s 420A. The issue arose again in Glodale Pty Ltd v Investec Bank (Australia) Ltd [2007] VSC 276 (Pagone J) in the context of the sale of two properties in ‘one line’ where the mortgagee was subject to duties under Property Law Act 1974 (Qld) s 85 and Corporations Act s 420A. Although it was held that the properties could be sold in ‘one line’ it was found that the bank had failed to conduct the sale on a basis appropriate to secure the market value. On appeal the Court of Appeal in Investec Bank (Australia) Ltd v Glodale (2009) 24 VR 617; 256 ALR 104 upheld the decision at first instance holding that a sale in ‘one line’ was permissible where the circumstances demonstrated such a course was reasonable: see at [67]. In Glodale, the mortgagor was in default with the debt increasing rapidly and there had already been a failed attempt to sell. See further Croft and Hay, The Mortgagee’s Power of Sale, [6.6]. A similar approach, including appropriate apportionment had been applied in Duggan, a case inviting the combined sale of freehold property with an adjacent leasehold. Sale by subdivision is specifically permitted under the NSW Act, and see Wilson v Ferrier (1985) Conveyancing Service (NSW) [92262]; Joyce v Cam [2004] NSWSC 621; (2004) 12 BPR 22,231. This is probably permitted anyway, since the power in all jurisdictions permits sale of part of the mortgaged property. Within the limits of the permitted discretion the selling mortgagee should investigate the best method of disposing of the mortgaged property to obtain the best price in the circumstances: see 20.21ff. Only the Victorian Act permits the purchase money to be paid by instalments. In other jurisdictions this should be expressly provided for. Where the mortgage permits an instalment sale, the mortgagee is bound to account for the instalments as they are received: Wright v NZ Farmers Cooperative Association of Canterbury Ltd [1939] AC 439; [1939] 2 All ER

701 (PC); Irving v Commercial Banking Co of Sydney (1897) 19 LR (NSW) (Eq) 54; Colin D Young Pty Ltd v Commercial and General Acceptance Ltd (1982) Conveyancing Service (NSW) [92179]. See further on instalment sale, Hickey v Heydon (1895) 16 LR (NSW) (Eq) 49; Chapman v Wade [1939] SASR 298. The property may be sold upon the terms that part or even the whole of the purchase money shall remain on mortgage, where the mortgagee takes the risk and charges himself in account with the mortgagor with the whole purchase money: Davey v Durrant; Smith v Durrant (1857) 1 De G & J 535; 44 ER 830; Thurlow v Mackenson (1868) LR 4 QB 97; Farrar v Farrars Ltd (1888) 40 Ch D 395; Kennedy v De Trafford [1897] AC 180 (HL); Belton v Bass, Ratcliffe and Gretton Ltd [1922] 2 Ch 449; Northern Developments (Holdings) Ltd v UDT Securities Ltd [1977] 1 All ER 747. [page 526] See, generally, Croft and Hay, The Mortgagee’s Power of Sale, [6.10]. On title conditions, see Property and Bloodstock Ltd v Emerton [1968] Ch 94 at 117–18; [1967] 3 All ER 321 at 328, 331; AIDC v Co-operative Farmers & Graziers Direct Meat Supply Ltd [1978] VR 633. In New South Wales, there is power to sever and sell fixtures apart from the balance of the mortgaged property (NSW Act 1919 s 109(1)(e) and see s 109A), and also, while the mortgagee is in possession, power to cut and sell timber subject to certain limitations: s 109(1)(d). In other jurisdictions there is no power to sell fixtures and timber apart from the land: Re Yates; Batcheldor v Yates (1888) 38 Ch D 112; Hunter v Hunter [1936] AC 222 at 248–49 (HL); Kay’s Leasing Corp Pty Ltd v CSR Provident Fund Nominees [1962] VR 429.

Incidental powers 20.7 The general law power of sale is extended by certain incidental powers: see NSW Act s 110; Victorian Act s 101(2). These incidental powers include:

a power to impose, or reserve, any restriction on the unsold part of the (a) mortgaged land or on the purchaser with respect to building upon or user of the land including, with respect to mines, covenants for the purpose of their beneficial working; (b) a power to sell the mortgaged property apart from any mines or minerals or vice versa and take appropriate covenants in connection therewith; (c) to open any appropriate roads and streets and to grant rights of way, drainage rights or profits a prendre as the mortgagee thinks fit. The power in (c) is a power to subdivide: Joyce v Cam [2004] NSWSC 621; (2004) 12 BPR 22,231. These incidental powers may be excluded or varied.

Further points on the statutory power 20.8 The statutory power of sale (as also an express power) is effectively exercised as soon as there is a binding contract for the sale of the mortgaged property, even though subject to some condition: Forsyth v Blundell (1973) 129 CLR 477; Brutan Investments Pty Ltd v Underwriting and Insurance Ltd (1980) 39 ACTR 47; 58 FLR 289; and see 20.36. Where the property is subject to a right of pre-emption binding on the mortgagee, there is nothing the mortgagee can do but offer the property to the person with the benefit of the right: see Williams v Wellingborough Borough Council [1975] 3 All ER 462; [1975] 1 WLR 1327. However, in such a situation the effect of the right of pre-emption may be avoided, depending on its wording, by foreclosure as this would be an involuntary disposition by the mortgagor. For shares subject to pre-emption rights, see Hunter v Hunter [1936] AC 222 (HL); Champagne Perrier-Jouet SA v HH Finch Ltd [1982] 3 All ER 713; [1982] 1 WLR 1359. Where, as in the case of leasehold property, the lease provisions may require the landlord’s consent to any assignment of the balance of the term of the lease, if the mortgage is valid against the landlord (for example if required, consent to the mortgage was obtained), the mortgagee’s power of sale is not affected; but see Property and Bloodstock Ltd v Emerton [1968] Ch 94; [1967] 3 All ER 321. The better view would be that the sale by a mortgagee of the lessee’s interest in a lease is not a parting with possession:

see Re Wright: Ex parte Landau [1949] Ch 729; [1949] 2 All ER 605 and the 11th English edition of this work, [19.7] fn 10. The power of sale does not affect the right of foreclosure: NSW Act s 112(6); Victorian Act s 106(2). This is in accordance with the law as to express powers of sale (Wayne v Hanham (1851) 9 Hare 62; 68 ER 415), but after order nisi and pending foreclosure [page 527] absolute, the mortgagee cannot sell without the leave of the court: Stevens v Theatres Ltd [1903] 1 Ch 857; see 22.42. The mortgagee is not answerable for any involuntary loss happening in the exercise of the statutory power of sale or of any power or provision in the mortgage deed: NSW Act s 112(7); Victorian Act s 106(3). At any time after the power of sale has become exercisable, the person entitled to exercise it may demand and recover (from any person other than a person having in the mortgaged property an estate, interest or right in priority to the mortgage) all the deeds and documents relating to the property, or to the title thereto, which a purchaser under the power of sale would be entitled to demand and recover for him: NSW Act s 112(8); Victorian Act s 106(4). For the implied right in the Australian Capital Territory, see NRMA Insurance Ltd v Individual Homes Pty Ltd (1988) 92 FLR 1. See also Queensland Act s 89(4); Anderson v Lockhart [1991] Qd R 501; and Commonwealth Bank of Australia v Buffett (SC (Norfolk Is), Morling J, 1 April 1993, unreported), which discusses the question of suing for the mortgage debt after sale. Subject to the provisions of particular Torrens system legislation, the general position is that the statutory power of sale conferred by that legislation may only be exercised by a registered mortgagee. This is the position in New South Wales and Victoria: see Real Property Act 1900 (NSW) s 57(2) and Transfer of Land Act 1958 (Vic) s 74 and Div 9 — Mortgages and Annuities. This view is supported by Mathieson v Mercantile Finance and Agency Co Ltd (1891) 17 VLR 271, where it was held that a mortgagee of Torrens system land could exercise the power of sale although the notice had been given prior to the registration of the mortgage and the notice, necessarily given its timing, was with respect to a default occurring

prior to the mortgagee’s registration. This case was applied in Midland Mortgage Australia Ltd v Cuthberton (1989) 17 NSWLR 309, a case which was, in turn, followed by Cliffshaw Pty Ltd v Old Kiama Wharf Pty Ltd [2007] NSWSC 276; and see also Ostabridge Pty Ltd v Adelaide Brighton Ltd [2007] NSWCA 59 at [32]–[33] (Hodgson JA (with whom Beazley JA and Hunt AJA agreed)); and King Investment Solutions Pty Ltd v Hussain (2005) 64 NSWLR 441; 13 BPR 25,077, [56] (Campbell J). It is sufficient that registration of the mortgagee occurs before execution of the transfer of the mortgaged land, though after service of the notice: Cox v Esanda Finance [2000] NSWSC 502 at [201] (Hunter J).

Devolution of the statutory power 20.9 The statutory power of sale under general law mortgages is exercisable by persons deriving title under the original mortgagee (NSW Act s 7(1); Victorian Act s 18(1)), and this appears to be sufficient to ensure the devolution of the power. But it is also provided that it shall be exercisable by any person for the time being entitled to receive and give a good discharge for the mortgage money: NSW Act s 112(5); Victorian Act s 106(1). But this does not confer the power of sale on an agent with a power of attorney to receive and give a good discharge for the mortgage money: Re Dowson and Jenkins’s Contract [1904] 2 Ch 219. The statutory power of sale conferred by the Torrens system legislation is generally only exercisable by a registered mortgage: see 20.8. Thus where the interest of a registered mortgagee of such land is transferred the transferee cannot prior to registration of the transfer give a demand for payment and any demand made prior to the registration remains ineffective even after subsequent registration of the transferee: Silkdale Pty Ltd v Long Leys Co Pty Ltd (1995) 7 BPR 14,414; and see Long Leys Co Pty Ltd v Silkdale Pty Ltd (1991) 5 BPR 11,512.

Right of sale between successive encumbrances 20.10 Where there are successive mortgages, the first mortgagee can exercise his power of sale without the concurrence of the subsequent mortgagees (although he will have to account to them for any surplus of the proceeds of sale: see 20.45). In practice a first mortgagee will often give a second mortgagee an opportunity of taking a transfer of the

[page 528] first mortgage. A second or subsequent mortgagee may sell subject to the first or prior mortgages: Manser v Dix (1857) 8 De GM & G 703; 44 ER 561. Alternatively, he may sell free of prior mortgages by arranging for them to be discharged out of the proceeds of sale, but the concurrence of the prior mortgagees will be required to achieve this and where necessary — for example in the case of a missing mortgagee — an application to the court may be necessary, as to which see 32.77.

When the statutory power of sale is exercisable: general law mortgages 20.11 There is a difference between the power of sale arising and the power of sale becoming exercisable. This difference is made clear in the legislation itself: for example in the Property Law Act 1958 (Vic) the power arises under s 101(1)(a) when the mortgage money has become due, but is not exercisable unless and until one or other of the conditions specified in s 103 are satisfied. In New South Wales, the requirements to be met before the power of sale is exercisable are set out in NSW Act s 111(2). These requirements apply also to express powers of sale. In Victoria, the requirements apply only to the statutory power. In New South Wales, the requirements in s 111(2) are that: (a) In the case of a mortgage, default has been made in — (i)

the observance of a covenant, agreement or condition expressed or implied in the mortgage,

(ii) the payment, in accordance with the terms of the mortgage, of the principal, interest or other money the payment of which is secured by the mortgage, or (iii) the payment in accordance with the terms of the mortgage, of any part of the principal, interest or other money, (a1) in the case of a charge, default has been made in: (i)

the payment, in accordance with the terms of the judgment to which the charge relates, of the principal interest or other money the payment of which is secured by the charge, or

(ii) the payment, in accordance with the terms of that judgment, of any part of that principal, interest or other money, (b) where —

(i)

the default relates to that payment; or

(ii) in the case of a mortgage, the default does not relate to that payment and notice or lapse of time pursuant to the section has not been dispensed with by agreement expressed in the mortgage, a written notice that complies with subsection (3) has been served on the mortgagor … in the manner authorised by section 170, (b1) where a notice is required to be served under paragraph (b), a copy of that notice has been served (in the manner authorized by section 170) on each mortgagee or chargee (if any) under a mortgage or charge to which the land is subject registered in the General Register of Deeds (other than the mortgagee or chargee intending to exercise the power of sale), and (c) where such a notice is so served, the requirements of the notice are not complied with within the time notified pursuant to subsection (3)(d).

Similar provisions apply to the power of sale under a Torrens system mortgage: see Real Property Act 1900 (NSW) s 57(2) and Conveyancing Act 1919 (NSW) s 111(1). Default of the type specified and, where necessary, a default notice which has not been complied with, are preconditions to the exercise of the power of sale. Notice may be dispensed with, except for defaults relating to payment, where the dispensation is by agreement expressed in the mortgage: see Conveyancing Act 1919 (NSW) s 111(2)(b)(ii). The same provision applies to dispensing with the lapse of time, that is, the period for complying with a notice. The provision limits the powers of variation and exclusion in s 109(2), (3). [page 529] In Victoria, the provisions in relation to general law mortgages follow those in England and Wales: Law of Property Act 1925 (UK) s 103. The Victorian Act s 103 provides that a mortgagee shall not exercise the statutory power of sale unless and until: (a) notice requiring payment of the mortgage money has been served on the mortgagor or one of two or more mortgagors, and default has been made in payment of the mortgage money, or of part thereof, for one month after such service; or (b) some interest under the mortgage is in arrear and unpaid for one month after becoming due; or (c) there has been a breach of some provision contained in the mortgage deed or in this Part, or in any corresponding previous enactment, and on the part of the mortgagor, or of some

person concurring in making the mortgage, to be observed or performed, other than and besides a covenant for payment of the mortgage money or interest thereon.

In Tasmania, the Conveyancing and Law of Property Act 1884, in addition to the general variation power, by s 22(4) provides that a mortgagor may, by writing under hand, waive notice in any particular case or generally, and may accept less than one month’s notice. In New South Wales, where the mortgagor has made default in payment of the principal sum at the expiry of the term of the mortgage and the mortgagee has accepted interest on such sum for a period of not less than three months after such default, then, so long as the mortgagor performs and observes all covenants expressed or implied in the mortgage, other than the covenant for payment of the principal sum, the mortgagee shall not be entitled to exercise any power of sale or to take other specified steps to enforce the mortgage without giving the mortgagor three months’ notice of his intention so to do: Conveyancing Act 1919 (NSW) s 92; Kater v Kater (No 1) [1963] NSWR 1667; and see Property Law Act 1974 (Qld) s 96. Both these provisions are extended to Torrens system mortgages. Whether or not the mortgage default relied upon is non-monetary, and whether capable of remedy or not, the period of notice must be allowed to elapse to satisfy the requirement of non-compliance within the stipulated time: Topfelt Pty Ltd v State Bank of New South Wales Ltd (1993) NSW ConvR ¶55-676. In New South Wales, the power of sale under Real Property Act 1900 s 58 arises on satisfaction of the notice requirements under s 57 of that Act and this position is not affected by any requirement in the mortgage with respect to notice: Ostabridge Pty Ltd v Adelaide Brighton Ltd [2007] NSWCA 59 at [36] (Hodgson JA (with whom Beazley JA and Hunt AJA agreed)). Although the default may not have occurred when the notice was prepared it will, nevertheless, be effective provided the default has taken place by the time the notice is served: Notaras v Sly & Weigall (2005) 12 BPR 23,765, [70]–[75] (Mason P (with whom Hodgson JA and Matthews AJA agreed)). In Victoria, where the statutory or an express power to sell is made exercisable upon the insolvency of the mortgagor, leave of the Supreme Court is required before the power can be exercised: see Property Law Act 1958 s 111.

Although a mortgagee may enter into a contract to sell the mortgaged land before the statutory notice is served the mortgagee’s entitlement to exercise the power of sale will not arise unless the notice is served and there is compliance with the statutory requirements: HG & HR Securities Pty Ltd v Sayer (2009) 14 BPR 27,045, [38]–[40].

Torrens system mortgages 20.12 As set out in 4.36, legislation in all jurisdictions provides for a power of sale for a mortgagee under a Torrens system mortgage. The same general principles apply [page 530] as to general law mortgages, though the method by which this is achieved may differ as a result of particular provisions in each of the General Conveyancing legislation and the Torrens legislation.

To whom notice given 20.13 As has been seen, notice in the statutory form must be given before sale with both general law and Torrens mortgages. In general law mortgages the term ‘mortgagor’ includes, unless the context otherwise requires, any person deriving title under the original mortgagor or entitled to redeem a mortgage according to his estate interest or right in the mortgaged property: Conveyancing Act 1919 (NSW) s 7(1); Property Law Act 1958 (Vic) s 18(1). If the mortgagor is dead, the notice should be served on his personal representatives as long as the equity of redemption remains in them: Gill v Newton (1866) 14 WR 490. It has been held that a subsequent mortgagee should be served where an express power required notice to the mortgagor or his assigns, but it was doubted whether notice must also be given to the mortgagor: Hoole v Smith (1881) 17 Ch D 434. The wording of Victorian Act s 103(a) and NSW Act s 111(2)(b) refers only to the mortgagor (but the statutory definition is imported). A leading English text suggests that it seems proper to give the notice to the mortgagor and at least the first subsequent encumbrancer (see

Wolstenholme and Cherry, Conveyancing Statutes, 13th ed, Oyez, 1972, vol 1, p 211) and, where a subsequent mortgagee is selling, to give notice to the mortgagor and prior mortgagees. In Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361, it was suggested that only the mortgagor need be given notice, as only the mortgagor can remedy the default.While that is true, one of the purposes of giving notice to other mortgagees is to give them a chance to redeem. The position was clarified in New South Wales by amendments in 1987 requiring a copy of the notice to be served in the case of general law mortgages upon each mortgagee or chargee under a mortgage or charge registered in the General Register of Deeds (Conveyancing Act 1919 s 111(2) (b1)); and in case of Torrens mortgages upon each mortgagee or chargee under a registered mortgage or charge having less priority than that of the selling mortgagee or chargee: Real Property Act 1900 s 57(2)(b1).

Form of notice 20.14 The form of the notice is set out with considerable detail for both general law and Torrens system mortgages in New South Wales but with less detail and varying in some cases between general law and Torrens system mortgages in other jurisdictions. In Whild v GE Mortgage Solutions Pty Ltd (2012) V ConvR ¶54-816; [2012] VSC 212, Croft J held (at 64,360–1, [56]) that although the form or content of a notice was not the subject of specific requirements under Transfer of Land Act 1958 (Vic) ss 76 and 77: … its provisions do, nevertheless, contemplate that something in the nature of a ‘notice’ (whether styled as a notice or demand) must be served on the mortgagor … As the High Court indicated in Barns v Queensland National Bank Ltd … the object of the notice is to guard the rights of the mortgagor. In my opinion, it follows that the ‘writing’ constituting the notice must make it clear that its purpose is not merely to provide information, but that, rather, the mortgagee is taking a step which may result in the exercise of the statutory power of sale under the TLA and that, if the mortgagor wishes to prevent this course being taken, then action needs to be taken to attend to compliance with the notice. This may involve communication with the mortgagee to establish the quantum of any amount or amounts claimed with respect to the default or defaults specified in the notice and, if necessary, the taking of proceedings to enjoin the mortgagee from taking any further steps. Clearly, the exercise of the mortgagee’s power of sale is a very drastic remedy … it is a remedy involving a process of notification and execution which significantly affects, or has the potential to significantly affect, the rights of the mortgagor with respect to his, her or its property the subject of the mortgage. Consequently, although the Victorian legislation does not contain some of the specific requirements with respect to default notices as are contained in s 57 of the Real Property Act 1900 of New South Wales, it is implicit in the Victorian provisions that a notice

[page 531] given under sub-s 76(1) of the TLA be drawn as a ‘notice’ (whether styled as a notice or demand) which meets the objective of guarding the mortgagor’s rights by providing a clear indication, and thereby a warning, of the course upon which the mortgagee is embarking.

An agreement for sale may be made before the expiration of the notice, if the agreement is conditional upon the power becoming exercisable and if the price is then proper: Major v Ward (1847) 5 Hare 598 at 604; 67 ER 1049; Farrar v Farrars Ltd (1888) 40 Ch D 395 at 412. Under Property Law Act 1958 (Vic) s 103(a), the notice may be in the form of demand for immediate payment, with an intimation that if the money is not paid before the expiration of one month from service, the mortgagee will proceed to sell, but it is equally effective if it is a notice to pay at the end of that period: Barker v Illingworth [1908] 2 Ch 20. In New South Wales, Conveyancing Act 1919 s 111(3) and Real Property Act 1900 s 57(3) set out the requirements for general law and Torrens system mortgages respectively in similar form. The notice must specify that it is a notice pursuant to the relevant section — that is, Conveyancing Act 1919 s 111(2)(b) or Real Property Act 1900 s 57(2)(b): see Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361. The notice must require the mortgagor on whom it is served to observe the covenant, agreement or condition in respect of the observance of which he made default or, as the case may be, to pay principal, interest or other money in respect of the payment of which he made default. If the costs and expenses of preparing and serving the notice are to be demanded, it must require payment of a reasonable amount for those costs and expenses and specify the amount. The notice must notify the mortgagor that, unless the requirements of the notice are complied with within one month after service of the notice (or, where some other period exceeding one month is limited by the mortgage for remedying the default referred to in the notice, within that other period after service of the notice) it is proposed to exercise a power of sale in respect of the land the subject of the mortgage: Conveyancing Act 1919 s 111(3); Real Property Act 1900 s 57(3). For notice requirements in other jurisdictions, see Property Law Act 1958 (Vic) s 103(a); Transfer of Land Act 1958 (Vic) ss 76, 77(1); Queensland Act

s 84; South Australian Act ss 48, 55A; Tasmanian Act s 22; Land Titles Act 1980 (Tas) ss 77, 78(1), 80; Western Australian Act s 59; Transfer of Land Act 1893 (WA) ss 106–108. As to general law mortgages, only New South Wales requires the notice to state that it is made pursuant to the relevant statutory provision: Conveyancing Act 1919 s 111(3)(a); and see Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361. In New South Wales and Tasmania, the notice must specify the intention to sell: NSW Act s 111(3)(d); Conveyancing and Law of Property Act 1884 (Tas) s 22(1). The statutory form of notice set under the Property Law Act 1974 (Qld) (Form 4 Version 1, Queensland Government Gazette, 17 May 1996, p 621) gives notice that the mortgagee may proceed to sell the land. For Torrens system mortgages New South Wales, South Australia and Tasmania require the notice to refer to the intention to sell if the default is not remedied: Real Property Act 1900 (NSW) s 57(3)(d); Real Property Act 1886 (SA) s 132; Land Titles Act 1980 (Tas) s 77(2)(b). Failure to refer to the intention to sell, where such is required, invalidates the notice: Hindmarsh Building Society v Manhire (1979) 20 SASR 206 at 209. In Queensland, the notice must state that the mortgagee may proceed to sell the land: Form 4 Version 1 under the Property Law Act 1974 (Queensland Government Gazette, 17 May 1996, p 621).

Object of the notice 20.15 The object of the notice is to guard the rights of the mortgagor and, if this object is substantially attained, the court will not minutely criticise the exact terms of the notice: [page 532] Barns v Queensland National Bank Ltd (1906) 3 CLR 925; and see Croft and Hay, The Mortgagee’s Power of Sale, [3.6]. The notice must specify the default alleged and required to be remedied. If the mortgage gives the mortgagee the right to demand repayment on different defaults, the default or defaults relied on must be specified: McDonald v

Rowe (1872) 3 VLR (E) 143; and see Mediservices International Pty Ltd v Stocks and Realty (Security Finance) Pty Ltd [1982] 1 NSWLR 516. The notice is not good if it identifies the wrong default or an act in respect of which the mortgagor has not made default, even though there is some other different default, unless that other default is also specified in the notice: see Websdale v S & J D Investments Pty Ltd (1991) 24 NSWLR 573; cf Mir Bros Projects Pty Ltd v 1924 Pty Ltd [1980] 2 NSWLR 907; and Wongala Holdings Pty Ltd v Mulinglebar Pty Ltd (1994) 6 BPR 13,527; and see Mulinglebar Pty Ltd v Wongala Holdings Pty Ltd (1994) NSW ConvR ¶55697. Nevertheless, a notice ineffective for the purposes of the statutory requirements may operate as an effective demand under the terms of the mortgage: Turnbull v National Mutual Royal Bank Ltd (1991) 26 NSWLR 361; Silkdale Pty Ltd v Long Leys Pty Ltd (1995) 7 BPR 14,414. However, where a notice had been given in respect of arrears which had been remedied, but there were subsequent arrears, it has been held that the notice covered the subsequent arrears and a further notice was not required. Nor did the acceptance of the first arrears operate as a waiver of the notice: see Morton v Suncorp Finance Ltd (1987) 8 NSWLR 325. On waiver, see below. Where the default is in payment the purpose of the notice is to identify the debt, rather than the quantum: Barns v Queensland National Bank Ltd, above; Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 153 CLR 491; 51 ALR 609; Indrisie v General Credits Ltd [1985] VR 251; see 17.9. It is safer to state some sum, though it has been said that if the amount due is known to the mortgagor or ascertainable by him (he can always ask the mortgagee), it may be that it is sufficient merely to demand payment of ‘the principal’ or ‘the interest’: Clarke v Japan Machines (Australia) Pty Ltd [1984] 1 Qd R 404; and see Stephenson Developments Pty Ltd v Finance Corp of Australia Ltd [1976] Qd R 326; Bunbury Foods Pty Ltd v National Bank of Australasia Ltd, above; AGC (Advances) Ltd v Tweed Canal Estates Pty Ltd (1988) 4 BPR 9404. A notice is not necessarily bad if it overstates the amount due: Campbell v The Commercial Banking Co of Sydney (1879) 40 LT 137; 2 LR (NSW) 357; Clyde Properties Ltd v Tasker [1970] NZLR 754; Bunbury Foods Pty Ltd v National Bank of Australasia Ltd, above; Clare Morris Ltd v Hunter BNZ Finance Ltd (1988) 4 BPR 9609, noted (1988) 64 ALJ 135; AGC (Advances) Ltd v Tweed Canal Estates Pty Ltd, above; Re Newman Air Charter Pty Ltd (1991) 6 ACSR 435; Krey v National Australia

Bank Ltd (1992) NSW ConvR ¶55-653; Commonwealth Bank of Australia v Jackson (1992) V ConvR ¶54-447 at 65,225; and Whild v GE Mortgage Solutions Pty Ltd (2012) V ConvR ¶54-816; [2012] VSC 212. In South Australia, Law of Property Act 1936 s 55B(1) requires the mortgagee, at the request of the mortgagor, to supply reasonable particulars of how the amount of the demand is arrived at. The sum in respect of which default is alleged must be due: Willett v Birt [1921] VLR 115. This is particularly important in relation to acceleration clauses. Note Real Property Act 1900 (NSW) s 57(5), which provides that acceleration and like clauses shall have no effect until the statutory power of sale becomes exercisable by reason of a default under s 57(2)(a). An acceleration clause does not become effective until the statutory notice has been given and not complied with in respect of the particular payment: Websdale v S & J D Investments Pty Ltd (1991) 24 NSWLR 573. This only applies where the acceleration clause is expressed or implied in the mortgage — not, for example, where it is contained in a bank mortgagee’s separate terms and conditions [page 533] which have not been incorporated into the mortgage: Turnbull v National Mutual Royal Bank Ltd (1991) 26 NSWLR 361. In South Australia, see Law of Property Act 1936 s 55A and Wombat Nominees Pty Ltd v De Tallio (1990) 98 ALR 307; cf Lamshed v Plakakis (1988) 47 SASR 316. Where the mortgagor was deregistered at the time of service of the notice, it cannot be said that it ‘failed’ to comply: Joro Pty Ltd v State Bank of NSW (1992) 5 BPR 11,709. Further, as to defective notices, see Knight v Independent Mortgage Management Services Pty Ltd [1998] V ConvR ¶54-587; and see 20.13. As regards dispensing with the need for a notice and varying the period for compliance with the notice, see 20.11 and 20.12. If the notice is duly complied with, the default to which the notice relates is deemed not to have occurred. This is stated specifically in the New South

Wales legislation (Conveyancing Act 1919 s 111(4); Real Property Act 1900 s 57(4)), but the effect is the same in other jurisdictions. The mortgagee may waive the effect of a notice expressly or by conduct. The mortgagor may waive a defect in the notice by failing to take proceedings to restrain the sale or to have the sale set aside. See also on waiver 20.18.

Service of the notice 20.16 In New South Wales, the service of the notice in respect of the exercise of the power to sell land is required to be effected in the manner authorised by Conveyancing Act 1919 s 170: see Conveyancing Act 1919 s 111(2)(b); Real Property Act 1900 s 57(2)(b). Section 170, besides requiring a notice to be in writing, provides that a notice shall be sufficiently served (a) if delivered personally, (b) if left at the last known residential or business address in or out of New South Wales of the person to be served, (b1) in the case of a mortgagor in possession if left at or sent by post to any occupied house or building comprised in the mortgage or lease, (c) if delivered to a document exchange of which the person to be served is a member or (d) if served in such manner as the court may direct: s 170(1). A notice required to be served under the legislation, if served otherwise than by post, will be sufficiently served if addressed to the mortgagor by that designation only, without his name, or generally to the persons interested, without any name, and notwithstanding that any person to be affected by the notice is absent, under a disability or unascertained: s 170(2). An address for the purposes of these provisions does not include the postcode: Perpetual Ltd v Treloar (2009) 14 BPR 27,699; and see Spencer v Bamber [2012] NSWCA 274. A notice served at a document exchange is deemed served on the second business day following delivery: s 170(1A). The relevant Victorian provision, Property Law Act 1958 s 198, follows more closely the equivalent English provision. The principal difference between that and the New South Wales provision is that s 198 does not apply to notices served under the Transfer of Land Act 1958: see Property Law Act 1958 s 198(6). For service provisions under the Transfer of Land Act, see s 113. For service provisions in other jurisdictions see, for general law land,

Queensland Act s 47 (applies also to Torrens system land), South Australian Act s 112,Tasmanian Act s 85,Western Australian Act s 135; and for Torrens system land, Real Property Act 1886 (SA) s 276; Land Titles Act 1980 (Tas) ss 77(1), 168; Transfer of Land Act 1893 (WA) ss 106, 240. These provisions as to sufficiency of service create a presumption of service. Service by other means may be proved: McDonald v Rowe (1872) 3 VLR (E) 143. Proof of [page 534] posting need only be on the balance of probabilities: Re 88 Berkeley Road NW9; Rickwood v Turnsek [1971] Ch 648; [1971] 1 All ER 254. Return to sender of a letter as undelivered indicates non-receipt by the addressee: Re Rustic Homes Pty Ltd (1988) 13 ACLR 105; 49 SASR 41. In the case of Torrens system mortgages, service may be on the mortgagor at the address appearing in the register: see Gunn v Land Mortgage Bank of Victoria Ltd (1890) 12 ALT 49; Irving v Commissioner of Titles [1963] WAR 67 at 68 (Hale J); Perpetual Ltd v Treloar (2009) 14 BPR 27,699; Spencer v Bamber [2012] NSWCA 274; and Whild v GE Mortgage Solutions Pty Ltd (2012) V ConvR ¶54-816 at 64,362–3, [65] (Croft J). See further, on sufficiency of service and service on corporations, Croft and Hay, The Mortgagee’s Power of Sale, [3.7], [3.8] and [3.26].

Further points on the notice 20.17 If the notice does not satisfy the statutory requirements, the mortgagor will be able to obtain an injunction to restrain the proposed sale: Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 at 376–7 (failure to specify the section under which notice given). But if the mortgagor fails to take any such action he will, in effect, be taken to have waived his right so that a purchaser under a contract without notice of the defect in the notice will be able to enforce that contract: Manton v Parabolic Pty Ltd at 377–8. Once a notice has been given it cannot be withdrawn without the consent of the mortgagor: Santley v Wilde [1899] 1 Ch 747, reversed on a different point [1899] 2 Ch 474. But the notice may be waived by either mortgagor or

mortgagee: see 20.18. A mortgagee is entitled to add to the security the costs incurred in the preparation and service of all proper notices: see Chapter 40. If, after a demand, the sale is stopped on receipt of a cheque for the amount due under the mortgage, but the cheque is afterwards dishonoured, the right of sale and the running of the notice having been only suspended, revive, and the power may be exercised without giving a new notice: Wood v Martin (1877) 47 LJQB 191; and see Morton v Suncorp Finance Ltd (1987) 8 NSWLR 325. If the mortgagors hold jointly, one notice served on them suffices. However, if the mortgagors hold distinct interests as tenants in common, all must be served: Stevenson v Byrne (1897) 3 Arg LR 198; 19 ALT 46 affirmed (1897) 3 Arg LR 250 FC. For the effect of compliance with the notice, see 20.15.

Waiver 20.18 A mortgagor may by his conduct waive his right to a valid and effective notice (see Selwyn v Garfit (1888) 38 Ch D 273; Re Thompson and Holt (1890) 44 Ch D 492; Forster v Hoggart (1850) 15 QB 155; 117 ER 417) or his right to impugn the sale: see Paterson v McNaghten (1905) 2 CLR 615; McNaghten v Paterson (1908) 6 CLR 257; Camfield Pastoral Co v Dixon [1972] Qd R 289; Porter v Associated Securities Ltd (1976) 1 BPR 9279; and see, generally, Chapter 35. Equally the mortgagee may, by his conduct showing that he does not intend to rely on the breach or the notice, waive the breach or the notice: Walsh v Derrick (1903) 19 TLR 209; Barns v Queensland National Bank Ltd (1906) 3 CLR 925; Blakely v Teal Investments Ltd [1982] NZLJ 242; Morton v Suncorp Finance Ltd (1987) 8 NSWLR 325; and see Croft and Hay, The Mortgagee’s Power of Sale, [3.10] and [3.27].

Protection of purchaser 20.19 Unless excused by the terms of the power, or of the conditions of sale, the mortgagee is bound to obtain for the purchaser proper evidence of the facts which entitle him to exercise the power. His unsupported statutory

declaration, being the evidence of an interested person, will not be sufficient for the purpose: Hobson v Bell (1839) 2 Beav 17; [page 535] 48 ER 1084; Re Edwards and Rudkin to Green (1888) 58 LT 789. A covenant by the mortgagor that he will join in the sale is for the benefit of the mortgagee only, and the purchaser cannot require such concurrence: Corder v Morgan (1811) 18 Ves 344; 34 ER 347. Formerly it was the practice to insert in mortgages a clause expressly protecting the purchaser against irregularities in the exercise of the power. Nowadays, however, a purchaser will not be concerned to inquire whether the power of sale had arisen or become exercisable because, in the case of a sale under the statutory power, the purchaser is protected by statutory provisions in all jurisdictions. In New South Wales, Conveyancing Act 1919 s 112(3) provides that, where a conveyance is made in professed exercise of the statutory power of sale, (a) a purchaser shall not, either before or on conveyance, be concerned to see or inquire whether a case has arisen to authorise the sale, or whether due notice has been given or the power is otherwise properly and regularly exercised, and (b) the title of the purchaser shall not be impeachable on the ground that no case had arisen to authorise the sale, or that due notice was not given, or that the power was otherwise improperly or irregularly exercised, but any person damnified by an unauthorised or improper or irregular use of the power shall have his remedy in damages against the person exercising the power. In Victoria, Property Law Act 1958 s 104(2) follows s 104(2) of the English Act and provides that where a conveyance is made in exercise of the statutory power of sale the title of the purchaser shall not be impeachable on the ground: (a) that no case had arisen to authorise the sale; or (b) that due notice was not given; or (c) that leave of the court, when so required, was not obtained; or (d) that the power was otherwise improperly or irregularly exercised, and a purchaser shall not, either before or on conveyance, be concerned to see

or inquire whether a case has arisen to authorise the sale, or due notice has been given, or the power is otherwise properly and regularly exercised; but any person damnified by an unauthorised, or improper, or irregular exercise of the power shall have his remedy in damages against the person exercising the power. A conveyance on sale by a mortgagee shall be deemed to have been made in exercise of the power of sale conferred by the Act unless a contrary intention appears. For other jurisdictions see Queensland Act s 87, South Australian Act s 49(2), Tasmanian Act s 23(2),Western Australian Act s 60(2). The difference in layout between the New South Wales and Victorian provisions (that is, the reversal of the two limbs of the subsection) is not, it is submitted, of any significance. Both are prefaced by the words ‘when a conveyance is made’ and both cover inquiries before or on conveyance in one limb. The subsections have two aspects. First, they are dealing with the effect of the conveyance (including, where appropriate, an assignment) on sale and the title of the purchaser after the conveyance. Though the purchaser’s title is expressed to be unimpeachable and it would appear that the only remedy of anyone injured by an improper exercise of the power of sale is the one in damages specified in the provision, the immunity for a purchaser is not as absolute as it might seem from the words of the provision, for the reasons mentioned below.

Investigation of title by purchaser 20.20 The second aspect of the provision deals with the investigation of title by the purchaser prior to conveyance. It provides that a purchaser is not concerned to see or inquire whether the power of sale is properly exercised. It does not provide, as was usual in express powers of sale before the introduction of the statutory power, that a purchaser [page 536] shall not be affected by knowledge that the notice required by the power had not been given and other similar provisions. Although a purchaser may not be concerned to inquire whether the exercise of the power of sale is proper, he

may, of course, obtain actual notice of the impropriety of the sale without inquiry or be deemed to have constructive notice of the impropriety from those circumstances of which he has knowledge. It would be possible to construe the first part of the Victorian provision, dealing with the effect of the conveyance and stating that the purchaser’s title shall not be impeachable, as not cut down by the latter part (whatever that part might mean) which deals with the purchaser’s position prior to conveyance. But perhaps because of the form of the provision, with the initial unimpeachability part linked to the latter part by the conjunction ‘and’ (thus importing the limitation in the latter part into the first part), it now appears to be generally accepted that the conveyance may be set aside if the purchaser under the conveyance takes with knowledge of any impropriety in the sale: Waring (Lord) v London and Manchester Assurance Co Ltd [1935] Ch 310 at 318; Northern Developments (Holdings) Ltd v UDT Securities [1977] 1 All ER 747; Holohan v Friends Provident and Century Life Office [1966] IR 1; Forsyth v Blundell (1973) 129 CLR 477; and see 20.42. To uphold the title of a purchaser who had notice of impropriety or irregularity in the exercise of the power of sale would be to convert the provisions of the statute into an instrument of fraud: Bailey v Barnes [1894] 1 Ch 25 at 30 (but note that this statement was made in relation to Conveyancing Act 1881 s 21(2), which is reproduced in the first part of the current provisions). (See, generally, Croft and Hay, The Mortgagee’s Power of Sale, [10.4] and [10.12]; Sykes and Walker, The Law of Securities, 5th ed, Law Book Co, Sydney, 1993, pp 124–6. For an account where the sale is not set aside, see 39.2.) This appears to be so whether the knowledge be actual or constructive (that is, ‘constructive’ in the sense of what would have come to the purchaser’s knowledge had he not shut his eyes to suspicious circumstances, rather than the usual sense related to failure to inquire). See Holohan v Friends Provident Century Life Office, above (where the combination of Conveyancing Act 1881 (UK) s 21(2) and Conveyancing Act 1911 (UK) s 5(1) are equivalent to the current Australian provisions); Bailey v Barnes [1894] 1 Ch 25 (where both actual and constructive notice were considered; but Conveyancing Act 1881 s 21(2) has no equivalent of the latter part of the current Australian provisions, and the constructive notice aspect was founded upon Conveyancing Act 1882 (UK) s 3(1), which was a general provision restricting constructive notice, not specifically related to a

purchaser on a mortgagee sale, and which formed the basis of NSW Act s 164(1), Victorian Act s 199(1) (as to which, see 24.13)). See also Lukass Investments Pty Ltd v Makaroff (1964) 82 WN (NSW) (Pt 1) 226; Latec Investments Ltd (in liq) v Hotel Terrigal Pty Ltd (1965) 113 CLR 265; Forsyth v Blundell (1973) 129 CLR 477 at 499–503, and at first instance sub nom Blundell v Associated Securities Ltd (1971) 19 FLR 167; McKean v Maloney [1988] 1 Qd R 268. On express powers, see Jenkins v Jones (1860) 2 Giff 99; 66 ER 43; Parkinson v Hanbury (1860) 1 Drew & Sm 143; 62 ER 332 (this point was not considered on appeal); Selwyn v Garfit (1888) 38 Ch D 273 (where, in each case, a purchaser with actual notice was not protected by the express relieving provision). The New South Wales provision, with its two clearly separate limbs, is more amenable to the possible construction referred to above, but again it appears to be generally accepted that the conveyance is not as unimpeachable as the provision appears on its face to suggest and the conveyance may be set aside against a purchaser under the conveyance with knowledge (in the senses mentioned above) of some impropriety in the sale. Subject to the point about constructive notice just mentioned, since inquiries might lead to a mortgagee having notice of an irregularity in the exercise of the sale, it is probably better for him to refrain from making any inquiries in relation to the mortgage. [page 537] The unimpeachability of the purchaser’s title referred to above is expressed to apply on ‘conveyance’, notwithstanding that the power of sale is deemed to be exercised upon the execution of the contract for sale. It is clear from this provision that the power of sale may be impeached (for example by injunction restraining sale: see 20.36ff) at any time before completion. As regards Torrens system mortgages, in New South Wales, Real Property Act 1900 s 58(2) provides that a purchaser from a mortgagee exercising the statutory power of sale shall not be concerned to inquire as to the fact of any default or notice having been made or served. In Victoria, Transfer of Land Act 1958 s 77(4) provides that the title of the purchaser shall not be

impeachable on the ground that no case had arisen to authorise the sale or that due notice was not given or that the power was otherwise improperly or irregularly exercised but any person thereby damnified shall have his remedy in damages against the person exercising the power. Under general provisions affecting Torrens system land upon registration the purchaser will get an indefeasible title, subject to the recognised exceptions — for example, fraud and rights in personam. The reference to a remedy in damages in both the general law and Torrens system legislation does not create a special statutory remedy, nor does it refer to a common law action for damages, but is a reference to the mortgagor’s right in equitable proceedings to hold the mortgagee to account on the footing of wilful default: McGinnis v Union Bank of Australia Ltd [1935] VLR 161; Coroneo v Australian Provincial Assurance Association Ltd (1935) 35 SR (NSW) 391; General Credits (Finance) Pty Ltd v Stoyakovich [1975] Qd R 352; Colin D Young Pty Ltd v Commercial and General Acceptance Ltd (1982) Conveyancing Service (NSW) [92179].

Mortgagee’s duty — in general 20.21 The power of sale is given to the mortgagee for his own benefit, to enable him the better to realise his debt: see, for example, Warner v Jacob (1882) 20 Ch D 220 at 234; Farrar v Farrars Ltd (1888) 40 Ch D 395 at 398; Palmer v Barclays Bank Ltd (1971) 23 P & CR 30; Lake Apartments Ltd v Bootwala (1973) 37 DLR (3d) 523; Forsyth v Blundell (1973) 129 CLR 477 at 483–4. As we shall see in 20.36 ff, the court may interfere with the exercise of the power at the instance of those interested in the proceeds of sale, but the court will not interfere merely to prevent its exercise contrary to the wishes of the mortgagor, or even (except on terms of payment of the mortgage debt) because the mortgagee is seeking some collateral object and not merely the payment of his debt: Nash v Eads (1880) 25 Sol Jo 95; Belton v Bass, Ratcliffe and Gretton Ltd [1922] 2 Ch 449 at 465–6; but see Quennell v Maltby [1979] 1 All ER 568; [1979] 1 WLR 318, and 19.13. For the mortgagee is not a trustee of the power for the mortgagor (Warner v Jacob, above; Ross v Victorian Permanent Property Investment and Building Society (1882) 8 VLR

(E) 254; Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949 at 965, 969; [1971] 2 All ER 633 at 643, 647; Commercial and General Acceptance Ltd v Nixon (1981) 152 CLR 491), and the court will not inquire into his motives for exercising it: Belton v Bass, Ratcliffe and Gretton Ltd, above, at 465. The duty of the mortgagee in respect of the sale itself was, formerly, generally put on the basis of good faith alone: Kennedy v De Trafford [1897] AC 180 (HL). There were dicta that something more was required of the selling mortgagee besides absence of bad faith, namely that he was also under a duty to take reasonable care to obtain whatever was the true market value of the mortgaged property at the moment he chose to sell it: Wolff v Vanderzee (1869) 20 LT 350; National Bank of Australasia v United Hand-in-Hand [page 538] and Band of Hope Co (1879) 4 App Cas 391 (PC); Tomlin v Luce (1889) 41 Ch D 573, on appeal 43 Ch D 191; McHugh v Union Bank of Canada [1913] AC 299 (PC). The English Court of Appeal preferred this line of authority to the good faith test in Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949; [1971] 2 All ER 633, and that view has been followed in other Commonwealth jurisdictions (for example in New Zealand in Alexandre v New Zealand Breweries Ltd [1974] NZLR 497; ANZ Banking Group (NZ) Ltd v Gibson [1981] 2 NZLR 513; Countrywide Banking Corp v Robinson [1991] 1 NZLR 75, and in Canada in Canadian Imperial Bank of Commerce v Haley (1979) 100 DLR (3d) 470; Bank of Nova Scotia v Barnard (1984) 9 DLR (4th) 575) and also by the Privy Council in Tse Kwong Lam v Wong Chit Sen [1983] 3 All ER 54; [1984] 1 WLR 1349. This was recently affirmed by the New South Wales Court of Appeal in Commonwealth Bank of Australia v Hadfield [2005] NSWCA 350 at [9]. But the Cuckmere principle has not been followed in Australia where the courts have preferred to retain the good faith test: see Barns v Queensland National Bank Ltd (1906) 3 CLR 925; Pendlebury v The Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676; Forsyth v Blundell (1973) 129 CLR 477; Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195; Commercial and General

Acceptance Ltd v Nixon (1981) 152 CLR 491; Goldcel Nominees Pty Ltd v Network Finance Ltd [1983]VR 257; Citicorp Australia Ltd v McLoughney (1984) 35 SASR 375; Cachalot Nominees Ltd Pty v Prime Nominees Pty Ltd [1984] WAR 380; Westpac Banking Corp v Mousellis (1986) 37 NTR 1; National Australia Bank Ltd v Sproule 17 NSWLR 505; Southern Goldfields Ltd v General Credits Ltd (1991) 4 WAR 138; Bourke v Beneficial Finance Corp Ltd (1991) ANZ ConvR 473; Westpac Banking Corp v Kingsland (1991) 26 NSWLR 700; Allfox Building Pty Ltd v Bank of Melbourne Ltd (1992) NSW ConvR ¶55-634; (1992) 66 ALJ 863; Upton v Tasmanian Perpetual Trustees Pty Ltd (2007) 158 FCR 118 (FC); Jovanovic v Commonwealth Bank of Australia (2004) SASR 570 (FC); and Ultimate Property Group Pty Ltd v Lord (2004) 60 NSWLR 646. See generally, on the two tests, (1979) 53 ALJ 172 (Butt); (1981) 55 ALJ 559 (Tyler); (1983) 57 ALJ (Tebbutt); (1987) 16 Melb Uni LR 146 (Kapnoullas). The good faith test has also been considered in more recent Australian authorities in terms of equitable concepts of unconscionability. In Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation Ltd (1994) 8 BPR 15,581; (1995) NSW ConvR ¶55-731, McLelland CJ in Eq explained the mortgagee’s duty of good faith in this light (at 15,583; 55,650): This is an area of the law where particular phrases used in judgments should not be construed and applied as if embodied in an Act of Parliament … What matters is the underlying equitable principle, which in the modern idiom usually finds expression in terms of unconscionability. The mortgagee is not answerable for what Isaacs J in Pendlebury describes (at 700) as ‘mere negligence or carelessness in carrying out the sale’. Any departure from reasonable standards must be so serious as to be properly characterised as unconscionable, in order to render the mortgagee accountable. If a failure by a mortgagee to take reasonable steps to obtain a proper price is sufficiently serious to be characterised as unconscionable as that expression is understood in equity, then in the taking of accounts between the mortgagee and the mortgagor, the mortgagee will be accountable on the basis of wilful default for the price which would have been obtained if the mortgagee had not been guilty of unconscionable conduct.

In similar vein Cohen J said in Adamse v Broadway Credit Union Ltd (1999) NSW ConvR ¶55-976 at ¶56,861: There may well be circumstances where failing to obtain a proper price could be regarded as unconscionable conduct … It may well be that a failure to consider what is a proper price or a disregard of advice to that effect may in appropriate circumstances amount to a lack of good faith.

And Young CJ in Eq commented in Ultimate Property Group Pty Ltd v Lord (2004) 60 NSWLR 646 at 652, [38]–[40]:

The duty is a duty to act conscionably towards the mortgagor and persons under the mortgagor. The duty is not to be considered in some mechanical way, but the whole of the mortgagee’s

[page 539] conduct with respect to the sale is to be considered. The mortgagee may, up to a point, act solely in its own interests, but it must also act conscionably towards the mortgagor and those claiming under the mortgagor. … Indeed, it is a fundamental principle in the textbooks that mere inadequacy in the price obtained and the value will not normally of itself be sufficient for a mortgagor to upset a purported sale …

Hawkesbury Valley Developments has also been followed in State Bank of NSW v Chia (2000) 50 NSWLR 587; Gomez v State Bank of NSW [2001] FCA 1059 and [2002] FCFCA 442 (on appeal); Commonwealth Bank of Australia v Hadfield [2004] NSWCA 350; Quzag v Gunning Shire Council (2005) 142 LGERA 77; [2005] NSWSC 970; Deangrove Pty Ltd v Buckby (2006) 56 ACSR 630; and Kingsway Group Ltd v Belramoul (2009) 14 BPR 27,075. There may be some practical differences between the two tests, such as in the extent of the mortgagee’s duty to others besides the mortgagor, but it is doubtful whether in most cases the result would be different whichever test was applied. In Forsyth v Blundell (1973) 129 CLR 477 at 481, it was said that to take reasonable precautions to obtain a proper price is but a part of the duty to act in good faith. This observation is particularly apposite in light of equitable concepts of unconscionability. Thus, in Australia, the concept of a fiduciary duty of reasonable care is not used in the sense of the law of negligence, but in suggesting that bona fide steps must be taken not to sacrifice the mortgagor’s interest: Commonwealth Bank of Australia v Lee (1996) 22 ACSR 574 (WASC). In any event the English courts seem to be moving back from the Cuckmere principle (or at least from an independent duty in tort) to the good faith test (see per Nourse LJ in Parker-Tweedale v Dunbar Bank plc [1991] Ch 12 at 18–19; [1991] 2 All ER 577 at 582), as also does the Privy Council: see China and South Sea Bank Ltd v Tan Soon Gin [1990] 1 AC 536; [1989] 3 All ER 839; Downsview Nominees Ltd v First City Corp Ltd [1993] AC 295 at 315; [1993] 3 All ER 626 at 637. More recent English authority

emphasise the basis of the mortgagee’s duty as lying in equity only: see Medforth v Blake [1999] 3 All ER 97; Yorkshire Bank plc v Hall [1999] 1 WLR 1713; Raja v Lloyds TSB Bank (16 May 2000) Times Law Reports 379; Raja v Austin Gray (a firm) [2002] EWCA Civ 1965; [2003] 1 EGLR 91; 3 EGLR 49; Silven Properties Ltd v Royal Bank of Scotland plc [2003] EWCA Civ 1409; 3 EGLR 49; Meretz Investments NV v ACP Ltd [2007] Ch 197.

To whom duty owed 20.22 The mortgagee’s duty of good faith in selling the mortgaged property is owed to the mortgagor and anyone else interested in the equity of redemption: Medforth v Blake [2000] Ch 86; [1999] 3 All ER 97. It is thus owed to other mortgagees: Alliance Acceptance Co Ltd v Graham (1974) 10 SASR 220 (third mortgagee obtained injunction restraining sale); Southern Goldfields Ltd v General Credits Ltd (1991) 4 WAR 138 (second mortgagee); and Jacobson v National Australia Bank (SC (Vic), 15 April 2003, unreported) (where Beach J suggested that ‘the only duty a first mortgagee owes to a second mortgagee is a duty to protect the second mortgagee’s financial interest in the property’). For assignment of the right to sue for an alleged sale at an undervalue, see Martin v Lewis [1985] ACLD 630. But the mortgagee does not owe a person with a beneficial interest in the mortgaged property, of which interest the mortgagee had notice, an independent duty over and above that which he owed to the mortgagor: Parker-Tweedale v Dunbar Bank plc [1991] Ch 12; [1990] 2 All ER 577. The duty is also owed to the guarantor of the mortgage debt: Tooth & Co Ltd v Lapin (1936) 53 WN (NSW) 224 at 225; Standard Chartered Bank Ltd v Walker [1982] 3 All ER 938; [1982] 1 WLR 1410; American Express International Banking Corp v Hurley [1985] [page 540] 3 All ER 564; Finance Corp of Australia Ltd v Stephens (1985) 3 Conveyancing Service (NSW) 92268. In Expo International Pty Ltd v Chant [1979] 2 NSWLR 820, the duty was expressed as one owed to creditors generally. As mentioned above, the mortgagee can decide the timing of the

sale. If a surety is concerned that the security may decline in value he may try to persuade the mortgagee to sell, but if he does not succeed he should pay off the debt and take over the security: see China and South Sea Bank Ltd v Tan Soon Gin [1990] 1 AC 536; [1989] 3 All ER 839 (PC); Westpac Banking Corp v Kingsland (1991) 26 NSWLR 700; Mailman v Challenge Bank Ltd (1991) 5 BPR 11,721; but see Palk v Mortgage Services Funding plc [1993] Ch 330; [1993] 2 All ER 481. The mortgagee’s duty, being a fiduciary duty, is of variable content. It is less intense the smaller the possible surplus that may be due to the mortgagor (Star v Silvia (No 1) (1994) 12 ACLC 600) and is discounted if it can be seen that there is only a slim possibility of the mortgagor being entitled to any surplus, no matter what the conduct of the mortgagee: Hodson v Deans [1903] 2 Ch 647 at 652; Sewell v Agricultural Bank of WA (1930) 44 CLR 104 at 110. There would seem to be no reason in principle (for example it could not be argued to be against public policy, save perhaps in those jurisdictions where a specific standard is set out in the legislation: see below) why the mortgage deed should not limit the selling mortgagee’s obligations, for example by analogy to the wide discretionary administrative powers of trustees, so that in exercise of the power of sale the mortgagee should be able to act as an absolute beneficial owner and in such manner as he, in his absolute discretion, thinks fit: American Express International Banking Corp v Hurley [1985] 3 All ER 564 at 571; Bishop v Bonham [1988] 1 WLR 742; see (1981) 55 ALJ 559 at 572 (Tyler). This, of course, is subject to any relevant Unfair Contract Terms legislation (such as, in New South Wales, the Contracts Review Act 1980: see 38.6) and exclusions. In some jurisdictions a specific standard is expressed in legislation. In Queensland, Property Law Act 1974 s 85(1) requires the selling mortgagee to ensure that the property is sold at the market value. This cannot be excluded: s 85(5). The general equitable duty is in all other respects preserved: s 85(6). It follows that a mortgagee subject to these provisions is not required to secure the market value ‘by the method of sale or by the timing of the date of sale’: Investec Bank (Australia) Ltd v Glodale Pty Ltd (2009) 24 VR 617; 256 ALR 104, [44] (CA). On this section, see Commercial and General Acceptance Ltd v Nixon (1981) 152 CLR 491; McKean v Maloney [1988] 1 Qd R 628; Cameron v Brisbane Fleet Sales Pty Ltd [2000] Q ConvR ¶54-

540; Emerson v Custom Credit Corporation Ltd [1994] 1 Qd R 516; Muirhead v Commonwealth [1997] 1 Qd R 567; (1997) 125 FLR 434; 139 ALR 561; Higton Enterprises Pty Ltd v BFC Finance Ltd [1997] 1 Qd R 168; and Cameron v Brisbane Fleet Sales Pty Ltd [2002] Qd R 463. On ‘market value’, see Martin v Lewis (1985) Conveyancing Service (NSW) [92266]; Emerson v Custom Credit Corporation Ltd, above, especially at 519 and 521. In Victoria, by Transfer of Land Act 1958 s 77(1), the mortgagee in exercising the power of sale must act in good faith and having regard to the interests of the mortgagor or other persons. This has been held to create a test which is a mixture of good faith and a duty of care: see Henry Roach (Petroleum) Pty Ltd v Credit House (Vic) Pty Ltd [1976] VR 309. That interpretation means that there are two different standards: a subjective standard for the good faith element and an objective standard for the second limb. This difficulty was not resolved in Goldcel Nominees Pty Ltd v Network Finance Ltd [1983] 2 VR 257; and see Gattuso v Geelong Building Society (1989) ANZ ConvR 565. In Tasmania, see Land Titles Act 1980 s 78(1) (good faith and best price); provisions which have been held to reflect the good faith standard: see Upton v Tasmanian Perpetual Trustees Ltd (2007) 158 FCR 118; 242 ALR 422 (FCAFC). The two divergent approaches in the Victorian cases have, more recently, been considered by the Victorian Court of Appeal. [page 541] In Kravchenko v The Rock Building Society (2009) 26 VR 400, Buchanan JA commented (at 404): I think the difference between these statements of the duty of a mortgagee is more apparent than real. Generally, the interests of the mortgagee and the mortgagor are best served by obtaining the best price that is available, and that should be the mortgagee’s aim. Nevertheless, as the mortgagee is entitled to prefer his own interests while taking reasonable care to protect the interests of others, in certain circumstances it may be that a mortgagor will be justified in accepting a price that is less than the best price that could reasonably be obtained, but is a price that can be described as proper.

Similarly, in Vasiliou v Westpac Banking Corporation (2007) 19 VR 229 at 242 [63], the Court of Appeal said that ‘[t]he mortgagee is obliged to obtain the best price consistent with its entitlement to realise its security’.

Further, in MBF Investments Pty Ltd v Nolan [2011] VSCA 114 (and see P Butt, ‘Mortgagee’s Power of Sale: Important Victorian Decision’ (2011) 85 ALJ 539 at 540), the Court of Appeal (at [65]) cautioned that the words of s 77(1) ‘must be interpreted against the background of the equitable principles which control the exercise of the mortgagee’s power of sale’. After reviewing the authorities the Court of Appeal continued (at [86]–[92]): We do not consider that a mortgagee’s duty to act in good faith and having regard to the interests of the mortgagor is confined to taking reasonable steps to obtain the best price consistent with its entitlement to realise its security. In Jenkins v National Australia Bank Ltd [1999] VSCA 33, Phillips JA (Brooking and Chernov JJA agreeing) considered that the mortgagee’s failure to preserve the mortgaged property after it took possession of it, amounted to a breach of that duty. Where a mortgagee holds security over several lots of land and is aware or ought to be aware that it is unnecessary to sell all of the lots because the sale of some of those lots would be sufficient to satisfy the mortgage debt and the costs of sale (described below as ‘the full amount’), the sale of more lots than required would conflict with the purpose of the power of sale, which is limited to recouping the mortgagee’s loss. Such a conflict would arise regardless of whether the mortgagee became aware that this was the case either before the sale or after one or more of the lots have been sold. Where it is unnecessary to sell all of the lots held as security, to recoup the amount owed, the choice as to which lots were to be sold could not be driven by an ulterior purpose, such as disrupting the mortgagor’s business or evicting the mortgagor from a home on one of the lots. Such behaviour would be an unconscionable exercise of the mortgagee’s power to sell the property in order to realise the debt. In such a case, even if there were no direct evidence of the mortgagee’s subjective intention, the facts might permit a court to infer that the mortgagee had an ulterior purpose in selecting the order in which the lots were sold. The selection, in such circumstances, of a lot or lots contrary to the wishes of the mortgagor, rather than an equally saleable lot or lots which would be sufficient to satisfy the full amount, might also provide the basis for an inference that the mortgagee acted in reckless disregard of the interests of the mortgagor, thus breaching the duty to sell in good faith. To that extent, the duty imposed on the mortgagee by s 77(1) to have regard to the mortgagee’s interests is not confined to a duty of obtaining the best price. However, where there are genuine doubts about the saleability of some lots or whether the sale of a particular lot or lots will be sufficient to satisfy the full amount, we do not consider that the mortgagee’s duty requires it to take account of the mortgagor’s preference as to the order of sale. The mortgagee’s duty has never been recognised as extending so far. Such an extension of the mortgagee’s duty would conflict with the historical development of the mortgagee’s duty, which we have discussed above. Historically, the Property Law Act 1958 gave the mortgagee the power to sell in a variety of ways including by public auction or by private contract, and for a sum payable either in one amount or by instalments, subject to such conditions respecting title, or evidence of title, or other matter, as he, the mortgagee, thinks fit, with power to vary any contract for sale, and to buy in at an auction, or to rescind any contract for sale, and to re-sell, without being answerable for any loss occasioned thereby, with

power to make such roads, streets and passages and grant such easements of right of way or drainage over the same as the circumstances may require and he thinks fit …

[page 542] Similar powers are conferred by s 77(1) of the TLA, which specifically permits the sale of land in lots ‘at one or several times’. This broad discretion would be difficult to reconcile with a duty on the mortgagee to have regard to the mortgagor’s preferences as to the order in which lots should be sold, except where there was no possibility that the mortgagee would be prejudiced in recovering the full amount by following the mortgagor’s proposed course of action.

Concluding, the Court of Appeal summarised the principles to be applied (at [100]): (a) a mortgagee is not a trustee of the power of sale, which is given to the mortgagee to enable the realisation of the security interest (Warner v Jacob (1882) 20 Ch D 220, 224); (b) a mortgagee must act in good faith (Pendlebury v The Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676), that is conscionably (Ultimate Property Group Pty Ltd v Lord (2004) 60 NSWLR 646), and cannot sell for a purpose other than that for which the power of sale is conferred (Barns v Queensland National Bank Ltd (1906) 3 CLR 925, 943); (c) a mortgagee is not required to place the interests of the mortgagor above the mortgagee’s interests in recovering the debt. For example, the mortgagee can sell the property at a time of the mortgagee’s choice, even though the property might realise a higher price if the sale were postponed (Florgale Uniforms Pty Ltd v Orders (2004) 11 VR 54); (d) the mortgagee cannot disregard the interests of the mortgagor by simply selling for a price which will cover the amount of the loan. The mortgagee must take reasonable steps to obtain the best price consistently with its right to enforce its security interest. This requires the mortgagee to consider how the property should be advertised and to allow an appropriate time between the advertisement and the sale; (e) the mortgagee must also have regard to the interests of subsequent security holders (Alliance Acceptance Co Ltd v Graham (1974) 10 SASR 220; Southern Goldfields Ltd v General Credits Ltd (1991) 4 WAR 138); and (f)

if there is no doubt that the sale of the lots preferred by the mortgagor would be sufficient to discharge the debt owed to the relevant mortgagee and of any other security holders whose interest the mortgagee is required to consider, a failure to sell the preferred lots may breach the mortgagee’s duty to sell in good faith.

A mortgagee cannot contract out of obligations under s 77(1) ‘to act in good faith’, but may contract out of lesser obligations, such as a duty to have regard to some special or particular interest the mortgagor may have in the property, such as a ‘home occupation interest’: MBF v Nolan [2011] VSCA

114 at [220]–[221]. The burden of proof is on the mortgagor or other person seeking to impugn the sale to prove breach of duty by the mortgagee: Haddington Island Quarry Co Ltd v Huson [1911] AC 727 (PC); Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195. The same duty is owed when the mortgagee sells by his attorney: see Alexandre v New Zealand Breweries Ltd [1974] 1 NZLR 497. Under Corporations Act 2001 (Cth) Pt 5.2, particularly s 420A, particular duties are required of controllers of companies selling: see Ultimate Property Group Pty Ltd v Lord (2004) 60 NSWLR 646; and see 18.13.

Time of sale 20.23 A mortgagee or a receiver may choose the time for sale at his own convenience and may sell when he considers it appropriate: Davey v Durrant (1857) 1 De G & J 535 at 553; 44 ER 830 at 838; Reliance Permanent Building Society v Harwood-Stamper [1944] Ch 362 at 372; [1944] 2 All ER 75 at 80; Mailman v Challenge Bank Ltd (1991) 5 BPR 11,721. This is subject to his duty to act bona fide in the conduct of the sale. See also Pendlebury v The Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 at 695; Hartley v Humphris [1928] St R Qd 83 at 91; Cuckmere Brick Co v Mutual Finance Ltd [1971] Ch 949 at 965, 969; [1971] 2 All ER 633 at 644, 646; China and South Sea Bank Ltd v Tan Soon Gin [1990] 1 AC 536; [1989] 3 All ER 839 (PC); Westpac Banking Corp v Kingsland (1991) 26 NSWLR 700. [page 543] The mortgagee is not bound to postpone the sale in the hope of obtaining a better price later: Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195; Bank of Cyprus (London) Ltd v Gill [1980] 2 Lloyd’s Rep 51; Commercial and General Acceptance Ltd v Nixon (1981) 152 CLR 491; Tse Kwong Lam v Wong Chit Sen [1983] 3 All ER 54; [1983] 1 WLR 1349 (PC). But he must allow sufficient time to permit proper advertising, etc, so that the best price

reasonably obtainable may be obtained: Standard Chartered Bank Ltd v Walker [1982] 3 All ER 938; [1982] 1 WLR 1410. Lightman and Moss, in The Law of Administrators and Receivers of Companies, 4th ed, Sweet & Maxwell, London, 2007, say at [10-032] that this means that a mortgagee or receiver is not obliged to defer a sale until an expected rise in the market is realised (see Cuckmere Brick Co v Mutual Finance Ltd, above; Henry Roach (Petroleum) Pty Ltd v Credit House (Vic) Pty Ltd [1976] VR 309 at 313; Pendlebury v The Colonial Mutual Life Assurance Society Ltd, above, at 701) or until after the mortgagor has had an opportunity to redeem the mortgage: Routestone Ltd v Minories Finance Ltd [1997] BCC 180. Lightman and Moss suggest that there is thus no obligation on a mortgagee to await the outcome of an application for planning permission. They also note the suggestion of Denning MR in Standard Chartered Bank Ltd v Walker [1982] 3 All ER 938 at 942; [1982] 1 WLR 1410 at 1416 that the mortgagee may have a duty not to sell at the worst possible moment is inconsistent with principle. See also McGowan v Gannas [1983] 3 Ir LR (Monthly) 616, where the question as to whether a receiver who knows the market is bad is nonetheless entitled to sell was raised, but not argued. However, in Dimmick v Pearce Investments Pty Ltd (1980) 43 FLR 235 at 243, Kelly J in the ACT Supreme Court said: Unless there are very clear signs that the market is improving rapidly and substantially, I do not think that a mortgagee displays lack of good faith in not postponing a sale otherwise regularly conducted on the chance that the market may improve.

Although one can find occasional dicta that there may be an obligation to sell at a proper time, at least where a surplus would flow to the mortgagor, these should not be relied upon. However, there is an exception where the mortgaged property itself requires urgent sale, for example where it consists of perishable goods: Predeth v Castle Phillips Finance Co Ltd [1986] 2 EGLR 144 at 148. See, generally, Meftah v Lloyds TSB Bank plc [2001] 2 All ER (Comm) 741 at 744–5. The mortgagee need not give the mortgagor time to try and sell: Bank of Cyprus (London) Ltd v Gll [1980] 2 Ll Rep 51.

What has been said above must be balanced by the words of Lord Templeman in China and South Sea Bank Ltd [1990] 1 AC 536 at 545; [1989] 3 All ER 839 at 842: ‘No creditor could carry on the business of lending if he could be liable to as mortgagor … for a decline in value of the mortgaged property, unless the creditor was personally responsible for the decline’. Walker applied this dictum when analysing the duty in the light of modern cases in Yorkshire Bank plc v Hall [1999] 1 All ER 879 at 893; [1999] 1 WLR 1713 at 1728. Lightman and Moss, at [10-034], posit the situation where a mortgagee might choose to lease the property even at a rent that is less than the accruing interest pending sale if it is perceived that the market is rising. The English Court of Appeal left this question open in Palk v Mortgage Services Funding plc [1993] Ch 330; [1993] 2 All ER 481. But, while the mortgagee may look to his own interests, he must pay some regard to the interests of the mortgagor. Where their interests conflict, he is not entitled to act in [page 544] a manner which sacrifices the interests of the mortgagor: Forsyth v Blundell (1973) 129 CLR 477 at 494; Commercial and General Acceptance Ltd v Nixon (1981) 152 CLR 491. Some jurisdictions specifically require the selling mortgagee to have regard to the interests of the mortgagor, or other persons: see, for example, Victorian Act s 77(1); Goldcel Nominees Pty Ltd v Network Finance Ltd [1983] 2 VR 257; Land Titles Act 1980 (Tas) s 78(1).

Dealings with the mortgagor 20.24 A selling mortgagee need not consult the mortgagor, nor subsequent encumbrancers. If he elects to keep them informed of the progress of the negotiations for sale, he does not thereby limit his freedom of action: G Merel & Co Ltd v Barclays Bank (1963) 107 Sol Jo 542. It is not a breach of the mortgagee’s duty to refuse to negotiate with the mortgagor, even if the latter is making the highest offer: Stoyanovich v National Westminster Finance (1984) 3 BPR 9310.

Sometimes the mortgagee will delay selling for a time to allow the mortgagor to sell or complete a sale already agreed. But even if the mortgagee should consent to do this, it would seem that, unless contractually bound or estopped by conduct, he could change his mind and proceed to sell: MidwayWood Products Pty Ltd v Permanent Custodians Pty Ltd [1991] ACL Rep 295 Vic 9. There is an indication in recent cases in England (where, because of recession, there has been a decline in property prices,) that if the market value of the property is insufficient to discharge the mortgage (so there is a negative equity), the court may be more willing to postpone a possession order to allow the mortgagor time to sell: see Target Home Loans v Clothier [1994] 1 All ER 439 (CA); Cheltenham and Gloucester Building Society v Grattridge [1993] TLR 216 (CA) (where the possession order was suspended subject to conditions of payment and a concurrent money judgment was also suspended); see also Target Home Loans Ltd v Clothier [1994] 1 All ER 439 (CA). In Palk v Mortgage Services Funding plc [1993] Ch 330; [1993] 2 All ER 481, the mortgagors had found a purchaser at £283,000, but the amount needed to redeem was £358,587 and the mortgagee sought possession with a view to letting until the market picked up. The mortgagors successfully applied for a sale under Law of Property Act 1925 (UK) s 91(2): see 21.12. A sale by the mortgagee at a lesser price than the mortgagor has been offered may be evidence of a sale at an undervalue.

The preparation for sale 20.25 The usual ground for complaint by the mortgagor or by other interested parties is that the sale is at an undervalue. Therefore great care must be taken in the sale. The most common complaints relate to inadequate description of the property, inadequate advertising and other reasons for failing to raise what is claimed to be the proper price for the property. These are all illustrations of the obligation of the selling mortgagee to get the best price possible for the property in the circumstances. Obviously if the property is sold subject to depreciatory conditions or is inadequately described or inadequately advertised there will be less interest in the property than might otherwise have been shown and thereby only a lesser price may be obtained.

Conditions of sale

20.26 The legislation generally provides that the property may be sold subject to such conditions respecting title or evidence of title or other matters as the mortgagee thinks fit: see 20.6. The mortgagee should avoid the use of unnecessarily stringent conditions of sale. Conditions commonly used by conveyancers are, as a general rule, safe for mortgagees, but they will not be restrained from adding such further conditions, adapted to the state of the title, as may be reasonably used in the disposal of his property by a prudent owner anxious to protect himself against the risk and expense of litigation. [page 545] It is as much for the benefit of the mortgagor as of the mortgagee to avoid such risk and the proper avoidance thereof outweighs the possible diminution in the number and value of the offers which may be caused by such conditions: Hobson v Bell (1839) 2 Beav 17; 48 ER 1084.

Description of the property 20.27 The mortgagee should be careful as to the description of the property in advertisements and particulars of sale; not only may the mortgagee be liable to the purchaser by reason of misdescription, but the mortgagee may also be liable to the mortgagor or other interested parties if the misdescription leads to the property fetching a lower price than would have been obtained had the property been properly described. If, by reason of misdescription of the property, compensation has to be allowed to the purchaser, the selling mortgagee will be liable to the mortgagor and another encumbrancer not necessarily just for the sum paid as compensation, but for the difference between the price paid and the price which would have been obtained if the mistake had not been made: Wolff v Vanderzee (1869) 17 WR 547; Tomlin v Luce (1889) 43 Ch D 191; Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949; [1971] 2 All ER 633. So, for example, where appropriate, the description of the property should cover all relevant planning permissions and possible redevelopment opportunities: see Cuckmere Brick Co Ltd v Mutual Finance Ltd, above; Brutan Investments Pty Ltd v Underwriting and Insurance Ltd (1980) 39

ACTR 47; 58 FLR 289; Commercial and General Acceptance Ltd v Nixon (1981) 152 CLR 491; Goldcel Nominees Pty Ltd v Network Finance Ltd [1983] 2 VR 257; Hallifax Property Corp Pty Ltd v GIFC Ltd (1987) 4 BPR 9708.

Valuation of the property 20.28 The mortgagee should obtain a valuation of the property on which the offering price for the property or the reserve price for any auction can be based. However, there is no rule of law that he must do so: Stockl v Rigura Pty Ltd [2004] NSWCA 73; (2004) 12 BPR 23,151 at 23,161, [49]. The valuer should be independent and unconnected with the selling mortgagee. But, as we shall see below, the selling mortgagee does not necessarily relieve himself of his obligations by appointing professional agents. Generally, however, the mortgagee will be able to rely on a professional valuation: see Bourke v Beneficial Finance Corp Ltd (1991) ANZ ConvR 473 (Federal Court of Australia, Hill J). The price obtained after proper steps have been taken is better evidence of value than valuations obtained long after the sale: see Stone v Farrow Mortgage Services Pty Ltd (1999) 12 BPR 22,175 at [4]; Stockl v Rigura Pty Ltd [2004] NSWCA 73 at [31]ff and cases there cited. Many of the reported cases involve undervaluation simpliciter. This is easy for the mortgagor to allege, but difficult to prove, if the mortgagee has obtained proper professional advice. Often, however, an alleged undervalue will merely be the difference in the opinions of the respective valuers concerned: Sinfield v Sweet [1967] 3 All ER 479. Property valuation is not an exact science and differences in the opinions of professional valuers is not necessarily evidence of any failure on the part of the selling mortgagee: see National Commercial Banking Corp of Australia Ltd v Solanowski (1984) NSW ConvR ¶55-194. The mere fact that there is a sale at an undervalue will usually not be sufficient for the mortgagor to succeed: Stone v Farrow Mortgage Services Pty Ltd (1999) 12 BPR 22,175 at [3]. It is quite clear that the selling mortgagee will not usually fulfil his duty by selling the property at a sum simply sufficient to pay off the mortgage debt. A threat to do so was often made in the past by unscrupulous lenders and the threat carried out (see Midland Bank Ltd v Joliman Finance Ltd (1967) 203

Estates Gazette 612; and see Predeth v Castle [page 546] Phillips Finance Co Ltd (1986) 279 Estates Gazette 1355 for a ‘crash’ sale); but this was generally wrong, though some lenders may have ‘got away’ with this conduct in the past before the full extent of the selling mortgagee’s duties was more widely appreciated. In view of the sufficient equity in the mortgaged property that most lenders require, a sale at just above the sum to discharge the mortgage will be looked at carefully by the court, but this is not to say that there may not be occasions when that sum is the proper price. For the problems of negative equity in a period of recession, see Palk v Mortgage Services Funding Plc [1993] Ch 330; [1993] 2 All ER 481. The fact that the property is resold shortly after the mortgage sale for a substantially higher price is a matter of suspicion: Bank of Cyprus (London) Ltd v Gill [1980] 2 Lloyd’s Rep 51; Predeth v Castle Phillips Finance Co Ltd. In establishing a case of undervalue the mortgagor does not need to prove that any particular individual would have paid more for the property: Nixon v Commercial and General Acceptance Ltd [1980] Qd R 153 (on appeal Commercial and General Acceptance Ltd v Nixon (1981) 152 CLR 491); McKean v Maloney [1988] 1 Qd R 628.

Fixing the reserve 20.29 The mortgagee has an obligation under Queensland Act s 85 properly to fix the reserve: Cameron v Brisbane Fleet Sales Pty Ltd [2000] Q Conv ¶54-540. Outside Queensland, this is part of the general duty to act bona fide.

Advertising 20.30 The property for sale must be adequately and property advertised. The property must be properly described in the advertisements and the advertisements must be sufficient in number and content to reach the appropriate market. For example, the advertisements should not be left until

the last moment just before an auction: see Ellison v Alliance Acceptance Ltd (1984) NSW ConvR ¶55-217. Nevertheless, there may be circumstances where the mortgaged property may be sold by private treaty without advertising: see 20.32. But the mortgagee bears the risk in this respect so prudence may dictate advertising in any event. The case of Highton Enterprises Pty Ltd v BFC Finance Ltd [1997] 1 Qd R 168, where the mortgagee was held to be in breach of duty in the circumstances of an unadvertised sale by private treaty, is a salutary warning in this respect. If special property or equipment is being sold, a longer time than usual will generally be required in order to reach the special market. The special property may be, for example, a site suitable for development or redevelopment, for which time is required to prepare proposals and make inquiries, or the special equipment may be such that there is no local market, but there is an overseas market which needs to be targeted. See, generally, Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195; Standard Chartered Bank Ltd v Walker [1982] 3 All ER 938; [1982] 1 WLR 1410; Commercial and General Acceptance Ltd v Nixon (1981) 152 CLR 491; McKean v Maloney [1988] 1 Qd R 628. In National Commercial Banking Corp of Australia Ltd v Solanowski (1984) NSW ConvR ¶55-194, the property was advertised stressing its bad points. The sale was restrained. It is not improper to advertise the sale as a mortgagee sale: Hallifax Property Corp Pty Ltd v GIFC Ltd (1987) 4 BPR 9708. See, however, Nathan Securities Ltd v Stavefield Holdings (No 29) Ltd (1993) 6 BCB 227; (1993) ANZ ConvR 597 (Williamson J) (1994) 68 ALJ 836. More recently, the New South Wales Court of Appeal considered the question whether the mortgagee would be in breach of duty by advertising the sale as a ‘mortgagee sale’ and concluded that there was no absolute rule because it was not certain what effect this would have on the market, positive or negative: Stockl v Rigura Pty Ltd (2004) 12 BPR 23,151 at 23,160, [46] where it was said that ‘… much will depend on the type of property being sold and the way in which the words [page 547] “mortgagee” sale are used in the advertising campaign’; and see Croft and

Hay, The Mortgagee’s Power of Sale, [6.5]. Disregarding advice as to price and selling at an undervalue may amount to unconscionable conduct: Adamse v Broadway Credit Union Ltd [1999] NSW ConvR ¶55-576. See also Harrison v Australia & New Zealand Banking Group Ltd (1996) [1999] Q ConvR ¶54-531 [1999] V ConvR ¶54-600 (a decision of the Victorian Court of Appeal in respect of land in Queensland where the court considered that a mortgagee had not acted conscionably when the advertising campaign failed to note the suitability of the property as a retirement village).

The property to be sold 20.31 The selling mortgagee must obtain the best price for the property in the circumstances. Therefore, when proposing to sell tenanted property which would realise a much higher price with vacant possession, the mortgagee should, in appropriate cases, attempt to obtain vacant possession: Holohan v Friends Provident and Century Life Office [1960] IR 1. Where commercial premises are involved the sale should generally include any goodwill (see Palmer v Barclays Bank Ltd (1971) 23 P&CR 30) and licences: Alexandre v New Zealand Breweries Ltd [1974] 1 NZLR 497. In Bank of Cyprus (London) Ltd v Gill [1980] 2 Lloyd’s Rep 508, the court held that the bank had acted properly in closing down the hotel. In appropriate cases, it may be necessary for the mortgagee to effect repairs or even complete a building to obtain a proper price. So too it may be appropriate to obtain planning and other permissions. The costs of all reasonable and proper action of this type incurred in order to obtain a proper price for the property may be added to the moneys secured by the mortgagee: see Chapter 40. ‘Sell’ means to obtain money in Australian currency: see Taylor v Parkinson & Blyth (1911) 31 NZLR 354; Bando Trading Co Ltd v Registrar of Titles [1975] VR 353. As to the ‘best price’, see Corporations Act 2001 (Cth) s 420A, which requires of a receiver certain standards of care in the exercise of a power of sale in respect of property of a corporation: see 18.13.

Private treaty or auction

20.32 Sale by auction does not necessarily prove the validity of the transaction (for the sale may be rendered unsatisfactory for inadequate advertising or other reasons). But, generally, the mortgagee can safely accept the highest bid for a properly described and advertised property at a properly publicised auction and such a sale will rarely be contested: Apostolou Corporation Aust Pty Ltd v VA Corporation of Aust Pty Ltd (2010) 77 ACSR 84, affirmed [2011] FCAFC 103 (including in circumstances where a subsequent valuation of the mortgaged property excluded the price obtained at auction). For this reason sale by auction is usually preferred by the mortgagee. Usually the legislation gives the mortgagee the option of sale by private treaty or auction: see 20.6 and 20.12. (Sometimes legislation requires a sale by auction — for example when there is an ineffective sale prior to foreclosure such as with Torrens system land: see 22.52–22.53.) Unless positively required, an auction is not essential: Gattuso v Geelong Building Society (1989) V ConvR ¶54-343; (1989) ANZ ConvR 565. For another example of sale by private treaty, see Colin D Young Pty Ltd v Commercial and General Acceptance Ltd (1982) Conveyancing Service (NSW) [92179]; (1982) NSW ConvR ¶55-097. A mortgagee may sell by private treaty even though the mortgaged property has not been advertised, provided the sale is made in good faith and for a fair price: Davey v Durant (1857) 1 De G & J 535; 44 ER 830; Hickey v Heydon (1895) 16 LR (NSW) (Eq) 49l; Legudi and Sons Pty Ltd v VL Finance Pty Ltd (SC (Vic), 30 April 1997, unreported); Vasiliou [page 548] v Westpac Banking Corporation (2007) 19 VR 229; but see 20.30. It is not necessary to offer the mortgaged property for sale by public auction prior to the sale by private treaty as the statutory power permits sale by either method: Davey v Durrant (1857) 1 De G & J 535 at 535; Vasiliou v Westpac Banking Corporation (2007) 19 VR 229. Nevertheless, if the mortgaged property is to be sold by public auction the sale must be advertised: Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676; Commercial and General Acceptance Ltd v Nixon (1982) 152 CLR 491 at 500 (Mason J).

To accept less in a private sale than a prospective purchaser with means has indicated he would bid at a proposed auction may be a breach of the mortgagee’s duty. The mortgagee has to balance a higher offer, which is not firm, against a lower firm offer which will be withdrawn if not accepted within a specified period: Forsyth v Blundell (1973) 139 CLR 477. Where an auction has been fixed, the mortgagee need not withdraw the property from auction in order to attempt sale by private treaty: Southern Goldfields Ltd v General Credits Ltd (1991) 4 WAR 138; and see Goldcel Nominees Pty Ltd v Network Finance Ltd [1983] 2 VR 257.

Auction 20.33 As previously indicated, the auction must be properly advertised and in due time. A mortgagee is not entitled to sell by public auction without there being some advertisement: Commercial and General Acceptance Ltd v Nixon (1981) 152 CLR 491 at 500, Mason J citing Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 at 683–5; Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] 1 Ch 949; and Henry Roach (Petroleum) Pty Ltd v Credit House (Vic) Pty Ltd [1976] VR 309 at 313. A reserve price may be fixed. A low reserve is a matter for suspicion: Dimmick v Pearce Investments Pty Ltd (1980) 43 FLR 235. (In Southern Goldfields Ltd v General Credits Ltd (1991) 4 WAR 138, a reserve of half the valuation figure did not make the auction improper.) The premature disclosure of a reserve price to an intending purchaser may be a breach of the mortgagee’s duty: Barns v Queensland National Bank Ltd (1906) 3 CLR 925 at 944; Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195; Goldcel Nominees Pty Ltd v Network Finance Ltd [1983] 2 VR 257; Tse Kwong Lam v Wong Chit Sen [1983] 3 All ER 54; [1983] 1 WLR 1349 (PC). The auction must be held at a proper time (just before Christmas, for example, might not be an opportune time — see Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd, above) and in proper conditions: see Standard Chartered Bank Ltd v Walker [1982] 3 All ER 938; [1982] 1 WLR 1410.

Exploiting the competition

20.34 It would appear that, if there is competition between prospective purchasers under a private sale, the selling mortgagee should exploit that competition to get the best price. But as indicated in 20.32, the mortgagee has to balance the various factors, such as whether the offer is firm or not, the creditworthiness of the person making the offer, etc. See, generally, Brutan Investments Pty Ltd v Underwriting and Insurance Ltd (1980) 39 ACTR 47; 58 FLR 289; Dimmick v Pearce Investments Pty Ltd (1980) 43 FLR 235; Goldcel Nominees Pty Ltd v Network Finance Ltd [1983] 2 VR 257. (This passage from an earlier edition was followed in Meftah v Lloyd’s TSB Bank plc [2001] 2 All ER (Comm) 741 at 745.) However, there is no obligation on the selling mortgagee, beyond proper advertising etc, to seek out a market for the property: see Tse Kwong Lam v Wong Chit Sen [1983] 3 All ER 54; [1983] 1 WLR 1349 (PC); Natwest Finance New Zealand Ltd v United Finance & Securities Ltd (1987) ANZ Conv R 486. [page 549]

Appointment of professional agents 20.35 A mortgagee does not relieve himself of his duty to obtain a proper price simply by placing the sale in the hands of reputable agents (Cuckmere Bank Co Ltd v Mutual Finance Ltd [1971] Ch 949 at 973; [1971] 2 All ER 633 at 649; Commercial and General Acceptance Ltd v Nixon (1981) 152 CLR 491; Goldcel Nominees Pty Ltd v Network Finance Ltd [1983] 2 VR 257; McKean v Maloney [1988] 1 Qd R 628; Bourke v Beneficial Finance Corp Ltd (1991) ANZ ConvR 473); a fortiori if the agents are not reputable. The mortgagee must maintain an overall supervision of and responsibility for the sale. The engagement of an agent with no experience of the market in which the mortgaged property is being sold may be a breach of the mortgagee’s duty: Investec Bank (Australia) Ltd v Glodale (2009) 24 VR 617; 256 ALR 104 (engagement of a Melbourne agent with no Queensland experience for a sale of property in Port Douglas). For the liability of the agent to the mortgagor, see Garland v Ralph Pay & Ransom (1984) 271 Estates Gazette 106; Predeth v Castle Phillips Finance

Co Ltd (1986) 279 Estates Gazette 1355, noted in [1986] Conv 442 (Thompson).

Stopping the sale 20.36 Where the mortgagor is a company, the presentation of a winding up petition is not in general a ground for stopping the sale, but an interim injunction may be granted where the mortgagee had himself presented the petition: see Re Cambrian Mining Co Ltd; Ex parte Fell (1881) 50 LJ Ch 836. A counterclaim will not prevent the right to sale where it has arisen: see Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161; United Dominions Corp Ltd v Jaybe Homes Pty Ltd [1978] Qd R 111; Altarama Ltd v Camp (1980) 5 ACLR 513; see also 1.52 and 19.22–19.24. Assuming that the mortgagee is otherwise acting properly, the mortgagee will not be restrained from exercising his power of sale merely because the amount due is in dispute: Gill v Newton (1866) 14 WR 490. This will be so at least where it is merely a matter of the mathematics of the calculation, which can be resolved in the taking of accounts. But the mortgagee will be restrained if, before there is a contract for the sale of the mortgaged property, the mortgagor tenders to the mortgagee or pays into court the amount claimed to be due: Jones v Matthie (1847) 16 LJ Ch 405; Warner v Jacob (1882) 20 Ch D 220; Duke v Robson [1973] 1 All ER 481; Inglis v Commonwealth Trading Bank of Australia, above; Contractor Services Pty Ltd v Esanda Finance Corp Ltd (1990) ATPR ¶41-020; Kelly v Commonwealth Trading Bank of Australia Ltd [1991] ACL Rep 295 Qld 1. The tender or payment must be made before there is an effective contract: Waring (Lord) v London and Manchester Assurance Co Ltd [1935] Ch 310; Property and Bloodstock Ltd v Emerton [1968] Ch 94; [1967] 3 All ER 321; see also 20.8. It is sometimes said that the equity of redemption is terminated by the contract. However, if an unconditional contract goes off or the condition of a conditional contract does not take effect, the equity of redemption becomes exercisable again. Accordingly, suspension is, it is submitted, the better description. The tender or payment must be for the amount which the mortgagee claimed to be due to him for principal, interest and costs: Hill v Kirkwood (1880) 28 WR 358; Hickson v Darlow (1883) 23 Ch D 690; Macleod v Jones (1883) 24 Ch D 289. A tender, at the auction, of principal and interest, though without costs, has been held to be sufficient: Jenkins v

Jones (1860) 2 Giff 99; 66 ER 43. However, if, on the face of the mortgage, the claim is excessive, the mortgagee may tender or pay the amount less such excess: Armor Coatings (Marketing) Pty Ltd v General Credits (Finance) Pty Ltd (1978) 17 SASR 259; Clarke v Japan Machines (Australia) Pty Ltd [1984] 1 Qd R 404 at 421; Jeanwest Corp Pty Ltd v JWD Pty Ltd (1991) 4 ASCR 689. A mortgagee will also be restrained if a subsequent encumbrancer has brought an action to redeem and his right to do so has been denied: Rhodes v Buckland (1852) 16 Beav 212; 51 ER 759. [page 550]

When mortgagee might be restrained from selling 20.37 The mortgagee will be restrained from exercising the power of sale if the mortgagor tenders to the mortgagee or pays into court the amount claimed to be due: Jones v Mattie (1847) 16 LJ Ch 405; Warner v Jacob (1882) 20 Ch D 220; Duke v Robson [1973] 1 All ER 481; [1973] 1 WLR 267; Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161; Morton v Suncorp Finance Ltd (1987) 8 NSWLR 325 at 335; Yarrangah Pty Ltd v National Australia Bank Ltd (1999) 9 BPR 17,061 at 17,062. The amount due is the amount claimed by the mortgagee to be due for principal, interest and costs: Hill v Kirkwood (1880) 28 WR 358; Hickson v Darlow (1883) 23 Ch D 690 (CA); Macleod v Jones (1883) 24 Ch D 289. There have been cases where tender of principal and interest with costs has been held sufficient: Jenkins v Jones (1860) 2 Giff 99; 66 ER 43. However, if on the face of the mortgage the claim is excessive, the amount claimed minus the excess must be tendered or paid: Hickson v Darlow Armor Coatings (Marketing) Pty Ltd v General Credits (Finance) Pty Ltd (1978) 17 SASR 259 and see Deverges v Sandeman, Clark & Co [1902] 1 Ch 579 (CA) where the mortgagee was the mortgagor’s solicitor and the court fixed what was to be paid. The sale will ordinarily only be stopped if the payment or tender is made before there is a binding contract for sale of the mortgaged property as that is when the power of sale is actually exercised: Waring (Lord) v London and

Manchester Assurance Co Ltd [1935] Ch 310; Property and Bloodstock Ltd v Emerton [1968] Ch 94; [1967] 3 All ER 321 (CA); National & Provincial Building Society v Ahmed [1995] 2 EGLR 127; Chia v Rennie (1997) 8 BPR 15,601. As, however, binding contracts for sale are prone to go off or suffer the fate that a condition is not fulfilled, it may be more accurate to say that an equity of redemption is only suspended while a binding contract is in force. On failure of such contract, the right to redeem will revive. It should be noted also that in parts of Ontario the equity of redemption is recognised until conveyance: Camp-Wee-Gee-Wa for Boys Ltd v Clark (1971) 23 DLR (3rd) 158; Re Hal Wright Motor Sales Ltd and Industrial Development Bank (1975) 8 OR (23d) 76. The power of sale is exercised when there is a binding contract for sale. Nevertheless, after contract and before completion, the mortgagor will be able to obtain an injunction to restrain the sale if he can show an arguable case that the power of sale has not been properly exercised, either because the conditions for its exercise (for example a notice: Selwyn v Garfit (1888) 38 Ch D 273) have not been satisfied or because the price is an undervalue or because in some other way the sale is improper: Forsyth v Blundell (1973) 129 CLR 477; Shercliff v Engadine Acceptance Corp Pty Ltd [1978] 1 NSWLR 729. There is some uncertainty whether injunctive relief is only available where the mortgagee has not acted in good faith and the actual sale would be liable to be set aside; but, since whether or not the completed sale will be set aside will depend on factors some of which are relevant to the purchaser, this does not seem to be a wholly satisfactory basis for determining an issue between mortgagor and mortgagee prior to completion. In any event, the many recent cases on the point indicate that an injunction is an available remedy in all instances where the power of sale has not been properly exercised: see, for example, Duke v Robson [1973] 1 All ER 481 at 488; [1973] 1 WLR 267 at 274–5; Henry Roach (Petroleum) Pty Ltd v Credit House (Vic) Pty Ltd [1976] VR 309. See, generally, the cases referred to and the comment in Croft and Hay, The Mortgagee’s Power of Sale, [11.6]ff; and see Kennedy v General Credits Ltd (1982) 2 BPR 9456; Mediservices Pty Ltd v Stocks and Realty (Security

Finance) Pty Ltd [1982] 1 NSWLR 516; Goldcel Nominees Pty Ltd v Network Finance Ltd [1983] 2 VR 257; Clarke v Japan Machines (Australia) Pty Ltd [1984] 1 Qd R 404; Morton v Black (1986) 4 BPR 9164; [page 551] Cunningham v National Australia Bank Ltd (1987) 77 ALR 632; McKean v Maloney [1988] 1 Qd R 628. As to the position of the purchaser, if the mortgagee has exercised his powers improperly, and the purchaser has knowledge of the facts, the purchaser cannot obtain a right superior to the right of the mortgagor. The mortgagee and the purchaser may then both be restrained from completing the sale: Forsyth v Blundell (1973) 129 CLR 477 at 497. The same applies even where, at the date of the contract, the purchaser was unaware of the impropriety of the sale: Forsyth v Blundell at 497–9. For the position of the purchaser after completion, see 20.19. On issue estoppel, see Helmville Ltd v Astilleros Espanoles SA The Jocelyn [1984] 2 Lloyd’s Rep 569 (the decision of the Belgian court that sale was not at undervalue was held binding on the English court). In some states the mortgagor may be able to protect a claimed right to set aside a contract of sale entered into by the mortgagee utilising the caveat provisions of the Torrens legislation: see Croft and Hay, The Mortgagee’s Power of Sale, at [11.9]; and as to the current state of the law in this respect in Victoria, see Vasiliou v Westpac Banking Corporation (2007) 19 VR 229 (CA). As to the lapsing of or revival of caveats, see Croft and Hay, The Mortgagee’s Power of Sale, at [13.19]–[13.21].

Requirement of payment into court 20.38 It is commonly said that payment into court is a condition of a grant of an injunction to restrain a sale by a mortgagee. This is merely an aspect of the general equitable rule that the mortgagor must offer to redeem before he can bring the mortgagee before the court: see 33.7. In Clarke v Japan Machines (Australia) Pty Ltd (No 2) [1984] 1 Qd R 421, it was expressed to

be an application of the maxim ‘he who seeks equity must do equity’, and see Hallifax Property Corp Pty Ltd v GIFC Ltd (1987) 4 BPR 9708 at 9710; MCP Muswellbrook Pty Ltd v Deutsche Bank (Asia) AG (1988) 12 NSWLR 16; Town & Country Sport Resorts (Holdings) Pty Ltd v Partnership Pacific Ltd (1988) 20 FCR 540. For recent analyses of the position, see (1993) 11 Aust Bar Rev 1 (Bryson) and (1993) 1 APLJ 61 (Young); see also Bank of New South Wales v Tyson (1871) 11 SCR (NSW) (Eq) 1 at 22–3 and Lloyd v Vickery (1871) 12 SCR (NSW) (Eq) 4 at 54, which suggest that the ordinary rule was not consistently applied in Australia in the 19th century. Indeed, the payment into court rule is not inflexible: Harris v Western Australian Exim Corp (1994) 129 ALR 387 at 399–400 per Hill J. If the mortgagor claims that the mortgagee should be restrained from exercising his powers because of an alleged breach of the Competition and Consumer Act 2010 (Cth) (previously the Trade Practices Act 1974 (Cth)), the court has the discretion to impose a term that the mortgagor pay money into court or otherwise give security for payment of the mortgage debt: Hallifax Property Corp Pty Ltd v GIFC Ltd (1987) 4 BPR 9708 at 9709; Town & Country Sport Resorts (Holdings) Pty Ltd v Partnership Pacific Ltd (1988) 20 FCR 540; and see Glendore Pty Ltd v Elders Finance & Investment Co Ltd (1984) 4 FCR 130 at 133–6 and Cunningham v National Australia Bank Ltd (1987) 15 FCR 495. The same would apply when the mortgagor is relying on some other statutory ground or other matter of law: see also Tucaba Pty Ltd v AGC Advances Ltd [1991] ACL Rep 295 NSW 13. Payment into court is generally required where the mortgagor seeks to restrain the mortgagee from selling prior to any contract for sale having been made, where the mortgagee is acting properly; but it seems that the mortgagor need not offer to redeem and therefore need not pay into court where it is alleged that the power of sale is not [page 552] exercisable: Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161; particularly at 164–5 (Walsh J). Examples of this are where the

validity of the mortgage is in issue or there is a question whether or not there has been a breach or the notice was effective (see Allfox Building Pty Ltd v Bank of Melbourne (1992) NSW ConvR ¶55-634; (1992) 66 ALJ 863), or where the power of sale is being used for an improper motive: see Milton Park Country Club Pty Ltd v Yasuda Trust Australia Ltd [1991] ACL Rep 295 NSW 3. See also United Builders Pty Ltd v Commercial Banking Co of Sydney Ltd [1975] Qd R 357. The state of the law and the principles to be applied with respect to the grant of an injunction to restrain a mortgagee’s sale were considered by Hamilton J in Parist Holdings Pty Ltd v Perpetual Nominees Ltd (2006) NSW Conv R ¶56-161 (at 59,925, [16]–[23]): Over the last 15 years, there have been various expressions of judicial opinion which are to the effect that the requirement in Inglis should be widened. For this to be done, it will need to be found either that there should be an additional exception to the general rule or that the time has come when the general rule should itself be revised and restated. Those proposed modifications include a relaxation of the rule to permit injunctive relief: (1) where the plaintiff claims that he can redeem the mortgage within a fairly short time by carrying out an on its face reasonable refinancing proposal; (2) where the plaintiff has a demonstrable capacity to secure or at least refinance the mortgage debt. As to proposition (1), this is derived from the judgment of Bryson J, as his Honour then was, in Grose v St George Commercial Credit Union Limited (1991) NSW ConVR 55-586 at 59, 300– 59,301. His Honour there suggested that the rule in Harvey [v McWatters (1949) 49 SR (NSW) 173], if literally applied, could wreak hardship. His Honour suggested that it should not be taken to be intended to prevent injunctive relief where there was a realistic prospect of refinancing. No doubt the evidence would need to establish that the mortgagor claimed to be able to redeem the matter within a fairly short time and that the refinancing proposal was rather likely to be fulfilled. The matter has also been the subject of discussion in learned writing including by Bryson J and the present Chief Judge in Equity writing extracurially: The Hon Justice John Bryson, Restraining Sales by Mortgagees and a Curial Myth (1993) 11 Aust Bar Rev 1; P W Young, A Mortgagor’s Right to Approach the Court (1993) 1 APLJ 61. And see note by P W Butt in (1989) 63 ALJ 696. The second of the formulas which I have set out above comes from the recent decision of the Court of Appeal in Notaras v Sly & Weigall [2005] NSWCA 235 at [133]. In indicating that proposition (2) above was an appropriate formula or test to apply, the Court of Appeal did not consider the matter in detail and did not analyse in detail what had been said in Harvey or in Inglis or, indeed, in any subsequent discussions. That was because the Court of Appeal was not dealing with the question in the form in which it arises in applications such as the present, but was dealing with an appeal in an action for negligence against two firms of solicitors in relation to advice given to a mortgagor who was a prospective applicant for injunctive relief to restrain a mortgagee sale. Whilst a Judge of this Court must always pay adequate attention and give adequate respect to statements of the Court of Appeal, I have some doubt as to whether what is said in Notaras is an

adequate basis to depart from a principle, which, although it may in some ways be regarded as harsh, has had long acceptance in Courts of Equity. It should be added that, in so far as it may be thought to operate harshly in some circumstances against mortgagors who have immediate and real prospects of re-financing, on the other hand it must be borne in mind that there is a very considerable public interest in not fettering in any undue way the rights and manner of exercise of a mortgagor’s power of sale, because of the effect that this might have of unsettling the finance market and discouraging persons, natural and corporate, from lending in that market, which is critical to the conduct of business in this as in other countries. As I have said, this is, as I perceive it, an ongoing and unresolved controversy. Part of the reason for that is that it usually arises in injunction applications from which there are not often appeals and in which urgency precludes the giving of fully reasoned judgments.

[page 553] See also Equity One Mortgage Fund Ltd v Thompson [2009] VSC 409, at [24]–[27]; Gross v St George Commercial Credit Union (1991) NSW ConvR ¶55-586 at 59,300–1; National Australia Bank v Convy [2007] NSWSC 1039 at [25]; and Australian Barter Currency Exchange Pty Ltd v Uniting Church of NSW Trust Association Limited [2009] NSWSC 607. As in all cases of an interim injunction, the purpose is to maintain the status quo (see Westfield Holdings Ltd v Australian Capital Television Pty Ltd (1992) 32 NSWLR 199), and, in deciding whether or not to grant the injunction, the court will consider the balance of convenience between the parties: see Eltran Pty Ltd v Westpac Banking Corp (1988) 32 FCR 195; and see Nicholas John Holdings Pty Ltd v ANZ Banking Group Ltd [1992] 2 VR 715. Where the mortgagor’s lack of credit makes it impossible for him to give the usual undertaking in damages, so long as there is evidence that the mortgaged property is and is likely to remain adequate security for the mortgagee, an injunction may be granted without such undertaking: see Eltran Pty Ltd v Westpac Banking Corp. If the mortgagor is alleging that the power of sale has not arisen, or is alleging lack of good faith, there is no need for any payment, but if the mortgagor is seeking to stop the sale for any other reason, payment is necessary. It may be that the requirement to pay into court applies only to interlocutory applications. In Harvey v McWatters (1948) 49 SR NSW 173 at 177, it was said that the rule operates to supplement the ordinary requirement

of an undertaking as to damages on an interlocutory application, in which case it can have no application where a final order is sought: see Mediservices Pty Ltd v Stocks and Realty (Security Finance) Pty Ltd [1982] 1 NSWLR 516 and Brutan Investments Pty Ltd v Underwriting & Insurance Ltd (1980) 39 ACTR 47. There has been in recent years a tendency for the court to show a more flexible attitude and ‘mould’ the order according to the circumstances: see, generally, the more recent cases referred to above. On the topic of restraining mortgagee sales and payment into court, see generally Woods v Commonwealth Bank of Australia (1990) 5 BPR 11,521; Allfox Building Pty Ltd v Bank of Melbourne Ltd (1992) NSW ConvR ¶55634; Shepherd v Silva (SC (NSW), Hodgson J, 18 December 1992, unreported); Rawcliffe v Custom Credit Corporation Ltd (1994) ATPR ¶41922; Harris v Western Australian Exim Corp (1994) 56 FCR 1; 129 ALR 387; Swift v Westpac Banking Corporation (1995) ATPR ¶41-401: see also (1989) 63 ALJ 696 (Butt) and (1993) 1 APLJ 61 (Young).

Mortgagor has no action at law 20.39 Apart from any action at law conferred on the mortgagor by statute, or, in rare cases by contract, the mortgagor has only equitable rights. As Jordan CJ said in Coroneo v Australian Provincial Assurance Association Ltd (1935) 35 SR (NSW) 391 at 394–5, the allegation that a mortgagee has exercised his power of sale in such a way that the equity of redemption has been lost, discloses no cause of action at common law: Fennell v Gardner (1885) 1 TLR 397; Tannock v North Queensland Securities Ltd [1932] SR(Q) 285. Jordan CJ then said at 395: ‘The proper remedy of the plaintiff is a suit in equity in which, upon his offering to redeem or to account, he may, if he so desires, litigate the question of any alleged equitable delinquencies on the part of his mortgage: cf Meredith v Davis (1933) 33 SR (NSW) 334’. There is no difference if the statutory power of sale is employed as NSW Act s 112 does not provide a remedy different to that existing under the general law.

Mortgagee may not purchase 20.40 The mortgagee ‘cannot sell to himself either alone or with others, or to a trustee for himself, nor to any one employed by him to conduct the sale’; for ‘a sale by a person to himself is no sale at all, and a power of sale does not authorize the donee of the power

[page 554] to take the property subject to it at a price fixed by himself, even though such price be the full value’: Farrar v Farrars Ltd (1888) 40 Ch D 395 at 409; see Martinson v Clowes (1882) 21 Ch D 857, on appeal (1885) 52 LT 706; Hodson v Deans [1903] 2 Ch 647; Goldcel Nominees Pty Ltd v Network Finance Ltd [1983] 2 VR 257; Tse Kwong Lam v Wong Chit Sen [1983] 3 All ER 54; [1983] 1 WLR 1349 (PC); and Kravchenko v Rock Building Society (2009) 26 VR 400 (CA). The same rule applies to any officer of the mortgagee or the solicitor or other agent who is acting for the mortgagee in the matter of the sale, or to a servant of the mortgagee: Martinson v Clowes; Parnell v Tyler (1833) 2 LJ Ch 195 (solicitor’s clerk); Re White; Ex parte Goggs (1866) 1 QSCR 149 (solicitor’s clerk); Conroy v Knox (1901) 11 QLJ 112; Hodson v Deans; Sewell v Agricultural Bank of Western Australia (1930) 44 CLR 104; see also Goldcel Nominees Pty Ltd v Network Finance Ltd. But the rule does not apply to the solicitor who acted in the matter of the mortgage, but not in the matter of the sale: Nutt v Easton [1899] 1 Ch 873, affirmed on another point [1900] 1 Ch 29. In Kravchenko v Rock Building Society (2009) 26 VR 400 (CA), the mortgagee was held to have breached its duty under Transfer of Land Act s 77(1) as the mortgagee, bearing the onus in the particular circumstances, failed to establish that the sale was in good faith and that reasonable steps were taken to obtain the best price where the property was sold prior to auction to an employee of the solicitors engaged to act in the sale. Corbett v Halifax plc [2003] 4 All ER 180; [2003] 1 WLR 964 was a peculiar case where an employee of the mortgagee, without the approval of the mortgagee, purchased the mortgaged property in the name of a relative. However, the employee’s deception did not give the mortgagor any equity to set aside the sale. Quoted shares and other securities may be an exception to this rule, on the basis that there is a readily ascertainable market price: see Stubbs v Lister (1841) 1 Y & CCC 81; 62 ER 799. A sale by a person to a corporation of which he is a member is not, either in form or in substance, a sale by a person to himself: Farrar v Farrars Ltd, above, at 409; Henderson v Astwood [1894] AC 150 (PC); Hodson v Deans, above; Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265;

Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195. There is no general rule that a company in which the mortgagee is interested cannot purchase the mortgaged property on a mortgagee’s sale: Apple Fields Ltd v Damesh Holdings Ltd [2004] 1 NZLR 721 at 729 (PC). Nevertheless, such a sale might be restrained or set aside or ignored on the ground that the mortgagee had not acted bona fide or taken reasonable precautions to obtain the best price reasonably obtainable: Tse Kwong Lam v Wong Chit Sen, above. The mortgagor himself may purchase, as may one of several comortgagors (Kennedy v De Trafford [1897] AC 180 (HL), followed in Re Nunes and District Registrar for the District of Winnipeg (1972) 21 DLR (3d) 97; see also Edwards v McDowell (1933) 50 WN (NSW) 244; R v Registrar of Titles; Ex parte Watson [1952] VLR 470); but note the rule in Otter v Lord Vaux (1856) 6 De GM & G 638. See 36.9. A later mortgagee may do so, provided he has not used his position as mortgagee to get an undue advantage or has otherwise acted mala fides: Parkinson v Hanbury (1860) 1 Drew & Sm 143; 62 ER 332; Shaw v Bunny (1865) 2 De GJ & Sm 468; 46 ER 456; Kirkwood v Thompson (1865) 2 Hem & M 392; 71 ER 515; Flower & Sons v Pritchard (1908) 53 Sol Jo 178. See, generally, Re One-Tel Networks Holdings (2001) 40 ACSR 83. But the mortgagee may purchase where the sale is made by the court, and he has obtained leave to bid: Downes v Grazebrook (1817) 3 Mer 200; 36 ER 77; National Bank of Australasia v United Hand-in-Hand and Band of Hope Co (1879) 4 App Cas 391 (PC); Farrar v Farrars Ltd, above; Williams v Wellingborough Borough Council [1975] 3 All ER 462; [1973] 1 WLR 1327; and New Beach Apartments Pty Ltd v Epic Hotels Pty Ltd (2007) 14 BPR 26,317 at 26,322–3, [27]. [page 555] If the mortgagee is a trustee, he will not have leave to bid if the beneficiary objects, unless attempts to sell to others have failed: Tennant v Trenchard (1869) 4 Ch App 537. A way around the rule that the mortgagee may not purchase may be to

obtain a money judgment on the personal covenant and then purchase the property on a sale on the execution of that judgment, as the rule does not apply to a judgment creditor: Stratford v Twynam (1822) Jac 418; 37 ER 908; see Simpson v Forrester (1973) 132 CLR 499; 47 ALJR 149; and (1972) 46 ALJ 469; (1973) 47 ALJ 544 (Barber). However, this is now barred in New South Wales (see Conveyancing Act 1919 s 102(1)) and Queensland (see Property Law Act 1974 s 97). As to warrants of seizure and sale (the successor to writs of fi fa) and the powers of the sheriff, see Zhou v Kousal and the Sheriff for the State of Victoria [2012] VSC 187.

The sale 20.41 Once a binding contract for sale has been made, the mortgagee is bound to complete that sale even though a higher offer is made: Casey v Irish Intercontinental Bank Ltd [1979] IR 364 and see Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672; cf a sale by a liquidator which was subject to the approval of the court: Van Hool McArdle Ltd v Rohan Industrial Estates Ltd [1980] IR 237. Such an offer can put the mortgagee in a difficult position, because, if it is a serious and realistic one, it may give rise to an argument that the mortgagee has not obtained the best price reasonably obtainable, but there is nothing the mortgagee can do about this, unless he can properly get out of the contract and the offer is still open. A mortgagee who has contracted to sell, but before the land has become vested in the purchaser has properly rescinded, and who later sells at a lower price, is only accountable for the purchase money received: Wright v New Zealand Farmers Co-operative Association of Canterbury Ltd [1939] AC 439; [1939] 2 All ER 701 (PC). Even though the rescission is technically proper, a mortgagor could argue that any reasonable vendor would have waived the default, etc. Whether there is any merit in such argument will depend on the circumstances. A mortgagee or his auctioneer may accept the purchaser’s cheque for the deposit, and if it is dishonoured, the mortgagee is not liable for the costs of the abortive sale, but may add them to his security: Farrer v Lacy, Hartland & Co (1885) 25 Ch D 636, affirmed 31 Ch D 42. With respect to the receipt by the mortgagee of the purchase money, the general land law legislation in all jurisdictions provides that the receipt in

writing of a mortgagee shall be a sufficient discharge for any money arising under the power of sale conferred by the legislation, or any money or securities comprised in his mortgage, or arising thereunder; and a person paying or transferring the same to the mortgagee shall not be concerned to inquire whether any money remains due under the mortgage: NSW Conveyancing Act 1919 s 113(1) (applies also to sale by Torrens system mortgagee); Victorian Property Law Act 1958 s 107(1). Where first and second mortgagees have power to sell and give receipts, they may concur in the sale, the one giving a receipt for so much of the purchase money as will discharge his debt, and the other for the balance: M’Carogher v Whieldon (1864) 34 Beav 107; 55 ER 574.

Setting the sale aside 20.42 The statutory provision relating to the protection of the purchaser has been dealt with in 20.19. In those cases where the purchaser is not so protected, because he has notice, actual or constructive, of the impropriety in the sale, the mortgagor has a number of potential remedies. An injunction lies to restrain completion where it has not yet [page 556] taken place: Forsyth v Blundell (1973) 129 CLR 477 at 495–6; Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 at 377; Clarke v Japan Machines (Australia) Pty Ltd (No 2) [1984] 1 Qd R 421. Where completion has occurred, the sale may be set aside if the purchaser had notice, at the time of completion, of the facts indicating the impropriety: see McKean v Maloney [1988] 1 Qd R 628 at 635 and also Butt, Land Law, 6th ed, Thomson Reuters, Sydney, 2010, at [18.169]. In these circumstances an order to set aside the sale does not render the conveyance void: Latec Investments v Hotel Terrigal (1965) 113 CLR 265 at 274–5 (Kitto J); cf Parkinson v Hanbury (1860) 1 Dr & Sm 143 at 147; 62 ER 332 at 334 (purchase ‘invalid’). Rather, the conveyance is treated as operating only as a transfer of the mortgage and the debt secured by it, and not as a transfer of the unencumbered legal estate: Selwyn v Garfit (1888) 38

Ch D 273; Stump v Gaby (1852) 2 De GM & G 623 at 630; 42 ER 1015 at 1018; Coroneo v Australian Provincial Assurance Association Ltd (1930) 44 CLR 104 at 114 (Jordan CJ). This result proceeds from the fact that the power of sale, improperly exercised, is ‘ineffectual to extinguish the equity of redemption and that the mortgagor [is] therefore entitled to redeem as against the purchaser’: Latec Investments v Hotel Terrigal and see also Coroneo v Australian Provincial Assurance Association Ltd, both above. The same reasoning appears to apply to Torrens mortgages notwithstanding the mortgagor enjoys legal title. In this context, where an improper sale has been set aside, the effect is not to reinstate any equity of redemption, but to ‘accord’ the mortgagor a ‘true’ equity of redemption: Latec Investments v Hotel Terrigal, above; cf Tse Kwong Lam v Wong Chit Sen [1983] 3 All ER 54 at 63; [1983] 1 WLR 1349 at 1359–60 (PC). In essence, the purchaser is treated as taking subject to the mortgagor’s right to have the mortgage discharged after payment of the due amount. The mortgagor’s claim to impeach a sale by the mortgagee being a mere equity, it will be defeated by a purchaser for value of any interest, legal or equitable, without notice of the irregularity: Latec Investments Ltd v Hotel Terrigal Pty Ltd, above; see also Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd (1993) V ConvR ¶54-487. Where the sale is not set aside for this reason or delay, the mortgagor will be left to a claim in damages against the mortgagee: see Latec Investments Ltd v Hotel Terrigal Pty Ltd and Tse Kwong Lam v Wong Chit Sen, both above. The remedy in damages is not a common law or statutory claim but the equitable remedy for an account on the footing of wilful default: see 20.20 and 39.2.

Application of sale moneys — generally 20.43 A binding contract for sale by the mortgagee destroys (or suspends, see 20.37) the equity of redemption in the mortgaged property, and constitutes the mortgagee exercising the power of sale a trustee of the surplus proceeds of sale, if any, for the persons interested according to their priorities: see South Eastern Railway Co v Jortin (1875) 6 HLC 425; Rajah Kishendatt Ram v Ralah Mumtaz Ali Khan (1879) LR 6 Ind App 145 (PC); Ross v Victorian Permanent Property Investment and Building Society (1882) 8 VLR (E) 254; and see the statutory provisions mentioned below. It has been held that the mortgagee is trustee of the proceeds of sale, even where the

statutory provisions are silent as to the mortgagee’s status: Adams v Bank of New South Wales [1984] 1 NSWLR 285. More recently the position was considered by the High Court in Bofinger v Kingsway Group Ltd (2009) 239 CLR 269. It was decided in that case that although the mortgagee had a fiduciary obligation to account for surplus proceeds of sale it was not necessary to decide whether the mortgagee ‘… was a trustee in a fuller sense which afforded … a beneficial interest in the assets in question’: 239 CLR 291 at [50] (Gummow, Hayne, Kiefel and Bell JJ). The rights of subsequent encumbrancers are then against the surplus proceeds of sale: see Avco Financial Services Ltd v Commonwealth [page 557] Bank of Australia (1989) 17 NSWLR 679; and Residential Housing Corp Pty Ltd v Esber (2011) 80 NSWLR 69; see also 10.12 and cases there cited. The order of application of any surplus is set out in the legislation. As regards general law mortgages, NSW Act s 112(4) provides that, in the absence of an express contract to the contrary, the money which is received by the mortgagee, arising from the sale (and after discharge of prior encumbrances to which the sale is not made subject (if any), or after payment into court under that Act of a sum to meet any prior encumbrance), shall be held by him in trust, to be applied by him (1) in payment of all costs, charges, and expenses properly incurred by him as incident to the sale or any attempted sale, or otherwise; and (2) in discharge of the mortgage money, interest, and costs, and other money (if any) due under the mortgage. The section provides that the residue of the money so received by the mortgagee shall be paid to the person entitled to the mortgaged property or authorised to give receipts for the proceeds of the sale thereof. The provisions in other jurisdictions are in similar form: see Victorian Act s 105; Queensland Act (1974) s 88; South Australian Act s 50; Tasmanian Act (1884) s 23(3); Western Australian Act (1969) s 61. The Queensland Act specifically mentions subsequent mortgages. This includes an unregistered Torrens mortgagee: Ex parte Australian Co-operative Development Society Ltd [1978] Qd R 395.

The order of application applies also to other moneys received by a mortgagee pursuant to the mortgage (for example, compensation on resumption) but with an adaptation as to costs: NSW Act 113(2); Victorian Act s 107(2). For payment into court to discharge prior encumbrances, see 32.78. For preferential payments on a winding up, see 8.25. ‘Expenses’ include building improvements: Network Finance Ltd v Deposit & Investment Co Ltd [1972] QWN 19, noted (1972) 46 ALJ 413. For costs of sale, see Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293. The words in the last part of the statutory provision seem to be incorrect, the person entitled to the property at the time of division of the surplus being in strictness the purchaser, and the person authorised to give receipts for the proceeds of sale being the mortgagee who exercises the power, but in practice the meaning is clear. The surplus is to be paid to the subsequent encumbrancer, if any, or to the mortgagor or his successors in title.

The trust of the surplus 20.44 A trust of the surplus proceeds after a mortgagee’s sale was imposed under the general rules of equity. The legislation governing non-Torrens law mortgages imposes a trust by statute: see, for example, NSW Act s 112(4). For Torrens land, see NSW Torrens Act s 58(3),Victorian Torrens Act s 77(3); see also 4.25. Such trusts used sometimes to be declared by the mortgage deed itself: see, for example, Gouthwaite v Rippon (1839) 8 LJ Ch 139. The trust under the legislation arises as soon as the proceeds of sale are received. As regards the mortgagor, however, an express trust, and, it is submitted, the statutory trust, applies only to the surplus and cannot be enforced by him for any other purpose: Banner v Berridge (1881) 18 Ch D 254; Warner v Jacob (1882) 20 Ch D 220. In Halifax Building Society v Thomas [1996] Ch 217; [1995] 4 All ER 673 (CA), the mortgagor was held entitled to the surplus even though the mortgage had been obtained by fraud. In Solicitors Life Assurance Society v Lamb (1864) 2 De GJ & Sm 251; 46 ER 372, which concerned a mortgaged life policy of an assured who suicided, the insurer paid the whole of the proceeds to the mortgagee which was more than was needed to satisfy his debt. Despite the suicide, the surplus

was held on trust for the assured’s estate: see also Moore v Woolsey (1854) 4 E & B 243; 119 ER 93; and 6.14. [page 558] Where a clause in the mortgage deed merely declares that the mortgagee shall apply the purchase money as above stated, or where under statute there is no express trust (for example the Shipping Registration Act 1981 (Cth) — see 9.26; and see The Benwell Tower (1895) 72 LT 664; 8 Asp MLC 13, and in the Torrens legislation) or no special provision for the application of the purchase money, a constructive trust arises, and the mortgagee becomes a constructive trustee of the surplus as soon as it is shown that there is a surplus: Banner v Berridge, above; Charles v Jones (1887) 35 Ch D 544; Re Morrison; Bennell v Smith [1962] Tas SR 337; Adams v Bank of New South Wales [1984] 1 NSWLR 285. For the mortgagee’s duty to account, see 39.21. Whether the trust is statutory, express or constructive, time will not run against the person or persons entitled to the surplus, if the selling mortgagee retains the surplus or converts it to his own use: Limitation of Actions Act 1958 (Vic) s 21; cf Limitation Act 1969 (NSW) ss 47–50; see also Thorne v Heard [1895] AC 495 (HL).

Subsequent encumbrancers 20.45 Care must be taken where there are subsequent encumbrances other than registered mortgages or there is reasonable suspicion that these may exist. It is unsafe merely to pay the apparent next encumbrancer: Residential Housing Corporation v Esber (2011) 80 NSWLR 69. Reliance formerly placed on Re Thomson’s Mortgage Trusts [1920] 1 Ch 508 in earlier editions of this work providing for an easier method for a mortgagee to follow must now be considered to be unreliable.If the first mortgagee has notice of any subsequent encumbrance, he is liable to any subsequent encumbrancer if he pays the proceeds to the mortgagor: West London Commercial Bank v Reliance Permanent Building Society (1885) 29 Ch D 954 at 962; Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222 at 228. Likewise if the apparent subsequent encumbrancer is paid when that person was not entitled to payment: Residential Housing Corporation, above.For examples of

subsequent encumbrancers, see Greendon Investments v Mills (1973) 226 Estates Gazette 1957; Avco Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679. Similar principles apply to sale under a Torrens system mortgage. The legislation sets out an order of application similar to that set out above (see NSW Torrens Act s 58(3); Victorian Torrens Act s 77(3); Property Law Act 1974 (Qld) s 88; South Australian Torrens Act ss 135, 135A; Tasmanian Torrens Act s 78; Western Australian Torrens Act s 109), save that the provisions do not refer to any trust of the surplus and do refer specifically to subsequent mortgagees in the order of their respective priorities. Accordingly, should the situation arise, the selling mortgagee does have the responsibility of distributing the surplus between subsequent mortgagees. The Victorian provision also refers specifically to payment into court. Such authorities as there are in relation to these Torrens system provisions do not paint a consistent picture in relation to their application or otherwise to unregistered interests. In New South Wales, the provisions have been held to apply only to registered mortgages (Residential Housing Corporation Pty Ltd v Esber (2011) 80 NSWLR 69 (CA); cf Avco Financial Services v Commonwealth Bank of Australia (1989) 17 NSWLR 679); in Victoria, to registered mortgages (Re Murrell (1984) 57 ALR 85; cf S&D International Pty Ltd v MIG Property Services Pty Ltd [2009] VSC 225); and, in Queensland, to registered and unregistered mortgages: ANZ v Evans (1992) 2 Qd R 230; and see also Emerson v Custom Credit Corporation Ltd (1991) Q ConvR ¶54-414 and Rockett v Moneycorp Securities Pty Ltd [2008] QSC 258. As discussed in detail in Croft and Hay, The Mortgagee’s Power of Sale, [13.4]–[13.18], it would seem that the reality of the difficulty and risks associated with expecting a mortgagee to determine relative priorities of registered and unregistered mortgages should be a very powerful consideration in determining the scope of these provisions in favour of a narrow view, restricting their operation to registered mortgages, unless the statutory language indicates the contrary. In any event the position of the guarantors of the mortgagor’s debt should be considered as they may have claims on [page 559]

funds otherwise payable to the mortgage if they have paid the debt in whole or in part on the basis of subrogation: see Bofinger v Kingsway Group Ltd (2009) 239 CLR 269. For priority of registered mortgages, see Chapter 27. For unregistered Torrens mortgages or charges, see Ex parte Australian Co-operative Development Society Ltd [1978] Qd R 395; Re Murrell; Ex parte Official Trustee in Bankruptcy (1984) 57 ALR 85; Avco Financial Services Ltd v Commonwealth Bank of Australia, above; Australia and New Zealand Banking Group Ltd v Evans, above. See, generally, on distribution of the proceeds of sale of registered land, Croft and Hay, The Mortgagee’s Power of Sale, Ch 13.

Receipt of sale moneys 20.46 Where a solicitor receives the sale moneys on behalf of the selling mortgagee, in the absence of any specific obligation to third parties, he holds the moneys as agent for the client and is obliged by solicitors’ accounts rules, or any relevant legislation, to pay the moneys according to the client’s direction: Adams v Bank of New South Wales [1984] 1 NSWLR 285, overruling Bank of New South Wales v Adams [1982] 2 NSWLR 659. Certainly, the solicitor does not become a constructive trustee of the moneys simply because he suspects that, upon the moneys being paid to the client, he will apply them for purposes inconsistent with the client’s duty as trustee; and the solicitor does not receive any part of the trust property simply by holding the moneys in his trust account. The position will be different if the solicitor actually receives part of the property in his own right or assists, with knowledge, in a dishonest and fraudulent design on the part of the trustee: Adams v Bank of New South Wales, above, and see Carl-ZeissStiftung v Herbert Smith and Co (No 2) [1969] 2 Ch 276; [1969] 2 All ER 367; (1975) 39 Conv NS 162 at 172ff (Hawkins); Lipkin Gorman v Karpnale [1992] 4 All ER 409. If, by a mistake, the mortgagee pays over to a subsequent encumbrancer or to the mortgagor more than he should have, he may claim repayment: WeldBlundell v Synott [1940] 2 KB 107; [1940] 2 All ER 580; and see 32.40. Where there are no subsequent encumbrancers the surplus must be paid over to the mortgagor or other person entitled to the equity of redemption,

subject to equities (if any): see Re Murrell; Ex parte Official Trustee in Bankruptcy (1984) 59 ALR 85. See Re G L Saunders Ltd [1986] BCLC 40 for conflict between liquidator and preferential creditors.Where the mortgagor has by his will given his realty and personalty to different persons and has died, questions may arise as to who is entitled to the surplus proceeds of sale. If the sale took place during the mortgagor’s life the surplus goes as personalty (Re Grange Chadwick v Grange [1907] 2 Ch 20); if after his death, as realty. If the equity of redemption is held upon trust for sale the surplus should be paid to the trustees as capital money. The money as capital money must be paid to not fewer than two trustees or to a trust corporation: see 32.78. In cases of difficulty the surplus should be paid into court: Re Walhampton Estate (1884) 26 Ch D 391; Trustee Act 1925 (NSW) s 95; Trustee Act 1958 (Vic) s 69. If there is a dispute as to whether or not there is a subsequent encumbrance (for example where the mortgagor contests the validity of the second mortgage), the surplus should be paid into court, or, if so requested, put on deposit pending a settlement of the dispute. For a dispute as to the entitlement of surplus proceeds of sale, see Keller (Samuel) (Holdings) Ltd v Martins Bank Ltd [1970] 3 All ER 950; [1971] 1 WLR 43. If the rights of the mortgagor and his successors have become statute-barred, the mortgagee may keep the surplus: Young v Clarey [1948] Ch 191; [1948] 1 All ER 197; Re Forrest Trust; Trustees Executors & Agency Co Ltd v Anson [1953] VLR 246; Incorporated Trustee of the Australian Clergy Provident Fund v Perpetual Executors and Trustees Association of Australia Ltd [1957] VR 390. [page 560] If a mortgagor unsuccessfully impeaches a sale by a first mortgagee, the latter is not allowed to add the costs of defending such action to his mortgage debt against a second mortgagee: Re Smith’s Mortgage; Harrison v Edwards [1931] 2 Ch 168. If the proceeds of sale are not sufficient to satisfy his debt, the mortgagee can sue the mortgagor on the personal covenant for the deficiency: Scandinavian Pacific Bank Ltd v Burke (1991) 5 BPR 11,846. The rule that a

mortgagee disables himself from suing for the debt by putting it out of his power to reconvey does not apply: Re McHenry; Barker’s Claim [1894] 3 Ch 290. The mortgage debt remains a specialty debt. The mortgagee of a reversionary interest is whole of the mortgagor’s interest when it falls discharge the principal, interest and costs due Jeffrey v Sayles [1896] 1 Ch 1; Re Lloyd; Lloyd 403.

not entitled to receive the in, but only so much as to on the mortgage: Re Bell; v Lloyd [1903] 1 Ch 385 at

Surplus purchase money and execution creditors 20.47 A properly protected execution creditor with a charging order is in the same position as an equitable chargee (see 2.16) and, accordingly, the mortgagee who has exercised the power of sale may insist on paying over the whole balance to such a person where there is no intermediate encumbrance. Where a garnishee order nisi has been obtained against the mortgagee by a judgment creditor of the mortgagor and there are no intermediate mortgages, any surplus will be bound by the order, even if the surplus exceeds the judgment debt, unless the order is restricted to such amount as will satisfy the judgment debt: Joachimson v Swiss Bank Corp [1921] 3 KB 110 at 121. If there are intermediate mortgages or charges, the order will usually have been made subject to the rights thereunder, and, in any event, the order cannot give the judgment creditor priority over such encumbrances: Badeley v Consolidated Bank (1888) 38 Ch D 238; cf Vacuum Oil Co Ltd v Ellis [1914] 1 KB 693. Under an order absolute the debt is subject to all rights attaching to it in the hands of the garnishee: Norton v Yates [1906] 1 KB 112 at 121. The surplus in the hands of a mortgagee who has realised his security cannot be attached by a garnishee order against the mortgagor obtained by a judgment creditor of a subsequent mortgagee before the sale: Chatterton v Watney (1881) 17 Ch D 259. It is necessary to obtain a garnishee order after the sale against the first mortgagee. A mortgagor’s interest in surplus proceeds of sale following a sale of the mortgaged property by the mortgagee under his statutory power of sale is an equitable chose in action and is included in the mortgagor’s personal estate, so that if the mortgagor’s personal estate is subject to a writ of sequestration the interest is subject to the writ. The mortgagee is bound to pay over the

surplus proceeds to the sequestrators and does not need the protection of a specific court order before paying over the surplus: Bucknell v Bucknell [1969] 2 All ER 998.

Interest after sale 20.48 Upon the sale being completed, interest ceases to run against the mortgagor: West v Diprose [1900] 1 Ch 337 at 340; Incorporated Trustees of Australian Clergy Provident Fund v Perpetual Executors and Trustees Association of Australia Ltd [1957] VR 390; Adams v Bank of New South Wales [1984] 1 NSWLR 285. The mortgagee is then allowed a reasonable time to calculate any surplus. The appropriate searches should have been made previously and the amount due under the mortgage easily obtainable, since details will have been required for any demand or proceedings. Usually the only outstanding matters will be the fees and disbursements of the sale itself. A period of 28 days will generally be adequate for this purpose. Thereafter interest will run on the surplus. [page 561] This has been stated to be a matter of the court’s discretion, rather than entitlement, but the practice is to allow interest in most cases: see Eley v Read (1897) 76 LT 39; affirmed sub nom Read v Eley (1899) 80 LT 369 (HL); cf Mathison v Clark (1855) 25 LJ Ch 29 and see, generally, Ramsbotham, Coote’s Treatise on the Law of Mortgages, 9th ed, vol II, Stevens and Sons, Sweet & Maxwell, London, 1927, p 945. The old cases refer to interest at four per cent per annum: Eley v Read. The appropriate rate is now probably what is obtainable on deposit accounts with banks or other financial institutions. On the rate of interest, see 39.57. In the case of pawn, the pawnbroker is obliged to pay interest on the surplus after sale and, if the surplus has been used in his business, at a commercial rate: Mathew v T M Sutton Ltd [1994] 4 All ER 793; [1994] 1 WLR 1455, and see Jay’s the Jewellers Ltd v IRC [1947] 2 All ER 762.

Effect of conveyance, etc 20.49 A mortgagee exercising the statutory power of sale has power by deed to convey the property sold for such estate and interest therein as is the subject of the mortgage, freed from all estates, interests, and rights to which the mortgage has priority, but subject to all estates, interests and rights which have priority to the mortgage: NSW Act s 112(1); Victorian Act s 104(1) (the wording is slightly different from the NSW provision); Queensland Act s 86(1); South Australian Act s 49(1); Tasmanian Act s 23(1); Western Australian Act s 60(1). For sale by an equitable mortgagee, see 20.50. The NSW Act s 112(2) contains provisions empowering the mortgagee by demise to convey not only the mortgage term but, in freehold mortgages, the fee simple, and in leasehold mortgages, the nominal reversion. The Victorian Act s 88 provides that if, under a mortgage by sub-demise, a leasehold nominal reversion is held in trust for the mortgagee, then, on a sale by the mortgagee, the conveyance shall operate to convey not only the mortgage term but also the nominal reversion. Since such mortgages are uncommon, nothing further will be said here about these provisions. If necessary, reference may be made to the 13th English edition of this work, [30.40]ff. With respect to Torrens system land, the registration of a transfer from the mortgagee pursuant to the statutory power of sale passes to and vests the fee simple in the transferee freed from the mortgage or any subsequent mortgage or charge: NSW Torrens Act s 59; Victorian Torrens Act s 77(4); Queensland Torrens Act s 79; South Australian Torrens Act s 136; Western Australian Torrens Act s 110; Tasmanian Torrens Act s 81. The Victorian provision specifically incorporates the rule in Otter v Vaux (1856) 6 De GM & G 638 (see 36.9) in the case where the mortgagor is the purchaser. The rule that a binding contract of sale destroys the mortgagor’s interest applies to Torrens land: R v Registrar of Titles; Ex parte Watson [1952] VR 470; and see 4.24. On the power of the registered mortgagee to obtain removal of a caveat, see Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222; Forster v Finance Corp of Australia Ltd [1980] VR 63; The Commercial Bank of Australia Ltd v Schierholter [1981] VR 292; Lewenberg and Pryles v Direct Acceptance Corp Ltd [1981] VR 344; Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672. The Tasmanian provision, Land Titles Act 1980 s 81, deals specifically

with caveats on the title by providing that the purchaser takes free of any caveat that if not removed would forbid the registration of any dealing by the purchaser; and see Queensland Torrens Act s 124(2)(c). For application to lapse or remove a caveat, see Real Property Act 1900 (NSW) ss 74J and 74MA, Transfer of Land Act 1958 (Vic) ss 89A, 90(3). On a caveat lodged by the mortgagor, see Re McKean’s Caveat [1988] 1 Qd R 524. [page 562]

Sale by equitable mortgagee 20.50 An equitable mortgagee, where the mortgage is made by deed, may be able to convey the legal estate in the property. It has been held, in a decision under the Conveyancing Act 1881 (UK), that the equitable mortgagee can only convey his equitable interest (Re Hodson and Howes’ Contract (1887) 35 Ch D 668), but dicta in a more recent case, relying on a difference in wording between the 1881 Act and the Law of Property Act 1925 (UK), suggest that the equitable mortgagee can convey the legal estate: Re White Rose Cottage [1965] Ch 940 at 951 per Lord Denning MR; [1965] 1 All ER 11 at 15, and see per Wilberforce J at [1964] Ch 483 at 494–6; [1964] 1 All ER 169 at 176–7. Nevertheless, it appears to be essential that the mortgage be made by deed in order to attract the operation of Law of Property Act 1925 ss 101 and 104: Swift 1st Ltd v Colin [2012] 2 WLR 186. These statements to the contrary are obiter, for the conveyance was not construed as an exercise of the mortgagee’s power of sale, but as a transfer by the mortgagor with the mortgagee’s concurrence. Harman LJ relied on the power of attorney for the conveyance of the legal estate: [1965] Ch 940 at 956; [1965] 1 All ER 11 at 18. The New South Wales provision follows the 1881 Act. The Victorian provision is closer to the 1925 provisions but not identical. See, generally, Croft and Hay, The Mortgagee’s Power of Sale, [2.6]ff. Because of the uncertainty on the point, it is necessary to extend the equitable mortgagee’s power of sale by the terms of the deed using the devices mentioned above (see 3.47, 3.48) of a power of attorney to convey

the legal estate. The sale can be made under the power of attorney without the formality of a legal charge being first called for: Re White Rose Cottage [1965] Ch 940 at 955–6; [1965] 1 All ER 11 at 18. In the case of an equitable mortgage by deposit of title deeds without any accompanying document, the mortgagee, if he wishes to sell, must apply to the court under NSW Act s 103, Victorian Act s 91: see 21.6. In Victoria, if the court orders a sale it may make a vesting order conveying the land or may appoint a person to convey the land: see also Queensland Act s 100; South Australian Act 1936 s 43; Western Australian Act s 54. The equitable mortgagee, whether selling under the statutory power or a power of attorney, owes the same duty as the legal mortgagee: Palmer v Barclays Bank Ltd (1971) 23 P & CR 30; and see 20.21ff.

Sale by receiver 20.51 A receiver may sell, either as delegate of the mortgagee (see, for example, NSW Act s 115(3), Victorian Act s 109(3); see also 18.9), or under an express power of sale in favour of the receiver in the mortgage. In the latter case, the mortgagor will have to convey the property, unless the receiver is given power of attorney to execute deeds in the name of the mortgagor. When the mortgagor becomes bankrupt, his trustee will have to join in any sale by the receiver in the absence of a power of attorney. On a mortgagor-company going into liquidation, the same principles apply. In a compulsory winding up, any disposition of the company’s property after the commencement of the winding up is void, unless the court orders otherwise (Corporations Act 2001 (Cth) s 468), but a sale under a mortgage does not fall within this provision, the object of which is to prevent the dissipation of the company’s assets. The relevant disposition, in such case, is the mortgage, which precedes the winding up, not the sale thereunder: Sowman v David Samuel Trust Ltd [1978] 1 All ER 616; Re Margart Pty Ltd (1985) 9 ACLR 269. The liquidator will have to join the conveyance in the absence of a power of attorney. The Corporations Act in Pt 5.2 empowers receivers and controllers of corporations to sell, but also to subject them to a statutory duty of care: see Ultimate Property Pty Ltd v Lord (2004) 60 NSWLR 646 and 18.13.

[page 563]

Sale of a mortgaged business 20.52 The principles set out where the goodwill of a business forms part of the mortgagee’s security: AIB Finance Ltd v Debtors [1997] 4 All ER 677 at 686, a statement approved on appeal [1998] 2 All ER 929 at 934. See also Palmer v Barclays Bank Ltd (1972) 23 P & CR 30.

Particular mortgages 20.53 Commentary and material relating to the exercise of powers of sale over shipping mortgages are dealt with in 9.13, and for mortgages affected by Consumer legislation, see 9.1–9.5.

Measure of compensation for default 20.54 Where the mortgagee breaches its duty on sale, the usual remedy is that, on accounts, the mortgagee will be charged with a sum that is prima facie measured by reference to the price that would have been obtained had the mortgagee performed its duty. That sum may or may not be equal to the cost of taking those steps: Jenkins v National Australia Bank [1999] V ConvR ¶54-602. See also Mike Griffikin Marine Pty Ltd v Princes Street Marine Pty Ltd (1995) 122 FLR 294; 17 ACSR 495; and Ultimate Property Pty Ltd v Lord (2004) 60 NSWLR 646.

[page 564]

Chapter 21

Foreclosure and Judicial Sale Foreclosure generally Effect of foreclosure Foreclosure incident to every true mortgage Accounts and time for redemption Reopening foreclosure South Australia, Tasmania and Queensland Setting aside order When foreclosures available: under legal (formal) mortgage Under equitable mortgage Under equitable charge Sale apart from statute Sale by court order under statute Who may redeem No necessity for offer to redeem In any action Priorities of encumbrancers Vesting orders Equitable mortgages Relationship between ss 90 and 91

21.1 21.2 21.3 21.4 21.5 21.6 21.7 21.8 21.9 21.10 21.11 21.12 21.13 21.14 21.15 21.16 21.17 21.18 21.19

Priority Exercise of statutory jurisdiction Whether time to pay Conduct of the sale Ancillary matters

21.20 21.21 21.22 21.23 21.24

Foreclosure generally 21.1 Until relatively recent times the remedy of foreclosure has been only rarely encountered with respect to mortgages of land. This is due principally to the fact that mortgagees have found the statutory power of sale (whether of general law or Torrens title land) more convenient and there has, almost invariably, been sufficient value in the mortgaged land to satisfy the mortgage or mortgages. Also, the foreclosure procedure is complex and relatively slow, whether curial or administrative (that is, in relation to either type of freehold title). The fact that economic conditions are likely to make the remedy more attractive would probably be sufficient reason to treat the topic fully even if this work were confined to mortgages of land. An additional, and perhaps more compelling, reason for providing [page 565] detailed treatment is because foreclosure is also a remedy (and a potentially useful one) available with respect to mortgages of other property, especially leasehold (unregistered under the Torrens statutes) and valuable personalty: see below. In Canada, foreclosure remains a principal remedy: see, generally, Rayner and McLaren, Falconbridge on Mortgages, 4th ed, Canada Law Book, Toronto, 1977, Chs 24–26. According to the Report of the Committee on the Enforcement of Judgment Debts (the Payne Committee) 1969, Cmnd 1309, para 1360, there had been a revival in the popularity of foreclosure as a remedy. The remedy has been replaced in the Republic of Ireland by judicial sale and has been abolished in New Zealand (see Property Law Act 2007 s

117): see, generally, (1979) 129 NLJ 33 (Markson). As an alternative to foreclosure, or, where foreclosure is not available as the sole remedy, the court may order a sale of the property: Moore v Morton [1886] WN 196; and see 21.6ff. Foreclosure was formerly a mortgagee’s primary remedy, but it is rarely sought or granted today. The general public still often thinks of the mortgagee’s remedies in terms of foreclosure: see, for example, Alliance Perpetual Building Society v Belrum Investments Ltd [1957] 1 All ER 635; [1957] 1 WLR 720. The vast majority of mortgages made today are bank and building society mortgages, under which (or by reason of the operation of general law or Torrens statutory provisions: see Chapter 20) the bank or building society will have a power of sale and the only relief it will want to seek from the court will be an order for possession, so that it can sell with vacant possession. A bank, building society or other commercial lender would not want to have the property vested in itself. However, foreclosure is still an appropriate remedy in the case of an equitable mortgage by deposit of title deeds unaccompanied by any deed or document, thereby giving a power of sale (see 3.37, 20.6); but whenever foreclosure is sought, if there are other encumbrancers interested in the property or if the value of the property exceeds the mortgage debt, the court will, if requested, usually order a sale, rather than foreclosure: see 21.6ff, and English Law Commission Working Paper No 99, Land Mortgages, HMSO, London, 1986, [3.50]ff; and see English Law Commission Report No 204, Transfer of Land — Land Mortgages, HMSO, London, 1991, [7.26]–[7.27]. Unlike the remedy by sale under a power of sale, there can generally be no foreclosure on a mortgage of general law land except by judicial order (Re Farnol, Eades, Irvine & Co [1915] 1 Ch 22 at 24) in an action to which the mortgagor must be a defendant, however remote his chance of redeeming may be: Moore v Morton, above. In the case of successive mortgages where prior encumbrances are to be discharged, the rule ‘redeem up, foreclose down’ must be applied; which means that ‘… one must pay out all mortgages of higher priority and give the opportunity of holders of mortgages of lower priority to redeem before foreclosing’: United Travel Agencies Pty Ltd v Cain (1990) 20 NSWLR 566 at 571; and see Ramsbotham, Coote’s Treatise on the Law of Mortgages, 9th

ed, Stevens and Sons, Sweet & Maxwell, London, 1927, vol ii, p 1046, citing Inman v Wearing (1850) 3 De G & Sm 729; 64 ER 680; see also 21.23, 22.5 and 22.12. As to the right to redeem a prior mortgage generally, see Hyde Management Services Pty Ltd v FAI Insurances Ltd (1979) 144 CLR 541; 32.1ff; and Croft and Hay, The Mortgagee’s Power of Sale, 3rd ed, LexisNexis Butterworths, Chatswood, New South Wales, 2013, [3.34]. (See 32.24 as to the right of a subsequent encumbrancer to redeem a prior mortgage.) Except in the case of mortgages of freehold or leasehold lands under the Torrens statutes in all states other than Queensland (see 22.1), the remedy of foreclosure is a curial remedy. In New South Wales, where Torrens title land and other securities as well are linked in the same loan by collateral securities, an order for foreclosure may be made by the court despite the provisions of the Torrens statutes: Conveyancing Act 1919 [page 566] (NSW) s 101. In Queensland, the remedy of foreclosure is in all cases curial. In other states the foreclosure procedure with respect to Torrens title land is administrative: see 22.1 and 22.52–22.55. The procedure on foreclosure is dealt with in Chapter 22. Foreclosure is not confined to mortgages of land. It is applicable to mortgages of chattels (Harrison v Hart (1726) 2 Eq Cas Abr 6; 22 ER 5; Tancred v Potts (1749) 2 Fonbl Eq 261n) and of shares and other things in action: General Credit and Discount Co v Glegg (1883) 22 Ch D 549; Harrold v Plenty [1901] 2 Ch 314; Stubbs v Slater [1910] 1 Ch 632 (CA); Adelaide Building Co Pty Ltd (in liq) v ABC Investments Pty Ltd (1990) 8 ACLC 445. As to shipping mortgages, see 6.2.

Effect of foreclosure 21.2 Upon non-payment of the debt when due (that is, on default under the proviso for redemption; as to which, see 16.5), or on earlier default (for example breach of covenant to pay interest: Twentieth Century Banking Corp Ltd v Wilkinson [1977] Ch 99; [1976] 3 All ER 361), or, where no date is

fixed for payment, after demand or notice (see 16.5, 17.9), and notwithstanding that the mortgagee may have a power of sale (Wayne v Hanham (1851) 9 Hare 62; 68 ER 415; Hutton v Sealy (1858) 27 LJ Ch 263), the mortgagee may commence an action asking that the equity of redemption of the mortgagor and all persons claiming through him, including subsequent encumbrancers, may be extinguished so as to vest the mortgaged property absolutely in the mortgagee. Such an action is called a foreclosure action, and the relief sought, foreclosure. If the relief is granted, the mortgagee is said to be foreclosed. For the periods of limitation applicable to foreclosure actions, see 16.17ff. Since equity had made inroads into the legal right of the mortgagee by developing the doctrine of the mortgagor’s right or equity of redemption, it became a matter of importance to develop a right to extinguish it, so that the mortgagee would not be obliged to hold the legal estate forever subject to the mortgagor’s right to redeem, even where the mortgagor continued in flagrant default. The result was the development of the right of foreclosure, by means of which equity permitted the extinguishing of that right of redemption which it had itself brought into being. In general, foreclosure means no more than this: that the conveyance or assignment to the mortgagee of the legal estate in property becomes absolute, and freed from the right of the mortgagor, upon repayment, to have the property reconveyed or reassigned to him. In the words of Jessel MR in Carter v Wake (1877) 4 Ch D 605 at 606: ‘The court simply removes the stop it has itself put on.’ Notwithstanding that a mortgagee, holding by assurance subject to a proviso for redemption, held under the mortgage a legal estate, the view of equity was that, until foreclosure, the mortgagee was no more than a chargee (to use an unambiguous term), but that by an order for foreclosure the beneficial ownership vested for the first time in the mortgagee: Heath v Pugh (1881) 6 QBD 345 (CA). Even where the mortgagee’s legal estate was a term of years created by a mortgage by demise, an order for foreclosure had the effect of changing the title of the mortgagee from the holding of the term as an encumbrance to the beneficial ownership of the fee simple: Heath v Pugh. This effect upon a term of years created by a mortgage by demise appears inconsistent with the general principle that foreclosure is an available remedy only where the mortgaged property has been conveyed or assigned to the

mortgagee; or where, under an equitable mortgage, there is a covenant or agreement, express or implied, that the mortgagee has the right to call for a conveyance or assignment of the legal estate in the mortgaged property. This apparent inconsistency can perhaps be explained by the fact that the mortgage by demise differed from the mortgage by assurance, subject to a [page 567] proviso for redemption, only in form and not in substance, both methods having been devised to confer similar rights upon the mortgagee.

Foreclosure incident to every true mortgage 21.3 The right to seek an order for foreclosure is one which is incident to every security of the true ‘mortgage’ character, and these include equitable as well as legal mortgages, even those equitable mortgages which are created by deposit of documents of title. This follows because a deposit of title deeds which is made as security for a loan is regarded either as an imperfect mortgage which the mortgagee is entitled to have perfected or as a contract for a legal mortgage which gives to the party entitled all such rights as he would have had if the contract had been completed: Parker v Housefield (1834) 2 My & K 419; 39 ER 1004; Carter v Wake (1877) 4 Ch D 605; Harrold v Plenty [1901] 2 Ch 314; Ex parte Wright (1812) 19 Ves 255; 34 ER 513; Pryce v Bury (1853) 2 Drew 41; 61 ER 633; Featherstone v Fenwick (1784) 1 Bro CC 270n. This proposition holds true regardless of the nature of the property which is subject to the mortgage. In the case of chattels, negotiable instruments or bearer bonds, the property in which passes by delivery, without the necessity of any writing by way of assignment, deposit as a security results in a pledge, not a mortgage: Gorgier v Mieville (1824) 3 B & C 45; 107 ER 651; Donald v Suckling (1866) LR 1 QB 585. Where the mortgage is equitable, judgment on a foreclosure application is prefaced by a declaration of charge, and it directs a conveyance or assignment of the legal estate in order to complete the mortgagee’s title: Marshall v Shrewsbury (1875) LR 10 Ch App 250. The remedy of foreclosure has been held to be available in respect of

policies of insurance (Re Kerr’s Policy (1869) LR 8 Eq 331), stocks and shares (London and Midland Bank v Mitchell [1899] 2 Ch 161; Harrold v Plenty [1901] 2 Ch 314), debentures charging uncalled capital (Sadler v Worley [1894] 2 Ch 170; [1891–94] All ER Rep 1209), a partnership share (Redmayne v Forster (1866) LR 2 Eq 467), and reversionary as well as present interests: Slade v Rigg (1843) 3 Hare 35; 67 ER 286; Wayne v Hanham (1851) 9 Hare 62; 68 ER 415; but see Stamford, Spalding and Boston Banking Co v Ball (1862) 4 De GF & J 310; 45 ER 1203 as to the effect of the terms of mortgage. In New South Wales it has been held that, where the mortgaged land was held under the Torrens system, the mortgagor’s right of redemption could be availed of at any time up to the entry of an order for foreclosure in the register book: Van Den Bosch v Australian Provincial Assurance Association [1968] 2 NSWR 550; 88 WN (Pt 1) (NSW) 357.

Accounts and time for redemption 21.4 Except by consent, an order for foreclosure will not be granted until an account is taken of what is owing on the mortgage for principal, interest, and costs of the action, and until default is made for a certain period after the balance on such account has been ascertained. If the mortgagee claims costs, charges and expenses beyond the mortgagee’s costs of action, he must make out a special case for them at the hearing: Bolingbroke v Hinde (1884) 25 Ch D 795. On accounts and costs, see Chapters 39 and 40. The dismissal of an action for redemption is equivalent to foreclosure: Cholmley v Countess of Oxford (1741) 2 Atk 267; 26 ER 565; and see 33.25. Any special matter affecting the account, such as a valuation of a security in bankruptcy, ought to be pleaded and noticed in the judgment: Sanguinetti v Stuckey’s Banking Co (No 2) [1986] 1 Ch 502. The usual period allowed for redemption after the account has been taken is six months, but where the action is not merely against the mortgagor, but also against subsequent encumbrancers, and the subsequent encumbrancers appear and ask for successive periods of redemption and there is no question of priority between them (but not otherwise: Platt v Mendel (1884) 27 Ch D 246; Doble v Manley (1885) 28 Ch D 664),

[page 568] they will be allowed such successive periods (Platt v Mendel), the party first entitled to redeem being allowed six months, and each of the others successive periods of three months more: see 22.25. But each case has to be judged on its merits, and sometimes an additional three months is allowed to the second person, and a further three months to all the others: Smithett v Hesketh (1890) 44 Ch D 161; and see Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 at 379–80 per Young J; Charters v The Cosmopolitan Land Banking Co Ltd (1902) 28 VLR 251; Beath v Armstrong (1910) 16 ALR 581; and Overlack v Martin [1955] QWN 56. During the period allowed for redemption a mortgagee can only exercise his power of sale by leave of the court: Stevens v Theatres Ltd [1903] 1 Ch 857; Marshall v Miles (1971) 13 DLR (3d) 158; cf Petranick v Dale (1973) 33 DLR (3d) 389 (where the foreclosure order had not been entered up); and see 22.38. Consistently with the general indulgence of courts of equity of the position of the mortgagor, it was held in Van Den Bosch v Australian Provincial Assurance Association Ltd [1968] 2 NSWR 550 that the mortgagor’s right to redeem, or equity of redemption, could be availed of at any time up to the entry of an order for foreclosure in the register.

Reopening foreclosure 21.5 In general terms the right to foreclosure exists, although the mortgagee has recovered part of the debt, so long as he has not been fully paid, but if, after foreclosure absolute, the mortgagee proceeds for personal payment, the effect is to reopen the foreclosure: Lockhart v Hardy (1846) 9 Beav 349; 50 ER 378; Palmer v Hendrie (1859) 27 Beav 349; 54 ER 136; Kinnaird v Trollope (1888) 39 Ch D 636. A foreclosure will not, however, be made in respect of interest only: Drought v Redford (1827) 1 Mol 572. In Fink v Robertson (1907) 4 CLR 864, it was held that under Transfer of Land Act 1890 (Vic) ss 129 and 130 the mortgage debt was extinguished on foreclosure with the result that no action would lie on the personal covenant for repayment. The provisions of s 130 of the 1890 Victorian Act were identical with the provisions of s 122 of the present Western Australian Act

(Transfer of Land Act 1893), and since the Western Australian Act also contains provisions (ss 58, 68, 82, 88, 105, 106, 110, 113, 122, 133, 220, 221, 226, 227 and 228) comparable with the provisions of the 1890 Victorian Act which were considered in Fink v Robertson and upon which the majority decision of the High Court in that case was based (namely, ss 63, 74, 89, 95, 113, 114, 118, 121, 130, 188 and 226–230 inclusive), it seems clear that the law in Western Australia is as was decided in this case. The basis of the ratio decidendi in Fink v Robertson, above, was that the then provision (now repealed) of the Transfer of Land Act 1958 (Vic) provided that on foreclosure the mortgagee should be deemed to be a ‘transferee’ of the land and further that what is now Transfer of Land Act s 46(2) stipulated that in every mortgage there should be an implied covenant by the ‘transferee’ to indemnify the mortgagor from any claims under the mortgage. This reasoning may solve the question whether in Queensland a foreclosure of a Torrens mortgage precludes later action on the personal covenant for payment. In New South Wales,Victoria and Western Australia, statutory force has now been given to this decision, and the matter has thus been placed beyond any doubt. Conveyancing Act 1919 (NSW) s 100 provides, both as to foreclosures under the general law and as to foreclosures under the Real Property Act 1900 (NSW), that on an order absolute or order under the hand of the Registrar-General (when recorded in the register) for foreclosure, the mortgagee is deemed to have taken the property in full satisfaction of the mortgage debt and the mortgagee’s right or equity to bring any action or to take other proceedings for the recovery of the mortgage money from the debtor, surety or other person, shall be extinguished and all collateral securities for the debt which have [page 569] not previously been enforced shall be released and the right or equity of the mortgagor to redeem the property shall also be extinguished. Property Law Act 1958 (Vic) s 87 and Property Law Act 1969 (WA) s 53 do not go quite as far. They extinguish the right to take any action or other

proceedings for the recovery of the mortgage money from the debtor, surety, or other person, and the right or equity of the mortgagor to redeem, but they expressly preserve the rights of the mortgagee, on such terms and conditions as to the court seems just, to obtain foreclosure over any other property over which the mortgagee holds security by way of mortgage for the same money or any part thereof, or to enforce all or any rights, powers and remedies expressed or implied in such mortgage, except the right to sue the mortgagor or any surety for the mortgagor either for the mortgage money or on any bill or note given as security for the mortgage money. Thus any action in the nature of an action in personam is extinguished, but any right in rem is preserved. In none of these three states, however, can there now be any question of opening the foreclosure. Both these provisions apply to both general law and Torrens title land: Property Law Act 1958 (Vic) s 86; Property Law Act 1969 (WA) s 53(2). Where statutory notice of a default is required as a prerequisite to the exercise of remedies on default, including foreclosure, the statutory provisions as to notice must be properly complied with: see, for example, Law of Property Act 1936 (SA) s 55A; and see Lamshed v Plakakis (1988) 47 SASR 316; Wombat Nominees Pty Ltd v De Tullio (1990) 98 ALR 307; and 16.8.

South Australia,Tasmania and Queensland 21.6 It will be observed that in South Australia and Tasmania the relative sections do not provide that upon entry of the foreclosure order in the register book the mortgagee ‘shall be deemed a transferee of the mortgaged land’. Consequently, the ratio decidendi in Fink v Robertson (1907) 4 CLR 864 does not apply to these sections. This, however, was also true of the New South Wales Act of 1862, which was the Act in force in that state when Campbell v Bank of New South Wales (1883) 16 LR (NSW) Eq 285 was decided. In the last-mentioned case it was held by Faucett J that where the formalities of the Act for the foreclosure of a mortgage had been complied with and there had been no fraud, the court had no power to reopen the foreclosure. This judgment was reversed by the Full Court of New South Wales, and then restored, on another ground, by the Privy Council: Campbell v Bank of New South Wales (1886) 11 App Cas 192. However, the High

Court in Fink v Robertson entirely concurred with the reasoning of Faucett J (see 4 CLR at 876) and continued: Besides the reasons given by that learned Judge there is a further reason: if such an action could be brought, it would, in a case in which there were subsequent encumbrances, involve the reopening of the register and its restoration to its original condition. Such a proceeding is, we think, wholly inconsistent with the scheme of the Act, and the Court has no jurisdiction to order it.

The reasoning in Campbell v Bank of New South Wales having been thus approved and supplemented by the High Court, it seems clear that in these states also there cannot be any reopening of a foreclosure in respect of Torrens land, and it would seem to follow that a mortgagee of such land could not, after foreclosure, maintain an action under the personal covenant. In South Australia, the matter is now put beyond doubt by Law of Property Act 1936 s 55B(3), which provides that any covenant by which a mortgagee might enforce a personal right to the repayment of a debt secured by a mortgage after and without reopening the foreclosure of the mortgage is invalid. In Queensland, the order for foreclosure in the case of Torrens land does not itself entitle the mortgagee to be registered as proprietor of the mortgaged estate and is not registered. There are only two ways of causing the mortgagee to become registered [page 570] proprietor of the mortgaged estate — by registered transfer from the mortgagor or by registration of a vesting order: Wilson v Brown (1896) 7 QLJ 16. A vesting order under Trusts Act 1973 (Qld) s 89 assumes a judgment for the conveyance of the land: see Queensland Torrens Act s 110A. The authorities indicate that an appropriate course is for the order nisi to order a conveyance or transfer of the mortgaged estate to the plaintiff mortgagee, and for the judgment absolute to declare that the defendant is trustee for the plaintiff of the mortgaged estate and to include a vesting order under the Trusts Act vesting in the plaintiff the estate of the defendant: Walker and Mackenzie v Sachs [1902] QWN 56 (order); [1952] QWN 13 note to Stevens v Hoberg (No 2) (extract from reasons in Walker and

Mackenzie v Sachs); Stevens v Hoberg (No 2) [1952] QWN 13; National Mutual Life Association of Australasia Ltd v National Bank of Australasia Ltd [1944] QWN 7; Union Trustee Co of Australia Ltd v Exton [1937] QWN 51 and unreported cases mentioned therein. The vesting order is then registered. It would seem that under this technique the mortgagee would become a ‘transferee’ of the land, and as the Queensland Torrens Act includes the like covenant of indemnity to the mortgagor as that implied by the Victorian Transfer of Land Act 1958, the principle of Fink v Robertson (1907) 4 CLR 864 would apply, with the result that after judgment for foreclosure and the clothing of the mortgagee with legal title, the mortgagee would be unable to sue on the personal covenant.

Setting aside order 21.7 Where a judgment for foreclosure has been obtained by actual fraud or by false evidence the court will set aside the judgment (Loyd v Mansell (1722) 2 P Wms 73; 24 ER 645; Gore v Stacpoole (1813) 1 Dow 18 (HL); 3 ER 607; Harvey v Tebbutt (1820) 1 Jac & W 197; 37 ER 350), but mere constructive fraud is not sufficient: Patch v Ward (1867) 3 Ch App 203. If the mortgagee, after decree or order absolute for foreclosure, sells in exercise of the power of sale expressly or impliedly conferred on him by the mortgage, the court will reopen the foreclosure, but only to the extent of requiring the mortgagee to account to the mortgagor for the purchase money (if there is any surplus) and it will not disturb the purchaser’s title: Watson v Marston (1853) 4 De GM & G 230; 43 ER 495; Stevens v Theatres Ltd [1903] 1 Ch 857. Normally, of course, a mortgagee, after decree or order absolute for foreclosure, would sell as a beneficial owner, not as a mortgagee exercising a power of sale. A foreclosure may be reopened as against a purchaser if the purchase was made shortly after the judgment and the purchaser took the property with notice of matters which might give the mortgagor a right to reopen: Campbell v Holyland (1877) 7 Ch D 166 at 172–3. An application for the reopening of a foreclosure must be made without delay (Thornhill v Manning (1851) 1 Sim (NS) 451; 61 ER 174; Campbell v Holyland), and if a mortgagor acquiesces in the mortgagee’s ownership, his

right to reopen will be lost: Fleetwood v Jansen (1742) 2 Atk 467; 26 ER 682. It is further observed that in Queensland the court may, on application by the mortgagor, grant relief from the consequences of default giving rise to an ‘accelerated sum’ becoming due and payable in any proceedings brought to enforce the rights of the mortgagee or brought by the mortgagor himself: Property Law Act 1974 (Qld) s 95. There can be no foreclosure against the Crown: see Hancock v A-G (1864) 33 LJ Ch 661 and Tannock v North Queensland Securities Ltd [1932] St R Qd 285 in respect of mortgagees of interests in Crown land.

When foreclosures available: under legal (formal) mortgage 21.8 The strict right of the legal mortgagee is foreclosure, and, independently of statute (see 21.6), the mortgagee has no general right to a sale (Tipping v Power (1842) 1 [page 571] Hare 405; 66 ER 1090; Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361), although in certain cases (see 21.1), the mortgagee is entitled to that relief. Where there are successive mortgages, each legal mortgagee has a right to foreclosure and to get in the legal estate of the mortgagor, subject only to prior mortgages. In the case of Torrens title land the remedy of foreclosure is available to a registered mortgagee but, except in Queensland, is generally an administrative rather than a curial procedure: see 22.1.

Under equitable mortgage 21.9 Although a mortgagee has not taken a formal mortgage, but only an equitable mortgage, yet if this is accompanied by an agreement, express or implied, on the part of the mortgagor to execute a legal mortgage, there is a right to foreclosure. Hence the depositee of title deeds is entitled to foreclosure, where the deposit is accompanied by an agreement to execute a legal mortgage (Perry v Keane; Perry v Partridge (1836) 6 LJ Ch 67; Cox v Toole (1855) 20 Beav 145; 52 ER 558; Underwood v Joyce (1861) 7 Jur NS 566; see 3.27, 20.6), and the right is available even where there is a simple deposit or memorandum without an agreement to execute a mortgage (Pryce

v Bury (1854) LR 16 Eq 153n; Redmayne v Forster (1866) LR 2 Eq 467; James v James (1873) LR 16 Eq 153), unless the terms of the agreement exclude the right to a legal mortgage: Sporle v Whayman (1855) 20 Beav 607; 52 ER 738. For the deposit is of itself evidence of an agreement to make a legal security, which the court will carry into effect against the mortgagor or any who claim under him with actual or constructive notice of the deposit: Birch v Ellames (1794) 2 Anst 427; 145 ER 924; Ex parte Wright (1812) 19 Ves 255; 34 ER 513; Parker v Housefield (1834) 2 My & K 419; 39 ER 1004. An equitable mortgagee of Torrens title land is generally in the same position as an equitable mortgagee of general law land. The procedure is much the same and it would appear that provisions such as Property Law Act 1958 (Vic) ss 90 and 91 — and their New South Wales (and other) equivalents — are applicable to such equitable mortgages: see 21.12 and 21.18. However, a doubt arises with respect to unregistered, equitable mortgages of Torrens system land because the remedy of foreclosure is not available to a mere chargee. The authorities that support this view are discussed by Young J in United Travel Agencies Pty Ltd v Cain (1990) 20 NSWLR 566 (and see 21.10). A registered mortgage of Torrens system land operates as a statutory charge (see 4.1ff), so it might be thought that an unregistered mortgage of such species, even if it contains an agreement to grant a mortgage in statutory form, amounts to nothing more than an agreement to create a statutory charge for the purpose of considering whether the general law principles in relation to foreclosure apply. However, this has not been the position taken by the courts, as foreclosure has been ordered — on the usual, general law, basis — on the application of unregistered, equitable, mortgagees of Torrens title land: see Charters v The Cosmopolitan Land Banking Co Ltd (1902) 28 VLR 251; Beath v Armstrong (1910) 16 ALR 581; Tietyens v Cox (1916) 17 SR (NSW) 48; Ryan v O’Sullivan [1956] VLR 99; Re Nairn’s Application [1961] VR 26 at 29 (though Dean J in Ryan v O’Sullivan at 100 seems to suggest that if an equitable mortgage of Torrens title land contains an express or implied agreement to grant a legal, registered mortgage then Transfer of Land Act 1958 (Vic) s 79 would apply and the court could not make an order for foreclosure). The position taken by the courts in these cases is consistent with the view

that the Torrens Acts are to be characterised as ‘conveyancing’ legislation rather than legislation intended to change substantive principles of law: see Barry v Heider (1914) 19 CLR 197 at 213 (Isaacs J) and see 28.2ff; but compare the general approach of Robinson, Transfer of Land in Victoria, Law Book Co, Sydney, 1979; and the comment by Lang (1994) ANZ ConvR 385. [page 572] Regard must also be had to the particular provisions of the New South Wales Conveyancing Act 1919 and the Victorian Property Law Act 1958. Section 103(7) of the New South Wales Act provides that: ‘Except as provided by section 101, this section applies only to charges imposed under section 88F on land which is not under the provisions of the Real Property Act 1900.’ Section 88F relates to charges arising under judgments on failure to comply with a public positive covenant imposed under s 88D or s 88F by a prescribed authority. New South Wales Act s 101(1) provides: 101(1) Where mortgage money or an amount secured by a charge is secured partly by a mortgage or charge registered under the Real Property Act 1900 and partly by other securities — (a) an order for foreclosure or sale, in respect of land the subject of the mortgage or charge; or (b) an order for redemption, in respect of land the subject of the mortgage, may, notwithstanding anything contained in that Act, be made by the Court as if the land was not under the provisions of that Act.

It would seem to follow from these provisions, bearing in mind that Real Property Act 1900 (NSW) ss 61 and 62 apply only to registered mortgages of Torrens title land (which include provisions for sale in lieu of foreclosure: see s 62(1)), that Conveyancing Act s 103 applies to unregistered mortgages of Torrens title land. Although it was not necessary to decide the point, Dean J in Ryan v O’Sullivan [1956] VLR 99 at 100 appears to have been of the view that s 91 applied to an unregistered mortgage of Torrens title land. The provisions of the Victorian Act do seem to suggest that unregistered mortgages of Torrens title land would be subject to s 91. Section 86 of the

Act expressly provides that with the exception of certain specified sections (not including s 91), Pt I Div 3 does not apply to ‘… mortgages under the Transfer of Land Act 1958 effected by instruments of mortgage under that Act’. In other words, the ‘exception’ is by reference to ‘mortgages’ under the Transfer of Land Act, not with respect to Torrens title land. In terms of the application of the provisions of the Property Law Act it is noted that ‘mortgage’ is defined in s 18(1) as including ‘… any charge or lien on any property for securing money or money’s worth’. A similar definition is contained in Conveyancing Act s 7. Save for provisions such as Property Law Act s 101, which confers a statutory power of sale where the mortgage is made by deed, there does not appear to be any general requirement that a mortgage be under seal for the provisions of Property Law Act Pt I Div 3 to operate.

Under equitable charge 21.10 An equitable chargee cannot foreclose, because there is no agreement to make a legal security nor any estate in the chargee: Re Owen [1894] 3 Ch 220; Shea v Moore [1894] 1 IR 158; Tennant v Trenchard (1869) LR 4 Ch App 537 at 542; United Travel Agencies Pty Ltd v Cain (1990) 20 NSWLR 566. This position is in contrast to the position of a registered mortgagee of Torrens title land who is in the position of a statutory chargee: see Chapter 4. A person subject to an equitable charge, may, however, obtain an order for sale of the subject property under s 91 of the English Act or its Australian equivalents: Worrell v Issitch [2001] 1 Qd R 570; see 21.21.

Sale apart from statute 21.11 Where a charge gave a right of foreclosure on the ground that it implied an agreement to execute a legal mortgage, the remedy was prima facie restricted to foreclosure (Pryce v Bury (1853) 2 Drew 41; 61 ER 633), but if it were a mere charge without such agreement, then the remedy was sale: Re Owen [1894] 3 Ch 220; Shea v Moore, above; Tennant v Trenchard (1869) LR 4 Ch App 537 at 542; United Travel [page 573]

Agencies Pty Ltd v Cain, above. (But debenture holders are entitled to foreclosure: Sadler v Worley [1894] 2 Ch 170.) If, however, the agreement were to execute a legal mortgage with a power of sale, then the court might order sale as an alternative remedy (Lister v Turner (1846) 5 Hare 281; 67 ER 919; Seton’s Judgments and Orders, 7th ed, Stevens, London, 1912, p 1976), and now that all mortgages by deed give a power of sale, it may be said that wherever there is an agreement, express or implied, to execute a legal mortgage, the mortgagee has the remedies of foreclosure and of sale. As to waiver by the mortgagee of his right to the legal security and a claim to sale under the charge, see Kennard v Futvoye (1860) 2 Giff 81; 66 ER 35; Matthews v Goodday (1861) 8 Jur NS 90. There were other cases in which, for special reasons connected with the subject matter of the security, sale was the proper remedy. Thus it seems that the legal or equitable mortgagee had a general right to a sale where the security was, or was thought to be, scanty or deficient: Dashwood v Bithazey (1729) Mos 196; 25 ER 347; Earl of Kinnoul v Money (1767) 3 Swan 202; 36 ER 830; and see Daniel v Skipwith (1787) 2 Bro CC 155; 29 ER 89. The mortgagee of a reversion was entitled to a sale on account of the unproductive nature of the security (How v Vigures (1628) 1 Rep Ch 32; 21 ER 499), but he was also entitled to foreclosure: Slade v Rigg (1843) 3 Hare 35; 67 ER 286; Wayne v Hanham (1851) 9 Hare 62; 68 ER 415. Sale is the proper remedy, rather than foreclosure, when the mortgagee is in conflicting positions, as where he becomes executor of the mortgagor or trustee of the mortgaged property: Lucas v Seale (1740) 2 Atk 56; 26 ER 431; Tennant v Trenchard (1869) 4 Ch App 537. There is an inherent jurisdiction in equity to order a judicial sale of mortgaged property analogous to the statutory power. This may be exercised where it is generally beneficial to both parties: Yarrangah Pty Ltd v National Australia Bank Ltd (1999) 9 BPR 17,061 at [37] (Young J). It may also be exercised whenever the court considers it appropriate to do so: Guardian Mortgages Pty Ltd v Miller [2004] NSWSC 1236 [121] and see Whicker v Pettiford (NSWSC, Macready AsJ, 1 August 2005). In Mango Media Pty Ltd v Mertes (2006) 14 BPR 26,971, Brereton J held (at 26,977–8), distinguishing Yarrangah Pty Ltd v National Australia Bank, that a judicial sale is not a remedy of last resort when sought by a second or unregistered mortgagee; referring also, in

support of this position, to Guardian Mortgages Pty Ltd v Miller (2004) 12 BPR 22,833 (Wood CJ at CL) and King Investment Solutions Pty Ltd v Hussain (2005) 64 NSWLR 441 (Campbell J). See also Sood v Christianos (2008) 14 BPR 26,101 (Brereton J), where this position was reaffirmed but the following warning sounded (at 26,104–6, [19]–[23]): That conclusion does not necessarily involve that the Court would give its imprimatur to the particular proposed sale. Having decided that it is appropriate to grant relief by way of judicial sale, the Court must next consider the manner of sale and the directions to be made in connection therewith. In essence, Ms Christianos proposes that she should be afforded an opportunity to find a purchaser at a higher price and given the conduct of the sale, or that the sale should be by public auction; Ms Sood, on the other hand, seeks approval for the proposed sale to Page Property Developments. Ordinarily, a judicial sale is by auction, in order to ensure that the market is fully tested and the best price obtained, but it is clear that the Court may authorise sale by private treaty, and may retrospectively authorise a pre-existing sale under an existing contract [Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361, 381; New Beach Apartments Pty Ltd v Epic Hotels Pty Ltd, [27]]. In Parker’s Practice in Equity (New South Wales), 2nd ed (1949) Lawbook Co, it is said (at 283): Sale by the Court. – On the appointment for directions under a decree or order necessitating a sale by the Court the Master ordinarily directs that the sale shall be by public auction, although he may in a proper case … approve of a sale by private contract either before or after the property has been put up for sale by public auction, or may

[page 574] direct that it be offered for sale by public tender to the highest bidder: Daniell’s Ch. Pr. (5th Ed.), 1152, 1184. Subsequently, it is said (at 286; references omitted): B. Sale by Private Contract – Unless the decree or order has ordered a sale by public auction only, the Master may allow the property to be sold by private contract, either before or after it has been put up for sale by public auction, where it is in the interests of the parties to do so: Daniell’s Ch. Pr. (5th Ed.) 1153, 1184. Generally, where this course is proposed to be followed, the purchaser enters into a contract with the party having the conduct of the sale or some other party to the proceedings or his agent, which is expressed to be subject to the approval of the Master. The contract should contain all proper terms, including a provision for the payment of the purchase money into court. Where particulars and conditions of sale by public auction have been settled, such of them as are appropriate to the private contract may be embodied therein by reference or otherwise. An appointment is taken out for the approval of the contract, and notice thereof given to all parties entitled to attend the proceedings. The evidence must show by

reference to title, survey, value, etc., that the terms of the contract are proper to be accepted and that the price is the full value. See notes to R. 275, post, and above under the heading ‘Value and Reserve’. … The subsequent note referred to is as follows (at 288; references omitted): Sale by private contract — in any case where the order authorises a sale either by public auction or by private contract, the evidence on an application for the Master’s approval of a sale by private contract should show that the price, terms of payment, and conditions of sale are proper in the particular circumstances. The evidence should show that the price is the best that can be reasonably obtained and that it is not less than the value of the property. To prove the former it should appear that the market has been properly canvassed either by first having submitted the property at public auction or by canvassing all likely buyers and inviting tenders, and in each case by advertising the property for sale. If the property is not offered at auction, the reason why should be stated. A similar procedure is applicable (mutatus mutandis) in cases where the sale if by private contract in the first instance. … Where the Court authorises or requires a sale by auction it will fix a reserve in order to ensure a reserve above the total of principal interest and costs due to the mortgagee or the prior mortgagee as the case may be [King Investment Solutions, [105]]. Ordinarily, the Court gives conduct of the sale to the party with the greatest interest in maximising the sale price. When the security is insufficient, then conduct will typically be given to the mortgagee, because the mortgagee has an interest in maximising its recovery; conduct of the sale may be given to the mortgagor where the security will be adequate, because the mortgagee then has little or no interest in maximising the selling price [King Investment Solutions, [122]]. However, care needs to be taken in applying the authorities in this field, because, again, many of them involve circumstances in which the mortgagee has been the applicant for an order for judicial sale against the resistance of one or more mortgagees. This is not such a case.

In relation to the statutory power of sale by a mortgagee of general law or Torrens title land without any order of the court, see 20.12 and Chapter 4.

Sale by court order under statute 21.12 Conveyancing Act 1881 (UK) s 25 was reproduced by Law of Property Act 1925 (UK) s 91 and in the various states: see NSW Act s 103; Victorian Act s 91; Queensland Act s 99; South Australian Act s 44; Western Australian Act s 55; Tasmanian Act s 27. Its provisions have been held to be wide enough (at least in Queensland) to empower the sale of property subject to an equitable charge by the Federal Court of Australia: see Worrell Issitch [2001] 1 Qd R 570; and see Phillips v Hogg [2001] QSC 390, as to the discretionary nature of relief under s 99(2) (Qld); and see 21.1. As to the application of provisions of this nature to Torrens title land, see 21.9. As to

the history of the English legislation, see Palk v Mortgage Services Funding plc [1993] Ch 330 at 335, 341; [1993] 2 All ER 481 at 484, 489–90. [page 575] For convenience, reference is made to the Victorian provisions (which are, with some minor variations, identical to the English provisions). They are reasonably typical of the provisions applying in the other states: 91(1) Any person entitled to redeem mortgaged property may have a judgment or order for sale instead of for redemption in an action brought by him either for redemption alone, or for sale alone, or for sale or redemption in the alternative. (2) In any action, whether for foreclosure, or for redemption, or for sale, or for the raising and payment in any manner of mortgage money, the Court, on the request of the mortgagee, or of any person interested either in the mortgage money or in the right of redemption, and, notwithstanding that — (a) any other person dissents; or (b) the mortgagee or any person so interested does not appear in the action — and without allowing any time for redemption or for payment of any mortgage money, may, if it thinks fit, direct a sale of the mortgaged property, on such terms as it thinks fit, including the deposit in court of a reasonable sum fixed by the Court to meet the expenses of sale and to secure performance of the terms. (3) But, in an action brought by a person interested in the right of redemption and seeking a sale, the Court may, on the application of any defendant, direct the plaintiff to give such security for costs as the Court thinks fit, and may give the conduct of the sale to any defendant, and may give such directions as it thinks fit respecting the costs of the defendants or any of them. (4) In any case within this section the Court may, if it thinks fit, direct a sale without previously determining the priorities of incumbrancers. (5) This section shall apply to actions brought either before or after the commencement of this Act. (6) In this section ‘mortgaged property’ shall include the estate or interest which a mortgagee would have had the power to convey if the statutory power of sale were applicable. (7) For the purposes of this section the Court may, in favour of a purchaser, make a vesting order conveying the mortgaged property, or appoint a person to do so, subject or not to any incumbrance, as the court thinks fit; or, in the case of an equitable mortgage, may create and vest in the mortgagee a legal estate to enable him to carry out the sale in like manner as if the mortgage had been made by deed by way of legal mortgage.

Who may redeem

21.13 ‘Any person entitled to redeem’ (see 32.19ff) may take advantage of these statutory provisions (see subs (1)): see Palk v Mortgage Services Funding plc [1993] Ch 330; [1993] 2 All ER 481. The necessary interest may be obtained by an assignment inter vivos or by operation of law, for example on the death or bankruptcy of a person ‘interested’: see Teevan v Smith (1882) 20 Ch 724 (second mortgagee); Gill v Newton (1866) 14 LT 240 (personal representatives); Francklyn v Fern (1740) Barn C 30; 27 ER 542; Spragg v Binkes (1800) 5 Ves 583; 31 ER 751 (bankruptcy). A person is an assignee of the mortgagor though that person takes as a volunteer (Rand v Cartwright (1664) 1 Ch Cas 59; 22 ER 694; Howard v Harris (1683) 1 Vern 190 at 193; 23 ER 406 at 407), even if the assignment contains a power of revocation, as long as it is not acted upon. As soon as a mortgagor parts with the whole of his interest in the mortgaged property the mortgagor ceases to be entitled to redeem: Moore v Morton [1866] WN 196. But a fresh right of redemption is acquired by a mortgagor if he is subsequently sued on the personal covenant for payment, subject to the rights of any other person in the equity of redemption: Kinnaird v Trollope (1888) 39 Ch D 636. Assignees of limited interests also have a right to redeem: see Mutual Life Assurance Society v Langley (1886) 32 Ch D 460; Hall v Heward (1886) 32 Ch D 430 (assignee of the equity of redemption in only one of two properties comprised in the mortgage); and Tarn v Turner (1888) 39 Ch D 456 at 465 (lessee under a lease not binding on the [page 576] mortgagee). One of two or more co-owners may redeem the whole of the mortgaged property on account of their unity of possession, but not merely their own undivided share: Cholmondeley v Clinton (1820) 2 Jac & W 1 at 134; 37 ER 527 at 575. A person who gains title by adverse possession against the mortgagor, but not the mortgagee, may redeem (see Fletcher v Bird (1896), Hawkins J, unreported) (an account of the judgment is contained in the sixth English edition of this work, p 1025); the adverse possessor is, in effect, the assignee of the mortgagor. In Lee v Wansey [1964] NSWR 1268,

this principle was extended to an accruing possessory title (see Jacobs J at 1271). The second class, persons ‘entitled to redeem’, includes ‘Any person interested in the equity of redemption …’: Pearce v Morris (1869) LR 5 Ch App 227 at 229 per Lord Chancellor Hatherley; see also Tarn v Turner (1888) 39 Ch D 456 and Hoole v Smith (1881) 17 Ch D 434. It appears that a sufficient interest may be obtained even by wrongful possession: see Lee v Wansey, above. A judgment creditor may redeem if he obtains, as a result of execution, a charge on the mortgaged land: Earl of Cork v Russel (1871) LR 13 Eq 210 at 215. Generally, unsecured creditors have no right to redeem, but there may be special circumstances: see Hartley v Russell (1825) 2 Sim & St 244; 57 ER 339 and Smith v Baker (1842) 1Y & CCC 223; 62 ER 864. A surety, though not strictly interested in the equity of redemption, is entitled to redeem on account of the surety’s right to pay off the debt and avail himself of all the creditor’s remedies: Gedye v Matson (1858) 25 Beav 310; 53 ER 655; Green v Wynn (1869) LR 4 Ch App 204; see also Kinnoul v Money (1767) 3 Swanst 202n; 36 ER 830; Hudson v Carmichael (1854) Kay 613; 69 ER 260. However, a surety for part only of the debt is not entitled to redeem a mortgage securing another part of the debt and given at a different time, though taken by the same creditor: Wade v Coope (1827) 2 Sim 155; 57 ER 747. Where a mortgage is made in the exercise of a general power of appointment it appears that the equity of redemption is in the appointor, hence the appointor may redeem: Re Van Hagan (1880) 16 Ch D 18 at 30. As to the right to redeem becoming statute-barred, see Young v Clarey [1948] Ch 191.

No necessity for offer to redeem 21.14 There is no requirement under this s 91(1) that there should be an offer to redeem, express or implied: Dalton v Hayter (1844) 7 Beav 313; 49 ER 1085; Gordon v Horsfall (1846) 5 Moo PCC 393; 13 ER 542; Harding v Tingey (1864) 4 New Rep 10; 34 LJ Ch 13; Murugaser Marimuttu v De Soysa [1891] AC 69. This represents a departure from the general rule that an offer to redeem is a requirement in any action by a person entitled to redeem, against the mortgagee.

Where particular state legislation defines ‘mortgage’ sufficiently broadly, it appears that the subsection would apply to an equitable charge; although the use of the word ‘redemption’ in the subsection is then not strictly appropriate: see notes to s 90(1) of the English legislation, and see, for example, Victorian Property Law Act 1958 s 18(1), which defines ‘mortgage’ to include ‘any charge or lien or any property for securing money or money’s worth’, although the application of s 18(1) is limited by the express requirement of consistency with context or subject matter. However, it appears that s 91(1) does not apply to a charge on the assets of a statutory undertaking as a going concern: Gardner v London, Chatham and Dover Rail Co (1867) 2 Ch App 201; Furness v Caterham Rail Co (1859) 27 Beav 358; 54 ER 140; Blaker v Herts and Essex Waterworks Co (1889) 41 Ch D 399; Re Woking Urban District Council (Basingstoke Canal) Act 1911 [1914] 1 Ch 300 (especially at 314); and Re Glyn Valley Tramway Co Ltd [1937] Ch 465. [page 577] In relation to orders for sale, the jurisdiction conferred by these provisions may be utilised quite expeditiously, as an order for sale can be made on an interlocutory application: see Woolley v Colman (1882) 21 Ch D 169 at 173 per Fry J; also Brewer v Square [1892] 2 Ch 111. The relationship between s 91(1) and the other parts of the section are not entirely clear. In some respects, these provisions (particularly given their placing as subs (1)) appear to be the general jurisdictional base for other provisions in the section. However, the drafting of the section indicates that this is not so; that is the role of subs (2). The cases tend to confirm this: see Woolley v Colman (1882) 21 Ch D 169 at 173; Davies v Wright (1886) 32 Ch D 220 and Brewer v Square, above. Thus, subs (1) supplements the provisions of subs (2) in relation to actions for redemption or sale (or these actions in the alternative). However, in Woolley v Colman (1882) 21 Ch D 169, Fry J (at 173) commented that the predecessors of s 91(1) and (2) (Conveyancing Act 1881 (UK) s 25(1) and (2)) appeared to confer ‘distinct and separate powers’.

In any action 21.15 Subsection (2) is prefaced by the words ‘in any action’. A mortgagor’s action to set aside a sale and conveyance by the mortgagee was held to be an action for redemption within the meaning of the County Courts Act 1888 (UK), in Powell v Roberts (1869) LR 9 Eq 169. The Act conferred jurisdiction on the County Courts in all suits for redemption and foreclosure. Sir John Stuart VC both isolated and answered the central question in that case in stating that ‘a suit to redeem where the right to redeem is resisted is still a suit to redeem’: LR 9 Eq at 171. The Chancery Procedure Act 1852 (UK) enabled the court to direct a sale in lieu of foreclosure but did not extend to actions by the mortgagor for redemption. The request by the persons specified in s 91(2) is the condition precedent to the court’s discretionary power arising: Woolley v Colman (1882) 23 Ch D 169 at 173; Palk v Mortgage Services Funding plc [1993] Ch 330; [1993] 2 All ER 481. The reference to ‘any person interested either in the mortgage money or in the right of redemption’ merely corresponds with the reference to ‘any person entitled to redeem’ in s 91(1). The failure of the mortgagee, or other persons specified, to appear does not deprive the court of jurisdiction under s 91(2). However, it seems clear that this is not a provision concerned with the question of proper parties to any action to which this section may apply. On general principles, it is necessary that every person ‘interested either in the mortgage money or the right of redemption’ should be made a party to the action: Westminster Bank Ltd v Residential Properties Improvement Co Ltd [1938] Ch 639 at 642–3 per Simonds J. In general, this includes subsequent encumbrancers ([1938] Ch at 643) but there is a strong argument that it is only necessary to have regard to those who have to be paid out on a sale, or who have to concur in making title: Adler v Ferguson [1962] VR 129 at 133. If a sale is to be ordered ‘altogether out of Court’ the court requires that it be satisfied that all persons interested are before it, or otherwise bound by the order; and the order must be prefaced by a declaration to this effect: see Cumberland Union Banking Co v Maryport Hematite Iron and Steel Co [1892] 1 Ch 92; Brewer v Square [1892] 2 Ch 111; also Adler v Ferguson [1962] VR 129, and Seton, Judgments and Orders, 7th ed, pp 324, 1846. See, generally, Jacobs, Proceedings in the Master’s Office, Law Book Co,

Melbourne, 1969, pp 106ff. The court has the power to order a sale under s 91(2) at any time before foreclosure absolute: Union Bank of London v Ingram (1882) 20 Ch D 463, see Jessel MR at 464; and see Weston v Davidson [1882] WN 28; Industrial Development Bank v Lees (1971) 14 DLR (3d) 612. [page 578] An order for sale does not preclude the subsequent making of a foreclosure absolute: see Lloyds Bank Ltd v Colston (1912) 106 LT 420, where the order was made on the ground that it would cause useless expense to direct a sale, the account showing the amount due to be greater than the value of the mortgaged property. But an order for sale will not be made upon a claim for foreclosure only against a mortgagor who has not had notice: South Western District Bank v Turner (1882) 31 WR 113. However, the lack of notice may only cause delay for it appears from this case that an order for sale may be made once the mortgagor has been notified of the plaintiff’s request for a sale and has had the opportunity of answering his, the plaintiff’s, affidavit in support. For an application for an order nunc pro tunc to give effect to an existing contract and a review of the authorities on the circumstances in which a sale should be ordered, see Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 at 379–81. It appears that a sale may be ordered in spite of the fact that the mortgagee’s statutory power of sale is exercisable, at least where no steps have been taken to exercise it: Brewer v Square [1892] 2 Ch 111 at 114 per Kekewich J. It follows from this decision that an order may be made even after steps have been taken if the order ensures that the mortgagee is not prejudiced. An order for sale puts a mortgagee’s statutory power into abeyance, although it may be revived: Brewer v Square [1892] 2 Ch 111 at 115. In considering the terms upon which the sale may be ordered it should be remembered that the subsection expressly empowers the court to make an order without allowing any time for redemption: Brewer v Square, above.

Priorities of encumbrancers

21.16 Section 91(4) appears to have been inserted ex abundanti cautela in view of the wide powers conferred on the court by s 91(2). Generally, there is no need to determine the priorities of encumbrancers until the time comes for distribution of the proceeds of sale; although there may be felt a need to do so in order to determine who should be given the conduct of the sale (under s 91(2) or (3)). The proceeds should be applied in the same manner as in the case of a mortgagee selling under the statutory power (the order prescribed by s 105 (UK and Vic; in relation to other state provisions, see 20.43): see Robbins, Law of Mortgages, Sweet & Maxwell, London, 1897, pp 1039–40; see also Seton, Judgments and Orders, 7th ed, p 1848. The request or assent of a plaintiff mortgagee to a sale does not deprive him of the right to costs of the action in priority to the defendants; they are merely the costs of realising his security: Cook v Hart (1871) LR 12 Eq 459; and see Pinchard v Fellows (1874) LR 17 Eq 421. On the other hand, a puisne encumbrancer who concurred in a conveyance to a purchaser under a decree for sale in lieu of foreclosure at the instance of the first mortgagee is not entitled to any costs until that mortgagee has been paid in full: Wonham v Machin (1870) LR 10 Eq 447. The order may be accompanied by an inquiry as to priorities: Paine v Edwards (1862) 6 LT 600.

Vesting orders 21.17 Section 91(7) empowers the court to make a vesting order conveying the mortgaged property. In relation to the effect of vesting orders generally, and the effect of vesting a legal estate in an equitable mortgagee, see s 90 of the Victorian and English legislation. The court’s power to make vesting orders is entirely discretionary. Section 91(7) applies to an equitable mortgage, whether accompanied by an agreement to execute a legal mortgage or not: Oldham v Stringer (1884) 33 WR 251. A similar provision is contained in Queensland Act s 99(7), South Australian Act s 44(6) and Western Australian Act s 55(7). In New South Wales and Tasmania, a vesting order may be made under trustee legislation: Trustee Act 1925 (NSW) s 76; Trustee Act 1898 (Tas) s 38; see also 21.9. [page 579]

Equitable mortgages 21.18 Legislation also makes special provision for the realisation of equitable mortgages by the court. For convenience, reference is made to the provisions of Victorian Act s 90(1) (which is, with some minor variations, identical to the UK Act s 90(1)). Other state legislation generally follows this (see Queensland Act s 100; South Australian Act s 43; Western Australian Act s 54). 90(1) Where an order for sale is made by the Court in reference to an equitable mortgage on land the Court may, in favour of a purchaser, make a vesting order conveying the land or may appoint a person to convey the land, or may create and vest in the mortgagee a legal estate in the land to enable him to carry out the sale as the case requires, in like manner as if the mortgage had been made by deed by way of legal mortgage, but without prejudice to any incumbrance having priority to the equitable mortgage unless the incumbrancer consents to the sale.

Section 91 empowers the court to order a sale of mortgaged property in certain circumstances (a power first conferred by the Chancery Procedure Act 1852 (UK) s 48). Apart from statute a mortgagee under an equitable mortgage has no right to apply for an order for judicial sale, the proper remedy being foreclosure, even in the case of an equitable mortgage by deposit: Pryce v Bury (1854) LR 16 Eq 153(n); National Bank of Tasmania Ltd (in liq) v McKenzie [1920] VLR 411 at 425; Ryan v O’Sullivan [1956] VLR 99. As to the application of s 91 to charges or liens which, strictly (and apart from statute) confer no right to redeem, see above. It will not generally be necessary to make an order under this section when the relevant equitable mortgage or charge is made by deed, as the statutory power of sale would then generally be implied under s 101 (UK and Victoria; for other state provisions see 20.5). A court may take the view that an order under this section is unnecessary in the case of an equitable mortgage containing an agreement to execute a legal mortgage ‘with an immediate power of sale’ (Hermann v Hodges (1873) LR 16 Eq 18; and see the comment as to this section not applying in such cases in Halsbury’s Statutes, 4th ed, vol 37, p 233), but the possible expense of enforcing the agreement may be a relevant consideration. In contrast, a mortgagee of a mere equitable charge could obtain an order for sale but not foreclosure. In Tennant v Trenchard (1869) LR 4 Ch App 537 at 542, Lord Chancellor Hatherley said: … it seems, on the whole, to be settled that if there is a charge simpliciter, and not a mortgage, or an agreement for a mortgage, then the right of the parties having such a charge is a sale and

not foreclosure.

Similarly, see Matthews v Goodday (1861) 31 LJ Ch 282. It is clear from these two cases that a mere equitable chargee’s inability to foreclose follows from the absence of any agreement to give a legal mortgage or any estate in him: see also Re Owen [1894] 3 Ch 220; Shea v Moore [1894] 1 IR 158. The term ‘equitable charge’ is often used somewhat loosely (as is implied by Lord Hatherley above) and sometimes in special contexts (for example London County and Westminster Bank Ltd v Tompkins [1918] 1 KB 515) but these usages should not be confused with the strict usage. An equitable lien and an equitable charge are distinguishable only by their modes of creation, the former by implication of law, the latter by act of the parties. On creation they confer the same remedies (as to liens and charges and their creation, see Chapter 2).

Relationship between ss 90 and 91 21.19 Where particular state legislation defines ‘mortgage’ sufficiently broadly it appears that s 90 would apply to any equitable mortgage, charge or lien of or affecting land. (As to the definition of mortgage, see above.) It seems that a mortgagee on a charge or lien must be regarded as a ‘person entitled to redeem’ for the purpose of s 91(1) or a ‘person interested either in the mortgage money or in the right of redemption’ for the purpose of s 91(2) (above). However, if this is not the case the apparent width of operation of s 90 [page 580] may be restricted, as it is arguable that the opening words ‘order for sale’, as a matter of drafting, import a reference to s 91. If the opening words of that section were given a restricted interpretation, equitable charges and liens — which, by their nature cannot be redeemed — would be excluded. Thus it would be necessary to support an order for judicial sale of property subject to an equitable charge or lien by a vesting order in favour of the purchaser under provisions such as Trustee Act 1958 (Vic) s 56.

Although this interpretation of the relationship between ss 90 and 91 is open, their drafting does not seem to compel it. The fact that s 90 is specifically directed to the realisation of equitable securities and confers some useful powers in addition to the general power to vest appears to support its wide, independent, operation; as does the additional vesting power conferred by s 91(7). If the court wishes merely to empower a mortgagee under an equitable mortgage — when s 101 (UK and Victoria; for other state provisions see 20.6) does not operate to imply a power of sale in his mortgage — to sell, without retaining the degree of control associated with either making a vesting order or appointing a person to convey in favour of a purchaser, it would be appropriate to create a legal estate in the mortgagee under the equitable mortgage, for the purposes of a sale. The creation and vesting of the legal estate under s 90(1) enables a mortgagee on an equitable mortgage to sell because its remaining provisions both invoke the aid of s 101 (UK and Victoria; and see 20.6) and the legal estate. As to the former, by ‘deeming’ the mortgage to be made by deed, the precondition to the application of s 101, hence the implication of the statutory power of sale, is satisfied. The mortgagee’s command of the legal estate avoids the problems that may be encountered by a mortgagee on an equitable mortgage of a legal estate when the mortgage provides neither a power of attorney nor a declaration of trust in his (or a mortgagor’s) favour, as will enable him to deal with the legal estate (see s 104 UK and Victoria); and see 20.6, 20.50.

Priority 21.20 It should be noted that s 90(1) is expressed to be without prejudice to any encumbrance having priority to the equitable mortgage unless that prior encumbrancer consents to the sale. Thus the nature of any prior encumbrances will determine which order is appropriate under this subsection. For example, in the case of an equitable mortgage by deposit of title deeds (having no statutory power of sale under s 101 (UK and Victoria; and see 20.6)) with no prior encumbrances, any one of the three possible orders could be made. The choice would depend on the degree of control the court thought appropriate to retain. If there were a prior ranking equitable mortgage the court may order a sale subject to that prior encumbrance, in which case any

of the three orders could be made on this basis (an order for, in effect, a sale under s 101 would operate in this way: see ss 101(1)(a), 105 (UK and Victoria)). On the other hand, if a prior encumbrance is a legal mortgage the court’s ability to make orders would be restricted by the fact that the legal estate is outstanding, in the hands of a protected third party. Thus it would not be possible to create and vest a ‘legal estate in the land’ in the lender for the purposes of sale. However, the court would not be precluded from making a vesting order in favour of a purchaser or for the appointment of a person to convey the equity of redemption. See also the discussion of the ability of an equitable mortgagee of land to convey the legal estate in that land under the statutory power: ss 101(1), 104(1) (UK and Victoria); see 20.6, 20.50. Section 90 of the Victorian and UK legislation applies to an equitable mortgage made or arising before or after the commencement of the Act but not to a mortgage that has been overreached (Law of Property Act 1925 (UK) s 90(2); Property Law Act 1958 [page 581] (Vic) s 90(2)); and see Adams v Bank of New South Wales [1984] 1 NSWLR 285 as to the appropriate remedy in respect of mortgages overreached.

Exercise of statutory jurisdiction 21.21 The court’s power under s 91(2) (Victoria and UK) is discretionary, once it has arisen. Thus in Woolley v Colman (1882) 23 Ch D 169, Fry J said (at 173): … the section simply gives the Court power to direct a sale ‘on the request of the mortgagee, or of any person interested either in the mortgage money or in the right of redemption’. The only condition precedent is that request, and then the discretionary power of the Court arises.

See also Brewer v Square [1892] 2 Ch 111; cf Clarke v Pannell (1884) 29 Sol Jo 147. The discretion to direct a sale of mortgaged property under s 91(2) (Victoria and UK) is unfettered and may be exercised against a mortgagee’s wishes and notwithstanding that a large part of the mortgage debt would

remain unsecured and outstanding: Palk v Mortgage Services Funding plc [1993] Ch 330; [1993] 2 All ER 481. The mortgagee in that case had relied upon authorities such as the Privy Council decision in China and South Sea Bank Ltd v Tan [1990] 1 AC 536; [1989] 3 All ER 839 in relation to the sale of mortgaged property; in particular that (at AC 545; All ER 842): If the creditor chose to exercise his power of sale over the mortgage security he must sell for the current market value but the creditor must decide in his own interest if and when he should sell.

(It should be noted that the standard of care imposed by the English courts on a mortgagee in the exercise of the power of sale is higher than that imposed by the Australian courts, as a matter of general law: see 20.21ff.) Sir Donald Nicholls VC noted that a mortgagee owes some duties to a mortgagor in the exercise of his powers and that the law imposes some constraints of fairness: see [1993] Ch at 337–8; [1993] 2 All ER at 486–7. Continuing, the Vice Chancellor said (at Ch 338; All ER 487): In the present case Mortgage Services is exercising its rights over the house. It has obtained an order for possession, suspended at present. The company has embarked on a course of realisation: initially by letting the property, with a sale to follow. This course is likely to be highly prejudicial to [the mortgagor’s] financial position as borrower.

The prejudice arose because the rent received from the property was less than the interest under the mortgage that would be saved if the house were sold. In effect, the mortgagee was gambling on property prices improving, but at the mortgagor’s risk. Sir Donald Nicholls emphasised that the court’s discretion under s 91(2) was very broad. His Lordship said (at Ch 339; All ER 487–8): … an exercise by the court of its statutory power to direct a sale even against the wishes of Mortgage Services is not dependent on there first having been a breach of duty by the company. The discretion given to the court by s 91(2) of the 1925 Act is not hedged about with preconditions. The question on this appeal is how ought the court to exercise its discretion under the statute in the particular circumstances and against the background that a mortgagee owes at least some duties in law to a mortgagor on exercising his rights over the mortgaged property. That Mortgage Services is not, or may not be, in breach of any duty it owes Mrs Palk [the mortgagor] is only one of the circumstances to be taken into account.

Butler-Sloss LJ agreed, as did Sir Michael Kerr, who also delivered a judgment in which he emphasised the very wide scope of the court’s statutory power to order a sale. Further, his Lordship said that the power did not depend upon whether the mortgagee had taken some steps to exercise any rights over the property or whether the dissent of the mortgagee was based on

any statutory or contractual rights. The position is put very clearly that s 91(2) gives the court express power to override the dissent of the mortgagee and that this power is unrestricted: see [1993] Ch at 343; 2 All ER at 491. [page 582] The operation of NSW Act s 103(2) (which is reflected in s 91(2) of the Victorian and UK legislation) was considered by Young J in Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 at 379–80. Young J in that case was particularly concerned with the question whether or not the authorities dealt with a situation where there had been a pre-existing sale by the mortgagee which the court was asked to validate. On reviewing the authorities as to when a sale might be ordered (at 379–80) Young J said (at 380): This flavour seems to me to indicate that unless there is some apparent benefit to the mortgagor which is not there with a foreclosure, the court does not make an order for sale. This is borne out by the fact that the court does not make an order for sale if, owing to the value of the property, it would be a useless exercise, see Lloyds Bank Ltd v Colston (1912) 106 LT 420, or where the mortgagee is a statutory tenant, so that on a sale the property will not get anything like its market value: Silsby v Hollyman [1955] Ch 552. But here again, it is unwise to appear to lay down rules which fetter the court’s discretion, because if the mortgagor or a puisne mortgagee requests a sale and offers to pay into the court a sufficient sum to guarantee the mortgagee against loss, the order may still be made: Norman v Beaumont [1893] WN (Eng) 45; Cripps v Wood (1882) 51 LJ Ch 584.

The court may order a sale in an action on an equitable mortgage taken by a mortgagee who has no express or statutory power of sale: Oldham v Stringer (1884) 51 LT 895; see also s 101(1) (Victoria and UK). Prior to the Conveyancing Act 1881 (UK), a mortgagee on an equitable mortgage by deposit could not obtain an order for sale unless the mortgagee could prove an agreement to execute a legal mortgage: Oldham v Stringer, above. The plaintiff’s counsel in this case indicated that this was thought to be due to limitations in the corresponding provision of Chancery Procedure Act 1852 (UK) s 48, the original predecessor of this section: see also York Union Banking Co v Artley (1879) 11 Ch D 205. The true reason was probably that the courts were then adhering to the view that a bare equitable mortgage by deposit was merely a charge. It appears that there are no longer any inhibitions against a mortgagee on

an equitable mortgage, charge or lien obtaining orders under this section as in each case he is either ‘entitled to redeem’ (see above in relation to s 91(1)) or ‘interested either in the mortgage money or in the right of redemption’ (see also s 90). A person subject to an equitable charge, may, at least in Queensland, obtain an order for sale of the subject property under Queensland Act s 99, the equivalent of s 91: Worrell v Issitch [2001] 1 Qd R 570. Although there is wide discretionary power, ‘it is a discretion which must be exercised judicially’ (Merchant Banking Co of London v London and Hanseatic Bank (1886) 55 LJ Ch 479 at 480 per Chitty J) and having regard to the interests of all concerned and to what, in all the circumstances, was just and equitable, as appears from Palk v Mortgage Services Funding plc [1993] Ch 330; [1993] 2 All ER 481; and see Phillips v Hogg [2001] QSC 390 at [14] (per Mullins J) where [21.1] of the first Australian edition of this work was relied upon; but cf BBC Hardware Ltd v GT Homes Pty Ltd (SC (Qld), Thomas J, 17 December 1996, unreported). In the London and Hanseatic case, above, the first mortgagees brought an action for payment or foreclosure. The second mortgagees, with the support of the mortgagors, sought an order for sale under Conveyancing Act 1881 (UK) s 25(2), but delayed on the basis of evidence they adduced that the passing of the Manchester Ship Canal Act 1885 (UK) was likely to lead to an increase in the value of the mortgaged land. As the first mortgage security was insufficient it was held that it would be unjust to delay the sale on the basis of speculation that the value of the land may increase. The usual foreclosure judgment was made with a period of six months given for all parties to redeem. The [page 583] London and Hanseatic case is discussed by Sir Michael Kerr in Palk’s case at [1993] Ch 342–3; [1993] 2 All ER 490–1. A sale will not be ordered where there is no evidence of the value of the property: Smithett v Hesketh (1890) 44 Ch D 161 at 163; and see Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 at 380. A sale was also refused in

Hopkinson v Miers (1889) 34 Sol Jo 128 in circumstances where a mortgagor opposed an order for sale as the mortgaged property formed part of a family estate he was anxious to save. The important factors against exercising the discretion were that there was no evidence that the security was insufficient and there was direct evidence of the mortgagor’s solvency and that the mortgages would be paid off. Where there is a reasonable equity in the property, the court will prefer a sale to foreclosure, as it will usually be unwilling to give the mortgagee a windfall profit: see, for example, Twentieth Century Banking Corp Ltd v Wilkinson [1977] Ch 99; Rhymney Valley District Council v Pontygwindy Housing Association Ltd [1976] LS Gaz R 405. Provided the first mortgagee is secured against loss, the mortgagor or subsequent mortgagees should have the chance of obtaining the surplus likely to be realised upon a sale: Hurst v Hurst (1852) 16 Beav 372; 51 ER 822. Consequently, a sale may be ordered on the terms of the subsequent mortgagee or the mortgagor asking for it paying into court a sum sufficient to secure the first mortgagee against loss (Norman v Beaumont [1893] WN 45), and such terms will be required where the security is deficient, and the mortgagor’s expectation of a surplus is based only on a speculative rise in value: Hurst v Hurst, above; Merchant Banking Co of London v London and Hanseatic Bank (1886) 55 LJ Ch 479. A sale has been refused where the defendant requesting it would not give security: Cripps v Wood (1882) 51 LJ Ch 584. Where the mortgaged property was in several places, and could not be sold as a whole, and some part was more valuable than others, the risk of selling merely the most valuable part, and leaving the mortgagee saddled with the worthless part, was a good reason for refusing a sale requested by the second mortgagee: Provident Clerks’ Mutual, etc Association v Lewis (1892) 62 LJ Ch 89. Where the security is deficient, and it is not for the benefit of either party that the expense of a sale or attempted sale should be incurred, a sale will not be ordered: Lloyds Bank Ltd v Colston (1912) 106 LT 420; cf Palk v Mortgage Services Funding plc [1993] Ch 330; [1993] 2 All ER 481. Nor will a sale be ordered where vacant possession of the property cannot be given: Silsby v Holliman [1955] Ch 552; [1955] 2 All ER 373 (mortgagee

statutory tenant). The law was reviewed in Cheltenham and Gloucester Plc v Krausz [1997] 1 WLR 1558; [1997] 1 All ER 21, where the Court of Appeal held that neither s 91 nor any inherent power justified a court in ordering a sale of the mortgaged property in circumstances where the mortgagor was seeking to enter into possession in order to sell the property in which there was a negative equity.

Whether time to pay 21.22 Under s 91(2), it is a matter for the court’s discretion whether to allow time for repayment or redemption when ordering a sale. Where the property is very small and would probably prove an insufficient security, an order for immediate sale may be appropriate: see Oldham v Stringer (1884) 51 LT 895 (note the reference to this case, on this point, in Green v Biggs (1885) 52 LT 680 at 681 and Charlewood v Hammer (1884) 28 Sol Jo 710). The court may think it proper to direct an account to be taken of what is due on the mortgage and, on the amount being certified, order a sale: see Wade v Wilson (1882) [page 584] 32 Ch D 235. In that case an immediate sale was directed, but in other cases it has been thought appropriate to allow some further time for redemption: see Green v Biggs and Jones v Harris (1887) 55 LT 884 (three months, in both cases); and see Manton v Parabolic Pty Ltd [1985] 2 NSWLR 361 and 21.4. An order for sale may be postponed for a short time to give interested persons — for example tenants of the mortgaged property — who were not parties to the proceedings, a chance to redeem: Rhymney Valley District Council v Pontygwindy Housing Association Ltd [1976] LS Gaz R 405.

Conduct of the sale 21.23

The conduct of the sale will usually be given to the mortgagor since

it is to the mortgagor’s interest to obtain as high a price as possible: Davies v Wright (1886) 32 Ch D 220; Christy v Van Tromp [1886] WN 111. If the conduct of the sale is not given to the mortgagor it will usually be given to the mortgagee last in priority (Norman v Beaumont [1893] WN 45), but the first mortgagee may be given its conduct: Re Jordan (1884) 13 QBD 228; Hewitt v Nanson (1858) 28 LJ Ch 49. When the sale is to be conducted by the mortgagor he need not in general give security for the costs of the sale since he will himself be liable for them (Davies v Wright, above); but the court may require this to be done: Brewer v Square [1892] 2 Ch 111. However, there is no general rule that the mortgagor or a subsequent encumbrancer will be given conduct of the sale (Christy v Van Tromp, above; Watt v McMahon (1897) 14 WN (NSW) 99; Manton v Parabolic Pty Ltd, above); but compare the situation where a sale has already been negotiated by the mortgagor but the proceeds would not fully discharge the mortgage debt, in which case the mortgagee’s rights are of primary importance and will be protected by the court: see Cheltenham and Gloucester plc v Krausz [1997] 1 All ER 21 (CA). A sale may be made out of court, but the reserve price must be fixed in chambers and the purchase money paid into court: Woolley v Colman (1882) 21 Ch D 169; Davies v Wright, above; Brewer v Square, above. The reserve price should, if the mortgagee does not consent to the sale, be fixed at a sum sufficient, if practicable, to cover the amount due to the mortgagee (Woolley v Colman) (but with the emphasis on ‘if practicable’: see Palk v Mortgages Services Funding plc [1993] Ch 330; [1993] 2 All ER 481 (CA)). As to sales by order of court, see Cumberland Union Banking Co v Maryport Hematite Iron and Steel Co [1892] 1 Ch 92. Where the court has ordered the conduct of the sale by the mortgagor, circumstances may arise which lead a mortgagee on a puisne mortgage, concerned at the conduct of the sale, to make application under s 91(3). The court may decide that the conduct of the sale should be taken from the hands of the mortgagor, but decide that the first mortgagee, not the applicant, is the appropriate person to conduct the sale. It seems clear that a court would become more reluctant to interfere with the conduct of the sale as time elapsed; however, this may not affect its willingness to make other directions. The party having the conduct of the sale is not responsible for the fraud of other parties to the action who act as or engage ‘puffers’: Union Bank v Munster (1887) 37 Ch D 51.

It also appears that the court may, under these provisions, direct a sale of minerals apart from the surface or vice versa, but not mining leases: Stamford, Spalding and Boston Banking Co v Keeble [1913] 2 Ch 96, especially at 101–2. A part of the mortgaged property, sufficient to satisfy the amount due, may be ordered to be sold: Wade v Wilson [1882] 22 Ch D 235. There may be difficulties in ordering a sale in one lot of distinct portions of land subject to distinct mortgages: see Ross v The Victorian Permanent Property Investment and Building Society (1882) 8 VLR 254. It appears that an order for sale under s 91(2) may be made on an interlocutory application: Woolley v Colman (1882) 21 Ch D 169 at 173; also Brewer v Square [1892] 2 Ch 111. Generally, see Seton, Judgments [page 585] and Orders, 7th ed, pp 1842–8. On s 91(2) generally, see Twentieth Century Banking Corp Ltd v Wilkinson [1977] Ch 99. Quaere whether the applicant for sale must establish that he had a right to foreclose: Twentieth Century Banking Corp Ltd v Wilkinson; and see English Law Commission Working Paper No 99, Land Mortgages, HMSO, London, 1986, [3.53]ff; and English Law Commission Report No 204, Transfer of Land — Land Mortgages, [7.26]–[7.27].

Ancillary matters 21.24 Section 91(3) allows any defendant to an action in which a sale is sought to apply for an order directing the plaintiff to give security for costs. It also empowers the court to give the conduct of the sale to ‘any defendant’. It is, of course, a matter for the court’s discretion whether to give the conduct of the sale to a defendant applying under this subsection. It is clear from s 91(2) and (3) that the court maintains general control over any sale ordered, whether out of court or not: see also Supreme Court Rules, Ord 55 (Victoria), CPR 40.15–40.19 and Practice Direction 40D (UK). Hence, in the absence of any temporal restrictions in this subsection, there seems to be no reason why a defendant’s application could not be entertained at any time until the sale is completed and the proceeds properly distributed. An order for sale does not prevent the creditor pursuing other remedies, for

example presenting and prosecuting a bankruptcy petition against the mortgagor: Re Kelday; Ex parte Meston (1888) 36 WR 585. Sale may be ordered where it is the proper remedy (under Law of Property Act 1925 (UK) s 91 or its equivalents: see 21.12), though foreclosure only is sought, and though there is no right to foreclosure. Except under the statutory powers of the court, no sale can be made of mortgaged property as against a mortgagee with a paramount title, save with the mortgagee’s express consent: Wickenden v Rayson (1855) 6 De GM & G 210; 43 ER 1212. Otherwise the sale can only be subject to his mortgage. The course is to direct a sale, free from the mortgagee’s security if the mortgagee concurs, but subject to it if he does not. If the mortgagee is a party to the action, he will be required at once to consent or refuse: Jenkin v Row (1851) 5 De G & Sm 107; 64 ER 1039. As to the interest which will be allowed to the mortgagee, see Re Fowler; Bishop v Fowler (1922) 128 LT 620. As to the foreclosure in the case of successive mortgages, see 21.1, 22.5.

[page 586]

Chapter 22

Procedure on Foreclosure I

Generally Foreclosure generally II Parties to the Action The holder of the security Personal representatives Co-mortgagees Subsequent encumbrancers Notice received pending the action Owner of equity of redemption Collateral securities Trustee in bankruptcy Personal representatives and trustees Severance of title to property III The Pleadings and Course of the Proceedings The relief sought Matters to be proved The course of the proceedings IV The Judgment A. The Nature and Form of the Judgment General form of judgment

22.1 22.2 22.3 22.4 22.5 22.6 22.7 22.8 22.9 22.10 22.11 22.12 22.13 22.14

22.15

Price of redemption Delivery up of deeds Equitable mortgage Proof of subsequent encumbrances Successive mortgages Effect of redemption Mortgage by surety Judgment in respect of a sub-mortgage Mixed mortgages B. The Time Allowed for Payment Six months allowed to mortgagor Successive periods for payment Cases where only a single period was allowed Present practice C. Enlarging the Time for Payment and Opening the Foreclosure Relaxation as to time of payment Several enlargements may be granted

22.16 22.17 22.18 22.19 22.20 22.21 22.22 22.23 22.24 22.25 22.26 22.27 22.28

22.29 22.30

[page 587]

Reasons for enlargement Terms of enlargement Where right to redeem is in dispute Foreclosure on default at appointed time Conditions of reopening foreclosure Circumstances under which foreclosure reopened Opening foreclosure as of right

22.31 22.32 22.33 22.34 22.35 22.36 22.37

Suing mortgagor for payment Reopening foreclosure for fraud or collusion Not usually after acquiescence D. Discharge of Order Discontinuance E. Judgments for Sale Sale in lieu of foreclosure Security for expenses Conduct of sale Equitable interests bound F. Order Absolute for Foreclosure Motion for final order for foreclosure Attendance by agent Getting in legal estates Order for possession Delivery of the deeds in foreclosure Effect of foreclosure order V Torrens Title Land Non-curial procedure (except Queensland) Torrens procedure in detail Reopening the foreclosure Queensland position

22.38 22.39 22.40 22.41 22.42 22.43 22.44 22.45 22.46 22.47 22.48 22.49 22.50 22.51 22.52 22.53 22.54 22.55

I Generally Foreclosure generally 22.1 Note that the structure of this chapter is to examine in some detail the curial procedure for foreclosure and then at the end (22.52–22.55) to look at the administrative procedure that exists under the Torrens Acts of all

Australian jurisdictions except Queensland. As set out in Chapter 21, foreclosure is the means by which a mortgagee could deal with the land free from the fear that the mortgagor might at some future time claim to exercise the equitable right of redemption. Traditionally, the procedure for foreclosure was by suit in equity in which accounts were taken and a decree nisi made that unless the mortgagor paid the amount found to be due on accounts within a fixed time, more often than not, six months, the mortgagor would be forever precluded from asserting his right of redemption. [page 588] While curial proceedings are still the rule for foreclosure of general law mortgages and all mortgages in Queensland, foreclosure of Torrens mortgages except in Queensland is effected by an administrative procedure. Foreclosure proceedings are commenced in accordance with relevant court rules for equity proceedings involving the taking of accounts. Foreclosure actions by different plaintiffs in respect of different mortgages made by the same mortgagor may be consolidated: Holden v Silkstone and Dodworth Coal and Iron Co (1881) 30 WR 98; and see the provisions of relevant court rules. Care must be taken in foreclosure proceedings to name as parties all persons interested in the security or the equity of redemption whose title is inferior to the plaintiff as these people will be deprived of their interests on the decree for foreclosure becoming absolute.

II Parties to the Action The holder of the security 22.2 The person in whom the legal interest in the security becomes vested (and though the person is only a trustee for the persons entitled to the mortgagee money) is a necessary party to an action for foreclosure: Bartle v

Wilkin (1836) 8 Sim 238; 59 ER 95; Smith v Chichester (1842) 2 Dr & War 393 at 404. This is so whether the legal interest was vested originally by the mortgage (Wood v Williams (1819) 4 Madd 186; 56 ER 676) or by assignment (Wetherell v Collins (1818) 3 Madd 255; 56 ER 502); and the original mortgagee must be joined in an action by a sub-mortgagee: Norrish v Marshall (1821) 5 Madd 475; 56 ER 977. A trustee of the legal estate in the security having no adverse rights may properly be — and, to save expenses to the mortgagor, ought to be — a coplaintiff (Smith v Chichester) unless the trustee refuses, or is likely to refuse, and then he should be made a defendant: Browne v Lockhart (1840) 10 Sim 420; 59 ER 678. Such a person is a necessary party because a reconveyance will be required should the mortgagor redeem; and in the case of a judgment for foreclosure, because the legal interest is to be protected by the judgment. A transferee of a mortgage may bring the action (Platt v Mendel (1884) 27 Ch D 246 at 247), but the transferee is subject to the state of the accounts between the mortgagor and the mortgagee at the date of the transfer, and also to any equities then existing in favour of the mortgagor: see 14.1.

Personal representatives 22.3 On the death of the mortgagee without the mortgage having been transferred, and on the death of a transferee, the debt and security devolve upon the mortgagee’s personal representatives, who can institute foreclosure proceedings until they have transferred the mortgage to a beneficiary or a transferee for value (see 14.13); as to representation by trustees and personal representatives, see 33.4.

Co-mortgagees 22.4 Where there are co-mortgagees (as to co-mortgagees, see 11.2, 11.3) they may institute proceedings jointly, or, if some are unwilling to be joined as plaintiffs or have done some act precluding them from suing in that capacity, one can sue alone, provided he makes all the others defendants: Davenport v James (1847) 7 Hare 249; 68 ER 102; Remer v Stokes (1856) 4 WR 730; Luke v South Kensington Hotel Co (1879) 11 Ch D 121 (CA). Unless the advance is made on a joint account (as to which, see 14.13), the mortgagees are tenants in common of the mortgage money, and on the death of one, his representatives are necessary parties: Vickers v Cowell (1839) 1

Beav 529; 48 ER 1046. A mortgagee entitled to part only of the mortgage money cannot sue alone and obtain [page 589] foreclosure of a corresponding part of the mortgaged property: Palmer v Earl of Carlisle (1823) 1 Sim & St 423; 57 ER 169.

Subsequent encumbrancers 22.5 The first mortgagee or encumbrancer (Adams v Paynter (1844) 1 Coll 530; 63 ER 530; Tylee v Webb (1843) 6 Beav 552; 49 ER 939), or any subsequent one (Johnson v Holdsworth (1850) 1 Sim NS 106; 61 ER 41), whether of a legal estate (Adams v Paynter), or an equitable estate (Tylee v Webb), who commences an action for foreclosure or sale (Burgess v Sturges (1851) 14 Beav 440; 51 ER 356; Ormsby v Thorpe (1808) 2 Mol 503), must make every encumbrancer whose security is subsequent to his own a party to the action, in order that their successive rights of redemption may be preserved, and that they may be able to protect their interests on the taking of the accounts: see Graves v Wright (1842) cited in 1 Dr & War 193. Generally, persons interested in the entire equity of redemption, not being cestuis que trust who are represented by a trustee, are necessary parties. Thus, partners of the mortgagor, who have a right of pre-emption over the mortgagor’s mortgaged share, are necessary parties to an action to foreclose the security: Redmayne v Forster (1866) LR 2 Eq 467. Where debentures are a second charge and are not secured by a trust deed, it is necessary in an action by the first mortgagee to enforce his security, for all debenture holders to be defendants, or for an order to be made that one or more shall represent the class: Wallace v Evershed [1899] 1 Ch 891. In Griffith v Pound (1890) 45 Ch D 553 and Westminster Bank Ltd v Residential Properties Improvement Co Ltd [1938] Ch 639; [1938] 2 All ER 374, it was held that all the debenture holders must be joined: cf Re Wilcox & Co; Hilder v Wilcox & Co [1903] WN 64. If there are trustees the trustees will be made parties: Cox v Dublin City Distillery Co Ltd (No 3) [1917] 1 IR 203 (CA). Subsequent mortgagees need not be joined if they have disclaimed: Union Trustee Co of Australia Ltd v Exton [1937] QWN 51.

The converse proposition does not hold good, and as a prior mortgagee cannot be affected by the foreclosure action of a subsequent encumbrancer, he is not a proper or necessary party to it: Rose v Page (1829) 2 Sim 471; 57 ER 864; Slade v Rigg (1843) 3 Hare 35 at 38; 67 ER 286 at 287. Where prior encumbrances are to be discharged the rule ‘redeem up, foreclose down’ applies: see 21.1 and 22.5. Thus the second or other later encumbrancers may foreclose the mortgagor and those subsequent, without joining the encumbrancers prior to themselves; for the latter can suffer no damage. The subsequent mortgagees, it is true, are left without the opportunity of redeeming all who are prior to themselves in the same action; but this, however inconvenient, is not thought to be unjust towards those who, lending money upon encumbered estates, have a full knowledge of the state of the security: Rose v Page (1829) 2 Sim 471; Briscoe v Kenrick (1832) 1 LJ Ch 116; Richards v Cooper (1842) 5 Beav 304; 49 ER 595; and see Slade v Rigg (1843) 3 Hare 35; 67 ER 286. Under special circumstances, however, it may be necessary for the second mortgagee to join the first: see, for example, Lord Kensington v Bouverie (1852) 16 Beav 194; (1859) 7 HLC 557; 51 ER 752 (HL). Nor are the owners of prior encumbrances necessary parties to actions for sale of the estate by subsequent creditors, the sale being made subject to those encumbrances (Delabere v Norwood (1786) 3 Swan 144n; see 36 ER 809; Parker v Fuller (1830) 1 Russ & M 656), and a judgment creditor may proceed against a receiver and the owner of the estate, for satisfaction out of surplus rents by a former judgment directed to be paid to the owner, without making prior encumbrancers parties: Lewis v Lord Zouche (1828) 2 Sim 388; 57 ER 834. If a receiver of the general proceeds of the estate is asked for, the presence of the prior encumbrancers is necessary, since there is an interference with their interests (Gibbon v Strathmore (1841) cited in Calvert, Parties in Suits in Equity, [page 590] 2nd ed, W Benning & Co, London, 1847, p 16), unless, of course, the order is to be without prejudice to the prior encumbrancers. In an action by later encumbrancers against a receiver appointed by the prior encumbrancers, and

the mortgagor who had covenanted to keep down the encumbrances according to their priorities, the prior encumbrancers had to be joined: Ford v Rackham (1853) 17 Beav 485; 51 ER 1122; and see Re Lord Annaly; Crawford v Annaly (1891) 27 LR Ir 534. Where prior encumbrances are to be discharged, the rule ‘redeem up, foreclose down’ applies: see United Travel Agencies Pty Ltd v Cain (1990) 20 NSWLR 566 at 571; and see 21.1 and 21.3, also 22.5. The rule that subsequent encumbrancers are necessary parties applies to a judgment creditor who has obtained a charging order on the land of the debtor: Earl of Cork v Russell (1871) LR 13 Eq 210.

Notice received pending the action 22.6 If, pending the action, the plaintiff receives notice of a subsequent encumbrance, the owner thereof should be added as a defendant (see Moser v Marsden [1892] 1 Ch 487 at 490 (CA)), but where the plaintiff does not have notice, it may be stated, but (from the imperfect character of the early reports) with caution: 1.

That if the plaintiff obtains his judgment without having received notice, the judgment will bind the subsequent encumbrancer as to the accounts, if taken bona fide, but not his right of redemption: Cockes v Sherman (1676) Freem Ch 13; 22 ER 1026; and semble in Lomax v Hide (1690) 2 Vern 185; 23 ER 721; and Godfrey v Chadwell (1707) 2 Vern 601; 23 ER 993, but Morret v Westerne (1710) 2 Vern 663; 23 ER 1031, seems contra as to accounts. In Greswold v Marsham (1685) 2 Cas in Ch 170; 22 ER 898, a judgment creditor was held to be bound, because he had not given notice of his encumbrance. He may, however, be joined even after judgment is pronounced: Keith v Butcher (1884) 25 Ch D 750; Re Parbola Ltd, Blackburn v Parbola Ltd [1909] 2 Ch 437, following Campbell v Holyland (1877) 7 Ch D 166.

2.

Collusion or other fraud will give the subsequent encumbrancer a right to open the accounts also, upon his stating particular errors (see 39.3); but not a right to unravel them upon general charges of fraud and collusion, if the fraud and collusion are denied (Needler v Deeble (1677) 1 Cas in Ch 299; 22 ER 810; Cockes v Sherman, above), and the fraudulent or vexatious conduct of the mortgagor, if he should create

subsequent encumbrances with the view of shielding himself from foreclosure, will excuse the mortgagee from making the owners of such securities parties to the action: Yates v Hambly (1742) 2 Atk 237; 26 ER 547; and see Smith v Chichester (1842) 2 Dr & War 393 at 404.

Owner of equity of redemption 22.7 The judgment in a foreclosure action gives to all persons interested in the equity of redemption the opportunity of redeeming. In default of their doing so they are foreclosed. Hence all such persons must be parties, or be sufficiently represented by persons who are parties: Tylee v Webb (1843) 6 Beav 552 at 557; 49 ER 939 at 941; Gedye v Matson (1858) 25 Beav 310; 53 ER 655; Caddick v Cook (1863) 32 Beav 70; 55 ER 27; Griffith v Pound (1890) 45 Ch D 553 at 567. As to foreclosure where there are rights of contribution and indemnity between co-mortgagors, see Gee v Liddell [1913] 2 Ch 62. The mortgagor himself (while owner, or the owner for the time being, of the equity) or, if the equity of redemption is held jointly, all the joint owners must be parties, and where a second mortgagee sues to redeem the first mortgagee, the mortgagor is a necessary party, since on redemption the action will become a foreclosure action against him: see 33.3. [page 591] The original mortgagor is not a necessary party to an action for foreclosure between a sub-mortgagee and sub-mortgagor (see Seton’s Judgments and Orders, 7th ed, Stevens & Sons, London, 1912, p 2011); but where a submortgagee seeks to foreclose the original mortgagor, the original mortgagee must be joined: Hobart v Abbot (1731) 2 P Wms 643; 24 ER 897.

Collateral securities 22.8 The mortgagor of another property as a collateral security is a necessary party to an action for foreclosure against the principal mortgagor by virtue of the mortgagor’s right to redeem, and thereby to prevent his own estate from being burdened to a greater amount than the estate of his principal is insufficient to satisfy (Stokes v Clendon (1790) 3 Swans 150n; 36 ER 812; Gee v Liddell [1913] 2 Ch 62; Re a Debtor (No 24 of 1971); Ex parte Marley

v Trustee of Property of Debtor [1976] 2 All ER 1010; [1976] 1 WLR 952; Re Thompson (1976) 8 ALR 479), and similarly, where a mortgage of the estate of a married woman is in effect a security for the husband’s debt (as to which, see 30.7), the husband is a necessary party: see Hill v Edmonds (1852) 5 De G & Sm 603; 64 ER 1262; and 22.22. However, the surety is not a necessary party, where he is bound by a personal covenant only, unless he has paid off part of the debt: Newton v Earl of Egmont (1831) 4 Sim 574; 58 ER 215; Gedye v Matson (1858) 25 Beav 310; 53 ER 655.

Trustee in bankruptcy 22.9 The official receiver, or trustee under the bankruptcy of the mortgagor, is the proper party to actions in respect of the mortgagor’s interest, and the bankrupt will be bound by a judgment against the mortgagor. Hence the mortgagor should not be made a party (see Kerrick v Saffery (1835) 7 Sim 317; 58 ER 859), not even if charges of fraud or other charges are made which are not particularly directed to matters on which relief is sought: Lloyd v Lander (1821) 5 Madd 282; 56 ER 903. However, if the mortgagor has parted with his interest before the bankruptcy, the trustee should not be joined. Hence the trustee should not be joined in respect of an estate of which the equity of redemption was settled by the mortgagor for valuable consideration before his bankruptcy: Steele v Maunder (1844) 1 Coll 535; 63 ER 532. If the trustee absolutely disclaims and states that he is ready to have the equity released, and that all the estate had been distributed, the trustee should not be brought to the hearing; it is otherwise if, by the disclaimer, the trustee admits having an interest in the estate: Thompson v Kendall (1840) 9 Sim 397; 59 ER 411; Collins v Shirley (1830) 1 Russ & M 638; 39 ER 245; see Melbourne Banking Corp v Brougham (1879) 4 App Cas 156 (PC). If the mortgagee has valued his security, the trustee can redeem at the valuation and the order must show this: Knowles v Dibbs (1889) 37 WR 378. The form of the order may allow for an amendment of proof: Hayes and Harlington UDC v Williams’ Trustee [1936] Ch 315. A bankrupt cannot appeal even though a right of redemption has been given him by the judgment, and it is alleged that there is a surplus: Re Leadbitter (1878) 10 Ch D 388 (CA); Re Austin; Ex parte Sheffield (1879) 10

Ch D 434 (CA); and see Re a Debtor; Ex parte Debtor v Dodwell (Trustee) [1949] Ch 236; [1949] 1 All ER 510.

Personal representatives and trustees 22.10 On the death of the mortgagor (or, where the equity of redemption has been transferred, on the death of the transferee) the mortgaged property devolves upon the mortgagor’s personal representatives, who are necessary parties, unless the property has by assent or conveyance by the personal representatives become vested in some other [page 592] person. The personal representatives must be parties if the mortgagee is asking for a sale of the property and the security is deficient: see Daniel v Skipwith (1787) 2 Bro CC 155; 29 ER 89. Trustees, executors and administrators sufficiently represent the trust estate, or the estate under administration, and if this includes the equity of redemption it is generally unnecessary to join any of the beneficiaries as defendants, as to which see relevant court rules. Where there has been a settlement of the equity of redemption, the fee simple subject to the mortgage term may be vested in the tenant for life, or, where there is no tenant for life or the tenant for life is an infant, in the statutory owners, who hold on trust for all persons beneficially entitled. It will, therefore, be sufficient to bring the holder of the legal estate before the court in the first instance, and, if necessary, directions for adding other parties will be given: see 33.4.

Severance of title to property 22.11 If two properties are mortgaged, and the mortgagor afterwards mortgages the equity of redemption of one of them to a second mortgagee, and sells that of the other to a third person, the original mortgagee in foreclosing must bring forward both the second mortgagee and the purchaser; for he cannot foreclose either of the properties alone, each being equally liable to the debt. It is also incumbent on the mortgagee, where the equity of

redemption has been sold in lots, to proceed against all the purchasers: Peto v Hammond (1860) 29 Beav 91; 54 ER 560. As to an allegation by the purchaser that he is assignee for valuable consideration without notice of the mortgage, see Payne v Compton (1837) 2 Y & C Ex 457; 160 ER 476; and see Hall v Heward (1886) 32 Ch D 430 (CA). The rule is the same where the mortgagee holds securities upon distinct properties, and even for distinct debts of the mortgagor (where there is a right to consolidate), whether the securities are by the same or by different instruments: Ireson v Denn (1796) 2 Cox Eq Cas 425, and see Payne v Compton. The corresponding paragraph of the English edition of this work was quoted in Rushton v Industrial Development Bank (1973) 34 DLR (3d) 582 (SC of Canada).

III The Pleadings and Course of the Proceedings The relief sought 22.12 Where the mortgagee is suing for foreclosure only, the claim is that an account may be taken of what is due to him on the mortgage, which must be specifically described, for principal, interest and costs, and that the mortgage may be enforced by foreclosure. For forms, generally, see Atkin’s Court Forms, 2nd ed, Butterworths, London, 1999, vol 28, Mortgages. It is usual to ask for a sale in the alternative to foreclosure but though foreclosure only is claimed, the court may direct a sale: Property Law Act 1958 (Vic); Law of Property Act 1925 (UK) s 91; see 21.12. Payment under the covenant for payment may be claimed and in default of payment foreclosure or sale: Dymond v Croft (1876) 3 Ch D 512; Farrer v Lacy, Hartland & Co (1885) 31 Ch D 42 (CA). If the mortgagee is in possession, the mortgagor will ask for an account of rents and profits received (see 39.28) and for the allowance of any special expenses: see 40.22. If the mortgagee is not in possession, he may claim delivery of possession, but this is not necessary: for the difference between a genuine foreclosure action and a disguised possession action, see Manchester Unity Life Insurance Collecting Society Trustees v Sadler [1974] 2 All ER 410; [1974] 1 WLR 770; cf Lord Marples of Wallasey v Holmes (1975)

[page 593] 31 P & CR 94. An action for foreclosure includes a claim for possession, and delivery of possession may be ordered as against the mortgagor though not included among the relief sought (Manchester and Liverpool Bank v Parkinson (1889) 68 LT 258), notwithstanding that the mortgagor does not appear: Salt v Edgar (1886) 54 LT 374. It will not, however, be ordered ex parte where not asked for by the summons: Le Bas v Grant (1895) 64 LJ Ch 368. An order for possession may be made after foreclosure absolute (Keith v Day (1888) 39 Ch D 452 (CA)), although not asked for by the summons: Jenkins v Ridgley (1893) 41 WR 585. Immediate payment will not be directed on a motion for judgment in default of pleading if the statement of claim asks for an account: Faithfull v Woodley (1889) 43 Ch D 287; Beath v Armstrong (1910) 16 ALR 581. Where the mortgage is an equitable mortgage by deposit the mortgagee may claim in the first instance that he is entitled to be considered as being a legal mortgagee: Marshall v Shrewsbury (1875) LR 10 Ch App 250 at 254.

Matters to be proved 22.13 The affidavit in support of the originating process should contain the following matters: full particulars of the mortgage (a true copy of the mortgage should be exhibited to the affidavit), and the circumstances, including the date, the sum or sums (including further advances) secured, the rate of interest, the amount due, the proviso for redemption or cesser, and any relevant covenants or stipulations; all transfers and devolutions; and all material facts, such as taking of possession by the mortgagee or the appointment of a receiver. In England, affidavits of due execution of mortgages or charges are no longer required on applications for foreclosure nisi unless the court directs otherwise: Practice Direction [1969] 2 All ER 639; [1969] 1 WLR 974. If possession is claimed the mortgaged property should be sufficiently described in order that a writ of possession may be completed so as to enable the sheriff to identify the property: Thynne v Sarl [1891] 2 Ch 79.

The course of the proceedings

22.14 Provided that the court is satisfied that the proper parties have been joined and that the plaintiff is entitled to relief, the judge will refer the matter to a master or other official to take accounts. The taking of the account is necessary even though the defendant does not appear; the taking of an account is required before a final order for foreclosure will be made: National Bank of Australasia v Cohen (1896) 22 VLR 269. However, a consent order may be made if the debt exceeds the value of the property and there is no subsequent encumbrancer: Bakker v Chambri Pty Ltd (1986) 4 BPR 9234; and see also Permanent Trustee Co of New South Wales Ltd v Martin (No 2) (1905) 22 WN (NSW) 76. Once the accounts have been certified, a period of three or six months will be allowed for redemption. Redemption is effected by paying the amount certified plus costs. If no one does so, a notice of motion is filed for final order before the judge. In some jurisdictions the motion is ex parte: see Atkin’s Court Forms, 2nd ed, vol 28, p 129. The final order for foreclosure can then be made and entered. There is no requirement that a foreclosure nisi certificate or a foreclosure order absolute should be served on the mortgagor: Lancashire and Yorkshire Reversionary Interest Co Ltd v Crowe (1970) 114 Sol Jo 435; and see Bank of New South Wales v Browne (1906) 23 WN (NSW) 24. For costs, see Chapter 40. Details of the procedure appear in the succeeding paragraphs. [page 594]

IV The Judgment A. The Nature and Form of the Judgment General form of judgment 22.15 In an action for foreclosure or sale the judgment is prefaced by a declaration that the security is valid, where this has been in dispute: Holmes v Turner (1843) 7 Hare 367n; 68 ER 151 and form; Faulkner v Daniel (1843) 3

Hare 199; 67 ER 355, establishing judgment debt; Carlon v Farlar (1845) 8 Beav 526; 50 ER 206. It declares, where necessary, the rights and priorities as well of the several encumbrancers as of any person who has a paramount claim on the property (Jones v Griffith (1845) 2 Coll 207; 63 ER 702); and after providing for other incidental matters, it directs that the accounts be taken (for form of foreclosure judgment by consent without account, see Boydell v Manby (1852) 9 Hare App I liii; 68 ER 788; for accounts, see 39.10ff), and where necessary, that rests be made against a mortgagee in possession (see 39.36), and that the sum due from him on account of his receipts be applied in payment first of interest and then of principal: see Thorneycroft v Crockett (1848) 2 HL Cas 239; 9 ER 1082; and see 32.51. As to form where a receiver has been in receipt of rents and profits, see Simmons v Blandy [1897] 1 Ch 19. A consent order may be made if the debt exceeds the value of the property and there is no subsequent encumbrance: Bakker v Chambri Pty Ltd (1986) 4 BPR 9234. For forms of order, see Atkin’s Court Forms, 2nd ed, vol 28, Mortgages. To the amount due to each mortgagee in respect of his own debt, are added all sums which may have been paid for the redemption of preceding encumbrancers, or to which he may be declared to be entitled for improvements (see 19.38), or for payments in respect of or for the protection of his security, or of the property: see 19.39. The mortgagor, when an order for personal payment has been claimed against him, will then be ordered to pay the debt to the mortgagee within a limited time, usually six months from the date of the master’s certificate or a certificate of a similar court officer, depending on the court rules (Platt v Mendel (1884) 27 Ch D 246; and see Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 at 379–80 (Young J); Charters v The Cosmopolitan Land Banking Co Ltd (1902) 28 VLR 251; Beath v Armstrong (1910) 16 ALR 581; Overlack v Martin [1955] QWN 56), and upon his doing so, the mortgagee will be ordered to reconvey to the mortgagor, when a conveyance is necessary, and to deliver to the mortgagor all deeds and documents relating to the property. The same course is followed as to any other person entitled to redeem, but who is not liable to an order for personal payment, upon payment of the sum found due. If the mortgagor is entitled to a set-off, the court may give the mortgagor the benefit of his set-off, and, upon payment by him into court of the principal and interest, the foreclosure may be suspended until

both accounts have been taken: Dodd v Lydall (1842) 1 Hare 333; 66 ER 1060. Where the mortgage debt is payable by instalments, the order will direct payment of the amount certified to be already due, and will declare, if necessary, that the mortgagee has a charge in respect of the unpaid instalments; and will give the mortgagee liberty to apply in chambers for the purpose of giving effect to it: Greenough v Littler (1880) 15 Ch D 93; Nives v Nives (1880) 15 Ch D 649. In England, in order to avoid unnecessary expense in the preparation of documents for reconveyance should the mortgagor fail to redeem, the order must provide (1) that the mortgagor must give seven days’ clear notice of his intention to attend and redeem, and (2) that if no such notice is given but the mortgagor in fact attends at the appointed time [page 595] and place then at the option of the mortgagee the time for redemption must be extended for one week: Practice Directions [1955] 1 All ER 30; [1955] 1 WLR 36. On non-payment by the person who was ordered, or was declared to be at liberty to pay, he is directed to be foreclosed whether the mortgage is legal or equitable; with the addition, in the case of an equitable mortgage, that a conveyance is to be executed by the mortgagor to the mortgagee (see Dymond v Croft (1876) 3 Ch D 512; Greenough v Littler, Lees v Fisher (1882) 22 Ch D 283), but it seems that if, for any reason, the judgment to account, instead of being made in the usual manner, proceeds upon the undertaking of the mortgagor to pay what shall be found due, the mortgagee, relying upon this undertaking, cannot avail himself of the right to foreclose if default is made in the payment: Dunstan v Patterson (1847) 2 Ph 341; 41 ER 974. As to the order where, in an action by a mortgagee of shares in a company to enforce his security, the company unsuccessfully disputes the security on the ground that the shares have been forfeited for non-payment of calls, see Watson v Eales (1857) 23 Beav 294; 53 ER 115. However, in case

of non-payment by the person who was ordered or was declared to be at liberty to pay where that person is plaintiff in an action for redemption, his action will be dismissed, and this will have the effect of foreclosure: see 33.25.

Price of redemption 22.16 Whether the action be one for foreclosure by the mortgagee or for redemption by the mortgagor (see 33.1), the price of redemption is the same: Du Vigier v Lee (1843) 2 Hare 326; 67 ER 134; Watts v Symes (1851) 1 De GM & G 240; 42 ER 544. Each party, according as he may be plaintiff or defendant, may be subject to particular equities arising out of these characters, but no distinction is made, as to the course and order of redemption, between an action in which the owner is seeking to clear his estate from encumbrances, and one in which the first (Barnes v Fox, LC (1776) A 608, in Seton’s Judgments and Orders, 7th ed, p 1907), or a subsequent (Jackson v Brettall, MR (1795) A 241, in Seton, above, p 1908) mortgagee is seeking to get possession of the estate in satisfaction of his debt, and though the mortgagee submits to depart from the common form of the judgment in one particular (as if it directs an account, and then reserves further consideration, instead of the usual order for payment or foreclosure), yet he retains his right to have the further order made in the usual form: Dunstan v Patterson (1847) 2 Ph 341; 41 ER 974. See observations in Watts v Symes (1851) 1 De GM & G 240 at 242; 42 ER 544.

Delivery up of deeds 22.17 The order further provides that on a receipt under the equivalent of Law of Property Act 1925 (UK) s 115 (see, for example, NSW Act s 91; Victorian Act s 115), the deeds shall be delivered up. Where the person redeeming is a later mortgagee and the judgment is for personal payment by the mortgagor, the plaintiff mortgagee will also be directed to assign the benefit of the judgment to the redeeming party, with liberty to enforce it in the name of the plaintiff upon giving the plaintiff a sufficient indemnity: Greenough v Littler (1880) 15 Ch D 93. If the mortgagee is in possession, it is also proper to add that the mortgagee shall deliver possession of the mortgaged estate: Yates v Hambly (1742) 2 Atk 360; 26 ER 618; Arthur v Higgs (1856) and Evans v Kinsey (1855) in Seton, Judgments and Orders,

7th ed, p 1887. As to the practice where the mortgagee refuses a proper tender, see Bank of New South Wales v O’Connor (1889) 14 App Cas 273 at 283 (PC). The judgment finally directs that, in default of payment, the person to whom the right to redeem was given shall be foreclosed, and, if possession is claimed, that the mortgagor shall forthwith deliver possession to the mortgagee: Wood v Wheater (1882) 22 Ch D 281. The court has jurisdiction to order possession even where it is not asked by the writ, pleadings or originating summons: Salt v Edgar (1886) 54 LT 374; see 22.12 and 22.49. [page 596]

Equitable mortgage 22.18 Where the security is equitable, the mortgagee upon redemption is ordered to deliver up all deeds, etc in the mortgagee’s custody relating to the estate, to the person redeeming; but in the case of non-payment, the party making default is ordered to convey or surrender to the mortgagee, free from encumbrances: Holmes v Turner (1843) 7 Hare 367n; 68 ER 151; Footner v Sturgis (1852) 5 De G & Sm 736; 64 ER 1322; Pryce v Bury (1853) 2 Drew 41; 61 ER 633. In default of compliance, a vesting order will be made (as to vesting orders, see 32.79); or if a sale is directed, the proceeds are ordered to be paid to the credit of the action, to be applied as the judgment directs, or, if no directions are given, there is liberty to apply. A vesting order may be made in favour of the purchaser, or the court may create and vest in the mortgagee a legal estate in the land to enable him to carry out the sale: see Victorian Act s 90; English Act s 90; and other corresponding provisions, see 21.6. Where the estate has already been sold by the mortgagee under the mortgagee’s power of sale, see Re Smith’s Mortgage Account (1861) 9 WR 799. Where the mortgagor was a company, and it had been dissolved before conveyance, a vesting order could be obtained: Re Nos 56 and 58, Albert Rd, Norwood [1916] 1 Ch 289; see now, for example, Victorian Act s 179 and English Act s 181; Re Wells; Swinburne-Hanham v Howard [1933] Ch 29 (CA); Re Strathblaine Estates Ltd [1948] Ch 228; [1948] 1 All ER 162.

Proof of subsequent encumbrances

22.19 In a foreclosure action by the first mortgagee, if he proves the subsequent encumbrances, he may at once have an order for redemption or foreclosure against the owners of them, according to their priorities. If the subsequent encumbrances are not proved or admitted, or if their priorities are disputed, the course is to direct an inquiry upon these questions: Guardner v Boucher (1850) 13 Beav 68; 51 ER 26. There will be no order until the securities have been established and the priorities of the respective encumbrances ascertained (Duberly v Day (1851) 14 Beav 9; 51 ER 190), for the encumbrancers cannot be excluded or postponed without a declaration of their rights by the judgment.

Successive mortgages 22.20 Where there are successive mortgages, the judgment proceeds upon the principle that the second mortgagee, as the first assignee of the equity of redemption, fills the place and acquires the rights of the mortgagor: see Palk v Mortgage Services plc [1993] Ch 330 at 342; [1993] 2 All ER 481 at 490, citing the corresponding part of the 10th English edition of this work. Thus, in taking the account the second mortgagee may assert such equity as the mortgagor might have to exclude any particular item: Mainland v Upjohn (1889) 41 Ch D 126. The second mortgagee has, therefore, the first right to redeem, upon payment of what is due to the first mortgagee; but, in default of payment, is foreclosed. The second mortgagee being thus removed out of the way, an account is taken of the first mortgagee’s subsequent interest and costs, and upon payment thereof, with the amount originally found due, the third mortgagee may redeem him, and in default he in turn is foreclosed; and this process is carried on as to all the successive encumbrancers, until the mortgagor or ultimate owner of the equity of redemption alone remains, when he may in like manner redeem, and in default stands foreclosed; and then the property remains to the first mortgagee, free from all encumbrances. In Bingham v King (1866) 14 WR 414, a later mortgagee, who verified the amount of the mortgage debt by affidavit, obtained an order for payment, without taking a formal account, out of surplus proceeds of sale paid in by the first mortgagee; creditors, however, being allowed time to dispute the account.

[page 597] Where there are several encumbrancers, and the mortgagor’s action for redemption is dismissed (which is generally equivalent to foreclosure: see 33.25), the last encumbrancer becomes quasi mortgagor, and the others become first and subsequent encumbrancers according to their priorities: Cottingham v Earl of Shrewsbury (1843) 3 Hare 627; 67 ER 530. As to whether successive periods for redeeming will be allowed to the successive encumbrancers, or whether one time only will be limited for redemption, see 22.26.

Effect of redemption 22.21

The following assumptions have been made.

First, that none of the successive encumbrancers has exercised their rights of redemption, but that the judgment provides for the exercise of these rights by directing that, in case the second mortgagee shall redeem the first, an account shall be taken of what is due to the person so redeeming on his own security, and for what that mortgagee shall have paid the first mortgagee, with interest thereon (see 39.54), and costs. Upon payment of the aggregate of these sums, the third mortgagee has liberty to redeem the second, in default of which the mortgagee is foreclosed according to the process first pointed out; and a further account having been taken of what is due to the second mortgagee in respect of his own debt, and of his payments, the next encumbrancer, or, if there is none, the mortgagor, will be at liberty to redeem. Second, that if the third mortgagee shall have redeemed the second, an account is taken of what is due to the third, in respect of his security, and of what he has paid; and he may be redeemed by the next encumbrancer, or by the ultimate owner of the equity of redemption. Finally, that upon non-payment to the last person to be redeemed of what he shall have paid to the prior encumbrancers, and of his own principal, interest and costs, the owner of the equity stands absolutely foreclosed, and the property, as before, remains in the hands of such one of the encumbrancers as has cleared off the rest, free from all the debts which affected it.

As to costs where an intermediate mortgagee redeems the first, who also holds a later mortgage, see Mutual Life Assurance Society v Langley (1886) 32 Ch D 460 (CA). As to an action by a later mortgagee of two estates, subject to separate mortgages, see Pelly v Wathen (1849) 7 Hare 351–63; 68 ER 144–50; on appeal (1851) 1 De GM & G 16; 42 ER 457; Hallett v Furze (1885) 31 Ch D 312.

Mortgage by surety 22.22 Where a principal debtor and a surety has each mortgaged his property, the judgment is so framed as to give the surety the full benefit of the surety’s rights against the property of the principal debtor, and the right of redemption being given to both, it is ordered that if the money is paid by the principal debtor, the properties shall be conveyed to their respective owners; but if by the surety, both properties are conveyed to him, and he, of course, holds that which belongs to his principal, subject to redemption by him. If neither principal nor surety redeems, the equities of both their properties are foreclosed: Beckett v Micklethwaite (1821) 6 Madd 199; 56 ER 1067; Seton’s Judgments and Orders, 7th ed, p 2088. See Aldworth v Robinson (1840) 2 Beav 287; 48 ER 1191, which also provides for redemption as between the principal and the surety. For an order where a wife and husband had mortgaged her estates for the husband’s debts, and, after a second security on the whole property to another encumbrancer, the husband became insolvent, see Hill v Edmonds (1852) 5 De G & Sm 603; 64 ER 1262. The estate of the husband or wife, as the case may be, will be indemnified out of the estate of the other of them for whose benefit the money was raised: Wilkinson v Beale (1823) 1 LJ OS Ch 89; Gray v Dowman (1858) 27 LJ Ch 702; and see 30.7. [page 598] For form of order where the mortgagee had a mortgage of property belonging to A and B for money advanced to them in different proportions, and another mortgage of the separate property of A, and of his interest in the joint property, to secure his separate debt, see Higgins v Frankis (1846) 10 Jur 328.

As no relief will be given against a surety beyond the express terms of his contract, his mortgage of a reversionary interest will not be subject either to sale or foreclosure, if its operation is limited to the application of the proceeds when it falls into possession: Stamford Spalding and Boston Banking Co v Ball (1862) 4 De GF & J 310; 45 ER 1203.

Judgment in respect of a sub-mortgage 22.23 Where a security is a sub-mortgage (W being the mortgagor, H the mortgagee, and K the sub-mortgagee) and a foreclosure action is brought by K against H and W, the judgment directs an account of what is due to H, and then of what is due to K. Upon payment to K of the sum due to him, not exceeding the sum due to H, and on payment of any residue to H, each will give a statutory receipt. In case of default W is foreclosed, and then, after the computation of subsequent interest and costs due to K, and payment to him of the whole amount due to him by H, he will give a statutory receipt. In default H will be foreclosed: Seton’s Judgments and Orders, 7th ed, p 2009; see also pp 2010, 2011. Directions to give statutory receipts have been substituted above for the former directions to convey.

Mixed mortgages 22.24 Where the mortgage is of land, and there is also a simple assignment of stock or other personal chattels, or of a policy of assurance, the proper order is for sale of the chattel security in the first instance, and then for foreclosure in respect of the deficiency; lest by taking the land first, the foreclosure should be opened by the subsequent sale of the policy. For forms of judgment on mortgages of stock and chattels, see Seton’s Judgments and Orders, 7th ed, pp 1923ff; and on a mortgage by one of the partners in a mine where the other partners have a right of pre-emption, see Redmayne v Forster (1866) LR 2 Eq 467. For judgment on a mortgage of a pension, see James v Ellis [1870] WN 269; 24 LT 12; Seton’s Judgments and Orders, 7th ed, p 1925. Where the assignment of the policy is followed by provisions which indicate that the mortgagee shall have the benefit of the policy moneys, foreclosure only may be ordered (Dyson v Morris (1842) 1 Hare 413; 66 ER 1092); though this would be liable to be opened, if the mortgagee should afterwards resort to the moneys to become payable on the policy (which he

was allowed to retain for that purpose) to cover the amount for which the estate might be insufficient. Hence, where a mortgage of a policy or other future thing in action is made as a collateral security, no provisions should be inserted which may affect the mortgagee’s right to an immediate sale of the thing in action, and thereby abridge the remedy against the primary security also, and see 22.36. As to bringing the value of the collateral security into account, see De Lisle v Union Bank of Scotland [1914] 1 Ch 22 (CA).

B. The Time Allowed for Payment Six months allowed to mortgagor 22.25 It is the practice to allow the mortgagor six months for payment, the period being reckoned from the date of the master’s certificate (or a certificate of a similar court officer, depending on the court rules) fixing the amount of the debt: Platt v Mendel (1884) 27 Ch D 246 at 248. [page 599] A shorter period for redemption, for example three months, may be ordered (Bakker v Chambri Pty Ltd (1986) 4 BPR 9234), particularly if the mortgagor has failed to appear: Beath v Armstrong (1910) 16 ALR 581; Overlack v Martin [1955] QWN 56. The court may extend the period: see Permanent Trustee Co of NSW Ltd v Martini (No 2) (1905) 22 WN (NSW) 76. The certificate must nominate a place of redemption. A similar practice is usually followed to that contained in the English Practice Direction [1955] 1 All ER 30; [1955] 1WLR 36. The equitable, as well as the legal, mortgagee has a right to this time under the ordinary process of the court, whether the judgment is for foreclosure or sale (Parker v Housefield (1834) 2 My & K 419; 39 ER 1004; Price v Carver (1837) 3 My & Cr 157 at 163; 40 ER 884 at 886; King v Leach (1842) 2 Hare 57; 67 ER 24; Lister v Turner (1846) 5 Hare 281 at 293; 67 ER 919; Lloyd v Whittey (1853) 17 Jur 754; 22 LJ Ch 1038); and although the security is given for a debt which does not carry interest: Meller v Woods (1836) 1 Keen

16; 48 ER 212. Under the statutory jurisdiction to order a sale, less than six months may be given, or an immediate sale may be directed.

Successive periods for payment 22.26 Where there are later encumbrancers the right to redeem is exercisable by them in succession, and ultimately by the mortgagor. Formerly it was the practice to give the encumbrancers successive periods within which to redeem; six months for the first, and successive periods of three months each for those subsequent to the first (see Titley v Davies (1743) 2 Y & C Ch Cas 399n; 63 ER 177; Beevor v Luck (1867) LR 4 Eq 537; Lewis v Aberdare and Plymouth Co (1884) 53 LJ Ch 741); and apparently a final three months after the last encumbrancer’s time for payment was allowed to the mortgagor (Seton’s Judgments and Orders, 7th ed, p 1907), although the mortgagor should not, by encumbering the equity of redemption, obtain a further right to redeem: Platt v Mendel (1884) 27 Ch D 246 at 248. However, this rule was not applied in certain cases, and as to those to which it was applied, it is either obsolete, or it is applied only under special circumstances.

Cases where only a single period was allowed 22.27 The rule did not, and does not now, apply where there are several judgment creditors entitled to a charge on land, and they were allowed only a single period of three months, as if their judgments formed one encumbrance only: Radcliff v Salmon (1852) 4 De G & Sm 526; 64 ER 942; Stead v Banks (1852) 5 De G & Sm 560; 64 ER 1241; Bates v Hillcoat (1852) 16 Beav 139; 51 ER 730. Only one period of redemption was allowed where several encumbrances were created on the same day (Long v Storie (1854) 23 LJ Ch 200); where persons entitled to redeem claimed under the same instrument, although, as in the case of tenant for life and remainderman, their periods of enjoyment were different (Beevor v Luck (1867) LR 4 Eq 537, and only one period was allowed to members of a building society to whom an estate purchased by their trustees had been allotted: Peto v Hammond (1861) 30 Beav 495; 54 ER 981; and see Loveday v Chapman (1875) 32 LT 689); and for any other good cause shown, such as the existence of a very small margin for subsequent encumbrancers: Cripps v Wood (1882) 51 LJ Ch 584.

Present practice 22.28 Even where the rule allowing successive periods for redemption would formerly have been applied it is now obsolete in two cases, namely, where there are questions of priority between the later encumbrancers and where some or all of them do not appear. Where there are questions of priority, the successive periods could not be assigned without determining these questions, and that is a matter in which the plaintiff, the first mortgagee, is not interested. It is therefore unnecessary to determine it in his action, and [page 600] the order allows only one period of redemption without prejudice to the order of the later encumbrancers among themselves: Bartlett v Rees (1871) LR 12 Eq 395; General Credit and Discount Co v Glegg (1883) 22 Ch D 549; Lewis v Aberdare and Plymouth Co (1884) 53 LJ Ch 741; Tufdnell v Nicholls (1887) 56 LT 152. In case more than one of several persons entitled to redeem at the same time should be then prepared to redeem, liberty is given to apply to the court without giving notice to the plaintiff, and without prejudice to any question as to the rights of the defendants as between themselves: see forms of judgment, in Edwards v Martin (1858) 28 LJ Ch 49; Bartlett v Rees, above. See Biddulph v Billiter Street Offices Co (1895) 72 LT 834, applying Jennings v Jordan (1881) 6 App Cas 698 at 711 (HL). Similarly, where some or all of the defendants to a foreclosure action do not appear at the hearing, only one period for redemption is allowed, since to give successive periods would be to fix their priorities in their absence: Doble v Manley (1885) 28 Ch D 664. This is done whether the statement of claim alleges that the defendants are entitled, or only claim to be entitled, to charges upon the property: Doble v Manley; Smithett v Hesketh (1890) 44 Ch D 161 at 164. Even where no questions of priority arise and all the defendants are before the court the practice now is to fix only one period for redemption (Smith v Olding (1884) 25 Ch D 462; Mutual Life Assurance Society v Langley (1884) 25 Ch D 686; Platt v Mendel (1884) 27 Ch D 246 at 248; Smithett v Hesketh, above); but this will be departed from and successive periods allowed under

special circumstances, and the onus lies on the subsequent encumbrancers to prove that they are entitled to this indulgence. In Bertlin v Gordon [1886] WN 31, where the mortgage was of a reversionary interest, which was likely soon to fall in, one additional period of a month was allowed. See also Mutual Life Assurance Society v Langley, above, where one additional period of three months was allowed; and Smithett v Hesketh, above, where two such additional periods were allowed.

C. Enlarging the Time for Payment and Opening the Foreclosure Relaxation as to time of payment 22.29 The enforcement of the strict terms of that part of the judgment in a foreclosure action, which directs absolute foreclosure upon non-payment of the redemption money on a certain day, is in the discretion of the court, which may relieve against it either by a postponement of that day, or by an opening of the foreclosure after the day has been allowed to pass without payment. In Campbell v Holyland (1877) 7 Ch D 166 at 171, Jessel MR observed that the final foreclosure order was ‘form only, just as the original deed was form only’: Ingham v Sutherland (1890) 63 LT 614. The application is made by summons by the person entitled to redeem, or it may be made at the hearing of a special application by the mortgagee to make the foreclosure absolute: Clay v — (1745) 9 Sim 317n; 59 ER 380; Lee v Heath (1747) 9 Sim 306n; 59 ER 575; Alden v Foster (1842) 5 Beav 592; 49 ER 708. For forms of summons, see Atkin’s Court Forms, 2nd ed, vol 28, pp 124ff. Reopening the foreclosure is not possible in New South Wales, Victoria and Western Australia: NSW Act s 100; Victorian Act s 87; and Western Australian Act s 53; see 21.5. It is only in a foreclosure action, as a general rule, and not in an action for redemption (see 33.23), that this indulgence is granted; because, in the latter case, the mortgagor comes to the court for relief, professing that his money is ready; but, in a foreclosure action, he redeems by compulsion: Novosielski v Wakefield (1811) 17 Ves 417; 34 ER 161.

Several enlargements may be granted 22.30 Upon good cause shown, the court does not stop at a single enlargement in a foreclosure action. Relief has been given three, even four, times in succession; and this, [page 601] although the time fixed by previous orders of enlargement has been thereby expressed to be peremptory, and even though the mortgagor has undertaken, by signing the Registrar’s book, not to ask for any further time: Anon (1740) Barn Ch 221; Edwards v Cunliffe (1816) 1 Madd 287; 56 ER 106. The period granted upon the first application is usually six months, and it does not appear that any longer time has been granted at once. The like period has also been given on a subsequent application, but the period has then varied from five to three months according to the circumstances.

Reasons for enlargement 22.31 The time is not enlarged as of course, even upon the first application. Some reason — though a very strong one is not necessary — must be given, such as that the defendant has used his best endeavours to find an assignee without success, but that, if time is granted, there is a reasonable prospect of getting the money, or that negotiations for that purpose are actually pending: Nanny v Edwards (1827) 4 Russ 124; 38 ER 752; Eyre v Hanson (1840) 2 Beav 478; 48 ER 1266; Quarles v Knight (1820) 8 Price 630; 146 ER 1318. Under the usual circumstances of an application by the mortgagor by reason of his being unable to raise the money in time, it is necessary to show that the estate is an ample security for the debt: Eyre v Hanson, above; Edwards v Cunliffe (1816) 1 Madd 287; 56 ER 106; Nanny v Edwards, above; Anon (1740) Barn Ch 221. This fact was formerly stated in the order: Geldard v Hornby (1841) 1 Hare 251; 66 ER 1026. Where, however, a necessity for enlarging the time has arisen from the opening of the account by the act of the mortgagee, the order will be made, although the security appears on the evidence to be of doubtful sufficiency;

but care will be taken that nothing is added by the delay to the amount of the debt: Geldard v Hornby. The magnitude of the sum involved, and of the arrears of interest, are circumstances to which weight will be given; but not, it seems, to the latter, if the arrears have been allowed to increase: Holford v Yate (1855) 1 K & J 677; 69 ER 631. A purchaser of the equity of redemption pendente lite will not as a rule be granted further time: Re Parbola Ltd; Blackburn v Parbola Ltd [1909] 2 Ch 437. Something more than the above excuses seems necessary upon subsequent applications, such as evidence that some steps have been actually taken, as the result of which the money is likely to be forthcoming: Edwards v Cunliffe, above. See Campbell v Moxhay (1854) 18 Jur 641, where one reason for refusing an extension was that the application was in violation of an express agreement. A strong case of unexpected delay or difficulty must be made out to support a third or fourth application. Where an order has been made for payment to several mortgagees who are entitled on a joint account, and one dies before the day fixed for payment, it seems that the survivors are not entitled to the benefit of the order, but a new day for payment will be appointed: Blackburn v Caine (1856) 22 Beav 614; 52 ER 1245; Kingsford v Poile (1859) 8 WR 110; Browell v Pledge [1888] WN 166.

Terms of enlargement 22.32 The order commonly directs that the time be enlarged upon payment by the mortgagor to the mortgagee, on or before the day originally fixed for payment of the principal, interest and costs, of the amount certified to be due for interest and costs on the mortgage (Edwards v Cunliffe (1816) 1 Madd 287; 56 ER 106; Seton’s Judgments and Orders, 7th ed, pp 1911ff), but where the large sum of £8000 was due for interest, the first order was made on payment of £3000 only on account of interest: Holford v Yate (1855) 1 K & J 677; 69 ER 631; and see Forrest v Shore (1884) 32 WR 356. The general [page 602]

condition of payment of interest will not be relaxed by reason of the infancy of the person entitled to redeem: Coombe v Stewart (1851) 13 Beav 111; 51 ER 44. If from the circumstances of the case, or the shortness of the interval between the time of application and of payment under the judgment, there is likely to be a difficulty in making the payment in due time, the court will direct enlargement on payment of the interest and costs in a month, or some other convenient time from the date of the order (Eyre v Hanson (1840) 2 Beav 478; 48 ER 1266; Geldard v Hornby (1841) 1 Hare 251; 66 ER 1026), and if there is any doubt as to the sufficiency of the security, the condition will also be imposed of immediate payment of the interest to accrue down to the day fixed for the ultimate payment of the mortgage debt: Geldard v Hornby. The condition for payment of interest and costs will not be imposed where the foreclosure is opened by reason of the mortgagee’s own acts: see Buchanan v Greenway (1849) 12 Beav 355; 50 ER 1097. If the time fixed for payment is likely to expire before the hearing of objections to the certificate which fixes the time of payment, the court will either enlarge the time on the usual application, or if the defendant omits to apply, a new day will be appointed, even after the objections have been overruled: Renvoize v Cooper (1823) 1 Sim & St 364; 57 ER 146.

Where right to redeem is in dispute 22.33 Where the right to redeem is in dispute, and time is required to prosecute an appeal, the object of the court is to make an order, which, without touching the judgment, will yet secure to the person redeeming the recovery of the money which the judgment requires him to pay. In such a case the terms imposed will be the payment into court of principal and arrears of interest, consent to a receiver and payment of interest from the commencement of the action; or of principal, interest, and costs of action and of the application: Monkhouse v Bedford Corp (1810) 17 Ves 380; 34 ER 147; Finch v Shaw; Colyer v Finch (1855) 20 Beav 555; 52 ER 718; and see Holford v Yate (1855) 1 K & J 677; 69 ER 631. The amount paid in will be ordered to be invested at the risk of the applicant (Finch v Shaw); and if the dividends or any interest are ordered to be paid to the mortgagee, it will be upon his undertaking to repay the same upon the reversal of the judgment.

Foreclosure on default at appointed time 22.34 The order will in all cases proceed to foreclose the mortgagor upon non-payment at the appointed time of the sum upon the conditional payment of which the order is made: Edwards v Cunliffe (1816) 1 Madd 287; 56 ER 106; Eyre v Hanson (1841) 2 Beav 478; 48 ER 1266. If the condition is not complied with, the order of foreclosure absolute may be made as of course, and its discharge has been refused with costs, though it was sworn to have been obtained by surprise during negotiations between the parties, and notwithstanding an affidavit by the tenant in possession, that he was willing to purchase the estate for more than twice as much as was due in the security: Jones v Roberts (1827) M’Cle & Yo 567; 148 ER 538.

Conditions of reopening foreclosure 22.35 The conditions are stricter when the application is made after order absolute for foreclosure, so that, in order to grant the indulgence, the foreclosure must be reopened, and also, it seems, when the application is made after the day fixed for payment has passed, but before order absolute: Patch v Ward (1867) 3 Ch App 203 at 212. As to reopening the foreclosure, see Cocker v Bevis (1665) 1 Cas in Ch 61; 22 ER 695; Ismoord v Claypool (1666) 9 Sim 317n; 59 ER 380; Nanfan v Perkins (1766) 9 Sim 308n; 59 ER 376; Crompton v Earl of Effingham (1782) 9 Sim 311n; 59 ER 377; Jones v Creswicke (1839) 9 Sim 304; 59 ER 374; Booth v Creswicke (1841) Cr & Ph 361; 41 ER 528. [page 603] Foreclosure was opened in favour of the heir of the mortgagor, where the latter had been foreclosed by his own consent: Abney v Wordsworth (1701) 9 Sim 317n; 59 ER 380. The order is that the entry of the order absolute shall be vacated, and the order discharged on condition of payment on the new day appointed; but on non-payment the order absolute is to stand: Booth v Creswicke; Ford v Wastell (1848) 2 Ph 591; 41 ER 1071; Thornhill v Manning (1851) 1 Sim NS 451; 61 ER 174. The foreclosure cannot be opened as to some only of the

parties to the action: Patch v Ward (1862) 4 Giff 96; 66 ER 635. The applicant must come with reasonable promptness, having regard to the nature of the property and other circumstances (Campbell v Holyland (1877) 7 Ch D 166; Hang Seng Bank Ltd v Mee Cheong Investment Co Ltd [1970] HKLR 94 (nine months delay — reopening refused)), and not only must he show that he will be able to redeem, if further time is given, and, if thought fit, must give security for costs in case he fails to do so (Bird v Gandy (1715) 7 Vin Abr 45, pl 20; 22 ER 213; and see Stevens v Williams (1851) 1 Sim NS 545; 61 ER 210), but he must also account satisfactorily for non-payment at the proper time, and he must repay all expenditure incurred by the mortgagee since the order absolute: Thornhill v Manning (1851) 1 Sim NS 451 at 456; 61 ER 174 at 176. The foreclosure may even be opened against a purchaser if the purchase is made shortly after the order absolute, and with notice of matters which would affect the mortgagee’s right to an absolute title; but not where the purchaser bought a considerable time after the date of the order absolute, and without notice of facts which would lead the court to interfere: Campbell v Holyland, above, but an order was refused in Re Power and Carton’s Contract (1890) 25 LR Ir 459.

Circumstances under which foreclosure reopened 22.36 The occasions upon which the court will give this relief, and the terms upon which it will be given, depend upon the circumstances of each case. Even after the entry of the judgment for foreclosure, certain matters have been admitted in the various cases as reasons for granting further time. These include the expectation that the money will be ready, founded upon a contract for sale, or a bona fide belief from facts known to the mortgagee that a negotiation was so far complete as to make a tender of the money unnecessary; ignorance or mistake as to the state of the proceedings, or the day fixed for payment (Collinson v Jeffery [1896] 1 Ch 644); irregularity in the proceedings before the order absolute; the illness, or accidental inability to travel, of the person charged with payment of the money; and poverty which could be shown to be but temporary. The fact that the property has a special value for the mortgagor may also be

taken into consideration: see Joachim v M’Douall (1798) 9 Sim 314n; 59 ER 379; Ford v Wastell (1847) 6 Hare 229; 67 ER 1151; Campbell v Holyland (1877) 7 Ch D 166. So, time was enlarged for redemption of a policy of life assurance where the life insured fell in after the day fixed for payment, but before foreclosure absolute (Beaton v Boulton [1891] WN 30); and, where the mortgagor had not understood the effect of the orders nisi and absolute and there was a great discrepancy between the amount owing under the mortgage (£3000) and the value of the mortgaged property (more than £6000), the foreclosure was reopened: Lancashire and Yorkshire Reversionary Interest Co Ltd v Crowe (1970) 114 Sol Jo 435. The relevant date for determining the value of the property and the mortgage debt is the date of the order for foreclosure absolute (Patch v Ward (1867) 3 Ch App 203; Hang Seng Bank Ltd v Mee Cheong Investment Co Ltd [1970] HKLR 94), but an irregular act, done under what might have been fairly considered to be a correct view of the law, and [page 604] not from fraudulent motives, will not be a ground for setting aside the order absolute after it has been passed and entered: Patch v Ward (1867) 3 Ch App 203. Additionally in modern court procedures are cases where a foreclosure order obtained ex parte may be set aside under rules of court: see, for example, WR Carpenter Australia Ltd v Ogle [1999] 2 Qd R 327 (CA).

Opening foreclosure as of right 22.37 In the cases mentioned above the court interferes with the foreclosure as an indulgence to the mortgagor, but the mortgagor may also be entitled either (before foreclosure) to have the time for redemption enlarged or (after foreclosure) to have the foreclosure opened. Thus, where rents are received between the date of the certificate and the date fixed for redemption, either by the mortgagee (Garlick v Jackson (1841) 4 Beav 154; 49 ER 297; Buchanan v Greenway (1849) 12 Beav 355; 50 ER 1097; Patch v Ward (1867) 3 Ch App 203 at 208; Prees v Coke (1871) 6 Ch

App 645; Allen v Edwards (1873) 42 LJ Ch 455) or by the receiver appointed in the action (Jenner-Fust v Needham (1886) 32 Ch D 582 (CA); Peat v Nicholson (1886) 54 LT 569; and see Seton’s Judgments and Orders, 7th ed, p 1914), the foreclosure will be reopened as a matter of course. A fresh account will be taken and a new day fixed for redemption, unless in the original judgment the mortgagee submitted to be charged with a sum in respect of rents in the receiver’s hands, or which might come to his hands prior to the order absolute, and the amount so received does not exceed the sum so fixed: Barber v Jeckells [1893] WN 91; Simmons v Blandy [1897] 1 Ch 19. For form of such judgment, see Lusk v Sebright [1894] WN 134; see also Ellenor v Ugle [1895] WN 161, where the order absolute was allowed on certain conditions, the rents received by the receiver being insufficient to pay out-of-pocket expenses and remuneration. A new day will not be fixed if the original judgment directed that any party might apply in chambers for payment or transfer to him of any money which might come to the hands of the receiver or be paid into court: Colman v Llewellin (1886) 34 Ch D 143 (CA). In that case the order absolute may provide for payment of the money to the mortgagee: Colman v Llewellin. It seems, however, that this latter direction will only be inserted in the judgment in special cases: Cheston v Wells [1893] 2 Ch 151. Where, however, rents are received between the day fixed for redemption and the date of the order absolute, the foreclosure will not be reopened (Prees v Coke (1871) 6 Ch App 645 at 650; Webster v Patteson (1884) 25 Ch D 626; National Permanent Building Society v Raper [1892] 1 Ch 54); nor will it be reopened on the ground that the receiver appointed by the court has made a mistake in his accounts: Ingham v Sutherland (1890) 63 LT 614.

Suing mortgagor for payment 22.38 If after foreclosure the mortgagee, claiming that the property is insufficient to satisfy the mortgage debt, sues the mortgagor on the covenant for payment, this will open the foreclosure and the mortgagor will be entitled to redeem: Dashwood v Blythway (1729) 1 Eq Rep 317, pl 3; 21 ER 1072; Perry v Barker (1803) 8 Ves 527; 32 ER 459; Lockhart v Hardy (1846) 9 Beav 349; 50 ER 378. The mortgagor has this right even though he has assigned the equity of redemption, though — under the former system of

reconveyance — the reconveyance would be made subject to such equity for redemption as was vested in any person other than himself: Kinnaird v Trollope (1888) 39 Ch D 636 at 645. But reopening of the foreclosure is not possible in all jurisdictions: see 21.5. It is assumed, however, that the mortgagee still has the property under his control, so that upon redemption it can be restored to the mortgagor. If it has been sold by the [page 605] mortgagee to a stranger as beneficial owner then, since the mortgagee cannot restore it, he cannot sue either the mortgagor (Lockhart v Hardy, above; Palmer v Hendrie (1859) 27 Beav 349; 54 ER 136; Palmer v Hendrie (No 2) (1860) 28 Beav 341; 54 ER 397; Walker v Jones (1866) LR 1 PC 50 at 62; Kinnaird v Trollope, above; Ellis & Co’s Trustee v Dixon-Johnson [1924] 1 Ch 342 at 351; on appeal [1924] 2 Ch 451 at 470 (CA); [1925] AC 489 (HL); Rushton v Industrial Development Bank (1973) 34 DLR (3d) 582) or a guarantor of the mortgagor’s personal covenant: Lloyds and Scottish Trust Ltd v Britten (1982) 44 P & CR 249. The principle does not apply if the mortgagee is prevented from restoring the estate by an act for which the mortgagee is not responsible — for example eviction by a superior landlord where the mortgagee was not liable to pay the rent or perform the covenants: Re Burrell; Burrell v Smith (1869) LR 7 Eq 399. Nor does it apply where the mortgagee’s inability to restore the property is the result of a sale under the power of sale: see 32.54. After foreclosure the mortgagee can still sell and make a title under the power of sale; and in this case, though the purchaser gets a good title and the property cannot be restored in specie, yet the foreclosure is reopened as regards the purchase money, and the mortgagee will have to account for this to the mortgagor: Watson v Marston (1853) 4 De GM & G 230; 43 ER 495; Re Alison; Johnson v Mounsey (1879) 11 Ch D 284 (CA); Stevens v Theatres Ltd [1903] 1 Ch 857 (and see 21.1 for the need for leave during the period for redemption). (Apparently this is not the result of a mere agreement to sell under the

power of sale: Watson v Marston (1853) 4 De GM & G 230 at 240; 43 ER 495. The fact that the mortgagee has referred to the mortgage in his will as if the debt were still subsisting is not a ground for opening the foreclosure, but the property will pass according to his actual interest: Took v Bishop of Ely (1705) 15 Vin Abr 476, note to pl 1; and see (1705) 2 ER 613; Silberschildt v Schiott (1814) 3 Ves & B 45; 35 ER 396; Le Gros v Cockerell (1832) 5 Sim 384; 58 ER 380.)

Reopening foreclosure for fraud or collusion 22.39 The foreclosure will also be opened if the judgment has been obtained by false evidence (Loyd v Mansell (1722) 2 P Wms 73; 24 ER 645), or other fraudulent or collusive (Harvey v Tebbutt (1820) 1 Jac & W 197; 37 ER 350) practice, just as other judgments are set aside under the like circumstances (Gore v Stacpoole (1813) 1 Dow 18; 3 ER 607); but actual fraud and contrivance, and not merely constructive fraud, must be shown for the purpose: Patch v Ward (1867) 3 Ch App 203.

Not usually after acquiescence 22.40 The court is generally unwilling to open a foreclosure after long acquiescence, especially if buildings (or other improvements) or settlements have been made on the faith of the order, and where the foreclosure has been by consent; and it has refused such relief after six years: Took v Bishop of Ely (1705) 15 Vin Abr 476, note to pl 1; and see (1705) 2 ER 613; Lant v Crisp (1719) 15 Vin 467; 22 ER 503; Fleetwood v Jansen (1742) 2 Atk 467; 26 ER 682; and see Thornhill v Manning (1851) 1 Sim NS 451; 61 ER 174; Jones v Kendrick (1727) 2 Eq Ca Abr 602; 22 ER 505. Acquiescence in a judgment for foreclosure does not necessarily preclude a subsequent action for redemption founded on new matter, and, notwithstanding the foreclosure, the plaintiff will have the benefit at the hearing of an equity which may arise upon his redemption action: Fleetwood v Jansen.

D. Discharge of Order Discontinuance 22.41

The mortgagee can, with the leave of the court under, for example,

Supreme Court (General Civil Procedure Rules) 2005 (Vic) O 25, discontinue the foreclosure [page 606] proceedings (for example the market may have improved to make sale preferable to foreclosure) and have the order nisi discharged (see relevant court rules). At any time in foreclosure proceedings the mortgagee can apply for sale in lieu of foreclosure (see 21.6ff), but it may be easier to discontinue the proceedings and sell under a statutory or express power of sale, rather than have to prove a case for sale. The mortgagor’s consent to the discontinuance is not necessary: Hang Seng Bank Ltd v Yeung Sau-min [1986] HKLR 273, in which the comment in the White Book under the former English Rules of Supreme Court O 21 based upon Stevens v Theatres Ltd [1903] 1 Ch 857, that the plaintiff would not be allowed to discontinue without the consent of the mortgagor, was stated not to be supported by Farwell J’s judgment in that case.

E. Judgments for Sale Sale in lieu of foreclosure 22.42 Where the judgment is for sale, instead of foreclosure, the direction is that, upon default in payment, the property comprised in the security shall be sold, and the proceeds applied in its discharge. As to sale by the court in lieu of foreclosure, either under its original jurisdiction or under Victorian Act s 91, English Act s 91 or the equivalent provisions, see 21.21ff. As to the right of the mortgagee to the benefit of goodwill, see 3.26; and as to his right to prevent the use by the assignee of the mortgagors of a trade name included in the security, see Beazley v Soares (1882) 22 Ch D 660. If it appears that the property is deficient, foreclosure may be directed even after an order for sale: Lloyds Bank Ltd v Colston (1912) 106 LT 420. For forms of order, see Atkin’s Court Forms, 2nd ed, vol 28, pp 111ff, 139ff. In an action for sale by a second mortgagee, the court in Ireland

refused to order the first mortgagee to lodge the deeds in court, since he was willing to produce them and let copies be taken under Conveyancing Act 1881 (UK) s 16: Armstrong v Dixon [1911] 1 Ir R 435. See now English Act s 96(1) and (for example) NSW Act s 96 and Victorian Act s 96; and see 3.32. Where an order for sale has been made, the mortgagee will not as a rule be allowed to sell out of court under his express power (Re Claire (1889) 23 LR Ir 281) and certainly cannot do so without leave (Stevens v Theatres Ltd [1903] 1 Ch 857; and see Marshall v Miles (1971) 13 DLR (3d) 158; cf Petranick v Dale (1973) 33 DLR (3d) 389) but an order for sale obtained by a second mortgagee does not prevent a sale by a first mortgagee who is not a party to the action: Duff v Devlin [1924] 1 IR 56. The period of six months for payment allowed by a foreclosure order is also allowed in cases of sale under the inherent jurisdiction of the court: Lloyd v Whittey (1853) 22 LJ Ch 1038. In cases under the statutory jurisdiction, the court is not restricted as to the time for payment, but three months is usually allowed: see 21.1. A shorter period, such as one month, may be fixed (Stains v Rudlin (1852) 9 Hare App 53 (margin); 68 ER 788; Smith v Robinson (1853) 1 Sm & G 140; 65 ER 61; see Lloyd v Whittey), or an immediate sale directed. Formerly this was not done where the owner of the equity of redemption did not appear at the hearing though he had appeared in the action (Smith v Robinson) but under the present law the order may be made though any of the persons interested do not appear in the action: English Act s 91(2) (and the equivalent state provisions). As to ordering an immediate sale, see cases cited at 21.8.

Security for expenses 22.43 The order may direct the deposit in court of a reasonable sum fixed by the court to meet the expenses of the sale and secure the performance of the terms subject to which the [page 607] order is made: Victorian Act s 91(2); English Act s 91(2) (or other equivalent

provisions; see 21.6). In a case in which a sale was ordered after decree for foreclosure, a sufficient amount was paid in to indemnify a later mortgagee, who had bought in several encumbrances, to the extent of his entire advances: Laslett v Cliffe (1854) 2 Sm & G 278; 65 ER 400. The deposit being made for the indemnity of the mortgagee will be applied in discharge of the mortgagee’s costs of the sale, if it proves abortive: Corsellis v Patman (1867) LR 4 Eq 156. Where a deposit is to be made, the order will be to sell in case the deposit is paid within a short time — such as a week — from the date of the certificate of the amount to be deposited, or from the date of the order if the amount is agreed or fixed at the hearing; but in case of default in making the deposit, or in case of no sale within six months from the date of the certificate, or order, then foreclosure: Bellamy v Cockle (1854) 18 Jur 465; 2 WR 326.

Conduct of sale 22.44 The conduct of the sale is given to the person who has the most interest in getting the best price, that is, the mortgagor, or if the mortgagor does not want it, the mortgagee lowest in priority: see generally 21.11. Leave may be given to the mortgagee to bid at the sale (Ex parte Marsh (1815) 1 Mad 148; 56 ER 56; The Wilsons (1841) 1 Wm Rob 173), but it will be refused until other ways of selling have failed, if the mortgagee is also a trustee, and objection is made by cestuis que trust (Tennant v Trenchard (1869) 4 Ch App 537), but if the mortgagee has the conduct of the sale, some other person will be appointed for that purpose: Domville v Berrington (1837) 2 Y & C Ex 723; 160 ER 585; see Re Laird; Ex parte M’Gregor (1851) 4 De G & Sm 603; 64 ER 976. As to the position where a mortgagee purchases the land at a sale by the mortgagee in the exercise of the power of sale, see 20.40. If the mortgagee becomes the purchaser, and his principal and interest exceed the purchase money, he may be let into possession as from a date earlier than that fixed by the contract: Bates v Bonnor (1835) 7 Sim 427; 58 ER 901.

Equitable interests bound 22.45

The rights of equitable encumbrancers on the estate, be they

plaintiffs or defendants, or whether they only come in under the judgment, are bound by the order for sale, in the same manner as the equity of redemption is bound by a judgment for foreclosure: see 22.15. Upon obtaining a conveyance of the legal estate (for a vesting order or similar in favour of the purchaser, see Victorian Act s 90, English Act s 90 and the equivalent provisions; and see 21.6), the purchaser therefore takes the property discharged from all claims, and is not entitled to any release from the equitable encumbrancers: Keatinge v Keatinge (1843) 6 I Eq R 43; Webster v Jones (1844) 6 Ir Eq R 142. Although a sale is made by consent of all parties, yet an investment of the purchase money in court is not at the risk of the mortgagee: Tompsett v Wickens (1855) 3 Sm & G 171; 65 ER 611. Neither is the investment made for the mortgagee’s benefit, so that the mortgagee cannot claim accumulations arising from the purchase moneys, unless they have been carried to his separate account (Irby v Irby (1855) 22 Beav 217; 22 ER 1091, and see R v De la Motte (1857) 2 H & N 589), and as to distribution of a fund comprising the proceeds of the mortgaged land and other moneys, see Taylor v Waters (1836) 1 My & Cr 266; 40 ER 376. [page 608]

F. Order Absolute for Foreclosure Motion for final order for foreclosure 22.46 Upon an affidavit of non-payment of the money at the appointed time and place, or subsequently, to the person to whom it is directed to be paid or his agent, the order for foreclosure contained in the original judgment (see 22.15), whether the security is legal or equitable (Lees v Fisher (1882) 22 Ch D 283 (CA)), will be made absolute by an order. This final order of foreclosure must be obtained before an account is taken of subsequent interest and costs, and a time appointed for the exercise of the next right of redemption: Whitbread v Lyall (1856) 8 De GM & G 383; 44 ER 437. If great delay takes place in obtaining it, the court will require an explanation, and the owner of the equity of redemption must be served: Prees v Coke

(1871) 6 Ch App 645. No order absolute may be made where the mortgagor has died during the course of proceedings, pending a grant of probate or letters of administration: Aylward v Lewis [1891] 2 Ch 81. Application should be made to join the personal representative or to appoint a person to represent the estate where there is no personal representative. As to whether there is any need to obtain a supplementary order to give the added defendant power to redeem, see (1947) 97 LJ News 313 at 328. If the mortgagor becomes bankrupt during the proceedings, the mortgagor’s trustee must be joined. The affidavit of non-payment must be made by all the mortgagees in the jurisdiction (if there are more than one), but the affidavit of attendance at the appointed time and place may be made by the mortgagee or his attorney if he attended by attorney: Kinnaird v Yorke (1889) 60 LT 380; Docksey v Else (1891) 64 LT 256; Barrow v Smith (1885) 33 WR 743; and see Frith v Cooke (1885) 52 LT 798.

Attendance by agent 22.47 The order nisi for foreclosure nominates a time and place for payment. It is customary for the plaintiff to file a nomination of agent (usually a solicitor’s clerk) to collect the money due under the order. The usual order in New South Wales is that the defendants attend the duty Deputy Registrar between 11.00 am and noon on a nominated day and there pay the sum referred to in the order. If the money is not paid, the agent makes an affidavit to the effect that he waited between 11.00 am and noon at the prescribed office and no one attended. If the person entitled attends by his agent, the agent ought to be authorised by a power of attorney to receive the money; and for want of such authority, the court, on the ground that it is the right of the mortgagor to have everything done with the strictest formality, has refused to make the order absolute, though no person appeared to make the payment: Gurney v Jackson (1853) 1 Sm & G App xxvi; 67 ER 1330. Orders have, however, been made both where the person entitled himself attended during a portion of the time between the hours fixed for payment, and also where he has not so attended: Lechmere v Clamp (No 3) (1862) 31 Beav 578; 54 ER 1263; London Monetary Advance Co v Bean (1868) 18 LT

349; Postlethwaite v Tavers [1871] WN 173; Cox v Watson (1877) 7 Ch D 196. In Bernard v Norton (1864) 3 New Rep 701; 10 LT NS 183; 142 RR 755, following Anon (1844) 1 Coll 273; 63 ER 416, an order absolute was made, though the mortgagee attended during a part only of the time fixed, and this appears to be sufficient; but in Lechmere v Clamp, above, Lord Romilly said that the alleged order in Anon did not exist or could not be found. Orders have also been made where the agent has attended, but without a power of attorney, and the mortgagor did not attend: Lechmere v Clamp; London Monetary Advance Co v Bean; Cox v Watson, all above; Hart v Hawthorne (1880) 42 LT 79; Macrea v Evans (1875) 24 WR 55; King v Hough [1895] WN 60. [page 609]

Getting in legal estates 22.48 The order for foreclosure of an equitable mortgage contains a direction for conveyance of the legal estate. Where a conveyance cannot be obtained in this way, the mortgagor will be declared to be a trustee for the mortgagee and a vesting order made under Trustee legislation: see Trustee Act 1925 (NSW) s 71; Trustee Act 1958 (Vic) ss 51 and 52; Trusts Act 1973 (Qld) ss 82 and 83; Trustee Act 1936 (SA) ss 36 and 37 (land), s 41 (other property); Trustees Act 1962 (WA) ss 78 and 79; Trustee Act 1898 (Tas) s 33 (land), s 34 (other property); and see 32.73. See Lechmere v Clamp (No 2) (1861) 30 Beav 218; 54 ER 872; Lechmere v Clamp (No 3) (1862) 31 Beav 578; 54 ER 1263; Re Cuming (1869) LR 5 Ch App 72; Re Crowe’s Mortgage (1871) LR 13 Eq 26; Re D Jones & Co’s Mortgage (1888) 59 LT 859; Jones v Davies [1940] WN 174. It was held in Smith v Boucher (1852) 1 Sm & G 72; 65 ER 32, that the vesting order could not be inserted in the judgment for foreclosure, but required a separate application; however, there seems to be no objection to including it in the judgment under appropriate circumstances. The former device for getting in a nominal reversion by vesting declaration is not now required: see British Empire Mutual Life Assurance Co v Sugden (1878) 47 LJ Ch 691; see also 3.3.

Order for possession 22.49 An order for possession may be added even where the writ or summons does not ask for it, but in the latter case the order will not be made ex parte: see Salt v Edgar (1886) 54 LT 374; Le Bas v Grant (1895) 64 LJ Ch 368; Keith v Day (1888) 39 Ch D 452 (CA); Jenkins v Ridgley (1893) 41 WR 585; and see Withall v Nixon (1885) 28 Ch D 413. The order for delivery of possession should contain a description of the property as in the mortgage: Thynne v Sarl [1891] 2 Ch 79. The order for foreclosure absolute does not by itself entitle the mortgagee to a writ of possession: Wood v Wheater (1882) 22 Ch D 281. The order for possession is inserted for convenience in order to avoid multiplicity of proceedings. If it were omitted the mortgagee would have to take separate proceedings to recover possession, and such proceedings would be based, not on the mortgagor’s default (the effect of which is exhausted by the foreclosure), but on the mortgagee’s own title as owner of the land: Wood v Smallpiece [1942] Ch 190; [1942] 1 All ER 252 (CA). Similar orders may be made for transfer of mortgaged stock (Ricketts v Ricketts [1891] WN 29), and for the delivery (along with possession of a mortgaged public-house) of the licence: Crowley v Fenry (1888) 22 LR Ir 96. For possession in a foreclosure action, see 22.12. For limitations on the rights to possession, see 16.10ff, 19.12–19.13 and 19.22–19.25.

Delivery of the deeds in foreclosure 22.50 When the action results in foreclosure, there is in general no need to direct delivery of the deeds by the mortgagor, because the mortgagee, either by direct delivery from the mortgagor upon the making of a security, or from another encumbrancer whom he has redeemed, has the deeds already in his possession; but where all the deeds are not already in the mortgagee’s custody, the order, after directing the mortgagor to convey on default of payment, goes on to order the delivery of the deeds: Holmes v Turner (1843) 7 Hare 367n; 68 ER 151. However, the mortgagee’s right does not in general extend to deeds which only affect the equity of redemption of the mortgaged property, but under special circumstances (for example if the possession of them by another person might affect the title), it seems that delivery of them may be ordered:

Greene v Foster (1882) 22 Ch D 566. As to delivery [page 610] of the register on a sale of a ship by the Admiralty Court, see The Tremont (1841) 1 Wm Rob 163; 166 ER 534.

Effect of foreclosure order 22.51 The order for foreclosure does not relate back to the judgment for an account, so as to make the mortgage real estate from that time; it is not until the final order that the quality of personalty is lost: Thompson v Grant (1819) 4 Madd 438; 56 ER 767. A release after judgment of foreclosure is equivalent to an absolute foreclosure by order: Reynoldson v Perkins (1769) Amb 564; 27 ER 362. In the case of trust property, and also where the right of redemption is extinguished under Limitation of Actions legislation, it is held on trust for sale; as to disposition of the net rents where the mortgage is a trust mortgage, see Re Horn’s Estate; Public Trustee v Garnett [1924] 2 Ch 222. Thus, Property Law Act 1958 (Vic) s 38(1) provides: 38(1) Where any property, vested in trustees by way of security, becomes, by virtue of the statutes of limitation, or of an order for foreclosure or otherwise, discharged from the right of redemption, it shall be held by them on trust for sale.

V Torrens Title Land Non-curial procedure (except Queensland) 22.52 Except in Queensland, curial proceedings for foreclosure are not available in the case of registered mortgages of land under the Torrens statutes. In New South Wales, where Torrens title land as well as other securities are linked in the same loan by collateral securities, an order for foreclosure may be made by the court despite the provisions of the Torrens statutes: Conveyancing Act 1919 (NSW) s 101. In Queensland, the remedy of foreclosure is in all cases curial. References to state provisions should in this material concerning Torrens title land be taken to exclude any reference to Queensland since, for ease of expression, the Queensland exception is

generally not mentioned specifically. Generally, curial proceedings are, however, available in the case of equitable mortgages, and consequently a foreclosure application in respect of an unregistered mortgage of lands under those Acts would have to be made to the court: see 21.1, 21.9 and 22.1; but note the possible reservations or exceptions referred to in 21.9. The Torrens Acts of the five states other than Queensland all contain special provisions for the making of an application in writing (in New South Wales, in the approved form) for a foreclosure order to the Registrar-General, Registrar, Commissioner or Recorder, as the case may require. The procedure is available only to a mortgagee, not to a chargee or an annuitant. In New South Wales, the relevant section refers specifically to a ‘registered mortgagee’, while in the other states the section refers to a ‘mortgagee’: Transfer of Land Act 1893 (WA) s 121 — ‘the mortgagee or his transferee’. In all states, however, no instrument until registered is effectual to create, vary, extinguish or pass any estate or interest or encumbrance in, on or over any land under the operation of the Act, but upon registration the estate or interest or encumbrance shall be created, varied, extinguished or pass in the manner and subject to the covenants and conditions specified in the instrument or by the Act prescribed or declared to be implied in instruments of a like nature. These words are those of the Victorian Act, but all other Acts have a provision of a like nature; see the various state Torrens legislation provisions: NSW s 41; Vic s 40(1); SA s 67; WA s 58; Tas s 49(1). It follows therefore that, in all states where the statutory application for foreclosure is available, only a registered mortgagee or a registered transferee from the mortgagee may take advantage of the procedure: see Charters v Cosmopolitan Land Banking Co Ltd (1902) 28 VLR 251; Beath v Armstrong [page 611] (1910) 16 ALR 581; Tietyens v Cox (1916) 17 SR (NSW) 48 at 55; Ryan v O’Sullivan [1956] VLR 99; and Re Nairn’s Application [1961] VR 26. It was held in New South Wales that the combined effect of Real Property Act 1900 ss 61 and 62 as they then read was to exclude from the Equity

Court the jurisdiction to make orders for the foreclosure of the right to redeem mortgages registered under the Real Property Act: Long v Town (1889) 10 LR (NSW) (Eq) 253. In all states the condition precedent to the making of the application is that default must have been made in the payment of the interest or principal sum secured by the mortgage for six months: NSW Torrens Act s 61; Victorian Torrens Act s 79; South Australian Torrens Act s 140 (but see also Law of Property Act 1936 (SA) s 55A which, in particular cases, requires certain notice to be given before application for foreclosure can be made; see 21.1); Western Australian Torrens Act s 121; Tasmanian Torrens Act s 85. The application must state (in Victoria, must be accompanied by a statutory declaration stating): (a) that default has been made (in Victoria, ‘and has continued’) as aforesaid; (b) that the notice to pay has been given to the mortgagor as required by the Act (as to which see 20.13); (c) that, after the giving of such notice (and, in Victoria, within two years prior to the date of the foreclosure application: Transfer of Land Act 1958 s 79(2)(c)) the land has been offered for sale at a public auction by a licensed auctioneer; (d) that the amount of the highest bid at such auction was not sufficient to satisfy the moneys secured by the mortgage together with the expenses occasioned by such sale (the amount of the highest bid must be stated: Transfer of Land Act 1893 (WA) s 121 (this section also requires that the application shall state, if such was the case, that there was no bid); such a statement appears to be required, by inference, by the corresponding sections in the other state Acts); (e) that notice of the intention to make the application for foreclosure has been served on the mortgagor (in New South Wales, in the manner prescribed by Conveyancing Act 1919 s 170 (and note that in this state a valid and effectual notice may be served upon the Public Trustee where at the time of the notice the mortgagee has knowledge that the mortgagor is dead and that there is no personal representative of the mortgagor in New South Wales); in Victoria,‘in the manner provided by

this Act’, as to which see s 113; in South Australia and Western Australia, by serving the notice personally or by leaving it on the mortgaged land or sending it through the post by registered letter to the mortgagor at his address appearing in the register book (in Western Australia the notice can also be sent to the person’s facsimile machine, if agreed in writing that service can be made in this way); in Tasmania, ‘in the manner provided in the mortgage for service of notices, or posted on the mortgaged land, or left at the usual or last known place of abode of the mortgagor’); (f)

(in Victoria, South Australia and Western Australia) that a like notice of the intention to make the application for foreclosure has been served (in like manner) on every person appearing by the register book to have any estate or interest in the mortgaged land subsequently to the mortgage; (in New South Wales) that notice in writing of the intention to make the application has been served on all registered mortgagees, chargees or convenant chargees which have less priority than that of the applicant and each caveator who claims as an unregistered mortgagee or charged to be entitled to an estate or interest in the land. [page 612]

As to the operation of these provisions and reliance upon an order under Conveyancing Act s 170(1)(d) to effect service for the purposes of Real Property Act s 61(2), see Spencer v Bamber [2011] NSWSC 1313 (Pembroke J); and affirmed on appeal with respect to the giving of notice under these provisions: [2012] NSWCA 274 (Basten, Campbell and Macfarlane JJA).

Torrens procedure in detail 22.53 In all states the application is to be accompanied by a certificate of the licensed auctioneer by whom the land was put up for sale, and by such other proof of the matters stated by the applicant as the appropriate officer may require, and the application is to be verified by declaration in South Australia, and by statutory declaration in three states: Western Australia; Tasmania (‘of the applicant’); and New South Wales (‘of the applicant or other person applying on his behalf’).

In New South Wales the Registrar-General may require the applicant to offer the land mortgaged or charged for sale and to do so in accordance with the directions of the Registrar-General: Real Property Act 1900 s 62(1). In Victoria the Registrar is bound to cause a notice to be published once in each of three successive weeks in at least one newspaper published in the City of Melbourne offering the land for private sale, and similarly appointing a time not less than one month from the date of the first of such advertisements upon or after which he will issue an order for foreclosure unless an amount, as in New South Wales (s 62(2)), has in the interval been realised: Transfer of Land Act 1958 s 79(3). Generally, in relation to the Victorian procedure, see Currey, Manual of Titles Office Practice in Victoria, Law Book Co of Australasia, Melbourne, 1933, pp 82–91. In South Australia the provisions are similar to those in Victoria, but the notice is required to be published in the Government Gazette: Real Property Act 1886 s 141. In Western Australia the requirement of publishing such a notice is at the discretion of the Commissioner, who may direct the Registrar to cause a notice to be published once in each of three successive weeks in at least one newspaper published in the City of Perth: Transfer of Land Act 1893 s 122. In Tasmania the Recorder shall direct notice to be published once in a newspaper published in the state (and circulating in the locality in which the mortgaged land is situated) offering the mortgaged land for sale and appointing a time similarly as in the other states and with the same consequences: Land Titles Act 1980 s 86(1). In all states, except in Queensland, the order for foreclosure under the hand of the appropriate officer, when recorded in the register or entered in the register book, has the effect of vesting in the mortgagee all the estate and interest of the mortgagor in the land mentioned in the order. In New South Wales and Tasmania this vesting is declared to be ‘free from all right and equity of redemption on the part of the mortgagor or of any person claiming through or under him’: NSW Torrens Act s 62(2); Land Titles Act 1980 (Tas) s 86(2). In Victoria the words now used vest in the mortgagee as registered proprietor the land mentioned in such order: … freed and discharged from any estate or interest of the mortgagor therein and from any mortgage charge or encumbrance except — (a) a lease easement or restrictive covenant to

which the mortgagee has consented in writing or to which the mortgagee is a party; or (b) a mortgage charge easement or other right that is for any reason binding upon the mortgagee. [Transfer of Land Act 1958 s 79(4)]

The provisions of the South Australian Act are generally similar to those of the New South Wales and Tasmanian Acts but have the additions ‘subsequently to the mortgage so foreclosed, and upon such entry the mortgagee shall be deemed the [page 613] registered proprietor of the said estate and interest’: Real Property Act 1886 s 142. The Western Australian Act also adds the words ‘subsequently to the mortgage’; and continues ‘and such mortgagee or his transferee shall upon such entry being made be deemed a transferee of the mortgaged land and become the proprietor thereof and the Register may either register the mortgage or the transferee as the proprietor of the land on the existing certificate of title or create and register a new certificate of title in the name of the mortgage or the transferee as the proprietor of the land’: Transfer of Land Act 1893 s 122.

Reopening the foreclosure 22.54 The significance of these various statutory provisions will be observed upon examination of the decision of the High Court in Fink v Robertson (1907) 4 CLR 864, in which it was held that, under the provisions of the then Victorian Act (Transfer of Land Act 1890 ss 129 and 130), on foreclosure the mortgage debt was extinguished and as a result no action would lie subsequently by the mortgagee upon the covenant in the mortgage to repay the mortgage debt. This decision and corresponding and subsequent statutory provisions are considered at 21.5. It has been held, in New South Wales, that there is no power in the Registrar-General to cancel an order for foreclosure once made: see Matton v Lipscomb (1985) 16 LR (NSW) (Eq) 142 at 148; but see Van Den Bosch v Australian Provincial Assurance Association Ltd [1968] 2 NSWR 550, referred to at 21.4.

Queensland position

22.55 In Queensland the order for foreclosure in the case of Torrens land does not itself entitle the mortgagee to be registered as a proprietor of the mortgaged estate and is not registered. There are only two ways of causing the mortgagee to become registered proprietor of the mortgaged estate, by registered transfer from the mortgagor or by registration of a vesting order: Wilson v Brown (1896) 7 QLJ 16. A vesting order under Trusts Act 1973 s 89 assumes a judgment for the conveyance of the land. The authorities indicate that an appropriate course is for the order nisi to order a conveyance or transfer of the mortgaged estate to the plaintiff mortgagee, and for the judgment absolute to declare that the defendant is trustee for the plaintiff of the mortgaged estate and to include a vesting order under the Trusts Act vesting in the plaintiff the estate of the defendant: Walker and Mackenzie v Sachs [1902] QWN 56 (order); Stevens v Hoberg (No 2) [1952] QWN 13 note to Stevens v Hoberg (No 2) (extract from reasons in Walker and Mackenzie v Sachs); National Mutual Life Association of Australasia Ltd v National Bank of Australasia Ltd [1944] QWN 7; Union Trustee Co of Australia Ltd v Exton [1937] QWN 51 and unreported cases mentioned therein. The vesting order is then registered. It would seem that under this technique the mortgagee would become a ‘transferee’ of the land, and as the Queensland Real Property Act includes the like covenant of indemnity to the mortgagor as that implied by the Transfer of Land Act in Victoria, the principle of Fink v Robertson (1907) 4 CLR 864 (see 22.54) would apply with the result that after judgment for foreclosure and the clothing of the mortgagee with legal title, the mortgagee would be unable to sue on the personal covenant.

[page 614]

Chapter 23

Insolvency of Mortgagor A. Mortgagee’s Remedies Generally Difference between individual and corporate insolvency Ordinary remedies available to the mortgagee B. Secured Creditors Definition of secured creditor Court may restrain mortgagee Voting Security must be on debtor’s own property Joint and separate estates C. Proof of Debt by Secured Creditor Rules of proof Proof for interest Administration of insolvent estates D. Redemption by Trustee, etc Redemption of security by trustee Sale where trustee dissatisfied with estimate E. Disclaimer Disclaimer of onerous property

23.1 23.2 23.3 23.4 23.5 23.6 23.7 23.8 23.9 23.10 23.11 23.12 23.13 23.14

Form and effect of order F. Discharge from Bankruptcy Duration of bankruptcy Effect of discharge

23.15 23.16 23.17

A. Mortgagee’s Remedies Generally 23.1 On the bankruptcy of an individual mortgagor or the winding up of a corporate mortgagor there are four courses of action available to the mortgagee: 1.

The mortgagee may rely entirely on the security and take the usual enforcement procedures, such as sale. On such a sale, if there is a surplus after discharging the selling mortgagee’s mortgage such surplus must be paid to any subsequent encumbrancer, or if none, to the bankrupt’s trustee or the liquidator of the insolvent company: see Pegler v Dale [1975] 1 NSWLR 265. If there is a deficiency on the sale, the mortgagee can claim in the insolvency for such: Bankruptcy Act 1966 s 90(2); [page 615] Corporations Act 2001 (Cth) s 554E(4); see 23.9. And if there is any chance of a deficiency a secured creditor should lodge a proof of debt in anticipation; or

2.

The mortgagee may surrender the security and prove in the insolvency as an ordinary creditor; or

3.

The mortgagee may value the security and prove in the insolvency as an ordinary creditor proving for the difference between the estimated value of the security and the amount due under the mortgage.

4.

The mortgagee may move to wind up a mortgagor company without first

realising any security held (Re Alexanders Securities Ltd (No 2) [1983] 1 Qd R 597; (1983) 8 ACLR 434); and a secured creditor can file a bankruptcy petition without first surrendering the security: Re McCann [1985] 2 Qd R 381. This chapter gives only a brief overview of the mortgagee’s position on the insolvency of the mortgagor. Reference should be made to the specialist texts on bankruptcy and liquidations for further details.

Difference between individual and corporate insolvency 23.2 In a corporate winding up the legal entity, the corporation, remains in existence and its property remains vested in it: the liquidator merely displaces the directors and controls the corporation. The property of the corporation does not vest in the liquidator, who merely has custody of the company’s property: see, for example, for compulsory winding up, Corporations Act s 474(1). In a personal bankruptcy, however, the property of the bankrupt ceases to be vested in him. Bankruptcy Act s 58 provides for the vesting of a bankrupt’s property in the trustee and restricts the enforcement of remedies by creditors of the bankrupt. But subs (5) expressly provides that nothing in the section affects the right of a secured creditor to realise or otherwise deal with his security. Prior to the 1992 amendments to the Corporations Law, the bankruptcy rules applied also to the winding up of an insolvent company. Presently, Corporations Act s 553E provides that, subject to Corporations Act Pt 5.6 Div 6, the Bankruptcy Act provisions with regard to debts provable apply in a corporate winding up except those in ss 82–94 inclusive and s 96. The excepted sections make up the bulk of the provisions of the Bankruptcy Act referred to in this chapter. The substitute provisions now made by the Corporations Act for the most part closely mirror provisions in the Bankruptcy Act.

Ordinary remedies available to the mortgagee 23.3 The mortgagee is entitled to stand outside the bankruptcy and pursue the ordinary remedies of a mortgagee: White v Simmons (1871) 6 Ch App 555; Re Wherly; Ex parte Hirst (1879) 11 Ch D 278; Re Dalle Nogare (1965)

6 FLR 277; Re McCann [1985] 2 Qd R 381; Re Hutton (a bankrupt) [1969] 2 Ch 201; [1969] 1 All ER 936; Re David Lloyd & Co; Lloyd v David Lloyd & Co (1877) 6 Ch D 339. Indeed, as we saw at 1.4, this is the primary purpose of taking security. A secured creditor is entitled to apply his security in discharge of whatever liability he thinks fit, so he can appropriate proceeds of sale first in discharge of non-preferential debts: Re William Hall (Contractors) Ltd (in liq) [1967] 2 All ER 1150; [1967] 1 WLR 948. The mortgagee exercises the ordinary rights not so much because of the insolvency of the mortgagor but because of some default or breach of covenant. A provision in a bill of sale, mortgage, lien or charge is void if it (a) enables the mortgagee etc to exercise any power or remedy or (b) is to the effect that the operation of the mortgage etc is to be modified if the mortgagor becomes bankrupt or commits an act of bankruptcy or executes a deed of assignment or a deed of arrangement under the Bankruptcy Act: [page 616] s 302; and see Victorian Act s 111 (leave of court required before exercising powers to sell or to appoint receiver exercisable upon insolvency). If the mortgagee needs to take proceedings in respect of the security given by a mortgagor who is a natural person, the bankrupt’s trustee will be the appropriate party to those proceedings, the equity of redemption having vested in the trustee upon the bankruptcy: see Bankruptcy Act s 58. No leave to commence or continue proceedings is required, but proceedings may be stayed in appropriate cases: see Bankruptcy Act s 60. In the case of liquidation, any necessary proceedings will be against the company itself. For stay of proceedings, see Corporations Act 2001 (Cth) s 471B. (Note that under Corporations Act s 471C, this does not affect a secured creditor’s right to deal with the security.) Corporations Act s 468 avoids all (save exempt) dispositions of the property of the company made after the commencement of the winding up by the court unless the court orders otherwise. A sale by a mortgagee or receiver is not such a disposition: see 20.36.

B. Secured Creditors Definition of secured creditor 23.4 A secured creditor, in relation to an individual debtor, means a person holding a mortgage, charge or lien on property of the debtor as security for a debt due to him from the debtor: Bankruptcy Act s 5(1). The definition of secured creditor is such as to include a charge arising under a process of execution (see 2.12–2.21), but not a mere judgment creditor who has not completed the process of execution (see Hall v Richards (1961) 108 CLR 84), nor a garnishee order nisi. See, generally, Sykes and Walker, The Law of Securities, 5th ed, Law Book Co, Sydney, 1993, pp 888– 90.

Court may restrain mortgagee 23.5 Historically, courts have generally been reluctant to restrain a mortgagee or other secured creditor in the exercise of legal remedies: see, for example, Re Wherly; Ex parte Hirst (1879) 11 Ch D 278; Re Evelyn; Ex parte General Public Works and Assets Co Ltd [1894] 2 QB 302. Notwithstanding this right of the mortgagee to proceed outside the bankruptcy, there may nevertheless be situations in which it may be more appropriate for the bankruptcy court to deal with an issue, in which case a creditor’s action in another court may be stayed to allow the issue to be litigated in the bankruptcy court: see Driller v Smail (1968) 12 FLR 326. Thus the court has restrained claims which are contrary to equitable principles or the provisions of insolvency law: see, for example, Re Chidley, Re Lennard (1875) 1 Ch D 177 (CA). Accordingly, the court restrained a mortgagee from pursuing a claim for foreclosure which had been commenced after the trustee in bankruptcy had made an advantageous contract for the sale of the property; the mortgagee was ordered to concur in the sale and give up the deeds to the property upon being paid the full amount that was due to him: Re Woods, Ex parte Ditton (1876) 1 Ch D 557 (CA). The court has also prevented a creditor from suing a trustee in bankruptcy on a bill of sale where the latter disputed its validity: Re Sparke; Ex parte Cohen (1871) 7 Ch App 20.

However, in Re Taylor and Rumboll; Ex parte Rumbol (1971) 6 Ch App 842, the court refused to intervene in a claim by a mortgagee which involved questions which did not affect the administration of the estate in bankruptcy. The court also refused to interfere with the rights of an execution creditor who had seized goods before the petition in bankruptcy: Re Hall; Ex parte Rocke (1871) 6 Ch App 795. [page 617] In England, the bankruptcy court has been ready to order sale of the property of the bankrupt which has been mortgaged on the application of the persons claiming to be mortgagees: see, for example, Re Cook; Ex parte Hodgson (1821) 1 Gl & J 12; Ex parte Bacon (1832) 2 Deac & Ch 181; Re Medley; Ex parte Barnes (1838) 3 Deac 223. The jurisdiction is now stated in the Insolvency Rules, 1986. See the 13th English edition of this work at [31.18]. While in Australia it may be possible to obtain such an order under Bankruptcy Act s 30, there does not appear to be any reported instance of such an order being made.

Voting 23.6 With an individual bankruptcy, a secured creditor is entitled to vote only in respect of the balance (if any) due to him after deducting the value of his security: see Bankruptcy Act s 64ZA(5). Regulation 5.6.24(3) under the Corporations Act provides that: ‘If a secured creditor votes in respect of his or her whole debt or claim, the creditor must be taken to have surrendered his or her security unless the court on application is satisfied that the omission to value the security has arisen from inadvertence’. As to inadvertence, see Re Maxson; Ex parte Trustee [1919] 2 KB 330 and Young v ACN 081 162 512 [2005] NSWSC 139. If the creditor votes in respect of a specific sum and does not include further liability also covered by the mortgage, and there is no inadvertence,

he will be taken to have surrendered the mortgage to the extent of the whole liability: Re Pawson [1917] 2 KB 527. With corporate insolvency, reg 5.6.24 of the Corporations Regulations 2001 provides that for the purposes of voting, a secured creditor must furnish the liquidator with particulars of his security and the estimate of the value of the security unless he surrenders his security. The secured creditor is only entitled to vote for the balance of the debt. For an example when reg 5.6.24(3) will not operate to surrender a security, see Health & Life Care Ltd (in liq) v South Australian Asset Management Corporation (1995) 65 SASR 48.

Security must be on debtor’s own property 23.7 The security which constitutes the creditor a secured creditor must be on the property of the debtor, and it is only in such a case that the creditor is within the rule that he must deduct the value of his security and prove for no more than the difference: Re Howe; Ex parte Brett (1871) 6 Ch App 838. ‘The question is whether, in substance, apart from technicality, the creditors held a security upon property of the bankrupt at the time they made their proof’: Re Howe; Ex parte Brett at 840. The principle is that a person is not allowed to prove against a bankrupt’s estate and to retain a security which, if given up, would go to augment the estate against which he proves: Re Turner; Ex parte West Riding Union Banking Co (1881) 19 Ch D 105 at 112; Re Dutton, Massey & Co; Ex parte Manchester and Liverpool District Banking Co [1924] 2 Ch 199. So well is this exception to the rule as to election established that it has been said to be almost a maxim in bankruptcy, that a security is never to go in reduction of proof, unless it belongs to the estate against which the proof is tendered: Re Wyatt; Ex parte Adams (1837) 3 Mont & A 157. Of the numerous cases in which it is applicable, a simple one is that in which the wife’s property is mortgaged to secure the debt of the husband; or where one partner mortgages his separate estate to secure a debt due from the partnership: Re Hart; Ex parte Caldicott (1884) 25 Ch D 716. For a case where the [page 618]

subject matter of the security had become vested in the creditor, so that he was not a ‘secured creditor’, see Re Hallett; Ex parte Cocks, Biddulph & Co [1894] 2 QB 256.

Joint and separate estates 23.8 For this purpose the joint and separate estates of partners are considered as distinct estates, and a joint creditor having a security upon the separate estate of one of the partners can prove against the joint estate for the full amount of his debt without giving up his security and vice versa: Rolfe and Bank of Australasia v Flower & Co (1865) LR 1 PC 27 at 47; Re Fraser Trenholm & Co (1868) 4 Ch App 49. As to allowing amendment where a separate security has been by mistake deducted, see Couldery v Bartrum (1881) 19 Ch D 394. The exception to the rule against retainer and full proof does not apply where it is only in appearance that the security belongs to a separate estate. Therefore it was not admitted where the joint debt was secured by shares in a company, which, though joint property, were standing in the separate names of the joint debtors, in compliance with a rule of the company that no shares should be held jointly: Re Collie; Ex parte Manchester and County Bank (1876) 3 Ch D 481; Re Cooksey; Ex parte Portal & Co (1900) 83 LT 435. Nor, where real estate bought with joint funds is used jointly, and mortgaged to secure a joint debt, can it be contended that because the conveyance was made to the partners as tenants in common, there was for the purpose of this exception to the general rule, a security upon the separate estate of each tenant in common: Re Burgess; Ex parte Freen (1827) 2 Gl & J 250. See Bankruptcy Act s 141 for joint and separate dividends.

C. Proof of Debt by Secured Creditor Rules of proof 23.9 The rules as to proof by secured creditors in a personal bankruptcy are contained in Bankruptcy Act s 90. As indicated above, the rule is that the secured creditor cannot at the same time retain his security and prove for the value of his debt. He can only prove for the deficiency after allowing for the security: see TSB Bank plc v Platts [1998] 2 BCLC 1. If the secured creditor

proves, the creditor is subject to the rule that there cannot be two proofs for one debt. Where a mortgagor assigns the equity of redemption and covenant to discharge the debt and the mortgagee proves in his bankruptcy, a proof by the assignee on the covenant is a double proof and not allowable: see Re Rushton (a bankrupt); Ex parte National Westminster Bank Ltd v Official Receiver [1972] Ch 197; [1971] 2 All ER 937. A secured creditor who surrenders his security to the trustee for the benefit of creditors generally may prove for the whole of his debt: Bankruptcy Act s 90(2). A secured creditor who realises his security may prove for any balance due to him after deducting the net amount realised, unless the trustee is not satisfied that the realisation has been effected in good faith and in a proper manner: s 90(3). A secured creditor who has not realised or surrendered his security may (a) estimate its value and (b) prove for the balance due to him after deducting the value so estimated (s 90(4)), stating particulars of the security and the value at which he estimates it in his proof: s 90(5). For amendment of estimated valuation, see s 92, and for possible consequential repayment of excess, see s 93. Where a secured creditor subsequently realises the security, the net amount realised must be substituted for the estimated value: s 94. A proof cannot be amended once the terms of a composition have been carried out: Re Morton; Ex parte Morton and Westpac Banking Corp (1987) 77 ALR 520, affirmed (1988) 79 ALR 206. [page 619] In the case of the winding up of an insolvent corporation, Corporations Act s 554E(1) provides that a secured creditor is not entitled to prove the whole or any part of a secured debt otherwise than in accordance with this section and with any other provisions of this Act or the Regulations. There is the proviso in subs (4) that if the security is realised by the secured creditor, the creditor may prove for any balance after deducting the net amount realised unless the liquidator is not satisfied that the realisation has been effected in good faith and in a proper manner. However, a creditor may estimate the value of a security and prove for the balance: s 554E(5). If a creditor takes this latter course, the liquidator may

elect to redeem the security for the amount of the creditor’s estimate of value (Corporations Act s 554F (2)) or, alternatively, require the property comprised in the security to be sold: s 554F (3). There are detailed provisions in the Act allowing adjustments and amendments to be made, which need not be considered here. Occasionally, a creditor overlooks the fact that it has a security, proves for the full debt, and votes. As has been seen in 23.6, in both corporate and individual insolvency, this may be fatal in the winding up of an insolvent company or in personal bankruptcy. Where the statute or regulation does not apply, courts are loath to infer that such a creditor has intended to give up its security merely because it has proved for its full debt if the dividend is able to be returned: Kelso v McCulloch (1994) ACL Rep 185 NSW 31.

Proof for interest 23.10 Interest up to the date of bankruptcy or corresponding date in a corporate winding up may form part of the proof of debt. In a personal bankruptcy, no interest is payable in respect of a period commencing on or after the date of the bankruptcy: Bankruptcy Act 1966 s 82(3B). In the winding up of an insolvent corporation, no special provision is made, though under the rule in Re Humber Ironworks Co (Warrant Finance Co’s Case) (1869) 4 Ch App 643, the practice is that dividends are paid on the debt (including interest) as at the date of winding up. Note that, consistently with this, under Corporations Act 2001 (Cth) s 563B, the liquidator is to pay interest on proved debts from the date of winding up or other relevant date, though this is not payable until after all other debts (other than debts due to members) have been paid in full. A debt bears interest if interest is specifically provided for by the transaction or if an agreement to pay interest can be implied from the dealings between the parties: Re Henry; Wilmott v Gardener [1901] 2 Ch 548. The provisions as to interest apply only to the proof of debts and they do not interfere with the right of the creditor to payment out of the security of all interest which accrues due thereunder. If, however, the security is deficient and the creditor is required to prove for any part of his debt, then the proof as regards interest must be made subject to the provisions as to the

apportionment set out in the Bankruptcy Act ss 88, 89. A secured creditor cannot increase the amount of his proof by applying the proceeds of realisation of his security to payment of interest accruing after the date of the bankruptcy order: Re Bonacino; Ex parte Discount Banking Co (1894) 10 R 147; 1 Mans 59; Re William Hall (Contractors) Ltd (in liq) [1967] 2 All ER 1150; [1967] 1 WLR 948. Apart from the express provisions of the Bankruptcy Act, it is a principle applicable to proof generally, that interest which accrues after the date of the bankruptcy order cannot be proved for: Re Savin (1872) 7 Ch App 760 at 764; Re Ball; Commercial Banking Co of Sydney Ltd v Official Receiver (1980) 31 ALR 16. But the creditor can set off profits [page 620] realised from the security since the winding up against interest accrued during the same period: Re London, Windsor and Greenwich Hotels Co; Quartermaine’s Case [1892] 1 Ch 639. If a debt is payable by instalments that include principal and interest, the rule is applied to the part representing interest: Re Phillips; Ex parte Bath (1882) 22 Ch D 450. But if the fixed instalment includes a premium, as well as principal and interest, the premium can be proved for: Re Phillips; Ex parte Bath (1884) 27 Ch D 509. Re Kershaw [2005] NSWSC 313 is a case where a company being wound up produced a surplus after payment of all provable debts. The court then considered whether the surplus should go for post-liquidation contractual interest or to meet non-provable claims.

Administration of insolvent estates 23.11 Provision is made by the Bankruptcy Act for the application of the provisions of that Act to the insolvent estates of deceased persons: see Bankruptcy Act Pt XI ss 244–252C.

D. Redemption by Trustee, etc Redemption of security by trustee

23.12 Where a secured creditor has lodged a proof of debt in respect of the balance due after deducting the estimated value of his security, the trustee may at any time redeem the security on payment to the creditor of the value at which it has been estimated by the creditor: Bankruptcy Act s 91; Corporations Act s 554F. The creditor may at any time, by notice in writing, require the trustee to elect whether he will, or will not, exercise his power of redeeming the security; and if the trustee does not within three months after receiving the notice notify the creditor, in writing, that he elects to exercise the power, he is not entitled to do so, and any equity of redemption or other interest in the property comprised in the security that is vested in the trustee vests in the creditor and the amount of the creditor’s debt shall be deemed to be reduced by the amount at which the creditor estimated the value of the security: Bankruptcy Act s 91(4); Corporations Act s 554F(5). Where any property of an individual bankrupt is subject to a mortgage, the trustee may, upon giving six months’ notice in writing to the mortgagee of his intention to do so, or upon paying six months’ interest in lieu of notice, require the mortgagee to discharge the mortgage, notwithstanding that the due time for payment of the moneys owing under the mortgage has not arrived and, upon tender of the moneys secured by the mortgage and, if appropriate, interest in lieu of notice, the mortgagee is bound to execute such documents as are necessary in consequence of the payment: Bankruptcy Act s 136.

Sale where trustee dissatisfied with estimate 23.13 If the trustee or liquidator as the case may be is dissatisfied with the value at which a security has been estimated by a creditor, he may require the property comprised in the security to be offered for sale at such times and on such terms and conditions as are agreed on by the creditor and the trustee or, in default of agreement, as the court determines: Bankruptcy Act s 91(2); Corporations Act s 554F(3). The creditor may give notice of election to the trustee as to whether the trustee requires the security to be realised in the same manner, and with the same consequences, as with the notice of election whether or not to redeem referred to in 23.12. If such property is offered for sale by public auction, the creditor, or the trustee on behalf of the estate (in the case of a corporation, the liquidator), is entitled to bid for, and to purchase, the property: Bankruptcy Act s 91(3); Corporations Act s 554F(4).

[page 621]

E. Disclaimer Disclaimer of onerous property 23.14 The Bankruptcy Act 1966 (Cth) empowers a trustee in bankruptcy to disclaim onerous property: s 133. Corporations Act s 568 confers similar powers on a liquidator. In personal bankruptcies, specific provision is made for leaseholds in general and for mortgaged leaseholds in particular: Bankruptcy Act s 133(4). Disclaimer is made by notice in the prescribed manner. Generally, the leave of the court is not required for disclaimer. In a personal bankruptcy, leave is required in the case of leases, unless the trustee has followed a particular procedure (s 133(4)), and also in the case of contracts: s 133(5A). In corporate insolvencies, leave is usually required before most contracts can be disclaimed: Corporations Act s 568(1A). Where leave is required and the mortgagee does not appear at the hearing of the application, the court will order that he be excluded from all interest in, and security on, the property, unless by a short date he elects to take a vesting order: Re Parker and Parker (No 1); Ex parte Turquand (1884) 14 QBD 405. The trustee will not be allowed to disclaim to the prejudice of an equitable mortgagee, but will be ordered to assign the lease to him on having a proper indemnity: Re Muller; Ex parte Buxton (1880) 15 Ch D 289. In Re Clarke; Ex parte East and West India Dock Co (1881) 17 Ch D 759, the rule as to disclaimer was stated in terms which overlooked the claim of an equitable mortgagee, but see Re Katherine et Cie Ltd [1932] 1 Ch 70. Formerly, where the mortgagor was assignee of the lease, and not the original lessee, and the mortgage was by assignment of the entire term, the trustee could not disclaim since he was not bound by the covenants of the lease either by privity of contract or privity of estate (Re Gee; Ex parte Official Receiver (1884) 24 QBD 65); but Bankruptcy Act s 133(4) would appear to overrule that decision for personal bankruptcies: see Re Tulloch Ltd (1978) 3 ACLR 808. The court may, on the application of the mortgagee, make an order for the vesting of disclaimed property including leaseholds in him, but this will

usually not be done except upon the terms of making the mortgagee: (a) subject to the same liabilities and obligations as the bankrupt was subject to under the lease in respect of the property at the date when the bankruptcy petition was presented; or (b) if the court thinks fit, subject only to the same liabilities and obligations as if the lease had been assigned to the mortgagee at that date: see Bankruptcy Act s 133(5), (9), (10). The same applies, mutatis mutandis, in the winding up of a company: Corporations Act s 568F; see 37.13. A vesting order may be made in respect of Torrens system land subject to mortgage: Re Hopgood; Ex parte Coveney (1957) 18 ABC 133; Re Tulloch Ltd (1978) 3 ACLR 808; National Australia Bank Ltd v State of New South Wales (2009) 182 FCR 52; National Australia Bank Ltd v State of Victoria (2010) 118 ALD 527. A liquidator of a company can disclaim a contract for a lease of land without leave of the court: Corporations Act s 568(1A). It was held in Re Willmott Forests Ltd (recs and mgrs apptd) (in liq) (2012) 91 ACSR 182, that when a liquidator of an insolvent landlord disclaims a contract for a lease any leasehold interest of the lessee cannot survive, including the right to quiet enjoyment. This decision, which is subject to an application [page 622] for special leave to appeal to the High Court of Australia, may have consequences for mortgagees of leasehold interests. If a lessee has mortgaged its leasehold interest, and the lessor subsequently becomes insolvent and disclaims the lease, the mortgagee’s security may become valueless. The mortgagee would then be left to explore possible remedies under Corporations Act ss 568B, 568D(2) and 568E.

Form and effect of order 23.15 Ordinarily the mortgagee will take the property subject, not only to future, but also to past liabilities to the lessor. The vesting order may be made

as if the lease had comprised only the property comprised in the order; and in a proper case the order will include the whole of the property in the lease although not in the mortgage: Re Holmes; Ex parte Ashworth [1908] 2 KB 812; and see Re Hosking; Ex parte Calder (1932) 5 ABC 130. It is open also to the lessor to take the initiative, and the court will, on the lessor’s application, exclude the mortgagee from all interest in the property unless he accepts a vesting order. Where, in order to escape this liability, the mortgagees by sub-demise assigned their sub-term to a man of straw as trustee for themselves, it was nevertheless held that they must accept a vesting order or lose their security: Re Smith; Ex parte Hepburn (1884) 25 QBD 536. Where leave to disclaim is required and, before the intervention of the mortgagee, leave has been given to the trustee in bankruptcy to disclaim, the mortgagee should apply for an order to stay proceedings pending an appeal. Once the disclaimer is executed, the lessor’s title will be complete, and the mortgagee’s remedy will be gone: Re Hawes; Ex parte Sadler (1881) 19 Ch D 122.

F. Discharge from Bankruptcy Duration of bankruptcy 23.16 Subject to certain exceptions, a first-time bankrupt will be automatically discharged three years after the date of the bankruptcy: Bankruptcy Act s 149. A bankrupt may apply to the court at any time for an order for discharge, but on such application the court will take into consideration a report of the trustee about the bankrupt and his conduct and if any of a long list of matters applies the court may refuse to make an order of discharge: see Bankruptcy Act s 149D.

Effect of discharge 23.17 Subject to certain limited exceptions, discharge operates to release the bankrupt from all debts, including secured debts, provable in the bankruptcy: Bankruptcy Act s 153(1). But the discharge of the bankrupt does not affect the right of a secured creditor, or any person claiming through or under him, to realise or otherwise

deal with his security (a) if the secured creditor has not proved in the bankruptcy for any part of the secured debt — for the purpose of obtaining payment of the secured debt; or (b) if the secured creditor has proved in the bankruptcy for part of the secured debt — for the purpose of obtaining payment of the part of the secured debt for which he has not proved in the bankruptcy. For those purposes the secured debt, or the part thereof, shall be deemed to have been released by the discharge of the bankrupt: Bankruptcy Act s 153(3); and see Lamont v Bank of New Zealand [1981] 2 NZLR 142.

[page 623]

Part VII

Priorities of Mortgages

[page 625]

Chapter 24

Priorities of Mortgages I

Priorities Generally How questions of priorities arise Possible tests of priority Arrangements affecting priorities II Possession of the Legal Estate Priority of the legal mortgagee of land When the legal estate availed Notice of trust Mortgagee without, and transferee with notice III Notice of Prior Encumbrances A. Actual and Constructive Notice Actual notice Constructive notice When notice is implied When notice to be obtained Sales by the court B. Constructive Notice Statutory Restriction on Constructive Notice Statutory restriction Constructive Notice through Non-inquiry

24.1 24.2 24.3 24.4 24.5 24.6 24.7

24.8 24.9 24.10 24.11 24.12

24.13

Inquiries which should be made Inquiries necessary to ascertain title Of whom inquiries should be made Notice from form of conveyance Notice of equities Notice of deed is notice of contents Deeds not necessarily affecting title Notice by occupation Constructive Notice through Agents Notice received in the same transaction Fraud of agent Relation of principal and agent IV Priority between Equitable Encumbrances Rule of priority in time Contemporaneous instruments Operation of the rule Rule applies to equitable interests generally

24.14 24.15 24.16 24.17 24.18 24.19 24.20 24.21 24.22 24.22 24.23 24.24 24.25 24.26 24.27 24.28

[page 626]

The better equity prevails Mortgages in breach of trust Mortgagee from defaulting trustee Priorities in proceeds of sale Salvage advances Notice of equities V Loss of Priority Postponement of legal mortgagee Postponement by fraud

24.29 24.30 24.31 24.32 24.33 24.34 24.35 24.36

VI

‘Gross’ negligence Negligence as to title Negligence as to obtaining the deeds Mortgagee’s rights to the deeds Negligence in custody of deeds Delivery of deeds for raising money Where legal mortgagee not postponed Postponement of equitable encumbrancer Effect of possession of the deeds Estoppel Misrepresentation Conclusion Judgment Creditors Effect of judgment Charging order Registration of writs and orders affecting land Chattels

24.37 24.38 24.39 24.40 24.41 24.42 24.43 24.44 24.45 24.46 24.47 24.48 24.49 24.50 24.51 24.52

I Priorities Generally How questions of priorities arise 24.1 If successive advances have been made on the security of the same property by different mortgages it may, for one reason or another, be necessary to discover the order in which the mortgages rank. A mortgagor may have contrived to borrow sums in excess of the value of the security; or the mortgaged property, though at first sufficient to support the debts of all the mortgagees, may have depreciated in value. Of course, the mortgagees have their remedy by way of the personal covenant for repayment made by the mortgagor, but the sale of the mortgaged property may be the only satisfactory method of recovering the sum lent, since the other property of the mortgagor may be of little value. Each mortgagee is then entitled to be

satisfied out of the proceeds of sale in full in the order of the priority of the mortgages. In addition to the question of order for payment, the rules as to priority also determine which one of several subsequent mortgages is entitled to the title to the mortgaged property (title deeds in the case of a general law mortgage and the certificate of title in the case of Torrens system land) on the discharge of a prior mortgage, which one of several mortgages can requisition a transfer instead of a reconveyance of a general law mortgage or a discharge of a Torrens system land mortgage and how a mortgage will be affected in an action for redemption or foreclosure. [page 627] A question of priorities may also arise between a mortgagee and certain other parties — for example a purchaser (McCarthy and Stone Ltd v Julian S Hodge & Co Ltd [1971] 2 All ER 973; [1971] 1 WLR 1547, and see Lyus v Prowsa Developments Ltd [1982] 2 All ER 953; [1982] 1 WLR 1044; cf Midland Bank Trust Co Ltd v Green [1981] AC 513; [1981] 1 All ER 153 (HL)); or a beneficial owner of the property: Williams and Glyn’s Bank Ltd v Boland [1979] Ch 312; [1979] 2 All ER 697 (CA); affirmed [1981] AC 487; [1980] 2 All ER 408 (HL); Kingsnorth Trust Ltd v Tizard [1986] 2 All ER 54; [1986] 1 WLR 783; City of London Building Society v Flegg [1988] AC 54; [1987] 3 All ER 435; Bristol and West Building Society v Henning [1985] 2 All ER 606; [1985] 1 WLR 778 (CA); Paddington Building Society v Mendelsohn (1985) 50 P & CR 244 (CA); Abbey National Building Society v Cann [1991] 1 AC 56; [1990] 1 All ER 1085; Lloyds Bank plc v Rosset [1991] AC 107; [1990] 1 All ER 1111; Equity and Law Home Loans Ltd v Prestige [1992] 1 All ER 909; [1992] 1 WLR 137 (CA); Barclays Bank plc v O’Brien [1994] 1 AC 190; [1993] 4 All ER 417 (HL); (1986) 49 MLR 345 (Thompson); (1986) 136 NLJ 208 (Hayton); (1986) 136 NLJ 771 (Luxton); [1986] Conv 309 (Sparkes); [1992] Conv 206, 443 (Thompson); and see also [1992] Conv 218 (Lawson); (1992) 142 NLJ 539 (Greed).

Possible tests of priority 24.2

The basic rules governing the priority of encumbrances are very easy

to state. There are only three possible situations and only three rules which apply subject to the effect, if any, of any applicable Registration of Deeds legislation (as to which see Chapter 27): 1.

Where there is a conflict between two legal estates, the rule ‘Nemo dat quod non habet’ (No one can give what he has not got) applies. If a person has already granted an estate to X, he no longer has that property to grant it to Y.

2.

Where one person has a legal estate and the other an equitable estate, the maxim ‘Where equities are equal, the law prevails’ applies. That is, unless the holder of the legal estate is postponed by some unconscionable conduct, the holder of the legal estate prevails.

3.

Where there is a conflict between two equitable estates, the maxim ‘Qui prior est tempore, potior est jure’ (First in time is stronger in law) applies. However, for the maxim to apply, the equities must be equal so that again, the holder of the prior equity may be postponed by his unconscionable conduct.

The usual reasons for loss of priority is as a result of notice against which the person is not protected or negligence in arming another with the indicia of title or other careless conduct in relation to the custody of the title deeds. Note that in certain cases a mortgagee can tack further advances as against a subsequent encumbrancer. Of course, these rules have limited applicability to Torrens system land. In addition, there are certain other statutory priority provisions (for example relating to insolvency — see Chapter 23; for patents, see 6.26) which determine priorities; there are also special considerations affecting the priority of judgment creditors (see 24.49ff) and of shipping and aircraft mortgages: see Chapter 9.

Arrangements affecting priorities 24.3 The parties may, by agreement among themselves, modify the ordinary rules of priorities. It is quite common for a prior lender to agree to be postponed, either wholly or in respect of a particular asset, to a subsequent lender. Variation of priorities may be effected by a deed of postponement or priority agreement as a separate document or included in a substantive

transaction: for forms, see The Australian Encyclopaedia of [page 628] Forms and Precedents, K I N Rose, LexisNexis, Australia, Mortgages (updated May 2009), [10.190]–[10.200]. Careful drafting is required. Any problems that arise are usually as to the construction of the extent of the postponement: see, for example, ANZ v National Mutual Life Nominees Ltd (1977) 137 CLR 252. Special attention should be given to the consequences of insolvency. For example, lending banks or other lending institutions may agree to rank equally, in which case the fact that some of the lenders have floating rather than fixed charges, and are therefore subject to the priority of preferential creditors, should be given attention. In Cheah Theam Swee v Equiticorp Finance Group Ltd [1992] 1 AC 482; [1991] 4 All ER 989 (PC), it was held that, where there were two mortgages of a piece of general law land, the mortgagees could agree to alter the priority of their mortgages without the consent of the mortgagor because in the ordinary case the mortgagor was not affected by the order in which his debts were satisfied as he was bound to satisfy all his secured debts before he could recover the property; and see Fisher v Rural Adjustment and Finance Corp of Western Australia (1995) 57 FCR 1 (FCAFC). See also Re Portbase Clothing Ltd [1993] Ch 388; [1993] 3 All ER 829 for an example of the consequences. As against subsequent mortgagees or other encumbrancers, it would be prudent to register such deed of postponement or priority agreement as a deed: see Chapter 27. See, in general, Gough, Company Charges, 2nd ed, Butterworths, London, 1996, p 1095ff; Waters v Widdows [1984] VR 503 at 506–7; and National Australia Bank Ltd v Composite Buyers Ltd (1991) 6 ACSR 94 at 100. One particular type of arrangement is the so-called subordination clause. For example, where a loan is made to a company which is part of a group, it is common to provide that other loans made by other members of the group to the borrowing company shall be subordinated to the outside lender. On subordination clauses generally, see Austin and Ramsay, Ford’s Principles of

Corporations Law, 15th ed, LexisNexis Butterworths, Australia, 2012, [20.060]; McKendrick and Goode, Goode on Commercial Law, 4th ed, Penguin, London, 2010, pp 655–7; Gullifer, Goode on Legal Problems of Credit and Security, 4th ed, Sweet & Maxwell, London, 2008, [1-79]–[1-81]; Gough, Company Charges, 2nd ed, p 1095ff; and see Re Woodroffes (Musical Instruments) Ltd [1986] Ch 366; [1985] 2 All ER 908; AG v McMillan and Lockwood Ltd [1991] 1 NZLR 51 and see casenote (1991) NZLJ 39 (Grantham). Where a bank gives an assurance that a mortgage held by it will be postponed to a mortgage in favour of a subsequent creditor and the latter relies on the bank’s assurance, the bank is liable in negligence for the creditor’s loss: Federal Savings Credit Union Ltd v Hessian (1980) 98 DLR (3d) 488 (NSSC).

II Possession of the Legal Estate Priority of the legal mortgagee of land 24.4 At general law, in the case of a mortgage of the fee simple, the legal estate in the fee simple is conveyed to the mortgagee. It follows that, of several possible mortgages of the property, there could be only one legal mortgage, but several legal mortgages by demise of freeholds or by subdemise of leaseholds were possible. At general law (ignoring for the moment the possible effect on priorities of deeds registration legislation: see Chapter 27) the foundation of the law as to priorities of mortgages is that a mortgagee who has the legal estate prevails over all other encumbrancers of whose securities he had no notice when he made his advance (Bacon’s [page 629] Abridgement Mortgage, E3); and this is so, too, where a later mortgagee had the better right to call for a conveyance of the legal estate (Wilkes v Bodington (1707) 2 Vern 599; 23 ER 991), where, for instance, the legal

estate is held on trust for the later purchaser or mortgagee: Stanhope v Earl Verney (1761) 2 Eden 81; 28 ER 826; Taylor v London and County Banking Co [1901] 2 Ch 231 at 263. See McCarthy and Stone Ltd v Julian S Hodge & Co Ltd [1971] 2 All ER 973; [1971] 1 WLR 1547.

When the legal estate availed 24.5 The legal estate is available for the protection of a mortgagee, whether he got it in at the time of his advance, or subsequently, provided in either case that the mortgagee had no notice of a prior encumbrance when making the advance: Pilcher v Rawlins (1872) 7 Ch App 259 at 269. It is the same where the mortgagee already holds the legal estate, as in the case of an advance by a trustee to a beneficiary: see Huntington v Greenville (1682) 1 Vern 49; 23 ER 303. If an equitable mortgagee has no notice at that time, he could protect himself by the legal estate, although he got it in after notice: Blackwood v London Chartered Bank of Australia (1874) LR 5 PC 92 at 111. For subrogation, see Orakpo v Manson Investments Ltd [1978] AC 95; [1977] 3 All ER 1 (HL); Re Sara Properties Pty Ltd [1982] 2 NSWLR 277; City of London Building Society v Flegg [1988] AC 54; [1987] 3 All ER 435 (HL).

Notice of trust 24.6 If the mortgagee gets in the legal estate at the time of the advance, and has then no notice that it is affected by a trust, the legal estate protects him: Pilcher v Rawlins (1872) 7 Ch App 259 at 269. But the mortgagee could not avail himself of it against the beneficiaries, if he got it in afterwards, and had notice of the trust when he got it in. In that case the mortgagee takes subject to the rights of the beneficiaries and becomes a trustee for them: Taylor v Russell [1892] AC 244; Taylor v London and County Banking Co [1901] 2 Ch 231; Perham v Kempster [1907] 1 Ch 373. See McCarthy and Stone Ltd v Julian S Hodge & Co Ltd [1971] 2 All ER 973; [1971] 1 WLR 1547. It is otherwise if the mortgagees are entitled to suppose that the trusts are at an end (Pearce v Bulteel [1916] 2 Ch 544), and see the statement of the doctrine by Wright J in Powell v London and Provincial Bank [1893] 1 Ch 610 at 615. It seems to be an open point whether, to be defeated, the mortgagee must not only know of the trust but also that the conveyance to him is in breach of trust: see Mumford v Stohwasser (1874) LR 18 Eq 556 at 563; and see Carter v Carter (1857) 3 K & J 591 at 640–1; 69 ER 1256 at

1266; and Sykes and Walker, The Law of Securities, 5th ed, Law Book Co, Sydney, 1993, [page 630] pp 392–3; cf (1976) 92 LQR 528 at 556 (Goode); (1977) 93 LQR 324 (Donaldson); (1977) 93 LQR 487 (Goode). If at the time of the advance, the mortgagee had notice of an equity affecting the title of the mortgagor, the mortgagee takes subject to that equity, since he cannot claim a better title than the mortgagor: see Cookson v Lee (1853) 23 LJ Ch 473, where, upon a purchase of trust property by the solicitor of the trustees being set aside, a mortgage of the property by that solicitor to a mortgagee who had notice of the relationship failed also. A trustee is entitled to the advantage of a legal estate vested in him to protect an advance made by him on the share of a beneficiary, and it will prevail over a prior encumbrance on the share of which he had no notice: Phipps v Lovegrove (1873) LR 16 Eq 80; Newman v Newman (1885) 28 Ch D 674.

Mortgagee without, and transferee with notice 24.7 Where a legal mortgagee gained priority over an earlier equitable encumbrance owing to want of notice, he can transfer his security with the like advantage to a transferee with notice, for otherwise the mortgagee’s right of disposition would be fettered (Lowther v Carlton (1741) 2 Atk 242; 26 ER 549; Kettlewell v Watson (1882) 21 Ch D 685 at 707; Wilkes v Spooner [1911] 2 KB 473 (CA)), but this rule does not apply where the transfer is made voluntarily in order to avoid the effect of notice (Merry v Abney (1663) 1 Ch Cas 38; 22 ER 682; Coote v Mammon (1724) 5 Bro Parl Cas 355; 2 ER 727), or to a transfer in breach of a fiduciary relationship: Re Stapleford Colliery Co; Barrow’s Case (1880) 14 Ch D 432; Gordon v Holland (1913) 82 LJ PC 81.

III Notice of Prior Encumbrances

A. Actual and Constructive Notice Actual notice 24.8 Notice is either actual or constructive: the one kind being a question of fact, the other arising from construction of law: Co Litt 309 b. The terms ‘actual notice’ and ‘express notice’ are both used in statutes, but probably with the same meaning; for ‘actual notice’, see, for example, the English Act s 198. Knowledge may be taken to imply, and to be equivalent to, what is commonly known as actual notice. Actual notice may be oral as well as written (Browne v Savage (1859) 4 Drew 635; 62 ER 244), and may be effected as well by the delivery of a document which shows the nature and extent of the claim as by one in the actual form of a notice: Baille v M’Kewan (1865) 35 Beav 177; 55 ER 862. It is not necessary that it should have been given for the purpose of making a transaction valid. If it is actually given, the object for which it was given is not material: Smith v Smith (1833) 2 Cr & M 231; 149 ER 745; Rickards v Gledstanes (1861) 3 Giff 298; 66 ER 423, affirmed 31 LJ Ch 142. The notice must be distinct; if written notice has not been given, evidence of casual conversations, not ‘ad rem’, will not alone be sufficient. It must be shown that an intelligent apprehension of the fact has been acquired such as would induce a reasonable or an ordinary individual of business to act upon the information, and to regulate his conduct by it in the matter: Ford v White (1852) 16 Beav 120; 51 ER 723; Edwards v Martin (1865) LR 1 Eq 121; Saffron Walden Second Benefit Building Society v Rayner (1880) 14 Ch D 406. There must be clear evidence of notice, for suspicious circumstances make no notice: Whitfield v Fausset (1750) 1 Ves Sen 387; 27 ER 1097; West v Reid (1843) 2 [page 631] Hare 249; 67 ER 104. It seems, also, that it ought to be given by a person interested in the property (Sugden, A Concise and Practical Treatise of the Law of Vendors and Purchasers, 14th ed, H Sweet, London, 1862, p 755);

but probably a notice would be held good if given even by a self-constituted agent, provided it is on behalf of an interested person, and provided the particulars of the claim are clearly set forth.

Constructive notice 24.9 Implied, or constructive, notice, has been defined to be the knowledge which the courts impute to a person, upon a presumption so strong that it cannot be allowed to be rebutted, that the knowledge must exist or have been communicated: Hewitt v Loosemore (1851) 9 Hare 449; 68 ER 586; Plumb v Fluitt (1791) 2 Anst 432; 145 ER 926. It extends to matters affecting the title to property, and to circumstances that would entitle persons to equitable priorities or change the character of rights depending upon want of notice; but it does not extend to such matters as relate merely to the motives and object of the parties, or to the consideration upon which the matter in hand is founded: Eyre v Burmester (1862) 10 HL Cas 114; 11 ER 968 (Lord Chelmsford). It is a presumption adopted for the prevention of fraud, and does not necessarily agree with, but may be contrary to, the probabilities of the particular case. A person who is proved to have known facts from which a court, or jury, or an impartial person, would properly draw a certain inference will, therefore, not be allowed to escape from notice by saying that he did not draw the natural inference from the facts: Re Douglas; Ex parte Snowball (1872) 7 Ch App 534, and see McCarthy and Stone Ltd v Julian S Hodge & Co Ltd [1971] 2 All ER 973; [1971] 1 WLR 1547. So in Commonwealth Bank v Platzer [1997] 1 Qd R 266, the equitable interest of a wife living with her husband prevailed over a later commercial mortgage by the husband to a bank.

When notice is implied 24.10 Constructive notice of a prior encumbrance is imputed to a mortgagee, first, when, on advancing his money, the mortgagee omits to make inquiries which, having regard to the state of the title known to him, are usual inquiries for a purchaser to make, and which would have led him to a knowledge of the prior encumbrance; and second, when he has reason to suspect a prior encumbrance, and wilfully or fraudulently avoids receiving actual notice of it.

The first ground is based on the presumption of law that a purchaser has investigated the title of the property which he purchases, and has examined whatever forms a link in that title: Jones v Smith (1841) 1 Hare 43; 66 ER 943; Berwick & Co v Price [1905] 1 Ch 632; and see Oversea-Chinese Banking Corp Ltd (OCBC) v Malaysian Kuwaiti Investment Co (MKIC) and Aljade [2003] VSC 495 at [169] referring to [24.9] and [24.15] of the first edition to this book. If there is anything else on the title that would put a professional person on inquiry, a mortgagee cannot set up the defence that he had no professional adviser: Berwick & Co v Price. The second is based on an obvious principle of equity, and, in these circumstances, notice may be imputed to the mortgagee although he does not act personally in the matter, but by an agent: Espin v Pemberton (1859) 3 De G & J 547; 44 ER 1380. Notice to the person who transacts is notice to the person for whom he transacts: Merry v Abney (1663) 1 Cas in Ch 38; 22 ER 682. The infancy of the principal makes no difference: Toulmin v Steere (1817) 3 Mer 210; 36 ER 81, and see 24.22ff.

When notice to be obtained 24.11 To be effectual, notice must be obtained before the completion of the transaction. It will be good if given before the execution of the deed although the money has already been paid, because the payment and execution are but parts of the same transaction: [page 632] Wigg v Wigg (1739) 1 Atk 384; 26 ER 244. Similarly, it will be good before payment, though security has been given for the consideration money; for perhaps after notice it will not be paid: Hardingham v Nicholls (1745) 3 Atk 304; 26 ER 977. If a cheque is delivered and countermanded, notice before withdrawal of the countermand will bind the purchaser: Tildesley v Lodge (1857) 3 Sm & G 543; 65 ER 772.

Sales by the court

24.12 Before 1882, notice operated in a transaction under the direction of the court, just as in any other case; for the court did not warrant the validity of titles, but only employed its officer to investigate them: Toulmin v Steere (1817) 3 Mer 210; 36 ER 81; distinguished in Re Howard’s Estate (1892) 29 LR Ir 266. This position was changed in England by Conveyancing Act 1881 s 70 which was re-enacted in the UK Act as s 204. The substance of the legislation was adopted in various states and New Zealand: see NSW Act s 173; Victorian Act s 205; Property Law Act 2007 (NZ) s 43. For convenience, reference is made to the Victorian provision which, with some minor variations, is identical to the English provision: 205(1) An order of the Court under or purporting to be under any statutory or other jurisdiction shall not, as against a purchaser, be invalidated on the ground of want of jurisdiction, or of want of any concurrence, consent, notice or service, whether the purchaser has notice of any such want or not. (2) This section shall have effect with respect to any lease, sale or other act under the authority of the Court, and purporting to be in pursuance of any statutory power notwithstanding any exception in such statute. (3) This section shall apply to all orders made before or after the commencement of this Act.

The grant of administration by the Probate Division is an ‘order of court’: Hewson v Shelley [1914] 2 Ch 13. It seems that if the court merely authorises the exercise of a statutory power out of court, the order only brings the power into force, and enables the donee of the power — for example the tenant for life — to bind the beneficiaries; it does not affect persons claiming under a paramount title: see Wolstenholme and Cherry, Conveyancing Statutes, 13th ed, Oyez, 1972, vol 1, p 335. Terms such as ‘court’ or ‘purchaser’ are generally defined in the legislation, with greater and lesser degrees of particularity (see, for example, ss 3 and 18 of the Victorian legislation, respectively). However, the legislative provisions are not always consistent: see, for example, the confusion as to the proper court to order relief against forfeiture under s 146(2) (Vic). The provision (s 204 and its equivalents) does not render an order binding on any estate or interest which, having regard to the terms and scope of the order, was not intended to be bound. It does not enable the court to sell and give a title to the property of A when it supposed that it was selling the property of B: Jones v Barnett [1900] 1 Ch 370. It seems to follow that such an order would not protect a purchaser against an encumbrance of which he had notice, if the court had no notice of it, and if there was nothing in the

order which suggested that the encumbrancer was intended to be bound. It is also considered that it protects only completed transactions, and would not be available for a purchaser with regard to anything to be done in the future in cases where there has been fraud, although the purchaser had no notice of it: see Eyre v Burmester (1862) 10 HL Cas 90; 11 ER 959; Heath v Crealock (1874) 10 Ch App 22; and cf Pilcher v Rawlins (1872) 7 Ch App 259. On the other hand, where the court purports to bind a third party by the order, a purchaser will be protected, even though the order is on the face of it ‘ultra vires’: Re Hall-Dare’s Contract (1882) 21 Ch D 41; Mostyn v Mostyn [1893] 3 Ch 376; Pritchard v Briggs [1980] Ch 338 (CA), especially at 407 (Goff LJ). In this respect see the provisos to s 173(1) of the New South Wales legislation, and the statements by the High Court [page 633] in Templeton v Leviathan (1920) 30 CLR 34 (see especially at 58–9) which led to the addition of the words ‘made or purporting to be made’ after the word ‘court’ in the opening line of the then equivalent English provision. See also the proviso to subs (1), and see Stuckey, The Conveyancing Act, 1919– 1969, 2nd ed, Law Book Co, Sydney, 1969, p 335.

B. Constructive Notice Statutory Restriction on Constructive Notice Statutory restriction 24.13 The provisions of UK Conveyancing Act 1881 s 3 were enacted to limit the equitable doctrine of constructive notice. As to its general effect, Vaughan Williams LJ said in Hunt v Luck [1902] 1 Ch 428 at 435: I wish to call attention to sub-s 3 of s 3 of the Act, which says that ‘A purchaser shall not by reason of anything in this section be affected by notice in any case where he would not have been so affected if this section had not been enacted.’ I refer to that sub-section only for the purpose of vouching what has been said in the course of the argument, namely, that, so far as this s 3 is concerned, the practical result is that the law prior to the Conveyancing Act can only be used as a shield, and not treated as going beyond the law contained in the code-like definition in s 3.

Nevertheless, the doctrine of constructive notice remains a danger to lenders (and purchasers): see McCarthy and Stone Ltd v Julian S Hodge & Co Pty Ltd [1971] 2 All ER 973; [1971] 1 WLR 1547; Kingsnorth Finance Co Ltd v Tizard [1986] 1 WLR 783; [1986] 2 All ER 54; Lloyds Bank plc v Rosset [1991] 1 AC 107; [1990] 1 All ER 1111; in general, with respect to purchasers, see Williams and Glyn’s Bank Ltd v Boland [1981] AC 487, especially at 503; [1980] 2 All ER 408, especially at 411 (Lord Wilberforce). Section 3 was re-enacted in the various states (and with some modifications in the UK Act s 199): see NSW Act s 164; Victorian Act s 199; Queensland Act s 346; South Australian Act s 117(1);Tasmanian Act s 5(1). Section 164 of the New South Wales Act provides: 164(1) A purchaser shall not be prejudicially affected by notice of any instrument, fact, or thing, unless — (a) it is within the purchaser’s own knowledge, or would have come to the purchaser’s knowledge, if such searches as to instruments registered or deposited under any Act of Parliament, inquiries, and inspections had been made as ought reasonably to have been made by the purchaser; or (b) in the same transaction with respect to which a question of notice to the purchaser arises, it has come to the knowledge of the purchaser’s counsel as such, or of the purchaser’s solicitor or other agent as such, or would have come to the knowledge of his solicitor or other agent as such, if such searches, inquiries, and inspections had been made as ought reasonably to have been made by the solicitor or other agent. (1A) Omission to search in any register or list kept by, or filed with the Australian Securities and Investments Commission shall not of itself affect a purchase of land with notice of any mortgage or charge. (2) This section shall not exempt a purchaser from any liability under or any obligation to perform or observe any covenant, condition, provision, or restriction contained in any instrument under which the purchaser’s title is derived, mediately or immediately, and such liability or obligation may be enforced in the same manner and to the same extent as if this section had not been enacted. (3) A purchaser shall not by reason of anything in this section be affected by notice in any case where the purchaser would not have been so affected if this section had not been enacted. (4) This section applies to purchases made either before or after the commencement of this Act, save that where an action is pending at the commencement of this Act the rights of the parties shall not be affected by this section.

[page 634]

A ‘purchaser’ is generally defined to include a ‘mortgagee’: see NSW Act s 7(1); Victorian Act s 18(1); UK Act s 205(1)(xxi). The negative character of the provisions makes the provisions of the third subsection strictly unnecessary; however, its practical effect is as indicated, above, in relation to Conveyancing Act 1881 (UK) s 3. The object of the first subsection is to get rid of some of those extensions of the law of notice which have gradually arisen out of the somewhat refined reasonings of courts of equity, and which operated with much harshness. However, in applying the legislation it will often be as necessary as before to consider what constitutes ‘knowledge’, either in the person to be affected by notice, or in his agent ‘as such’, when agency exists; whether the knowledge has been acquired in the same transaction; and what inquiries and inspections ‘ought reasonably to have been made’: see 24.8ff; and Hunt v Luck, above. Subsection (1A) of the New South Wales legislation is of a similar nature, with particular reference to company registration records. It is not clear whether these provisions apply to land under Torrens title, although Robinson, in The Property Law Act, (Victoria), Law Book Co, Sydney, 1992, p 440, argues they should not; but this appears at odds with the High Court’s view of the nature and operation of the Torrens system: see Barry v Heider (1914) 19 CLR 197. In that case Isaacs J said at 213: Mr Loxton contended that the consequence was that until registration no person can acquire any interest in land legal or equitable. He said that whatever personal liability existed might be enforced as ‘a chose in action’ against the person liable, but not against the land, for the Act recognizes no interests legal or equitable except in the registered proprietor. Such a contention is absolutely opposed to all hitherto accepted notions in Australia with regard to the Land Transfer Acts. They have long, and in every State, been regarded as in the main conveyancing enactments, and as giving greater certainty to titles of registered proprietors, but not in any way destroying the fundamental doctrines by which Courts of Equity have enforced, as against registered proprietors, conscientious obligations entered into by them.

This approach is evident in later decisions, particularly J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546, which is apposite to present matters.

Constructive Notice through Non-inquiry Inquiries which should be made

24.14 Legislative provisions derived from Conveyancing Act 1881 (UK) s 3 generally adopt as the ‘test’ for constructive notice of an ‘instrument or matter or any fact or thing’ establishment of the fact that the ‘instrument etc’ would have come to the knowledge of the person against whom notice is sought to be established ‘if such inquiries and inspections had been made as ought reasonably to have been made by him’. (See UK Act s 199(1)(ii) and Victorian Act s 199(1); the New South Wales provisions are more expansive.) The inquiries which are reasonable are those which ought to have been made as a matter of prudence, having regard to what is usually done by careful business people in similar circumstances: Bailey v Barnes [1894] 1 Ch 25 (CA); Berwick & Co v Price [1905] 1 Ch 632; Northern Bank Ltd v Henry [1981] IR 1. (This is equivalent to the inquiries which a purchaser should make according to the practice of conveyancers: see also Agra Bank Ltd v Barry (1874) LR 7 HL 135; McCarthy and Stone Ltd v Julian S Hodge & Co Ltd [1971] 1 WLR 1547; [1971] 2 All ER 973; O’Connor v McCarthy [1982] IR 161; Kingsnorth Trust Ltd v Tizard [1986] 1 WLR 783; [1986] 2 All ER 54; (1986) 136 NLJ 771 (Luxton); Drulroad Pty Ltd v Gibson (1992) 5 BPR 11,878; and also Bailey v Richardson (1852) 9 Hare 734; 68 ER 711; Barnhart v Greenshields (1853) 9 Moo PCC 18; 14 ER 204; Hunt v Luck [1902] 1 Ch 428 at 433 which are referred to at 24.21.) [page 635] It may be stated generally that, where a person has actual notice that the property with which he is dealing is charged or otherwise affected, it is his duty to inquire into the extent and nature of the charges; and he must not assume that the reference is only to charges which are already known to him: Jones v Williams (1857) 24 Beav 47; 53 ER 274. (The omission to make inquiry so obviously tends to fraud that the purchaser is affected with notice, even though the omission does not proceed from fraudulent motives: Jones v Williams. On the question of constructive notice resulting from failure to make reasonable inquiries, see Newman v Real Estate Debenture Corp Ltd and Flower Decorations Ltd [1940] 1 All ER 131.) If there is no actual notice that the property is affected, and no turning

away from the knowledge of facts which the res gestae would suggest to a prudent mind, there will be no constructive notice: Plumb v Fluitt (1791) 2 Anst 432; 145 ER 926; Evans v Bicknell (1801) 6 Ves 174; 31 ER 998; Jones v Smith (1841) 1 Hare 43; 66 ER 943, affirmed (1843) 1 Ph 244; 41 ER 624. See Agra Bank Ltd v Barry (1874) LR 7 HL 135; English and Scottish Mercantile Investment Co v Brunton [1892] 2 QB 700 (where the mortgagee’s solicitor knew that the mortgaging company had issued debentures, but was told that they did not affect the property proposed to be mortgaged to his client); Re Castell and Brown Ltd; Roper v The Company [1898] 1 Ch 315; Re Valletort Sanitary Steam Laundry Co Ltd; Ward v Valletort Sanitary Steam Laundry Co Ltd [1903] 2 Ch 654; Re Bourne; Bourne v Bourne [1906] 2 Ch 427.

Inquiries necessary to ascertain title 24.15 An intending mortgagee must satisfy himself that the mortgagor has at least a prima facie title. It is not sufficient for him merely to put the question ‘is this your property?’: Mulville v Munster and Leinster Bank (1891) 27 LR Ir 379. He will be deemed to have notice of all facts which he would have learned upon a proper investigation of the title, under a contract containing no restriction of his rights in that respect: Re Nisbet and Potts’ Contract [1905] 1 Ch 391, on appeal [1906] 1 Ch 386. See also Re Cox and Neve [1891] 2 Ch 109 at 117, and also UK Act s 44(1) and (5) and various equivalents: for example, NSW Act s 53; Victorian Act s 44(1) and (5); and Property Law Act 2007 (NZ) Sch 6, s 5(1). On the concealment of documents, see NSW Act s 183; Victorian Act s 183; UK Act s 183; District Bank Ltd v Luigi Grill Ltd [1943] Ch 78; [1943] 1 All ER 136. If, therefore, an intending mortgagee does not ask for the title deeds, he will be affected with notice of the rights of an undisclosed mortgagee in whose custody they are: Berwick & Co v Price [1905] 1 Ch 632 per Joyce J at 638. See Kennedy v Green (1834) 3 My & K 699; 40 ER 266; Jones v Smith (1841) 1 Hare 43; 66 ER 943, affirmed (1843) 1 Ph 244; 41 ER 624; Hewitt v Loosemore (1851) 9 Hare 449; 68 ER 586; Lloyds Banking Co v Jones (1885) 29 Ch D 221; Oliver v Hinton [1899] 2 Ch 264. The High Court reached a similar position with respect to Torrens title land in J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546. A fortiori, if an intending mortgagee knows that the deeds are in deposit, or

that the person with whom he deals is indebted, and has given security to another, and that the title deeds are not forthcoming, he abstains from seeking information as to their actual position: see Whitbread v Jordan (1835) 1 Y & C Ex 303; 160 ER 123. (As regards ‘knowing’, see Birch v Ellames (1794) 2 Anst 427; 145 ER 924; Hiern v Mill (1806) 13 Ves 114; 33 ER 237.) If A claims priority over B on the ground that B took with notice of A’s earlier security, the onus lies on A to prove such notice; and it is not sufficient to show that the deeds were in the hands of A if, irrespective of the security, he was the person entitled to hold them: Re Hardy; Ex parte Hardy (1832) 2 Deac & Ch 393. Possession of deeds by a solicitor is in the ordinary course of business and does not generally call for inquiry: Bozon v Williams (1829) 3 Y & J 150; and see Eade v Vogiazopoulos (1993) V ConvR [page 636] ¶54-458 with respect to representations by a solicitor which may go to the authority or agreement of particular individuals to the transaction proposed. The fact that the mortgagee does not employ a solicitor, and is ignorant of the law, is immaterial: Berwick & Co v Price [1905] 1 Ch 632. A person will be affected with notice of an instrument brought to his actual knowledge, though it be inartistically expressed, if the meaning is so plain that an unprofessional person would not be misled: Davies v Davies (1841) 4 Beav 54; 49 ER 258. The notice will not affect the purchaser, if he afterwards purchases other lands under a title independent of the instrument of which he had notice, though that instrument may have actually related to them. The purchaser is neither presumed to take notice of, nor bound to remember, more than is necessary to make out his title: Hamilton v Royse (1804) 2 Sch & Lef 315.

Of whom inquiries should be made 24.16 Where notice may depend on the result of inquiries, these should not be made of the mortgagor if there are better means of information: Taylor v Baker (1818) 5 Price 306; 146 ER 616; Broadbent v Barlow (1861) 3 De GF & J 570; 45 ER 999.

While, in general, it is not sufficient diligence to ask only those against whose possible fraud the inquiries are intended to be a safeguard, nevertheless, if the mortgagee has inquired honestly and to the best of his means, he will not be prejudiced because of having been misled by false information: Jones v Smith (1841) 1 Hare 43; 66 ER 943; Jones v Williams (1857) 24 Beav 47; 53 ER 274; Hipkins v Amery (1860) 2 Giff 292; 66 ER 122; and see Oversea-Chinese Banking Corp Ltd (OCBC) v Malaysian Kuwaiti Investment Co (MKIC) and Aljade [2003] VSC 495 at 169, referring to [24.10] and [24.16] of the first edition of this book.

Notice from form of conveyance 24.17 Notice may also be imputed from the nature or form of a conveyance. Thus, a purchaser has notice of a prior title by the concurrence in the conveyance to him of persons interested under that title; but though a peculiarity in a deed, such as the unusual position of a signature or the manner of engrossing it, ought to cause inquiry, it will not lead to notice of a defect in the title with which it is not connected.

Notice of equities 24.18 Nor is the rule under consideration confined to plain recitals of matters of fact. A purchaser will generally be bound by the particulars, and even sometimes by the equities, arising out of an important or peculiar transaction, recited or referred to in a deed or abstract, of which he has notice, and concerning which transaction it becomes his duty to inquire. Thus notice will be imputed of the particulars of a trust, of the existence of which there is actual notice: Malpas v Ackland (1827) 3 Russ 273; 38 ER 578 (provided that the notice is clear: see London and Canadian Loan and Agency Co Ltd v Duggan [1893] AC 506; and see Lacey v Ingle (1847) 2 Ph 413; 41 ER 1002 (notice imputed to mortgagee of contract for sale that prior encumbrancers had claims on the purchase money)). There will be no notice of an equity which the usual inquiry into title would not discover. Thus, a purchaser from a trustee will not have notice of negligence or other matter amounting to breach of trust in connection with the sale: Borell v Dann (1843) 2 Hare 440; 67 ER 181. Notice, however, will arise where the matter depends upon the application

of a clear equitable doctrine. Hence notice of the reservation of an equity of redemption is notice of the mortgage title, if the court is of opinion that the equity still subsists: Hansard [page 637] v Hardy (1812) 18 Ves 455; 34 ER 389. Where, however, the construction of a deed is so uncertain, and the equity so doubtful, that the decision of the court could not be known, a purchaser for valuable consideration who denies actual notice will not be affected: Parker v Brooke (1804) 9 Ves 583; 32 ER 729; see also Bovy v Smith (1682) 1 Vern 144; 22 ER 877.

Notice of deed is notice of contents 24.19 Actual notice of an instrument which must necessarily affect the title is constructive notice of its contents and of everything to which it refers (Jones v Smith (1843) 1 Ph 244 at 253; 41 ER 624 at 628); except, it seems, that in cases of fraud, none but the parties to the deed are affected by constructive notice of the fraud: Read v Ward (1739) 7 Vin Abr 123. Thus, notice of a lease is notice of all covenants in it, whether usual or unusual, provided the purchaser has a fair opportunity of ascertaining its provisions: Grosvenor v Green (1858) 28 LJ Ch 173; Hyde v Warden (1877) 3 Ex D 72; Re White and Smith’s Contract [1896] 1 Ch 637. Generally, the person to whom an instrument is brought for the express purpose of examination in the transaction (Cosser v Collinge (1832) 3 My & K 283; 40 ER 108), or for whose inspection it is left open for examination in the transaction (Crofton v Ormsby (1806) 2 Sch & Lef 583), has actual or constructive notice of its contents, even though the nature of the contents may have been misrepresented. There will be full notice of an encumbrance as against a person who takes subject to such an instrument, even if, in the recital of it, it is described inaccurately or not completely: Hope v Liddell (1855) 21 Beav 183; 52 ER 829; and see Gibson v Ingo (1847) 6 Hare 112; 67 ER 1103. A purchaser is bound by a prior mortgage, even if not particularly specified, if the deed subject to or under which he claims shows the existence of prior mortgages (Eland v Eland (1839) 1 Beav 235; 48 ER 930; Farrow v Rees (1840) 4 Beav 18; 49 ER 243), but the purchaser is not bound by reason

of having notice of a prior mortgage where a representation concerning the mortgage deed is made which is calculated to mislead and to disarm inquiry (Drysdale v Mace (1854) 2 Sm & G 225; 65 ER 375; affirmed 5 De GM & G 103; 43 ER 809); nor where an imperfect or erroneous statement has been made as to the contents of a deed: Re Bright’s Trusts (1856) 21 Beav 430; 52 ER 925.

Deeds not necessarily affecting title 24.20 While notice of a deed which must of necessity affect the title is constructive notice of its contents, this is not so with other deeds, and notice of these requires only that the person who has notice shall act honestly and shall not be guilty of gross negligence. Thus, where the proposing mortgagor has made a settlement which may or may not affect the land in question, a statement that the settlement does not affect it can be accepted without being produced: Jones v Smith (1843) 1 Ph 244 at 257; 41 ER 624. (See Finch v Shaw (1854) 18 Jur 935; affirmed sub nom Colyer v Finch (1856) 5 HL Cas 905; 10 ER 1159; Lloyds Banking Co v Jones (1885) 29 Ch D 221 at 230; as to debentures, see English and Scottish Mercantile Investment Co v Brunton [1892] 2 QB 700; Re Valletort Sanitary Steam Laundry Co; Ward v Valletort Sanitary Steam Laundry Co Ltd [1903] 2 Ch 654; Wilson v Kelland [1910] 2 Ch 306; and see 8.6.) A purchaser is not affected with notice by matters appearing upon an abstract or a deed which merely leave room for suspicion of what the purchaser cannot know to be true, and which may not be true: see M’Queen v Farquhar (1805) 11 Ves 467 at 482; 32 ER 1168 at 1173; Dodds v Hills (1865) 2 H & M 424; 71 ER 528. However, cases of this kind depend very much on their own circumstances, and that which will not affect one person will be abundantly sufficient to affect another: Jones v Smith (1841) 1 Hare 43 at 55; 66 ER 943 at 948. Moreover, circumstances which may affect a trustee with notice are not necessarily sufficient to make a person liable as a constructive trustee: Williams v Williams (1881) 17 Ch D 437; Karak Rubber Co Ltd v Burden (No 2) [1972] [page 638]

1 WLR 602; [1972] 1 All ER 1210; Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; Adams v Bank of New South Wales [1984] 1 NSWLR 285; Agip (Africa) Ltd v Jackson [1991] Ch 547; [1992] 4 All ER 451 (CA); Baden v Sociéte Générale pour Favoriser le Développement du Commerce et de l’Industrie en France SA [1992] 4 All ER 161; [1993] 1 WLR 509; Lipkin Gorman (a firm) v Karpnale Ltd [1992] 4 All ER 331; [1987] 1 WLR 487 (on appeal [1992] 4 All ER 409; [1989] 1 WLR 1340 (CA); [1991] 2 AC 548; [1992] 4 All ER 512 (HL)); Re Montagu’s Settlement Trusts [1987] Ch 264; [1992] 4 All ER 308; Polly Peck International plc v Nadir (No 2) [1992] 4 All ER 769 (CA).

Notice by occupation 24.21 Notice also arises from the fact that a person other than the person with apparent title is in actual occupation (meaning physical presence, not some entitlement in law: Williams and Glyn’s Bank Ltd v Boland [1981] AC 487 at 505; [1980] 2 All ER 408 at 413) or is in receipt of the rents of the land: Williams and Glyn’s Bank Ltd v Boland; Kingsnorth Trust Ltd v Tizard [1986] 1 WLR 119; [1986] 2 All ER 54 (CA); and see Hodgson v Marks [1971] Ch 892; [1971] 2 All ER 684 (CA). Thus, for example, where a tenant is in occupation, the purchaser is put on inquiry as to the terms of the holding and has constructive notice of the tenant’s rights: Barnhart v Greenshields (1853) 9 Moo PCC 18 at 32; 14 ER 204 at 209, and see Hegeman v Rogers (1972) 21 DLR (3d) 272; with respect to Torrens title land see also, for example, Victorian Torrens Act s 42(2)(e); and see 12.13. (Where the property is in the possession of a partnership, a mortgagee from one partner has constructive notice of the title of the firm: Cavander v Bulteel (1873) LR 9 Ch App 79.) Where, however, the tenant is paying rent to a person claiming adversely to the vendor, the purchaser is not, as between himself and such claimant, bound to inquire to whom the rent is paid, and does not have constructive notice of his title: Barnhart v Greenshields, above; Hunt v Luck [1902] 1 Ch 428 at 432; Green v Rheinberg (1911) 104 LT 149 (CA); and see Smith v Jones [1954] 1 WLR 1089; [1954] 2 All ER 823; and Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265. This is not the case, however, if the purchaser inquires and finds that rent is being paid to an adverse claimant: Bailey v Richardson (1852) 9 Hare 734; 68 ER 711;

Barnhart v Greenshields, above; Hunt v Luck [1902] 1 Ch 428 at 433. Moreover, as the principle of the doctrine is that the purchaser is not justified in assuming the possession of the occupier to be that of the apparent owner, but is bound to inquire into the nature of his interest, the notice equally arises, whether the property is described to the purchaser as occupied only by the person who claims the interest in question, or by that person and that person’s under-tenants: Bailey v Richardson, above, and see Crofton v Ormsby (1806) 2 Sch & Lef 583; Hanbury v Litchfield (1833) 2 My & K 629; 39 ER 1084; Miles v Langley (1831) 1 Russ & M 39; 39 ER 15, affirmed 2 Russ & M 626; 39 ER 533. With reference to the equitable rights of a spouse in occupation by reason of a contribution to the purchase price, it is no longer safe, since Williams and Glyn’s Bank Ltd v Boland [1981] AC 487; [1980] 2 All ER 408, to rely on the previous practice of dispensing with inquiries as to occupation beyond that of the vendor and of accepting the risks of doing so: see Williams and Glyn’s Bank Ltd v Boland, above, AC at 508; 2 All ER at 415. Recent Court of Appeal decisions, however (where an intention to postpone the beneficial owner’s interest to the mortgagee’s interest was found), may have somewhat limited the effect of Boland’s case: see Bristol and West Building Society v Henning [1985] 1 WLR 778; [1985] 2 All ER 606 (CA); Paddington Building Society v Mendelsohn (1985) 50 P & CR 244 (CA); and see [1986] Conv 57 (Thompson). Payment to two trustees [page 639] of land held on trust for sale overreaches the beneficial interests: City of London Building Society v Flegg [1988] AC 54; [1987] 3 All ER 435; and see Kingsnorth Trust Ltd v Tizard [1986] 2 All ER 771; [1986] 1 WLR 783. See, generally, English Law Commission Third Report on Land Registration (1987). Even though a purchaser or mortgagee may have constructive notice of an occupier’s right, the occupier may be estopped by his conduct from asserting it: Midland Bank Ltd v Farmpride Hatcheries Ltd (1981) 260 EG 493 (CA); [1989] Conv 342 (Sparkes).

Constructive Notice through Agents Notice received in the same transaction 24.22 The principal may be affected by notice received through his agent, otherwise notice might always be avoided by employing agents: Sheldon v Cox (1764) Ambl 624; 27 ER 404. Notice to a solicitor in and affecting a transaction in which he is engaged on behalf of a client is notice to the client: Magee v UDC Finance Ltd [1983] NZLR 438. As to the position where a solicitor is agent, see 42.5. The doctrine is not confined to notice received through solicitors: Merry v Abney (1663) 1 Cas in Ch 38; 22 ER 682. However, under NSW Act s 164 and its equivalents (see 24.13) the effect of notice to the agent, whether actual or constructive, is confined to notice received in the same transaction as that with respect to which the question arises (Re Cousins (1886) 31 Ch D 671; Thorne v Heard [1895] AC 495 (HL); Magee v UDC Finance Ltd [1983] NZLR 438), but probably, where the agent who effected the earlier mortgage himself becomes second mortgagee, he still cannot deny notice of the earlier mortgage: see Perkins v Bradley (1842) 1 Hare 219; 66 ER 1013.

Fraud of agent 24.23 Notice to the agent is not imputed to the principal where the transaction effected by the agent is itself founded in fraud, in which the agent is so concerned that it is certain he would conceal it (see Kennedy v Green (1834) 3 My & K 699; 40 ER 266; Cave v Cave (1880) 15 Ch D 639; Rhodes v Moules [1895] 1 Ch 236), and probably this rule is not altered by the statute; otherwise an agent, under its shelter, might use the knowledge which he acquired in one transaction for the purpose of committing a fraud in another: and see Salera v Cousens [2001] VSC 378. It is otherwise, however, where the matter is not necessarily fraudulent: see Le Neve v Le Neve (1748) 3 Atk 646; 26 ER 1172; Hewitt v Loosemore (1851) 9 Hare 449; 68 ER 586; Bradley v Riches (1878) 9 Ch D 189. In all these cases the burden of proof is upon the client to show the probability of non-communication of the fact by the agent: Thompson v Cartwright (1836) 33 Beav 178; 55 ER 335.

Relation of principal and agent 24.24 The relation of principal and agent must subsist at the time of the transaction. But actual retainer of a person as agent seems unnecessary; for even where the person to be affected knows nothing of the matter until after its completion, if he then acts upon or adopts it, he thereby makes the agent his agent ab initio. If the agent is employed in part only of the transaction, notice arises of whatever came to his knowledge during his agency: Bury v Bury (1748) Sudg V & P (11th ed) App No 25. For the case of a bank manager who is agent for his bank, see Re Macnamara (1884) 13 LR Ir 158. [page 640]

IV Priority between Equitable Encumbrances Rule of priority in time 24.25 Subject to any applicable Deeds Registration legislation, equitable encumbrances rank in order of date of creation, provided the equities are otherwise equal: see Rice v Rice (1854) 2 Drew 73 at 78; 61 ER 646 at 648; Capell v Winter [1907] 2 Ch 376 at 381; Heid v Reliance Finance Corp Pty Ltd (1983) 154 CLR 326; Cash Resources Australia Pty Ltd v BT Securities Ltd [1990] VR 576; Avco Financial Services Ltd v Fishman [1993] 1 VR 90. This is in accordance with the maxim ‘qui prior est tempore, potior est jure’, and has been justified on the ground that the first equitable encumbrancer has a vested interest which cannot be displaced except for strong reasons: see Willoughby v Willoughby (1756) 1 Term Rep 763 at 773; 99 ER 1366 at 1371 per Lord Chancellor Hardwicke; Cory v Eyre (1863) 2 De GJ & S 149 at 167; 46 ER 58 at 65; and see AG(CQ) as Trustee for AG(CQ) Family Trust v A & T Promotions Pty Ltd (as trustee for the Toowoomba Unit Trust) [2011] Qd R 306 (CA). The rule is also a consequence of the principle that a mortgagor cannot

grant more than he is justly entitled to. Hence, after the mortgagor has diminished his ownership by the grant of an equitable mortgage, a second equitable mortgage is necessarily subject to the first: Phillips v Phillips (1862) 4 De GF & J 208 at 215; 45 ER 1164 at 1166; Cave v Cave (1880) 15 Ch D 639; Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265; McCarthy and Stone Ltd v Julian S Hodge & Co Ltd [1971] 1 WLR 1547; [1971] 2 All ER 973; see also West v Williams [1899] 1 Ch 132 (Lindley MR) referred to with approval by Lord Shaw in Deeley v Lloyds Bank Ltd [1911–13] All ER Rep 1149 at 1159–60.

Contemporaneous instruments 24.26 Where several instruments have been executed on the same day, priority will follow the order of execution, subject to any contrary intention appearing on the deeds, and an inquiry may be directed to ascertain the times of execution if uncertain: Gartside v Silkstone and Dodworth Coal Co (1882) 21 Ch D 762. There may be some situations where two equities are created simultaneously, such as the liability of guarantors of two separate obligations becoming binding because of the happening of a winding up. The Canadian solution is to give priority to the first in time of the inchoate liability which has now become crystallised: see Bank of Montreal v Innovation Credit Union [2010] SCC 47; [2010] 3 SCR 3 and Royal Bank of Canada v Radius Credit Union [2010] SCC 48; [2010] 3 SCR 38.

Operation of the rule 24.27 In accordance with the above rule, the claim of an equitable mortgagee will prevail against the solicitor of the mortgagor into whose hands the deeds subsequently come, and the solicitor cannot thereby acquire any lien for his costs: Molesworth v Robbins (1845) 2 Jo & Lat 358; Smith v Chichester (1842) 2 Dr & War 393; Pelly v Wathen (1851) 1 De GM & G 16; 42 ER 457. Moreover, where the mortgagor made two securities by depositing part of the deeds with one person and part with another, the former had the preference: Roberts v Croft (1857) 24 Beav 223; 53 ER 343; see Dixon v Muckleston (1872) LR 8 Ch App 155. Where notice by an equitable

mortgagee is not required to be given for his own protection, the omission to give notice is not a ground for postponing that equitable mortgagee, although the notice might have prevented the creation of a subsequent encumbrance: Union Bank of London v Kent (1888) 39 Ch D 238. [page 641]

Rule applies to equitable interests generally 24.28 The rule is not confined to priority as between equitable encumbrances, but applies to equitable interests generally. An equitable mortgagee by deposit of deeds will be postponed to a prior purchaser, whose purchase (without negligence on the purchaser’s part) has not been completed: Flinn v Pountain (1889) 58 LJ Ch 389; McCarthy and Stone Ltd v Julian S Hodge & Co Ltd [1971] 1 WLR 1547; [1971] 2 All ER 973. A mere equity to set aside a deed will, however, be postponed to an actual equitable interest created for valuable consideration under the deed: Roddy v Williams (1845) 3 Jo & Lat 1; Hiorns v Holtom (1852) 16 Beav 259; 51 ER 778; Phillips v Phillips (1862) 4 De GF & J 208; 45 ER 1164; French v Hope (1887) 56 LJ Ch 363, but see Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265; and see Double Bay Newspapers Pty Ltd v AW Holdings Pty Ltd (1996) 42 NSWLR 409; and Shawyer v Amberday Pty Ltd (in liq) (2001) 10 BPR 18,869.

The better equity prevails 24.29 The rule as to priority in time is subject to the important qualification that the equities of the rival encumbrancers are in other respects equal. Equality means here the non-existence of any circumstances which affects the conduct of one of the rival claimants and makes it less meritorious than that of the other (Bailey v Barnes [1894] 1 Ch 25, and see McCarthy and Stone Ltd v Julian S Hodge & Co Ltd [1971] 1 WLR 1547; [1971] 2 All ER 973; Drulroad Pty Ltd v Gibson (1992) 5 BPR 11,878); and see Australian Securities and Investments Commission v John McKenny Consulting Pty Ltd (2002) 43 ASCR 458, where the equitable lien of the liquidator attaching to the realisation of the assets in a winding up was given priority to the

administrators’ statutory lien, the former having the better equity on the basis that it would be unconscionable for the administrators to benefit from the work of the liquidator. In Rice v Rice (1854) 2 Drew 73; 61 ER 646, a vendor conveyed without receiving the purchase money, but a receipt was indorsed on the conveyance, and the title deeds delivered to the purchaser. The purchaser then created a mortgage by deposit of the deeds and absconded. It was held that the indorsement of the receipt and the possession of the title deeds gave the mortgagee the better equity, and he had priority over the vendor’s lien. However, in a case in which the first encumbrancer is postponed on the ground of negligence, the better equity of a later encumbrancer is usually founded on the negligence of the first. In Bradley v Riches (1878) 9 Ch D 189, Fry J said that priority might be displaced by showing either fraud on the part of the earlier mortgagee, or a better equity in the later, but, on another view, there appears to be no real alternative. As to postponement on the ground of negligence, see 24.43. On the theoretical basis for granting priority — whether the basis is in the doctrine of estoppel or a more general principle of the better equity — see Heid v Reliance Finance Corp Pty Ltd (1984) 154 CLR 326 at 339ff, and see 24.46. Also the principles are discussed and the authorities helpfully considered by Brooking J in Cash Resources Australia Pty Ltd v BT Securities Ltd [1990] VR 576; and see Jacobs v Platt Nominees Pty Ltd [1990] VR 146; and see Nunn v Wily (2001) 10 BPR 18,983. As to the effect of notice of a prior equity, see 24.34.

Mortgages in breach of trust 24.30 The question of the values of rival equities arises where a trustee creates a mortgage in breach of trust. The English courts have held that the interest of the beneficiary is of the same quality as the interest of the equitable mortgagee, and being prior in time it prevails: Cave v Cave (1880) 15 Ch D 639; Coleman v London County and [page 642]

Westminster Bank Ltd [1906] 2 Ch 353 at 361; Walker v Linom [1907] 2 Ch 104 at 114ff. Similarly, where a personal representative charges the estate for his own purposes, the estate has priority over the mortgagee: Re Morgan; Pillgrem v Pillgrem (1881) 18 Ch D 93. In Ireland, it has been held that the mortgagee has the better equity (see Re Bobbett’s Estate [1904] 1 IR 461; Scott v Scott [1924] 1 IR 141); this is provided the beneficiary has no reason to suspect want of good faith on the part of the trustee. The fact that the beneficiary has created the trust for his own purposes, and has allowed the deeds to remain in the custody of the trustee, is not negligence so as to postpone him: Carritt v Real and Personal Advance Co (1889) 42 Ch D 263. If, however, the transaction is authorised by the trust and the deed contains a proper receipt clause, the equitable title taken under the trustee will prevail (Lloyds Bank Ltd v Bullock [1896] 2 Ch 192); but this will not be so when, the trustee having power to sell only, the transaction, while in form a sale, is, in substance, a mortgage: Capell v Winter [1907] 2 Ch 376. If trustees invest the trust fund upon property which, by the terms of the purchase, becomes subject to an obligation, the beneficiaries are bound by the obligation, though the transaction was a breach of trust, so long as they claim the benefit of the purchase: New London and Brazilian Bank v Brocklebank (1882) 21 Ch D 302. The above principles have no application to the case of negotiable instruments, the legal interest in which passes by indorsement or delivery free from all equities, unless the transferee has notice: see London Joint Stock Bank v Simmons [1892] AC 201; Jameson v Union Bank of Scotland (1914) 109 LT 850. As to the power of a trustee to mortgage the trust property, see Heydon and Leeming, Jacob’s Law of Trusts in Australia, 7th ed, LexisNexis Butterworths, Chatswood, 2006, [2027]–[2029].

Mortgagee from defaulting trustee 24.31 Although the right of trustees to be indemnified out of the trust property in respect of the liabilities incurred in the exercise of their office is to be preferred to any charge created by the beneficiary (Re Exhall Coal Co

(1860) 35 Beav 449; 55 ER 970), the trustee cannot set up against an assignee of the beneficiary a debt to him incurred by the beneficiary after notice: Re Pain; Gustavson v Haviland [1919] 1 Ch 38. Yet, since a defaulting trustee, who also has a beneficial interest, cannot share in the trust estate until his own default has been made good, a mortgagee from him is in the same position, and will be postponed to claims of the beneficiaries (Doering v Doering (1889) 42 Ch D 203), for the application of the same principle to derivative interest. As to the trustee’s right to reimbursement and indemnity, see Heydon and Leeming, Jacob’s Law of Trusts in Australia, 7th ed, LexisNexis Butterworths, Chatswood, [2102]–[2116]; Ford and Lee et al, The Law of Trusts, 3rd ed, Law Book Co, Sydney, 1996, [14.110]ff; and see Myers and Hardingham, ‘Lending to Trustees’ (1986) Leo Cussen Institute (occasional paper).

Priorities in proceeds of sale 24.32 The proceeds of the sale of mortgaged property are bound by the same equities and claims as bind the property itself (Lane v Horlock (1853) 1 Drew 587 at 616; 61 ER 576 at 586, and see Deputy Comr of Taxation v Horsburgh [1983] 2 VR 591 at 598), and if the sale is made by the first mortgagee, he will be liable to the second mortgagee if he allows the balance of the purchase money, after payment of the first mortgage, to be paid to the mortgagor: West London Commercial Bank v Reliance Permanent Building Society (1885) 29 Ch D 954. Generally, any encumbrancer holding the purchase money is bound to pay it to the encumbrancers according to their priorities. As to the proper application of proceeds of sale, see 20.43. [page 643]

Salvage advances 24.33 The rule that encumbrances rank in order of time is subject to an exception in favour of advances by means of which the encumbered property is saved from loss or destruction. These are payable in priority to all charges of earlier date, and rank among themselves in the inverse order of their dates. Effect will be given to this principle only where the expenditure was essential

for the preservation of the property: Landowners West of England and South Wales Drainage and Inclosure Co v Ashford (1880) 16 Ch D 411 (a case of being wise after the event?); Network Finance Ltd v Deposit & Investment Co Ltd [1972] QWN 19; 46 ALJ 413. For an example of such essential expenditure (payment of head rent to prevent eviction by a superior landlord), see Fetherstone v Mitchell (1848) 11 I Eq R 35; Hill v Browne (1844) Drury temp Sug 426; Re Wadsworth; Rhodes v Sugden (1886) 34 Ch D 155. See also Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293; Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd [1984] 2 NSWLR 128; and see 16.1 and 40.3. An encumbrancer will not lose priority by omitting to make advances necessary for the recovery of the fund which is the subject of the security, and to answer or notice communications by the mortgagor’s agent informing him of the necessity for such advances, unless distinct notice is given, that if no advances are made a new charge will be created; this will be particularly the case where the subsequent encumbrancer has taken the security without inquiry into prior rights, but the first encumbrancer will not be allowed the benefit of advances made by the other, without paying him the amount of his advances with interest: Myers v United Guarantee and Life Assurance Co (1855) 7 De GM & G 112; 44 ER 44.

Notice of equities 24.34 The general rule as to priority in time is unaffected by the UK Act s 113 and its equivalents: see NSW Act 1919 s 96A; Victorian Act s 113; and see 14.8. In Beddoes v Shaw [1937] Ch 81; [1936] 2 All ER 1108, it was explained that that section is merely concerned with relieving persons who are investigating title to land from being affected by notice of, and from making inquiries into, equitable interests of which they may have actual or constructive notice and which relate to the money secured by mortgages on the land. The effect of notice of a prior equity was considered in Moffett v Dillon [1999] 2 VR 480 (CA), where a vendor’s equitable charge took priority over a bank’s second mortgage which was taken with actual notice of the charge. The vendor’s charge took priority both because it was first in time, and

because of the bank’s notice of it. Brooking JA (with whom Buchanan JA agreed) said at 486 that the authorities use language suggesting that a later equitable interest can never prevail over an earlier one when a holder of the later interest had at the time of its acquisition notice of the earlier interest. He noted that it was inappropriate that priority should be given to a person with notice that someone was already the holder of an equitable interest, and who has chosen to acquire a rival one from a person who in the eye of equity is not entitled to create that interest: Phillips v Phillips (1861) 4 De GF & J 208; 45 ER 1164. See also General Finance Agency and Guarantee Co of Australia Ltd v Perpetual Executors and Trustees Association of Australia Ltd (1902) 27 VLR 739. [page 644]

V Loss of Priority Postponement of legal mortgagee 24.35 A legal mortgagee may by his conduct forfeit the priority which his legal estate gives him over an equitable encumbrancer who is earlier in point of time; and he may even, despite his holding the legal estate, be postponed to a subsequent equitable encumbrancer. Where there is an earlier equitable mortgage, the priority of the legal mortgagee depends on his taking without notice of it. When the mortgagee who is taking a legal mortgage has notice that there is a subsisting equitable charge, his title is subject to it, and if he is told that the charge has been cleared off, this must be verified, or the mortgage is taken at his own risk: Jared v Clements [1903] 1 Ch 428; and see Oversea-Chinese Banking Corp Ltd (OCBC) v Malaysian Kuwaiti Investment Co (MKIC) and Aljade [2003] VSC 495; and see also 24.10 and 24.16. The conduct which will postpone a legal mortgagee to a prior equitable encumbrancer of which he had not notice may be either actual fraud or negligence.

Postponement by fraud

24.36 Actual fraud is an obvious ground for postponement (see Birch v Ellames (1794) 2 Anst 427; 145 ER 924 — legal mortgage antedated so as to validate it in bankruptcy, and no inquiry made as to the object of a prior deposit of the deeds), and a mortgagee will be postponed to a subsequent encumbrance which has been created either through the mortgagee’s own fraud or the fraud of his solicitor. In the latter case, however, it must be shown that, at the time of the fraud, the relation of solicitor and client subsisted; it is not sufficient that it had previously subsisted: see Finch v Shaw; Colyer v Finch (1854) 19 Beav 500; 52 ER 445; affirmed sub nom Colyer v Finch (1856) 5 HL Cas 905; 10 ER 1159. See also Peter v Russell (1716) 1 Eq Cas Abr 321; 21 ER 1075.

‘Gross’ negligence 24.37 The negligence which will cause a legal mortgagee to be postponed usually occurs either in regard to inquiries as to the title of the mortgagor, or as to the title deeds, and in the latter case it may consist of failure to get the title deeds into the mortgagee’s possession, or of parting with them after they have been in his possession. Thus, a legal mortgagee will be postponed to a prior equitable encumbrancer who holds the deeds, if he has not investigated that title at all (see Oliver v Hinton [1899] 2 Ch 264), or has not inquired for the deeds (Hewitt v Loosemore (1851) 9 Hare 449; 68 ER 586; especially if the abstention from inquiry was to avoid having knowledge of a prior encumbrance: Ratcliffe v Barnard (1871) 6 Ch App 652; see also Berwick & Co v Price [1905] 1 Ch 632), or, having inquired, has accepted an insufficient reason for their non-production. ‘Gross negligence’ is an expression which is incapable of precise definition; but in Oliver v Hinton [1899] 2 Ch 264 (CA) (and see Walker v Linom [1907] 2 Ch 104), it was used to indicate a degree of negligence which made it unjust to enforce the natural order of priority. It was described by Eve J in Hudston v Viney [1921] 1 Ch 98 at 104, as follows: It must at least be carelessness of so aggravated a nature as to amount to the neglect of precaution which the ordinary reasonable man would have observed, and to indicate an attitude of mental indifference to obvious risks.

In a case in which, although there is no previous mortgage, the legal mortgagee leaves the deeds under the control of the mortgagor (see, for

example, Agra Bank Ltd v Barry (1874) LR 7 HL 135; Cash Resources Australia Pty Ltd v BT Securities Ltd [1990] VR 576), or, having obtained possession of them, returns them to the mortgagor, with [page 645] the result that a subsequent mortgage or other disposition of the estate is accepted on the faith of the deeds, the legal mortgagee will lose priority, though, even here, it has been said (Evans v Bicknell (1801) 6 Ves 174 at 189; 31 ER 998 at 1005, where Lord Eldon used the phrase ‘gross negligence that amounts to evidence of a fraudulent intention’) that the legal mortgagee will be postponed only if his conduct amounts to such gross negligence as to be equivalent to fraud. The onus of proving gross negligence is on the person alleging it: Carter v Carter (1857) 3 K & J 617; 69 ER 1256. In fact, however, fraud and negligence — even when it is gross negligence — are of a different nature, the one importing a design to commit the fraud, the other an omission due to carelessness or want of thought or attention (Northern Counties Fire Insurance Co v Whipp (1884) 26 Ch D 482 at 494 (CA)), and the idea that there must be fraud has been dropped. In Northern Counties Fire Insurance Co v Whipp, a case in which a mortgagee had parted with the deeds, Fry LJ stated that fraud was required both for failing to obtain the deeds and to retain them, but it is now accepted by the text-book writers that gross negligence is sufficient: see Ramsbotham, Coote’s Treatise on the Law of Mortgages, 9th ed, Stevens and Sons, Sweet & Maxwell, London, 1927, p 1341; Waldock, The Law of Mortgages, 2nd ed, Stevens, London, 1950, pp 395–7; Sykes and Walker, p 400. As to postponement for negligence generally, see Willoughby, The Legal Estate, Cambridge University Press, 1912, pp 19–20. To postpone the legal mortgagee it is sufficient that there has been gross negligence on his part (see Hunt v Elmes (1860) 2 De GF & J 578; 45 ER 745; Ratcliffe v Barnard (1871) 6 Ch App 652 (CA)), and where the equitable encumbrance precedes the legal mortgage, gross negligence is the negligence described by Lindley MR in Oliver v Hinton [1899] 2 Ch 264 (CA) of such a type as would render it unjust to deprive the prior

encumbrancer of his priority. The same rule applies to the postponement of the legal mortgagee to a subsequent equitable encumbrancer. The legal mortgagee will be postponed if, owing to his conduct in regard to the deeds, it has been possible for the subsequent encumbrance to be created so that it would be inequitable to allow him to rely on his priority: see Cottey v National Provincial Bank of England Ltd (1904) 48 Sol Jo 589; 20 TLR 607; Walker v Linom [1907] 2 Ch 104; cf Hudston v Viney [1921] 1 Ch 98; and see Tsang Chuen v Li Po Kwai [1932] AC 715 (PC).

Negligence as to title 24.38 As regards inquiry into title, priority will not be forfeited by the neglect of the mortgagee, or the mortgagee’s solicitor, to obtain or inquire for an instrument recited in a deed of remote date which forms the root of title, if there was no wilful neglect on the part of the mortgagee (Finch v Shaw; Colyer v Finch (1854) 19 Beav 500; 52 ER 445; affirmed (1856) 5 HL Cas 905; 10 ER 1159; Hudston v Viney [1921] 1 Ch 98); nor where, from the smallness of the purchase money and other circumstances, the cost of investigation of title would have made it practically impossible: Kettlewell v Watson (1882) 21 Ch D 685.

Negligence as to obtaining the deeds 24.39 As regards inquiry for the deeds and obtaining delivery of them, the legal mortgagee will not be postponed if he has made inquiry and has failed to obtain the deeds through the deceit of the mortgagor; if, for instance, the latter assures him that he has delivered to him all the deeds (Roberts v Croft (1857) 2 De G & J 1; 44 ER 887; Hunt v Elmes (1860) 2 De GF & J 578; 45 ER 745; Dixon v Muckleston (1872) LR 8 Ch App 155, and see Ratcliffe v Barnard (1871) 6 Ch App 652 (CA); Finch v Shaw; Colyer v Finch (1854) 19 Beav 500; 52 ER 445; affirmed (1856) 5 HL Cas 905; 10 ER 1159); or if a [page 646] reasonable excuse has been given for their not being delivered: Hewitt v

Loosemore (1851) 9 Hare 449; 68 ER 586; Espin v Pemberton (1859) 4 Drew 333; 62 ER 129. The question ‘What is a reasonable excuse?’ must always be decided in the light of the particular circumstances of the case. Where the defendant, a farmer, took a legal mortgage of a leasehold interest from a solicitor but failed to obtain possession of the lease, which in fact had already been deposited with the plaintiff, on the mortgagor’s excuse that he was then busy but he would give it to him at another time, the defendant was not postponed to the plaintiff: Hewitt v Loosemore, above. In some cases, however, false statements as to the place or nature of the custody of the deeds have been held not to relieve the person who accepts them for notice of the real facts, when by inquiry the truth could easily have been discovered: Maxfield v Burton (1873) LR 17 Eq 15; Spencer v Clarke (1878) 9 Ch D 137; but see Agra Bank Ltd v Barry (1874) LR 7 HL 135.

Mortgagee’s rights to the deeds 24.40 Ordinarily, the legal owner is entitled to the deeds, and where a purchaser of land took a conveyance, but allowed the vendor to retain the deeds, and the vendor then mortgaged the land and delivered the deeds to the mortgagee, the purchaser was held to be entitled to recover the deeds from the mortgagee: Harrington v Price (1832) 3 B & Ad 170; 110 ER 63; see Smith v Chichester (1842) 2 Dr & War 393; and cf Hunt v Elmes (1860) 2 De GF & J 578; 45 ER 745 (leasehold). Before the UK Judicature Acts, however, if a legal mortgagee had to come into equity to establish his priority, the mortgagee’s suit was subject to the rule that equity would not interfere to deprive a purchaser for value without notice of any advantage he had obtained, and therefore would not order a subsequent mortgagee by deposit to give up the deeds unless he was paid off, leaving the legal mortgagee otherwise to his remedy at law: Head v Egerton (1734) 3 P Wms 280; 24 ER 1065; Heath v Crealock (1874) 10 Ch App 22; Waldy v Gray (1875) LR 20 Eq 238. This doctrine applied only as against a legal mortgagee. Where both the encumbrances were equitable, so that the matter arose solely in equity, a final order was made, and the court both declared the priority (Stackhouse v Countess of Jersey (1861) 1 J & H 721; 70 ER 933), and, if appropriate,

ordered the deeds to be given up: Newton v Newton (1868) LR 6 Eq 135; reversed on the facts, 4 Ch App 143. Since the Judicature Acts, this rule is applied whether the claim to the deeds is made by a legal or an equitable mortgagee, so that if he establishes his priority, he will have an order for the delivery of the deeds: Manners v Mew (1885) 29 Ch D 725 at 732; Re Ingham; Jones v Ingham [1893] 1 Ch 352; and see Ingpen, Bloxan and Garrett, Seton’s Judgments and Orders, 7th ed, Stevens, London, 1912, p 2024.

Negligence in custody of deeds 24.41 The same principles apply in cases in which the mortgagee has had, but has afterwards given up, or otherwise lost, the possession of the title deeds. If, under the circumstances, it can be inferred that he did this fraudulently, or if ‘gross negligence’ can be imputed to the mortgagee, he will be postponed, not only in favour of the particular encumbrancer, who by the legal mortgagee’s conduct has been induced to advance money on the estate, but also in favour of all later encumbrancers, who, after making proper inquiries as to the deeds, have lent their money in ignorance of the original security: Perry-Herrick v Attwood (1857) 2 De G & J 21; 44 ER 895; Clarke v Palmer (1882) 21 Ch D 124. [page 647]

Delivery of deeds for raising money 24.42 When the first mortgagee allows the mortgagor to have the custody of the deeds for the express purpose of creating a security up to a limited amount, which shall have precedence to his own, and the mortgagor raises a larger sum, the first mortgagee will be postponed to the whole sum so raised (Brocklesby v Temperance Permanent Building Society [1895] AC 173 (HL)); and the mortgagee will be postponed where he delivers the deeds to the mortgagor, in order to make a second mortgage, upon the faith that the mortgagor will disclose the first mortgage, which the mortgagor omits to do: Briggs v Jones (1870) LR 10 Eq 92; see Re Lambert’s Estate (1884) 13 LR Ir 234.

Similarly, where the owner of property delivers the deeds to an agent in order to raise money up to a specified amount, and the agent raises money in excess of that amount and misappropriates the excess, the owner can only redeem on payment of the full amount raised: Brocklesby v Temperance Permanent Building Society, above; Rimmer v Webster [1902] 2 Ch 163. This, however, depends on the principle that an owner cannot, as against an innocent purchaser or mortgagee, limit an authority which the owner has conferred; and the former cases depend, not strictly on negligence, but upon the estoppel arising out of the circumstance that the legal mortgagee has enabled the mortgagor to represent himself as unencumbered owner.

Where legal mortgagee not postponed 24.43 The legal mortgagee is not, however, required to guarantee the safety of the deeds, and if in spite of having taken proper precautions for their custody, they come into the hands of the mortgagor and are used by the mortgagor for creating a subsequent encumbrance, the legal mortgagee will not be postponed: Northern Counties of England Fire Insurance Co v Whipp (1884) 26 Ch D 482 (CA). Nor will the legal mortgagee be postponed if he hands the deeds to the mortgagor upon the mortgagor’s requesting them for a reasonable purpose, for example the mortgagor wants the deeds to enable the grant of a building lease advantageous to the estate: Peter v Russell (1716) 2 Vern 726; 23 ER 1076; and see Martinez v Cooper (1826) 2 Russ 198; 38 ER 309; Hall v West End Advance Co (1883) Cab & El 161. However, if this purpose is only temporary, the mortgagee will be postponed if he omits to see to the return of the deeds: Waldron v Sloper (1852) 1 Drew 193; 61 ER 425; distinguished in Re Vernon (1886) 33 Ch D 402; and see Dowle v Saunders (1864) 2 Hem & M 242; 71 ER 456.

The mortgagee will not be postponed if the deeds come to the mortgagor’s hands by the wrongful act of a third person to whom the mortgagee had properly delivered them: Taylor v London and County Banking Co [1901] 2 Ch 231. Nor will the legal mortgagee be postponed, where it cannot be discovered by what means the deeds come back into the mortgagor’s possession, provided there is nothing to show that the mortgagor was enabled by the first mortgagee to commit the fraud; the mere possession of the deeds by the mortgagor, without evidence that he got them through the neglect or fraud of the mortgagee, not being enough to postpone the latter: Allen v Knight (1847) 11 Jur 527; 16 LJ Ch 370. A legal mortgagee is not guilty of negligence in omitting to give notice of

his mortgage to a prior equitable mortgagee who holds the deeds, with the result that the prior equitable mortgage is paid off and a new equitable mortgage created without notice of the legal mortgage: Grierson v National Provincial Bank of England [1913] 2 Ch 18.

Postponement of equitable encumbrancer 24.44 As between equitable encumbrancers, the prima facie rule that the encumbrancers rank in order of time may be displaced by the fraud or negligence of the earlier encumbrancer. It has been seen that, originally, the negligence which would postpone a legal mortgagee was described as negligence so gross as to be equivalent to fraud: [page 648] see 24.37. The negligence which will postpone an equitable encumbrancer appears never to have been described in these terms, and a distinction has been drawn between the gross negligence which will postpone a legal mortgagee and the slighter negligence which will postpone a prior equitable mortgagee to a later one: Farrand v Yorkshire Banking Co (1888) 40 Ch D 182. The question in the latter case is whether the earlier encumbrancer has acted in such a way that he is not justified in insisting on his prima facie priority: Kettlewell v Watson (1882) 21 Ch D 685; National Provincial Bank of England v Jackson (1886) 33 Ch D 1. According to the modern view, however, this amounts to the test for the negligence which will postpone a legal mortgagee. It is such negligence as would render it unjust to deprive the prior equitable encumbrancer of his priority: see 24.37. It would seem, therefore, that there is now in effect no difference between the tests for the two cases, and in each the question is, whether the conduct of the legal mortgagee or the equitable mortgagee has been such as will justifiably deprive him of the priority given either by the possession of the legal estate or by his being first in time. This view was most emphatically expressed by Kay J in Taylor v Russell [1891] 1 Ch 8 at 17. His judgment was reversed by the Court of Appeal [1891] 1 Ch 24, but on another point,

and the question of negligence as between rival equities was not discussed. In the House of Lords [1892] AC 244 at 262 Lord Macnaghten referred to the point, but only to say that he was not convinced of the correctness of Kay J’s view; and see Taylor v London and County Banking Co [1901] 2 Ch 231 at 260 per Stirling LJ. Since priorities are now mainly determined by registration, the question is unlikely to be determined: see English Law Commission Working Paper No 99, Land Mortgages, [3.16]; and see the subsequent Report No 204, Transfer of Land — Land Mortgages, [3.18]ff; see also Cash Resources Australia Pty Ltd v BT Securities Ltd [1990] VR 576; and Commonwealth Bank of Australia v Green (CA (NSW), 24 September 1997, unreported).

Effect of possession of the deeds 24.45 When two equitable interests are of the same quality, so that they furnish in themselves no ground for saying that one is superior to the other in this respect, the fact that the encumbrancer who is the later in time has possession of the deeds may give the possessor the better equity and cause the earlier encumbrance to be postponed: see Rice v Rice (1854) 2 Drew 73 at 81; 61 ER 646 at 649. This case is the origin of the ‘arming’ principle: see also McCarthy and Stone Ltd v Julian S Hodge & Co Ltd [1971] 1 WLR 1547; [1971] 2 All ER 973; Heid v Reliance Finance Corp Pty Ltd (1984) 154 CLR 326. This test prevails, however, only when there has been some default on the part of the prior equitable encumbrancer in respect of the deeds, and in effect he is postponed by reason of his default or negligence (Farrand v Yorkshire Banking Co (1888) 40 Ch D 182; and see Flinn v Pountain (1889) 58 LJ Ch 389); or, in a case where the deeds have been left in the possession of the mortgagor, because he has thereby been enabled to deal with the property as if it were free from encumbrance: Layard v Maud (1867) LR 4 Eq 397. Similarly, the prior equitable encumbrancer will be postponed where, without adequate reason, that encumbrancer parts with the deeds after he has had them in his possession: Waldron v Sloper (1852) 1 Drew 193; 61 ER 425. It is otherwise where there is no default attributable to the prior encumbrancer: Allen v Knight (1847) 5 Hare 272; 67 ER 915; Re Castell and Brown Ltd [1898] 1 Ch 315. Moreover, this rule applies only where the prior equitable owner ought to have the deeds in his possession. This is usually the case with an equitable

encumbrancer, but a beneficiary is not guilty of negligence if he leaves the deeds with the trustee, and is therefore not postponed to a mortgagee with whom the trustee pledges them in breach of trust; it makes no difference that the mortgaged property belongs partly to the trustee: Cory v Eyre (1863) 1 De GJ & Sm 149 at 169; 46 ER 58 at 66; Bradley v Riches (1878) [page 649] 9 Ch D 189; see 24.29. This will be so, however, only where the deeds have in the first place come into the possession of the trustee. If the trustee negligently omits to get them in, and is postponed on this ground, the beneficiary is postponed also: Walker v Linom [1907] 2 Ch 104. An equitable mortgagee by deposit of earlier title deeds will retain his priority over a mortgagee by deposit of the subsequent deeds, if he was led by the mortgagor to believe that they were the whole of the deeds: Roberts v Croft (1857) 2 De G & J 1; 44 ER 887; Dixon v Muckleston (1872) LR 8 Ch App 155.

Estoppel 24.46 A similar principle applies where an equitable encumbrancer acts in such a way as to enable the owner of the land to represent that the encumbrance no longer exists, for example the encumbrancer executes a conveyance containing a receipt for the money due to him, although it is not in fact paid: Rice v Rice (1853) 2 Drew 73; 61 ER 646; Lloyds Bank Ltd v Bullock [1896] 2 Ch 192; Rimmer v Webster [1902] 2 Ch 163 at 175; see also Jared v Clements [1903] 1 Ch 428; Oversea-Chinese Banking Corp Ltd (OCBC) v Malaysian Kuwaiti Investment Co (MKIC) and Aljade [2003] VSC 495 which refers to [24.10] and [24.16] of the first edition of this book. This is in accordance with the doctrine of estoppel by representation, recognised both at law and in equity, namely, that where one by his words or conduct wilfully causes another to believe the existence of a certain state of things, and induces him to act on that belief, and the latter in so doing alters his own position, the former cannot aver against him the existence of a different state of things: Pickard v Sears (1837) 6 A & E 469; 112 ER 179 per Lord Denham CJ. See now Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 and, generally, Meagher, Gummow and Lehane, Equity:

Doctrines and Remedies, 4th ed, LexisNexis Butterworths, Sydney, 2002, [17-005]–[17-060] and [17-125]–[17-135], discussing Waltons Stores at [17045]ff. For cases on estoppel in the present context, see Kettlewell v Watson (1884) 26 Ch D 501; Cannock v Jauncey (1857) 27 LJ Ch 57.

Misrepresentation 24.47 Both priority in respect of possession of the legal estate and priority in time operate to the advantage of a mortgagee only if the equities are in other respects equal. Another case where the equities are not thus equal is where a mortgagee has been guilty of misrepresentation. The displacement of priority may arise from either implied or express misrepresentation. If, for instance, the first mortgagee leaves the deeds in the possession of the mortgagor, who requires them for the purpose of raising a further advance, on the understanding, however, that the existence of the prior mortgage will be disclosed, and the mortgagor conceals the prior encumbrance, the mortgagee will not, as against third parties, be able to claim that the mortgagor was acting in excess of his authority: Perry Herrick v Attwood (1857) 2 De G & J 21; 44 ER 895; Northern Counties Fire Insurance Co v Whipp (1884) 27 Ch D 482. In Rimmer v Webster [1902] 2 Ch 163, Farwell J said (at 173): When … the owner is found to have given the vendor or borrower the means of representing himself as the beneficial owner, the case forms one of actual authority apparently equivalent to absolute ownership, and involving the right to deal with the property as owner, and any limitations on this generality must be proved to have been brought to the knowledge of the purchaser or mortgagee.

Conclusion 24.48 Throughout the many and various instances of cases in which the mortgagee may lose priority, whether it be a legal mortgagee to a prior or even subsequent equitable encumbrancer, or an equitable encumbrancer to another, and whether the grounds of such loss be actual fraud, negligence, misrepresentation or estoppel, there runs the [page 650]

principle that priority may be lost if the conduct of the mortgagee, who prima facie has priority, is such that it would be unjust, on the particular facts and in relation to one or more of the foregoing heads, to postpone another mortgagee whose claim is more deserving of merit. The thread is the same as that which runs through recent High Court of Australia decisions on equitable estoppel, unconscionable conduct and unjust enrichment: see, for example, Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; and David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; 109 ALR 57.

VI Judgment Creditors Effect of judgment 24.49 Subject to legislative intervention, the general rule is that the interest of the judgment creditor (whether he is with or without notice) in the property of the debtor is subject to every liability (or interest, legal or equitable) under which the debtor holds it: Dolphin v Aylward (1870) LR 4 HL 486 at 500; Whitworth v Gaugain (1846) 1 Ph 728; 41 ER 809; Bond v McClay [1903] St R Qd 1 at 7; and see Anderson v Liddell (1968) 117 CLR 36 at 44–5 (Barwick CJ), 47 (Kitto J). If the debtor has a legal estate subject to an equity effective against third parties, the judgment (if and when it becomes a charge) will be a charge upon the estate subject to the same equity; and in an equitable estate, the judgment will affect the equitable interest: Langton v Horton (1842) 1 Hare 549; 66 ER 1149; Whitworth v Gaugain, above; Abbott v Stratten (1846) 3 Jo & Lat 603; Hughes v Williams (1852) 3 Mac & G 683; 42 ER 423; Ames v Trustees of Birkenhead Docks (1855) 20 Beav 332; 52 ER 630; Coleman v De Lissa (1885) 6 LR (NSW) Eq 104; Rowe v Equity Trustees Executors & Agency Co Ltd (1895) 21 VLR 762; Bruce v Woods [1951] VLR 49; see also Simpson v Forrester (1973) 132 CLR 499. A judgment creditor has, therefore, no priority by force of a judgment over persons who have prior equitable interests in the same estate: Whitworth v Gaugain (1846) 3 Hare 416 at 427; 67 ER 444 at 448; affirmed 1 Ph 728; 41 ER 809; Williams v Craddock (1831) 4 Sim 313; 58 ER 117; Abbott v Stratten, above; see Lodge v Lyseley (1832) 4 Sim 70; 58 ER 27; Brearcliff v Dorrington (1850) 4 De G & Sm 122; 64 ER 762; Eyre v M’Dowell (1861) 9

HL Cas 619; 11 ER 871. This is so whether the judgment creditor claims (in an ordinary case of trust) against the estate of the cestui que trust (Newlands v Paynter (1839) 4 My & Cr 408; 41 ER 158) or against such an equitable interest as that of a purchaser for value who has paid the purchase money without getting a conveyance: Finch v Earl of Winchelsea (1715) 1 P Wms 277; 24 ER 387. The judgment creditor cannot, by giving notice to a fund’s trustee, put himself in any better position than the judgment debtor, and therefore cannot thereby gain priority over the mortgagees of the latter, who have omitted to give notice of their charges to the trustee: see 26.4. For priority between writs, see Hutchinson v Johnston (1787) 1 Term Rep 729; 99 ER 1346; Jones v Atherton (1816) 7 Taunt 56; 129 ER 23; Halsbury’s Laws of England, 4th ed, Butterworths, London, 1973, vol 17(1), [134]. On the effect of an appeal setting aside and then restoring a judgment, see Bankers Trust Co v Galadari [1987] QB 222; [1986] 3 All ER 794 (CA).

Charging order 24.50 A charging order upon stock is presumed to be a lawful charge, and therefore a charge only upon such interest as the debtor really possessed: see Beavan v Earl of Oxford (1856) 6 De GM & G 507; 43 ER 1331; and see the judgment of Romilly MR [page 651] in Kinderley v Jervis (1856) 22 Beav 1; 52 ER 1007; Brearcliff v Dorrington (1850) 4 De G & Sm 122; 64 ER 762; Dunster v Lord Glengall (1853) 3 Ir Ch R 47; Benham v Keane (1861) 1 John & H 685; 70 ER 919; Pickering v Ilfracombe Rly Co (1868) LR 3 CP 235; Robinson v Nesbitt (1868) LR 3 CP 264; Re Bell; Carter v Stadden (1886) 54 LT 370. Subject to the provisions of applicable court legislation and rules, the court has power to make a charging order over bank accounts, stocks and shares and any equitable interest to which the judgment debtor is entitled, including the equity of redemption, in realty and personalty: see Union Bank v O’Leary (1897) 13 WN (NSW) 124; and see Australia and New Zealand Banking

Group Ltd v Greig [1980] 1 NSWLR 112 (Master Allen) and Permanent Trustee Co Ltd v University of Sydney [1983] 1 NSWLR 578. In most jurisdictions the order will not affect any third party dealing with the judgment debtor bona fide for value and without notice unless it is registered in the appropriate statutory register: see, for example, NSW Act ss 186–188. It appears that (at least under the Judgment Creditors’ Remedies Act 1901 (NSW)) (now re-enacted as Civil Procedure Act 2005 s 126) a charging order may not be made over a mortgagor’s interest in Torrens title land: Quint v Robertson (1985) 3 NSWLR 398, not following Australia and New Zealand Banking Group Ltd v Greig, above. A judgment creditor, therefore, cannot gain priority by virtue of a charging order (whether nisi or absolute) over the equitable mortgagee of a chose in action who has given no notice, whether the mortgage was earlier or later than the judgment, but before the charging order; not only because the creditor gets nothing but what the debtor can dispose of, but because, before the date of the order, the debtor has ceased to be the sole owner of the fund (Scott v Lord Hastings (1858) 4 K & J 633; 70 ER 263; Warburton v Hill (1854) Kay 470; 69 ER 199), and the ground for giving a second mortgagee priority over the first, by reason of his having been led to take an encumbered as an unencumbered property, is not applicable to a judgment creditor; who has not been deceived as to the condition of the title, and as to whom the judgment debtor has been guilty of no deceit in suffering judgment: Scott v Lord Hastings. The order nisi operates as a charge (subject to cause being shown against making it absolute) and, subject to registration of orders affecting land (see 24.51), it cannot be defeated by any subsequent proceeding. The priority of a creditor who has obtained judgment against the executor of his debtor, and a charging order nisi, will, therefore, not be affected by a decree for the administration of the debtor’s estate before the charging order was made absolute (Haly v Barry (1868) 3 Ch App 452), and, as a charging order has no greater effect than a charge executed by the judgment debtor (see 7.5; also 7.8), a charging order under a judgment by default for a debt which was incapable of being enforced will be inoperative: Re Onslow’s Trusts (1875) LR 20 Eq 677. As to charging orders generally, see United Travel Agencies Pty Ltd v Cain

(1990) 20 NSWLR 566 at 571; and see 7.5.

Registration of writs and orders affecting land 24.51 In the absence of particular legislative provisions as to the priority of judgments or other interests it seems that land would be affected as soon as the judgment is entered in the court records, whether or not the judgment is executed under a writ of fi fa, or its equivalent: see Sykes and Walker, Law of Securities, 5th ed, p 426. Various types of provisions are contained in the legislation of the states (generally see Sykes and Walker, pp 426–34). For example, NSW Act ss 186–189 make provision for registration of writs or orders under judgments and lis pendens: see Stuckey, The Conveyancing Act, 1919–1969, 2nd ed, pp 344–9. Section 188 is designed to protect purchasers against non-registration. It provides: [page 652] 188(1) Every such writ issued or renewed, and every such order, award, determination, notification, or charge, and every proceeding thereunder, shall be void against, and current legal proceedings shall not bind a person who becomes a purchaser of the land affected thereby without notice of the writ, order, award, determination, notification, charge or current legal proceedings unless the same is registered in the General Register of Deeds so that such registration has effect at the time of the purchase, and is so indexed that the purchaser ought reasonably to have found the entry on search. (2) No purchaser shall be affected with notice of any such writ, order, award, determination, notification, charge, or any proceeding thereunder or of any current legal proceedings by reason of omission to make any inquiry or any search other than search in the General Register of Deeds. (3) This section does not apply, and shall be deemed never to have applied, in respect of land under the provisions of the Real Property Act, 1900.

Registration ceases to have effect after five years, but registration may be renewed: s 186(2). Section 189(1) provides that judgments are not to be a charge on land or on the unpaid purchase money for any land until registered. In Victoria, similar provisions are contained in the Property Law Act 1958 ss 209–214: see Robinson, The Property Law Act, Victoria, Law Book Co, Sydney, 1992, pp 456–63. The rule that the judgment creditor takes subject to any prior created interests in land (see 24.49) applies to Torrens title land: see Anderson v

Liddell (1968) 117 CLR 36; Simpson v Forrester (1973) 132 CLR 499; see also Coleman v De Lissa (1885) 6 LR (NSW) Eq 104; National Bank of Australasia Ltd v Morrow (1887) 13 VLR 2; Rowe v Equity Trustees (1895) 21 VLR 762; Re Bosquet’s Caveat (1883) 17 SALR 173; Bruce v Woods [1951] VLR 49. The fact that such a prior claimant has failed to lodge a caveat will not lead to postponement, at least until registration of the sheriff’s transfer (Re Broughton (1916) 17 SR (NSW) 29; but cf Bond v McClay [1903] St R Qd 1 at 10 and Patchell v Maunsell (1881) 7 VLR (E) 6); and this is subject to statutory provisions requiring a caveat, such as Western Australian Torrens Act s 133 and Queensland Torrens Act s 120: see Sykes and Walker, Law of Securities, 5th ed, p 515. The Torrens legislation in the various jurisdictions generally applies the principle that writs of fi fa or their equivalent are not to affect Torrens land as against purchasers or mortgagees until a copy has been served on the Registrar and entered in the register in some way: see NSW Torrens Act s 105; Victorian Torrens Act s 52; Queensland Torrens Act ss 117–119; South Australian Torrens Act ss 105–110; Western Australian Torrens Act s 133;Tasmanian Torrens Act s 61. No specific proprietary interest in the land is gained by the judgment creditor merely as a result of registration of a writ under these provisions: Bond v McClay [1903] St R Qd 1; Re Shears and Alder (1891) 17 VLR 316. The binding effect of service or entry of a writ of fi fa under these provisions is limited as to time. In Victoria, for example, unless a transfer on sale under the writ etc is lodged for registration within three months from the date of service on the Registrar it ceases to bind or affect the land (Transfer of Land Act 1958 s 52(5)): see Re Shears and Alder; Colonial Bank of Australasia v Riddel (1893) 19 VLR 280. Successive copies of the writ may be served under s 52 and fresh three-month periods of protection gained (Registrar of Titles v Paterson (1876) 2 App Cas 110; Re Broughton (1916) 17 SR (NSW) 29; Pirpiris v Iovanella [1975] VR 129); but the protection thereby gained in a subsequent three-month period does not protect against any instruments lodged for registration in a previous three-month period of protection: Hoy v AAA Home Loans Pty Ltd [1985] VR 281; generally, see Sykes and Walker, pp 511–18; Butt and Ticehurst, Woodman and Nettle — The Torrens System in New South Wales, 2nd ed, Thomson Law Book Co, Sydney, [105.240]; Robinson, Transfer of Land in Victoria, Law Book Co, Sydney, 1979, pp

237–46. As to the possible relevance of Deeds Registration legislation on other non-Torrens registration legislation to Torrens system land, see Sykes and Walker, pp 519–20. In [page 653] general it appears that the Torrens legislative provisions can only apply where the judgment debtor has a registered estate or interest in Torrens land (see Sander v Twigg (1887) 13 VLR 765 at 788; Watson v Royal Permanent Building Society (1888) 14 VLR 283 at 291–3); otherwise it would follow that the general law and other non-Torrens legislative provisions would apply: see Bank of Western Australia v Connell (1996) 16 WAR 483.

Chattels 24.52 Where the equitable encumbrancer of chattels has completed his title by giving notice (see 26.5), he will have priority over the subsequent judgment creditor without notice, who has sued out his fi fa. It has, therefore, been held that a judgment creditor has no right to take in execution a ship and cargo, as against prior equitable mortgagees (under a security made while the ship was at sea), who had sent notice of the assignment to the master, and had received immediate possession of the property from him upon the termination of the voyage: Langton v Horton (1842) 1 Hare 549; 66 ER 1149. It was intimated (1 Hare at 560) that if the prior equitable title was incomplete, the claim of a subsequent judgment creditor, as well as that of a subsequent equitable purchaser, might prevail, but this would be contrary to the principle stated above. The judgment creditor takes subject to any prior equity.

[page 654]

Chapter 25

Tacking Further Advances Tacking Two forms of tacking Advances Former conditions for tacking Tacking against surety Tacking unsecured debts Mortgage to cover further advances Constructive notice Tacking by agreement Abolition of tacking Victorian s 94 The rule in Hopkinson v Rolt Extension of the rule in Hopkinson v Rolt Statutory effect on Hopkinson v Rolt Effect of rule in Clayton’s case Torrens title land

25.1 25.2 25.3 25.4 25.5 25.6 25.7 25.8 25.9 25.10 25.11 25.12 25.13 25.14 25.15 25.16

Tacking 25.1

Essentially, tacking covers the situation where a mortgagee is able to

cover subsequent advances by a mortgage taken to secure an earlier advance. It was the superiority allowed in equity to the legal estate that gave rise to the doctrine of tacking: see Willoughby, The Legal Estate, Cambridge University Press, 1912, pp 42ff. This was a particular application of the rule that a mortgagee who had the legal estate should prevail over other mortgagees of whose securities a mortgagee had no notice when the advance was made. The old doctrine of tacking, however, has been abolished in many states, including Victoria, but survives in others, including New South Wales. As noted in 25.2 there are currently two forms of tacking in modern law. Tacking and further advances under the Torrens system are considered in 4.35.

Two forms of tacking 25.2 If a legal mortgagee made a further advance on the security of the estate, and had at the time of the further advance no notice of a second mortgage, the mortgagee’s legal estate gave priority to the further advance: see (1958) 22 Conv (NS) 44 (Rowley), but quaere whether the principle does depend on the doctrine of estates in land: see Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293; cf a further advance and a new mortgage, [page 655] see Sibbles v Highfern Pty Ltd (1987) 164 CLR 214. If the intervening encumbrancer agreed to the further transaction, or if the prior mortgage made express provision for the extension of the security to further advances, an equitable mortgagee could also avail himself of the doctrine; in all cases, however, a mortgagee who had notice of a subsequent (that is, intervening) encumbrance at the time of making the further advance could never tack further advances against it. The same principle applied also where, after a legal mortgage to A and a second mortgage to B, there was a third mortgage to a different person, C, who made the advance without notice of the second mortgage. If C took a

transfer of A’s mortgage, C had priority, not only in respect of the first mortgage but, by virtue of the legal estate, in respect of the third as well. Consequently, C could tack the third mortgage to the first and so squeeze out the second: Marsh v Lee (1670) 2 Ventr 337; 86 ER 473; Brace v Duchess of Marlborough (1728) 2 P Wms 491; 24 ER 829; Wortley v Birkhead (1754) 2 Ves Sen 571; 28 ER 364. (The court would not take from the third mortgagee the legal protection of an honest debt: Belchier v Renforth (1764) 5 Bro PC 292; 2 ER 686; Blackwood v London Chartered Bank of Australia (1874) LR 5 PC 92 per Lord Selborne C at 111.) The doctrine, applied in this form, was described as the third mortgagee’s tabula in naufragio. This expression was attributed to Hale CJ (see (1728) 2 P Wms 491; 24 ER 829; 2 Ves Sen 573; 28 ER 365); but the acquisition of the legal estate in part of a security did not protect any more of the subsequent encumbrance than was charged upon that part: Marsh v Lee, above. However, the effect was merely to change the order of priority, and not to alter the mode of discharging the securities by combining the debts and making the interest payable on both in the first instance, instead of the interest and principal of each in succession: Latouche v Dunsany (1803) 1 Sch & Lef 137.

Advances 25.3 There is no difference in substance between a further advance and a re- advance. A re-advance is a further advance after the original principal sum has been reduced and within the monetary limits of the original advance. There may be a further advance, though no money is paid directly to the mortgagor: Re Smith; Lawrence v Kitson [1918] 2 Ch 405; for example, further facilities by a bank under an overdraft, further liability for goods supplied by the mortgagee. As to the difference between a further advance and a new mortgage, see Sibbles v Highfern Pty Ltd (1987) 164 CLR 214 and Coast Securities No 9 Pty Ltd v Bondoukou Pty Ltd (1986) 61 ALJR 285 at 288; 69 ALR 385 at 390 (PC). Further advances should be distinguished from legitimate expenditure by a lender in possession to preserve or perfect the security and expenditure properly and reasonably incurred by a lender in an endeavour to obtain the best price on a sale: see Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293; also Network Finance Ltd v Deposit and Investment Co Ltd [1972]

QWN 19.

Former conditions for tacking 25.4 While tacking was based on the special value attached to the legal estate, it was not essential that the mortgagee claiming to tack should have the legal estate actually vested in him. It was sufficient if that mortgagee had the best right to call for the legal estate (Wilkes v Bodington (1707) 2 Vern 599; 23 ER 991; Ex parte Knott (1806) 11 Ves 609; 32 ER 1225; Willoughby vWilloughby (1756) 1 Term Rep 763; 99 ER 1366), and it was also sufficient if that mortgagee had a partial interest in the legal estate, such as a term of years, or a security which might be used at law, such as a judgment: Brace v Duchess of Marlborough (1728) 2 P Wms 491; 24 ER 829; Re Russell Road Purchase-Moneys (1871) LR 12 Eq 78. An encumbrancer in whose favour a declaration of trust of the legal interest had been made (see Stanhope v Earl Verney (1761) 2 Eden 81; 28 ER 826; Wilmot v Pike (1845) [page 656] 5 Hare 14; 67 ER 808; Taylor v London and County Banking Co [1901] 2 Ch 231 at 263; but see McCarthy and Stone Ltd v Julian S Hodge & Co Ltd [1971] 1 WLR 1547; [1971] 2 All ER 973) — or one who, having the best right to call for a transfer of that interest, had done some act short of obtaining a transfer, but equivalent to an act of ownership (Ex parte Knott (1806) 11 Ves 609 at 618; 32 ER 1225; Fourth City Mutual Benefit Building Society v Williams (1879) 14 Ch D 140) — was, for the purpose of tacking, in the same position as an encumbrancer who actually held the legal estate. His claim, however, depended on the continued holding of the legal estate, and the right to tack was lost if he parted with that estate: Rooper v Harrison (1855) 2 K & J 86; 69 ER 704. Further, it was necessary that he should hold both securities in his own right (Morret v Paske (1740) 2 Atk 52; 26 ER 429; Barnett v Weston (1806) 12 Ves 130; 33 ER 50; see Shaw v Neale (1858) 6 HLC 581; 10 ER 1422), and that he should have an equal equity with the mesne encumbrancer (Lacey v Ingle (1847) 2 Ph 413 at 419; 41 ER 1002 at 1005; Rooper v Harrison, above); as to rival equities, see 24.29 ff.

The legal estate might be got in either at the time of the later encumbrance which it was desired to tack, or subsequently. It was essential that there should be no notice of the mesne encumbrance at the time of the advance: Willoughby v Willoughby (1756) 1 Term Rep 763; 99 ER 1366; Brace v Duchess of Marlborough, above; Cooke v Wilton (1860) 29 Beav 100; 59 ER 564. Similarly, where a prior mortgagee acquired a later encumbrance, he must have had no notice of the mesne encumbrance at the time of such acquisition: Bedford v Backhouse (1730) 2 Eq Cas Abr 615; 22 ER 516; Morret v Paske, above. Where a subsequent mortgagee acquired a prior mortgage it was immaterial whether the first mortgagee, from whom the legal estate was got in, had at that time notice of the mesne encumbrance; hence a second mortgagee could gain no protection by giving notice to the first mortgagee (Peacock v Burt (1834) 4 LJ Ch 33) — that is, the first mortgagee could prefer which of the subsequent encumbrances he pleased; but this doctrine, though apparently accepted, was disapproved: Bates v Johnson (1859) John 304 at 314; 70 ER 439 at 442; West London Commercial Bank v Reliance Building Society (1885) 29 Ch D 954. A subsequent mortgagee could tack notwithstanding that he had notice when that mortgagee got in the legal estate (Blackwood v London Chartered Bank of Australia (1874) LR 5 PC 92 at 111), that being, to use the words of Lord Hardwicke (in Wortley v Birkhead (1754) 2 Ves Sen 571 at 574; 28 ER 364 at 366), the very occasion that showed the necessity of taking it in. A subsequent mortgagee could not, however, avail himself of a legal estate if it were got in with notice that the conveyance was a breach of trust (Saunders v Dehew (1692) 2 Vern 271; 23 ER 775; Taylor v Russell [1891] 1 Ch 8; on appeal [1892] AC 244 per Lord Macnaghten at 261; Bailey v Barnes [1894] 1 Ch 25; but see Pilcher v Rawlins (1872) 7 Ch App 259); nor if it were got in from a satisfied mortgagee, since such a mortgagee was a trustee for the equitable encumbrancers according to their priorities (Prosser v Rice (1859) 28 Beav 68 at 74; 54 ER 291 at 293; Taylor v Russell [1892] AC 244 at 259 (HL)), and the trustee of the mortgagor could not make use of the legal estate to alter the priorities: Ledbrook v Passman (1888) 57 LJ Ch 855. It was essential to the right to tack, that the debt was either originally contracted on the credit of the estate, or, if at first it was a simple contract

debt, or only a general lien upon the mortgaged property, that a specific security was taken for it without notice of the intermediate encumbrance: Lacey v Ingle (1847) 2 Ph 413; 41 ER 1002. Hence a legal mortgagee might tack a further charge (Lloyd v Attwood (1859) 3 De G & J 614; 44 ER 1405), and a legal mortgagee was allowed to tack a subsequent judgment debt (Shepherd v Titley (1742) 2 Atk 348; 26 ER 612; Brace v Duchess of Marlborough (1728) 2 P Wms [page 657] 491; 24 ER 829; Ex parte Knott (1806) 11 Ves 609; 32 ER 1225), since a legal mortgagee was treated as having made a further advance on the security of the land, but a judgment creditor could not get in the first mortgage and tack his judgment debt: Brace v Duchess of Marlborough; Ex parte Knott; Beavan v Earl of Oxford (1856) 6 De GM & G 507 at 518; 43 ER 1331 at 1335.

Tacking against surety 25.5 The mortgagee might also, perhaps, tack a further advance as against a surety if the contract of guarantee did not affect the mortgagee’s right to make further advances (Williams v Owen (1843) 13 Sim 597; 60 ER 232; Farebrother v Wodehouse (1856) 23 Beav 18; 53 ER 7; dissented from in Forbes v Jackson (1882) 19 Ch D 615; but followed in Nicholas v Ridley [1904] 1 Ch 192; this case was, however, decided by the Court of Appeal on other grounds: at [1904] 1 Ch 205), and might certainly do so where the mortgagee had no notice that the surety was merely a surety (Re Toogood (1889) 61 LT 19; Nicholas v Ridley), but where the mortgagee had notice of an intermediate charge, then, as the mortgagee could not tack as against that charge, it was held that the mortgagee could not in general tack as against the surety’s right to the benefit of his security on payment of the first advance alone: Drew v Lockett (1863) 32 Beav 499; 55 ER 196; Forbes v Jackson; Leicestershire Banking Co v Hawkins (1900) 16 TLR 317.

Tacking unsecured debts 25.6

Although, as against mesne encumbrances, tacking was allowed only

where the debt to be tacked was incurred on the credit of the estate, and this applied also as against the mortgagor (Challis v Casborn (1715) Prec Ch 407; 24 ER 183) and persons claiming under the mortgagor inter vivos (Coleman v Winch (1721) 1 P Wms 775; 24 ER 609; Richardson v Horton (1843) 7 Beav 112; 49 ER 1006), yet, after the death of the mortgagor, such debts could be tacked against his successors in title to the equity of redemption, so far as the land was assets in their hands for the payment of the unsecured debt: Heams v Bance (1748) 3 Atk 630; 26 ER 1162; Coleman v Winch; Thomas v Thomas (1856) 22 Beav 341; 52 ER 1139. This, however, was allowed only to enable the mortgagee to recover the whole debt in one proceeding and so avoid circuity of action. It was not tacking in the full sense, so as to disturb the priorities and enable the mortgagee to exclude a mesne encumbrancer: Pile v Pile (1875) 23 WR 440; Morret v Paske (1740) 2 Atk 52; 26 ER 429; Irby v Irby (1855) 22 Beav 217; 52 ER 1091.

Mortgage to cover further advances 25.7 As previously mentioned (see 25.3), a legal mortgagee who made a further advance without notice of a second mortgage could tack the further advance by virtue of the legal estate; but there was, in addition, a form of tacking which was independent of the legal estate (a passage cited with approval in Naxatu Pty Ltd v Perpetual Trustee Co Ltd [2012] FCAFC 163 at [87] (Dowsett, Jagot and Yates JJ)). This occurred when the first mortgage was expressed to cover the advance made at the time and also further advances. In such a case the mortgagee could, by virtue of the contract, tack a further advance to the original advance as against a subsequent mortgagee who had not got the legal estate, provided that, at the time of the further advance, the mortgagee had no notice of the subsequent mortgage; and a mortgage to secure a current account was on the same footing: Hopkinson v Rolt (1861) 9 HL Cas 514; 11 ER 829; Calisher v Forbes (1871) 7 Ch App 109; see Re Weniger’s Policy [1910] 2 Ch 291 at 295 and Deeley v Lloyds Bank Ltd [1912] AC 756 at 780–2. If a further advance was made either by a legal mortgagee (Wyllie v Pollen (1863) 3 De GJ & Sm 596; 46 ER 767), or by an equitable mortgagee with the best right to the legal estate, and this further advance was made without notice of the intervening mortgage, it might be tacked and priority resulted in such a case from the superiority attached to the legal estate.

[page 658] If, however, the contract expressly provided for the extension of the security to cover further advances, the device of tacking might be used by either a legal or an equitable mortgagee. Notice of a subsequent mortgage prevented the first mortgagee from gaining priority for advances subsequently made, and it was decided that the same rule applied even where the first mortgage contained a covenant to make further advances: West v Williams [1899] 1 Ch 132 (CA). The extension of the rule as to notice, via Hopkinson v Rolt, above, to the instant case, showed an increasing restriction by the courts of this form of tacking. Originally it was held that where the second mortgagee took with notice that the first mortgage was to cover further advances, the first mortgagee might tack advances made subsequently to the second mortgage, and it was folly of the second mortgagee with notice to take such a security: Gordon v Graham (1716) 2 Eq Cas Abr 598; 22 ER 502. This was overruled by Hopkinson v Rolt: see London and County Banking Co v Ratcliffe (1881) 6 App Cas 722 (HL); Bradford Banking Co v Briggs (1886) 12 App Cas 29 (HL); Union Bank of Scotland v National Bank of Scotland (1886) 12 App Cas 53 (HL); Deeley v Lloyd’s Bank Ltd [1912] AC 756; Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293; Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd [1984] 2 NSWLR 128; R & I Bank of Western Australia Ltd v Cash Resources Australia Pty Ltd (1993) 11 WAR 536; Commonwealth Bank of Australia v Grubic (FCSC (SA), Debelle, Cox and Duggan JJ, 27 August 1993, unreported); Chase Corporation (Australia) Pty Ltd (Scheme Administrators Appointed) v North Sydney Brick and Tile Co (1994) 35 NSWLR 1; Beachquest Pty Ltd v Interstate Mortgage and Investments Pty Ltd [2003] 2 Qd R 586; Oversea-Chinese Banking Corp Ltd (OCBC) v Malaysian Kuwaiti Investment Co (MKIC) and Aljade [2003] VSC 495; and Westpac Banking Corporation v Adelaide Bank Ltd (2005) 12 BPR 22,919. The burden of proving that the first mortgagee had notice at the relevant time rests with the holder of the subsequent interest: Joseph Constantine Steamship Line Ltd v Imperial Smelting Corp Ltd [1942] AC 154 at 192; Russo v Bendigo Bank Ltd [1999] 3 VR 376 at 386 (Ormiston JA); Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188 at 194

(Hayne JA); Macquarie Bank v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133; and OCBC v MKIC and Aljade, above, at [96] (Redlich J, referring to these authorities); and Westpac Banking Corporation v Adelaide Bank Ltd (2005) 12 BPR 22,919, at 22,933, [75] (White J), cited with approval in Naxatu Pty Ltd v Perpetual Trustee Co Ltd [2012] FCAFC 163 at [87] (Dowsett, Jagot and Yates JJ). The principle that notice of a subsequent encumbrance prevents a first mortgagee from gaining priority for further advances applies also to a company claiming a lien on shares of a member for debts incurred after it has received notice of an encumbrance on the shares (Bradford Banking Co v Briggs, above), and applies also to mortgages of ships: The Benwell Tower (1895) 72 LT 664. It also applies to a subsequent purchaser of the land (Hopkinson v Rolt (1861) 9 HL Cas 514; 11 ER 829; London & County Banking v Ratcliffe (1881) 6 App Cas 722; Union Bank of Scotland v National Bank of Scotland (1886) 12 App Cas 53), and to an assignee of the mortgagor’s interest: Wilson v Holland [1915] VLR 46; and OCBC v MKIC and Aljade, above, at [70] and [71] and see 25.12).

Constructive notice 25.8 Constructive notice of the second or subsequent mortgage might, having regard to the nature of the rule in Hopkinson v Rolt (1861) 9 HL Cas 514; 11 ER 829, generally be thought to be insufficient (see 25.11; but as to the effect of statutory provisions, see 25.13), a position which may be influenced by the position taken as to the basis of the rule: see 25.12. In Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd [1984] 2 NSWLR 128, 132, Kearney J, after a full discussion of the authorities, said: [page 659] The reason for this is set out at p 132, that the rule in Hopkinson v Rolt (1861) 9 HLC 514; 11 ER 829, makes it equitable fraud for a first mortgagee to claim priority in respect of further advances made with notice of an intervening equity and the authorities have consistently held that constructive notice, by registration of some intervening interest is insufficient. Thus, in Re O’Byrne’s Estate (1885) 15 LR (Ir) 373, 379, two members of the Irish Chancery Bench said: ‘Hopkinson v Rolt … rests entirely on the doctrine of equitable fraud, which arises only on actual notice …’ The mere fact that there was a registration of a petition for sale by the second

mortgagee as a lis pendens did not operate to prevent the first mortgagee from getting priority for further advances.

This was applied in Nia v Phuong (1993) 6 BPR 13,141 at 13,144. This position was echoed in R & I Bank of Western Australia Ltd v Cash Resources Australia Pty Ltd by Anderson J (at (1993) 11 WAR 547 (and see below)); and OCBC v MKIC and Aljade [2003] VSC 495: and see Westpac Banking Corporation v Adelaide Bank Ltd (2005) 12 BPR 22,919, at 22,933, [75] (White J), cited with approval in Naxatu Pty Ltd v Perpetual Trustee Co Ltd [2012] FCAFC 163 at [87] (Dowsett, Jagot and Yates JJ)); also 25.12 and 25.16. In Beachquest Pty Ltd v Interstate Mortgage and Investments Pty Ltd [2003] 2 Qd R 586, White J held that Kearney J’s position gave the preferable result. Thus, the Queensland equivalent of para 94(1)(b) of the Victorian Property Law Act 1958 (see 25.10), para 82(1)(b), required actual notice of any subsequent encumbrance. In so doing, her Honour noted at [2003] 2 Qd R 594–5 that the authorities as to whether a mortgagee had notice of a subsequent registered interest were not uniform. Thus, in Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd [1984] 2 NSWLR 128 at 133–5, it was held that lodging a caveat was not notice; while Re Arcade Hotel Pty Ltd [1962] VR 274 at 279 held that registration is notice for purposes of enforcing a restrictive covenant. See also Queensland Trustees Ltd v Registrar of Titles (1893) 5 QLJ 46 at 51. Her Honour asked rhetorically that if constructive notice is insufficient to constitute notice for s 82(1)(b) then what was the purpose to subs (3A) because the special rule for current accounts would be the general rule. This, then, might suggest that the drafter intended a distinction to be made between the two and that s 82(1)(b) is premised on registration being sufficient notice. However, it is unclear from the authorities to what extent and in what circumstances constructive notice may be sufficient for the operation of the rule. Authorities supporting the requirement of actual notice include Re O’Byrne’s Estate (1885) 15 LR (Ir) 373; Pierce v Canada Permanent Loan and Savings Co (1894) 25 OR 671 at 676 Boyd C; Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd, above; and OCBC v MKIC and Aljade, above. In Sibbles v Highfern Pty Ltd (1987) 164 CLR 214 at 221, Mason CJ and

Dawson, Toohey and Gaudron JJ said: ‘That is to say, the prior mortgagee could not tack if at the time of the further advances he had notice, actual or constructive, of the subsequent mortgage.’ In relation to this statement, and the High Court’s preceding discussion of the rule, Anderson J said, in R & I Bank of Western Australia Ltd v Cash Resources Australia Pty Ltd (at (1993) 11 WAR 547): The statement does not seem to have been strictly necessary for the decision in that case and no authority was cited for the dicta that constructive notice would be sufficient to affect the equities of this kind of case. Perhaps it is not truly a matter of categorising the notice as being actual or constructive. The basis of the rule in Hopkinson v Rolt is ‘justice and fair dealing as between the mortgagor and the mortgagees, and as between competing mortgages’ (Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293 at 300, Holland J). The starting proposition is that the security of the first mortgage is not impaired or affected without notice of a second mortgage. The first mortgage is entitled to act on the basis that his security continues in full effect until he has notice of something to the contrary. Knowing that a second mortgagee has acquired an interest in the property, it would

[page 660] be, in the language of equity, against conscience to allow the first mortgagee to make a further advance calculated to affect the rights of the second mortgagee. In the technical sense in which the word is used in equity, it would be a fraud on the second mortgagee. Therefore, any notice, to be operative, would have to sustain a charge of equitable fraud. The notice would have to be such as to affect conscience. The general rule is that only actual notice will be sufficient to do that. Actual notice must generally be proved. However, there may be exceptions. There may be circumstances under which, although actual knowledge is not proved, the circumstances are so strongly against the first mortgagee that knowledge of a subsequent encumbrance should be imputed to him. One such circumstance may perhaps be where there has been deliberate conduct on the part of the first mortgagee designed to prevent receipt of actual notice of the later encumbrance.

See also Nia v Phuong (1993) 6 BPR 13,141 at 13,144.

Tacking by agreement 25.9 It was possible, also, for the mortgagee to tack after having secured the consent of the intervening encumbrancer, and in this case it was immaterial whether the first mortgage was legal or equitable (for priority agreements, see Chapter 24).

Abolition of tacking 25.10 The doctrine of tacking was finally abolished in England, after earlier unsuccessful attempts, by Law of Property Act 1925 s 94, while provision was simultaneously made for tacking further advances in the same section. The tabula in naufragio form of tacking survives where the contest is between persons other than mortgagees: see McCarthy and Stone Ltd v S Hodge & Co Ltd [1971] 2 All ER 973; [1972] CLJ 34 (Fairest). The English legislation is now reflected in various corresponding provisions in some states and New Zealand: Victorian Act s 94; Queensland Act s 82; Tasmanian Act s 38; Property Law Act 2007 (NZ) ss 89–94. In relation to the operation of the Queensland provision, see Martin, ‘Tacking, further advances and the Property Law Act 1974–1978’ (1980) 5 Qld Lawyer 103. In the other states the doctrine of tacking survives with full force and effect: see Sykes and Walker, The Law of Securities, 5th ed, Law Book Co, Sydney, 1993, pp 394– 5. For convenience, reference is made to Victorian Property Law Act 1958 s 94: 94(1) After the commencement of this Act, a prior mortgagee shall have a right to make further advances to rank in priority to subsequent mortgages (whether legal or equitable) — (a) if an arrangement has been made to that effect with the subsequent mortgagees; or (b) if he had no notice of such subsequent mortgages at the time when the further advance was made by him; or (c) whether or not he had such notice as aforesaid, where the mortgage imposes an obligation on him to make such further advances. This sub-section shall apply whether or not the prior mortgage was made expressly for securing further advances. (2) In relation to the making of further advances after the commencement of this Act a mortgagee shall not be deemed to have notice of a mortgage merely by reason that it was registered under Part I of this Act or any corresponding previous enactment, if it was not so registered at the time when the original mortgage was created or when the last search (if any) by or on behalf of the mortgagee was made, whichever last happened. This sub-section shall apply only where the prior mortgage was made expressly for securing a current account or other further advances. (3) The right to tack, save in regard to the making of further advances as aforesaid, is hereby declared to have been abolished by the Property Law Act 1928, section 94(3): Provided that nothing in this Part shall affect any priority acquired before the commencement of that Act by tacking, or in respect of further advances made without notice of a subsequent incumbrance or by arrangements with the subsequent incumbrancer.

(4) This section shall apply to mortgages of land made before or after the commencement of this Act.

[page 661]

Victorian s 94 25.11 The effect of Victorian Property Law Act 1958 s 94 is, subject to the preservation of certain acquired priorities (see s 94(3)), to abolish the doctrine of tacking save as provided by subs (1). Subject to s 94(3), this applies to mortgages made before or after the commencement of the Act, the relevant date being 18 December 1929: see s 94(4); also s 2(3). Untrammelled by statute, there are two aspects of the doctrine of tacking which have been considered previously but are now reviewed in the context of these provisions. One is the doctrine of tabula in naufragio and the other applies to tacking further advances. In general terms the doctrine of the tabula allows a puisne mortgagee to ‘squeeze out’ prior puisne mortgages by acquiring the legal estate or the best right to it. Thus, in the simplest case, if a mortgagee who has already created two mortgages grants a third, the mortgagee on that third mortgage may, if he took without notice of the second mortgage, gain priority over the mortgagee on the second mortgage by buying in the legal estate, the first mortgage: see Marsh v Lee (1670) 2 Ventr 337; 86 ER 473; Brace v Duchess of Marlborough (1728) 2 P Wms 491; 24 ER 829; Wortley v Birkhead (1754) 2 Ves Sen 571; 28 ER 364; and Jennings v Jordan (1881) 6 App Cas 698, especially 714 ff. As has been mentioned, it was not even necessary that the third mortgagee actually acquire the legal estate; the best right to call for it was sufficient, as long as the third mortgage was taken without notice of the second: see Willoughby v Willoughby (1756) 1 Term Rep 763; 99 ER 1366; and see 25.1 and 25.4. The basis of the doctrine was explained, somewhat unsatisfactorily, by Lord Hardwicke, in terms of the separate jurisdictions of law and equity and the deference which the latter accorded the legal estate: see Wortley v Birkhead, above; and see Willoughby, The Legal Estate, pp 42 ff; and see 25.16. Thus the doctrine of tabula in naufragio is gone: that is, in the context

of mortgages at least: McCarthy and Stone Ltd v Julian S Hodge & Co Ltd [1971] 2 All ER 973; [1971] 1 WLR 1547; but see (1957) 21 Conv (NS) 195 at 196 (Delaney).

The rule in Hopkinson v Rolt 25.12 The second aspect of the doctrine, tacking further advances, has survived statutory intervention in the form of s 94 (and its equivalents) but with some alterations. Previously, a mortgagee on the security of a legal mortgage could make further advances and secure priority over subsequent encumbrancers due to the mortgagee’s possession of the legal estate. Although the strength of the legal estate is vital in determining priorities, there is no floundering for the ‘plank’ of the legal estate. The difference between this and the tabula doctrine is also reflected in the fact that, on application of the former, the mortgage debts are combined and interest paid on the aggregate, while in the latter the sums secured are separately discharged: see Latouche v Dunsany (1803) 1 Sch & Lef 137. On the other hand, where a mortgage was expressed to cover further advances, the right to tack depended on contract rather than on possession of the legal estate. Thus a mortgagee under an equitable mortgage could only tack on the basis of a contractual provision to cover further advances (West v Williams [1899] 1 Ch 132), but the right to tack does not arise in the case of a charge arising from a lien created by a company’s articles of association to secure debts: Chase Corporation (Australia) Pty Ltd v North Sydney Brick and Tile Co (1994) 35 NSWLR 1 (and see the statement of Cohen J (at 17) that it is ‘… necessary that the person seeking to tack has a legal and not merely equitable mortgage’ which, in the context of Chase is consistent with West v Williams). In both cases the right to tack a further advance would be lost if the mortgagee on the prior mortgage had notice of any subsequent encumbrance before the further advance was made: Hopkinson v Rolt (1861) 9 HLC 514; 11 ER 829. In West v Williams [1899] 1 Ch 132, it was held that this rule applied even where the [page 662] mortgage imposed a positive obligation on the mortgagee to make further

advances. However, this decision was not as harsh as it may seem. Chitty LJ put the position thus: The principle in which these decisions [including Hopkinson v Rolt, supra] are founded appears to me to be, that a mortgagee cannot obtain a charge on property which is no longer the mortgagor’s to charge, and which the mortgagee knows at the time when he makes his further advance is no longer the property of the mortgagor. No charge arises for a further advance until it is actually made. This principle is plain and simple, and is based on natural justice and fair dealing. If this be the principle (which I think it is), the covenant to make further advances creates no difficulty: and for this reason; the covenant is to make the further advance on the security of the property, and, inasmuch as the mortgagor has by his own act deprived himself of the power to give the stipulated security, no action for damages would lie on the covenant. It is hardly necessary to add that no action lies for specific performance of any agreement to make a loan. [at 146; see also Lindley MR at 143–4]

The mortgagee may, nevertheless, have a right of action on the covenant if he could only reinvest the money the mortgagee would otherwise have been obliged to advance at a lower rate. West v Williams was approved by the House of Lords in Deeley v Lloyds Bank Ltd [1912] AC 756. The rule in Hopkinson v Rolt does not, however, defeat securities, as was observed in Mercantile Credits Ltd v ANZ Banking Group (1988) 48 SASR 407 (FC) at 410 (King CJ) (a passage cited with approval by White J in Westpac Banking Corporation v Adelaide Bank Ltd (2005) 12 BPR 22,919 at 22,930, [58]): The rule in Hopkinson v Rolt does not operate to defeat that security or any part of it. It merely fixes the amount for which the security has priority over subsequent securities at the date upon which the mortgagee has notice of those subsequent securities.

The basis of the rule was considered more recently by Redlich J in Oversea-Chinese Banking Corp Ltd (OCBC) v Malaysian Kuwaiti Investment Co (MKIC) and Aljade [2003] VSC 495. His Honour performed a lengthy analysis of the authorities, however, with somewhat different results to most others: see especially [68]–[85]. In the course of this analysis, his Honour noted that: The source of the rule is to be found in equitable principles based on notice affecting the conscience, so that the person with notice takes subject to it. The rule does not depend upon the doctrine of estates [Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293 at 300 and 305]. It is the equities derived from the contractual relationship which make it unconscionable for the mortgagor to further charge the property to secure a subsequent advance made by the mortgagee. Notice that the prior interest exists makes it inequitable for the mortgagee to rely upon its subsequently acquired interest which the mortgagor was not entitled to create.

Redlich J also considered an alternative basis for the rule, which would emphasise intention and equitable fraud, but rejected it. He noted that in Hopkinson v Rolt when considering the justice of the rule neither the judgments of the Lord Chancellor or Lord Chelmsford nor the dissenting judgment of Lord Cranworth raise considerations of intent or fraud. Redlich J took the issue of fraud further at [93]–[95] of that case, principally with respect to Torrens title land (see 25.16); and see the comments by Young J with respect to notice under the rule in Hopkinson v Rolt in Nia v Phuong (1993) 6 BPR 13,141 at 13,143 and 13,144, referring to the decision of Kearney J in Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd [1984] 2 NSWLR 128; and those of Anderson J in R & I Bank of Western Australia Ltd v Cash Resources Australia Pty Ltd (1993) 11 WAR 536 at 547: see 25.8. In any event, the basis of any equity claimed to stand in priority to the subsequent advance must be clear: see McDonald’s Australia Ltd v Bendigo and Adelaide Bank Ltd [2013] VSC 639. The actual making of the advance by the first mortgagee is essential to the operation of the rule: OCBC v MKIC and Aljade, above, at [77], referring to Matzner v Clyde Securities [page 663] Ltd [1975] 2 NSWLR 293; Philos Pty Ltd v National Bank (1976) 5 BPR 11,810; Commonwealth Bank of Australia v Grubic (FCSC (SA), Debelle, Cox and Duggan JJ, 27 August 1993, unreported). As Redlich J said in the OCBC v AKIC case at [77], the rule has no application where the first mortgagee is bound to make and the mortgagor bound to accept advances made after the date of the second mortgage: Matzner v Clyde Securities Ltd, above, at 304 per Holland J; Wilson v Holland [1915] VLR 46; Re Dehy Fodders (Aust) Pty Ltd (1973) 4 SASR 538; Sibbles v Highfern Pty Ltd (1987) 164 CLR 214 at 221. When the further advances are made under a building mortgage so that each advance facilitates the construction of the building and increases rather than diminishes the value of the security, the rules do not operate. Matzner v Clyde

Securities Ltd was such a case where advances made were necessary to enable the buildings to be completed. The mortgagee’s obligation to make advances under the terms of the mortgage was not discharged by notice of the subsequent mortgages.

Extension of the rule in Hopkinson v Rolt 25.13 The rule in Hopkinson v Rolt (1861) 9 HLC 514; 11 ER 829 was considered at length in Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293 at 298 ff. As to the nature of further advances within the meaning of the rule, see Re Dehy Fodders (Australia) Pty Ltd (1973) 4 SASR 538 (see also Wilson v Holland [1915] VLR 46). Proper costs, charges and expenses, particularly those incurred in properly preserving or effecting the rights of the first mortgagee under the security, may be tacked: Philos Pty Ltd v National Bank of Australasia Ltd (1976) 5 BPR 11,810, citing Coote on Mortgages, 5th ed, Stevens, London, 1884, vol 2, p 899 and Matzner’s case at 308. The rule does not apply where the first mortgagee has no choice about making a further advance: Wilson v Holland [1915] VLR 46 at 49; Chase Corporation (Aust) Pty Ltd v North Sydney Brick & Tile Co Ltd (1994) 35 NSWLR 1 at 16–17; Re Dehy Fodders (Aust) Pty Ltd; Winter v Bank of Adelaide (1973) 4 SASR 538 at 550–1; Westpac Banking Corporation v Adelaide Bank Ltd (2005) 12 BPR 22,919 at 22,929, [53]. It seems that agreement by subsequent encumbrancers to the mortgagee on first mortgage making advances on a fluctuating basis overcomes the difficulties of the rule in Hopkinson v Rolt; Australia and New Zealand Banking Group Ltd v National Mutual Life Nominees Ltd (1977) 137 CLR 252; Citicorp Australia Ltd v Syndal Securities Pty Ltd (SC (Qld), 21 June 1985, McPherson J, unreported); Conv Serv (NSW) [92257]; Philos Pty Ltd v National Bank of Australasia Ltd, above. Compare s 94(1)(b); but, as the Philos case indicates, any agreement to give priority to accrued interest needs to be quite clear. Section 94 and its equivalents, in summary, extended this aspect of the doctrine by removing the requirement of possession of the legal estate or a provision in the mortgage for further advances: see s 94(1). Section 94(1) as regards subsequent mortgages makes no distinction according to whether they are legal or equitable by reason of the inclusion of the ‘qualifying’

words, ‘whether legal or equitable’. As to equitable mortgages, see Wormald v Maitland (1866) 3 LJ Ch 69; Calisher v Forbes (1871) 7 Ch App 109. Thus an equitable mortgagee (for example by deposit of title deeds) can now tack further advances, even where there is no provision in his equitable mortgage to cover them, as against any subsequent legal or equitable mortgage to which his equitable mortgage ranks in priority. Compare the position in New South Wales, which has not enacted any legislation corresponding to s 94, where it was held that the right to tack does not arise in the case of a charge arising from a lien created by a company’s articles of association to secure debts: Chase Corporation (Australia) Pty Ltd v North Sydney Brick and Tile Co (1994) 35 NSWLR 1 (and see the statement of Cohen J (at 17) that it is ‘… necessary that the person seeking to tack has a legal and not merely equitable mortgage’; and see 25.11. [page 664] The rule in West v Williams [1899] 1 Ch 132 is reversed. Subject to that, the only requirement retained is that there must be no notice at the time of the further advance. The expression ‘after the commencement of this Act’, in s 94, is a reference to the commencement of the 1928 Act, on 18 December 1929: see s 2(3). The effect of these provisions is now considered in some detail. An arrangement with subsequent mortgagees, a priority agreement, would not normally require statutory sanction. However, reference to an arrangement in para 94(1)(a) was probably inserted ex abundanti cautela, as the section was apparently drafted as a prohibition of the doctrine of tacking with express exceptions as to when it would be allowed. Paragraph 94(1)(b) retains the old rule that there must be no notice of subsequent encumbrances when the advance is made: see Hopkinson v Rolt (1861) 9 HLC 514; 11 ER 829; cf Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293 and Network Finance Ltd v Deposit and Investment Co Ltd [1972] QWN 19; and see 25.7 and 25.8. (The doctrine of tacking is in full force in New South Wales and was in Queensland until the Property Law Act 1974.) Subject to s 94(2), a mortgagee will be deemed to have notice if the

subsequent mortgage is registered under Pt I of the Act: see s 199, also Mills v Renwick (1901) 1 SR (NSW) Eq 173; and see 25.14. The Queensland equivalent of para 94(1)(b), para 82(1)(b), has been held to require actual notice of any subsequent encumbrance: see Beachquest Pty Ltd v Interstate Mortgage and Investments Pty Ltd [2003] 2 Qd R 586 at 594–5. Paragraph 94(1)(c) reverses the rule in West v Williams [1899] 1 Ch 132 that notice was fatal to a claim to tack further advances even where the mortgage imposed a positive obligation to make them. In view of this provision a second or subsequent mortgagee should be careful to inspect the first mortgage, and any other prior mortgages, of which he has notice on account of the title deeds being in the first mortgagee’s possession, or their registration under Property Law Act 1958 (Vic) Pt I (deeds registration) or its equivalent. However, if the mortgage does not impose an obligation to make further advances, the principle of Hopkinson v Rolt still applies: see para 94(1)(b), above. A mortgage ‘made expressly for securing a current account or other further advances’ appears to refer to the account or advance as authorised by the mortgage. See generally (1958) 22 Conv (NS) 44 (Rowley); and 25.7. The concluding sentence of s 94(1) effects an extension of the rules for tacking further advances, discussed above.

Statutory effect on Hopkinson v Rolt 25.14 Section 94(2) reduces the rigour of the rule in Hopkinson v Rolt (1861) 9 HLC 514; 11 ER 829 (see s 94(1), para (b)) in certain cases, when the prior mortgage was made expressly to secure a current account or other further advances (but short of obligation or para 94(1)(c) would apply). Its rigour is reduced because a mortgagee of such a mortgage is not deemed to have notice of a subsequent mortgage ‘merely by reason that it was registered under Pt I’ (emphasis added) if not registered at the time the latest of two events occurred — either the creation of the mortgage or the mortgagee’s last search of the Pt I register (the register of deeds). The most important observation on the protection this subsection affords is that it only operates to undo the deeming effect of Property Law Act 1958 (Vic) s 199, ‘merely’ the result of registration: see Law of Property Act 1925 (UK) s 199; and see, for example, NSW Act s 164; and as to statutory restrictions on constructive notice, see generally 24.13. The words are carefully qualified so that s 199

would operate in relation to any other matter, apart from registration. Thus the protection would be lost in the event that the mortgagee receives actual notice of a subsequent mortgage or constructive notice other than as a result of registration. [page 665] There is no express provision in s 94(2) that its protection is dependent, or conditional, upon the mortgagee searching the Pt I deeds register. However, it is not entirely clear that the implication cannot be drawn from the reference to the ‘last search’ that a mortgagee is not obliged to search the Pt I deeds register a reasonable time before the advance is made; particularly given the reference to the last event, which could be the ‘last search’ rather than creation of the mortgage. If this were not so these provisions would merely serve to encourage a mortgagee not to search before making an advance, which is contrary to the principle that a ‘purchaser’ who neglects to search the deeds register cannot be in a better position than if he had done so: see Mills v Renwick (1901) 1 SR (NSW) Eq 173. It is conceded that this interpretation would cause considerable difficulties for banks relying on a mortgage to secure a fluctuating overdraft — perhaps the answer in these circumstances is (assuming the bank’s mortgage deed is registered under Pt I) that a second or subsequent mortgagee, who should have made his own searches, accepts the risks of a fluctuating prior mortgage and the fact that the bank cannot be expected to search the register before it honours each cheque. If the bank’s mortgage is not registered the principle of Le Neve v Le Neve (1748) 3 Atk 646; 26 ER 1172 may apply: see 24.23. But this may be only a necessary exception to a general rule. It should also be remembered that the subsection only gives protection against other mortgages. In view of the possibility of other transactions, there would be considerable risk involved in failing to search. In relation to the operation of equivalent Queensland legislation — Property Law Act 1974 s 82 — see Martin, ‘Tacking, further advances and the Property Law Act 1974–1978’ (1980) 5 Qld Lawyer 103; and see Beachquest Pty Ltd v Interstate Mortgage and Investments Pty Ltd [2003] 2 Qd R 586.

Section 94(3) preserves the effect of the Property Law Act 1928 (Vic), but with the proviso that priorities, the result of application of the doctrine as in force prior to that Act, be maintained. Subsections 94(3) and (4) should be read together. Subsection (4) is not consistent with the preceding subsections: see s 2(3). Section 94 does not apply to registered mortgages of Torrens title land (see 25.15) but it does have general application to unregistered mortgages of Torrens title land, whether or not in statutory form: see Property Law Act 1958 (Vic) s 86.

Effect of rule in Clayton’s case 25.15 Where a prior mortgage is made to cover a current account with a bank and notice of a subsequent mortgage is received, the rule in Devaynes v Noble (Clayton’s Case) (1816) 1 Mer 572; 35 ER 781 (see Sibbles v Highfern (1987) 164 CLR 214 at 222 (Mason CJ and Dawson, Toohey and Gaudron JJ); and Beachquest Pty Ltd v Interstate Mortgage and Investments Pty Ltd [2003] 2 Qd R 586 at 595–7 (White J); and see 32.53) applies if the account continues to be operated upon. Under the rule, payments into the account after notice of a subsequent mortgage has been received must be applied to reduce the overdraft at the time of the notice: Deeley v Lloyds Bank Ltd [1912] AC 756 (HL); and see Re Chute’s Estate [1914] 1 IR 180; Bank of New Zealand v Development Finance Corp of New Zealand [1988] 1 NZLR 495 (CA) at 500 ff. Thus the subsequent mortgagee, who takes subject only to the overdraft at the time of the notice, will benefit by each repayment, to the detriment of the bank’s security. The bank may avoid the operation of the rule by closing the existing account and opening a new one for the receipt of future payments. A well-drawn security will reserve to the bank a contractual right to do this (prudent in view of Joachimson v Swiss Bank Corp [1921] 3 KB 110 (CA); also Rouse v Bradford Banking Co Ltd [1894] AC 586 (HL) at 596 per Lord Herschell LC). An example of such a provision is English Encyclopaedia of Forms and Precedents, 4th ed, Butterworths, London, vol 2, p 832, clause 8: [page 666]

8. The bank shall in the event of it receiving notice that the mortgagor has incumbered or disposed of the said property or any part thereof be entitled to close the then current account and to open a new account with the mortgagor and no money paid in or carried to the credit of the mortgagor in such new account shall be appropriated towards or have the effect of discharging any part of the amount due to the bank on the said closed account at the time when it received such notice as aforesaid.

In Philos Pty Ltd v National Bank of Australasia Ltd (1976) 5 BPR 97,409, it was held that the application of the rule in Clayton’s case, above, was avoided as it had been agreed that the bank would have priority over a subsequent mortgagee ‘having regard to the balance of the running account rather than by any analysis of debits and credits’. Similarly, and it may be relevant to the application of the rule in Clayton’s case, the terms of the mortgage must be considered to determine the extent and nature of the obligations secured: see Re Clark’s Refrigerated Transport Pty Ltd (in liq) [1982] VR 989; and see 3.8.

Torrens title land 25.16 It was held in Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293 that Hopkinson v Rolt (1861) 9 HLC 514; 11 ER 829 applied to Torrens title land: see also Network Finance Ltd v Deposit and Investment Co Ltd [1972] QWN 19; Philos Pty Ltd v National Bank of Australasia Ltd (1976) 5 BPR 97,409; Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd [1984] 2 NSWLR 128; Mercantile Credits Ltd v Australia and New Zealand Banking Group Ltd (1988) 48 SASR 407; Bank of New Zealand v Development Finance Corp of New Zealand [1988] 1 NZLR 495 (CA); and see Commonwealth Bank of Australia v Grubic (SC (SA), 27 August 1993, unreported, FC; noted (1993) 1 APLJ); R & I Bank of Western Australia Ltd v Cash Resources Australia Pty Ltd (1993) 11 WAR 536; Beachquest Pty Ltd v Interstate Mortgage and Investments Pty Ltd [2003] 2 Qd R 586; and Oversea-Chinese Banking Corp Ltd (OCBC) v Malaysian Kuwaiti Investment Co (MKIC) and Aljade [2003] VSC 495. The implication from these cases is that the whole of the doctrine of tacking is applicable to Torrens title land subject to the provisions of General Property Law legislation and Torrens system legislation and also subject to the applicability of the tacking rules to the Torrens system, in so far as they are the product of the general law system of the states and interests in land. The matter is fully considered in Chapter 4.

[page 667]

Chapter 26

Priority by Notice to Trustees A. The Rule in Dearle v Hall Priority by order of notice Origin of the rule Rule is independent of conduct Assignees who are not within the rule Effect of notice of prior encumbrance Bankruptcy of assignor Assignment of mortgage B. Property to which the Rule Applies Things in action Locality of fund Life policies Equitable interests in land Shares in companies C. Giving Notice To the legal holder of the fund Derivative settlements Trustee’s title Effect of notice to one trustee Effect of notice to all trustees

26.1 26.2 26.3 26.4 26.5 26.6 26.7 26.8 26.9 26.10 26.11 26.12 26.13 26.14 26.15 26.16 26.17

Form of notice Notice of assignment is notice of contents Custody of the notice Service of the notice Indorsement on trust instrument D. Funds in Court Stop orders Carrying share to new account Stop orders on same day Encumbrance and payment in Bankruptcy of beneficiary

26.18 26.19 26.20 26.21 26.22 26.23 26.24 26.25 26.26 26.27

[page 668]

A. The Rule in Dearle v Hall Priority by order of notice 26.1 Where property is held by a trustee, or other person having the legal control of property, dispositions by the beneficial owner rank in the order in which notice of the disposition is given to the trustees. This is known as the rule in Dearle v Hall (1828) 3 Russ 1; [1824–34] All ER Rep 28. For a consideration of this case and Warner Bros Records Inc v Rollgreen Ltd [1976] QB 430; [1975] 2 All ER 105 (CA), see (1975) 39 Conv (NS) 261 (Kloss) and Jordan, ‘Equity’ (in Jordan, Select Legal Papers, 6th ed, Legal Books Pty Ltd, 1983, pp 61–2); and see Meagher, Gummow and Lehane’s, Equity: Doctrines and Remedies, 4th ed, LexisNexis Butterworths, Sydney, 2002, [8-095]ff. The burden of showing absence of notice is on those who claim against an earlier security: Re Stevens; Ex parte Stevens (1834) 4 Deac & Ch 117. The rule in Dearle v Hall has no application where in fact the assignor has no beneficial interest he can effectively assign: see B S Lyle Ltd v Rosher [1959] 1WLR 8; [1958] 3 All ER 597. The rule is of limited

application and will not be extended: see Jordan, Select Legal Papers, p 62. Thus, if a bona fide encumbrancer upon a thing in action or other property to which the rule applies (for property to which this rule applies, see 26.8; on tracing and book debts, see (1980) 96 LQR 90 (McLauchlan)) gives notice of his own charge to the person who has control of the property, the encumbrancer will generally be preferred (whether he claims under the mortgagor or under his personal representative: Re Freshfield’s Trusts (1879) 11 Ch D 198; Montefiore v Guedalla [1903] 2 Ch 26) to an earlier claimant who has given a later or no notice (Dearle v Hall, above; Meux v Bell (1841) 1 Hare 73; 66 ER 955; Ward v Duncombe [1893] AC 369 (HL); Re Dallas [1904] 2 Ch 385 (CA)), unless — under the former law — the holder of the property had in some way other than by formal notice acquired notice of the earlier claim: Lloyd v Banks (1868) 3 Ch App 488; Spencer v Clarke (1878) 9 Ch D 137; Saffron Walden Building Society v Rayner (1880) 14 Ch D 406. If notice of two or more assignments is received by the trustees on the same day, the assignments rank in order of their dates: Boss v Hopkinson (1870) 18 WR 725; see also Re De Groot [2001] 2 Qd R 359 where Muir J preferred this position, but found it unnecessary to decide. If notice is delivered at business premises after business hours, it is treated as having been given at the time at which in the ordinary course of business, it would be opened and read, that is, on the following day: Re Dallas [1904] 2 Ch 385 at 395. If two assignees rank equally in point of time, they share the fund rateably: Re Metropolitan Railway Co; Re Tower Hill Extension Act; Re Rawlins’ Estate; Ex parte Kent (1871) 19 WR 596. The rule applies to dispositions generally, save that a mere declaration of trust made by the beneficiary need not be notified, for this leaves the interest still in his hands, and the sub-beneficiary can assert his right only through him: Hill v Peters [1918] 2 Ch 273. Where a mortgage is made to cover further advances, and notice of this mortgage has been given to the trustees, further advances probably need not be notified — but a further advance should not be made without inquiring of the trustees whether notice of a subsequent encumbrance has been received: Calisher v Forbes (1871) 7 Ch App 109; Re Weniger’s Policy [1910] 2 Ch 291; see West v Williams [1899] 1 Ch 132 (CA). Perhaps Law of Property Act 1925 (UK) s 94 is confined to land, but this is not clear: see subs (4). The

provisions of Property Law Act 1958 (Vic) s 94(4) clearly confine its provisions to mortgages of land (but note the broad definition of ‘land’ contained in s 18(1) of that Act). Where the mortgage does not cover further advances, notice of any further charge must be given to the trustees: Re Weniger’s Policy [1910] 2 Ch 291 at 296. [page 669] Where the security is on an interest in a trust fund, part of which is in court, and part in the hands of the trustees, the assignee should obtain a stop order as regards the fund in court, and give notice to the trustees as to the funds in their hands, or obtain a stop notice (Mutual Life Assurance Society v Langley (1886) 32 Ch D 460 (CA)); as to stop orders on funds in court, see 26.22.

Origin of the rule 26.2 The rule, when first introduced, was based on the analogy of the order and disposition clause in bankruptcy (see Ryall v Rowles (1750) 1 Ves Sen 348; 27 ER 1074; 9 Bli NS 337, upon which the judgment of Plumer MR in Dearle v Hall was largely founded, and Re Wyatt; White v Ellis [1892] 1 Ch 188 at 209 (CA)), which, under the bankruptcy law then in force, applied to things in action generally. ‘The legal holders’, it was said by Plumer MR, ‘are converted into trustees for the new purchaser, and are charged with responsibility towards him; and the cestui que trust is deprived of the power of carrying the same security repeatedly into the market, and of inducing third persons to advance money on it under the erroneous belief that it continues to belong to him absolutely, free from encumbrance, and that the trustees are still trustees for him, and for no-one else’. Lord Chancellor Lyndhurst said, ‘The act of giving the trustee notice is, in a certain degree, taking possession of the fund; it is going as far towards equitable possession as it is possible to go; for, after notice is given, the trustee of the fund becomes a trustee for the assignee who has given him notice’: Dearle v Hall (1827) 3 Russ 48 at 58–9 (and see (1823) 3 Russ 1 for

the trial before Plummer MR.) In Ward v Duncombe [1893] AC 369, Lord Macnaghten took exception to the statement that notice ‘converts’ the trustees of the fund into a trustee for the person who gives the notice: ‘The trustee of the fund is trustee for the persons entitled to the fund, whether he knows their names or not. The notice, no doubt, places him under a direct responsibility to the person who gives the notice … but before notice is given he is just as much a trustee for the persons rightfully entitled as he is after he receives the notice.’ It has been pointed out that, in many of the subsequent cases, the facts have not been as clear or as simple as those of the leading cases, and it has become necessary to ascertain the principles on which the rule is based. In some cases, the giving of notice in respect of a chose in action has been likened to the delivery of a chose in possession. In others, courts have emphasised the necessity of preventing frauds by beneficiaries who create successive encumbrances without disclosing the earlier ones. It is said, however, that the real foundation of the judgment of Plumer MR lay in the duty of the assignee to do all that he could to obtain the possession of the subject matter of the assignment. ‘He must do that which is tantamount to obtaining possession by placing every person who has an equitable or legal interest in the matter under an obligation to treat it as his property’: Dearle v Hall (1828) 3 Russ 1 at 23; [1824–34] All ER Rep 28 at 36. For a full account (from which the above paragraph is taken) of the development of the rule, see (1895) LQR 337 ff (Firth). The importance of the matter lay in the avoidance of the application of the rule that assignments of equitable interests rank in order of time (see 24.25), and this was done by treating the omission of the first assignee to give notice, so leaving the assignor free to deal with the property over again — enabling him to gain a ‘false and delusive credit’ — as negligence sufficient to postpone him (Dearle v Hall, above (Russ at 22; All ER Rep at 36)), and Lord Herschell said in Ward v Duncombe [1893] AC 369 at 378 that the leading consideration in Dearle v Hall for laying down the rule that he who gives notice has a better equitable right than a prior encumbrancer who has given no notice was that [page 670]

any other decision would facilitate fraud by the cestui que trust and cause loss to those who might have used every precaution before parting with their money. It is only, however, as a protection against subsequent assignments that notice perfects the security. As between mortgagor and mortgagee the security is complete without notice: Ward v Duncombe [1893] AC 369 at 392; Gorringe v Irwell India Rubber and Gutta Percha Works (1886) 34 Ch D 128 (CA); Thomas v National Australia Bank Ltd [2000] 2 Qd R 448; Alma Hill Constructions Pty Ltd v Onal (2007) 16 VR 190.

Rule is independent of conduct 26.3 While in its inception the rule was an application of the general principle that a prior encumbrancer may be postponed to a subsequent encumbrancer on the ground of negligence, and was based on the consideration that, by the omission to give notice, the subsequent encumbrancer was misled, it has now ceased to depend upon the conduct of the encumbrancers, or on the subsequent encumbrancer’s being in fact misled, and has become an absolute rule that, as between equitable encumbrancers, priority depends solely on notice: Ward v Duncombe [1893] AC 369 at 391; Re Dallas [1904] 2 Ch 385 at 414 (CA); see Lloyds Bank v Pearson [1901] 1 Ch 865 at 872–3. It is therefore immaterial that the subsequent encumbrancer made no inquiry of the trustee before taking the security (Meux v Bell (1841) 1 Hare 73 at 84–6; 66 ER 955 at 959–60; Re Brown’s Trusts (1867) LR 5 Eq 88 at 89); or that the earlier encumbrancer was prevented from giving notice, because he was not aware of the assignment to himself (Re Lake; Ex parte Cavendish [1903] 1 KB 151); or that the security was such that notice could not effectually be given (English and Scottish Mercantile Investment Trust Ltd v Brunton [1892] 2 QB 1 at 8); of course, it makes no difference that the earlier encumbrancer has agreed not to give notice (ibid); or that at the date of the earlier assignment there was no trustee to whom notice could be given: Re Dallas [1904] 2 Ch 385 at 397, 415, 417–18.

Assignees who are not within the rule 26.4

The rule does not apply to a statutory assignee, since he cannot have

been misled by the absence of notice: Re Anderson; Ex parte New Zealand Official Assignee [1911] 1 KB 896. Hence a trustee in bankruptcy (now the Official Trustee in Bankruptcy: see Bankruptcy Act 1966 (Cth) s 5(1)) cannot, by giving notice, obtain priority over a mortgage made before the bankruptcy (Re Wallis; Ex parte Jenks [1902] 1 KB 719) but the trustee should give notice in order to perfect his title, and if the trustee does so, he will have priority over a subsequent assignee from the bankrupt: Mercer v Vans Colina [1900] 1 QB 130n; Re Beall; Ex parte Official Receiver [1899] 1 QB 688. Otherwise the trustee will be postponed to a subsequent assignee for value without notice of the bankruptcy, who gives notice or obtains a stop order, for example Palmer v Locke (1881) 18 Ch D 381. The trustee takes the property subject to all equities to which it would be liable in the hands of the bankrupt: Re Atkinson (1852) 2 De GM & G 140; 42 ER 824; see Re Garrud; Ex parte Newitt (1881) 16 Ch D 522. Generally, the rule does not apply in favour of persons who are not allowed to put themselves in a better position than the assignor, such as a voluntary assignee (West v Williams [1899] 1 Ch 132 (CA)), or a judgment creditor who has obtained a charging order (Scott v Lord Hastings (1858) 4 K & J 633; 70 ER 263; and United Bank of Kuwait Plc v Sahib [1995] 2 All ER 973; [1995] 2 WLR 94), or a garnishee order (Re Marquis of Anglesey; De Galve v Gardner [1903] 2 Ch 727 at 732), or equitable execution by the appointment of a receiver: Arden v Arden (1885) 29 Ch D 702; Re Marquis of Anglesey, above.

Effect of notice of prior encumbrance 26.5 The subsequent assignee cannot gain priority by giving notice to the trustees if, at the time when that assignee took the security, he had notice of the first assignment (Re Holmes (1885) 29 Ch D 786); but if the assignee had no notice at that time, receiving [page 671] notice afterwards does not prevent him from obtaining priority by serving notice before the first assignee does so. Indeed, it is in just this situation that an encumbrancer would be moved to gain priority by giving notice: Mutual

Life Assurance Society v Langley (1886) 32 Ch D 460 (CA).

Bankruptcy of assignor 26.6 The effect of the creation of an encumbrance by the bankrupt in respect of after-acquired property is governed by Bankruptcy Act 1966 (Cth) s 126, which is a recognition and extension of the rule in Cohen v Mitchell (1890) 25 QBD 262 (CA); and see Hunt v Fripp [1898] 1 Ch 675; Re Behrend’s Trust; Surman v Biddell [1911] 1 Ch 687. Before its extension by statute the rule was held not to apply to real estate: Re New Land Development Association and Gray [1892] 2 Ch 138; Official Receiver v Cooke [1906] 2 Ch 661. Concisely stated, the rule in Cohen v Mitchell was: ‘… where a bankrupt who had not obtained his discharge, entered into transactions in respect of property acquired by him after his bankruptcy then, until the trustee intervened, all such transactions with any person dealing with the bankrupt bona fide and, for value, and whether with or without knowledge of the bankruptcy (cf Re Bennett; Ex parte Official Receiver [1907] 1 KB 149) were valid against the trustee’: Gronow and McQuade, Australian Bankruptcy Law and Practice, 6th ed, Lawbook Co, Sydney, 2008–, [126.1.10]. Sufficient intervention by the trustee in the case of a chose in action is the giving of notice to the debtor, and priority is determined according to the time such notice was given: Mercer v Vans Colina [1900] 1 QB 130 (n2); Re Beall; Ex parte The Official Receiver [1899] 1 QB 688.

Assignment of mortgage 26.7 It is not necessary in order to complete the title of an assignee of a mortgage, or of a sub-mortgage, either of land or personal estate, to give notice to the original mortgagor of the assignment of the mortgage debt; because the debt is incident to the property which forms the security, and which cannot be taken from the assignee without payment (Jones v Gibbons (1804) 9 Ves 407; 32 ER 659; see Re Reay; Ex parte Barnett (1845) De G 194), but so long as the original mortgagor has no notice of the assignment, payments on account of the debt to the original mortgagee will discharge the original mortgagor: Re Lord Southampton’s Estate; Allen v Lord Southampton (1880) 16 Ch D 178.

B. Property to which the Rule Applies Things in action 26.8 The application of the rule in Dearle v Hall (1828) 3 Russ 1; [1824– 34] All ER Rep 28 was extended in England by Law of Property Act 1925 s 137 to equitable interests in land and capital money (with regard to dispositions made after 31 December 1925); but apart from the statutory provisions the rule is confined to things in action, including equitable interests in personalty, and to such interests in real or leasehold estate as can only reach the hands of the beneficiary or assignee in the form of money: see Ward v Duncombe [1893] AC 369; and see [1993] Conv 22 (Howell). No Australian state or territory has any equivalent of this English statutory provision (s 137) applying the rule to land, so the rule remains confined in these jurisdictions: see Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, [8-100]; and see Jordan, Select Legal Papers, p 62. Moreover, where the assignor of a chattel has not the legal right in it, or from other circumstances cannot deliver possession, the assignee must protect himself against subsequent assignees by giving such notice as goes as far as possible towards taking possession. Otherwise the subsequent assignee, by obtaining possession, will have priority: Daniel v Russell (1807) 14 Ves 393; 33 ER 572; cf Sykes and Walker, The Law of [page 672] Securities, 5th ed, Law Book Co, Sydney, 1993, p 803, where it is suggested that the rule applies to all equitable interests whether in real or personal property which can reach the hands of the beneficiary or assignor only in the form of money, as well as to all types of choses in action. The rule does not apply where the security consists of a bill of exchange, promissory note payable to order, or other negotiable instrument (as to the effect on title where instruments are ‘negotiable’, see London Joint Stock Bank v Simmons [1892] AC 201), whether indorsed or not by the debtor: Re Gibbs; Ex parte Price (1844) 3 Mont D & De G 586. The encumbrancer may have an equity to have the security indorsed by the debtor or his assignees

(Re Gibbs; Ex parte Price), but the debtor may ignore a notice given by the assignee of the consideration for the note or bill if the assignor is still the holder of the instrument itself: Bench v Shearman [1898] 2 Ch 582. Nor does it apply to shares in a company which is precluded by its constitution from receiving notices of trusts: Société Générale de Paris v Walker (1885) 11 App Cas 20.

Locality of fund 26.9 The rule applies where the legal holder of the fund is within the jurisdiction. Thus it applies to all dealings in English trust funds settled by English trust instruments, the trustees of which are in England, although the assignor is domiciled abroad, and even though, according to his lex domicilii, notice to trustees is unnecessary: Kelly v Selwyn [1905] 2 Ch 117; which applies to the Australian states and New Zealand on the basis that ‘England’ or ‘English’ is a reference to the appropriate jurisdiction. In the case of debts, the debtor is the person to whom notice must be given, and, if the debtor is domiciled in England (or in Australia or New Zealand — see above), the rule applies. If the debtor is domiciled abroad, priority is determined by the law of the debtor’s domicile, and not by the law of the domicile of either mortgagor or mortgagee: Re Queensland Mercantile and Agency Co; Ex parte Australasian Investment Co; Ex parte Union Bank of Australia [1892] 1 Ch 219; Republic of Guatemala v Nunez (1926) 42 TLR 625, affirmed [1927] 1 KB 669; see Davies, Bell and Brereton, Nygh’s Conflict of Laws in Australia, 8th ed, LexisNexis Butterworths, Chatswood, NSW, 2010, Ch 33; Collins, Morse, McClean and Briggs et al, Dicey, Morris and Collins — The Conflict of Laws, 15th ed, Sweet & Maxwell, London, 2012, vol 2, Ch 24.

Life policies 26.10 As to mortgages of policies of life insurance and their respective priorities, see 6.15.

Equitable interests in land 26.11 In accordance with the principle that the rule applies to interests in land which can only reach the beneficiary in the form of money, it applies to

a sum of money raisable by way of portion out of land (Re Hughes’Trusts (1864) 2 Hem & M 89; 71 ER 394, and see Malcolm v Charlesworth (1836) 1 Keen 63; 48 ER 230); and it applies to interests in the proceeds of land which is subject to an imperative trust for sale, whether present (Re Wyatt; White v Ellis [1892] 1 Ch 188 at 195; on appeal, Ward v Duncombe [1893] AC 369 at 390 (HL); Lloyds Bank v Pearson [1901] 1 Ch 865; Gresham Life Assurance Society v Crowther [1915] 1 Ch 214) or future: Lee v Hewlett (1856) 2 K & J 531; 69 ER 893; Arden v Arden (1885) 29 Ch D 702. The rule does not apply to equitable interests in real property (Jones v Jones (1838) 8 Sim 633; 59 ER 251; Wilmot v Pike (1845) 5 Hare 14; 67 ER 808; Rooper v Harrison (1855) 2 K & J 86 at 103; 69 ER 704 at 711; Re Richards; Humber v Richards (1890) 45 Ch D 589; Ward v Duncombe [1893] AC 369 at 390) or in leasehold property (Wiltshire v Rabbits (1844) 14 Sim 76; 60 ER 285; Union Bank of London v Kent (1888) [page 673] 39 Ch D 238), and priority cannot be obtained by giving notice to the holder of the legal estate (Jones v Jones, above; see Taylor v London and County Banking Co [1901] 2 Ch 231 at 254–5), or, where the legal mortgagee has created successive sub-mortgages, by giving notice to the mortgagor: Hopkins v Hemsworth [1898] 2 Ch 347; see Re Richards, above. Whether the rule applies to moneys subject to a trust for investment in land, or to capital moneys arising under the settled land legislation, is not clear. Since, however, land subject to a trust for sale is treated for this purpose as land, money subject to be invested in the purchase of land should be treated as land: so held in Re Carew’s Estate (1868) 16 WR 1077; cf Re Sandes’ Trusts [1920] 1 IR 342. Generally, see Jordan, Select Legal Papers, p 62.

Shares in companies 26.12 Where the security consists of shares in a public company or undertaking, if the security is made by the directors and secretary for the purposes of the company, no further notice will be necessary: Re Shelley; Ex

parte Stewart (1864) 4 De GJ & Sm 543; 46 ER 1029. If the mortgage is made by a shareholder to a third party, companies (such as banking companies) governed by the Companies Clauses Consolidation Act 1845 (UK) are not bound to recognise equities at all. As regards companies registered under the Companies Act under Companies Act 1985 (UK) s 360, no notice of a trust is to be entered in the company’s register, but if directors know of circumstances showing that a transfer is fraudulent, they may be personally liable: Société Générale de Paris v Tramways Union Co (1884) 14 QBD 424 (CA), affirmed without reference to this point, sub nom Société Générale de Paris v Walker (1885) 11 App Cas 20 (HL). However, even though notice given to the company does not affect the priority of equitable claims in respect of registered shares, such a notice is not inoperative for all purposes, and the receipt of notice by a company of a charge upon some of its shares will prevent the company from availing itself, as against those shares, of any lien under its articles of association for a debt to the company incurred subsequently to its receipt of the notice: Bradford Banking Co v Briggs & Co (1886) 12 App Cas 29 (HL) applying the principle of Hopkinson v Rolt (1861) 9 HL Cas 514; 11 ER 829; see Peat v Clayton [1906] 1 Ch 659; Champagne Perrier-Jouet SA v H H Finch Ltd [1982] 3 All ER 713; [1982] WLR 1359; and see 6.17. A similar position is achieved under current Australian Companies legislation. Corporations Act 2001 (Cth) s 1072E(10) provides, subject to some limited exceptions, that no notice of trust is to be entered on a register — but that even where the exceptions apply (and they are contained in ss 169 and 1072E), the company is not affected by any notice of a trust: see s 1072E(10)(c). It follows that where several persons claim shares registered in the name of another the first in time has priority unless he is postponed by his conduct in relation to the share certificate: see Moore v North-Western Bank [1891] 2 Ch 599; and see Cash Resources Australia Pty Ltd v BT Securities Ltd [1990] VR 576; Linter Group Ltd v Goldberg (1992) 7 ACSR 580. It would seem that the possession by the mortgagee of the share certificates is sufficient to preserve that mortgagee’s priority as against subsequent encumbrancers: Colonial Bank v Whinney (1886) 11 App Cas 426. Generally, see Jordan, Select Legal Papers, p 62.

[page 674]

C. Giving Notice To the legal holder of the fund 26.13 Notice must be given to the person having the legal interest in or control over the property which is the subject of the security. If there are prior encumbrances, notice to a prior mortgagee only affects priorities in that it prevents a prior mortgagee from tacking a further advance: Re Weniger’s Policy [1910] 2 Ch 291. Usually this is a personal representative or trustee. In the case of a debt, or of other property depending on an obligation to pay money, such as a policy of insurance, it is the debtor or person under obligation: Gardner v Lachlan (1838) 4 My & Cr 129; 41 ER 51; as to a policy of insurance, see 7.12. If the debt is due from a company in liquidation notice should be given to the liquidator: Re Breech-Loading Armoury Co; Wragge’s Case (1868) LR 5 Eq 284. In the case of a legacy, notice must be given to the executor (see Re Dallas [1904] 2 Ch 385 (CA)) but it would seem that notice to an executor who renounces is ineffective: Re Wasdale; Brittin v Partridge [1899] 1 Ch 163. If the legacy is a trust legacy, then, after assent by the executor in favour of the trustees, notice must be given to the trustees. If the subject of the legacy is held by trustees under a prior instrument, and an assignment is made before assent, notice must be given to the executor. When the assent is given, notice of the assent and of the assignment should be given to the trustees of the prior instrument; but if the assignment is made after assent, notice should be given to the trustees of the prior instrument, and not to the executor: Holt v Dewell (1845) 4 Hare 446; 67 ER 723. Generally, see Jordan, Select Legal Papers, pp 62–3.

Derivative settlements 26.14 Where notice is given to a trustee, this must be the trustee who is immediately responsible to the assignor. Thus in the case of a security on an interest under a derivative settlement, the notice should be given to the trustees of that settlement, and not to the trustees of the original settlement,

notwithstanding that the fund is still vested in them. The trustees of the derivative settlement are bound in due course to get in the fund, and it is to them that the assignee will look for payment. In other words, there is no priority between assignees of interests under the derivative settlement and the trustees of the original settlement: Stephens v Green [1895] 2 Ch 148 (CA); in accordance with Holt v Dewell (1845) 4 Hare 446; 67 ER 723.

Trustee’s title 26.15 In order that the notice may be effectual, the person to whom it is given must at the time be trustee for the assignor: Dearle v Hall (1828) 3 Russ 1 at 58; 38 ER 475 at 494; Meux v Bell (1841) 1 Hare 73 at 87; 66 ER 955 at 960; Ward v Duncombe [1893] AC 369 at 387, 389, 392 (HL); Stephens v Green [1895] 2 Ch 148 at 158 (CA); Re Dallas [1904] 2 Ch 385 (CA). This requires: 1.

That the person to whom notice is given shall be a duly constituted trustee: see Webster v Webster (1862) 31 Beav 393; 54 ER 1191. Thus, notice to an administrator is ineffectual unless the administrator has obtained a grant of administration; and so, it seems, is notice to an executor who afterwards renounces without having acted, or to a trustee who disclaims: Re Dallas; Re Kinahan’s Trusts [1907] 1 IR 321.

2.

There must be under the trustee’s control property in which the assignor has an actual interest, that is, the fund must be in the hands of the holder on behalf of the assignor, and priority will follow the dates of the notices after it is in that person’s hands. Thus in a series of Army cases it was held that notice to an Army agent of an assignment by an officer of money payable to him on retirement was only effective if [page 675] at the time the agent had in his hands money either credited to the officer, or at least specifically available for him (Somerset v Cox (1864) 33 Beav 634; 55 ER 514; Yates v Cox (1868) 17 WR 20; Boss v Hopkinson (1870) 18 WR 725; Addison v Cox (1872) LR 8 Ch App 76; Addison v Cox (1874) 30 LT 253); or, perhaps, only if given after the

retirement had been gazetted: Earl of Suffolk and Berkshire v Cox (1867) 36 LJ Ch 591; Johnstone v Cox (1881) 19 Ch D 17. As to these cases, see Re Dallas, above. Where there were two sets of trustees, one of an annuity, and the other of a term by which the annuity was secured, notice of a prior encumbrance to one of the trustees of the annuity was held binding, although the trustees of the term had no notice: Wise v Wise (1845) 2 Jo & Lat 403. The fact, however, that at the time of the several assignments there was no trust fund and no trustee in existence does not prevent the rule in Dearle v Hall from applying, and priorities will be regulated in accordance with notices given after the fund has come into existence, and there is a person who has legal control over it (Re Dallas, above), and it was the same where, the assignor being the sole trustee, no effective notice could be given: [1904] 2 Ch at 401–2; see Phipps v Lovegrove (1873) LR 16 Eq 80; see also 26.18. However, where notices have only been given before this time, the order in date of the encumbrances prevails: Buller v Plunkett (1860) 1 John & H 441; 70 ER 819. The rule has been applied to an attachment in the Mayor’s Court, London, against a fund before it has reached the trustee’s hands: Webster v Webster (1862) 31 Beav 393; 54 ER 1191. It has been held, however, that if, before his appointment, a trustee had acquired knowledge of an encumbrance, and if this continued to operate on his mind after his appointment, it would protect the priority of the encumbrance against a subsequent encumbrance of which notice was given after his appointment (Ipswich Permanent Money Club Ltd v Arthy [1920] 2 Ch 257), and if this were correct a formal notice given to a trustee before appointment would be good on his appointment. The present requirement in England of written notice to the trustees (Law of Property Act 1925 (UK) s 137, which does not have any Australian equivalents: see 26.8) appears to imply that in England it must be given after they have been appointed.

Effect of notice to one trustee 26.16 It is the result of the rule in Dearle v Hall that an intending mortgagee can protect himself by inquiring of the trustees whether they have received notice of any previous encumbrances. It has been said to be his duty to make inquiry (Smith v Smith (1833) 2 Cr & M 231; 149 ER 745; Willes v Greenhill (1861) 4 De GF & J 147 at 150; 45 ER 1139 at 1140); but this only

means that the encumbrancer cannot complain of being postponed if he omits to make this inquiry. The trustee is not bound to answer (Re Wyatt; White v Ellis [1892] 1 Ch 188), and if the trustee refuses to do so, the intending mortgagee proceeds at his peril. If, however, the trustee does answer, he must answer correctly; otherwise the trustee will be liable to indemnify the mortgagee (Low v Bouverie [1891] 3 Ch 82 (CA)); unless, indeed, the answer has been obtained by the concealment by the inquiring party of a material fact, for example that he had already applied to the trustees’ solicitors who were considering what advice they should give: Porter v Moore [1904] 2 Ch 367. The intending mortgagee has not exhausted the means of inquiry until he has inquired of all the trustees, and hence notice to any one of them is sufficient to satisfy the rule and secure priority for the mortgagee giving the notice: Smith v Smith; Meux v Bell (1841) 1 Hare 73; 66 ER 955. If, however, the one trustee who has had notice is dead when the mortgagor negotiates a second loan, there is no chance now of making effective inquiry, the fund is once more at the disposition of the mortgagor, and a subsequent mortgagee who gives notice to the surviving trustees obtains priority: Timson v Ramsbottom (1837) 2 Keen 35; 48 ER 541. [page 676] In Ward v Duncombe [1893] AC 369, this was accepted as correct by Lord Herschell, but Lord Macnaghten was inclined to allow more weight to the fact that the rule had been complied with, and less to the continuing effect of the notice on the apparent control of the mortgagor. ‘It may be’, he said at 395, ‘that when an assignee or mortgagee has once discharged that duty [of giving notice] he has done all that the rule requires of him … and that he is not, on a change of trustees, to be deprived of his pre-existing equitable title by the diligence or by the happy thought of a subsequent encumbrancer’. In Ward v Duncombe it was not necessary to decide this point. Notice of an assignment had been given to one of two trustees, A. During his life, notice of a second assignment was given to both trustees. It was held that the subsequent death of A did not deprive the first assignees of the priority they had already acquired over the second assignees in his lifetime, but the

doctrine of Timson v Ramsbottom, above, was followed in Re Phillips’ Trusts [1903] 1 Ch 183, and an assignee after the death of A, who gave notice to the existing trustees, had priority over the assignee who gave notice to A alone, since the effect of his notice had ceased on A’s death: see also the statement of the law by Byrne J in Freeman v Laing [1899] 2 Ch 355 at 359.

Effect of notice to all trustees 26.17 On the other hand, where the mortgagee has given notice to all the trustees, the mortgagee has done all that is required to secure priority. The mortgagee is not bound to watch for changes in the trusteeship and give fresh notices from time to time; and he is entitled to priority over a subsequent assignee who has taken an assignment after the death or retirement of all the first trustees, and who gives notice to the new trustees: Re Wasdale; Brittin v Partridge [1899] 1 Ch 163. Similarly, if an assignee gives notice to all the trustees and the fund is afterwards paid into court, he has priority over a subsequent assignee who takes his assignment without notice of the prior assignment after the payment into court and obtains a stop order: Livesey v Harding (1856) 23 Beav 141; 53 ER 55; Re Marquis of Anglesey; De Galve v Gardner [1903] 2 Ch 727 at 732. The doctrine that notice given to one of several trustees secures priority only while he is living leads to complications if there are successive encumbrancers (A, B and C) and, there being two trustees (X and Y), A gives notice to X only; B gives notice to X and Y; and C, taking his security after the death of X, gives notice to Y. Thus, while A by reason of giving notice to X ranks before B, and B by reason of his notice to Y, ranks before C, yet C ranks before A because A’s notice as against C is exhausted by the death of X. The solution of the difficulty is, it seems, to be found by subrogating C to A to the extent of A’s charge; then comes B, his position not being disturbed; then C takes the balance, if any, of his charge; and A comes last: Re Wyatt; White v Ellis [1892] 1 Ch 188 at 209; see Benham v Keane (1861) 1 John & H 685; 70 ER 919; argument in Taylor v London and County Banking Co [1901] 2 Ch 231 at 244; Re Weniger’s Policy [1910] 2 Ch 291 at 296. So, where, for any reason, out of securities in the above order, B has priority over A, and C over B, but as between A and C, A retains priority; if

the fund available is not more than B’s security will exhaust, it will be paid first to C, to the extent of the debt for which he has priority over B, and the balance to B, but it seems that if the fund is more than enough for B all further sums received by C will be for the benefit of A: Benham v Keane (1861) 1 John & H 685; 70 ER 919, affirmed (1861) 3 De GF & J 318; 45 ER 901; Re Lord Kensington; Bacon v Ford (1885) 29 Ch D 527.

Form of notice 26.18 Notice for the purpose of the rule in Dearle v Hall is not required to be a written or a formal notice (Selkrig v Davies (1814) 2 Dow 230; 3 ER 848), but in order to give [page 677] priority it was necessary to show that the trustee had such knowledge of the transaction, however acquired, as an ordinary business person would act upon: Lloyd v Banks (1868) 3 Ch App 488; Re Worcester; Ex parte Agra Bank (1868) 3 Ch App 555 at 559; Re Dallas [1904] 2 Ch 385 at 399 (CA). But it was not correct to say that encumbrances ranked not in the order of notices given by the encumbrancers, but of accidental knowledge obtained by the trustee: Arden v Arden (1885) 29 Ch D 702 at 708. Hence, while a statement to a trustee in casual conversation was insufficient (Browne v Savage (1859) 4 Drew 635; 62 ER 244; Re Tichener (1865) 35 Beav 317; 55 ER 918), oral notice was effectual (Re Tichener), provided it was brought clearly to the mind of the trustee: Saffron Walden Second Benefit Building Society v Rayner (1880) 14 Ch D 406 (CA). On this principle, if the assignee is one of the trustees, the knowledge which he has of his own security gives the assignee priority over subsequent assignments made during his life: Brown v Savage, above. It followed that if, before the fund came to the hands of the trustee, encumbrances were created in favour of A and then of the trustee, A could not secure priority. For notice by A would not operate until the trustee received the fund, and when this happened, the notice of the trustee’s own security would attach and would give the trustee priority (Somerset v Cox (1864) 33 Beav 634; 55 ER 514;

Roxburghe v Cox (1881) 17 Ch D 520; see Re Goddard; Hooker v Buckley (1912) 57 Sol Jo 42 (CA)), but notice, though ineffectual to give priority over the trustee’s existing charge, prevented the trustee from acquiring any new charge or right of set-off, and the trustee was, from that time, bound to withhold all further payments on the account of the mortgagor, unless made with the mortgagee’s consent: Stephens v Venables (1862) 30 Beav 625; 54 ER 1032; Re Pain; Gustavson v Haviland [1919] 1 Ch 38. Apart from the question of notice, the priority of the holder of the fund extends not only to actual charges, but to all rights of lien, set-off, and other equities existing between him, or the estate out of which the fund is payable, and the person entitled to the fund subject to the encumbrances: Webster v Webster (1862) 31 Beav 393; 54 ER 1191; Stephens v Venables, above; Roxburghe v Cox, above; see Willes v Greenhill (1860) 29 Beav 376 (No 1); 387 (No 2); on appeal (1861) 4 De GF & J 147. However, if the assignor is a trustee, the knowledge which the assignor has of the security does not operate as notice to him, whether the assignor is one of several trustees (Browne v Savage (1859) 4 Drew 635 at 640; 62 ER 244 at 245; Lloyds Bank v Pearson [1901] 1 Ch 865) or sole trustee: Re Dallas [1904] 2 Ch 385 at 401–2 (CA). Thus, where the assignor was sole trustee, no effectual notice could be given (Phipps v Lovegrove (1873) LR 16 Eq 80); and where the assignor was one of several trustees, it was a question whether notice to him and the other trustees would be a good notice to all the existing trustees so as to survive changes in the trusteeship: see Willes v Greenhill, above; and see Jordan, Select Legal Papers, pp 62–3. In England, in respect of notices after 1925, these questions cannot arise since the notice is inoperative unless in writing: see Law of Property Act 1925 s 137(3); and see Smith v The Owners of the Steamship ‘Zigurds’ [1934] AC 209.

Notice of assignment is notice of contents 26.19 As a general rule, trustees to whom notice of an assignment is given have notice of all the contents of the deed. Thus, notice of a general charge by the deed is sufficient, and the trustees and subsequent assignees must satisfy themselves as to the extent of the charge (Re Bright’s Trusts (1856) 21 Beav 430 at 434; 52 ER 925 at 927), but it is different if, with the notice of the deed, a statement of its contents is given which is erroneous or

incomplete. Thus, if the deed comprises two funds held under one settlement, and the notice specifies only one fund as being affected, there is not a sufficient notice as to the [page 678] other fund (Re Bright’s Trusts; Mutual Life Assurance Society v Langley (1886) 32 Ch D 460 at 474 (CA)); and similarly, if the notice states that only sum A is charged on the assignor’s interest, while sum B is also charged, the notice is only effective as to sum A, unless the charge of sum B is merely ancillary: Re Bright’s Trusts.

Custody of the notice 26.20 In order to ensure that information as to notices received by the trustees shall always be available for intending mortgagees, the trustees on parting with the trust fund to a new trustee should inform the new trustee of such notices: Re Booth’s Settlement (1853) 1 WR 444. Conversely, it would seem that the new trustee ought to inquire of the old trustees as to notices received, but no such obligation appears to have been judicially recognised (Phipps v Lovegrove (1873) LR 16 Eq 80); and it is not the practice of the court on appointing new trustees to make such inquiry: Phipps v Lovegrove.

Service of the notice 26.21 The notice must be given to the trustees personally or to an agent expressly or impliedly authorised to receive it on their behalf. Unless their solicitor has such authority, notice to him is not effectual: Saffron Walden Second Benefit Building Society v Rayner (1880) 14 Ch D 406 (CA); Arden v Arden (1885) 29 Ch D 702 at 709. A notice served on an agent so authorised will be binding, though the agent, in compliance with the direction of his principal, has not forwarded the notice to the principal: Re Hennessey (1842) 2 Dr & War 555. As to notice to an agent who, as assignor, has an interest in withholding communication of it, see 24.22; and as to notice to a company through an interested officer, see Re Hennessey; Re Sketchley; Ex parte Boulton (1857) 1 De G & J 163; 44 ER 685; and cf Bartlett v Bartlett (1857) 1 De G & J 127; 44 ER 671. Where it is necessary to give notice to a

company or association it makes no difference that they have no rules or provisions applicable to the receipt of such notices (Williams v Thorp (1828) 2 Sim 257; 57 ER 785); or that they do not require notices to be given of assignment: Re Loosemore; Ex parte Patch (1843) 12 LJ Bcy 44. The holder of, or other person having any control over, the property concerning which the notice is given, is bound to accept the notice (see Williams v Thorp; see also Re Hennessey); and if that person disregards it and parts with the fund, he may be compelled to make it good to the person entitled, but he is not bound to inform the giver of the notice, that he himself has a charge upon the fund: Re Lewer; Ex parte Wilkes (1876) 4 Ch D 101.

Indorsement on trust instrument 26.22 In cases where there is difficulty in giving notice of an assignment, the object of the notice may be attained by indorsing a memorandum of the assignment on the trust instrument. Priority may be secured by having the encumbrance noted in the trust instrument, where this is practicable (Public Works Commissioners v Harby (1857) 23 Beav 508; 53 ER 199); and it is settled that the effect of notice to all the trustees survives changes in trusteeship: see 26.18. It was suggested that, for complete security, the assignment should be indorsed on the original deed: Phipps v Lovegrove (1873) LR 16 Eq 80. Where the fund is not a fund in court and consists of any government stock and or stock of certain bodies corporate, priority may be secured by utilising the stop notice procedure: see 26.23. As to giving an ordinary notice of equitable rights in shares to a limited company, see 6.16. It may be necessary to have recourse to a stop notice, where, for instance, there is no trust instrument on which a memorandum can be endorsed. [page 679]

D. Funds in Court Stop orders

26.23 When a fund is in court, an encumbrancer on it can secure priority by obtaining a stop order: Civil Procedure Rules (UK) rr 73.11–73.15; Uniform Civil Procedure Rules 2005 (NSW) r 41.16; Supreme Court (General Civil Procedure) Rules 2005 (Vic) r 73.12; Uniform Civil Procedure Rules 1999 (Qld) r 882; Supreme Court Rules 2000 (Tas) r 937; and see 7.13. South Australia and Western Australia no longer have stop order provisions; however, Civil Judgments Enforcement Act 2004 (WA) s 58 will be relevant in some circumstances. Where an order to show cause has been made in relation to funds in court (including securities in court) and a copy thereof has been served on the proper officer of the court, no disposition by the judgment debtor of any interest to which the order relates, made after the making of that order, shall, so long as the order remains in force, be valid as against the judgment creditor: Civil Procedure Rules (UK) r 73.13. Notice of the stop order should be given to all persons who have obtained similar orders on the fund: Hulkes v Day (1840) 10 Sim 41; 59 ER 527. A stop order cannot be obtained on a fund in court in respect of a mortgage of costs not yet ordered to be paid: Lord v Colvin (1862) 2 Drew & Sm 82; 62 ER 553. Where securities are not in court the procedure is by way of stop notice: Civil Procedure Rules (UK) r 73.14 (stop order for securities not in court) and rr 73.16–73.21 (stop notice); see the State Supreme Court Rules (above) Vic, rr 73.13–73.16; Tas, r 936; New South Wales, Queensland, South Australia and Western Australia do not have corresponding provisions; and see 2.16. This will be effectual for the purpose as notice in other cases: Greening v Beckford (1832) 5 Sim 195; 58 ER 310; Swayne v Swayne (1848) 11 Beav 463; 50 ER 896; Warburton v Hill (1854) Kay 470; 69 ER 199; Montefiore v Guedalla [1903] 2 Ch 26. Where an assignee who has obtained a stop order assigns his interest, the second assignee should obtain a stop order: Wheatley v Bastow (1855) 3 WR 296; on appeal (1855) 7 De GM & G 261; 3 WR 540. It will give a better right than notice to the trustees given after the payment into court (Pinnock v Bailey (1883) 23 Ch D 497), provided the mortgagor claims directly under the trustees whose trust is being administered by the court: Stephens v Green [1895] 2 Ch 148, and see Re Bell (1886) 54 LT 370; Re Dallas [1904] 2 Ch 385 at 403 (CA); Re Seager Hunt [1906] 2 Ch 295.

The stop order will not give priority over a prior mortgagee of whose mortgage the party obtaining the stop order had notice when he made the advance, although such prior mortgagee may have omitted to obtain a stop order: Re Hamilton’s Windsor Ironworks; Ex parte Pitman and Edwards (1879) 12 Ch D 707 at 711; Re Holmes (1885) 29 Ch D 786; Montefiore v Guedalla, above. Where, however, the second encumbrancer was ignorant of the prior mortgage when he made the advance, the second encumbrancer will get priority by means of a stop order obtained after he is informed of the first mortgage: Timson v Ramsbottom (1837) 2 Keen 35; 48 ER 541. Like notice, also, the stop order applies only to the particular charge in respect of which it is obtained, although it is granted against the whole fund: Re Dallas [1904] 2 Ch 385 at 395 (CA). Apparently a stop order will not affect funds paid into court after its date unless those funds are named in the order: Timson v Ramsbottom (1837) 2 Keen 35 at 49; 48 ER 541 at 546. For charging orders, see Civil Procedure Act 2005 (NSW) ss 106(1)(c) and 126–128 and Uniform Civil Procedure Rules 2005 (NSW) rr 39.44–39.45; Enforcement of Judgments Act 1991 (SA) s 8; Supreme Court Civil Procedure Act 1932 (Tas) ss 166–168 and Supreme [page 680] Court Rules 2000 (Tas) rr 930–935; and state Supreme Court Rules (above) (Vic) rr 73.01–73.11; (Qld) rr 874–880.

Carrying share to new account 26.24 If, after the stop order has been obtained, the share is carried over to the account of the mortgagor and his encumbrancers, a stop order obtained by a later mortgagee will not affect the priority of the person who obtained the first — though, it seems, it would be otherwise if the fund were carried over to the account of the mortgagor alone: Mutual Life Assurance Society v Langley (1886) 32 Ch D 460; Ward v Royal Exchange Shipping Co; Ex parte Harrison (1887) 58 LT 174.

Stop orders on same day

26.25 When several stop orders have been obtained on the same day, a prior notice by one of the assignees will give priority to that assignee’s claim (Macleod v Buchanan (1864) 4 De GJ & Sm 265; 46 ER 921); or, perhaps, the claims rank in order of their dates (Shaw v Hudson (1879) 48 LJ Ch 689), and where none of the assignees has obtained a stop order, notice to the trustees may be effectual to determine priority: Lister v Tidd (1867) LR 4 Eq 462; Mutual Life Assurance Society v Langley (1886) 32 Ch D 460. The order should state whether capital or income, or both, are affected. If it does not, recourse may be had to any part of the order to ascertain its operation: Mack v Postle [1894] 2 Ch 449.

Encumbrance and payment in 26.26 When a person who has a lien upon a fund of which he is the holder pays it into court, he should state the claim and obtain a stop order; otherwise priority may be lost as against a creditor without notice of the lien who gets such an order: Swayne v Swayne (1848) 11 Beav 463; 50 ER 896. If, however, an encumbrancer has, before conversion and payment into court of the proceeds of encumbered property, completed his title by giving notice to the holder, that encumbrancer’s priority will not be affected by a stop order obtained by another claimant: Brearcliff v Dorrington (1850) 4 De G & Sm 122; 64 ER 762; Livesey v Harding (1856) 23 Beav 141; 53 ER 55; see Re Marquis of Anglesey; De Galve v Gardner [1903] 2 Ch 727 at 732.

Bankruptcy of beneficiary 26.27 If there is no fund in court which could be the subject of a stop order before the bankruptcy of the assignor, and the assignee has given notice, he will have a better right than the bankruptcy trustee to the fund when brought into court: Day v Day (1857) 1 De G & J 144; 44 ER 678. If the trustee makes the advance, the fund being in court, the trustee should obtain a stop order, so that any other person who proposes to make an advance may ascertain if the fund is encumbered: Elder v Maclean (1857) 5 WR 447; see Mutual Life Assurance Society v Langley (1886) 32 Ch D 460. A bankruptcy trustee must protect himself by a stop order: Stuart v Cockerell (1869) LR 8 Eq 607; Palmer v Locke (1881) 18 Ch D 381; and see 26.6.

[page 681]

Chapter 27

Effect of Registration of Deeds Statutory provisions General effect of statutory provisions Registrable deeds and instruments Diverse operation of state legislation Effect of registration South Australia Western Australia Tasmania New Zealand Effect of legislation Consideration Bona fides Notice Focus on grantee Defective instruments Miscellaneous

27.1 27.2 27.3 27.4 27.5 27.6 27.7 27.8 27.9 27.10 27.11 27.12 27.13 27.14 27.15 27.16

Statutory provisions 27.1

Up until recently all states and New Zealand had statutory provisions

providing for the registration of deeds and other instruments. As at 1998, these provisions were contained in the following legislation: NSW Act Pt XXIII (ss 184A–184J) (this legislation replacing the Registration of Deeds Act 1897 (NSW)); Victorian Act Pt I (ss 4–17); Queensland Act ss 241–249; Registration of Deeds Act 1935 (SA); Registration of Deeds Act 1856 (WA); Registration of Deeds Act 1935 (Tas); and Deeds Registration Act 1908 (NZ). All of these provisions are in force as at 1 April 2013, with the exception of the Victorian legislation. By the Transfer of Land (Single Register) Act 1998 (Vic), as from 1 January 1999, no further deed could be registered under the Act and ss 4, 5 and 7–14 were repealed. This was a result of the introduction of a scheme of Qualified Torrens Title now set out in ss 26C ff of the Victorian Torrens Act. Although a similar process was introduced in New South Wales in 1967, that state retained the Registration of Deeds legislation, though now incorporated into the Conveyancing Act. South Australia has also experienced a conversion scheme and there is only a small amount of old system land remaining. Similarly, there is only a small amount in Western Australia; however, the legislation remains on the statute books in those states. [page 682] The Registration of Deeds Acts derive from different models used in England or Ireland and were the first attempts at an Australian system of registered titles in the early to mid 19th century. Because different states followed different precedents, the state Acts differ in material respects. See, generally, Sykes and Walker, The Law of Securities, 5th ed, Law Book Company, Sydney, 1993, p 409. Most of the statutes referred to above have three principal aims: first, to ensure as much as possible that deeds, particularly deeds affecting land, are on a public register; second, to reward registration by some priority; and third, to provide a facility for the deposit of deeds which might otherwise be lost. Even Victoria has retained the last mentioned: see Victorian Act ss 15 ff.

General effect of statutory provisions 27.2 None of the provisions made registration essential to the validity of the deed or instrument, with the result that the legal and equitable and priorities rules would apply to their full extent if the relevant deed or instrument, and any other deeds or instruments with respect to the same land or subject matter, all remained unregistered. This would also appear to be the position in South Australia and Western Australia, where the legislation contains in the first case an avoidance provision without any priority provision and in the latter case a combination of both. Registration is generally encouraged by a priorities provision which, in summary, has the effect of postponing the priority that a deed would otherwise have enjoyed in favour of a later registered deed or instrument, whenever made, assuming it was made for valuable consideration and complied with the ‘good faith’ provisions of legislation requiring this. It is important to note that the Deeds Registration legislation applies only to deeds or instruments. Thus the legislation does not apply to interests arising aliunde, such as a vendor’s lien, or to any interests created by an oral transaction — for example an equitable mortgage by deposit of title deeds — which is not evidenced by any written memorandum. It appears that interests arising or created other than by deed or any other instrument are not affected if any later dispositions, legal or equitable, are registered: see White v Naylon (1886) 11 App Cas 171 (PC); White v Hunter (1868) 5 WW & A’B (E) 178. This means, of course, that the usual priorities will apply. Interests arising or created other than by deed or any instrument will normally be equitable interests but there are some exceptions, for example some short-term leases. In general terms, applying the ordinary priorities rules, if the interest created without deed or instrument is a legal one then any subsequent distribution of interests in the property will be subject to it. The position is different, however, if the interest created without deed or instrument is an equitable interest, which is more probable. In this event the equitable interest will take priority over subsequently created equitable interests, assuming equities are equal: see 24.25. An equitable interest of this kind is nevertheless liable to be defeated by a subsequent legal interest if that interest is taken bona fide for value and without notice of the earlier equitable interest.

Registrable deeds and instruments 27.3 The NSW Act s 184G(1) provides that all instruments (except wills) affecting land or intended to affect any lands in New South Wales may, subject to conditions which are discussed below, be registered in the general register of deeds, for which provision is made in s 184C. Generally speaking, the provisions of the other states and New Zealand are similar and include deeds, conveyances and other instruments in writing: Queensland Act s 241; Registration of Deeds Act 1935 (SA) s 10(1); Registration of Deeds Act 1856 (WA) s 2; Registration of Deeds Act 1935 (Tas) s 5; Deeds Registration Act 1908 (NZ) s 9. [page 683] In summary, the legislation enables the registration of deeds or instruments with respect to interests in land, including leasehold interests, and whether those interests be legal or equitable in nature. There are some exceptions in relation to registration of leases: in Victoria and Queensland, any lease for less than three years (Victorian Act s 6; Queensland Act s 241(1)(a); in South Australia, leases for three years or less (Registration of Deeds Act 1935 (SA) s 10(1); in Western Australia, for bona fide leases not exceeding 14 years at a rack rent (Registration of Deeds Act 1856 (WA) s 3); and in Tasmania, leases for a term of less than 14 years: Registration of Deeds Act 1935 (Tas) s 3(b). It follows from these provisions that a very broad range of deeds and instruments may be registered: see Hogg, Deeds Registration in Australasia, Law Book Co, Sydney, 1908, pp 19–20. Instruments relating to Crown land holdings in New South Wales have been held to be registrable (see Blackwood v London Chartered Bank of Australia (1870) 9 SCR (NSW) (Eq) 101) and the position is probably similar in Queensland and Tasmania: see Sykes and Walker, p 410. The position appears to be uncertain in other states and the position may be the same as with respect to instruments affecting Torrens title land: see Sykes and Walker, p 410; and see Hinde, McMorland and Sim, Land Law (New Zealand), 2nd ed, 2004, pp 217–18, [7.026]. Judgments are registrable in South Australia, Western Australia and Tasmania: see Registration of Deeds

Act 1935 (SA) ss 5(1), 10(1), but excluding Crown judgments; Registration of Deeds Act 1856 (WA) s 2; Registration of Deeds Act 1935 (Tas) ss 5 and 11.

Diverse operation of state legislation 27.4 Instruments affecting Torrens title land are treated differently by the Deeds Registration legislation in various jurisdictions. In New South Wales instruments registered or required to be registered under the Real Property Act 1900 may be registered in the General Register of Deeds but their registration will not attract the priority provisions of NSW Act s 184G which applies to deeds and instruments generally: NSW Act s 184B. However, the NSW Act, particularly s 184B, does not prohibit or otherwise prevent the registration of deeds or instruments affecting Torrens title land which are not themselves registrable under the Real Property Act 1900 (NSW). Nevertheless, if an unregistrable instrument confers an interest in land such as would support a caveat, any priority advantage accruing by registration of the instrument under the Conveyancing Act may be lost as a result of the failure to lodge a caveat under the Real Property Act (see 28.21); and note the argument based on Miller v Minister of Mines [1963] AC 484 that an unregistrable interest cannot support a caveat: Robinson, Transfer of Land in Victoria, Law Book Co, Sydney, 1979, p 357; but cf Commercial Bank of Australia Ltd v Schierholter [1981] VR 292 (FC). Real Property Act 1900 (NSW) s 43A(3) provides that registration under Deeds Registration legislation shall not of itself affect the rights of any person contracting or dealing in respect of estates or interests in land under the provisions of that Act. Instruments registered or required to be registered under the Real Property Act 1900 are not affected as to priority by the provisions for the registration of deeds in the Conveyancing Act 1919: NSW Act s 184B. In South Australia and Tasmania, instruments affecting Torrens title land are outside the scope of the Deeds Registration legislation: Registration of Deeds Act 1935 (SA) s 9; Registration of Deeds Act 1935 (Tas) s 3. Sykes and Walker, p 410, suggest that

[page 684] the position in Queensland and Western Australia would be similar to the position in New South Wales. The provisions in the Queensland Property Law Act relating to registration of deeds are subject to the Land Titles Act 1994, so that registration of instruments not in themselves registrable under the Real Property Acts may confer some advantage: Property Law Act 1974 (Qld) ss 5(1)(b), 241 and 246.

Effect of registration 27.5 In New South Wales, all instruments (except wills) affecting land or other property in that state, which are executed or made bona fide and for valuable consideration and are duly registered under the provisions of the NSW Act Pt 23 (which takes the place of the Registration of Deeds Act 1897), shall have and take priority not according to their respective dates, but according to the priority of their registration only: NSW Act s 184G(1). The section further provides (s 184G(2)): No instrument registered under the provisions of this Division or the Registration of Deeds Act, 1897, shall lose any priority to which it would be entitled by virtue of registration thereunder by reason only of bad faith in the conveying party, if the party beneficially taking under the instrument acted bona fide, and there was valuable consideration given therefor.

In Victoria, a similar provision as to priority according to registration is in force (Property Law Act 1958 s 6), but there is no corresponding provision as to bona fides protecting the person taking the benefit of the instrument. In Queensland, deeds and other instruments (wills excepted) affecting land or any interest therein, which are executed or made bona fide and for valuable consideration and which are duly registered in accordance with the provisions of Property Law Act 1974, Pt 18 Div 3, have and take priority not according to their respective dates but according to the priority of the registration only: Property Law Act (Qld) 1974 s 246. The Tasmanian Act (Registration of Deeds Act 1935 (Tas) s 9) affords priority according to the date of registration to all instruments executed or made in good faith and for valuable consideration. In these four states the priority accorded by registration extends only to instruments executed ‘bona fide and for valuable consideration’ (in

Tasmania, ‘in good faith’).

South Australia 27.6 In South Australia, the priority provisions are rather different from those in the eastern states. The legislation in that state provides that every deed, conveyance, contract or judgment affecting land not under the Real Property Act 1886 shall be fraudulent and void at law and in equity against any subsequent ‘registered’ purchaser, mortgagee or party for or upon valuable consideration unless a memorial thereof is registered under the Act before the registration of the deed or conveyance, contract or judgment under which the subsequent purchaser, mortgagee or party claims: Registration of Deeds Act 1935 (SA) s 10(2). The section applies notwithstanding that the party taking under the subsequent instrument had, before or at the time of the making of it, notice of the prior deed, conveyance, contract, judgment or devise: Registration of Deeds Act 1935 (SA) s 10(4).

Western Australia 27.7 In Western Australia, the provisions bear a closer resemblance to those in force in the eastern states. Deeds, conveyances and other instruments, wills and judgments affecting land under the general law or old system title which are registered have priority according to their respective dates of registration; but if not registered are, as against any subsequent bona fide purchaser or mortgagee of the same lands, tenements or hereditaments for valuable consideration, absolutely null and void. These provisions do not extend to bona fide leases at rack rent for any term not exceeding 14 years: Registration of Deeds Act 1856 (WA) s 3. [page 685]

Tasmania 27.8 The Registration of Deeds Act 1935 makes registration of wills and letters of administration affecting land in Tasmania, compulsory: see s 10.

However, these documents are not within the definition of ‘instruments’ so that the priority provisions of the statute do not apply. Otherwise the Act applies in similar ways to the New South Wales legislation.

New Zealand 27.9 In New Zealand, registration of any instrument affecting title is not compulsory but the sanction is possible loss of priority on registration of a subsequent instrument. The Deeds Registration Act 1908 (NZ) s 35 provides: Every deed or contract authorized by this Act to be registered as aforesaid shall, so far as regards any land to be affected thereby, be void as against any person claiming for valuable consideration under any subsequent deed or contract duly registered unless the earlier deed or contract was registered before the registration of the subsequent deed or contract.

Effect of legislation 27.10 In all jurisdictions, then, except South Australia, specific provisions afford priority according to the date of registration of the deed or other instrument and these extend to ‘instruments’ or to ‘instruments in writing’ which relate to or affect land; these ‘instruments’ may be those which create or convey equitable interests or estates only, and consequently by priority of registration an equitable estate may gain priority over a legal estate in the same land: Darbyshire v Darbyshire (1905) 2 CLR 787. It was held, early in the history of deeds registration, that registration is only important in deciding priority between inconsistent conveyances, each of which would be effectual but for the other, but gives no increased efficacy to conveyances impugned for fraud or mistake: Sutherland v Peel (1864) 1 WW & A’B (E) 18. Although there is no ‘priority’ provision in the South Australian legislation, the possibility of avoidance of an unregistered mortgage by the subsequent registration of an instrument affecting the same land affords an adequate sanction for failure to register and so it has become almost universal practice to register mortgages, and all other deeds or instruments relating to land. The most dramatic effect of the Deeds Registration legislation is on the general law priority rules. The authorities show that if a deed creating an

equitable interest in land is registered, provided that it was acquired bona fide and for valuable consideration, it will take priority over a deed creating an inconsistent legal interest in the land even where the person acquiring the legal interest acts bona fide and gives valuable consideration: Wharton v Greville (1856) 1 VLT 76; Darbyshire v Darbyshire (1905) 2 CLR 787; Davidson v O’Halloran [1913] VLR 367; and see Mills v Renwick (1901) 1 SR (NSW) (Eq) 173. Normal principles of construction must be applied in order to determine whether deeds are inconsistent with each other: Boyce v Beckman (1890) 11 LR (NSW) L 139. The same property must be the subject of the competing deeds or instruments (Smith v Deane (1889) 10 LR (NSW) (Eq) 207; Boyce v Beckman; Fraser v Clarke (1872) 3 VR (Eq) 84; Lyons v Imperial Land, Building and Deposit Co Ltd (1894) 15 LR (NSW) Eq 64; Sydney and Suburban Land Assn v Lyons [1894] AC 260; and Ex parte Pearse (1900) 16 WN (NSW) 262); although the person named as conveying the relevant interest need not be the same: Fuller v Goodwin (1865) 4 SCR (NSW) 66; Smith v Deane, above; Blaxland v Grattan (1887) 8 LR (NSW) (L) 287; Andrews v Taylor (1869) 6 WW & A’B (L) 223. Further complications may arise as a result of the effective abrogation of the principle nemo dat quod non habet (‘no one gives who possesses not’). When two conveyances by the same conveying party each purport to convey the legal estate in the same piece of [page 686] land, and the second is registered prior to the first, it has been held that registration has the effect of revesting the legal estate in the conveying party so as to ‘feed the estate of the party registering first’: Smith v Deane; Boyce v Beckman; Fuller v Goodwin (all above); see also Stonham, The Law of Vendor and Purchaser, Law Book Co, Sydney, 1964, pp 445 and 448, referring to Andrews v Taylor (1869) 6 WW & A’B (L) 223 and Fraser v Clarke (1872) 3 VR (E) 84 at 90. Registration simply confers priority over unregistered deeds; it does not otherwise affect the validity of the deed: Stonham, p 446. The natural priority enjoyed by a devisee of realty under a will may be lost if, in jurisdictions where that is possible, the will is not registered (that is, in

all jurisdictions save Tasmania). Registration of a will containing a devise does not give the devisee priority over any person taking an interest in land under an earlier instrument, by reason of registration of the will: see NSW Act s 184G(1); Queensland Act s 246; Registration of Deeds Act 1935 (SA) s 10(3); Registration of Deeds Act 1856 (WA) s 3; Deeds Registration Act 1908 (NZ) ss 35 and 36. However, registration may preserve the natural priority of the devisee because of the requirement that any grantee of an interest in the land under a subsequent interest must take both bona fide and for value: see 27.5.

Consideration 27.11 Registration of a deed or other instrument does not have any of the priorities consequences referred to unless it is made for valuable consideration (NSW Act s 184G(1); Victorian Act s 6; Queensland Act s 246; Registration of Deeds Act 1935 (Tas) s 9; Deeds Registration Act 1908 (NZ) s 39; and see Bullen v a’Beckett (1863) 1 Moo PC (NS) 223; 15 ER 684; cf Mountford v Scott [1975] Ch 258; Midland Bank Trust Co v Green [1981] AC 513; [1981] 1 All ER 153); and compare the position under the Torrens legislation where provisions that a Torrens instrument has, upon registration, the effect of a deed will preclude the defence of lack of consideration where the mortgage moneys have not actually been advanced to the mortgagor, or mortgagors: HG & R Nominees Pty Ltd v Fava (1997) 2 VR 368. As to what constitutes valuable consideration and how a valuable consideration not expressed in a deed may be proved, see Norton, A Treatise on Deeds, 2nd ed, Sweet & Maxwell, London, 1928, pp 220–1. Valuable consideration is also required of any person seeking to assert priority under the ‘avoidance’ clause approach of the South Australian legislation (see Registration of Deeds Act 1935 (SA) s 10(2)), and similarly in the corresponding Western Australian provision: Registration of Deeds Act 1856 (WA) s 3. Although a volunteer does not gain the advantages of registration under the Deeds Registration legislation in the sense of being able to gain priority over an earlier unregistered deed or instrument by registering his voluntary deed or instrument, failure to register may result in the natural priority which he possesses being lost. For example, a conveyance of the legal estate in land by way of gift would, according to the ordinary priority rules, have priority over

a subsequent purported legal mortgage of the same land. However, were the mortgagee in the circumstances to register the mortgage before the voluntary conveyance of the fee simple was registered it appears that the mortgagee would gain priority: see Reid v Kearney (1887) 8 LR (NSW) (Eq) 37. If, in the circumstances, the voluntary conveyance were registered first, then registration of the mortgage may not confer priority by reason of the fact that registration of the voluntary conveyance may result in the mortgagee having actual or constructive notice of the interest of the donee of the fee simple (but cf Sykes and Walker, pp 413–14).

Bona fides 27.12 The question of what constitutes lack of bona fides is one that has not been answered satisfactorily by the courts, the unresolved problem being whether actual or constructive notice of an inconsistent interest is required. [page 687] In Agra Bank Ltd v Barry (1874) LR 7 HL 135, the owner of certain land had granted an equitable mortgage of it. The deeds were held by the solicitor for the equitable mortgagee. The owner of the land subsequently agreed to grant a legal mortgage of the land. In ignorance of the equitable mortgage, the solicitor for the proposed legal mortgagee, who was also ignorant of the equitable mortgage, requested production of the deeds by the solicitor holding them. That solicitor gave an excuse for their non-production, which the House of Lords accepted as quite satisfactory, and provided a summary statement of their contents omitting any reference to the equitable mortgage. In due course the legal mortgage was executed and registered. It was held that the legal mortgage ranked in priority to the equitable mortgage. Lord Selborne said that the legal mortgagee had a duty to make an inquiry to discover any latent interests but that this was not a duty owed to any person, merely a matter going to the bona fides of the proposed mortgagee. If no search is made, the view may be taken that the person acquiring the subsequent interest did not act bona fide but wished simply to avoid discovering the true state of the title. The sufficiency or otherwise of the explanation for this conduct will depend upon the circumstances of each

case.

Notice 27.13 A person with actual notice of a prior unregistered deed cannot register a subsequent, inconsistent, deed and thereby gain priority: Le Neve v Le Neve (1747) Amb 436; 27 ER 291. Notice that an inconsistent interest in part of the relevant land exists, without knowledge of the actual part affected, also prevents priority from being obtained by registration: Sydney and Suburban Mutual Building and Land Investment Assoc Ltd v Lyons [1894] AC 260 (PC). In Marsden v Campbell (1897) 18 LR (NSW) (Eq) 33, it was held that registration of a conveyance gave the purchaser no priority over the interests of a lessee, although he was not aware of the nature of the lessee’s interest but knew what sheep were being run on the land. It appears that a person cannot be said to make a contract ‘bona fide’ in circumstances where the contract is made without notice of a prior interest but notice of such interest is received by the purchaser before paying the balance of purchase money: Scholes v Blunt (1917) 17 SR (NSW) 36. It is otherwise if notice of a prior instrument is received after completion of the contract: Burrows v Crimp (1887) 8 LR (NSW) 198; Blackwood v London Chartered Bank of Australia (1871) 10 SCR (NSW) (Eq) 56. The provisions of Deeds Registration Act 1908 (NZ) s 39 should be noted in this respect: The priority given under the provisions hereinbefore contained to any person claiming for valuable consideration shall not avail if before the execution of the deed or contract under which he claims he had actual personal knowledge affecting him with fraud or was served either personally or through his solicitor in the transaction with an express notice in writing of an earlier deed or contract, whether registered or not.

Whether this provision takes matters much further in light of the authorities discussed is not clear.

Focus on grantee 27.14 It is the bona fides of the grantee under a deed or instrument that is relevant for present purposes, not that of the grantor: Davidson v O’Halloran [1913] VLR 367; and see the specific provisions to this effect in NSW Act s

184G(2) and Queensland Act s 247. An interest taken bona fide by means of a deed or instrument is not rendered less so merely by reason of notice of a prior interest being received prior to registration: Blackwood v London Chartered Bank of Australia (1870) 10 SCR (NSW) (Eq) 56 at 91; Burrows v Crimp (1887) 8 LR (NSW) 198 at 210. [page 688]

Defective instruments 27.15 The Deeds Registration legislation does not cure defects in deeds or instruments. A conveyance rendered voidable through fraud will not be cured by registration: Sutherland v Peel (1864) 1 WW & A’B 18; Re Cooper (1882) 20 Ch D 611. Thus a forged document, though registered, will still be a nullity: see Re Cooper, decided under the Middlesex Registry Act. Instruments dealing with interests in personal property do not gain priority by registration, which may be permitted by way of record: Attorney-General (NSW) v Hill and Halls Ltd (1923) 32 CLR 112; Re Christie (1968) 11 FLR 390. The differing legislative approaches in the South Australian and Western Australian legislation make it less certain how far the general law priorities rules are affected. In South Australia, the priorities position is left to be inferred from the terms of the avoidance provision: see Registration of Deeds Act 1935 (SA) s 10(2), which renders an unregistered instrument fraudulent and void at law and in equity against an instrument for valuable consideration that is registered subsequently to the making of the unregistered instrument; and see 27.6. If registration of an instrument constitutes actual or constructive notice then the general law priorities rules (including the bona fide purchaser for value without notice aspects) follow accordingly. On general principles this is thought to be correct, though cf decisions to the contrary on similar legislation, the Middlesex Registration Act such as Elsey v Lutyens (1850) 8 Hare 159; 68 ER 314: see Sykes and Walker, pp 414–15. (Note the cases under the Middlesex Registry Act are collected in vol 38 of the first edition of the English and Empire Digest, at pp 742 ff.) The Western Australian legislation renders void an unregistered instrument

against subsequent instruments bona fide and for value: see 27.7. The authorities already discussed would appear to be applicable to provisions of this nature.

Miscellaneous 27.16 There are additional benefits and advantages conferred by registration to which reference should be made. In all states the Acts provide for secondary evidence of instruments by office copies certified by a person who might reasonably be supposed to have custody of the document: Evidence Act 1995 (NSW) ss 155 and 156; Property Law Act 1974 (Qld) s 249; Registration of Deeds Act 1935 (SA) s 28; Registration of Deeds Act 1856 (WA) s 15; Evidence Act 2001 (Tas) ss 155 and 156; Evidence Act 2008 (Vic) ss 155 and 156. Searches of title are greatly facilitated by the registration of instruments. In New South Wales it was held that a purchaser or mortgagee who omits to make a search will be affected with constructive notice of any matter or thing which would have been discovered if he had made the usual searches under the circumstances: Mills v Renwick (1901) 1 SR (NSW) Eq 173. The general conveyancing statutes now contain similar provisions: see NSW Act s 164(1); Victorian Act s 199(1); Queensland Act s 346(1); South Australian Act s 117(1); Tasmanian Act s 5(1). In Western Australia, the Act provides that the registration of any instrument is notice of all facts, circumstances and particulars referred to in the memorial: Registration of Deeds Act 1856 (WA) s 16. In New South Wales, omission to search in any register or list kept by, or filed with, the Australian Securities and Investments Commission, whether within New South Wales or elsewhere, does not of itself affect a purchaser of land with notice of any mortgage or charge: NSW Act 1919 s 164(1A).

[page 689]

Chapter 28

Effect of the Torrens System General Application of general law rules Possession of the legal estate New South Wales Priorities between legal interests Registration essential Priority between legal and equitable interests Pre-registration protection Priority between equitable encumbrances The effect of failure to caveat on priorities Abigail v Lapin Other High Court cases Breskvar v Wall Heid’s case State decisions Effect of authorities

28.1 28.2 28.3 28.4 28.5 28.6 28.7 28.8 28.9 28.10 28.11 28.12 28.13 28.14 28.15 28.16

General 28.1

Because the most frequent of all mortgages in Australia are mortgages

over Torrens system land, the effect of the Torrens system has been considered at every stage in this work. In particular, Chapter 4 provided a full overview of its effect on the law of mortgages. However, the basic structure of this work is based on the traditional real property mortgage in England and it is necessary to devote some space to the vital differences applicable to Torrens mortgages over those traditional mortgages. The purpose of this section is thus to consider the effect of Torrens Title legislation on the priorities of mortgages of Torrens title land with respect to registered and unregistered interests in that land. This is not a work on the Torrens system so for this reason and reasons of space the discussion is confined to aspects of Torrens system priorities of particular relevance to mortgages. Reference should be made to the appropriate Torrens title texts, in particular: Butt and Ticehurst, Woodman and Nettle — The Torrens System in New South Wales, 2nd ed, Thomson Law Book Co, Sydney, 1996; Whalan, The Torrens System in Australia, Law Book Co, Sydney, 1982; Stein and Stone, Torrens Title, Butterworths, Sydney, 1991; and Robinson, Transfer of Land in Victoria, Law Book Co, Sydney, 1979. Mortgagees may agree between themselves to vary the otherwise natural order of priorities without the consent of the mortgagor: Cheah Theam [page 690] Swee v Equiticorp Finance Group Ltd [1992] 1 AC 472; [1991] 4 All ER 989 (PC); and see 24.3. As against subsequent mortgagees or encumbrancers it would be prudent to register a priority agreement under provisions such as NSW Torrens Act s 56A (and see s 56B), Victorian Torrens Act s 75B or Tasmanian Torrens Act s 76 (and see Whalan, The Torrens System in Australia, p 176), or to lodge a caveat or caveats.

Application of general law rules 28.2 The general position is that the general law doctrines with respect to mortgages apply to mortgages under the Torrens system. As has been noted in 4.2–4.3, the basic purpose of the Torrens Acts was to set up a new system

of conveyancing and provide government guaranteed title. Whether as a result of specific provision in the relevant Torrens Act, or in the General Land Law legislation or because the general law principle is not inconsistent with the Torrens Act, the general law principles normally apply to Torrens system mortgages. In particular, the general law priorities rules apply with respect to Torrens title land. Thus the holder of the legal estate still prevails; indeed his or her title is made indefeasible. As between holders of equitable interests, the first in time ordinarily prevails. The matter is fully considered in 4.23. As will be apparent from Chapter 4 and subsequent parts of this chapter, under the Torrens legislation ‘legal estate’ and ‘registered interest’ are usually synonymous, though there are some legal estates in the traditional sense, such as short-term leases, which can exist unregistered. An unregistered instrument as such may be disregarded; however, the underlying transaction recorded in the unregistered instrument may well create equitable interests in Torrens land: Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 257; 89 ALR 522 at 532.

Possession of the legal estate 28.3 Other than in New South Wales, the ‘legal estate’ is to be equated with a registered interest under the Torrens System legislation for the purpose of applying the priorities rules: see IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550. This position follows from the provisions of the Torrens System legislation, which provides that no instrument is effectual to pass any estate or interest in land under the Act or to render any land liable as security except on the registration of an instrument at which time the estate or interest specified in the instrument shall pass or the land become liable as security: see NSW Torrens Act s 41; Victorian Torrens Act s 40; Queensland Torrens Act s 181; South Australian Torrens Act s 67; Western Australian Torrens Act 1893 (WA) s 58;Tasmanian Torrens Act s 49. This position is strengthened, and more basis is provided for equating general law concepts of the ‘legal estate’ with registration of a corresponding interest under the Torrens legislation, by provisions to the effect that an instrument when registered under the relevant Act takes effect as a deed. This is another example of the legislature equating and applying general law

concepts: see NSW Torrens Act s 36(11); Victorian Torrens Act s 40(2); Queensland Torrens Act s 176; South Australian Torrens Act s 57; Western Australian Torrens Act s 85; Tasmanian Torrens Act s 48(7). Similarly, in Crowley v Templeton (1914) 17 CLR 457 at 463, Griffith CJ said: ‘… the only way of dealing with land which is under the provisions of the Act is by alteration of the register, and modes by which such alteration can be procured are prescribed by the Act. No other mode is authorised.’

New South Wales 28.4 The position in New South Wales is somewhat more complicated by reason of s 43A of its Torrens Act, a section that has no equivalent in the other states (its provisions are set out at 28.8). [page 691] The use of the expression ‘legal estate’ in s 43A is a further invitation by the legislature to apply general law concepts and priorities rules. This section was considered by the High Court in IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550. In that case, which is considered more fully below, Kitto J considered that it followed from the use of the phrase ‘legal estate’ that all unregistered estates must necessarily be equitable and only the registered legal estate was to be regarded as the ‘legal estate’. Taylor J, in that case, took a contrary view that the ordinary common law meaning was to be applied to the phrase ‘legal estate’, which may or may not be registered in the Torrens register; similarly, Hardie J in Courtenay v Austin (1961) 78 WN (NSW) 1082: see 28.8. A similar equating of registration under Torrens legislation and possession of the ‘legal estate’ is to be found in Victorian Torrens Act s 81 which, it would appear, proceeds to place a first registered mortgagee in the same, or at least a very similar, position as a first mortgagee of general law land: see City Mutual Life Assurance Society Ltd v Lance Creek Meat Works Pty Ltd [1976] VR 1 and Commonwealth Bank of Australia v Figgins Holdings Pty Ltd [1994] 2 VR 505; (1994) V ConvR ¶54-492. Subsection 81(1) is set out at 19.7.

It will be noted that s 81 applies only to a first registered mortgagee which, again, is consistent with the general approach of the Torrens legislation to equate rights under the registration system with corresponding interests under the general law. It would have been contrary to this approach had s 81 been drafted on the basis that all registered mortgagees enjoyed the same rights as a first registered mortgagee at general law, subject to their relative priorities. Western Australia has a similar provision: see Transfer of Land Act 1893 s 116. The legislation leaves second and subsequent mortgagees to their rights and remedies according to their respective priorities, but does provide a statutory right to take possession of the mortgaged property by either taking actual physical possession or receiving the rents and profits or by bringing an action equivalent to an action of ejectment: see NSW Torrens Act s 60; Victorian Torrens Act s 78; Queensland Torrens Act s 78; South Australian Torrens Act s 137; Western Australian Torrens Act s 111; and Tasmanian Torrens Act s 82. Some provisions of the Torrens Acts may appear to depart in some respects from the approach discussed but it is difficult to put too much weight on some of the expressions used in the legislation for the purposes of this analysis ‘in such badly drawn legislation as the Torrens statutes’: see Sykes and Walker, The Law of Securities, 5th ed, Law Book Co, Sydney, 1993, p 452.

Priorities between legal interests 28.5 The general principle is that in the absence of fraud, priority is accorded to legal (in the sense of registered) interests in order of creation, which is by means of registration. The NSW Torrens Act s 36(9) provides: Dealings registered with respect to, or affecting the same estate or interest shall, notwithstanding any notice (whether express, implied or constructive), be entitled in priority the one over the other according to the order of registration thereof and not according to the dates of the dealings.

Provisions of this type are reflected in other jurisdictions: see Victorian Torrens Act s 34(1); Queensland Torrens Act s 178; South Australian Torrens Act s 56; Western Australian Torrens Act s 53; Land Transfer Act 1952 (NZ) s 37; see also Farrier-Waimak Ltd v Bank of New Zealand [1965] AC 376; [1965] NZLR 426.

Reference should also be made to NSW Torrens Act s 36(4), which provides that where two or more dealings affecting the same land have been lodged and are awaiting registration the Registrar-General may register those dealings in the order which will give effect to the intentions of the parties as expressed in or as apparent to him from the dealings. Section 36(5) provides that in the event that the intentions of the parties to [page 692] the dealings referred to in s 36(4) appear to the Registrar-General to conflict, the order of registration shall be the order in which the dealings were lodged in registrable form. Section 36(6) makes detailed provision for the circumstances in which a dealing will be deemed to be or not to be in registrable form. The NSW Torrens Act s 36(6A) provides that a dealing is registered when the Registrar-General has made such recording in the register with respect to the dealing as he thinks fit. Similar provisions appear in other Torrens legislation: see Victorian Torrens Act ss 27A, 33–34A and see also Pt IIIA – Electronic Instruments; Queensland Torrens Act s 174; South Australian Torrens Act ss 54, 56(1a), 56A; Western Australian Torrens Act ss 52, 54, 56; Tasmanian Torrens Act s 33(11); and Land Transfer Act 1952 (NZ) s 34(1). Note that in Queensland by virtue of Queensland Torrens Act s 175, registration is backdated to the date of lodgment.

Registration essential 28.6 It should be stressed that these priorities rules as between registered instruments, by analogy with the general law priorities rules as between legal interests in property, only operate with respect to instruments that are registered. The application of the general law priorities rules between registered, legal, interests and equitable, unregistered, interests and between one equitable interest and another are considered below. The further possibility of a contest between an unregistered but nevertheless legal interest and an unregistered, equitable, interest in Torrens system land could only arise if the legal interest subsisted by reason of one of the statutory exceptions to the indefeasibility provisions: see Chapter 4. Otherwise the

legal interest would be defeated on registration of the unregistered equitable estate or interest in the property, the priority of which on registration is established by the provisions to which reference has been made. That it is possible for a legal interest to be created in Torrens system land which is not registrable is apparently confirmed, or facilitated, by the statutory exceptions to indefeasibility already referred to. If legal interests in Torrens land, such as short tenancies, enjoy priority as legal interests according to the ordinary general law priorities rules, without regard to the priority provisions referred to regulating the priority between registered estates and interests, the statutory exceptions to indefeasibility, including those excepting short-term leases in certain jurisdictions, would not be necessary: see Josephson v Mason (1912) 12 SR (NSW) 249 and Munro v Stuart (1924), reported (1941) 41 SR (NSW) 203. It appears that any interest, whether legal or equitable, protected by the provisions by way of express exception to the indefeasibility provisions (for example the interest of a tenant in possession under Victorian Torrens Act s 42(2)(e)) does not gain any greater protection than it would have enjoyed under the general law priorities rules: see Burke v Dawes (1938) 59 CLR 1; Barba v Gas and Fuel Corp of Victoria (1976) 136 CLR 120. Priorities may, of course, be varied by agreement between the holders of both legal and equitable interests. There is a difficulty in using an agreement, deed or otherwise, inter partes with respect to interests in Torrens system land, because its effect will only operate between its parties. Without the lodgment of a caveat or caveats to protect the varied priority of each interest under the agreed terms of the priority agreement, it may be possible for the parties to deal with the world at large inconsistently with the terms of the priorities agreement of which the world would not otherwise have notice. Specific provision has been made in Torrens legislation for variation of priorities and the registration of a memorandum or priority agreement effecting the variation: see NSW Torrens Act s 56A; Victorian Torrens Act s 75A; Queensland Torrens Act s 77;Tasmanian Torrens Act s 76; Land Transfer Act 1952 (NZ) s 103. [page 693]

Priority between legal and equitable interests 28.7 The Torrens legislation does not abrogate the general law priorities rules but makes provision for priority of registered, legal, interests according to their terms: see 4.22. Accordingly, what has been described as the ‘notice provision’ of the legislation is in similar terms in all jurisdictions: see Whalan, The Torrens System in Australia, p 269. NSW Torrens Act s 43(1) is a ‘typical’ notice provision: 43(1) Except in the case of fraud 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 required or in any manner concerned to inquire or ascertain the circumstances in or the consideration for which such registered owner or any previous registered owner of the estate or interest in question is or was registered, or to see to the application of the purchase money or any part thereof, or shall be affected by notice direct or constructive of any trust or unregistered interest, any rule of law or equity to the contrary notwithstanding; and the knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud.

Similar provisions are to be found in the Torrens legislation of the other jurisdictions: Victorian Torrens Act s 43; Queensland Torrens Act s 184; South Australian Torrens Act ss 186, 187; Western Australian Torrens Act s 134; Tasmanian Torrens Act s 41; Land Transfer Act 1952 (NZ) s 182. A significant limitation on the operation of the ‘notice’ provisions is that they do not generally provide satisfactory protection prior to registration of the registrable interest: see Whalan, The Torrens System in Australia, pp 270ff; Butt and Ticehurst, Woodman and Nettle — The Torrens System in New South Wales, 2nd ed, Thomson Law Book Co, Sydney, 1996, [43.200] and [43A.20]; Hinde, McMorland and Sim, Land Law, 2nd ed, 2003, vol 1, [9.013]. Had the notice provisions been construed literally, the provisions would have given protection arising at the time when a purchaser or a mortgagee settled the purchase or advanced the mortgage money, and even possibly at the time of contract: see Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266 at 279; Hinde, McMorland and Sim, vol 1, [9.013] especially at pp 352–3; and see Whalan, The Torrens System in Australia, p 271. However, both the Australian and the New Zealand courts have consistently declined to give the section its literal construction, and have held that its benefits could only be enjoyed on registration: Cowell v Stacey (1887) 13 VLR 80; Baker’s Creek Consolidated Gold Mining Co v Hack (1894) 15

LR (NSW) Eq 207; Solicitor-General v Mere Tini (1899) 17 NZLR 733; sub nom Solicitor-General v Here Tini 2 GLR 60 (CA); Templeton v Leviathan Pty Ltd (1921) 30 CLR 34 at 54–5 per Knox CJ (approving the statement in Hogg, Registration of Title to Land Throughout the Empire (1920), pp 125– 6); Lapin v Abigail (1930) 44 CLR 166 at 182 per Knox CJ; at 188 per Isaacs J; at 196 per Gavan Duffy and Starke JJ; and at 203 per Dixon J (the decision of the High Court of Australia was reversed by the Privy Council: Abigail v Lapin [1934] AC 491; [1934] All ER Rep 720 (PC) but the statements cited remain unaffected); Webb v Hooper [1953] NZLR 111; IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550 at 572–3 per Kitto J; and at 581–2 per Taylor J; and Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969) 89 WN (Pt 1) (NSW) 568 at 573; [1969] 1 NSWR 621 at 625 per Herron CJ, Jacobs and Asprey JJA; see also Merbank Corp Ltd v Landel Corp of New Zealand Ltd (1979) 1 NZCPR 33 at 35–6 (Holland J). But there would also be some problems with a literal approach (for example with two different mortgagees from the same mortgagor): see Burrows reviewing The New Zealand Torrens System Centennial Essays (1971) in (1971) 4 NZULR 421, 423. The approach taken by the courts over a long period of time confirms that the general law priorities rules are to be applied to Torrens title land except in circumstances where it is made quite clear by the legislative provisions or the legislative scheme that they are not to apply: see 28.2 and 4.22. This leaves a purchaser or mortgagee of Torrens title land [page 694] in a very vulnerable position by comparison with the position at general law, particularly with the advantage of the deeds registration system, as to which see Chapter 27. As has been discussed, the legal estate does not pass until registration of the instrument of the acquisition under the Torrens system. The ‘areas of risk’ where protection is limited under the Torrens legislation were referred to in Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969) 89 WN (Pt 1) (NSW) 568 at 577; [1969] 1 NSWR 621 at 628 (Herron CJ, Jacobs and Asprey JJA).

In the normal course of events a purchaser or a mortgagee takes a mere equitable title at settlement of the purchase or on the advance of the mortgage moneys and will not, without taking other steps which may be available under the Torrens legislation, have his priority position protected until registration (as to the effect of unregistered but registrable instruments of Torrens system land, see 4.23; see also Hinde, McMorland and Sim, 2nd ed, vol 1, [9.003]). A purchaser or a mortgagee may gain some protection by lodging a caveat in support of the unregistered interest but this would tend to be unusual unless there is some reason to expect a significant delay between settlement or advance of mortgage moneys and lodgment of the instrument for registration. The Torrens legislation does provide a number of other devices designed to enable a person acquiring a registrable interest in Torrens system land to protect his priority position. However, the machinery provided is often rather cumbersome and potentially costly, given the view that appears to be taken — or, at least, as is evident in conveyancing practice — that the risk of an adverse interest being acquired to the prejudice of the mortgagee prior to lodgment of the instrument for registration is not great.

Pre-registration protection 28.8 A search certificate and stay order procedure is available in Western Australia which enables registration to be stayed for a period of 48 hours under a written order of the Registrar (see Western Australian Torrens Act ss 146–150), but the short period of time for which registration is stayed limits the practical use of the procedure and probably accounts for the fact that it is virtually never used. The Tasmanian Torrens Act provides a priority notice procedure under which priority may be reserved, for up to 30 days, for lodgment of a dealing which is specified in the notice. The notice prevents any dealing lodged or served after the lodgment of the priority notice being registered or recorded. The procedure is contained in ss 52 and 170(2)(b) of that Act. It was to overcome the deficiencies in the ‘notice’ provisions of the Torrens legislation that New South Wales enacted s 43A of its Torrens Act. The section was inserted by Act No 44 of 1930, s 38(b)(2). Section 43A now provides: 43A(1) For the purpose only of protection against notice, the estate or interest in land under the provisions of this Act, taken by a person under a dealing registrable, or which when

appropriately signed by or on behalf of that person would be registrable under this Act shall, before registration of that dealing, be deemed to be a legal estate. (2) No person contracting or dealing in respect of an estate or interest in land under the provisions of this Act shall be affected by notice of any instrument, fact, or thing merely by omission to search in a register not kept under this Act. (3) Registration under Division 1 of Part 23 of the Conveyancing Act 1919 shall not of itself affect the rights of any person contracting or dealing in respect of estates or interests in land under the provisions of this Act. (4) Nothing in subsection (2) or (3) operates to default any claim based on a subsisting interest, within the meaning of Part IVA, affecting land comprised in a qualified folio of the Register.

The operation of s 43A was considered in IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550. Kitto and Taylor JJ expressed divergent views as to the operation of that section. Kitto J took the view that the effect of the section was, in effect, to bring forward [page 695] the protection of the ‘notice’ provisions of s 43 to the time of settlement rather than the time of registration. Kitto J said (at 573): 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.

Taylor J took the same view as Hardie J in the New South Wales Supreme Court, which was that the effect of s 43A was to put the person taking a registrable dealing in the same position in terms of protection as he would have had had he acquired the ‘legal estate’ at common law. The High Court now regards the view of Taylor J as the correct one: see J & H Just (Holdings) Pty Ltd v The Bank of New South Wales (1971) 125 CLR 546 at 556 (Barwick CJ); Meriton Apartments Pty Ltd v McLaurin and Tait (Developments) Pty Ltd (1976) 50 ALJR 743 at 746 (Barwick CJ, Mason and Jacobs JJ); Black v Garnock (2007) 230 CLR 438 at 450, [33] (Gummow and Hayne JJ); Westpac Banking Corporation v Ollis [2008] NSWSC 824 (Einstein J); see also Butt and Ticehurst, Woodman and Nettle — The Torrens System in New South Wales, 2nd ed, Thomson Law

Book Co, Sydney, 1996, [43A.20]ff. Whichever view is taken of the proper interpretation of s 43A, its provisions are subject to significant limitations. The first is that the instrument taken must be ‘registrable under this Act’. This implies not only that the instrument itself must be registrable but that the person taking the estate or interest must have the duplicate certificate of title within his control: see NSW Torrens Act s 36(6); and see Whalan, The Torrens System in Australia, p 277. The further limitation is that to obtain the protection of s 43A the person must deal with the registered proprietor: see Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969) 89 WN (Pt 1) (NSW) 568 and IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550; see also Whalan, The Torrens System in Australia, pp 227–8, particularly the comment at p 278 that: ‘It is suggested that it would be unfortunate if the result of an action could depend upon whether parties put their transactions in one form (a transfer by direction) rather than another (a series of interlocking transfers). It would seem to be preferable to apply s 43A to each of the dealings in the series in turn and provided each qualifies, the protection would adhere’. Third, the protection only applies to a ‘purchaser’. Thus a transferee through a consent order of the Family Court does not come within its purview: Big River Timbers Pty Ltd v Stewart (1998) 9 BPR 15,599 at 16,602. One further aspect of the operation of the priorities rules with respect to legal and equitable interest in Torrens system land has already been mentioned, namely the contest between a legal but unregistered interest in land and an equitable interest. As indicated, the issue would seem to be resolved by the application of the general law priorities rules: see 28.6.

Priority between equitable encumbrances 28.9 The ‘notice’ provisions referred to (and, consequently, NSW Torrens Act s 43A) are subject to the general exception of fraud (as to the meaning of ‘fraud’ under the Torrens legislation, see Chapter 4). As between two equitable, unregistered, interests the general law priorities rules apply — where the equities are equal the first in time prevails: see 24.25. This rule is subject to an exception where the prior interest is classified as a mere ‘equity’: Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113

CLR 265; and see Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd (1993) V ConvR ¶54-487; and see Double Bay Newspapers Pty Ltd v AW Holdings Pty Ltd (1996) 42 NSWLR 409, referring also (at 423–5) to Westminster Bank Ltd v Lee [1956] Ch 7 (a ‘mere equity’ in [page 696] the sense of a claim to an equitable interest which can only be established with the grant of equitable relief by a court). The application of the general law priorities rules to Torrens land is, as is the case with the application with other priorities principles, subject to the provisions of the Torrens legislation. A feature of the legislation is the provision of caveat machinery, which provides protection for unregistered interests. The legislation in various jurisdictions provides for caveats in a number of forms and for various purposes (see Whalan, The Torrens System in Australia, pp 223–5), but for present purposes reference is made to caveats against dealings lodged by a person claiming an estate or interest in Torrens land: see NSW Torrens Act s 74F; Victorian Torrens Act s 89(1); Queensland Torrens Act s 122(1); South Australian Torrens Act s 191; Western Australian Torrens Act s 137; Tasmanian Torrens Act s 133; Land Transfer Act 1952 (NZ) s 137. As to caveats and caveatable interests, see 4.26–4.27. The application of the priorities rules to equitable interests in Torrens land is particularly important given the limited protection provided to a person taking a registrable but unregistered (hence equitable) interest under the ‘notice’ provisions referred to above (for example, NSW Torrens Act s 43 and Victorian Torrens Act s 43; and see 28.7); and also given the limitations of NSW Torrens Act s 43A: see 28.8. The application of the priorities rules and the effect of failing to lodge a caveat to protect an equitable, unregistered, interest is best considered by reference to the principal cases.

The effect of failure to caveat on priorities 28.10 The caveat procedure was included in the Torrens legislation as a device to allow time for a person who considered that he or she was adversely affected by a transaction to apply to the court before registration of

the instrument effecting the transaction. The caveat thus operated as a statutory injunction. However, the conveyancing practice was adopted of lodging caveats to protect most unregistered interests. This imbued conveyancers with the feeling that they might safely proceed if there was no caveat on the title protecting undisclosed interests. This, in turn, led to the notion that if a person with an unregistered interest failed to protect it by caveat, that person might lose priority. The first significant case in which this matter surfaced was Butler v Fairclough (1917) 23 CLR 78. That case concerned the priority of competing equitable interests where the person acquiring the interest second in time did so without notice of the first equitable interest. The second was acquired only two days after the first following a search of the grantor’s title and five days after the second was acquired the holder of the first equitable interest lodged a caveat. In the leading judgment, Griffith CJ reasoned from the premise that general law priorities principles were to be applied in so far as the applicable Torrens legislation made this possible. As the priority dispute was between competing equitable interests, the rule that ‘where the equities are equal the first in time prevails’ was applied: see Shropshire Union Railways and Canal Co v R (1875) LR 7 HL 496; and Rice v Rice (1853) 2 Drew 73; 61 ER 646. It was not suggested that the Act did not allow this rule to be applied; the only matter which was in doubt was whether the claimant first in time had done or omitted to do something which would lead to a loss of priority because his act or omission had led the second claimant to act to his prejudice. It was argued by the second claimant that the first claimant’s failure to lodge a caveat led to this result and consequently the equities were not equal, but in favour of the second claimant. [page 697] The Chief Justice equated the lodging of a caveat with notice that the registered proprietor’s title is subject to the equitable interest claimed in the caveat (at 91–2):

In the case of a contest between two equitable claimants the first in time, all other things being equal, is entitled to priority. But all other things must be equal, and the claimant who is first in time may lose his priority by any act or omission which had or might have had the effect of inducing a claimant later in time to act to his prejudice. Thus, if an equitable mortgagee of lands allows the mortgagor to retain possession of the title deeds, a person dealing with the mortgagor on the faith of that possession is entitled to priority in the absence of special circumstances to account for it. Under the Australian system a clear title on the register is, for some purposes at any rate, equivalent to possession of the title deeds. A person who has an equitable charge upon the land may protect it by lodging a caveat, which in my opinion operates as notice to all the world that the registered proprietor’s title is subject to the equitable interest alleged in the caveat. In the present case the plaintiff might, if he had been sufficiently diligent, have registered his charge of 30 June on that day. The defendant, having before parting with the purchase money to Good found on searching the register that Good had a clear title, and relying on the absence of any notice of defect in Good’s title, paid the agreed price. The question then seems to be: Had the plaintiff when the defendant acquired his equitable right taken or failed to take all reasonable steps to prevent Good from dealing with the land without notice of plaintiff’s title?

As the failure by the first claimant to lodge a caveat was an omission which led the second to act to his prejudice, the latter’s interest was accorded priority.

Abigail v Lapin 28.11 In Abigail v Lapin [1934] AC 491 (PC), the registered proprietors of certain land, the Lapins, executed transfers, in absolute form, expressed to be in consideration of money payments, in favour of Mrs Heavener. In reality the transfers were merely to secure a debt but they were handed, with the certificates of title, to the creditor who, upon registration executed a mortgage, in registrable form, to a third party. The latter had no notice of the equitable interest of the original registered proprietors and would not have received notice had he searched the register as no caveat had been lodged. The third party, Abigail, was successful in the Supreme Court of New South Wales (Lapin v Heavener (1929) 29 SR (NSW) 514) but the Full Court dismissed the appeal and a divided High Court allowed it: Lapin v Abigail (1930) 44 CLR 166; the majority consisted of Knox CJ, Isaacs J and Dixon J. Gavan Duffy and Starke JJ dissented. Knox CJ, on the basis of English authorities, said at 183–4: ‘… the possessor of a 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’. The Chief Justice said that the omission of the Lapins to caveat could not have induced Abigail to lend the money as it was not proved that he had searched title. The mere fact that the certificates of title showed Mrs Heavener as registered proprietor afforded Abigail no grounds for concluding that there were no outstanding equitable interests. Isaacs J expressed similar views. In contrast, Dixon J agreed that Abigail had not shown that he had been prejudiced by any act or omission of the Lapins but went one step further in expressing the view that even if Abigail had searched the titles he could not conclude by the absence of caveats that no equitable interests existed in the land. His Honour said at 205: ‘No doubt, if it were the settled practice for all owners of equitable interest to lodge caveats, a failure to conform to the practice would naturally lead those who searched to believe that there was no outstanding equity. It may well be doubted, however, whether such a regular practice has actually been established.’ [page 698] Knox CJ and Isaacs J would have reached different conclusions if Abigail had proved reliance on the register; Dixon J would not. In the joint dissenting judgment of Gavan Duffy and Starke JJ it was accepted that the holder of a prior equitable title is not to be postponed unless the words or actions of the holder of that interest led a person to alter his position by acquiring a subsequent equitable interest: (1930) 44 CLR 166 at 196; on this principle all members of the court agreed. On the facts it was held that, as the Lapins had clothed Mrs Heavener with power to go to the world under the false colours of absolute owner of the land, they were bound by the natural consequences of their acts (see Dixon v Muckleston (1872) LR 8 Ch App 155 at 160; cited at 44 CLR 196), namely that a third person may thereby be induced to act to his prejudice by acquiring an equitable interest in the land in ignorance of the first. It was said that, if a caveat had been lodged, Mrs Heavener would not have had the ability to represent herself as the absolute owner and thereby induce third parties to act to their prejudice. The failure of the Lapins to caveat was the

final factor in their postponement; they had ‘armed’ Mrs Heavener with false colours by executing the transfers and failed to disarm her by lodging a caveat. Lord Wright, who delivered the advice of the Privy Council [1934] AC 491 said (at 503): The question is whether in such a case as this, where the title on the register is clear, the failure to prove a search by the second encumbrancer can make any difference. There is no reason to think that Heavener would have ventured to claim that Mrs Heavener was proprietor in fee simple unless she was so registered [the only answer given by the Privy Council to the objections of Dixon J] and in that sense the grant of the transfer by the respondents to her did cause or contribute to Abigail’s lending the money. A search by or on behalf of Abigail would merely have shown that the transfer purported to be for full consideration, thus excluding any idea of it being by way of security.

The Lapins had, in the words of Kindersley VC in Rice v Rice (1853) 2 Drew 73 at 83–4; 61 ER 646 at 650, ‘voluntarily armed the purchaser with the means of dealing with the estate as the absolute legal and equitable owner, free from every shadow of encumbrance or adverse equity’: a caveat would have disarmed Mrs Heavener. The result would have been different had Abigail received notice of the Lapins’ interest in any other way. The Privy Council accepted the finding of Lord Innes J at first instance, that he had no notice.

Other High Court cases 28.12 The point arose again in IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550, but not in a way which calls for detailed discussion. Next, J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 showed that the holder of a prior equitable interest could, under special circumstances, prevent a subsequent holder of an equitable interest from being misled by means other than the lodging of a caveat. In that case the registered proprietor executed a mortgage in registrable form to the bank which, in accordance with common New South Wales bank practice, was not registered. Although the bank did not lodge a caveat it retained the duplicate certificate of title. A further mortgage was created in favour of the plaintiff company which, although it searched the register, failed to require production of the duplicate certificate of title. Barwick CJ, with whom McTiernan, Windeyer and Owen JJ expressly

agreed, delivered the leading judgment. Menzies J reached the same conclusion but for different reasons. The court held that the bank’s mortgage was entitled to priority despite the fact that [page 699] it had not lodged a caveat. Barwick CJ rejected the proposition that the failure of the holder of a prior equitable interest to lodge a caveat in respect of that interest must necessarily result in loss of priority. The remarks of Dixon J in Lapin v Abigail (1930) 44 CLR 166 at 205 were cited in support of this view, after an examination of the advice of the Privy Council, but with no mention of the lack of support that Dixon J received on appeal. In relation to the purpose of a private caveat under the Real Property Act 1900 (NSW), Barwick CJ said at 552: ‘The purpose of the caveat is not to give notice to the world or to persons who may consider dealing with the registered proprietor of the caveator’s estate or interest though if noted on the certificate of title it may operate to give such notice.’ On this point, Menzies J disagreed and approved the views previously expressed by Griffith CJ in Butler v Fairclough (1917) 23 CLR 78; and the Privy Council in Abigail v Lapin [1934] AC 491. Barwick CJ (in J & H Just (Holdings) Pty Ltd v Bank of New South Wales, above) continued at 554–5: … there may be situations in which [a failure to lodge a caveat] may combine with other circumstances to justify the conclusion that ‘the act or omission proved against’ the possessor of the priority equity ‘has conduced or contributed to a belief on the part of the holder of a subsequent equity, at the time when he acquired it, that the prior equity was not in existence’. This is the relevant principle to apply if it is claimed that the priority of a prior equitable interest has been lost in competition with a subsequent equitable interest.

Breskvar v Wall 28.13 In Breskvar v Wall (1971) 126 CLR 376, the registered proprietor of land executed a transfer by way of security, in blank and for an expressed monetary consideration. The creditor, Petrie, fraudulently and in breach of the agreement with the Breskvars inserted the name of his grandson, Wall. After his registration, Wall contracted to sell the land to Alban Pty Ltd, a bona fide purchaser for value without notice of the Breskvars’ claim.

The High Court held, unanimously, that the equitable interest of the Breskvars was to be postponed to that acquired by Alban. Barwick CJ, with whom Owen and Windeyer JJ agreed, said that the ‘actual decision’ in Abigail v Lapin [1934] AC 491 (PC) as explained (see J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 at 553–4) applied so Alban did not need to rely on the Breskvars’ failure to lodge a caveat. The difficulty with this approach is that it fails to take account of the fact that the Breskvars’ failure to lodge a caveat was an essential factor in the process by which Petrie was ‘armed’ with the power to mislead third parties: see Sackville, ‘Competing Equitable Interests in Land Under the Torrens System — A Postscript’, 46 ALJ 347. The other judgments recognised that there was more to Abigail v Lapin than conceded by Barwick CJ and Owen and Windeyer JJ. Walsh J, who dealt with the matter in detail, said at 409: [The] Acts of the [Breskvars], coupled with their failure at the relevant time to place upon the register any notice of any interest retained by them in the land, enabled Wall and his agent Petrie to represent to an intending purchaser that Wall had an unencumbered estate in fee simple in the land. Although the [Breskvars] did not themselves make any direct representations to Alban their conduct placed Wall in a position to make the representations upon which Alvan acted. In this respect their conduct was precisely the same as the conduct described in Abigail v Lapin [[1934] AC 491 at 506] which was held to postpone the equity of the person who by that conduct enabled a representation to be made upon the faith of which another person acquired an equitable interest.

Heid’s case 28.14 In Heid v Reliance Finance Corp Pty Ltd (1983) 154 CLR 326, the High Court considered the relative priorities of a vendor’s lien and two unregistered mortgages where a vendor did not lodge a caveat until after the creation of the subsequent mortgages. [page 700] Briefly, the facts of the case were that the vendor had agreed to sell certain land to a company for an agreed price, of which a substantial sum was to be secured by mortgage. The company which was purchasing the land was one of a group of companies controlled by a firm of mortgage brokers. That firm

persuaded the vendor to allow the person described as the ‘company solicitor’ to handle the transactions in connection with the sale on the basis that there would be a saving of costs if the company solicitor acted for both parties. Arrangements were made to hand to the company solicitor the certificate of title and the vendor signed and left with him a contract of sale and a memorandum of transfer of the land. The transfer contained an acknowledgment that the full purchase price had been paid. In fact, only the small part of the purchase price had been paid, so the vendor had a lien on the land for the substantial part of the agreed purchase price. Armed with the duplicate certificate of title and a transfer acknowledging that the purchase price had been received in full, the purchaser company proceeded to raise money on the securities by unregistered mortgages. In summary, it was held that the conduct of the vendor in handing over a transfer containing an acknowledgment of payment of the purchase price in full, together with the duplicate certificate of title, allowed the purchaser to represent itself as absolutely entitled to the land in law and in equity and so armed it with the capacity to go to the world as the true owner. It was held that it was reasonably foreseeable that the purchaser would engage in the conduct it had engaged in. As to the representation, Gibbs CJ said in relation to the question of arming with the ability to make representations (at 336): The result may be explained in point of principle by saying (as was said in Lapin v Abigail [(1930) 44 CLR at 198]) that the appellant is bound by the natural consequences of his acts, although I would prefer to say, in the words of Griffith CJ in Barry v Heider [(1914) 19 CLR 197 at 208], that ‘the transfer operated as a representation, addressed to any person into whose hands it might lawfully come without notice’, that Connell Investments had an absolute interest.

In a joint judgment Mason and Deane JJ restated the general principles applicable to priorities between equitable interests and the circumstances in which the prima facie priority, in point of time of creation, might be displaced. Mason and Deane JJ said (at 339): Where the merits are equal, the general principle applicable to competing equitable interests is summed up in the maxim qui prior es tempore potior est jure — priority in time of creation gives the better equity. But where the merits are unequal and favour the later interest, as for instance where the owner of the later equitable interest is led by conduct on the part of the owner of the earlier interest to acquire the later interest in the belief or on the supposition that the earlier interest did not then exist, priority will be accorded to the later interest: Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) [(1965) 113 CLR 265 at 276]; Abigail v Lapin [(1934) 51 CLR 58 at 63]; IAC (Finance) Pty Ltd v Courtenay [(1963) 110 CLR 550 at 575–6].

A common illustration of conduct on the part of the owner of an equity which postpones his interest is the arming of a third person with the indicia of title, such as the delivery of title deeds and an instrument of transfer of the property containing or accompanied by an acknowledgment that the third party has paid the consideration for it in full. Generally speaking in this situation a person who acquires an interest from the third party for value without notice of the prior interest takes in priority: Abigail v Lapin [(1934) 51 CLR at 68 et seq], reversing Lapin v Abigail [(1930) 44 CLR 166; the dissenting judgment of Gavan Duffy and Starke JJ in Lapin v Abigail [(1930) 44 CLR, at 197–8]; Tsang Chuen v Li Po Kwai [[1932] AC 715, at 728–9]; Rice v Rice [(1853) 2 Drew 73 [61 ER 646]]; and Rimmer v Webster [[1902] 2 Ch 163 at 173; cf Courtenay [(1963) 110 CLR 550 at 578]. To use the words of Lord Selborne LC in Dixon v Muckleston [(1872) LR 8 Ch App 155 at 160], words which have often been repeated in the cases to which we have referred, the owner of the first equity is said to have ‘armed’ the third party ‘with the power of going into the world under false colours’.

Looking at the particular circumstances, Mason and Deane JJ said (at 345): Accordingly, we must look at the case as one in which the appellant handed the documents to an employee of the purchaser. The delivery of the documents to the employee armed the

[page 701] purchaser with the capacity to represent itself to be the true owner of the property and to engage in fraudulent and deceptive conduct of the kind which took place. The risk of the purchaser engaging in that conduct was reasonably foreseeable. Indeed, that conduct, though not intended by the appellant, was the natural consequence of his positive act in handing over the documents to Gibby [the ‘company solicitor’ so called] — in effect to the purchaser — without taking any steps, as for instance, by lodging a caveat, to protect himself and others who might otherwise be deceived by misuse of the documents.

On the more general issue of whether failure to lodge a caveat necessarily results in loss of priority for the equitable interest that could otherwise be protected, Mason and Deane JJ said (at 342): Thus, the mere failure of the holder of a prior equitable interest in land to lodge a caveat does not in itself involve the loss of priority which the time of the creation of the equitable interest would otherwise give [J & H Just (Holdings) Pty Ltd v Bank of NSW [(1971) 125 CLR 546]), notwithstanding that the person acquiring the later interest had, before acquiring that interest, searched the register book and ascertained that no caveat had been lodged. It is just one of the circumstances to be considered in determining whether it is inequitable that the prior equitable owner should retain his priority.

State decisions 28.15 In Osmanoski v Rose [1974] VR 523, decided of course before Heid’s case, Gowans J attempted to rationalise the authorities, but was only

able to do so by saying that the New South Wales and Victorian Torrens legislation differ with respect to the nature of a caveat. Gowans J held on the facts that as the second purchasers were induced to acquire their interest and pay the balance of purchase moneys by the absence of any caveat on the register, the first purchaser’s interest was postponed to that of the second. He listed four relevant circumstances operating between the parties, one of which was that ‘the possessors of the prior equity did not lodge a caveat notwithstanding the fact that their vendors retained the certificate of title’ (at 528). The cases were again reviewed in Avco Financial Services Ltd v White [1977] VR 561. The principles in Heid’s case have also been applied in Jacobs v Platt Nominees Pty Ltd [1990] VR 146; Cash Resources Australia Pty Ltd v BT Securities Ltd [1990] VR 576; Avco Financial Services Ltd v Fishman [1993] 1 VR 90; V ConvR ¶54-442; and AG (CQ) Pty Ltd (as trustee for the AG (CQ) Family Trust) v A & T Promotions Pty Ltd (as trustee of the Toowoomba Unit Trust) [2010] QCA 83. The cases to 1984 were fully considered by McLelland J in Person-ToPerson Financial Services Pty Ltd v Sharari [1984] 1 NSWLR 745. See also Clark v Raymor (Brisbane) Pty Ltd (No 2) [1982] Qd R 790. More recent cases include Finlay v R & I Bank of Western Australia Ltd (1992) 6 BPR 13,232; Newcastle City Council v Kern Land Pty Ltd (1997) 42 NSWLR 273; Double Bay Newspapers Pty Ltd v A W Holdings Pty Ltd (1996) 42 NSWLR 409; Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266; and Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210. Of course, it is a matter of ordinary common sense for an intending mortgagee to search the Torrens register before settlement of the mortgage transaction: see Mills v Renwick (1901) 1 SR (NSW) (Eq) 173; Drulroad Pty Ltd v Gibson (1992) 5 BPR 11,878; 28.16.

Effect of authorities 28.16 Since Heid v Reliance Finance Corp Pty Ltd (1983) 154 CLR 326, it is well established, in Australia, that mere failure to lodge a caveat will not of

itself involve loss of priority which the time of creation of the equitable interests would otherwise [page 702] confer: see Heid v Reliance Finance Corp Pty Ltd at 342; and see Double Bay Newspapers Pty Ltd v A W Holdings Pty Ltd (1996) 42 NSWLR 409; and Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210. See also Daniell v Paradiso (1991) 55 SASR 359 especially at 365. The mere entrusting of the indicia of title with a person for safekeeping does not of itself confer on the keeper ostensible authority to mortgage or otherwise deal with the land: Daniell v Paradiso (1991) 55 SASR 359 at 364; and see Eade v Vogiazopoulos (1993) V ConvR ¶54-458. In a number of cases a later unregistered interest has been held to prevail over an earlier created unregistered interest: see Barnes v James (1902) 27 VLR 749; Connolly v Noone and Cairns Timber Ltd [1912] St R Qd 70; Butler v Fairclough (1917) 23 CLR 78; Abigail v Lapin [1934] AC 491; Osmanoski v Rose [1974] VR 523; cf Lynch v O’Keefe [1930] St R Qd 74; Heid v Reliance Finance Corp (1983) 154 CLR 326; King v AGC (Advances) Ltd [1983] 1 VR 682; and see Cash Resources Australia Pty Ltd v BT Securities Ltd [1990] VR 576; Heid v Reliance Finance Corp Pty Ltd, above. The vendors in Osmanoski v Rose, above, were armed with the power to go to the world under the ‘false colours’ of absolute ownership. The Osmanoskis failed to disarm them by lodging a caveat, hence their interest was postponed. This appears to be the key to reconciling Osmanoski v Rose with Just’s case (1971) 125 CLR 546. In that case the bank was not postponed because it did take steps which, it was reasonable to expect, would prevent the creation of further equitable interests in the land, at least without notice of the bank’s interest: and see Avco Financial Services Ltd v Fishman [1993] 1 VR 90; (1992) V ConvR ¶54-442. Similarly, in IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550, the holders of the prior equitable interest had taken action which would have been expected to prevent the creation of further equitable interests without notice of theirs: and see Jacobs v Platt Nominees Pty Ltd [1990] VR 146. In

contrast, Butler v Fairclough (1917) 23 CLR 78; Abigail v Lapin [1934] AC 491 (PC); and Breskvar v Wall (1971) 126 CLR 376, were cases where the holder of the first equitable interest failed to ‘disarm’ a person who was thus enabled to create further equitable interests the acquirers of which were ignorant of the first. As those acquirers showed the requisite degree of reliance on the ‘false colours’ of the person not disarmed, the holders of the prior equitable interest were postponed. Although the cases may be reconciled on general principles, the task of a legal adviser is complicated by the conflicting dicta in the cases. As the facts of each case have been critically important, it is difficult for the principles to be other than general. Otherwise the result would be a plurality of rules applicable only to special and complicated fact situations. The New Zealand text Hinde, McMorland and Sim, Land Law, 2nd ed, [10.005] states propositions which would appear to be equally applicable in Australia. The first five of these (the only ones to appear in the first edition of that work), were cited by Barker J in Morris v Merbank Corp Ltd [1984] 1 NZLR 552 at 557–8 without dissent. In summary these five propositions are as follows: 1.

The holder of an equitable interest can never improve his position by lodging a caveat: Butler v Fairclough (1917) 23 CLR 78 at 84; Lynch v O’Keefe [1930] St R Qd 74; Lamshed v Lamshed (1963) 109 CLR 440 at 451–2. The priority of competing equitable interests is not determined by the order in which caveats are lodged: see J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546. Indeed, the lodgment of a caveat confers no priority: FNCB Waltons Finance Ltd v Crest Realty Pty Ltd (1977) 10 NSWLR 621 at 631. [page 703]

2.

The holder of the prior equitable interest will not be postponed if the holder of the later equitable interest knew at the time when he acquired it, of the existence of the prior interest. In such a case, the holder of the later interest is the author of his own misfortune: see (1971) 45 ALJ 396 at 410 (Sackville) and Moffett v Dillon [1999] 2 VR 480 (CA).

3.

Failure to lodge a caveat will not necessarily involve loss of priority, but may well do so in certain circumstances such as where the registered proprietor may mislead persons that no outstanding equitable interest exists. However, if the later holder did not in fact search the register, it will be difficult to show that the failure to caveat misled him: Newcastle City Council v Kern Land Pty Ltd (1997) 42 NSWLR 273 at 284.

4.

The holder of an equitable interest must ensure that he or she is not responsible for any act or omission which might have the effect of inducing a later claimant to act to his or her prejudice.

5.

Notwithstanding the foregoing, the holder of an equitable interest is in peril if he or she does not lodge a caveat promptly. As Isaacs J said in Butler v Fairclough (1917) 23 CLR 78 at 97, ‘The protection given by the Act’ (to an equitable interest) ‘is coupled with the price of diligence in guarding others against loss arising through ignorance of the transaction’. The second edition of Hinde, McMorland and Sim added two further propositions, viz:

6.

An innocent purchaser who has searched and paid over the purchase money and obtained the transfer and certificate of title, usually prevails: see, for example, Osmanoski v Rose [1974] VR 523.

7.

A beneficiary under a trust is not postponed for failure to caveat as he or she is entitled to place confidence in the trustee. As Turner LJ said in Cory v Eyre (1863) 1 De GJ & S 149 at 169; 46 ER 58 at 66, ‘the very first principle of trusts is that the cestui que trust places confidence in his trustee’ a principle which would be defeated if the beneficiary had to give notice of his interest in case the trustee defaulted. See also Shropshire Union Railways and Canal Co v R (1875) LR 7 HL 496 and Cash Resources Pty Ltd v BT Securities Ltd [1990] VR 576 at 581.

[page 705]

Part VIII

Incidence of the Mortgage Debt

[page 707]

Chapter 29

Incidence on the Death of the Mortgagor Formerly personal estate primarily liable Mortgaged property now primarily liable Contrary intention Where the Act does not apply

29.1 29.2 29.3 29.4

Formerly personal estate primarily liable 29.1 The old rule was that, as between the personal representatives of the mortgagor and the heir or devisee of the whole or part of mortgaged land, the personalty of the mortgagor was primarily liable to the debt, and had to exonerate the mortgaged land, which was treated only as collateral security. Earlier editions of the English work may be referred to in this respect.

Mortgaged property now primarily liable 29.2 By a series of statutes, known as Locke King’s Acts, the old rule was reversed and, as between the persons entitled to the mortgagor’s property, the mortgaged property was made the primary fund for the payment of the debt. Locke King’s Acts are a series of three statutes: 17 & 18 Vict c 113 (1854), 30 & 31 Vict c 69 (1867), and 40 & 41 Vict c 34 (1877). The purpose and effect of these provisions was stated by Kay J in Re Cockcroft; Broadbent v Groves (1883) 24 Ch D 94 as follows (at 98–9):

The object of these enactments was to subject any real estate of a testator or intestate to all the incumbrances upon it in exoneration of the personal estate or other real estate, and to prevent the heir or devisee from being able to insist that the personal or other estate should be applied to discharge them. The former rule of administration, which entitled him to claim such exoneration, was fixed when personal estate was comparatively of small value or account, and the law favoured greatly the heir or devisee of the real estate. That law has been relaxed by degrees, first by subjecting real estate to the payment of the debts of the deceased, and more recently by the statutes which have made it primarily liable to all legal and equitable charges expressly in exoneration of the personal or other assets.

The first part of this passage was relied upon in In the Will of Smith [1909] VLR 91 at 94; and see In the Will of O’Brien [1924] VLR 262. Locke King’s Acts are now repealed but are reproduced and extended to mortgaged personal estate by the Administration of Estates Act 1925 (UK). This legislation was, in due course, adopted in most jurisdictions: see NSW Conveyancing Act s 145; Administration and Probate Act 1958 (Vic) s 40; Succession Act 1981 (Qld) s 61(1); Administration and Probate Act 1919 (SA) s 52; 17 & 18 Vict c 113 (UK) (Locke King’s Act; the first of the three) adopted by 31 Vict No 8 (WA); Administration and Probate Act 1935 (Tas) s 35. [page 708] For convenience, reference is made to the Victorian provisions (which are almost identical to the English provisions): 40(1) Where a person dies possessed of or entitled to or under a general power of appointment (including the statutory power to dispose of entailed interests) by his will disposes of an interest in property which at the time of his death is charged with the payment of money whether by way of mortgage charge or otherwise (including a lien for unpaid purchase money) and the deceased has not by will deed or other document signified a contrary or other intention the interest so charged shall as between the different persons claiming through the deceased be primarily liable for the payment of the charge; and every part of the said interest according to its value shall bear a proportionate part of the charge on the whole thereof. (2) Such contrary or other intention shall not be deemed to be signified — (a) by a general direction for the payment of debts or of all the debts of the testator out of his personal estate or his residuary real and personal estate or his residuary real estate; or (b) by a charge of the debts upon any such estate — unless such intention is further signified by words expressly or by necessary implication referring to all or some part of the charge.

(3) Nothing in this section shall affect the right of a person entitled to the charge to obtain payment or satisfaction thereof either out of the other assets of the deceased or otherwise.

The section applies whether the mortgagor dies testate or intestate. ‘Equitable charge’ (an expression used in subs (1) in place of ‘charge’ in the current English legislation) includes an equitable charge by deposit, whether or not accompanied by a memorandum: Pembrooke v Friend (1860) 1 John & H 132; 70 ER 692; Coleby v Coleby (1866) LR 2 Eq 803; Brent v Jones (1870) 1 VR (E) 76; Davis v Davis (1876) 24 WR 962. Indeed, the Act extends to every equitable charge, whether created by statute or however enforceable. Hence it applies to a charge for estate duty (Re Bowerman; Porter v Bowerman [1908] 2 Ch 340; Re Wilson [1916] 1 Ch 220) and a charging order on land (Re Anthony; Anthony v Anthony [1892] 1 Ch 450), but not to a general charge by the testator (testatrix) upon his real estate in aid of his personalty for payment of debts or legacies until the amount of the charge has become accurately defined: Hepworth v Hill (1862) 30 Beav 476; 54 ER 974; see also Gellibrand v Murdoch (1937) 58 CLR 236 at 247 (general banker’s lien over shares); Buchanan v May (1911) 12 SR (NSW) 366 (charge for rates). A mortgage of Torrens title land is effected by way of statutory charge: see Chapter 4. Even in the absence of authorities where the provisions have been applied to Torrens mortgages there would be no basis, given the broadness of these statutory provisions, to suppose that they did not apply to Torrens land, registered or unregistered. The extension of the provisions to include a lien for unpaid purchase money was introduced by s 2 of the Act of 1867; it was not included in the original Act: Re Newmarch (1877) 9 Ch D 12; Re Beirnstein; Barnett v Beirnstein [1925] Ch 12 at 17; Re Winter [1930] NZGLR 23; Davies v Littlejohn (1923) 34 CLR 174. It includes a vendor’s lien under a contract to create and sell ground rents (Re Kidd; Brooman v Withall [1894] 3 Ch 558); and a lien of a company: Re Turner; Tennant v Turner [1938] Ch 593; [1938] 2 All ER 560; Re Birmingham [1959] Ch 523; [1958] 2 All ER 397. For a case where a contrary intention was signified by documents other than the will, see Re Campbell; Campbell v Campbell [1898] 2 Ch 206. See also Re Nicholson; Nicholson v Boulton [1923] WN 251; Re Wakefield; Gordon v Wakefield [1943] 2 All ER 29 (CA); Re Birmingham, above. The expression ‘persons claiming through the deceased’ indicates that this

provision is only intended for the benefit of the beneficiaries inter se: see Re Fison’s Will Trusts [1950] Ch 394; [1950] 1 All ER 501. Unless the will shows a contrary intention each property charged, whether real or personal estate, contributes rateably to the payment of the charge: Lipscomb v Lipscomb (1868) LR 7 Eq 501; Trestrail v Mason (1878) 7 Ch D 665; [page 709] Re Newmarch; Newmarch v Storr (1878) 9 Ch D 12 (CA); Re Major [1914] 1 Ch 278; Mullavey v Harrison (1905) 5 SR (NSW) 545; Re Forsyth (1929) 29 SR (NSW) 411; In the Will of Davies (1924) 20 Tas LR 36. A contrary intention for this purpose is not constituted by a direction that certain properties be exonerated from a charge: Haimes v Goode (1932) 33 SR (NSW) 1; Re Bowcock [1968] 2 NSWLR 697. Value in this context means probate value: Re Cohen [1960] Ch 179. Where several properties, each separately mortgaged, are devised to the same devisee, all the mortgages are consolidated in favour of the personal estate: Re Baron Kensington; Earl of Longford v Baron Kensington [1902] 1 Ch 203. The three sources of payment referred to in subs (2) are not mutually exclusive (Gellibrand v Murdoch (1937) 58 CLR 236 at 244); and as to the proper construction of a provision of this nature, see McPhie v Mackay [1975] 2 NSWLR 369. This provision is for the exclusive benefit of the mortgagee: Lipscomb v Lipscomb, above.

Contrary intention 29.3 The provision in Victorian Act s 40(2)(a) that a direction for payment of the testator’s debts out of the estate there mentioned shall not be deemed to be a signification of an intention contrary to the statutory rule is repeated from the current English provisions which were repeated from the Act of 1867 (which referred only to personal estate), as extended by the Act of 1877 (which added a reference also to residuary real and personal estate or residuary real estate). The provision adopted Lord Campbell’s construction of the Act of 1854 (Woolstencroft v Woolstencroft (1860) 2 De GF & J 347; 45 ER 655) in preference to that of other judges: Mellish v Vallins (1862) 2 John & H 194; 70 ER 1027; Eno v Tatham (1863) 3 De GJ & Sm 443; 46 ER 706;

and other cases. The effect is that a ‘contrary intention’ is not shown by a mere charge of, or direction for, the payment of the testator’s debts out of his personal estate, or out of his other real estate; or out of a mixed fund, in aid of his personal estate, or in exoneration of his real or other real estate; or by a combination of those expressions: Re Newmarch; Newmarch v Storr (1878) 9 Ch D 12 (CA); Re Rossiter; Rossiter v Rossiter (1879) 13 Ch D 355; Elliott v Dearsley (1880) 16 Ch D 322. Nor was it shown even where the testator directed payment out of a specific fund of all and every liability which he might have incurred during his lifetime: Re Hooper; Ashford v Brooks [1892] WN 151. The contrary intention must be very clear (that is, ‘distinct and indubitable’): Nelson v Page (1868) LR Eq 25 at 28; In the Will of Knight [1918] VLR 343 at 345; Re Beirnstein; Barnett v Beirnstein [1925] Ch 12; In the Will of Fisher [1948] VLR 8; Re Blake [1905] VLR 107; Re Brady [1947] VLR 347; Wells v Mitchell [1942] VLR 55; Re Neeld [1962] Ch 643 (CA). Where there are several properties comprised in one charge the fact that a specific devise is made of one of the properties, while the other passes under a residuary devise, does not indicate a contrary intention: Re Neeld; overruling Re Biss; Heasman v Biss [1956] Ch 243. A contrary intention is shown by a direction to pay mortgages out of a special fund: Allie v Katah [1963] 1 WLR 202 (PC); Re Heininger (1908) 8 SR (NSW) 120; and see McPhie v Mackay [1975] 2 NSWLR 369; cf Wyatt v Wyatt (1916) 16 SR (NSW) 455. A direction to pay debts ‘except the mortgage debts, if any’ on ‘Blackacre’, out of the residue, implied that other mortgage debts were to be paid out of the residue (Re Valpy; Valpy v Valpy [1906] 1 Ch 531), and a direction to pay ‘trade debts’ out of residuary personal estate is sufficient to exonerate real estate, the title deeds of which were subsequently deposited with the testator’s bankers to secure an overdrawn trade account: Re Fleck; Colston v Roberts (1888) 37 Ch D 677; see Re Valpy; Valpy v Valpy. Where there are several properties comprised in one charge an indication that one property was intended to form a primary security and the other a secondary security will constitute a contrary intention: Lipscomb v Lipscomb (1868) LR 7 Eq 501; Leonino [page 710]

v Leonino (1879) 10 Ch D 460; Re Athill; Athill v Athill (1880) 16 Ch D 211 (CA). The intention to exonerate must be signified by words referring clearly to the mortgage debt. The intention to exonerate the mortgaged estate only extends to the value of the fund or property made liable by the testator. If that fund or property is insufficient, the residue must be borne by the mortgaged estate, though there may be other property which is liable by law to the testator’s debts, for example, the general personal estate: Re Birch; Hunt v Thorn [1909] 1 Ch 787, explaining Allen v Allen (1862) 30 Beav 395 at 403; Re Fegan; Fegan v Fegan [1928] Ch 45. The intention need not be expressed in the will; it is sufficient that it be expressed in any document, deed or otherwise, and in this respect the mortgage and any documents connected with it may be considered (Re Fleck (1888) 37 Ch D 677; Re Campbell; Campbell v Campbell [1893] 2 Ch 206); and the other document or documents may be executed after the will: see Brown v Abbott (1881) 7 VLR (E) 121.

Where the Act does not apply 29.4 The Act does not apply to real estate of a partner mortgaged to secure a partnership debt if, at the time of the partner’s death, the partnership assets are sufficient to answer all the debts of the partnership: Re Ritson; Ritson v Ritson [1899] 1 Ch 128 (CA). Nor does it apply where a testator gives to a son the option of purchasing real estate at a fixed price (in such a case the price so fixed is taken to be for the land free from encumbrances: Re Wilson; Wilson v Wilson [1908] 1 Ch 839; Re Fison’s Will Trusts [1950] Ch 394; [1950] 1 All ER 501); nor where the testator was in fact a surety only for the debt and it is paid off by the principal debtor after his death: Re Hawkes; Reeve v Hawkes [1912] 2 Ch 251. As to the operation of Locke King’s Act where a husband had purported to mortgage property of his wife without her knowledge, and a genuine mortgage had been created by them of their joint property and, the husband having disposed of the wife’s property by will, she elected to take under his will, see Re Williams; Cunliffe v Williams [1915] 1 Ch 450. The Act was held not to apply to the former property, but it applied to the latter, and the husband’s estate being insufficient, the property brought in by the widow’s

election was liable to contribute pari passu with the testator’s property to the discharge of his debts.

[page 711]

Chapter 30

Incidence as Between Different Properties Liabilities of different properties I Contribution Underlying principle Where contribution excluded II Exoneration Where one owner personally liable Assignment of one property free from mortgage Paramount mortgage Mortgage by wife for husband’s debt Exoneration beyond husband and wife III Marshalling Principle of marshalling Scope of principle The requirement of a common debtor No marshalling to injury of third encumbrancer In whose favour the doctrine applies Against whom the doctrine is applied Marshalling excluded by exoneration Pleading The inverse order rule

30.1 30.2 30.3 30.4 30.5 30.6 30.7 30.8 30.9 30.10 30.11 30.12 30.13 30.14 30.15 30.16 30.17

Liabilities of different properties 30.1 As between the properties of different owners which are included in the same security, each property may have to contribute its share of the common burden, or one property may be entitled to be exonerated by the other, and there is a claim to exoneration where, though only a single property is mortgaged, the debt is primarily the debt of another person than the owner of the property. The incidence of the debt is also varied by marshalling. [page 712]

I Contribution Underlying principle 30.2 The doctrine of contribution rests upon the principle that a fund that is equally liable with another to pay the debt shall not escape because the creditor has been paid out of that other fund alone. The doctrine is a doctrine of law and of equity: see Albion Insurance Co Ltd v Government Insurance Office of New South Wales (1969) 121 CLR 342 at 350 ff. Kitto J put the basis of the principle as follows (at 350): ‘This was because the basic concept was accepted by both law and equity as one of natural justice, as indeed it had been by the law of other countries since ancient times.’ At 350–2, Kitto J reviewed the history of the doctrine through the authorities and other writings: see also a review of the history of the doctrine in equity by Wright J in Wolmershausen v Gullick [1893] 2 Ch 514. Similarly, in Mahoney v McManus (1981) 180 CLR 370, Gibbs CJ said (at 378): It should be remembered that the doctrine of contribution is based on the principle of natural justice that if several persons have a common obligation they should as between themselves contribute proportionately in satisfaction of that obligation. The operation of such a principle should not be defeated by too technical an approach to the question whether a surety has paid the creditor, when he has supplied moneys to the principal debtor for the purpose of making such payment.

Consistently with this position and the basis of the doctrine, in Robinson v Campbell (No 2) (1992) 30 NSWLR 503 (CA), Meagher, Handley and

Cripps JJA said (at 508): … it is also well established that Equity will not permit legal rights of contribution or indemnity to be enforced where it would be inequitable to do so: see Dunbar v Dunbar [1909] 2 Ch 639 at 646; Coulls v Bagot’s Executor and Trustee Co Ltd (1967) 119 CLR 460 at 480, 488, 505; Cunningham-Reid v Public Trustee [1944] KB 602 at 605; Gadsden v Commissioner for Probate Duties (Vic) [1978] VR 653; Muschinski v Dodds (1985) 160 CLR 583 at 597, 617.

It follows that the application of the doctrine is not dependent upon express or implied agreement: see AGC (Advances) Ltd v West (1984) 5 NSWLR 590; Robinson v Campbell (No 2) (1992) 30 NSWLR at 508 (Meagher, Handley and Cripps JJA); and Official Trustee in Bankruptcy v Citibank Savings Ltd (1995) 38 NSWLR 116 at 119–27; (1995) 7 BPR 97,570 at 14, 471ff, where the authorities are considered in some detail by Bryson J. In equity the doctrine, or its application, is therefore within the concurrent jurisdiction: see Maitland, Equity, 2nd ed, Cambridge University Press, UK, 1947, pp 20–1. If several properties, whether of one or of several owners (see Aldrich v Cooper (1803) 8 Ves 382; 32 ER 402; Johnson v Child (1844) 4 Hare 87; 67 ER 572), are mortgaged for, or subject equally to, one debt (and not one as surety or collateral security for the other: Marquis of Bute v Cunynghame (1826) 2 Russ 275; 33 ER 339; Stringer v Harper (1858) 26 Beav 33; 53 ER 808); or, if the owner of several properties, having mortgaged one of them, charges his real estate with or devises it in trust for payment of his debts (Carter v Barnadiston (1718) 1 P Wms 505; 24 ER 492; Irvin v Ironmonger (1831) 2 Russ & M 531; 39 ER 496; Middleton v Middleton (1852) 15 Beav 450; 51 ER 612), and the properties descend or are devised to different persons (for the rule will not hold where they come to the same person: Stronge v Hawkes (1853) 4 De GM & G 186; 43 ER 478), and though one of them passes by a specific and the other by a residuary devise (Gibbins v Eyden (1869) LR 7 Eq 371; Sackville v Smyth (1873) LR 17 Eq 153; Re Smith; Hannington v True (1886) 33 Ch D 195, dissenting from Brownson v Lawrence (1868) LR 6 Eq 1), the several properties will contribute rateably to the debt, being valued for that purpose after deducting from each property any other encumbrance by which it is affected. [page 713]

The right of contribution between properties so charged is not affected by Administration of Estates Act 1925 (UK) s 35 or its equivalents (see 29.2) (Sackville v Smyth, above; notwithstanding Brownson v Lawrence; and see Re Smith; Hannington v True, both above), nor does this affect the liability of real and personal estate to contribute rateably, when both are included in the same security: Lipscomb v Lipscomb (1868) LR 7 Eq 501; Trestrail v Mason (1878) 7 Ch D 665; and see Re Dunlop; Dunlop v Dunlop (1882) 21 Ch D 583 at 590 (CA). As to foreclosure where there are rights of contribution and indemnity between co-mortgagors, see Gee v Liddell [1913] 2 Ch 62. For contribution (or marshalling) in respect of settlement of debts of a group of companies, see Brown v Cork [1985] BCLC 363 (CA). So, if one of the properties has been mortgaged for one debt and both of them for another, though the first will bear exclusively its own debt, both must contribute rateably to that which is later, the amount of the first debt being deducted from the value of the property which has paid it (Lipscomb v Lipscomb, above; De Rochefort v Dawes (1871) LR 12 Eq 540), but if there are successive loans and successive securities, and nothing to show that one property was to be charged before another, all will be charged rateably (Leonino v Leonino (1879) 10 Ch D 460; and see Flint v Howard [1893] 2 Ch 54 (CA)), provided there is an actual specific charge upon each property, and not merely a general charge or liability upon one of them, it being necessary in order to raise a case of rateable apportionment, that each property shall be equally liable: Re Dunlop; Dunlop v Dunlop, above. The right of contribution extends to sureties who are liable for the same debt, and whose liabilities are contemporaneous: Duncan, Fox & Co v North and South Wales Bank (1879) 11 Ch D 88; and see 6 App Cas 1. As to cosureties, see Scholefield Goodman & Sons v Zyngier [1986] AC 562; [1985] 3 All ER 105 (PC), in which D & J Fowler (Australia) Ltd v Bank of New South Wales [1982] 2 NSWLR 879 was doubted. On the analogy of contribution to marshalling, see Finance Corp of Australia Ltd v Bentley (1991) 5 BPR 97,412 (CA), applying Banner v Berridge (1881) 18 Ch D 254; Finance and Investments Pty Ltd v Van Kempen (1986) 6 NSWLR 305 (CA). In questions of liability, the use of the word ‘collateral’ does not imply that the security so called is secondary to another and the absence of a special provision that one property shall be resorted to before another is relevant: Re Athill; Athill v Athill (1880) 16 Ch D 211 (CA). For policies avoided by

suicide, see 6.15.

Where contribution excluded 30.3 The right of contribution will be prevented by the right of marshalling from being applied against a property which is liable to other creditors of the debtor (Bartholomew v May (1737) 1 Atk 487; 26 ER 309; as to marshalling, see 30.9–30.17), or which, not being charged with his debts, and even though consisting of leasehold and other personality, is liable under a specific or pecuniary, as distinguished from a residuary, bequest; the devisee in such cases being obliged to take the mortgaged estate as he finds it: Oneal v Mead (1720) 1 P Wms 693; 24 ER 574; Davis v Gardiner (1723) 2 P Wms 187; 24 ER 693; Wythe v Henniker (1833) 2 My & K 635; 39 ER 1087; Halliwell v Tanner (1830) 1 Russ & M 633; 39 ER 243; Cope v Cope (circa 1710) 2 Salk 449; 91 ER 389; and see Symons v James (1843) 2 Y & C Ch Cas 301; 63 ER 132. So if one of several properties charged with the payment of debts is expressly made liable to the payment of a mortgage debt to which it is subject, it will not be liable to contribute with other properties to the general charge: Wisden v Wisden (1854) 2 Sm & G 396; 65 ER 452. See also Finance Corp of Australia Ltd v Bentley (1991) 5 BPR 97,412. There appears to be no reason why the doctrine of contribution should not apply to Torrens title mortgages as a right in personam in law or in equity: see Frazer v Walker [1967] 1 AC 569 and the subsequent cases on the extent to which rights in personam subsist. [page 714]

II Exoneration Where one owner personally liable 30.4 The doctrine of contribution is founded on equality. It assumes that of two properties, X and Y, comprised in the same security, both are equally liable to bear the debt; but this prima facie equality is subject to exception, as the doctrine of exoneration depends upon the presumed intention of the parties: see Official Trustee in Bankruptcy v Citibank Savings Ltd (1995) 38

NSWLR 116 at 129–30; 7 BPR 14,469 at 14,480–1 (Bryson J). Thus if the mortgagor, being personally liable, assigns one property, X, and retains the other, Y, X is no longer treated as equally with Y to bear the debt, unless the assignment is expressly made subject to the mortgage (Re Mainwaring; Mainwaring v Verden [1937] Ch 96; [1936] 3 All ER 540 (CA)); so, continuing the example, ‘… if the mortgagee enforces the debt against X, then the assignee of that property is entitled to be exonerated at the expense of Y’: Chase Corporation (Australia) Pty Ltd (Scheme Administrators Appointed) v North Sydney Brick and Tile Co (1994) 35 NSWLR 1 at 22 (Cohen J); and see Gee v Liddell [1913] 2 Ch 62; and also Caldwell v Bridge Wholesale Acceptance Corporation (Australia) Ltd (1993) 6 BPR 13,539, where the authorities are discussed (particularly the latter case, at 13,544–6 per Cohen J), and the proposition that the doctrine only applied to the relationship of husband and wife was rejected. The duty of the mortgagor to discharge his own personal liability makes the property in his hands the primary fund for payment. So, too, where it has come to the hands of the mortgagor’s personal representatives. Hence, if the mortgagor or the mortgagor’s personal representatives have paid the debt, there is no equity to compel contribution from X: Re Darby’s Estate; Rendall v Darby [1907] 2 Ch 465; see Re Stephenson; Solomon v Trustees Executors and Agency Co of NZ Ltd [1911] NZLR 145. On the other hand, if the mortgagee enforces the debt against X, the assignee of that property is entitled to be exonerated at the expense of Y: Re Best; Parker v Best [1924] 1 Ch 42. This is so whether the assignment of X was for valuable consideration or was voluntary: Ker v Ker (1869) 4 IR Eq 15. As to an exchange, see Kirkham v Smith (1749) 1 Ves Sen 258; 27 ER 1018; and as to the effect of a sale by the court, see Lloyd v Johnes (1804) 9 Ves 37 at 64; 32 ER 514 at 524. If a person, bound to elect between two properties, has mortgaged one of them before election, and afterwards elects to take the other, the first must be taken subject to the mortgage, but will be exonerated by the other: Rumbold v Rumbold (1796) 3 Ves 65; 30 ER 896.A person with a right of exoneration has a charge by way of indemnity to secure the right: Gee v Liddell [1913] 2 Ch 62 at 72. There appears to be no reason why the doctrine of exoneration should not apply to Torrens title mortgages both as a right in personam (see Frazer v

Walker [1967] 1 AC 569 and subsequent cases on the extent to which rights in personam subsist) and as an equitable charge by way of indemnity, but subject to the priorities rules discussed previously (see Chapter 28), a position supported by Caldwell v Bridge Wholesale Acceptance Corporation (Australia) Ltd (1993) 6 BPR 13,539.

Assignment of one property free from mortgage 30.5 If the mortgagor has assigned both properties, each to a different assignee, the above reason fails, for neither assignee is personally liable. Where, however, the first assignment — that of X — was to a purchaser for value and contained a covenant against encumbrances, or for further assurance, this furnishes a ground for giving preferential treatment to X, and the assignee of X will be entitled to exoneration out of Y: Re Jones; Farrington v Forrester [1893] 2 Ch 461 at 470; see Averall v Wade (1835) L & G temp Sugd 252; Hughes v Williams (1852) 3 Mac & G 683; 42 ER 423; Chappell v Rees [page 715] (1852) 1 De GM & G 393; 42 ER 603; Re Roddy’s Estate; Ex parte Fitzgerald (1861) 11 Ir Ch R 369; Re Roche’s Estate (1890) 25 LR Ir 271. This is so even though his claim, being only equitable, will not be enforceable against one who takes the legal estate in Y for value and without notice: Ocean Accident and Guarantee Corp v Collum [1913] 1 IR 337. It is the same where, on the assignment of X, the mortgagor represented that it was free from encumbrances (M’Carthy v M’Cartie [1904] 1 Ir R 100 at 115; see Finch v Shaw; Colyer v Finch (1854) 19 Beav 500; 52 ER 445), but it seems that this ground of exoneration is not available for a voluntary assignee: Tighe v Dolphin [1906] 1 Ir R 305; and see Stronge v Hawkes (1859) 4 De G & J 632; 45 ER 246. The doctrine of exoneration applies not only to an assignment but also to an equitable mortgage: Chase Corporation (Australia) Pty Ltd (Scheme Administrators Appointed) v North Sydney Brick and Tile Co (1994) 35 NSWLR 1 at 22–3 (Cohen J), referring particularly to Stronge v Hawkes, above.

Paramount mortgage 30.6 Where properties X and Y have become vested in an owner, A, subject to a mortgage which was not created by A but is paramount to A’s title, and where A assigns X, whether for value or not, here again the first ground for displacing the principle of equality fails. Hence, if A pays off the mortgage, A is entitled to contribution from X (Ker v Ker (1869) 4 Ir Eq 15; and see Re Darby’s Estate; Rendall v Darby [1907] 2 Ch 465), unless A assigned X on the footing that it was free from encumbrances, so as to entitle it to exoneration on the second ground: Re Jones; Farrington v Forrester [1893] 2 Ch 461; see Averall v Wade (1835) L & G temp Sugd 252; Hughes v Williams (1852) 3 Mac & G 683; 42 ER 423; Chappell v Rees (1852) 1 De GM & G 393; 42 ER 603; Re Roddy’s Estate; Ex parte Fitzgerald (1861) 11 I Ch R 369; Re Roche’s Estate (1890) 25 LR Ir 271.

Mortgage by wife for husband’s debt 30.7 It is a well established principle that a person who has mortgaged his property to secure the debt of another stands only in the position of a surety and is entitled to be exonerated by the principal debtor: Lee v Rook (1730) Mos 318; 25 ER 415; Evelyn v Evelyn (1731) 2 P Wms 659; 24 ER 904; Peirs v Peirs (1750) 1 Ves Sen 521; 27 ER 1180. The corresponding passage in a previous edition was applied by the full Federal Court in Parsons v McBain (2001) 109 FCR 120 at 127; 192 ALR 772 at 778. In this position is a wife who has mortgaged her property to secure money raised for the benefit of her husband: Huntington v Huntington (1702) 2 Vern 437; 23 ER 881; Tate v Austin (1714) 1 P Wms 264; 24 ER 382; Peirs v Peirs, above; Lancaster v Evors (1846) 10 Beav 154; 50 ER 541. There is a similar equity in favour of a husband: Bagot v Oughton (1717) 1 P Wms 347; 24 ER 420; Stokes v Clendon (1790) 3 Swans 158n; 36 ER 812; Gee v Liddell [1913] 2 Ch 62; Re a Debtor (No 24 of 1971); Ex parte Marley v Trustee of Property of Debtor [1976] 2 All ER 1010; Re Thompson (1976) 8 ALR 479; and see Caldwell v Bridge Wholesale Acceptance Corporation (Australia) Ltd (1993) 6 BPR 13,539. Exoneration applies also where jointly owned property is mortgaged to secure the indebtedness of one co-owner (Re Pittortou [1985] 1 All ER 285; [1985] 1 WLR 58, and see Farrugia v Official Receiver in Bankruptcy [1982]

43 ALR 700; Re Berry (a bankrupt) [1976] 2 NZLR 449); but it may be a question of construction whether the liability of mortgagors is joint and several in any event: see AIB Group (UK) plc v Martin [2002] 1 WLR 94 (HL). The principle applies not only between the co-owners, but also in relation to the creditor: Re Pittortou, above. More recent cases in which this principle has been applied in the context of void or imperfect securities are considered in Chapter 13; see particularly 13.16 ff. Where the property of the wife, or property over which she has a power of appointment (Thomas v Thomas (1855) 2 K & J 79; 69 ER 701), is mortgaged, and the money is paid [page 716] to her and her husband, or to him alone, it is considered prima facie that it was borrowed for his benefit, and his property is first applied, as for payment of his own debt, unless the presumption is rebutted by proof on the part of the husband, that the whole or some part of the money did not come to his hands: Pocock v Lee (1707) 2 Vern 604; 23 ER 995; Tate v Austin (1714) 1 P Wms 264; 24 ER 382; Parteriche v Powlett (1742) 2 Atk 383; 26 ER 632; Earl of Kinnoul v Money (1767) 3 Swan 202n; 36 ER 830; Ruscombe v Hare (1828) 6 Dow 1; 3 ER 1379. If the debt was not originally incurred for the benefit of the husband, this equity of exoneration does not arise by reason of his giving a covenant as additional security: Bagot v Oughton (1717) 1 P Wms 347; 24 ER 420; and see Christmas v Christmas (1725) Cas temp King 20; 25 ER 199; Pitt v Pitt (1823) Turn & R 180; 37 ER 1065; Nelson v Booth (1857) 27 LJ Ch 110; Gray v Dowman (1858) 27 LJ Ch 702. The result will be the same, where the husband has paid off the mortgage, and has taken an assignment of it in trust for himself: Huntington v Huntington (1702) 2 Vern 437; 23 ER 881. Where it appears on the face of the mortgage deed that the money was paid to the husband, the court infers, subject to rebutting evidence, that the debt is the debt of the husband, and that the wife’s property is a surety for it, but by way of rebuttal it may be shown that the money was in fact paid to the wife, or that it was applied by the husband for her benefit: Hall v Hall [1911] 1 Ch 487.

The value of cases decided in Victorian England to changed social conditions was doubted by Walton J in Re Woodstock (a bankrupt) (19 November 1979, unreported), referred to in Re Pittortou [1985] 1 All ER 285; [1985] 1 WLR 58. It has been said that the wife’s right to exoneration of her property should be postponed to the husband’s other debts (Tate v Austin, above, cited with approval in Clinton v Hooper (1791) 3 Bro CC 201; 29 ER 490) but this has been doubted (Hudson v Carmichael (1854) Kay 613; 69 ER 260) and is inconsistent with the principle that the husband’s creditors are not subrogated to the mortgagee as against the wife’s property: Robinson v Gee (1749) 1 Ves Sen 251; 27 ER 1013. For an account of the law in this area, see Collier, ‘Bankrupt Husbands and the Application of the Doctrine of Exoneration in Australian Law; Moving into the 21st Century’ (2008) 82 ALJ 720. The wife’s right to have her property indemnified depends on the circumstances of the particular case, and where it appears that the debt, though legally the debt of the husband, was contracted to pay the expenses of the extravagant joint living, no inference of her right to indemnity will be drawn (Paget v Paget [1898] 1 Ch 470); and see further where the right to indemnify is rebutted on the ground that the debt was really the wife’s: Lewis v Nangle (1752) 1 Amb 150; 27 ER 97; Clinton v Hooper, above; Earl of Kinnoul v Money (1767) 3 Swan 202n; 36 ER 830. The wife will also have no claim to exoneration, if, after her husband’s death, she directs his executor to apply his personalty in payment of the legacies given by his will, whether the personal estate was so applied before or after such direction: Clinton v Hooper, above. Even where the money was raised for the benefit of the husband alone, the wife will have no claim, if the mortgage was made in execution of a joint power in the husband and wife to raise money by mortgage, and she took the estate subject to the power; because the estate conveyed to the mortgagee was not that of the wife alone, but was created under the power, and in conformity with the purpose of the settlement: Scholefield v Lockwood (No 3) (1863) 32 Beav 439; 55 ER 172. The presumption in these cases in favour of the wife may be rebutted by parol evidence, and the rule concerning the admission of such evidence appears to be that, though parol evidence is not admissible to show that a transaction purporting by the instruments themselves, or by them and by other evidence not parol, to be for the husband’s benefit, was of a different

kind. It may be shown that the debts of the wife were paid with the [page 717] money, or that it was in fact applied to some other than the purpose for which it was raised, or that, under the circumstances, the husband’s estate is not primarily liable: Clinton v Hooper, above; Thomas v Thomas (1855) 2 K & J 79; 69 ER 701; Gray v Dowman (1858) 27 LJ Ch 702. Hence, evidence is admissible that the widow, in conversation with the executor, admitted an agreement that the debt should be discharged out of the estate, and disclaimed her right of exoneration.

Exoneration beyond husband and wife 30.8 As the Full Federal Court said in Parsons v McBain (2001) 109 FCR 120 at 127; 192 ALR 772 at 779 [19], while it was once thought that the doctrine of exoneration was limited to husband and wife, the authorities show that the doctrine is not so limited and will apply to other cases. Examples are Gee v Liddell [1913] 2 Ch 62 (brothers) and Caldwell v Bridge Wholesale Acceptance Corp (Australia) Ltd (1993) 6 BPR 13,539 at 13,544 (two couples). In Knight v Lawrence [1993] BCLC 215, Browne-Wilkinson VC applied the principle between partners, but said at 231 that this was a matter of applying a general equitable principle ‘whether it be called marshalling or the equity of exoneration’.

III Marshalling Principle of marshalling 30.9 Although it is customary to speak of the doctrine of marshalling, there are actually three or four principles which can be described as ‘marshalling’ and it is easy to misread authorities if this is not borne in mind. The principles are (a) the right of a surety to have access to the principal’s property to make good what the surety has paid; (b) the right of a person

having resort to one fund only protecting himself from the capricious exercise of power of another person who has both access to that fund and another fund as well; (c) the inverse order rule discussed in 30.17; and, perhaps (d) allied principles such as those considered in Finance Corporation of Australia Ltd v Bentley (1991) 5 BPR 11,833 at 11,834: see Sarge Pty Ltd v Cazihaven Homes Pty Ltd (1994) 34 NSWLR 658 at 662–3. Apart from 30.17, doctrine (b) is that to which the text refers. The doctrine of marshalling rests upon the principle that a creditor who has the means of satisfying his debt out of several funds shall not, by the exercise of his right, prejudice another creditor whose security comprises only one of the funds. The doctrine applies to all types of property. (For insurance policies, see Heyman v Dubois (1871) LR 13 Eq 158; Bank of New South Wales v City Mutual Life Assurance Society Ltd [1969] VR 556; Commonwealth Trading Bank v Colonial Mutual Life Assurance Society Ltd [1970] Tas SR 120; (1970) 26 FLR 338; Bissett v ANZ Bank Ltd [1961] NZLR 687.) The corresponding part of the first Australian edition was endorsed by Santow J in Australia and New Zealand Bank v Magarditch (1 April 1997, unreported). Although the rationale for equitable intervention is to avoid any prejudice caused to subsequent mortgagees by the first mortgagee’s caprice in exercising his choice of fund, or that ‘it shall not depend upon the will of one creditor to disappoint another’ (Aldrich v Cooper (1803) 8 Ves 382 32 ER 402 per Lord Eldon LC), this does not require the first mortgagee to act deliberately or wilfully: Across Australia Finance v Kalls (2008) 14 BPR 26,265 at [19]–[22], [28]. The right to marshal does not arise out of abstract justice, but only where there is a duty of one debtor to pay the debts of another: Sarge Pty Ltd v Cazihaven Homes Pty Ltd, above; CAN 077 991 890 v National Australia Bank (2007) 13 BPR 24,299. [page 718] The doctrine only operates in relation to securities given by the debtor, not, for example, to a collateral security given by the debtor’s company or by some relative: Re O’Leary; Ex parte Bayne (1985) 61 ALR 674; and Beachquest Pty Ltd v Interstate Mortgage and Investments Pty Ltd [2001]

QSC 512. The doctrine applies to mortgages of Torrens title land, whether or not there are other securities involved: Bank of New South Wales v City Mutual Life Assurance Society Ltd, above; and see Takemura v National Australia Bank Ltd (2003) 11 BPR 21,185; NSW ConvR ¶56-056: cf Kerr, Principles of the Australian Lands Titles (Torrens) System, Law Book Co, Sydney, 1927, p 23 as to the applicability of the principles of marshalling of assets between beneficiaries for the payment of debts. Thus, if the owner of two properties X and Y mortgages them both to A and then mortgages one of them, Y, to B, B may require the securities to be marshalled — that is, that A’s mortgage shall be thrown upon property X so far as it will suffice, and property Y, or so much as is not required for A’s mortgage, shall be left to satisfy B’s mortgage: Lanoy v Duke of Athol (1742) 2 Atk 444; 26 ER 668; Aldrich v Cooper (1803) 8 Ves 382; 32 ER 402; Baldwin v Belcher; Re Cornwall (1842) 3 Dr & War 173; Tidd v Lister (1852) 10 Hare 140 at 157; 68 ER 872 at 879; on appeal (1854) 3 De GM & G 857; 43 ER 336; Gibson v Seagrim (1855) 20 Beav 614; 52 ER 741; Lawrence v Galsworthy (1857) 3 Jur NS 1049; Re Roddy’s Estate (1861) 11 I Ch R 369; Webb v Smith (1885) 30 Ch D 192 (CA); Miles v Official Receiver (1963) 109 CLR 501; Bank of New South Wales v City Mutual Life Assurance Society Ltd, above; Commonwealth Trading Bank v Colonial Mutual Life Assurance Society Ltd, above; Victoria and Grey Trust Co v Brewer (1971) 14 DLR (3d) 28; Butler Engineering Ltd v First Investors Corp Ltd [1986] 1 WWR 469; Mir Bros Projects Pty Ltd v Lyons [1978] 2 NSWLR 505;Chase Corporation (Australia) Pty Ltd (Scheme Administrators Appointed) v North Sydney Brick and Tile Co (1994) 35 NSWLR 1; ACN 077 991 890 Pty Ltd v National Australia Bank Limited [2007] NSWSC 358; Across Australia Finance v Kalls (2008) 14 BPR 26,265 and see Takemura v National Australia Bank Ltd (2003) 11 BPR 21,185 at 21,189; NSW ConvR ¶56-056 at [37] (Young CJ in Eq), where this proposition was specifically relied upon and the doctrine of marshalling applied where the bank held mortgages over both land and a business and the other relevant party held a mortgage over land only. See Re Chute’s Estate [1914] 1 IR 180, where a bank mortgage for an overdraft was treated as paid off in accordance with the rule in Clayton’s Case (1816) 1 Mer 572; 35 ER 781, as applied in Deeley v Lloyds Bank Ltd [1912] AC 756: see 32.54. The fact that B had an opportunity to take security over X as well as Y is irrelevant to his right to seek relief: Across Australia Finance v Kalls, above, at [49].

In Lanoy v Duke of Athol, above, it was said that the second mortgage must be taken without notice of the first, but this does not seem to be material: Flint v Howard [1893] 2 Ch 54 at 74 (CA); but cf Re Lawder’s Estate (1861) 11 I Ch R 346; Re Roddy’s Estate, above; Re Roche’s Estate (1890) 25 LR Ir 271. The mortgagee of the two properties must not be bound by the terms of his mortgage to resort to one property rather than the other: Re Holland (1928) 28 SR (NSW) 369 at 378–9; Miles v Official Receiver, above.

Scope of principle 30.10 This principle applies to all securities, whether mortgages, charges (Lanoy v Duke of Athol (1742) 2 Atk 444; 26 ER 668; Rancliffe v Parkyns (1818) 6 Dow 149 at 214; 3 ER 1428 at 1449), or liens (Trimmer v Bayne (1803) 9 Ves 209; 32 ER 592; Sproule v Prior (1826) 8 Sim 189; 59 ER 76); but not to a right of set-off (Webb v Smith (1885) 30 Ch D 192 (CA)), so as, that is, to subrogate the second creditor to the first creditor’s right of set-off against fund X, if he resorts to fund Y on which the second creditor’s debt is charged. The doctrine has been applied, notwithstanding Locke King’s Acts (UK) (see 29.2) so as to entitle rentchargees under a will, whose rentcharges were to be created out of mortgaged land, to have the land sold, reserving the rentcharges, and then to have any [page 719] deficiency made good out of the personal estate: Re Fry; Fry v Fry [1912] 2 Ch 86, following and applying Buckley v Buckley (1887) LR 19 Ir 544. It has also been applied by analogy where a broker pledged his customer’s securities with his own, so that, on the broker’s bankruptcy, and a sale by the pledgee of the customer’s securities, the customer was entitled, as against the trustee in bankruptcy, to the benefit of the broker’s securities: Re Burge, Woodall & Co; Ex parte Skyrme [1912] 1 KB 393. However, it does not interfere with the right of the creditor with several securities to resort to whichever he chooses: see Mir Bros Projects Pty Ltd v Lyons [1977] 2 NSWLR 192 (subsequent proceedings are reported at [1978] 2 NSWLR 505); Across Australia Finance v Kalls (2008) 14 BPR 26,265 at [30]; Elnic

Holdings Pty Ltd v New Wave Development (NSW) Pty Ltd [2005] NSWSC 1226 at [21]. The principle only applies as against the owner of the two properties, and if A has satisfied the debt out of Y, it operates by subrogating B to his rights against X: Mason v Bogg (1837) 2 My & Cr 443; 40 ER 709; Wallis v Woodyear (1855) 2 Jur NS 179; Dolphin v Aylward (1870) LR 4 HL 486 at 500–1; The Chioggia [1898] P 1, distinguishing The Edward Oliver (1867) LR 1 A & E 379; Mir Bros Projects Pty Ltd v Lyons [1978] 2 NSWLR 505; Butler Engineering Ltd v First Investors Corp Ltd [1986] 1 WWR 469. In Butler’s case, the plaintiff was first mortgagee of three properties A, B and C; the defendant was second mortgagee of C; a sale of A and B alone would have produced a substantial deficiency, but a sale of all three properties would have produced a substantial balance. The second mortgagee was permitted to pay the first mortgagee the difference between the value of A and B and the first mortgage moneys and was subrogated to the first mortgage in respect of C. As to the case where the only fund to which the subsequent mortgagee could resort has been applied for the first creditor’s debt by order of the court, see Gwynne v Edwards (1825) 2 Russ 289n; 38 ER 349. A mortgagee may resort to funds not comprised in his security where, for example, that has been swept away by a landlord under a distress for rent: Re Stephenson; Ex parte Stephenson (1847) De G 586; and see Aldrich v Cooper (1803) 8 Ves 382; 32 ER 402. The principle of marshalling is not such as to confer an equitable right of property on a party to whom the right is available. It is no more than a right to seek from the court an equitable remedy in certain circumstances: Commonwealth Trading Bank v Colonial Mutual Life Assurance Society Ltd [1970] Tas SR 120, where the defendant was first mortgagee of land and of one of its own life policies. The bank was second mortgagee of the land. On default by the mortgagor, the defendant sold the land for more than its debt and reassigned the policy to the mortgagor. The bank claimed, unsuccessfully, that the defendant held the policy in trust for it. And see Chase Corporation (Australia) Pty Ltd (Scheme Administrators Appointed) v North Sydney Brick and Tile Co (1994) 35 NSWLR 1 at 19–21 per Cohen J; and also Sarge Pty Ltd v Cazihaven Homes Pty Ltd (1994) 34 NSWLR 658.

The requirement of a common debtor

30.11 The extent to which the principle of marshalling requires a common debtor was considered relatively recently by White J in Beachquest Pty Ltd v Interstate Mortgage and Investments Pty Ltd [2003] 2 Qd R 586 at 597–8 and by Windeyer J in ACN 077 991 890 Pty Limited v National Australia Bank Limited [2007] NSWSC 358, who referred to the corresponding part of the previous edition with approval at [13]. The general rule is that in order to oblige a creditor to marshal its securities the funds must be funds of the same debtor. The reason for the rule was stated by Lord Eldon in Ex parte Kendall (1811) 17 Ves 514 at 520; 34 ER 199 at 201–2; and see The Chioggia [1898] P 1 at 6 and Sarge v Cazihaven Homes Pty Ltd (1994) 34 NSWLR 658. [page 720] It is not sufficient to satisfy the same debtor test, for example, that security has been given by a company to all the shares in which the debtor is beneficially entitled: see Meagher, Gummow and Lehane [11-040] based on Re O’Leary; Ex parte Bayne (1985) 61 ALR 674 at 680. This can as well apply to unit holding in a unit trust. There is an exception to the general rule that assets will be marshalled only among creditors of a common debtor, namely that there may be resort to marshalling to give effect to the equities in favour of the creditors of that debtor who is only secondarily liable for the debt, or ought to be called upon only after the exhaustion of the other’s means: Carter v Tanners’ Leather Co 81 NE 902 at 904 (1907) (Mass) followed in Sarge Pty Ltd v Cazihaven Homes Pty Ltd (1994) 34 NSWLR 658 at 662. See also Neff v Miller (1848) 8 Barr 347, cited in ACN 077 991 890 Pty Limited v National Australia Bank Limited, above. It had been submitted in Sarge at 663 that where the creditors are creditors of funds belonging to different debtors, the right to marshal will exist where it is just to do so, that is where an equity arises in the circumstances of the case. To that submission Young J responded: ‘The right will only rise where there is an equity and there will only be an equity where there is a duty on the part of one debtor to pay the debts of the other. The right does not arise

merely because the court as a matter of abstract justice thinks that it ought to apply.’ In ACN 077 991 890 Pty Limited v National Australia Bank Limited, above, A granted a first-ranking charge over its assets and undertakings (X) to B which secured both a loan from B to A and a guarantee by A of a loan from B to C. B also enjoyed a mortgage over land owned by C (Y) to secure the loan from B to C. A granted a second charge over X in favour of D to secure a loan from D to A, which was guaranteed by C. B had resort to X with respect to the debts directly owed and guaranteed by A, and D sought to marshal against Y. C objected on the basis that A’s entitlement, as guarantor, to be subrogated to B’s rights against Y was superior to D’s entitlement to marshal. Given A did not seek subrogation, and that both its right to subrogation and any proceeds received pursuant to this right would fall within the charge it had granted to D over X in any case, Windeyer J dismissed the objection and applied the usual exception to the common debtor principle.

No marshalling to injury of third encumbrancer 30.12 Equity will not marshal securities where in aiding one encumbrancer, it would injure another: Aldrich v Cooper (1803) 8 Ves 382; 32 ER 402; Averall v Wade (1835) L & G temp Sugd 252; Dolphin v Aylward (1870) LR 4 HL 486; Victor Investment Corp v Fidelity Trust Co (1973) 41 DLR (3d) 65, SC of Can; Chase Corporation (Australia) Pty Ltd (Scheme Administrators Appointed) v North Sydney Brick and Tile Co (1994) 35 NSWLR 1. Thus, if properties X and Y are mortgaged first to A and secondly X is mortgaged to B, and thirdly Y to C, here A may resort for his whole debt either to X or Y. Now, if A is compelled to take his debt exclusively from Y, X will be left free for B, but at the expense of C, but this would clearly be inequitable. For even if C had notice when he took the security, C had notice of no more than that A had security upon Y: a purchaser is not bound to take notice of all the equities arising out of a particular deed or action: Averall v Wade, above; Shalcross v Dixon (1838) 7 LJ NS Ch 180, but cf Webb v Smith (1885) 30 Ch D 192 at 202 (CA). It follows that C ought not to lose the benefit of his contract in favour of B, who claims under no contract against that property. B, having lent money on property X only, and having taken no

charge upon or covenant respecting Y, has no more than a ‘potential’ equity against that property, which by means of the subsequent security given to C was prevented from fully arising. B has no equity to prevent the mortgagor from pledging property Y to C, none to prevent A from giving up his security [page 721] upon it, and so depriving B even of his chance of getting a title by redeeming A. The only equity which B has is in respect of so much as the mortgagor had not alienated for value. In such a case, therefore, the court would throw the debt of A upon both his securities, rateably according to their value, and so leave the residue of each to satisfy the subsequent encumbrancer, to whom it is specifically mortgaged: Barnes v Racster (1842) 1 Y & C Ch Cas 401; 62 ER 944; Bugden v Bignold (1843) 2 Y & C Ch Cas 377; 63 ER 167; Titley v Davies (1843) 2 Y & C Ch Cas 399; 63 ER 177; and see Gibson v Seagrim (1855) 20 Beav 614; 52 ER 741; Liverpool Marine Credit Co v Wilson (1872) 7 Ch App 507; Flint v Howard [1893] 2 Ch 54 (CA); Moxon v Berkeley Mutual Benefit Building Society (1890) 59 LJ Ch 524; Baglioni v Cavalli (1901) 49 WR 236; Chase Corporation (Australia) Pty Ltd (Scheme Administrators Appointed) v North Sydney Brick and Tile Co, above. The fact that A’s choice of fund has been effectively determined for him by the initiative of subsequent mortgagees is neither here nor there: Across Australia Finance Pty Ltd v Kalls (2008) 14 BPR 26,265. In Re Archer’s Estate [1914] 1 Ir R 285, under similar circumstances, marshalling of the first mortgagee’s security in favour of the second mortgagee was allowed: but in Smyth v Toms [1918] 1 Ir R 338, this was considered to be opposed to Barnes v Racster, above, and the first mortgagee’s debt was apportioned between his two securities. In relation to Barnes v Racster, and Baglioni v Cavalli, above, see Sykes and Walker p 184. But if C takes by his contract only the surplus which will remain after satisfying the earlier mortgagees, the marshalling will take place between them, without regard to C’s interest: Re Mower’s Trust (1869) LR 8 Eq 110.

In whose favour the doctrine applies 30.13 The doctrine of marshalling applies in the manner above stated in favour of a subsequent mortgagee of one of the properties subject to the original mortgagee’s security, and it applies generally in favour of persons taking under the mortgagor by assignment, whether for value or not: Aldrich v Cooper (1803) 8 Ves 382 at 395–6; 32 ER 402 at 407–8; Re Wood [1949] Qd SR 17. (See also Porter v Associated Securities Ltd (1976) 1 BPR 9279, where it was held that there was no marshalling where a subsequent encumbrancer sells and pays off a prior encumbrancer.) Thus, if, subsequently to the mortgage, the mortgagor settles one of the mortgaged properties, the mortgage debt will be thrown as far as possible on the other: Hales v Cox (1863) 32 Beav 118; 55 ER 46; Aldridge v Forbes (1840) 9 LJ Ch 37; Anstey v Newman (1870) 39 LJ Ch 769; Mallott v Wilson [1903] 2 Ch 494; Re Stephenson; Solomon v Trustees Executors and Agency Co of NZ Ltd (1911) 30 NZLR 145; but see Re Lysaght’s Estate [1903] 1 IR 235. In this situation, a surety is entitled to the benefit of marshalling: Heyman v Dubois (1871) LR 13 Eq 158; and see Re Westzinthus (1833) 5 B & Ad 817; 110 ER 992; Brigham v Saunders (1880) OB & F 66 (CA). As in the case of the mortgagee’s right to hold several securities (see 31.10), his equity of marshalling overrides the right of the surety to have the benefit of all securities for the debt which he has discharged, where he has not entered into a contract which will prevent the mortgagor from conferring upon a later mortgagee of one of the estates, the ordinary right to have the securities marshalled: South v Bloxam (1865) 2 Hem & M 357; 71 ER 541. This case was considered in New Zealand Loan and Mercantile Agency Co Ltd v Loach (1912) 31 NZLR 292. If a consignee or other agent pledges his principal’s goods with his own for his own debt, the pledgee will be compelled to resort in the first instance to the agent’s goods: Broadbent v Barlow (1861) 3 De GF & J 570; 45 ER 999; Re Holland; Ex parte Alston (1868) 4 Ch App 168; followed in Re Stratton; Ex parte Salting (1883) 25 Ch D 148 (CA). [page 722]

The doctrine does not apply in favour of the mortgagor or the mortgagor’s trustee in bankruptcy, or his personal representatives, or persons who do not take by assignment or charge or conveyance an actual interest in one of the properties. Thus, it does not apply in favour of unsecured creditors (Anstey v Newman; Re Watkins (dec’d); Guardian Trust and Executors Co of NZ Ltd v Watkins [1938] NZLR 847), or in favour of a judgment creditor (see Averall v Wade (1835) L & G temp Sugd 252 at 262; Re Stephenson; Solomon v Trustees Executors and Agency Co of NZ Ltd, above; Williamson v Loonstra (1973) 34 DLR (3d) 275, BCSC), unless he has obtained a charge on the estate: Re Fox (1856) 5 Ir Ch R 541.

Against whom the doctrine is applied 30.14 The doctrine applies against the mortgagor (Haynes v Forshaw (1853) 11 Hare 93; 68 ER 1201), and persons claiming under the mortgagor otherwise than by assignment or charge. Hence it applies against the mortgagor’s trustee in bankruptcy (Baldwin v Belcher; Re Cornwall (1842) 3 Dr & War 173; Re Tristram; Ex parte Hartley (1835) 1 Deac 288; Re Holland; Ex parte Alston (1868) 4 Ch App 168; Heyman v Dubois (1871) LR 13 Eq 158; see Re Stephenson; Ex parte Stephenson (1847) De G 586), and the mortgagor’s personal representatives: Flint v Howard [1893] 2 Ch 54 at 73 (CA). The right to marshal formerly existed against the heir (Lanoy v Duke of Athol (1742) 2 Atk 444 at 446; 26 ER 668 at 669), and against his judgment creditors (Gray v Stone (1893) 69 LT 282) and, a fortiori, against his simple contract creditors. The doctrine also applies as against the wife of the mortgagor who has charged her own property to secure the prior — that is, the double — creditor’s debt: Tidd v Lister (1854) 3 De GM & G 857; 43 ER 336. The first mortgagee is entitled to satisfy his charge as he thinks fit and the prevailing view is that he owes no duty to the second or subsequent mortgagees: Bank of New South Wales v City Mutual Life Assurance Society Ltd [1969] VR 556 at 557; Mir Bros Projects Pty Ltd v Lyons (1977) 2 NSWLR 1932 at 196; and Naxutu Pty Ltd v Perpetual Trusteee Co Ltd (2012) 92 ACSR 131 at 151 (FCAFC). However, as noted in Naxatu, there is some comment in the authorities that the first mortgagee does owe some obligation: see Meagher, Gummow & Lehane [11.025]; Sarge Pty Ltd v

Cazihaven Homes Pty Ltd (1994) 34 NSWLR 658 at 665; Chase Corporation (Australia) Pty Ltd v North Sydney Brick & Tile Co Ltd (1994) 35 NSWLR 1 at 212; 14 ACSR 586 at 603.

Marshalling excluded by exoneration 30.15 In accordance with the rule that marshalling will not be applied to the prejudice of the rights of third persons, it will not be applied to its full extent against persons claiming part of the property by assignment or charge, whether for value (Barnes v Racster (1842) 1 Y & C Ch Cas 401; 62 ER 944; Flint v Howard [1893] 2 Ch 54 at 73 (CA)) or as volunteers (Dolphin v Aylward (1870) LR 4 HL 486 at 501; Re Stephenson; Solomon v Trustees Executors and Agency Co of NZ Ltd (1911) 30 NZLR 145), unless the other part had already been disposed of with a right to exoneration against the double creditor’s mortgage (as to such right of exoneration, see 30.4–30.8). Ordinarily it will be subject to apportionment of the first mortgage debt between the two parts of the property: see 30.4. So far as Finch v Shaw (1854) 19 Beav 500; 52 ER 445 (affirmed sub nom Colyer v Finch (1856) 5 HL Cas 905 at 922; 10 ER 1159 at 1166), and Haynes v Forshaw (1858) 11 Hare 93; 68 ER 1201 suggest that the subsequent alienation of another part is necessarily subject to marshalling, they appear to be contrary to Barnes v Racster.

Pleading 30.16 It is not necessary to frame the pleadings in an action expressly for marshalling. When the court sees at any time that one class of creditors will be deprived of their debts by the claims of another class upon their fund, it will, without being called upon, direct the assets to be marshalled: Gibbs v Ougier (1806) 12 Ves 413; 33 ER 156; Commonwealth [page 723] Trading Bank v Colonial Mutual Life Assurance Society Ltd [1970] Tas SR 120; Westpac Banking Corp v Daydream Island Pty Ltd [1985] 2 Qd R 330. This paragraph in the previous edition was followed in Naxutu Pty Ltd v Perpetual Trusteee Co Ltd (2012) 92 ACSR 131 at 146.

The inverse order rule 30.17 The principle is that if a mortgagee has a mortgage over a large parcel of land which is subdivided, the mortgagee first must look to the remaining property in the hands of the mortgagor before resort to the part of the property which has been transferred to third parties. If and when the part transferred is attacked, it is in inverse order to the order of sale: Sarge Pty Ltd v Cazihaven Homes Pty Ltd (1994) 34 NSWLR 658 at 662. Although there is some reflection of the doctrine in Harbert’s Case (1594) 3 Co Rep 11b; 76 ER 647 (decided in the Exchequer), the only reported instances of its application in the last century have occurred in the United States. There, however, the rule is firmly entrenched on strong authority commencing from the early 19th century. The authorities are digested and reviewed in the annotations to Maurer v Arab Petroleum Corporation 135 SW (2d) 87 (Tex) (1940) in (1940) 131 American Reports Annotated 1. The rationale of the equitable rule is stated in Ridge of Brooklyn Realty Co v Offerman 134 NYS 788 (1912): It may be stated as a general rule that where a mortgagor conveys part of the mortgaged premises, covenanting that it is free from encumbrances, it is equivalent to an agreement that the remaining portion shall be devoted to the payment of the mortgage, and the mortgagee having knowledge of this situation is bound to respect it.

See also Pomeroy, A Treatise on Equity Jurisprudence as Administered in the United States, Bancroft — Whitney, San Francisco, 1941, vol 4, [1224]– [1225]; Gribble v Sterman & Kaplan Inc 239 A (2d) 573 (1968) (Md); and Nelson and Whitman, Real Estate Finance Law, 2nd ed, West, Minnesota, 1985, pp 728 ff. Note, however, that in Across Australia Finance Pty Ltd v Kalls [2008] NSWSC 783; (2008) 14 BPR 26,265 at [30], Bryson J observed that the law of marshalling in Australia and England has developed in a completely different way to the law of the United States. The same point is made in Meagher Gummow and Lehane at [11.025].

[page 724]

Chapter 31

Consolidation Nature of consolidation Statutory exclusion of consolidation Conditions for consolidation Same mortgagor Securities in existence Different mortgagees Securities may be of different natures Against whom consolidation can be enforced No consolidation attaches after severance of equities Extent of right of consolidation Torrens title mortgages

31.1 31.2 31.3 31.4 31.5 31.6 31.7 31.8 31.9 31.10 31.11

Nature of consolidation 31.1 A mortgagee who holds several distinct mortgages under the same mortgagor, and under which the legal dates for redemption have passed or the mortgage moneys have otherwise become due — for example in an instalment mortgage on default — may, within certain limits and against certain persons entitled to redeem all or some of the mortgages, consolidate them — that is, treat them as one — and decline to be redeemed as to any,

unless he is redeemed as to all. Consolidation is an application of the rule that he who seeks equity must do equity (Chesworth v Hunt (1880) 5 CPD 266 at 271), and is a condition which can only be imposed on the equitable right to redeem which arises after default in payment, not on the contractual right to redeem on the day fixed for payment: Cummins v Fletcher (1880) 14 Ch D 699 at 708 (CA); Mills v Jennings (1880) 13 Ch D 639 at 646 (CA); Greig v Watson (1881) 7 VLR (E) 79; Minter v Carr [1894] 3 Ch 498 at 501 (CA); Browne v Cranfield (1925) 25 SR (NSW) 443 at 446–7. The doctrine has been applied, but probably improperly, where there were several mortgages on the same property: Re Salmon; Ex parte Trustee [1903] 1 KB 147. The principle is that, redemption being an equitable right, the person who redeems must on his part do equity towards the mortgagee, and redeem the mortgagee entirely — not taking one of his securities, and leaving him exposed to the risk of deficiency on the other: Jennings v Jordan (1881) 6 App Cas 698 at 700 (HL); Mills v Jennings, above; Griffith v Pound (1890) 45 Ch D 553 at 560. The mortgagee is entitled to consolidate, whether the action is by a person who is actively seeking the aid of equity to redeem, or whether it is a foreclosure action, in which the mortgagor can redeem only upon the same terms as if he were suing for redemption. In bankruptcy the mortgagee may consolidate, whether the application to the court is by the mortgagee himself or not: Tribourg v Lord Pomfret (1773) cited Amb 733; 27 ER 474; Re Loosemore; Ex parte Berridge (1843) 3 Mont D & De G 464; Watts v Symes (1851) 1 De GM & G 240; 42 ER 544; [page 725] Selby v Pomfret (1861) 3 De GF & J 595; 45 ER 1009; notwithstanding Holmes v Turner (1843) 7 Hare 367n; 68 ER 151; Smeathman v Bray (1851) 15 Jur 1051. The mortgagor cannot insist upon consolidation as against the later mortgagee of two properties, of which there are prior mortgages to different persons. Either of such persons may be redeemed separately by the later mortgagee, notwithstanding the mortgagor’s objection: Pelly v Wathen (1849) 7 Hare 351; 68 ER 144; affirmed (1851) 1 De GM & G 16; 42 ER 457. A right of consolidation may be expressly agreed between mortgagor and mortgagee, in which case there will be no need to rely on the equitable

doctrine. Where the benefit of several mortgages is in one person and the equities in another, it may be convenient to treat the mortgages as one. A deed effecting such an arrangement is often called a deed of consolidation (for forms, see, for example, English Encyclopaedia of Forms and Precedents, 4th ed, Butterworths, London, vol 14, pp 818–27; such deeds are often made by parents and subsidiary companies in favour of banks or financial institutions and contain cross guarantees and charges).

Statutory exclusion of consolidation 31.2 In practice the doctrine of consolidation was found to cause hardship to persons dealing with estates in mortgage, and it was abolished by Conveyancing Act 1881 (UK) s 17, as to securities dated after that year, unless a contrary intention was expressed in the mortgage deeds or one of them. This provision was reproduced in the Law of Property Act 1925 (UK). These provisions are reflected in the legislation in NSW Act s 97; Victorian Act s 93; Queensland Act s 98; Western Australian Act s 56; and Property Law Act 1952 (NZ) s 85. The principal variation between these and the English provisions is that the Australian and New Zealand provisions cannot be negatived by any contrary provision in the mortgage, whereas Law of Property Act 1925 (UK) s 93 applies only ‘if and as far as a contrary intention is not expressed in the mortgage deeds or one of them’: s 93(1). The opening sentence of the English Act s 93(1) reflects the substance of the various provisions: 93 (1) A mortgagor seeking to redeem any one mortgage is entitled to do so without paying any money due under any separate mortgage made by him, or by any person through whom he claims, solely on property other than that comprised in the mortgage which he seeks to redeem …

The term ‘mortgage’ is broadly defined under the Australian legislation (see NSW Act s 7(1);Victorian Act s 18(1); Queensland Act s 6; Western Australian Act s 7) so its broad reach would include an attempt to consolidate, for example, a vendor’s lien and a mortgage in the strict sense: see Re Pearce [1909] 2 Ch 492 at 498 (CA). As to the position in relation to mortgages of Torrens title land, see 31.11. Generally, as to the position in New Zealand, see Hinde, McMorland and

Sim, Land Law (New Zealand), 2nd ed, 2004, vol 2, [15.040] (see also Hinde, McMorland and Sim, Introduction to Land Law, 2nd ed, Butterworths, Wellington, 1986).

Conditions for consolidation 31.3 In order that the right of consolidation (where the statutory provisions do not apply) may exist, it is necessary that the mortgages were created by the same mortgagor, and that all the securities — with an exception as to the exercise of the power of sale — be in existence when the claim to consolidate is set up, but the securities need not have been originally made to the same mortgagee, nor need they be of the same nature.

Same mortgagor 31.4 The mortgages must originally have been made by the same mortgagor: Cummins v Fletcher (1880) 14 Ch D 699 (CA); Sharp v Rickards [1909] 1 Ch 109; notwithstanding Beevor v Luck (1867) LR 4 Eq 537; and see Marcon v Bloxam (1856) 11 Exch 586; [page 726] 156 ER 964; Corozo Pty Ltd v Total Australia Ltd [1987] 2 Qd R 11 at 20. Thus, there can be no consolidation of a security given by a person for his own debt, with one given by him and another for their joint debt (Re Raggett; Ex parte Williams (1880) 16 Ch D 117 (CA)), and a mortgage by three cannot be consolidated with a prior mortgage by two of the same persons, though the equity of redemption belonged to all three: Re Raggett; Ex parte Williams. For the mortgagee has no right to go behind the mortgagor and inquire into equitable interests for the purpose of consolidation (Sharp v Rickards, above), and a mortgagee with several securities is not entitled to the discharge of both debts against a person who happens to be engaged with another in one mortgage only, though his co-mortgagor may have pledged another property to the same mortgagee: see Jones v Smith (1794) 2 Ves 372; 30 ER 679; Aldworth v Robinson (1840) 2 Beav 287; 48 ER 1191; Higgins v Frankis (1846) 15 LJ Ch 329; Bowker v Bull (1850) 1 Sim NS 29; 61 ER 11.

Where a tenant for life had charged the estate in exercise of a power reserved to him, and had mortgaged the charge with other property to a second mortgagee, it was held that the remainderman might redeem the latter without paying off the whole debt, on the ground that the burden of the whole redemption would in effect be an increase of the charge, making the estate of no value to those in remainder, but it was intimated that there was a distinction between the cases of the mortgagor and of the remainderman: Lord Kensington v Bouverie (1854) 19 Beav 39; 52 ER 262, affirmed (1859) 7 HL Cas 557; 11 ER 222. As to mortgages of different interest in the same land, see Jones v Griffith (1845) 2 Coll 207; 63 ER 702. For the form of an order for redemption where there were successive mortgages, first, of the entirety of land, and then of undivided shares, and the mortgages of the entirety and of one of the shares were assigned to the same person, see Thorneycroft v Crockett (1848) 2 HL Cas 239; 9 ER 1082.

Securities in existence 31.5 The securities must be in existence at the time when consolidation is claimed. Hence a surplus on one mortgage cannot be retained to meet a deficiency on a mortgage which has ceased to exist through the determination of its subject matter, such as a lease (Re Raggett; Ex parte Williams (1880) 16 Ch D 117 (CA)), or a life interest: Re Gregson; Christison v Bolam (1887) 36 Ch D 223; see Brecon Corporation v Seymour (1859) 26 Beav 548; 53 ER 1010. This does not, however, apply where a security has ceased to exist through realisation; hence the mortgagee’s right is not affected by his selling one of the estates under his power of sale: Selby v Pomfret (1861) 1 John & H 336; 70 ER 776; Cracknall v Janson (1879) 11 Ch D 1 (CA).

Different mortgagees 31.6 The securities need not have all been made to the same mortgagee. It is sufficient that they are united in the same person when consolidation is claimed (Tweedale v Tweedale (1857) 23 Beav 341; 53 ER 134; Vint v Padget (1858) 2 De G & J 611; 44 ER 1126; Selby v Pomfret (1861) 3 De GF & J 595; 45 ER 1009; Jennings v Jordan (1881) 6 App Cas 698 at 700 (HL); Pledge v White [1896] AC 187 (HL)), but a mortgage to one person and a mortgage to the same person and another on a joint account cannot be consolidated: Riley v Hall (1898) 79 LT 244. An assignment can be taken

after the bankruptcy of the mortgagor, though the holder of an original security taken after notice of the insolvency of the mortgagor will not, in bankruptcy, be allowed to gain a preference by consolidating it with an earlier security for another debt: Re Softley; Ex parte Hodgkin (1875) LR 20 Eq 746. The mortgagee has a right to the benefit of the rule, though the securities are made to trustees, and even where they are made to different sets of trustees (Tassell v Smith (1858) 2 De G & J 713; 44 ER 1166), and if the mortgages are made to different mortgagees, one of whom takes an assignment from the other of his security, the securities may be united, whether the assignee had an interest which entitled him to require an assignment [page 727] (as where he was surety for that debt: Tweedale v Tweedale, above), or whether he had no such interest: Vint v Padget, followed in Pledge v White, both above; and see Re Salmon; Ex parte the Trustee [1903] 1 KB 147. A mere equitable interest in the securities will enable the mortgagee to hold them both, the right not being founded upon any principle connected with the legal estate: Watts v Symes (1851) 1 De GM & G 240; 60 ER 1022; Neve v Pennell (1863) 2 Hem & M 170; 71 ER 427; and see Re Loosemore; Ex parte Berridge (1843) 3 Mont D & De G 464, where the rule was applied in bankruptcy by directing an account of what was due upon all the securities.

Securities may be of different natures 31.7 The encumbrancer may consolidate securities of different natures, for example an assignment of equitable personalty with a mortgage upon freeholds and leaseholds (Watts v Symes (1851) 1 De GM & G 240; 60 ER 1022; and see Spalding v Thompson (1858) 26 Beav 637; 53 ER 1044; Tassell v Smith (1858) 2 De G & J 713; 44 ER 1166; Cracknall v Janson (1879) 11 Ch D 1 (CA); Re McDonald (1972) 28 DLR (3d) 380 (ancillary chattel mortgage)), but the surplus produce of a sale of chattels included in a bill of sale cannot be held by the grantee of the bill of sale against an

execution creditor, on the ground that the former holds a mortgage of other property from the same grantor. Such a claim is considered to be inconsistent with the definition of a bill of sale, and to have been inconsistent with the provision as to setting forth the consideration and other matters in the Bills of Sale Act 1878 (UK). An equitable and a legal mortgage may be consolidated (Watts v Symes (1851) 1 De GM & G 240; 42 ER 544), as may two or more equitable mortgages: Tweedale v Tweedale (1857) 23 Beav 341; 53 ER 134. If the subject matter of the security has ceased to exist, so that the debt is an unsecured debt, consolidation is no longer possible: Talbot v Frere (1878) 9 Ch D 568; Re Raggett; Ex parte Williams (1880) 16 Ch D 117 (CA); Re Gregson; Christison v Bolam (1887) 36 Ch D 223; Chesworth v Hunt (1880) 5 CPD 226.

Against whom consolidation can be enforced 31.8 So long as there is no severance in the titles to the equities of redemption in the mortgaged properties, the right of consolidation is not affected by any change of ownership, whether by devolution on death, sale, mortgage, or otherwise (Re Breeds; Ex parte Alsager (1841) 2 Mont D & De G 328; Selby v Pomfret (1861) 3 De GF & J 595; 45 ER 1009; Margrave v Le Hooke (1690) 2 Vern 207; 23 ER 734; In the Will of Underwood (1889) 10 LR (NSW) Eq 227), and provided the mortgages were all made while the properties belonged to the mortgagor (see Squire v Pardoe (1891) 40 WR 100; 31.3 ff), they can be consolidated notwithstanding that the union of the mortgages in one person occurs after the change of title to the equities of redemption; and with notice of such change: Vint v Padget (1858) 2 De G & J 611; 44 ER 1126. Thus the right of consolidation exists where the mortgage becomes united after the bankruptcy of the mortgagor (Selby v Pomfret, above; Re Salmon; Ex parte the Trustee [1903] 1 KB 147) or after the sale or further mortgage of both properties as one transaction to the same person: Tweedale v Tweedale (1857) 23 Beav 341; 53 ER 134; Vint v Padget, above; Pledge v White [1896] AC 187 (HL). An assignee compelled to redeem another mortgage is entitled to have transferred to him the mortgage over the property in which he does not have the equity of redemption: Cracknall v Janson (1879) 11 Ch D 1; Mutual Life Assurance Society v Langley (1886) 32 Ch D 460.

No consolidation attaches after severance of equities 31.9 Where the title to the equities of redemption has been severed, the right of consolidation cannot be enforced unless it had already attached at the time of severance. [page 728] The assignee of one equity of redemption takes subject to the possibility of existing mortgages being consolidated, but the mortgagor cannot, by any subsequent dealing, prejudice the rights of his assignee: Harter v Colman (1882) 19 Ch D 630; Mutual Life Assurance Society v Langley (1886) 32 Ch D 460. There can be no consolidation after an assignment in bankruptcy: Eastern Canada Savings and Loans Co v Campbell (No 2) (1971) 19 DLR (3d) 231. The purchaser of the equity of redemption therefore takes subject only to the equities which existed at the date of the conveyance to him, and is not affected by possibilities of equities, which are dependent upon future and uncertain dealings with the property. It follows that there is no right of consolidation against such a purchaser where the mortgage of the second property was made after the mortgagor had assigned the equity of redemption of that which was first mortgaged, nor where the securities have become united only after the separation of the equities of redemption of the several estates: Jennings v Jordan (1881) 6 App Cas 698 (HL); Hughes v Britannia Permanent Benefit Building Society [1906] 2 Ch 607, and see Baker v Gray (1875) 1 Ch D 491; Minter v Carr [1894] 3 Ch 498 (CA). In Andrews v City Permanent Benefit Building Society (1881) 44 LT 641, a first mortgagee was allowed to consolidate against a second mortgagee who had notice of an express covenant for consolidation in the first mortgage. That case was not cited in Hughes v Britannia Permanent Benefit Building Society, above, the facts of which were substantially the same, where the claim to consolidate was rejected as being contrary to the principle of Hopkinson v Rolt (1861) 9 HL Cas 514; 11 ER 829 (see 25.7); that is, such a right of consolidation is treated as a right to tack further advances, so that the first mortgagee cannot consolidate mortgages created after he has received

notice of the second mortgage. As to the effect on consolidation of a consent by a second mortgagee to the first mortgagee making further advances in priority to himself, see Bird v Wenn (1886) 33 Ch D 215. As to the effect of a voluntary settlement on consolidation, apart from Law of Property Act 1925 (UK) s 173(2) (as to which, see 13.9), see Re Walhampton Estate (1884) 26 Ch D 391.

Extent of right of consolidation 31.10 The mortgagee may hold both properties (subject to the above restrictions), even against the purchaser or mortgagee of the equity of redemption of one of them without notice of the other mortgage, until payment of all that is due on both (Ireson v Denn (1796) 2 Cox Eq Cas 425; 30 ER 197; Neve v Pennell (1863) 2 Hem & M 170; 71 ER 427; Cracknall v Janson (1879) 11 Ch D 1 (CA)), and though the security of such later mortgagee is earlier in date, but postponed for another consideration: Neve v Pennell. The purchaser or other assignee may then hold until he is redeemed, both as to his own security and what he paid when redeeming the original mortgagee (Bovey v Skipwich (1671) 1 Cas in Ch 201; 22 ER 762; Titley v Davies (1743) 2 Y & C Ch Cas 399n; 63 ER 177), and if he has paid off the mortgagee who first claimed a right to consolidate, out of the purchase money of one of the properties which he has sold, he is considered to have made the payment out of his own money to the extent to which the payment was made necessary by the original mortgagee’s claim to consolidate: Cracknall v Janson. The right of consolidation overrides the right of the surety for one of the debts, who discharges it, to have the full benefit of the security for that debt (see 30.9 ff), unless there is a special contract that the surety’s right shall have priority, or unless fraud or misrepresentation against the surety has affected the rights of the mortgagee. A contract in the surety’s favour will not be inferred from the mere fact that the suretyship extends only to one of the debts, and that he refused to be bound for the other: Farebrother [page 729]

v Wodehouse (1856) 23 Beav 18; 53 ER 7, compromised on appeal (1857) 26 LJ Ch 240; cf Nicholas v Ridley (1904) 89 LT 234, on appeal [1904] 1 Ch 192.

Torrens title mortgages 31.11 The question as to whether or not the right to consolidate can be asserted in relation to Torrens title mortgages has been the subject of various decisions which have offered some assistance in furnishing an answer to the question. In Greig v Watson (1881) 7 VLR (E) 79, it was held by Stawell CJ that a mortgage of land under the Transfer of Land Statute 1866 (Vic) could not be consolidated with a mortgage of land not under the statute, while in Browne v Cranfield (1925) 25 SR (NSW) 443, Long Innes J held, in New South Wales, that although where Conveyancing Act 1919 (NSW) s 97 did not apply, a common law mortgage could not be consolidated with one under the Real Property Act 1900 (NSW), yet a mortgage under the Real Property Act could be consolidated with a common law mortgage. This decision is, of course, not inconsistent with, but rather complementary to, that of Stawell CJ; and on the basis of these decisions it would appear that, in those states in which consolidation has not been abolished by statute, a mortgagee required to redeem a common law mortgage could require the mortgagor also to redeem a Torrens mortgage, but a mortgagee required to redeem a Torrens mortgage could not require the mortgagor also to redeem a common law mortgage. In New Zealand it appears that there is no right of consolidation in respect of Torrens mortgages: Wilkin v Deans (1886) 6 NZLR 425. Since, under the ‘paramountcy’ provisions of the Torrens legislation (see 28.3–28.6), the registered proprietor holds the land absolutely free from all other encumbrances, liens, estates or interests whatsoever except those noted in the register (and save for the specified exceptions), it seems to follow that a registered proprietor should be entitled to redeem a mortgage registered on his certificate of title without at the same time being required to redeem any other mortgage not appearing on that certificate of title. Some support for this view may be lent by the fact that neither Victoria nor Western Australia, in abolishing the doctrine of consolidation in respect of general law mortgages, appears to have considered it necessary specifically to

extend the provisions of Victorian Act s 93 or Western Australian Act s 56, respectively, to mortgages of land under their Transfer of Land Acts. In both New South Wales and Queensland, the abolition provisions apply expressly to Torrens mortgages (see NSW Act s 97(3); Queensland Act s 98, applied to Torrens mortgages by s 77(1)(b) (and see the more general provisions of s 5(1)(b) of that Act)). Thus it appears that the position of the registered proprietor of land subject to any Torrens mortgage is that, in all states, he may redeem that mortgage without the necessity of redeeming any other mortgage but that, except in New South Wales, Victoria, Queensland, Western Australia and New Zealand, he may be required to redeem his Torrens mortgage as a condition of the redemption of any other mortgage not being a Torrens mortgage in any case to which the doctrine of consolidation would otherwise be extended by a court of equity. This approach conforms to the general approach of the courts with respect to the Torrens legislation as referred to by Starke J in English Scottish and Australian Bank Limited v Phillips (1937) 57 CLR 302 at 315– 16: ‘The general tendency of the courts in construing the [Torrens] Act’ is ‘to assimilate rights and liabilities under it to those existing under general law, and to alter previous law as little as possible’ (referring to Groongal Pastoral Co Ltd v Falkiner (1924) 35 CLR 157 at 163 and Guest, The Transfer of Land Act 1890, Arnall and Jackson, Melbourne, 1895, pp 3 and 215).

[page 731]

Part IX

Discharge of the Mortgage

[page 733]

Chapter 32

Redemption A. The Nature of the Right of Redemption Rights of redemption The equity of redemption Conditions for redemption B. Assignment of Right of Redemption The right to assign Form of assignment C. The Time for Redemption Usual time for redemption Early redemption Postponement of redemption Oppressive and unconscionable postponement ‘Breaking’ the mortgage Once a mortgage, always a mortgage Collateral advantages and clogs on the equity of redemption Allowable clogs Tests as to whether there is a collateral advantage Bonuses, premiums and costs Collateral advantages under modern law

32.1 32.2 32.3 32.4 32.5 32.6 32.7 32.8 32.9 32.10 32.11 32.12 32.13 32.14 32.15 32.16

Early repayment discount Release of equity of redemption Lease to mortgagee D. Persons Entitled to Redeem Mortgagor and his successors in title Assignee of equity of redemption Title by adverse possession Bankrupts Bona vacantia Subsequent encumbrancer Creditors Devolution on death Trust property Mentally disabled persons Sureties Reservation of redemption to third party E. Redemption of Building Society Mortgages Generally

32.17 32.18 32.19 32.20 32.21 32.22 32.23 32.24 32.25 32.26 32.27 32.28 32.29 32.30 32.31 32.32

[page 734]

Future interest and fi nes Liability on dissolution of society F. Redemption on Compulsory Acquisition Legislative provisions G. Payment of the Debt Notice to Pay Off Notice before payment New South Wales and Queensland statutory

32.33 32.34 32.35

32.36

provision When rule as to notice applies Missing mortgagee Tender and Payment Effect of tender of amount due Ancillary aspects Where tender dispensed with Time of tender Place of tender Legal tender Production of the money Tender must be unconditional Who may make a tender To whom the tender may be made Payment to joint creditors Appropriation of Payments Appropriation to principal or interest Appropriation by debtor Appropriation by creditor The rule in Clayton’s case Discharge of the Mortgage Mortgagee’s duty Mortgagee can be required to transfer mortgage Reconveyance formerly necessary Indorsed receipt or memorandum — NSW Indorsed receipt or memorandum — Victoria Indorsed receipt or memorandum — Tasmania and generally Receipt operating as a transfer

32.37 32.38 32.39 32.40 32.41 32.42 32.43 32.44 32.45 32.46 32.47 32.48 32.49 32.50 32.51 32.52 32.53 32.54 32.55 32.56 32.57 32.58 32.59 32.60 32.61

Cessation of mortgage terms on payment

32.62

Discharge of Torrens system mortgages Building society receipts Effect of receipt or memorandum on mortgagor’s liability Discharge of statutory mortgage Discharge of mortgages of special types — land mortgage Discharge of equitable mortgages Debentures Discharge of mortgages of personalty Discharge of collateral security Discharge of mortgages of life policies

32.63 32.64 32.65 32.66 32.67 32.68 32.69 32.70 32.71 32.72

[page 735]

The mortgagor’s right to policies Solicitor’s undertaking to discharge mortgage Preparation of reconveyance Other matters Discharge under Overreaching Powers Discharge on payment into court Discharge under overreaching conveyance Vesting Orders Vesting orders in case of trustees and mentally disordered persons Delivery of the Deeds (including the certifi cate or other instrument) Duty of mortgagee to have the deeds (certifi cate etc) ready

32.73 32.74 32.75 32.76 32.77 32.78

32.79

32.80

Loss of the title deeds (certificate etc) Indemnity and compensation by mortgagee Loss of the Right of Redemption Generally Extinguishment of Equity of Redemption by Time Mortgages of land Effect of expiration of limitation period Possession by mortgagee When time begins to run Acknowledgment and part payment Redemption of personalty Mortgage of land and personalty Enlargement of mortgage term into fee simple Subsequent encumbrancer

32.81 32.82 32.83 32.84 32.85 32.86 32.87 32.88 32.89 32.90 32.91 32.92

A. The Nature of the Right of Redemption Rights of redemption 32.1 At the outset, it should be made clear that although much of this chapter is couched in language referable to Old System mortgages, the principles considered apply to Torrens system mortgages as well. Steytler J said in Sandgate Corporation Pty Ltd v Ionnou Nominees Pty Ltd (2000) 22 WAR 172 at 182: In Australia, the expression ‘right of redemption’ has come to comprehend the legal right to have the mortgage discharged as a matter of contractual right if the mortgage is paid by the due date and also the truly equitable right to ‘have the land restored’ if there is a payment after the due date and before foreclosure.

It must be borne in mind by Australian readers that a lot of the English case law is concerned merely with the latter equitable right only as many English mortgages specify a very short period for repayment during which,

alone, the mortgagor has a contractual right at law to redeem. There are, therefore, two distinct rights of redemption — the legal or contractual right to redeem on the appointed day and the equitable right to redeem thereafter: see 1.15. The equitable right to redeem, which does not need to be expressly conferred and which only arises after the contractual date of redemption has passed, must be [page 736] distinguished from the equity of redemption, which arises when the mortgage is made and comprehends both the legal and equitable rights of redemption: see Stocks and Enterprises Pty Ltd v McBurney (1977) 1 BPR 9521 at 9526; Chant v Deputy Commissioner of Taxation (1991) 22 ATR 79; on appeal (1991) 103 ALR 387 especially at 399–400 and 1.14–1.15 and 32.2. The equitable right to redeem applies whenever property has been conveyed as security. In those cases where the nature of the transaction is doubtful (see 1.20–1.25) the litigation has generally occurred because the grantor is seeking to redeem. A mortgagor may redeem even if the mortgage was obtained by fraud: Halifax Building Society v Thomas [1996] Ch 217; [1995] 4 All ER 673. On the use of these expressions in the context of Torrens system mortgages, see 1.14, 4.1, 4.2 and Chapter 28; see also Perry v Rolfe [1948] VLR 297; Australia and New Zealand Banking Group Ltd v Greig [1980] 1 NSWLR 112; (1980) 42 FLR 387; Addison v Billion [1983] 1 NSWLR 586; Quint v Robertson (1985) 3 NSWLR 398; and Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1998) 196 CLR 245. For the discharge of such mortgages, see 32.63. General law doctrines and authorities are applicable more directly than merely by analogy in the Torrens context in relation to unregistered, or equitable, mortgages of Torrens system land, because the recognition of these mortgages as such depends upon these doctrines and authorities rather than the Torrens statutes: see 4.23.

The equity of redemption 32.2 The equity of redemption has been described as an estate and as an interest or equitable right inherent in the land: Re Wells [1933] Ch 29; Pawlett v AG (1667) Hard 465 at 468; 145 ER 550 at 551; see 1.14, 32.1. Even though the mortgagor has at law conveyed the land to the mortgagee, in equity he is considered as the owner of the land, subject only to the mortgage: see Re Wells. Though strictly equitable and formerly capable of being enforced in equity alone, it was of so much consequence in the eye of the law, that the law took notice of it, and allowed it to be assigned and devised: Pawlett v AG; Fawcett v Lowther (1751) 2 Ves Sen 300; 28 ER 193. Notwithstanding the different nature of the Torrens system mortgage the same principles have been applied to it: see 1.15 and 32.1; and see Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1998) 196 CLR 245.

Conditions for redemption 32.3 As regards general law land mortgages, an express right to redeem is generally conferred on the mortgagor by a proviso or condition in the mortgage to the effect that, if the mortgagor pays to the mortgagee the principal sum and any interest due on a certain day, the mortgagee will, at the cost of the person redeeming, reconvey to him or as he shall direct. The same applies to mortgages of personal property and of choses in action and equitable interests, with provision for reassignment or transfer back to the mortgagor. Similarly, for general law mortgages of leasehold land by assignment there will be a provision for reassignment, and for mortgages by demise or sub-demise a provision for surrender or release. It is not strictly necessary to have a provision for surrender in the case of a mortgage by demise or sub-demise in those jurisdictions having statutory provisions for satisfied terms, since the term ceases on repayment (see 32.62), but in order to define the rights of the parties a provision may be inserted in the mortgage stating that the term will cease upon repayment on the date fixed. It has been seen at 1.14–1.15 that at law, whatever form the mortgage took, upon non-payment by the appointed time, the estate of the mortgagee became absolute and irredeemable, but that equity intervened to enable the mortgagor to redeem after the date of repayment.

[page 737] Mention has been made above to reconveyance and reassignment. In New South Wales, Victoria and Tasmania, the General Law Land legislation provides for a form of endorsed receipt or memorandum, the effect of which is to obviate the need for an actual reconveyance or reassignment: see 32.58–32.61. Under the general law, a mortgagor of chattels can still redeem even after the mortgagee has seized the goods, so long as the goods are in the mortgagee’s possession: Johnson v Diprose [1893] 1 QB 512. Note that a mortgagor who is entitled to redeem (see 32.20 ff) may seek an order for sale under NSW Act s 103 and Victorian Act s 91: see 21.12 and Palk v Mortgage Services Funding plc [1993] Ch 330; [1993] 2 All ER 481. Alternatively, he may seek an order for transfer of the mortgage: see 32.56. In a redemption action it is open to the mortgagor to challenge the validity of the security he otherwise wishes to redeem: Devlin v Surfers Paradise Investments Pty Ltd [1998] 1 Qd R 404 (CA); and see 33.10.

B. Assignment of Right of Redemption The right to assign 32.4 In the absence of statutory or other express provision to the contrary, the mortgagor is free to deal with the equity of redemption: see Casborne v Scarfe (1738) 1 Atk 603; 26 ER 377; Latec Investments Ltd v Hotel Terrigal Pty Ltd (1963) 113 CLR 265 at 277; Sibbles v Highfern Pty Ltd (1987) 164 CLR 214. Consumer Credit legislation frequently restricts this right: see Chapter 9. Under most institutional mortgages the mortgagor is restrained from transferring the land without the lender’s consent, and many other mortgages similarly so provide. Such a restraint, which lasts only while the mortgage exists, is not objectionable as a clog on the equity: see 32.12–32.14. It has been seen at 17.5 that the burden of the covenant for payment does not run with the equity of redemption and there is, therefore, a danger from the point of view of the lender, on a long-term mortgage, that if the borrower could

freely dispose of the property, he might disappear from the scene and the lender would be left to his security rights alone. If the value of the property had depreciated and the whereabouts of the original borrower were unknown, the lender might suffer a loss. Consent to a transfer of the equity is usually forthcoming on terms of the transferee entering into a covenant for payment with the lender. A transfer without consent, where such is required, does not in itself invalidate the transfer, but will be a breach of the terms of the mortgage and thereby, according to the terms thereof, will give the lender the right to call in the mortgage moneys, etc if he so wishes. Depending on the terms of the restraint provision in the mortgage, it may be possible to avoid the restraint by a transfer of the equitable interest or interests in the property: see Spellman v Spellman [1961] 2 All ER 498 at 501; [1961] 1 WLR 921 at 926. This will not usually assist where an independent purchaser of the property is involved, but may be of some use where, for example, a person wishes to transfer their interest to their spouse.

Form of assignment 32.5 The mortgaged property is conveyed or otherwise transferred subject to the mortgage. If the mortgagee is party to the assignment, there will normally be a release of the original mortgagor (this release should be extended to the covenants for title implied in the mortgage) and the assignee will enter into fresh covenants with the mortgagee. If the mortgagee is not party to the assignment, the assignee should covenant with the assignor to pay the principal and interest payable under the mortgage, to observe and perform the other covenants in the mortgage and to indemnify the assignor. For implied [page 738] covenants on sale subject to encumbrance, see NSW Act s 79; Simpson v Forrester (1973) 132 CLR 499. And for implied covenants to indemnify the transferor of Torrens system land subject to encumbrance, see Real Property Act 1900 (NSW) ss 76, 80(1) and Transfer of Land Act 1958 (Vic) ss 46(2), 112(1).

C. The Time for Redemption Usual time for redemption 32.6 In England and Wales it is conventional to fix the date for redemption as six months from the date of the mortgage, even though the date for repayment is a much later date. The effect of this is that the mortgagor’s legal right to redeem ceases at six months and thereafter the mortgagor has only equitable rights. The mortgagee’s remedy to foreclose arises only after the contractual right to redeem has passed. In Australia the date for redemption is usually the same date as the date for repayment, so that the mortgagor has a legal right to redeem up to that date. When a time is fixed for redemption (and such time is unobjectionable: see 32.8) a mortgage is not redeemable until that time has arrived (see Hyde Management Services Pty Ltd v FAI Insurances Ltd (1979) 144 CLR 541) unless there is an acceleration clause (see 3.15) or a statutory right to early repayment (as under NSW Act s 93 (see below), the Consumer Credit Code and the Bankruptcy Act 1966 (Cth) s 136 (see 32.23)) or unless the mortgage is discharged pursuant to some statute — for example on resumption: see 32.35. Subject thereto a mortgagee may take objection to an action to redeem at an earlier day even though the mortgagor tenders interest during the whole intervening period: Brown v Cole (1845) 14 Sim 427; 60 ER 424; Harding v Tingey (1864) 34 LJ Ch 13; Hyde Management Services Pty Ltd v FAI Insurances Ltd, above. But if the mortgagee has taken steps to recover payment by taking possession of the property or otherwise he cannot object: Bovill v Endle [1896] 1 Ch 648; Ex parte Wickens [1898] 1 QB 543 at 548; Re Mangan; Ex parte Andrew (1983) 123 ALR 633; cf Ex parte Tori [1977] Qd R 256; O’Reilly v Heydon (1893) 14 LR (NSW) (Eq) 283; Stocks and Enterprises Pty Ltd v McBurney (1977) 1 BPR 9521. Where no date for redemption is specified and the debt is repayable on demand by the mortgagee, the mortgagor may, it seems, redeem at any time. This is apparently so even where the mortgagee has covenanted not to call the mortgage in until a specified date: GA Investments Pty Ltd v Standard Insurance Co Ltd [1964] WAR 264, where it was held that the only notice required was for such period as would enable the mortgagee to receive the

money and bank it. The difference between the two situations is that specifying a date for redemption indicates that the mortgage is not a temporary investment (see ‘the investment theory’ in relation to the six months’ rule at 32.35). Where no date for redemption is specified but the covenant for repayment specifies a date for repayment, then, subject to any right to accelerate payment, it seems that the mortgage can only be redeemed before that date on terms set by the mortgagee. Where there is no date for redemption but the covenant for repayment provides for instalment payments, whether redemption is postponed depends upon the form of the covenant. If there is a direct covenant (that is, one for payment by instalments with a proviso for the whole debt to become immediately due on default), usually the borrower cannot redeem until the date for payment of the final instalment: De Borman v Makkofaides [1971] EGD 909 (subject, of course, to any statutory or contractual right for early repayment). [page 739] Ex parte Tori, above, is a special case as the mortgage was interest free and not to be regarded as an investment. In any event the mortgagor cannot redeem while there are contingent liabilities secured by the mortgage capable of arising: Re Rudd & Son Ltd; Fosters v Rudd (1986) 3 BCC 9855; Evans v Evans (1983) Conveyancing Service (NSW) [92210].

Early redemption 32.7 In Branwood Park Pastoral Co Pty Ltd v Willing & Sons Pty Ltd [1976] 2 NSWLR 149, Helsham J identified three circumstances in which the general law disentitlement of a mortgagor to redeem before the due date for payment of principal is qualified. Barrett J followed this approach in Myross (NSW) Pty Ltd v Kahlefeldt Securities Pty Ltd (2003) 11 BPR 21,015 at 21,016 ff. The first is where there is some ‘express provision in the contract of mortgage’; the second where ‘the mortgagee himself demands payment’; and the third where the mortgagee ‘takes steps to realise his security, by entering

into possession or otherwise’. In the first case, the express provision will govern the matter. In the second and third, the mortgagee ‘cannot refuse a tender of the mortgage money and interest to the date of payment’. New South Wales is alone in having in its General Land Law legislation a provision entitling the mortgagor to redeem before the time fixed for redemption, subject to paying interest on the principal for the unexpired portion of the mortgage term: NSW Act s 93. This is applied to Torrens system mortgages: s 93(4). The early redemption is without prejudice to the right of the mortgagee to any collateral advantage or to enforce any restriction until the due date. The mortgagee cannot avoid the effect of this provision by defaulting, unless the mortgagee thereupon demands payment: Branwood Park Pastoral Co Pty Ltd v Willing & Sons Pty Ltd [1976] 2 NSWLR 149. The operation of s 93 was considered in detail by Barrett J in Myross (NSW) Pty Ltd v Kahlefeldt Securities Pty Ltd, above, at 21,016 ff: It is provided by s 93(3) that s 93 has effect ‘notwithstanding any stipulation to the contrary’. This does not mean, in my opinion, that mortgagor and mortgagee may not, by contract, stipulate for some right of early redemption by the mortgagor differing from that made available by s 93. Mortgages commonly allow early redemption provided that interest is paid up to the time of such redemption and a certain period of notice has been given. The effect of s 93(3) is that the right of early redemption conferred upon a mortgagor by s 93(1) may not be excluded or denied by contract and subsists even if the parties purport to contract for some exclusion or denial. An alternative right of early redemption created by contract may co-exist with the statutory right.

His Honour noted that that is the construction that was preferred by Needham AJ in Steindlberger v Mistroni (1992) 29 NSWLR 351. He continued: Where the contractual right is, for the mortgagor, more attractive than the statutory right, the latter, clearly enough, will remain in abeyance in a practical sense.

In Myross, above, Barrett J found that the agreement contained an implied term for early discharge, which was a contractual right that co-existed with the statutory right of early redemption under s 93. See further on the section, Evans v Evans (1983) Conveyancing Service (NSW), [92210] and Re Mangan; Ex parte Andrew (1983) 123 ALR 633. Besides the instances of early repayment mentioned, see Nominees Pty Ltd v Blann Enterprises Pty Ltd [1983] 3 NSWLR 338; Berry v Advance Bank

Australia Ltd (1995) 6 BPR 14,046. The mortgage may expressly provide for redemption at any time, on payment of the principal together with, for example, three months’ interest thereon and all costs, charges and expenses due to the mortgagee and the costs of redemption, or after a specified [page 740] period of notice or upon payment of interest in lieu of notice. See further on acceleration clauses, 3.15. Institutional mortgages sometimes permit redemption whenever the interest rate is varied. Building society rules may also provide for early repayment. The mortgagor is not liable to the mortgagee for damages caused to the latter by failure to redeem the mortgage on the due date: Nedrak Pty Ltd v Permanent Custodians Ltd (1994) 6 BPR 13,344.

Postponement of redemption 32.8 The right of redemption (strictly the equitable right to redeem, but a restriction on the contractual right must necessarily affect the equitable right), while it cannot be altogether done away with by the original contract, may be postponed by a covenant that during a certain time the mortgage shall remain irredeemable. The mere length of time of any postponement is not in itself an objection to the enforceability of such a covenant, although it may well be an important consideration. So long as the essential requirements of a mortgage transaction are observed, and oppressive and unconscionable terms are not imposed, the court will not interfere: Knightsbridge Estates Trust Ltd v Byrne [1938] Ch 741; [1938] 2 All ER 444, reversed [1939] Ch 441; [1938] 4 All ER 618, affirmed on other grounds [1940] AC 613; [1940] 2 All ER 401 (HL). (Note the distinction drawn by Sir Wilfrid Greene MR between the equitable right to redeem and the contractual right.) A direct covenant for repayment by a specified number of instalments or over a specified number of years may operate as a postponement: see De

Borman v Makkofaides [1971] Estates Gazette Digest 909. The essential requirements of a mortgage transaction are not observed where the right of redemption is rendered illusory. The nature of the interest mortgaged is relevant in this respect. Where it is freehold or a long term of years is still outstanding, subject to the other conditions of not being oppressive or unconscionable, a long postponement may be unobjectionable. A postponement of 40 years in the case of freehold was considered unobjectionable in Knightsbridge Estates Trust Ltd v Byrne in the Court of Appeal. No opinion was expressed on this point in the House of Lords, in which the case was decided on the grounds that debentures may be irredeemable: see below. The following periods have been held unobjectionable: five or seven years (Teevan v Smith (1882) 20 Ch D 724 at 729); five years (Biggs v Hoddinott [1898] 2 Ch 307); 14 years (Williams v Morgan [1906] 1 Ch 804); and see Re Fortesque’s Estate [1916] 1 IR 268 (10 years). Such arrangements are supported on the ground that the contract is valuable to both parties — the mortgagee being sure of a continuing security and the mortgagor being freed from the expense and trouble of seeking new lenders. In Multiservice Bookbinding Ltd v Marden [1979] Ch 84; [1978] 2 All ER 489, the borrower appears to have accepted the validity of a 10 years’ postponement. On the other hand, where the interest mortgaged is a short term of years a postponement for as long as, or nearly as long as, the remainder of the term will render the equity of redemption illusory: Fairclough v Swan Brewery Co Ltd [1912] AC 562 (PC) (mortgage of term of 17½ years postponing redemption until last six weeks of term); Davis v Symons [1934] Ch 442, explained in Knightsbridge Estates Trust Ltd v Byrne [1939] Ch 441 at 461– 2; [1938] 4 All ER at 629 (mortgage of insurance policies maturing before end of postponement period). [page 741] Santley v Wilde [1899] 2 Ch 474 (mortgage of 10 years residue of term with covenant to pay one-third of net profits of rents derived from

underleases mortgage security for loan and for the payment under the said covenant) must be contrasted with these cases. Santley v Wilde was criticised in Noakes & Co Ltd v Rice [1902] AC 24 (HL) by Lords Macnaghten and Davey (although the criticism was on the basis that the case concerned a collateral advantage), and it seems impossible to support the decision. It has also been suggested that the transaction was not one of mortgage but a partnership agreement to share in the profits: Waldock, The Law of Mortgages, 2nd ed, Stevens, London, 1950, p 187; Cousins on Mortgages, 1st ed, p 306; and see also Bevham Investments Pty Ltd v Belgot Pty Ltd (1982) 149 CLR 494.

Oppressive and unconscionable postponement 32.9 As to oppressive and unconscionable postponement, relevant considerations are: 1. the absence of a corresponding restraint on the mortgagee — that is, there is nothing to prevent him calling the mortgage in (see Williams v Morgan [1906] 1 Ch 804; Morgan v Jeffreys [1910] 1 Ch 620; Davis v Symons [1934] Ch 442 at 448 (quaere whether this consideration survived the supposed rejection of the test of reasonableness by Knightsbridge Estates Trust Ltd v Byrne [1939] Ch 441); 2. the size of the loan (Knightsbridge Estates Trust Ltd v Byrne [1939] Ch 441 at 455; [1938] 4 All ER 618 at 625 per Sir Wilfred Greene MR) (in that case the loan was £310,000 and the parties were a property company and the trustees of a friendly society bargaining at arm’s length); 3. the character and bargaining power of the parties, companies or individuals (Samuel v Jarrah Timber and Wood Paving Corp [1904] AC 323 at 327 (HL) per Lord Macnaghten); 4. the circumstances surrounding the loan (Knightsbridge Estates Trust Ltd v Byrne [1939] Ch 441 at 454; [1938] 4 All ER 618 at 624 per Greene MR); 5. the circumstances surrounding the claim that the postponement is invalid (Knightsbridge Estates Trust Ltd v Byrne, above (where interest rates had generally declined below the rate specified in the mortgage; this was no doubt why the mortgagor was seeking redemption).

The doctrine of restraint of trade applies to mortgages: see Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269; [1967] 1 All ER 699 (HL) (21 years unreasonable, five years reasonable); Re Petrol Filling Station, Vauxhall Bridge Road, London; Rosemex Service Station v ShellMex and BP (1969) 20 P & CR 1; Texaco Ltd v Mulberry Filling Station [1972] 1 All ER 513; [1972] 1 WLR 814; Alec Lobb (Garages) Ltd v Total Oil (Great Britain) Ltd [1985] 1 All ER 303; [1985] 1 WLR 173 (where the finance was raised, in effect, by lease and lease back, rather than mortgage); Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288; Quadramain Pty Ltd v Sevastapol Investments Pty Ltd (1976) 133 CLR 390; see also Competition and Consumer Act 2010 (Cth) Pt IV s 47. A postponement which might by itself be valid may therefore be unenforceable if accompanied by an unreasonable restraint of trade during the postponement period. If a provision for postponement is invalid, it is invalid as much against the assign of the mortgagor as against the mortgagor himself: Mehrban Khan v Makhna (1930) 57 Ind App 168 at 172. The mortgagee is entitled to the benefit of a valid postponement provision against a subsequent mortgagee, who took his security with notice of the covenant and who will not be allowed during the stipulated period to redeem the prior mortgage: Lawless [page 742] v Mansfield (1841) 1 Dr & War 557. If he takes without notice, the equity of redemption also still seems to be bound in his hands by the covenant of the mortgagor who can give to another no better equity against the first mortgagee than he had himself. A mortgage may be validly irredeemable for an uncertain period, when, for example, it is made to secure an annuity, or as an indemnity against contingent future liabilities (see Richards v Commercial Bank of Australia (1971) 18 FLR 95 and 32.5), or for any other object not capable of immediate pecuniary valuation: Fleming v Self (1854) 3 De M & G 997; 43 ER 390). In

certain cases statute permits the postponement of redemption. A company may issue irredeemable debentures: Corporations Act 2001 (Cth) s 124(1)(b); and see Knightsbridge Estates Trust Ltd v Byrne [1940] AC 613; [1940] 2 All ER 401 (HL). The rule against perpetuities does not apply to a postponement provision: Knightsbridge Estates Trust Ltd v Byrne [1939] Ch 441 at 463; [1938] 4 All ER 618 at 631; and see 1.59.

‘Breaking’ the mortgage 32.10 In many cases where redemption is postponed, the terms of the mortgage also provide that if there is any default on the part of the mortgagor in the payment of interest or instalments for a specified period the whole of the mortgage moneys shall become due. Accordingly, if the mortgagor has the means to redeem, he has merely to default and then tender the mortgage moneys — but this cannot be done if the mortgagee has the choice of treating the default as making the mortgage moneys due or not. See also 3.15; and Branwood Park Pastoral Co Pty Ltd v Willing & Sons Pty Ltd [1976] 2 NSWLR 149; 32.6.

Once a mortgage, always a mortgage 32.11 While redemption may be postponed, if the above-mentioned conditions are satisfied, it cannot be extinguished by any covenant or agreement made at the time of the mortgage as part of the mortgage transaction: Fairclough v Swan Brewery Co Ltd [1912] AC 562 (PC); Alec Lobb (Garages) Ltd v Total Oil (Great Britain) Ltd [1983] 1 All ER 944 at 965; [1983] 1 WLR 87 at 98–9, on appeal [1985] 1 All ER 303; [1985] 1 WLR 173. For perpetual debentures, see 32.8–32.9. This has been summarised in the rule ‘once a mortgage, always a mortgage’: Newcomb v Bonham (1861) 1 Vern 7; 23 ER 266; Spurgeon v Collier (1758) 1 Eden 55; 28 ER 605. Hence an agreement confining the right of redemption to any given period (such as the life of the mortgagor) or to any specified class of persons (such as to the mortgagor alone) will be invalid: Howard v Harris (1683) 1 Vern 33 and 190; 23 ER 288 and 406. An agreement made at the time of the loan not to sue for redemption or for discharge of the equity of redemption upon some event or condition will not

be allowed: Vernon v Bethell (1762) 2 Eden 110; 28 ER 838; Salt v Northampton (Marquess) [1892] AC 1 (HL). Nor will a separate covenant that if the mortgagee shall think fit, the mortgagor will convey to him so much of the estate as shall be of the value of the mortgage money at so many years’ purchase be allowed: Jennings v Ward (1705) 2 Vern 520; 23 ER 935, as explained in Biggs v Hoddinott [1898] 2 Ch 307 at 315, 323. An option granted to the mortgagee to purchase the mortgaged property will not be enforceable (at all events, if the purchase price is a fixed one): Samuel v Jarrah Timber and Wood Paving Corp [1904] AC 323 (HL); (1944) 60 LQR 191 (Williams); see also Lewis v Frank Love Ltd [1961] 1 All ER 446 (option contained in assignment of mortgage; this was not really a case of a simple transfer, but more of a new loan); Bannerman Brydone Folster & Co v Murray [1972] NZLR 411; Re Supreme Court Registrar to Alexander Dawson Inc [1976] 1 NZLR 615; Westfield Holdings Ltd v Australian Capital Television Pty Ltd (1992) 32 NSWLR 194 (transaction not a mortgage). [page 743] Seemingly, an option will be effective if independent of the mortgage. For this purpose one examines the documents to see if in substance they form part of the same transaction or whether there is something outside and clear of the mortgage: Baker v Biddle (1923) 33 CLR 188; Toohey v Gunther (1928) 41 CLR 181 at 192. An option granted before the mortgage was made, and not part of the mortgage transaction, will be enforceable: London and Globe Finance Corp Ltd v Montgomery (1902) 18 TLR 661 (where it was held that the transaction was not a mortgage). Where, on a sale, part of the purchase moneys are left on mortgage, a covenant for pre-emption is good if it is part of the contract for sale: Davies v Chamberlain (1909) 26 TLR 138; and see Orby v Trigg (1722) 9 Mod Rep 2; 88 ER 276. A right of pre-emption is not subject to the same objection as an option since the mortgagor cannot be compelled to sell: see Re Petrol Filling Station,Vauxhall Bridge Road, London; Rosemex Service Station v Shell Mex

and BP Ltd (1968) 20 P & CR 1. Where the mortgage and the option to purchase were part of a vendor and purchaser arrangement and where the option was given to prevent the property coming into the hands of a competitor it has been held that the option was enforceable: see Re Moore and Texaco Canada [1965] CLY 2548. So an option is, probably, valid where it is part of the sale price of the property, but a mortgagee cannot sell to himself in exercise of his power of sale in accordance with an option or right of pre-emption: see Williams v Wellingborough Borough Council [1975] 3 All ER 462; and see 20.8 and 20.40. On independent transactions, see also 32.12. Where the mortgaged property is leasehold and the lease contains an option to renew or to purchase the reversion and the mortgagee exercises the option, the mortgagor is entitled on redemption to have the renewed lease or the reversion transferred to him, subject to payment of the proper expenses involved in exercising the option: Nelson v Hannam [1943] Ch 59; [1942] 2 All ER 680. Whether or not a mortgagee could stipulate to have the benefit of an option transferred to him as something collateral to a mortgage transaction was left open. Even minor advantages such as the obtaining of commission may fall foul of this maxim. Thus in Salt v Northampton (Marquess) [1892] AC 1 at 19, Lord Bramwell said: … this right of redemption shall not even by bargain between the creditor and the debtor be made more burdensome to the debtor than the original debt, except so far as additional interest and expenses consequent on the debt not having been paid at the time appointed may have occurred or arisen: That any agreement making such a right of redemption more burdensome is void.

More details are considered in the succeeding paragraphs dealing with collateral advantages. A provision in a mortgage of a hotel that the mortgagee may retain the title deeds after the debt is paid out as security for compliance with a tied house agreement, will offend the rule: Toohey v Gunther (1928) 41 CLR 181 at 192.

Collateral advantages and clogs on the equity of redemption 32.12 In Santley v Wilde [1899] 2 Ch 474 (CA) at 475; [1895–9] All ER Rep 1338, Lindley MR said that a clog is ‘something which is inconsistent

with the idea of “security”’. It would seem that the word ‘clog’ originally had the same meaning as ‘log’, particularly the log tied to a person or animal to restrain movement: see AWB Simpson, A History of Land Law, 2nd ed, Clarendon Press, Oxford, 1986, p 245. Up to the 17th century, it merely meant an encumbrance in the lay rather than any technical sense. Its first use in mortgage law appears to be Bacon v Bacon (1639) Tot 133. [page 744] Today, the word ‘clog’ denotes a fetter or repugnant condition. However, although the term is commonly used, it is now acknowledged that the term is not particularly helpful: Cheak Theam Swee v Equiticorp Finance Group Ltd [1992] 1 AC 472 at 476; [1991] 4 All ER 989 at 991–2; and see Brighton and Hove City Council v Andus [2009] EWHC 340 (Ch) [46]–[47]. There is a useful general discussion by F Burns,‘Clogs on the Equity of Redemption’ in Glister and Ridge (eds), Fault Lines in Equity, Hart Publishing, 2012, and see Devonshire (1997) 5 ALPJ 21. A collateral advantage is a stipulation, not forming part of the security, giving the mortgagee some advantage in addition to the security. Such a stipulation may, in the circumstances shortly to be mentioned, while being valid until redemption (unless unconscionable in itself: Biggs v Hoddinott [1898] 2 Ch 307, and see Competition and Consumer Act 2010 (Cth); also 13.35 and 38.6), become invalid upon redemption. In South Australia this is specially provided for by Law of Property Act 1936 s 55B(2), which is extended to mortgages of Torrens system land.

Allowable clogs 32.13 The principles now being discussed are often put in the maxim ‘There may be no clogs on the Equity of Redemption’. This tag comes from the 17th century and, like all maxims, is not completely true. The special rules relating to collateral advantages do not apply, and the validity of the stipulation must be determined on general principles, if the provision is contained in an agreement forming a separate transaction from the mortgage. Whether or not a stipulation forms part of the mortgage is

determined by the intention of the parties: Kreglinger v New Patagonia Meat and Cold Storage Co Ltd [1914] AC 25 at 61 (HL). The question is not one of form but of substance: ibid at 39; and see Re Supreme Court Registrar to Alexander Dawson Inc [1976] 1 NZLR 615. But the form may be the best evidence of the intention: Kreglinger v New Patagonia Meat and Cold Storage Co Ltd [1914] AC 25 at 43. (See further on subsequent and independent transactions, Tooth & Co v Parkes (1900) 21 LR (NSW) (Eq) 173; Baker v Biddle (1923) 33 CLR 188; Toohey v Gunther (1928) 41 CLR 181.) The same applies if the provision, although contained in the mortgage deed, is independent of the mortgage. The collateral advantage was independent in De Beers Consolidated Mines Ltd v British South Africa Co [1912] AC 52 (HL): see Kreglinger v New Patagonia Meat and Cold Storage Co Ltd at 44; Re Petrol Filling Station,Vauxhall Bridge Road, London; Rosemex Service Station v Shell Mex and BP (1968) 20 P & CR 1. If, however, the stipulation can be construed as a term of the mortgage (and so long, it seems, as the mortgagor has offered to repay the mortgage: see Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 at 299; [1967] 1 All ER 699 at 708 (HL); Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd [1975] AC 561; [1975] 1 All ER 968 (PC)), the rule is that such a stipulation will not be enforceable if it is either (1) unfair and unconscionable, or (2) in the nature of a penalty clogging the equity of redemption, or (3) inconsistent with or repugnant to the contractual and equitable right to redeem: see Kreglinger v New Patagonia Meat and Cold Storage Co Ltd, above, at 61. (See also Knightsbridge Estates Trust Ltd v Byrne [1939] Ch 441 at 457; [1938] 4 All ER 618 at 629; Cityland and Property (Holdings) Ltd v Dabrah [1968] Ch 166; [1967] 2 All ER 639; Multiservice Bookbinding Ltd v Marden [1979] Ch 84; [1978] 2 All ER 489. In the latter case Browne-Wilkinson J did not think that Goff J by his reference to ‘unreasonable’ in the Cityland case had intended to cut down the effect of the Kreglinger and Knightsbridge Estates cases. See also Perth Brewery Co Ltd v Simms (1903) 5 WALR 24; Herman v Gill [page 745]

(1921) WALR 10; Toohey v Gunther, above; Queensland Brewery Ltd v Baker [1936] St R Qd 98; Amoco Australia Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288; Devlin v Surfers Paradise Investments Pty Ltd [1998] 1 Qd R 404 (CA); Wily v Endeavour Health Care Services Pty Ltd [2003] NSWCA 321, emphasising the need to inquire into the true nature of the transaction rather than its nominal form.) In Canada, it has been held that a provision that a land mortgage may not be redeemed without also redeeming an associated chattel mortgage has been held not to be a clog: Re Macdonald and Cowtun (1972) 28 DLR (3d) 380 (Manitoba). The rule against clogs does not itself preclude the mortgagor from stipulating for an advantage which does not affect the property, or which affects the property, but which ceases on redemption. However, it must be remembered that even though a collateral advantage is not rendered invalid as a clog, it may fail for some other reason such as under the Restraint of Trade doctrine: see Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269: [1967] 1 All ER 699; Alex Lobb (Garages) Ltd v Total Oil (GB) Ltd [1985] 1 All ER 303; [1985] 1 WLR 173 (CA) and Heydon (1969) 86 LQR 229.

Tests as to whether there is a collateral advantage 32.14

Relevant considerations are:

1. the character and bargaining power of the parties, company or individual, whether the mortgagor has offered to repay the mortgage: see, for example, Cityland and Property (Holdings) Ltd v Dabrah [1968] Ch 166 at 180; [1967] 2 All ER 639 at 647; Multiservice Bookbinding Ltd v Marden [1979] Ch 84 at 111; [1978] 2 All ER 489 at 502; 2. the circumstances of the loan — commercial transaction or private loan (Cityland and Property (Holdings) Ltd v Dabrah; Multiservice Bookbinding Ltd v Marden); 3. the quantum of consideration (Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 at 300, 323; [1967] 1 All ER 699 at 708– 9, 723; Alec Lobb (Garages) Ltd v Total Oil (Great Britain) Ltd [1985] 1 All ER 303 at 310; [1985] 1 WLR 173 at 179);

4. the benefits to the mortgagor (Amoco Australia Pty Ltd v Rocca Bros Engineering Co Pty Ltd [1975] AC 561 at 579; [1975] 1 All ER 968 at 978; Alec Lobb (Garages) Ltd v Total Oil (Great Britain) Ltd [1985] 1 All ER 303 at 310; [1985] 1 WLR 173 at 179); 5. the nature of the security. In Kreglinger v New Patagonia Meat and Cold Storage Co Ltd, above, the security was a floating charge; 6. the nature and duration of the restriction (if any) on the mortgagor’s right to deal freely with the mortgaged property and other property of the mortgagor. In Bradley v Carritt [1903] AC 253 (HL) and Noakes & Co Ltd v Rice [1902] AC 24 (HL), the restriction was perpetual. In Kreglinger v New Patagonia Meat and Cold Storage Co Ltd, above, it was for five years; and see Jones v Morgan [2003] Lloyd’s Rep Bank 323, where the agreement involved the sale of certain farmland; 7. whether the borrower was advised by solicitors (Multiservice Bookbinding Ltd v Marden [1979] Ch 84 at 111; [1978] 2 All ER 489 at 502) (on undue influence, see 13.16 ff); 8. the terms of the collateral advantage. In Kreglinger v New Patagonia Meat and Cold Storage Co Ltd [1914] AC 25, the right granted to the mortgagee to purchase the mortgagor’s sheepskins was on the terms that the mortgagee should pay a price equal to the best price offered by any other person. Quaere whether the result would have been the same had the price not been such. [page 746] A collateral advantage is not, it seems, invalid merely because it is to endure after redemption: cf Noakes & Co Ltd v Rice, above. Stipulations making the mortgage irredeemable or postponing redemption have already been dealt with in 32.8–32.9. A provision that a land mortgage may not be redeemed without also redeeming an associated chattel mortgage has been held not to be a clog: Re Macdonald & Cowtin (1972) 28 DLR (3d) 380. A collateral advantage may affect the mortgaged property (as in Biggs v

Hoddinott [1898] 2 Ch 307) or be personal to the mortgagor (as in Bradley v Carritt, above). An enforceable collateral advantage, if in substance negative, is binding not only on the mortgagor but also on his assigns and tenants who take with notice of it: John Bros Abergarw Brewery Co v Holmes [1900] 1 Ch 188; Bradley v Carritt, above; cf Reeve v Lisle [1902] AC 461 (HL) and Davies v Chamberlain (1909) 26 TLR 138. The special rules relating to collateral advantages apply to a debenture with a floating charge: De Beers Consolidated Mines Ltd v British South Africa Co [1912] AC 52 (HL). But debenture holders may, if it is so provided, share in surplus assets although they have been paid off: Re Cuban Land and Development Co (1911) Ltd [1921] 2 Ch 147. The doctrine of restraint of trade applies to collateral advantages: Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd, above; Amoco Australia Ltd v Rocco Bros Engineering Co Pty Ltd, above; Alec Lobb (Garages) Ltd v Total Oil (Great Britain) Ltd, above (where finance was raised, in effect, by lease and leaseback rather than mortgage). See (1969) 86 LQR 229 (Heydon) and 32.6. See Contracts Review Act 1980 (NSW); 38.6; and Competition and Consumer Act 2010 (Cth); also 13.35 and 38.6.

Bonuses, premiums and costs 32.15 A stipulation that, in case the property is sold, the mortgagee shall receive a bonus or commission, has been held bad: Broad v Selfe (1863) 11 WR 1036; and see Browne v Ryan [1901] 2 IR 653. A stipulation in a mortgage payable by instalments, making the entire debt (and not merely the balance) recoverable in case of default being made in payment of any instalment, has also been held invalid: Booth v Salvation Army Building Association (1897) 14 TLR 3. Many of the 19th-century cases on premiums or additional payments (beyond principal, interest and costs) were influenced by earlier usury laws. Now the validity of a provision by the mortgagee for a bonus or premium or other such sum must be determined in the same way as any other collateral advantage: Kreglinger v New Patagonia Meat and Cold Storage Co Ltd [1914] AC 25; Cityland and Property (Holdings) Ltd v Dabrah [1968] Ch 166; [1967] 2 All ER 639; Multiservice Bookbinding Ltd v Marden [1979] Ch

84; [1978] 2 All ER 489. For the suggestion that the uncertainty over collateral advantages impedes the development of novel forms of financing the purchase and development of land, see Law Commission of England and Wales Working Paper No 99, Land Mortgages, [3.36] and reference therein and Report No 204, Transfer of Land — Land Mortgages, [6.42]. A provision that a mortgage shall be redeemable only on payment of a larger sum than that advanced is not necessarily bad (Potter v Edwards (1857) 26 LJ Ch 468 (loan of £700 and premium of £300 held good); Mainland v Upjohn (1889) 41 Ch D 126; C J Belmore Pty Ltd v AGC (General Finance) Ltd [1976] 1 NSWLR 507); for acceleration clauses and, in Queensland, relief against acceleration, see 3.15. The sum may be larger than that advanced because a sum representing interest has been added to the advance: Cityland and Property (Holdings) Ltd v Dabrah, above. Such sums added to the advance are commonly known as premiums. [page 747] Alternatively, the principal may be index-linked: Multiservice Bookbinding Ltd v Marden, above; Stanwell Park Hotel Co Ltd v Leslie (1952) 85 CLR 189 at 201; and see 3.17. A premium may be justifiable if it is in lieu of interest (so long as it represents interest at a reasonable rate): Cityland and Property (Holdings) Ltd v Dabrah, above. Inter alia, the nature of the security and the means of the borrower are relevant as to the reasonableness of the rate. In Cityland, where the premium was held unreasonable, the premium amounted to 57 per cent of the loan and could not be claimed to be in lieu of interest because interest was also claimed, but had it been in lieu of interest it would have represented interest at 19 per cent, or 38 per cent taking into account that on default it became payable forthwith. A premium may be justified where the security is of a hazardous nature: Potter v Edwards; Mainland v Upjohn, both above. (See the review of these cases in Cityland and Property (Holdings) Ltd v Dabrah.) That the premium as well as the loan (and not merely the balance of the loan) shall become payable forthwith on default is a relevant factor, as also is the fact that the premium is so large that it destroys the whole equity making it a completely deficient security: Cityland and Property (Holdings)

Ltd v Dabrah, above; Wanner v Caruana [1974] 2 NSWLR 301; O’Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359; Re Mangan; Ex parte Andrew (1983) 123 ALR 633; Van Kempen v Finance & Investment Pty Ltd (1984) 6 NSWLR 293. For early repayment discount, see 32.16. If the provision is unreasonable it will not be payable, but interest on the principal sum advanced at a rate fixed by the court will be payable. In the Cityland case, above, a rate of seven per cent per annum on a day-to-day basis was ordered, but it was emphasised in that case that that rate was chosen on the facts of the case and that it had no bearing on what would be the proper rate in any other case. However, in that case, no evidence of prevailing market rates was filed. In fact the premium represented interest at 9½ per cent non-reducing over six years. Non-reducing rates are common today in private mortgages and, indeed, in any but institutional mortgages, and economic forces for the time being indicate that 9½ per cent nonreducing is far from being an exceptional rate. Hire-purchase rates are often higher. Day-to-day balances are exceptional. A bonus or commission may be deducted from the advance, the mortgagee paying only the balance, but the whole advance will be allowed as the principal debt where the bonus or commission is reasonable: the Benwell Tower (1895) 8 Asp MLC 13, 18; 72 LT 664 at 670; Mainland v Upjohn (1889) 41 Ch D 126; Biggs v Hoddinott [1898] 2 Ch 307. If it is not deducted at the time of the advance it will be subsequently allowed in taking account of what is due to the mortgagee or under the head of just allowance: General Credit and Discount Co v Glegg (1883) 22 Ch D 549; Bucknell v Vickery (1891) 64 LT 701 (PC). A reasonable sum may be deducted from the advance, but be allowed in the taking of accounts, in respect of a service charge: Wallingford v Mutual Society (1880) 5 App Cas 685 (HL); Protector Endowment and Annuity Loan Co v Grice (1880) 5 QBD 592. The costs of setting up the mortgage are, of course, greater at the start, though the charge will usually be spread evenly over the prospective term of the mortgage. Interest or ‘commission’ on unpaid instalments may be allowed if at a reasonable rate: see 39.56. For additional expenses payable on default under a regulated mortgage under the Consumer Credit Code, see Chapter 9.

Collateral advantages under modern law 32.16 In modern commercial transactions between commercial entities fully advised by competent lawyers and other experts with no claim to the protection of equity as [page 748] persons who cannot look after themselves, people have queried whether the maxim should still apply. Recent cases show a trend to weaken the maxim’s applications. In Westfield Holdings Ltd v Australian Capital Television Pty Ltd (1992) 32 NSWLR 194 at 202, Young J said: There does not appear to me to be any commercial reason why, in 1992, the court should invalidate a transaction merely because a mortgagee obtains a collateral advantage or seeks to purchase a mortgage property. Quite obviously equity must intervene if there is unconscionable conduct. Again equity must intervene in the classic case where it can see that a necessitous borrower is not, truly speaking, a free borrower.

In my view, in 1992, the rule only applies where the mortgagee obtains a collateral advantage which in all the circumstances is either unfair or unconscionable. This passage has been applied in Thomas v Silvia (1994) 35 NSWLR 96 at 103; 14 ACSR 446 at 452; Epic Feast Pty Ltd v Mawson KLM Holdings Pty Ltd (1998) 71 SASR 161 at 173 (SAFC) and Wily v Endeavour Health Care Services Pty Ltd (2003) 11 BPR 21,081 at 21,093 (affirmed by Court of Appeal as Wily v Macquarie Medical Holdings Pty Ltd [2003] NSWCA 321; (2003) 12 BPR 22,247) and see Lift Capital Partners Pty Ltd v Merrill Lynch International [2009] NSWSC 7; (2009) 73 NSWLR 404; Guardian Mortgages v Miller [2004] NSWSC 1236; (2004) 12 BPR 22,833 and Sam Management Services (Aust) Pty Ltd v Bank of Western Australia Ltd [2009] NSWCA 320. It should be realised that most of the above is contained in dicta and that there are considerable weighty older authorities which express the principle in far wider terms. Indeed, English judges have recognised the problem that the doctrine creates for the modern commercial community, but have considered that

older authority binds them to enforce the wide rule: see, for example, Morgan v Jones [2001] EWCA Civ 995 (noted (2001) 75 ALJ 724) and Warnborough Ltd v Garmite Ltd [2004] 1 P & CR D18, and see note by Butt in (2004) 78 ALJ 366. However, the words of Dillon LJ in Alec Lobb (Garages) Ltd v Total Oil (Great Britain) Ltd [1985] 1 All ER 310 at 313; [1985] 1 WLR 173 at 183, must be borne in mind: Inequality of bargaining power must anyhow be a relative concept. It is seldom in any negotiation that the bargaining powers of the parties are absolutely equal. Any individual wanting to borrow money from a bank, building society or some other financial institution in order to pay his liabilities or buy some property he urgently wants to acquire will have virtually no bargaining power: he will have to take or leave the terms offered to him.

Barrett J in Lift Capital Partners Pty Ltd v Merrill Lynch International [2009] NSWSC 7; (2009) 73 NSWLR 404 at 429ff ([126]ff), held that there was no Australian authority which bound the New South Wales Supreme Court to apply the anti-clog doctrine. The correct modern approach was to deal with such cases on unconscionability principles. See also Sam Management Services (Aust) Pty Ltd v Bank of Western Australia Ltd [2009] NSWCA 320; and the discussion by F Burns in Fault Lines in Equity, Hart Publishing, 2012, pp 61ff. In Queensland, Henry J in Sun North Investments Pty Ltd v Dale [2013] QSC 44 (noted with commentary by Peter Butt in (2013) 87 ALJ 507) went back to the old authorities and said that the explanation behind their approach was that clogging the equity of redemption was inherently unconscionable and that the more modern liberal authorities had failed to give sufficient weight to this. However, the facts of this case show that, whatever the approach the mortgagee was guilty of unconscionable conduct.

Early repayment discount 32.17 For the type of mortgage where the interest is calculated for a fixed term and added to the principal as a premium, the mortgage should provide for an early repayment [page 749]

discount. This is usually done by reference to a scheduled table or to the ‘rule of 78’ (a formula whereunder a sum of interest is spread over the period of a loan so that, in general terms, the interest is at a constant rate over the period and reducing): see 3.15. It is not advisable to provide for a discount based simply on the proportion of the term expired, because, although the interest element will have been spread evenly over the term of the mortgage, the interest is in fact greater in the early part of the term. The absence of such discount may result in the premium being void as an unreasonable collateral advantage: Cityland and Property (Holdings) Ltd v Dabrah [1968] Ch 166; [1970] 2 All ER 639; see 32.12. But for the situation mentioned above there would appear to be no entitlement to a discount: see Harvey v Municipal Permanent Investment Building Society (1884) 26 Ch D 273. The position is not like that in hire-purchase, where the owner is claiming damages against the hirer on default. See 3.15 for acceleration clauses and Chapter 9 for regulated mortgages.

Release of equity of redemption 32.18 The equity of redemption cannot be extinguished by any covenant or arrangement made, although a mortgagee cannot at the time, or as a part of the mortgage transaction, stipulate in advance for the extinguishment of the equity of redemption if the debt is not paid by a certain time: Alec Lobb (Garages) Ltd v Total Oil (Great Britain) Ltd [1983] 1 All ER 944 at 965; [1983] 1 WLR 87 at 98–9 (not affected when appeal dismissed [1985] 1 All ER 303; [1985] 1 WLR 171) citing Vernon v Bethell (1762) 2 Eden 110 at 113; 28 ER 838 and Samuel v Jarrah Timber and Wood Paving Corporation [1904] AC 323. However, the equity of redemption may be released to the mortgagee under a separate transaction independent of the mortgage: Reeve v Lisle [1902] AC 461 (HL); the Alec Lobb case at pages noted earlier, but see Lewis v Frank Love Ltd [1961] 1 All ER 446. For subsequent and independent transactions, see 32.12–32.13. The rule, which prohibits a trustee from buying the trust property from his beneficiary, does not apply to a purchase of the equity of redemption by the mortgagee from the mortgagor, since they are regarded for such a purpose as on the ordinary footing of vendor and purchaser, until the contrary is shown by the person impeaching the deed. There are no special rules applicable to the purchase of the equity of

redemption by a mortgagee. The only significance of the relationship of mortgagor and mortgagee is that it affords to the unscrupulous mortgagee the opportunity to take an unfair advantage of the mortgagor. It is for this reason that the court will scrutinise the transaction with care: Alec Lobb (Garages) Ltd v Total Oil (Great Britain) Ltd [1983] 1 All ER 944 at 965; [1983] 1 WLR 87 at 98–9; Carello v Jordan [1935] St R Qd 294. The right of redemption will not be defeated, however, if the release was obtained by fraud or oppression, such as would invalidate a sale between an ordinary vendor and purchaser, or, if by means of the influence of his position, the mortgagee has obtained the purchase at a nominal or insufficient price. Undervalue alone will not be sufficient to impeach the release: Knight v Marjoribanks (1849) 2 Mac & G 10; 42 ER 4; Ford v Olden (1867) LR 3 Eq 461; Melbourne Banking Corp v Brougham (1882) 7 App Cas 307 (PC). The validity of the release may also be impeached for other reasons, for example if it were made by a person without power to make it, or if there was no release of the covenant for payment of the debt. When the release is of an interest in land it must be in writing: NSW Act s 23C; Victorian Act s 53.

Lease to mortgagee 32.19 During the subsistence of the relation of mortgagor and mortgagee, the mortgagee may not take a lease from the mortgagor upon terms which are, as regards the mortgagor, improvident: Webb v Rorke (1806) 2 Sch & Lef 661; Morony v O’Dea (1809) [page 750] 1 Ba & Be 109; Hickes v Cooke (1816) 4 Dow 16; 3 ER 1074. This objection does not lie against an occupation lease for a short term at a fair rent: Gubbins v Creed (1804) 2 Sch & Lef 214; Hickes v Cooke, above; Alec Lobb (Garages) Ltd v Total Oil (Great Britain) Ltd [1983] 1 All ER 944; [1983] 1 WLR 87.

D. Persons Entitled to Redeem

Mortgagor and his successors in title 32.20 The right to redeem follows the interest of the mortgagor, and is exercisable by him and also by those taking the whole of his interest, whether by assignment inter vivos, or by devolution on death. The right also belongs to those who have only a partial interest in the property: Pearce v Morris (1869) LR 5 Ch App 227; Tarn v Turner (1888) 39 Ch D 456; and see 32.21. One co-owner may redeem the whole debt: Hall v Heward (1886) 32 Ch D 430. For partners, see Hegeman v Rogers (1972) 21 DLR (3d) 272 referring, inter alia, to Cavander v Bulteel (1873) LR 9 Ch App 79. See also 33.2. A first mortgagee may waive his right to priority, but does not thereby affect the mortgagor’s right to redeem: Cheah Theam Swee v Equiticorp Finance Group Ltd [1992] 1 AC 472; [1991] 4 All ER 989 at 991 (PC); and see 24.3.

Assignee of equity of redemption 32.21 The assignee of the equity of redemption can redeem (Carpentaria Investments Pty Ltd v Airs and Arnold [1972] Qd R 436); and for the purchase of the equity of redemption in goods to a charge, see Re Bunbury Foods Pty Ltd; Robertson v Nissho Iwai Australia Ltd [1985] WAR 126; (1985) 2 ACLC 639. This applies even if the assignee is a volunteer (Howard v Harris (1683) 1 Vern 190 at 193; 23 ER 406 at 407) and even if a voluntary assignment contains a power of revocation, so long as it is not acted upon. The assignee of the equity of redemption of one only of two properties comprised in the same mortgage cannot insist on redeeming that property only, and cannot be compelled to do so, his right being to redeem the whole: Mutual Life Assurance Society v Langley (1886) 32 Ch D 460; Hall v Heward (1886) 32 Ch D 430. Although on assignment the mortgagor ceases to be entitled to redeem, his right to do so revives if he is sued for the mortgage debt. He is then, in effect, a surety for the assignee (Kinnaird v Trollope (1888) 39 Ch D 636 at 645), and he may redeem notwithstanding that the assignee has created fresh charges in favour of the mortgagee: Kinnaird v Trollope. The right to redeem extends also to a limited interest granted by the mortgagor, such as that of a lessee under a lease, even one which is not binding on the mortgagee and which the mortgagee refuses to recognise

(Tarn v Turner (1888) 39 Ch D 456 at 465), but not to a short-term lease: see Re ANZ Banking Group Ltd and Devine Holdings Pty Ltd [1991] ACL Rep 295 Qld 11, distinguishing Tarn v Turner.

Title by adverse possession 32.22 Where an adverse possessor has gained a title against the mortgagor, but not against the mortgagee, so that the mortgagor’s title is extinguished and a new title created in the adverse possessor, there is in effect an assignment of the equity of redemption and he can redeem: Lee v Wansey [1964] NSWR 1268, citing Fletcher v Bird (1896) (a report of the judgment in this case was given in the Appendix to the 6th English edition of this work at p 1025).

Bankrupts 32.23 The bankruptcy of the mortgagor operates to vest the equity of redemption in the trustee, and as in the case of a voluntary assignment, the mortgagor ceases to be entitled to redeem: Spragg v Binkes (1800) 5 Ves 583; 31 ER 751. See 23.9 for proof by the [page 751] mortgagee. The right to redeem passes to the trustee, who may require the mortgagee to discharge the mortgage upon giving six months’ notice, notwithstanding that the time for payment under the mortgage has not arrived: see Bankruptcy Act 1966 (Cth) s 136; and 23.12.

Bona vacantia 32.24 On the intestacy of the person entitled to the equity of redemption, in the absence of persons entitled as next of kin the equity of redemption passes to the Crown as bona vacantia: Probate and Administration Act 1898 (NSW) s 61B(7); Administration and Probate Act 1958 (Vic) s 55. In England, even an equity of redemption in leasehold premises subject to a mortgage passes as bona vacantia upon dissolution of a corporate mortgagor: Re Wells [1933] Ch 29. In Australia, any interest of a deregistered

corporation vests in the Australian Securities and Investments Commission under Corporations Act 2001 (Cth) s 601AD(2) (or s 588 in the case of a defunct registrable body).

Subsequent encumbrancer 32.25 The later mortgagee is entitled to redeem, but in relation to general law mortgages his right is not, as in the case of the mortgagor and the assignee of the equity of redemption, an absolute right: Teevan v Smith (1882) 20 Ch D 724 at 729. In relation to mortgages of Torrens system land, see Skinner v Elders Ltd (1995) V ConvR ¶54-527; see 1.14, 4.1, 4.2, Chapter 28 and 32.1. If it has to be asserted in an action, it is only ancillary to the later mortgagee’s right to work out his remedy against the mortgaged property by foreclosure. No later encumbrancer can redeem a prior mortgagee adversely, without bringing the mortgagor before the court for the purpose of completing his remedy by foreclosure: Fell v Brown (1787) 2 Bro CC 276; 29 ER 151. (‘The natural decree is that the second mortgagee shall redeem the first mortgagee, and that the mortgagor shall redeem him or stand foreclosed’: Palk v Lord Clinton (1806) 12 Ves 48 at 58; 34 ER 1096; Teevan v Smith, above; Gunn v Commonwealth Bank of Australia (1922) 18 Tas LR 26; Porter v Associated Securities Ltd (1976) 1 BPR 9279.) This is the principle known by the maxim ‘redeem up, foreclose down’. If by any means, such as by a covenant not to foreclose until a specified date, the later mortgagee has precluded himself from pursuing that remedy against the mortgagor, he cannot insist that, upon paying off the first mortgagee, the latter shall assign the mortgage to him; for, being unable to seek relief against the mortgagor by reason of his covenant, he may not bring him forward at all, and without him the action will fail as against the prior mortgagee also: Rhodes v Buckland (1852) 16 Beav 212; 51 ER 759. But the later encumbrancer is not, in such a case, altogether without remedy, for the court will restrain the first mortgagee from depriving him of his right by a sudden sale of the property, where it appears that the sale is about to be made for that purpose: Rhodes v Buckland. Moreover, the rule does not justify the first mortgagee in refusing to be redeemed except in an action. He should, without the necessity for judicial proceedings, accept payment from the second mortgagee, and thereupon transfer the first mortgage to the second mortgagee: Smith v Green (1844) 1 Coll 555 at 563; 63 ER 541 at 544–5.

Creditors 32.26 A judgment creditor, save in the cases mentioned below, cannot redeem. Where a charging order in favour of a judgment creditor of a mortgagor has the like effect as an equitable charge created by the debtor (see 7.5 and 7.8) the chargee is therefore in the same position as the subsequent encumbrancer dealt with above. A judgment creditor who has obtained the appointment of a receiver by way of equitable execution (see 2.18) and, where necessary, registered it, may redeem: Earl of Cork v Russell (1871) LR 13 Eq 210. The receiver holds the property subject to prior encumbrances, but the [page 752] judgment creditor can obtain a sale of the interest of the debtor in the land without redeeming prior encumbrances: Wells v Kilpin (1874) LR 18 Eq 298; Beckett v Buckley (1874) LR 17 Eq 435. The general creditors of the mortgagor cannot generally redeem: Beckett v Buckley, above. But under special circumstances this may be allowed — where, for instance, it is necessary for enabling them to obtain the benefit of an order of the court: Christian v Field (1842) 2 Hare 177; 67 ER 74. If creditors can make out that the trustees to whom the mortgaged property has been assigned for their benefit are colluding with the mortgagee to prevent the recovery of their claim, or that the trustees were called on to redeem and refused to do so, or that they themselves are unsafe, it seems they may redeem: Troughton v Binkes (1801) 6 Ves 573; 31 ER 1202; White v Parnther (1829) 1 Knapp 179 at 229; 12 ER 288 at 306. If the bankruptcy trustee refuses to bring an action to redeem for the benefit of the estate it seems that the creditor may do so under peril of costs (Francklyn v Fern (1740) Barn Ch 30 at 32; 27 ER 542 at 543) but liberty to redeem will be given to the trustee first and then to the plaintiff.

Devolution on death 32.27 On the death of the mortgagor, the equity of redemption, and with it the right to redeem, devolves on his personal representatives (Probate and

Administration Act 1898 (NSW) ss 44, 45, 46E; Administration and Probate Act 1958 (Vic) ss 13, 14) and is exercisable by them until, by assent or conveyance, the equity becomes vested in the devisee or other person entitled.

Trust property 32.28 In the case of land subject to a trust for sale the legal estate is vested in the trustees and the general rule stated in the previous paragraph applies. In the rare case of settled land, the legal estate is vested in the tenant for life or in the statutory owners as trustee for all parties interested: Conveyancing and Law of Property Act 1898 (NSW); Settled Land Act 1958 (Vic). Where the mortgage affects the legal estate the right of redemption is primarily in the tenant for life as estate owner. The case is within the general rule that, for the purposes of redemption, the trustees represent their beneficiaries, and the beneficiaries should not seek to redeem on their own account unless the trustees are improperly refusing to do so: Troughton v Binkes (1801) 6 Ves 573; 31 ER 1202; Mills v Jennings (1880) 13 Ch D 639.

Mentally disabled persons 32.29 Where the right of redemption is vested in a protected person it is exercised by the Protective Commissioner or equivalent: see 11.21.

Sureties 32.30 The right to redeem belongs also to a person who is under liability for the mortgage debt (Green v Wynn (1869) LR 4 Ch App 204) or whose property is subject to the debt: Gedye v Matson (1858) 25 Beav 310; 53 ER 655. Thus a surety, if he pays the debt himself, is entitled to redeem. This is by virtue of his right to avail himself of all the creditor’s securities: see 42.13. The surety does not have the right to redeem if he has given up his right to subrogation: Royal Trust Co Mortgage Corp v Nudnyk Holdings Ltd (1974) 4 OR (2d) 721. If a third person has brought property of his own into the security he is entitled to redeem in order to protect his property. Thus a wife who has mortgaged her own property for her husband’s debt, and in aid of a mortgage of his property, is entitled to redeem the husband’s property: Dixon v Steel [1901] 2 Ch 602; Re Thompson; Ex parte Smith (1976) 8 ALR 479.

[page 753]

Reservation of redemption to third party 32.31 In rare cases the right to redeem may be reserved to a third party. In determining whether such reservation was effective, the courts of equity were guided by the principle that, a mortgage being nothing more than a transaction for raising a loan, there was a presumption (the strength or weakness of which depended on the circumstances of each particular case: Plomley v Felton (1888) 14 App Cas 61 at 65 (PC)) against an intention to alter the previous rights of the parties further than was necessary to effect that object: Fitzgerald v Fauconberge (1730) Fitzgib 207; 94 ER 722. Thus, if husband and wife mortgaged the wife’s land, the equity of redemption would be the wife’s, although, by the deed, it was reserved to the husband and his heirs, and though he kept down the interest: Brend v Brend (1684) 1 Vern 213; 23 ER 421; and see Re Duke of Marlborough; Davis v Whitehead [1894] 2 Ch 133. To change the ownership, therefore, the court had to be satisfied that there was a purpose to do so beyond the immediate object of the mortgage, and it would not generally take the words of the deed as prima facie evidence of such purpose, though it required no express declaration of intention: Jackson v Innes (1819) 1 Bli 104; 4 ER 38.

E. Redemption of Building Society Mortgages Generally 32.32 The distinction is still made in some jurisdictions between permanent building societies on the one hand and terminating and other societies on the other hand. The right of borrowers to whom advances have been made on mortgage to redeem the mortgage are the same as under any other mortgage (Provident Permanent Building Society v Greenhill (1878) 9 Ch D 122), and will be on the terms set out in the mortgage deed and in the rules of the society: Eason v Johnsonville Co-operative Building Society [1918] GLR 129. A society usually sets forth the conditions upon which a borrower can redeem in its rules, but an advanced member is not merely a

mortgagor. He is liable to have his rights altered by an alteration of the rules, and thereby to have his right of redemption postponed: Bradbury v Wild [1893] 1 Ch 377. The society, if it insists that a mortgagor shall only redeem subject to his liabilities as a shareholder, must prove his membership.

Future interest and fines 32.33 Although the mortgage provides for retention out of the proceeds of sale under the power of sale of all subscriptions, fines and other moneys (as to which see Bailes v Sunderland Equitable Industrial Society (1886) 55 LT 808), which should then be due, or should become due, in respect of the advanced shares during the remainder of the period over which the repayment of the principal and interest was spread, this does not authorise retention in respect of interest after repayment of principal. This would also apply to redemption, but an advanced member cannot redeem without paying fines which are properly due from him: Parker v Butcher (1867) LR 3 Eq 762. In the absence of special contract, members of building societies are entitled to redeem by paying up the amount remaining due on their securities and so put an end to their connection with the society. They are not bound to remain members for the purpose of sharing any loss that may have been sustained by the society: Re West Riding of Yorkshire Permanent Building Society; Ex parte Pullman (1890) 45 Ch D 463 (where the members had obtained a statutory receipt before the commencement of the winding up). Where there is a special contract, advanced members must on redemption pay their proper proportion of losses sustained by the society: Re West Riding of Yorkshire Permanent Building Society. [page 754]

Liability on dissolution of society 32.34 Where a society is being wound up or dissolved, advanced members cannot be required to pay the balance owing on their securities except in accordance with their contracts; hence they can continue to pay by instalments unless the mortgage or rules provide to the contrary: Kemp v Wright [1895] 1 Ch 121.

F. Redemption on Compulsory Acquisition Legislative provisions 32.35 Legislation in all jurisdictions provides that the acquiring authority may purchase or redeem the interest of the mortgagee in any interest in land acquired or proposed to be acquired for the purposes of the Act permitting resumption, whether or not the authority has previously acquired the equity of redemption, and whether the mortgagee is entitled in his own right or in trust, and whether the mortgagee is in possession by virtue of the mortgage, and whether the mortgage affects land solely or jointly with other interests in that or any other land not required for the purposes of the special Act. See Lands Acquisition Act 1989 (Cth) ss 53, 62, 64, 66, 84, 92; Land Acquisition (Just Terms Compensation) Act 1991 (NSW) s 65; Land Acquisition and Compensation Act 1986 (Vic) ss 68 ff; Acquisition of Land Act 1967 (Qld) s 32; Land Acquisition Act 1969 (SA) s 26(a); Land Acquisition Act 1993 (Tas); and Land Administration Act 1997 (WA) s 257. Reference should be made to the specialist books on this topic for further details and to the procedures and valuation.

G. Payment of the Debt Notice to Pay Off Notice before payment 32.36 The law was simply stated by Romer J in Smith v Smith [1891] 3 Ch 550 at 552: It seems to be a settled rule of practice that, after default has been made by a mortgagor in payment of the principal and interest in accordance with the proviso for redemption contained in the mortgage deed, he must give the mortgagee six calendar month’s notice of his intention to pay off the mortgage, or must pay the mortgagee six months’ interest in lieu of notice.

His Lordship noted that there were exceptions to this rule, the most prominent being: If the mortgagee has himself demanded payment of the debt or has taken any steps to compel payment of it, no notice by the mortgagor and no payment of interest in lieu of notice is required.

These words have been cited with approval in many subsequent cases: see, for example, Bovill v Endle [1896] 1 Ch 648 at 650, 651 and Branwood Park Pastoral Co Pty Ltd v Willing & Sons Pty Ltd [1976] 2 NSWLR 149. The reason for this was said to be that the mortgagor, having lost his estate at law, and being only entitled to redeem in equity, had to do equity by allowing a reasonable opportunity for the mortgagee to find a new security for his money: see Centrax Trustees Ltd v Ross [1979] 2 All ER 952 at 955– 6; (1950) 24 ALJ 311 (Fox). As Barrett J said in Myross (NSW) Pty Ltd v Kahlefeldt Securities Pty Ltd (2003) 11 BPR 21,015, steps by the mortgagee clearly and unequivocally directed towards obtaining payment of the principal before the stipulated date carry with them acceptance by the mortgagee of a position inconsistent with insistence upon interest up to that date. This rationale is recognised in the judgment of Holland J in Van Kempen v Finance & Investments Pty Ltd (1984) 6 NSWLR 293 and the judgments of Street CJ and Samuels JA in Stocks & Enterprises Pty Ltd v McBurney (1977) 1 BPR 9521. [page 755] Six months’ notice is treated as the reasonable and proper time: Cromwell Property Investment Co Ltd v Western and Toovey [1934] Ch 322. The six months rule is too firmly established to be disregarded, and any change to the rule should not be made by the court: Friend v Mayer [1982] VR 941. The rule applies to Torrens system mortgages: Friend v Mayer. But if the mortgagee demands his money or, with the qualifications mentioned below, takes proceedings to realise his security (which amounts to a demand), notice will be unnecessary (Smith v Smith [1891] 3 Ch 550; Edmondson v Copland [1911] 2 Ch 301), whether the time for payment has arrived or not: Bovill v Endle [1896] 1 Ch 648. The same applies where the mortgagee has taken possession, this also being in effect a demand for payment: Bovill v Endle. For other instances where notice is unnecessary, see Re Fowler; Bishop v Fowler (1922) 128 LT 620; Re Moss; Levy v Sewill (1885) 31 Ch D 90; Re Alcock; Prescott v Phipps (1883) 23 Ch D 372; Hill v Rowlands [1897] 2 Ch 361; Van Kempen v Finance & Investment Pty Ltd [1984] 6 NSWLR 293 (on appeal, 305).

Where money is in court and the mortgagor applies for payment out to the mortgagee and himself, the mortgagee is entitled to six months’ notice: Smith v Smith, above. Also, where judgment has been given in a foreclosure action appointing a specific date for redemption, the mortgagor cannot redeem before paying interest up to that day, for the judgment has settled the rights of the parties: Hill v Rowlands, above; cf Soloway v Sheahan (1972) 21 DLR (3d) 388. Where no date for redemption is specified and the debt is repayable on demand, the mortgagor may redeem at any time without paying interest: see 32.6. By a rule of practice the mortgagee is entitled to six months’ interest in lieu of notice: Browne v Lockhart (1840) 10 Sim 420 at 424; 59 ER 678 at 679; see also Friend v Mayer [1982] VR 941. The mortgagee cannot claim interest in lieu of notice where he has waived the right to it by his own action: Banner v Berridge (1881) 18 Ch D 254.

New South Wales and Queensland statutory provision 32.37 The corollary to the six months rule, which applies only in New South Wales and Queensland by statute (NSW Act s 92; Queensland Act s 96) is that if the mortgagee has accepted interest after the expiry of the term of the mortgage or any renewed term mortgage, the mortgage is not to be called up unless three months’ notice is given to the mortgagor: see 1.60 and 16.7. The section was derived from New Zealand: see Property Law Act 1952 s 90. New Zealand cases show that the purpose of the section is to prevent mortgagors who have continued to pay interest on overdue mortgages and have thereby been lulled into a sense of security from being called up on less than three months’ notice: Development Consultants Ltd v Lion Breweries Ltd [1981] 2 NZLR 258 at 271. The section only applies to protect a ‘mortgagor’ strictly so called, that is, the person who borrowed the money and who pays the interest, and does not protect a person who mortgages land to secure the borrowing of another: Savill v Damesh Holdings Ltd [2004] 2 NZLR 289. As to ‘expiry of the term’, see Hunt v Hearn (1911) 30 NZLR 501, which

construed an odd form of mortgage. Of course the section does not apply to a mortgagor who does not continue to perform the covenant to pay interest: Rimmer v Bourke [2003] NSWSC 200. If a notice is given and then further interest is accepted, it seems that a new notice must be given: Watson v Brown [1919] NZLR 60 and see Savill v Damesh Holdings Ltd [2004] 2 NZLR 289 at 296. [page 756]

When rule as to notice applies 32.38 The rule that a mortgagee who does not himself take steps to call in or realise his mortgage is entitled to six months’ notice, or six months’ interest in lieu of notice, does not apply to an equitable mortgage by deposit, with or without memorandum, this being presumed to be a mere temporary security: Fitzgerald’s Trustee v Mellersh [1892] 1 Ch 385; Cape v the Trustees of the Savings Bank of New South Wales (1893) 14 LR (NSW) (Eq) 33, 204; and see 32.35 for where the mortgage debt is repayable on demand. Otherwise the rule applies not only to securities upon realty, but upon things in action and other personalty wherever the nature of the security might make it necessary for the mortgagor to take proceedings for redemption: Smith v Smith [1891] 3 Ch 550. A subsequent mortgagee who has not himself taken steps to enforce his mortgage — for example on a sale by a prior mortgagee — is entitled to take the benefit of the rule. The rule applies, also, where the security is naturally discharged by an event which does not depend on the will of the debtor, or by the falling in of a policy of insurance, which constitutes the security (Smith v Smith, above); and, where a railway company purchased land compulsorily, it was held that the mortgagee was entitled to insist on six months’ interest in lieu of notice from the vendor: Spencer-Bell to L & SW Rly Co (1885) 33 WR 771. A mortgagee can require fresh notice, or interest in lieu of notice, where the money is not paid on the expiration of the first notice, whether it was

given by himself or the mortgagor: Bartlett v Franklin (1867) 36 LJ Ch 671; cf Edmondson v Copland [1911] 2 Ch 301. Six months is again the reasonable and proper period (Re Moss; Levy v Sewill (1885) 31 Ch D 90) unless, where the first notice was given by the mortgagor, there is some reasonable explanation for his failure to pay (Cromwell Property Investment Co Ltd v Western and Toovey [1934] Ch 322; Joubert v Johnson (1894) 15 LR (NSW) 64), in which case a shorter period, such as three months, will be allowed.

Missing mortgagee 32.39 Where the mortgagee is missing it will not be possible to give him notice. In such circumstances it may be possible to commence redemption proceedings seeking substituted service and asking the court to appoint a person to execute a statutory receipt or other discharge on payment of the mortgage moneys into court. Alternatively, if the property is to be sold the procedure for payment into court may be adopted in those jurisdictions which permit it: see NSW Act s 66; Victorian Act s 50; Law of Property Act 1936 (SA) s 27; Conveyancing and Law of Property Act 1884 (Tas) s 4. These provisions are extended to Torrens system mortgages: see 32.77. Where there is no need for any reconveyance etc and there is evidence of the repayment, nothing further is required to be done: see 32.62. In some jurisdictions there is special provision for the payment of the mortgage moneys into court where the person entitled to receive the mortgage moneys is out of the jurisdiction, cannot be found or is unknown, or where it is uncertain who is entitled to the moneys: see NSW Act s 98, and Wayne v Kusznierz [1973] 2 NSWLR 799; In the Application of Piromalli [1977] 1 NSWR 39; Queensland Act s 101, and Re Losa [1982] Qd R 381; Ex parte Prackert [1987] 2 Qd R 560; NZ Property Law Act 1952 s 102A, and Murphy v New Zealand Newspapers Ltd [1983] NZLR 225. Section 98 does not cover the case where the mortgagee is dead and an identified living person is named as executor, but that person declines to take out probate: Sotiropoulos v Angelides [2004] NSWSC 1184. [page 757]

Tender and Payment Effect of tender of amount due 32.40 Upon the contractual date of redemption or upon the expiration of the notice of intention to redeem, the mortgagee is bound to know the amount due to him and if he unjustifiably refuses to accept an unconditional tender of all that is due, it will be at his own peril: Harmer v Priestly (1853) 16 Beav 569; 51 ER 899; Gardner v Fitzgerald [1962] Qd R 29. A qualified refusal will be justified if an unusual form of discharge is tendered with the money, for the mortgagee is entitled to a reasonable time to be advised whether such a document is proper for him to execute and a draft should have been sent to him beforehand: Webb v Crosse [1912] 1 Ch 323. The mortgagor is entitled to know how much he is liable to pay and this is provided by the mortgagee in what is now commonly called a redemption statement or payout figure: see Project Research Pty Ltd v Permanent Trustee of Australia Ltd (1990) 5 BPR 11,225. The mortgagor has the right to know how the redemption figure is arrived at: see Cityland and Property (Holdings) Ltd v Dabrah [1968] Ch 166 at 172–3; [1967] 2 All ER 639 at 641–2. See also National Credit Code; and see 9.1ff. If the mortgagee extorts more than is due, the overpayment may be recovered by the mortgagor either as money received by the mortgagee to his use (Close v Phipps (1844) 7 Man & G 586; 135 ER 236; Fraser v Pendlebury (1861) 10 WR 104; Mobil Oil Canada Ltd v Rural Municipality of Storthoaks No 31 [1973] 6 WWR 644; J & S Holdings Pty Ltd v NRMA Insurance Ltd (1982) 61 FLR 108 at 128 (Full Federal Court); Hartl v Cowen (1982) [1993] 2 Qd R 633 at 638) or as money paid by mistake, being a mistake of fact (see, for example, National Westminster Bank Ltd v Barclays Bank International Ltd [1975] QB 654; [1974] 3 All ER 834; Barclays Bank Ltd v W J Simms Son & Cooke (Southern) Ltd [1980] QB 677; [1979] 3 All ER 522; Agip (Africa) Ltd v Jackson [1992] 4 All ER 385) or a mistake of law: see now David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353. Alternatively, the overpayment may be recovered by tracing: Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] Ch 105; [1979] 3 All ER 1025. On unjust enrichment, see Royal Bank of Canada v LVG Auctions Ltd (1984) 2 DLR (4th) 95.

But moneys paid under protest under compulsion of legal process (for example winding up) are not recoverable: J & S Holdings Pty Ltd v NRMA Insurance Ltd (1981) 39 ACTR 1. If the redemption figure supplied is less than the amount actually due, the mortgagee may claim the deficiency, subject to any issue of estoppel (as to which see the bank cases: where a customer has been credited in error and would have acted differently if he had not believed he were richer than in fact he was, see United Overseas Bank v Jiwani [1977] 1 All ER 733; [1976] 1 WLR 964; Avon County Council v Howlett [1983] 1 All ER 1073; [1983] 1 WLR 605).An estoppel can be asserted by a mortgagor, or by a mortgagor’s solicitor who has given a professional undertaking to a purchaser to procure the discharge of the mortgage — the latter being more likely to succeed than the former. A finance company was held by the English Court of Appeal to be bound by its undervaluation of the debt and estopped from claiming the balance in Lombard North Central plc v Stobart [1990] TLR 171. And note the binding effect of statements given under the National Credit Code. As to the effect of receipts on discharge, see 32.65.

Ancillary aspects 32.41 If upon tender of the sum due under a mortgage, the mortgagee refuses the tender, the mortgagor may re-enter, but the debt remains: Co Litt 209b; Australian [page 758] Mid-Eastern Club Ltd v Yassim (1989) 1 ACSR 399; Occidental Life Assurance Co of Australia Ltd v Life Style Planners Pty Ltd (1992) 9 ACSR 171. An action of detinue for deeds deposited by way of equitable mortgage of land cannot be supported prior to actual repayment, the proper remedy of an equitable mortgagor being an action of redemption: Bank of New South Wales v O’Connor (1889) 14 App Cas 273 (PC). Interest ceases to run upon the mortgage debt from the time at which a proper tender of the whole amount due is shown to have been made: Bank of

New South Wales v O’Connor, above; Rourke v Robinson [1911] 1 Ch 480; Edmondson v Copland [1911] 2 Ch 301; Graham v Seal (1918) 88 LJ Ch 31; Gardner v Fitzgerald [1962] Qd R 29; see 39.60. The tender to stop interest need not be such a tender as would be a defence to an action at law: Webb v Crosse [1912] 1 Ch 323. Executors who refuse a proper tender on the ground that they have not proved the will can demand no further interest, because they are entitled to receive the money before probate: Austen v Dodwell’s Executors (1729) 1 Eq Cas Abr 318 Pl 9; 21 ER 1073. But it ought to appear, that, from the time of the tender, the money was kept ready by the mortgagor and no profit was afterwards made from it. Upon proof to the contrary, interest will still run: Gyles v Hall (1726) 2 P Wms 378; 24 ER 774. But there is no need to keep the money idle to deprive the mortgagee of costs of the redemption action: see Moore v Lean (1905) 5 SR (NSW) 671, but cf Gardiner v Fitzgerald, above. For loss of mortgagee’s right to costs of action, see 40.9. The money should be paid into court if there are proceedings pending in which this can be done or put on deposit, the mortgagor accounting for the interest thereon to the mortgagee: Kinnaird v Trollope (1889) 42 Ch D 610; Edmondson v Copland [1911] 2 Ch 301; Baratt v Gough-Thomas [1951] 2 All ER 48. There must be an actual tender of the money due: Bishop v Church (1751) 2 Ves Sen 371; 28 ER 238. An assertion of willingness to pay is not enough: Devon Nominees Ltd v Hampstead Holdings Ltd [1981] 1 NZLR 477. The court will not stay the interest on proof of a proposal by the mortgagor, when money is due to him from the mortgagee on another account between them, to satisfy the mortgage by deducting the sum due thereon from the other debt: Garforth v Bradley (1755) 2 Ves Sen 675; 28 ER 430; see also 1.53 and 19.22–19.25.

Where tender dispensed with 32.42 The conduct of the creditor may amount to a dispensation with the tender. A mere claim of more than is due will not have this effect, but if, claiming too much, or setting up two different claims, one of which is wrongful, the creditor so conducts himself as to show that a tender of the amount properly due would not be accepted, it will be a dispensation: Scarfe v Morgan (1838) 4 M & W 270; 150 ER 1430; Kerford v Mondel (1859) 28 LJ Ex 303.

If the mortgagee refuses to reconvey, but then makes a demand, the necessity for tender revives: Campbell v Commercial Banking Co of Sydney (1881) 2 LR (NSW) (L) 397. In Challenge Bank Ltd v Hodgekiss (1995) 7 BPR 14,399, the mortgagee took the position that it would not discharge a collateral security upon redemption: this was held to be insufficient to dispense with tender.

Time of tender 32.43 The payment must be tendered at a proper time and place, in sufficient money, with proper formalities, and by and to the proper person. The fixing of a special time and place for payment is unusual today. [page 759] If a certain hour is fixed, an attendance before the beginning of the next hour will be sufficient (Knox v Simmons (1793) 4 Bro CC 433; 29 ER 975); and to satisfy an order to pay money between certain specified hours it is not necessary to attend during the whole period: see Bernard v Norton (1864) 10 LT 183. Where a tender was not made on time, but was properly made later, an attempted sale on the ground of default was set aside: Camp-Wee-Gee-Wa for Boys Ltd v Clark (1972) 23 DLR (3d) 158.

Place of tender 32.44 Unless a particular place is agreed upon, a personal tender is generally necessary. If a particular place is fixed by the deed or by a notice by the mortgagor and there are no circumstances making that choice of place unreasonable, an effective tender may be made there: Gyles v Hall (1726) 2 P Wms 378; 24 ER 774. A place for tender may be implied: Shallay Holdings Pty Ltd v Griffith Co-operative Society Ltd [1983] 1 VR 760. The mortgaged land itself is not the place for payment, the charge being a sum in gross and not a rent issuing out of the land: Phipps v Earl of Anglesea (1721) 5 Vin Abr 209. It may be sufficient to tender the money at the mortgagee’s house or last place of abode, though it does not appear that the tender was made to him, or

even that he was within the house. This can be done, for instance, where the mortgagee is deliberately keeping out of the way to avoid the tender: see Manning v Burges (1663) 1 Cas in Ch 29; 22 ER 678. In the case of debentures it is usual to provide by the debenture that the principal money and interest shall be paid at the bank or registered office of the company. In the absence of such a provision the company is bound to seek out the debenture holder in order to pay him: Fowler v Midland Electric Corp for Power Distribution [1917] 1 Ch 656. If tender is made by post the payer carries the risk of non-delivery: Altarama Ltd v Camp (1980) 5 ACLR 513.

Legal tender 32.45 The tender must be a legal tender. As to tender generally, see Halsbury, 5th ed, vol 22, Contract, [538]ff, and Halsbury’s Laws of Australia, vol 6, J W Carter, Contract, [110-8065]. On ‘jingle’ money, see Leeward Holdings Ltd v Douglas [1982] 2 NZLR 532. The tender of a cheque, which is met, is probably a proper tender: see George v Cluning (1979) 28 ALR 57. A debt is not discharged on the mere delivery of a cheque: Official Solicitor to the Supreme Court v Thomas (1986) Times, 13 March; (1986) 279 Estates Gazette 407. On post-dated cheques, see Brien v Dwyer (1979) 141 CLR 378. When a loan is made in foreign currency, the borrower is entitled to redeem in that currency, notwithstanding that it may have depreciated in value: British Bank for Foreign Trade Ltd v Russian Commercial and Industrial Bank (No 2) (1921) 38 TLR 65; Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 (HL).

Production of the money 32.46 Generally, the money should be actually produced. For it was said that though the creditor may at first refuse, yet the sight of the money may tempt him to take it. And see Powney v Blomberg (1844) 8 Jur 746 (tender by letter insufficient). But actual production may be dispensed with by the express declaration or equivalent act of the creditor if the tender is otherwise sufficient: Dickinson v Shee (1801) 4 Esp 67; 170 ER 644; Thomas v Evans (1808) 10 East 101; 103 ER 714. So that if the creditor refuses to authorise

his agent to take the money, or refuses to take it himself, the tender will be good: Robarts v Jefferys (1830) 8 LJ OS Ch 137. [page 760]

Tender must be unconditional 32.47 A tender will be bad if it is clogged with a condition, such as that the payment shall be taken on the balance due (Evans v Judkins (1815) 4 Camp 156; 171 ER 50) unless the creditor, making no objection on account of the condition, refuses the tender on another ground, such as that the amount is insufficient: Cole v Blake (1793) Peake 238; 170 ER 142; and see Ellis v Ellis (1924) SASR 379; Armstrong v Robinson (1882) 2 VLR (L) 17; Brennan v Pitt, Son & Badgery Ltd (1901) 1 SR (NSW) Eq 92. But a tender is nevertheless good which reserves to the tenderer the right to tax the mortgagee’s costs and to review his account: Greenwood v Sutcliffe [1892] 1 Ch 1.

Who may make a tender 32.48 The persons entitled to redeem are, of course, able to make a good tender of the mortgage money. But a good tender cannot be made by a stranger, or, generally, by anyone not entitled to the equity of redemption: Pearce v Morris (1869) LR 5 Ch App 227. An agent may, of course, pay for his principal, and if a solicitor pays off his client’s mortgage, he is considered to have paid it as his agent: Ward v Carttar (1865) 35 Beav 171; 55 ER 860. An agent who has exceeded his authority in tendering the whole amount due will be allowed to stand by subrogation in the place of the mortgagee: Butler v Rice [1910] 2 Ch 277.

To whom the tender may be made 32.49 The tender, to be effective, must be made to the person named for the purpose in the mortgage deed, if any, or to the person or persons legally entitled to receive the money and to reconvey the estate: Co Litt 210; and see Cliff v Wadsworth (1843) 2 Y & CCC 598; 63 ER 268. Money will be well tendered to the executors of the mortgagee, though the

day fixed arrives before they have proved the will: Austen v Dodwell Executors (1729) 1 Eq Cas Abr 318 pl 9; 21 ER 1073. The mortgagor will not be discharged by payments to the agent of the mortgagee, unless the agent has authority to receive the money on the mortgagee’s behalf. But, in some jurisdictions, the General Law Land legislation provides that where a solicitor produces a deed having in the body thereof, or endorsed thereon, a receipt for consideration money or other consideration, the deed being executed or the receipt signed by the person entitled to give a receipt, the agent has statutory authority to receive the money on the mortgagee’s behalf: Victorian Act s 69; Tasmanian Act s 69. A forged reconveyance will not satisfy this provision: Jared v Walke (1902) 18 TLR 569. And under the Trustee legislation in some jurisdictions a trustee may authorise a solicitor to receive trust money by permitting the solicitor to have the custody of and produce a deed with a receipt in the body thereof or endorsed thereon: see, for example, Trustee Act 1958 (Vic) s 28(3). There is also usually a general provision for the employment of agents: see Trustee Act 1925 (NSW) s 53; Trustee Act 1958 (Vic) s 28(1). Subject to the statutory exceptions, there is no power in the mortgagee’s solicitor to receive either the principal or the interest of the mortgage debt merely by virtue of his possession of the security (Jared v Walke, above), or to receive the principal merely by virtue of an authority to receive the interest: Withington v Tate (1869) 4 Ch App 288; Bonham v Maycock (1928) 138 LT 736; and see Martin v Diamantikos [1964] VR 593. It may be inferred that the mortgagee treated his solicitor as his agent to receive the interest, as where, after receiving interest by his hands, the mortgagee allowed arrears to accumulate without applying to the mortgagor for payment: Kent v Thomas (1856) 1 H & N 473; 156 ER 1287. [page 761]

Payment to joint creditors 32.50 Although a joint debt was discharged at law by payment to one joint creditor (Husband v Davis (1851) 10 CB 645; 138 ER 256), and a release of one of several joint debtors was at law a release of all of them (Nicholson v

Revill (1836) 4 Ad & El 675; 111 ER 941), yet the receipt of one joint creditor for a mortgage debt, without evidence of any special authority to receive it, would not discharge the security in equity, the interest of the creditors being then treated as a tenancy in common: Powell v Brodhurst [1901] 2 Ch 160; and see Re Losa [1982] Qd R 381. So if one of the joint creditors died, his representatives were entitled in equity to his share of the debt: Petty v Styward (1631) 1 Eq Cas Abr 290; 21 ER 1052; Vickers v Cowell (1839) 1 Beav 259; 48 ER 1046. It therefore became usual to insert in mortgages to trustees, or other persons whose interests were intended to survive, a provision that the receipt of the survivors or survivor should be a good discharge for the debt. It was considered that, if such a security had been acted upon by the mortgagees, the clause would operate, although the deed was not actually executed by them. Such a clause is no longer necessary, it being provided in the General Law Land legislation in all jurisdictions and extended to Torrens system mortgages that where the advance is expressed to be made by several persons out of moneys belonging to them on a joint account, or the mortgage is made to more persons than one jointly, the receipt in writing of the survivors or the last survivor of them, or of the personal representative of the last survivor, is a complete discharge for the money, notwithstanding any notice to the payer of a severance of the joint account: NSW Act s 99; Victorian Act s 112; and see 11.31–11.32.

Appropriation of Payments Appropriation to principal or interest 32.51 Where the debtor claims to be discharged by reason of payments which were not specially made in respect either of the principal or the interest of the mortgage, the rule is that a general payment shall be applied in the first place to sink the interest, before any part of the principal is discharged: Chase v Box (1702) Freem Ch 261; 22 ER 1197; and see Parr’s Banking Co v Yates [1898] 2 QB 460 at 466; Wrigley v Gill [1906] 1 Ch 165. This passage in the 9th English edition of this work was cited in Re Mangan; Ex parte Andrew (1983) 123 ALR 633, and see Falk v Haugh (1935) 53 CLR 163, where the rule is expressed as affording only a presumption in the absence of any actual or express appropriation by the debtor or the creditor.

Appropriation by debtor

32.52 It is, however, the right of the debtor, in the first instance, to declare upon what he pays the money (Mills v Fowkes (1839) 5 Bing NC 455; 132 ER 1174; Re Walsh; Ex parte Deputy Federal Comr of Taxation (1982) 42 ALR 727; Re Mangan; Ex parte Andrew (1983) 123 ALR 633); but the terms of the mortgage may allow the mortgagee to appropriate: see Katsaounis v Belehris (1995) ANZ ConvR 114. When he has so declared, the destination of the payment cannot be changed: Hammersley v Knowlys (1798) 2 Esp 666; 170 ER 490; Simson v Ingham (1823) 2 B & C 65; 107 ER 307. Entries made by the debtor in his own books are not sufficient evidence of the particular appropriation of money paid on a general account: Wrout v Dawes (1858) 25 Beav 369; 53 ER 678. The mortgagor’s direction must be in clear terms: Colonial Bank of Australasia v Kerr (1889) 15 VLR 314; Healey v Commonwealth Bank of Australia (NSWCA, 8 December 1998, unreported).

Appropriation by creditor 32.53 Where the debtor omits, at the time of the payment, to declare upon what account the money was paid, he cannot afterwards do so: Wilkinson v Sterne (1744) 9 Mod [page 762] Rep 427; 88 ER 551. The right of appropriation is then with the creditor (see Tucaba Pty Ltd v AGC Advances Ltd [1991] ACL Rep 295 NSW 13), who may refer the payment to the debt for which he has the least available security (Mackenzie v Gordon (1839) 6 Cl & Fin 875; 7 ER 927; and see Re William Hall (Contractors) Ltd (in liq) [1967] 2 All ER 1150); however, the terms of the mortgage may allow the mortgagee to appropriate: see Katsaounis v Belehris [1995] ANZ ConvR 114. But when the creditor by himself or his authorised agent has accepted the payment on a particular account, he cannot afterwards change the appropriation without the debtor’s consent: Kershaw v Kirkpatrick (1878) 3 App Cas 345. The creditor may declare upon what account he receives the money at any time after payment, and before action brought or account settled between him

and his debtor: Blackburn Building Society v Cunliffe, Brooks & Co (1882) 22 Ch D 61 at 71, affirmed Cunliffe, Brooks & Co v Blackburn Benefit Building Society (1884) 9 App Cas 857 (HL). The creditor’s written memorandum may be used after his death as evidence of his intention: Wilkinson v Sterne, above; Simson v Ingham (1823) 2 B & C 65; 107 ER 307. The accounts kept by a mortgagee have been used as evidence against him of a continuing agreement to apply rents in payment of interest, not only during the time covered by the accounts, but until the mortgagor had notice to the contrary: Cockburn v Edwards (1881) 18 Ch D 449; Wrigley v Gill [1906] 1 Ch 165.

The rule in Clayton’s case 32.54 Where there is a current account, but not otherwise (see Cory Bros & Co v Mecca Turkish SS (Owners);The Mecca [1897] AC 286 (HL)), and there has been no appropriation by either party, the general presumption — known as the rule in Clayton’s case (see Devaynes v Noble; Clayton’s Case (1816) 1 Mer 529; 35 ER 767) — is that the moneys are intended to be applied in discharge of the items of the debt consecutively; and see Sibbles v Highfern (1987) 164 CLR 214 at 222, where the rule was described by Mason CJ and Dawson, Toohey and Gaudron JJ as presuming: … that payments made in reduction of a debt are intended to be applied consecutively in discharge of the items making up the debt. Where notice of a second mortgage is given, subsequent payments into the account are applied to reduce the overdraft existing at the time of the notice and, in effect, for the benefit of the subsequent mortgagee.

And see Beachquest Pty Ltd v Interstate Mortgage and Investments Pty Ltd [2003] 2 Qd R 586 at 595–7 per White J. The rule applies in favour of a purchaser or subsequent mortgagee of property mortgaged to a bank to secure a current account. But it does not apply where the bank mortgage imposes an obligation on the bank to make further advances, and the bank has notice of the sale or subsequent mortgage (London and County Banking Co v Ratcliffe (1881) 6 App Cas 722 (HL)), unless there is evidence to show that the bank did not intend to appropriate payments in discharge of the balance due at the date of the purchase or subsequent mortgage: Deeley v Lloyds Bank Ltd [1912] AC 756 (HL). The presumption is liable to be rebutted by evidence of a different

intention: Deeley v Lloyds Bank Ltd; Cory Bros & Co v Mecca Turkish SS (Owners),The Mecca, above, and see Fahy v MSD Spiers Ltd [1975] 1 NZLR 240 (PC). The rule does not apply where the interest of a surety raises an obligation against the creditor to discharge the debt for which he is liable: Pearl v Deacon (1857) 24 Beav 186; 53 ER 328; Kinnaird v Webster (1878) 10 Ch D 139. Bank mortgages to secure overdraft facilities generally expressly exclude the operation of the rule in Clayton’s case by including a declaration that the security is to be a continuing one; and where the mortgage does not impose an obligation on the bank to make further advances, the operation of the rule can be avoided in the case of a subsequent [page 763] mortgage by ruling off the mortgagor’s account and passing future transactions through a separate account. The applicability of the rule in cases of a travel agent’s trust account was discussed in Sutherland, Re French Caledonia Travel Service Pty Ltd (2003) 59 NSWLR 361. The nature of the current account contemplated by the rule in Clayton’s case was considered by the High Court in Sibbles v Highfern (1987) 164 CLR 214 at 222 and in Airservices Australia v Ferrier (1996) 185 CLR 483 at 504–5 where it was said that: A running account between traders is merely another name for an active account running from day to day, as opposed to an account where further debits are not contemplated. The essential feature of a running account is that it predicates a continuing relationship of debtor and creditor with an expectation that further debits and credits will be recorded.

White J in Beachquest Pty Ltd v Interstate Mortgage and Investments Pty Ltd [2003] 2 Qd R 586 at 595–7 discussed these and other cases and said at 597 that many of the cases construing those words were preference cases and the observations on the meaning of the term ‘running account’ must be seen in that light.

Discharge of the Mortgage

Mortgagee’s duty 32.55 On the debt being paid off, the mortgagor is entitled to have the mortgaged property restored to him free from the mortgagee’s security (Devlin v Surfers Paradise Investments Pty Ltd [1998] 1 Qd R 404 (CA); and see Temwood Holdings Pty Ltd v Oliver [2002] WASC 220); but in the absence of an express covenant there is no right to damages for any delay in discharging the mortgage, at common law or, seemingly, by way of equitable compensation: see Nadrak Pty Ltd v Permanent Custodians Ltd (1994) 6 BPR 13,344 (Bryson J). Repayment is the precondition to discharge. It is not enough that the borrower has a counterclaim for an equal or greater amount. (See further, on the relation between payment and reconveyance, Keller (Samuel) (Holdings) Ltd v Martins Bank Ltd [1970] 3 All ER 950; [1971] 1 WLR 43: see 1.52 and 19.22–19.25.) Upon payment off, it is the duty of the mortgagee to reconvey the property to the mortgagor: Graham v Seal (1918) 88 LJ Ch 31. The repayment of the debt is made against the reconveyance of the property and the handing back of the deeds, and strictly these should be simultaneous transactions: Graham v Seal, above. As stated at 32.39, a tender of the amount due for principal, interest and costs conditionally upon the mortgagee then and there executing a reconveyance and handing over the deeds is a good tender, so that if it is refused, interest stops running. This assumes that the mortgagee has had a reasonable opportunity of approving the conveyance (Graham v Seal) or that for any other reason no delay is necessary: Rourke v Robinson [1911] 1 Ch 480. A reasonable time has to be allowed for obtaining the execution of the deed, especially when the conveying parties were not the persons to whom the tender was made: Webb v Crosse [1912] 1 Ch 323. See also Kitson v Goodge (1997) 7 BPR 15,173, where it was held that penalty interest would not run against a mortgagor after tender where a mortgage management agreement provided that penalty interest of eight per cent per day would apply if the mortgagors did not tender certain stamped trust deeds to a nominated party. Payment and reconveyance being thus related, it was considered that the mortgagee’s action for foreclosure implied an offer to reconvey on redemption: Matthews v Antrobus (1879) 49 LJ Ch 80. The mortgagee could not refuse, when the property was redeemed, to restore possession of it to the mortgagor or to those claiming under him — the mortgagee having no right,

whether the mortgagor’s title was good or bad, to dispute it. The mortgagee is not allowed to deal with the property in such a way that, upon discharge of the debt, the property cannot be restored: Tasker v Small (1837) 3 My & Cr [page 764] 63 at 70; 40 ER 848 at 851; Thornton v Court (1854) 3 De GM & G 293; 43 ER 115; Walker v Jones (1866) LR 1 PC 50; Kinnaird v Trollope (1888) 39 Ch D 636. This does not apply where the property has been sold by the mortgagee under his power of sale (Rudge v Richens (1873) LR 8 CP 358) or where he contracted to sell it under such power: Property and Bloodstock Ltd v Emerton [1968] Ch 94; [1967] 3 All ER 321 (even if the mortgaged property is leasehold and the landlord’s consent to an assignment is required); and see Lord Waring v London and Manchester Assurance Co [1935] Ch 310; Duke v Robson [1973] 1 All ER 481; [1973] 1 WLR 267. Nor does it apply where the mortgagee has been evicted by title paramount: Re Burrell; Burrell v Smith (1869) LR 7 Eq 399. And the mortgagee can claim to retain the property on the ground of a future contingent claim upon it: see Brecon Corp v Seymour (1859) 26 Beav 548; 53 ER 1010. A surety was not entitled to redeem where the charge embraced contingent liabilities of the principal debtors: Re Rudd & Son Ltd (1986) Times, 22 January; and see Fraser v Power (2001) Aust Contract R ¶90-127, where the release of a guarantor was held to discharge liability under the mortgage. After payment the mortgagee becomes constructively a trustee for the mortgagor. There is an implied trust to surrender the estate to the person entitled to demand it: Pearce v Morris (1869) LR 5 Ch App 227; Holme v Fieldsend [1911] WN 111. If the mortgagee refuses to reconvey after payment, the mortgagor can obtain a declaration that the mortgagee is trustee for the mortgagor and an order that the Registrar convey the property to him or a vesting order: see 32.80. In the meantime the mortgagor in possession is tenant at will to the mortgagee for the purposes of the limitation of actions: Sands to Thompson (1883) 22 Ch D 614. In Victoria, in the case of a mortgage by demise or sub-demise after payment, the mortgage term becomes a satisfied term and ceases: see 32.53. A satisfied mortgagee is bound to take care that the security gets back to the mortgagor, or to someone

to whom the mortgagor authorises it to be transferred: Magnus v Queensland National Bank (1888) 37 Ch D 466.

Mortgagee can be required to transfer mortgage 32.56 Save in Western Australia, the mortgagor of general law land is entitled to require the mortgagee to transfer the mortgage to a third party instead of taking a reconveyance to himself: NSW Act ss 94, 95; Victorian Act s 95; Queensland Act s 94; South Australian Act s 45; Tasmanian Act s 17; and see (1981) 55 ALJ 692 (Butt). This right is extended to the Torrens mortgagor in most jurisdictions. The NSW Act provides that a mortgagor who is entitled to redeem has power to require the mortgagee, instead of discharging, and on terms on which the mortgagee would be bound to discharge, to transfer the mortgage to any third person as the mortgagor directs (s 94(1)); see also Victorian Act s 95(1). As to a transfer to keep alive the rights of persons other than the mortgagor in the equity of redemption, see Alderson v Elgey (1884) 26 Ch D 567. ‘Mortgagor’ includes any person from time to time deriving title under the original mortgagor or entitled to redeem the mortgage: NSW Act s 7(1); Victorian Act s 18(1). This right of the mortgagor belongs to and is capable of being enforced by each encumbrancer or by the mortgagor, notwithstanding any intermediate encumbrance, but a requisition of an encumbrancer shall prevail over a requisition of the mortgagor and as between encumbrancers a requisition of a prior encumbrancer shall prevail over a requisition of a subsequent encumbrancer: NSW Act s 95;Victorian Act s 95(2). The right to require a transfer in lieu of discharge cannot be excluded: NSW Act s 94(3);Victorian Act s 95(4). The mortgagor may call for a transfer, even if there is a second mortgage, but, at least where the mortgagor seeks a transfer to himself or to a nominee, the first mortgagee is not justified in disregarding notice of the second mortgage, and where there is such notice, the first mortgagee should not transfer without the consent of the second mortgagee: Corozo Pty Ltd v Westpac Banking Corp [1988] 2 Qd R 481, reversing [1987] 2 Qd R 311; Ley v Scarff (1981) 146 CLR 56, referring to the text of the 6th English edition of this

[page 765] work. The first mortgagee may therefore have the burden of determining which among several subsequent encumbrancers is entitled to priority. The right is exercisable by a second or later mortgagee and by an alter ego of the original mortgagor, such as a personal representative or trustee in bankruptcy: First Chicago Australia Ltd v Loyebe Pty Ltd [1980] 2 NSWLR 703. It is exercisable by an equitable mortgagee (Everitt v Automatic Weighing Machine Co [1892] 3 Ch 506) and by an unregistered transferee of Torrens system land: Corozo Pty Ltd v Westpac Banking Corp, above. The mortgagor may require the transfer to be made to any third person — that is, to any person other than the mortgagor named in the mortgage (First Chicago Australia Ltd v Loyebe Pty Ltd, above) or the alter ego of the mortgagor: Ley v Scarff; Corozo Pty Ltd v Westpac Banking Corporation, both above. The rights under the section are not invoked where the funds to redeem are provided by the alter ego of the mortgagor: the rights under the section are only exercisable where the mortgagor is entitled to redeem and can insist on a discharge: Challenge Bank Ltd v Hodgekiss (1995) 7 BPR 14,399. The right does not apply in the case of a mortgagee being or having been in possession: NSW Act s 94(2); Victorian Act s 95(3). A mortgagee in possession is exempted from the obligation to transfer because it is not possible for such a mortgagee by a transfer to get rid of the liability to account as mortgagee in possession, except under an order of the court: see Hall v Heward (1888) 32 Ch D 430 at 435; and 19.34. In Queensland, a further limitation on the right to require a transfer applies in the case of a mortgage which contains a valid and enforceable covenant or condition in favour of the mortgagee in restraint of trade or business of the mortgagor or any other collateral benefit or advantage in favour of the mortgagor: Queensland Act s 94(3)(b). In most jurisdictions the right is extended to Torrens system mortgages either expressly or generally: see NSW Act s 94(4); Property Law Act 1974 (Qld) s 5(1)(b); Conveyancing and Law of Property Act 1884 (Tas) s 91, Sch 4.

In some jurisdictions there is provision that where a prior mortgagee has demanded payment a subsequent mortgagee is entitled to pay off the prior mortgage and take a transfer thereof: Transfer of Land Act 1958 (Vic) s 87; Real Property Act 1886 (SA) s 131; Transfer of Land Act 1893 (WA) s 128A. On the connection between such provisions and the broader right referred to at the start of this paragraph, see Excel Finance Corp v Commonwealth Bank of Australia (1988) 48 SASR 225.

Reconveyance formerly necessary 32.57 The reconveyance of property which has been mortgaged by conveyance of the whole estate of the mortgagor, whether freehold or leasehold, and whether legal or equitable, is effected by a re-grant or reassignment to the owner of the equity of redemption. Where the mortgage has been made by a demise for a term of years the reconveyance may be effected by a surrender of the term. While, in the case of equitable mortgages created by deed, the ordinary form of reconveyance is usually adopted, this is technically unnecessary since the mere receipt of the debt puts an end to the mortgagee’s interest: see Firth & Sons Ltd v IRC [1904] 2 KB 205. Nor is a reconveyance strictly necessary in the case of mortgages by demise in those jurisdictions where legislation as to satisfied terms exists (see 32.61), since the term ceases on payment of the debt by virtue of that legislation. A mortgagee may be treated as impliedly discharged when it is replaced by a later mortgage: see Walthamstow Building Society v Davies (1990) 22 HLR 60; Times, 9 November 1989. [page 766] In the case of mortgages to unincorporated building societies, the English Building Societies Act 1836 s 5 avoided the necessity of an actual reconveyance by making a receipt indorsed on the mortgage operate to revest in the mortgagor the mortgagee’s estate in the mortgaged property, and substantially the same provision was later applied to incorporated building societies, friendly, industrial and provident societies and by the Law of Property Act 1925 to unregistered mortgages generally.

Indorsed receipt or memorandum — NSW 32.58 The device of automatic reconveyance by indorsed receipt was extended to general law mortgages in New South Wales, Victoria and Tasmania: see NSW Act s 91; Victorian Act s 115; Tasmanian Act s 31A. The NSW Act provides that, inter alia, the mortgage debt may be discharged by a memorandum indorsed on or annexed to the mortgage and signed by the persons to be bound thereby and attested by one witness: s 91(1). Such memorandum may be in the form or to the effect of the form set out in the first form to Sch 5 of the Act, and operates as a deed: s 91(2). Every such memorandum of discharge, upon registration, but as from the date of such memorandum, shall, unless a contrary intention appears in the memorandum, vacate the mortgage debt, and shall operate as a deed of conveyance of the estate and interest of the mortgagee of and in the mortgaged property to the person for the time being entitled to the equity of redemption to the uses and for the estates and interests, and subject to the powers and trusts to, for and subject to which, the equity of redemption at the date of such memorandum stood limited or subject, discharged from all moneys secured by the mortgage: s 91(3)(a). The NSW Act s 91(3)(a) contains a proviso that, in case there is any subsequent subsisting mortgage on the property at the date of such memorandum, the legal estate in the property under the discharged mortgage shall vest in the person in whom the subsequent mortgage is vested or, in the event of there being more than one such mortgage, then in the person who has the prior right to call for a conveyance of such legal estate: NSW Act s 91(3)(a). For registration of deeds in New South Wales, see NSW Act ss 184Aff.

Indorsed receipt or memorandum — Victoria 32.59 The legislation in Victoria follows more closely the English legislation, providing for an indorsed receipt rather than memorandum. The Victorian Act provides for a receipt under seal indorsed on, written at the foot of or annexed to a mortgage for all money thereby secured which states the name of the person who pays the money and is executed by the person in whom the mortgaged property is vested and who is legally entitled to give a receipt for the mortgage money. Such receipt operates without any

reconveyance, reassignment, release or surrender in the following manner depending on the nature of the property mortgaged. In the case of freehold land in fee simple, the receipt operates as a reconveyance of the land to the person (if any) who immediately before the execution of the receipt was entitled in fee simple to the equity of redemption or otherwise to the mortgagor in fee simple to the uses (if any) upon the trusts and subject to the powers and provisions which at that time are subsisting or capable of taking effect with respect to the equity of redemption or to uses (if any) which correspond as nearly as may be with the limitations then affecting the equity of redemption. In the case of a mortgage by demise or sub-demise, the receipt operates as a surrender of the term as respects the subject matter of the mortgage so as to merge in the reversion immediately expectant on that term. [page 767] In the case of other property, the receipt operates as a reassignment thereof to the extent of the interest which is the subject matter of the mortgage to the person who immediately before the execution of the receipt was entitled to the equity of redemption. In all cases the receipt operates as a discharge of the mortgaged property from all principal money and interest secured by and from all claims under the mortgage but without prejudice to any term or interest of the mortgagee or the person in whom the mortgaged property was vested (see s 115(1)); for the form of receipt, see s 115(5) and Sch 6.

Indorsed receipt or memorandum — Tasmania and generally 32.60 Tasmanian Act s 31A, added in 1988, is in simple terms. It provides that a memorandum in the form set out in the schedule has effect as a deed, discharges the mortgaged property from all claims under the mortgage and operates to convey the estate of the mortgagee to the person for the time being entitled to the equity of redemption in the property. Where the notional conveyance is to two or more persons, they hold the estate in the same manner as they held the equity of redemption.

Where the mortgage consists of a mortgage and a further charge, or of more than one instrument, it is sufficient, for the purposes of such reconveyance, if the memorandum or receipt refers to all the instruments whereby the mortgage money is secured or to the aggregate amount of the mortgage money thereby secured and is indorsed on or annexed to one of the mortgage instruments: NSW Act s 91(3)(b);Victorian Act s 115(7). The mortgagor may require the mortgagee to execute a proper instrument of reconveyance of the mortgaged property instead of executing a memorandum of discharge or receipt: NSW Act s 91(5); Victorian Act s 115(4). In some cases a memorandum or receipt will not be appropriate or sufficient: see Nelson v Hannam [1943] Ch 59 (where the mortgagee of leasehold land had exercised an option to purchase the reversion). The statutory provisions refer, in New South Wales, to discharge of the debt and in Victoria to payment of all moneys secured by the mortgage, so a statutory memorandum or receipt cannot be used where only part of the mortgage money is repaid. In that case if no part of the security is discharged an ordinary receipt should be used. Nor can a statutory receipt or memorandum be used where a single mortgage deed has been lost, in which case a release or surrender is necessary. (Where there is a further charge, as seen above, the indorsed receipt or memorandum may be made on the further charge, so the loss of the principal mortgage document is not fatal.) Such statutory memorandum or receipt must name the payer. If a receipt does not name the payer, it will take effect as a simple receipt: see Edwards v Marshall-Lee (1975) 119 Sol Jo 506; and 32.62. The Victorian Act deals specifically with the case where by the receipt the money appears to have been paid by a person who is not entitled to the immediate equity of redemption. Then, unless otherwise provided, the receipt operates as if the benefit of the mortgage had by deed been transferred to the payer: s 115(2); and see 32.60. But this effect does not occur unless the receipt is expressed to operate as a transfer, where the mortgage is paid off out of capital money or other money in the hands of a personal representative or trustee properly applicable for the discharge of the mortgage. A note appended to the statutory form of receipt says that, if the persons paying are not entitled to the equity of redemption, the receipt should state that they are paying the money out of a fund applicable to the discharge of the mortgagee:

see Sch 6. Usually a personal representative who pays off a mortgage is entitled to the immediate equity of redemption by devolution from the mortgagor. [page 768] Also in Victoria, the statutory provisions as to receipts do not confer on a mortgagor a right to keep alive a mortgage paid off by him so as to affect prejudicially any subsequent encumbrancer, and where there is no right to keep the mortgage alive the receipt shall not operate as a transfer: Victorian Act s 115(3). Where there is a second mortgage, the second mortgagee is the person entitled to the immediate equity of redemption. So if the mortgagor pays off the mortgage and takes a receipt showing that he is not entitled to the immediate equity of redemption, this will operate prima facie as a transfer of the mortgage to the mortgagor. A mortgagor cannot, however, keep a mortgage alive in his own favour as against his own creditors: Otter v Vaux (1856) 6 De GM & G 638; see 36.9. Subsection (3) preserves this rule. In Victoria, the statutory receipt provisions apply to the discharge of statutory mortgages (Victorian Act s 115(8)); for discharge of statutory mortgages, see 32.65. They apply also, as an alternative to the special forms of receipt applicable thereto, to the discharge of mortgages in favour of building societies, friendly societies, provident societies, industrial and provident societies and successory trusts, provided the receipt is executed in the manner required by any Act relating to the society or trust (s 115(9)); for discharge of building society mortgages, see 32.64. In view of the wording of the Victorian provision there must be some uncertainty whether a statutory receipt may be used where a right of consolidation exists, since the receipt will not be for ‘the aggregate or balance’ of the principal money. Also, in view of the words ‘in whom the mortgaged property is vested’ a statutory receipt may be inappropriate for the discharge of an equitable mortgage, though the reference to ‘any other property’ in s 115(1)(c) may be sufficient to include an equitable mortgage. The New South Wales provision does not refer to the mortgaged property being vested in the mortgagee and it too may be available in the case of an

equitable mortgage and a mortgage of other than land or an interest therein. A statutory receipt may not be appropriate in the case of a sub-mortgage, because NSW Act s 91(3)(a) implies a covenant that the mortgagee has not encumbered the property.

Receipt operating as a transfer 32.61 This paragraph applies only in Victoria, which follows the English provision on this topic. (For a discussion of the transfer of mortgages, see Chapter 14.) In order that the receipt may operate as a transfer it must state the name of the person paying the mortgage money, and it must appear by the receipt that the person making the payment is not entitled to the immediate equity of redemption. A statement that the payer is not so entitled is sufficient, but such a statement is not necessary: Simpson v Geoghegan [1934] WN 232; (1934) 78 Sol Jo 930; and see Pyke v Peters [1943] KB 242; Cumberland Court (Brighton) Ltd v Taylor [1964] Ch 29; [1963] 2 All ER 536.

Cessation of mortgage terms on payment 32.62 In Victoria, mortgages by demise or sub-demise will automatically cease upon payment of the mortgage money, by virtue of general and specific statutory provisions as to satisfied terms that reproduce the Satisfied Terms Act 1845 (UK). (On the history of that legislation, see Anderson v Pignet (1872) 8 Ch App 180 at 188–9.) The Victorian Act s 20 deals with satisfied terms generally, providing for the merger of the term in the reversion expectant thereon. Where the purposes of the term are satisfied only in respect of part of the land comprised therein, a separate term is deemed to have been created in regard to that part of the land: s 20(3). The principle applies to sub-terms, thus overruling Re Moore and Hulm’s Contract [1912] 2 Ch 105. [page 769] The Victorian Act s 116 deals specifically with the cesser of mortgage terms. When the money secured by the mortgage has been discharged, the

mortgage term becomes a satisfied term and ceases. Section 116 covers the same ground as s 20. It assumes that the mortgage has been finally discharged — that is, that the term has become a satisfied term. In that case it cannot be kept on foot and so complicate the title to the land. The effect of the cessation of mortgage terms on payment is that only evidence of payment is required to discharge a mortgage by demise and this can be given as effectually by an ordinary receipt as by a statutory receipt: Edwards v Marshall Lee (1975) 119 Sol Jo 506; (1976) 40 Conv (NS) 102. See also, for satisfied terms, South Australian Act s 17(2); Tasmanian Act s 32(2);Western Australian Act s 22(2). Notwithstanding these provisions for satisfied terms, it is not the practice to discharge legal mortgages of land by an ordinary receipt. However, in certain cases, the discharging effect of a simple receipt may usefully be relied upon where, for example, there has been a reconveyance to the wrong person (and there is no question of a statutory receipt operating as a transfer) or where, after repayment, but before execution of a discharge, the mortgagee has disappeared. For further details of these provisions reference should be made to the current English edition of this work. The relationship of Victorian Act ss 115 and 116 is a matter of some uncertainty. It is difficult to see the point of the detailed provisions as to statutory receipts if they are not to be employed in every case where a simple receipt would suffice. From the mortgagor’s point of view the statutory receipt with its implied covenants for title (Victorian Act s 115(6)) is the better discharge and it is submitted that no special provision in the mortgage for a statutory receipt is required. Nor is any special provision required for a reconveyance etc, to which the mortgagor is entitled under s 115(4) if he so wishes. In practice the statutory receipt is employed wherever appropriate, except in the case of a mortgage debenture where a simple receipt is used. The mortgagor will bear the costs whatever form of discharge is employed.

Discharge of Torrens system mortgages 32.63 The Torrens system legislation provides for the discharge of registered mortgages and charges by an appropriate form of acknowledgment of payment and discharge. It should be noted that the Registrar-General has power to remove from the

register a mortgage of which the Registrar-General is satisfied that it no longer affects the title: see, for example, NSW Torrens Act s 32(6). This section may be used to expunge mortgages which are clearly spent because of the Statute of Limitations: Scallan v Registrar-General (1988) 12 NSWLR 514; Sotiropoulos v Angelidis [2004] NSWSC 1184. The Torrens legislation differs slightly from state to state. The matter is considered in detail in 4.38.

Building society receipts 32.64 In some jurisdictions a building society mortgage may be discharged on repayment of the mortgage debt either under the general land law provisions or under Building Societies legislation. The Victorian Act s 115(9) applies to the discharge of mortgages to building, friendly and like societies. Special legislation for friendly, provident and industrial societies provides for discharge by statutory receipt: in Victoria, Property Law Act 1958 s 115 may be used in lieu (s 115(9)). [page 770]

Effect of receipt or memorandum on mortgagor’s liability 32.65 The effect of a redemption statement has been dealt with in 32.40 and 39.41: at that stage there has been no reconveyance, actual or implied. The effect of a receipt or memorandum of discharge depends principally upon the precise words of the legislation and the wording of the document. The same applies to discharges of Torrens system mortgages: see 17.11. As to the effect of a statutory receipt, and taking the wording of Victorian Act s 115(1), the receipt operates as a discharge of the mortgaged property from all principal money and interest secured thereby and from all claims under the mortgage: see 32.59. Nothing is said about the debt and the liability therefor under the personal covenant. The NSW Act s 91(3) provides that the memorandum of discharge shall vacate the mortgage debt and that the equity of redemption shall be discharged from all moneys secured by the mortgage: see 32.58. The importance of the effect of the discharge arises where, through

some miscalculation or otherwise, the money paid on the discharge is less than the money actually due. If too much is paid by the mortgagor, he will have the remedies referred to in 32.40. Two late 19th-century English cases concerning receipts by building societies — where by the relevant legislation the effect of the receipt was specifically to vacate the debt — support the proposition that the effect of the discharge was to release the mortgagor from all liability in respect of the debt: see Harvey v Municipal Permanent Investment Building Society (1884) 26 Ch D 273 at 286; London and County United Building Society v Angell (1896) 65 LJ QB 194. That approach has been followed by a county court in England: see Erewash Borough Council v Taylor [1979] CLY 1831. The wording of NSW Act s 91(3) is clearly stronger in favour of the mortgagor being free from any claim by the mortgagee for any deficiency than is Victorian Act s 115(1).As indicated above, the result may turn on the actual wording used in the form of discharge, as well as on the wording of the relevant statute. In Groongal Pastoral Co Ltd (in liq) v Falkiner (1924) 35 CLR 157, the discharge of a Torrens mortgage contained an acknowledgment that the payment was in full satisfaction of the moneys due under the mortgage. That and other cases indicate that it may also be relevant whether or not the form of discharge is a deed. (This may also be relevant to the limitation period — see 16.17 ff — if the liability continues.) In the Groongal case the mortgagee was held unable to recover the deficiency under the personal covenant. The point has been much litigated and discussed in Australia and New Zealand. In Associated Securities Ltd v Perry [1978] Qd R 13, the mortgagee was held entitled to claim the deficiency and in Grundy v Ley [1984] 2 NSWLR 467, it was held that the discharge did not release the personal covenant. The latter case referred to the discussion on the topic in Sykes and Walker, The Law of Securities, 5th ed, Law Book Co, Sydney, 1993 and many of the earlier cases. See also Perpetual Trustees Estate and Agency Co of New Zealand Ltd v Morrison [1980] 2 NZLR 447. In Hartl v Cowen [1983] ACLD 144; (1982) Conveyancing Service (NSW) [92193], it was suggested that the deficiency might be recoverable from the mortgagor as money had and received. In State Bank of New South Wales v Berowra Waters Holdings Pty Ltd

(1986) 4 NSWLR 398 at 402, Needham J analysed the position where a memorandum of discharge wrongly said the money had been repaid is registered under the Torrens system and said that it destroyed the charge previously binding the land. In Big Rock Pty Ltd v Esanda Finance Corporation Pty Ltd (1992) 10 WAR 259 (FC), a mortgagee of a car wrongly gave the mortgagor a statement that nothing was owing and that it had no interest in the car. This was held to be a statement that the mortgagor had redeemed the car, so that the mortgagee was unable to sue in conversion. On the solicitor’s liability for the mortgagor, see [1988] ANZ ConvR 469. [page 771]

Discharge of statutory mortgage 32.66 Statutory mortgages are provided for only in Victoria and Tasmania. Thus, Tasmanian Act s 28 permits a mortgage to be made in accordance with the simple form in Sch 1 Pt 1 of that Act. In Victoria, a statutory mortgage may be discharged by statutory receipt (Victorian Act s 115(8)) or by a reconveyance of the statutory mortgage made by a deed expressed to be made by way of statutory reconveyance of mortgage in the form given in Victorian Act Sch 7 Pt III, with such variations and additions (if any) as the circumstances may require: s 124. The Tasmanian Act has no special provision for statutory receipt or discharge by memorandum and a statutory mortgage is probably better to be the subject of a statutory reconveyance under s 31.

Discharge of mortgages of special types — land mortgage 32.67 As to the form of mortgages of interests in Crown land, see 1.17 and 9.6 ff. Discharge will be in the form appropriate to the original mortgage, depending on whether that was in the general law form, by statutory transfer or Torrens system charge or equitable mortgage. In most jurisdictions specific provision is made for mortgages of mining tenements and their discharge under the appropriate Mining Act.

Discharge of equitable mortgages 32.68 An equitable mortgage of a legal estate is discharged by a reassignment. Even in those jurisdictions providing for indorsed receipt or memorandum of discharge, the relevant wording of the respective provisions probably makes such method inappropriate to equitable mortgages: see 32.58–32.60.A mortgage of an equitable interest is discharged by a reassignment of the interest. In the case of an equitable mortgage by mere deposit, a simple receipt may be employed. Where the deposit is accompanied by a memorandum or deed of charge a separate receipt should be used, but a mere cancellation of the document suffices. For partial release, see 34.4. If the equitable mortgage is a mortgage of a chose in action, notice of the receipt of the mortgage moneys should be given to the debtor, trustee or fund holder: see Dearle v Hall (1828) 3 Russ 1; 38 ER 475; and NSW Act s 12; Victorian Act s 134; and see generally Chapter 26.

Debentures 32.69 Where the debenture does not create a fixed legal or equitable mortgage on land, it may be discharged by a simple receipt, indorsed on the debenture or separately. A fixed legal or equitable mortgage will be discharged in the appropriate manner as dealt with in preceding paragraphs. The registration in the Australian Register of Company Charges will require cancellation by the official form of memorandum of satisfaction: see Corporations Act s 269.

Discharge of mortgages of personalty 32.70 Discharges of mortgages over personal property are considered in dealing with PPSA in Chapter 5.

Discharge of collateral security 32.71 The various types of collateral security have already been mentioned: see 1.43. A further charge by a mortgagor is discharged in the usual form. In Victoria, a statutory receipt endorsed on the principal mortgage referring

to the further charge or to the aggregate amount of the mortgage money secured by both deeds may be used: see Victorian Act s 115(7). Where there is a principal debtor and a surety [page 772] and payment is made by the principal debtor (there being separate mortgages) both mortgages should be discharged by the appropriate method. Discharge of the principal security generally operates to discharge any collateral security: see Porter v Associated Securities Ltd (1976) 1 BPR 9279. Where payment is made by the surety he is entitled to a discharge of his own mortgage and a transfer of the mortgage of the principal debtor (see 35.8), but where there are not separate mortgages — where, for example, the principal debtor does not charge any of his property but the surety does, or where both principal debtor and surety each charges his property in one deed — then, on payment by the surety he is entitled in the first case to an assignment of the personal debt of the principal debtor (the mortgage being discharged) and in the second case to a transfer of the security created by the principal debtor (the security created by the surety being released).

Discharge of mortgages of life policies 32.72 For the form of mortgage of a life policy, see 7.13. Discharge of a legal mortgage of a policy is generally effected by reassignment. Where a statutory receipt or memorandum is a method of discharge (see 32.58–32.60), it may be that such method can be used. Similarly, where Building Societies legislation provides for a statutory receipt (see 32.64) and the policy is mortgaged to a building society, such receipt may be used. Notice of the discharge should be given to the insurance company, where notice of the mortgage was given. An equitable mortgage of a life policy may be discharged by redelivery and the cancellation of any memorandum of deposit.

The mortgagor’s right to policies 32.73 The mortgagor is entitled, of course, to have back on redemption the property which is strictly comprised in the mortgage, but a question may arise whether he is entitled also to a policy which has been effected as a collateral

security. If the relation of debtor and creditor exists between the parties, and it has been agreed, or can be inferred, that the debtor shall be charged with the premiums, and that the policy is effected as a security or indemnity, the policy or the balance of the insurance money, after discharge of the debt, will be the debtor’s. It is immaterial in such a case that the premiums were not actually paid by the debtor, if he has been charged with them in account by the creditor, and has not disputed his liability to pay them: Morland v Isaac (1855) 20 Beav 389; 52 ER 653; Freme v Brade (1858) 2 De G & J 582; 44 ER 1115; Courtenay v Wright (1860) 2 Giff 337; 66 ER 141. The payment by the mortgagee of premiums, on the mortgagor’s refusal to pay them, will not divest the latter of his right to the policy, after payment by him of the advances for the premiums with interest: Drysdale v Piggot (1856) 8 De GM & G 546; 44 ER 500; Salt v Marquess of Northampton [1892] AC 1 at 16 (HL). The fact that an allowance for insurance was included in the calculation of the advance, will, however, entitle the debtor to a policy kept up by the creditor, if there was no stipulation by the debtor for an insurance. The matter is then at the option of the creditor who, whether he effects an insurance or, by retaining the money, becomes his own insurer, is equally entitled to the benefit of the arrangement: Freme v Brade, above. If the policy is not taken out under an arrangement with the debtor, but is effected entirely by the creditor for his own protection, he alone is interested in it. The mere fact that the creditor has charged the debtor with the premiums in his accounts (at least, if there is no evidence that the debtor was aware of the fact, or that he had agreed to pay them) will not give him a right to the policy: Bruce v Garden (1869) LR 5 Ch App 32. The mortgagor will also take the benefit of the insurance if there is an agreement, express or to be inferred, to that effect: Gottlieb v Cranch (1853) 4 De GM & G 440; 43 ER 579. If there is an actual contract that the policy shall be assigned to the grantor [page 773]

on redemption of the security, if he shall elect to take it, then, although the grantee may be under no obligation to keep up the policy even after the grantor has elected to take it, he has clearly no right after such election, or even before election (Hawkins v Woodgate (1844) 7 Beav 565; 49 ER 1185), to dispose of it for his own benefit. If a lessee mortgages his interest, then the benefit of a fire insurance, effected in the names of himself and the lessor, and with a provision that the money payable under the policy should be applied in restoring the premises, passes by, though it is not mentioned in, the mortgage, and the mortgagor will be ordered to sign a joint receipt with the lessor to the insurance office for the money. A mere covenant by the mortgagor with the mortgagee to effect an insurance does not imply that the mortgagee shall have the benefit of the insurance, either in discharge of the debt or in the restoration of the property, if there is no stipulation to that effect: Lees v Whiteley (1866) LR 2 Eq 143.

Solicitor’s undertaking to discharge mortgage 32.74 Where a mortgage is to be discharged out of the proceeds of the sale of the mortgaged property, it will often not be possible for the vendor to deliver the discharged mortgage with the remainder of the title deeds on completion. The execution of the discharge may take a number of days or longer. Accordingly, it is now common for completion to take place upon the undertaking of the vendor’s solicitor to discharge the mortgage and to forward the discharged mortgage to the purchaser’s solicitor within a specified period. (The vendor’s solicitor should seek the vendor’s authority to give the undertaking: see Holmes v Kennard (1985) 49 P & CR 202.) The risk of liability under the undertaking ought to be considered by the maker, as he may be ordered by the court to implement his undertaking: United Mining and Finance Corp Ltd v Becher [1910] 2 KB 296; Re Mallows (1960) 176 Estates Gazette 1117 (undertaking to cancel entries of puisne mortgages as land charges); Hawkins v Gaden (1925) 37 CLR 183 (undertaking to withdraw caveat); and see Re a Solicitor (Lincoln) [1966] 3 All ER 52; Silver and Drake v Baines [1971] 1 QB 396; [1971] 1 All ER 473; John Fox v Bannister King & Rigbeys [1988] QB 925; [1987] 1 All ER 737;

Udall v Capri Lighting Ltd [1988] QB 907; [1987] 3 All ER 262. The liability may be greater than would at first sight appear by virtue of the reservation of a power of consolidation. There is little or no danger in the case of the private vendor and the single mortgage, but the position may be otherwise in the case of a developer vendor who may have several mortgages on foot. The risk to the purchaser’s solicitor in accepting such undertaking, in view of a possible negligence claim, must also be considered: see Edward Wong Finance Ltd v Johnson Stokes & Master [1984] AC 296 (PC); [1984] Conv 86; Al-Kandari v J R Brown & Co [1987] QB 514; [1987] 2 All ER 302.

Preparation of reconveyance 32.75 The mortgagor’s solicitor generally prepares the document of discharge, though some institutional mortgages have the form of discharge on their printed form of mortgage.

Other matters 32.76 As to discharges of shipping mortgages, see 9.28. As to costs of redemption, see 40.28. [page 774]

Discharge under Overreaching Powers Discharge on payment into court 32.77 The General Law Land legislation in most jurisdictions provides that where land subject to any encumbrance, whether immediately payable or not, is sold, by the court or out of court, the court may, on the application of any party to the sale, direct or allow payment into court of such amount as, when invested in government securities, is sufficient by means of the dividends thereof, to keep down or otherwise provide for that charge, together with any additional sum to meet further costs, expenses and interest or any other contingency: NSW Act s 66; Victorian Act s 50; South Australian Act s 27; Tasmanian Act s 4. The provisions apply to Torrens system land: NSW Act s

66(5); Victorian Act — by non-exclusion. Thereupon the court may declare the land freed from the encumbrance and make any order for conveyance, or vesting order, proper for giving effect to the sale, and give directions for the retention and investment of the money in court and for the payment or application of the income thereof: NSW Act s 66(2); Victorian Act s 50(2); and see Re Uplands [1948] WN (Eng) 165. The court may declare all other land, if any, affected by the encumbrance (besides the land sold) to be freed from the encumbrance: Victorian Act s 50(3); and see Re Wilberforce [1915] 1 Ch 94; Lidco Investments Ltd v Hale (1971) 219 Estates Gazette Digest 669. Payment of money into court effectually exonerates therefrom the person who makes the payment: NSW Act s 171; Victorian Act s 202. For the special provision in New South Wales and Queensland to deal with the situation of the missing mortgagee, see 32.39.

Discharge under overreaching conveyance 32.78 In appropriate cases land may also be discharged from an equitable encumbrance by a sale made under an overreaching trust for sale or power of sale. In order that the sale may have the overreaching effect the proceeds of sale must be paid to the trustees who must be either two or more individuals or a trust corporation: see NSW Act s 66B; Victorian Act s 34. The land is conveyed free from the equitable encumbrance. It is the duty of the trustees to provide for the encumbrance out of the proceeds of sale, and unless the encumbrance can be immediately paid off they must allow for a proper margin. The principle is the same as in ascertaining the amount to be paid into court, but the trustees have not the advantage of an order of the court in fixing the amount.

Vesting Orders Vesting orders in case of trustees and mentally disordered persons 32.79 A vesting order may be required where a mortgagee is a trustee, or a person mentally disordered, or both. Such orders can be made under the relevant Trustee Act legislation and the Mental Health legislation, the main

distinctions being that the order is made under the Mental Health legislation where the mortgagee is a person mentally disordered and the mortgage belongs to him beneficially; and under the Trustee Act if the mortgagee is a trustee who is not a person mentally disordered. As to vesting orders where an order for sale is made in reference to an equitable mortgage of land, see 21.18. In all jurisdictions the Trustee Acts provide that the court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult or impracticable so to do without the assistance of the court, make an order appointing a new trustee or new trustees either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee. In particular in Victoria, the court may make an order appointing a new trustee in substitution for a trustee who is [page 775] mentally disordered: see Trustee Act 1958 (Vic) s 48; see also Trustee Act 1925 (NSW) s 70. Generally, the power to appoint a new trustee is expressed to apply where a trustee is a bankrupt or is a corporation which is in liquidation or has been dissolved. The Trustee legislation further provides that, where the court appoints or has appointed a trustee; or where a trustee has been appointed out of court under any statutory or express power; or where a trustee is, inter alia, a trustee entitled to or possessed of any land or interest therein, whether by way of mortgage or otherwise, or is entitled to a contingent right therein, either solely or jointly with any other under disability or out of the jurisdiction or who cannot be found or, being a corporation, has been dissolved; or where any property is vested in a trustee whether by way of mortgage or otherwise, and it appears to the court to be expedient, the court may make an order (called a vesting order) thereby vesting the property in any such person, in any such manner, and for any such estate or interest as the court may direct: Trustee Act 1925 (NSW) s 71; Trustee Act 1958 (Vic) ss 51, 58. For an example of an unsuccessful application for a vesting order, see Re Nairn’s Application [1961] VR 26 (where both borrower and lender were deceased).

Trustee Act 1925 (NSW) s 75 deals specifically with a vesting order where a mortgagee has died and s 74 deals, inter alia, with a mentally disordered mortgagee: see Victorian Act s 154. New South Wales Act s 76 (Victorian Act s 56) deals with vesting orders consequential upon a court order for sale. In Dotter v Evans [1969] VR 41 at 45, it was held that ‘a vesting order should not be made where it is merely intended to facilitate or be a substitute for ordinary conveyancing practice’; see also Casella v Casella [1969] VR 49 at 59.

Delivery of the Deeds (including the certificate or other instrument) Duty of mortgagee to have the deeds (certificate etc) ready 32.80 Where the mortgage is to be paid off in accordance with notice given on either side, it is the duty of the mortgagee to see that the deeds are forthcoming, so that the mortgagor may be enabled without risk to pay the money, and to take his reconveyance on the day fixed: Midleton (Lord) v Eliot (1847) 15 Sim 531; 60 ER 725. The mortgagor is entitled to demand the deeds, although by the act of the mortgagee in disposing by a single document of the property and the debt, other persons have acquired an interest in a title deed of the property: Dobson v Land (1850) 4 De G & Sm 575 at 581; 64 ER 963. This right extends to previous mortgages, assignments, and reconveyances made between the same parties, or their representatives, before the redeemed mortgage: Hudson v Malcolm (1862) 10 WR 720. A mortgagee or transferee of a mortgage, though he is entitled to keep a copy of the draft for his own protection until the transaction is completed, has no right to keep copies of the mortgage or transfer after he is paid off. Whatever copies he has are, as a general rule, copies paid for by the mortgagor, and must be delivered up to him when he pays off the mortgage: Re Wade and Thomas (1881) 17 Ch D 348. Where several mortgages on distinct properties have been transferred by a single deed, one of the mortgagors who comes to redeem singly is entitled to have the deed of transfer delivered to him, upon his covenanting to produce it: Capper v Terrington (1844) 1 Coll 103; 63 ER 340.

Where the mortgagee reconveys only part of the property, and is entitled to retain the deeds by virtue of his absolute title to the greater part of the property, he ought also to covenant with the redeeming party for production: Yates v Plumbe (1854) 2 Sm & G 174; 65 ER 354. The mortgagor is not entitled to the deeds where there is another mortgage outstanding and the mortgagee should hand over the deeds to the encumbrancer next entitled in priority of which he has notice: Corbett v National Provident Association (1900) 17 TLR 5. [page 776] On this point in Victoria, see Property Law Act 1958 s 97. The authorities discussed in this paragraph are applicable to mortgages of Torrens system land, with respect to the certificate of title and any other instruments (for example a registered lease affecting the mortgaged freehold property), subject to the context provided by the nature of Torrens mortgages: as to which, see 1.15, 4.1, 4.2 and Chapter 28; see also Perry v Rolfe [1948] VLR 297; Australia and New Zealand Banking Group Ltd v Greig [1980] 1 NSWLR 112; (1980) 42 FLR 387; Addison v Billion [1983] 1 NSWLR 586; Quint v Robertson (1985) 3 NSWLR 398; and Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1998) 196 CLR 245.

Loss of the title deeds (certificate etc) 32.81 The mortgagee will not be deprived of the benefit of his security by reason of the loss of the title deeds, if the court is satisfied that a security was effected and that they have really been lost: Baskett v Skeel (1863) 11 WR 1019. It follows from the nature of Torrens system land title registration that the same problems do not arise in this respect as under the general law (and see 32.80); and Torrens legislation makes provision for replacement of lost certificates of title (see, for example, NSW Torrens Act s 111) and a caveat may be lodged to protect the position of a registered proprietor pending cancellation and replacement of a lost certificate. Otherwise the general law position would appear to be applicable. If the title deeds of a property have been mislaid or lost by, or stolen out of

the custody of, the mortgagee or his agent, the court, either in a redemption or in a foreclosure action, will direct an inquiry according to the circumstances, as to what deeds or documents were delivered to the mortgagee, and whether they are or not existing or lost, or in the power of the mortgagee to produce, or what has become of them: Smith v Bicknell (1810), cited 3 Ves & B 51n; Stokoe v Robson (1814) 3 Ves & B 51; 35 ER 398; Bentinck v Willink (1842) 2 Hare 1; 67 ER 1. The costs of such an action will fall on the mortgagee: James v Rumsey (1879) II Ch D 398; Caldwell v Matthews (1890) 62 LT 799. The same result follows where he has to sue a third party for them: James v Rumsey. Where the failure to produce the deeds was due to an adverse claim by an attorney, an account was ordered to be taken of the principal, interest and costs; the amount to be paid into and to remain in the bank, until the deeds could be secured and a reconveyance had: Schoole v Sall (1803) 1 Sch & Lef 176. Interest ceases to run from the time redemption should have taken place: Perpetual Trustee Co Ltd v Gregg (1914) 14 SR (NSW) 266.

Indemnity and compensation by mortgagee 32.82 If the deeds are certified to be lost, or are known to have been destroyed or fraudulently disposed of by the mortgagee or his agent, the mortgagor will be entitled to an inquiry as to what indemnity or security ought to be given in respect of the loss (Midleton (Lord) v Eliot (1847) 15 Sim 531; 60 ER 725; James v Rumsey (1879) 11 Ch D 398); and see as to bond of indemnity, Caldwell v Matthews (1890) 62 LT 799. In addition, or alternatively, an inquiry may be made as to what ought to be allowed as a sufficient compensation for the loss or destruction of the deeds: Hornby v Matcham (1848) 16 Sim 325; 60 ER 899. This compensation is given in respect of the expense to arise on future dealings with the property, in getting office copies of the order and other proceedings in the action which must thenceforth form part of the title, and not as speculative damages for injury occasioned by the absence of the deeds at a sale. The amount of the compensation will be set off against the principal and interest due on the security (Brown v Sewell (1853) 11 Hare 49; 68 ER 1182; James v Rumsey, above); see also Macartney v Graham (1828) 2 Russ & M 353; 39 ER 429, where the document lost was a bill of exchange, and only an indemnity was given.

[page 777] The mortgagee will also be directed to deliver, upon oath, attested copies of such of the documents destroyed of which attested copies can be made or had. If it is found, or appears, that the deeds were stolen, an indemnity will be ordered (Shelmardine v Harrop (1821) 6 Madd 39; 56 ER 1004); for form of bond of indemnity, see Stokoe v Robson (1814) 3 Ves & B 51; 35 ER 398 and James v Rumsey (1879) 11 Ch D 398 at 400, 401. But no liability arises for compensation in such a case, whether the deeds were in the possession of the mortgagee himself, or in the possession of his solicitor or agent, in whose custody he might properly have left them if they had been his own, if no fraud or collusion is shown: Jones v Lewis (1751) 2 Ves Sen 240; 28 ER 155; Woodman v Higgins (1850) 14 Jur 846. If the result of the inquiry is merely that the deeds are not to be found, it seems that an indemnity only (the indemnity must be given even in the absence of negligence: James v Rumsey, above), and no compensation, will be directed. For the party chargeable is then entitled to assume that which is most to his own advantage — namely, that the deeds were stolen, or are otherwise missing not by reason of any wrong or negligence on his part: Smith v Bicknell (1810), cited 3 Ves & B 51n; Stokoe v Robson, above; Midleton (Lord) v Eliot, above. The mortgagee is probably not liable in negligence for the loss of the title deeds: Browning v Handiland Group Ltd (1978) 35 P & CR 345, Rubin J relying on Bank of New South Wales v O’Connor (1889) 14 App Cas 273 at 282 (PC) and Gilligan and Nugent v National Bank Ltd [1901] 2 IR 513. But there is older authority to the contrary: see Brown v Sewell, above; Hornby v Matcham, above. Where compensation is given, it is given not under any implied covenant for safe custody, but under the general jurisdiction of the court in accident: Gilligan and Nugent v National Bank Ltd. This position would appear to be applicable to mortgages of Torrens system land: and see 32.80.

Loss of the Right of Redemption

Generally 32.83 The right of redemption may be lost by redemption itself, by release of the right to the mortgagee by the mortgagor (see 32.18), the sale of the land by the mortgagee under the power of sale (see 20.4), upon foreclosure (see 21.1), and by extinguishment by lapse of time under the Limitation Acts.

Extinguishment of Equity of Redemption by Time Mortgages of land 32.84 Legislation in all jurisdictions provides that where the mortgagee has been in possession of the mortgaged land for a specified period (in New South Wales 12 years, in Victoria 15 years) no action to redeem the mortgaged land shall be brought after the end of that period by the mortgagor or any person claiming through him: Limitation Act 1969 (NSW) s 41; Limitation of Actions Act 1958 (Vic) s 15; and Limitation of Actions Act 1974 (Qld) s 20 (12 years); Limitation of Actions Act 1936 (SA) s 27(1) (15 years) and note s 48 for extension of time; Limitation Act 1974 (Tas) s 18 (12 years); Limitation Act 1935 (WA) s 29 (12 years); Limitation Act 1985 (ACT) s 23 (12 years); Limitation Act 1981 (NT) s 26 (12 years). See in general 16.17ff. Where the title of the mortgagor is confirmed by the mortgagee in possession — for example by receipt of any sum in respect of the principal or interest of the mortgage debt or an acknowledgment of the title of the mortgagor or his equity of redemption — the specified time runs from such payment or acknowledgment: Limitation Act 1969 [page 778] (NSW) ss 41, 55; Limitation of Actions Act 1958 (Vic) s 24(2). But an acknowledgment or payment cannot extend the statutory period once it has expired. What appears to be an action by the mortgagor for an account may in reality be an action for redemption: see Ocean Accident and Guarantee Corp Ltd v Collum [1913] 1 IR 337. The relevant limitation period for an account

is six years: see General Credits Ltd v Wenham (1989) 18 NSWLR 570. The Torrens system mortgagor may lose his title after the expiration of the relevant limitation period. This varies from state to state. For New South Wales, see NSW Torrens Act s 45D. In Victoria, adverse possession is a specific exception to the paramountcy of the registered title: see Transfer of Land Act 1958 s 42. The matter is more fully considered in 4.40.

Effect of expiration of limitation period 32.85 At the expiration of the specified period (and assuming an ordinary case where no special circumstances apply, such as the mortgaged land being held on trust for sale) the title of the mortgagor is extinguished: Limitation Act 1969 (NSW) s 65 (on earlier Limitation legislation, see Addison v Billion [1983] 1 NSWLR 586); Limitation of Actions Act 1958 (Vic) s 18. The title of a subsequent mortgagee is also extinguished: Young v Clarey [1948] Ch 191; [1948] 1 All ER 197. If the mortgagee sells after being in possession for the specified period he may keep the whole of the proceeds of sale: Young v Clarey. In such a case the mortgagee should sell as mortgagee. In those jurisdictions which permit it (see 32.91), where a mortgage term has been enlarged, the former mortgagee may sell as owner of the fee simple.

Possession by mortgagee 32.86 To gain the benefit of the statute, the mortgagee must enter and continue in possession solely as mortgagee: Park v Brady [1976] 2 NSWLR 329; and see Lord Advocate v Lord Lovat (1880) 5 App Cas 273 at 288 (HL); Kirby v Cowderoy [1912] AC 599 (PC). Where the mortgaged property is leasehold the receipt by the mortgagee of the rent reserved thereout for the specified period amounts to adverse possession of the land: see, for example, Limitation of Actions Act 1958 (Vic) s 3(1), (6); see also Ward v Carttar (1865) LR 1 Eq 29; Markwick v Hardingham (1880) 15 Ch D 339 and 16.20ff.

When time begins to run 32.87

Under the statute, time will generally begin to run from the date of

the mortgagee’s entry into possession: Re Metropolis and Counties Permanent Investment Building Society; Gatfield’s Case [1911] 1 Ch 698. The terms of the mortgage may provide for redemption beyond the statutory period: Alderson v White (1858) 2 De G & J 97 at 109; 44 ER 924. But the terms of the deed and the circumstances of the case may start the period running at another time. The provisions of the limitation statute relating to disability apply to the disability of the mortgagor who seeks to redeem (Limitation Act 1969 (NSW) ss 52–53; Limitation of Actions Act 1958 (Vic) s 23); and for fraud and mistake, see Limitation Act 1969 (NSW) ss 55–56; Limitation of Actions Act 1958 (Vic) s 27. See generally 16.20–16.21.

Acknowledgment and part payment 32.88 The particular provision for limitation of redemption actions may deal with the fresh accrual of an action to redeem on acknowledgment or part payment: see 32.84. General provisions as to acknowledgments and part payments are set out in Limitation [page 779] Act 1969 (NSW) s 54; Limitation of Actions Act 1958 (Vic) ss 24–26; see 16.20–16.21. An acknowledgment or part payment made after the statutory period is ineffective: see 16.33–16.34. An acknowledgment must be in writing and signed by the mortgagee or other person claiming through him, or by his agent. It must be given to the mortgagor or his successor in title or his agent: Trulock v Robey (1841) 12 Sim 402; 59 ER 1186; Lucas v Dennison (1843) 13 Sim 584; 60 ER 227. It cannot be given to the mortgagor after his title has ceased, by lapse of the specified period. After the mortgagor’s bankruptcy, the acknowledgment must be given to his trustee to be effective: Markwick v Hardingham (1880) 15 Ch D 339. Where the mortgagee has entered into possession accounts of his receipt of rents are not a sufficient acknowledgment, unless kept for or communicated to the mortgagor or his agent: Re Alison; Johnson v Mounsey (1879) 11 Ch D

284; and see Wilson v Walton and Kirkdale Permanent Building Society (1903) 19 TLR 408; Re Metropolis and Counties Permanent Investment Building Society; Gatfield’s Case [1911] 1 Ch 698. Payments in respect of the mortgage debt must be made to the mortgagee or his agent: Limitation Act 1969 (NSW) s 54; Limitation of Actions Act 1958 (Vic) s 25(2). Receipt of the rents and profits by the mortgagee while in possession is not a receipt of any sum in respect of the mortgage debt and accordingly not a part payment: Harlock v Ashberry (1882) 19 Ch D 539. Payment of the rents and profits to the mortgagee by a receiver appointed by him constitutes part payment: Berwick & Co v Price [1905] 1 Ch 632 at 642. Where two or more mortgagees are, by virtue of the mortgage, in possession of the mortgaged land, an acknowledgment of the mortgagor’s title or of his equity of redemption by one of the mortgagees only binds him and his successors in title and does not bind any other mortgagee or his successors. Where the mortgagee by whom the acknowledgment is given is entitled to a part of the mortgaged land and not to any ascertained part of the mortgage debt, the mortgagor shall be entitled to redeem that part of the land on payment, with interest, of the part of the mortgage debt which bears the same proportion to the whole of the debt as the value of the part of the land bears to the whole of the mortgaged land: Limitation of Actions Act 1958 (Vic) s 26(3). The New South Wales situation is unclear: see Limitation Act 1969 s 54. Where there are two or more mortgagors and the title, or the right for redemption or the right to discharge of the mortgage, of one of the mortgagors is acknowledged as aforesaid, the acknowledgment is deemed to have been made to all mortgagors: Limitation of Actions Act 1958 (Vic) s 26(4); and see 16.34.

Redemption of personalty 32.89 The New South Wales limitation on redemption actions (Limitation Act 1969 s 41) applies to all property except ships: see s 46. See Park v Brady [1976] 2 NSWLR 329 generally and for the meaning of ‘in possession’. In other jurisdictions there is no corresponding enactment barring actions to redeem mortgages of pure personalty, and the statutory period for

redemption actions for mortgages of land is not adopted by analogy. The right of redemption is only barred upon equitable grounds, such as the acquiescence of the mortgagor in the extinction of the right of redemption, or the alteration of the position of the mortgagee: Weld v Petre [1929] 1 Ch 33. As in other cases of the enforcement of equitable demands after the lapse of time, it is a question of the balance of justice and injustice in granting the remedy or withholding it. Although mere length of time may bar the remedy, this is on the ground that to allow redemption would be unjust. There is no hard and fast rule that a period [page 780] equivalent to the statutory period for land will be sufficient for the purpose, but probably there will be a difficulty in establishing a right to redeem after this period: Weld v Petre at 53, 54.

Mortgage of land and personalty 32.90 Where a mortgage comprises both land and personalty, if the equity of redemption is barred as regards the land, it is barred as to the personalty also, because the right of redemption of the properties is indivisible: Charter v Watson [1899] 1 Ch 175 (20 years was considered there, that being the relevant period under the Real Property Limitation Act 1833 (UK) then in force).

Enlargement of mortgage term into fee simple 32.91 In New South Wales, Victoria and Tasmania, a long term, originating in an old mortgage by demise or sub-demise, the equity of redemption of which has become barred by the Limitation Acts, may be enlarged into a fee simple in certain circumstances: see Conveyancing Act 1919 (NSW) s 134; Property Law Act 1958 (Vic) s 153; Conveyancing and Law of Property Act (Tas) 1884 s 83. This situation is rarely encountered today and if necessary, reference should be made for further details to the English edition of this work.

Subsequent encumbrancer

32.92 Where a subsequent mortgagee’s right of action against the mortgagor is barred (see 16.40), he cannot claim to redeem a prior encumbrancer: Cotterell v Price [1960] 3 All ER 315; [1960] 1 WLR 1097.

[page 781]

Chapter 33

Redemption Proceedings Preliminary and definition Persons entitled to redeem Owner of equity of redemption Trustees and beneficiaries Assignment of equity during proceedings Insolvency or death Offer to redeem Exceptions to the ordinary rule as to offers to redeem Proceedings to impeach mortgage Proceedings for redemption Discovery etc Effect of foreclosure on redemption proceedings Joinder of causes of action The holder of the security Purchasers from the mortgagee Transferee of mortgage Personal representatives Mortgages to multiple mortgagees

33.1 33.2 33.3 33.4 33.5 33.6 33.7 33.8 33.9 33.10 33.11 33.12 33.13 33.14 33.15 33.16 33.17 33.18 33.19

Proceedings to redeem by subsequent mortgagee Order for redemption Interim orders Successive mortgages Time for payment Affidavit of non-payment Dismissal operates as foreclosure Right to redeem refused Disclaiming defendants

33.20 33.21 33.22 33.23 33.24 33.25 33.26 33.27

Preliminary and definition 33.1 A redemption suit is a proceeding for an account which will authoritatively certify the amount the mortgagor needs to pay the mortgagee in order to discharge the relevant property from the mortgage. The same position applies to redemption proceedings in relation to both general law and mortgages of Torrens system land, subject to the nature of registered Torrens mortgages; the general law position being more directly applicable in the case of unregistered mortgages of Torrens title land: see 32.1,32.2. [page 782] Undeniably, there are some theoretical differences in redemption suits with general law mortgages and Torrens system mortgages. With the former, the mortgagor is generally pursuing an equitable right to redeem. With a Torrens mortgage, Fullagar J truly said in Perry v Rolfe [1948] VLR 297 at 301 that the mortgagor is not merely seeking an equitable remedy for the enforcement of a legal right, he is also seeking the intervention of equity to relieve him from the legal consequences of a failure to perform a legal duty. In practice the distinction is rarely recognised and the court applies much

the same principles as it applies in redemption suits proper. Examples of redemption suit principles being applied in Torrens cases include Re Shanahan (1941) 58 WN (NSW) 132 and Project Research Pty Ltd v Permanent Trustee of Australia Ltd (1990) 5 BPR 11,225. Redemption proceedings are instituted in the Supreme Court. In New South Wales the Equity Division hears the proceedings. The proceedings are in three stages: (a) determination by the judge as to whether the plaintiff is entitled to redeem the mortgage and other questions of principle; (b) determination on inquiry before the Master as to the amount owing to the mortgagee; (c) payment of the amount certified to be owing and the provision of a discharge. In most situations, mortgagor and mortgagee will agree on the amount owing, or, at least on the method of ascertaining that amount. Accordingly, redemption proceedings in Australia are comparatively rare.

Persons entitled to redeem 33.2 All persons who are interested in the equity of redemption must be parties to the proceedings: Tylee v Webb (1843) 6 Beav 552 at 557; 49 ER 939 at 941; Gedye v Matson (1858) 25 Beav 310; 53 ER 655; Caddick v Cook (1863) 32 Beav 70; 55 ER 27; Griffith v Pound (1890) 45 Ch D 553 at 567. Indeed, all persons interested in the security are necessary parties to the proceedings. (As to these, see 32.20 ff and 33.14–33.19.) All joint or several mortgagors are, of course, interested in the equity of redemption, as is the mortgagor of another property under a collateral security: Stokes v Clendon (1790) 3 Swans 150n; 36 ER 812; Hall v Heward (1886) 32 Ch D 430; Gee v Liddell [1913] 2 Ch 62; Re a Debtor [1976] 1 WLR 952; [1976] 2 All ER 1010; Re Thompson (1976) 8 ALR 479; and see 22.7. A lessee from the mortgagor may redeem (Tarn v Turner (1888) 39 Ch D 456); though see Re Australia & New Zealand Banking Group Ltd and Devine Holdings Pty Ltd and Edwards [1991] ACL Rep 295 Qld 11. A surety or any person whose property is under any liability to satisfy the debt due under the mortgage may redeem: Green v Wynn (1869) 4 Ch App 204. The person who seeks redemption must show a good right to redeem, for the mortgagee is entitled to hold the property against everybody who has not a paramount title. If the defendant can make out a case which goes directly to

show that the title is in another person than the plaintiff, the latter will not even be allowed to redeem at his peril: Lomax v Bird (1683) 1 Vern 182; 23 ER 402; and see Francklyn v Fern (1740) Barn Ch 30; 27 ER 542. The defence will not succeed where the mortgagor had parted with his interest in the security to an assignee for whose benefit he was seeking redemption, though the assignee must be a party to such proceedings: Winterbottom v Tayloe (1854) 2 Drew 279; 61 ER 726. If the right to redeem is to an extent dependent on the validity of an instrument, the question of validity is decided first: Blake v Foster (1813) 2 Ball & B 387. The court will act upon a prima facie title shown by the plaintiff, however complicated, if it is supported by satisfactory evidence, and is uncontradicted except by a mere allegation of an adverse claim considering that the only matter determined is the right of redemption, the judgment for which will not hinder an adverse claimant from asserting his title in another proceeding: Lloyd v Wait (1842) 1 Ph 61; 41 ER 554. [page 783] The rule requiring the presence of all parties is based on the right of the mortgagee to account once and for all, which can only be done if the account is taken in the presence of all parties who could demand an account: Palk v Lord Clinton (1805) 12 Ves 48; 33 ER 19. There is no right for the plaintiff to obtain a partial account: Adams v Bank of NSW [1984] 1 NSWLR 285; Colin D Young Pty Ltd v CAGA (1982) Conveyancing Service (NSW) [92179]; (1982) NSW ConvR ¶55-079. In practice if all parties inform the judge that there are no other questions between the parties preventing them from agreeing on a figure to pay out the mortgagee, declaratory proceedings may be entertained. A person entitled to redeem cannot be omitted merely because his interest is very small: Hunter v Macklew (1846) 5 Hare 238; 61 ER 902. Thus, if there is a tenancy in common, the holders of all undivided shares must be parties: Bolton v Salmon [1891] 2 Ch 48. This is not the case where the mortgaged property is merely certain undivided shares. In that case only the proprietors of the mortgaged shares should be parties: Nichol v Allenby (1889) 17 OR 275.

The only exception to the rule is as regards beneficiaries under a trust and persons interested in the estate of a deceased person where it is sufficient for the proceedings to be commenced by or against the trustees or personal representatives leaving it to the court to add parties if it considers it necessary: see 33.5. However, the court will not stop redemption on account of the absence of a party who cannot be found if the mortgagee runs no risk: Faulkner v Daniel (1843) 3 Hare 199 at 202; 67 ER 355 at 356. Thus the rule is properly said to be only a prima facie rule: Re Richerson; Scales v Hoyle (No 2) [1893] 3 Ch 146.

Owner of equity of redemption 33.3 The mortgagor himself, or the owner for the time being of the whole of the equity of redemption, including all joint owners, must be present in every set of proceedings in which the question of redemption arises between mortgagees. This is because, after giving liberty to the later mortgagee to redeem the first, the order is that the former may in turn be redeemed by the mortgagor, in default of which the mortgagor is foreclosed. If the mortgagor were not a party to the proceedings, his right of redemption would remain open and the first mortgagee would be exposed to another set of proceedings: Fell v Brown (1787) 2 Bro CC 276; 29 ER 151; Palk v Lord Clinton (1805) 12 Ves 48; 33 ER 19; see also Ramsbottom v Wallis (1835) 5 LJ Ch 92 and Craddick v Cook (1863) 9 Jur NS 454. Where the equity of redemption has been subdivided, all the purchasers of the individual lots should ordinarily be parties: Peto v Hammond (1860) 29 Beav 91; 54 ER 560; Home Building & Savings Assn v Pringle (1914) 14 DLR 482; 5 OWN 226. The provisions of court rules permitting representative defendants do not apply to a number of persons interested in the equity of redemption: Westminster Bank Ltd v Residential Properties Improvements Co Ltd [1938] Ch 639. The mortgagor must also be a party to proceedings in which the validity of the mortgage is contested: Thompson v Baskerville (1688) 3 Rep Ch 215; 21 ER 770; and see Stackhouse v Countess of Jersey (1861) 1 J & H 721; 70 ER 933. The mortgagor, however, need not be joined in proceedings for redemption between a mortgagee and a sub-mortgagee. The assignee of the equity of redemption stands in the place of the

mortgagor for the purpose of this rule. The owner of the equity of redemption of one of two properties comprised in the same mortgage cannot take proceedings for redemption of one property separately: Hall v Heward (1886) 32 Ch D 430. [page 784] Where there are co-mortgagors, any of them may redeem, but the whole of the property must be redeemed: the mortgagee cannot be forced to accept a partial redemption extending only to the plaintiff’s interest: Cholmondeley v Clinton (1820) 2 Jac & W 1 at 134; 37 ER 527 at 575; Pearce v Morris (1869) 5 Ch App 227; Hall v Heward (1886) 32 Ch D 430; Stevenson v Byrne (1897) 19 ALT 47; 3 ALR 198. Where there is doubt as to who is entitled to the equity of redemption, all persons who appear prima facie to have a right to redeem should be made parties, leaving it to them to institute separate proceedings as to who is actually so entitled: see Sprague v Mayne (1930) 38 OWN 16 at 18–19.

Trustees and beneficiaries 33.4 As noted in 33.2, proceedings are properly commenced by or against trustees, but the court may order that the beneficiaries or some of them be added as parties. The discretion is at large, but the court is often guided by the practice of the old Court of Chancery. Under such practice, no further parties were appropriate where executors or trustees had complete power over the estate or had under their control funds available for redemption: Mills v Jennings (1880) 13 Ch D 639; Re Cooper; Cooper v Vesey (1882) 20 Ch D 611; and see Re Mitchell; Wavell v Mitchell (1892) 65 LT 851. However, where the beneficiaries are many and fluctuating and questions arise between the trustees as to the proper mode of protecting their interests, some or all of the beneficiaries should be added as parties: see Minn v Stant (1851) 12 Beav 190; 50 ER 1032; Re De Leeuw; Jakens v Central Agency of Discount Corp [1922] 2 Ch 540. Where the beneficiaries might suffer from the limited power of an administrator, the court may join them or at least some of them as in Ellis v

Deane (1827) Beat 5; Clough v Dixon (1841) 10 Sim 564; 59 ER 235; Groves v Lane (1852) 16 Jur 854.

Assignment of equity during proceedings 33.5 No assignment or dealing with an estate after the commencement of proceedings for redemption may cause the proceedings to become defective and they may be continued by or against the person to or upon whom such estate has devolved. In the case of a transmission of interest or liability, new parties may be added if it becomes necessary or desirable. A person who acquires an interest in property the subject of litigation acquires no right distinct from the assignor, pendente lite nihil innovatur: Co Litt 102b; Metcalfe v Pulvertoft (1813) 2 Ves & B 200; 35 ER 295; Bishop of Winchester v Paine (1805) 11 Ves 194; 32 ER 1062. As to adjusting rights of an assignee of a later mortgagee after judgment for foreclosure nisi by which his assignor’s interest is bound, see Booth v Creswicke (1837) 8 Sim 352; 59 ER 139. The rule is grounded upon the reason that any person in the subject matter of proceedings might otherwise harass the other parties thereto by making occasions for the addition of new parties. It is therefore limited in its operation to the particular proceedings pending which the assignment is made, and does not prevent the assignees from enforcing their rights in any other act or proceedings: Metcalfe v Pulvertoft, above. If, therefore, pending redemption proceedings, the equity of redemption is assigned by the mortgagor, the assignee will be bound: Garth v Ward (1741) Atk 174; 26 ER 509; Eades v Harris (1842) 1 Y & CCC 230 at 234; 62 ER 867 at 869; Patch v Ward (1867) 3 Ch App 203 at 208. The rule applies as well to assignments which affect the whole equitable estate or interest in question in the proceedings as to those by which one of several parties assigns his separate interest: Eades v Harris. If the other party to the proceedings desires to have the assignee pendente lite before the court, the latter cannot object, it being desirable that all persons interested should be present: Campbell v Holyland (1877) 7 Ch D 166. If a legal interest with which it is necessary to deal passes by the assignment, the assignee’s presence becomes necessary [page 785]

because, although the legal interest will be bound in his hands, so as to make him a trustee for the person entitled under the order, yet, unless he is joined, he cannot be compelled to reconvey: Bishop of Winchester v Paine (1805) 11 Ves 194; 32 ER 1062; Barry v Wrey (1827) Russ 465; 38 ER 650. In Coles v Forrest (1847) 10 Beav 552; 50 ER 694, the legal interest appears to have been assigned.

Insolvency or death 33.6 The rule stated in 33.5 does not apply to cases of involuntary alienation. Thus, where the mortgagor becomes bankrupt, or a judgment creditor obtains a charge on the property, the trustee in bankruptcy or the creditor as the case may be should be joined as a party: Wood v Surr (1854) 19 Beav 551; 52 ER 465; Re Parbola Ltd; Blackburn v Parbola Ltd [1909] 2 Ch 437. Trustees under a deed of arrangement represent the creditors for the purpose of proceedings relating to the property comprised in the deed (Morley v Morley (1858) 25 Beav 253; 53 ER 633) and thus the creditors need not be parties unless the trustees have some interest distinct from the creditors. In this exceptional case, although the creditors have no right of redemption apart from the trustees, they may be parties: Troughton v Binkes (1801) 6 Ves 573; 31 ER 1202. Where the mortgagor dies during the course of the proceedings his personal representative should seek to be substituted pursuant to the court rules.

Offer to redeem 33.7 As a general rule the mortgagor is not entitled to bring the mortgagee before the court except for the purpose of redemption: Tasker v Small (1837) 3 My & Cr 63; 40 ER 848; Jefferys v Dickson (1866) 1 Ch App 183; National Bank of Australasia v United Hand-in-Hand and Band of Hope Co (1879) 4 App Cas 391; Toms v Kimble [1992] ACL Rep 295 NSW 3 and see (1993) 1 APLJ 61 (Young). Redemption is the only relief to which a subsequent encumbrancer is entitled against the prior mortgagee: Gordon v Horsfall (1846) 5 Moo PCC 393 at 426; 13 ER 542. Hence a mortgagee is said not to be amenable to proceedings relating to the mortgage unless there is expressly or by

implication an offer to redeem: Troughton v Binkes (1801) 6 Ves 573; 31 ER 1202; Balfe v Lord (1842) 2 Dr & War 480; Dalton v Hayter (1844) 7 Beav 313; 49 ER 1085; Gordon v Horsfall (1846) 5 Moo PCC 393; 13 ER 542; Harding v Tingey (1864) 10 Jur NS 872; Hughes v Cook (1865) 34 Beav 407; 55 ER 692; Russian Commercial etc Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438. There must be an offer to redeem though the plaintiff is a trustee, the trust having been created by the mortgagor and the mortgagee not being interested (McDonough v Shewbridge (1814) 2 Ball & B 555), and even though part of trust property has been improperly included in the mortgage: Eaton v Hazel (1852) 1 WR 87. The offer should be for principal, interest and costs: Grugeon v Gerrard (1840) 4 Y & C 119 at 128; 160 ER 945 at 948–9. Early cases held that proceedings were demurrable if no offer was made in the pleadings, for example Harding v Tingey (1864) 10 Jur NS 872. Even last century, however, leave to amend would be granted: Palk v Lord Clinton (1805) 12 Ves 48; 33 ER 19; Balfe v Lord (1842) 2 Dr & War 480. Where proceedings are commenced by summons, an offer may be implied by the filing of the proceedings. In any event, no relief will be given to the mortgagor in the ordinary case unless, before decree, he offers to redeem and to submit to any condition to the granting of relief that the court might impose: Dayton v Hayter (1844) 7 Beav 313 at 319; 49 ER 1085 at 1088. The usual rule is that where there is a dispute as to the amount owing under the mortgage the mortgagee can require as the price of a discharge that the mortgagor pay the [page 786] amount reasonably demanded for principal, interest and costs to date plus a reasonable sum to cover the costs of taking the accounts: Project Research Pty Ltd v Permanent Trustee of Australia Ltd (1990) 5 BPR 11,225. A mortgagor may obtain a declaration that no money is owing under a mortgage, together with ancillary injunctive relief, but once it appears that there is an arguable case that some money is owing, the mortgagee is entitled to pursue his rights under the mortgage: Westpoint Finance Pty Ltd v

Chocolate Factory Apartments Ltd [2002] NSWCA 287. In that case, Young CJ in Eq noted at [32] that a dispute as to the quantum of the mortgage debt where there is no dispute as to whether there has been a default does not entitle a mortgagor to an injunction; he referred to Harvey v McWatters (1948) 49 SR (NSW) 173; and see Fletcher v Ould Pty Ltd [2003] WASC 226. See also Boscawen v Bajwa [1995] 4 All ER 769; [1996] 1 WLR 328 (CA) as to the tracing of trust moneys used to discharge a mortgage and consequent rights of subrogation by the bank providing the money.

Exceptions to the ordinary rule as to offers to redeem 33.8 The ordinary rule does not apply where the object of the proceedings is to obtain the construction of the mortgage deed (Re Nobbs; Nobbs v Law Reversionary Interest Society [1896] 2 Ch 830) or where the mortgagor’s claim is for sale and not redemption under NSW Act s 103(1) or Victorian Act s 91 (see 21.12) or to restrain the mortgagee from an unauthorised sale of the mortgaged property: see, for example, Murad v National Provincial Bank (1966) 198 EG 117. See 20.36 and (1993) 1 APLJ 61 (Young). The rule also does not apply where the equity of redemption has become subject to trusts which provide for the payment of the mortgage debt and the mortgagee is made a party to an action relating to the trusts: Jefferys v Dickson (1866) 1 Ch App 183. Again, if the proceedings relate to different property which has been conveyed in trust to exonerate the mortgaged property, and those proceedings cannot be effectual without the presence of the mortgagee, he may be joined without any offer to redeem him: Dalton v Hayter (1844) 7 Beav 313; 49 ER 1085. A prior mortgagee, if a necessary party in respect of accounts, may waive the redemption of his security, in which case the judgment should be prefaced by a statement that he consents not to be redeemed and to allow his debt to remain a charge on the estate: Kensington (Lord) v Bouverie (1854) 19 Beav 39; 32 ER 262. Further, as to necessary parties see, for example, Boscawen v Bajwa [1995] 4 All ER 769; [1996] 1 WLR 328 (CA). Where purely statutory relief is being sought, rather than equitable relief — such as the case where a person is avoiding a transaction under a Moneylenders Act — no offer need be made: Lodge v National Union Investment Co Ltd [1907] 1 Ch 300; Langman v Handover (1929) 43 CLR 334; and White v Pacific Acceptance Corp (1961) 62 SR (NSW) 60.

However, if an offer is made in pleadings, it cannot be recalled: Denis v Duke of Marlborough (1819) 2 Swan 108 at 134; 36 ER 555 at 565; Bazzelgetti v Battine (1821) 2 Swan 156n; 36 ER 576. An offer to redeem made under a mistake as to the amount secured on the property was enforced in Holford v Burnell (1687) 1 Vern 448; 23 ER 577, but this would hardly be so now. The court may in its discretion refuse to enforce the offer where it would be unjust to do so (Knight v Bowyer (1858) 2 De G & J 421; 44 ER 1053), or where it is so limited in its terms as not to be strictly applicable to the statement of affairs which has resulted from the hearing of the case: Pelly v Wathen (1849) 7 Hare 351; 68 ER 144. As to enforcing payment where there has been no offer to redeem, see Hollis v Bulpett (1865) 12 LT 293.

Proceedings to impeach mortgage 33.9 Where the proceedings are brought to impeach the mortgage and are framed solely for this purpose and contain no prayer for redemption, the plaintiff cannot, upon the [page 787] proceedings failing, and the validity of the mortgage being established, obtain an order for redemption. The proceedings will be dismissed, but without prejudice to the right of redemption: Martinez v Cooper (1826) 2 Russ 198; 38 ER 309; Johnson v Fesenmeyer (1858) 25 Beav 88; 53 ER 569; Crenver etc Mining Co Ltd v Willyams (1866) 35 Beav 353; 55 ER 932. It is otherwise where the defendant has not relied solely on his title as mortgagee, but has set up an inconsistent title, for instance that he is absolute owner: National Bank of Australasia v United Hand-in-Hand and Band of Hope Co (1879) 4 App Cas 391. In such a case redemption can be ordered in the same proceedings, and the mortgagor can claim to set aside the mortgage or, in the alternative, if it is valid, to redeem (Hunt v Worsfold [1896] 2 Ch 224); though see the earlier case of Ernest v Partridge (1863) 1 New Rep 425 where this was denied. Nevertheless, in a redemption action it is open to the mortgagor to challenge the validity of the security he otherwise wishes to

redeem: Devlin v Surfers Paradise Investments Pty Ltd [1998] 1 Qd R 404 (CA).

Proceedings for redemption 33.10 It has been said that where a mortgagee is made party to proceedings, the prayer for relief is the same thing as a prayer for redemption, because redemption is the proper relief: Cholmley v Oxford (Countess) (1741) 2 Atk 267; 26 ER 565; Palk v Lord Clinton (1805) 12 Ves 48 at 62; 33 ER 19 at 24. Consequently, if an account is taken, dismissal will be the penalty for non-payment, and this will be the equivalent to foreclosure: see Cholmley v Oxford (Countess) and 33.26. However, it may be that this result would only follow if there was no offer to redeem: Inman v Wearing (1850) 3 De G & Sm 729; 64 ER 680. Proceedings may be treated as a redemption suit although they involve a claim to set aside a sale by the mortgagee: Powell v Roberts (1869) LR 9 Eq 169 and see Inman v Wearing, above. However, redemption will not be ordered in ejectment proceedings against a purchaser unless the claim includes specifically a prayer for redemption: Murugaser Marimuttu v De Soysa [1891] AC 69.

Discovery etc 33.11 The plaintiff in proceedings for redemption is entitled to discovery of matters necessary to make the proceedings effective. Thus the mortgagee’s securities are liable to discovery: West of England and South Wales Bank v Nickolls (1877) 6 Ch D 613. Discovery can be had and interrogatories administered as to the amount claimed to be due: Bridgwater v De Winton (1863) 33 LJ Ch 238; Beavan v Cook (1869) 17 WR 872; Elmer v Creasy (1873) 9 Ch App 69; London v Manby (1879) 13 Ch D 239. There is, in addition, the statutory right to inspect title deeds conferred by NSW Act s 96, Victorian Act s 96: see 3.32. There appears to be an exception to the position stated above where the mortgagee is a solicitor who has lent as a trustee. Such a mortgagee is not bound to discover the names of the cestuis que trustent or to produce documents relating to the transactions, if that cannot be done without a breach of professional confidence, notwithstanding any inconvenience which

may arise to the plaintiff from want of the information: Jones v Pugh (1842) 1 Ph 96; 41 ER 567. However, more recent authority makes it clear that the privilege may not be so extensive. Thus in Zielinski v Gordon [1983] 1 WWR 414, a rectification of mortgage case, a mortgagor’s solicitor had to discover his instructions to the extent that the only privilege was against disclosure of any request for and supply of professional legal advice with respect to the transaction. Where the proceedings have been commenced by summons, discovery, while not automatic, will be ordered unless there is some good reason to the contrary: Coni v Robertson [1969] 2 All ER 609; [1969] 1 WLR 1007; Re Greenhalgh [1982] Qd R 99. [page 788]

Effect of foreclosure on redemption proceedings 33.12 Possession under a judgment of foreclosure is a good defence to redemption proceedings where the rights of the plaintiffs or of those under whom they claim are concluded by the judgment; but not otherwise, even if the mortgagee on foreclosure had no notice of other encumbrances. The defence therefore will not hold against proceedings by subsequent encumbrancers, who were not parties to the proceedings by which foreclosure was effected: Nicholls v Short (1713) 2 Eq Cas Abr 608; 22 ER 511; 15 Vin Abr 478. A party to proceedings in which an order for foreclosure has been made is bound by it though it was made in the absence of a person whose interest was not disclosed by the pleadings: Bromitt v Moor (1851) 9 Hare 374; 68 ER 552. A mortgagor who is a defendant in that character in proceedings for foreclosure is bound by the judgment in those proceedings in respect of his interest in another character, though the other interest did not appear upon the proceedings: Goldsmid v Stonehewer (1852) 9 Hare App xxxiii; 68 ER 778. It seems, however, that if a person whose interest has been foreclosed in proceedings to which he was a party becomes afterwards entitled to another interest in the same estate, derived from a person who was not a party to those proceedings, the owner of the newly acquired interest may bring proceedings for redemption notwithstanding the former judgment

of foreclosure, but the pleadings ought to state the former proceedings in the foreclosure proceedings: Bromitt v Moor. As can be seen from 22.36, under certain circumstances the foreclosure may be reopened and a new right to redeem will arise. The foreclosure cannot be pleaded until the final order has been obtained (Senhouse v Earl (1752) 2 Ves Sen 450; 28 ER 287 and see Quarrell v Beckford (1816) 1 Madd 269; 56 ER 100), for up to that time the estate retains the quality of a mortgage, and would not formerly pass as land by the will of the mortgagee made before the date of the order absolute for foreclosure: Thompson v Grant (1819) 4 Madd 438; 56 ER 767. Where the land is under Torrens system, the order for foreclosure is made administratively by the Registrar-General. The NSW Torrens Act s 62(3) provides that upon recording the foreclosure order on the register the mortgagee takes an indefeasible title free from any right and equity of redemption of the mortgagor or any person claiming through or under the mortgagor. Accordingly, a Torrens system foreclosure order when registered will defeat redemption proceedings. Moreover, such an order may not be recalled (Matton v Lipscomb (1895) 16 LR (NSW) (Eq) 142 at 148), though the court might in appropriate circumstances make orders in personam adjusting rights. The Victorian Torrens Act takes a slightly different form. Section 79(4) provides that upon registration of the order of foreclosure the mortgagee will still remain subject to a lease easement or restrictive covenant to which he has consented in writing or to which he is a party or any other right that is for any reason binding on him. The net effect in the two states appears to be the same and see 22.53.

Joinder of causes of action 33.13 Since the mortgagee has an immediate right to have accounts taken and a time fixed for payment and is not bound to wait the result of taking accounts and other matters in which he has no interest, a mortgagor formerly could not in the same proceedings seek redemption of one mortgage and foreclosure of another: Plumbe v Plumbe (1841) 4 Y & C Ex 345; 160 ER 1039. A mortgagee could seek to strike out proceedings which, besides redemption, sought general administration of the personal estate of the

deceased mortgagor and a declaration of the rights of devisees and legatees: Pearse v Hewitt (1835) 7 Sim 471; 58 ER 918. Present-day practice is not so strict and, generally speaking, proceedings may contain several causes of action subject to the court’s discretion to strike out or order separate trials. [page 789] There seems to have been, in the 19th century, a disinclination to consider redemption of two different types of mortgage in a single suit. Chesworth v Hunt (1880) 5 CPD 266 was a case at law where the holder of a bill of sale levied execution and raised more than enough to pay out the bill of sale. The court refused to allow the surplus to be used partially to redeem a freehold mortgage between the same partier. See also Greig v Watson (1881) 7 VLR (Eq) 79 at 85. It is difficult to see why this feeling should prevail today.

The holder of the security 33.14 The person in whom the legal interest in the security becomes vested, whether originally by the mortgagee (for example, Wood v Williams (1819) 4 Madd 186; 56 ER 676) or by assignment (for example, Wetherell v Collins (1818) 3 Madd 255; 56 ER 502), is a necessary party to proceedings for redemption so that a reconveyance may be obtained. This is so even though the legal interest is held on trust for the persons entitled to the mortgage money. However, a person who claims to be interested in part of a mortgage debt vested in another is sufficiently represented by the latter in proceedings to set aside the security and should not be made a party: Emmet v Tottenham (1864) 10 Jur NS 1090. As to a trustee who has not been fully discharged from the trust by the appointment of a successor, see Adams v Paynter (1844) 1 Coll 530; 63 ER 530. The trustee of the legal interest in the security having no adverse rights may properly be — and to save expense to the mortgagor ought to be — a coplaintiff (Smith v Chichester (1842) 2 Dr & War 393) unless he refuses or is likely to refuse, and then he should be made a defendant: Browne v Lockhart (1840) 10 Sim 420; 59 ER 678.

The rule is not affected by the present automatic effect of a receipt on the discharge of the mortgage. The mortgagee is not a necessary party to proceedings brought by the mortgagor in possession to prevent injury to the mortgaged property: Fairclough v Marshall (1878) 4 Ex D 37. (See NSW Act s 11; Victorian Act s 98; and 12.4.) One who has agreed to purchase an equity of redemption cannot make the mortgagee either of a legal or equitable interest a party to proceedings to compel specific performance of a contract in which he has no concern or the performance of which will not affect his security or interfere with his remedies: Taker v Small (1837) 3 My & Cr 63; 40 ER 848; Hall v Laver (1838) 3 Y & C Ex 191; 160 ER 669. It is the same where one has agreed to purchase a property which is afterwards mortgaged: Long v Bowring (1864) 33 Beav 585; 55 ER 496. In both situations the principle is applied that a person who claims a right to redeem must first have acquired the mortgagor’s title to a reconveyance: Francklyn v Fern (1740) Barn Ch 30 at 32; 27 ER 542 at 543. Neither the mortgagor (Smith v Vallence (1655) 1 Rep Ch 169; 21 ER 540; Darcy v Callan (1836) 1 Jo Ex Ir 614) nor the mortgagee is allowed to dispute the title of the other. However, if the mortgagor’s title is impeached in or by the proceedings, the mortgagee, having a great interest in supporting it and being often in possession of the deeds, ought to be joined: Copis v Middleton (1818) 2 Madd 410; 56 ER 386. See also Hitchins v Lander (1807) G Coop 34; 35 ER 468, where the validity of a lease was in dispute and the lessor’s mortgagee was held to be a necessary party. As to pleading a paramount title in redemption proceedings, see Meder v Birt (1726) Gilb Rep in Eq 185; 25 ER 130.

Purchasers from the mortgagee 33.15 The purchaser under a power of sale in a mortgage is not a necessary party to an action by the mortgagor against the mortgagee to recover the surplus purchase money (Minn v Stant (1851) 15 Beav 49; 51 ER 454), but persons with whom the mortgagee [page 790]

has dealt wrongfully for the produce of the mortgaged estate are proper parties to a redemption action, as being in possession of the value of the converted part of the estate, though they no longer hold the property in specie: Hood v Easton (1856) 2 Jur NS 917.

Transferee of mortgage 33.16 Ordinarily, where the mortgage has been assigned, and the mortgagor sues for redemption, the mortgagee need not be a party in respect of the accounts: Anon (1680) 2 Freeman Ch 59; 22 ER 1058; 2 Eq Cas Abr 594; 22 ER 499. For if the mortgagor were not a party to, or if he had not notice of the assignment, the assignee, having agreed to stand in the place of the original mortgagee, is bound by all the equities subsisting between him and the mortgagor, and cannot afterwards object to accounts which have been taken with the assignor: Hill v Adams (1741) 2 Atk 39; 26 ER 420; Chambers v Goldwin (1804) 9 Ves 254 at 269; 32 ER 600 at 606; Norrish v Marshall (1821) 5 Madd 475; 56 ER 977: see 14.1. Where the mortgagor was a party or had notice, the same must apply as a matter of principle because the assignor’s accounts have been admitted by both parties: Anon, above; Car v Boulter (1697) 2 Freeman Ch 217; 22 ER 1169. If the mortgagee had been in possession, and the mortgagor seeks an account of a surplus alleged to have been received, the mortgagee, notwithstanding his assignment, must be joined with the assignee, so that he may account for what he received in his time: Anon, above. It has been suggested that this case was overruled by Chambers v Goldwin, above, but Lord Eldon’s observations in that case did not extend to the case put here, of a mortgagee in possession, and an account sought of the surplus received. Lowther v Carlton (1740) was decided upon the principle of the case cited, as appears by the report in Barn Ch 358; 27 ER 678; also reported 2 Atk 139; 26 ER 487. If only part of the security has been assigned to a derivative mortgagee for a sum less than the original debt, then upon an action for redemption, the original mortgagee, as well as the assignee, must be a party; for he claims an interest — namely, a right to redeem the assignee and prevent another account: Norrish v Marshall, above; Hobart v Abbot (1731) 2 P Wms 643; 24 ER 897; Re Burrell; Burrell v Smith (1869) LR 7 Eq 399. Yet if in such case the objection of the absence of the original mortgagee is not taken until the

hearing, the case will be allowed to proceed without him if, being a witness, he has sworn that he is fully satisfied and retains no interest: Norrish v Marshall, above. As to Torrens system mortgages, see 14.5.

Personal representatives 33.17 Both the mortgage debt and the estate or interest of the mortgagee in the mortgaged property devolve on his death upon his personal representatives, and they are the persons to represent the security in a redemption action unless by transfer or assent or other means they have divested themselves of their title. Where a mortgagee has no legal personal representative (who, if existing, would be a necessary defendant), rules of court now usually permit the court to proceed in his absence, or, after proper notices, appoint someone to represent the estate.

Mortgages to multiple mortgagees 33.18 If a mortgage of land is made to several persons, those mortgagees may hold their interests as joint tenants or tenants in common. The mortgagees may also be either joint tenants or tenants in common of the mortgage money. If they are joint tenants — that is, if the money belongs to them on a joint account — then, on the death of one, the survivors or survivor are entitled to the mortgage money, and the personal representatives of the deceased mortgagee need not be joined in a redemption action. [page 791] If they are tenants in common, the personal representatives should be joined, although the mortgaged estate vests in the survivors or survivor (Vickers v Cowell (1839) 1 Beav 529; 48 ER 1056); but this will be so only if the mortgage expresses that the money is advanced by or belongs to the mortgagees in stated sums or shares. If the advance is expressed to be made out of moneys belonging to the

mortgagees on a joint account, or if the mortgage is simply made to the mortgagees jointly, then they are deemed to be joint tenants: NSW Act s 99; Victorian Act s 112; see 11.32. If payment is made to one joint mortgagee during the lifetime of the others, this is a good discharge of the debt at law: but the equitable rule prevails, and the security is only discharged to the extent of the payee’s beneficial interest at the time (if any), although he is ultimately the last survivor in the joint account: Matson v Dennis (1864) 4 De G J & Sm 345; 46 ER 952; Powell v Brodhurst [1901] 2 Ch 160.

Proceedings to redeem by subsequent mortgagee 33.19 The law is summarised in the motto ‘redeem up, foreclose down’. In the case of successive mortgages a later mortgagee must make all mortgagees subsequent to himself (as well as the mortgagor) parties in an action to redeem the mortgage immediately prior to his mortgage: Fell v Brown (1787) 2 Bro CC 276; 29 ER 151; Johnson v Holdsworth (1850) 1 Sim NS 106 at 109; 61 ER 41 at 42–3; Farmer v Curtis (1829) 2 Sim 466; 57 ER 862; Rose v Page (1829) 2 Sim 471; 57 ER 864; Ramsbottom v Wallis (1835) 5 LJ Ch 92; Richards v Cooper (1842) 5 Beav 304; 49 ER 595; Slade v Rigg (1843) 3 Hare 35; 67 ER 286; Teevan v Smith (1882) 20 Ch D 724 (CA). See 32.25. If the later mortgagee seeks to redeem any other prior mortgage he must make parties all mortgagees between himself and the mortgagee whom he seeks to redeem: Teevan v Smith, above.

Order for redemption 33.20 The common form order for redemption directs that an account be taken of what is due to the mortgagee under the mortgage, including his taxed costs of the proceedings, and orders the mortgagor to pay to the mortgagee, within a set time from the date of the certificate of the Master, the amount certified to be due. Upon such payment, the mortgagee is ordered to surrender or give a statutory receipt and deliver the title deeds to the mortgagor. If there has been a dispute as to the title to redeem there will also be a declaration that the right subsists: Holmes v Turner (1843) 7 Hare 367n; 68 ER 151; Faulkner v Daniel (1843) 3 Hare 199; 67 ER 355; Carlon v Farlar (1845) 8 Beav 526; 50 ER 206.

The order should also include declarations where necessary as to the rights and priorities of the various encumbrancers (Jones v Griffith (1845) 2 Coll 207; 63 ER 702), and the order may be made without prejudice to the rights of encumbrancers between themselves. Special directions may be given for the account. Where the mortgagee has been in possession the order directs as against the mortgagee an account of the rents and profits: see 39.28. To the amount due to the mortgagee are added all sums to which he may be declared to be entitled for improvements (see 19.38) or for payments in respect of or for the protection of his security, or the property: see 16.1. If the order for redemption is made after tender, the account is directed of what was due on the date of tender with consequential directions to meet the alternative results of the amount due exceeding or not exceeding the amounts ordered: Greenwood v Sutcliffe [1892] 1 Ch 1. It should be noted that in taking accounts, the money that may be charged to the mortgagor’s account may include sums which the mortgagee would not be able to [page 792] recover from the mortgagor by action at law: Ex parte Fewings; Re Sneyd (1883) 25 Ch D 338 at 348 and 352; and see 16.30. The ordinary form of a redemption decree like the ordinary form of a foreclosure decree creates no personal liability in the mortgagor and the decree is not enforceable by execution: Perry v Rolfe [1948] VLR 297 at 302.

Interim orders 33.21 The court may make an order for discharge of a mortgage before the taking of final accounts in an appropriate case. In commercial transactions, it may be imperative that the mortgaged land or other property be released from the mortgage prior to the finalisation of redemption proceedings. This will usually occur where there is little dispute as to the maximum payout figure due to the mortgagee and the mortgagor needs to discharge the

mortgage to sell the property. However, the amount due to the mortgagee will be fixed by the court so as to give clear protection to the mortgagee and cover any amount likely to be found due on the accounts. It will include a sum to secure the mortgagee against the costs of the taking of accounts: Project Research Pty Ltd v Permanent Trustee of Australia Ltd (1990) 5 BPR 11,225. The leading modern authority is Equus Financial Services Ltd v RMBL Investments Pty Ltd (1996) 22 ACSR 744; 7 BPR 14,966, which was based on this paragraph in the previous edition of this work: see also Touzell v Cawthorn (1995) 18 ACSR 328. The mortgagor in proceedings for redemption against the mortgagee and his sub-mortgagee can have the estate discharged on payment into court of the amount found due to the mortgagee without waiting for the settlement of the accounts and inquiries between the mortgagee and sub-mortgagee: Lysaght v Westmacott (1864) 33 Beav 417; 55 ER 429. As to an order in redemption proceedings by a second mortgagee where a later mortgagee subsequently made a sub-mortgage, see Booth v Creswicke (1837) 8 Sim 352; 59 ER 139.

Successive mortgages 33.22 Where there are successive mortgages, the judgment proceeds on the principle that the second mortgagee, as the first assignee of the equity of redemption, fills the place and acquires the rights of the mortgagor. Thus, in taking the account, the second mortgagee may assert such equity as the mortgagor himself might have to exclude any particular item: Mainland v Upjohn (1889) 41 Ch D 126. He has therefore the first right to redeem, upon payment of what is due to the first mortgagee; but, in default of payment, he is foreclosed. This process is carried on as to all the successive encumbrancers, until the mortgagor alone remains, when he may in like manner redeem, or, in default, stand foreclosed. The judgment provides for the exercise of the rights by directing that in case the second mortgagee shall redeem the first, an account shall be taken of what is due to the person so redeeming on his own security, and for what he has paid the first mortgagee with interest thereon (see 39.54) and costs; and upon payment of the aggregate of these sums the third mortgagee has liberty to redeem the second in default of which he is foreclosed; and a further account having been taken of what is due to the second mortgagee in respect of his own debt, and of his

payments, the next mortgagee — or, if there is none, the mortgagor — will be at liberty to redeem. Upon non-payment to the last person to be redeemed of what he has paid to the prior mortgagee and of his own principal, interest and costs, the mortgagor stands absolutely foreclosed, and the property becomes that of the mortgagee who cleared off the rest, free from any mortgages. As to costs where an intermediate mortgagee redeems the first, who [page 793] holds a later mortgage, see Mutual Life Assurance Society v Langley (1886) 32 Ch D 460. As to an action by a later mortgagee of two properties, subject to separate mortgages, see Pelly v Wathen (1849) 7 Hare 351; 68 ER 144; on appeal 1 De GM & G 16; 42 ER 457; Hallett v Furze (1885) 31 Ch D 312.

Time for payment 33.23 It is customary to order that the mortgagor pay out the mortgage within six (calendar) months of the certificate: Parker v Housefield (1834) 2 My & K 419; 39 ER 1004; Jamieson v Johnson (1871) 2 VR (E) 26. This period is merely the norm: Stevens v Hoberg [1951] QWN 44. The court may consider it appropriate that the period be three months: see, for example, London Chartered Bank v Davison (1897) 13 WN (NSW) 134 and Overlack v Martin [1955] QWN 56. The period is selected as that which is appropriate in all the circumstances. If the mortgagor has deliberately delayed, the period may be quite short. See generally Bakker v Chambri Pty Ltd (1986) 4 BPR 9234 at 9238. Although older cases lay it down that time for payment will not generally be extended in proceedings for redemption except in special circumstances (see, for example, Novosielski v Wakefield (1811) 17 Ves 417; 34 ER 161; Faulkner v Bolton (1835) 7 Sim 319; 58 ER 860; Collinson v Jeffrey [1896] 1 Ch 644), modern-day practice is more flexible. See also Permanent Trustee Co of NSW Ltd v Martin (No 2) (1905) 22 WN (NSW) 76; Wills v Ogier (1880) 2 ALT 1; Latimer v Gilbert (1896) 18 ALT 109; and Bakker v Chambri, above.

Affidavit of non-payment 33.24 Redemption proceedings will be dismissed upon production of the certificate of the amount due, and of an affidavit of attendance and nonpayment of the money (Stuart v Worrall (1785) 1 Bro CC 581; 28 ER 1310; Proctor v Oates (1740) 2 Atk 140; 26 ER 488; Newsham v Gray (1742) 2 Atk 286; 26 ER 575); even though, after the time fixed for payment, the mortgagor has tendered the principal and interest, with an additional sum for interest, to the day of tender: Faulkner v Bolton (1835) 7 Sim 319; 58 ER 860. For a form of order, see Atkin’s Court Forms, 2nd ed, Butterworths, London, p 142.

Dismissal operates as foreclosure 33.25 Dismissal of redemption proceedings by reason of default in payment of the money, or for any other cause than for want of prosecution, operates as a judgment of foreclosure: Cholmley v Oxford (Countess) (1742) 2 Atk 267; 26 ER 565; Winchester (Bishop) v Paine (1805) 11 Ves 194; 32 ER 1062; Hansard v Hardy (1812) 18 Ves 455; 34 ER 389; Inman v Wearing (1850) 3 De G & Sm 729; 64 ER 680; see Garth v Ward (1741) 2 Atk 174; 26 ER 509; Wood v Surr (1854) 19 Beav 551; 52 ER 465. In the case of successive mortgages, if the mortgagor is the plaintiff, the effect of excluding his interest is that the last encumbrancer becomes quasi-mortgagor, the prior mortgagees ranking according to their priorities: Cottingham v Shrewsbury (Earl) (1843) 3 Hare 627 at 637; 67 ER 530 at 535. This is because the mortgagor admits by the proceedings the title of the mortgagee and the debt and, if he does not discharge it, he is not allowed to harass the mortgagee by other proceedings for the same purpose. If an action to redeem an equitable mortgage is dismissed, this does not have the effect of a foreclosure, because the mortgagee does not get the relief which he would have in a foreclosure action (namely, a conveyance: Marshall v Shrewsbury (1875) LR 10 Ch App 250), and if the mortgagee has refused redemption, except on the terms of the discharge of another security, there is no admission by the mortgagor of the debt upon the security for which the foreclosure would operate (Marshall v Shrewsbury); and this [page 794]

seems to show that the rule would not operate under such circumstances in the case of a legal mortgage.

Right to redeem refused 33.26 The proceedings will be dismissed at the hearing if the right to redeem is rejected by the court; and the dismissal was held upon appeal to be proper, where the plaintiff having claimed an absolute right to redeem upon certain terms, the decision was that he had no equity to redeem upon those terms: Seagrave v Pope (1851) 1 De GM & G 783; 42 ER 756. So an action for redemption, by a person who is subject to the same equities as the mortgagor, will be dismissed as against a defendant, who, as between himself and the mortgagor, is not liable to be foreclosed by encumbrancers on the estate, having prior rights to such defendant. Thus, where A was a mortgagor, B and C encumbrancers, and X tenant in tail in remainder whose estate, as between himself and A, was not liable to the encumbrances of B and C (having been exonerated therefrom by A’s covenant), an action by E, a subsequent judgment creditor of A, was dismissed against A because E was not in the position of a purchaser for valuable consideration without notice, but was subject to the same equities as A, and could not compel X to pay off B and C: Hughes v Williams (1852) 3 Mac & G 683; 42 ER 423. However, it would seem that X should first have had a permissive right to redeem. See Chappell v Rees (1852) 1 De GM & G 393; 42 ER 603, where the same principle was applied in an action by the assignee of the insolvent mortgagor and covenantor. The redemption proceedings will also be dismissed if, at the hearing, the plaintiff refuses to ask for any accounts: Gibson v Nicol (1846) 9 Beav 403; 50 ER 399. This may happen when the plaintiff, being a later encumbrancer, finds that the security is altogether insufficient.

Disclaiming defendants 33.27 It is the practice to dismiss the proceedings against defendants who disclaim all interest in the mortgaged premises, where such defendants are able to make and do make a complete and valid disclaimer; and provided the disclaimer is complete, it is equally good, whether it was made before or after the commencement of the action: Aldworth v Robinson (1840) 2 Beav 287;

48 ER 1191; Thompson v Kendall (1840) 9 Sim 397; 59 ER 411; Silcock v Roynon (1843) 2 Y & CCC 376; 63 ER 166; Lock v Lomas (1851) 15 Jur 162; and semble also in Ford v Earl of Chesterfield (1853) 16 Beav 516; 51 ER 878; Vale v Merideth (1854) 18 Jur 992; Thorneycroft v Crockett (1848) 2 HL Cas 239; 9 ER 1082. If the disclaimer is insufficient in form, as where the pleadings admit that the property is vested in the party, and contain an entire or partial disclaimer only of an interest therein, or if it is otherwise ineffectual, the judgment will be for foreclosure: Appleby v Duke (1842) 1 Hare 303; 66 ER 1047; Collins v Shirley (1830) 1 Russ & M 638; 39 ER 245, and cited in Thompson v Kendall (1840) 9 Sim 397 from Reg Lib; 59 ER 411.

[page 795]

Chapter 34

The Release of the Debt or Security Generally Release of the debt Release of the security Release of the security under equitable mortgage Release where mortgage by deposit of deeds Release and estoppel Releases and covenants not to sue Other aspects of releases

34.1 34.2 34.3 34.4 34.5 34.6 34.7 34.8

Generally 34.1 The whole or part of the debt or security may be released, either before or after the date for repayment, upon the payment of the whole or part of the loan or without such payment.

Release of the debt 34.2 By releasing the debt, the security for the debt is released: see Sheppard’s Touchstone of Common Assurances, 7th ed, J & WT Clarke, London, 1820–1821, p 342; Cowper v Green (1841) 7 M & W 633; 151 ER 920. To be binding, a release for a debt must generally be made for consideration (see, for instance, Taylor v Manners (1865) 1 Ch App 48), or, if not so made, should be made under seal.

While an alleged release or forgiveness of the debt cannot be established merely by showing that the creditor had expressed an intention to release the debt, yet where the creditor has so acted that the debtor has done acts by which his position has been altered, the creditor will not be allowed to enforce his security: Yeomans v Williams (1865) LR 1 Eq 184; and see 34.3. This will be more readily applied to the release of interest than principal, because the intention to release the latter would probably be evidenced by the giving up of the security. Provided the appropriate intention is present and the mortgagee cancels the mortgage, this is as much a release as cancelling a bond. Moreover, a declaration of present forgiveness of the debt, though only verbal and unsupported by consideration, may be effective to release the debt, if it is accompanied by the delivery of the deeds to the debtor. The same thing will occur where the debtor becomes the creditor’s personal representative so long as the intention to forgive continues until the creditor’s death: Strong v Bird (1874) LR 18 Eq 315; Re Wale; Wale v Harris [1956] 3 All ER 280; [1956] 1 WLR 1346. Again, if the mortgagee declares himself a trustee of the mortgaged [page 796] premises for the mortgagor, this will be equivalent to a release: Re Hancock (1888) 57 LJ Ch 793; 59 LT 197. A release of the debt is usually encountered on the disposition of the whole of the equity of redemption, either on sale, or, for example, on its transfer to new trustees. The purchaser or other assignee of the equity of redemption is not liable on the covenant for payment (Re Errington; Ex parte Mason [1894] 1 QB 11; and see 17.5), and the mortgagor remains liable, but the assignee will be liable to indemnify the mortgagor, even if there is no express indemnity covenant: Waring v Ward (1802) 7 Ves 332; 32 ER 136. On a disposition of the equity of redemption the mortgagee may release the mortgagor or his successor in title from the mortgage debt in consideration of a covenant by the purchaser or donee, or, for example, the new trustees, for payment and to observe and perform the mortgagor’s covenants in the mortgage deed. The release and the covenant may be included in the transfer

or may be effected by a separate document. The appointment of a debtor as executor may extinguish the cause of action in debt, but the executor may remain liable under an equitable obligation to account to those interested in the estate for the amount of the debt: Commissioner of Stamp Duties v Bone [1977] AC 577; (1976) 9 ALR 11.

Release of the security 34.3 Under the classical law, if the mortgagor repaid the loan on or before the due date the mortgagee never obtained an absolute estate and the mortgagor was entitled to bring ejectment against the mortgagee. Indeed, in New York, heretically, this principle was extended to cases where the mortgagor made a valid tender after such date. On such tender the ‘lien’ or ‘cloud’ on the mortgagor’s title disappeared: see, for example, Kortright v Cady 21 NY 343; 78 Am Dec 145 (1860); and cf Shields v Lozeur 34 NJL 496; 3 Am Rep 256 (1869). Therefore, where the whole of the mortgage moneys are paid, strictly speaking no further documentation is required, though from the practical point of view of proof of the intent to discharge, it is desirable. Of course, as a practical matter a discharge is required in virtually every case. Any mortgage may be discharged, informally, on proof of intent to discharge it — for example by cancellation — but where the release is gratuitous, the appropriate formalities will be required, unless the mortgagor can rely on having altered his position on the faith of a declaration of intent to release: see 17.11. The form of release of property secured by legal mortgage depends on the circumstances. Usually the memorandum of discharge endorsed on the mortgage is employed utilising NSW Act s 91, Victorian Act s 115. If the release is made for value to enable the mortgagor to sell the property, the mortgagee may join in the conveyance, rather than making a statutory receipt or a separate deed of surrender or release followed by the conveyance. Where the mortgagee joins in the conveyance, unless the property (if any) remaining in mortgage is sufficient security for the mortgage debt, he will usually require the whole or part of the purchase money to be paid to him in discharge or reduction of the mortgage debt.

Where a sale of the property to be released is not contemplated, a statutory receipt should be used if the release is in consideration of the repayment of the moneys secured by the mortgage; but otherwise a deed of surrender or release in the case of charge will be appropriate. Debentures are released in the appropriate manner according to what sort of charge has been created — that is, specific legal charge, equitable charge or floating charge. An appropriate return is then made to the Australian Securities Commission in accordance with the regulations made under the Corporations Act 2001 (Cth). [page 797] The difference in effect of a statutory memorandum of discharge and a reconveyance should be noted. With the former, the legal estate passes to the person who is entitled to the equity of redemption who may well be a second mortgagee, whereas with a reconveyance the legal estate passes to the conveyee: Hosking v Smith (1888) 13 App Cas 582; Crosbie-Hill v Sayer [1908] 1 Ch 866 at 873–4, but see Carlisle Banking Co v Thompson (1884) 24 Ch D 398. If a statutory memorandum is used, care must be taken to ensure that appropriate obligations other than the simple discharge of the debt are accomplished: Groongal Pastoral Co Ltd (in liq) v Falkiner (1924) 35 CLR 157; Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423; English Scottish and Australian Bank Ltd v Phillips (1937) 57 CLR 302. In Equus Financial Services Ltd v RMBL Investments Pty Ltd (1996) 22 ACSR 744, it was held that the court has power, by interlocutory order, to require the mortgagee to give up the security pending the settling of accounts where, consequently, the amount payable to the mortgagee has not been ascertained; but, having regard to the unusual advantage of having the security released before the secured debts are all available to the mortgagee, with provisions in the order protecting the mortgagee’s position. A mortgagor does not, however, have the right to require a partial release of the security: see State Bank of New South Wales v Cadea (No 18) Pty Ltd (1995) 7 BPR 14,301, where the mortgagee’s consent, and release of the security, was required for a proposed subdivision.

Release of the security under equitable mortgage 34.4 An equitable mortgage does not create any legal estate or interest in favour of the mortgagee thus no formal deed of release is required. A release of the whole of such property may be effected by cancellation of the mortgage or a simple receipt. The release of part of equitably mortgaged property is generally effected by written statement or letter from the mortgagee that the mortgagee has no charge on the particular property: see (1962) 26 Conv (NS) 449–53 (Rowley). For property subject to a floating charge, a letter of non-crystallisation from some officer of the company or its solicitor suffi ces.

Release where mortgage by deposit of deeds 34.5 In the absence of consent or abandonment, an equitable mortgage by deposit of title deeds can only be displaced by actual payment of the amount secured: Bank of New South Wales v O’Connor (1899) 14 App Cas 273 at 282; UTC Ltd v NZI Securities Australia Ltd (1991) 4 WAR 349 at 356. The deposit is merely a piece of evidence that there is an agreement to mortgage and release of the deeds will not discharge the mortgage: UTC Ltd at 355. The UTC case involved a mortgage of shares by deposit of the share certificate which was handed over to enable a takeover offer to be accepted.

Release and estoppel 34.6 Even before recent developments in the law of estoppel a mortgagee may be estopped from denying that a mortgage has been discharged when the mortgagee has indicated to the mortgagor that the mortgage will be treated as discharged and the latter has acted on this to his detriment: see Yeomans v Williams (1865) LR 1 Eq 184. However, last century cases such as Re Hancock (1888) 57 LJ Ch 793; 59 LT 197 show that the doctrine had limited application. In Hancock’s case, the essential facts were that the mortgagee wrote to his brother, who was the mortgagor, a letter indicating that he had found a letter from their late mother requesting that the mortgage should be released, and that he was, in accordance with that request, forwarding the mortgagor the mortgage to be considered at an end. Later the mortgagee changed his mind. Kay J found that the mortgage had not been discharged. He said that the

mortgagee was not seeking any remedy in the court; mere handing over a deed of mortgage to the mortgagor was not enough to effect a discharge [page 798] (see Re Richardson (1885) 30 Ch D 396) and the mortgagor could not insist that there was a discharge merely if the mortgagee without any consideration handed him the mortgage deed with the then intention of releasing the debt: see LJ Ch at 795; LT at 199. It would seem that this case might now be decided the other way. In recent years it has become apparent that a mortgagee may by conduct such as the mortgagees in Hancock’s case be estopped from denying that a mortgage has been released. There is not sufficient case law as yet to set the limits of the application of this principle. However, if a bank were by its conduct to induce a debtor’s wife who has filed an application for dissolution of marriage to believe that if she raises no objection to the bank selling her husband’s property ‘Blackacre’ and ‘Whiteacre’ the bank will release its mortgage over the matrimonial home, the bank may well be estopped from denying that it is bound in equity to grant a release. See the leading cases of Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 and Commonwealth v Verwayen (1990) 170 CLR 394; and see Meagher, Gummow and Lehane [17-045]ff.

Releases and covenants not to sue 34.7 There is a very real difference between a release and a covenant not to sue. Drastic consequences flow from a release. A release expunges the debt as a matter of law. Thus, when there is a release, no right is able to be reserved: Webb v Hewitt (1857) 3 K & J 438 at 442; 69 ER 1181 at 1183; and Bateson v Gosling (1841) 41 LJCP 53 at 55. Where there is a mere covenant not to sue one of several mortgagors then the mortgagee’s rights against others of the several mortgagors and perhaps sureties are not affected. Where there is a release, all rights of the mortgagee disappear.

Other aspects of releases

34.8 The fact that a creditor accepts further security from the principal debtor does not release the surety: Twopenny v Young (1824) 3 B & C 208; 107 ER 711; Eyre v Everett (1826) 2 Russ 381 at 384; 38 ER 379 at 380. However, a surety is entitled to the benefit of collateral security: Dixon v Steel [1901] 2 Ch 602. A release of the collateral security will release the surety: Pearl v Deacon (1857) 1 De G & J 461; 44 ER 802. For a discharge of collateral security, see 32.71.

[page 799]

Chapter 35

Waiver and Allied Concepts A. Waiver Generally Nature of waiver Express waiver Awareness of rights Taking additional security Taking substituted security Attempts to alter law of waiver by advance contract B. Waiver against Sureties Generally Variation of the terms of the mortgage Release of principal debtor Release in bankruptcy and schemes of arrangement Release of co-surety C. Promissory Estoppel Generally

A. Waiver Generally

35.1 35.2 35.3 35.4 35.5 35.6

35.7 35.8 35.9 35.10 35.11 35.12

Nature of waiver 35.1 The term ‘waiver’ is a vague one. ‘Waiver’ is to be compared and contrasted with acquiescence and estoppel. A mere waiver signifies nothing more than an expression of intention not to insist on a right and as such it is unenforceable (see, for example, Stackhouse v Barnston (1805) 10 Ves 453; 32 ER 921), but the plaintiff’s conduct may be such as to estop him from asserting the continuance of the liability: Yeomans v Williams (1865) LR 1 Eq 184. In Ross T Smyth & Co Ltd v TD Bailey, Son & Co [1940] 3 All ER 60 at 70, Lord Wright said: The word ‘waiver’ is a vague term used in many senses. It is always necessary to ascertain in what sense and with what restrictions it is used in any particular case.

In Banning v Wright [1972] 1 WLR 972 at 978–9; [1972] 2 All ER 987 at 997–8, Lord Hailsham LC, after citing that speech of Lord Wright, said that waiver ‘is the abandonment of a right in such a way that the other party is entitled to plead the abandonment by way of confession and avoidance if the right is thereafter asserted’. In Commonwealth v Verwayen (1990) 170 CLR 394, various of the High Court judges discussed the concept of waiver in relation to equitable estoppel, election and release. [page 800] It is clear that at law a mere waiver of the debt is ineffectual unless it amounts to a release. However, in equity, the conduct constituting the waiver may be sufficient to amount to an equitable estoppel preventing the person waiving from resuming his previous position. However, the rights of a creditor under a security may be varied by waiver provided that at the relevant time the creditor was cognisant of his rights. The usual example given of this is Vyvyan v Vyvyan (1861) 30 Beav 65; 54 ER 813, though this appears to modern eyes to be more a case of acquiescence. The older cases about to be discussed may well need to be reconsidered in the light of cases such as Verwayen and distinctions between the concept of waiver and allied concepts more recognised.

Express waiver 35.2 Waiver, of course, may be express or implied. The extent of an express waiver is governed by the language used. If the waiver is clearly limited to part of the security, the mortgagee’s rights over the remainder of the security will be unaffected. Accordingly, where a mortgagee surrendered his legal interest in a leasehold security to enable the mortgagor to provide another security, but stipulated that the surrender was without prejudice to any other security he may have for his debt, he and his assignee were held to be still entitled to the benefit of the covenants in the mortgage. This is because the surrender operated on the legal interest in the land and not upon the covenants: Greenwood v Taylor (1845) 14 Sim 505; 60 ER 454, a later aspect being reported as AG v Cox; Pearce v AG (1850) 3 HL Cas 240; 10 ER 93. If the waiver is on the face of it clearly a general one, it will not be restricted on the representation of one of the parties that a more limited one was intended: Drought v Jones (1840) 4 Dru & War 174.

Awareness of rights 35.3 As noted above, a prerequisite to waiver is that the creditor is aware of his rights. The court will not be anxious to imply waiver from a mere omission, or other circumstances, from which the intention cannot fairly be inferred. Thus, where it was provided by the mortgage deed that, as between the mortgagor and his surety, a certain part of the security given by the principal should be primarily liable to the debt, without mentioning the rest, it was held that the surety upon paying off the debt had not lost, by the omission, the right to a transfer of the whole security: Bowker v Bull (1830) 1 Sim (NS) 29; 61 ER 11; see also 35.8. However, the sale by a mortgagee of mortgage chattels operated to discharge a collateral security of land in Greenberg v Rapoport (1970) 10 DLR (3d) 737.

Taking additional security 35.4 If a creditor, having a security on the funds of his debtor for part of his debt, takes another security on the same funds for his whole debt, the earlier debt keeps its force and may be separately dealt with: see Miln v Walton (1843) 2 Y & CCC 354; 63 ER 156, a case dealing with a lien on the freight of a ship which arose from the discounting of bills of exchange. Similarly, where a creditor, having a security upon his debtor’s funds, takes

afterwards either a loan (but on behalf of himself and another creditor), or jointly with such other creditor, and security for both debts on the same funds, the separate security keeps its force and may be separately dealt with. Where the surety pays off the debt or interest in arrears and his payment has been included in the security of a subsequent mortgagee, the surety having taken a note from the latter to that effect, an intention by the surety to take an additional security, and not a waiver of his old right, is to be inferred: Beckett v Booth (1708) 2 Eq Cas Abr 595; 22 ER 500; and see Martin v Sedgwick (1846) 9 Beav 333; 50 ER 372. [page 801]

Taking substituted security 35.5 When it is contended that the benefit of a security has been waived by the acceptance of another security in its place, it is for the owner of the estate to show that it was discharged by the taking of the new security and not for the creditor to disprove the substitution of the new security for the old. The mere acceptance of a personal security for interest in arrears, or other charge whether express or implied, is therefore not a waiver of the original security, even if a receipt is given for the amount: see Barret v Wells (1700) Prec Ch 131; 79 ER 309; Hardwick v Mynd (1793) 1 Anst 111; 145 ER 815; Curtis v Rush (1814) 2 Ves & B 416; 35 ER 378; Saunders v Leslie (1814) 2 Ball & B 509. The position is more debatable as against a purchase of a value of a subsequent interest in the estate on the faith of an assurance (supported by the receipt) that no interest was due: see Kemmis v Stepney (1828) 2 Mol 85. The absence of any mention of the original security, and the reservation of interest at a different rate from that which was secured by it, have been treated as evidence that the new security was taken by way of substitution: Re Brettle (1864) 2 De GJ & Sm 244; 46 ER 369.

Attempts to alter law of waiver by advance contract 35.6 Mortgage and other documents may attempt to deal with waiver and related issues. However, as Bryson J held in Nadrak Pty Ltd v Permanent Custodians Ltd (1994) 6 BPR 13,344 at 13,351, it is inherently impossible for

parties by contractual provision to alter the general law relating to waiver and to provide in advance that the general law shall not apply to their future conduct, should that conduct constitute a waiver of some right arising out of the contract. His Honour distinguished American cases which appeared to go the other way as their concept of waiver was not in accordance with that adopted in Australia in cases such as Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305 at 326. Bryson J also held that Australian law has no room to accommodate nonwaiver clauses as a ground on which a later promissory estoppel would not be effective.

B. Waiver against Sureties Generally 35.7 As Wilkin and Villiers note in The Law of Waiver, Variation and Estoppel, 2nd ed, Oxford University Press, UK, 2002, [17.21], a contract of guarantee may be affected by waiver in three ways: waiver of the terms of the guarantee itself, waiver of the terms of the facility on the guarantee and waiver of the guarantor’s rights against the borrower. It is a general principle of the law of guarantees that any material variation of the terms of the contract between the creditor and the principal debtor will discharge the surety: see, for example, Blest v Brown (1862) 4 De G F & J 367 at 376; 45 ER 1225 at 1229; Browne v Carr (1831) 7 Bing 508 at 515; 131 ER 197 at 199–220; Sanderson v Aston (1873) LR 8 Ex 73; and Re Wolmershausen (1890) 62 LT 541; 38 WR 537. However, that proposition from the older authorities is now too widely stated. Alterations for the benefit of the surety or those that do not put the surety in a worse position do not effect a discharge: General SteamNavigation Co v Rolt (1858) 6 CB (NS) 550 at 575; 141 ER 572 at 581; Holme v Brunskill (1878) 3 QBD 495 at 507; Shee v Larkin [1907] VLR 295. Thus if the transaction guaranteed is carried out in a different manner to that contemplated, the guarantee might not be affected: Matthews Thompson & Co v Everson (1934) 34 SR (NSW) 114 at 122. See, in general, Halsbury, 5th ed, vol 49, [1214]ff; and Moss, Rowlatt on Principal and Surety, 5th ed, Sweet & Maxwell, London, 1999, p 79.

[page 802] However, in contrast with the rule as to variation, it is unclear whether a temporary waiver has the same effect: see Wilkin and Villiers, [17.22]– [17.25]. Courts are usually reluctant to find that a guarantor has waived rights to subrogation and require clear evidence, not a mere course of dealing between the parties: Re Bulmer: Ex Parte Johnson (1853) 2 De G M & G 218 at 235; 43 ER 86 at 93. If a creditor releases part of the principal debt, the surety remains liable for the remainder: Hollier v Eyre (1840) 9 C & F 1 at 57; 8 ER 313 at 336; Holme v Brunskill (1878) 3 QBD 495 at 507, but see Egbert v National Crown Bank [1918] AC 903.

Variation of the terms of the mortgage 35.8 A creditor may by various acts or omissions waive or lose his right against the surety for the principal debtor. This, for instance, will happen where, without the surety’s consent and without reserving the creditor’s rights against the surety, the creditor gives the debtor further time for payment of the debt: see, for example, Samuell v Howarth (1817) 3 Mer 272; 36 ER 105; Bank of Ireland v Beresford 6 Dow PC 233; 3 ER 1456; Oakeley v Pasheller (1836) 10 Bli NS 548; 6 ER 202 and Overend, Gurney & Co v Oriental Finance Corp (1874) LR 7 HL 348; and see Goss v Chilcott [1996] AC 788; [1997] 2 All ER 110 (PC), where the debtor extended the payment period of the secured loan. The rule does not apply when time is given after judgment has been obtained against both the principal debtor and the surety: Re a Debtor [1913] 3 KB 11. The creditor’s rights can be reserved when time is given (Re Renton; Ex parte Glendinning (1819) Buck 517), and this is effectual although the surety is not informed: Webb v Hewitt (1857) 3 K & J 438; 69 ER 1181. A general reservation is usually included in the guarantee as a matter of course. Such a clause is effective to prevent waiver: Cowper v Smith (1838) 4 M & W 519; 150 ER 1534; Union Bank of Manchester Ltd v Beech (1865) 3 H & C 672; 159 ER 695; Perry v National Provincial Bank of England [1910] 1 Ch 464; British Motor Trust Co Ltd v Hyams (1934) 50 TLR 230, but see Burnes v

Trade Credits Ltd [1981] 1 NSWLR 93; [1981] 1 WLR 805 (PC) and note by Wilkinson in (1981) 131 NLJ 883. See also Wyke v Rogers (1852) 1 De GM & G 408; 42 ER 609. A consolidation of mortgages given by the principal debtor, with the fixing of a later date for payment, operates as a giving of time and discharges the surety: Bolton v Buckenham [1891] 1 QB 278; Bolton v Salmon [1891] 2 Ch 48. The surety may also be discharged by the mortgagee’s consenting to the surrender of a leasehold interest which forms part of the security with the guarantor’s consent (see Dowling v Ditanda Ltd (1975) 236 EG 485); or where the bank applied proceeds of sale otherwise than in accordance with the agreement of all parties that they be applied in reduction of the advance: Australia and New Zealand Banking Group Ltd v Costikidi (SC (Vic), Hansen J, 22 December 1994, unreported). The reason for the discharge of the surety in such a case is either that the contract for which the surety became responsible has been altered, and that a surety cannot be made responsible for another and different contract (see per Lushington in The Harriett (1841) 1 Wm Rob 182; 166 ER 541) or that the giving of time alters the rights of the surety against the debtor: see, for example, per Tindal CJ in Browne v Carr (1831) 7 Bing 508; 131 ER 197 and per Lord Eldon in Samuell v Howarth (1817) 3 Mer 272 at 278; 36 ER 105 at 107. The right lost is that of subrogation to the creditor’s rights against the debtor upon the surety paying the creditor on the date for repayment. It is a general rule that a surety is discharged by the creditor dealing with the principal debtor or a co-surety in a manner at variance with the contract the performance of which the surety had guaranteed: Ward v National Bank of New Zealand (1883) 8 App Cas 755; Re Wolmershausen (1890) 62 LT [page 803] 541 and see Lep Air Services Ltd v Rollsowin Investments Ltd [1971] 1 WLR 934, affirmed as Moschi v Lep Air Services Ltd [1973] AC 331; and see Ghirardi v Allregal Corp Pty Ltd [2001] WASC 366. Sometimes the rule has been applied strictly without regard to the question

whether the surety is prejudiced or not and even though the alteration is for his benefit: Blest v Brown (1862) 4 De GF & J 367; 45 ER 1225 and Polak v Everett (1876) 1 QBD 669. However, where it is evident without inquiry that the alteration is unsubstantial or that it cannot be otherwise than beneficial to the surety the surety is not discharged: Holme v Brunskill (1878) 3 QBD 495 at 505; Chatterton v Maclean [1951] 1 All ER 761; and see Winstone Ltd v Bourne [1978] 1 NZLR 94. The surety is also released if there has been a material alteration in his position by operation of law: Mortgage Insurance Corp Ltd v Pound (1895) 64 LJ QB 394 and see on appeal 64 LJ QB 397 (CA) and 65 LJ QB 129 (HL). See also Williams, Joint Obligations, Butterworths, London, 1949, p 123 and Cardozo, The Nature of the Judicial Process,Yale University Press, New Haven, 1921, pp 152–4. It should be noted that the release of the surety extends to any security he has given: Bolton v Salmon [1891] 2 Ch 48 and see Hodgson v Hodgson (1837) 2 Keen 704; 48 ER 800. However, where a surety guaranteed the sufficiency of the principal debtor’s security for part of the debt, and paid a sum of money in discharge of his guarantee, the security not being delivered up, it was not released, but remained as security for the balance: Waugh v Wren (1862) 7 LT 612. A material change in a head contract does not discharge a guarantee of the performance of subcontracts to which the person giving the guarantee is not a party: Town of Truro v Toronto General Insurance Co (1973) 38 DLR (3d) 1.

Release of principal debtor 35.9 Where the creditor gives the debtor an absolute release of the debt, the surety is discharged, and the debt being gone at law, the creditor cannot reserve any right against the surety: Webb v Hewitt (1857) 3 K & J 438; 69 ER 1181; Bateson v Gosling (1871) LR 7 CP 9; Perry v National Provincial Bank of England [1910] 1 Ch 464. It is otherwise where, although the principal debtor is released, the debt remains: Perry’s case. It is the same where the creditor releases the principal debtor, and accepts another person as debtor in his stead, so that there is a novation of the contract: Commercial Bank of Tasmania v Jones [1893] AC 313. As to release by operation of law in bankruptcy, see 35.10. Again, it is usual to insert in a guarantee a provision permitting the creditor

to compound with the principal debtor without affecting the guarantor’s liability.

Release in bankruptcy and schemes of arrangement 35.10 The Bankruptcy Act 1966 (Cth) s 153(4) provides that the discharge of a bankrupt from bankruptcy does not release a surety or a person in the nature of a surety from the bankrupt. Section 75(2) in respect of compositions provides that the composition does not release any person who is a surety or was in the nature of a surety from the debtor (and see ss 74A and 75 more generally for the variation and effect of a composition or scheme of arrangement). The very purpose of a contract of guarantee would be frustrated if it were otherwise. However, where the contract of guarantee clearly provides that the liability of the guarantor shall be released if the principal debtor becomes bankrupt, the provision will apply according to its tenor: Jowitt v Callaghan (1938) 38 SR (NSW) 512; see also Bank of Adelaide v Lorden (1970) 127 CLR 185. A court-approved scheme of arrangement under the Corporations Act will not release a guarantor: Hill v Anderson Meat Industries Ltd [1971] 1 NSWLR 868 at 874–6; on appeal [1972] 2 NSWLR 704 at 708. However, it may be that a scheme of arrangement [page 804] under which creditors agree to give up all their rights for a stated period may operate to release a surety (Stramit Industries Ltd v Gardner [1970] 2 NSWR 450; 92 WN (NSW) 433), though this decision would appear to have been disapproved by Hill’s case: see also Re Renton; Ex parte Glendinning (1819) Buck 517. It makes no difference whether the creditor was present at the meeting which approved the scheme of arrangement or not or whether he votes in favour of the resolution to adopt the scheme or against it: Ex parte Jacobs (1875) 10 Ch App 211 and Commercial Banking Co of Sydney Ltd v Gaty [1978] 2 NSWLR 271. Here again it is possible for an individual contract of guarantee to bring about the reverse result and it is usual, though unnecessary, to insert a clause

preserving the guarantor’s liability in such situations: see Phillips and O’Donovan, Modern Contract of Guarantee, 4th ed, Law Book Co, Sydney, 2004–, [6.1100] (looseleaf edition).

Release of co-surety 35.11 A discharge of one of several co-sureties is a release of them all, unless the creditor reserves his rights against the others (see, for example, Thompson v Lack (1846) 3 CB 540; 136 ER 216); but this is subject to the provisions of the mortgage or guarantee: Ghirardi v Allregal Corp Pty Ltd [2001] WASC 366. This will apply whether the liability is joint only as in Re Armitage; Ex parte Good (1877) 5 Ch D 46, or whether it is joint and several as in Nicholson v Revill (1836) 4 Ad & El 675; 111 ER 941. The rule also applies where judgment has been obtained for the joint and several obligations: Re EWA [1901] 2 KB 642; compare Re a Debtor [1913] 3 KB 11. Verbal negotiations prior to release for reserving the rights of the cosureties would not at law affect the release (Mercantile Bank of Sydney v Taylor [1893] AC 317), but a different result may now be reached as a result of equitable doctrines. Where a co-surety’s liability is several only, he is not discharged unless his right to contribution is affected: Ex parte Crisp (1744) 1 Atk 133; 26 ER 87; Aldrich v Cooper (1803) 8 Ves 382; 32 ER 402; Ward v National Bank of New Zealand (1883) 8 App Cas 755.

C. Promissory Estoppel Generally 35.12 Promissory estoppel has developed in recent years so that rights in equity are created if a person stands by seeing someone assume that he has a proprietary right and as a result of that assumption acts to their detriment. The usual case is the family situation where a parent allows a son to build on the parent’s land on the assumption that that land will be transferred to the son: see, for example, Voyce v Voyce (1991) 62 P & CR 290 (CA). The claimant may merely be a former friend as in Chalmers v Pardoe [1963] 1 WLR 677; [1963] 3 All ER 552 (PC). The principle is mentioned here merely for completeness; it has little play in the law of mortgages. However, in Corpers (No 664 Pty Ltd ) v NZI

Securities Australia Ltd (1989) NSW ConvR ¶55-475, the plaintiff sought to enforce a contract to make a loan or alternatively a declaration that equity should order a loan under the principle of proprietary estoppel. The point can be raised in myriad situations. Thus, in Midland Bank Ltd v Farmpride Hatcheries Ltd (1981) 260 EG 493, an occupier put up an unsuccessful plea that he was in occupation under circumstances which, in equity, bound the mortgagee to take subject to his rights of occupation.

[page 805]

Chapter 36

Merger Merger generally Merger of estates Merger in specialty Merger of charges Where limited owner acquires charge Evidence of intention Where no evidence of intention, benefi t of owner prevails Circumstances affecting merger Keeping prior mortgages on foot The doctrine of Toulmin v Steere Illustrations of merger Effect of bankruptcy Merger of lower in higher security Effect of judgment on mortgage interest Conditions of merger of the security Merger prevented by intention Merger under the Torrens system

36.1 36.2 36.3 36.4 36.5 36.6 36.7 36.8 36.9 36.10 36.11 36.12 36.13 36.14 36.15 36.16 36.17

Merger generally 36.1 ‘Merger is the incorporation of one right in another and is a principle of wide application. It is a rule of law the operation of which extinguishes a right by reason of its coinciding with another and greater right in the same person’: per Esson JA in Re der Bach and Mueller (1987) 46 DLR (4th) 320 at 326. At common law, before the 20th-century reforms of property law, merger occurred automatically if the circumstances were appropriate. However, in equity, whether merger occurred was a matter of the intention of the relevant party. In the law of mortgages, merger may enter the picture as merger of estates (see 36.2), merger of a simple contract in a deed (see 36.3), merger of charges (see 36.4–36.12) or merger of lower in higher security: see 36.13–36.16. Care must be taken in the use of older cases referred to in this chapter. This is because, formerly, great stress was laid on the certainty of the application of automatic rules, whereas nowadays the emphasis is on intention: see, for example, Pallos v Munro (1970) 72 SR (NSW) 507; Pascon Pty Ltd v San Marco in Lamis Cooperative Social Club Ltd [1991] 2 VR 227. [page 806]

Merger of estates 36.2 Merger of estates took place at law when two estates in land, which were held in the same legal right, became united in the same person: Re Radcliffe; Radcliffe v Bewes [1892] 1 Ch 227. According to Cheshire and Burn, in Modern Law of Real Property, 17th ed, Butterworths, London, 2000, p 1005, ‘At common law the doctrine of merger has nothing to do with the intention of the parties, and provided that certain essentials are satisfied, the effect is automatically to annihilate the smaller estate’. ‘Merger (of estates) occurs where a greater and lesser estate in land vest in the same person in the same right without any intervening estate’: Lansen v Olney (1999) 100 FCR 7 at 25; 169 ALR 49 at 65 (FCA) per French J. In Radin v Commmonwealth Bank of Australia [1998] ACL 295 FC 1; BC9800172 p 5, Lindgren J put it thus:

It is usually said that the doctrine of merger is activated where a lesser and a greater interest become vested in the one legal person, and that its effect is that the lesser is merged in the greater and so ceases to exist as an independent interest. Perhaps a preferable way of describing what happens is to say that where there are two complementary interests, the existence of each depending on the separate existence of the other, which become vested in the one person, they lose their raison d’etre as distinct interests and constitute together a greater interest recognised in law.

A person does not hold in the same right where one estate is held in his own right and the other as executor or administrator: Chambers v Kingham (1878) 10 Ch D 743 at 745; see also Jones v Davies (1861) 7 H & N 507; 158 ER 573. The estate which in legal valuation was the smaller estate was then swallowed up or merged in the greater. (The words ‘legal valuation’ are significant because, for example, a lease for 999 years would merge in a life estate held by an octogenarian.) In equity, merger depended on intention and the equitable rule now prevails: NSW Act s 10; Victorian Act s 185. Thus there is now merger by operation of law of any estate the beneficial interest in which would not be deemed to be merged or extinguished in equity. However, this applies only to the merger of estates: Capital and Counties Bank Ltd v Rhodes [1903] 1 Ch 631 at 648. Recent cases illustrative of the modern approach include Shell Co of Australia Ltd v Zanelli [1973] 1 NSWLR 216 and Buchanan Borehole Collieries Pty Ltd v NSW Coal Compensation Review Tribunal (1997) 9 BPR 16,253.

Merger in specialty 36.3 It is a general rule in contract that where parties have, after a preliminary agreement, restated their contract in a deed, the deed alone governs. The terms of the preliminary agreement are said to be merged in the deed: see Leggott v Barrett (1880) 15 Ch D 306. A common situation where this rule is invoked is where a contract for the sale of land is completed by the parties entering into a deed of conveyance or transfer. As a general principle, provisions of the contract which are not repeated in the conveyance cease to be effective: see Knight Sugar Co Ltd v The Alberta Railway & Irrigation Co [1938] 1 All ER 266 at 269.

Modern authority shows that this is a prima facie rule only and that the principle depends on the intention of the parties, so that there will not be any merger unless the parties so intended: Pallas v Munro (1970) 72 SR (NSW) 507 at 511; Pascon Pty Ltd v San Marco in Lamis Cooperative Social Club Ltd [1991] 2 VR 227 at 229. [page 807] The rule may become relevant in the law of mortgages where there is an agreement to grant a mortgage which is followed by a formal mortgage. In Adriatic Development Ltd v Canada Trust Mortgage Co (1982) 135 DLR (3d) 549, the letter of commitment required building work to commence by a certain date or else the loan would lapse. This term did not survive the registration of the formal mortgage which did not contain it. The reverse case occurred in Grouse Nest Resources Ltd v First National Mortgage Corp (1977) 1 RPR (Can) 246 (BC), where a term favouring the mortgagor in the letter of offer was not incorporated into the mortgage. The principle also applies in various of the situations discussed in 36.13 and following. Merger must be distinguished from various apparently allied situations. Thus the principle that one cannot go behind a written contract is a principle of the law of evidence, and not part of the law of merger: Major v Bretherton (1928) 41 CLR 62; Hawke v Edwards (1947) 48 SR (NSW) 21.

Merger of charges 36.4 Analogous to the merger of estates at law was the extinguishment, or merger, in equity of a charge on land where the absolute ownership of the charge and the land were united in the same person. Prima facie the charge was merged for the benefit of the inheritance: Earl of Buckinghamshire v Hobart (1818) 3 Swan 186 at 199; 36 ER 824 at 825. The court did not consider the subtleties of merger, but discharged the estate from the encumbrance; otherwise it would burden estates to no purpose: Donisthorpe v Porter (1762) 2 Eden 162; 28 ER 858. There was no merger where, for example, the charge was subject to a prior life interest which did not

determine during the life of the owner of the charge: Wilkes v Collin (1869) LR 8 Eq 338. However, the existence of liabilities which had to be satisfied out of the charge did not prevent merger: Re French Brewster’s Settlements;Walters v French-Brewster [1904] 1 Ch 713. But where at the death of the owner of the land and the charge, the charge was vested in trustees and was subject to succession duty on a previous death, it was held that, since the owner could not call for an assignment by the trustees without discharging the duty, the right of the charge was not co-extensive with the title to the land, and there was no merger: Re Simmons; Dennison v Orman (1902) 87 LT 594. In equity the test for merger was not the mere union of interests, but the intention of the owner, and the equitable rule now prevails. The intention might be actual, evidenced by declaration (see, for example, Earl of Buckinghamshire v Hobart (1818) 3 Swan 186; 36 ER 824) or by circumstances at the time of the union of interests or subsequently during the life of the owner; or a presumed intention, and it is presumed that the owner intends merger or not according as it is more for his benefit. When it is perfectly indifferent to him whether the charge should subsist or not, then the prima facie rule operates and the charge is extinguished: Forbes v Moffatt (1811) 18 Ves 384; 34 ER 362; Thorne v Cann [1895] AC 11 at 18. The presumption of intention as to merger arises on the death of the person entitled both to the estate and the charge, and this intention is to be collected from all the circumstances which existed at that period, including the person’s acts prior to decease and all the facts affecting his position down to and at the time of decease: Swinfen v Swinfen (No 3) (1860) 29 Beav 199 at 204; 54 ER 603 at 605. The result, where an equitable mortgagee purchases the equity of redemption, may be to subject him to agreements made by the mortgagor such as an agreement to grant a lease: Smith v Phillips (1837) 1 Keen 694; 48 ER 474 (considered in Rust v Goodale [1957] Ch 33; [1956] 3 All ER 373); O’Loughlin v Fitzgerald (1873) 7 Ir R Eq 483; Guthrie v Australia and New Zealand Banking Group Ltd (1991) 23 NSWLR 672. [page 808]

By ‘owner’ is usually meant the person in whom the two interests are united: Thorne v Cann [1895] AC 11 at 18 and 19; Donisthorpe v Porter (1762) 2 Eden 162; 28 ER 858.

Where limited owner acquires charge 36.5 The rule that merger prima facie results from the union of the charge and the land in the same person applies where the interests are absolute. Where a tenant for life or other limited owner becomes entitled to the charge the position is reversed: prima facie there is no merger, for it is not to be supposed that he will discharge a debt on another person’s estate. (For the same reason, where a person entitled to the equity of redemption of an estate which is jointly mortgaged together with another pays off the mortgage, it will be kept alive in his favour: Taws v Knowles [1891] 2 QB 564 at 572 (CA).) Hence the merger only results where the tenant for life shows an intention that the charge shall be extinguished for the benefit of the remaindermen: Wyndham v Earl of Egremont (1775) Amb 753; 27 ER 485; Williams v Williams-Wynn (1915) 84 LJ Ch 801. The burden of proof is on those who claim to have the estate exonerated (Countess of Shrewsbury v Earl of Shrewsbury (1790) 3 Bro CC 120 at 127; 29 ER 445 at 448; Burrell v Earl of Egremont (1844) 7 Beav 205; 49 ER 1043); and this is so even when the remainderman is the child of the tenant for life (Re Harvey; Harvey v Hobday [1896] 1 Ch 137), though in such a case the smallest indication that the tenant for life meant to pay the money himself will prevent his representatives from obtaining payment. If the holder of an interest in remainder pays off a charge it is presumed that he meant to keep the charge alive even though his interest falls into possession: Wigsell v Wigsell (1825) 2 Sim & St 364; 57 ER 385; Horton v Smith (1858) K & J 624; 70 ER 259; Re Chesters; Whittingham v Chesters [1935] Ch 77.

Evidence of intention 36.6 Evidence of intention may be direct or may be inferred from the attendant circumstances, and since the intention may be formed at any time during the life of the owner, so long as his ownership both of the land and the

charge continue, it is necessary to consider the circumstances not only at the time when the union of interest first occurs, but also subsequently. Parol evidence may be used: Astley v Miller (1827) 1 Sim 298 at 345; 57 ER 588 at 606. The clearest way of causing or preventing merger is by an express declaration in the instrument which effects the union of the charge and the estate. The assignment of the charge to the owner or to a trustee for him, while it affords some evidence of an intention against merger, is neither necessary nor sufficient for that purpose: Hood v Phillips (1841) 3 Beav 513 at 518; 49 ER 202 at 204; Parry v Wright (1823) 1 Sim & St 369; 57 ER 148; affirmed (1828) 5 Russ 142; 38 ER 981. Where it is accompanied by a declaration of trust (see Bailey v Richardson (1852) 9 Hare 734; 68 ER 711), the intention of preventing merger should be clearly and unequivocally stated, and it will be considered that if the intention did exist, it would be expressed in such an instrument, and be accompanied by a declaration of trust of the charge. An intention against merger might be inferred, for example, where the owner declared a trust in favour of his personal representatives, but see Tyrwhitt v Tyrwhitt (1863) 32 Beav 244; 55 ER 96; Re Gibbon; Moore v Gibbon [1901] 1 Ch 367. Any dealing in relation to the property which indicates that the owner considers the charge to be existing can be used as evidence against merger (Hatch v Skelton (1855) 20 Beav 453; 52 ER 678; Re Gibbon; Moore v Gibbon, above), but the owner cannot set up the charge after he has disposed of the land — whether by sale (Bulkeyley v Hope (1855) 1 K & J 482 at 487; 69 ER 549 at 551; Re Gibbon; Moore v Gibbon, above), mortgage (Tyler v Lake (1831) 4 Sim 351; 58 ER 131; Re Gibbon; Moore v Gibbon, above), or [page 809] settlement (Gower v Gower (1783) 1 Cox Eq Cas 53; 29 ER 1059) — on the footing that it is free from the charge. An intention in favour of merger may be inferred if the owner of the land disposes of it by will, making no mention of the charge (unless there are other charges to which the devise is subject

and which are also not mentioned), and using language calculated to exclude the existence of any charge on the estate (Hood v Phillips, above; Swinfen v Swinfen (No 3) (1860) 29 Beav 199; 54 ER 603; Re Lloyd’s Estate [1903] 1 IR 144), or other circumstances showing that it was not treated as subject to any charge: Pitt v Pitt (1856) 22 Beav 294; 52 ER 1121. A charge, though merged, may be treated as existing for the purpose of liability to death duties: Re French-Brewster’s Settlements; Walters v French-Brewster [1904] 1 Ch 713.

Where no evidence of intention, benefit of owner prevails 36.7 Where there is no evidence of the conduct or acts of the owner of the estate or the evidence is neutral, the course most beneficial to the owner will be considered as that which he intended to follow: Adams v Angell (1877) 5 Ch D 634 (CA); Thorne v Cann [1895] AC 11 (HL); Liquidation Estates Purchase Co v Willoughby [1896] 1 Ch 726; Ether v Nolle [1924] 2 DLR 322; Re der Bach and Mueller (1987) 46 DLR (4th) 320 at 327. The owner of an estate who buys up an encumbrance at less than its full value is entitled to hold it for full value against subsequent encumbrancers: Davis v Barrett (1851) 14 Beav 542; 51 ER 394; and see Ghana Commercial Bank v Chandiram [1960] AC 732; [1960] 2 All ER 865 (PC). The circumstances, therefore, that the estate is subject to debts and legacies (or other charges) to which the charge in question is paramount, even although from the state of the testator’s assets the liability, in the case of debts and legacies, is of little apparent importance; the uncertainty whether the estate will be sufficient to bear all its burdens; and other matters which make it better for the owner of the estate to preserve than merge the charges, will be taken as grounds for presuming his intention to do so: Forbes v Moffatt (1811) 18 Ves 384; 34 ER 362; Whiteley v Delaney [1914] AC 132.

Circumstances affecting merger 36.8 The intention to merge will not be imputed to a person on account of particular dealings with the estate, where those dealings are carried out in a manner, or by words, only explicable on the supposition that the person concerned was ignorant of his rights; as where a tenant for life, being also executor, paid off certain charges on the settled estate, under circumstances

which showed his belief that, in the character of executor and residuary legatee of the settlor, he was bound to do so: Burrell v Earl of Egremont (1844) 7 Beav 205; 49 ER 1043; Connolly v Barter [1904] 1 IR 130. On the other hand, a mortgagor who, as one of the executors and residuary legatees of the mortgagee, is treated as having in his hands the amount owing on the mortgage, will be also treated as having intended to discharge the mortgage out of his share of the residue: Re Greg; Fordham v Greg [1921] 2 Ch 243.

Keeping prior mortgages on foot 36.9 Where the owner of the land creates successive mortgages upon it he is not allowed to get in the first mortgage and set it up against the subsequent encumbrancers, because, if the mortgagor pays off a charge on the estate, he does so for the benefit of the inheritance, and of all who are entitled to subsequent charges thereon: Otter v Lord Vaux (1856) 6 De GM & G 638; 43 ER 1381; Re W Tasker & Sons Ltd; Hoare v W Tasker & Sons Ltd [1905] 2 Ch 587 (CA); and see Sussman v AGC Advances Ltd (1995) 37 NSWLR 37; 7 BVPR 14,312 (CA), where the rule in Otter v Lord Vaux was affirmed as a general equitable principle applicable to mortgages of Torrens system land. See also Oversea-Chinese Banking Corp Ltd (OCBC) v Malaysian Kuwaiti Investment Co (MKIC) [page 810] and Aljade [2003] VSC 495 at [76] (Redlich J) and Bofinger v Kingsway Group Ltd [2009] HCA 44; 239 CLR 269; 260 ALR 71. This rule is excluded in respect of company debentures by Corporations Act s 124(1)(b). Thus a corporation may reissue debentures unless its articles of association otherwise provide or there has been an effective resolution to cancel the paid debentures. There are many illustrations of the rule. In Morrison v Guaranty Trust Co of Canada (1972) 28 DLR (3d) 458, a husband and wife were the mortgagors. The wife could not pay off the mortgage to keep it alive; see too Cochrane v Cochrane (1985) 3 NSWLR 403. When a mortgagor becomes

bankrupt (and so is released from the debt), and subsequently buys the first mortgage, it seems he can keep it on foot (Re Howard’s Estate (1892) 29 LR Ir 266), and it is considered that a purchase by the mortgagor, after several bona fide mesne transfers, might be set up, since the mortgagor would not then be found paying money to the prior mortgagee which he is bound by his contract to pay in discharge of his debt: Otter v Lord Vaux, above. See also Sussman v AGC (Advances) Ltd (1991) 5 BPR 11,822; Rogers v ResiStatewide Corp Ltd (1991) 101 ALR 377; and Bofinger v Kingsway Group Ltd (2009) 239 CLR 269; 260 ALR 71. Accordingly, a statutory indorsed receipt cannot operate in his favour as a transfer: NSW Act s 91(3)(a);Victorian Act s 115(3). A purchaser of the equity of redemption, not being himself liable on the mortgage, is not subject to this restriction, and he may get in the first mortgage and keep it on foot against subsequent encumbrancers; that is, he can prevent the merger of the first mortgage and, as in other cases where the question of merger arises, the result will depend upon his intention. The first mortgage will be kept on foot, if that was his intention; otherwise, it will be extinguished: Adams v Angell (1877) 5 Ch D 634; and see Parkash v Irani Finance Ltd [1970] Ch 101; [1969] 1 All ER 930; Re H & S Credits Ltd; Tucker v Roberts [1969] Qd R 280.

The doctrine of Toulmin v Steere 36.10 The judgment of Sir William Grant MR in this case (Toulmin v Steere (1817) 3 Mer 210; 36 ER 81) suggests that the intention necessary to keep the first mortgage on foot must be an actual intention, either expressed or evidenced by the attendant circumstances; and that in the absence of such actual intention the purchaser of the equity of redemption is not entitled to the benefit of the presumption that he intended to keep the mortgage on foot because that would be for his benefit. This decision, however, has frequently been called in question, and the statement therein that the purchaser of an equity of redemption cannot keep up a charge for his own benefit cannot be regarded as a correct statement of the law: Whiteley v Delaney [1914] AC 132. The intention, if it can be shown to exist, governs the case (Adams v Angell (1877) 5 Ch D 634; Minter v Carr [1894] 3 Ch 498) and all that Toulmin v Steere can be treated as deciding is,

that if no intention exists, then the encumbrance which is paid off is merged, and the subsequent encumbrancers let in. While the decision stands, the law does not assist the purchaser of the equity of redemption with the presumption that where he has not shown an intention, expressly or from the circumstances, he intended what was for his benefit, but the existence of mesne encumbrances is probably a circumstance indicating an intention against merger. Toulmin v Steere was considered in, inter alia, the following cases: Watts v Symes (1851) 1 De GM & G 240; 42 ER 544; Stevens v Mid-Hants Rly Co; London Financial Association v Stevens (1873) 8 Ch App Cas 1064 (CA); Adams v Angell; Thorne v Cann [1895] AC 11 (HL); Liquidation Estates Purchase Co v Willoughby [1896] 1 Ch 726; Manks v Whiteley [1911] 2 Ch 448; [1912] 1 Ch 735 (CA); and Whiteley v Delaney, above. [page 811]

Illustrations of merger 36.11 Sometimes the circumstances themselves show an intention that the charge which is paid off shall merge. If, for example, a mortgagee takes a conveyance of the equity of redemption, in consideration of the debts due to himself and to the other mortgagees, whom he covenants to pay, prima facie the mortgagee’s own debt will merge in favour of the other encumbrancers: Brown v Stead (1832) 5 Sim 535; 58 ER 439; and see Parry v Wright (1823) 5 Russ 142; 38 ER 981, doubted in Stevens v Mid-Hants Rly Co, above, at 1069. Nevertheless, odd circumstances will occur, and in English Scottish and Australian Bank Ltd v Phillips (1937) 57 CLR 302, there was held to be no merger where a mortgagor took a transfer of a Torrens system mortgage from the mortgagee and then in turn transferred the mortgage to a bank: see especially at 316 and 323. However, in Fink v Robertson (1907) 4 CLR 864 at 877, the High Court had held that generally there would be merger in such a case.

Effect of bankruptcy

36.12 The giving up by a mortgagee of his security for the benefit of the creditors in the mortgagor’s bankruptcy puts the trustee in the mortgagee’s place and does not destroy the security so as to let in subsequent encumbrancers: Cracknall v Janson (1877) 6 Ch D 735. Where the trustee purchases the first mortgage, he only has the rights of a transferee as against subsequent encumbrancers: Bell v Sunderland Building Society (1883) 24 Ch D 618. The trustees of a deed for the benefit of creditors, by which all the real and personal estate of the debtor has been conveyed to them, do not thereby become owners of the estate, so as to cause the merger of a judgment assigned to them by one of the creditors: Squire v Ford (1851) 9 Hare 47; 68 ER 408.

Merger of lower in higher security 36.13 The benefit of the security will be lost by merger in a security of a higher nature; for it is a general rule of law that a party, by taking or acquiring a security of a higher nature in legal operation than the one he already possesses, merges and extinguishes his legal remedies upon the minor security. Thus a simple contract debt merges in a specialty debt — that is, a contract under seal, such as a bond or covenant: Owen v Homan (1851) 3 Mac & G 378; Price v Moulton (1851) 10 CB 561; 138 ER 222 (but see Stamps Comrs v Hope [1891] AC 476 (PC)); Saunders v Milsome (1867) LR 2 Eq 573; Re European Central Rly Co; Ex parte Oriental Financial Corp (1876) 4 Ch D 33. But a taking of a mortgage will not merge a simple contract debt if a contrary intention appears: Bank of Victoria v Looker (1896) 21 VLR 704; Barclays Bank Ltd v Beck [1952] 2 QB 47; [1952] 1 All ER 549 (CA). For merger of the vendor’s lien in a mortgage to the vendor, see Winter v Lord Anson (1827) 3 Russ 488, 492; 38 ER 658; Frail v Ellis (1852) 16 Beav 250; 51 ER 814; Re Taylor, Stileman and Underwood [1891] 1 Ch 590; Re Molton Finance Ltd [1968] Ch 325; [1976] 3 All ER 843; Capital Finance Co Ltd v Stokes [1969] 1 Ch 261; [1968] 3 All ER 625 (CA); Security Trust Co v The Royal Bank of Canada [1976] AC 503; [1976] 1 All ER 381 (PC). In some places it is not uncommon for certain mortgages, mortgages to finance companies, to contain as a schedule promissory note. In order to prevent merger of the personal promissory note, either no covenant for payment should be

usually second to the deed a remedy on the inserted in the

mortgage, or, if inserted, it should be accompanied by a declaration against merger. The question as to whether there has been a merger or not is relevant in considering whether it is possible merely to sue on the promissory note and ignore the mortgage. Both a simple contract debt and a specialty debt merge in a judgment (Ward v Liddaman (1847) 10 LT OS 225), but not while the debt remains unsatisfied, so as to prevent the creditor from making the debtor bankrupt in respect [page 812] of it: Re Mostyn; Ex parte Griffiths (1853) 3 De GM & G 174; 43 ER 69. The obtaining of a judgment for the mortgage debt does not, while the judgment remains unsatisfied, prevent the mortgagee from enforcing his security: Lloyd v Mason (1845) 4 Hare 132; 67 ER 590. The same principle has been applied where an informal equitable mortgage — such as a mortgage by deposit of deeds — has been followed by a formal mortgage, so that the equitable mortgage is extinguished and the formal mortgage stands as security only for the sums it is expressed to cover, although these do not include all sums which were secured by the deposit: Vaughan v Vanderstegen (1854) 2 Drew 289; 61 ER 730. An original mortgage will not, however, be merged in a new mortgage on the same property taken as security for the old debt and further advances (Tenison v Sweeney (1844) 1 Jo & Lat 710; Re James; Ex parte Harris (1874) LR 19 Eq 253); and see, generally, on the merger of an earlier equitable mortgage in a later legal mortgage, Farrier-Waimak Ltd v Bank of New Zealand [1965] AC 376; [1964] 3 All ER 657 (PC).

Effect of judgment on mortgage interest 36.14 On the above principle a covenant in a mortgage for payment of principal is merged in a judgment obtained on the covenant and the interest runs on the judgment at the statutory rate: see 39.49. If the mortgage provides for a higher rate, the right to recover the difference between the higher rate and the judgment rate depends on the form of the covenant for payment of interest, and the nature of the proceedings — whether the claim is against the mortgagor personally, or is against the mortgaged property: see Mercantile

Credits Ltd v McDowell [1980] 2 NSWLR 101. If the effect of the covenant for payment of interest is that interest is to be payable so long as any principal money shall be due on the covenant for payment of principal, then it is extinguished in the judgment together with the latter covenant. On judgment being obtained no principal is any longer due on the covenant since it is gone: Economic Life Assurance Society v Usborne [1902] AC 147 (HL). (The speech of Lord Davey in this case comments on and explains the authorities mentioned below prior to that case; see also Elders Trustee & Executor Co Ltd v Eagle Star Nominees Ltd (1986) 4 BPR 9205.) The principal is thenceforth due on the judgment. The interest covenant is considered to this effect where it provides for payment of interest until the principal is repaid (Re European Central Rly Co; Ex parte Oriental Financial Corp (1876) 4 Ch D 33 (CA)) or so long as the principal or any part thereof remains unpaid: Re Sneyd; Ex parte Fewings (1883) 25 Ch D 338 (CA). A covenant of this nature is said to be ancillary to the main covenant, and the excess of interest cannot be recovered in proceedings against the mortgagor personally. Where the interest covenant is not merely ancillary, but is an independent covenant, it is not extinguished in the judgment, and the excess of interest can be recovered in personal proceedings. A covenant for payment of interest so long as any principal remains due on the security is an independent covenant, since the principal is equally due on the security whether it is owing on the covenant or the judgment. Consequently, under a covenant in this form the excess interest can be recovered in personal proceedings: Popple v Sylvest (1882) 22 Ch D 98; Mercantile Credits Ltd v McDowell [1980] 2 NSWLR 101. In proceedings in which the mortgagee’s claim is against the property, the full interest provided by the mortgage is recoverable whether the interest covenant is independent or ancillary: Lowry v Williams [1895] 1 IR 274; Aman v Southern Rly Co [1926] 1 KB 59 at 73. This is so in foreclosure and redemption, and also whenever an account has to be taken between mortgagee and mortgagor. Where the mortgage allows for a higher rate than four per cent up to the day fixed for payment, but there is no provision for future interest, the judgment of Lord Davey in

[page 813] Economic Life Assurance Society v Usborne, above, appears to assume that the full rate will run, but, in the past, only five per cent has been allowed: see Wallington v Cook (1878) 47 LJ Ch 508.

Conditions of merger of the security 36.15 It is a necessary condition for merger of a lower in a higher security, that the remedy given by the higher shall be co-extensive with that under the inferior security. Therefore, if several persons are indebted on a joint and several note, and some only of them execute a mortgage, the liability on the note will not merge in the covenant in the mortgage: Boaler v Mayor (1865) 19 CB NS 76; 44 ER 714; Westmorland Green and Blue Slate Co v Feilden [1891] 3 Ch 15. Nor will there be any merger unless the securities are vested in the same person (Bell v Banks (1841) 3 Man & G 258); and the debt comprised in each security must be the same: Holmes v Bell (1841) 3 Man & G 213; Norfolk Rly Co v M’Namara (1840) 3 Exch 628; 154 ER 996. There will be no merger if the higher security is ineffectual: Re Emery; Ex parte Harvey (1839) Mont & Ch 261; Vibart v Coles (1890) 24 QBD 364 (CA); compare Capital Finance Co Ltd v Stokes [1969] 1 Ch 261; [1968] 3 All ER 625 (CA); and see 2.14.

Merger prevented by intention 36.16 The more modern authorities emphasise that the application of the doctrine is dependent upon intention: see, for example, Pallos v Munro (1970) 72 SR (NSW) 507; Pascon Pty Ltd v San Marco in Lamis Cooperative Social Club Ltd [1991] 2 VR 227. Merger of a lower in a higher security may be prevented by an expressed or an implied intention to the contrary: General Credits (Finance) Pty Ltd v Brushford Pty Ltd [1975] 2 NSWLR 308. A recital in the security that it is given by way of further or collateral security will prevent merger both at law and in equity (Twopenny v Young (1824) 3 B & C 208; 107 ER 711; Stamps Comrs v Hope [1891] AC 476 (PC); Barclays Bank Ltd v Beck [1952] 2 QB 47) and an intention against it

may be sufficiently shown from the nature of the transaction, or the acts of the parties. Thus, where a reversionary lease was deposited as security and the debtor afterwards purchased the lease in possession and deposited it with the same lender as security for another sum, it was held that there was no merger: Re Dix; Ex parte Whitbread (1841) 2 Mont D & De G 415; and see Locking v Parker (1872) 8 Ch App 30.

Merger under the Torrens system 36.17 Early cases such as Beavan v Dobson (1906) 26 NZLR 69 held that the doctrine of merger of estates applied to Torrens system land. It was held that merger will occur when the registered proprietor of a lease becomes registered proprietor of the fee simple: Smith v Davy (1884) 2 NZLR (SC) 398. In Lewis v Keene (1936) 36 SR (NSW) 493 at 506, it was held that merger takes place even if the leasehold is land under the Torrens system while the fee simple is not so registered. However, later cases have taken the view that because each interest under the Torrens system is a separate and distinct statutory interest, there can be no merger. Thus in English Scottish and Australian Bank Ltd v Phillips (1937) 57 CLR 302 at 323–4, the majority in the High Court said that destruction by merger of a mortgagee’s interest by merger was not part of the Torrens concept of a mortgagee’s rights. It must be noted that in Fink v Robertson (1907) 4 CLR 864 at 877, the High Court had held that if a mortgagor transferred the mortgaged land to the mortgagee, the mortgage was extinguished: see 36.11. [page 814] In Cooper v Federal Commissioner of Taxation (1958) 100 CLR 131 at 140, the High Court took the view that merger of registered leases with the fee simple did not accord with the Torrens system. The same approach was taken by the New South Wales Court of Appeal in Shell Co of Australia Ltd v Zanelli [1973] 1 NSWLR 216 at 221. See also Radin v Commonwealth Bank of Australia (FCA) [1998] ACL 295 FC 1; BC9800172 at p 5 per Lindgren J where a bank took two separate and independent mortgages from a borrower and the doctrine of merger was held to be quite irrelevant.

[page 815]

Chapter 37

Destruction or Loss of the Property Loss of the property Security lost with the property Personal covenant Change of nature of property Devaluation of the property Mortgages by one joint tenant or by a life tenant Other losses of interests in freehold Leaseholds Relief against forfeiture by statute Relief against forfeiture — equitable jurisdiction Form of relief Extension of relief principle Disclaimer Other statutory causes of loss

37.1 37.2 37.3 37.4 37.5 37.6 37.7 37.8 37.9 37.10 37.11 37.12 37.13 37.14

Loss of the property 37.1 Certain events may occur which will mean that the property the subject of the mortgage will cease to exist. While this will not occur often, and when it does occur will mostly affect chattels, it can be relevant to

mortgages of real estate. The subject matter may be lost through earthquake, annihilation of the estate through merger, by operation of the ius accrescendi in joint tenancy (Lyons v Lyons [1967] VR 169), or by resumption. Where the subject matter is a lease, it may expire or be forfeited or frustrated: see 37.8.

Security lost with the property 37.2 As noted in 6.14, where there is a mortgage of a ship and the ship is lost at sea, the mortgagee’s rights against the ship cease. Where the ship is taken as prize, the same applies, though the Crown may make an ex gratia payment: see, for example, The Marie Glaeser [1914] P 218; The Aina (1854) 1 Sp Ecc & Ad 313; 164 ER 181; and The Tobago (1804) 5 C Rob 218; 165 ER 754. The same will apply where personal property over which a mortgage is held is destroyed by fire, collision or otherwise. Where real property is destroyed by earthquake, legislation is likely to cover the scenario, and see 37.7. As to forfeiture or surrender of leases by a mortgagor, see 37.8, 37.9. [page 816]

Personal covenant 37.3 Though the security be lost, the liability of the mortgagor under the personal covenant will remain and the mortgagee in appropriate cases may have a claim against third parties as well: see London and South of England Building Society v Stone [1983] 1 WLR 1242; [1983] 3 All ER 105. In that case the mortgagee successfully sued a negligent valuer; see also Moorgate Estates Ltd v Trover [1940] Ch 206. The mortgagor breached a covenant to insure a London building against being bombed. At the time when the default came to light, one could not purchase such insurance. The court still declared that the mortgagee was entitled to call in the mortgage on that default. See also Europe Mortgage Co v Halifax Estate Agencies [1996] TLR 325.

Change of nature of property 37.4 The right of the owner of property generally, and therefore of one who has a security thereon, is not destroyed by the mere transmutation of its subject matter into a different form without his assent: Story on Bailment, 7th ed, Little, Brown and Co, Boston, 1863, s 363. Thus if a person has a charge over a piece of realty that person will also have a charge over the fund formed by the receipt of the proceeds of that piece of property: Bebe v Pickering [1953] NZLR 832 and Avco Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679 at 682.

Devaluation of the property 37.5 It is not uncommon, when the time for realisation of the property arises, for the land to be worth less than the mortgagee considered to be its value when the money was lent. If this is caused by natural or economic factors there is usually nothing that can be done. If the problem is caused otherwise, the mortgagee may have a remedy such as an action against a valuer on whose opinion it relied when the money was lent: see Kemp v Hornsby (1982) 43 ALR 410; Yianni v Edwin Evans & Sons [1982] QB 438; and Roberts v J Hampson & Co [1990] 1 WLR 94. Note, however, that often valuers seek to limit their liability to mortgagees by disclaimer. The land may be devalued by rezoning after the mortgage money is lent. This does not give rise to an action at law, but the relevant planning scheme may give rise to a person who suffers loss having a statutory cause of action, or may entitle an owner, including a mortgagee, to compel a statutory authority to purchase the land or its interest. Again, the property may be depreciated in value because of action such as heritage listing. Although a mortgagee may make inquiries as to this matter before money is lent, action by heritage bodies after the loan is made is just a risk that all persons with interests in property have to bear: Amalgamated Investment & Property Co Ltd v John Walker & Sons Ltd [1977] 1 WLR 164; Brett v Cumberland Properties Pty Ltd [1986] VR 107. A more recent problem is the discovery that the land is contaminated. In Victoria, for example, there is a Priority Sites Register, which should be searched before moneys are lent, at least in high-risk areas. Priority Sites are those for which the Environmental Protection Authority has issued a ‘clean-

up’ notice pursuant to Environmental Protection Act 1970 (Vic) ss 31A or 31B. Note, however, that the Register is not a complete list of contaminated sites in Victoria, nor of the sites which the EPA knows to be contaminated: see generally the EPA website. Where the land is contaminated, the mortgagee will have to consider whether it should remove the contamination and sell, and, if so, whether it can add the cost of decontamination onto the principal sum. In analogous circumstances, a mortgagee is only allowed those expenses bona fide incurred in a proper and economical way to [page 817] render the property more valuable on sale so long as it does not cripple the mortgagor’s right of redemption. See Sandon v Hooper (1843) 6 Beav 246; 49 ER 820; Penny v Walker (1855) 24 LJ Ch 319; Henderson v Astwood [1894] AC 150; Southwell v Roberts (1940) 63 CLR 581; Midland Credit Ltd v Hallad (1977) 1 BPR 9570. See also 19.36. A mortgagee who enters into possession may be an ‘owner’ or ‘occupier’ who can be compelled by the authorities to spend even its own moneys in decontaminating the land. This will depend on the terms of the relevant statute: see Maguire v Leigh on Sea UDC (1902) 95 LT 319 and Westminster City Council v Haymarket Publishing Ltd [1981] 2 All ER 555; [1981] 1 WLR 677; also (1993) 10 EPLJ 97 (Lee); and Bates, Environmental Law in Australia, 7th ed, LexisNexis Butterworths. A mortgagee who does not go into possession is probably not liable in this way, nor even in nuisance: Ontario (AG) v Tyre King Recycling Ltd (1992) 9 OR (3d) 318.

Mortgages by one joint tenant or by a life tenant 37.6 The most frequent example in practice of the mortgage property disappearing is where a mortgagee takes a mortgage over the interest of one joint tenant and that joint tenant predeceases his fellows. In such a situation, the property no longer bears any liability to the mortgagee: see Lyons v Lyons [1967] VR 169; Penny Nominees Pty Ltd v Fountain (No 3) (1990) 5 BPR 11,284.

Other losses of interests in freehold 37.7 An earthquake may make it impossible to find the land mortgaged and would thus make the security unenforceable. It is of little purpose to discuss this class of case in detail as each disaster may be dealt with by special legislation which may provide compensation. Where a life tenant mortgages, unless the mortgage is able to be secured over the whole freehold by power conferred by statute (see 11.11), the mortgagee’s interest will cease on the fall of the life interest.

Leaseholds 37.8 In the case of mortgaged leaseholds, loss could occur through forfeiture, though relief may be obtained against forfeiture in the appropriate case: see 37.9–37.11. Again, the mortgagor’s interest may cease through the lease being frustrated (see National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675; Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17), in which case the mortgagee’s interest would also disappear. Where the buildings on land are destroyed, the rules with regard to insurance moneys will generally apply: see 3.20. Where the mortgaged property is resumed, the relevant statute will usually make provision as to what is to happen to the mortgagee’s interest: see Chapter 38. A surrender of mortgaged leaseholds does not extinguish the mortgagee’s interest and the mortgagee will thereupon be entitled to possession: Ushers Brewery Ltd v PS King & Co (Finance) Ltd (1969) 113 Sol Jo 815; E S Schwab & Co Ltd v McCarthy (1975) 31 P & CR 196 at 209. See also London & County (A & D) Ltd v Wilfred Sportsman Ltd [1971] Ch 764; [1970] 2 All ER 600.

Relief against forfeiture by statute 37.9 The risk that a mortgagee might lose his security over leasehold by forfeiture incurred by the mortgagor has been lessened by statute. Where the mortgagor is incurring a forfeiture because of non-payment of rent, the mortgagee may pay the rent itself and add the cost to the security: see 16.1.

[page 818] Even if a forfeiture is incurred, the mortgagee may take advantage of Landlord and Tenant Act 1899 (NSW) s 10, or Supreme Court Act 1986 (Vic) ss 79, 80 and 85, and avail itself of the right first conferred by the Common Law Procedure Act 1852 (UK): Standard Pattern Co Ltd v Ivey [1962] Ch 432; United Dominions Trust Ltd v Shellpoint Trustees [1993] 4 All ER 310. If the application under the statute is not made within the statutory time limits, it cannot succeed, but the mortgagee may apply under the discretionary power to relieve: United Dominions Trust Ltd v Shellpoint Trustees Ltd. Although relief under the statute is automatic and the relief in equity equitable, these statutes reflect the fact that equity always considered that the proviso for re-entry consequent upon a forfeiture for non-payment of rent was intended to be a security for the payment of the rent so that, almost invariably, if the rent was paid, the tenant was restored to his estate: Howard v Fanshawe [1895] 2 Ch 581 at 588; and see generally Gill v Lewis [1956] 2 QB 1; Belgravia Insurance Co Ltd v Meah [1964] 1 QB 436; and Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW (1970) 2 BPR 9562. Where the forfeiture is otherwise than for non-payment of rent the landlord will need to give the tenant a notice to remedy under NSW Act s 129, Victorian Act s 146. If the mortgagee hears of this, it is not necessary for the landlord to serve the notice on the mortgagee, as it may be able to enter under a right reserved in the mortgage and effect repairs etc (see 3.19), or the mortgagee may be able to pay what is owing and add it on to the principal. The statutory power may be exercised when the landlord is proceeding in a court or in the tenant’s proceedings. This is so even if the proceedings are winding up proceedings: Re Brompton Securities Ltd (No 2) [1988] BCLC 616, but see Re Blue Jeans Sales Ltd [1979] 1 All ER 641; [1979] 1 WLR 362.

Relief against forfeiture — equitable jurisdiction 37.10 Where a landlord has re-entered peaceably without an order of the court, or where the lessor is no longer proceeding by curial action or otherwise to enforce a forfeiture, the court’s power to grant relief to tenant or

mortgagee is not statutory, but arises under the general equitable jurisdiction. There is no time limit under this jurisdiction save the general principle that ‘delay defeats equity’ so that equity will not give relief in respect of stale claims: Lovelock v Margo [1963] 2 QB 786; Thatcher v C H Pearce & Sons (Contractors) Ltd [1968] 1 WLR 748; Abbey National Building Society v Maybeech Ltd [1985] Ch 190; see also Smith v Metropolitan City Properties Ltd (1985) 277 EG 753; and (1986) 136 NLJ 339 (Smith). Also see MacDonald v CBFC Ltd [2001] QSC 453, where relief against forfeiture was granted in relation to a chattel mortgage of a helicopter. An equitable chargee under a charging order is entitled to claim relief under the inherent jurisdiction: Ladup Ltd v Williams and Glyn’s Bank plc [1985] 2 All ER 577; [1985] 1 WLR 851. Notwithstanding a landlord has physically re-entered with a court order, the landlord is still proceeding to enforce his right to forfeiture and the tenant may apply for relief: Billson v Residential Apartments Ltd [1992] 1 AC 494; [1992] 1 All ER 141 (HL); and see [1992] Conv 32 (Smith).

Form of relief 37.11 Relief can also be granted to an underlessee or mortgagee by demise: Belgravia Insurance Co Ltd v Meah [1964] 1 QB 436; and see also Re Good’s Lease [1954] 1 WLR 309; [1954] 1 All ER 275; Grand Junction Co Ltd v Bates [1954] 2 QB 160; Chelsea Estates Investment Trust Co Ltd v Marche [1955] Ch 328; and Purley Automobile Co v Aldon Motors (1968) 112 Sol Jo 482. The mortgagee generally has the same recourse to the statutory and equitable remedies for relief against forfeiture as the tenant/mortgagor, but may be required to pay the landlord’s costs of the proceedings against the tenant: [page 819] Egerton v Jones [1939] 2 KB 702. See also United Dominions Trust Ltd v Shellpoint Trustees Ltd [1993] 4 All ER 310 (CA), and see (1994) 110 LQR 15. Relief may be given upon an underlessee accepting a new term, not

exceeding that under his sublease: Ewart v Fryer [1901] 1 Ch 499 at 515; Factors Sundries Ltd v Miller [1952] 2 All ER 630 at 634. Note that NSW Act s 130 (Victorian Act s 146(4)) provides that the court may vest the demised premises in the underlessee for the whole of the term of the lease or any less term, but the underlessee shall not be entitled to require a lease to be granted to him for any longer term than he had under his original sub-lease. The above cases decided that the latter of these conflicting provisions prevails: see also the Chelsea Estates and Belgravia Insurance cases, above. Such an order in favour of the mortgagee binds the mortgagee directly to the lessor, but the relationship of mortgagor and mortgagee remains nevertheless. The new lease granted to the mortgagee is a substituted security and is subject to the mortgage. The court may grant the new lease upon such other terms as to payment of rent, compensation and otherwise as it may think fit: Ewart v Fryer [1901] 1 Ch 499; Gray v Bonsall [1904] 1 KB 601 at 604. Where the mortgage is of part of the demised premises, relief may be given to the underlessee of the part on terms of his paying the whole of the arrears under the head lease: Webber v Smith (1689) 2 Vern 103; 23 ER 676; though see Chatham Empire Theatre (1955) Ltd v Ultrans [1961] 1 WLR 817; [1961] 2 All ER 381 in which Webber v Smith was not considered. A vesting order made under the statutory power is not retrospective. Pending any order, a receiver appointed by the mortgagee is not entitled to the rents of tenanted premises: Official Custodian for Charities v Mackey [1985] Ch 168; [1984] 3 All ER 689; Official Custodian for Charities v Mackey (No 2) [1985] 1 WLR 1308; [1985] 2 All ER 1016. The mortgagee could seek protection, for example against the reduction in the value of the property: Mackey’s (No 1) case [1985] Ch 168 at 189; [1984] 3 All ER 689 at 702.

Extension of relief principle 37.12 In Stern v McArthur (1988) 165 CLR 489, the High Court showed itself willing to extend the relief against forfeiture principle to cases analogous to a mortgage, such as the case where a vendor was in a position to forfeit a deposit from a defaulting purchaser. In such a case, the deposit was a security to the vendor who, if the land has risen in value, has already reaped a

windfall profit. It may be appropriate to relieve a more or less innocent purchaser from the consequences of default. See also Tanwar Enterprises Pty Ltd v Cauchi (2003) 201 ALR 359 (HC), where with respect to the termination of certain contracts it was held that the circumstances for the intervention of equity need not be ‘exceptional’ — the applicant must show that it was against conscience to terminate the contracts (see at [59] and [60] per Gleeson CJ and McHugh, Gummow, Hayne and Heydon JJ).

Disclaimer 37.13 Corporations Act s 568 permits a liquidator to disclaim property which is burdened with onerous covenants. It is quite clear that a mortgage containing covenants to pay principal and interest, to repair and to pay taxes is in this category: Re Mercer and Moore (1880) 14 Ch D 287; Re Exton (1932) 5 ABC 83 at 90; Re Middle Harbour Investments Ltd [1977] 2 NSWLR 652; Re Tulloch Ltd (in liq) (1978) 3 ACLR 808; compare Re Rickman; Ex Parte Bank of New Zealand (1890) 8 NZLR 381 and Briggs v Harcourt (1911) 31 NZLR 366; see also 23.14. In the absence of any vesting order, property disclaimed escheats to the Crown. If there was no default by the mortgagor at the time of disclaimer the mortgagee would [page 820] be without remedy as his interest in the land would disappear, including his powers of sale. All he would have would be a right to prove in the mortgagor’s liquidation. Because of this, the court will be slow to give a liquidator leave to disclaim property subject to mortgage: Re Tulloch Ltd, above and Re Crest Realty Ltd [1977] 2 NSWLR 450.

Other statutory causes of loss 37.14 Modern statutes appear to be reinventing the old practice of forfeiture of a criminal’s property. One example is legislation dealing with the confiscation of proceeds of crime. Unfortunately, each piece of legislation

tends to operate in different ways. Thus under NSW Confiscation of Proceeds of Crime Act 1989 s 19 any confiscation order vests the property in the Crown subject to every charge and encumbrance to which it was subject at the time of confiscation. However, the Proceeds of Crime Act 2002 (Cth) provides in Pts 2.2 and 2.3 for forfeiture of property considered to be gained as the proceeds of crime. Any third party must actually make application if it wishes to preserve its interest in the property. The NSW Act only permits the whole of the land to be confiscated, not merely a part: R v Bolger (1989) 41 A Crim R 222; R v Galek (1993) 70 A Crim R 252 (CCA (NSW)). After confiscation the Crown will be subject to the covenants of the mortgage, but it is unclear whether the original mortgagee is still liable on the personal covenants as well. There are many statutory provisions now working forfeiture of property, but not all direct themselves to the position of a mortgage. The operation of the NSW Drug Trafficking (Civil Proceedings) Act 1990 on property registered in the name of a person whose property was forfeited under the Act where there were outside interests is discussed in Black Uhlans Inc v NSW Crime Commission [2002] NSWSC 1060; (2000) 12 BPR 29. The Customs Act 1901 (Cth) permits goods to be forfeited if certain breaches of the Act are committed. There is also legislation permitting the confiscation of boats used for illegal fishing. Confiscation can take place irrespective of mortgages or other interests, even the interest of a bona fide purchaser without notice: Burton v Honan (1952) 86 CLR 169; Cheatley v R (1972) 127 CLR 291; DPP v Lawler (1994) 68 ALJR 289. In R v Ghadami [1997] Crim LR 606, it was held that mortgage debts should be taken into account for the purpose of the confiscation provisions of the Criminal Justice Act 1998 as a result of a conviction for fraudulent evasion of value added tax. Again, Copyright Act 1968 (Cth) s 133(4) empowers a court to forfeit property irrespective of whether it is charged: see Irvine v Carson (1991) 19 IPR 187, noted and commented upon in (1992) 66 ALJ 312.

[page 821]

Chapter 38

Discharge or Modification by Statute Contrast of English and Australian positions Resumption Legislation Compensation proceedings Discharge pursuant to the Australian Consumer Law Contracts Review Act 1980 (NSW) Absent mortgagees

38.1 38.2 38.3 38.4 38.5 38.6 38.7

Contrast of English and Australian positions 38.1 The English editions of this work list a whole series of Acts pursuant to which the law may requisition property on the basis of the property’s dangerous condition or because of unhealthy or slum condition. When this occurs, any mortgage on the property will also fall. Most of those statutory enactments are brought about because of older style residential housing which no longer meets current conditions and needs to be demolished with appropriate adjustments to various persons’ interests in the property. Because Australia is a much younger country and there has not been, as opposed to what apparently has been the case in parts of England, a significant problem

with slums, there is little comparable legislation. Up until its repeal in 1991, Public Health Act 1902 (NSW) s 58 covered comparable situations. There does not seem to be any current legislation of this type in New South Wales or Victoria, but the South Australian Home Improvement Act 1940 s 23, which is not atypical of this sort of legislation, provides that a council, if it is satisfied that any house is unfit for human habitation and that it is impracticable to make it fit for human habitation, may demolish the house at the owner’s expense. A council may sell any material taken from the house to defray expenses and pay any surplus in discharge of any mortgage and any balance to the owner.

Resumption 38.2 Provision exists in many statutes for land to be resumed for public purposes. The general scheme of this legislation is that upon the appropriate notice appearing in the Government Gazette the interests of all persons in the land are converted into claims against the resuming authority. A typical provision is Land Acquisition (Just Terms Compensation) Act 1991 (NSW) s 20(1) which provides as follows: [page 822] On the date of publication in the Gazette of an acquisition notice, the land described in the notice is, by force of this Act: (a) vested in the authority of the State acquiring the land; and (b) freed and discharged from all estates, interests, trusts, restrictions, declarations, reservations, easements, rights, charges, rates and contracts in, over or in connection with the land.

Thus, on acquisition a person with a proprietary interest in land ceases to own such interest and is entitled instead to a statutory claim for compensation: see NSW Act s 37.

Legislation 38.3 The Lands Acquisition Act 1989 (Cth) makes detailed provisions where mortgages are involved. Sections 64, 68 and 69 are as follows:

64(1) For the purposes of this Division, money shall be taken to have been due to a mortgagee under, or to have been secured by, a mortgage at the time of acquisition of a mortgage interest only to the extent that, at that time: (a) the right of the mortgagee to recover the money secured by the mortgage was not barred by a law relating to the limitation of actions; or (b) the mortgagee was entitled to recover money secured by the mortgage by exercising a power of sale of, or other remedy in relation to, the interest in land subject to the mortgage. (2) For the purposes of this Division, the interest due to the mortgagee under a mortgage at a particular time is the interest that would be payable to the mortgagee if the mortgage were discharged at that time, other than so much (if any) of that interest as represents: (a) costs of re-investing the principal under the mortgage; or (b) a loss, or possible loss, of interest on the re-investment of the principal under the mortgage. 68(1) This section applies where: (a) a mortgage interest has been acquired from a mortgagee; and (b) the mortgagee makes a claim for compensation in respect of the acquisition. (2) To the extent of the compensation payable to the mortgagee in respect of the acquisition, excluding amounts referred to in paragraph 65(1)(b), the acquisition shall, on the making of the claim, be taken to have discharged the liability of the mortgagor under the mortgage as from the time of acquisition. (3) On payment or tender of the compensation to the mortgagee, the mortgagee shall, if so required by the mortgagor and at the expense of the mortgagor, execute a discharge of the mortgage debt to the extent to which the mortgage debt is taken, by subsection (2), to have been discharged. 69(1) Where an amount has been paid to or recovered by the mortgagee under a mortgage in respect of a liability that, upon the making of a claim by the mortgagee is, by section 68, taken to have been discharged as from the time of acquisition of a mortgage interest under the mortgage: (a) the mortgagee is liable to repay that amount to the person who paid it; and (b) the Commonwealth may deduct from the compensation payable to the mortgagee and pay to the person who paid that amount so much of that amount as has not been so repaid. (2) A payment made by the Commonwealth under paragraph (1)(b) shall be deemed to have been made in discharge of the obligation of the mortgagee under paragraph (1)(a).

Under the Land Acquisition (Just Terms Compensation) Act 1991 (NSW), a registered mortgagee may make his personal claim for compensation.

Compensation proceedings 38.4 Most resumption problems are settled by negotiation between mortgagee, mortgagor and the acquiring authority. In the past the tendency

was to allow one set of compensation and let the ordinary courts assess what should be paid to the mortgagee: see, for example, Robert Reid & Co v Minister for Public Works (1902) 2 SR (NSW) L 405 and Syme v Commonwealth (1942) 66 CLR 413. This is no longer the case: see, for [page 823] example, Rosenbaum v Minister for Public Works (1965) 114 CLR 424. However, the earlier cases do give insights as to how, apart from statute, one approaches the problem: see also Sparke v Minister for Works (1891) 12 LR (NSW) L 276 and Ex parte Patience (1940) 40 SR (NSW) 96.

Discharge pursuant to the Australian Consumer Law 38.5 Under Trade Practices Act 1974 (Cth) s 87, the court had the power to order that a mortgage be set aside. That might be done, for instance, if the court came to the conclusion that it was brought about by false and misleading conduct contrary to Trade Practices Act s 52. The Trade Practices Act was repealed by the Competition and Consumer Act 2010 (Cth) (CCA) with effect from 1 January 2011 and s 52 is now to be found restated in Australian Consumer Law (ACL) s 18, which is contained in Sch 2 of the 2010 Act. Trade Practices Act s 87 is reproduced and extended in Competition and Consumer Act s 87. Sections 227 and 238 of the ACL provide similar powers to s 87 of the CCA. The ACL is applied as a law of the states and territories by the following Acts: Fair Trading Act 1987 (NSW) (Pt 3); Fair Trading Act 1999 (Vic) (Pt 2); Fair Trading Act 1989 (Qld) (Pt 3); Fair Trading Act 1987 (SA) (Pt 3); Fair Trading Act 2010 (WA), Australian Consumer Law (Tasmania) Act 2010 (Tas); Fair Trading (Australian Consumer Law) Act 1992 (ACT); and Consumer Affairs and Fair Trading Act (NT) (Pt 4). An example of the operation of ss 52 and 87 is provided by National Australia Bank Ltd v Nobile (1988) 100 ALR 227, where a third party mortgage and guarantee were set aside under the Act and also because of unconscionable conduct, and see 13.35. See also Abram v Bank of New Zealand [1996] ATPR ¶41-507; Krambousanos v Jedda Investments Pty Ltd

(1996) 142 ALR 604; and Mahlo v Westpac Banking Corp (1998) NSW ConvR ¶55-844. Trade Practices Act s 52A (added by the Trade Practices Revision Act 1986) introduced the concept of unconscionable conduct into the Trade Practices Act and those provisions — ss 51AA, 51AB and 51AC — have been reproduced in ACL ss 20–22 and the various states and territories Fair Trading legislation; and see 13.35.

Contracts Review Act 1980 (NSW) 38.6 In New South Wales alone, the Supreme Court and the District Court are given statutory jurisdiction to declare a contract void as unjust or to vary a contract (s 7);‘unjust’ includes unconscionable, harsh or oppressive: s 4. The jurisdiction extends to invalidate a mortgage. The Act does not apply to a contract or mortgage entered into in the course of or for the purpose of trade: s 6. This means that the Act does not apply to contracts which are entered into as an ordinary incident of the carrying on of a particular trade, business or profession then being carried on or proposed to be carried on. It is insufficient that the mortgagor intended to use the amount advanced to invest in a business being conducted by another in which he would acquire an interest: Collins v Parker (1984) NSW ConvR ¶55-212; see also Ellison v Vukucevic (1986) 7 NSWLR 104. By virtue of s 19 of the Act, no order may be made in respect of a contract contained in an instrument registered under the Torrens Act. However, the court may, in the appropriate case, direct the execution of a deed or instrument to vary the terms of a registered mortgage: Toscano v Holland Securities Pty Ltd (1985) 1 NSWLR 145 at 152. The NSW Contracts Review Act 1980 is more fully considered in 13.36. The National Consumer Credit Code replaced existing state and territory based consumer credit codes as from 1 July 2010. It is to be found in Sch 1 of the National Consumer Credit Protection Act 2009 (Cth). The Code applies to a mortgage if (a) it [page 824]

secures obligations under a credit contract or a related guarantee; and (b) the mortgagor is a natural person or a strata corporation: ss 6 and 7. It applies to reverse mortgages in the circumstances mentioned in s 13A. The provisions relating to mortgages are set out in Pt III ss 42–53. They deal with, among other things, the form of the mortgage, all accounts mortgages, and third party mortgages. If the Code applies, a mortgagee cannot take possession of the mortgaged property until a default notice has been served and the mortgagor given at least 30 days to remedy the default: s 88; but see Commonwealth Bank of Australia v Kilpatrick [2013] NSWSC 169, citing Monas v Perpetual Trustees Victoria Ltd [2011] NSWCA 417; (2011) 80 NSWLR 739 at [39].

Absent mortgagees 38.7 The NSW Act s 98 provides that, if a mortgagee cannot be found, a mortgagor may apply to the court for a discharge of the mortgage. Queensland and New Zealand have enacted comparable provisions. If the evidence satisfies the judge that the mortgagor has completely paid the mortgagee, then the court will order a discharge to be given by an appropriate officer of the court and, upon registration in the Torrens Registry, this will be effective. If the evidence does not so satisfy the judge then he will order that accounts be taken and direct that the mortgagor pay into court the amount found to be due less the mortgagor’s costs of the application. There is authority for the proposition that an order under s 98 will not be made ex parte: Wayne v Kusznierz [1973] 2 NSWLR 799; though see Re Piromalli [1977] 1 NSWLR 39. A mortgagee who departs overseas without appointing attorneys to deal with the mortgagor will be disentitled from charging against the mortgagor the extra costs in giving a discharge: Ex parte Prackett [1987] 2 Qd R 560.

[page 825]

Part X

Accounts and Costs

[page 827]

Chapter 39

Accounts A. Accounts Generally between Mortgagor and Mortgagee Mortgagor’s right to an account When accounts are not taken Interference with settled accounts Special circumstances affecting the accounts Nature of proceedings for account Procedure on taking of accounts Evidence B. Who is Bound by the Accounts Accounts prima facie binding on all parties When accounts not binding C. Accounts Against the Mortgagor Mortgagee’s right to an account Evidence of the debt Where the debt is for costs Payments on account of debt Accounting for rents: legal mortgage Accounting for rents: equitable mortgage Growing crops

39.1 39.2 39.3 39.4 39.5 39.6 39.7 39.8 39.9 39.10 39.11 39.12 39.13 39.14 39.15 39.16

Improvements Where receiver in possession D. Accounts Against the Mortgagee and his Assigns Purchase of mortgage debt under par Transferee takes subject to state of accounts Accounting for proceeds of sale Overpayments of interest Sale by mortgagee of shares E. Accounts Against the Mortgagee in Possession Accounts extend to wilful default Possession must be as mortgagee Attornment by mortgagor Inquiry as to possession Account of rents and profits Equitable possession Amount of rents to be accounted for Occupation rent Where rents collected by agent

39.17 39.18 39.19 39.20 39.21 39.22 39.23 39.24 39.25 39.26 39.27 39.28 39.29 39.30 39.31 39.32

[page 828]

Accounts of mines, etc Repairs and improvements, etc F. Taking Accounts with Rests Form of accounts Accounts with rests When accounts taken with rests Circumstances subsequent to taking possession Intervals of rests

39.33 39.34 39.35 39.36 39.37 39.38 39.39

Account when debt paid off Receipts after certificate G. Accounts of Interest Right to interest on mortgage debts Interest after day for redemption Interest on money retained Interest on expenditure Payment of interest in bankruptcy Neglect to claim interest H. Interest on Specialty and Judgment Debts Bond covering mortgage debt Judgment debts I. Capitalisation of Interest Interest on arrears not allowed apart from contract Effect of capitalisation Capitalisation after mortgage Capitalisation on transfer of mortgage Capitalisation under foreclosure order J. The Rate of Interest Allowed Lower rate on punctual payment Commission on unpaid instalments Rate of interest allowed by the court Variation in rate of interest K. When Interest Ceases to Run Notice to pay off mortgage Interest ceases on tender Purchase by mortgagee L. Incidence as between Tenant for Life and Remainderman

39.40 39.41 39.42 39.43 39.44 39.45 39.46 39.47 39.48 39.49

39.50 39.51 39.52 39.53 39.54 39.55 39.56 39.57 39.58 39.59 39.60 39.61

Duty of life tenants

39.62

A. Accounts Generally between Mortgagor and Mortgagee Mortgagor’s right to an account 39.1 A mortgagor has the right in certain circumstances to demand an account from the mortgagee. While the relationship of mortgagor and mortgagee subsists, the mortgagor is only entitled to an order for an account as ancillary to the principal relief of redemption or in a mortgagee’s action. [page 829] After the mortgage has been finalised, the mortgagor only has a right to an account if he pleads and proves that there is a surplus owing to the mortgagor: C2C Developments Pty Ltd v Commonwealth Bank of Australia [2012] NSWSC 1162; (2012) 16 BPR 31,735. There can only be one account. A party cannot have, as it were, little bits of account. The declaratory procedure cannot be used to get little bits of an account, because the proceedings may become, in relation to the account, otiose: see Kennedy v General Credits Ltd (1982) 2 BPR 9456; Colin D Young Pty Ltd v Commercial and General Acceptance Ltd (1982) NSW ConvR ¶56,572; Adams v Bank of New South Wales [1984] 1 NSWLR 285; Challenge Bank v Hodgekiss (1995) 7 BPR 14,399; Nemeth v Reachcord Pty Ltd (1998) NSW ConvR ¶55-873; Westpoint Finance Pty Ltd v Chocolate Factory Apartments Ltd [2002] NSWCA 287. Thus in accounts in an estate, there can be no declaration that a particular asset is an asset in the estate: Tomlin v Tomlin (1841) 1 Hare 236; 66 ER 1019. Furthermore, there is no such thing as an interim account: Westpoint Finance Pty Ltd v Chocolate Factory Apartments Ltd [2002] NSWCA 287 at [33].

There is a general principle that a mortgagee cannot be made a party to an action relating to the mortgage unless the mortgagor has made either expressly or by implication an offer to redeem: see 33.7. This rule does not apply where the mortgage is no longer subsisting — for example after a sale by the mortgagee has been completed: see National Bank of Australasia v United Hand-in-Hand and Band of Hope Co (1879) 4 App Cas 391 at 401 (PC); Kennedy v General Credits Ltd (1982) 2 BPR 9456. And the rule is less strictly applied nowadays than previously: see, in relation to restraining a sale by a mortgagee, 20.37. Where a mortgagee is alleged to have sold the mortgaged property at an undervalue or is otherwise in breach of the mortgagee’s duty in relation to the sale and the sale has not or cannot be set aside, a mortgagor is entitled in equitable proceedings to hold the mortgagee to account on the footing of wilful default: see Coroneo v Australian Provincial Assurance Association Ltd (1935) SR (NSW) 391; McGinnis v The Union Bank of Australia Ltd [1935] VLR 161; Colin D Young Pty Ltd v Commercial and General Acceptance Ltd, above; Wenham v General Credits Ltd [1989] ACLD 142, on appeal on a different point, General Credits Ltd v Wenham (1989) 18 NSWLR 570. For an account sought by a legally assisted person, see Maher v Network Finance Ltd [1982] 2 NSWLR 503. The nature of these equitable proceedings was considered in some detail in Ultimate Property Group Pty Ltd v Lord (2004) 60 NSWLR 646. There are situations where a mortgagor can seek an account against the mortgagee even though the relationship of mortgagor and mortgagee has ceased to exist: Hartl v Cowen (1982) [1993] 2 Qd R 633 at 638; and see National Bank of Australasia v The United Hand-in-Hand and Band of Hope Company, above and Welsh v Nilsson [1961] NZLR 644.

When accounts are not taken 39.2 After exercise of the power of sale the equity of redemption is destroyed and the mortgagee exercising the power constituted a trustee of the surplus proceeds, after satisfying his own charge, first for subsequent encumbrancers, and ultimately for the mortgagor: Rajah Kishendatt Ram v Rajah Mumtaz Ali Khan (1879) LR 6 Ind App 145 at 160 (PC). See also Coroneo v Australian Provincial Assurance Association Ltd (1935) 35 SR

(NSW) 391 at 395; Weld-Blundell v Synott [1940] 2 KB 107 at 115; and Adams v Bank of New South Wales [1984] 1 NSWLR 285 at 299. The same principle applies if a sale under some arrangement between the parties results in an apparent surplus in the hands of the mortgagee. [page 830] Thus the action is for breach of trust or for equitable damages, not for an account: Commonwealth Bank of Australia v Hadfield (2001) 53 NSWLR 614; Ultimate Property Group Pty Ltd v Lord (2004) 60 NSWLR 646 at 652; and see Adamson v Halifax plc [2003] 1 WLR 60 (CA); and see also 20.20. Again, where there has been compulsion on the mortgagor to pay an excessive sum to secure a discharge and the amount of the excess is clear, it is not appropriate to seek an account. The appropriate action is one for money had and received: Hartl v Cowen (1982) [1993] 2 Qd R 633 at 638; and see J & S Holdings Pty Ltd v NRMA Insurance Ltd (1982) 61 FLR 108 at 128 (Full Federal Court) and 32.40. Apart from the situation referred to above, or where there are accounts stated, the action of money had and received does not lie against a mortgagee: Westpoint Finance Pty Ltd v Chocolate Factory Apartments Ltd [2002] NSWCA 287 [58].

Interference with settled accounts 39.3 A settled account is sometimes referred to as a stated account, but the meaning is the same. The account is stated between the parties, or stated by one side and agreed to by the other. The reservation in an account of ‘errors excepted’ does not prevent it from being considered as settled; and such an account will be taken to be settled where the balance is carried over to a new account; as to settled accounts, see Parkinson v Hanbury (1867) LR 2 HL 1 at 12. A settled account, although prima facie binding on the parties to it and on other persons interested in the equity of redemption, and although in the ordinary course it will not be disturbed (see Newen v Whetter (1862) 31 Beav 315; 54 ER 1160), may under special circumstances be either reopened

altogether or subjected to possible alteration in respect of particular items only. In the former case the order is that the settled account shall be opened and set aside and a new account taken. In the latter case, the order is that the settled account is to stand, but that any of the parties are to be at liberty ‘to surcharge and falsify any of the items and charges therein’. If any of the parties can show an omission for which credit ought to be given, that is a surcharge; or if anything is inserted that is a wrong charge, he is at liberty to show it, and that is falsification: Pit v Cholmondeley (1754) 2 Ves Sen 565 at 566; 28 ER 360 at 360.

In this connection, ‘surcharge’ means an omission for which credit ought to be given. ‘Falsification’ means a charge appearing in the accounts wrongly made. Both surcharges and falsifications may raise questions of fact and/or law. The issues on the surcharges are usually tried first. The onus of establishing a surcharge is on the surcharging party who begins. With falsifications, the onus is on the accounting party, who thus begins: see Pit v Cholmondeley (1754) 2 Ves Sen 565; 28 ER 360. It has been said that for accounts to be falsified, they must contain charges in the nature of fraud; not merely charges which may be regarded as excessive (Heighington v Grant (1845) 1 Ph 500 at 601; 41 ER 761 at 761) but a charge might be so excessive as to be improper and fraudulent in equity, though there was no actual fraud. Moreover, when an account is admitted to contain an error, it can be ‘purged’ by setting off against that error an error shown to have been made in another account, in favour of the person prejudiced by the first error: Lawless v Mansfield (1841) 1 Dr & War 557. Liberty to surcharge and falsify will be given merely on the ground of error in the account: Langstaffe v Fenwick (1805) 10 Ves Jun 405; 32 ER 902 (commission on personal collection of rents by mortgagee); Daniell v Sinclair (1881) 6 App Cas 181 (compound instead of simple interest charged by common mistake); see Wrixon v Vize (1842) 2 Dr & War 192 at 203. [page 831] The amount of the error, it has been said, is immaterial. The court looks at the principle involved. Thus relief has been given upon an error of only a few shillings: Lewes v Morgan (1817) 5 Price 42 at 86; 146 ER 530 at 544;

Lawless v Mansfield, above, at 616. But it is essential that at least one error shall be specifically charged and proved: Parkinson v Hanbury (1867) LR 2 HL 1 at 12; Lawless v Mansfield. This also is sufficient since, if one error has been proved, it may be expected that, upon investigation, others will be discovered: Coleman v Mellersh (1850) 2 Mac & G 309 at 314; 42 ER 119 at 121. The error may be either of fact or of law: Langstaffe v Fenwick, above; Daniell v Sinclair, above, at 190. It appears not to have been decided whether, where there are several distinct accounts, in some only of which errors are alleged and proved, all become liable to be surcharged and falsified: Lawless v Mansfield, above. The account will be opened altogether in case of fraud, and this notwithstanding the lapse of a great number of years: Cheese v Keen [1908] 1 Ch 245 at 252. Moreover, apart from fraud, it will be reopened if the relation of the parties, or the manner in which the settlement took place, or the nature of the error proved, shows that the settlement ought not to be considered as an act binding on the parties who signed it, and that it would be inequitable for the accounting party to take advantage of it: Coleman v Mellersh Mac & G at 314; ER at 121; Re Webb; Lambert v Still [1894] 1 Ch 73 at 84. Thus the account may be reopened if it contains errors of considerable extent both in number and amount; and if a fiduciary relation exists between the parties — where, for instance, the accounting party is an agent or a trustee — fewer errors will suffice for the making of such an order: Williamson v Barbour (1877) 9 Ch D 529. (Although the errors are numerous and important, if there has been a great lapse of time and the books and documents have been lost, the court may decline to open the account altogether and give leave only to surcharge and falsify: Millar v Craig (1843) 6 Beav 433; 49 ER 893. In a foreclosure action the mortgagor can set up a claim to reopen an account by way of defence in the same way as if the claim had been made by counterclaim: Eyre v Hughes (1876) 2 Ch D 148.) A single error of large amount has been made the ground for reopening the whole account, but ordinarily it will be sufficient to give leave to surcharge and falsify: Gethina v Keighley (1878) 9 Ch D 547 (save in case of fraud and fiduciary relationship: see Williamson v Barbour, above).

Where the reopening of the account is claimed, either fraud or specific error must be alleged and proved: Needler v Deeble (1677) 1 Ch Cas 299; 22 ER 810; Knight v Bampfield (1683) 1 Vern 179; 23 ER 399; Dawson v Dawson (1737) West temp Hardwicke 171; Taylor v Haylin (1788) 2 Bro CC 310; 29 ER 170; and Johnson v Curtis (1791) 3 Bro CC 266; 29 ER 528. The accounts will be more readily opened where the relationship of solicitor and client exists, ‘provided, that is, excessive charge or error is shown’: Ward v Sharpe (1884) 53 LJ Ch 313; Re Webb; Lambert v Still [1894] 1 Ch 73; Cheese v Keen [1908] 1 Ch 245.

Special circumstances affecting the accounts 39.4 Any special circumstance or fact affecting the amount due from the mortgagor to the mortgagee in a foreclosure action — such as a valuation of the security in bankruptcy — should be pleaded or brought to the attention of the court, before the usual foreclosure judgment is made, in order that a direction may be given that, in taking the accounts, regard shall be had to such special circumstance or fact. If this is not done at the trial, no such question can be subsequently raised either on taking the accounts or on the master’s certificate: Sanguinetti v Stuckey’s Banking Co (No 2) [1896] 1 Ch 502. [page 832]

Nature of proceedings for account 39.5 Proceedings for an account can theoretically be taken either at law or in equity. However, since the latter procedure is more efficient, virtually all proceedings are now brought in equity: see McGhee, Snell’s Equity, 32nd ed, Sweet & Maxwell, London, 2010, [20-003]. The action for an account is in three stages: (1) before the judge as to whether the plaintiff is entitled to an account, (2) before the master or equivalent to certify as to the accounts and certify them, and (3) before the judge to act on the certificate. The first stage is often formal. However, problems may arise where the defendant does not concede the plaintiff’s right.

A vital principle in actions for account is that the court does not take accounts in bits (see 39.2); therefore it has been argued that the plaintiff is not entitled to have discovery or ask interrogatories of the defendant about the accounts, because to allow this to occur would breach the rule. After some hesitation, discovery has been allowed: see Elmer v Creasy (1873) 9 Ch App 69. Then, at the trial, the question remains: should evidence about individual items in the account be received? To do so may in practical terms breach the rule; however, not to do so may stymie the plaintiff. In Tomlin v Tomlin (1841) 1 Hare 236 at 245–6; 66 ER 1019 at 1023–4, it was held that the evidence must be received if relevant to the issue before the court. Usually, the only proper defences are that there have been settled accounts between the parties (or even that the defendant has already rendered a full and proper account) or that the proceedings are barred by the Statute of Limitations. The defence of settled accounts may be met with the reply that the settled accounts are vitiated by some fraud, mistake or other omission which it would be against conscience to allow to stand. In such a case, the plaintiff is given leave to file surcharges and falsifications: see 39.3. In rare cases the court may exercise its power to direct a discharge of the mortgage prior to the taking of accounts: Equus Financial Services Ltd v RMBL Investments Pty Ltd (1996) 22 ACSR 744; 7 BPR 14,966.

Procedure on taking of accounts 39.6 The second stage of the proceedings is the taking of accounts. The procedure for accomplishing this will vary on each court’s rules. However, very often the parties will prescribe their own more simplified procedure involving their accountants dealing with the questions arising informally. Even when the traditional procedure is employed, it is usually as a result of directions given in each case rather than by the application of the court rules. Where the traditional procedure is followed, the following occurs: (a) The court appoints one party as the ‘accounting party’. (b) The accounting party files verified accounts.

(c) The accounts are vouched before the Chief Clerk. (d) The accounting party may be cross-examined on those accounts. (The accounting party may be cross-examined even before vouching: Meacham v Cooper (1873) 16 LR Eq 102. The accounting party is entitled to be informed as to the points on which he is to be crossexamined: Lord v Lord (1866) 2 Eq 605. A notification that all items save one are disputed, is insufficient (McArthur v Dudgeon (1872) LR 15 Eq [page 833] 102; Glover v Ellison (1872) 20 WR 408), though a notice that the whole account is disputed is sufficient: Woods v Oliver [1880] WN Eng 51.) (e) The other party (the ‘objecting party’) files surcharges and falsifications. (f)

The issues on the surcharges and falsifications are tried, traditionally by the master.

(g) The master issues a certificate. (h) The court adopts or varies the certificate and makes an order nisi that the mortgagor pay the amount certified (or as the case may be) within a defined period, usually three or six months.

Evidence 39.7 The evidence to be presented on taking accounts will be in accordance with the normal rules. However, two matters must be noted. First, a party may seek to tender in evidence schedules made up by members of its staff from various records of the company. Unless the parties otherwise agree, such schedules must be accompanied by all underlying records, unless the schedules are prepared by an accountant: Potts v Miller (1940) 64 CLR 282; Re Montecatini’s Patent (1973) 47 ALJR 161. Second, many mortgages contain clauses allowing certain certificates by officers of the mortgagee to be evidence or conclusive evidence of the

matters contained therein. As to these, see 17.7. In a question as to accounts which had been kept by a creditor in the position of a trustee, but which were always open to the inspection of the debtor, the books were admitted as prima facie evidence of the amount of all moneys received and paid by the creditor, with liberty to surcharge and falsify (Ogden v Battams (1855) 1 Jur NS 791); and an account book of a deceased mortgagee, containing entries against interest, has been admitted as evidence on behalf of his executors: Hudson v Owners of Swiftsure (1900) 82 LT 389. The court may decide at the third stage, the further hearing, on the certificate and merits, any question on the accounts: Burne v Robinson (1844) 1 Dr & Wal 688.

B. Who is Bound by the Accounts Accounts prima facie binding on all parties 39.8 An account taken between the mortgagee and the mortgagor, whether it is taken in or out of court, is prima facie binding not only on the parties to it, but on other persons interested in the equity of redemption. It is binding, therefore, on a subsequent encumbrancer: Wrixon v Vize (1842) 2 Dr & War 192, affirmed 3 Dr & War 104. So accounts taken in an action by a subsequent encumbrancer against the mortgagor and the prior encumbrancer bind the mortgagor as to the amount of the debt due to the prior encumbrancer, so long as the judgment remains unimpeached: Farquharson v Seton (1828) 5 Russ 45; 38 ER 944. Sureties are bound by the accounts of a receiver, where the accounts are regularly passed: Mead v Lord Orrery (1745) 3 Atk 235; 26 ER 937.

When accounts not binding 39.9 The account is only binding when the parties to it represent both sides of the account. Hence the mortgagor, or a person claiming under him, is not bound by accounts taken in his absence between the mortgagee and a transferee of the mortgage: Mangles v Dixon (1852) 3 HL Cas 702 at 737; 10 ER 278 at 292–3. Accounts taken in

[page 834] an action are not binding upon co-defendants, as between themselves, except so far as the relief sought by the plaintiff required that such accounts should be taken as between those defendants. In the case, therefore, of a simple action to redeem against several encumbrancers, since it is unnecessary for the purposes of the judgment to take the accounts between the subsequent encumbrancers, any accounts so taken will not be binding as between them: Cottingham v Earl of Shrewsbury (1843) 3 Hare 627 at 638; 67 ER 530.

C. Accounts Against the Mortgagor Mortgagee’s right to an account 39.10 Whether the action is for foreclosure or for redemption, the mortgagee is entitled to an immediate account of his principal, interest, and costs, including: 1. costs, charges and expenses properly incurred in relation to the debt and security; 2. costs of litigation properly undertaken by the mortgagee; and 3. costs of the redemption or foreclosure proceedings: see Re Wallis; Ex parte Lickorish (1890) 25 QBD 176; and Chapter 40. He is also entitled to have a day fixed for payment or foreclosure; and all moneys for which the deed is expressly declared to be a security, or which carry interest or are otherwise of the nature of principal — such as fines secured to a building society — may be claimed as principal: Blackford v Davis (1869) Ch App 304; Provident Permanent Building Society v Greenhill (1878) 9 Ch D 122. Where the mortgage is limited to a stated sum, this means that amount of principal, exclusive of interest and costs: White v City of London Brewery Co (1889) 42 Ch D 237. A current account is not necessarily closed by the appointment of a receiver: Yourell v Hibernian Bank Ltd [1918] AC 372 (HL); and see National Bank of Greece SA v Pinios Shipping Co (No 1) [1990] 1 AC 637; [1990] 1 All ER 78 (HL).

An assignee or subsequent encumbrancer of the equity of redemption stands in the position of the mortgagor as to accounts: Melbourne Banking Corp v Brougham (1882) 7 App Cas 307 (PC); Mainland v Upjohn (1889) 41 Ch D 126. In Portman Building Society v Hamlyn Taylor Neck [1998] 4 All ER 202 (CA), the mortgagee sought an account (by way of restitution) from a solicitor who had acted for both parties and who had supplied a report indicating that the mortgagee society’s conditions were being complied with when, in fact, only part of the loan was being applied to the mortgaged property. In the absence of proof that the solicitors had been unjustly enriched it was held that there was nothing to account. Foreclosure will not be ordered without such an account if the mortgagor insists on it, even where the mortgagee swears at the hearing that the money due to him is many times more than the value of the estate, but in that case the court will reserve the costs of the account: Taylor v Mostyn (1883) 25 Ch D 48.

Evidence of the debt 39.11 The production of the security is prima facie evidence of the existence of the debt: Piddock v Brown (1734) 3 P Wms 288; 24 ER 1069. (The realisation of a surety’s securities may be equivalent to a further advance to the principal debtor: Re Smith; Lawrence v Kitson [1918] 2 Ch 405.) If payment is acknowledged in the usual manner by the deed, and sworn to by the mortgagee, he need not prove the payment of the consideration money by other evidence. An account stated for the purposes of a security in respect of which the debtor is entitled to the protection of the court, such as a post obit security, is not conclusive [page 835] against him: Tottenham v Green (1863) 32 LJ Ch 201. Where there are manifest signs of fraud there must be proof of actual payment: Piddock v Brown, above. See as to proving consideration for a bond debt, Whitaker v Wright (1843) 2 Hare 310; 67 ER 128. Where there is an uncertainty as to the

amount of principal due — either because it is shown that the sum mentioned in the security was not advanced, but that only a running security was intended to be made (Melland v Gray (1843) 2 Y & CCC 199; 63 ER 87 (other aspects of which are reported (1841) 5 Jur 1004 and (1845) 2 Coll 295; 63 ER 741)), or by reason of the making of further advances (Gordon v Graham (1716) 2 Eq Cas Abr 598; 22 ER 502; 7 Vin Abr 52, pl 3; 22 ER 502) — an inquiry may be directed to ascertain the amount lent under or on the credit of the mortgage security; and if there is no evidence of the amount really lent, the mortgagor will be charged to the extent of his own admissions only: Melland v Gray, above. In Close Asset Finance Ltd v Derek Allan Taylor [2006] EWCA 788, it was held that the mortgagor, and a person claiming under him, is entitled to challenge the mortgagee as to the amount secured under the mortgage, provided that he can show that there is a serious question as to whether the sum stated in the acknowledgment of receipt to have been advanced was in fact advanced. See also Minot v Eaton (1826) 4 LJOS Ch 134; Mainland v Upjohn (1889) 41 Ch D 126; Greer v Kettle [1938] AC 156, 171; and 16.39. Entries in the books of a deceased person, who was the solicitor of the mortgagor at the date of the mortgage, to the effect that he had received the money and had paid it over to the mortgagor, are admissible as evidence of payment of the mortgage money: Clark v Wilmot (1841) 1 Y & C Ch Cas 53; 62 ER 787; and see Smartle v Williams (1694) Comber 247; 90 ER 1163 (book of bursar of a college).

Where the debt is for costs 39.12 In the case of a mortgage given to a solicitor by his client to secure the amount of a bill of costs, the court will assume, after several years have elapsed, that the business charged for was actually done. But the peculiar jealousy with which the court watches such transactions will cause it to direct an inquiry as to the fairness of the charges, although at the time of executing the security the client had assented to the bill: Wragg v Denham (1836) 2 Y & C Ex 117; 160 ER 1136. Where money has been lent by the solicitor to the client, the security is not conclusive proof of the actual advance, and this must be proved by other evidence: Lewes v Morgan (1817) 3 Y & J 230 at 394; 148 ER 1164 at 1233; Lawless v Mansfield (1841) 1 Dr & War 557; Gresley v Moulsey (1861) 3 De GF & J 433; 45 ER 945.

Payments on account of debt 39.13 The assignee of the security will be bound to allow payments made by the mortgagor to the original mortgagee, after, but without notice of, the assignment: Bickerton v Walker (1885) 31 Ch D 151 at 158; Turner v Smith [1901] 1 Ch 213; cf Dixon v Winch [1900] 1 Ch 736, where there was collusion. But payments of principal made to the mortgagee’s solicitors, if the solicitors had no special authority to receive such payments, will not be allowed the mortgagor: Withington v Tate (1869) 4 Ch App 288.

Accounting for rents: legal mortgage 39.14 Subject to any statutory restriction, a legal mortgagee of general law land is generally entitled to take possession immediately upon execution of the mortgage (see 19.12) whereas the position with mortgages of Torrens system land is that the remedy is one arising as a result of default: see 19.2. So long as he abstains from doing so, neither the mortgagor, remaining in possession, nor his assignees in bankruptcy, nor a person holding under a mere voluntary trust for the mortgagor, and whose possession may therefore be considered to be that of the mortgagor, is bound to account to the mortgagee for the rents: see Ex parte Wilson (1813) 2 Ves & B 252; 35 ER 315; Ex parte Calwell (1828) 1 Mol 259; Hele v Lord Bexley (1855) 20 Beav 127; 52 ER 551; Flight v Camac (1856) 4 WR 664; and generally 12.4. [page 836] On the legal mortgagee giving notice to the tenant to pay the rent to him, he becomes entitled to rent due or in arrears at the date of the notice, as well as to rent which accrues afterwards (Moss v Gallimore (1779) 1 Doug KB 279; 99 ER 182), provided, in the case of a lease made after the mortgage, either that the tenant has attorned to the mortgagee or that the lease is made under the mortgagor’s statutory power, as to which see 12.7 ff. Where attornment is required, this is not conclusively shown by the tenant merely continuing in possession after receipt of the notice: Towerson v Jackson [1891] 2 QB 484 (dissenting from Underhay v Read (1887) 20 QBD 209) and Brown v Storey (1840) 1 Man & G 117; 133 ER 270.

Accounting for rents: equitable mortgage 39.15 In the case of an equitable mortgagee who is not in possession, the right to rents does not arise until he is entitled to possession: see 19.14 (equitable mortgage of general law land); and 19.11 (equitable mortgage of Torrens system land). (An equitable mortgagee is not entitled to rents which are payable to a legal reversioner, because such a mortgage creates no privity of estate between the mortgagee and the tenant entitling the mortgagee to claim the rent. Accordingly, an equitable mortgagee has no right to direct a tenant of the mortgagor to pay the rent to him; but see 19.11 in relation to equitable mortgages of Torrens system land, though the analogy is applicable having regard to the nature of those mortgages: see 1.14, 4.1, 4.2 and Chapter 28; see also Perry v Rolfe [1948] VLR 297; Australia and New Zealand Banking Group Ltd v Greig [1980] 1 NSWLR 112; (1980) 42 FLR 387; Addison v Billion [1983] 1 NSWLR 586; Quint v Robertson (1985) 3 NSWLR 398; and Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1998) 196 CLR 245.) An equitable mortgagee will be entitled to possession upon an order for sale being made: see 21.12. From the date of the application upon which an order for sale is made the mortgagee is entitled to the rent: Re Postle; Ex parte Bignold (1834) 4 Deac & Ch 259. This is so even though an inquiry as to the date of his security forms part of the order: Re Feaver: Ex parte Smith (1844) 3 Mont D & De G 680. But if by any means the mortgagee should get into lawful possession (if, for example, the mortgage entitles him to possession), he will be entitled, as a legal mortgagee under like circumstances, to the rents from the date of his possession (Re Postle; Ex parte Bignold, above), and to growing crops which he severs from the soil (Re Gordon; Ex parte Official Receiver (1889) 61 LT 299), and he will not be made to refund them upon the making of the order: Re Freeman; Ex parte Williams (1865) 13 WR 564. In the same way, if rent is paid to an equitable mortgagee by a tenant who is under no mistake of fact, but knows that the rent is claimed by a mere equitable mortgagee, the tenant cannot demand it back: Finck v Tranter [1905] 1 KB 427.

Growing crops 39.16 A mortgagee who has not taken possession is not entitled to growing crops which have been removed by the mortgagor between the time of

demand and recovery of possession. But he has a right to all crops growing on the premises when he takes possession, unless the mortgagor can claim them as emblements under an express contract of tenancy (Re Skinner; Ex parte Temple (1822) 1 Gl & J 216; Re Phillips; Ex parte National Mercantile Bank (1880) 16 Ch D 104; Official Trustee in Bankruptcy v Westpac Banking Corp Ltd (1987) 77 ALR 677), and the mortgagor and persons claiming under him will be restrained from removing them: Bagnall v Villar (1879) 12 Ch D 812. This applies as well to an equitable as to a legal mortgagee who has taken possession: Re Gordon; Ex parte Official Receiver (1889) 61 LT 299.

Improvements 39.17 A mortgagor can have no allowance for money spent by him on the estate, all improvements enuring for the benefit of the mortgagee: Norris v Caledonian Insurance Co (1869) LR 8 Eq 127. [page 837]

Where receiver in possession 39.18 A receiver is entitled to rents in arrears at the time of his appointment: see Re Ind, Coope & Co Ltd; Fisher v Ind Coope & Co Ltd [1911] 2 Ch 233. But where the produce of crops was shipped to the consignees of the mortgagor, but was not converted prior to the appointment of a receiver on behalf of the mortgagee, the mortgagor was not obliged to give any account of it: Codrington v Johnstone (1838) 1 Beav 520; 48 ER 1042. If the mortgagor is in possession, he is liable to pay an occupation rent only from the date of the demand by the receiver: Yorkshire Banking Co v Mullan (1887) 35 Ch D 125. If a mortgagee is restrained from taking possession, and a receiver is appointed adversely to him, on an undertaking to be answerable in damages, the receiver will be charged with an occupation rent: Re Joyce; Ex parte Warren (1875) 10 Ch App 222. Where a receiver is in possession in an action to which the mortgagee is not a party, a mortgagee out of possession will not be entitled to the rents paid by the tenants to the receiver even after notice

given them by the mortgagee, it being first necessary to apply to the court to discharge the receiver: see 18.25. From the time of the discharge of a receiver appointed in an action to which the mortgagee is not a party, or of the application for it, the mortgagee may be considered to be in possession, and to be entitled to the rents: Thomas v Brigstocke (1827) 4 Russ 64; 38 ER 729. As to payments by a receiver to a first mortgagee in excess of the interest to which he is entitled, see Law v Glenn (1867) 2 Ch App 634. As to payment of rents to a mortgagee by sequestrators under a sequestration for contempt, see Re Hoare; Hoare v Owen [1892] 3 Ch 94.

D. Accounts Against the Mortgagee and his Assigns Purchase of mortgage debt under par 39.19 When the amount of the debt owing on the mortgage has been established, the mortgagor cannot claim the benefit of a purchase of the security by a transferee for less than that amount. It is a general rule that the bona fide purchaser of an encumbrance for less than is due upon it, or than it is worth (whether he is a creditor of the mortgagor: Morret v Paske (1740) 2 Atk 52; 26 ER 429, or a stranger: Davis v Barrett (1851) 14 Beav 542; 51 ER 394) is entitled, both against the mortgagor or his representatives (Phillips v Vaughan (1685) 1 Vern 336; 23 ER 504; Ascough v Johnson (1688) 2 Vern 66; 23 ER 652) and other encumbrancers (Morret v Paske), to be paid all that is due on the purchased security, and there is no right against him for an account of what he has paid for his purchase: and see Equuscorp Pty Ltd v Westpac Banking Corp [2003] VSC 241; and Elders Rural Finance Ltd v Westpac Banking Corp (1988) 4 BPR 9383 at 9385–6. For example, if the owner of the mortgaged property, not being the original mortgagor of the property which is subject to several charges, purchases the first charge for less than is due upon it, he may hold it for all that is due, and the later encumbrancers will have no account against him, nor any equity to make the purchased security stand only for the price which he paid for it: Davis v Barrett, above. This rule depends upon the principle that the assignee stands in the place of his assignor, and as the latter might have assigned to him gratis, it is but just that the measure of the allowance should be what was

due, and not what was paid. The assignee taking the hazard should also have the benefit of the bargain, of which neither the mortgagor, nor any subsequent encumbrancer, can have any equity to deprive him: Anon (1707) 1 Salk 155; 91 ER 143; see also Dobson v Land (1850) 4 De G & Sm 575; 64 ER 963; and 14.12. The rule is, however, different if the purchaser of the encumbrance is a person in whom the property charged with the encumbrance has become vested subject also to other liabilities of the former owner, such as the executor of the owner (Morret v Paske, [page 838] above), or if he is a person standing in any confidential relationship with the mortgagor, by reason of which his interest and his duty are in conflict. Such is the position of a guardian (Powell v Glover (1721) 3 P Wms 251n; 24 ER 1050), trustee (Morret v Paske), counsel (Carter v Palmer (1842) 8 Cl & Fin 657; 8 ER 256), or agent: Hobday v Peters (1860) 28 Beav 349; 54 ER 400; Morret v Paske. There is no fiduciary obligation on a first mortgagee to grant a right of first refusal to the mortgagor or to a subsequent encumbrancer: Elders Rural Finance Ltd v Westpac Banking Corp (1988) 4 BPR 9383. It seems that if the tenant for life buys a mortgage on the inheritance for less than is due, he does so for the benefit of the estate: see Hill v Browne (1844) Drury temp Sug 426. Subject to the same equity is the surety of the mortgagor, who, being liable upon a contract of indemnity with his principal, is under an obligation, if he can make terms with the creditor, to treat the settlement as a payment of the debt, and to give his principal the benefit of the arrangement: Reed v Norris (1837) 2 My & Cr 361; 40 ER 678. To all these persons, therefore, no more will be allowed in account than they have paid for the encumbrance, with interest at the legal or current rate, if that is less than the interest reserved: Carter v Palmer (1842) 8 Cl & Fin 657; 8 ER 256. The rule did not, however, extend to a tenant in common, as there was no fiduciary relation between him and his co-tenants: Kennedy v De Trafford

[1896] 1 Ch 762. But though the purchase is made by a person who, under ordinary circumstances, would be allowed no more than he paid, yet, if it was made under the advice of a later encumbrancer who did not disclose the fact that he, and not the purchaser, would reap the benefit of it, the full sum due will be allowed to the assignee: Bayly v Wilkins (1846) 3 Jo & Lat 630. It is the same notwithstanding that the fiduciary relation has ceased, and the former trustee will be allowed no more than he has paid, unless he has entered into a fair contract with the persons interested that he may become the purchaser, or unless he can show that there was no fraud or concealment, nor any advantage taken of information acquired in the character of trustee: Carter v Palmer, above. The general rule will also not be applicable where the assignment is equitable only and the assignor needs the assistance of a court of equity to perfect his title (Re Romford Canal Co (1883) 24 Ch D 85 at 93) or where the assignee is the mortgagor or a co-mortgagor: Otter v Vaux (1856) 6 De GM & G 638; 43 ER 1381; Green v Walker 45 A (2d) 742 (1900); Harrington v Harrington 427 A (2d) 1314 (1981); Elders Rural Finance Ltd v Westpac Banking Corp (1988) 4 BPR 9383 at 9385–6.

Transferee takes subject to state of accounts 39.20 The transferee of the mortgage is bound by the state of accounts between the mortgagor and mortgagee: see 14.1. Hence, though the transferee may have had no notice, by indorsements on the deeds or otherwise, that part of the debt has been discharged, yet he can claim under his assignment no more than is really due as between the mortgagor and the mortgagee, without reference to what was paid on the assignment, and is subject to have the whole account taken: see Matthews v Wallwyn (1798) 4 Ves 118; 31 ER 62; Chambers v Goldwin (1804) 9 Ves 254; 32 ER 600; Mangles v Dixon (1852) 3 HL Cas 702; Turner v Smith [1901] 1 Ch 213; De Lisle v Union Bank of Scotland [1914] 1 Ch 22; and see Equuscorp Pty Ltd v Westpac Banking Corp [2003] VSC 241; and Elders Rural Finance Ltd v Westpac Banking Corp (1988) 4 BPR 9383 at 9385–6; and 14.12 and 39.19. It is assumed that the mortgagor was not a party to the assignment. If he were a witness, it should be pleaded that he knew and agreed to the contents of the deed: Jamieson v English (1820) 2 Mol 337. The mortgagee who

transfers his mortgage does not thereby get rid of his liability to future accounts, but may be ordered to account, [page 839] both before and after the assignment: Hall v Heward (1886) 32 Ch D 430. The reason for this is that the mortgagee must be responsible for the person to whom he assigns the mortgagor’s estate. But he is not answerable if he assigns by the direction of the court: Hall v Heward.

Accounting for proceeds of sale 39.21 On a sale of the mortgaged property by the mortgagee under his power of sale, the mortgagor, and a second and subsequent mortgagee (Adams v Bank of New South Wales [1984] 1 NSWLR 285) — at least if there is a surplus (on the basis of there being a trust of the purchase money, see 20.2) — is entitled to an account of the proceeds: see also Ramsbotham, Coote’s Treatise on the Law of Mortgages, 9th ed, Stevens and Sons, Sweet & Maxwell, London, 1927, p 946. The right only exists if there is a surplus and that matter must be pleaded and proved: CSC Developments Pty Ltd v Commonwealth Bank of Australia [2012] NSWSC 1162; (2012) 16 BPR 31,735. The account between the mortgagor and the first mortgagee does not create an estoppel between the first and the second mortgagees: Weld-Blundell v Synott [1940] 2 KB 107; [1940] 2 All ER 580. If, in addition to the mortgage debt, there is another account between mortgagor and mortgagee, the latter will be treated as having received the money on the mortgage account and not on the other account, provided this is in accordance with the nature of the transaction: Young v English (1843) 7 Beav 10; 49 ER 965; Johnson v Bourne (1843) 2 Y & CCC 268; 63 ER 118. Even where the mortgage was obtained by fraud, if the mortgagee adopts it, the surplus belongs to the mortgagor: Halifax Building Society v Thomas [1996] Ch 217; [1995] 4 All ER 673 (CA). If the mortgagor sells, and the mortgagee adopts the contract, the mortgagee as between himself and the purchaser stands in the mortgagor’s

place, and must bear the loss occasioned by the insolvency of a person to whom the deposit has been paid: Rowe v May (1854) 18 Beav 613; 52 ER 241. But if the mortgagee has consented to the sale upon the terms that he shall be paid out of the purchase money, although his execution of the conveyance and signature of the receipt will discharge the purchaser, it will not discharge the mortgagor if the money is misappropriated by his agent without the mortgagee’s default, even though the agent may have also acted for the mortgagee: Barrow v White (1862) 2 John & H 580; 70 ER 1190. Where a lender has protected himself, by way of a mortgage indemnity policy, against loss from the proceeds of sale of the mortgaged property being insufficient to discharge the mortgage, the lender is not entitled to credit for sums paid by the insurer: Leeds Building Society v Banfield [2007] EWCA Civ 1369 at [48]. The same applies for sums paid by a guarantor of the mortgage: Woolwich Building Society v Brown [1996] CLC 625.

Overpayments of interest 39.22 Where interest on the mortgage has been paid in excess of what was due, the overpayments will be treated as payments on account of principal: Re Carroll’s Estate [1901] 1 IR 78. But it is otherwise where interest has been paid on money which is afterwards found not to be included in the mortgage, and this will not be taken to have been paid on account of the principal: Blandy v Kimber (1858) 25 Beav 537; 53 ER 742.

Sale by mortgagee of shares 39.23 Mortgagees of stocks or shares, who sell the securities in their hands, may apparently (contrary to the general rule) purchase themselves (see 20.40), but they must take them at the market price of the day and cannot credit the debtor with less than that price, on the speculation that if the securities had come together into the market, the price would have fallen: Stubbs v Lister (1841) 1Y & CCC 81; 62 ER 799. [page 840]

E. Accounts Against the Mortgagee in Possession

Accounts extend to wilful default 39.24 For the liability of the mortgagee in possession to account, see 19.34. The account usually directed against the mortgagee in possession is of what he has, or without wilful default might have received from the time of his taking possession. This applies to all types of property. As to the mortgagee’s position if he becomes a partner in a mortgaged business, see Rowe v Wood (1822) 2 Jac & W 553 at 556–8; 37 ER 740 at 740–1. As to receipt of rents by mistake, see Forster v Forster [1918] 1 IR 95. The account will include the receipts of any person whom the mortgagee has put into possession without a just title, and in derogation of the rights of the mortgagor: National Bank of Australasia v United Hand-in-Hand and Band of Hope Co (1879) 4 App Cas 391 (PC). If the mortgagee in possession has sold the property, the account will extend to the proceeds of sale received by him, or which without wilful default he might have received. But if no special case is made (see 20.17) there will not be an inquiry into the propriety of the sale or the adequacy of the price: Mayer v Murray (1878) 8 Ch D 424; Farrar v Farrars Ltd (1888) 40 Ch D 395; Meredith v Davis (1933) 33 SR (NSW) 334. (It has been said that the case of an account against a mortgagee is the only instance in which the court directs an account on the footing of wilful default without any special case made for the purpose: Lord Kensington v Bouverie (1855) 7 De GM & G 134 at 156; 44 ER 53 at 61 — although a purchaser, whose purchase has been set aside and ordered to stand as a security, is within the rule: Adams v Sworder (1863) 2 De GJ & Sm 44; 46 ER 291.) Where a mortgagee has been in possession, in any settlement of accounts between the mortgagee and mortgagor, tax payable on interest due is allowed as money received on account of interest: see Hollis v Wingfield [1940] Ch 336; [1940] 1 All ER 531.

Possession must be as mortgagee 39.25 A mortgagee who is in possession of the mortgaged property will not be liable to account as mortgagee in possession unless he entered as mortgagee. The court will not treat possession as being held by the mortgagee

as such unless it is satisfied that he took possession in his capacity of mortgagee, without reasonable ground for believing himself to hold in any other capacity: Gaskell v Gosling [1896] 1 QB 669 at 691. Thus one who, having a lien on property, takes possession thinking himself to be purchaser will not be treated as mortgagee in possession (Parkinson v Hanbury (1867) LR 2 HL 1); nor will a mortgagee who has possession as tenant (Page v Linwood (1837) 4 Cl & Fin 399; 7 ER 154), nor a mortgagee who lawfully uses the property for purposes unconnected with the mortgage: Re Colnbrook Chemical and Explosives Co;A-G v Colnbrook Chemical and Explosives Co [1923] 2 Ch 289. Where the creditor entered as receiver under a power of attorney and afterwards became mortgagee, he was still treated for the purpose of accounting as receiver: Trimleston v Hamill (1810) 1 Ball & B 377. The assignee of a tenant for life is not liable to account to the remainderman as mortgagee in possession during the life estate: Kensington (Lord) v Bouverie (1855) 7 De GM & G 134 at 156; 44 ER 53 at 61; and see Whitbread v Smith (1854) 3 De GM & G 727; 46 ER 286.

Attornment by mortgagor 39.26 The attornment of the mortgagor, if in actual occupation, as tenant to the mortgagee — although only by virtue of an attornment clause in the mortgage deed — does not make the mortgagee liable as mortgagee in possession to subsequent [page 841] encumbrancers (Stanley v Grundy (1883) 22 Ch D 478) and the ordinary relation of mortgagor and mortgagee continues: Re Knight: Ex parte Isherwood (1882) 22 Ch D 384 at 392. In any case the mortgagee is not liable on this ground to account as mortgagee in possession to the mortgagor: Re Betts; Ex parte Harrison (1881) 18 Ch D 127.

Inquiry as to possession 39.27 In case of doubt the court will grant an inquiry as to the fact of possession. The inquiry will be whether the mortgagee has been in possession

of the rents and profits as mortgagee, and if he has, the account is directed to be taken against him as such, including wilful default: Dobson v Lee (1842) 1 Y & CCC 714; 62 ER 1084. No special direction as to wilful default is necessary. Admission of possession, though contrary to the fact, has been held to make him liable to account on that footing: Parker v Watkins (1859) Johns 133; 70 ER 369.

Account of rents and profits 39.28 The mortgagee who takes possession of the mortgaged property is required to be diligent in realising the amount due on the mortgage, so that the estate may be redelivered to the mortgagor: Kensington (Lord) v Bouverie (1855) 7 De GM & G 134 at 157; 44 ER 53 at 62; see Langton v Waite (1869) 4 Ch App 402. (As to the different nature of the possession of a person who enters as a receiver, see Kensington (Lord) v Bouverie.) The mortgagee is liable to account for the rents and other profits during his possession. In taking the account, the Limitation Act is no bar where the relation of mortgagor and mortgagee subsists; because, the mortgagor having a right to get back the value of his property, every item must be brought into account: Hood v Easton (1856) 2 Giff 692; 66 ER 290; on appeal, 2 Jur NS 917. If the mortgagee remains in occupation himself he is liable to pay an occupation rent. His liability to account extends in favour of all those who are interested in the equity of redemption, and he cannot by any dealing with the estate discharge himself of this liability: Hinde v Blake (1841) 11 LJ Ch 26. After receiving notice of a later mortgage, the mortgagee in possession becomes liable to account to the later encumbrancer for so much of the surplus rent as he has paid to the mortgagor or his representatives, but so long as the mortgagee in possession was without notice, the later mortgagee cannot call upon him or the mortgagor for an account of the bygone rents: Berney v Sewell (1820) 1 Jac & W 647; 37 ER 515; Parker v Calcraft (1821) 6 Madd 11; 56 ER 992. After redemption, where the mortgagee has died, a claim in respect of profits during his possession should not be made in a creditor’s action, but by proceedings to correct the redemption judgment: Shoobridge v Woods (1843) 8 Jur 27.

Equitable possession

39.29 The action of a later encumbrancer, brought to enforce his claim (the prior encumbrancer being made a party), amounts to an equitable possession of the rents, and binds the surplus rents in the hands of the prior encumbrancer until the dismissal of the action, even though it is not prosecuted: Parker v Calcraft (1821) 6 Madd 11; 56 ER 992. Even though the order may not include reference to subsequent receipts, if the mortgagees receive money subsequent to the decree, they must bring it to account: Bulstrode v Bradley (1747) 3 Ark 582; 26 ER 1136. But it is said that the mortgagee is not bound to account to a later encumbrancer for the profits received after foreclosure, though he had notice of his claim before judgment: Bird v Gandy (1715) 7 Vin Abr 45 pl 20. A judgment creditor can obtain a charge on the property giving him a right to a sale (see 7.5), but according to the former practice — which, it may be presumed, continues — he must submit to account as a mortgagee in possession, as the price of the relief [page 842] sought: Bull v Faulkner (1847) 1 De G & Sm 685; 63 ER 1251. But he will not be liable to this form of account unless he has actually obtained possession under his claim to the exclusion of the mortgagor: Kingston v Cowbridge Rly Co (1871) 41 LJ Ch 152.

Amount of rents to be accounted for 39.30 Where a mortgagee enters into receipt of rents he accounts at the rate of the rent reserved: Trimleston (Lord) v Hamill (1810) 1 Ball & B 377 at 385; Metcalf v Campion (1828) 1 Mol 238. Where he enters into actual possession, it has been said that he will be charged with the utmost value the lands are proved to be worth: Trimleston (Lord) v Hamill. But his liability is limited by the circumstances of the case, and he will not usually be required to account for more than he has received, unless it is proved that, but for his gross default, mismanagement or fraud, he might have received more: see 19.34 ff.

Occupation rent

39.31 The mortgagee, if he has been in actual occupation of the whole or some part of the property, may be charged an occupation rent, but his occupation must be stated in the pleadings: Trulock v Robey (1846) 15 Sim 265; 60 ER 619; Shepard v Jones (1882) 21 Ch D 469; and see Fee v Cobine (1847) 11 Ir Eq R 406. An inquiry as to the fact of occupation may be directed, if it is not admitted, and any necessary directions will be given for ascertaining the amount of rent to be fixed. No rent will be charged if the property has no rental value or during such time as the property, from its ruinous state, or for any other reason, was incapable of making any return: Fyfe v Smith [1975] 2 NSWLR 408. No rent will be charged if the mortgagee’s possession is only for the purposes of sale within a reasonable time: Norwich General Trust v Grierson [1984] CLY 2306. If the mortgagee has expended money in permanent improvements, these will not increase the occupation rent, unless the expenditure is allowed him in his accounts: Bright v Campbell (1885) 54 LJ Ch 1077; see 19.38. If the mortgagee has sold the property, the admission of the purchaser into possession before the stipulated time will not make the mortgagee liable for occupation rent, though he may have admitted the purchaser upon terms which raise a claim for wilful default: Shepard v Jones, above. Where a lease by the mortgagor to the mortgagee has been set aside, the mortgagee will be charged with the rent reserved by the lease if a fair one: see Gubbins v Creed (1804) 2 Sch & Lef 214; Webb v Rorke (1806) 2 Sch & Lef 661.

Where rents collected by agent 39.32 Where the mortgagee employs an agent to collect the rents, he must account for all the rents received by that agent, and not merely for what the agent has paid to him (unless the rents were collected by the mortgagor as the mortgagee’s agent: Dallimore v Oriental Bank Corp (1875) 1 VLR (Eq) 13). The death of the agent and consequent difficulty of proving what the agent received is no answer: Noyes v Pollock (1885) 30 Ch D 336.

Accounts of mines, etc 39.33 The mortgagee in possession, who opens mines or quarries without special authority, will be charged with his receipts but will not be allowed the

costs of severing the produce or other expenses; for he has no right to speculate at the mortgagor’s expense, and the act is a sale of part of the mortgaged property: Thorneycroft v Crockett (1848) 16 Sim 445; 60 ER 946. (See Taylor v Mostyn (1886) 33 Ch D 226; and Hood v Easton (1856) 2 Giff 692; 66 ER 290, where a mortgagee without authority to work mines authorised strangers to work them; doubted on appeal, 2 Jur NS 917. As to inquiries with respect to the working of mines, see Thorneycroft v Crockett.) [page 843] But a mortgagee with an insufficient security may open new mines, or may lease or work abandoned mines, and will be only liable to account for the profits or royalty, and not for the value of the ore raised or the damage caused to the surface: Millett v Davey (1862) 31 Beav 470; 54 ER 1221. If the mortgagee is specially authorised to work the mines, he will be allowed the expenses incurred in doing so, with interest: Norton v Cooper (1854) 25 LJ Ch 121. If the mortgagee comes into possession of open mines, he cannot be called upon to speculate by working them, however likely it may be that the mines will be improved by a large expenditure: Rowe v Wood (1820) 2 Jac & W 553; 37 ER 740. He is not bound to advance more than a prudent owner would advance, and cannot be charged with mismanagement if he omits to do so. On the other hand, a mortgage of a colliery was prima facie a mortgage of it as a going concern, and passed the right to work the mines: County of Gloucester Bank v Rudry Merthyr etc, Colliery Co [1895] 1 Ch 629, distinguishing Whitley v Challis [1892] 1 Ch 64. As to where the mortgagee is also a lessee of the mines with certain restrictions on working pillars, see Taylor v Mostyn, above. Where there is a mortgage of a business as a going concern, the mortgagee in possession is entitled to be recouped losses that are not attributable to negligence, out of the proceeds of the sale of the estate: see Bompas v King (1886) 33 Ch D 279 (a block of residential flats).

Repairs and improvements, etc 39.34 For allowances to the mortgagee for certain repairs and permanent improvements, etc, see 19.36 and 19.38.

F. Taking Accounts with Rests Form of accounts 39.35 The usual mode of taking accounts against the mortgagee in possession is to set the total amount of rents and profits received by, or found to be chargeable to, him against the whole amount due upon the mortgage debt; and to apply them in discharge, successively, of the interest of the mortgage debt and of money advanced for costs and improvements, and then of the principal: Webb v Rorke (1806) 2 Sch & Lef 661; Union Bank of London v Ingram (1880) 16 Ch D 53. But this is only done in arriving at the final result, when the account could, if necessary, be shown as a complete debtor and creditor account. In practice the account is taken in a series of separate accounts: 1. an account of principal, interest and costs; 2. an account of moneys expended by the mortgagee in repairs and permanent improvements, with interest from the date of expenditure; and 3. an account of rents and profits. The balance is arrived at by adding the results of accounts (1) and (2), and subtracting what the mortgagee has to account for under (3). If, during the currency of the account, a part of the mortgaged property is sold, the net proceeds are credited to the mortgagor in account (1), first in payment of interest due, and then in relation of principal, and the interest is correspondingly reduced; but account (2) is not further affected: Wrigley v Gill [1905] 1 Ch 241; Ainsworth v Wilding [1905] 1 Ch 435; cf Thompson v Hudson (1870) LR 10 Eq 497. The result of taking this continuous account is that the mortgagee benefits if the rents and profits exceed the interest, since he does not apply the excess in reduction of

[page 844] principal, with consequent reduction of subsequent interest. He keeps it in hand, paying no interest on it, while interest is running all the time on the undiminished principal; but if the rents and profits are less than the interest, the mortgagor benefits, since the deficiency is a further debt due from him, but it does not carry interest: see Union Bank of London v Ingram, above.

Accounts with rests 39.36 Where the receipts of the mortgagee are more than sufficient to cover the interest a different method may be adopted, known as taking the account with rests. A balance in the account is struck at stated intervals (see Montreal Trust Co v Hounslow Holdings Ltd (1972) 22 DLR (3d) 503) and the surplus to the credit of the mortgagor is applied in reduction of principal: see Thorneycroft v Crockett (1848) 16 Sim 445; 60 ER 946. It has been said that this method applies only in the case of real estate: Robinson v Cumming (1742) 2 Atk 409; 26 ER 646. But there appears to be no reason for so restricting it. Under an account with rests, an occupation rent for which the mortgagee is liable must be brought in (Wilson v Metcalfe (1826) 1 Russ 530; 38 ER 204); but not a rent payable by the mortgagee when he is in occupation as tenant, and not as mortgagee in possession: Page v Linwood (1837) 4 Cl & Fin 399; 7 ER 154; see 39.25.

When accounts taken with rests 39.37 It is not a matter of course for rests to be made against a mortgagee in possession: see Wrigley v Gill [1905] 1 Ch 241, on appeal [1906] 1 Ch 165. The order must expressly direct that the accounts shall be so taken (Wrigley v Gill), and special circumstances justifying the direction must be alleged and proved. Any special matter affecting the accounts must be brought forward at the trial and dealt with in the judgment: Sanguinetti v Stuckey’s Banking Co (No 2) [1896] 1 Ch 502; and see Taylor v Mostyn (1886) 33 Ch D 226. The special case for rests must be made on the pleadings where the action is by writ (Neesom v Clarkson (1845) 4 Hare 97; 67 ER 576; Blackford v Davis (1869) 4 Ch App 304 at 308); otherwise, it must appear on the summons or the mortgagor’s affidavit.

The reason why rests are not the normal method of taking the accounts is said to be that the mortgagee is not bound to accept payment by driblets, but is entitled to have the account taken as whole, and not to be treated as repaid until that account has been taken: Nelson v Booth (1858) 3 De G & J 119 at 122; 44 ER 1214 at 1215; Wrigley v Gill [1905] 1 Ch 241 at 254; and see 39.1. One might be forgiven for thinking that this is not a sufficient ground for adopting an unnatural mode of taking the account. That mode is a tradition which the court in England has not yet had the courage to abandon. It is otherwise in Ireland, where rests are made half-yearly without special direction, but not at intermediate periods: Graham v Walker (1847) 11 Ir Eq R 415. The point does not appear to have been considered in Australia. The safer course is to ensure that the order for accounts specifies the regime under which they will be taken. To direct the account to be with rests in a measure penalises the mortgagee (see Wrigley v Gill [1905] 1 Ch 241 at 254), and generally this will not be done unless he went into possession where there were no arrears — or no material arrears — of interest due, or unless the annual rents greatly exceed the interest: Uttermare v Stevens (1851) 17 LTOS 115. Rests will usually be directed if interest was not in arrears (see Shephard v Elliot (1918) 4 Madd 254; Nelson v Booth (1858) 3 De G & J 119), but not where it was in arrears: see Finch v Brown (1840) 3 Beav 70; 49 ER 26; Wilson v Cluer (1840) 3 Beav 136; 49 ER 53. Where interest was to be paid half-yearly, and there was a half-year’s interest due when the mortgagee entered, this was sufficient to save him from annual rests: Moore v Painter (1842) 6 Jur 903. [page 845] Where the mortgagee takes possession after bills have been indorsed to him for the arrears of interest, and the bills become due and are dishonoured after possession taken, the interest is considered to be in arrears at the time of taking possession, and no rests will be made: Dobson v Land (1851) 4 De G & Sm 575; 64 ER 963.

A great excess of rents over interest will make the mortgagee liable to rests: see Thorneycroft v Crockett (1848) 2 HL Cas 239; 9 ER 1082; Carter v James (1881) 29 WR 437. But rests will not be directed on the ground of a slight excess: Nelson v Booth, above. Rests will also be directed where the encumbrancer denies that character, and sets up an adverse title: Incorporated Society in Dublin v Richards (1841) 1 Dr & War 258 at 290, 334; National Bank of Australasia v United Hand-in-Hand and Band of Hope Co (1879) 4 App Cas 391 at 409 (PC); Wrigley v Gill [1905] 1 Ch 241 at 254; see Douglas v Culverwell (1862) 4 De GF & J 20; 45 ER 1089 (sale treated as mortgage). The fact that there are, or are not, arrears of interest at the time of taking possession is not altogether decisive upon the question of rests, and the circumstances of the particular case will be considered. Consequently, if the mortgagee has been driven by the acts of others to take possession, or has been harassed by litigation, and thereby put to costs (even though the costs have afterwards been adjudged to be paid him by his opponent) and his own conduct has been free from harshness or vexation; or if, in the case of leaseholds, the security is endangered by non-payment of ground-rent or insurance, or through want of repairs, rests will not be directed against him, though as to other circumstances he might be within the general rule: Horlock v Smith (1844) 1 Coll 287; 63 ER 422; Patch v Wild (1861) 30 Beav 99; 54 ER 826; and see Nelson v Booth, above.

Circumstances subsequent to taking possession 39.38 The circumstances when the mortgagee took possession usually determine his liability to rests, and if interest was in arrears, so that rests were not directed, he will not, without special reason, become liable to rests after the arrears have been paid off: Finch v Brown (1840) 3 Beav 70; 49 ER 26; Scholefield v Lockwood (No 3) (1863) 32 Beav 439; 55 ER 172. But if, after the mortgagee has taken possession, there is a settled account, by which it appears that no interest is due — or that, if any is in fact due, it has been satisfied as interest by being turned into principal — and the mortgagee continues in receipt of rents more than sufficient to satisfy the interest of such principal, the settlement is considered as a rest made by the parties, and the mortgagee will henceforth be treated as a mortgagee who

takes possession with no interest in arrears, and will be subject to annual rests: Wilson v Cluer (1840) 3 Beav 136; 49 ER 53. If rests have been directed in a redemption action which is abandoned, they will also be directed in a foreclosure action afterwards commenced by the mortgagee, though no case for them is then made: Morris v Islip (1855) 20 Beav 654; 52 ER 756.

Intervals of rests 39.39 The order for accounts with rests usually directs that the rests shall be made at stated intervals — half-yearly or yearly. As long as principal remains due, the excess of rents and profits over interest and expenses at each interval is struck off the principal, and the account is then carried on upon the footing of the reduced principal. This is the effect of an order substantially in the form in Yates v Hambly (1742) 2 Atk 360 at 362; 26 ER 618 at 619: ‘Take an account of what shall be coming due on account of rents and profits, to be applied in the first place in payment of interest and principal, and make annual rests: and in taking such account make all just allowances’, cited in Webber v Hunt (1815) 1 Madd 13 at 14; 56 ER 6; see Wilson v Cluer (1840) 3 Beav 136; 49 ER 53; Thorneycroft v Crockett (1848) 2 HL Cas 239 at 256; 9 ER 1082 at 1089. [page 846] An alternative method is to direct that rests shall be made from time to time whenever the mortgagee has an excess of rents and profits over interest in his hands. If this is combined with a direction for annual rests, a rest should be made at the date when the mortgagee has this excess in his hands, although in the interval between the annual rests, and from this date the subsequent annual rests will be computed: Binnington v Harwood (1825) Turn & R 477; 37 ER 1184.

Account when debt paid off 39.40 As soon as no principal remains due, the effect of the order is to charge the mortgagee with compound interest on the excess of rents and

profits over outgoings at each rest. This is expressly stated in the order in Cotham v West, Rolls, Nov 15 1839, Reg Lib: ‘Take an account etc, and in taking the said account, make annual rests of the clear balance, and compute interest on such respective balances at 5 per cent and in making such annual rests, except the first, include in the balance then stated, the interest of each preceding balance, so as to charge the defendant with compound interest thereon.’ The usual rate, in the past, was four per cent: Ashworth v Lord (1887) 36 Ch D 545 at 552; see Wilson v Metcalfe (1826) 1 Russ 530 at 537; 38 ER 204; Horlock v Smith (1844) 1 Coll 287 at 297; 63 ER 422. The order in Cotham v West is the basis of the form now in use. Presumably, a higher rate of interest would be allowed today: see 39.57. Generally, when the mortgagee has been paid off his interest and principal out of rents and profits, and nevertheless continues in possession, he becomes a debtor to the mortgagor in respect of subsequent receipts and annual rests will be directed in the account against him, although no rests were directed in the original order for accounts: Wilson v Metcalfe, above; Wilson v Cluer (1840) 3 Beav 136; 49 ER 53; Uttermare v Stevens (1851) 17 LTOS 115; Ashworth v Lord, above. And this may be done where the mortgagee becomes overpaid during the action, though he will not be charged with interest on the surplus received prior to the date of the certificate: Lloyd v Jones (1842) 12 Sim 491; 59 ER 1221.

Receipts after certificate 39.41 It would seem that where money has been received after the date of the master’s certificate, which represents corpus of the mortgaged property, no further account is required: Welch v National Cycle Works Co (1886) 55 LT 673. If, after that date and before the day fixed for redemption, the mortgagee varies the amount by receiving rent or other moneys in the nature of income (see Welch v National Cycle Works Co; Lacon v Tyrrell (1887) 56 LT 483), the accounts must be carried on and a new day (usually the expiration of a month from the date originally named) fixed for redemption: Fenner-Fust v Needham (1886) 32 Ch D 582; Press v Coke (1871) 6 Ch App 645. For exceptions to this rule, see 22.37. This extension of the time for redemption is not, as in the case of an

extension granted on the application of the mortgagor (see 22.32), dependent on the mortgagor paying forthwith arrears of interest and cost: Buchanan v Greenway (1849) 12 Beav 355; 50 ER 1097. The mortgagee accounts by affidavit for the amount received: Oxenham v Ellis (1854) 18 Beav 593; 52 ER 233. Where a receiver has been appointed by the court, a further account may be avoided by inserting in the order for foreclosure nisi liberty to apply in chambers for payment of any moneys in his hands: Coleman v Llewellin (1886) 34 Ch D 143; Smith v Pearman (1888) 36 WR 681. But perhaps this will only be done under special circumstances: Cheston v Wells [1893] 2 Ch 151. For another form of order intended to avoid a further account where a receiver has been appointed, see Simmons v Blandy [1897] 1 Ch 19. [page 847]

G. Accounts of Interest Right to interest on mortgage debts 39.42 The general common law rule as to loans is that, unless there is a contract for interest, it is not payable on a loan: Page v Newman (1829) 9 B & C 378; 109 ER 140; President of India v La Pintada Cia Navigacion SA [1985] AC 104; [1984] 2 All ER 773 (HL); Hungerfords v Walker (1990) 171 CLR 125 at 137. However, as Sperling J noted in Jageev Pty Ltd v State Bank of New South Wales (SC (NSW), 26 March 1996, unreported), interest may be recovered as damages in certain circumstances, and sometimes on a compound basis: Hungerfords v Walker, above. For instance, entitlement to interest as damages arises upon failure by a primary debtor to indemnify a guarantor who has been required to pay out under the guarantee: McColl’s Wholesale Pty Ltd v State Bank of New South Wales [1984] 3 NSWLR 365. Again, in spite of the position at law, equitable interest may be awarded where it is equitable to do so: Al Wazir v Islamic Press Agency Inc [2001] All ER (D) 437; [2002] 1 Ll Rep 210 (CA). As to the rate of interest, four per cent was usually awarded as this was the standard ‘trustee rate’. In McColl, above, at 377, Powell J held that nowadays

the current trustee rate should be allowed. The current practice in trustee cases is now to award interest at the current ‘mercantile rate’: Heydon and Leeming, Jacobs’ Law of Trusts in Australia, 7th ed, LexisNexis Butterworths, Sydney, 2006, [2208]; Re Dawson (Dec’d); Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd (1966) 2 NSWR 211 at 217–20; Hagan v Waterhouse (1991) 34 NSWLR 308 noted (1993) 67 ALJ 471. This situation has, as a matter of practice, been affected by statutory provisions for interest to be added to claims before a court such as under Civil Procedure Act 2005 (NSW) s 101, Supreme Court Act 1986 (Vic) s 56. Statutory interest is also added to judgment debts: see 39.49. Despite the general rule, interest is payable upon mortgage debts, even though it is not expressly reserved. A reason is that it would be inequitable to allow redemption without payment of interest: Cityland and Property (Holdings) Ltd v Dabrah [1968] Ch 166 at 182; [1967] 2 All ER 639 at 649. See also Carey v Doyne (1856) 5 Ir Ch Rep 104 and In re Kerr’s Policy (1869) LR 8 Eq 331; and 3.13 and 3.17. The situation is fully analysed in 3.15; and see Corbett v Sullivan (1898) 19 ALT 177; De Garis v Dalgety & Co Ltd (1915) SALR 102. It was noted in Julong Pty Ltd v Fenn [2002] QSC 26 (and see, on appeal, [2004] QCA 529; [2004] 2 Qd R 272), that in addition to the obligation at general law, Queensland Act s 78(1) also implies an obligation to pay interest under an instrument of mortgage. This applies although the mortgage is only equitable (Anon (1813) 4 Taunt 876; Re Kerr’s Policy (1869) LR 8 Eq 331), including a charge by mere deposit of title deeds (Re Kerr’s Policy), and generally where the principal sum is a charge on specified property: Lippard v Ricketts (1872) LR 14 Eq 291; Re Drax; Savile v Drax [1903] 1 Ch 781; Mendl v Smith (1943) 112 LJ Ch 279. And see Whitbread plc v USB Corporate Services Ltd (2000) 35 EG 136 (CA), where on a proper construction of the mortgage deed ‘interest’ was simple interest whereas in a deed of priority it might include obligations providing for compound interest. It was noted in Lai v Gong (1997) 8 BPR 15,837, that all the cases cited above with exception of Mendl v Smith were cases of equitable mortgages or breach of fiduciary obligations. Where provisions with respect to interest are ambiguous their construction is likely to be resolved, contra proferentem, against the mortgagee: see

Jageev Pty Ltd v State Bank [page 848] of New South Wales (SC (NSW), Sperling J, 26 March 1996, unreported) and see NZI Capital Corporation Pty Ltd v Child (1991) 23 NSWLR 481. The principle applies unless inconsistent with the terms of the mortgage: see Re Andersons Seeds Ltd [1971] 2 NSWLR 120. On this basis interest was not allowed in addition to a large premium in Cityland and Property (Holdings) Ltd v Dabrah [1968] Ch 166 at 182; [1967] 2 All ER 639 at 649; see 32.15. As to the limitation on recoverable arrears, see 16.17 ff. A power to charge land with a sum of money carries power to charge it also with interest: Kilmurry v Geery (1713) 2 Salk 538; 91 ER 456. On a debt which would have been satisfied but for a mortgagee’s wrongful or inequitable act, the mortgagee will be allowed no interest during such time as the debt has thereby remained unsatisfied: see Thornton v Court (1854) 3 De GM & G 293 at 301; 43 ER 115 at 118. As to the right of creditors to interest under a deed of trust executed by the debtor for their benefit, see Jenkins v Perry (1838) 3Y & C Ex 178; 160 ER 664. Where the loan contract provides expressly for reconveyance upon payment of the principal, interest will not be payable, unless the deed contains elsewhere an express or implied agreement for payment of interest: Thompson v Drew (1855) 20 Beav 49; 52 ER 521; Ex parte Hodge (1857) 26 LJ Bcy 77; Ashwell v Staunton (1861) 30 Beav 52; 54 ER 808; Re King; Ex parte Furber (1881) 17 Ch D 191; Mendl v Smith (1943) 169 LT 153. Interest arises on mortgages from day to day (Re Rogers’Trusts (1860) 1 Drew & Sm 338; 62 ER 408); for statutory apportionment, see NSW Act 1919 ss 142–144; Supreme Court Act 1986 (Vic) s 54.

Interest after day for redemption

39.43 Where the security does not expressly provide for payment of interest after the time fixed for redemption, interest will still be recoverable, not on the contract, but as damages for the detention of the debt, and therefore only to the extent of the damages claimed. It is clearly established that even if a contract provides for a certain rate of interest down to a certain day, a farther contract for the continuance of the same rate of interest after that day, until actual payment, is not to be implied unless there is something to justify it, upon the construction of the words of the particular instrument: Cook v Fowler (1874) LR 7 HL 27 at 37; Lai v Gong (1997) 8 BPR 15,837 at 15,843; Coughlan v George (2003) 11 BPR 20,919 at 20,922. See also Re Andersons Seeds Ltd [1971] 2 NSWLR 120 at 122–3; Broadbank Corporation Ltd v Mosgiel Ltd [1985] 1 NZLR 257. In Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation Ltd (NSWSC, 9 December 1994, unreported), MH McLelland CJ in Eq only allowed the court rate of interest on judgments, even though the contractual rate was 21 per cent: see Lai v Gong, above, at 15,843. (Another judgment in that case delivered on the same day is reported in (1994) 6 BPR 14,053.) The matter has been discussed on many occasions: see, for example, Price v Great Western Rly Co (1847) 16 M & W 244; 153 ER 1179; Morgan v Jones (1853) 8 Exch 620; 155 ER 1500; Cook v Fowler (1874) LR 7 HL 27; Re European Central Rly Co; Ex parte Oriental Financial Corp (1876) 4 Ch D 33; Re Roberts; Goodchap v Roberts (1880) 14 Ch D 49; Goldstrom v Tallerman 18 QBD 1; Mellersh v Brown (1890) 45 Ch D 225; McPherson v Summerville (1905) 6 SR (NSW) 1; see also London, Chatham and Dover Rly Co v South Eastern Rly Co [1893] AC 429 (HL); Mathura Daas v Raja Narindar Bahadur Pal (1896) 12 TLR 609 (PC). [page 849] To avoid payment of subsequent interest, the mortgagor must be prepared to pay at the day fixed, and must give notice that he will do so; and he will be liable to pay subsequent interest, although it is only provided that interest is to be paid until, or even that it is not to be paid after, the day of redemption, if by the default of the mortgagor the principal was not then paid: Price v Great Western Rly Co, above; Gordillo v Weguelin (1877) 5 Ch D 287.

In fixing the amount of subsequent interest the court will consider (but will not be entirely guided by) the agreement between the parties as to the rate payable up to the time fixed for redemption. In the past, it would allow this rate if it was not more than five per cent, but would be inclined to cut down if it exceeded that figure: Re Roberts; Goodchap v Roberts, above; Re King; Ex parte Furber (1881) 17 Ch D 191; Mellersh v Brown, above. In Wallington v Cook (1878) 47 LJ Ch 508, the interest was cut down from 60 per cent to five per cent. But a more realistic rate would now be allowed: see Cityland and Property (Holdings) Ltd v Dabrah [1968] Ch 166; [1967] 2 All ER 639; Wallersteiner v Moir (No 2) [1975] QB 373; International Military Services Ltd v Capital and Counties plc [1982] 2 All ER 20; [1982] 1 WLR 575; and see 39.57.

Interest on money retained 39.44 The mortgagee may be liable to pay interest on money in his hands arising from the security, as where, being mortgagee in possession, he holds over and receives rents after the mortgage debt has been paid: Ashworth v Lord (1877) 36 Ch D 545; and see 39.40. The same applies where, though not in possession, there is a balance due from him, and he improperly resists redemption (Smith v Pilkington (1859) 1 De GF & J 120; 45 ER 304) or where, after a sale under his power, he retains the surplus: Charles v Jones (1887) 35 Ch D 544 (interest allowed at four per cent per annum); see 20.48.

Interest on expenditure 39.45 The court allows the mortgagee interest, in certain cases, upon money which he has laid out for the benefit of the mortgaged property or the support of his security, payments so made being treated as further advances. The rate is generally that which is payable on the original loan. Thus, interest will be allowed upon fines paid by the mortgagee for the renewal of leases which form the security, though there is no covenant by the mortgagor for renewal: Woolley v Drage (1795) 2 Anst 551; 145 ER 964. Interest will also be allowed upon premiums on life policies, which form part of the security: Bellamy v Brickenden (1861) 2 John & H 137; 70 ER 1002. (As to interest on premiums paid by a surety, see Hodgson v Hodgson (1837) 2 Keen 704; 48 ER 800.) Interest will be allowed upon money laid out in supporting the mortgagor’s title where it has been impeached (Godfrey v

Watson (1747) 3 Atk 517; 26 ER 1098); or in the redemption of land tax: Knowles v Chapman (1815) 3 Seton (7th ed, 1888) 1905. Interest is allowed on money laid out in lasting improvements or otherwise for the benefit of the estate, where the principal so laid out is allowed: Quarrell v Beckford (1816) 1 Madd 269; 56 ER 100; Webb v Rorke (1806) 2 Sch & Lef 661. (As to sums expended by the mortgagee in the working of mines, where he was authorised by the deed to work them, see 39.33.) It is not the practice generally to allow interest upon money expended by the mortgagee in repairs, although it has sometimes been done: Seton (7th ed), 1906. But interest is not allowed upon costs ordered to be paid by the mortgagor, unless the mortgagee has been given leave to add them to his security, in which case he will be allowed to charge interest from the date of the taxing master’s certificate: Eardley v Knight (1889) 41 Ch D 537. Payment of interest on costs will also be directed where they have been paid under an order of the court which declared the person paying them to be entitled to an indemnity for so doing: Wainman v Bowker (1845) 8 Beav 363; 50 ER 142. [page 850]

Payment of interest in bankruptcy 39.46 A mortgagee who realises his security can, notwithstanding the bankruptcy of the mortgagor, apply the proceeds in payment of principal, interest and costs in full, but if he claims to prove in the bankruptcy (either on abandoning his security, or assessing it or realising it, and proving for the balance) he can only claim interest up to the date of the making of the bankruptcy order unless there is a surplus: Bankruptcy Act 1966 (Cth) s 82(3B); and see Re Mangan; Ex parte Andrew (1983) 123 ALR 633 and also 3.17 and 23.9.

Neglect to claim interest 39.47 If a prior mortgagee does not take possession and the interest falls into arrears, a subsequent mortgagee cannot redeem without paying the whole interest: Aston v Aston (1750) 1 Ves Sen 264; 27 ER 1021. This seems to

apply even though the prior mortgagee let the interest run in arrears with an ill intent, to get the estate, but if there is fraud or collusion it will be otherwise: Bentham v Haincourt (1691) 1 Eq Cas Abr 320 pl 2; 24 ER 16.

H. Interest on Specialty and Judgment Debts Bond covering mortgage debt 39.48 Although bond debts generally carry no interest, either at law or in equity, beyond the amount of the penalty — which is taken to represent by the agreement of the parties the ultimate amount of the debt (Hatton v Harris [1892] AC 547) — yet, if there is a bond and also a mortgage to secure the same sum with all interest that may become due thereon, interest will be carried under the mortgage beyond the penalty of the bond, for the amount of the penalty is not to prejudice the mortgage: Clarke v Lord Abingdon (1810) 17 Ves 106; 34 ER 41. It matters not whether the mortgage precedes or follows the bond. Interest will also be given in such a case where the mortgagor is a surety, since the creditor may make the mortgage as available as if it were given by the principal debtor.

Judgment debts 39.49 Judgment debts carry interest at the statutory rate: see Civil Procedure Act 2005 (NSW) s 101; Supreme Court Act 1986 (Vic) s 101; Supreme Court Act 1995 (Qld) s 48; Supreme Court Act 1935 (SA) s 114; Supreme Court Civil Procedure Act 1932 (Tas) s 165; Supreme Court Act 1935 (WA) s 142. (See Mercantile Credits Ltd v McDowell [1980] 2 NSWLR 101.) These provisions apply also to orders of a court of equity. Interest runs from the date of the taking effect of the judgment: see New South Wales Supreme Court Uniform Civil Procedure Rules reg 36.4; R W Miller & Co Pty Ltd v The Ship Patris [1975] 1 NSWLR 704 at 723. As to the effect on interest of merger of the debt in the judgment, see 36.14.

I. Capitalisation of Interest Interest on arrears not allowed apart from contract 39.50

Interest upon arrears — compound interest — or upon fines for non-

payment of principal and interest is generally not allowed by the court where there is no contract for it: see Broughton v Rodd (1867) 6 SCR (NSW) Eq 102; Parker v Butcher (1867) LR 3 Eq 762; Daniell v Sinclair (1881) 6 App Cas 181 (PC); Wrigley v Gill [1906] 1 Ch 165; Belmore (CJ) Pty Ltd v AGC (General Finance) Ltd [1976] 1 NSWLR 507; Domaschenz v Standfield Properties Pty Ltd (1977) 17 SASR 56; Bank of New South Wales v Brown (1983) 151 CLR 514; Re Mangan; Ex parte Andrew (1983) 123 ALR 633; Bakker v Chambri Pty Ltd (1986) 4 BPR 9234; Brinkworth v The Commissioners of the [page 851] Rural and Industries Bank of Western Australia [1990] ANZ ConvR 243; Kingdrake Pty Ltd v Tarkington Pty Ltd [1998] VSC 65 (and on appeal, Tarkington [2001] ANZ ConvR 555); cf Whitbread plc v USB Corporate Services Ltd (2000) 35 EG 136 (CA); Tadrous v Tadrous [2010] NSWSC 1388, but cf on appeal [2012] NSWCA 16. For the implied right to compound interest in a mortgage to a bank to secure the balance of a current account, see National Bank of Australasia v United Hand-in-Hand and Band of Hope Co (1879) 4 App Cas 391 at 400 (PC). A bank which is otherwise entitled to charge compound interest does not cease to be entitled to compound interest by closing a customer’s account after a demand for repayment of a loan: see National Bank of Greece SA v Pinios Shipping Co (No 1) [1990] 1 AC 637; [1990] 1 All ER 78 (HL). Though a capitalisation clause has the effect of increasing the total amount of interest payable that does not mean that there is a variation in the rate of interest chargeable on the original loan: see Imperial Life Assurance Co of Canada v Efficient Distributors Ltd [1992] 2 AC 85 (PC).

Effect of capitalisation 39.51 The capitalisation of income does not mean, however, that such interest becomes capital for all purposes: for example income tax (Re Morris; Mayhew v Halton [1922] 1 Ch 126; IRC v Oswald [1945] AC 360; [1945] 1

All ER 641 (HL)), or priority payment on liquidation: Bank of New South Wales v Brown (1983) 151 CLR 514. A capitalisation clause may prevent money being due for the purposes of the exercise by the mortgagee of the power of sale: see 20.11. See also Sibard v AGC (Advances) Ltd (1992) 6 BPR 13,178; cf Barns v Queensland National Bank (1906) 3 CLR 925 at 935 and note Farrow Mortgage Services Pty Ltd v Victor Tunevitsch Pty Ltd (1998) 8 Tas R 65.

Capitalisation after mortgage 39.52 After the mortgage a mere notice by the mortgagee to the mortgagor is not sufficient to turn arrears of interest into principal. There must for that purpose be a distinct assent to the demand, or an agreement otherwise made. Such an agreement must be made fairly, and is generally and most properly made upon the advance of fresh money: Tompson v Leith (1858) 4 Jur NS 1091. But such an agreement, when made in favour of the first mortgagee, will not hold against later encumbrancers of whom he had notice: Digby v Craggs (1762) Amb 612; 27 ER 396.

Capitalisation on transfer of mortgage 39.53 Arrears of interest will be capitalised on the transfer of a mortgage, if this is made with the concurrence of the mortgagor: Ashenhurst v James (1745) 3 Atk 270; 26 ER 958; Matthews v Wallwyn (1798) 4 Ves 118; 31 ER 62; Chambers v Goldwin (1804) 9 Ves 254; 32 ER 600; Mangles v Dixon (1852) 3 HL Cas 702 at 737; 10 ER 278 at 293. Where the mortgage is transferred without the mortgagor’s concurrence, arrears of interest will not be capitalised (Cottrell v Finney (1874) 9 Ch App 541) unless, it seems, he first refuses either to pay off the debt or to join in the transfer: Anon (1719) Bunb 41; 145 ER 588. The mortgagor’s mere privity or assent to the account is not sufficient to change the interest into principal, even if he signs the account, for no intent is thereby shown to alter the nature of that part of the debt which consists of interest: Brown v Barkham (1720) 1 P Wms 652; 24 ER 555. On the other hand, conversion may take place on the mere written consent of the mortgagor or person entitled to redeem, without his being actually a party to the assignment, or even on inference of his consent arising from his acts or from his acquiescence. Thus, where interest had been paid for many years

upon an ascertained balance of principal and interest, reported due at the date of an order for sale, the court inferred an agreement that interest should be paid as the price of forbearance to enforce [page 852] the sale: see Ashenhurst v James, above. As to the form of judgment where it is denied that anything was due at the time of the assignment, see Matthews v Walwyn, above, at 129.

Capitalisation under foreclosure order 39.54 Interest is also in effect capitalised in working out foreclosure in an action by a first mortgagee against subsequent mortgagees and the mortgagor. If successive periods of redemption are directed, the second mortgagee is first given the chance of redeeming on payment of the sum certified to be due to the first mortgagee for principal, interest and costs. If he fails to redeem, the direction is that subsequent interest shall be computed, and this computation is made, not on the principal due, or on principal and costs, but on the total amount originally certified to be due, such amount being treated as one consolidated sum: Elton v Curteis (1881) 19 Ch D 49. Thus, for the purpose of the further account the interest due to the first mortgagee is capitalised and made to bear interest. Where interest runs on the whole sum found due by a certificate, it so runs only from the date when the certificate becomes binding, and up to that time on the principal only: Jacob v Earl of Suffolk (1728) Mos 27; 25 ER 250.

J. The Rate of Interest Allowed Lower rate on punctual payment 39.55 For the rule that if the mortgagee wishes to stipulate for a higher rate of interest in default of punctual payment, he must reserve the higher rate as the interest payable under the mortgage, and provide for its reduction in case of punctual payment, see 3.18. The mortgagee cannot effect this object by reserving the lower rate, and making the higher the penalty for non-payment

at the appointed time, because, it is said, an agreement of the latter kind, being nomine poenae, is relievable in equity: Wallingford v Mutual Society (1880) 5 App Cas 685 at 702; Belmore (C J) Pty Ltd v AGC (General Finance) Ltd [1976] 1 NSWLR 507; Kelles-Sharpe v PSAL Ltd [2012] QCA 371. For a case of penalty interest which was held to be void, see Kitson v Goodge (1997) 7 BPR 15,173. On penalties generally, see now Andrews v ANZ Banking Group Ltd [2012] HCA 30. Where the provision for reduction of interest is in a general form, the mortgagor cannot have the benefit of it, unless he strictly performs the condition. He will have no relief after the time of payment has passed: Stanhope v Manners (1763) 2 Eden 197; 28 ER 873. A trustee is justified in accepting the lower rate, after the higher rate has become payable by the strict terms of the contract, it being the usual course to treat interest paid under such circumstances as having been paid within the time fixed: Booth v Alington (1856) 26 LJ Ch 138. On punctual payment and retardation clauses, see 3.16. If the mortgagee has taken possession by reason of the mortgagor’s default, he will also be entitled to the higher rate of interest reserved: National Bank of Australasia v United Hand-in-Hand and Band of Hope Co (1879) 4 App Cas 391 (PC); Union Bank of London v Ingram (1880) 16 Ch D 53; Cockburn v Edwards (1881) 18 Ch D 449 at 463; Bright v Campbell (1889) 41 Ch D 388; Wrigley v Gill [1906] 1 Ch 165. This will be so even if there was no interest in arrears when the mortgagee took possession, and although he did so by arrangement with the mortgagor: Bright v Campbell, above. But if it is provided that, whenever interest is paid within the specified time, the lower rate shall be accepted or some equivalent words be used pointing to any payment of interest, the mortgagor will not, by a single breach of the condition, lose his right to the benefit of it on future payments, but only upon that particular occasion: Stanhope v Manners, above; Burrowes v Molloy (1845) 2 Jo & Lat 521; Wayne v Lewis (1855) 3 WR 600. [page 853]

Commission on unpaid instalments 39.56 A contract to pay a percentage on unpaid instalments for the interval between the time fixed for, and that of actual payment, under the name of a ‘commission’, has been allowed as not being in the nature of a penalty: General Credit and Discount Co v Glegg (1883) 22 Ch D 549. A similar payment on the renewal of promissory notes has also been allowed: Bucknell v Vickery (1891) 64 LT 701 (two per cent). The mortgagee of a ship may contract for a commission on any cash advance remaining unpaid for two months: The Benwell Tower (1895) 72 LT 664; 8 Asp MLC 13. On commission, generally, see 32.14.

Rate of interest allowed by the court 39.57 Where no rate of interest is fixed by the parties the court can fix it, and has in the past adopted the rate of five per cent per annum: Ashwell v Staunton (1861) 30 Beav 52; 54 ER 808; Re Kerr’s Policy (1869) LR 8 Eq 331; Corbett v Sullivan (1898) 19 ALT 177; Re Drax; Savile v Drax [1903] 1 Ch 781 (four per cent per annum allowed); De Garis v Dalgety & Co Ltd (1915) SALR 102; Mendl v Smith (1943) 169 LT 153; Cityland and Property (Holdings) Ltd v Dabrah [1968] Ch 166; [1967] 2 All ER 639 (seven per cent per annum); Congresbury Motors Ltd v Anglo-Belge Finance Co Ltd [1970] Ch 294; [1969] 3 All ER 545 (five per cent); Finance & Investments Pty Ltd v Van Kempen (1986) 6 NSWLR 305; and see 3.17 and 39.43; but cf Nunn v Wily (2001) 10 BPR 18,983. In the case of further advances, or of money allowed in the nature of further advances, the interest is generally given at the same rate as upon the moneys originally lent: Woolley v Drage (1795) 2 Anst 551; 145 ER 964; Quarrell v Beckford (1816) 1 Madd 269 at 281; 56 ER 100 at 104.

Variation in rate of interest 39.58 An unwritten agreement to reduce the rate of interest on a mortgage is good. But in the absence of evidence or presumption of such an agreement, the difference between the rate reserved and that actually paid must be made good: Lord Milton v Edgworth (1773) 5 Bro Parl Cas 313; 2 ER 700; Gregory v Pilkington (1857) 26 LJ Ch 177; Re Venning (1947) 63 TLR 394. (On estoppel, see Lewis v Levy (1876) 2 VLR (E) 110; Central London

Property Trust Ltd v High Trees House Ltd [1947] KB 130; Je Maintiendrai Pty Ltd v Quaglio (1980) 26 SASR 101 and note in (1982) 56 ALJ 484. For variation of mortgages, see 3.34 ff.) So, if a higher rate than is reserved is paid, the excess may be deducted on discharge of the mortgage: Tyler v Manson (1826) 5 LJ OS Ch 34.

K. When Interest Ceases to Run Notice to pay off mortgage 39.59 The mortgage deed may permit early repayment by the mortgagor on terms and, in some jurisdictions, legislation provides for early repayment: see 3.15 and 32.6. Subject thereto the mortgagee is entitled to six months’ interest from the date of the notice to him of the intended discharge of the security. If the payment is not made at the time fixed, the mortgagee is entitled to a new notice, or to six months’ additional interest from the time of actual payment: see 32.37. But he will not be entitled to such interest if he has demanded, or taken proceedings to recover, payment, even though notice of payment has been given to and accepted by him pending the proceedings: Bartlett v Franklin (1867) 15 WR 1077; Re Alcock; Prescott v Phipps (1883) 23 Ch D 372. Where the mortgagee consents in an administration action to a sale of the mortgaged property, he will have interest for six months from the date of the consent, if the mortgage [page 854] is discharged before the end of that time; but if it is not, interest runs to the time of payment: Day v Day (1862) 31 Beav 270; 54 ER 1142. Hence, if the mortgagee sells he can charge interest only up to the completion of the purchase: Re Mangan; Ex parte Andrew (1983) 123 ALR 633. On the method of calculation of interest, see Falk v Haugh (1935) 53 CLR 163; Re Mangan, above. It is the same if the interest is payable in advance,

and the mortgagee sells before the day of payment: Banner v Berridge (1881) 18 Ch D 254; Van Kempen v Finance & Investments Pty Ltd (1984) 6 NSWLR 293. If the mortgage cannot be discharged at the time fixed, by reason of the inability of the mortgagee to produce the deeds, or if in a redemption or foreclosure action he omits to attend at the time and place fixed for payment, he will be allowed no interest beyond that day. Where the omission arose from a mistake, and the mortgagor also neglected to attend, the mortgagee was not compelled to wait another six months, but a new time was fixed for payment at the end of 10 days: Midleton (Lord) v Eliot (1847) 15 Sim 531; 60 ER 725; Hughes v Williams (1853) Kay App iv; 69 ER 313, and form of order there; James v Rumsey (1879) 11 Ch D 398.

Interest ceases on tender 39.60 Subject to the matters noted in 39.59, interest will cease to run upon the mortgage debt from the time at which a proper tender of the whole amount due is shown to have been made. If the right to redeem is disputed, and an inquiry becomes necessary, the mortgagee does not lose his interest, pending the inquiry, although a tender has been made: Sharpnell v Blake (1737) 2 Eq Ca Abr 604; 22 ER 507; and see Berry v Advance Bank Australia Ltd (1995) 6 BPR 14,046. Interest also ceases to run upon payment into court: Belmore (CJ) Pty Ltd v AGC (General Finance) Ltd [1976] 1 NSWLR 507. It was suggested in McPherson v Summerville (1905) 6 SR (NSW) 1 at 4, that to escape further interest after tender, the mortgagor must set aside the sum tendered. This is not a hard and fast rule: see Coughlan v George (2003) 11 BPR 20,919 at 20,924. In Kitson v George (1977) 7 BPR 15,173, there was a dispute as to the amount of interest payable and the mortgagee refused a tender. The mortgagor did not set aside the sum tendered as he would have had to borrow it at 9.45 per cent. The mortgage carried 20 per cent interest. Hodgson JU required the mortgagor to pay 9.45 per cent after the wrongful rejection of the tender: cf GWH Pty Ltd v Commonwealth Bank of Australia (1994) 6 BPR 14,073. As to costs after tender, see 40.9.

Purchase by mortgagee 39.61 Upon a purchase by the mortgagee of the mortgaged property, where the mortgagee takes possession, but completion is deferred for a long time, it may be inferred that there was a set-off of the mortgage debt against the purchase money at the time of taking possession, and interest reserved by the contract on the purchase money runs only on the balance: Wallis v Bastard (1853) 4 De GM & G 251; 43 ER 503. As to set-off against the mortgage of sums due to persons claiming under the mortgagor, see Pettat v Ellis (1804) 9 Ves 563; 32 ER 721; and in bankruptcy, Re Barker; Ex parte Penfold (1851) 4 De G & Sm 282; 64 ER 834. See 1.45–1.49.

L. Incidence as between Tenant for Life and Remainderman Duty of life tenants 39.62 A tenant for life of a mortgaged estate is bound to keep down the interest of the charge during his life to the extent of the rents and profits, not merely of the mortgaged property, but also of any other property comprised in the settlement under which he [page 855] is the life tenant: Marshall v Crowther (1874) 2 Ch D 199; Frewen v Law Life Assurance Society [1896] 2 Ch 511; Honeywood v Honeywood [1902] 1 Ch 347. However, this duty is owed to the reversioner and gives no right to an encumbrancer: Re Morley (1869) LR 8 Eq 594. Where there are successive tenants for life, each is bound to keep down the interest on encumbrances which accrues in his own lifetime: Caulfield v Maguire (1845) 2 Jo & Lat 141. In so far as the rents and profits are insufficient for the purpose, or so far as through the insolvency of the first tenant for life the interest is not kept down, it is charged on the reversion: Sharshaw v Gibbs (1834) Kay 333; 69 ER 141. Where arrears which had accrued, through insufficiency of rents, during

the lifetime of one tenant for life were discharged by the trustees of a subsequent life estate, they were thrown on the reversion: Sharshaw v Gibbs, above.

[page 856]

Chapter 40

Costs A. General Right of Mortgagee to Costs Rule as to costs of action Party and party costs Costs, charges and expenses generally Costs are added to the debt Costs in priority action Appeal as to costs Effect of directions for assessment and payment of costs Costs of bottomry bondholder B. Costs of Action Loss of right to costs When nothing is due Where right to costs not lost Costs due to loss of deeds Unnecessary or unsuccessful proceedings Costs of parties added for benefit of mortgagee Parties added through mortgagee dealing with the estate C. Costs of Disclaiming Defendants

40.1 40.2 40.3 40.4 40.5 40.6 40.7 40.8 40.9 40.10 40.11 40.12 40.13 40.14 40.15

Rules as to costs D. Costs on Sale Account of proceeds Costs on sale by court Expenses of the sale Waiver of mortgagee’s priority Rights of subsequent mortgagee to have first mortgagee’s costs assessed E. Costs, Charges and Expenses Mortgagee’s entitlement Costs of litigation relating to the security Costs of preparation of mortgage not allowed Costs of completing security Internal costs of administration ‘Just allowances’ F. Costs of Reconveyance General rule Trustee for mortgagee Conveyance to equitable mortgagee G. Assessment or Taxation of Costs

40.16 40.17 40.18 40.19 40.20 40.21

40.22 40.23 40.24 40.25 40.26 40.27 40.28 40.29 40.30

[page 857]

Generally

40.31

A. General Right of Mortgagee to Costs Rule as to costs of action 40.1

At common law the mortgagee is entitled as of right to the costs

properly incurred by him in an action for foreclosure or other action to enforce the mortgage and in an action against him for redemption. As Lord Eldon LC said in Detillin v Gale (1802) 7 Ves 583 at 584–5; 32 ER 234 at 235, so long as the mortgagee acts reasonably, he ought to be indemnified. This has been quoted on many occasions since: see, for example, Perry v Rolfe [1948] VLR 297 at 301 per Fullagar J. This right extends to an equitable mortgagee, including a mortgagee by deposit, whether with or without a memorandum of deposit: Cotterell v Stratton (1874) LR 17 Eq 543; Elders Trustee and Executor Co Ltd v Eagle Star Nominees Ltd (1986) 4 BPR 9205; and see Central Mortgage and Housing Corp v Johnson (1971) 20 DLR (3d) 622. But the mortgagee may forfeit these costs by misconduct and may even have to pay the costs of such an action where he has acted vexatiously or unreasonably. The court departs from the general rule with reluctance. Formerly, it was the proper practice that a claim by the mortgagor that the mortgagee should pay the costs should be specifically pleaded. However, nowadays an omission to do so would not be fatal to an order depriving the mortgagee of costs or making him pay costs. The mortgagee’s right to costs of action has been treated as an implied term of the mortgage contract: see Re Wallis; Ex parte Lickorish (1890) 25 QBD 176 at 180–1. Alternatively, it has been said to rest substantially in contract and can only be lost or curtailed by such inequitable conduct on the part of the mortgagee as may amount to a violation or culpable neglect of the mortgagee’s duty under the contract: see Cotterell v Stratton (1872) 8 Ch App 295 at 302. Nowadays, rules of court generally confirm the above rule: see New South Wales Uniform Civil Procedure Rules Pt 42; Victorian Supreme Court Rules r 63.26. See, generally, on the mortgagee’s right to costs, Cotterell v Stratton, above; Bank of New South Wales v O’Connor (1889) 14 App Cas 273 at 278 (PC); Meredith v Davis (1933) 33 SR (NSW) 334; Maher v Network Finance Ltd [1982] 2 NSWLR 503; Westpac Banking Corp v Daydream Island Pty Ltd [1985] 2 Qd R 330; Elders Trustee and Executor Co Ltd v Eagle Star Nominees Ltd, above; Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1988) 20 FCR 164; 84 ALR 734; Gomba Holdings UK Ltd v Minories

Finance Ltd (No 2) [1993] Ch 171; [1992] 4 All ER 588 (CA); and see Adelaide Bank Ltd v Gibbs [1995] ANZ ConvR 615 where the costs of preparing and serving notices were refused on the basis that they were not properly incurred as the notices were defective. A mortgagee is entitled to his anticipated costs of a redemption action where the mortgagor is contesting the payout figure: see Project Research Pty Ltd v Permanent Trustee of Australia Ltd (1990) 5 BPR 11,225; and see 32.1 and 33.10. A guarantor is in the same position as a mortgagee in respect of costs: see Project Research Pty Ltd v Permanent Trustee of Australia Ltd. The general rule, in so far as it creates an automatic condition of redemption, has been held not to apply to Torrens system mortgagees: Perry v Rolfe [1948] VLR 297; but [page 858] see Re Forrest Trust; Trustees, Executors and Agency Co Ltd v Anson [1953] VLR 246; Road Chalets Pty Ltd v Thornton Motors Pty Ltd (1988) 47 SASR 532. The relationship between this general equitable rule and the discretion in the court under rules of court to order payment of costs by one party to another was considered in detail by the English Court of Appeal in Gomba Holdings UK Ltd v Minories Finance Ltd (No 2), above: see Ch at 194; All ER at 607 where the principles are set out by Scott LJ.

Party and party costs 40.2 The basic rule is that a mortgagee in a mortgage action is entitled to costs on a party and party basis, not solicitor and client basis: Re Adelphi Hotel (Brighton) Ltd; District Bank v Adelphi Hotel (Brighton) Ltd [1953] 2 All ER 498; Re Shanahan (Re a Solicitor’s Bill of Costs) (1941) 58 WN (NSW) 132; Maher v Network Finance Ltd [1982] 2 NSWLR 503; Jamieson v Gosigil Pty Ltd [1983] 1 Qd 117; AGC (Advances) Ltd v West (1986) 5 NSWLR 504; Elders Trustee and Executor Co Ltd v Eagle Star Nominees

Ltd (1986) 4 BPR 9205; Elders Trustee and Executor Co Ltd v EG Reeves Pty Ltd (1988) 84 ALR 734; Katsaounis v Belehris [1995] ANZ ConvR 114. The general rule gives way to any agreement between the parties plainly and unambiguously providing for taxation on some other basis (for example the indemnity basis), but even such agreement cannot exclude the exercise of the court’s discretion: ANZ Banking Group (NZ) Ltd v Gibson [1981] 2 NZLR 513; Shercliff v Engadine Acceptance Corp Pty Ltd (No 2) (1982) 3 BPR 9207; Jamieson v Gosigil Pty Ltd, above; Westpac Banking Corp v Daydream Island Pty Ltd [1985] 2 Qd R 330; Justelius v Douglass (1985) Conveyancing Service (NSW) [92263]; AGC (Advances) Ltd v West, above; Sandtara Pty Ltd v Australian European Finance Corp Ltd (1990) 20 NSWLR 82; Gomba Holdings UK Ltd v Minories Finance Ltd (No 2) [1993] Ch 171; [1992] 4 All ER 588 (CA); and see Fairview Investments Ltd v Sharma, 14 October 1999 English Court of Appeal, and Agricullo v Yorkshire Housing Ltd [2010] L&TR 9 (landlord and tenant cases); and Van Der Velde v Ng [2011] FCA 594. The relationship between the court’s discretion to order payment of costs by one party to another and a contractual right to costs was considered in detail in Gomba Holdings UK Ltd v Minories Finance Ltd (No 2), above; and see Parker-Tweedale v Dunbar Bank plc (No 2) [1991] Ch 26; [1990] 2 All ER 588. In short, the discretion should ordinarily be exercised so as to reflect the contractual right. Where the scale of taxation is based on an amount the costs are regulated by the amount of the original debt and not by the amount owing when the litigation commences: Cotterell v Stratton (1874) LR 17 Eq 543.

Costs, charges and expenses generally 40.3 In addition to the costs incurred in an enforcement or redemption action the mortgagee is also entitled, in taking the accounts, to all costs, charges and expenses reasonably and properly incurred by him. This principle covers costs (here used in a general sense) incurred by the mortgagee in ascertaining or defending his rights, in preserving the security (as to which see 16.1) or in recovering the mortgage debt. A mortgagee does not in terms contract for costs, but the rule is that all costs which he, the mortgagee, properly incurs in relation to his security are to be allowed to

him: National Provincial Bank of England v Games (1886) 31 Ch D 582 at 592; Elders Trustee and Executor Co Ltd v Eagle Star Nominees Ltd (1986) 4 BPR 9205; Lawnic Pty Ltd v Wilson (SC (Qld), Shepherdson J, 17 December 1997, unreported); and see Estoril Investments Pty Ltd v Westpac Banking Corporation (No 2) (SC (NSW),Young J, 31 August 1999, unreported) and Nemeth v Reachcord Pty Ltd (1998) NSW ConvR ¶55-873, where mortgagee’s costs, charges and expenses reasonably and properly [page 859] incurred were allowed even in circumstances involving a defective notice of default under Real Property Act 1900 (NSW) s 57(2)(b); cf Adelaide Bank v Gibbs [1995] ANZ ConvR 615 where it was held that the bank was not entitled to recover, as costs properly incurred, the costs of preparing and serving, what were found to be, defective notices of default. This, as well as the right to costs of enforcement or redemption actions, is founded on the principle that the mortgagee ought to be indemnified to the extent to which he acts reasonably as mortgagee. ‘The owner in coming to deliver the estate from that encumbrance he himself put upon it, the person having that pledge is not to be put to expense with regard to that’: Detillin v Gale (1802) 7 Ves 583; 32 ER 234. See Meredith v Davis (1933) 33 SR (NSW) 334; Ex parte Prackert [1987] 2 Qd R 560; Elders Trustee and Executor Co Ltd v Eagle Star Nominees Ltd, above. A mortgagee is entitled to the costs in getting in a prior mortgage: see Re Mangan; Ex parte Andrew (1983) 123 ALR 633. An equitable mortgagee has the same right: Justelius v Douglass (1985) Conveyancing Service (NSW) [92263]. The costs occasioned by an unsuccessful objection to the mortgagee’s right to sue may be thrown on the mortgagor (Tildesley v Lodge (1857) 3 Sm & G 543; 65 ER 772) and so may the costs of a claim which the encumbrancer has been obliged to institute by reason of subsequent dealings with the estate by the owner of the equity of redemption without giving notice of the charge: Wise v Wise (1845) 2 Jo & Lat 403.

Costs are added to the debt 40.4 The general rule is that costs, whether costs of an enforcement or a redemption action or included in ‘costs, charges and expenses’, are not recoverable from the mortgagor personally, but both as against the mortgagor and other persons interested in the equity of redemption, they are added to the amount due under the mortgage and must be paid as a condition of redeeming: Re Sneyd; Ex parte Fewings (1883) 25 Ch D 338; Re Wallis; Ex parte Lickorish (1890) 25 QBD 176; Sinfield v Sweet [1967] 3 All ER 479. With the principal and interest they form a single debt and are payable in the same priority: Barnes v Racster (1842) 1 Y & CCC 401; 62 ER 944; Harpham v Shacklock (1881) 19 Ch D 207 at 215. The mere fact that the mortgage contains a declaration that ‘the total amount to be recovered by the mortgagees under these presents shall not exceed’ so much, does not preclude the mortgagee from adding arrears of interest and costs beyond that sum since the proviso is construed to relate exclusively to principal: White v City of London Brewery Co (1889) 42 Ch D 237. The general rule does not apply where the terms of the mortgage provide that the mortgagor shall be personally liable to pay such costs: see Shercliff v Engadine Acceptance Corp Pty Ltd (No 2) (1982) 3 BPR 9207; Justelius v Douglass (1985) Conveyancing Service (NSW) [92263]; Gomba Holdings UK Ltd v Minories Finance Ltd (No 2) [1993] Ch 171; [1992] 4 All ER 588 (CA). Where there is a right of consolidating mortgages, costs incurred in respect of one property may be added to the debt due upon the other property, of which redemption is ordered: Batchelor v Middleton (1848) 6 Hare 75 at 86; 67 ER 1088 at 1093. If one of two mortgagees who advance the money in separate sums brings an action for foreclosure, the other mortgagee being a defendant, the judgment will direct foreclosure, on default of payment of the whole debt and the costs of both mortgagees: Davenport v James (1847) 7 Hare 249; 68 ER 102. [page 860]

Costs in priority action 40.5 In an action to determine priorities the costs follow the mortgages, but the court has a discretion and can order one or other of the claimants to pay the costs if a case is made for it: Harpham v Shacklock (1881) 19 Ch D 207. Where legal mortgagees brought a foreclosure action and one of the defendants, an equitable mortgagee, unsuccessfully claimed priority, it was held that the plaintiffs should add their ordinary costs to their security and that the defendant mortgagee must pay them the residue of their costs: Northern Counties of England Fire Insurance Co v Whipp (1884) 26 Ch D 482 at 496.

Appeal as to costs 40.6 Older cases indicate that the mortgagee’s right to costs of an enforcement or a redemption action are not, like costs of actions in general, within the discretion of the court. Hence they are not within the provision that an appeal cannot be brought as to costs only, where those costs by law are left to the discretion of the court. See, however, Gomba Holdings UK Ltd v Minories Finance Ltd (No 2) [1993] Ch 171; [1992] 4 All ER 588 (CA) and 40.1. But where a mortgagee has been deprived of costs on the ground of misconduct, he can appeal as of right and, if the appeal is successful, the costs of the appeal will be added to the security: Addison v Cox (1872) 8 Ch App 76; Turner v Hancock (1882) 20 Ch D 303. On the other hand, if — notwithstanding that the charge of improper conduct is established — the mortgagee’s costs are allowed, this is done in the exercise of the discretion of the court, and the mortgagor has no right of appeal: Charles v Jones (1886) 33 Ch D 80. But see Gomba Holdings UK Ltd v Minories Finance Ltd (No 2), above. The restriction on appeals as to costs only refers to the costs of the action in which the appeal is brought. It does not apply to an order by which the mortgagee is allowed ‘costs, charges and expenses’ and against this the mortgagor cannot appeal without leave: Re Chennell; Jones v Chennell (1878) 8 Ch D 492. (The criticism of this case by the Court of Appeal in Bew v Bew [1899] 2 Ch 467 at 472 applies only to costs of action and not to the other mortgagee’s costs referred to in ‘costs, charges and expenses’: see Re

Beddoe; Downes v Cottam [1893] 1 Ch 547.)

Effect of directions for assessment and payment of costs 40.7 Where a court order directs assessment or taxation of costs, the costs assessor or taxing officer may disallow costs which, having regard to the relation of the parties, ought not to be charged against the mortgagor: Stone v Lickorish [1891] 2 Ch 363; and see New South Wales Uniform Civil Procedure Rules Pt 42 and Victorian Supreme Court Rules O 63. An order for payment of costs by a mortgagee is not necessarily an order for personal payment. The mortgagee may be allowed to set them off against the amount payable to him in respect of the debt: West v Jones (1851) 1 Sim (NS) 205; 61 ER 79.

Costs of bottomry bondholder 40.8 The bottomry bondholder also has a right to general costs of enforcing the security. The right to the costs of a reference to ascertain what is due on the bond will be determined according to the circumstances of each case, though with an inclination to the bondholder: The Kepler (1861) Lush 201; 167 ER 97.

B. Costs of Action Loss of right to costs 40.9 The jurisdiction either to deprive the mortgagee of costs or to order the mortgagee to pay costs will be exercised where the mortgagee has been guilty of gross misconduct [page 861] or even where, without proper motives, he causes expenses to be incurred which cannot be justly thrown upon the mortgagor. The mortgagee may be refused his costs or be liable for so much of the costs which his improper conduct has caused (though he may be allowed the

ordinary costs of redemption) in the following circumstances: 1. If the mortgagee sets up an unjust defence, or resists a claim to redeem on the ground of a foreclosure collusively obtained, or sets up an adverse title and fails, or resists any just claim to redeem: see England v Codrington (1758) 1 Eden 169; 28 ER 649; Tarn v Turner (1888) 39 Ch D 456; Hall v Heward (1886) 32 Ch D 430; Henderson v Astwood [1894] AC 150 (PC); National Bank of Australasia v United Hand-in-Hand and Band of Hope Co (1879) 4 App Cas 391 (PC). 2. If the mortgagee refuses a proper tender, even if it is made under protest (see Greenwood v Sutcliffe [1892] 1 Ch 1), or fails on tender to execute a reconveyance which has been already approved (see Graham v Seal (1918) 88 LJ Ch 31), or proceeds after payment of all that is due. The mortgagee does any of these on peril of paying the costs incurred after the payment or tender, whether it is made before or after the commencement of the action and whether by the mortgagor or someone representing him or by a later encumbrancer: see Cliff v Wadsworth (1843) 2 Y & CCC 598; 63 ER 268; Smith v Green (1844) 1 Coll 555 at 564; 63 ER 541 at 543; Gregg v Slater (1856) 22 Beav 314; 52 ER 1129; Hosken v Sincock (1865) 11 Jur NS 477. But if the mortgagor makes no tender, but only states in his defence that he is willing to pay so much as he considered to be due before the institution of the action, he will not save the costs, even though at the hearing he succeeds in establishing his case as to the amount due: Hodges v Croydon Canal Co (1840) 3 Beav 86; 49 ER 34; Kinnaird v Trollope (1889) 42 Ch D 610; Broad v Selfe (1863) 9 Jur (NS) 885; and see Sentance v Porter (1849) 7 Hare 426; 68 ER 176. The court has no power to order the mortgagee to pay the mortgagor’s costs of a separate action: Australian Guarantee Corp Ltd v De Jager [1984] VR 483. As to the position where the mortgagee has relied upon a defective notice of default, see 40.3.

When nothing is due 40.10 If the mortgagee institutes a foreclosure action and upon taking the accounts it is shown that nothing was due at the commencement of the

proceedings, the mortgagee must bear the whole expense of the action; similarly if the mortgagee drives the mortgagor to institute an action under like circumstances: see Binnington v Harwood (1825) Turn & R 477; 37 ER 1184; Morris v Islip (1856) 23 Beav 244; 53 ER 95. If, where he is the defendant, the mortgagee denies that he is satisfied, when nothing remains due, he must pay the costs of so much of the proceedings as have been caused by such denial or false suggestion: see Ashworth v Lord (1887) 36 Ch D 545; Kinnaird v Trollope (1889) 42 Ch D 610. So too is the case where the mortgagee, knowing he has been overpaid, contests the mode of taking the accounts and fails; or where, having sold the mortgaged property, the mortgagee asserts that the surplus, after paying principal, interest and costs, is much less than is found due on the master’s certificate: see Charles v Jones (1887) 35 Ch D 544; Heath v Chinn (1908) 98 LT 855. The same applies if the mortgagee refused to account and the balance is found against him: Tanner v Heard (1857) 23 Beav 555; 53 ER 219.

Where right to costs not lost 40.11 In the absence of tender by the mortgagor and in the absence of misconduct, the mortgagee will neither be ordered to pay, nor will he forfeit his right to, costs by a [page 862] mere bona fide extension of his claim beyond that to which the court adjudges him to be entitled: Loftus v Swift and St Patrick’s Hospital (1806) 2 Sch & Lef 642 at 657; Cotterell v Stratton (1872) 8 Ch App 295; Re Watts; Smith v Watts (1882) 22 Ch D 5 (CA). The same applies where the mortgagee loses a point on a question of fact, provided he has acted reasonably: Wilson v Metcalfe (1818) 3 Madd 45; 56 ER 426. In Norton v Cooper (1854) 5 De GM & G 728; 43 ER 1053, a mortgagee who insisted that the mortgagor bear the cost of making up special accounts was held not to have acted unreasonably or vexatiously so as to be deprived

of costs. (Indeed, this is the mortgagee’s right: see Project Research Pty Ltd v Permanent Trustee of Aust Ltd (1990) 5 BPR 11,225.) The mortgagee may be deprived of costs where his claim is unfounded, though bona fide: a claim is not classed as ‘unfounded’ if fairly arguable: Credland v Potter (1874) 10 Ch App 8; Bird v Wenn (1886) 33 Ch D 215; Kinnaird v Trollope (1889) 42 Ch D 610. In a doubtful case as to the right of foreclosure (Teulon v Curtis (1832) 1 You 610; 159 ER 1135), or to redeem (Kirkham v Smith (1749) 1 Ves Sen 259; 27 ER 1018), it may be that no costs will be given on either side.

Costs due to loss of deeds 40.12 If the mortgagee has lost the title deeds for the mortgaged property, he will be liable for any costs incurred by the mortgagor in consequence thereof. If, therefore, upon the mortgagor’s refusal to repay the debt by reason of the non-production of the deeds and the mortgagee’s failure to give a satisfactory indemnity, an action is brought for foreclosure or recovery of the land, or if the mortgagor sues for redemption, the costs of such actions will fall upon the mortgagee: see Midleton (Lord) v Eliot (1847) 15 Sim 531; 60 ER 725; James v Rumsey (1879) 11 Ch D 398. The mortgagee must, at his own cost, give an indemnity against any loss arising out of having lost the deeds: Midleton (Lord) v Eliot, above. Where proceedings are brought by the mortgagor, the court will not consider whether the indemnity, if any has been offered, should have satisfied the mortgagor, for the mortgagor is entitled to institute an action in order that any person with whom he may thereafter deal concerning the property may be fully satisfied of the loss. But where the mortgagee brings an action for foreclosure the court may inquire whether a proper indemnity was offered. If the mortgagee has a power of sale, but by reason of the loss of the deeds is obliged to seek an order for sale from the court, any subsequent encumbrancers are entitled to be paid their costs of the action out of the purchase money in priority to the selling mortgagee: Wontner v Wright (1829) 2 Sim 543; 57 ER 890. On lost deeds, see 32.82.

Unnecessary or unsuccessful proceedings

40.13 It is the duty of the mortgagee so to pursue his remedies as not to incur unnecessary costs. Hence he must bear the cost of proceedings so far as they are mistaken or useless. Where, for instance, an action was not originally commenced as, but was turned into, a foreclosure action, the costs incurred before it assumed that form were thrown on the mortgagee: Smith v Smith (1815) Coop G 141; 35 ER 508; Briant v Lightfoot (1837) 1 Jur 20; Philips v Davies (1843) 7 Jur 52; Hogan v Baird (1843) 4 Dr & War 296. As to costs incurred unnecessarily, see Ex parte Fletcher (1832) Mont 454; Cocks v Stanley (1857) 4 Jur NS 942. The court may except from the general costs the costs of a particular issue on which the mortgagee has failed, although the remainder of the action was justified: Deeley v Lloyds Bank (No 2) (1909) 53 Sol Jo 419. A mortgagee who has neglected to attend at the [page 863] appointed time and place for the completion of redemption, and has thereby created the difficulty which caused the action, has been refused his costs: Cliff v Wadsworth (1843) 2 Y & CCC 598; 63 ER 268. The costs incurred by an improper joinder of parties, whether as plaintiffs or defendants, must be paid by the mortgagee: Pearce v Watkins (1852) 5 De G & Sm 315 at 317; 64 ER 1132 at 1134. An example of this is where in an action subsequent encumbrancers were needlessly made parties: Cooke v Brown (1840) 4 Y & C Ex 227; 160 ER 989. But it is not a reason for depriving the mortgagee of costs in an action in which the person in respect of whose interest they were incurred might have been a co-plaintiff (because he might have objected to be a plaintiff): Browne v Lockhart (1840) 10 Sim 420; 59 ER 678. (To deprive the mortgagee of the costs of the party joined as a defendant it must be shown, not only that he might have been, but that he was willing to be, a plaintiff, and that the mortgagee wilfully abstained from so joining him.)

Costs of parties added for benefit of mortgagee 40.14

Under special circumstances the mortgagee has been ordered to pay

the costs of the defendant in the first instance (even though the security is deficient), and then add them to his debt. Otherwise the mortgagee does not generally pay costs of parties whose presence is made necessary by the act of the mortgagor. The mortgagee will not be ordered to pay such costs, even where he has been ordered to pay his own costs of an unsuccessful claim, the determination of which was the object of the action: Green v Briggs (1848) 6 Hare 632; 67 ER 1315.

Parties added through mortgagee dealing with the estate 40.15 The mortgagee is entitled to deal with the mortgaged property as soon as the day fixed for redemption has passed and his enforcement rights are exercisable, and if he disposes of it so as to make other parties beside himself necessary parties to a redemption or foreclosure action, as trustees or otherwise, their costs will be paid by him in the first instance, and he can add them to his debt: Wetherell v Collins (1818) 3 Madd 255; 56 ER 502; Bartle v Wilkin (1836) 8 Sim 238; 59 ER 95; Smith v Chichester (1842) 2 Dr & War 393. As to the costs of the mortgagee’s trustee in bankruptcy, see Coles v Forrest (1847) 10 Beav 552; 50 ER 694. See also 19.2 ff in relation to the mortgagee’s right to possession of registered and unregistered mortgages of Torrens system land. The mortgagee’s acts must have been so done as not to burden the estate with unnecessary expense. Therefore if he, or those who represent him, transfers mortgages on separate properties by a single deed, so as to cause a necessity for a covenant for production, either by the person redeeming, or by those interested under the assignment in case the former should waive his right to delivery, the costs of preparing and perfecting the covenant and attested copies, and of the redeeming parties’ application to the court, will fall upon the mortgagee’s estate: see Capper v Terrington (1844) 1 Coll 103; 63 ER 340; Dobson v Land (1850) 4 De G & Sm 575–81; 64 ER 963–7. But where the mortgagor refused an offer to deliver a deed to him upon his covenanting to produce it, the costs of his application to the court for a reconveyance were thrown upon himself: Capper v Terrington. The costs of both the mortgagee himself and of a trustee, where either of them are necessary parties by the imprudence of the mortgagee, may be

thrown upon the latter: see Shackleton v Shackleton (1825) 2 Sim & St 242; 57 ER 338; Hickson v Fitzgerald (1826) 1 Mol 14n. If an assignment of the mortgage security is made after judgment, or, it seems, is made at all pendente lite, the mortgagor will not be charged with costs of the supplementary proceedings by which the assignee is brought before the court: Barry v Wrey (1827) [page 864] 3 Russ 465; 38 ER 650; Coles v Forrest, above. Where an order was made in a foreclosure action to revive against an assignee after decree, it was ordered to be specified that the costs should be paid by the plaintiff: James v Harding (1855) 24 LJ Ch 749.

C. Costs of Disclaiming Defendants Rules as to costs 40.16 A defendant in a foreclosure action may be allowed costs if, having been needlessly made a party, he disclaims any interest in the subject matter of the action: Tipping v Power (1842) 1 Hare 405; 66 ER 1090; Ford v Earl of Chesterfield (1853) 16 Beav 516; 51 ER 878; Ridgway v Kynnersley (1856) 2 Hem & M 565; 71 ER 583; Earl of Cork v Russell (1871) LR 13 Eq 210; Ward v Shakeshaft (1860) 1 Drew & Sm 269; 62 ER 381. The same applies to a representative defendant, such as a trustee in bankruptcy: Cash v Belcher (1842) 1 Hare 310; 66 ER 1051. In view of the small number of foreclosure proceedings in Australia, there is little purpose in listing the detailed rules for this esoteric topic: these are set out in the 13th English edition of this work at ch 32, to which reference should be made, if required.

D. Costs on Sale Account of proceeds

40.17 Where the mortgagee has sold the property he holds the surplus proceeds on trust for the persons entitled to the equity of redemption: Banner v Berridge (1881) 18 Ch D 254; see 20.47. Though a trustee, the selling mortgagee is, it is submitted, allowed the costs involved in ascertaining any subsequent mortgagees and of payment over. Hence an action by the second mortgagee for an account is not treated as a redemption action and is outside the rule which entitles the first mortgagee to costs. (For the right of those entitled to any surplus to an account, see 20.47.) If the action has been occasioned by the mortgagee refusing to account, or if, on taking the accounts, it is found that a much larger sum is due from him than he admitted, he will either be refused costs or have to pay them: Tanner v Heard (1857) 23 Beav 555; 53 ER 219; Charles v Jones (1887) 35 Ch D 544; Williams v Jones (1911) 55 Sol Jo 500.

Costs on sale by court 40.18 The right of a mortgagee to costs extends to the case where the mortgaged property is sold under the order of the court. The order for sale does not of itself alter the rights of the parties, but the purchase money, being considered to be substituted for the property, is treated in the same manner as the property. Each encumbrancer will be paid his costs, including the costs of obtaining the direction for payment to him of the proceeds of the sale, together with his principal and interest, according to priority, the later encumbrancer taking nothing until he who is prior has been paid in full: Chissum v Dewes (1828) 5 Russ 29; 38 ER 938; Barnes v Racster (1842) 1 Y & CCC 401; 62 ER 944; Cook v Hart (1871) LR 12 Eq 459.

Expenses of the sale 40.19 The expenses of the sale, since they are incurred as much for the benefit of the mortgagee as of other persons interested, are a first charge on the proceeds (Re Oriental Hotels Co; Perry v Oriental Hotels Co (1871) LR 12 Eq 126; Batten v Wedgwood Coal and Iron Co (1884) 28 Ch D 317; Lathom v Greenwich Ferry Co (1895) 72 LT 790); as to the position where the mortgagee has relied upon a defective notice of default, see 40.3. So too are the costs of an abortive sale: Henderson v Astwood [1894] AC 150 (PC); Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293. Where the mortgagee is a party, he

[page 865] must submit to the costs of sale being paid first (Re Regent’s Canal Ironwork Co; Ex parte Grissell (1875) 3 Ch D 411 at 427); and also, it would seem, where, without being a party, he consents to the sale. On the statutory order of application of sale moneys, see 20.43.

Waiver of mortgagee’s priority 40.20 If the mortgagee merely consents to the sale, or is a party to the action solely with a view to the realisation of his security, his claim against the proceeds is prior to the general costs of the action: Hepworth v Heslop (1844) 3 Hare 485; 67 ER 472; Armstrong v Storer (1852) 14 Beav 535; 51 ER 391; Wonham v Machin (1870) LR 10 Eq 447. He will, however, be taken to have waived his priority over such costs if he takes advantage of an administration action in order to obtain a remedy against the mortgagor’s personal estate: Re Spensley’s Estate; Spensley v Harrison (1872) LR 15 Eq 16. Where, however, a later encumbrancer — for example by an action to ascertain the priorities — is the means of securing and distributing a fund for the benefit of all the encumbrancers, his costs of the action or proceedings will be paid before the other charges on the fund: Ford v Earl of Chesterfield (1856) 21 Beav 426; 52 ER 924; Wright v Kirby (1857) 23 Beav 463; 53 ER 182; Batten Proffitt and Scott v Dartmouth Harbour Commissioners (1890) 45 Ch D 612; Re Barne (1890) 62 LT 922; Carrick v Wigan Tramways Co [1893] WN [Eng] 98.

Rights of subsequent mortgagee to have first mortgagee’s costs assessed 40.21 The selling mortgagee’s costs will generally be deducted from the proceeds of sale of the mortgaged property before the balance (if any) is paid over to the second mortgagee and, if appropriate, subsequent mortgagee or mortgagees: see 20.43. The subsequent mortgagee who has thus suffered deduction from the moneys payable to him is entitled to have the selling mortgagee’s costs assessed or taxed, as a person (other than the party chargeable with the bill) who has paid or is or was liable to pay the bill either

to the solicitor or to the party chargeable with the bill: see Halsbury’s Laws of England, 5th ed, LexisNexis, London, 2008, vol 66, Legal Professions, [971]; Re Taylor (1854) 18 Beav 165; 52 ER 65; Re Early [1897] 1 IR 6; Legal Profession Act 1987 (NSW) s 199; Supreme Court Act 1986 (Vic) s 73; Debney v Semerdziev [1982] 2 NSWLR 391; AGC (Advances) Ltd v West (1984) 5 NSWLR 301. In some instances ‘paid’ means paid following the delivery of a bill and is not applicable where no bill has been delivered: Halsbury’s Laws of England, 5th ed, vol 66, [979]; Ex parte Farmers’ Fertilizers Corp Ltd (1916) 16 SR (NSW) 645; Debney v Semerdziev. The right to have a bill assessed or taxed implies the right to have a bill prepared and delivered: Debney v Semerdziev. See, in general, Parramatta River Lodge Pty Ltd v Sunman (1991) 5 BPR 12,038 and Re Morris Fletcher & Cross’ Bill of Costs [1997] 2 Qd R 228.

E. Costs, Charges and Expenses Mortgagee’s entitlement 40.22 The costs (other than costs of action referred to above), charges and expenses to which the mortgagee is entitled are: 1. costs of litigation relating to the security; and 2. costs, charges, and expenses generally.

Costs of litigation relating to the security 40.23 It is essential to the claim to costs of litigation that the proceedings shall have been reasonable. Hence the mortgagee will not be allowed the costs of improper, or useless, or unnecessary litigation: see Dryden v Frost (1838) 3 My & Cr 670; 40 ER 1084 [page 866] (where the mortgagee, having only a title in equity, defended an action by the legal owner for the recovery of the property); Burke v O’Connor (1888) 4 Ir

Ch R 418 (where the mortgagee’s action for rent failed through being brought in the name of the wrong person); Peers v Ceeley (1852) 15 Beav 209; 51 ER 517 (where the mortgagee, having sold under his power of sale, sued for specific performance, but lost the action owing to misdescription); and see Kingdrake Pty Ltd v Tarkington Pty Ltd [1998] VSC 65 (and on appeal by Tarkington [2001] ANZ ConvR 555). However, unless the mortgage otherwise provides, it is necessary to distinguish between the costs of defending attacks on the mortgagor’s title, which costs are borne by the mortgagor, and attacks on the mortgagee’s title, where the mortgagee must bear the costs of defending his own title by persons other than the holder of the equity of redemption: Parker v Watkins (1859) John 133; 70 ER 369; Re Smith’s Mortgage [1931] 2 Ch 168; ParkerTweedale v Dunbar Bank plc (No 2) [1991] Ch 26; [1990] 2 All ER 588; and see Estoril Investments Pty Ltd v Westpac Banking Corporation (1993) 6 BPR 13,146 at 13,160. Generally, he will not have the costs of litigation concerning the mortgaged property arising out of the wrongful act of a stranger: Owen v Crouch (1857) 5 WR 545; Parker-Tweedale v Dunbar Bank plc. He will be allowed the costs of obtaining or recovering possession of the mortgaged property: Sandon v Hooper (1843) 6 Beav 246 at 250; 49 ER 820 at 821, on appeal 14 LJ Ch 120; Horlock v Smith (1844) 1 Coll 287; 63 ER 422; Owen v Crouch; Wilkes v Saunion (1877) 7 Ch D 188; Halsall v Egbunike (1963) 107 Sol Jo 514 (where the mortgagor was legally aided). Also allowable are the costs of recovering the mortgage debt, whether against the mortgagor (see National Provincial Bank of England v Games (1886) 31 Ch D 582) or against a surety. The latter is so although the contract of suretyship is subsequent to the mortgage (Sachs v Ashby & Co (1903) 88 LT 393) and the fruits of the action are lost by the surety’s insolvency: Ellison v Wright (1827) 3 Russ 458; 38 ER 647. As to the position where the mortgagee has relied upon a defective notice of default, see 40.3. The mortgagee will also be entitled to the costs of taking out letters of administration to the mortgagor’s estate to obtain a necessary party to proceedings: Ramsden v Langley (1705) 2 Vern 536; 23 ER 947; Hunt v Fownes (1803) 9 Ves 70; 32 ER 527; and see Saunders v Dunman (1878) 8 Ch D 825. And generally, he is entitled to costs incurred in asserting or defending the mortgagor’s title to the mortgaged property (Sandon v Hooper;

Sclater v Cottam (1857) 5 WR 744), or in defending the mortgage title against the mortgagor and persons claiming under him: Ramsden v Langley, above; Samuel v Jones (1862) 7 LT 760; Clark v Hoskins (1868) 37 LJ Ch 561 at 569. Where a foreclosure action is pending when a redemption action is brought by a later encumbrancer, the costs of the foreclosure action will be provided for in the redemption action: see Ainsworth v Roe (1850) 14 Jur 874. This rule applied where the mortgagor sued as a poor person: Re Leighton’s Conveyance [1937] Ch 149; [1936] 3 All ER 1033. But see Sinfield v Sweet [1967] 3 All ER 479 for an unsuccessful attempt to make the mortgagor personally liable for costs to avoid the limitations imposed by Legal Aid legislation (in New South Wales, see Legal Aid Commission Act 1979 s 47); Saunders v Anglia Building Society (No 2) [1971] AC 1039; [1971] 1 All ER 243 (HL); Maher v Network Finance Ltd [1982] 2 NSWLR 503; Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1988) 84 ALR 734. The costs of protecting the security are not recoverable from the mortgagor personally, unless the mortgage so provides, but are added to the debt: Sinfield v Sweet, above. ‘If a mortgagee has expended any sum of money in supporting the right of the mortgagor to the estate, where his title has been impeached, the mortgagee may certainly add this to the principal of his debt, and it shall carry interest’: Godfrey v Watson (1747) 3 Atk 517 at 518; 26 ER 1098 at 1099; and see 40.4. A provision entitling a mortgagee to add costs [page 867] to the mortgage debt prevailed over Legal Aid legislation which provided that where a court made an order for costs against a legally aided person the legal aid authority should pay the costs within a specified limit: Maher v Network Finance Ltd, above. Where party and party costs have been recovered in such litigation the mortgagee is entitled to add to the debt the sum required to make up costs on the indemnity basis when there is a contractual provision for such: see Gomba Holdings UK Ltd v Minories Finance Ltd (No 2) [1993] Ch 171;

[1992] 4 All ER 588 (CA) and 40.2.

Costs of preparation of mortgage not allowed 40.24 The general costs, charges, and expenses which the mortgagee can add to his security do not include the costs of and incidental to preparing the mortgage, these being merely a simple contract debt: Wales v Carr [1902] 1 Ch 860. It is not unusual for the terms of any agreement for loan to provide that the mortgagor will pay the mortgagee’s costs and expenses of and incidental to the mortgage. Alternatively, the costs and expenses may be built into the loan. An agreement for the payment of the costs of an intending lender does not cover his expenses of obtaining the money: Re Blakesley and Beswick (1863) 32 Beav 379; 55 ER 148. Nor do the costs which may be added to the security include the costs of investigating the mortgagor’s title for the purpose of preparing a legal mortgage pursuant to the covenant in that behalf: National Provincial Bank of England v Games (1886) 31 Ch D 582. An agreement to pay all costs and charges of investigating the title covers the interest on money lying idle during the negotiation of the mortgage: Sweetland v Smith (1833) 1 Cr & M 585; 149 ER 532. The solicitor of an intending mortgagee has no claim against the intending mortgagor for the cost of an unsuccessful negotiation for the security, or for the costs of investigating the title to the property. There is no implied contract on the part of the borrower to produce a security of any particular degree of safety, or any particular title, as in the case of a contract for sale: Melbourne v Cottrell (1857) 29 LTOS 293; Wilkinson v Grant (1856) 18 CB 319; 139 ER 1392; Re Cowburn; Ex parte Firth (1882) 19 Ch D 419 at 427. For construction of an agreement on the subject, see St Leger v Robson (1831) 9 LJ (OS) KB 184.

Costs of completing security 40.25 The mortgagee will be allowed the costs of preparing a legal mortgage in pursuance of an agreement accompanying a deposit of deeds, including the expenses of such inspection of the deeds as was necessary for

preparing it; and also the costs of correspondence relating to the legal mortgage: National Provincial Bank of England v Games (1886) 31 Ch D 582. The mortgagee will also be allowed the costs of obtaining a stop order, if the fund forming the subject of the mortgage is in court, and the mortgage authorises the application (Waddilove v Taylor (1848) 6 Hare 307; 67 ER 1183) unless the application was unnecessary: Hoole v Roberts (1848) 12 Jur 108. On a transfer of the mortgage, the transferee can add the costs of the transfer to his security if the mortgagor has been required to pay the debt, or if the interest was in arrear, but not otherwise: Re Radcliffe (1856) 22 Beav 201; 52 ER 1085; Bolingbroke v Hinde (1884) 25 Ch D 795; Sewell v Bishopp (1893) 62 LJ Ch 985; Re Mangan; Ex parte Andrew (1983) 123 ALR 633. If the security covers a life policy, the mortgagee is allowed premiums paid by him for keeping the policy on foot: Bellamy v Brickenden (1861) 2 John & H 137; 70 ER 1002; [page 868] Gill v Downing (1874) LR 17 Eq 316. (If the insurance office is the mortgagee and is so empowered by the mortgage, it can pay the premiums to itself and add them to the security: Richards v Macclesford (1841) 10 LJ Ch 329; Earl Fitzwilliam v Price (1858) 4 Jur NS 889. The office can charge the full premiums although it has shared them with a solicitor as its agent: Leete v Wallace (1888) 58 LT 577.) The mortgagee may also charge the expenses of a sale: White v City of London Brewery Co (1889) 42 Ch D 237 at 243. (The expenses of an attempted sale are also allowed: Farrer v Lacy, Hartland & Co (1885) 31 Ch D 42. The acceptance of a cheque for the deposit, which is subsequently dishonoured, is not such negligence as to deprive the mortgagee of his right to the expenses of the abortive sale: Farrer v Lacy, Hartland & Co. As to expenses where there is a statutory limit, see McHugh v Union Bank of Canada [1913] AC 299 at 305 (PC).) But the mortgagee is not allowed the costs of such deeds as are not

necessary for the security of the mortgagee, nor, on discharge of the mortgage, the costs of making a copy of it, though the mortgagee may at the mortgagor’s cost make a fair copy of the draft security to keep until redemption: Re Wade and Thomas (1881) 17 Ch D 348.

Internal costs of administration 40.26 Unless such costs otherwise fall within the scope of the rule as to costs, charges and expenses or are specifically covered by a contractual provision for their payment, the internal costs of administering the mortgage do not fall within the rule: see Sandtara Pty Ltd v Australian European Finance Corp Ltd (1990) 20 NSWLR 82. The expenses of an appointment of a receiver to manage mortgaged property will usually fall within such internal costs, but each case will depend on the construction of the particular mortgage documents in their factual matrix (see Sandtara Pty Ltd v Australian European Finance Corp Ltd at 90 and Nicobar Pty Ltd v Abrokiss Pty Ltd [2003] NSWSC 1247). In Gomba Holdings UK Ltd v Minories Finance Ltd (No 2) [1993] Ch 171; [1992] 4 All ER 588 (CA), the court considered that the terms of the relevant mortgage were wide enough to allow a receiver’s costs. See also Re Wallis (1890) 25 QBD 176 at 182; Rottenberg v Monjack [1993] BCLC 374 and Austin v Royal (1999) 47 NSWLR 27.

‘Just allowances’ 40.27 In taking the account as between mortgagor and mortgagee, where the account has been directed by any judgment or order, all ‘just allowances’ will be made without any direction for that purpose: Wilkes v Saunion (1877) 7 Ch D 188; and see New South Wales Civil Procedure Rules Pt 46 reg 46.8; Victorian Supreme Court Rules r 52.06. In general, the charges referred to as proper in the previous paragraphs are treated as just allowances: Blackford v Davis (1869) 4 Ch App 304. Where it is desired to make any unusual charge, this should be asked for at the hearing and the claim established at the hearing. A special direction will then be inserted in the order: Rees v Metropolitan Board of Works (1880) 14 Ch D 372; Bolingbroke v Hinde (1884) 25 Ch D 795. If necessary, an inquiry as to the costs and charges claimed will be directed (Merriman v Bonner (1864) 10 Jur NS 534), and such relief should be specifically claimed: see Ingpen, Bloxan and Garrett, Seton’s Judgments and Orders, 7th ed, Stevens, London,

1912, p 189. If the judgment gives no direction, an inquiry may be directed on further consideration: Thompson v Rumball (1839) 3 Jur 53.

F. Costs of Reconveyance General rule 40.28 The costs of reconveyance are borne by the mortgagor. This applies in ordinary cases where the mortgage title has not been changed, or has become vested by transfer [page 869] or devolution in persons from whom a reconveyance can be obtained (King v Smith (1848) 6 Hare 473 at 475; 67 ER 1251), as where there has been a change of title or other event which necessitates special expense, such as the obtaining of a vesting order. A vesting order may be necessary if, for instance, the person who should reconvey is under disability or cannot be found, or if the mortgage is vested in a trustee-mortgagee who has absconded: Re Stuart; Ex parte Marshall (1859) 4 De G & J 317; 45 ER 123; Webb v Crosse [1912] 1 Ch 323, and see 32.39. There is an exception where the mortgagee is a mentally disabled person. In that case, if he is beneficially interested in the mortgage money, the costs of any application for an order for conveyance or vesting are borne by his estate: Re Stuart; Ex parte Marshall at 319. If the mortgagee is a trustee, the costs of the reconveyance are borne by the trust estate: Re Phillips (1869) 4 Ch App 629; Re Jones (1876) 2 Ch D 70. In general, a mortgage made with trust money does not disclose the trust, but it has been held that where the trust appears on the face of the mortgage, these costs fall on the mortgagor: Re Lewes (1849) 1 Mac & G 23; 41 ER 1170. The mortgagor pays the ordinary costs of the reconveyance, where a reconveyance is ordered.

Trustee for mortgagee

40.29 A trustee for the mortgagee is bound to assign according to his direction, and if he refuses to do so, in a plain and simple case (as, for instance, to a purchaser under a power of sale), he will be made to pay the costs of an action rendered necessary by his refusal: Hampshire v Bradley (1845) 2 Coll 34; 63 ER 624.

Conveyance to equitable mortgagee 40.30 The costs of conveying to the equitable mortgagee upon foreclosure are not generally provided for by the judgment: Lees v Fisher (1882) 22 Ch D 283. See Encyclopaedia of Court Forms in Civil Proceedings, 2nd ed, Butterworths, London, 2004, Re-issue, vol 28, Mortgages, [171]–[172], which simply directs the conveyance to be made. When there is no express covenant by the mortgagor to pay the costs of the conveyance, he is only bound by the terms of the judgment to execute the conveyance when tendered to him, because it is said he has only contracted to vest the estate in the mortgagee, who, according to the ordinary practice, prepares and tenders the conveyance for his execution. However, since the contract on an equitable mortgage is a contract to transfer the legal estate to the mortgagee, the person whose duty it is to make the transfer must pay the expenses of it: Pryce v Bury (1853) 2 Drew 41; 61 ER 633; affirmed (1854) LR 16 Eq 153n.

G. Assessment or Taxation of Costs Generally 40.31 The ordinary rules of taxation apply to a mortgagor who is liable to pay the bill of the mortgagee’s solicitor. For the right of a subsequent mortgagee to have the first mortgagee’s costs assessed or taxed, see 40.21. Items which the mortgagor would not be liable to pay as between himself and the mortgagee will be disallowed, even though the solicitor would be entitled to charge them against his client the mortgagee: Re Longbotham & Sons [1904] 2 Ch 152; Re Cohen and Cohen [1905] 2 Ch 137; Forsinard Estates Ltd v Dykes [1971] 1 All ER 1018; [1971] 1 WLR 232. [page 870]

The interrelation between, on the one hand, the general equitable rules referred to in section A of this chapter and a contractual right to indemnity costs and, on the other hand, the principles of taxation set out in the Supreme Court Rules was considered in detail by the English Court of Appeal in Gomba Holdings UK Ltd v Minories Finance Ltd (No 2) [1993] Ch 171; [1992] 4 All ER 588. Appropriate references have been made to that decision in this chapter: see 40.1, 40.2, 40.4, 40.6, 40.23 and 40.26. The court also considered the difference between litigation costs and nonlitigation costs. It thought it misconceived to draw a sharp line between quantification of the two types of costs. In each case taxation was no more than a quantification machinery by means of which the recoverable amount of costs, disbursements, expenses and the like could be ascertained.

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Part XI

Taxation Considerations

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Chapter 41

Taxation Considerations Commissioner’s garnishee notices Taxation of mortgage interest Tax deductibility of interest Foreign aspects Capital gains tax (CGT) Goods and services tax: general principles Sale by mortgagee in possession Stamp duties on mortgages Consequences of a failure to pay duty Collateral mortgages and multi-jurisdictional mortgages Exemptions Charges on land under revenue statutes

41.1 41.2 41.3 41.4 41.5 41.6 41.7 41.8 41.9 41.10 41.11 41.12

Commissioner’s garnishee notices 41.1 Under s 260-5 of Schedule 1 of the Taxation Administration Act 1953 the Commissioner has power to issue garnishee notices to third parties to assist in collecting unpaid tax. Section 260-5 authorises the issue of such a written notice if the Commonwealth is owed an amount of a ‘tax-related liability’ or a related amount, such as a judgment debt for a tax-related

liability. ‘Tax-related liability’ is defined broadly to include a number of different taxes. In Hansen Yuncken Pty Ltd v Ian Jones Ericson t/as Flea’s Concreting (2012) 260 FLR 151 the court held that a garnishee notice issued by the Commissioner under s 260-5 does not give the Commissioner a proprietary interest in the debt but rather a statutory charge over the debt whilst it continues to exist. As a result, in that case, the court held that because the debt subject to the notice was paid into court, it ceased to exist. The Commissioner therefore had no entitlement to the moneys. The decision that the debt ceased to exist when it was paid into court may be inconsistent with earlier authorities, including: DCT v Government Insurance Office NSW (1992) 36 FCR 314; 23 ATR 378 and Macquarie Health Corp Pty Ltd v FCT (1999) 96 FCR 238; 43 ATR 650. Until recently it had been thought that secured creditors had priority over the Commissioner for payment of money subject to a garnishee notice. The case law on s 218 of the Income Tax Assessment Act 1936, the predecessor to s 260-5, indicated that the Commissioner’s right to enforce a garnishee notice was subject to prior equities vested in third parties—see, for example, Tricontinental Corporation Ltd v FCT (1987) 18 ATR 827 and Elric Pty Ltd v Taylor (1988) 19 ATR 1551. This line of authority indicated that if moneys were payable to another party (the secured creditor) rather than to the taxpayer then they were no longer ‘payable to the taxpayer’ for the purposes of a [page 874] garnishee notice. But in FCT v Park (2012) 205 FCR 1 the Full Court of the Federal Court held that a third party who is given a notice by the Commissioner under s 260-5 must comply with the notice even if there is a registered mortgage on title. In Park’s case the vendor of a property became bankrupt. Park was the registered trustee. When the vendor entered into the contract the property was subject to two mortgages: one to NAB and a second to a company, ‘Instyle’, associated with the bankrupt. The amounts secured exceeded the sale price of the property.

Settlement was rescheduled a number of times because the parties were unable to agree on the arrangements that would apply to the purchase money. The sticking point was the purchaser’s statement of adjustments which provided for payment of the tax debt to the Commissioner. This was repeatedly rejected by solicitors for the vendor. The Commissioner refused to release the purchasers from the s 260-5 notice unless they paid the tax debt. Settlement was eventually completed on condition that the disputed money was paid into the trust account of the solicitors for the secured creditor. The NAB, whose debt was satisfied out of the settlement proceeds, provided a release of its registered mortgage, as did the private company. A majority of the Full Court (Jessup and Katzmann JJ with Siopsis J dissenting) decided that the Commissioner was entitled to the whole of the amount paid into court. Their Honours distinguished the Tricontinental case on the basis that if a chargee is put into a position of the taxpayer and is owed money directly by a taxpayer’s debtors, the s 260-5 notice is no longer valid because the chargee now has a beneficial interest in those debts. In contrast, there could never be a situation in which the purchasers owed anything to the secured creditor, Instyle, as mortgagee. The purchaser only ever owed money to the taxpayer as vendor, so the s 260-5 notice applied. Park’s case suggests that a mortgagee should not release its mortgage if there is a risk that at settlement the vendor will pay part of the sale proceeds required to satisfy the mortgage to the Commissioner. The only options to a mortgagee in that situation appear to be to refuse to release the mortgage unless the Commissioner agrees to allow the mortgagee’s debt to be paid first or to keep the registered mortgage on foot and exercise rights as mortgagee in possession to sell the property. In practice, Park’s case may not pose a threat to arm’s length mortgagees. It is noteworthy that in Park’s case, the NAB received payment of its outstanding liability in full. The Commissioner’s Practice Statement PSLA 2011/18 states that if a garnishee notice is served on a purchaser of mortgaged land or property, the notice attaches to that part of the purchase price necessary to pay out the mortgage. But because the release of the mortgage is necessary to allow the sale to proceed, the Commissioner will take account of individual circumstances and may require that the notice only apply to that part of the purchase price to be paid to the vendor after the

mortgage has been discharged.

Taxation of mortgage interest 41.2 Interest received from a mortgagor is ordinarily taxable in a mortgagee’s hands as ‘ordinary income’ under s 6-5(1) of the Income Tax Assessment Act 1997 (Cth). A mortgagee who is not conducting a business of money lending is not required to return income as assessable until it is received in cash or the debt for the interest is discharged by some other means: St Lucia Usines & Estates Co Ltd v Colonial Treasurer of St Lucia [1924] AC 508; Leigh v IRC [1928] 1 KB 73. Money lenders should return interest as assessable income on an accruals basis: IRC (NZ) v National Bank of New Zealand (1976) 7 ATR 282. In addition, a taxpayer who lends in the course of a business and recognises interest income in its financial statements on an accruals basis should also return the interest on an accruals basis: FCT v Ashwick (Qld) No 127 Pty Ltd [2011] [page 875] FCAFC 49 at [65]–[69]. In Taxation Ruling TR 93/27 the Commissioner of Taxation has indicated that money lenders should generally return income using a straight line daily accruals method, but if a financial institution makes a bona fide assessment that accrued interest will not be received the interest need not be returned until received: Taxation Ruling TR 94/32.

Tax deductibility of interest 41.3 Interest is tax deductible to a mortgagor, as a general rule, under s 8-1 of the Income Tax Assessment Act 1997, if the mortgagor applies the borrowed money to produce assessable income: FCT v Roberts and Smith (1992) 37 FCR 246. For example, if the borrowed funds are used to acquire shares in a company for the purpose of earning dividends, or if the money is applied to purchase or construct an income-producing asset, the interest is deductible. Further, interest is not deductible on a borrowing simply because the mortgage is over an income-producing property; it is the purpose to which

the mortgagor applies the borrowed funds that is critical: FCT v Munro (1926) 38 CLR 153. Tax deductions for interest may also be available even if the asset is not expected to become income producing until some time in the future: Steele v DFCT (1999) 197 CLR 459; FCT v Total Holdings (Australia) Pty Ltd (1979) 9 ATR 885. But if the purpose for which a mortgagor holds a property changes from an income-producing purpose to a non-income-producing purpose, the interest ceases to be deductible: FCT v Riverside Road (1990) 21 ATR 499. Generally speaking, the deduction for interest is available to a mortgagor in a year of income even though the income to which the deduction relates is less than the interest expense (that is, the property is ‘negatively geared’): FCT v Janmor Nominees Pty Ltd (1987) 19 ATR 254. But if the interest expense is disproportionate to the expected income, the interest may be disallowed as a deduction, or only so much allowed as is attributable to an income-producing purpose: Fletcher v FCT (1991) 173 CLR 1; Ure v FCT (1981) 11 ATR 484. Subject to statutory modifications by Div 16E of Pt III of the Income Tax Assessment Act 1936 (Cth) and Div 230 of the Income Tax Assessment Act 1997 (see below), tax deductions for interest are generally available to a mortgagor on an accruals basis: FCT v Australian Guarantee Corporation (1984) 2 FCR 483. Prepaid interest is generally deductible over the period to which the interest relates: see ss 82KZL, 82KZO, 82KZM, 82KZMA and 82KZMD. But prepaid interest is deductible at the time of payment for a borrower who and individual who: does not incur the interest in carrying on a business (eg a taxpayer who prepays interest for 12 months in relation to a loan used to acquire an investment asset); and is not a ‘small business entity’, defined in s 328-110 of the Income Tax Assessment Act 1997 as, broadly speaking, persons with a business turnover of less than $2 million. Premiums and discounts may be treated as interest, particularly where no interest is payable: IRC v Thomas Nelson & Sons Ltd [1938] SC 816; Davies v Premier Investment Co Ltd [1945] 2 All ER 681. However, if interest is also payable, there is no presumption that the discount or premium is interest:

Lomax v Peter Dixon & Sons Ltd [1943] KB 671. Capitalised interest does not cease to be interest: IRC v Oswald [1945] AC 360. Any sum paid by a guarantor in respect of money due from the principal debtor ranks as payment of interest and not a payment of a sum in lieu of interest: Re Hawkins [1972] Ch 714; Re Amalgamated Investment & Property Co Ltd [1985] Ch 349. [page 876] Discount on a bill of exchange or promissory note is taxable as income to a mortgagee: FCT v Hurley Holdings (NSW) Pty Ltd (1989) 20 ATR 1295. Discount on a bill of exchange or promissory note is deductible to a mortgagor on a straight line accruals basis: Coles Myer Finance Ltd v FCT (1993) 176 CLR 640. If the payment of interest is deferred for more than 12 months, or if the mortgagee’s return on the loan is payable other than by way of interest, the interest may be assessable to the mortgagee and deductible to the mortgagor on a yield to maturity basis: see Div 16E of Pt III of the Income Tax Assessment Act 1936 or alternatively under the provisions in Div 230 of the Income Tax Assessment Act 1997, which tax financial arrangements entered into by financial institutions and other large taxpayers on an accruals basis. A mortgagee who is a money lender would be entitled to deduct the legal and other costs of enforcing the mortgage. But such costs would generally not be deductible to a mortgagee who is not carrying on a business of money lending, on the basis that the costs would be of a capital nature. A mortgagor may be entitled to deduct the legal costs of entering into a mortgage under s 25-25 of the Income Tax Assessment Act 1997, notwithstanding that those costs are capital in nature. Under s 25-25 borrowing costs are deductible over the period of the loan or five years, whichever is shorter. A mortgagor is also entitled to deduct the costs of discharging a mortgage, provided the borrowed money was used solely to produce assessable income: s 25-30 of the Income Tax Assessment Act 1997. If the money was used partly to produce assessable income, a deduction is allowable to the extent that the mortgagor used the money to produce assessable income: s 25-30(3).

Foreign aspects 41.4 As a general rule, a non-resident is assessable on any income that has an Australian source: see s 6-5 of the Income Tax Assessment Act 1997. Therefore, a non-resident is not taxable on income from a non-Australian source. The question where interest is derived requires an analysis of all the factors behind the payment of the interest: see, for example, Studebaker Corporation of Australasia Ltd v C of T (NSW) (1921) 29 CLR 225. These rules are subject to any contrary provisions in Australia’s double tax agreements (DTAs) and to the withholding tax regime. Where interest is paid under a mortgage by a mortgagor who is a resident of Australia to a non-resident, the mortgagor must deduct withholding tax at a rate of 10 per cent: Income Tax Assessment Act 1936 s 128B and Taxation Administration Act 1953 (Cth) Sch 1, s 12-245. A mortgagor who fails to comply with this requirement may become liable to a penalty equal to the amount of the withholding tax and may be convicted of an offence: see Taxation Administration Act 1953 Sch 1, ss 16-25 and 16-30. Interest from which withholding tax is deducted is non-assessable, non-exempt income (and therefore free from tax): Income Tax Assessment Act 1936 s 128D. The requirement to withhold tax from interest may be affected by the terms of any applicable DTA between Australia and the country in which the mortgagee is resident: see, for instance, the DTAs negotiated between Australia and the United States and the United Kingdom. There is also an exception under s 128F of the Income Tax Assessment Act 1936 for certain syndicated loans, widely issued debentures and other loan arrangements.

Capital gains tax (CGT) 41.5 A gain that is capital in nature may be taxable under Pts 3-1 and 3-3 of the Income Tax Assessment Act 1997. The derivation of a taxable capital gain is made to depend upon the occurrence of a ‘CGT event’: see s 102-20 of the Income Tax Assessment Act 1997. The main CGT event is CGT event A1. CGT event A1 occurs if there is a disposal of an asset: see s 104-10(1). An asset is disposed of if there is a change in the beneficial ownership of the asset: see s 104-10(2). Because a common law mortgage is [page 877]

effected by a transfer of the legal title to the mortgagee, CGT event A1 would, in the absence of an exception, be triggered by the grant or redemption of such a mortgage. But under s 104-10(7) CGT event A1 does not occur if the disposal of the asset ‘was done (a) to provide or redeem a security…’. Therefore, the grant or redemption of a mortgage should not give rise to a capital gains tax liability. CGT event A1 also does not apply to a mortgagee who enforces a mortgage under a power of sale. Section 106-60 of the Income Tax Assessment Act 1997 provides that Pts 3-1 and 3-3 apply to an act done by an entity in relation to a CGT asset for the purpose of enforcing or giving effect to a security, charge or encumbrance the entity holds over the asset as if the act had been done instead by the person who provided the security. Therefore, it would be the mortgagor who would realise a taxable capital gain (or be entitled to claim a capital loss) from the sale of a mortgaged property by the mortgagee pursuant to a power of sale. It is noteworthy that s 106-60 provides for the tax liability created as a result of the enforcement of a mortgage to be payable by the mortgagor, rather than the mortgagee. The risk that the mortgagor might be insolvent and unable to pay the tax therefore lies with the Commissioner of Taxation, rather than with the mortgagee. This is in contrast to the treatment under the GST regime (see below).

Goods and services tax: general principles 41.6 Goods and services tax applies to ‘taxable supplies’ made on or after 1 July 2000. Under s 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the GST Act) the elements of a taxable supply are that the taxpayer must make: 1. a ‘supply’ for consideration; 2. in the course or furtherance of an enterprise; 3. that is ‘connected with Australia’; 4. the taxpayer is registered or required to be registered for GST purposes; provided that 5. the supply is not GST-free or ‘input taxed’.

A ‘supply’ is defined to include, among other things, a grant, assignment or surrender of ‘real property’ or the creation, grant, transfer, assignment or surrender of any right: s 9-10(2) of the GST Act. ‘Real property’ is defined to mean, among other things, any interest in or right over land: s 195-1 of the GST Act, definition of ‘real property’. A supply of real property is ‘connected with Australia’ if the real property, or the land to which the real property relates, is in Australia: s 9-25(4) of the GST Act. The maker of the taxable supply is liable for the GST. The amount of the GST is 1/11 of the price of the supply: ss 9-70 and 9-75 of the GST Act. Under s 11-20 of the GST Act a person who makes a ‘creditable acquisition’ is entitled to claim a credit for the GST embedded in the purchase price. Under s 11-5 of the GST Act a person makes a ‘creditable acquisition’ if: 1. the person acquires anything solely or partly for a ‘creditable purpose’; 2. the supply of the thing was a taxable supply; 3. the person provides or is liable to provide consideration for the supply; and 4. the person is registered or required to be registered for GST purposes. A person acquires a thing for a ‘creditable purpose’ to the extent that the person acquires it in carrying on their enterprise, but not to the extent that the acquisition [page 878] relates to making supplies that would be ‘input taxed’ or the acquisition is of a private or domestic nature. Hence, it is not essential, in order to obtain an input tax credit, that the acquisition must relate to the making of taxable supplies (as it is in some other jurisdictions). The requirement is merely that it be made in carrying on the taxpayer’s enterprise. A further requirement for obtaining an input tax credit is that the person holds a ‘tax invoice’: see s 29-10(3) of the GST Act. The recipient of a

supply has a right to request a tax invoice from the maker of the supply: s 2970(2) of the GST Act. A supply that would otherwise be a taxable supply is exempt from GST if it is an ‘input taxed’ supply. Although an input taxed supply is exempt from GST, as noted above, if an acquisition relates to making supplies that would be input taxed, the acquisition is also not a creditable acquisition. Supplies of residential properties and ‘financial supplies’, as a general rule, are input taxed: see Div 40 of the GST Act. Leases of residential property (except for ‘commercial residential premises’) are generally input taxed, as are sales of residential properties, other than sales of ‘commercial residential premises’ and sales of ‘new residential’ properties. ‘Financial supplies’ are defined in the A New Tax System (Goods and Services Tax) Regulations 1999 (the Regulations): see s 40-5(2) of the GST Act. Under reg 40-5.09 a supply is a ‘financial supply’ if it involves the provision, acquisition or disposal of an ‘interest’: for consideration; in the course or furtherance of an enterprise; that is connected with Australia; if the supplier is registered or required to be registered and a financial supply provider in relation to the supply of the interest; and the interest is listed in reg 40-5.09(3) or (4). Regulation 40-5.02 provides that an ‘interest’ in relation to a financial supply is anything that is recognised at law or in equity as any form of property. Hence an ‘interest’ would include a mortgage over land or premises: para 78 of GSTR 2002/2. Regulation 40-5.09(3) lists the following interests, among others: Item 3: A charge or mortgage over real or personal property. Item 7: A guarantee Item 8: Credit under a hire purchase agreement in relation to goods if:

(a) the credit for the goods is provided for a separate charge; and (b) the charge is disclosed to the recipient of the goods. Item 10: Securities, including: (a) a debenture described in the Corporations Act 2001 (Cth) s 9(a), (b), (c), (d), (e) of the definition of debenture; and (b) a document issued by an individual that would be a debenture if it were issued by a body corporate; and (c) a scheme described in s 9(e), (i) or (m) of the definition of managed investment scheme in Corporations Act 2001 s 9; and (d) the capital of a partnership or trust.

[page 879] Hence, provided the other conditions in reg 40-5.09 are satisfied, the grant of a mortgage or charge is input taxed. This is confirmed by Sch 7 of the Regulations, which sets out examples of interests that are financial interests. The examples for item 3 set out in Pt 3 of Sch 7 include: a mortgage over land or premises, a chattel mortgage, a charge over the assets of a company, documentation or valuation of the collateral or security for a credit or advance, and a mortgage over a share or bond. Part 8 of Sch 7 lists the following examples for item 10 in the table in reg 40-5.09(3): bonds, stocks or debentures issued by a government, debentures in a body, promissory notes or bills of exchange, and

securities lending. Because the creation of a mortgage or charge is input taxed, a mortgagor is exempt from GST in respect of the creation of a mortgage or a charge over an asset, but the mortgagor and mortgagee are also generally not entitled to claim input tax credits. An important exception to the general principle that a person is not entitled to claim input tax credits for acquisitions relating to supplies that would be input taxed is that such acquisitions may be creditable if the person’s ‘financial acquisitions’ fall within the ‘financial acquisitions threshold’: s 1115(4) of the GST Act. ‘Financial acquisitions’ are acquisitions that relate to the making of a ‘financial supply’ other than a financial supply consisting of borrowing: s 189-15 of the GST Act. The quantum of financial acquisitions is determined by reference to a ‘rolling’ 12-month period. It is necessary to look at financial acquisitions the person has made for the month in question together with the previous 11 months and the month in question and the succeeding 11 months. The person exceeds the ‘financial acquisitions threshold’ if they incur GST on financial acquisitions for either the past 12month period (see s 189-5) or the future 12-month period (see s 189-10) that exceeds either $50,000 or ten per cent of the creditable GST incurred on all costs including financial acquisitions.

Sale by mortgagee in possession 41.7

Under s 105-5(1) a person makes a taxable supply if the person:

supplies the property of another person (‘the debtor’) to a third person; is in or towards the satisfaction of a debt that the debtor owes to the person; and had the debtor made the supply, it would have been a taxable supply. Further, the usual requirements that a person must be registered or required to be registered and that the sale must occur in the course of an enterprise are relaxed: s 105-5(2). A supply is not taxable if the debtor gives to the person making the sale a written notice stating that it would not have been taxable if the debtor had made it and the notice sets out fully the reasons why the supply would not be a taxable supply: s 105-5(3)(a). A creditor is also

entitled to treat a supply as not being a taxable supply if: the person making the sale cannot obtain a notice from the debtor; but believes on the basis of reasonable information that the supply would not be a taxable supply if the debtor were to make it. [page 880] The intention underlying Div 105 is to treat the sale of property by a mortgagee in possession as having the GST status it would have if the debtor had effected the sale, but the liability for the tax (unlike for capital gains tax) falls upon the mortgagee. This is consistent with the assumption underlying GST that the maker of a supply can collect the GST from the recipient of the supply by increasing the price of the supply. Unfortunately Div 105 has not been well drafted, because a creditor who enforces a security may not be selling the property of another person. Under a traditional common law mortgage there is a transfer of title to the mortgagee. Therefore, the mortgagee who enforces a mortgage is selling his own property. On a literal interpretation of s 105-5 it would not apply to a sale of property pursuant to such a mortgage. Despite the wording of s 105-5 the Commissioner of Taxation has stated in the context of a chattel mortgage that when a creditor repossesses goods and then sells them to a third party in order to recover its debt, s 105-5 of the GST Act would apply and the supply by the creditor would have the same GST status as if it was made by the debtor. But, not surprisingly, and in accordance with the legislation, the Commissioner takes the view that if a creditor sells goods subject to a hire purchase agreement, s 105-5 would not apply, because title to the goods is with the financier until final payment. The following example illustrates the application of s 105-5. Example Sarah, who is retired and does not carry on any business, has invested in a mortgage over Torrens Title land used in a manufacturing business. The

mortgagor defaults. Sarah takes possession of the property as mortgagee and sells the property. Even though she is not registered for GST purposes, and does not carry on an enterprise, under s 105-5 of the GST Act the sale of the property would be subject to GST because the property was used by the mortgagor in its enterprise, and the mortgagor was registered for GST purposes. Sarah will therefore need to remit 1/11th of the sale price to the Taxation Office. Division 105 was recently amended by Tax Laws Amendments (2012 Measures No 4) Act 2012 to clarify that Div 105 applies to the exclusion of Div 58 where a representative of an incapacitated entity is a creditor of the incapacitated entity and the representative makes a supply in satisfaction of a debt that the incapacitated entity owes to the representative. In 2008 the Federal Court held in DCT v PM Developments Pty Ltd [2008] FCA 1886 that the liquidator of a company was not liable for the GST arising from the sale of a property by the company during the period of the liquidator’s appointment. Instead, the GST liability was a liability of the company. In response to that decision the GST Act was amended by the insertion of a new Div 58 to clarify that a representative of an incapacitated entity is responsible for certain GST consequences that arise from a supply, acquisition or importation for which the representative is responsible. Section 195-1 defined ‘representative’ to ensure that Div 58 would apply to a ‘controller’ within the meaning of s 9 of the Corporations Act 2001. That definition includes a receiver or receiver and manager of a corporation’s property or anyone else who is in possession or has control of that property for the purpose of enforcing a security interest. As a result of those amendments there were circumstances where both Div 58 and Div 105 could apply to a mortgagee or another holder of a security interest who was in possession or control of a corporation’s property. Division 105 operates differently to Div 58. For example, under Div 105 a mortgagee may report any GST liabilities arising from the sale of a mortgagor’s property under the one GST registration, in its capacity as mortgagee. On the other hand, Div 58 requires a representative to separately register each incapacitated entity that it represents. The main amendment was the insertion of

[page 881] s 58-95, which provides that Div 58 does not apply in relation to a representative of an incapacitated entity to the extent that s 105-5(1)(a) applies. Hence, if a receiver or another person is a mortgagee in possession of the entity’s property and is not a representative of the entity for any other reason the receiver/other person need not register under s 58-20 if it will supply that property in or towards the satisfaction of a debt owed to it by the entity.

Stamp duties on mortgages 41.8 Historically in Australia the Stamp Duties Acts of the various states and territories imposed duties on security transactions. But one aspect of the Federal Government’s Intergovernmental Agreement on Reform of Commonwealth-State Financial Relations made between the Commonwealth and the states in the lead-up to GST was that in return for the Federal Government agreeing to allocate the proceeds of goods and services tax to the states, the states would abolish stamp duty on most business transactions. At the time of writing a majority of the states had either removed stamp duty on mortgages and other security transactions or had agreed to do so. The position of each of the states is as follows. The Australian Capital Territory (ACT) has never imposed stamp duty on mortgages and the Northern Territory abolished duty on mortgages before 2000. Victoria abolished duty on mortgages and other securities from 1 July 2004. Generally speaking, mortgages executed over property in Victoria before 1 July 2004 remain dutiable but not in relation to advances of money made after that date. For further details see Victorian State Revenue Office Bulletin D1/04 ‘Abolition of Duty on Mortgages’. In South Australia, from 1 July 2005 all mortgages taken out for the purpose of securing a loan that has been or is to be applied for the acquisition of a home or improvement of a home are exempt from stamp duty. Also from 1 July 1995, a mortgage to secure a loan that has been applied wholly to refinance an existing indebtedness is exempt from stamp duty. South Australia partly abolished the remaining stamp duty on mortgages from 1 January 2006. From 1 July 2009 stamp duty on all mortgages was fully

abolished. In Queensland, mortgage duty was abolished in full from 1 July 2008. In Western Australia, instruments, including bonds and guarantees, executed on or after 1 January 2004 that did not create a charge over property were no longer subject to stamp duty. From 1 July 2008 stamp duty on all remaining mortgages was abolished. In Tasmania mortgage duty was reduced by 50 per cent in the 2006/07 financial year and was abolished in full from 1 July 2007. In New South Wales, duty on mortgages taken out by natural persons that secured an advance or advances for the purposes of owner occupied housing was abolished on 1 September 2007. On 1 July 2008 mortgages taken out by an individual that secured an advance or advances for the purposes of investment housing only was also abolished. All other duties chargeable on mortgages were to be abolished on 1 July 2013. However, on 23 April 2013 the state government deferred the abolition of these duties indefinitely in order to meet its funding obligations to the Gonski national education reforms. In addition to the phased removal of stamp duty on mortgages, which is a consequence of the Intergovernmental Agreement, Victoria, Tasmania, Queensland, New South Wales and the Australian Capital Territory have introduced new Acts that replace the traditional basis of stamp duty, which was a tax on documents, with a new, transactional basis for imposing stamp duty (or ‘duty’ as it is known under these enactments). There is now a relatively uniform set of rules applying duty to mortgages in New South Wales, Tasmania and Queensland. Duty in those jurisdictions applies only to instruments that meet a statutory definition of a ‘mortgage’ and only when it secures an ‘advance’. [page 882] In the remainder of this commentary we consider the current state of the law in New South Wales and comment briefly on the positions in the other states that still impose duty on mortgages.

Mortgage duty applies regardless of the nature of the property the subject of the mortgage. ‘Property’ is not defined in the Duties Acts (DA) and therefore carries its usual broad meaning. In New South Wales the Stamp Duties Act 1920 imposed duty on ‘loan securities’. This term was defined as meaning a ‘mortgage, bond, debenture or covenant’. Duty under the Duties Act 1997 (NSW) is, subject to transitional provisions, charged upon mortgages that are first executed on or after 1 July 1998. In Revenue Ruling DUT 001 the Chief Commissioner observes that the 1920 Act continues to apply to loan securities executed before 1 July 1998. If further advances are made after 30 June 1998 the liability for stamp duty arises under the 1920 Act. But as a result of amendments introduced by the State Revenue Legislation Amendment Act 2002 (NSW) the 1920 Act no longer applies to advances made after 1 January 2003 if the advances were secured only by a ‘loan security’ within the meaning of s 83 of the 1920 Act. The Duties Act 1997 (NSW) only applies to ‘mortgages’, which is defined more narrowly than ‘loan securities’. Under ss 210 and 213 of the Duties Act the duty chargeable on a mortgage is determined by the amount of the advances actually secured by the mortgage. The two elements required before a liability arises to pay duty are therefore a ‘mortgage’ and an ‘advance’ secured by the mortgage. Under s 205 an instrument of mortgage is defined as: 1. a security by way of mortgage or charge over property wholly or partly in New South Wales at the ‘liability date’; 2. a security by way of a transfer or conveyance of any property in New South Wales that is held on trust for sale; or 3. an instrument that, on deposit of documents of title to property in New South Wales or instruments creating a charge on property in that state, becomes a mortgage or evidences the terms of a mortgage. Under s 206 an ‘advance’ is defined as the provision or obtaining of funds by way of financial accommodation by means of: 1. a loan (whether by way of an advance of money or the payment of money

for or on account of any person, a forbearance to requirement payment of money owing or any transaction that in substance effects a loan of money); or 2. a bill facility. Liability arises on the date of first execution and additional duty becomes payable on the making of an advance or further advance as a result of which the amount secured increases, but the duty does not have to be paid until three months after the liability arises: ss 208 and 209 (compare DA Tas ss 142 and 143 and DA Qld ss 252 and 255). Under s 295 a mortgage is first executed at the first time it is signed or signed and sealed by any party. An ‘all moneys’ mortgage is liable to duty of at least five dollars but if it secures a definite sum the duty is calculated by reference to the amount of moneys in fact secured. Other mortgages are liable for duty by reference to the amount secured: see s 213. Section 208 defines the ‘liability date’ as ‘the date of its first execution’. [page 883] Unless the instrument meets the definition of a mortgage, as explained above, New South Wales does not impose mortgage duty. For example, a guarantee would not be dutiable, but if it is secured by a mortgage, as defined, the instrument may be subject to mortgage duty. But an unsecured debenture instrument would not be subject to mortgage duty.

Consequences of a failure to pay duty 41.9 If duty is not paid the mortgage is not enforceable except to the extent of the amount secured by the mortgage on which duty has been paid: s 211 of the DA (NSW). Section 304 of the DA (NSW) treats dutiable instruments that are not stamped as unenforceable, but it would appear that the specific provision, s 211, would govern the consequences of a failure to pay duty in relation to mortgages. It is the amount of duty that has been paid by the time the mortgage is required to be tendered that is relevant for the purposes of s 211, not the duty originally paid: Commercial Banking Company of Sydney

Ltd v Love (1974) 133 CLR 459. An undertaking to pay the duty may be effective to remedy the failure to stamp the document: see Westpac v Mousellis (1986) 17 ATR 49. Failure to pay a liability for duty within three months of the date it is due and payable is a tax default giving rise to a liability for a penalty under the Taxation Administration Act 1996 (NSW).

Collateral mortgages and multi-jurisdictional mortgages 41.10 Given that New South Wales is now the only jurisdiction charging duty on mortgages this part of the commentary should only be relevant to mortgages that attract duty in New South Wales. Until recently s 203A of the DA (NSW) provided for duty on mortgages to cease from 1 July 2013, but the section has been amended to provide for duty to be abolished from a date to be proclaimed. Section 216 of the DA (NSW) provides that where: advances are secured by a single mortgage, for example a company Deed of Charge, and the property secured is located in both New South Wales and in other Australian jurisdictions, the mortgage is only liable in New South Wales on a proportion of the advance. This is known as the dutiable proportion. Section 216 operates to effectively apportion the duty among the states in which the secured property is situated. It does this by providing that the duty is calculated by reference to the proportion of the amount secured by the mortgage equal to the proportion of the value of the property in the state compared to the value of all property charged (excluding for this purpose the value of property situated in a jurisdiction that does not impose duty). Provided a comparable methodology is adopted in other states, the states imposing mortgage duty apportion the duty otherwise payable between themselves. From 1 July 2009 each collateral mortgagee is to be stamped and charged with a new minimum duty of $50 as a collateral mortgage: DA (NSW) ss 214, 217.

Exemptions 41.11 Not all instruments that fall within the definition of a ‘mortgage’ in New South Wales are subject to stamp duty. Specific exemptions are created for policy reasons. For example, in New South Wales mortgages securing less than $35,000 advanced under a ‘consumer credit contract’ are exempt (see s 223). [page 884]

Charges on land under revenue statutes 41.12 It is not uncommon for taxing Acts to impose charges on the land in respect of unpaid taxes, which charges are to rank in priority to all other charges. Thus s 47(1) of the Land Tax Management Act 1956 (NSW) provides that ‘Land tax shall until payment be a first charge upon the land taxed in priority over all other encumbrances whatsoever…’. In Metropolitan Water Sewerage & Drainage Board v Aston Investments Pty Ltd (1978) 4 BPR 9728, it was held that such a charge could be enforced by the court appointing a trustee for sale and directing the trustee to discharge the tax debt out of the proceeds of sale: see also Sutherland Shire Council v Glendon Court Ltd (1934) 12 LGR 20.

[page 885]

Part XII

Miscellaneous Matters

[page 887]

Chapter 42

Miscellaneous Aspects of Mortgages A. Solicitors Generally B. Securities to Solicitors No advantage must be taken Conditions for validity of security Security must not be oppressive Solicitor as agent Solicitors’ negligence Conflict of interest Authority re documents Authority re money Costs of solicitor mortgagees Solicitors’ mortgage practices C. Guarantees and Rights of Sureties Guarantees generally Surety’s right to securities Qualification on restriction Failure of creditor to preserve securities Position of surety on insolvency of mortgagor D. Sureties and Subrogation

42.1 42.2 42.3 42.4 42.5 42.6 42.7 42.8 42.9 42.10 42.11 42.12 42.13 42.14 42.15 42.16

Generally Subrogation The 13 points of subrogation Waste by mortgagor Liability of mortgagee for waste, etc

42.17 42.18 42.19 42.20 42.21

A. Solicitors Generally 42.1 Solicitors may become personally involved with failed mortgage transactions in a number of ways. First, it may be alleged that the solicitors were negligent in and about the preparation of the mortgage. Then it may be alleged that the solicitor had a conflict of interest which has caused loss. Third, it may be said that the solicitors have acted without authority. [page 888] Before dealing with these problems in 42.6–42.9, it is necessary to look at basic matters such as the retainer and usual duties of a solicitor in a mortgage transaction. The general practice is for the mortgagee’s solicitors to prepare the mortgage document. The mortgagee’s solicitors are retained by the mortgagee who is thus solely liable to pay their costs unless there is something more in the documentation. Thus a mortgagee’s solicitors may require an undertaking from the intending mortgagor’s solicitors to pay those costs: Re Cowburn; Ex parte Firth (1882) 19 Ch D 419 at 427. Where the mortgagor promises to pay the mortgagee’s costs of preparation of the mortgage but does not do so before settlement, a simple contract debt is raised which does not form part of the security: Wales v Carr [1902] 1 Ch 860; Re Foster [1920] 3 KB 306 at 317, 318. The mortgage document may, of course, expressly include those costs: see, for example, Blackford v Davis (1869) 4 Ch App 304.

As to costs allowable where the solicitor is the mortgagee, see 42.10.

B. Securities to Solicitors No advantage must be taken 42.2 A security given to a solicitor by his client is subject to the principles applied in cases of undue influence; partly because of the personal influence of the solicitor over his client, and partly because of the solicitor’s knowledge of the client’s property and value: see Oldham v Hand (1751) 2 Ves Sen 259; 28 ER 167; Welles v Middleton (1784) 1 Cox 112 at 125; 29 ER 1086 at 1092; Gibson v Jeyes (1801) 6 Ves 266; 31 ER 1044; Wood v Downes (1811) 18 Ves 120; 34 ER 263; Montesquieu v Sandys (1811) 18 Ves 301; 34 ER 331; Cane v Allen (1814) 2 Dow 289; 3 ER 869; Casborne v Barsham (1839) 2 Beav 76; 48 ER 1108; Tomson v Judge [1855] 3 Drew 306; 61 ER 920; Rhodes v Bate (1865) LR 1 Ch App 252 at 260; Liles v Terry [1895] 2 Ch D 679; Morgan v Minett (1877) 6 Ch D 638 at 647; Barron v Willis [1902] AC 271; Wright v Carter [1903] 1 Ch 27 (CA); Allison v Clayhills (1907) 97 LT 709 at 711–12; Dowsett v Reid (1912) 15 CLR 695 at 707 (Barton J); Haywood v Roadknight [1927] VLR 512 at 520 (Lowe J). This rule applies by reason of the reliance and confidence reposed by a client in his solicitor; hence it does not apply only with respect to matters in which a solicitor is specifically instructed (see Boardman v Phipps [1967] 2 AC 46 at 126; [1966] 3 All ER 721 at 757–8 (Lord Upjohn)) and may apply even though a solicitor is no longer retained as long as the confidence which naturally arises from the relationship is proved or may be presumed to continue: see Allison v Clayhills (1907) 97 LT 709 at 712 (Parker J), applied in Demerara Bauxite Co Ltd v Hubbard [1923] AC 673 (PC) at 675–6. If a solicitor purchases, or obtains a benefit, from his client, the solicitor is bound to show that he has taken no advantage of his professional position, but has given every information and advice, and has protected the client’s interests in the same manner as if he had dealt with a stranger. In default of such proof the deed will only stand as a security for the amount found to be due: Tomson v Judge; Wright v Carter; Demerara Bauxite Co Ltd v Hubbard, all above; McMaster v Byrne [1952] 1 All ER 1362 (PC); Hanson v Lorenz & Jones [1986] NLJ Rep 1088 (CA). A gift or a security for a gift

pending the relation is subject to the same principles (Liles v Terry [1895] 2 QB 679; Wright v Carter, above), but, in the absence of a mala fides, trifling gifts are not within this rule: Rhodes v Bate (1866) 1 Ch App 252. An assignment by a client to his solicitor of a bare right to sue is good when it is made by way of security: Wood v Downes (1811) 18 Ves 120; 34 ER 263; Anderson v Radcliffe (1858) EB & E 806; 120 ER 710: affirmed (1860) 29 LJQB 128. In general a solicitor has a duty to avoid acting for more than one client where a conflict of interest arises or is likely to arise between them; the more so where the solicitor is a [page 889] party to or has an interest in a party to the transaction or some interest in the transaction itself. The duty arises at common law which in many jurisdictions has been superseded or reinforced by express rules made under statutory authority. Generally, see The Council of the Law Institute of Victoria v Martin (1992) ConvR ¶54-449 at ¶65,234-5; and see Pyramid Building Society (in liq) v Rick Nominees Pty Ltd (SC (Vic), Byrne J, 23 August 1994, unreported). Solicitors’ liens are considered in depth at 2.33ff.

Conditions for validity of security 42.3 For a security given by a client to his solicitor to be valid, it is necessary that the money secured shall have been advanced, or shall otherwise be actually due (Nelson v Booth (1857) 27 LJ Ch 110); that the amount, if not ascertained at the time, shall be capable of being ascertained (the onus of the inquiry being on the solicitor); and that there are no unusual provisions by which the client may be injured or kept in the solicitor’s hands (Cockburn v Edwards (1881) 18 Ch D 449 (CA)); but where the mortgage is to secure costs it may include special provisions: Pooley’s Trustee v Whetham (1886) 33 Ch D 111 (CA), and see Law Society’s Digest, Opinions Nos 352-64. If any greater advantage is given to the solicitor than the law would give the solicitor, the client must first have been informed of his

rights: Lyddon v Moss (1859) 4 De G & J 104; 45 ER 41. In the case of a security given by a client to his solicitor, strict evidence of the payment of the money may be required (Lawless v Mansfield (1841) 1 Dr & War 557 at 605; and see 42.2; Carter v Palmer (1842) 1 Dr & War 722), though ordinarily receipts are admitted as prima facie evidence of advances. Where, however, the security is for the balance found due on a settled account, the solicitor must be prepared with evidence that the client was not under pressure or undue influence, and that the account was stated upon the production of books or other proper evidence, and under circumstances which enabled the client to judge of the result of the transactions between himself and the solicitor: Judd v Ollard (1859) 5 Jur NS 755; Davies v Parry (1859) 1 Giff 174; 65 ER 874; Morgan v iggins (1859) 1 Giff 270; 65 ER 915. The security may be for costs or advances, the amount of which has not been fixed, or where bills for the costs have not been delivered; and the amount due on such securities for costs will be ascertained by taxation. Under the then English legislation it was held that an agreement to give security for costs to be ascertained by taxation is not required to be in writing: Jonesco v Evening Standard Co [1932] 2 KB 340 (CA). Though a solicitor may not be able to recover his charges for a period of time after his bill of costs has been delivered (for example Solicitors Act 1974 (UK) s 69(1)); or may have to comply with other requirements, such as providing on request a bill of costs in taxable form (see Solicitors’ (Professional Conduct and Practice) Rules 1984 (Vic) r 5), this does not prevent the solicitor enforcing a security for his costs though no bill has been delivered: Thomas v Cross (1864) 11 LT 430; see (1984) 100 LQR 86 at 91 (Anderson). A solicitor may take security for his future charges and disbursements, to be ascertained by taxation or otherwise: as to charges on future property, see Avco Financial Services Ltd v White [1977] VR 561.

Security must not be oppressive 42.4 Where the debt is bona fide, the security will not be invalid because it was made under pressure from the solicitor: Johnson v Fesenmeyer (1858) 25 Beav 88; 53 ER 569; Pearson v Benson (1860) 28 Beav 598; 54 ER 496. If the mortgage is oppressive in form, as by an unreasonable postponement of the time for redemption, the mortgagor will have the general rights of a mortgagor (see 32.8–32.9) and where there has been a concealment or

misrepresentation in obtaining or framing the security, the mortgage will be valid only for so much as, on taking the accounts, shall appear to be actually due: [page 890] Cowdry v Day (1859) 1 Giff 316; 65 ER 936. So, where the power of sale omitted the usual conditions precedent to its exercise, the solicitor mortgagee was not allowed to sell, even when interest was three months in arrears, the solicitor not having explained the omission to the client: Cockburn v Edwards (1881) 18 Ch D 449 (CA); Cradock v Rogers (1884) 53 LJ Ch 968; affirmed [1885] WN 134 (CA). Where a mortgagee, being a solicitor for the mortgagor, neglects his duty towards the mortgagor (as by omitting to register the mortgage when it requires registration by statute) the solicitor will not be allowed to avail himself of it, even though it is not avoided by the non-registration: Re Patent Bread Machinery Co; Ex parte Valpy and Chaplin (1872) 7 Ch App 289. For negligence in relation to mortgages, see Whiteman v Hawkins (1878) 4 CPD 13 (failure to call for production of title deeds and consequent non-disclosure of prior equitable mortgage); Cooper v Stephenson (1852) 16 Jur 424; 21 LJ QB 292 (failure to search in bankruptcy); Bean v Wade (1885) Cab & El 519; on appeal 2 TLR 157 (CA) (failure to give notice of mortgage). As to professional negligence of lawyers generally, see Mills, ‘Professional negligence: the expanding liability of lawyers’ (1992) 9 ABR 1. A case that is difficult to classify is Maguire v Makaronis (1997) 188 CLR 449; 144 ALR 729. In that case solicitors/mortgagees took advantage of mortgagor clients with imperfect English. In the special circumstances, the High Court reformed the mortgage requiring the mortgagor to do equity by paying a lower rate of interest as a condition of obtaining relief against an oppressive mortgage.

Solicitor as agent 42.5 Notice to a solicitor in and affecting a transaction in which he is engaged on behalf of a client is notice to the client: Magee v UDC Finance

Ltd [1983] NZLR 438. A solicitor is not an agent for the purpose of receiving notice of an encumbrance on or other dealings with the security, merely because he was employed to invest the money: Saffron Walden Second Benefit Building Society v Rayner (1880) 14 Ch D 406. Where both parties employ the same solicitor, the knowledge of the mortgagor will not be notice to the mortgagee (Re Cousins (1886) 31 Ch D 671), and any notice the solicitor acquires will not, generally, be imputed to both (Dryden v Frost (1838) 3 My & Cr 670; 40 ER 1084; Meyer v Charters (1918) 34 TLR 589; and see Lloyds Bank Ltd v Marcan [1973] 1 WLR 1387; [1973] 3 All ER 754 (CA); Halifax Mortgage Services Ltd v Stepsky [1996] 1 Ch 1; [1995] 4 All ER 656; [1996] Ch 207; [1996] 2 All ER 277 (CA)); and see Royal Bank of Scotland v Etridge [1997] 3 All ER 628 (CA), where it was held that the bank would be fixed with constructive notice if the solicitor which it engaged to give independent advice to one of the mortgagors (a wife) failed to discharge that duty; and see also 13.20 and 13.31. The same principle applies where the same person acts as officer of two companies: Re Hampshire Land Co [1896] 2 Ch 743. It has been said that if the mortgagor, being a solicitor, himself prepares the security, and no other solicitor is employed, the mortgagor will still be the mortgagee’s solicitor; it makes no difference that the mortgagee pays him nothing for the solicitor’s services, because it is the nature of the transaction that all the expenses should be borne by the mortgagor: Kennedy v Green (1834) 3 My & K 699; 40 ER 266; Hewitt v Loosemore (1851) 9 Hare 449; 68 ER 586; cf Espin v Pemberton (1859) 3 De G & J 547; 44 ER 1380; Kettlewell v Watson (1882) 21 Ch D 685. But if the mortgagee employs no solicitor, it will not be assumed, in the absence of evidence, that the mortgagor’s solicitor acted for the mortgagee: Atterbury v Wallis (1856) 2 Jur NS 343; 44 ER 465. Regard should now be had to the professional restrictions on a solicitor acting for more than one party in a conveyancing transaction (including the granting of a mortgage) contained in different forms in the state regulations governing solicitors’ practices: and see Law Institute of Victoria v Martin (1992) V ConvR ¶54-449; also [page 891]

Pyramid Building Society (in liq) v Rick Nominees Pty Ltd (SC (Vic), Byrne J, 23 August 1994, unreported).

Solicitors’ negligence 42.6 This work is not the place for a comprehensive survey of liability of solicitors for contractual or tortious negligence. This subject is thoroughly treated, inter alia, in Walton et al, Charlesworth & Percy on Negligence, 12th ed, Sweet & Maxwell, London, 2010, [9-213]ff and in Cordery on Legal Services, 9th ed, LexisNexis, London, 1995 looseleaf, Section 3Aff. This paragraph will be confined to the principal problems that have concerned solicitors who are alleged to have been in breach of their duty of care with respect to the lending of money and taking proper security. In the case of solicitors who act for clients who are lending money on security, the solicitors must duly investigate to see that the security is, in law, sufficient. This includes searching the title and making the clients aware of any prior encumbrances: Whiteman v Hawkins (1878) 4 CPD 13. While the solicitor does not ordinarily have responsibility to see that the value of the security is adequate, if the searches and inquiries show a possible problem which might affect the valuation of the property or the bona fides of the borrower, the client must be told: Mortgage Express Ltd v Bowerman & Partners [1996] 2 All ER 836 at 842. In that case, Bingham MR said, if in the course of the investigation ‘a solicitor discovers material facts which a reasonably competent solicitor would realize might have a material bearing on the valuation of the lender’s security or some other ingredient in the lending transaction, then it is his duty to point it out’. This case was one of a number where there were back to back sales and the price of the earlier sale was significantly lower: other cases are referred to in Charlesworth & Percy at [9-266]. The client must also be told of any facts known to the solicitor which go to the potential borrower’s untrustworthiness in money matters (Newshul v Mellish & Harkavy (1967) 111 Sol Jo 399), however, generally speaking the solicitor is not obliged to report matters simply going to the borrower’s creditworthiness, National Home Loans Corp plc v Giffen, Couch & Arthur [1996] 1 WLR 207; [1997] 3 All ER 828 (CA). A solicitor acting for the borrower may also owe some duty to the mortgagee even though the latter is not the client: see Charlesworth & Percy at [9-268].

Where the lenders are trustees, the solicitors must explain the usual requirement, if applicable, that there must be a margin of safety in the lending of trust moneys: Stokes v Prance [1898] 1 Ch 212. Unless the retainer otherwise expressly or impliedly provides, solicitors must ensure that the clients understand the documentation which they are to execute and the consequences of executing them, a fortiori in the case of documents with unusual provisions: Stannard v Ullithorne (1834) 10 Bing 491; 131 ER 985; Powys v Brown (1924) 25 SR (NSW) 65; Fox v Everingham (1983) 50 ALR 337 at 341–2; 76 FLR 170 at 174–5; Henderson v Amadio (No 1) (1995) 140 ALR 391 at 518–19; 62 FCR 1 at 139–40. Solicitors must take due care not to lose documents in their custody. There will be situations where solicitors’ carelessness will constitute a breach of fiduciary duty. This will give rise to a liability to pay compensation assessed in a different manner than damages at common law. An example is Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484, where the solicitors were also trustees of the mortgage fund and paid it out without proper care.

Conflict of interest 42.7 The principal problem is raised where a solicitor acts both for the purchaser of a property and also for the intending lender. If the solicitor becomes aware of a financial matter from his client, the purchaser, which might be material to the lender’s [page 892] risk, may he tell the lender and, if he does not, is he liable to the lender who suffers a financial loss? The general attitude of English courts is that a solicitor who finds himself in this position has only himself to blame and they have not been concerned in awarding damages against the solicitor. The governing statement on this issue was made by Millett LJ in Mortgage Express Ltd v Bowerman and Partners [1996] 2 All ER 836 at 844–5:

A solicitor who acts both for a purchaser and a mortgage lender faces a potential conflict of duty. A solicitor who acts for more than one party to a transaction owes a duty of confidentiality to each client, but the existence of this duty does not affect his duty to act in the best interests of the other client. All information supplied by a client to his solicitor is confidential and may be disclosed only with the consent, express or implied, of his client. There is, therefore, an obvious potentiality for conflict between the solicitor’s duty of confidentiality to the buyer and his duty to act in the best interests of the mortgage lender.

That passage was approved by the House of Lords in Hilton v Barker Booth & Eastwood [2005] 1 WLR 567 at 580; see also National Home Loans Corporation plc v Giffen Couch & Archer [1997] 3 All ER 808; [1998] 1 WLR 207 (CA). However, there is no rule of law that a solicitor with proper disclosure may not act for more than one party: Clark Boyce v Mouat [1994] 1 AC 428; [1993] 4 All ER 268. A good illustration of the difficulties that may arise, unexpectedly, for a solicitor who acts for both mortgagor and mortgagee is provided by Barratt v Gough-Thomas [1945] 2 All ER 650, where the solicitor for both parties later became the mortgagee’s executor.

Authority re documents 42.8 Ordinarily, solicitors are authorised to document the transaction which the client has made or intends to make: they are not authorised merely by virtue of their retainer to enter into the transaction or alter its terms: CTM Nominees Pty Ltd v Galba (1982) 2 BPR 9588. However, it is accepted that the mortgagee’s solicitors have authority to perfect the arrangement made by the client by modifying it in essential aspects and including further property in the security, but not to include terms which impose additional obligations on the mortgagee: Rhodes v Moules (1894) 10 TLR 559 (reversed on other grounds [1895] 1 Ch 236). Once the mortgage document becomes binding, subject to the terms of the document, the parties’ solicitors do not have authority to accept notices or other documents at least unless the solicitor is under a duty to communicate such matters to the client: Hooper v ooke (1856) 25 LJ Ch 467 at 468.

Authority re money 42.9 Ordinarily, solicitors have no general authority to receive money on behalf of a client in non-contentious matters: Edmiston v Scottish

Temperance and General Assurance Co Ltd (1929) 115 LT Jo 70; Kearney v Cullen [1955] IR 18. Where a mortgagor sells the mortgaged property with the acquiescence of the mortgagee, and the proceeds of sale come to the mortgagor’s solicitor, that solicitor receives the amount due under the mortgage as the mortgagee’s agent and the balance as the mortgagor’s agent: West London Commercial Bank v Reliance Permanent Building Society (1885) 29 Ch D 954 at 960. In the reverse case where the mortgagee’s solicitors receive the proceeds, the surplus is held on trust for the mortgagor or next encumbrancer: see Re Bell (1886) 34 Ch D 462 and modern statutory provisions such as s 112(4) of the NSW Act and s 105 of the Victorian Act. This latter matter is considered in 10.12.

Costs of solicitor mortgagees 42.10 Prior to the enactment of legislation, or without an agreement which expressly permits it, a solicitor-mortgagee cannot charge for work done by himself, although in the [page 893] ordinary course of his business, nor charge profit-costs for work done in connection with the mortgage, including the costs of a redemption or foreclosure action: see Re Roberts (1889) 43 Ch D 52; Field v Hopkins (1890) 44 Ch D 524; Re Wallis; Ex parte Lickorish (1890) 25 QBD 176; Stone v Lickorish [1891] 2 Ch 363; Re Doody; Fisher v Doody [1893] 1 Ch 129. The rule does not prevent a partner from taking remuneration provided (if there is an agreement) that the mortgagee is excluded from sharing, or (if there is no agreement) that his partnership share does not go to his partner: Re Doody; Fisher v Doody, above. This rule was abolished in England by the Mortgagees Legal Costs Act 1895 (see now Solicitors Act 1974 (UK) ss 2, 58). The provisions of the 1895 English Act were copied into some Australian legislation. In New South Wales this occurred with s 213 of the

Conveyancing Act 1919 which was repealed and re-enacted as s 209 of the Legal Profession Act 1987, which entitles a solicitor to recover from the person on whose behalf the business is transacted and to charge against the mortgaged property such costs as he would otherwise have been entitled to receive in cases where a mortgage is made to that solicitor or a mortgage becomes vested in him and the business is in relation to the mortgage, the loan is secured by the mortgage or the property is charged by the mortgage. See also the Supreme Court Act (Vic) 1986 s 63. Section 209 of the New South Wales legislation has been repealed and not replaced. However, the current legislation governing solicitors makes it fairly clear that the old rule is no longer applicable.

Solicitors’ mortgage practices 42.11 Solicitors’ practices involving contributory mortgages managed by the solicitors may fall within the definition of a Managed Investment Scheme as defined by s 9 of the Corporations Act 2001 (Cth). As from 7 September 2001, the Australian Securities and Investments Commission has granted an exemption from ss 601EAff of that Act in the case of solicitors’ mortgage practices which are registered by the New South Wales Law Society pursuant to state legislation. The current provisions are Pt 3.5 being ss 477–493 of the Legal Profession Act 2004 (NSW). Under s 479 of the NSW Legal Profession Act 2004, a solicitor is not to negotiate a regulated mortgage except under the state Act or under a Registered Managed Investment Scheme. Although the 2004 Act is uniform legislation, ss 477–493 only apply in New South Wales and the Australian Capital Territory.

C. Guarantees and Rights of Sureties Guarantees generally 42.12 It is quite common for a mortgage to be guaranteed by third parties. This may give rise to a number of problems which are outside the scope of this work which impinge on the method employed by the mortgagee and its agents to secure guarantees.

This work will confine itself to conduct of parties to a mortgage which might affect sureties or (see Chapter 30) how equitable doctrines may come into play affecting sureties. Sureties are given some special consideration under the law of mortgages. Thus in Ayoub v Euphoric Pty Ltd [2004] NSWCA 457; (2004) 12 BPR 22,735 at 22,742 [41] McClellan AJA giving the reasons of the NSW Court of Appeal said: [page 894] There is no doubt that care must be exercised when construing a security, particularly an all accounts security, to identify the debts which the parties intended to fall within it. Ambiguity should be construed in favour of the surety.

The judge referred to Ankar Pty Ltd v National Westminster Finance (Aust) Ltd (1987) 162 CLR 549 and Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424; 206 ALR 378; 78 ALJR 907 and noted that the context would be important to resolve ambiguity.

Surety’s right to securities 42.13 A surety is entitled to the benefit of every security which the creditor has against the principal debtor, the whole or any part of whose debts he has discharged: Goddard v Whyte (1860) 2 Giff 449; 66 ER 188. A surety who takes security from the principal debtor holds it not for his exclusive benefit, but for the benefit of himself and his co-sureties: Berridge v Berridge (1890) 44 Ch D 168. For the effect of a voluntary payment, see Owen v Tate [1976] QB 402 and see the article thereon by Birks and Beatson, ‘Unrequested payment of another’s debt’ (1976) 92 LQR 188. See Boscawen v Bajwa; Abbey National plc v Boscawen [1995] 4 All ER 769; [1996] 1 WLR 328 (CA) as to the tracing of trust moneys used to discharge a mortgage and consequent rights of subrogation by the bank providing the money; see also Halifax Mortgage Services v Muirhead (1997) 76 P & CR 418 (CA). This right is not in abeyance until the surety is called upon to pay, but is complete throughout: Dixon v Steel [1901] 2 Ch 602. The creditor is bound to hold and preserve the securities for the benefit of the surety: McColl’s

Wholesale Pty Ltd v State Bank of New South Wales [1984] 3 NSWLR 365. (For the creditor’s liability to the surety in the exercise of the power of sale, see Chapter 20; and see generally Bauer v Bank of Montreal (1980) 110 DLR (3d) 424; (1986) 1 B&FLR 73 (Kent).) Thus on payment of the debt the surety is entitled to receive the securities unimpaired: Pledge v Buss (1860) John 663; 70 ER 585; Pearl v Deacon (1857) 24 Beav 186; 53 ER 328. This is so whether the surety was or was not aware of the existence of the securities (Lake v Brutton (1856) 8 De GM & G 440; 44 ER 460) and even though they were taken by the creditor after the contract of suretyship: Forbes v Jackson (1882) 19 Ch D 615. The rule will also apply although the surety has taken a particular indemnity upon other property, if he has done so without knowledge of the security held by the creditor, which was available for his own indemnity: Lake v Brutton and see Brandon v Brandon (1859) 3 De G & J 524; 44 ER 1371. In O’Day v Commercial Bank of Australia Ltd (1933) 50 CLR 200 at 220, Dixon J approved the rule laid down by Viscount Cave LC in Ellis & Co’s Trustee v Dixon-Johnson [1925] AC 489 at 491, that: … if a creditor holding security sues for his debt, he is under an obligation on payment of the debt to hand over the security; and if, having improperly made away with the security, he is unable to return it to his debtor, he cannot have judgment for the debt.

However, a person who had made his own interest in the mortgage property liable to the debt was held to have lost his right against the principal security, by taking from the principal debtor by way of indemnity a security upon other property: Cooper v Jenkins (1863) 32 Beav 337; 55 ER 435. A surety for a limited sum only has, on payment of that sum, all the rights of the creditor in respect of that amount and is therefore entitled to a share in any security held by the creditor for the whole of the debt: Goodwin v Gray (1874) 22 WR 312.

Qualification on restriction 42.14 This restriction on the creditor in dealing with his securities only applies when he has notice of the suretyship, and if he accepts the liability of two co-debtors without

[page 895] knowing that, while they are both principal debtors towards him, they stand in the relation of principal and surety between themselves, he is not affected by the restriction until he has notice of the rights of the surety. To these rights, subject to his own claims, he must then give effect: Duncan, Fox & Co v North & South Wales Bank (1880) 6 App Cas 1; Rouse v Bradford Banking Co Ltd [1894] AC 586; Nicholas v Ridley [1904] 1 Ch 192. The right of the surety extends to all equities which the creditor whose debt he has discharged could have enforced not merely as against the principal debtor but against all who claim under him. See Drew v Lockett (1863) 32 Beav 499; 55 ER 196 and also Praed v Gardiner (1788) 2 Cox Eq Cas 86; 30 ER 40. This right of the surety to the benefit of the creditor’s securities was affirmed by the English Mercantile Law Amendment Act 1856 which has been re-enacted in the Australian states; see, for example, Law Reform (Miscellaneous Provisions) Act 1965 (NSW) s 3, replacing s 8A of the Usury, Bills of Lading and Written Memoranda Act 1902 (NSW), and the Supreme Court Act 1958 (Vic) s 52. A surety who pays the debt is entitled to have all the securities held by the creditor assigned to him, and to stand in the place of the creditor, and use all remedies, and, if need be, upon a proper indemnity, use his name in any proceeding in order to obtain from the principal debtor, or any co-surety or co-debtor, indemnity for the payment he has made. The statute applies to a co-debtor as well as to a co-surety.

Failure of creditor to preserve securities 42.15 The surety being thus interested in the mortgage estate, the neglect of the creditor to preserve the securities for his benefit will cause the release of the surety, either entirely or to the extent of the lost fund. Compare the situation of absolute discharge where the terms of the principal contract are varied to the surety’s disadvantage. Where securities are released the surety is released only to the extent of the loss of his security. The wasteful application of the principal debtor’s estate by the creditor will release the surety (Mutual Loan Fund Association v Sudlow (1858) 5 CB NS 449; 141 ER 183); similarly, if the creditor, instead of proving, as he ought to do, under the

bankruptcy of the debtor, without notice to the surety, releases the trustee and the bankrupt’s estate in consideration of a conveyance of the equity of redemption: see Pledge v Buss (1860) Johns 663; 70 ER 785. The creditor may choose the time to sell the security. If the creditor refuses a surety’s request to sell the security, the surety should pay out the debt and take over the security: China and South Sea Bank Ltd v Tan Soon Gin [1990] 1 AC 536; Downsview Nominees Ltd v First City Corp Ltd [1993] AC 295. The creditor cannot, as against the surety, apply the security in payment of any other debt than that for which the surety was liable: Pearl v Deacon (1857) 24 Beav 186; 53 ER 328. The creditor is under no obligation not to assign the securities or the debt. Upon such an assignment the creditor’s obligation to preserve the securities attaches upon the assignee, who also acquires the rights of the creditor against the surety; and those rights are not lost by the neglect of the assignee to give notice of the assignment to the surety; though by omitting to give notice he will risk the consequences of a payment by the surety to the assignor, but if, through the neglect of the creditor or his assignee to enforce or protect the security, the benefit of it is lost to the surety, he is discharged: Taylor v Bank of New South Wales (1886) 11 App Cas 596; Buckeridge v Mercantile Credits Ltd (1981) 147 CLR 654. It is usual to insert in the guarantee a provision to prevent the release of securities discharging the surety. It should be noted that the whole of this paragraph in the corresponding English edition was quoted in Dowling v Ditanda Ltd (1975) 236 EG 485. [page 896]

Position of surety on insolvency of mortgagor 42.16 Where a surety becomes so for the whole of the debt, but his liability is limited to a specific sum, he does not, on paying that sum, acquire a right of proof in priority to the creditor. Consequently, the creditor can still prove for the full debt and the surety cannot prove until the creditor has been fully paid. But, if the surety is surety for part of the debt and pays that part, he succeeds pro tanto to the right of proof of the creditor: Re Sass; Ex parte

National Provincial Bank of England [1896] 2 QB 12; Barclays Bank Ltd v TOSG Trust Fund Ltd [1984] 1 All ER 628, affirmed [1984] AC 626; [1984] 1 All ER 1060 (HL). A surety who has not been called upon to pay is nevertheless under a contingent liability in respect of which he can prove: Re Blackpool Motor Car Co Ltd; Hamilton v Blackpool Motor Car Co Ltd [1901] 1 Ch 72; Re Fenton; Ex parte Fenton Textile Association Ltd [1931] 1 Ch 85. But where a surety had covenanted to keep up the premiums on a policy mortgaged by the principal debtor, and to pay interest so long as any principal remained due (the mortgagor having agreed to indemnify him), and the mortgagee valued his security and proved for the deficiency in the bankruptcy of the mortgagor, the surety was not allowed to prove under the indemnity in respect of either head of liability, since the policy had been realised and the debt extinguished by the bankrupt: Re Moss; Ex parte Hallett [1905] 2 KB 307. The decision was based also on the prohibition on double proof.

D. Sureties and Subrogation Generally 42.17 The rights and duties of sureties in mortgage transactions are mentioned in various places in this work as best suits the flow of the text. Duties owed to sureties on exercise of power of sale are considered in 20.22, the effect on sureties on consolidation in 31.10. Rights of sureties as to contribution are considered in 30.2, exoneration in 30.7 and marshalling in 30.13. The effect on sureties of release of the principal debtor is discussed in 35.9. As to the effect of foreclosure on sureties, see 22.22. Redemption by sureties or their role in redemption proceedings are considered in 32.30 and 33.2; tacking and sureties in 25.5. A surety taking advantage of the doctrine of subrogation does not necessarily become entitled to the benefit of all the covenants which may be contained in any security given by the principal debtor because the ultimate purpose of subrogation is not to put the surety in the identical position in which the creditor formerly stood, but to enable the surety to enforce his right of indemnity to resort to the securities formerly held by the creditor: McColl’s Wholesale Pty Ltd v State Bank of NSW [1984] 3 NSWLR 365 at

379 based on Orakpo v Manson Investments Pty Ltd [1977] 1 All ER 666 at 676; [1977] 1 WLR 347 at 358 per Buckley LJ. Other aspects are considered below.

Subrogation 42.18 It is not intended to delve deeply into the principles of subrogation generally, as to which see general works on equity such as Meagher, Gummow and Lehane Chapter 9. Basically subrogation has been described as ‘a legal fiction, by force of which an obligation extinguished by a payment made by a third person is treated as still subsisting for the benefit of this third person, so that by means of it one creditor is substituted to the rights, remedies and securities of another’: Aetna Life Insurance Co v Middleport 124 US 534 at 548–9 (1887). Subrogation is a principle of equity to be applied where the person who paid money has no adequate remedy at law: Cochrane v Cochrane (1985) 3 NSWLR 403 endorsed by the Court of Appeal in New South Wales Medical [page 897] Defence Union Ltd v Crawford (No 3) (23 November 1994, unreported, BC 9404919). However, English law appears to have moved from this classic position overinfluenced by restitutionary doctrines: see Banque Financière de la Cité v Purc (Battersea) Ltd [1999] 1 AC 221; [1998] 1 All ER 737; Anfield (UK) Ltd v Bank of Scotland plc [2010] EWHC 2374 (Ch); [2010] All ER(D) 119. Subrogation operates in the law of mortgages. The overriding principle is found in Ghana Commercial Bank v Chandiram [1960] AC 732 (PC), that there is a presumption in equity that a person who pays off a mortgage does not intend to discharge it, but keep it alive for his own benefit. The principle has been applied for centuries: see, for example, Chetwynd v Allen [1899] 1 Ch 353; Butler v Rice [1910] 2 Ch 277 at 282 and 14.6; but see Ibrahim v Barclays Bank plc [2012] EWCA Civ 640; [2012] 2 Lloyd’s Rep 13. The mere fact that a person, A, borrowed money and lent that sum to X who used it to discharge a mortgage from Y is insufficient to make A

subrogated to Y’s mortgage (Wylie v Carlyon [1922] 1 Ch 51), however, the court will act on even slender evidence of a positive intention that A will have the benefit of the security: Paul v Speirway Ltd [1976] Ch 220; [1976] 2 All ER 587; State Bank of New South Wales v Geeport Developments Pty Ltd (1991) 5 BPR 11,947. In State Bank of New South Wales v Geeport Developments Pty Ltd (1991) 5 BPR 11,947, 11,953, Cohen J held that subrogation is available of a proportionate part of the security where part payment of a debt is made; and see Patten v Bond (1889) 60 LT 583. Cohen J declined to follow the contrary view in Meagher, Gummow and Lehane, above. However, the conflict may be more apparent than real as the latter text at [9-230] notes that there are distinct situations. One is where the surety guarantees the whole of the debt, but discharges only part, in which case subrogation does not apply: Ex parte Brett; Re Howe (1871) LR 6 Ch App 838 at 841; Austin v Royal (1999) 47 NSWLR 27. However, if the surety pays the balance of what is owing or a discrete part of the debt, the doctrine may apply: Equity Trustees Executors and Agency Co Ltd v New Zealand Loan & Mercantile Agency Co Ltd [1940] VLR 201 at 207 and Meagher Gummow and Lehane at [9-230].

The 13 points of subrogation 42.19 In Cheltenham & Gloucester plc v Appleyard [2004] EWCA Civ 291 (CA) Neuberger LJ (with whom Lord Phillips MR and Kennedy LJ agreed) made a compendious statement of 13 principles relating to the law of subrogation. Neuberger LJ first accepted the definition of subrogation stated by Walton J in Burston Finance Limited v Speirway Limited[1974] 3 All ER 735 at 738; [1974] 1 WLR 1648 at 1652: [W]here A’s money is used to pay off the claim of B, who is a secured creditor, A is entitled to be regarded in equity as having had an assignment to him of B’s rights as a secured creditor … It finds one of its chief uses in the situation where one person advances money on the understanding that he is to have certain security for the money he has advanced, and for one reason or another, he does not receive the promised security. In such a case he is nevertheless to be subrogated to the rights of any other person who at the relevant time had any security over the same property and whose debts have been discharged in whole or in part by the money so provided by him.

His Lordship then set out a 13-point summary of the principles of subrogation:

32. First, subrogation ‘embraces more than a single concept’: it is sometimes contractual in nature and it is sometimes based on equity — see per Lord Diplock and per Lord Keith of Kinkel in Orakpo at 104D and 119A-B. The particular type of subrogation with which cases such as the present are concerned was described by Lord Hoffmann in Banque Financiere at 231G-H as: An equitable remedy to reverse or prevent unjust enrichment which is not based upon any agreement or common intention of the party enriched and the party deprived.

[page 898] Any reference hereafter to subrogation should be treated as a reference to this equitable species of subrogation. 33. Secondly, subrogation is a remedy primarily aimed at preventing unjust enrichment. That is clear from what was said by Lord Diplock in Orakpo v Manson Investments Limited [1978] AC 95 at 104C-D, and it has been recently repeated by Millett LJ in Boscawen at 335C, and by Lord Hoffman and by Lord Clyde in Banque Financiere respectively at 231G-H, and 237D-E. 34. Thirdly, subrogation is a flexible remedy, which nonetheless must be applied in a principled fashion. That was made clear by Millett LJ in Boscawen at 338G-339C relying in part on what was said by Lord Diplock in Orakpo at 104, and by Lord Clyde in Banque Financiere at 237DE. 35. Fourthly, a classic case of subrogation is that described by Walton J in Burston Finance at 1652B-D, cited above. The reasons that a lender’s anticipated security may not have been forthcoming so that he has sought to invoke subrogation arevarious. Examples include the lender’s ineptitude (as in Burston Finance), the lender being misled (as in Banque Financiere and in Boscawen), the borrower being an infant (as in Thurstan v Nottingham Building Society [1903] AC 6), and the borrowing being ultra vires the borrower (as in Re Cork and Youghall Railway Co (1860) LR 4 Ch App 748). 36. Fifthly, although the classic case of subrogation involves a lender who expected to receive security (in the proprietary sense — eg a mortgage) claiming subrogation to another security, it can apply to personal rights. In Re Wrexham Mold and Connah’s Quay Railway Co [1899] 1 Ch 440 at 458, Vaughan Williams LJ referred to the claim for subrogation being to ‘the rights of the creditor who has been paid off’, and does not appear to have limited those rights to proprietary rights. In Banque Financiere, the lender bargained for what Lord Hoffmann called at 229C ‘a negative form of protection … in the form of an undertaking’, which he did not get. This did not prevent his claim to be subrogated to a security, albeit essentially as a personal remedy — see per Lord Steyn at 228C-D and Lord Hoffmann at 229C. 37. Sixthly, the fact that a lender of money gets some security does not prevent him from claiming to be subrogated to another security: see Banque Financiere, perhaps most clearly per Lord Hutton at 241C-D. In that case, the lender anticipated two forms of protection, one of which (a pledge of shares) was provided as agreed. Although this was ‘the principal security’ (see at 229G), it did not prevent the lender obtaining a subrogated right owing to the failure of the other form of protection.

38. Seventhly, a lender cannot claim subrogation if he obtains all the security which he bargained for, as in Burston Finance (applying Capital Finance Co Limited v Stokes [1969] 1 Ch 261) or where he has specifically bargained on the basis that he would receive no security as in Paul v Speirway Limited (in liquidation) [1976] 1 WLR220. 39. Eighthly, the fact that the lender’s failure to obtain the security he bargained for was attributable to his negligence is irrelevant. It does not prevent him from claiming subrogation — see per Lord Hoffmann at 235E-G in Banque Financiere. The effect of that observation was probably impliedly to disapprove observations of Walton J in Burston Finance at 1657C and F. However, Walton J was concerned with a case where the lender obtained the security, but negligently failed to protect himself by registering it, whereas in Banque Financiere the lender’s negligence was in failing to check that he had obtained the security. 40. Ninthly, the absence of a common intention on the part of the borrower and the lender that the lender should have security is by no means fatal to a lender’s subsequent claim for subrogation: see Banque Financiere at 232B-234C. However, the intention of the parties to the arrangement which is said to give rise to a claim for subrogation may be ‘highly relevant’: ibid at 234D. It would seem that the intention of the lender is particularly important (see for example Banque Financiere at 235A-B and Boscawen at 339H-340A). 41. Tenthly, subrogation cannot be invoked so as to put the lender in a better position than that in which would have been if he had obtained all the rights for which he bargained: see Banque Financiere at 235D and 236G-273B per Lord Hoffmann. This point was also made by Lindley MR in Wrexham at 447. 42. Eleventhly, it is difficult, and may be impossible, for a lender who has obtained security to invoke subrogation where the security he has obtained gives him all the rights and remedies of security to which he claims to be subrogated (see Burston Finance at 1653D-E), or is a security in which the original security would naturally merge (see Burston Finance at 1653C and per Lord Diplock in Orakpo at 105B-C).

[page 899] 43. Twelfthly, the capital sum in respect of which a lender is subrogated cannot normally be greater than the amount of the secured debt that has been discharged: see per Lord Diplock in Orakpo at 104G, and per Evans LJ in Halifax Mortgage Services v Muirhead 76 P&CR 418 at 426. 44. Finally, normal equitable principles apply to subrogated rights. Thus, the familiar equitable defences can be raised against a claim for subrogation, and priority as between the person with the subrogated right and other parties are to be determined in accordance with normal equitable principles: see Halifax v Omar, at paragraphs 81-83 per Jonathan Parker LJ.

Most case references are included in the above quotation, however Orakpo is Orakpo v Manson Investments Ltd [1978] AC 95; [1977] 3 All ER 1 and Banque Financière is Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221; [1998] 1 All ER 737. In his article on the case, G Tilley, in ‘Restitution and the Law of

Substitution in England and Australia’ (2005) 79 ALJ 518 (referred to by the High Court in Bofinger v Kingsway Group Ltd (2009) CLR 269 at 301 fn 98; 260 ALR 71 at 92 fn 77) remarks that this is a useful summary of the law for Australia, but that, insofar as it relies heavily on Banque Financière de la Cité v Parc (Battersea) Ltd, above, which has not, at least yet, been recognised in Australia, care must be taken with many of the propositions. He notes that proposition 8 is questionable: see also Young, ‘Mortgages Rights of Subrogation’ (case note) (2005) 79 ALJ 424. Thus claims in Appleyard such as ‘subrogation is a remedy primarily aimed at preventing unjust enrichment’ might be seen as denying the equitable basis of the remedy as the Australian courts currently prefer it to be framed. Bryson J in Challenger Managed Investments Ltd v Direct Money Corp Pty Ltd (2003) 12 BPR 22,257 at 22,269–70 (a passage edited out of the report in 59 NSWLR 452) considered Banque Financière and stated: I would respectfully say that Lord Hoffman’s relation, at AC 234; All ER 747, of subrogation to unjust enrichment was not articulated in the authorities to which his Lordship referred, and is not established in Australian case law. In my understanding explanation of subrogation in terms of restitution and unjust enrichment was introduced by Millett LJ in Boscawen v Bajwa [1996] 1 WLR 328 at 334; [1995] 4 All ER 769 at 776, and was not earlier found … To my mind it is enough to see subrogation as an entitlement which equity accords to the payer, firmly established by judicial decisions notwithstanding that a satisfactory doctrinal basis is difficult to identify, and notwithstanding that classification of the mortgagor’s position as unconscionable seems very attenuated.

The High Court in Bofinger at CLR 302; ALR 93 [98] firmly rejected unjust enrichment as the basis for subrogation in Australia.

Waste by mortgagor 42.20 The mortgagee may not only obtain the restraint of such acts as mining under buildings so as to endanger their stability (Dugdale v Robertson (1857) 3 K & J 695; 69 ER 1289, and see Metropolitan Life Assurance Co v McQueen [1924] 2 DLR 942), but, if the mortgagee shows that the security will be made insufficient, he may restrain acts which lessen its value. These may consist of the removal of valuable fixtures (Ackroyd v Mitchell (1860) 3 LT 236; Gough v Wood & Co [1894] 1 QB 713 (CA); Huddersfield Banking Co Ltd v Henry Lister & Son Ltd [1895] 2 Ch 273 (CA); Ellis v Glover and Hobson Ltd [1908] 1 KB 388 (CA)), or the cutting of timber: Usborne v Usborne (1740) 1 Dick 75; 21 ER 196; Hampton v Hodges (1803) 8 Ves 105;

32 ER 292; Hippesley v Spencer (1820) 5 Madd 422; 56 ER 956; Humphreys v Harrison (1820) 1 Jac & W 581; 37 ER 489; King v Smith (1843) 2 Hare 239 at 243; 67 ER 99 at 101; Simmins v Shirley (1877) 6 Ch D 173; Harper v Aplin (1886) 54 LT 383.

Liability of mortgagee for waste, etc 42.21 At common law a legal mortgagee in possession is not liable for waste because as the owner of the fee simple estate at law the legal mortgagee is the absolute owner, hence could not commit waste (see Wh & TLC ii 927 (and, generally, see 943-4)), but [page 900] the mortgagee will not be allowed to cause unnecessary injury to the security when the security is not shown to be defective: Withrington v Banks (1725) 25 ER 205; and see Wh & TLC ii at 943–4. The legal mortgagee may be prevented from so doing by injunction or by being deprived of possession: Hanson v Derby (1700) 2 Vern 392; 23 ER 852. If, without special authority, the mortgagee opens mines or quarries he will be charged with his receipts, and will not be allowed the costs of severing the minerals or other expenses. For the mortgagee has no right to speculate at the mortgagor’s expense and such an act is a sale of part of the inheritance (Hughes v Williams (1806) 12 Ves 493; 33 ER 187; Thorneycroft v Crockett (1848) 16 Sim 445; 60 ER 946); but the mortgagee may work mines already opened (Elias v Snowdon Slate Quarries Co (1879) 4 App Cas 454), although he is not obliged to advance more money on them: Rowe v Wood (1822) 2 Jac & W 553; 37 ER 740. The mortgagee has statutory power to cut and sell timber and other trees ripe for cutting, and not planted or left standing for shelter or ornament: NSW Act s 109(1)(d); Queensland Act s 83(1)(d); Tasmanian Act s 21(1)(d); UK Act s 101(1)(iv). However, the statutory power to cut timber may be varied or excluded by the mortgage deed: NSW Act s 109(2), (3); Queensland Act s 83(3), (4);Tasmanian Act s 21(2), (3). A mortgagee with an insufficient security may cut timber and open new

mines, and may lease or work abandoned mines, and will only be liable to account for the profits or royalty, and not for the value of the minerals raised or the damage caused to the surface: Millett v Davey (1862) 31 Beav 470; 54 ER 1221. If the mortgagee is expressly authorised to work mines he will be allowed the expenses incurred in doing so, with interest: Norton v Cooper (1854) 25 LJ Ch 121; 43 ER 1053. Where there is a mortgage of a business as a going concern, the mortgagee may carry on the business with a view to sale (see 19.31), and is entitled to be recouped for losses (not attributable to negligence) out of the proceeds of sale of the business: Bompas v King (1886) 33 Ch D 279 (CA). The mortgagee is entitled to add to the security reasonable and proper expenses incurred in preserving the property pending sale or otherwise, for example the cost of protecting the premises against vandals (see 16.1 and 40.3).

Index References are to paragraphs A Abandonment equitable lien lost by .… 2.19 solicitor’s lien lost by .… 2.37 Absolute owner power to mortgage .… 11.1 Acceleration clause land mortgages .… 3.15 redemption timing effects .… 32.6 Accession common law doctrine distinguished from PPSA .… 5.94 definition of .… 5.94 PPSA security interests enforcement of interests in .… 5.97 generally .… 5.93 priority .… 5.95–5.96, 5.98 protection of security interests in .… 5.95 Accounts .… 39.1–39.62

action for .… 39.5 against mortgagee and his assigns .… 39.19–39.23 against mortgagee in possession .… 19.34–19.35, 39.24–39.41 against mortgagor .… 39.10–39.18 for crops .… 39.16 for debt .… 39.11–39.13, 39.19 definition of .… 5.22 errors .… 39.3 evidence .… 39.7, 39.11 falsification of .… 39.3 foreclosure requirements .… 21.4, 21.22, 22.12, 22.14, 39.4, 39.10 for improvements or repairs .… 39.17, 39.34 in estate .… 39.1 interim .… 39.1 of interest .… 39.42–39.61 after redemption day .… 39.43 capitalisation .… 39.50–39.54 cessation of .… 39.59–39.61 on expenditure .… 39.45 failure to claim .… 39.47 on judgment debt .… 39.49 on money retained .… 39.44 mortgage debt .… 39.42 payments during bankruptcy .… 39.46 rate allowed .… 39.55–39.58 on specialty debt .… 39.48

tenant for life .… 39.62 of mines .… 39.33 mortgagee’s right to .… 39.10 between mortgagor and mortgagee .… 39.1–39.7 mortgagor’s right to .… 19.9, 39.1 not taken .… 39.2 overpayments of interest .… 39.22 parties bound by .… 39.8–39.9 payments on .… 39.13 proceedings .… 39.5–39.6 receipt after master’s certificate .… 39.41 receiver in possession .… 39.18 redemption requirements .… 39.10 for rent and profits .… 39.14–39.15, 39.28–39.32 reopening .… 39.3 with rests .… 39.35–39.41 sale by mortgagee of shares .… 39.23 sale proceeds .… 39.21, 40.17 security interest granted over .… 5.22 security interests in .… 5.139 set-off on .… 1.51 settled .… 39.3, 39.5, 39.38 special circumstance affecting .… 39.4 surcharges .… 39.3 taking of .… 39.6–39.7 transferee of mortgage bound by state of .… 39.20

wilful default .… 39.24 Accountant liens .… 2.28 perfection of charge, liability .… 11.41 Accretion land mortgages .… 3.27–3.28 Acknowledgment generally .… 16.34 part payment and .… 16.33 redemption on .… 32.88 Acquiescence foreclosure reopening after .… 22.40 Acquisition compulsory, redemption on .… 32.35 Action administration .… 16.9 choses in see Chose in action costs of .… 40.9–40.15 loss of deeds .… 40.12 loss of right to .… 40.9 parties added for benefit of mortgagee .… 40.14 parties added through mortgagee dealing with estate .… 40.15 rule as to .… 40.1 unnecessary or unsuccessful proceedings .… 40.13

when nothing is due .… 40.10 where right to costs not lost .… 40.11 for account .… 39.5 on covenant to pay see Action on covenant to pay in debt .… 2.5 ejectment .… 19.5, 19.22, 19.23, 19.29 future things in .… 6.5, 6.23 Inequitable, restriction on suing .… 16.10 limitation of see Limitation of actions possession .… 19.5, 19.22–19.29 priority .… 40.5 redemption see Redemption Action on covenant to pay .… 17.1–17.12 Anshun principle .… 17.12 assignment of equity of redemption .… 17.5 conclusive evidence clauses .… 17.7 generally .… 17.1 implied covenants .… 17.4 insurance premium recovery .… 17.6 limitation period .… 17.1 loss of right of action .… 17.10 miscellaneous matters .… 17.3 mistaken discharges .… 17.11 notices of demand .… 17.9 recovery .… 17.2 Torrens system .… 17.1

when right of action accrues .… 17.8 Additional security see Collateral ADI account see Authorised deposit-taking institution (ADI) account Administration action by mortgagee .… 16.9 costs of .… 40.26 insolvent estates .… 23.11 Administrators foreclosure proceeding party .… 22.10 mortgage by .… 11.16–11.17 Advance tacking of further advances see Tacking Adverse possession title by .… 32.22 Advertising mortgagee’s obligation when exercising power of sale .… 20.30 Affidavit foreclosure proceedings .… 22.13 of non-payment .… 22.46, 33.24 After-acquired property PPSA security interests .… 5.32, 5.35 Agency partners regarding borrowing .… 11.25

principal-agent relationship .… 24.24 Agent appointment under power of sale .… 20.35 constructive notice through .… 24.22–24.24 of corporation .… 11.34 foreclosure .… 22.47 fraud of .… 24.23 mortgage by .… 11.24, 11.34 of mortgagee in possession .… 19.42 possession by .… 5.44 receivers as .… 18.5 redemption payments .… 32.48, 32.49 relationship with principal .… 24.24 rent collected by .… 39.32 solicitor as .… 42.5 Agreement buy-back .… 5.18 equitable charge .… 2.4 hire-purchase .… 1.20, 6.20 not to sue .… 16.13 oral .… 5.40 salvage .… 9.13 security see Security agreement subordination .… 5.91, 24.3 supply .… 1.39

tacking by .… 25.9 Agricultural land crops see Crops livestock see Livestock mortgages of .… 9.10–9.12 Aircraft mortgages of .… 9.29 Alienation forfeiture on .… 13.51–13.52 inter vivos .… 17.3 pensions .… 13.49 restraint on .… 13.50, 13.53 All moneys clause construction of .… 3.8, 3.9 repayable items under .… 3.14 Allowances costs of ‘just’ .… 40.27 Anshun principle actions on covenant to pay .… 17.12 Appeal as to costs .… 40.6 Appointment of receiver .… 18.1–18.27 artificer’s lien enforceability .… 2.27 by court .… 18.18–18.27

applicants .… 18.21 committal for contempt .… 18.27 managers .… 18.24 power of court .… 18.18 powers of receiver .… 18.26 prior mortgagee is in possession .… 18.22 property receiver may be appointed over .… 18.23 purpose of .… 18.19 security .… 18.20 status of receiver .… 18.25 equitable execution, by .… 7.11 generally .… 18.1 by mortgagee .… 18.2–18.17 Corporations Act application .… 18.11–18.13 distribution by receiver of moneys receiver .… 18.16 effect of .… 18.8 generally .… 18.6–18.7 liability of receiver .… 18.14 multiple receivers .… 18.6, 18.7, 18.11 notice .… 18.7, 18.17 power of appointment .… 18.2–18.3, 18.6 powers of receiver .… 18.9–18.10, 18.12–18.13 receiver and manager .… 18.4, 18.7 receiver as agent of mortgagor .… 18.5 renumeration of receiver .… 18.15 right lost by waiver .… 18.6

termination of receiver .… 18.17 Torrens system .… 18.7 validity of .… 18.6, 18.7 writing requirement .… 18.7 mortgagees in possession .… 19.42 mortgagor’s rights and .… 12.9 possession and .… 16.4 receiver as agent of mortgagor .… 18.5 remedies of chargee .… 2.8 Appropriation of payments .… 32.51–32.54 Clayton’s case rule .… 32.54 by creditor .… 32.53 by debtor .… 32.52 to principal or interest .… 32.51 Arming doctrine possession of deeds, effect on priority .… 24.45 Arrear interest on .… 39.50, 39.53 Artificer’s lien .… 2.21–2.27 completeness of work .… 2.25 delivery of possession .… 2.23 extent of .… 2.26 generally .… 2.21 improvement .… 2.22 priority over mortgagee .… 2.27

work done with owner’s authority .… 2.24 Assignee Dearle v Hall rule, non-application .… 26.4 Assignment absolute .… 6.5 choses in action .… 6.4–6.14 common law lien .… 2.31 debt .… 6.19, 6.21, 14.3 equitable .… 6.10–6.14 charges on particular fund must be clear .… 6.13 creation .… 6.11 effect of .… 6.14 requirements .… 6.12 statutory assignment distinguished from .… 6.10 equity of redemption .… 17.5, 32.22, 33.5 hire-purchase agreements .… 6.20 life insurance policies .… 6.15 marine insurance .… 6.15 mortgage .… 1.7 see also Transfer of mortgage by mortgagor .… 14.16 notice .… 6.24, 26.7, 26.19 priorities .… 6.8 public pay and pensions .… 13.49 redemption rights .… 32.4–32.5 statutory .… 6.4–6.10

effect of .… 6.6 equitable assignment distinguished from .… 6.10 failure to meet requirements .… 6.9 generally .… 6.4 notice .… 6.7 priorities .… 6.8 requirements for .… 6.5 at undervalue .… 14.12 voluntary .… 6.5 Assignor bankruptcy of .… 26.6 Attachment automatic .… 5.31–5.34, 5.54 orders .… 7.13 PPSA security interests automatic .… 5.31–5.34 floating charge .… 5.35 requirements .… 5.28–5.30 transitional interests .… 5.8 solicitor’s lien .… 2.49 Attorney see Power of attorney Attornment clause attornment by mortgagor .… 39.26 land mortgages .… 3.23 mortgagee’s right to possession and .… 12.11

purpose .… 12.11 registered mortgages .… 12.11 tenancy by .… 3.23, 12.11 Auction power of sale under .… 20.32–20.33 Australian Securities and Investments Commission (ASIC) registration .… 11.38, 11.40, 11.44 Authorised deposit-taking institution (ADI) account perfection by control .… 5.51, 5.118 Avoidance of security see Void or imperfect securities B Bad faith under PPSA .… 5.121 Bailment perfection of PPSA security interest via possession of bailee .… 5.57, 5.61–5.62 personal property security leases .… 5.24–5.25 pledge conversion .… 1.11 possession of goods under .… 19.27 Bailor purchase-money security interest (PMSI) .… 5.83 Banker influence presumption .… 13.22

Bankrupt persons mortgage by .… 11.22 redemption rights .… 32.23 Bankruptcy see also Insolvency of assignee .… 17.5 of assignor .… 26.6 of beneficiary .… 26.27 consolidation .… 31.1, 31.8 conveyances in fraud of creditors .… 13.5 discharge from .… 23.16–23.17 duration of .… 23.16 interest payments .… 39.46 merger effect .… 36.12 of mortgagee .… 14.14 release in .… 35.10 trustee in see Trustee in bankruptcy Bearer debenture .… 8.3 Beneficiary bankruptcy of .… 26.27 equitable lien over amount of trust fund .… 2.18 redemption proceedings .… 33.2, 33.4 Bet loan for payment of .… 13.47 Bill of sale

fixtures passing by mortgage of land .… 1.20 Bona fides registration of deeds .… 27.12–27.14 Bona vacantia redemption rights .… 32.24 Bond bottomry .… 9.19, 40.8 interest on .… 39.48 Bonus collateral advantage .… 32.15 Book debt assignment .… 6.21 charge on .… 11.39 definition of .… 6.20, 11.39 future .… 6.21 mortgages of .… 6.20–6.22 profit-sharing loans .… 6.22 Bottomry bond costs of bondholder .… 40.8 maritime lien recognition .… 9.19 Breach of trust by executors .… 11.18 mortgages in, effect on priority of mortgages .… 24.30 Broker .… 1.55

Building society discharge on repayment .… 32.64 dissolution of .… 32.34 mortgage by .… 11.45 redemption .… 32.7, 32.32–32.34, 32.57 Business book debt see Book debt goodwill see Goodwill mortgagee in possession’s right to carrying on of .… 19.31 ordinary course of .… 8.16 power of sale .… 20.52 Buy-back agreement PPSA security interests .… 5.18 Buyer taking free rules .… 5.34, 5.65–5.66, 5.102–5.110 C Capital gains tax (CGT) liability for .… 41.5 Capitalisation of interest .… 39.50–39.54 Cash common law lien over .… 2.30 Cash cover .… 1.54

Caveat assignment of book debt .… 6.21 priority effect .… 28.10–28.16 ship mortgages .… 9.18 Torrens system .… 4.26–4.28, 28.10–28.16 Certificated investment instrument possession of, under PPSA .… 5.49 CGT see Capital gains tax (CGT) Charge choses in action .… 6.3 convertible .… 8.17 creation .… 11.39 definition of .… 1.8, 1.9, 2.2, 8.9 equitable see Equitable charge in favour of officers .… 8.22 fixed see Fixed charge floating see Floating charge on land for unpaid taxes .… 41.12 merger of .… 36.4–36.11 mortgage distinguished from .… 1.8, 1.9 statutory see Statutory charge Charge-back transaction PPSA security interests .… 5.9 Charging order

effect .… 7.8 enforcement .… 7.9 generally .… 7.5 partnership share over .… 7.12 priority of .… 24.50 process .… 7.7 registration of writs and orders affecting land .… 7.6 relief against forfeiture .… 37.10 Chattel see also Personal property aircraft .… 9.29 artificer’s lien see Artificer’s lien bills of sale .… 1.7 foreclosure .… 21.1, 21.3 mortgagee’s right of possession .… 19.26, 19.44 personal .… 1.1, 20.3 power of sale .… 20.3 priority of equitable encumbrancers and judgment creditors .… 24.52 redemption rights .… 32.3 ships .… 9.17 vendor’s lien over .… 2.10, 2.12 Chattel paper definition of .… 5.2, 5.22 financing .… 5.48 PMSI exemption .… 5.84 possession of, under PPSA .… 5.48

security interest perfection .… 5.58 security interests .… 5.22, 5.139 vesting on insolvency .… 5.114 Children influence presumption .… 13.22 Chose in action assignment equitable .… 6.10–6.14 statutory .… 6.4–6.10 charges .… 6.3 classification .… 6.3 Dearle v Hall rule application .… 26.8 foreclosure .… 21.1 future .… 6.5, 6.23 mortgagee’s right to possession .… 19.45 mortgages copyright .… 6.25 debt .… 6.19–6.22 equitable assignment .… 6.10–6.14 future things in action .… 6.5, 6.23 generally .… 6.3 interest in trust funds .… 6.24 life insurance policies .… 1.43, 6.15 partnership shares .… 6.18 patents .… 6.26

PPSA exemption .… 6.2 registered trade marks and designs .… 6.27 shares .… 6.16–6.17 statutory assignment .… 6.4–6.10 power of sale .… 20.3 Circulating asset definition of .… 5.117 under PPSA .… 5.116–5.117 Clayton’s case appropriation of payments .… 32.54 tacking .… 25.15 Clogs on equity of redemption allowable .… 32.13 definition of .… 32.12 oppressive securities .… 13.10 Co-mortgagee foreclosure proceeding party .… 22.4 joint account requirement .… 11.31–11.32 Co-mortgagor redemption .… 32.20, 33.3 Co-owner actions on covenant to pay .… 17.2 equitable mortgages .… 3.39, 3.49 mortgages

by all co-owners .… 11.2–11.3 husband and wife .… 11.2, 11.3 partition of mortgaged land .… 11.6 by some co-owners only .… 11.4 undivided shares .… 11.5 redemption rights .… 32.20 transfer of mortgage by .… 14.17 Co-surety release of .… 35.11 right of contribution .… 30.2 Collateral advantages .… 1.43 discharge of .… 32.71 disposal of, under PPSA .… 5.128–5.133 examples of .… 1.43 foreclosure proceedings .… 22.8 grantors’ rights .… 5.30 power of sale extended to .… 20.6 release of .… 34.8 security interest see Security interest stamp duty .… 41.10 transfer of .… 14.10 Collateral advantage .… 32.12–32.16 advantages .… 32.16 bonuses .… 32.15

clogs on equity of redemption and .… 32.12–32.13 generally .… 32.12 premiums .… 32.15 tests for .… 32.14 Collusion foreclosure reopened for .… 22.39 Commercial consignment definition of .… 5.23 security interests .… 5.23 vesting on insolvency .… 5.114 Commercial pressure securities obtained by .… 13.39 Commercial property definition of .… 5.10 Commercially reasonable under PPSA .… 5.121 Commingling Conflicts between interests in commingled goods under PPSA .… 5.99–5.101 generally .… 5.93 perfection of interests in commingled goods under PPSA .… 5.55 Commission mortgagee in possession .… 19.41 redemption rights and .… 32.11

on unpaid instalments .… 39.56 Committal for contempt interference with receiver .… 18.27 Common law lien .… 2.20–2.32 accountants’ .… 2.28 artificer’s .… 2.21–2.27 assignment .… 2.31 definition of .… 1.10 equitable lien distinguished from .… 1.10, 2.9 generally .… 2.20 insurers’ .… 2.29 loss of .… 2.32 over cash .… 2.30 Company charge definition of .… 8.9 registration of .… 3.53, 11.38–11.44 Comparative law PPSA security interests .… 5.4 Compensation agents or employees of mortgagees in possession .… 19.42 for default of power of sale .… 20.54 resumption .… 38.4 Conclusive evidence clause actions on covenant to pay .… 17.7

Confiscation proceeds of crime .… 37.14 Conflict of interest solicitors .… 42.1, 42.7 Consideration inadequacy and unconscionable dealing .… 13.32 registration of deeds .… 27.11 Consignment definition of .… 5.23 security interests .… 5.23 Consolidation .… 31.1–31.11 conditions for .… 31.3–31.7 different mortgagees .… 31.6 generally .… 31.3 same mortgagor .… 31.4 securities in existence .… 31.5 securities of different natures .… 31.7 deed of .… 31.1 enforcement of .… 31.8 nature of .… 31.1 no attachment after severance of equities .… 31.9 right of .… 31.8, 31.9, 31.10 statutory exclusion .… 31.2 Torrens system .… 31.2, 31.11

Constructive knowledge definition of .… 5.109 Constructive notice generally .… 24.9 imputation .… 24.10 securities made under undue influence .… 13.28 statutory restriction .… 24.13 tacking .… 25.8 through agents .… 24.22–24.24 through non-inquiry .… 24.14–24.21 Consumer Credit Code .… 9.1–9.3 Consumer credit security .… 9.1–9.5 Consumer Credit Code application .… 9.1–9.3 dispute resolution scheme .… 9.4 power of sale .… 9.4, 20.53 restrictions on suing .… 16.16 void or imperfect .… 13.15 Consumer law discharge pursuant to .… 38.5 Consumer property definition of .… 5.10 Contempt, committal for interference with receiver .… 18.27 Contra proferentem rule .… 3.7

Contractor statutory charge .… 7.10 Contractual lien delivery of possession .… 1.4 pledge distinguished from .… 1.4 ships .… 9.21 Contribution doctrine of .… 30.2 exclusions .… 30.3 Contributory mortgage debentures as .… 8.1 Control definition of .… 5.118 perfection by .… 5.40, 5.50–5.52, 5.89, 5.118 Conversion land mortgages .… 3.55 Convertible charge .… 8.17 Conveyance absolute mortgage distinguished from .… 1.24–1.25 discharge of mortgage under overreaching .… 32.78 to equitable mortgage .… 40.30 in fraud against creditors .… 13.5–13.38

generally .… 1.26 of land see Mortgage of legal estate .… 22.48 of mortgagee’s estate .… 14.3 notice imputed from form of .… 24.17 power of sale and .… 20.49 reconveyance after redemption .… 32.57–32.61 costs of .… 40.28–40.30 with repurchase option .… 1.24–1.32 secret .… 1.26 Copyright mortgages of .… 6.25 Corporation charges definition of .… 8.9 registration of .… 3.53, 11.38–11.44 dissolution of .… 14.15 legal capacity .… 11.33 mortgage by .… 11.33–11.46 agents .… 11.34 building societies .… 11.45 generally .… 11.33 liquidators .… 11.35 mortgage form .… 11.37

public authorities .… 11.45 registration of .… 3.53, 11.38–11.44 specific loan not company asset .… 11.36 Costs .… 40.1–40.31 of action .… 40.9–40.15 loss of deeds .… 40.12 loss of right to .… 40.9 parties added for benefit of mortgagee .… 40.14 parties added through mortgagee dealing with estate .… 40.15 rule as to .… 40.1 unnecessary or unsuccessful proceedings .… 40.13 when nothing is due .… 40.10 where right to costs not lost .… 40.11 added to debt .… 40.4 administration .… 40.26 appeals as to .… 40.6 assessment .… 40.7, 40.31 bottomry bondholder .… 40.8 debt for .… 39.12 of disclaiming defendants .… 40.16 due to loss of deeds .… 40.12 just allowances .… 40.27 legal, tax deductibility .… 41.3 litigation costs relating to security .… 40.23 mortgage document preparation .… 42.1 of mortgage preparation .… 40.24

mortgagee’s entitlement generally .… 40.3, 40.22 litigation costs relating to security .… 40.23 mortgage preparation .… 40.24 of parties added for benefit of mortgagee .… 40.14 of parties added through mortgagee dealing with estate .… 40.15 party and party basis .… 40.2 payment .… 40.7 priority actions .… 40.5 of reconveyance .… 40.28–40.30 rule as to .… 40.1 on sale .… 40.17–40.21 security completion .… 40.25 of solicitor mortgages .… 42.10 subsequent mortgagee’s right to have assessed .… 40.21 taxation of .… 40.31 unnecessary .… 40.13 Court-appointed receiver .… 18.18–18.27 applicants .… 18.21 committal for contempt .… 18.27 managers .… 18.24 power of court .… 18.18 powers of receiver .… 18.26 prior mortgagee is in possession .… 18.22 property receiver may be appointed over .… 18.23 purpose of .… 18.19

security .… 18.20 status of receiver .… 18.25 Court order see Order Court, sale by see Foreclosure and judicial sale Covenant enforcement rights .… 12.3 to insure .… 3.20 mortgagee in possession’s liability on .… 19.40 by mortgagees of land .… 3.25 by mortgagors of land .… 3.11–3.24 not to call in money .… 16.6 not to sue .… 34.7 to pay see Covenant to pay personal .… 37.3 to repair .… 3.19 to repay .… 3.13–3.18 in second or subsequent mortgages .… 10.7 for title .… 3.11 Torrens system .… 4.29 usual .… 3.12 Covenant to pay absolute .… 17.3 action on .… 17.1–17.12 Anshun principle .… 17.12 assignment of equity of redemption .… 17.5

conclusive evidence clauses .… 17.7 generally .… 17.1 implied covenants .… 17.4 insurance premium recovery .… 17.6 loss of right of action .… 17.10 miscellaneous matters .… 17.3 mistaken discharges .… 17.11 notices of demand .… 17.9 recovery .… 17.2 when right of action accrues .… 17.8 implied .… 17.4 interest .… 3.13–3.14, 36.14 mortgagee’s costs .… 3.21 rates and taxes .… 3.22 Credit contract, defined .… 9.2 Credit Ombudsman Service .… 9.5 Creditor generally .… 1.4 joint .… 32.50 judgment see Judgment creditor preferential .… 8.25 preservation of securities .… 42.15 priority see Priority redemption rights .… 32.26, 32.53 secured see Secured creditor

transactions defrauding .… 13.5–13.9 unsecured, marshalling in favor of, non-application .… 30.13 waiver of debt .… 35.1–35.12 Crime forcible entry .… 19.19–19.20 forfeiture of property considered to be proceeds of .… 37.14 Crops growing .… 39.16 mortgagee’s right to .… 39.16 mortgagor’s right to .… 12.5 under Personal Property Securities legislation .… 1.17 proceeds of .… 5.33 Crown land mortgages of .… 9.6–9.9 power of sale .… 20.5 registration of deeds .… 27.3 vendor’s lien .… 2.10 Crystallisation floating charge .… 5.35, 8.19–8.21 Curial proceeding foreclosure .… 22.1 Custody of deeds mortgagee’s rights .… 3.31 negligence in .… 24.41

production of deeds by mortgagee .… 3.32 Torrens system .… 4.31 D Damages breach of promise to give mortgage .… 1.41 Dangerous condition discharge or modification of mortgage .… 38.1 Dearle v Hall rule .… 26.1–26.12 application to property .… 26.8–26.12 assignees not within rule .… 26.4 assignment of mortgage .… 26.7 bankruptcy of assignor .… 26.6 burden of proof .… 26.1 generally .… 26.1 independence from conduct .… 26.3 notice of prior encumbrance effect .… 26.5 origin of .… 26.2 trust fund interests .… 6.24 Death devolution on .… 14.13, 17.3 of mortgagee .… 14.13 of mortgagor .… 16.9, 18.8, 29.1–29.4, 32.27, 33.6 of partner .… 11.30 of receiver .… 18.17

Debenture .… 8.1–8.25 bearer .… 8.3 definition of .… 8.1 discharge of .… 32.69 floating charge see floating charge form .… 8.2 generally .… 8.1 holders’ remedies .… 8.7–8.8 irredeemable .… 8.2 redeemable .… 8.2 statutory definition .… 8.9 stock .… 8.1 trust deeds securing .… 8.4–8.8, 11.42 trustees .… 8.6 Debt accounts for .… 39.11–39.13, 39.19 action for .… 16.4 assignment .… 6.19, 6.21, 14.3 book assignment .… 6.21 charge on .… 11.39 definition of .… 6.20, 11.39 future .… 6.21 mortgages of .… 6.20–6.22 profit-sharing loans .… 6.22 costs added to .… 40.4

costs for .… 39.12 equitable mortgage as security for .… 3.43 evidence of .… 39.11 incidence of consolidation .… 31.1–31.11 death of mortgagor .… 29.1–29.4 as between different properties .… 30.1–30.17 interest on .… 39.42 judgment, interest on .… 39.49 mortgage of .… 6.19–6.22 book debt .… 6.20–6.22 generally .… 6.19 priority .… 6.19 payment of .… 32.36–32.92 accounts taken with rests .… 39.40 appropriation of payments .… 32.51–32.54 cessation of mortgage terms on .… 32.62 notice to pay off .… 32.36–32.39 release upon .… 34.1–34.8 tender .… 32.40–32.50 time for .… 33.23 proof of .… 23.7, 23.9–23.11 purchase of under par .… 39.19 recovery of .… 17.2 release of covenants not to sue .… 34.7

estoppel and .… 34.6 generally .… 34.1–34.2 mortgage by deposit of deeds .… 34.5 specialty, interest on .… 39.48 subordinated agreements. priority .… 5.91, 24.3 second or subsequent mortgages .… 10.15 trust .… 10.15 unsecured, tacking .… 25.6 Debtor appointment as executor .… 34.2 default by .… 5.125 release of principal .… 35.9 Deceit see Fraud Deed of consolidation .… 31.1 delivery in foreclosure proceedings .… 22.17, 22.50 equitable mortgage by deposit of .… 3.36–3.44 co-owners .… 3.39 custody of documents .… 3.41 debt secured by .… 3.43 documents .… 3.37 form of memorandum .… 3.46 generally .… 3.36 liens mutually exclusive .… 3.44

partial .… 3.38 proof of intent to create .… 3.40 property affected by .… 3.42 release of debt or security .… 34.5 errors as to sum repayable .… 17.1 notice of .… 24.19–24.20 possession of, effect on priority .… 24.45 power of sale requirement .… 20.6 registration of see Registration of deeds sub-mortgages effected by .… 15.2 title see Title deeds transfer of mortgage .… 14.4 trust .… 8.4–8.8, 11.42 Deemed security interest .… 5.21–5.25 consignor under commercial consignment .… 5.23 generally .… 5.13 lessor or bailor under PPS lease .… 5.24–5.25 perfection .… 5.67 rationale for .… 5.21 remedies for holders .… 5.120 transferee of account or chattel paper .… 5.22 vesting on insolvency .… 5.114 Default mortgagee’s exercise of remedies upon .… 16.7–16.8 mortgagee’s right to possession before .… 19.7–19.8

notice of .… 19.8, 21.5 power of sale .… 20.54 redemption effects .… 32.10 requirements .… 16.7 Torrens system mortgages .… 4.36 wilful .… 39.24 Default priority rules .… 5.70–5.78 perfected–perfected disputes …. 5.73 change in mode of perfection …. 5.78 perfected–unperfected disputes …. 5.71 unperfected-unperfected disputes …. 5.72 Defective legal mortgage .… 3.49 Defence possession claims .… 19.24–19.25 of settled account .… 39.5 Delivery pledge existence .… 1.11 Derivative settlement notice to trustee .… 26.14 Destruction of property see Loss or destruction of property Devaluation of property .… 37.5 Devolution .… 14.13–14.15 see also Transfer of mortgage on bankruptcy .… 14.14

on death .… 14.13, 17.3, 32.27 dissolution of company mortgagee on .… 14.15 power of sale .… 20.9 Different properties, incidence as between .… 30.1–30.17 contribution .… 30.2–30.3 exoneration .… 30.4–30.8 liabilities of .… 30.1 Discharge from bankruptcy .… 23.16–23.17 duration .… 23.16 effect .… 23.17 Discharge of mortgage .… 32.1–38.7 building societies .… 32.64 cessation of terms on payment .… 32.62 collateral securities .… 32.71 debentures .… 32.69 delivery of deeds upon .… 32.80–32.82 document preparation .… 32.75 effect of receipt on mortgagor’s liability .… 32.65 equitable mortgages .… 32.68 insurance policies .… 32.72–32.73 of land mortgages .… 32.67 loss or destruction of property .… 37.1–37.14 change of nature of property .… 37.4 devaluation of property .… 37.5 disclaimers .… 37.13

generally .… 37.1 interests in freehold .… 37.7 joint tenants .… 37.6 leaseholds .… 37.8–37.11 liability of mortgagor under personal covenant .… 37.3 life tenants .… 37.6 security lost with .… 37.2 through forfeiture .… 37.8–37.11, 37.14 memorandum of .… 17.11 merger .… 36.1–36.17 bankruptcy effect .… 36.12 of charges .… 36.4–36.11 definition of .… 36.1 of estates .… 36.2 generally .… 36.1 intention .… 36.5–36.11, 36.16 loss of property through see loss or destruction of property of lower in higher security .… 36.13–36.15 in specialty .… 36.3 Torrens system .… 4.34, 36.17 mistaken .… 17.11 mortgagee’s duty .… 32.55 under overreaching powers .… 32.77–32.78 on payment into court .… 32.77 personalty .… 32.70 prior to taking account .… 39.5

reconveyance of property .… 32.57–32.61 redemption see Redemption registration of .… 17.11 release of debt or security .… 34.1–34.8 covenants not to sue .… 34.7 debt .… 34.2 estoppel and .… 34.6 generally .… 34.1 mortgage by deposit of deeds .… 34.5 security .… 34.3–34.4, 34.8 second or subsequent mortgages .… 10.11 shipping mortgages .… 32.76 solicitor’s undertaking .… 32.74 by statute .… 38.1–38.7 statutory mortgages .… 32.66 sub-mortgages .… 15.5 Torrens system .… 4.38–4.39, 17.11, 32.63 transfer of mortgage at mortgagor’s direction .… 32.56 vesting orders .… 32.79 waiver of debt .… 35.1–35.12 additional security .… 35.4 altering law by advance contract .… 35.6 creditor’s rights .… 35.3 estoppel distinguished from .… 35.1 express .… 35.2 nature of .… 35.1

non-waiver clauses .… 35.6 substituted security .… 35.5 against surety .… 35.7–35.11 Disclaimer costs of disclaiming defendants in action .… 40.16 of onerous property .… 23.14, 37.13 redemption proceedings dismissed upon .… 33.27 Discovery redemption proceedings .… 33.11 Dismissal redemption proceedings .… 33.24–33.27 Disposal of seized collateral .… 5.128–5.133 distribution of proceeds .… 5.133 duty to obtain market value .… 5.130 generally .… 5.129 notice .… 5.129 obligations of seizing party .… 5.128 purchaser takes free on resale .… 5.132 reinstatement of security .… 5.137 sale to self .… 5.131 Dispute resolution consumer credit securities .… 9.5 Dissolution of building societies .… 32.34

of company mortgagee .… 14.15 Distress for rent replacement of .… 19.27 Document discharge of mortgage .… 32.75 equitable mortgage by deposit of deeds .… 3.37, 3.41 production of .… 2.43–2.45 solicitor’s duty to prepare mortgage document .… 42.1, 42.8 solicitors’ lien over .… 2.33, 2.35, 2.43 Dragnet clause .… 3.8, 3.9 Drug crime forfeiture of property considered to be proceeds of .… 37.14 Duress securities obtained by .… 13.38–13.39 E Early repayment accounts of .… 39.59 discounts .… 32.17 Earthquake, loss of property through see Loss or destruction of property Economic compulsion securities obtained by .… 13.38 Economic pressure

void or imperfect securities .… 13.37–13.39 Ejectment action mortgagee right to possession .… 19.5, 19.22, 19.23, 19.29 Electronic record chattel paper .… 5.48 Employee of mortgagee in possession .… 19.42 Endorsement possession of negotiable instruments .… 5.47 variation of mortgage by .… 3.34 Enforcement of security .… 16.4–16.9 administration actions .… 16.9 covenant not to call in money .… 16.6 default .… 16.8 exercise of remedies .… 16.7 legal redemption date .… 16.5 mortgagee’s remedies .… 16.4 Entry forcible .… 19.19–19.20 mortgagee’s right of .… 19.2, 19.11–19.12, 19.15, 19.19–19.20 Equitable assignment see Assignment Equitable charge .… 2.2–2.8 agreement .… 2.4 creation of .… 1.38, 2.3–2.5

definition of .… 2.2 equitable lien distinguished from .… 2.1, 2.2 equitable mortgage distinguished from .… 1.9, 1.42, 2.6, 2.7 floating charge see Floating charge foreclosure .… 21.10–21.12 importance of .… 1.1 judicial sale .… 21.11–21.12 over personalty .… 2.6 over realty .… 2.7 power of sale .… 21.11–21.12 property appropriated to .… 2.4 remedies of chargee .… 2.8 in supply agreements .… 1.39 Torrens system application .… 4.24 Equitable encumbrances, priority between .… 24.25–24.34 contemporaneous instruments .… 24.26 loss of .… 24.44–24.47 mortgagee from defaulting trustee .… 24.31 mortgages in breach of trust .… 24.30 notice of equities .… 24.34 proceeds of sale .… 24.32 rule of priority in time .… 24.25, 24.27–24.29 salvage advances .… 24.33 Torrens system .… 28.9 Equitable execution

appointment of receiver .… 7.11 Equitable interest priority .… 24.28, 26.11 Equitable lien .… 2.9–2.19 beneficiary’s rights under trust .… 2.18 common law lien distinguished from .… 1.10, 2.9 equitable charge distinguished from .… 2.1, 2.2 equitable mortgage distinguished from .… 3.44 for expenditure on another’s property .… 2.16 extinction of .… 2.19 generally .… 2.9 partnership dissolution .… 2.18 purchaser’s lien .… 2.15 purpose of .… 1.1 sale of land contracts .… 2.11 salvage .… 2.17 on shares for debts due company .… 2.18 trade mark owners .… 2.18 trustee’s rights under trust .… 2.18 vendor’s lien .… 2.10–2.14 Equitable mortgage .… 3.36–3.50 account for rents .… 39.15 co-owners .… 3.39, 3.49 conveyance to .… 40.30 costs, mortgagee’s right to .… 40.3

creation of .… 1.34, 3.45 custody of deeds .… 3.31 debt secured by .… 3.43 defective legal mortgage .… 3.49 by deposit of deeds .… 3.36–3.44 co-owners .… 3.39 custody of documents .… 3.41 debt secured by .… 3.43 documents .… 3.37 form of memorandum .… 3.46 generally .… 3.36 liens mutually exclusive .… 3.44 partial .… 3.38 proof of intent to create .… 3.40 property affected by .… 3.42 release of debt or security .… 34.5 discharge of .… 32.68 encumbrances .… 3.35 equitable charge distinguished from .… 1.9, 1.42, 2.6, 2.7 equitable lien distinguished from .… 3.44 equitable rights .… 1.37 examples .… 1.40 fixtures passing by .… 1.20 foreclosure .… 21.2, 21.3, 21.9, 21.18–21.20, 22.18, 22.48 formal requirements .… 1.35 generally .… 1.33

legal owners .… 1.38 mergers .… 36.13 mortgagee’s right of entry .… 19.11 mortgagee’s right to possession .… 19.14 power of attorney .… 3.47 power of sale .… 20.50 release of security under .… 34.4 ships .… 9.17, 9.24 specific performance .… 1.41 in supply agreements .… 1.39 title against trustee in bankruptcy .… 3.50 Torrens system application .… 4.24 types of .… 1.36–1.38 undertaking to execute .… 3.48 Equitable rights mortgages of .… 1.36, 1.37 to redeem .… 1.15, 32.1 Equities notice of .… 24.18 Equity of redemption assignees, redemption rights .… 32.21 assignment .… 17.5, 32.22, 33.5 bona vacantia .… 32.24 clogs on .… 32.12–32.13 defeasible purchase .… 1.30

definition of .… 1.15 equitable right to redeem distinguished from .… 1.15, 32.1 extinguishment by time .… 32.84–32.92 enlargement into fee simple .… 32.91 land mortgages .… 32.84, 32.90 limitation period .… 32.85–32.89 personalty .… 32.89–32.90 possession by mortgagee requirement .… 32.86 subsequent encumbrancers .… 30.92 historical development .… 1.14 nature of .… 32.2 owner foreclosure proceeding party .… 2.7 presence required at redemption proceedings .… 33.3 power of sale as authority to defeat .… 20.1 release of .… 32.18 subdivision .… 33.3 Error in accounts .… 39.3 as to sum repayable .… 17.1 Escrow mortgage as .… 3.5 Escrow agent possession by .… 5.44 Estate

accounts in .… 39.1 insolvency .… 23.11 legal see Legal estate merger of .… 36.2 payments from .… 29.3 Estoppel actions on covenant to pay .… 17.12 in favour of mortgagors .… 12.20–12.21 mortgagee’s right to possession .… 19.18 priority loss by .… 24.46 promissory .… 35.12 release of debt or security by .… 34.6 by representation .… 24.46 security’s existence as result of .… 1.4 waiver distinguished from .… 35.1 Evidence of debt .… 39.11 taking accounts .… 39.7 Execution proof of .… 16.37 Executor appointment of debtor as .… 34.2 foreclosure proceeding party .… 22.10 mortgage by .… 11.15–11.18 redemption payments .… 32.49

Exoneration assignment of one property free form mortgage .… 30.5 marshalling excluded by .… 30.15 mortgage by wife for husband’s debt .… 30.7 of mortgaged estate .… 29.3 paramount mortgage .… 30.6 property of one mortgaged to secure another’s debt .… 30.7–30.8 Torrens system .… 30.4 where one owner is personally liable .… 30.4 Expectancy mortgages of .… 6.23 Expectant heir securities by .… 13.11–13.14 Expenditure on another’s property .… 2.16 interest on .… 39.45 F Family law transactions defrauding creditors .… 13.8 Farms. see also Agricultural land definitions .… 9.12 mortgages of .… 9.12 mortgages over rights associated with .… 9.11 Fiduciary relationship and duty

influence presumption .… 13.22 power of sale .… 20.21, 20.22 reasonable care .… 20.21 receivers .… 18.5 Finance contracts made subject to .… 1.32 Financial Ombudsman Service .… 9.5 Financing lease operating lease distinguished from .… 5.19, 5.24 PPSA security interests .… 5.19 Financing statement incorporation into security agreement .… 5.36 registration .… 5.53, 5.63 Fine future .… 32.33 Fire insurance mortgagee in possession’s liability for .… 19.39 Fixed charge conversion to floating charge .… 8.17 creation .… 8.2 floating charge distinguished from .… 8.15 Fixture land mortgages .… 3.26 loose parts .… 1.22

mortgage over .… 1.19 passing or not passing by mortgage of land .… 1.20–1.21 as personal property .… 5.9 power of sale .… 20.6 trade .… 1.20 Floating charge avoidance of certain .… 8.24 characteristics .… 8.13 collateral advantage application .… 32.14 conversion to fixed charge .… 8.17 creation .… 8.2, 8.11, 8.14 crystallisation .… 5.35, 8.19–8.21 definition of .… 8.10 difficulties .… 8.11 in favour of officers .… 8.22 fixed charge distinguished from .… 8.15 generally .… 8.18 historical development .… 8.12 importance of .… 1.1 ordinary course of business limitation .… 8.16 under PPSA .… 5.35, 5.116 preferential creditors .… 8.25 property appropriation to meet .… 2.4 release of property subject to .… 34.4 security creation .… 8.14 undue preferences .… 8.23

Floating security creation .… 8.14 Foreclosure and judicial sale .… 21.1–22.55 account requirements .… 21.4, 21.22, 22.12, 22.14, 39.4, 39.10 chattels .… 21.1 choses in action .… 21.1 collusion .… 22.39 conduct of sale .… 21.23–21.24, 22.44 contribution rights .… 30.2 costs .… 40.16 course of .… 22.14 delivery of deeds .… 22.17, 22.50 discontinuance .… 22.41 dismissal of redemption proceedings as .… 33.25 effect of .… 21.2 equitable charge .… 21.10–21.12 equitable mortgage .… 21.2, 21.3, 21.9, 21.18–21.20, 22.18, 22.48 fraud .… 21.7, 22.39 generally .… 21.1, 22.1 indemnity rights .… 30.2 judgment .… 22.15–22.51 delivery up of deeds .… 22.17 discharge of order .… 22.41 equitable mortgage .… 22.18 form .… 22.15 mixed mortgages .… 22.24

order absolute for foreclosure .… 22.46–22.51 price of redemption .… 22.16 redemption effect .… 22.21 reopening foreclosure .… 22.35–22.40 for sale .… 22.42–22.45 sub-mortgage judgment .… 22.23 subsequent encumbrances proof .… 22.19 successive mortgages .… 22.20 surety mortgages .… 22.22 time allowed for payment .… 22.25–22.34 jurisdiction .… 21.21 legal mortgage availability .… 21.8, 21.11 limitation period .… 16.31 mortgagor’s redemption rights .… 16.4, 21.4 orders capitalisation under .… 39.54 discharge .… 22.41 final absolute .… 22.46–22.51 setting aside .… 21.7 vesting .… 21.17 parties to action .… 22.2–22.11 bankruptcy trustees .… 22.9 co-mortgagees .… 22.4 collateral securities .… 22.8 equity of redemption owner .… 22.7 personal representatives .… 22.3, 22.10

security holder .… 22.2 severance of title to property .… 22.11 subsequent encumbrancers .… 22.5–22.6 trustees .… 22.10 pleadings .… 22.12–22.13 postponement .… 21.22 power of sale and .… 20.8, 21.1, 21.11 priority of encumbrancers .… 21.16, 21.20 redemption date .… 16.5 effect of .… 22.21, 33.12 offers to .… 21.14 persons entitle to redeem .… 21.13 price of .… 22.16 time for .… 21.4, 21.22, 22.14, 22.25–22.34 reopening .… 21.5–21.7, 22.35–22.40, 22.54 repayment .… 21.22 right of .… 21.2, 21.3 subsequent mortgages .… 10.13, 16.31, 21.1, 22.5–22.6, 22.11, 22.19 Torrens system .… 16.4, 16.5, 21.6, 21.9, 22.52–22.55 Foreign interests and issues equitable mortgage requirements .… 1.35 interest in Australian mortgages .… 1.47 proper law of mortgage debt .… 1.46 taxation .… 41.4

Forestry activities .… 9.12 Forfeiture alienation on .… 13.51–13.52 loss of property through .… 37.8–37.11, 37.14 relief against .… 3.30, 37.9–37.11 Forgery husband and wife cases .… 4.20, 13.44 Torrens system .… 4.16–4.20 void or imperfect securities .… 13.43–13.44 Fraud account opening .… 39.3 of agent .… 24.23 equity of redemption release by .… 32.18 foreclosure .… 21.7, 22.39 limitation period .… 16.36 mortgage brokers or originators .… 1.55 priority loss by .… 24.36, 24.44 Torrens system .… 4.18–4.19 Fraudulent conveyance generally .… 1.26 void securities .… 13.5–13.38 Freehold land legal mortgage of .… 3.2 loss of interests .… 37.7

Furnished homes rent of .… 12.15 Further advance priority by notice to trustees .… 26.1 tacking .… 25.3, 25.7, 25.12–25.14 Future book debts .… 6.21 interest .… 32.33 mortgages made void by Consumer Credit Act .… 9.3 things in action .… 6.5, 6.23 vesting of PPSA security interests .… 5.113 G Garcia/Yerkey principle .… 13.26, 13.29 Garnishee notice commissioner’s power to issue .… 41.1 Garnishment procedure .… 7.14 General jurisdiction unconscionable dealing .… 13.30 Good definition of .… 5.10 Good faith power of sale .… 20.21, 20.22

under PPSA .… 5.121 Goods and services tax (GST) generally .… 41.6 sale by mortgagee in possession .… 41.7 Goodwill mortgagee’s power of sale .… 20.31, 20.52 mortgages .… 1.19, 1.23 profit-sharing loans .… 6.22 GST see Goods and services tax (GST) Guarantee generally .… 42.12 personal security .… 1.6 waiver effects .… 35.7–35.11 Guarantor see also Surety costs, right to .… 40.1 mortgagee’s duty to when exercising power of sale .… 20.22 H Hair trigger clause .… 3.10 Heir expectant, securities by .… 13.11–13.14 marshalling against .… 30.14 Hire–purchase agreement assignment .… 6.20

fixtures passing by mortgage of land .… 1.20 Husband and wife exoneration .… 30.7 forgery .… 4.20, 13.44 Locke King’s act application .… 29.4 marshalling application .… 30.14 mortgage by co-owners .… 11.2, 11.3 undue influence presumption .… 13.25–13.29 Hypothecation ships .… 9.19 I Ignorant persons contracts by .… 13.12 Illegal transaction void or imperfect securities .… 13.45–13.47 Illiteracy unconscionable dealing .… 13.30 Improvement accounts for .… 39.17, 39.34 mortgagee in possession’s liability for .… 19.38 In substance security interest .… 5.14–5.20 consensual transaction requirement .… 5.15 defined .… 5.14

generally .… 5.13 interest in personal property .… 5.16 payment or performance requirement .… 5.17–5.20 Incapable persons mortgage by .… 11.21 Indefeasibility of title .… 4.11–4.15 covenants .… 4.13 fraud .… 4.15 generally .… 4.11 limits .… 4.12 statutory exceptions .… 4.14 Indemnity court-appointed receivers .… 18.26 power of appointment .… 18.6 title deed loss .… 32.82 Independent advice unconscionable dealing .… 13.33 Indorsement on trust instrument .… 26.22 Inequality of bargaining power economic pressure .… 13.39 Inequitable action restriction on suing .… 16.10 Injunction

default of mortgagee .… 3.54 power of sale notice, failure to satisfy statutory requirements .… 20.17 Inquiry constructive notice .… 24.14–24.21 as to possession .… 39.27 Insolvency see also Bankruptcy disclaimers .… 23.14–23.15 individual distinguished from corporate .… 23.2 liquidators’ lien .… 2.52 mortgagee’s remedies .… 23.1–23.3 of mortgagor during redemption proceeding .… 33.6 surety’s position on .… 42.1 PPSA security interests .… 5.111–5.118 circulating assets .… 5.116–5.117 control .… 5.118 generally .… 5.111 registration deadline for filing statements .… 5.115 vesting of unperfected security interests on .… 5.112–5.114 priority effects .… 24.3 redemption by trustee .… 23.12–23.13 secured creditors .… 23.4–23.11 court’s restraint of mortgagee .… 23.5 definition of .… 1.4, 23.4 joint and separate estates .… 23.8

proof of debt by .… 23.7, 23.9–23.11 remedies of .… 23.3 security must be on debtor’s own property .… 23.7 voting .… 23.6 vesting orders .… 23.14–23.15 Instalment power of sale .… 20.6 redemption timing effects .… 32.6, 32.8, 32.10 unpaid, commission on .… 39.56 Institutional mortgage redemption .… 32.7 Instrument certified office copies .… 27.16 defective, registration of deeds .… 27.15 investment see Investment instrument negotiable see Negotiable instrument priority .… 24.26 trust, indorsement on .… 26.22 Insurance discharge of mortgage .… 32.72–32.73 fire, mortgagee in possession’s liability for .… 19.39 life see Life insurance marine .… 6.15 mortgagor’s right to .… 32.73 premium recovery .… 17.6

Insure covenant to .… 3.20 Insurers’ lien .… 2.29 Intangible property definition of .… 5.87 PPSA security interests .… 5.10, 5.87 seizure .… 5.124 Intent contrary .… 29.3 conveyances in fraud of creditors .… 13.6 equitable mortgage creation .… 3.40 mergers .… 36.6–36.11, 36.16 mortgage or conveyance with repurchase option .… 1.28 Interest acceleration clauses .… 3.15 acceptance by mortgagee .… 16.7 accounts of .… 39.42–39.61 after redemption day .… 39.43 capitalisation .… 39.50–39.54 cessation of .… 39.59–39.61 on expenditure .… 39.45 failure to claim .… 39.47 on judgment debt .… 39.49 on money retained .… 39.44 mortgage debt .… 39.42

payments during bankruptcy .… 39.46 rate allowed .… 39.55–39.58 on specialty debt .… 39.48 tenant for life .… 39.62 after redemption day .… 39.43 on arrears .… 39.50, 39.53 arrears, recoverability .… 16.30 bankruptcy payments .… 39.46 capitalisation .… 39.50–39.54 cessation of .… 39.59–39.61 early repayment .… 39.59 purchase by mortgagee .… 39.61 on tender .… 39.60 covenant for payment .… 3.13–3.14, 36.14 on expenditure .… 39.45 failure to claim .… 39.47 future .… 32.33 on money retained .… 39.44 on mortgage debt .… 39.42 overpayments .… 39.22 punctual payment provisions .… 3.18 rate of accounts of .… 39.55–39.58 commission on unpaid instalments .… 39.56 fixed by court .… 39.57 generally .… 3.17

lower rate on punctual payment .… 39.55 variation of .… 39.58 recovery of .… 17.2 secured creditor’s proof for .… 23.10 on surplus proceeds after power of sale .… 20.48 tax deductibility .… 41.3 Intermediated security definition of .… 5.10 perfection by control .… 5.52 PMSI exemption .… 5.84 remedies for holders of .… 5.120 taking free rules .… 5.105 Interpretation PPSA security interests .… 5.3–5.5 Invalid mortgage vendor’s liens .… 2.14 Inverse order rule marshalling .… 30.17 Investment instrument certificated .… 5.49 perfection of security interests .… 5.52, 5.63 PMSI exemption .… 5.84 remedies for holders of .… 5.120 taking free rules .… 5.105

IOU personal security .… 1.6 Irredeemable debenture .… 8.2 J Joinder of causes of action redemption proceedings .… 33.13 Joint account co-mortgagee’s lending on .… 11.31–11.32 Joint creditor redemption payments .… 32.50 Joint estate partners .… 23.8 Joint mortgagor power of sale notice .… 20.17 Joint tenant loss or destruction of property .… 37.6 mortgage by all co-owners .… 11.2 redemption proceedings .… 33.18 Judgment foreclosure proceedings .… 22.15–22.51 delivery up of deeds .… 22.17 discharge of order .… 22.41 equitable mortgage .… 22.18

form .… 22.15 mixed mortgages .… 22.24 order absolute for foreclosure .… 22.46–22.51 price of redemption .… 22.16 redemption effect .… 22.21 reopening foreclosure .… 22.35–22.40 for sale .… 22.42–22.45 sub-mortgage judgment .… 22.23 subsequent encumbrances proof .… 22.19 successive mortgages .… 22.20 surety mortgages .… 22.22 time allowed for payment .… 22.25–22.34 statutory .… 7.4–7.14 appointment of receiver by equitable execution .… 7.11 attachment orders .… 7.13 charging orders .… 7.5–7.9 charging share in partnership .… 7.12 garnishment .… 7.14 generally .… 7.4 Judgment creditor marshalling .… 30.13, 30.14 priority .… 24.49–24.52 redemption rights .… 32.26 tacking by see Tacking Judgment debt

interest on .… 39.49 Judicial sale foreclosure by see Foreclosure and judicial sale Jurisdiction foreclosure and judicial sale .… 21.21 unconscionable dealing .… 13.30, 13.34 Jus tertii by mortgagor prohibited .… 19.17 K Knowledge actual .… 5.109 constructive .… 5.109 taking free rules .… 5.109 L Land .… 3.1–3.55; see also Torrens system accretions .… 3.27–3.28 agricultural see Agricultural land all moneys clause .… 3.8, 3.9, 3.14 alterations to mortgagor’s leasehold interests .… 3.29 construction of .… 3.6–3.10 conversion .… 3.55 covenants by mortgagee .… 3.25 covenants by mortgagor

acceleration clauses .… 3.15 attornment clauses .… 3.23 to insure .… 3.20 interest .… 3.17–3.18 to pay mortgagee’s costs .… 3.21 to pay rates and taxes .… 3.22 to repair .… 3.19 to repay .… 3.13–3.14, 3.15 retardation clauses .… 3.16 for title .… 3.11 usual .… 3.12 Crown see Crown land custody of deeds .… 3.31–3.32 definitions .… 5.2 developmental land .… 3.25 discharge of .… 32.67 encumbrances .… 3.35 equitable mortgages .… 3.36–3.50 equity of redemption extinguishment .… 32.85, 32.90 extent of security .… 3.26–3.30 fixtures see Fixture generally .… 1.17 hair trigger clauses .… 3.10 injunctions and actions at law .… 3.54 language .… 3.8 legal mortgage .… 3.1–3.5, 3.49

mortgagor’s right to possession .… 3.24, 3.55 mortgagor’s right to use of .… 12.5 partition of .… 11.6 registration .… 3.52–3.53 registration of writs and orders affecting .… 7.6 relief against forfeiture .… 3.30 sale of purchaser’s lien .… 2.15 vendor’s lien .… 2.11 security interests secured with .… 5.138 silence on point .… 3.7 situs .… 1.44 strata titles .… 3.51 terms .… 3.7 Torrens system see Torrens system variation of .… 3.33–3.35 Lease see also Tenancy financing .… 5.19, 5.24 to mortgagee .… 32.19 mortgagee’s veto on .… 19.3–19.4 by mortgagor .… 12.17 by mortgagor and mortgagee together .… 12.29 by mortgagor in occupation .… 12.6–12.12 attornment .… 12.11 generally .… 12.6–12.7 mortgagee-mortgagor relationship .… 12.9

mortgagor in possession’s liability .… 12.12 obligations of mortgagee .… 12.8 tenancy in mortgagor creation .… 12.10 operating .… 5.19, 5.24 personal property security .… 5.24–5.25 attachment requirement .… 5.30 definition of .… 5.25 lessor or bailor under .… 5.24–5.25 vesting of security interests on insolvency .… 5.114 PPSA security interests .… 5.19 by prospective purchasers .… 12.16 registration of .… 27.3 restraint on alienation .… 13.53 statutory power .… 12.22–12.29, 19.32 sub-lease .… 3.3, 3.27, 13.53 surrender of .… 12.30–12.31 taking free rules .… 5.34, 5.65–5.66, 5.102–5.110 under Torrens system generally .… 12.7 mortgagor’s leasing powers .… 12.25 surrender of .… 12.31 tenancy before mortgage .… 12.13 Lease purchase agreement .… 9.17 Leasehold alterations to .… 3.29

generally .… 3.3 loss or destruction of property .… 37.8–37.11 option to purchase reversion .… 32.11 option to renew .… 32.11 power of sale .… 20.8 relief against forfeiture .… 3.30 Legal aid statutory charge over verdict moneys .… 7.1 Legal charge debentures .… 8.2 Legal estate conveyance of .… 22.48 doctrine of prevalence of .… 24.4 possession of .… 24.4–24.7, 28.3–28.4 Legal mortgage account for rents .… 39.14 definition of .… 1.12 foreclosure availability .… 21.8, 21.11 of land .… 3.1–3.5 defective .… 3.49 as escrow .… 3.5 form of .… 3.4 freehold land .… 3.2 generally .… 3.1 mortgagee’s right of entry .… 19.2, 19.12

other interests in land .… 3.3 priority loss of .… 24.35–24.43 possession of legal estate .… 24.4–24.7 Legal owner equitable mortgages by .… 1.38 Lender purchase-money security interest (PMSI) .… 5.82, 5.88 Lessee see also Lease taking free rules .… 5.34, 5.65–5.66, 5.102–5.110 Lessor see also Lease purchase-money security interest (PMSI) .… 5.83 Letter of credit perfection by control .… 5.52 Liability of accountant for perfection of charge .… 11.41 of agents to mortgagor .… 20.35 to debt upon death of mortgagor .… 29.1–29.4 different properties .… 30.1 discharge of borrower’s .… 11.10 mortgagees in possession .… 19.21, 19.34–19.42 of mortgagor for costs .… 40.4 discharge of mortgage .… 32.65

under personal covenant .… 37.3 mortgagors in possession .… 12.12 personal see Personal liability of receiver .… 18.14 for waste .… 42.21 License compensation for .… 1.23 Lien .… 2.9–2.52 accountants’ .… 2.28 artificer’s .… 2.21–2.27 assignment .… 2.31 common law see Common law lien contractual .… 1.4, 9.21 definition of .… 2.20 equitable see Equitable lien insurers’ .… 2.29 liquidators’ .… 2.52 loss of .… 2.32 maritime .… 2.20, 9.19, 9.21 over cash .… 2.30 pledge distinguished from .… 1.11 possessory .… 2.22, 2.32, 2.33 purchaser’s .… 2.15 solicitors’ see Solicitors’ lien vendor’s .… 2.10–2.14

Life insurance policies assignment .… 6.15 collateral security .… 1.43, 6.15 covenants to pay .… 17.6 Dearle v Hall rule application .… 26.10 discharge of mortgages of .… 6.15, 32.72 foreclosure .… 21.3 power of sale .… 20.3 premium costs .… 40.25 priority .… 6.15 suicide of insured .… 6.15 Life tenant see Tenant for life Limitation of actions .… 16.17–16.36 acknowledgment .… 16.34 arrears of interest .… 16.30 common law position .… 16.27–16.36 covenants to pay .… 17.1 date from which time runs .… 16.29 expiration of limitation period .… 16.35 foreclosure .… 16.31 fraud .… 16.36 generally .… 16.27 mistake .… 16.36 mortgagee’s possession .… 19.43 part payment .… 16.33

period of limitation .… 16.28 possession .… 16.32, 19.28 statutory provisions .… 16.17–16.27 historical development .… 16.17–16.18 New South Wales .… 16.20 present law .… 16.19 Queensland .… 16.22 South Australia .… 16.23 Tasmania .… 16.25 territories .… 16.26 Victoria .… 16.21 Western Australia .… 16.24 Limitation period mortgagee’s remedies .… 16.28 redemption actions .… 32.85–32.89 Torrens system mortgages .… 4.40 Limited owner mortgage by .… 11.7, 11.11 Liquid asset security interests in .… 5.139 Liquid property taking free rules .… 5.105 Liquidation proceedings .… 23.3

Liquidator disclaimers of onerous property .… 23.14, 37.13 mortgage by .… 11.35 Liquidators’ lien .… 2.52 Litigation costs of .… 40.23 production of documents .… 2.43–2.45 restrictions on .… 16.10–16.16 Livestock under Personal Property Securities legislation .… 1.17 proceeds of .… 5.33 products of .… 5.38 Locke King’s Acts generally .… 29.2–29.4 Logging .… 9.12 Loss of common law lien .… 2.32 of priority .… 24.35–24.48 fraud .… 24.36 negligence .… 24.37–24.39, 24.41 postponement of equitable encumbrancer .… 24.44–24.47 postponement of legal mortgagee .… 24.35–24.43 unjust conduct by mortgagee .… 24.48 of property see Loss or destruction of property

of security document .… 16.38 of title deeds .… 32.81–32.82, 40.12 Loss or destruction of property .… 37.1–37.14 change of nature of property .… 37.4 devaluation of property .… 37.5 disclaimers .… 37.13 generally .… 37.1 interests in freehold .… 37.7 joint tenants .… 37.6 leaseholds .… 37.8–37.11 liability of mortgagor under personal covenant .… 37.3 life tenants .… 37.6 security lost with .… 37.2 through forfeiture .… 37.8–37.11, 37.14 M Manager appointment of .… 18.4, 18.7, 18.24 Marine insurance assignment .… 6.15 Maritime lien priority .… 9.21 recognition .… 9.19 subfreight on cargo .… 2.20 Maritime security

marshalling .… 9.20 Married persons see Husband and wife Marshalling .… 30.9–30.17 application of .… 30.13–30.14 common debtor requirement .… 30.11 contribution effects .… 30.3 definition of .… 1.60 exclusion by exoneration .… 30.15 inverse order rule .… 30.17 maritime securities .… 9.20 none to injury of third encumbrancer .… 30.12 pleadings .… 30.16 principle of .… 30.9–30.10 Mass secured party’s interest in .… 5.100 Master’s certificate money received after date of .… 39.41 Mental capacity void or imperfect securities .… 13.12 Mentally disabled persons mortgage by .… 11.20 redemption rights .… 32.29 Mentally disordered persons discharge of mortgage by vesting order .… 32.79

Merger .… 36.1–36.17 bankruptcy effect .… 36.12 of charges .… 36.4–36.11 definition of .… 36.1 of estates .… 36.2 generally .… 36.1 intention .… 36.5–36.11, 36.16 loss of property through see Loss or destruction of property of lower in higher security .… 36.13–36.15 in specialty .… 36.3 Torrens system .… 4.34, 36.17 Migrated security interest definition of .… 5.8 Mines accounts of .… 39.33 waste .… 42.20–42.21 Minor mortgage by .… 11.19 Misconduct by mortgagee loss of right to costs .… 40.9 Misrepresentation priority loss by .… 24.47 void or imperfect securities .… 13.40 Mistake

common .… 13.41 limitation period .… 16.36 mutual .… 13.42 rectification .… 13.42 unilateral .… 13.41 void or imperfect securities .… 13.41 Mixed mortgage foreclosure judgment .… 22.24 Modification of mortgage by statute .… 38.1–38.7 Mortgage see also Charge; Security absolute conveyance distinguished from .… 1.24–1.25 of agricultural land .… 9.10–9.12 of aircraft .… 9.29 assignment .… 1.7 see also Transfer of mortgage Australian statutes .… 1.2 as beneficial owner .… 1.31 in breach of trust .… 24.30 ‘breaking,’ .… 32.10 brokers .… 1.55 charge distinguished from .… 1.8, 1.9 of chattels see Chattel of chose in action see Chose in action classification .… 1.8 collateral see Collateral

contracts made subject to .… 1.32 of copyright .… 6.25 covenants see Covenant creation of .… 1.7 of Crown land see Crown land definition of .… 1.7, 1.8 discharge of see Discharge of mortgage equitable see Equitable mortgage equitable principles .… 1.60 fixtures .… 1.19–1.22 foreclosure see Foreclosure and judicial sale foreign see Foreign interests and issues generally .… 1.12–1.16 goodwill .… 1.19, 1.23 historical development .… 1.1–1.3, 1.13 to impeach .… 33.9 imperfect .… 11.3 instruments .… 1.7 invalid .… 2.14 on joint account .… 11.31–11.32 of land see Land law governing .… 1.60 legal see Legal mortgage lending money on .… 11.14, 11.29 low documentary scheme .… 1.55 modification of .… 38.1–38.7

multi-jurisdictional .… 41.10 notice of .… 12.14 obligations under .… 1.16 originators .… 1.55 parties to .… 11.1–11.46 of partnership shares .… 6.18, 7.12, 11.28 of patents .… 6.26 perpetuities rule not applicable .… 1.58 personal liability exclusion .… 1.7 of personal property see Personal property phantom .… 1.58 pledge distinguished from .… 1.11 power to .… 11.8 preparation .… 40.24, 42.1 priority of see Priority quasi .… 1.48–1.49 with repurchase option .… 1.24–1.32 reverse .… 1.56 second or subsequent see Second or subsequent mortgage securities .… 1.57 set-off .… 1.50–1.54 shares, of .… 6.16–6.17 of ships .… 9.13–9.28 situation .… 1.44–11.47 by sub-demise .… 13.53 sub-mortgages .… 15.1–15.5, 22.23

sub-prime .… 1.55 ‘subject to,’ .… 1.32 terms, variation of .… 35.8 of thing in action see Chose in action Torrens system see Torrens system of trade mark .… 6.27 transfer see Transfer of mortgage unauthorized .… 11.9–11.10 Mortgage debt see Debt Mortgage money definition of .… 20.6 Mortgagee account against .… 39.19–39.23 account between mortgagor .… 39.1–39.7 bankruptcy of .… 14.14 costs, entitlement to see Cost covenant to pay costs of .… 3.21 death of .… 14.13 lease by see Lease misconduct by .… 40.9 missing, redemption effects .… 32.39 obligations when bound by mortgagor’s lease .… 12.8 in possession see Mortgagee in possession priority of see Priority purchase under power of sale prohibited .… 20.40

receiver as agent or .… 18.5 relationship with mortgagors .… 12.9 remedies of see Mortgagee’s remedies right to possession .… 19.1–19.29 chattels .… 19.26, 19.44 choses in action .… 19.45 distress for rent law replacement .… 19.27 ejectment actions .… 19.5, 19.22, 19.23, 19.29 equitable mortgagees .… 19.14 estoppel .… 19.18 exercise of .… 19.16 generally .… 19.1 jus tertii by mortgagor prohibited .… 19.17 mortgagee entering into possession .… 19.5–19.8 mortgagees in possession .… 19.30–19.43 mortgagee’s veto on leases .… 19.3–19.4 mortgagor’s right to account .… 19.9 possession actions .… 19.5, 19.22–19.29 right of entry .… 19.2, 19.11–19.12, 19.15, 19.19–19.20 second mortgagees .… 19.5, 19.6, 19.10, 19.13, 19.23 taking physical possession .… 19.19–19.22 Torrens system .… 19.1, 19.2, 19.11 when arising .… 19.15 solicitor .… 2.41, 2.42 transfer of mortgage by .… 14.1–14.12 waste by .… 42.21

Mortgagee in possession account against .… 19.34–19.35, 39.24–39.41 crops .… 39.16 liabilities .… 19.34–19.42, 42.21 to account .… 19.34–19.35 carrying on business of mortgagor .… 19.31 on covenants .… 19.40 generally .… 19.21 improvements .… 19.38 negligence .… 19.37 no allowance for personal trouble .… 19.41 for outgoings .… 19.39 repairs and maintenance of property .… 19.36 limitation period for possession .… 19.43 receiver appointment by court .… 18.22 rights .… 19.30–19.33 application of receipts .… 19.33 carrying on of business .… 19.31 leasing .… 19.32 preservation of mortgaged property .… 16.1 rent and profits .… 19.30 ships .… 9.15, 9.16, 9.25 sale by .… 41.7 set-off on accounts .… 1.51 taking possession .… 19.19–19.22 Mortgagee’s remedies .… 16.1–23.17

appointment of receiver .… 18.1–18.27 artificer’s lien enforceability .… 2.27 Corporations Act application .… 18.11–18.13 by court .… 18.18–18.27 distribution by receiver of moneys receiver .… 18.16 effect of .… 18.8 equitable execution, by .… 7.11 generally .… 18.1, 18.6–18.7 liability of receiver .… 18.14 mortgagees in possession .… 19.42 mortgagor’s rights and .… 12.9 multiple receivers .… 18.6, 18.7, 18.11 notice .… 18.7, 18.17 possession and .… 16.4 power of appointment .… 18.2–18.3, 18.6 powers of receiver .… 18.9–18.10, 18.12–18.13 receiver and manager .… 18.4, 18.7 receiver as agent of mortgagor .… 18.5 remedies of chargee .… 2.8 renumeration of receiver .… 18.15 right lost by waiver .… 18.6 termination of receiver .… 18.17 Torrens system .… 18.7 validity of .… 18.6, 18.7 writing requirement .… 18.7 choice of .… 16.12

covenant to pay .… 17.1–17.12 absolute .… 17.3 action on .… 17.1–17.12 implied .… 17.4 interest .… 3.13–3.14, 36.14 enforcement of security .… 16.4–16.9 exercise of .… 16.1–16.9 foreclosure and judicial sale see Foreclosure and judicial sale on insolvency of mortgagor .… 23.1–23.17 limitations of actions .… 16.17–16.36 power of sale .… 20.1–20.54 advertising property for sale .… 20.30 agents .… 20.35 auctions .… 20.32–20.33 chattel .… 20.3 choses in action .… 20.3 competition between prospective purchasers .… 20.34 conditions of sale .… 20.26 consumer credit securities .… 9.4, 20.53 conveyance effects .… 20.49 court order .… 21.12 default .… 20.54 description of property for sale .… 20.27 equitable charge .… 21.11–21.12 equitable charge creation .… 2.3 by equitable mortgagee .… 20.50

execution creditors .… 20.46 express .… 20.4, 20.8 foreclosure and .… 20.8, 21.1, 21.11 generally .… 20.1 implied .… 20.3 interest after sale .… 20.48 liability of property .… 20.2 mortgagee’s duties .… 20.21–20.22 mortgagee’s purchase prohibited .… 20.40 mortgagors, dealings with .… 20.24 mortgagor’s purchase .… 20.40 mortgagor’s rights .… 20.39 notice .… 20.13–20.18 or mortgaged business .… 20.52 payment into court requirement .… 20.38 preparation for sale .… 20.25 private treaty .… 20.32 property to be sold .… 20.31 protection of purchaser .… 20.19 by receiver .… 20.51 receivers .… 18.10, 18.13 reserve, fixing .… 20.29 restraint of sale .… 20.36–20.38 sale completion .… 20.41 sale moneys .… 20.43–20.45 secondary or subsequent mortgagees .… 20.10, 20.44

setting sale aside .… 20.42 shipping mortgages .… 9.26, 20.53 statutory .… 20.5–20.11 stopping sale .… 20.36–20.38 sub-mortgagees .… 15.3 surplus purchase money .… 20.46–20.48 timing .… 20.23 title investigation by purchaser .… 20.20 Torrens system .… 4.37, 20.4, 20.5, 20.9, 20.11, 20.12 trustees .… 11.12 undervaluation .… 20.28 valuation of property .… 20.28 proof of security .… 16.37–16.40 protection of security .… 16.1–16.3 restrictions on suing .… 16.10–16.16 right to possession .… 19.1–19.29 chattels .… 19.26, 19.44 choses in action .… 19.45 distress for rent law replacement .… 19.27 ejectment actions .… 19.5, 19.22, 19.23, 19.29 equitable mortgagees .… 19.14 estoppel .… 19.18 exercise of .… 19.16 generally .… 19.1 jus tertii by mortgagor prohibited .… 19.17 mortgagee entering into possession .… 19.5–19.8

mortgagees in possession .… 19.30–19.43 mortgagee’s veto on leases .… 19.3–19.4 mortgagor’s right to account .… 19.9 possession actions .… 19.5, 19.22–19.29 right of entry .… 19.2, 19.11–19.12, 19.15, 19.19–19.20 second mortgagees .… 19.5, 19.6, 19.10, 19.13, 19.23 taking physical possession .… 19.19–19.22 Torrens system .… 19.1, 19.2, 19.11 when arising .… 19.15 Mortgagor account against .… 39.10–39.18 account between mortgagee .… 39.1–39.7 assignment of mortgage by .… 14.16 attornment by .… 39.26 death of .… 16.9, 18.8, 29.1–29.4, 32.27, 33.6 estoppel in favor of .… 12.20–12.21 insolvency of see Insolvency lease by .… 12.17 liability for costs .… 40.4 discharge of mortgage .… 32.65 under personal covenant .… 37.3 mortgagee’s duty to when exercising power of sale .… 20.22 notice of exercise of power of sale .… 20.13 in occupation .… 12.6–12.12 possession, in see Mortgagor in possession

power of sale rights .… 20.39 purchase under power of sale .… 20.40 receiver as agent or .… 18.5 redemption rights .… 16.4, 32.20 relationship with mortgagee .… 12.9 rights of see Mortgagor’s rights transfer of mortgage .… 14.1, 14.16–14.18 waste by .… 42.20 Mortgagor in occupation .… 12.6–12.12 attornment .… 12.11 generally .… 12.6–12.7 mortgagee-mortgagor relationship .… 12.9 mortgagor in possession’s liability .… 12.12 obligations of mortgagee .… 12.8 tenancy in mortgagor creation .… 12.10 Mortgagor in possession attornment clauses .… 3.23 conversion .… 3.55 liability of .… 12.12 relationship with mortgagee .… 12.9 rights of to sue .… 12.2 use of land .… 12.5 tenant at will distinguished from .… 12.9 Mortgagor’s rights .… 12.1–12.31

to account .… 19.9 covenant enforcement .… 12.3 generally .… 12.1 leases by mortgagor in occupation .… 12.6–12.12 to possession .… 3.24, 3.55, 12.4 to sue .… 12.2 tenancy after mortgage .… 12.17–12.31 estoppel in favour of mortgagor .… 12.20–12.21 lease by mortgagor .… 12.17 new tenancy under mortgagee .… 12.19 statutory power of leasing .… 12.22–12.29 surrender of lease .… 12.30–12.31 Torrens system leases .… 12.25 Torrens system mortgages .… 12.18 tenancy before mortgage .… 12.13–12.16 use of land .… 12.5 Multiple mortgages redemption proceedings .… 33.18 N Negative pledge definition of .… 1.11 enforcement .… 2.5 equitable charge creation upon default .… 2.5 Negligence

gross definition of .… 24.37 priority loss from .… 24.37, 24.44 mortgagee in possession’s liability for .… 19.37 priority loss from .… 24.37–24.39, 24.41, 24.44 solicitors .… 42.1, 42.6 title deed loss .… 32.82 Negotiable instrument foreclosure .… 21.3 perfection of security interests .… 5.52, 5.63 PMSI exemption .… 5.84 possession .… 5.40, 5.47 security interests in .… 5.139 Nemo dat quod non habet PPSA security interests .… 5.30, 5.122 priority test .… 24.2 Non est factum mistakes .… 13.41 unconscionable dealing .… 13.31 Non-residents taxable income .… 41.4 Notice actual .… 24.8 assignment .… 6.24, 26.7, 26.19

constructive generally .… 24.9 imputation .… 24.10 securities made under undue influence .… 13.28 statutory restriction .… 24.13 tacking .… 25.8 through agents .… 24.22–24.24 through non-inquiry .… 24.14–24.21 consumer credit securities power of sale .… 9.4 of deed .… 24.19–24.20 of default .… 19.8, 21.5 of demand .… 17.9 deposit of share certificate .… 6.17 discharge of sub-mortgage .… 15.5 equitable assignment .… 6.14 of equities .… 24.18 garnishee .… 41.1 garnishment .… 7.14 legal estate possession .… 24.7 of mortgage to tenant .… 12.14 mortgagee’s right of entry .… 19.2 by occupation .… 24.21 to pay off debt .… 32.36–32.39 to pay off mortgage .… 39.59 power of sale .… 20.3, 20.13–20.18 of prior encumbrances .… 24.8–24.24

actual .… 24.8 constructive .… 24.9–24.10, 24.13–24.24 priority by notice to trustees effect .… 26.5 sales by court .… 24.12 timing .… 24.11 receiver appointment .… 18.7 receiver termination .… 18.17 registration .… 11.42, 11.43 registration of deeds .… 27.13 second or subsequent mortgages .… 10.6, 22.6, 25.7 seizure of accession .… 5.97 seizure of collateral .… 5.126, 5.129, 5.134, 5.139 service of .… 17.9 statutory assignment .… 6.7 sub-mortgage .… 15.2 of suretyship .… 42.14 Torrens system .… 28.7, 28.8, 28.9 transfer of mortgage .… 14.11 of trust .… 24.6 to trustees, priority by .… 26.1–26.27 to all trustees .… 26.17 custody of notice .… 26.20 Dearle v Hall rule .… 26.1–26.12 form of notice .… 26.18 funds in court .… 26.23–26.27 indorsement on trust instrument .… 26.22

notice of assignment is notice of contents .… 26.19 to one trustee .… 26.16 service of notice .… 26.21 O Occupation notice by .… 24.21 rent payable for .… 39.31 Offer to redeem .… 21.14, 33.7–33.8 Officer charge in favour of .… 8.22 Operating lease financing lease distinguished from .… 5.19, 5.24 PPSA security interests .… 5.19 Oppressive conduct discharge of mortgage .… 38.6 equity of redemption release by .… 32.18 Oppressive nature securities .… 13.10–13.39 clogging the equity .… 13.10 consumer credit .… 13.15 economic pressure .… 13.37–13.39 expectant heirs .… 13.11–13.14 securities given to solicitors .… 42.4 unconscionable dealing .… 13.30–13.36

undue influence .… 13.16–13.29 Option to purchase enforceability .… 32.11 Oral agreement security agreements .… 5.40 Order attachment .… 7.13 charging see Charging order foreclosure and judicial sale capitalisation under .… 39.54 discharge .… 22.41 final absolute .… 22.46–22.51 setting aside .… 21.7 vesting .… 21.17 for redemption .… 33.20–33.23 generally .… 33.20 interim .… 33.21 successive mortgages .… 33.22 time for payment .… 33.23 for sale .… 21.12, 21.15 stop generally .… 7.13 trust funds in court, priority .… 26.23–26.27 ultra vires .… 3.40 vesting see Vesting order

Ordinary course of business buyer or lessees of goods in .… 5.104 debentures .… 8.16 definition of .… 5.104 Outgoings mortgagee in possession’s liability for .… 19.39 Overreaching power discharge of mortgage under .… 32.77–32.78 Owner absolute .… 11.1 co-owner see Co-owner legal .… 1.38 limited .… 11.7, 11.11 P Parol evidence equitable mortgage creation .… 3.40 mortgages distinguished from absolute conveyances .… 1.25 Part payment limitation period .… 16.33 redemption on .… 32.88 vendor’s lien .… 2.10 Partner death of .… 29.4 mortgage by .… 11.25–11.30

Partnership change in constitution of .… 11.30 dissolution of .… 2.18 insolvency .… 23.8 mortgages of shares .… 6.18, 7.12, 11.28 Party to mortgage .… 11.1–11.46 absolute owners .… 11.1 administrators .… 11.16–11.17 agents .… 11.24, 11.34 bankrupt persons .… 11.22 bankruptcy trustees .… 11.23 co-mortgagees .… 11.31–11.32 co-owners .… 11.2–11.6 corporations .… 11.33–11.46 agents .… 11.34 building societies .… 11.45 generally .… 11.33 liquidators .… 11.35 mortgage form .… 11.37 public authorities .… 11.45 registration of company charges .… 11.38–11.44 specific loan not company asset .… 11.36 donees of power of attorney .… 11.7 executors .… 11.15–11.18 limited owners .… 11.7, 11.11 mentally disabled persons .… 11.20

minors .… 11.19 partners .… 11.25–11.30 personal representatives .… 11.15–11.18 powers, exercise of .… 11.8 protected or incapable persons .… 11.21 trustees .… 11.12–11.15 unauthorized security .… 11.9–11.10 Patent mortgagee’s right to possession .… 19.45 mortgages of .… 6.26 Payment appropriation .… 32.51–32.54 into court discharge on .… 32.77 power of sale .… 20.38 redemption payment where mortgagee missing .… 32.39 of debt .… 32.36–32.92 accounts taken with rests .… 39.40 appropriation of payments .… 32.51–32.54 cessation of mortgage terms on .… 32.62 notice to pay off .… 32.36–32.39 release upon payment .… 34.1–34.8 tender .… 32.40–32.50 time for .… 33.23 foreclosure judgments .… 22.25–22.34

part .… 2.10, 16.33, 32.88 proof of security .… 16.39 repayment see Repayment stay of proceedings .… 16.15 transfer of mortgage by .… 14.6 Penalty interest .… 39.55 Pension public officers .… 13.49 Perfection automatic .… 5.54 collateral relocated to Australia .… 5.64 by control .… 5.40, 5.50–5.52, 5.89, 5.118 deemed security interests .… 5.67 description .… 5.41 goods in possession of bailee .… 5.57, 5.61 investment instruments .… 5.63 liability of solicitor or accountant .… 11.41 mortgagee’s duty to mortgagor .… 3.25, 16.2 negotiable instruments .… 5.63 otherwise perfected .… 5.54–5.58 by possession .… 5.42–5.49 actual possession .… 5.43 certificated investment instruments .… 5.49 chattel paper .… 5.48

enforcement purposes .… 5.45 generally .… 5.42 negotiable instruments .… 5.47 third parties .… 5.44 PPSA security interests .… 5.8, 5.41–5.67 control .… 5.40, 5.50–5.52, 5.89, 5.118 generally .… 5.41 otherwise perfected .… 5.54–5.58 possession .… 5.42–5.49 priority rules .… 5.71–5.78 registration .… 5.36, 5.53, 5.74, 5.76, 5.87 temporary .… 5.59–5.67 proceeds .… 5.56, 5.60 purpose .… 5.41 by registration .… 5.36, 5.53, 5.74, 5.76, 5.87 requirements .… 5.41 taking free rules .… 5.65–5.66 temporary .… 5.59–5.67, 5.106 title documents in transit .… 5.62 Perpetuities modern rule not generally applicable .… 1.59 postponement provision non-application .… 32.9 Personal chattel pledge .… 1.11 power of sale .… 20.3

Personal liability clauses excluding .… 17.3 mortgage exclusion .… 1.7 of mortgagors for costs .… 40.4 Personal property see also Chattel actions on covenant to pay .… 17.10 charges over .… 2.6 classification .… 5.10 definition of .… 5.9 discharge of mortgages of .… 32.70 interest in .… 5.16 liability to debt upon death of mortgagor .… 29.1 loss or destruction of see Loss or destruction of property partnerships .… 11.26 PPSA-exempted .… 6.1–6.27 assignment .… 6.4–6.14 copyright .… 6.25 debt .… 6.19–6.22 future things in action .… 6.5, 6.23 generally .… 6.2–6.3 interest in trust funds .… 6.24 life insurance policies .… 1.43, 6.15 partnership shares .… 6.18 patents .… 6.26 registered trade marks and designs .… 6.27 shares .… 6.16–6.17

redemption of .… 32.89 security interests covered by PPSA .… 5.1–5.139 accession .… 5.93–5.98 attachment .… 5.8, 5.28–5.34 characterisation .… 5.26 circulating assets .… 5.116–5.117 commingling .… 5.93, 5.99–5.101 control .… 5.40, 5.50–5.52, 5.89, 5.118 deemed .… 5.13, 5.21–5.25 enforceability against third parties .… 5.36–5.40 enforcement .… 5.119–5.139 insolvency .… 5.111–5.118 loss of .… 5.92–5.118 perfection .… 5.8, 5.36, 5.41–5.67 PPSA application .… 5.6–5.12 PPSA background .… 5.1–5.5 priority .… 5.68–5.91 protection .… 5.8, 5.27–5.40 purchase-money security interest see Purchase-money security interest (PMSI) in substance .… 5.13, 5.14–5.20 taking free rules .… 5.34, 5.65–5.66, 5.102–5.110 transitional interests .… 5.8 situs .… 1.44 Personal property security (PPS) lease attachment requirement .… 5.30

definition of .… 5.25 lessor or bailor under .… 5.24–5.25 vesting of security interests on insolvency .… 5.114 Personal remedies see Covenant to pay Personal representative foreclosure proceeding party .… 22.3, 22.10 marshalling in favor of, non-application .… 30.13 mortgage by .… 11.15–11.18 notice of exercise of power of sale .… 2013 redemption proceedings .… 33.2, 33.17 Personalty see Personal property Phantom mortgage .… 1.58 Physical violence securities obtained by .… 13.37 Pleadings foreclosures .… 22.12–22.13 marshalling .… 30.16 Pledge conversion .… 3.55 definition of .… 1.11 delivery of possession .… 1.4, 1.11 lien distinguished from .… 1.4, 1.11 mortgage distinguished from .… 1.11 negative

definition of .… 1.11 enforcement .… 2.5 equitable charge creation upon default .… 2.5 personal chattel .… 1.11 PMSI see Purchase-money security interest (PMSI) Policies of insurance see Insurance Poor contracts by .… 13.12 Possession accounts .… 39.25, 39.27 actions .… 19.5, 19.22–19.29 actual .… 5.43 apparent .… 5.43 by bailee .… 5.57, 5.61–5.62 chattels left on premises .… 19.26 of deeds, effect on priority .… 24.45 definition of .… 5.42 delivery of artificer’s lien .… 2.23 pledges .… 1.4, 1.11 for enforcement purposes .… 5.45 equitable .… 39.29 equity of redemption effects .… 32.86 inquiry as to .… 39.27 of legal estate .… 24.4–24.7, 28.3–28.7

limitation period .… 16.32 mortgagee in see Mortgagee in possession mortgagee’s right to .… 19.1–19.29 chattels .… 19.26, 19.44 choses in action .… 19.45 distress for rent law replacement .… 19.27 ejectment actions .… 19.5, 19.22, 19.23, 19.29 equitable mortgagees .… 19.14 estoppel .… 19.18 exercise of .… 19.16 generally .… 19.1 jus tertii by mortgagor prohibited .… 19.17 mortgagee entering into possession .… 19.5–19.8 mortgagees in possession .… 19.30–19.43 mortgagee’s veto on leases .… 19.3–19.4 mortgagor’s right to account .… 19.9 possession actions .… 19.5, 19.22–19.29 right of entry .… 19.2, 19.11–19.12, 19.15, 19.19–19.20 second mortgagees .… 19.5, 19.6, 19.10, 19.13, 19.23 taking physical possession .… 19.19–19.22 Torrens system .… 19.1, 19.2, 19.11 when arising .… 19.15 mortgagor in see Mortgagor in possession mortgagor’s right to .… 3.24, 3.55 oral security agreement enforceability .… 5.40 order for, foreclosure proceedings .… 22.49

perfection by .… 5.42–5.49 actual possession .… 5.43 certificated investment instruments .… 5.49 chattel paper .… 5.48 enforcement purposes .… 5.45 generally .… 5.42 negotiable instruments .… 5.47 third parties .… 5.44 receivers in .… 39.18 by third parties .… 5.44 Possessory lien chattel improvement .… 2.22 loss of .… 2.32 solicitor’s .… 2.33 Postponement of equitable encumbrancer .… 24.44–24.47 of foreclosure and judicial sale .… 21.22 of legal mortgagee .… 24.35–24.43 of mortgage .… 10.14 of redemption .… 32.8–32.11 ‘breaking the mortgage,’ .… 32.10 generally .… 32.8 once a mortgage, always a mortgage rule .… 32.11 oppressive .… 32.9 unconscionable .… 32.9

Power to mortgage .… 11.8 of receivers .… 18.9–18.10, 18.12–18.13, 18.26 Power of appointment court .… 18.18 mortgagees express power .… 18.2, 18.6 implied power .… 18.6 statutory power .… 18.3 Power of attorney donees .… 11.7 equitable mortgage .… 3.47 Power of sale .… 20.1–20.54 advertising property for sale .… 20.30 agents .… 20.35 auctions .… 20.32–20.33 chattel .… 20.3 choses in action .… 20.3 competition between prospective purchasers .… 20.34 conditions of sale .… 20.26 consumer credit securities .… 9.4, 20.53 conveyance effects .… 20.49 court order .… 21.12 default .… 20.54 description of property for sale .… 20.27

equitable charge .… 21.11–21.12 equitable charge creation .… 2.3 by equitable mortgagee .… 20.50 execution creditors .… 20.46 express .… 20.4, 20.8 foreclosure and .… 20.8, 21.1, 21.11 generally .… 20.1 implied .… 20.3 interest after sale .… 20.48 liability of property .… 20.2 mortgagee’s duties .… 20.21–20.22 mortgagee’s purchase prohibited .… 20.40 mortgagors, dealings with .… 20.24 mortgagor’s purchase .… 20.40 mortgagor’s rights .… 20.39 notice .… 20.13–20.18 chattel .… 20.3 cost added to security .… 20.17 failure to satisfy statutory requirements .… 20.17 form .… 20.14 to joint mortgagors .… 20.17 object of .… 20.15 recipients .… 20.13 service of .… 20.16 waiver .… 20.18 withdrawal of .… 20.17

or mortgaged business .… 20.52 payment into court requirement .… 20.38 preparation for sale .… 20.25 private treaty .… 20.32 property to be sold .… 20.31 protection of purchaser .… 20.19 purchasers under, as redemption proceeding party .… 33.15 by receiver .… 20.51 receivers .… 18.10, 18.13 reserve, fixing .… 20.29 restraint of sale .… 20.36–20.38 sale completion .… 20.41 sale moneys .… 20.43–20.45 secondary or subsequent mortgagees .… 20.10, 20.44 setting sale aside .… 20.42 shipping mortgages .… 9.26, 20.53 statutory .… 20.5–20.11 collateral security extension .… 20.6 conveyance effects .… 20.49 devolution .… 20.9 exercise of .… 20.8, 20.11 fixtures .… 20.6 foreclosure rights effect .… 20.8 generally .… 20.5 incidental powers .… 20.7 instalments .… 20.6

leasehold property .… 20.8 by mortgage deed .… 20.6 mortgagees jointly selling .… 20.6 sale of part of mortgaged property .… 20.6 scope .… 20.6 successive mortgages .… 20.10 stopping sale .… 20.36–20.38 sub-mortgagees .… 15.3 surplus purchase money .… 20.46–20.48 timing .… 20.23 title investigation by purchaser .… 20.20 Torrens system .… 4.37, 20.4, 20.5, 20.9, 20.11, 20.12 trustees .… 11.12 undervaluation .… 20.28 valuation of property .… 20.28 PPS lease see Personal property security (PPS) lease Premium collateral advantage .… 32.15 Prescribed management schemes co-mortgagees .… 11.5 Preservation of mortgaged property .… 16.1 of securities .… 42.15 Principal

relationship with agent .… 24.24 Principle recovery of .… 17.2 Prior encumbrances, notice of .… 24.8–24.24 actual .… 24.8 constructive .… 24.9–24.10, 24.13–24.24 priority by notice to trustees effect .… 26.5 sales by court .… 24.12 timing .… 24.11 Prior mortgage costs, mortgagee’s entitlement .… 40.3 keeping on foot .… 36.9–36.10 Prior mortgagor notice of exercise of power of sale .… 2013 Priority .… 24.1–28.16 accessions .… 5.95–5.98 actions .… 40.5 arrangements affecting .… 24.3 artificer’s lien over mortgagee .… 2.27 commingling .… 5.99–5.101 costs .… 40.5 creditors .… 1.4 debt mortgages .… 6.19 default rules .… 5.70–5.78

equitable encumbrances .… 24.25–24.34 contemporaneous instruments .… 24.26 loss of .… 24.44–24.47 mortgagee from defaulting trustee .… 24.31 mortgages in breach of trust .… 24.30 notice of equities .… 24.34 proceeds of sale .… 24.32 rule of priority in time .… 24.25, 24.27–24.29 salvage advances .… 24.33 Torrens system .… 28.9 floating charge .… 8.25 foreclosure .… 21.16, 21.20 generally .… 24.1–24.3 judgment creditors .… 24.49–24.52 life insurance policies .… 6.15 life insurance policy mortgages .… 6.15 loss of .… 24.35–24.48 fraud .… 24.36 negligence .… 24.37–24.39, 24.41 postponement of equitable encumbrancer .… 24.44–24.47 postponement of legal mortgagee .… 24.35–24.43 unjust conduct by mortgagee .… 24.48 notice mortgagee without .… 24.7 of prior encumbrances .… 24.8–24.24, 26.5 transferee with .… 24.7

of trust .… 24.6 to trustees .… 26.1–26.27 possession of legal estate .… 24.4–24.7 prior encumbrances, notice of .… 24.8–24.24 actual .… 24.8 constructive .… 24.9–24.10, 24.13–24.24 priority by notice to trustees effect .… 26.5 sales by court .… 24.12 timing .… 24.11 question of .… 24.1 registration effects .… 27.1–27.16 benefits conferred by .… 27.16 bona fides .… 27.12–27.14 consideration .… 27.11 defective instruments .… 27.15 notice of prior unregistered deed .… 27.13 registrable deeds and instruments .… 27.3 statutory provisions .… 27.1–27.10 Torrens title land .… 27.4 rules .… 24.1–24.2 security interests (PPSA rules) .… 5.68–5.91 accessions .… 5.95–5.96, 5.98 change in mode of perfection .… 5.78 commingling .… 5.99–5.101 control .… 5.89 default rules .… 5.70–5.78

generally .… 5.68–5.69 miscellaneous provisions .… 5.90 mixed disputes .… 5.76–5.77 purchase-money security interest .… 5.79–5.88 special priority rules .… 5.90 subordination agreements .… 5.91 super priority rules .… 5.79–5.89 shipping mortgages .… 9.21–9.24 solicitor’s liens .… 2.37 statutory assignment of choses in action mortgages .… 6.8 tacking .… 25.1–25.16 abolition .… 25.10–25.15 by agreement .… 25.9 constructive notice .… 25.8 former conditions for .… 25.4 further advances .… 25.3, 25.7, 25.12–25.14 generally .… 25.1 re-advances .… 25.3 second or subsequent mortgages .… 10.13, 25.4, 25.7, 25.8, 25.15 against surety .… 25.5 tabula in naufragio .… 25.10, 25.12 Torrens system .… 4.35, 25.16 types of .… 25.2 unsecured debts .… 25.6 tests of .… 24.2 Torrens system .… 28.1–28.16

constructive notice .… 24.13 between equitable encumbrances .… 28.9 failure to caveat .… 28.10–28.16 general law rules application .… 4.23, 28.2 generally .… 28.1 between legal and equitable interests .… 28.7 between legal interests .… 28.5 notice .… 28.7, 28.8, 28.9 possession of legal estate .… 28.3–28.4 pre-registration protection .… 28.8 registration importance .… 28.6 trust fund interest mortgages .… 6.24 by trustee notice .… 26.1–26.27 to all trustees .… 26.17 custody of notice .… 26.20 Dearle v Hall rule .… 26.1–26.12 form of notice .… 26.18 funds in court .… 26.23–26.27 indorsement on trust instrument .… 26.22 notice of assignment is notice of contents .… 26.19 to one trustee .… 26.16 requirements .… 26.13–26.22 service of notice .… 26.21 waiver of mortgagee’s .… 40.20 waiver of rights .… 32.20 Private treaty

power of sale under .… 20.32 Proceeds accounts for .… 39.21, 40.17 PPSA security interests automatic attachment .… 5.32 from disposal of seized collateral .… 5.133 perfection .… 5.56, 5.60 priority of .… 24.32 Profit-sharing loan .… 6.22 Promissory estoppel application to mortgages .… 35.12 Promissory note merger of personal remedy on, prevention .… 36.13 Proof of debt by secured creditors .… 23.7, 23.9–23.11 Proof of security .… 16.37–16.40 lost document .… 16.38 payment of consideration .… 16.39 proof of execution .… 16.37 validity of security .… 16.40 Property after-acquired .… 5.32, 5.35 appropriation to meet charge .… 2.4 commercial .… 5.10

consumer .… 5.10 definition of .… 5.9 devaluation of .… 37.5 expenditure on another’s .… 2.16 intangible .… 5.10, 5.87, 5.124 liability to debt upon death of mortgagor .… 29.2 liquid .… 5.105 personal see Personal property protection of .… 16.1 real, partnerships .… 11.27 receiver appointment over .… 18.23 seizure of see Seizure of property special .… 1.11 tangible .… 5.10, 5.124 Protected persons mortgage by .… 11.21 redemption rights .… 32.29 Public authorities mortgage by .… 11.46 resumption by .… 38.2–38.4 Public office assignment of pay .… 13.49 sale of .… 13.48 Purchase-money security interest (PMSI) bailor’s .… 5.83

cosignor’s .… 5.83 definition of .… 5.80 disputes with non-PMSIs .… 5.87 exemptions .… 5.84 lender’s .… 5.82, 5.88 lessor’s .… 5.83 mixed .… 5.85 priority rules .… 5.79–5.88 refinancing .… 5.85–5.86 seller’s .… 5.81 Purchaser power of sale protection .… 20.19 redemption proceedings .… 33.15 title investigation .… 20.20 Purchaser’s lien .… 2.15 Q Quasi-mortgage .… 1.48–1.49 Qui prior est tempore, potior est jure priority test .… 24.2, 24.4 Quota, agricultural .… 9.11 R Rate covenants to pay .… 3.22

Real property partnerships .… 11.27 Realty charges over .… 2.7 vendor’s lien upon .… 2.13 Receipt building societies .… 32.64 effect on mortgagor’s liability .… 32.65 indorsed, automatic reconveyance by .… 32.57–32.61 of money, solicitor’s authority .… 42.9 mortgagee in possession’s right top possession .… 19.33 as transfer .… 32.61 Receiver as agent of mortgagor .… 18.5 appointment of see Appointment of receiver Corporations Act application .… 18.11–18.13 court-appointed see Court-appointed receiver definition of .… 18.4 distribution of moneys received by .… 18.16 duties of .… 18.4 generally .… 18.1 liability of .… 18.14 multiple .… 18.6, 18.7, 18.11 as officer of court .… 18.25 in possession .… 39.18

power of sale by .… 20.51 powers of .… 18.9–18.10, 18.12–18.13, 18.26 receiver and manager status .… 18.4, 18.7, 18.24 remedies under PPSA .… 5.120 renumeration of .… 18.15 termination of .… 18.17 Receivership objective of .… 18.19 Reconveyance after redemption .… 32.57–32.61 costs of .… 40.28–40.30 Recordkeeping register of charges .… 11.44 Rectification for mistake .… 13.42 Redeemable debentures .… 8.2 ‘redeem up, foreclose down’ principle redemption rights .… 32.25 Redemption .… 32.1–33.27; see also Equity of redemption account requirements .… 39.10 on acknowledgment .… 32.88 appropriation of payments .… 32.51–32.54 Clayton’s case rule .… 32.54 by creditor .… 32.53

by debtor .… 32.52 to principal or interest .… 32.51 building society mortgages .… 32.32–32.34 collateral advantages .… 32.12–32.16 compulsory acquisition on .… 32.35 conditions for .… 32.3 covenant not to call in money .… 16.6 date for .… 16.5 date or time for .… 32.6–32.19 collateral advantages .… 32.12–32.16 early .… 32.7 early repayment discount .… 32.17 extension .… 39.41 lease to mortgagee .… 32.19 postponement .… 32.8–32.11 release of equity of redemption .… 32.18 usual .… 32.6 delivery of deeds .… 32.80–32.82 discharge of mortgage .… 32.55–32.79 building societies .… 32.64 cessation of terms on payment .… 32.62 collateral securities .… 32.71 of debentures .… 32.69 delivery of deeds upon .… 32.80–32.82 document preparation .… 32.75 effect of receipt on mortgagor’s liability .… 32.65

of equitable mortgages .… 32.68 insurance policies .… 32.72–32.73 of land mortgages .… 32.67 mortgagee’s duty .… 32.55 under overreaching powers .… 32.77–32.78 on payment into court .… 32.77 personalty .… 32.70 reconveyance of property .… 32.57–32.61 shipping mortgages .… 32.76 solicitor’s undertaking .… 32.74 of statutory mortgages .… 32.66 Torrens system .… 32.63 transfer of mortgage at mortgagor’s direction .… 32.56 vesting orders .… 32.79 dismissal of action for .… 21.4 early .… 32.7 foreclosure date .… 16.5 effect of .… 22.21 offers to .… 21.14 persons entitle to redeem .… 21.13 price of .… 22.16 rights of .… 16.4 time for .… 21.4, 21.22, 22.14, 22.25–22.34 interest after day for .… 39.43 limitation period .… 32.85–32.89

loss of right of .… 32.83 notice to pay off debt .… 32.36–32.39 equitable mortgage by deposit, non-application .… 32.38 generally .… 32.36 missing mortgagees .… 32.39 six months interest in lieu of .… 32.38 six months rule .… 32.36, 32.38 three months rule (NSW and Queensland) .… 32.37 offers to redeem .… 21.14, 33.7–33.8 order for .… 33.20–33.23 generally .… 33.20 interim .… 33.21 successive mortgages .… 33.22 time for payment .… 33.23 on part payments .… 32.88 payment of debt .… 32.36–32.92 appropriation of payments .… 32.51–32.54 cessation of mortgage terms on .… 32.62 notice to pay off .… 32.36–32.39 tender .… 32.40–32.50 time for .… 33.23 on personalty .… 32.89–32.90 persons entitled to .… 32.20–32.31 adverse possessors .… 32.22 bankrupt persons .… 32.23 beneficiaries .… 33.2, 33.4

bona vacantia .… 32.24 creditors .… 32.26 death of mortgagor .… 32.27 equity of redemption assignees .… 32.21 judgment creditors .… 32.26 lessee from mortgagor .… 33.2 mentally disabled persons .… 32.29 mortgagors and successors in title .… 32.20 parties to redemption proceeding .… 33.2 protected persons .… 32.29 subsequent encumbrancers .… 32.25 sureties .… 32.30, 33.2 third parties .… 32.31 trustees .… 32.28, 33.4 postponement .… 32.8–32.11 ‘breaking the mortgage,’ .… 32.10 generally .… 32.8 once a mortgage, always a mortgage rule .… 32.11 oppressive .… 32.9 unconscionable .… 32.9 price of .… 22.16 proceedings .… 33.1–33.27 assignment of equity during .… 33.5 discovery .… 33.11 dismissal .… 33.24–33.27 foreclosure effects .… 33.12

generally .… 33.1, 33.10 to impeach mortgage .… 33.9 joinder of causes of action .… 33.13 mortgagor’s death or insolvency .… 33.6 multiple mortgages .… 33.18 offers to redeem .… 33.7–33.8 orders .… 33.20–33.23 owner of equity of redemption’s presence .… 33.3 parties’ to .… 33.2–33.4, 33.14–33.19 subsequent mortgagees .… 33.19 Torrens system .… 33.1 release of debt or security .… 34.1–34.8 covenants not to sue .… 34.7 debt .… 34.2 estoppel and .… 34.6 generally .… 34.1 mortgage by deposit of deeds .… 34.5 security .… 34.3–34.4, 34.8 right of assignment .… 32.4–32.5 consolidation and .… 31.1 court’s rejection of .… 33.26 equitable .… 1.15, 32.1 foreclosures .… 16.4 legal .… 32.1 nature of .… 32.1–32.3

statutory right under PPSA .… 5.136 sub-mortgagees .… 15.3 subsequent mortgages .… 32.92 tender of payment .… 32.40–32.50 agents .… 32.48, 32.49 amount due .… 32.40–32.41 dispensation of .… 32.42 joint creditors .… 32.50 legal requirement .… 32.45 persons entitled to .… 32.49–32.50 place of .… 32.44 production of money .… 32.46 time of .… 32.43 unconditional requirement .… 32.47 who may make .… 32.48 transfer of mortgage on see Transfer of mortgage by trustees .… 23.12–23.13 Refinancing PMSI-financed acquisitions .… 5.85–5.86 Registered ship mortgage .… 9.15–9.16, 9.28 Registration actions on covenant to pay .… 17.1 of assignment .… 6.7 of charges .… 11.38–11.44 ASIC duties .… 11.38, 11.40, 11.44

exemptions .… 11.39 extension of time .… 11.43 non-registration effects .… 11.41 notice .… 11.42, 11.43 provisional .… 11.40 records .… 11.44 requirements .… 11.38–11.40, 11.42 of deeds see Registration of deeds of leases .… 12.7, 12.13 perfection of security interest .… 5.36, 5.53, 5.74, 5.76, 5.87, 11.41 of security interests .… 5.115 of Torrens system land .… 12.13, 28.6 of writs and orders affecting land .… 24.51 Registration of deeds .… 27.1–27.16 benefits conferred by .… 27.16 bona fides .… 27.12–27.14 consideration .… 27.11 defective instruments .… 27.15 generally .… 3.52–3.53 notice of prior unregistered deed .… 27.13 registrable deeds and instruments .… 27.3 statutory provisions .… 27.1–27.10 effect .… 27.2, 27.5, 27.10 generally .… 27.1 New South Wales .… 27.3, 27.4, 27.5 New Zealand .… 27.9

priority .… 27.5 registrable deeds and instruments .… 27.3 South Australia .… 27.4, 27.6 Tasmania .… 27.4, 27.5, 27.8 Torrens title land .… 27.4 Victoria .… 27.5 Western Australia .… 27.7 Torrens title land .… 27.4 Reinstatement security interest grantors or other secured parties .… 5.137 Release in bankruptcy .… 35.10 of debt or security .… 34.1–34.8 covenants not to sue .… 34.7 debt .… 34.2 estoppel and .… 34.6 generally .… 34.1 mortgage by deposit of deeds .… 34.5 security .… 34.3–34.4, 34.8 of equity of redemption .… 32.18 of principal debtor .… 35.9 in schemes of arrangement .… 35.10 waiver and .… 35.1 Remedy breach of promise to give mortgage .… 1.41

of chargee .… 2.8 of debenture holders’ .… 8.7–8.8 of deemed security interest holders .… 5.120 distress for rent .… 19.27 mortgagee’s see Mortgagee’s remedies power of sale default .… 20.54 under PPSA .… 5.119–5.134 application .… 5.120–5.122 availability .… 5.123–5.134 generally .… 5.119 second or subsequent mortgages .… 10.8–10.9, 16.7 seizure .… 5.124–5.128 Rent and profit accounts for .… 39.14–39.15, 39.28–39.32 accounts taken with rests .… 39.35–39.41 collection by agent .… 39.32 mortgagee in possession’s liability to account for .… 19.34 mortgagee in possession’s rights .… 19.30 mortgagor’s rights .… 12.3, 19.9 occupation .… 39.31 receiver’s receipt of .… 18.8, 18.26 tenancy before mortgage .… 12.13 Renumeration of receiver .… 18.15 Repair

accounts for .… 39.34 covenant to .… 3.19 mortgagee in possession’s liability for .… 19.36 Repayment. see also Redemption acceleration clauses .… 3.15 early repayment discounts .… 32.17 mortgagee’s duty upon .… 32.55 personal covenant for .… 3.13–3.14 redemption timing effects .… 32.6, 32.8 timing .… 21.22 Replacement mortgage transfers of .… 14.18 void or voidable .… 13.3 Repossession perfection of security interests .… 5.45, 5.58 Repurchase agreement (repo) PPSA security interests .… 5.18 Reservation of title clause .… 1.49 Reserve mortgagee’s obligation to fix when exercising power of sale .… 20.29 Respondentia bond maritime lien recognition .… 9.19 Restraint waste by mortgagor .… 42.20

Restraint of trade application of .… 32.9 collateral advantage application .… 32.14 Rests accounts with .… 39.35–39.41 Resumption compensation proceedings .… 38.4 legislation .… 38.3 loss of property through see Loss or destruction of property for public purposes .… 38.2–38.4 Retardation clause .… 3.16 Retention, of seized collateral generally .… 5.134 obligations of seizing party .… 5.128 reinstatement of security .… 5.137 Returned good security interests .… 5.58, 5.61 Reverse mortgage… 1.56 Reversion foreclosure .… 21.11 in mortgagee .… 12.13 statutory protection for dealings with .… 13.14 Reversioners securities granted by .… 13.11

Right of grantor and other secured parties under PPSA .… 5.135–5.137 of mortgagors see Mortgagor’s rights Romalpa clause .… 1.49 S Sale costs on .… 40.17–40.21 by court .… 40.18 deficiency on .… 23.1 expenses of .… 40.19, 40.25 inequitable .… 13.13 judgments for .… 22.42–22.45 judicial see Foreclosure and judicial sale of land purchaser’s lien .… 2.15 vendor’s lien .… 2.11 by mortgagee in possession .… 41.7 order for, mortgagors entitled to redeem .… 32.3 power of see Power of sale PPSA security interests .… 5.18 proceeds of, priority .… 24.32 of property as alternative to foreclosure .… 21.1, 21.11 remedies of chargee .… 2.8 second mortgagees .… 10.10 to self .… 5.131

surplus after .… 23.1 Sale and lease-back transaction PMSI exemption .… 5.81, 5.84 Sale with option to repurchase PPSA security interests .… 5.18 Salvage lien .… 2.17, 9.21 payments, priority of .… 24.33 Schemes of arrangement release in .… 35.10 Second or subsequent mortgage contractual restraints .… 10.4 costs, right to assessment .… 40.21 covenants .… 10.7 creation .… 10.1 discharge .… 10.11 foreclosure .… 10.13, 16.31, 20.10, 21.1, 22.5–22.6, 22.11, 22.19, 22.20 form .… 10.3 generally .… 10.13 marshalling .… 30.12–30.13, 30.14 mergers .… 36.9 notice .… 10.6, 25.7, 25.8 notice of subsequent encumbrance .… 22.6 postponement .… 10.14

power of sale .… 20.10, 20.44 redemption .… 32.25, 32.92, 33.19 redemption orders .… 33.22 remedies of exercise of .… 16.7 general law .… 10.9 Torrens system .… 10.8 right to surplus .… 10.12 sales by mortgagee .… 10.10 subordinated debt .… 10.15 tacking .… 10.13, 25.4, 25.7, 25.8, 25.15 title deeds .… 10.5 Torrens system .… 4.25–4.26, 10.2, 10.8 Secured creditor .… 23.4–23.11 court’s restraint of mortgagee .… 23.5 definition of .… 1.4, 23.4 joint and separate estates .… 23.8 possession by .… 5.44 proof of debt by .… 23.7, 23.9–23.11 remedies of .… 23.3 restrictions on suing .… 16.16 security must be on debtor’s own property .… 23.7 voting rights .… 23.6 Securitisation .… 1.57 Security

charge see Charge collateral see Collateral completion .… 40.25 definition of .… 1.4, 5.1 enforcement of .… 16.4–16.9 administration actions .… 16.9 covenant not to call in money .… 16.6 default .… 16.8 exercise of remedies .… 16.7 legal redemption date .… 16.5 mortgagee’s remedies .… 16.4 guarantee .… 1.6 land .… 3.26–3.30 lien .… 1.10 litigation relating to .… 40.23 lost document .… 16.38 mortgage see Mortgage nature of .… 1.4 personal guarantee .… 1.6 IOU .… 1.6 real security distinguished from .… 1.4, 1.6 suretyship .… 1.6 pledge .… 1.4 preservation of .… 42.15 proof of .… 16.37–16.40

protection of .… 16.1–16.3 real classification .… 1.5 creation .… 1.5 definition of .… 1.4 personal security distinguished from .… 1.4, 1.6 release of covenants not to sue .… 34.7 creditor’s acceptance of further security from principal debtor .… 34.8 under equitable mortgage .… 34.4 estoppel and .… 34.6 generally .… 34.1, 34.3 mortgage by deposit of deeds .… 34.5 return upon payment of debt .… 16.11 set-off as quasi security .… 1.54 special .… 9.1–9.29 surety’s right to .… 42.13–42.16 types of .… 1.4, 1.57 unauthorized .… 11.9–11.10 validity of .… 16.40, 42.3 void see Void or imperfect securities Security agreement financing statement incorporation into .… 5.36 form .… 5.38 registration .… 5.36

signature .… 5.37, 5.39 writing requirement .… 5.36–5.40 Security holder foreclosure proceeding party .… 22.2 redemption proceeding party .… 33.14 Security interest common law .… 5.12 definition of .… 5.16 perfection see Perfection PPSA characterisation .… 5.26 purchase-money see Purchase-money security interest (PMSI) registration .… 5.115 Security interest over personal property covered by PPSA .… 5.1–5.139 accession .… 5.93–5.98 attachment automatic .… 5.31–5.34 floating charge .… 5.35 requirements .… 5.28–5.30 transitional interests .… 5.8 characterisation .… 5.26 circulating assets .… 5.116–5.117 commingling .… 5.93, 5.99–5.101 control .… 5.40, 5.50–5.52, 5.89, 5.118 deemed .… 5.13, 5.21–5.25 enforceability against third parties .… 5.36–5.40

enforcement .… 5.119–5.139 generally .… 5.119 liquid assets .… 5.139 obligations secured by land and personal property .… 5.138 remedies .… 5.120–5.134 rights of grantor and other secured parties .… 5.135–5.137 insolvency .… 5.111–5.118 circulating assets .… 5.116–5.117 control .… 5.118 generally .… 5.111 registration deadline for filing statements .… 5.115 vesting of unperfected security interests on .… 5.112–5.114 loss of .… 5.92–5.118 accession .… 5.93–5.98 commingling .… 5.93, 5.99–5.101 insolvency .… 5.111–5.118 taking free rules .… 5.102–5.110 perfection .… 5.8, 5.36, 5.41–5.67 PPSA application .… 5.6–5.12 PPSA background .… 5.1–5.5 priority .… 5.68–5.91 accessions .… 5.95–5.96, 5.98 change in mode of perfection .… 5.78 commingling .… 5.99–5.101 control .… 5.89 default rules .… 5.70–5.78

generally .… 5.68–5.69 miscellaneous provisions .… 5.90 mixed disputes .… 5.76–5.77 purchase-money security interest .… 5.79–5.88 special priority rules .… 5.90 subordination agreements .… 5.91 super priority rules .… 5.79–5.89 protection .… 5.8, 5.27–5.40 purchase-money security interest see Purchase-money security interest (PMSI) in substance .… 5.13, 5.14–5.20 taking free rules .… 5.34, 5.65–5.66, 5.102–5.110 transitional interests .… 5.8 Security lease operating lease distinguished from .… 5.19, 5.24 PPSA security interests .… 5.19 Seizure of collateral, disposal of .… 5.128–5.133 distribution of proceeds .… 5.133 duty to obtain market value .… 5.130 generally .… 5.129 notice .… 5.129 obligations of seizing party .… 5.128 purchaser takes free on resale .… 5.132 reinstatement of security .… 5.137 sale to self .… 5.131

Seizure of property accessions .… 5.97 perfection of security interests .… 5.45, 5.58 under PPSA .… 5.124–5.128 default by debtor .… 5.125 generally .… 5.124 liquid assets .… 5.139 methods .… 5.127 notice .… 5.126, 5.129, 5.134, 5.139 obligation to retain or dispose of collateral .… 5.128–5.134 Seller purchase-money security interest .… 5.81 Serial-numbered good PMSI exemption .… 5.84 taking free rules .… 5.108 Service garnishment notice .… 7.14 notice to trustee .… 26.21 notices of demand .… 17.9 power of sale notice .… 20.16 Set aside foreclosure orders .… 21.7 sale under mortgagee’s power of sale .… 20.42 Set-off .… 1.50–1.54

on accounts .… 1.51 generally .… 1.50 marshalling and .… 30.10 possession action defence .… 19.24–19.25 PPSA security interests .… 5.16 purchase by mortgagee of mortgaged property .… 39.61 as quasi security .… 1.54 statutory assignment .… 6.6, 6.8 transactional .… 1.52 Settled account defence of .… 39.5 interference with .… 39.3 rests .… 39.38 Shares mortgages of .… 6.16–6.17 bonus issues .… 6.17 deposit of share certificate by .… 6.16, 6.17 generally .… 6.16 partnership .… 6.18 nature of .… 6.16 partnership .… 6.18, 7.12, 11.28 power of sale .… 20.3 priority by notice to trustees .… 26.12 sale by mortgagees of .… 39.23 transfer of .… 6.16, 6.17

Ships foreign .… 9.13 loss or destruction .… 9.27, 37.2 mortgagee in possession’s liability for outgoings .… 19.39 mortgages of .… 9.13–9.28 caveats .… 9.18 discharge of .… 9.28, 32.76 equitable mortgage .… 9.17, 9.24 generally .… 9.13 legislative background .… 9.14 loss or destruction of ship .… 9.27 maritime liens .… 9.19, 9.21 marshalling of maritime securities .… 9.20 mortgagee’s power of sale .… 9.26, 20.53 mortgagee’s rights in possession .… 9.15, 9.16, 9.25 priority .… 9.21–9.24 registered ships .… 8.28, 9.15–9.16 similarities with Torrens system .… 9.15 unregistered ships .… 9.17 salvage agreements .… 9.13 Signature security agreements .… 5.37, 5.39 Six months rule .… 1.60 Solicitor as agent .… 42.5

conflicts of interest .… 42.1, 42.7 discharge of mortgage .… 32.74 duties .… 42.1 influence presumption .… 13.22 lien see Solicitors’ lien mortgage practices .… 42.11 negligence of .… 42.1, 42.6 notice to as notice to client .… 24.22, 42.5 perfection of charge, liability .… 11.41 redemption payments .… 32.49 securities to .… 42.2–42.11 authority .… 42.8–42.9 conflicts of interest .… 42.7 costs of .… 42.10 negligence .… 42.6 oppressive securities .… 42.4 practices .… 42.11 solicitor as agent .… 42.5 undue influence .… 42.2 validity of security .… 42.3 Solicitors’ lien … 2.33–2.51 binding to extent of client’s interest .… 2.40 claim for .… 2.35 classifications .… 2.33 discharge .… 2.38, 2.45 enforcement .… 2.35, 2.51

examples of .… 2.50 for general professional charges .… 2.33 generally .… 2.33 historical development .… 2.34 limitation to professional matter .… 2.36 loss or displacement of .… 2.37 mortgagee’s solicitor .… 2.41, 2.42 over documents .… 2.33, 2.35 over fruits of litigation .… 2.48 persons affected by .… 2.39 possessory .… 2.33 production of documents in litigation .… 2.43–2.45 same solicitor for both parties .… 2.42 solicitor’s right to attach funds .… 2.49 trust deeds .… 2.46 winding up orders .… 2.47 Special security .… 9.1–9.29 agricultural land mortgages .… 9.10–9.12 aircraft .… 9.29 consumer credit .… 9.1–9.5 Crown Lands Act mortgages .… 9.6–9.9 ships .… 9.13–9.28 Specialty security mergers of .… 36.13 Specific performance

debentures converted into shares .… 8.1 equitable mortgage .… 1.41 mortgagee’s remedies .… 16.2 Stamp duty .… 41.8–41.11 collateral mortgages .… 41.10 exemptions .… 41.11 failure to pay .… 41.9 generally .… 41.8 multi-jurisdictional mortgages .… 41.10 Stated account see Settled account Statutory assignment… 6.4–6.10 effect of .… 6.6 equitable assignment distinguished from .… 6.10 failure to meet requirements .… 6.9 generally .… 6.4 notice .… 6.7 priority .… 6.8 requirements for .… 6.5 Statutory guide PPSA security interests .… 5.5 Statutory charges .… 7.1–7.14 appointment of receiver by equitable execution .… 7.11 attachment orders .… 7.13 charging order .… 7.5, 7.7–7.9

charging share in partnership .… 7.12 enforcement .… 7.2, 7.3 garnishment .… 7.14 generally .… 7.1, 7.4 judgment, may become charge .… 7.4, 7.6 to workers of contractors .… 7.10 Statutory jurisdiction unconscionable dealing .… 13.34 Statutory memorandum transfer of mortgage .… 14.4 Statutory mortgage discharge of .… 32.66 Statutory power to lease .… 12.22–12.29 effects of .… 12.28 extension of .… 12.27 generally .… 12.22–12.24 leases by mortgagor and mortgagee together .… 12.29 restrictions on or exclusion of .… 12.26 Torrens leases .… 12.25 of trustees to mortgage .… 11.13 Stay of proceedings on payment or tender .… 16.15 Stock

charging order see charging order power of sale .… 20.3 Stop order generally .… 7.13 trust funds in court, priority .… 26.23–26.27 Strata title .… 3.51 Sub-lease accretions .… 3.27 covenants against .… 13.53 generally .… 3.3 Sub-mortgage .… 15.1–15.5 discharge .… 15.5 effect .… 15.3 equitable .… 15.2 foreclosure judgments .… 22.23 form .… 15.2 generally .… 15.1 notice .… 15.2 sub-mortgagee’s interest .… 15.4 sub-mortgagee’s rights and obligations .… 15.3 Torrens system .… 15.1, 15.3, 15.4 Sub-prime mortgage .… 1.55 Subordination agreements, priority .… 5.91, 24.3

second or subsequent mortgages .… 10.15 trust .… 10.15 Subrogation PPSA security interests .… 5.110 principles of .… 42.18–42.19 of sureties .… 42.17–42.21 unauthorized borrowings .… 11.10 Subsequent mortgage see Second or subsequent mortgage Subsequent purchasers conveyances in fraud of .… 13.9 Substitute mortgage transfers of .… 14.18 void or voidable .… 13.3 Successive mortgage see Second or subsequent mortgage Suicide life insurance policies .… 6.15 Supply agreement charges in .… 1.39 Surety see also Guarantor foreclosure judgments .… 22.22 insolvency of mortgagor and .… 42.16 liability in action on the covenant .… 17.3 redemption proceeding party .… 33.2 release of .… 34.8, 35.11

rights consolidation overriding .… 31.10 of contribution .… 30.2 of redemption .… 32.30 to securities .… 42.13–42.16 subrogation .… 42.17–42.21 tacking against .… 25.5 waiver .… 35.4, 35.7–35.11 Suretyship notice of .… 42.14 personal security .… 1.6 Surplus accounts for .… 39.21 second mortgagee’s right to .… 10.12 Surrender of lease generally .… 12.30 Torrens leases .… 12.31 Syndicated loan .… 1.54 T Tacking .… 25.1–25.16 abolition .… 25.10–25.15 by agreement .… 25.9 consolidation by .… 31.9 constructive notice .… 25.8

former conditions for .… 25.4 further advance distinguished from re-advance .… 25.3 generally .… 25.1 mortgage to cover further advances .… 25.7 second or subsequent mortgages .… 10.13, 25.4, 25.7, 25.8, 25.15 against surety .… 25.5 tabula in naufragio .… 25.10, 25.12 Torrens system .… 4.35, 25.16 types of .… 25.2 unsecured debts .… 25.6 Taking free rules buyer or lessee of goods in ordinary course of business .… 5.104 disposal of collateral .… 5.132 generally .… 5.102 knowledge .… 5.109 liquid property .… 5.105 low-value consumer property .… 5.107 residual protection for secured parties .… 5.110 returned collateral .… 5.34 serial-numbered goods .… 5.108 temporary perfection .… 5.65–5.66, 5.106 unperfected security interests .… 5.103 Tangible property PPSA security interests .… 5.10 seizure .… 5.124

Taxation .… 41.1–41.12 capital gains tax .… 41.5 charges on land for unpaid taxes .… 41.12 commissioner’s garnishee notices .… 41.1 of costs .… 40.31 covenants to pay taxes .… 3.22 goods and services tax .… 41.6–41.7 of mortgage interest .… 41.2–41.3 non-residents .… 41.4 receiver appointment and .… 18.7 stamp duties .… 41.8–41.11 withholding tax .… 41.4 Tenancy after mortgage .… 12.17–12.31 by attornment clause .… 3.23 creation of .… 12.10 joint .… 11.2, 33.18, 37.6 before mortgage .… 12.13–12.16 mortgagee’s ejectment powers .… 19.29 in mortgagor .… 12.10 Tenant at will creation of .… 12.10 mortgagor in possession distinguished from .… 12.9 Tenant for life duty to keep down interest .… 39.62

foreclosure proceeding party .… 22.10 loss or destruction of property .… 37.6, 37.7 purchase of mortgage debt under par .… 39.19 Tenant in common mortgage by all co-owners .… 11.2 mortgage by some co-owners only .… 11.4 partition by co-owners of mortgaged land .… 11.6 purchase of mortgage debt under par .… 39.19 redemption proceedings .… 33.18 Tenant in occupation mortgagor’s rights .… 12.6 Tenant in possession rights of .… 19.4 Tender interest cessation on .… 39.60 payment of debt under redemption .… 32.40–32.50 stay of proceedings .… 16.15 Termination of receivership .… 18.17 Thing in action see Chose in action Third party mortgagee’s protection of title against .… 16.3 possession by .… 5.44, 19.17 PPSA security interest enforceability .… 5.36–5.40

redemption rights reserved to .… 32.31 rights of .… 16.14 undue influence .… 13.18–13.19 Threat securities obtained by .… 13.37 Title by adverse possessor .… 32.22 deeds see Title deeds indefeasibility of .… 4.11–4.15 covenants .… 4.13 fraud .… 4.15 generally .… 4.11 limits .… 4.12 mortgages on behalf of protected or incapable persons .… 11.21 statutory exceptions .… 4.14 inquiries made to ascertain .… 24.15 investigation by purchaser .… 20.20 mortgagee’s protection against third parties .… 16.3 negligence as to .… 24.38 negotiable documents in transit .… 5.62 searches .… 27.16 severance of .… 22.11 Title deeds custody of mortgagee’s rights .… 3.31

negligence in .… 24.41 production of deeds by mortgagee .… 3.32 Torrens system .… 4.31 delivery .… 24.42–24.43, 32.80–32.82 equitable mortgage by deposit of .… 3.36–3.44 loss of .… 32.81–32.82, 40.12 mortgagee’s duty to have ready .… 32.80–32.81 mortgagee’s rights to .… 24.40 negligence .… 24.39, 24.41 registration of see Registration of deeds second or subsequent mortgages .… 10.5 Torrens system .… 4.1–4.35 attornment clauses .… 3.23 caveat procedure .… 28.10–28.16 caveats .… 4.26–4.28 consolidation .… 31.2, 31.11 contribution rights .… 30.3 costs of action .… 40.1 covenants .… 3.12, 4.29, 17.1 custody of deeds .… 4.31 death of mortgagor, incidence on .… 29.2 default .… 4.36 description of .… 1.18 discharge .… 4.38–4.39, 17.11, 32.63 equitable charge application .… 2.3, 4.24 equitable mortgage application .… 4.24

equity of redemption .… 4.7–4.8, 32.2, 32.84 exoneration .… 30.4 foreclosure and judicial sale .… 16.4, 16.5, 21.6, 21.9, 22.52–22.55 forgery .… 4.16–4.20, 13.43 form .… 4.5 fraud .… 4.18–4.19 further advances .… 4.35 generally .… 4.1 incidental rights .… 4.2 indefeasibility of title .… 4.11–4.15 covenants .… 4.13 fraud .… 4.15 generally .… 4.11 limits .… 4.12 mortgages on behalf of protected or incapable persons .… 11.21 statutory exceptions .… 4.14 leases generally .… 12.7 mortgagee’s leasing powers .… 19.32 mortgagor’s leasing powers .… 12.25 surrender of .… 12.31 tenancy before mortgage .… 12.13 limitation period .… 4.40 mergers .… 4.34, 36.17 mortgagee’s rights .… 4.10 mortgagor’s rights

covenant enforcement .… 12.3 generally .… 4.9, 12.1 possession .… 12.4 notice .… 28.7, 28.8, 28.9 possession before default .… 19.7–19.8 defences to possession claims .… 19.24 ejectment actions .… 19.5, 19.29 generally .… 19.1 mortgagee’s right of entry .… 19.2, 19.11 rents and profits .… 19.30 veto on leases .… 19.3–19.4 postponement .… 4.32 power of sale .… 4.37 conveyance effects .… 20.49 express .… 20.4 generally .… 20.12 notice .… 20.14 protection of purchaser .… 20.20 sale moneys application .… 20.43 setting aside sale .… 20.42 statutory .… 20.5, 20.9, 20.11 priority .… 28.1–28.16 application of general law rules .… 4.23 constructive notice .… 24.13 between equitable encumbrances .… 28.9

failure to caveat effect .… 28.10–28.16 general law rules application .… 4.23, 28.2 generally .… 28.1 between legal and equitable interests .… 28.7 between legal interests .… 28.5 notice .… 28.7, 28.8, 28.9 possession of legal estate .… 28.3–28.4 pre-registration protection .… 28.8 registration importance .… 28.6 production of deeds by mortgagee .… 3.32 purpose of .… 28.2 receiver appointment .… 18.7 redemption proceedings .… 33.1 redemption rights application .… 32.1 registration of deeds .… 27.4 second mortgages .… 4.25–4.26, 10.2, 10.8 standard clauses (New South Wales) .… 4.41 state differences .… 4.21 statutory charge under .… 4.4 as statutory instrument .… 1.18 sub-mortgages .… 15.1, 15.3, 15.4 sufficient interest in land .… 4.28 tacking .… 4.35, 25.16 tenancy after mortgage .… 12.18 title searches .… 4.3 traditional mortgage distinguished from .… 1.1

transfer of .… 4.33, 14.5 types of .… 4.6 unregistered .… 4.27 variations of .… 4.30 vendor’s lien .… 2.10, 2.13 volunteers .… 4.22 Tort lien ships .… 9.21 Tracing PPSA security interests .… 5.32 Trade mark mortgages of .… 6.27 no lien on goods bearing fraudulent .… 2.18 Trading account set-off in .… 1.52 Transfer of account security interests .… 5.22 Transfer of chattel paper security interests .… 5.22 Transfer of mortgage .… 14.1–14.18 accounts .… 39.20 capitalisation on .… 39.53 devolution on death or bankruptcy of mortgagee .… 14.13–14.15 generally .… 1.7

by mortgagee .… 14.1–14.12 assignment at undervalue .… 14.12 of collateral securities .… 14.10 concurrence of mortgagor .… 14.1 deed or statutory memorandum necessity .… 14.4 form .… 14.3 limitation period .… 14.1 notice .… 14.11 of part of mortgage .… 14.7 by payment .… 14.6 position of transferee .… 14.2 Torrens system mortgage .… 14.5 transfer on appointment of new trustees .… 14.9 of trust mortgages .… 14.8 by mortgagor .… 14.16–14.18 assignment .… 14.16 between co-owners .… 14.17 mortgagor’s right upon redemption .… 32.56 substitute mortgages .… 14.18 notice .… 14.11 order for, mortgagors entitled to redeem .… 32.3 situation of mortgage .… 1.45 sub-mortgages .… 15.1–15.5, 22.23 Torrens system .… 4.33, 14.5 transferees redemption proceeding party .… 33.16

takes subject to state of accounts .… 39.20 Transferee of account or chattel paper security interests .… 5.22 position of .… 14.2 Transitional security agreement definition of .… 5.8 Transitional security interest definition of .… 5.8 Trespass mortgagor’s right to sue in .… 12.2 True lease financing lease distinguished from .… 5.19, 5.24 PPSA security interests .… 5.19 Trust breach of, effect on priority of mortgages .… 24.30 deeds belonging to held as subject to solicitors’ lien .… 2.46 notice of .… 24.6 PPSA security interests .… 5.20 subordination .… 10.15 of surplus proceeds after exercising power of sale .… 20.47 transfer of .… 14.8 Trust deeds .… 8.4–8.8 debenture holders’ remedies .… 8.7–8.8 form .… 8.4

open-end .… 8.5 registration .… 11.42 trustees’ duties .… 8.6 Trust fund in court .… 26.23–26.27 mortgage of interest in .… 6.24 notice to legal holder .… 26.9, 26.13 Trust instrument indorsement on .… 26.22 Trust receipt definition of .… 5.2 Trustee appointment .… 26.15 costs .… 40.29 debenture .… 8.6 defaulting, effect on priority of mortgages .… 24.31 discharge of mortgage by vesting order .… 32.79 equitable lien over trust property to secure money in execution of trust .… 2.18 foreclosure proceeding party .… 22.10 influence presumption .… 13.22 marshalling in favor of, non-application .… 30.13 mortgage by .… 11.12–11.15 power to mortgage .… 11.12–11.15 priority by notice to .… 26.1–26.27

to all trustees .… 26.17 custody of notice .… 26.20 Dearle v Hall rule .… 26.1–26.12 form of notice .… 26.18 funds in court .… 26.23–26.27 indorsement on trust instrument .… 26.22 notice of assignment is notice of contents .… 26.19 to one trustee .… 26.16 requirements .… 26.13–26.22 service of notice .… 26.21 redemption by .… 23.12–23.13, 32.28 redemption proceedings .… 33.2, 33.4 transfer of mortgage upon appointment of new .… 14.9 Trustee in bankruptcy bankruptcy proceeding party .… 23.3 disclaimer of onerous property .… 23.14 foreclosure proceeding party .… 22.9 mortgage by .… 11.23 redemption by .… 23.12–23.13 title against .… 3.50 U Ultra vires doctrine mortgage validity .… 11.33, 11.46 Ultra vires order

equitable mortgage creation .… 3.40 Unconscionability .… 13.30–13.36 borrower must ‘do equity,’ .… 13.34 discharge of mortgage .… 38.5, 38.6 duress .… 13.39 inadequacy of consideration .… 13.32 independent advice .… 13.33 jurisdiction .… 13.30, 13.35 onus of proof .… 13.31 postponement .… 32.9 test for .… 13.36 Undervalue assignment of mortgage at .… 14.12 release of equity of redemption at .… 32.18 sale at .… 20.28, 39.1 transactions at, void against third parties .… 13.4 Undivided share co-mortgagees of .… 11.5 Undue influence categories .… 13.17 court intervention .… 13.23 definition of .… 13.16 generally .… 13.16 husband and wife cases .… 13.25–13.29 influence by third party .… 13.18–13.19

onus of proof .… 13.20, 13.23 presumption of .… 13.21–13.29 court intervention .… 13.23 generally .… 13.21–13.22 husband and wife cases .… 13.25–13.29 rebuttal .… 13.24 relief availability .… 13.19 securities given to solicitors .… 42.2 void or imperfect securities .… 13.16–13.29 Undue preference voidable transactions .… 8.23 Unfair conduct equitable lien creation .… 2.18 Unfair contract test for .… 13.36 Unjust mortgage discharge of .… 38.6 Unregistered mortgage Torrens system .… 4.27 V Validity of security proof of security .… 16.40 Value

personal property for .… 5.103 PPSA security interests .… 5.29 Variation land mortgages .… 3.33–3.34 Torrens system .… 4.30 Vendor’s lien .… 2.10–2.14 benefit transfer .… 2.13 Crown land .… 2.10 enforcement .… 2.13 extent of .… 2.13 generally .… 2.10 invalid mortgages .… 2.14 over chattels .… 2.10, 2.12 part payments .… 2.10 Torrens system .… 2.10, 2.13 unpaid .… 2.10, 2.13, 2.14 upon realty .… 2.13 Vesting PPSA security interests .… 5.112–5.114 Vesting order discharge of mortgage on .… 32.79 foreclosure .… 21.17 insolvency .… 23.14–23.15 reconveyance .… 40.28 relief against forfeiture .… 37.11

Void or imperfect securities .… 13.1–13.53 classification .… 13.1 clogging the equity .… 13.10 consumer credit .… 13.15 economic pressure .… 13.37–13.39 expectant heirs .… 13.11–13.14 forgeries .… 13.43–13.44 illegal transactions .… 13.45–13.47 misrepresentation .… 13.40 mistakes .… 13.41–13.42 oppressive nature securities .… 13.10–13.39 property forbidden to be encumbered .… 13.50–13.53 public pay and pensions .… 13.48–13.49 replacement or substitute mortgages .… 13.3 transactions at undervalue .… 13.4 transactions defrauding creditors .… 13.5–13.9 unconscionable dealing .… 13.30–13.36 undue influence .… 13.16–13.29 voidable mortgages generally .… 13.2 Voidable mortgage generally .… 13.2 Volunteer Torrens system .… 4.22 wife as .… 13.27 W

Waiver of appointment of receiver .… 18.6 of debt .… 35.1–35.12 additional security .… 35.4 altering law by advance contract .… 35.6 creditor’s rights .… 35.3 estoppel distinguished from .… 35.1 express .… 35.2 nature of .… 35.1 non-waiver clauses .… 35.6 substituted security .… 35.5 against surety .… 35.7–35.11 of mortgagee’s priority .… 40.20 of power of sale notice .… 20.18 of right to priority .… 32.20 Washable loan .… 1.54 Waste mortgagee’s liability .… 42.21 by mortgagor .… 42.20 Wife see Husband and wife Will expectancy under .… 6.23 Winding up insolvent companies .… 23.2, 23.9

production documents .… 2.47 receiver’s status after .… 18.5 registrable charge void as security .… 11.41 stopping mortgagee’s power of sale .… 20.36 Withholding tax interest paid to non-residents .… 41.4 Wool under Personal Property Securities legislation .… 1.17 proceeds .… 5.33 security interest in .… 5.38 Worker statutory charge .… 7.10 Writing requirement see also Deed mortgage of equitable rights .… 1.37 receiver appointments .… 18.7 security agreements .… 5.36–5.40