Argyle Developments & Ors v ANZ Banking Group

[1994] HCATrans 132

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
              Hobart        No H14 of 1994

B e t w e e n -

ARGYLE DEVELOPMENTS PTY LTD,
  KINGBOROUGH NURSING HOME PTY LTD,
  REDWOOD VILLIAGE PTY LTD, JOHN
  STEWART McCALLUM, JOAN ESTELLE
  McCALLUM, PETER JOHN STEWART
  McCALLUM, SALLY-ANNE
  McCALLUM‑TOOMEY, SUZANNE McCALLUM
  and JPS McCALLUM HOLDINGS PTY LTD

Applicants

and

THE AUSTRALIA AND NEW ZEALAND
  BANKING GROUP LIMITED and TIMOTHY
  OLIVER BAYLEY

Respondents

Second Respondent
  Application for special leave to
  appeal

MASON CJ
GAUDRON J

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON THURSDAY, 8 DECEMBER 1994, AT 11.21 AM

Copyright in the High Court of Australia

________________________

MR R.V. GYLES, QC:   If Your Honours please, I appear with my learned friend, MR S.J. HOLT for the applicant.  (instructed by Murdoch Clarke Cosgrove & Drake)

MR P.E. EVANS:   May it please the Court, I appear on behalf of the first-named respondent with my learned friend, MR R.E. HUDSON.  (instructed by Butler McIntyre & Butler)

MR N.J. YOUNG:   May it please the Court, I appear with my learned friend, MR A.J. ABBOTT for the second respondent.  (instructed by Dobson Mitchell & Allport)

MASON CJ:   Mr Gyles.

MR GYLES:   I rely on the same 242,000 titles, Your Honours, and I hope the law of averages do not apply.

MASON CJ:   Maybe, but you may as well direct your argument to the suggested incorrectness of the decision of the courts below.

MR GYLES:   Yes, Your Honour.

MASON CJ:   Because prima facie it seems to me you have a very high hurdle to jump.

MR GYLES: Your Honours, I should add to the matters put in the outline of argument a reference to sections 48, 49 and 50 of the Land Titles Act 1980, which are familiar generally to Your Honours, which provide that:

Every dealing lodged for registration shall-

.....

(c) comply with prescribed requirements.

That is 48(1). Section 49 is the provision, familiar to Your Honours, that:

(1) An instrument shall not be effectual to pass any estate or interest in registered land, or to render that land liable as security for the payment of money -

but that the estate is created upon registration.  And 50 is the prohibition upon the Registrar registering, dealings not in accordance with this Act.

Now, the point which arises, as Your Honours see, is that in the present case a mortgagee has a registered mortgage over each of the relevant parcels of land.  That registered mortgage contains no power to appoint a receiver.  The registered mortgage provides for notice to be given before any power of sale is exercised.  In the present case a receiver was appointed and a power of sale was exercised without any notice having been given.  Under the Tasmanian statutes there is provision for the appointment of a receiver under the Conveyancing and Law of Property Act, but that only arises, as Your Honours will have seen from the outline, when the power of sale arises.

The argument, which was accepted below, was that notwithstanding the existence of the registered mortgages and notwithstanding the terms of the Land Titles Act dealing with mortgages in Division 5, which have a number of provisions from section 72 onwards which provide protections to a mortgagor, including not only the sections to which we have drawn particular attention, 77 and 78, which are directly applicable here, that is section 77, provides a procedure that:

default is continued for one month, or for such other period as may be expressly limited -

and that was done in this case, one day was limited, the mortgagee may do certain things, and 78 follows on from that.  Now, those are provisions which have traditionally been said by the courts to be inserted for the benefit of mortgagors of Real Property Act land and, Your Honours, the authorities to which reference was made below and are referred to in Part B of our submissions, establish that in a Real Property Act mortgage you cannot contract out of a provision such as 77 and 78 unless you have an express provision to do so such as section 80, which was not availed of here.

You certainly could not, for example, contract out of provisions such as 85 and 86.  You could not overcome, so it has been held and we submit rightly, the statutory inhibitions upon powers of sale, and you cannot fill the gap created by the absence of a power or appoint a receiver under the Real Property Act mortgages, by referring as here to a general mortgage debenture which simply fixes upon or purports to charge all of the assets of a particular person or corporation, and that is what has happened in this case, Your Honours.

McHUGH J:   But is it not put against you that the question you are seeking to litigate does not really arise in this case because Bayley was not exercising a mortgagee’s power of sale, he was simply acting pursuant to a power of attorney from the companies to sell their property?

MR GYLES:   It may be put against us, Your Honour, but it is incorrectly put against us, because what was being exercised, as one can see from the judgments below, was a clause in a mortgage debenture.  A clause in a mortgage debenture, which may be valid so far as chattels are concerned, it may have some effect so far as other types of property are concerned, shares and the like, but they cannot affect Real Property Act land.  You cannot charge Real Property Act land in a mortgage debenture which is not in registrable form, given the fact that you have registered mortgages on the title to the same mortgagee.  Your Honours, upon analysis it is really a - - -

GAUDRON J:   So it would all be different if there were no registered mortgages on the title?

MR GYLES:   No.  It may or may not be, it would depend on how it worked out, Your Honour.  It would depend upon whether the unregistered instrument could be said to be a contract to create the registered mortgage.  It may well be.  In this case it is, because there is a clause in the registered mortgage which provides that the mortgagor, upon request, will execute such further documents as are necessary to create a specific charge.  That is precisely what one would expect.  We put below, and we put here in our outline of argument, that a mortgage debenture of this kind which is not in registrable form, at its highest it would give rise, or it might give rise, to a right to have a mortgage in registrable form provided by the mortgagor.  As I say, in this case that would be so because of the expressed provisions of the mortgage debenture.

That, of course, is academic in the present case because there they did have mortgages in each case which did not provide for the appointment of a receiver, and did not provide for the provision of notice under 77 to be abandoned or waived, dispensed with.

Now, Your Honours, this Court has not examined the effect of an unregistered mortgage in this sort of situation, but it is rather like the examination which was conducted by the Court recently in relation to leases in Chan v Cresdon, (1989) 168 CLR 242. I have, Your Honours, copies of some of the relevant pages if I could hand it up.

MASON CJ:   Why is it like Chan v Cresdon?

MR GYLES:   Because there the question was - Chan v Cresdon was an examination of the effect of unregistered leases, and examined what equitable rights flowed from the instance of such a document.  This is also a case in which the issue as to what rights are created by an unregistrable form of mortgage debenture in Real Property Act land, and we submit it is a similar question, it is not decided by this case of course, but this case is a recent example of the Court examining that type of issue.  If Your Honours please, there are some passages to which perhaps I should make reference.  At page 247, at the foot, this was, as Your Honours will see, a form of lease which was:

appropriate for registration (Form E) and otherwise complied with the statutory requirements, so that it was in registrable form.  In these circumstances the respondent, by executing a lease which was intended to operate as a lease at law, was under an obligation to register, or procure the registration of, the lease: see Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd.

The failure to register the lease did not render it void, unlike the lease for upwards of three years in Hill v Cox, which was held void because it was not in Form E in the Schedule to the Act, that being the form of lease prescribed by s.52.  As the lease was not void, it was capable of being or becoming a source of rights.

And then Your Honours went on to examine what those rights may have been.  Then at page 256, at the foot, having examined the nature of the rights which may be created by a registrable instrument, Your Honours then, at the foot of 256 say:

In any event, s.43 of the Act presents an insuperable obstacle to the respondent’s success.  The section provides, in relation to land under the Act, that, until registration, no instrument -

et cetera, and there is reference to authority and to Barry v Heider.  And after reference to that well‑known passage the majority say:

The point made in this passage is that, though the unregistered instrument is itself ineffective to create a legal or equitable estate or interest in the land, before registration, the section does not avoid contracts or render them inoperative.  So an antecedent agreement will be effective, in accordance with the principles of equity, to bring into existence an equitable estate or interest in the land.  But it is that antecedent agreement, evidenced by the unregistered instrument, not the instrument itself, which creates the equitable estate or interest.  In this way no violence is done to the statutory command in s.43.

In other words, Your Honours, to take this case, the mortgage debenture does not, as an instrument, give any rights or create any estate or interest in relation to Real Property Act land, and as section 49 says, does not, “render that land liable as security for the payment of money.”

GAUDRON J:   But you have to go a step further.  You have to find something in the other terms of the deed or in the Act which renders the power of attorney void, or invalid or inoperative or something of that kind.

MR GYLES:   With respect, that is to start at the wrong end.  The question is, “What rights does the mortgage deed create in relation to Torrens land?”

GAUDRON J:   Why?  If it creates a power of attorney it creates a power of attorney, with power to sell.

MR GYLES:   If it were a severable power of attorney that might be correct, with respect.

GAUDRON J:   Exactly.

MR GYLES:   But, with respect, it is not.

GAUDRON J:   That is why I say you have got to turn to the mortgage debenture and show something in it, or in it in combination with the Act, or in the Act, which renders the power of attorney inoperative.

MR GYLES: Yes. If I may pick that up, Your Honour. The way we should put it is that the power of attorney in this mortgage debenture is ancillary to the purpose of that document as a mortgage debenture and for its purposes, and that section 49 says that that mortgage debenture does not, “render the land liable as security for the payment of money” and that is all the debenture does. May I remind Your Honours that “mortgage” in section 3 is defined to mean, “any charge on land created merely for securing a debt” and the mortgage debenture would surely come within that definition.

Bearing in mind section 49, the Court then goes to section 72 and 73:

The registered proprietor of a freehold or leasehold estate in registered land-

(a) may mortgage it by a memorandum of mortgage in the prescribed form -

and then 73:

A mortgage or encumbrance when registered has effect as security, and is an interest in land, but does not operate as a transfer of the land mortgaged or charged.

So that the mortgage debenture, if it be correctly categorised as a mortgage, and only as a mortgage, and if the power of attorney is seen to be ancillary to and expressly ancillary to that purpose, then it - - -

GAUDRON J:   But it is ancillary to the power of sale, is it not?  That is your difficulty.

MR GYLES:   Quite.  With respect that is the fact.  It is ancillary to the power of sale.

GAUDRON J:   And not merely to the mortgage as such.

MR GYLES:   True.

GAUDRON J:   It is not ancillary in the sense that it is there for the purpose only of perfecting an equitable charge into - - -

MR GYLES:   Quite so, but it is there to deal with the exercise of the powers under the mortgage debenture or deed which, by virtue of the sections to which we have drawn attention, and bearing in mind the general principles recently analysed in Chan’s case, that power of attorney may be perfectly effective in relation to property other than Real Property Act land, but only has any life in relation to that land once the mortgage has been registered.  Certainly in the present case, with the mortgages having been registered, it has no operation; its equitable interest is spent if you like.  Now, Your Honours, the terms of the mortgage - - -

GAUDRON J:   Is this an argument that was actually put forward below?

MR GYLES:   Yes, indeed.

GAUDRON J:   In this way?

MR GYLES:   I think so, yes.  It is the kernel of it.  You cannot - - -

GAUDRON J:   But it was put forward that the power of attorney was merely ancillary and ancillary in the way you have just identified?

MR GYLES:   I cannot recall whether the word “ancillary” was used, Your Honour.  The fundamental argument we put below and put here is that mortgages under the Real Property Act are governed by Division 5 of the relevant part of the Real Property Act, bearing in mind the general principles which operate, and that the protections given to mortgagors cannot be avoided by creating an unregistrable document in other form in dealing with it, and certainly not by having a mortgage debenture in unregistrable form.

GAUDRON J:   That seems to me to be a quite different argument from the construction argument which you have suggested in argument today.

MR GYLES:   That is our fundamental point and it always has been.  Now, the power of attorney argument is the one which is being used against us in both courts, and we submit that it is misconception.  The power of attorney does not stand as a severable document giving rise to contractual rights.  It is on its face ancillary to the mortgage debenture and all that goes with it; perfectly appropriate for that property which is picked up by way of charge in which a power of sale may be exercised out of court as it were or out of registration, but not in relation, with respect, to a mere equity or even an equitable estate arising out of an unregistrable instrument.  Now, Your Honours, the power of attorney is to be so understood.

The debenture deed is not set out in the papers, but extracts from it are. At page 8 of the book; paragraph 19 of the mortgage deed is set out at line 10, and the power of attorney is paragraph 20, which is set out at the foot of that page, line 32:

20  The Mortgagor hereby for valuable consideration irrevocably appoints any such Receiver as its Attorney for the purpose of enabling him in the name and on behalf of the Mortgagor to sign or sign seal and deliver all such conveyances transfers mortgages.....take all such steps.....may in the opinion of such Receiver be necessary or expedient -

and so on.  Now, if you then go back to see how the receiver comes into the sequence of events:

19  At any time after the moneys hereby secured become payable the Bank by notice in writing signed by any officer of the Bank may appoint any qualified person to be a Receiver.....may remove -

and so on, and he shall have power inter alia to take possession of premises and -

to sell or concur in selling all or any of the mortgaged premises.

Now, with respect, Your Honours can see immediately that this can only be categorised as a mortgage under the Act if it purports to govern or create a security out of Real Property Act land or Land Titles Act land, that the power in clause 19 is a power by way of security, and that clause 20 is ancillary to that power.  In other words, what we are dealing with is a mortgage securing the repayment of a debt.  This is one of the means by which that security is to be enforced.  We submit that that cannot, in relation to land in which there is a registered mortgage, or in relation to land which is registered under the Act cannot, of its own force operate unless and until there is a matching clause in a registered mortgage.

Now, as I have said, because of the provisions of this mortgage debenture it may have been possible to get one.  But they did not do that.  They took a mortgage in a different form.  So, Your Honours, that is the kernel of our argument on merits.  It requires an examination of Barry v Heider and its consequences as far as mortgages are concerned, which this Court has not undertaken.  I respectfully submit that such authority as there is indicates that you cannot contract out of the mortgage provisions of the Land Titles Act and that this device should not be permitted.

MASON CJ:   Mr Gyles, one thing I should say is that your draft notice of appeal is quite inadequate.  Pages 64, 65.

MR GYLES:   With respect I agree, Your Honour.

MASON CJ:   It is seriously inadequate.

MR GYLES:   Yes.  I accept that criticism, Your Honour.

MASON CJ:   Thank you, Mr Gyles.  The Court need not trouble you, Mr Evans, nor you, Mr Young.  The Court is of the view that the actual decision of the court below is not attended with sufficient doubt to justify the grant of special leave to appeal.  The application is therefore refused. 

Are you going to ask for costs?

MR EVANS:   Yes, Your Honour.

MASON CJ:   I raise the matter because otherwise we are only going to be confronted with an application later on which involves a waste of everyone’s time.  So if you are contemplating asking for costs, now is the time to do it.

MR EVANS:   On behalf of the first respondent, Your Honour, I apply for costs.

MASON CJ:   Mr Gyles?  The application is refused with costs.

MR YOUNG:   Your Honour, we seek costs for the second respondent as well.

MASON CJ:   Yes, I gathered that you did.

AT 11.45 AM THE MATTER WAS ADJOURNED SINE DIE