Black & Ors v Garnock

[2007] HCATrans 15

[2007] HCATrans 015

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S401 of 2006

B e t w e e n -

STUART ALEXANDER BLACK

First Appellant

VAUGHAN LEE CHAPMAN

Second Appellant

ANDREW PHILIP CARTER

Third Appellant

and

BRYCE LACHLAN GARNOCK

First Respondent

SARAH JANE GARNOCK

Second Respondent

ROBERT LEONARD LUFF

Third Respondent

LYNETTE JANE LUFF

Fourth Respondent

SHERIFF OF NEW SOUTH WALES

Fifth Respondent

MARYLIN CLAIRE SMITH

Sixth Respondent

GLEESON CJ
GUMMOW J
HAYNE J
CALLINAN J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 1 FEBRUARY 2007, AT 10.03 AM

Copyright in the High Court of Australia

__________________

MR J. STOLJAR:   May it please the Court, I appear with my learned friend, MS K.W. DAWSON, for the appellants.  (instructed by SBA Lawyers)

MR G.C. LINDSAY, SC:   May it please the Court, I appear with MR A.J. GRANT and MS G.F. MAHONY for the first to fourth respondents.  (instructed by Capon & Hubert)

GLEESON CJ:   Mr Stoljar, just a formal matter.  Is the undertaking for damages which you seek to vindicate that that was given to Justice Basten or that that was given to Justice Campbell or both?

MR STOLJAR:   Both, but ultimately, because Justice Campbell’s only prevented certain preparatory steps being undertaken, it was Justice Basten’s injunction principally that prevented the sale taking place.

GLEESON CJ:   We do not actually have the reasons for judgment or the order of Justice Campbell as far as I can see.

MR STOLJAR:   They are not in the appeal book, as I recollect, your Honour.

GLEESON CJ:   Would it be possible to make those available to us, please.

MR STOLJAR:   Yes, your Honour.

GLEESON CJ:   Thank you.  Yes, Mr Stoljar.

MR STOLJAR:   The question in this appeal is whether an unregistered interest in Torrens land in New South Wales may be protected by an injunction such as to defeat rights arising from a writ registered against the title to that land.  The answer to that question lies, your Honours, in the relevant provisions of the Real Property Act and I will take your Honours to those provisions in a moment.  However, first it may be of assistance to describe briefly to your Honours the relevant sequence of events giving rise to the competing interests or recordings in the register.

The starting point, your Honours, is that on 17 September 2004 the appellants obtained a judgment against the sixth respondent in the District Court of New South Wales in the sum of approximately $228,000.  The sixth respondent, who I will call the judgment debtor, was at that time the registered proprietor of the parcel of land in rural New South Wales near Cooma.

On 15 July 2005, the following year, the judgment debtor entered into a contract for the sale of that land with the first to fourth respondents, who I will call the purchasers.  The sale price was $1 million.  A deposit of 10 per cent was payable on exchange.  The purchasers did not between exchange and settlement lodge a caveat to protect their unregistered interest in the land.  Settlement was originally scheduled for 26 August 2005.  It was brought forward by several days for reasons which I will not go into at present.

GUMMOW J:   So the contract was outstanding for some period?  What is the date of the contract, 15 July?

MR STOLJAR:   It was 15 July 2005.

GUMMOW J:   Thank you.

GLEESON CJ:   It was settled within about six weeks.

MR STOLJAR:   Yes, 42 days, but it was brought forward.  Settlement then took place on 24 August 2005.  On that day at about 9.00 am the then solicitors for the purchasers caused a search of title to be carried out.  The search did not disclose any writ because, as I will recount, in due course, the writ had not yet been recorded and disclosed nothing materially adverse.

The appellants then, through their solicitors and on their own account had conversations by telephone with the solicitors for the purchasers and, in the course of those conversations, did not advert to the writ.  Since precisely what was said and not said in those conversations looms large in my friend’s submissions, I will take your Honours to the evidence as to some of those conversations.  One of them, at least, appears at page 239 of the appeal book, a passage from the affidavit of Mr Black.

If your Honours come to about line 30 of page 239, your Honours will see that Mr Black deposes that he had a conversation with Mr Main of JMA Legal, the then solicitors for the purchasers.  Travelling through the paragraph of text at the bottom of page 239, Mr Black deposes in line 3:

We have been chasing Peter & Claire Smith for some time to collect fees owing to us by the Smiths and their related entities -

As appears from the affidavit, your Honours, Mr Black is one of the firm of solicitors and the judgment was in respect about standing fees.  Coming down further on the page Mr Black tells Mr Main:

We had been promised full settlement of our debt from the sale proceeds of the properties but have now been told that there will be insufficient funds.  You should be aware that Claire [the judgment debtor] is an aunt of Bryce Garnock [the first‑named purchaser] and we believe that the property is being sold to him at less than market value.  Our solicitor Stephen Blanks is trying to stop the Wanaka sale from settling and has already spoken with Margot Gill of your office.  I am just putting you on notice that we intend to stop the sale.”

True it is that specific reference is not made to the writ although it had not of course been lodged at that point.  It was only collected from the District Court on that morning by an employed solicitor in the employ of Mr Blanks, but the purchasers were squarely on notice as and from that time that it was intended to stop the sale.

At about 11.00 am on the morning of 24 August 2005 the writ was recorded in the register maintained by the Registrar‑General.  At about 2.00 pm, some three hours later, settlement took place and it appears that the balance of the purchase moneys was handed over.  The incoming purchasers received from the judgment debtor or her representatives a certificate of title and transfer of the land and discharges of various securities or encumbrances recorded against title.

Shortly after that date the writ was delivered to the sheriff.  Subsequently the purchasers lodged the transfer with the Registrar‑General.  The evidence does not reveal precisely the date on which the purchasers’ agent lodged the transfer with the Registrar‑General, but certainly on or by 8 September the purchasers became aware that there was a problem in registering the transfer.

In due course the purchasers commenced these proceedings.  Their amended summons is at page 3 of the appeal book.  Your Honours will see that the purchasers claimed by summons and first of all, a declaration that they were entitled to priority over any interest in the land held by the appellants as they now are and, secondly, a permanent injunction restraining execution of the writ.

GUMMOW J:   What does this phrase “are entitled to priority over” mean?

MR STOLJAR:   It is not a priority contest in the conventional sense, we would say, your Honour, because the mere existence of the writ or its recording does not give rise to any interest.  As I apprehend what it means in the context of declaration 1 it is that the interest which had been acquired by the purchasers on exchange entitled them, of itself and without more, to the various remedies they sought, principally an injunction preventing execution.

HAYNE J:   We need, do we not, to begin from the premise long established that the Torrens system is not a system of registration of title, it is a system of title by registration.

MR STOLJAR:   Yes.

HAYNE J:   That was established long since it is found in Breskvar v Wall 126 CLR at 385 and unless one begins from that premise one is at serious risk.

MR STOLJAR:   We would say that certainly is one of the essential premises in the case and that our case is consistent with that premise.  What was achieved by the recording of the writ was not a registration of title to land in the sense contemplated in Breskvar v Wall, but it was the recording of an interest which enabled, in due course, a statutory process to be undertaken which would culminate in an acquisition of title in the Breskvar v Wall sense.

HAYNE J:   But declaration 1 when it speaks of being “entitled to priority over any interest in the Land” does not reveal, at least to my eye, what is the interest being spoken of or what, if any, consequence is said to follow in respect of the register.

MR STOLJAR:   That proposition may, with respect, be one that I would accede to.  The majority in the Court of Appeal when formulating the appropriate relief, as they apprehended it from my friends, formulated the declaration in a different way but ‑ ‑ ‑

GUMMOW J:   Could we just look at that because unless we get these basics in our head we will not progress.  This is at page 563.

MR STOLJAR:   At 507, I think, your Honour.  Yes, at paragraph (c) on page 507:

It is declared that the appellants (the purchasers), as holders of equitable interests in the land the subject of this appeal, are entitled to priority over any rights to the land that might be held by the first, second and third respondents (the judgment creditors).

GLEESON CJ:   But the statutory scheme is in aid of the interest that will ultimately be in the purchaser from the sheriff.

MR STOLJAR:   Yes, it culminates in that interest.

GLEESON CJ:   A writ of execution does not turn the judgment creditor into a secured creditor.

MR STOLJAR:   No, your Honour.

CRENNAN J:   What was being attempted was trying to put the purchaser in the same position as it would have been in had it filed a caveat.

MR STOLJAR:   That is one way to view the case.  Yes, that is so, your Honour.  Had a caveat been lodged, it would have, among other things, prevented the registration of an incoming purchaser from the sheriff, registration of that transfer.

HAYNE J:   Would it not have intercepted the registration of the writ?

CRENNAN J:   The recording of the writ.

HAYNE J:   The recording of the writ.

MR STOLJAR:   It would not, your Honour, under section 74H.  I am just turning that up, but from memory section 74H(5) indicates that the lodgement of a caveat does not prevent recording of a writ.

CRENNAN J:   But the consequence would be that the writ would have to have a memorandum or note recording the caveat.

MR STOLJAR:   Yes, and the further consequence is that when it was sought to register in due course a transfer received from a sheriff’s sale, that could not be registered such as to defeat the caveat.

GUMMOW J:   We had better look precisely at 74H.  It is much longer than the sections we grew up with dealing with caveats.

MR STOLJAR:   Section 74H provides that:

while a caveat lodged under 74F remains in force:

(a)the Registrar-General must not, except with the written consent of the caveator:

(i)     record in the Register any dealing . . . 

if it appears to the Registrar-General that the recording of the dealing ‑ ‑ ‑

GUMMOW J:   But you said it had some particular provision about writs.

MR STOLJAR:   Yes, section 74H(5) begins:

Except in so far as it otherwise specifies, a caveat lodged under section 74F . . . does not prohibit the Registrar-General from recording in the Register . . . 

(f)a writ or the cancellation of the recording of a writ in accordance with section 105D –

One of the grounds of appeal that we have agitated is that the relief given by the Court of Appeal creates a circumstance in which merely my friends having an unregistered interest of itself and without more entitled them to the relief that they seek, and we say ‑ ‑ ‑

GUMMOW J:   You were taking us to the Court of Appeal order.  It appears formally at 563.  There is a declaration of the Garnock interests “as holders of equitable interests in the land . . . are entitled to priority”.

MR STOLJAR:   Yes, “over any rights to the land that might be held” by the appellants.

GUMMOW J:   Then there was a restraint.

MR STOLJAR:   The restraint was explained in Justice Ipp’s judgment.  It was only for 60 days but that was to ensure that upon expiry of the protected period the purchasers could achieve registration of their interest.  Justice Ipp was of the view that that could be done well within the 60‑day period.

GLEESON CJ:   The order in respect of which the undertaking as to damages was given appears at page 503. 

MR STOLJAR:   Yes, your Honour, and order 1 restrained the first, second and third respondents and, pausing there, the appellants, and the fourth respondent, being the sheriff, who was the fifth respondent on this appeal, from executing the writ.

GLEESON CJ:   And the writ is at page?

MR STOLJAR:   Page 392, your Honour, of the appeal book.  Unless there was any matter that your Honour the Chief Justice wished to raise with me about the writ I will take your Honours to the relevant legislation.

GLEESON CJ:   Thank you.

MR STOLJAR: Your Honours, we provided as annexure A to our outline a bundle of the relevant legislation including the relevant provisions. Section 105 appears conveniently at page 32 of that bundle. The numbers are in the top right‑hand corner. We have included the extracts from the authorised reprints but this version conveniently incorporates various amendments that otherwise one would have to go to various locations to source. Section 105(1) provides, as I have already indicated to your Honours, that:

A writ, whether or not it is recorded in the Register, does not create any interest in land under the provisions of this Act.

Section 105(2) describes the machinery pursuant to which the Registrar‑General may record a writ.  It is done by an application being lodged in reproof form.  Section 105(3) contemplates that if:

it appears to the Registrar-General that the land to which the application relates is held by the registered proprietor in a fiduciary capacity the Registrar-General may refuse to record the writ unless it is proved to the Registrar-General’s satisfaction that the writ was issued pursuant to a judgment against the registered proprietor in that fiduciary capacity. 

Then coming directly to what we would say is one of the key operative provisions of the scheme, section 105A(2), your Honours will find that on page 34 of the bundle. If I can take your Honours through that, it begins:

Where a writ is recorded under section 105 –

and pausing there, that is, of course, what occurred at about 11.00 am on the morning of 24 August –

and a dealing (other than a dealing to which, by the operation of subsection (1), this subsection does not apply) –

I will take your Honours back to subsection (1) in a moment –

that affects the land to which the recording relates –

pausing there, that would include the transfer which the purchasers received on 24 August –

is lodged for registration within the protected period –

Your Honours will see from section 105A(9), which I will take your Honours to in a moment, that the protected period begins upon recording of the writ and continues for a period of six months so the transfer in the present case was lodged during the protected period because it was lodged after the recording of the writ. So, where that occurs, looking at the concluding words of 105A(2):

the Registrar-General shall not, during the protected period, register the dealing unless the writ is referred to in the dealing as if it were a prior encumbrance.

GUMMOW J:   If it were referred to as a “prior encumbrance” what would be the consequence?

MR STOLJAR:   While the transfer would be registered the purchaser would acquire an interest subject to the writ and whatever rights were enlivened under the writ and would only enjoy title to the extent that whatever rights were enjoyed were not inconsistent with those arising under the writ.

GUMMOW J:   What about the purchaser from the execution of the writ?

MR STOLJAR:   That purchaser would, in that circumstance, achieve indefeasible title under 105B(2).

GUMMOW J:   Why would that be so?

MR STOLJAR:   Because the dealing that had been registered refers to the writ as if it were a prior encumbrance and so a person taking through and by the authority of the writ would be entitled to be registered such as to defeat interest inconsistent with the writ although it were rights arising under it.

GUMMOW J:   It does not actually say that.

MR STOLJAR:   It does not say that in so many words, your Honour, but that, in my submission, must be the appropriate construction.  Briefly adverting to 105A(1) on page 33 ‑ ‑ ‑

GLEESON CJ:   Sorry, just before you leave that point I would like to understand it even better than I do at the moment.

MR STOLJAR:   Yes, your Honour.

GLEESON CJ:   If the purchasers in the present case, the Garnocks, had lodged for registration a memorandum of transfer which referred to the writ of execution as if it were a prior encumbrance then they would have become the registered proprietors subject to that writ.  What would that mean?  Would it mean that the sheriff could go ahead and sell the land and the proceeds of sale would go to the sheriff for disbursement to the judgment creditors?

MR STOLJAR:   Yes.

GLEESON CJ:   And the title of the Garnocks would be extinguished, is that your proposition.

MR STOLJAR:   It would be extinguished upon the registration of the transfer received by the purchaser.  While there are differences, it would operate a bit like a circumstance in which a registered proprietor had title but subject to an interest, such as a mortgage, recorded on title.  In that event, the mortgagee could enliven its rights under the mortgage even if they were inconsistent with those of the registered proprietor.

GLEESON CJ:   Whereas if the judgment of the Court of Appeal is correct, the Garnocks, instead of submitting for registration a memorandum of transfer subject to the writ as a prior encumbrance, do not seek or need not seek to register a memorandum of transfer at all but can get an injunction to restrain the sheriff doing anything during the protected period and then they can register their memorandum of transfer at the end of the protected period.

MR STOLJAR:   Yes.

CRENNAN J:   Can I ask you in that context how subsection (7)(a)(iii) works?

MR STOLJAR:   Yes, 105 after 105A(2) deals with a whole series of possible circumstances that can arise and conflicts that can arise and, in particular, contemplates circumstances, namely whether or not the writ has been executed during the protected period.  Subsection (7) deals with a circumstance in which a writ has been recorded.  It is not executed during the protected period so the protected period expires, the writ remains on the title.  Then after that time, although the protected period has expired, the writ can still be executed.  In that event, under subsection (a), assuming it is executed and a transfer has been lodged, the Registrar-General shall register the transfer and particularly in (iii) in that event provided that:

no dealing creating or disposing of an estate or interest in the whole or part of the land –

has already been lodged and is awaiting registration but has not been effectively registered.  So the particular circumstance that your Honour is referring to is when the protected period has expired, the writ is nevertheless executed, transfer is lodged, the Registrar-General will register the transfer unless awaiting registration at that time is a transfer for valuable consideration.

GLEESON CJ:   Now, the writ as appears from page 392 is enforceable against property of the judgment debtor.

MR STOLJAR:   Yes.

GLEESON CJ:   In a situation where the judgment debtor has sold the land, executed a memorandum of transfer of the land and received in full the purchase price of the land and thereafter - the transfer remaining unregistered – there is a sale of property by the sheriff, what is the property that the sheriff is selling?  More accurately, what is the property of the judgment debtor that the sheriff is selling?

MR STOLJAR:   At law the sheriff could only sell that which the judgment debtor has and if the judgment debtor has conveyed away his or her property prior to the sale, the sheriff could not sell any more.  However, in the context of the Torrens system, the fact that the judgment debtor’s title may have been incomplete at law does not prevent an incoming purchaser or a person receiving a transfer of that land and achieving registration acquiring indefeasible title.  As Justice Hayne indicated earlier, as your Honours know, it is title by registration.

GLEESON CJ:   Yes, but the stream cannot rise higher than its source, can it?

MR STOLJAR:   It can, your Honour, in the context of the Torrens system because under the Torrens system an officer of the State, effectively, the Registrar‑General, can achieve that which the individual landowner might not have been able to achieve, namely an effective transfer of the entire property in the land.

GUMMOW J:   What we do not have though in the system involved in this case is any equivalent – you mention mortgages.  We do not have any equivalent of section 59.  Section 59 authorises the Registrar‑General to register the transfer executed on the power of sale and thereby extinguish the registered interest of the mortgagor.  Do you see what I mean?

MR STOLJAR:   Yes, although that ‑ ‑ ‑

GUMMOW J:   It is really tied up and made very clear with mortgages what happens.

MR STOLJAR:   Yes.  That work is done in part, your Honour, by 105B which I have not taken your Honours to yet.  It is at page 37 of the bundle.  Your Honours will see that 105B(1) provides that:

A transfer pursuant to a sale under a writ is registered when it is recorded in the Register and the Registrar‑General may make a like recording on the relevant certificate of title or duplicate registered dealing when it becomes available to the Registrar‑General.

Those words are significant, your Honour, the final words, because it contemplates the Registrar‑General registering, despite the fact that the certificate of title is not at that time available.  The certificate of title might be held at that time by, for example, an equitable mortgagee or the judgment debtor, for whatever reason, may not want to surrender the certificate of title, but the transfer can nevertheless be effective.  Then coming to (2):

Upon the registration of a transfer . . . the transferee holds the land transferred free from all estates and interests except such as:

(a)      are recorded in the relevant folio . . . 

(b)      are preserved by section 42 –

which, as your Honours know, is the essential indefeasibility provision, and (c) deals with qualified folios which are not presently relevant.  So 105B(2) contemplates ‑ ‑ ‑

GUMMOW J:   What about 105B(2)(a)?

MR STOLJAR:   That means that where there has been an earlier recording in the relevant folio prior to the entry of the writ that would be not defeated.

CRENNAN J:   Such as a caveat from this ‑ ‑ ‑

MR STOLJAR: Yes, save for this, that a caveatable interest is normally not recorded in the relevant folio. It is noted on the - but it operates in the same way. Could I just take your Honours back to one or two other subsections in 105A. Section 105A(6) is significant. I was indicating to your Honour Justice Crennan some of the factual circumstances contemplated by 105A. Section 105A(6) deals with the very situation which we have in the present case, namely a writ has been recorded. Within the protected period a dealing has been lodged for registration and 105A(6) provides that when the protected period then expires:

a dealing . . . may be registered notwithstanding the recording of the writ.

So 105A(6) contemplates the factual circumstances arising in the present case and in particular it contemplates, we would say, that the unregistered interest should, as it were, wait in the queue pending the expiry of the protected period.  Upon that expiry, then the unregistered dealing may be registered, notwithstanding the recording of the writ.  The approach taken by the majority in the Court of Appeal below, we would say, subverts the operation of 105A(6) in that rather than, as the legislation prescribes, if I can use the expression, wait in the queue, the incoming purchasers were able to achieve in substance registration rather than allowing the protected period to expire.

GUMMOW J:   Could you just explain that again?  I am not saying you are wrong.

MR STOLJAR: Section 105A(6) deals with the circumstances arising here, namely, where there has been a recording and during the protected period a dealing affecting the land is lodged for registration. In that circumstance, according to 105A(6), the protected period should be waited out and if, at the end of the protected period, as appears from the first line of 105A(6), the writ has not been executed then, and only then we would say, the dealing can be registered, so that the six-month period has to be waited out but, more particularly, an opportunity given to put into play the statutory process contemplated by the scheme and, in short, sell the land.

GUMMOW J:   Whereas these orders made by the Court of Appeal do what?

MR STOLJAR:   They restrain the judgment creditor and the sheriff from executing the writ during the protected period so there is an enforced, as it were, waiting out of the protected period.

GUMMOW J:   What is the source of the 60 days referred to in the order?

MR STOLJAR:   It was, as it were, an accident of timing.  When the appeal was heard, the protected period was still going and, as I understand it, Justice Ipp wished simply to provide some extra time to the purchasers to ensure that not only had the protected period expired but that they had been able to achieve registration of their dealing and he gave them an additional 60 days in order to ensure that that could be done. 

GLEESON CJ:   So the theory on which the Court of Appeal operated was that if you are in a position in which these purchasers, the Garnocks, found themselves, what you do is not attempt to have a memorandum of transfer registered during the protected period but wait out the protected period and, in the meantime, restrain the sheriff from doing anything.

MR STOLJAR:   The critical thing would be to restrain particularly the sheriff and the judgment creditors.  It is probably not decisive whether or not one actually lodged the transfer during the protected period.

GLEESON CJ:   Which from their point of view, if they were right, was simply the court intervening to protect the interests of the purchasers pending the expiry of the protected period.

MR STOLJAR:   Yes.

GUMMOW J:   And giving a particular view to what the content of that interest was of the purchasers.  That is what we have to get to the bottom of, I suppose.

MR STOLJAR:   Yes, one issue that has to be resolved is whether the interest that the purchasers had in the land, and undoubtedly they had some interest arising from exchange, entitled them to the equitable relief that they sought of itself and without more.

GLEESON CJ:   Justice Ipp was at pains in his reasons to point out that he did not attach significance to the fact that they had completion and paid the balance of purchase moneys.  He said their position would have been no different if there had simply been a contract.

MR STOLJAR:   Yes.  The reason for that, your Honour, is that even under the approach taken to the predecessors to this scheme that I will take your Honours to in a moment, interests acquired subsequent to the entry of the writ would not be effective to defeat interests acquired by a purchaser from a sheriff.  It was only interests acquired before the entry of the writ and on the facts, as they fell in the present case, prior to the recording of the writ at 11.00 am on 24 August all that my friends had done is exchange contracts.  What they did afterwards was settled, but that was all subsequent to the entry and that is why, as I apprehend it, Justice Ipp took the approach he did.

HAYNE J:   The hinge about which his Honour’s reasoning turned appears, does it not, at paragraphs 33 and 34 of his reasons at 520 to 521, in particular, at 520, paragraph 33, line 38 or thereabouts:

prior to the registration of the writ and the payment of the balance of the purchase price, the purchasers had an equitable interest in the land.

His Honour explains that.  On 520, paragraph 34, last sentence:

I shall proceed however, by reference only to the equitable interest the purchasers obtained when they entered into the contract for the purchase of the land.

I stand subject to correction, of course, but I am not conscious of his Honour having further explained the nature of the interest thus identified or its content or its relationship with the Torrens system.

MR STOLJAR:   That is so, your Honour, other than perhaps in passing, but in essence his Honour determined the case on the basis of the interest acquired prior to the recording of the writ, yes.

HAYNE J:   In particular, his Honour does not identify whether the interest is sufficiently captured as an interest that would permit the obtaining of an order and have the vendor do what, assist in obtaining registration?  Do what?  Do not know?

MR STOLJAR:   Those matters do not appear to be canvassed, no, your Honour.  The question of construction that I have been discussing with your Honours needs to be considered in the broader context of the statutory mischief, pursuant to which these amendments were inserted into the New South Wales Act in 1976.  In that regard I wish to do a number of things.  Firstly, take your Honours briefly to the predecessor to the 1976 scheme, then to ‑ ‑ ‑

GUMMOW J:   Just before we leave Justice Ipp – this is paragraph 33 there on page 520.  There are references there to Tanwar but there is not a reference to paragraph 53 in Tanwar at page 332 where we adopted the view that the so-called “interest” was commensurate with the availability of specific performance, namely, to get a transfer in registrable form.

MR STOLJAR: Yes, that is so, your Honour. The predecessor to the 1976 amendments is at page 3 of the bundle. It comes from the reprint issued as at 26 May 1975 and so was in force in 1976. Most of the commentators, judicial and otherwise, in respect of the first or the earlier section 105 comment on the difficulty in understanding it in whole or in part, but I will take your Honours through it just so that your Honours can see how it works. Section 105(1) begins:

No writ . . . shall bind, charge, or affect any land, estate, or interest under the provisions of this Act –

Just pausing there momentarily, that must mean no writ of itself and without more shall bind, charge or affect any land.  As your Honours will see in a moment, subsections (3) and (5) contemplate that the writ does bind the land, but just continuing to travel through 105(1):

but whenever any land or any estate or interest in land under the provisions of this Act is seized or sold by the sheriff . . . the Registrar‑General, on being served with an office copy of the writ . . . shall record particulars thereof in the Register –

So what section 105(1) seems to contemplate is that the writ has already been delivered to the sheriff so that the land is bound and after that time the Registrar‑General may record details of the writ in the Register. Subsection (1A) does not appear directly relevant. Subsection (2):

After particulars of the writ have been recorded under subsection (1) the sheriff . . . shall do such acts and execute such instruments as . . . may be necessary to transfer or otherwise to deal with the said estate or interest.

Then subsection (3), and this is where the section really bites:

Unless and until such particulars have been recorded as aforesaid no such writ shall bind or affect any land under the provisions of this Act –

Now, pausing there, it is not entirely clear whether the mere entry of the writ of itself and without more binds the land or whether delivery to the sheriff which would otherwise bind the land is only – or the binding is only concluded upon entry of the writ, but in any event it is clear that entry is a necessary but perhaps not sufficient condition for binding.

GLEESON CJ:   What is involved in this concept of binding?

MR STOLJAR:   Binding means that it does not affect property rights of itself.  The effect it has is that after the writ has been bound the judgment debtor cannot deal with the land inconsistently with the rights of the sheriff or, put another way, any dealing by the judgment debtor after the writ has bound the land is void as against the sheriff.  The 1976 amendments, as your Honours have seen, do not invoke the language of binding at all.  It was simply omitted from the amendments coming into force in 1976. 

The balance of subsection (3) provides that no sale by the sheriff shall be valid as against a purchaser or mortgagee unless and until the writ has been entered and the land is bound.  As 105(3) says “notwithstanding such writ may have been actually in the hands of the sheriff . . . or notwithstanding that such purchaser or mortgagee may have had actual or constructive notice of the issue of such writ”, it would appear to follow at least that if the writ has been entered then it is valid against a purchaser at least in respect of interests acquired after the entry of the writ, but it is not entirely clear, it would appear from the language of the section, what happens in respect of interests acquired prior to the entry of the writ. 

If I could now take your Honours to the leading case in respect of the construction of 105 as it previously was ‑ ‑ ‑

GUMMOW J:   Before you do that, we have been referred to the article by Professor Sykes.  Do you have that?

MR STOLJAR:   Yes, I do, your Honour.

GUMMOW J:   27 Australian Law Journal, in two parts.  The relevant part is the Torrens title part of it which begins at page 306.  Do you disagree with what Professor Sykes says – before you take us to the case – do you disagree with the outcome of the cases which he states on page 310 in the second column?

MR STOLJAR:   No, your Honour.

GUMMOW J:   “Let it first be assumed”, do you see that paragraph?

MR STOLJAR:   Yes.  Not in the context of the legislation prior to 1976.

GUMMOW J:   Yes, of course.

MR STOLJAR:   No, that would appear, with respect, to be an accurate and concise statement of the effect of the case ‑ ‑ ‑

GUMMOW J:   He says at about line 12 from the bottom of the page:

it is a well settled principle that the transferee from the sheriff takes merely what interest the judgment debtor had at the time of such service or entry.  Thus if at such time there was any equitable proprietary interest . . . such interest has priority.

MR STOLJAR:   Yes.

GLEESON CJ:   That is because the execution is upon the property of the debtor.

MR STOLJAR:   Yes, and, in addition, that could only be during the period prior to registration of the transfer received by a purchaser on the sheriff’s sale because, of course, upon registration of that interest it would extinguish any prior unregistered equitable interests.

GUMMOW J:   That is what worries me a bit.  This is written pre‑Breskvar v Wall, is it not?

MR STOLJAR:   Yes, it is, your Honour, Breskvar v Wall was 1971.

GUMMOW J:   There were arguments about deferred indefeasibility and so on and so forth which are cut through in Breskvar v Wall with a basal proposition about title by registration.

MR STOLJAR:   Yes, an immediate indefeasibility.

GUMMOW J:   So when Professor Sykes is talking about “equitable proprietary interest” what in the Breskvar v Wall view of the Torrens system is being spoken of there?  Do you see the problem, if there is a problem?

MR STOLJAR:   Yes, I do.  There are perhaps two stages.  One question is whether Professor Sykes’ statement of principle accurately reflects the approaches of the cases to which he refers.  The answer to that, I would say, is yes.  The second question is whether on the understanding, at least post‑Breskvar v Wall, of immediate indefeasibility those cases would necessarily be decided in the same way today.

GUMMOW J:   Yes, that is what is worrying me.

MR STOLJAR:   Perhaps not, your Honour.  The first authority to which Professor Sykes refers in that passage is Coleman v De Lissa.

HAYNE J:   For what purpose are we going back through these cases?  I do not say you should not do it, but I just want to understand what your purpose is in doing so.

MR STOLJAR:   I was only going to take your Honours to what we say was the statutory mischief identified in 1976 and the reason for the amendments.

GLEESON CJ:   That is reflected in the Minister’s speech.

MR STOLJAR:   It is, your Honour, yes, and perhaps, given that your Honours have gone to the passage in Professor Sykes, I do not need to take your Honours through Coleman v De Lissa.

GLEESON CJ:   The Minister said in the 1970s that the courts had made a terrible decision back in the 1880s.

GUMMOW J:   Namely Coleman v De Lissa, I think.

MR STOLJAR:   Well, the Minister’s speech refers expressly to Coleman v De Lissa and says that ‑ ‑ ‑

GUMMOW J:   Yes.

GLEESON CJ:   It must have taken the legislature 90 years to wake up to it.

MR STOLJAR:   ‑ ‑ ‑ the machinery for giving effect to sheriff’s sales has not worked effectively.  We have set out the relevant ‑ ‑ ‑

GUMMOW J:   Where do we see the Minister’s speech?

MR STOLJAR:   Your Honours will see it in a more complete form in paragraph 23 of our written submissions in‑chief on page 5.  Your Honours will see that the Minister said:

the machinery . . . has not worked effectively.  The breakdown is largely due to a judicial decision in Coleman v De Lissa ‑ ‑ ‑

CRENNAN J:   Mind you, the mischief is not really that unregistered interests might exist and so forth; it is that at sheriff’s sales there are fire sales really.

MR STOLJAR:   That is precisely it, your Honour, yes.

CRENNAN J:   That is really the mischief…..distinctions.  It is not that there are unregistered interests.

MR STOLJAR:   No, but the practical consequence of ‑ ‑ ‑

CRENNAN J:   It is the effect of not knowing about them.

MR STOLJAR:   Yes, it was the uncertainty.  The real vice, your Honour, is that a purchaser at a sheriff’s sale could not proceed on the faith of the register because when bidding at a sheriff’s sale the purchaser could have no idea whether a third party or third parties might come forth and claim interests unknown and unknowable by the purchaser.

GUMMOW J:   Yes.  The mischief in a way was that the purchaser from the sheriff could not rely on the face of the register.

MR STOLJAR:   Yes.  That, in my submission, is really the underlying uncertainty and the consequence of the inability to rely was that it would take a brave purchaser at a sheriff’s sale to pay value.  The consequence of that was that judgment debtors faced the prospect of losing their land for next to nothing and judgment creditors did not receive substantial payments on the judgment debt.  The purchasers were in a sense gambling but gambling for small stakes.  I will just refer your Honours to one ‑ ‑ ‑

GUMMOW J:   But how is that to be fixed up?

MR STOLJAR:   Because if an incoming purchaser can proceed on the faith of the register and knows that no one can come forward with an unregistered interest previously unknown, then ‑ ‑ ‑

GUMMOW J:   Within this moratorium period.

MR STOLJAR:   Yes.

CRENNAN J:   But if this purchaser had a caveat, there would be notice about the purchaser’s interest.

MR STOLJAR:   Yes.

CRENNAN J:   In a sense the court proceedings were just an attempt to get into the same position not through the statutory injunction of the caveat but through an injunction from the court.  That is to say, to bring to the attention of anyone buying from the sheriff that there was this interest.

MR STOLJAR:   Yes, but in addition it went further than bringing attention to a buyer from the sheriff; it in fact prevented any buyer from the sheriff bidding at all because of course the sheriff was injuncted.

GLEESON CJ:   But why do you say the statutory scheme is subverted if in the circumstances of the present case if the purchasers had simply lodged a caveat, they would have produced the same practical consequence of inhibiting in a practical sense the sale by the sheriff?

MR STOLJAR:   They may well have done in a practical sense but – simply because they did not elect to follow that procedure, your Honour, and they did not – the way the scheme works ‑ ‑ ‑

CALLINAN J:   But judgment creditors could have moved immediately for the removal of the caveat and then you would have had this sort of issue litigated in exactly the same way as it was.  I was going to ask you, talking about caveats, what are the caveats referred to in the relief claimed at page 3 of the appeal book?  There are two caveats referred to there.

MR STOLJAR:   They were caveats which were lodged by persons claiming to have a caveatable interest in the subject land, but what is in fact adverted to at 3B are withdrawals of those caveats.

CALLINAN J:   I am just interested.  What were the interests that the caveats were said to be in support of or to seek to vindicate?

MR STOLJAR:   I will double check, your Honour, but from memory the caveats themselves are not in evidence.  All that was known was that there had been caveats on title and that withdrawals had been executed.

CRENNAN J:   The property was heavily mortgaged, was it not?

MR STOLJAR:   It was.

CALLINAN J:   There was some suggestion at the special leave application – I think Mr Lindsay said – that there was nothing for anybody anyway, but there is no evidence about any of that.

MR STOLJAR:   No, your Honour, and we make a number of ‑ ‑ ‑

CALLINAN J:   You need not deal with it if there is no evidence about it.

GLEESON CJ:   There is evidence of a fairly complex personal situation behind all this.

MR STOLJAR:   Yes.

GLEESON CJ:   Mr Smith was in custody at one stage, I think.

MR STOLJAR:   Yes, he was.

GLEESON CJ:   What are the grounds upon which a court may remove a caveat?

MR STOLJAR:   The principal one would be where there was no caveatable interest.

GLEESON CJ:   Exactly.  And what would be the basis for saying that if the purchasers in the present case had lodged a caveat they had no caveatable interest?

MR STOLJAR:   They may well have had a caveatable interest following exchange, your Honour.

GLEESON CJ:   So how could their caveat have been removed?

MR STOLJAR:   As I apprehended Justice Callinan’s question, it was whether the issues in this case would have been ventilated in that forum but ‑ ‑ ‑

CALLINAN J:   You would have sought a declaration that even if it were not to be removed that there would be orders permitting the execution to proceed.

MR STOLJAR:   Yes, although the difficulty would be ‑ ‑ ‑

CALLINAN J:   Though there may well be, as the Chief Justice has really said, that an equitable interest is demonstrated.

MR STOLJAR:   Yes.  While the caveat remained recorded against the title an incoming purchaser would not have been able to achieve registration, at least in such a way as to defeat that caveat.

HAYNE J:   That is the incoming purchaser from the sheriff.

MR STOLJAR:   Yes.

HAYNE J:   So 105B could never have been engaged and 105B would not have been engaged because there would not be a transfer pursuant to a sale under a writ registered and that would not have occurred because the caveat provisions – I am not sure which of 74F – would intercept and preclude registration of any dealing except that in pursuance of the interest caveated.

GLEESON CJ:   So you would be back with the mischief that the Minister was speaking about.  While the caveat was on the title, nobody would bid for the land in practice at a sale.

HAYNE J:   But those who would bid for the land would do so on the faith of the register.

MR STOLJAR:   Yes.

HAYNE J:   The mischief identified by the Minister was that even if you bid on the faith of the register you could be defeated and commonly were defeated by the emergence of unknown unknowable claims to equitable interest that defeated the effect of a claim made.

MR STOLJAR:   Yes, that would ‑ ‑ ‑

HAYNE J:   The root of the amendment is to require faith in the register.

MR STOLJAR:   Yes.  That is the way we would put the case, your Honour.

GUMMOW J:   But it all comes back in a way, just considering what Justice Hayne put to you – there has been a view which is perhaps too loose that failure to caveat is not a disqualification, you know that line of territory going back to Abigail v Lapin and so on.

MR STOLJAR:   Yes, and J & H Just (Holdings) Pty Ltd.

GUMMOW J:   Yes, that is right.  If you are right, the failure to caveat can have real consequences under this scheme.

MR STOLJAR:  At least in this context.

HAYNE J:   Only where the search upon which you rely is a search that occurs a discernable period of time before settlement.  If you search, in effect, immediately prior to settlement – and I am not talking about 9.00 am on the day of, I am talking minutes before – you may reduce, perhaps practically eliminate, the risks.

MR STOLJAR:   Yes.

CALLINAN J:   Old practices are best.

HAYNE J:   Yes.  Settle in the Titles Office.

MR STOLJAR:   Yes.  Well, there was the evidence from Mr Moses about the practice that used to be the case in New South Wales of settling in the Titles Office for the very reason that your Honour is adverting to.

GUMMOW J:   What is the current practice?  Is there evidence of that?  With an electronic register?

MR STOLJAR:   There was some evidence from Mr Moses to the effect that where, even if those procedures were being used, one could with – I was going to saying simultaneous searches, but very late searches or the use of fax machines and the like achieve near simultaneous searching and settlement even though it was not taking place in the ‑ ‑ ‑

GLEESON CJ:   I think Mr Moses said that people very rarely do it in practice for a variety of practical reasons but his opinion – there might have been an argument, I think, about admissibility of this – was that having regard to what was known by everybody to be swirling around in the background here, it was a procedure that could have been done.

MR STOLJAR:   Yes.  One aspect of the scheme that I should perhaps address briefly is the fact that the scheme does not – when I say “the scheme”, I mean the 1976 amendments – in its terms preclude protecting an unregistered interest in the way that my friends have achieved.  Justice Ipp in the court below said, against the position that we propound, that if the legislature had intended to take away the rights of a person holding an unregistered interest to do that, it would have said so in clear terms.

Our submission is that while the legislation may not say that in terms, given the content of the various provisions that I have taken your Honours to and given the purpose for which it was enacted that consequence flows, as Justice Basten said, inexorably from the operation of the scheme as a whole.  The critical event for the purposes of a scheme is the recording of the writ in the register and the register is thereby frozen for a period of some six months.

CALLINAN J:   There used to be a practice by some very cautious solicitors to caveat immediately in respect of all uncompleted transactions, mortgages as well as purchases.

MR STOLJAR:   If that practice had been followed here, we would not be here today, but I am not certain as to whether that is the current practice, your Honour.

CALLINAN J:   It obviously is not, which does not make it right, though, that it has lapsed.

HAYNE J:   It may not be the practice in the State with which we are presently concerned.

MR STOLJAR:   Yes.  Your Honour Justice Hayne discussed some aspects of Justice Ipp’s judgment.  I was going to take your Honours to the latter part of his Honour’s judgment where his Honour applied the decision in Austral Lighting, or the approach taken there, to the statutory scheme.  It may be of more assistance if I take your Honours briefly to Austral Lighting [1983] 2 Qd R 507. The case had some factual features in common with the present case.

Prior to August 1983 a bank held an unregistered equitable mortgage.  In August 1983 a writ was registered and the bank asserted its prior right had priority.  If I take your Honours directly to page 509 at about point 3, your Honours will see set out the relevant section from the Queensland Act of 1877 that Justice Connolly regarded as determinative in the Austral Lighting Case.  Your Honours will see that section 35 has some similarities in general terms with section 105B which I took your Honours to, namely, in its first paragraph it deals with some procedures or machinery by which the Registrar‑General or the sheriff can execute a transfer and the second provides that:

Such transfer shall be subject to all equitable mortgages and liens notified by any caveat lodged with the Registrar‑General –

so it provides a form of indefeasibility.  Then if I could take your Honours to page 510, about line 17, Justice Connolly says that:

Section 35 should, in my opinion, be regarded as a provision for the protection of the purchaser from the Sheriff rather than of the judgment creditor.

Just pausing there, my friends in their submissions say that the statutory scheme is protective of purchasers from the sheriff.  In our submission, that does not reflect fully the statutory mischief and the purpose of the scheme in curing the statutory mischief.  The mischief was really the uncertainty and hence the undervalue.  If anything, we would say the statutory scheme is protective of judgment debtors in ensuring that they do not lose their land for only nominal value.

GUMMOW J:   The judgment debtor, the Minister said, loses ownership without any reduction of the judgment debt and he said the judgment creditor gets nothing of the amount owing to him.  The purchaser from the sheriff may get a windfall.

MR STOLJAR:   Yes.  We would say that the protective aspect of the amendments extends well beyond purchasers from the sheriff.  Then coming down to line 30 on page 510, your Honours will see that Justice Connolly says that “s. 35 says nothing to the position of a prior equitable mortgagee before registration” and then goes through the passage from Professor Sykes’ article that your Honour Justice Gummow took me to earlier.  His conclusion is on the next page, page 511, at about line 45:

The position in my view is that the equity created prior to the lodgment of the writ of execution may be set up until the Sheriff’s transfer has been registered.

We would say, your Honours, that Austral Lighting reflects the settled position in New South Wales prior to 1976 but is of limited relevance to the position in New South Wales after 1976.

Justice Ipp in the court below took a different approach.  His Honour sets out the background to the case and then at page 523 of the appeal book at paragraph 44 it begins “The relevance of Commonwealth Trading Bank of Australia v Austral Lighting Pty Ltd”.  If I can take your Honours over to the next page, page 524, your Honours will see at the top of the page Justice Ipp says:

In my view this case is relevant to the present issue.

That is Austral Lighting.

It is first necessary to show how the law in Queensland at the time of this decision resembled the present law in New South Wales.

Then your Honours will see at paragraph 45 Justice Ipp sets out section 35.  At 46 he deals with section 105B that I have taken your Honours to.  Then coming through to paragraph 49, his Honour says “Section 44 of the Queensland Real Property Act” and then sets it out.  Your Honours will see that section 44 is typical of Real Property Acts in that it regulates the circumstances in which a person acquires indefeasible title.

HAYNE J:   Sorry, can I take you back to paragraph 48.  Is his Honour correct in what he says there?

CALLINAN J:   Mr Stoljar, I am sorry to take you back to Austral Lighting, but if you go to page 509 where the relevant section is set out, in the second paragraph of that section it is stated that:

Such transfer shall be subject to all equitable mortgages and liens notified by any caveat lodged with the Registrar-General prior to the date of the registration of the writ of execution -

Does Justice Connolly deal anywhere with those words, “subject to all equitable mortgages . . . notified by any caveat” which rather implies to me that unless you caveat, even under the Queensland provision, unless you caveat you are postponed to a registered writ of execution and any sale pursuant to it.  Does he deal with those words anywhere – the qualification?

GLEESON CJ:   He deals with those words in the last two lines on page 509.

MR STOLJAR:   Yes.

CALLINAN J:   He does not really put them in the statutory context though, does he?  Why do not those words give rise to an implication that unless you caveat, that is get something on the register, the register being the all important thing, unless you get something on the register, which you can, your caveat, you take your chances.  It is the whole purpose of caveats to protect your interests unless and until you can get them registered. 

MR STOLJAR:   It does not take the analysis much further but at 510, line 16, he says:

What, however, is the position if no such caveat is lodged before the writ of execution?

He then goes on to set out his analysis although he then seems to move into the analysis from Professor Sykes that we ‑ ‑ ‑

CALLINAN J:   I do not find any of that persuasive, I must say. 

HAYNE J:   Can I take you back to paragraph 48 of page 525.  Is his Honour correct in what he says there?  In particular, is he right to contemplate a circumstance in which the transferee under a sheriff’s sale could be completed in face of the caveat claiming an interest as purchaser?

MR STOLJAR:   As I read it, it does not appear entirely on all fours with, I think, section 74H that I took your Honours to earlier.  At first glance it appears not to be but it may be that the position really is that the transfer cannot be registered because it would affect the interest recorded in the caveat.

CALLINAN J:   There used to be a time when there was some doubt about the availability of injunctive relief and the nature of injunctive relief you could get as an alternative to a caveat which is a form of an injunction, of course, really, but in modern times all sorts of flexibility entered into it.  You can get injunctions to protect caveatable interests but an injunction could be granted perhaps postponing other interests to your caveat excepting, and it could except, as is a consequence of the proper construction of the statute and not otherwise, it could except a duly registered writ of execution.

MR STOLJAR:   Yes.

CALLINAN J:   So your caveat might remain but it might remain in a highly qualified form, reduced form.

MR STOLJAR:   Yes.

CALLINAN J:   You are still entitled to have your equitable interest but it is the order in which it ranks which is important.

GUMMOW J:   In J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 the Court said the purpose of a caveat is:

to act as an injunction to the Registrar-General to prevent registration of dealings with the land until notice has been given to the caveator . . . 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 -

Now, does that square with your theory of the 105 sections up to 1976?

MR STOLJAR:   Yes, in my submission it does.  It depends on the context in which it is being looked at.  For the purpose that - as I recollect it, Justice Barwick was discussing it there - it was a question of whether or not the failure to caveat caused a postponement in terms of priorities between two competing equitable interests and by reason of the fact that the caveat does not…..as a notice to all the world, he said it did not or at least the failure to caveat of itself and without more, but in the context of sales ‑ ‑ ‑

GUMMOW J:   The bank used to take mortgages by deposited certificate of title - no caveat.

MR STOLJAR:   Yes, but in a circumstance in which – well, for the purposes of the mischief that was being discussed earlier and the necessity to proceed on the faith of the register if a person wants the protection.  If a person wants to protect their interest they can do so and then they are secure from purchasers from the sheriff and the operation of the scheme.  If they choose for whatever reason not to then they may not have the benefit of that protection.

In the circumstance in J & H Just (Holdings) the bank no doubt regarded itself as fully secure because it held the certificate of title.  In the context of a sheriff’s sale it may be, as I think your Honour is suggesting, that given that a transfer pursuant to legislation can be registered without the certificate of title a bank would be wise to caveat rather than simply rely on what is said in that case or the fact that it holds a certificate of title.

GUMMOW J:   That is another thing I wanted to raise with you.  This whole notion of duplicate certificates of title in all these cases, that has all gone, has it not?

MR STOLJAR:   As I understood that ‑ ‑ ‑

GUMMOW J:   With an electronic register?

MR STOLJAR:   There is still a certificate of title issued by the Registrar‑General and a duplicate maintained, perhaps not in hardcopy, but there would still be a duplicate, I suppose, in some sense maintained by the Registrar‑General.

CALLINAN J:   You still get something you can deposit, can you not?  You still get a document you can deposit, do you not?

MR STOLJAR:   Yes, you do.  I was taking your Honours through Justice Ipp’s judgment and I had arrived at 48 and then 49 on page 525 of the appeal book and your Honours will see that a conclusion is expressed at 50 on about line 31:

In substance, therefore, s 44 of the Queensland legislation has the same effect as s 42(1) of the Real Property Act (NSW).

That may itself be a proposition with which we would not quarrel but then paragraph 51, his Honour concludes:

Thus, the Full Court of the Supreme Court of Queensland in Commonwealth Trading Bank of Australia v Austral Lighting Pty Ltd was considering similar legislation to that with which this Court is now concerned.

CALLINAN J:   I think it might have been.  Justice Connolly did not appreciate that.  If you look at that clause, the qualifying clause to which I referred you.

MR STOLJAR: The proposition I was going to put was that it was, insofar as the Queensland Act included section 35 and section 44, but what was not contained within the Queensland Act are comparable provisions to section 105A and 105A(2), in particular and absent those ‑ ‑ ‑

CALLINAN J:   It depends on whether Justice Connolly was correct in his construction of section 35 of the Queensland Act, but anyway, you do not have to worry about.  Either way, you can argue that there is a misconception on the part of Justice Ipp.  You have it two ways.

MR STOLJAR:   Yes, your Honour.  Then, really, once his Honour arrived at that conclusion the balance of the reasoning process follows that which was summarised in Professor Sykes’ article and applied in Austral Lighting.  I take your Honours briefly to the minority judgment.

GUMMOW J:   What was the basis of Justice Basten’s construction?

MR STOLJAR:   Yes.  That was what I was going to take your Honour to now.  On page 550 of the appeal book, paragraph 126, his Honour begins his analysis of the 1976 amendments.  His Honour discusses briefly Breskvar v Wall in the preceding paragraph but then he moves on to 1976.  He observes in the course of those paragraphs in paragraph 128 at about line 44 that:

the 1976 amendments said nothing about the writ “binding” the land, nor did they make provision in relation to the power of the registered proprietor or the Sheriff to sell the land.

Then, coming over to paragraph 129 on page 552 his Honour summarises the effect of the provisions:

First, they preclude the purchaser for valuable consideration from the registered proprietor having his or her interest immediately recorded in the register, unless the application were lodged prior to the application to record the writ, or the transfer had the Sheriff’s consent. Secondly, the Sheriff’s purchaser will be entitled to have the transfer to him or her registered, pursuant to s 105A(1)(a) during the protected period. The purchasers from the registered owner will thus be pre‑empted, unless they caveated their interest before the recording of the writ.

130     The purchasers’ argument reflected the position before the 1976 amendments to the Real Property Act –

Your Honours will then see that Justice Basten summarises the key points articulated by my friends in their submissions.  Then Justice Basten took the view in paragraph 132 after setting out my friend’s submissions that:

Subject to the effect of s 112(2), discussed below, these arguments are not persuasive.  It is clear that the intention of the Parliament was to allow a Sheriff’s purchaser to take, through the Sheriff, the interest of the registered proprietor, subject to whatever limitations or encumbrances might be recorded on the register, but without the risk of unregistered interests taking priority.  The language of the new provisions is apt to achieve that effect.

GUMMOW J:   I asked you about this on the special leave application.  I think the position is that section 43A has not entered into this litigation at any stage?

MR STOLJAR:   No, it did enter into it in that it was part of my friend’s case below that 43A was afforded then some protection or was a step in their reasoning process.  We would submit that 43A is not determinative and ultimately not relevant to this case.  Firstly, even if as a matter of theory my friends acquired by reason of 43A a deemed legal estate, they ‑ ‑ ‑

GUMMOW J:   Yes, that is what I wondered about.

MR STOLJAR:   - - - they did so only as at 2.00 pm on 24 August, that is to say after the entry of the writ.  So we would say even if that as a matter of theory were the case, it could not defeat the earlier recording of the writ. 

GUMMOW J:   So in other words what then is the relation between 43A and 105A?

MR STOLJAR:   We would say that there is no direct relation.  Whatever is acquired pursuant to 43A, it is unregistered and cannot defeat the recording that has been effected pursuant to 105A.  Our second argument, which was in a sense a fallback argument, was that even if 43A, contrary to our primary position, afforded my friends some protection, they did not on the facts qualify for that protection in any event because 43A is only protective as against notice and we submitted that my friends had at least constructive notice by reason of their failure to carry out a search of the register in a timely fashion.

GUMMOW J:   Your primary submission is to the effect that 43A when speaking of a notional legal estate is dealing with advancement as between unregistered interests but you had, pursuant to the registration under 105A, something more than that.

MR STOLJAR:   Yes.

GUMMOW J:   So 43A does not really operate.

MR STOLJAR:   That is so, your Honour.  Section 43A, as your Honour knows, contemplates a situation in which there is an earlier equitable interest in conflict with what would be a later equitable interest absent 43A and 43A says that in that circumstance a purchaser of Torrens land acquires a deemed legal estate and is thereby in a similar position to a purchaser of Old System Title land upon payment of moneys and execution of the relevant documents.

GUMMOW J:   It displaces the ordinary idea of first in time, in equity.

MR STOLJAR:   Yes, in that limited circumstance.  Perhaps travelling through to paragraph 138 of Justice Basten’s judgment on page 555, his Honour says:

Given that the very purpose of the 1976 Amendment Act was to allow a sale in execution of a writ by the Sheriff to defeat any unregistered interest in the land, it is perhaps unfortunate that the Parliament did not expressly provide for that consequence.  Nevertheless, the consequence follows inexorably from the statutory scheme and must be accepted.

His Honour, as appears from paragraph 139, had had the benefit of reading in draft Justice Ipp’s judgment and points out that Justice Ipp reached a different conclusion and goes on to discuss Justice Ipp’s judgment and his Honour says that the comparison between sections 35 and 105B(2) may be correct as far as it goes but is beside the point and goes on to discuss ‑ ‑ ‑

GUMMOW J:   What do you say about line 10 on page 556 there:

In the present case, the fact that the purchasers had a caveatable interest is beside the point, because they did not seek to lodge –

The Chief Justice asked you this before.  What would have happened if they had caveated?

MR STOLJAR:   If they had caveated, then it would not have prevented the recording of the writ but it would have prevented the registration of the transfer received by a purchaser on a sheriff’s sale from being registered.  Secondly, as Justice Hayne indicated earlier in the course of argument, it would have put a purchaser from the sheriff on notice of the fact that someone had an unregistered interest.

GLEESON CJ:   Hence the qualification in the last sentence of paragraph 129.

MR STOLJAR:   Yes, your Honour, and his Honour Justice Basten, just coming to the end of this passage of his judgment, indicates that, at paragraph 141 on 556 that:

Austral Lighting is a clear statement of accepted principle which would have been applicable in New South Wales prior to the 1976 amendments.

His Honour then dealt with some of the other matters arising in the case including the matter that Justice Callinan adverted to about the situation of the secured creditors on title, which I will deal with further in reply if I need to.  His Honour says in conclusion on page 561 that:

the purchasers were not entitled to the relief they sought in the Equity Division.  The appeal should be dismissed with costs.

GUMMOW J:   Paragraph 144 is important, is it not, of Justice Basten’s reasoning?

MR STOLJAR:   Yes.  The first sentence is a form of the proposition that I have been endeavouring to put this morning that that would have been the outcome; the purchaser would have been entitled to register a transfer and thus obtain title unencumbered by the unregistered interest.  Unless there is anything further, those are our submissions.

GLEESON CJ:   Yes, thank you, Mr Stoljar.  Yes, Mr Lindsay.

MR LINDSAY:   Your Honours, we agree that the questions for determination in the proceedings are essentially questions of construction.  A principal point of difference between ourselves and the appellants is that we submit that the provisions of the Real Property Act must be construed in the context of the Civil Procedure Act and in particular section 112 and section 106.

If one looks to the appellant’s writ, we say it was a statutory instrument and it derived its authority from the civil procedure legislation.  That legislation did not cease to apply merely because the writ was recorded on the land titles register.  Central provisions of the civil procedure legislation are sections 112 and 106.  The appellant’s writ in conformity with section 106 of the Civil Procedure Act authorised the sheriff to execute the writ against the property of a judgment debtor, not third parties such as the respondents.  At no point did the appellants have an interest in land and we know that expressly because of the terms of the Real Property Act section 105(1).

GUMMOW J:   Just a minute, 105.

GLEESON CJ:   The writ of execution does not turn a judgment creditor into a secured creditor.

MR LINDSAY:   Correct, and that is confirmed not only by section 105(1) but also by section 112(3) of the Civil Procedure Act which provides that a judgment for the payment of money does not of itself create an interest in land. So that the two sections do that work but section 105(1) provides that:

A writ, whether or not it is recorded in the Register, does not create any interest in land under the provisions of this Act.

So we submit that the most that the appellants had was a statutory right to have the sheriff do his duty and that gives rise to the question, what was the sheriff’s duty?

CALLINAN J:   They are all statutory rights under the Real Property Act though.  Torrens Title is a statutory proprietary right.

MR LINDSAY:   There is undoubtedly a legislative framework that governs land and the dealings ‑ ‑ ‑

CALLINAN J:   All I am saying is there is no magic in the word “statutory” in this context.

MR LINDSAY:   It certainly does drive the inquiry to what is the content of a statute and that gets back to the need to have statutory construction.  But the duty of the sheriff was to execute the appellant’s writ against property of the judgment debtors and we would submit he had no authority to sell property of anybody but the judgment debtors.  The sheriff, in any event, did not come under such a duty unless and until the appellant’s writ was delivered to him and we know that by the express terms of the Civil Procedure Act, section 112, which provides that a writ did not bind the land unless and until delivery to the sheriff.

GLEESON CJ:   Was that on the 26th?

MR LINDSAY:   That occurred on 26 August, two days after the completion of the contract and on the completion of the respondent’s purchase, the registered proprietor, the judgment debtor, we would submit, held the land as trustee for the respondents and she was at that stage, if not earlier, a bare trustee for them they having paid the whole of the purchase price.

HAYNE J:   Does not that combination of expressions mask the problem?  What orders could have been made at whatever you say is the relevant time that would have worked the result you say is described in the terms you offer, “their trustee”, “trustee for”, et cetera?

MR LINDSAY:   The orders that were made by the Court of Appeal, in our submission, were open to them and sufficient, it not being suggested by my friends that they ‑ ‑ ‑

HAYNE J:   Those, in some respects, were orders directed to third parties.  What orders could have been made as between the parties to the contract because that is what is at the heart of the notion that as between parties to the contract one was to be a trustee for the other and whatever other expressions you offer?

MR LINDSAY:   As between the parties to the contract, there would not have been any dispute, one infers, from the course of what occurred that the judgment debtor, the vendor, to the respondents held the property at most as trustee for the respondents.  There was no assertion of any case to the contrary at any stage and, in my submission, there is nothing controversial about that proposition even if one gets into controversy about ‑ ‑ ‑

HAYNE J:   Its content is what I am after, not about whether it is controversial, but its content as identified by the orders that would have been made as between those parties.  It would have been an order for specific performance, would it not?

MR LINDSAY:   The contract having been performed ‑ ‑ ‑

HAYNE J:   And the contract was performed, the vendor had done all that she could do, namely produce a form of transfer in registrable form, yes?  The purchasers had paid the money.

GLEESON CJ:   And entered into possession?

MR LINDSAY:   They had entered into possession but I am reminded that one needs to be a little bit careful with the facts of the particular case because it was rural land and I think there were a few animals and the like, that it was not physically occupied on a day-to-day basis, but, yes, they entered into possession subject to that qualification.

GLEESON CJ:   The orders that the purchasers would have been entitled to against the vendors might have depended upon what the vendors were failing to do that they should have done.  One of the things they should have done, presumably, was to hand over possession.

MR LINDSAY:   Yes, well, they had handed over possession.  There is no question about that.  In conveyancing terms, the contract was wholly completed.

HAYNE J:   Just so.  Then what follows, vis‑à‑vis the third parties?  You have to work out the consequences of the fact, yes, the contract had been wholly performed and completed.  What does that then lead to in relation to the register?  You have a transfer in registrable form.  You take it along.  You encounter a difficulty because prior to your obtaining that transfer in registrable form somebody else has done something with the register.

MR LINDSAY:   We would submit, in those circumstances, it does come down to a priorities dispute, the determination or the contest being between the respondents who have what might be described as a full beneficial ownership of the land and the appellants who have no interest in land, as such, but an entitlement, whatever the content of that might have been, possibly to have steps taken under the writ in the context of the Real Property Act and in the context of the Civil Procedure Act.

HAYNE J:   What equity did your clients have against the party that had obtained recording of the writ?  The recording of the writ was apparently regular, I think, was it not, on its face?

MR LINDSAY:   On its face, yes.

HAYNE J:   And there is no deficiency or imperfection about its recording, is there?

MR LINDSAY:   No, but the ‑ ‑ ‑

HAYNE J:   What is the equity your clients had against that party?

MR LINDSAY: First of all, section 105(1) of the Real Property Act provided that the writ – whether it was recorded or not – provided no interest in land so we were entitled to a determination that we did have an interest or an estate in land and that it took priority over such entitlements, if any, that the appellants had with respect to the land and if it be relevant we say it is not necessary, as a matter of theory, but we say it is relevant on the facts, to the extent that it was necessary for us to point to the appellants having notice of our entitlements they did so because they ‑ ‑ ‑

GLEESON CJ:   Does not section 105(1) produce the consequence that no question of priorities arose? Priorities means priorities as between competing interests, does it not? Interest in the land?

MR LINDSAY:   It may mask a number of different concepts but we would submit that it is a shorthand expression which refers to a contest between claims to the land.  In that context we say we had an equitable estate and that was being challenged, if you like, by reference ‑ ‑ ‑

HAYNE J:   You had an unregistered interest in the land, yes?

MR LINDSAY:   We did have an unregistered interest in the land.

HAYNE J:   The party that recorded the writ did not have an interest in the land, see 105(1).

MR LINDSAY:   Correct.

HAYNE J:   So there is, as the Chief Justice says, no competition between interests?

MR LINDSAY:   I accept that, yes.

GUMMOW J:   But there was a statutory right or whatever you would like to call it that was triggered under 105A (2), was there not?

MR LINDSAY:   That is the question at – we keep on getting back to that.

GUMMOW J:   The question is, what is the impact of 105A(2) upon the general proposition in 105(1), namely it does not create interest in land but there is this operation of 105A(2).  Is that not what we have to debate?

MR LINDSAY:   We certainly do have to debate that and we say that 105A(2) is nothing more than a machinery provision that provides a period, the protected period, during which questions competing claims to the land might be determined.  That has to be considered, we would submit, in the context of ‑ ‑ ‑

GUMMOW J:   If you are right, there is never going to be anything to debate because there is no interest at all.  You just say 105(1).  What are you going to debate in this period in 105A(2)?

MR LINDSAY:   One might have a debate in other factual circumstances about whether or not people in my client’s position did or did not have an interest or an estate in land.  The fact of the matter is it seems to be accepted that the respondents did, by virtue of exchange of contracts if not the completion of the contracts, have some beneficial estate or interest.  That would not necessarily be the case in all cases.

The crux of this case focuses on the effect of section 105A(2) because if one gets beyond that hurdle what we would call the merits generally are fairly beyond dispute, namely that if section 105A(2) has the effect that the appellants say then that would appear to stymie us – we say it does not but that is it. If it does not have the effect for which they contend then it is quite clear, on our submission, that the respondents would be entitled to relief.

GLEESON CJ:   Have you completed your argument about the Civil Procedure Act?

MR LINDSAY:   Yes.  Well, I have not taken your Honours to – and I do not feel a particular need to – the writ or to section 106 of the Civil Procedure Act both of which emphasise that the authority conferred on a sheriff under a writ is to execute against property of the judgment debtor but I have made that point.  Having made that point I am in a position to move on, if your Honour would desire that I do so.

GLEESON CJ:   I just wanted to be sure that you had exhausted what you wanted to say about the Civil Procedure Act.

MR LINDSAY:   Yes, I have for the time being.  We would submit that nothing in the Real Property Act excluded the jurisdiction of the Supreme Court to make a determination as to the entitlements of my client and to enforce those rights. Section 105A(2) is directed only to the Registrar‑General. It does not provide that there is some form of indefeasibility of title or interest that is conferred upon the recording of a writ. It is machinery in the sense of just providing time. That is a fundamental difference between ourselves and the appellants.

HAYNE J:   The register being in the state it was immediately after completion of the settlement of the purchase, did the sheriff then have anything that he could sell as the property of the judgment debtor?

MR LINDSAY:   We would submit not, subject to one qualification ‑ ‑ ‑

HAYNE J:   Not even the bare legal estate reflected in the register?

MR LINDSAY:   That is the qualification to which I was going to come.  I invite your Honour to bear in mind that immediately following the completion of the contract the sheriff had no role to play in the sense that the writ had not been delivered to the sheriff.

HAYNE J:   Upon delivery of the writ.

MR LINDSAY:   Upon delivery of the writ.  It certainly is arguable that the sheriff at that stage might have taken the bare legal estate.  That is consistent with one branch of our argument for the purposes ‑ ‑ ‑

HAYNE J:   He would not have taken it.  He could have sold whatever estate or interest the judgment debtor has in Blackacre, could he not?

MR LINDSAY:   We submit – and this gets back to the form of the relief that the court granted – that it was appropriate for the court in the circumstances in which it was dealing with the matter to make the order it did, namely to restrain the execution of the writ because the contest between the parties was not whether or not there could be a sale of the bare legal estate.  The contest between the parties was whether or not there could be a sale of the land in its entirety.

HAYNE J:   I understand that and I do not want to deflect you ultimately from the development of that argument.  I just want to follow out a little further if the sheriff upon delivery of the writ had advertised and sold whatever estate or interest the judgment debtor had in the land in question, would not the statutory consequence of such a sale have been that provided for by 105B and in particular the registration of a transfer free from all estates and interests other than those prior?  Is not the effect of the court’s order which you say was properly made – I understand that is the burden of your case of course – to intercept what otherwise would have been the statutory consequence of a sale by the sheriff in pursuance of the obligation imposed by the writ?

MR LINDSAY:   Certainly the effect of the injunction was to restrain a sale taking place.  The effect of the injunction was that there was never a purchaser from the sheriff who might have asserted rights under section 105B.  It is not at all obvious that had events played out without the intervention of the court that there would have been indefeasibility of title taken by the purchaser from the sheriff because ‑ ‑ ‑

HAYNE J:   That is a point that I would need to be persuaded of.  If that is an important step in your argument, it is one that you should not assume I accept without explanation.

MR LINDSAY:   First of all, we would submit that it is entirely consistent with the scheme of both the Civil Procedure Act and the scheme of the Real Property Act that we be able to protect our estate before there is a sale.  Indeed, quite sensibly, that is so.  One might think of other ways that the matter might be dealt with.  For example, it might have been that there was declaratory relief granted to say that there was no property in the land, no property of the judgment debtors, which was available for sale by the sheriff.  So that one ‑ ‑ ‑

GUMMOW J:   We keep getting away from the nature of the Torrens system really.  This declaration at 563 is not easy to understand frankly, when you talk about and equitable estate, and so on.  You cannot register the equitable estate of a person with a fully constituted bare trust in their favour, can you?  You could caveat.  So what is being spoken of, entitled “as holders of equitable interests in the land”, that is a meaningless expression really.  I know it is used in parlance but what are you talking about?  It is their right to get on the register and displace the present registered proprietor, is it not, and what is the priority being talked about, the priority over the possibility of someone else getting ahead of them to displace the present registered proprietor’s registration on the title?

MR LINDSAY:   The priority that is spoken of is the priority between the respondents’, we would say, equitable estate in the land or, if your Honour wants to put it that way, the entitlement of the respondents to displace the vendor to them as the registered proprietor.  That is on the one hand.  On the other hand ‑ ‑ ‑

GUMMOW J:   It is not me.  It was Sir Garfield Barwick and a number of other people.

MR LINDSAY:   Point taken.  On the other hand there is such right as flows from the recording of the writ, a right in the ‑ ‑ ‑

GUMMOW J:   What has been put to you I think is the recording of the writ triggers this whole regime set up by 105A and 105B which can culminate in an indefeasible title.  It looks like it, 105B(2).

MR LINDSAY:   Section 105B(2) speaks, however, from the time of registration of a sale from the sheriff.

GLEESON CJ:   Is not the purpose of a caveat, in an ordinary case, to intercept the operation of section 42?

MR LINDSAY:   It can do that, yes.

GLEESON CJ:   That is why you get injunctions to protect unregistered interests because of the indefeasibility of title inferred by section 42.

MR LINDSAY:   Correct, to forestall the problem before the problem arises.  One can imagine a whole range of circumstances if this case had followed through to a sale by the sheriff because it is entirely possible, in fact it would probably be rational, for the respondents to go along and make sure that everybody knew precisely that they claimed an estate in the land, and, of course ‑ ‑ ‑

GUMMOW J:   Where do you get the equity that gives you that relief on 563, that injunction which you accept, I think, disrupts any operation of the statutory scheme under 105A and 105B?

MR LINDSAY:   We say the equity arises from the completion of the contract of purchase which entitles us, vis-à-vis, the vendor to us to be registered as proprietor of the land and we say that section ‑ ‑ ‑

GUMMOW J:   It becomes circular, I think.

MR LINDSAY: At the end of the day there is a degree of that, that is true, and we say that that entitlement is not precluded by section 105A of the Real Property Act.

GUMMOW J:   That is their debate, I guess.

GLEESON CJ:   From one point of view it is a debate about whether the statutory purpose of section 105B(2) is, in the case of a writ of execution, different from the statutory purpose of section 42.  It is not inconsistent with section 42 that you can get an injunction to restrain somebody doing something that will produce nasty consequences against you by reason of section 42. 

MR LINDSAY:   Correct.

GLEESON CJ:   But your opponent says the scheme in relation to writs of execution includes 105B(2) as a way of overcoming the mischief that was concerning the Minister.

MR LINDSAY:   That is right.  My friend’s argument really boils down to two sections.  One section is 105A(2) and then there is a jump immediately to 105B(2).

HAYNE J:   In aid of the proposition that 105B(2) achieves this result and points also to the possibility of purchasers dealing on the faith of the register or lodging caveats in support of their claims.  Thus he goes on inferentially to say, “Give it this operation.  You are not working an injunction against purchasers who protect their position”.

MR LINDSAY:   There are two soft parts, we would submit, in that sort of case.  First of all we would submit there is nothing in the Real Property Act which precludes people in the position of the respondents from seeking to protect their position before a sale is affected.  That is the first thing.  Second thing is that my friend’s case is predicated upon a contention that it is open to the sheriff even with knowledge of equitable interests to seek to defeat them and we challenge at both points and we say that cannot be done.  But at the end of the day one comes back to that sort of territory.

GUMMOW J:   How do you give these sections an operation which is apt to effectuate the Minister’s perceived mischief in enacting these provisions?

MR LINDSAY:   We say our construction of the legislation precisely serves the concern that the Minister had because it insures that where there is a purchaser who is registered, a purchaser from the sheriff, then subject to considerations like section 42 there can be indefeasibility of title for that purchaser.  But the Minister’s speech does not in any way say that it was the intention of the legislation to enable the sheriff to sell property in conscious disregard of the ownership interests that other people might have ‑ ‑ ‑

GUMMOW J:   This is where we get into security, really.  You keep talking about property and interests and they are all unregistered and it is really all about who is on the register and who can get on the register.

MR LINDSAY:   One does eventually have to take the various sections and look at them holistically and deal with it so that one does, in that sense at least, engage in a degree of circular reasoning.  But my friends’ submissions are based upon the idea that they can with conscious planning proceed to take out a writ and to have it registered or, more accurately, recorded in circumstances in which they can deliberately compel the sheriff to defeat those interests.  If one looks at what happened in this case, on the facts, the starkness of that becomes apparent because it is quite plain that the appellants had notice of the respondents’ estate because they issued charging orders.  They were told about settlement and they issued charging orders which enabled them to get the bulk of the deposit.  Then, having done that, they subsequently delivered the writ to the sheriff and they seek via those means to frustrate the entitlements.

GLEESON CJ:   At one stage they were complaining that this was a sale at an undervalue.

MR LINDSAY:   Yes.

GLEESON CJ:   Then there was evidence of valuations submitted to them to persuade them to the contrary of that.

MR LINDSAY:   They took no point about that really in the proceedings because the ‑ ‑ ‑

GLEESON CJ:   No, but the whole thing happened in slow motion, as it were.  Everybody knew what was going on.

MR LINDSAY:   Yes.  That raises a question about whether or not the writ was or was not worthless, and we have made submissions about that, but a difference between us which has crystallised is this.  We make a submission that there was no equity in the land which could be attached by the writ and my friend says, no, that is not right because there are two things.  First of all, there was the deposit and so that was equity.  By means of charging orders the appellants obtained that.  So that was not available.  All of the purchase price – and there is evidence of the disbursement of the purchase price – all of the purchase price was spent in paying out the various encumbrances.

GUMMOW J:   Now, are those encumbrances what appear on page 3, paragraph 3B(a) to (e), two mortgages, two caveats and a lease?

MR LINDSAY:   Yes.  In order to provide various references, can I hand up a document that summarises where the various pieces of evidence can be found on that.  I hand up five copies and I will make other copies available in due course.

GLEESON CJ:   Thank you.

MR LINDSAY:   This document is simply a summary of where one finds the various title references.  There is, I have been reminded, one addition which might usefully be made and that is that, contrary to an assumption earlier in the day, one of the caveats is in evidence and if your Honours would just make this notation in the schedule?  At paragraph 2d, that particular caveat is in the appeal book at page 78.

GLEESON CJ:   Where is the evidence that shows that on completion the whole of the balance of purchase money went to people other than the vendor?

MR LINDSAY:   Essentially it is at pages 365 to 371, which in effect is the settlement statement, together with an assertion to that effect that appears in the correspondence between the solicitors at page 139.  In our written submissions we have drawn those references together and they appear in our written submissions in paragraph 7, footnote 7.  Those are the precise references.

GLEESON CJ:   That is page 139, line 31.

MR LINDSAY:   Correct.  Having deflected the point about the deposit, my friend in his submissions in reply says there is another indication that there was equity in the land or some value in the writ because there was a lease which was surrendered.  In order to look at the conveyancing aspects of that again just factually, may I draw your Honours’ attention to the fact that that lease was due to expire on 30 March 2008 and moneys were paid upon settlement of the respondents’ contract to obtain a surrender of that lease.  An amount of $109,000‑odd was paid to the lessee to secure that surrender, and that appears in the surrender of lease document which is in the appeal book at page 170 at about line 28.

That, in our submission, demonstrates that the appellants are endeavouring really to have it both ways.  On the one hand, they are endeavouring to obtain the benefit of the contract by the charging orders getting the deposit.  On the other hand, they are trying to get the benefit of what they say is an unencumbered fee simple which is even without the lease, but in the practical world there would be a problem if the property just proceeded without the intervention of the court going to a settlement.  What happened was that the respondents lodged for registration the withdrawals of caveat and the discharges of mortgage and the surrender of lease and their transfer and the Registrar‑General held those documents in abeyance effectively pending the determination of what I have described as the priority dispute. 

Your Honours can see that factually from the land title searches that were undertaken on 26 September.  An example is at page 160 of the appeal book.  There are three folios or there were three folios but there is no material difference between them.  They all show the same thing.  At the bottom of page 160 under the heading “NOTATIONS” your Honours will see that there are documents referred to there as unregistered dealings and in the schedule I have handed up I have endeavoured to identify each one of those, but your Honours doing that exercise will see that “WX” is the withdrawal of caveat forms.  There are two of those.  “DM” is a reference to the mortgages, discharges of the mortgage.  “DL” is a reference to the surrender of lease and “T” is a reference to the transfer in favour of the respondents.  The final “X” is a reference to a caveat that the respondents themselves put on the land on 9 September when they became aware of the ‑ ‑ ‑

GLEESON CJ:   Do we have the contract of sale?

MR LINDSAY:   Yes.  The contract of sale commences at page 55.

GLEESON CJ:   How did it deal with this matter of the surrender of the lease?  In other words, did the vendor contract to procure a surrender of the lease?

MR LINDSAY:   I will have to check that.  I am told the answer is yes.

GLEESON CJ:   The reason I ask the question is ‑ ‑ ‑

MR LINDSAY:   Yes, at page 67.

GLEESON CJ:   All right.  On Justice Basten’s approach, what happened to the lease and the surrender of the lease?  In other words, when the sheriff went to sell the land or when the sheriff was going to sell the land at the sale pursuant to the writ of execution, on Justice Basten’s approach what was going to happen in relation to the lease?

MR LINDSAY:   Subject to one qualification which I will mention, I think the effect of that is that we would be in a priorities dispute at that stage and it is not clear what the outcome of that will be.

HAYNE J:   Why?  Why would not 105B(2) be engaged?

MR LINDSAY:   That is the qualification ‑ ‑ ‑

HAYNE J:   It was a registered lease, was it not?

MR LINDSAY:   Yes, it was.

HAYNE J:   It would be sale subject to it, would it not?

MR LINDSAY:   Yes, that is the qualification.

CALLINAN J:   The purchasers would take subject to it.  It would be the end of it, would it not?

MR LINDSAY:   Well, the qualification ‑ ‑ ‑

GLEESON CJ:   But the lessee had surrendered the lease by the time of the sheriff’s sale and had been paid for surrendering the lease by the time of the sheriff’s sale.

MR LINDSAY:   Yes, that is right, and the surrender of lease was within the control of the respondents because the Registrar‑General took the various dealings from the respondents and indicated that they would be held and they would be dealt with together. So there would have been questions that would have arisen in respect of all of them in the context of the situation that we have described. So there would be a degree of uncertainty and then there would be a dispute about the effect of section 105A(1)(e).

GLEESON CJ:   Did the lease cover the whole of the land?

MR LINDSAY:   Yes, it did.

GLEESON CJ:   So the lessee was the person who was farming the land, I presume?

MR LINDSAY:   Yes.

GLEESON CJ:   So by the time the sheriff received the writ on 26 August the lessee on or before 24 August, the person who was farming the land, had executed a surrender of the lease, had received $100,000 in consideration for that and had vacated the land. 

MR LINDSAY:   Yes.

GLEESON CJ:   The sheriff then presumably was going to sell the land with vacant possession.

MR LINDSAY:   We do not know precisely what the sheriff’s precise intentions were.  We would submit that the sheriff could not do that but, on my friend’s case, the sheriff had every right and duty to do that. 

HAYNE J:   Be it so, what is the consequence you say follows from that contention?  Assume the appellants make the contention, assume the contention is right, what is the consequence you say?

MR LINDSAY:   The consequence of all of that is that if one wants to achieve the sort of objective that the Minister spoke of in his 1976 speech it is necessary to appreciate that the subject matter of a sale of the sheriff can be determined before any sale so that in order to make sure that people at an auction sale know what they are getting one needs, in our submission, to appreciate that the court has jurisdiction to determine those questions. 

CALLINAN J:   What follows from that?

MR LINDSAY:   At the end of the day, in our submission, what is required is a construction of the two pieces of legislation:  the civil procedure legislation and the Real Property Act.  In our submission, what follows from all of that is that the scheme is eminently workable and it involves ‑ ‑ ‑

CALLINAN J:   It is eminently workable, is it not, the other way on the appellants’ construction?  In fact it is simpler in lots of ways.

MR LINDSAY:   No, it is not simpler, that is the ultimate point. 

CALLINAN J:   I do not know about that.  If you were not looking at the register and having regard to exactly what is on the register, writs of execution and other interests, it would be a lot more complicated.  The point is, Mr Lindsay, you can get on the register with a caveat, you can at least get your caveat on the register, and any registrable interests of any kind you can get on the – you can protect your interest, and that does simplify a lot of things.  If you choose not to do that, you take your chances.

MR LINDSAY:   I will return to that and I will perhaps ‑ ‑ ‑

GLEESON CJ:   But in this case is the lease on or off the register?

MR LINDSAY:   The registered lease remained on the register, so it was there, subject to whether or not there was an entitlement to have the surrender of lease registered.

GLEESON CJ:   That is what I am trying to understand.  The person who was going to lodge the surrender of lease was the same as the person who was going to lodge the memorandum of transfer, was it not, namely, your clients?

MR LINDSAY:   That is right.

GLEESON CJ:   Is there a suggestion that your clients might have been prevented from lodging the memorandum of transfer but compelled to lodge the surrender of lease?

MR LINDSAY:   That underlies my friend’s submissions and we submit that that shows the flaw in his reasoning. 

CALLINAN J:   Well, say his clients had said, “We don’t object to the registration of the surrender”.  They could have done that, could they not?  It would have been in their interest to do that, would it not?

MR LINDSAY:   That is the battle because what the appellants were endeavouring to achieve was to get the benefit of the contract by taking the deposit moneys and then to say, “Yes, we are also entitled to effectively unencumbered fee simple being submitted for a sheriff’s auction sale because” ‑ ‑ ‑

CALLINAN J:   Subject to the mortgages?

MR LINDSAY:   No.

CALLINAN J:   Were there no mortgages?

MR LINDSAY:   Your Honours earlier this morning looked at the final search of the morning of the 24th and it had two mortgages, a lease and two caveats.  On completion of the contract what happened was that the purchase moneys were paid over and the respondent purchasers received discharges of mortgage, withdrawals of caveat and a form of surrender of the lease.  They then lodged those with the Registrar‑General and having done that, they were alerted to the existence of the writ.

My friend’s case is that because of the operation of section 105A(2) the appellants were entitled to compel the sheriff to sell the land to a purchaser who might then invoke section 105B(2) and they ‑ ‑ ‑

GLEESON CJ:   But to sell the land with vacant possession or to sell the land subject to the lease to the farmer who had departed?

MR LINDSAY:   I understand the appellants’ case is that they were entitled to sell the land free of the lease.

CRENNAN J:   When the writ is recorded, it is necessary, is it not, under the statute for there to be a recordal of all prior encumbrances that are shown on the register, otherwise it will not be recorded?  Is that not the position?

MR LINDSAY:   I think that is so, yes.  That is so.  Then one gets to what happened.

CRENNAN J:   So any putative purchaser in relation to a sale from the sheriff be on notice of those prior encumbrances.

MR LINDSAY:   Yes.

GUMMOW J:   They are not really prior encumbrances any more.  The lessee has no interest to resist change in the register, neither have the mortgagees, have they?

MR LINDSAY:   That is my friend’s ‑ ‑ ‑

GUMMOW J:   They could not be heard, could they, to resist that coming about?

MR LINDSAY:   It is by those means that my friend submits effectively that the appellants were entitled to have the sheriff submit to public auction what was, in effect, an unencumbered fee simple.

GLEESON CJ:   Is this behind what was said by one of the members of the Court of Appeal about subrogation?

MR LINDSAY:   Justice Basten raised that.  Yes, it is behind that.

GLEESON CJ:   Did he have in contemplation, for example, that your clients might be entitled to recover the amount that was paid to the lessee to go out of the proceeds of sale to a purchaser from the sheriff?

MR LINDSAY:   His Honour raised it but I do not think resolved it.  There are a number of uncertainties of a conveyancing nature that arose from his Honour’s concept of defeasible interests.  I do not think he resolved them.

HAYNE J:   The bottom line is this, is it not?  Your clients paid out a total of $1 million.

MR LINDSAY:   Correct.

HAYNE J:   They did so in the hope and expectation that they would obtain registered Torrens title to the land.  The case against you is that for want of having searched the register immediately prior to settlement and for want of a caveat, their hopes and expectations are to be frustrated.  True it is they have paid out $1 million, and that is a very large consequence, but that is the nub of the case against you dependent at its heart upon the proposition that you do not register title; you get title by registration.

MR LINDSAY: Dependent ultimately upon a contention as to the proper construction of section 105A(2) and following on from that 105B(2) which might be invoked correctly or successfully otherwise by a purchaser from the sheriff. So that then does force you ultimately back to what is the construction and purpose of section 105A(2). We say that that does not in effect create an interest in land or anything akin to it in the execution creditors because it is directed only to the Registrar‑General, it is for a limited period and it is limited to the machinery of working through a sheriff’s sale which has quite a number of steps that have to be taken either under the Civil Procedure Act or Part 39 of the Uniform Civil Procedure Rules.

So that at heart it comes down to a difference of contentions about section 105A(2) and we say that 105A(2) does not exclude the jurisdiction of the court to protect the interests of people in the respondents’ position. In circumstances in which there is no purchaser from the sheriff, there is no sale by the sheriff. That crystallises the difference. Subject to any questions, I have addressed each of the matters upon which I propose to address.

GLEESON CJ:   Thank you, Mr Lindsay.  Yes, Mr Stoljar.

MR STOLJAR:   Could I take your Honours to section 112 of the Civil Procedure Act.  My friend places some reliance on it and it may be of assistance to go through it.  My proposition is that it is not determinative of or even relevant to the present.  Your Honours will find it at page 20 of the bundle of legislation attached to my friend’s written outline.  Section 112(1) provides that:

A writ of execution against land binds the land, as from the time the writ is delivered to the Sheriff, in the same way as a writ of execution against goods binds the property in the goods.

GUMMOW J:   This expression “binds the land” received some attention from Professor Sykes, did it not, just what that meant, in relation to Old System land?

MR STOLJAR:   Yes.  Indeed, 112 ‑ ‑ ‑

GUMMOW J:   It is a phrase with a long history and not an easy one to understand either.

MR STOLJAR:   Yes, a long history, including in New South Wales.  Section 112 in substance reproduces section 13 of the old Judgment Creditors’ Remedies Act 1901. There are some ‑ ‑ ‑

GLEESON CJ:   I think you said in your argument in‑chief that the expression “binds the land” means it prohibits any dealing with the land contrary to the obligations of the sheriff?

MR STOLJAR:   In substance, yes, your Honour, dealings with the land by the judgment creditor after – let me start again.  After the writ has been delivered to the sheriff and the writ binds the land, a dealing with that land by the judgment debtor would be void insofar as it seeks to defeat the sheriff.

GLEESON CJ:   What is the position during the interval of two days here, 24 to 26 August, and the interval of time between the registration of the writ and the delivery of the writ to the sheriff?

MR STOLJAR:   The delivery is achieved, it would appear, by an internal mechanism of the District Court.  That is how the writ physically arrives at the sheriff.  During that period of time two things had occurred.  One is the writ had been recorded and so the protected period was running, but secondly, at that stage at least, the writ had not yet been delivered to the sheriff and if an issue had arisen as to a dealing by the judgment debtor during that period as against the sheriff, at least under the Old System, there may have been a live issue as to the efficacy of that dealing but ‑ ‑ ‑

GLEESON CJ:   But completion in fact occurred during that time interval here, did it not?

MR STOLJAR:   It did, yes.  It occurred at 2.00 pm, yes.

GLEESON CJ:   So in the present case what went on between the time of the registration of the writ and the time of its delivery to the sheriff was the payment of $1 million by the purchasers ‑ ‑ ‑

MR STOLJAR:   Well, 900,000, the balance of the purchase moneys.

GLEESON CJ:   ‑ ‑ ‑ the delivery of a surrender of lease by the lessee so that the vendor could give vacant possession and of course the delivery of a memorandum of transfer in registrable form.

MR STOLJAR:   Yes, that is all so, your Honour, and if this had been a case in which it was other than Torrens land or the writ had not been recorded, questions may have arisen as to the efficacy of those dealings by the judgment debtor.  But the fact is, we say, 112 only really bites in circumstances in which the writ has not been recorded.

If I can attempt to develop that.  Section 112(1) regulates the circumstances in which the writ binds the land and I said before that the binding of itself has a particular consequence with respect to dealings by a judgment debtor.  Section 112(2) qualifies what I said to some extent in that if there is a dealing by the judgment debtor, even after delivery and binding of the land, then the interest acquired by a person in good faith and for valuable consideration and without notice will still be effective.  But 112(1) and 112(2) are concerned with writs of themselves and without more, that is to say, they are not concerned with the situation obtaining here, namely, where there was not just a writ but a recording of the writ.

GUMMOW J:   I just wonder if section 112 is saying anything about Torrens Title land myself. 

MR STOLJAR:   That is my submission in substance, your Honour.  It might still have some work to do in circumstances in which ‑ ‑ ‑

GUMMOW J:   When you come to section 113 that is made clear.

MR STOLJAR:   Yes, 113(1)(a).

GUMMOW J:   The 1901 statute is the Judgment Creditors ‑ ‑ ‑

MR STOLJAR:   The Judgment Creditors’ Remedies Act 1901.

GUMMOW J:   Yes, did that apply to the Torrens Title system?

MR STOLJAR:   I have section 13 but it does not say in terms.  I would need to ‑ ‑ ‑

GUMMOW J:   I think that is why Professor Sykes is considering it in relation to Old System.

MR STOLJAR:   Yes, and in 1901, of course, as your Honour knows, there was a great deal more Old System title than there is now.  The only additional point I was going to make in respect of that, your Honour, is that it is possible that 112 could still have some work to do if a writ was issued and delivered to the sheriff but for some reason the judgment creditor elected not to record the writ on the register and then there was a dealing with the land and then there may be nice issues as to the efficacy of such dealings and the operation of 112, but that, of course, was not the situation obtaining here.  So we would say that to the extent that my friend draws comfort from 112, it does not assist him on the facts as they fell in the present case. 

GUMMOW J:   But what is the significance of 113 in this case?

MR STOLJAR:   It provides a circumstance in which a judgment creditor consents to particular sales taking place.  That was adverted to in some of the subsections of 105A that I did not take your Honours to in detail, but in certain circumstances ‑ ‑ ‑

GUMMOW J:   There is cross references there?  There is, I think, 105A(1)(b).

MR STOLJAR:   Yes.

GUMMOW J:   And again in subsection (3)(c), (4)(d) and so on.  So that I understand, but how you marry up 112 with 105 I am not clear about at the moment – the basal provision of 105 in the Torrens Title statute.

MR STOLJAR:   That is my submission, yes, your Honour, and 112 really is directed to other circumstances which could arise in other cases.  One additional matter is that 112 is concerned with the binding of the land.  It seems implicit in my friend’s submissions that – well, the following proposition seems to be implicit in my friend’s submissions, that this writ only became effective on delivery to the sheriff on 26 August, but that seems to ignore the important effect of recording of the writ on 24 August.  We would say that is the decisive event under the Torrens system.

GUMMOW J:   I am sorry to be stubborn about this, but 105(1) says that the writ “does not create any interest in land under the provisions of this Act”.

MR STOLJAR:   Yes.

GUMMOW J:   That is the Torrens regime.  Section 112(3), the Old System regime.  It is not said twice, is it?

MR STOLJAR:   Yes.

GUMMOW J:   I do not know.  Section 112(3) says “A judgment in any action at law”, which is old-fashioned language really.

MR STOLJAR:   Yes.  A binding of the land by delivery of the writ would not of itself, as I apprehend it, create an interest in the land, so 112(3) may have some work to do, as it were, separate from 105(1).  In any event, in my submission, and we have put this in our written submissions, 112 seems primarily directed towards a circumstance in which there has been no recording and typically where it is Old System Title. 

Coming to a separate topic, my friend said that during the six-month protected period there could be debate as to interest taking – priorities debates.  However, given 105(1), a judgment creditor will not have an interest in the land.  My friend’s proposition seems to be that the equitable interest in the land defeats the rights of the judgment creditor, so we would say that the outcome of those priorities disputes would always be resolved on my friend’s approach in favour of the person holding the unregistered interest because in my friend’s approach it is implicit that the unregistered interest of itself and without more entitles them to what they describe as priority.

GLEESON CJ:   When a sheriff sells the land, what does the sheriff do with the proceeds of sale?

MR STOLJAR:   That is regulated by the Uniform Civil Procedure Rules.  That appears at page 42 of the bundle attached to my outline, but in essence the proceeds are distributed firstly to the sheriff to cover the sheriff’s fees and charges; secondly, to the judgment creditor; and thirdly, to the judgment debtor.

GLEESON CJ:   I do not understand you to submit that the judgment creditor has any interest in the land.

MR STOLJAR:   No, your Honour.

GLEESON CJ:   Your opponent says what the judgment creditor has is a right to have the sheriff perform the sheriff’s duty.

MR STOLJAR:   Yes.

GLEESON CJ:   Is that a fair statement of what the judgment creditor is entitled to?

MR STOLJAR:   It has the right to the benefit of the protected period in the statutory process that that encompasses.  The judgment creditor may not have any statutory right to compel the sheriff to do something although the Rules do require that the sheriff act reasonably promptly in executing sales upon delivery, but we would say that the judgment creditor has the benefits arising out of the statutory scheme and principally the benefit of that protected period during which the property can be sold.

GLEESON CJ:   In the present case what would the sheriff advertise for sale?

MR STOLJAR:   The property of the judgment debtor appearing on the register.

GLEESON CJ:   With vacant possession?

MR STOLJAR:   Either with vacant possession – that raises issues about the efficacy of the withdrawals and discharges of the various encumbrances – either with vacant possession or, in the alternative, in circumstances in which the mortgagees and lessees who previously held those interests had no interest in continuing those interests on the register.

GLEESON CJ:   What about the money that had been paid to them to produce the result that they no longer had any such interest?

MR STOLJAR:   That gives rise to the subrogation question that your Honour raised with my friend and that Justice Basten adverted to.  If I can come to these issues in response to what my friend said.  The starting point we would say – perhaps I can go back one step.  My friend’s proposition is, as he advances it now, appears to be that the writ is, as he puts it, worthless.  It is unclear from our side precisely what work that proposition is intended to play.

Ultimately, what my friend’s submission comes to is that there is no utility in an inquiry on an undertaking as to damages because the outcome of that inquiry would, in my friend’s case, inevitably be that no moneys would result to the judgment creditor.  But we would resist that proposition.  The starting point is that there is not the factual foundation, either in evidence and more particularly on the findings, to justify that submission ‑ ‑ ‑

GLEESON CJ:   This argument does make it necessary to decide what happened in relation to the mortgages and the lease, does it not, because, as I understand your argument, the sheriff would have been entitled to sell the land unencumbered with vacant possession and to have received $1 billion, assuming that is the right price, and to have devoted as much of that sum as was necessary to discharge the debtor’s liability to your client and there was no occasion to deduct any amount to pay a lessee to surrender a lease or a mortgagee to discharge a mortgage.

MR STOLJAR:   Yes.

GLEESON CJ:   So that raises questions of principle in addition to the issues of evidence that you want to raise so we have to face up to and deal with those questions of principle in order to deal with this argument that there is nothing here worth fighting over.

MR STOLJAR:   Yes.  If I can then try to come to the specific evidence and draw what we would say are the appropriate conclusions.  My friend attaches reliance on the letter at page 365 of the appeal book and my friend says that that operated as a kind of settlement sheet.  We would resist that characterisation of that letter.

It is a “without prejudice” document written in advance of settlement, the purpose of which was to procure so it was hoped an outcome pursuant to which the judgment creditor would accept the amount said to be available, namely $92,000 which was altered in subsequent correspondence.  Our first proposition is that evidence of this kind does not establish with any clarity precisely what in fact occurred on 24 August and precisely what moneys were distributed to the various creditors.

The reason that the never emerged at trial was twofold:  one of which is that – my friends ran a case at trial which was effectively that they had paid moneys to the judgment debtor and thereby obtained the entire equitable estate in the land.  They did not run a case at trial that they paid moneys for the benefit of any secured credited holders for the purposes of keeping the securities alive.

GLEESON CJ:   Mr Stoljar, leaving aside questions of the precise amounts involved, the inference is plain, is it not, that on 24 August moneys were paid to mortgagees to get discharges of mortgage and moneys were paid to a lessee to get a surrender of lease.

MR STOLJAR:   Yes.

GLEESON CJ:   The precise amounts may or may not be the subject of available conclusions, but on those inferences, which are not disputed, what, as a matter of principle then, follows in relation to the amount of money that your client would have been entitled to receive on a sheriff’s sale.

MR STOLJAR:   There would be two possible approaches, your Honour.  The first would be that had the injunction not be granted in December we say the sheriff’s sale would have proceeded in approximately late February.  During that time two things could have occurred.  One is that either the discharges could have been registered against title, the discharges of the mortgages.  That would fall from ‑ ‑ ‑

GLEESON CJ:   Who would lodge them for registration?

MR STOLJAR:   Either my clients would have procured registration of the discharges that were already lodged but were being held in abeyance or, in the alternative, my clients could have procured replacement discharges from the mortgagees.  The discharges that had been lodged – I am just endeavouring to turn up the page – were not precluded from registration by reason of 105A(1) on page 33 of the bundle which provides that subsection (2) does not prevent the registration of:

(f)a dealing by a mortgagee or chargee in exercise of the mortgagee’s or chargee’s powers under a mortgage -

previously registered.  The discharge of mortgages that were already on title could have been registered.  If there had been some difficulty there there would appear to be no reason why the mortgagees would have resisted providing an alternative discharge although that may not have ever become an issue.

In respect of the lease, again, either – it would appear that the lessee had been fully paid out and had vacated the premises.  In those circumstances there would appear to be no substantive impediment either to – well, in essentially to procuring the registration of the surrender of the lease executed by the lessee.

HAYNE J:   Is that a document of a kind or dealing of a kind reflected in 105A(1)(e)?

MR STOLJAR:   Yes, your Honour.  The practical reality is that even if there had been some impediment, and we say there would not have been, to the registration of those dealings, a purchaser on the sheriff’s sale becoming aware of those encumbrances registered against title could have made their own inquiries as to the person holding those encumbrances and made arrangements for the appropriate discharges or the surrender to be lodged, together with their transfer, in the ordinary course and there would appear to be no reason why, as I indicated before, the encumbrances would resist that.

GUMMOW J:   What do you say would happen on the order of events which you would prefer to have happened culminating in the sale by the sheriff and I think it was agreed the hopeful price would be $1 million and your judgment debt would have been what, roughly, allowing for interest?  Say 300,000.

MR STOLJAR:   Yes, it would be less than that, I think, your Honour, taking into account the ‑ ‑ ‑

GLEESON CJ:   The deposit.  You have $100,000?

MR STOLJAR:   Yes.

GLEESON CJ:   So it would have been 300,000 less the deposit that you got your hands on?

MR STOLJAR:   Yes.  Before Justice Basten, the figure was approximately 168, 000, I think.  I will just check that.

GUMMOW J:   Yes, all right, say 200,000.  What would happen to the other 800,000, where would that go?  It goes to pay the sheriff?

MR STOLJAR:   Yes.

GUMMOW J:   He gets first bite, I guess.  Then there is the 200,000 to you.  What happens to the rest?

MR STOLJAR:   On application of the rules, it would be paid to the judgment debtor, but my friends would no doubt wish to be heard as to whether the rules would apply in the ordinary course, such that the judgment debtor receive the moneys – it would be up to my friends.  In their position, I would expect they would wish to seek some relief against the proceeds of sale.

GLEESON CJ:   Is this what Justice Basten had in mind when he was talking about subrogation?

MR STOLJAR:   I do not ‑ ‑ ‑

GUMMOW J:   Who is being subrogated to what?

MR STOLJAR:   Yes, your Honour, but in answer to your Honour the Chief Justice’s question the reference to subrogation is somewhat fleeting and I do not know if he specifically had that in mind.

GLEESON CJ:   I wondered if he contemplated that the purchasers were being subrogated to the vendors’ right to get the balance of money from the sale.

CALLINAN J:   The net amount.

MR STOLJAR:   I apprehended what he had in mind was that the subrogation was to the rights of secured creditors whose securities had been discharged by application of the proceeds of sale.

GLEESON CJ:   Now, suppose it had been the case that – and at the least it looks as though it might have been the case – the net proceeds of sale – I mean, after deducting the sheriff’s expenses – the net proceeds of sale of Blackacre, $1 million less sheriff’s expenses, had been less than the total of the amounts that were paid on settlement to the mortgagees and the lessee.

MR STOLJAR:   Well, on our analysis the distribution would still proceed pursuant to the rules, namely, sheriff’s expenses in diminution of the judgment debt and then whatever is left.

GUMMOW J:   There may be a problem and the problem may be that, insofar as you get your hands on the 200,000, you are being enriched, in a sense, unjustly because you are only able to do that because the mortgages and the lease had been got rid of and they were indubitably anterior registered interests to which you would otherwise be subject.  They would still be on the register.

MR STOLJAR:   Yes.

GUMMOW J:   And you are being unjustly enriched at the expense of Mr Lindsay’s client.

MR STOLJAR:   Well, we would say that if ‑ ‑ ‑

GUMMOW J:   How would that play out?

MR STOLJAR:   Well, we would say that when your Honour says “unjustly enriched”, the way that equity would normally intervene ‑ ‑ ‑

GUMMOW J:   You have the advantage of getting free of the mortgagee and the lessee without having paid anything to get rid of them.

MR STOLJAR:   Yes.

HAYNE J:   As the result of a transaction improvident in the hands of the purchaser on one point of view.

CALLINAN J:   Priority over the registered interest.

MR STOLJAR:   Well, the intervention of equity in the circumstance that your Honour is putting to me is normally by way of subrogation to the interest of the mortgagee.  We would say that whether or not that would be available is simply not a matter that has been articulated to date and the evidence and the necessary findings in order to resolve that argument one way or the other are not before this Court.

GUMMOW J:   No, but it may get swept up in this undertaking as to damages, you see.

MR STOLJAR:   Yes.

CALLINAN J:   Exactly, which I have just been looking at, which was fashioned in a particular way entitling the applicants to claim the amount of the outstanding debt without having to demonstrate in a possibly contested hearing that absent the injunction they would have been able to sell the property and obtain the benefit of the proceeds of sale.  The benefit of the proceeds of sale would have to be the benefit of the net proceeds after the money owing to other registered holders had been paid.  You would have to read that into it, would you not?

MR STOLJAR:   Yes.

GLEESON CJ:   But you are assuming a sale with no other registered holders.

MR STOLJAR:   No, but even if, your Honour, whether by way of subrogation or unjust enrichment or in some other way the moneys had been payable to the mortgagees, that would still have left the issue of the arrangements as between the judgment debtor and the lessee and it would still have left the – perhaps I will go back one step. 

GUMMOW J:   All I am putting to you is you may be receiving money to the use of Mr Lindsay.

MR STOLJAR:   On the undertaking.

GUMMOW J:   No, these proceeds of sale received by you may nevertheless have to be to his use to allow for this equity involved in this enrichment question.  I am not indulging in trendy Canadian language.

GLEESON CJ:   It is being put to you that this result is unconscientious.

HAYNE J:   If we here insert the word “therefore”, QED.

GUMMOW J:   It can be done in quite orthodox reasoning and I think you have to grapple with it.

MR STOLJAR:   We would say that even if – which is not conceded – can I start this way.  The first question is what would have been achieved on a sheriff’s sale in February 2005.

GLEESON CJ:   There is an anterior question to that:  what would the sheriff have sold?

MR STOLJAR:   Yes, but those questions would need to be debated in the inquiries for damages because there may be questions about what value of the land would have been achieved on the sheriff’s sale.  If it might have been possible to achieve a better price through wider advertising or in other ways, then many of these problems are resolved, so that is the first point and those questions simply have not been tested.

The next question is, even if one were to assume that the maximum purchase price that could have been achieved was $1 million and even if one were to assume against me, for the sake of this assumption, or that my friends were subrogated to the position of the mortgagees, the amount distributed to the mortgagees only totalled, again on the assumption that the letter that I took your Honours to is accurate, roughly $750,000-odd, that would then leave the balance of moneys flowing were paid by the purchaser available for distribution.

GLEESON CJ:   No, it was the amount paid to the lessee.

MR STOLJAR:   That arrangement was one that ‑ ‑ ‑

GLEESON CJ:   This is a farm and you paid out the farmer, or the vendor paid out the farmer in order to give vacant possession on completion.

MR STOLJAR:   Yes, but your Honour, an incoming purchaser may wish to have a lessee in place depending on the intent of the purchaser.  For example, if in this particular case my friends wished to divide the land because there were four incoming purchasers and they separated it into two parts so they had to get rid of the lease, to put it roughly, but another incoming purchaser may have a very different view.  They may wish to have there on the premises the security of the premises being maintained and rent coming in.

GLEESON CJ:   This is a puzzle.  Because of completion and the vacating of the land by the farmer before the sheriff’s sale, how is it possible that the incoming purchaser might want to have the benefit of having a lessee there?  The lessee had gone and been paid to go.

MR STOLJAR:   Well, in that circumstance the question may be whether an incoming purchaser not wishing to divide the land what they may have been prepared to pay for it, but perhaps the point is this, your Honour, that your Honour is assuming that the payment to the lessee is a benefit for which my clients would be held to account in equity.  What we say is ultimately it was an arrangement entered into as between judgment debtor and lessee for the benefit of the particular incoming purchasers.

GLEESON CJ:   Is this a convenient time, Mr Stoljar, to adjourn?

MR STOLJAR:   Yes, your Honour.

GLEESON CJ:   We will resume at 2.00 pm.

AT 12.58 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.03 PM:

GLEESON CJ:   Yes, Mr Stoljar.

MR STOLJAR:   Your Honour asked at the outset about the decision and orders of Justice Campbell in the Supreme Court.  We have copies of his Honour’s judgment which I can make available.

GLEESON CJ:   Thank you.

MR STOLJAR:   At this stage we are making inquiries but do not have copies of the orders which Justice Campbell made and there is a slight further complication in that it appears that he extended an interlocutory regime put in place by Justice Hamilton the week before when sitting as a duty judge.  If convenient to your Honours, the course that I propose is that we will make investigations of the court file, identify precisely what orders were made and then in consultation with my friend, and with his agreement, forward them to the Court within, say, seven days.

GLEESON CJ:   Thank you, Mr Stoljar.

MR STOLJAR:   If I could hand up five copies of Justice Campbell’s.  Could I come back to the issue of the worth of the writ that we were dealing with before lunch and can I approach it in this way.  There are two distinct factual possibilities and I will deal with them separately.  The first is that, if one contemplates this situation, that my friends had conducted a search of the register close to 2.00 pm, observed the writ having been recorded against title and then declined to complete, in that event a number of things would have happened.

Firstly, obviously, they would not have handed over the remaining $900,000.  Secondly, the deposit moneys would not have been, as we apprehend it, released to the vendor because completion would not have taken place and so would not have been available pursuant to the charging order.

In that contemplated scenario in due course a sale would have taken place by the sheriff and all encumbrances would have remained on title.  However, the question then is what might a purchaser have been prepared to pay at such an auction?  There is not a great deal of evidence of this but there is at least some evidence in the appeal books suggesting that there was another purchaser who was prepared to pay a higher price than the purchasers, the first to fourth respondents, paid for the land.

If I could take your Honours to page 200, at line 42 of the appeal book, your Honours will see that in a letter from my instructing solicitors to the purchasers’ previous solicitors it is asserted at about line 44:

In particular, Willmott Forests had agreed to pay $1,000,000 for the land in addition to a payment of $50,000 to Grassfarms for surrender of the lease.

Just so that is not being taken out of context, that is in relation to – if your Honours go back to the beginning of the paragraph:

assertion concerning payment of full market value -

That evidence is, to some extent, supported by evidence from Ms Gill at appeal book 176, line 30, where Ms Gill deposes at about line 25 that:

At about 4.00 pm on 15 July 2005 –

that is, shortly prior to exchange –

I received a telephone call from the solicitor for the vendor, Ms Angela Harvey . . . 

She said:

“I have received your couriered contract and deposit but I have some bad news, the vendor has received an offer from Wilmotts for a further $50,000 and unless your clients can match it, the vendor will sell to Wilmotts”.

I said:

“The vendor has promised my clients that they could buy the property for $1 million.”

She said:

“If your clients want to purchase, they will have to meet Wilmotts offer” -

Then Ms Gill deposes to some conversation that she had with her clients and then she deposes on page 177 that she telephoned Ms Harvey back and said her clients were “unable to increase their offer” and she was at that stage “sure that the matter would not proceed” and then she says:

Ms Harvey called me back and we had a conversation to the following effect:

She said:

“The vendor has decided to accept your client’s offer” -

We do not know why the vendor agreed to accept the lower offer but that is what in due course occurred.

Had a sale by the sheriff proceeded then, it may be inferred – though this would need to be the subject of evidence – that Willmott Forests would have been still prepared to pay $1,050,000.  It may even be that advertising of the sale would have attracted some other persons interested in acquiring the land, and they could have done – and that might have achieved a higher sale price.  That would need to be the subject of evidence, but that would have procured on any view a situation in which all of the encumbrances on title which would have remained because they were not discharged, were paid out and would have left available to the judgment creditors the 50,000 additional moneys that Willmott Forests were prepared to pay plus the approximately 80,000‑odd that became available pursuant to payment of the deposit.  So we would say viewed that way the writ cannot be said to have been worthless.  That is the first scenario.

The second scenario is, as it were, what in fact happened.  The incoming purchasers did not effect a search of the register and paid out moneys to the judgment or complete it.  Now, in that circumstance, the next question is, as your Honour Justice Gummow put to me earlier, whether the judgment creditor’s conscience might be affected in some way so as to require it to disgorge moneys commensurate with the benefit it received by reason of the discharge of the various securities.

We would say that findings as to whether or not the judgment creditor’s conscience is affected in that way would turn on evidence and factual findings that are simply not present or before the Court at the moment and are matters that would need to be explored.

CALLINAN J:   As to what?  Factual findings, for example?  What factual findings will affect that?

MR STOLJAR:   Each interest would need to be considered separately, your Honour, and factual ‑ ‑ ‑

CALLINAN J:   They are on the title.  The only question would be whether they were bona fide paid out.  By that I mean whatever was owing to the mortgagees was paid and no more than that and that a fair price was paid for the surrender.  It is very simple, is it not?  The only thing that there would need to be any inquiry about was how much was owing under the mortgages and what was a fair thing in relation to the surrender, what was the surrender value of the lease.

MR STOLJAR:   That is so, your Honour, in respect of mortgages and I would not wish to say that there would need to be a detailed factual inquiry there.

CALLINAN J:   There would be no inquiry at all, would there, except as to the actual amount owing?

MR STOLJAR:   Quantum, yes, but in respect of the caveats, there may be issues about precisely what the interest said to be caveated was and how much was owing in respect of that.  That was a proportion of the purchase moneys were applied in that way and in respect of the lease, your Honour has said that there would need to be a question as to what is a fair ‑ ‑ ‑

CALLINAN J:   Would not the first inquiry be, with respect to the caveats, whether, in fact, they were in respect of registrable interests and then, if the interests were registrable, the value of them?

MR STOLJAR:   Yes.

CALLINAN J:   I take it under the New South Wales legislation, a caveator has to make an application to the court to vindicate the caveat or does the caveatee have to apply for its removal?

MR STOLJAR:   A person wishing to, in the usual course, register an interest inconsistent with the caveat serves a lapsing notice and then the caveator has, I think, 21 days within which to procure an order from the court extending the life of the caveat.  My friend reminds me that there can also be, in appropriate circumstances, an application to the court direct. 

CALLINAN J:   Application which?

MR STOLJAR:   An application to the court directly by a person wishing to challenge the caveat in circumstances ‑ ‑ ‑

GLEESON CJ:   An application for removal of the caveat.

MR STOLJAR:   Yes, in circumstances of urgency that might well be the course adopted but the practical course usually adopted is the service of a lapsing notice.  So that factual inquiry would need to be undertaken.  A factual inquiry as to the surrender of the lease and the appropriate value would need to be undertaken and the interrelationship between that surrender and the value of the land.  But even if everything went against my clients on all those issues, your Honour, at the end of the day there would still be a higher offer out there, it would appear, of $1,050,000, which would represent some value to the writ.

CALLINAN J:   There is quite a lot of authority that says an offer does not provide – it is only completed transactions or in the case of the actual property itself that the offer was bona fide and that the person making it was capable of completing.

MR STOLJAR:   Yes, there is no doubt about that, your Honour, but I am saying that that inquiry would need to be undertaken or need to be established on evidence that Willmott Forests was prepared to ‑ ‑ ‑

CALLINAN J:   On any view, it is a pretty skinny margin, is it not, 5 per cent of the purchase price?  It would be hard to say that is an under value, would it not, 105th of what you say it is worth?

MR STOLJAR:   But the proposition that my friend has put is that the writ is worthless and my submission is that even making every losing assumption against myself, it is still worth, on the limited evidence admittedly presently available, some $50,000 which represents a third of the value of the writ.

CALLINAN J:   And a lot of costs.

MR STOLJAR:   Well, yes, but I am assuming the worst, your Honour.  I am assuming that we are unsuccessful on all those points.  I would not be so pessimistic on an inquiry as to damages, but I am just trying to, for present purposes, almost like an application for summary judgment, as it were, assume my friend’s case against me and then look at what the outcome is and then ask whether it is still a valuable exercise to go to an inquiry.  In my submission, it is.  Unless there was anything further, those are my submissions.

CRENNAN J:   Mr Stoljar, there is something I wanted to raise with you.  I think I am right in saying that Justice Ipp said there was nothing in the second reading speech to suggest the amendments or the scheme was intended to preclude an unregistered interest holder from asserting their interest and I think the Minister, in fact, contemplated that in certain circumstances an unregistered holder of an interest could either stop the writ being recorded or, if that was not achieved, nevertheless, any sale under a writ would be postponed to the interests of the unregistered person.

MR STOLJAR:   Yes.

CRENNAN J:   This seemed to me to raise this possibility, that the real point of the scheme, the amendments, was to ensure that it was too late for an unregistered holder of an interest to raise that interest once there was the registration of a transfer in respect of a sale from the sheriff, but before that period, whether it was by way of caveat or otherwise, there was a period of time during which an unregistered holder of an interest could raise that interest, just as has been done on this occasion.

MR STOLJAR:   Prior to the recording of the writ?

CRENNAN J:   Prior or after.

MR STOLJAR:   After, we would say no because after, the operation of the scheme, we say, brings the protected period into place.

CRENNAN J:   But the protective period does not preclude the interest holder raising that interest in the context of seeking an injunction from the Court.

MR STOLJAR:   Not in terms, your Honour, but ‑ ‑ ‑

CRENNAN J:   It just postpones the registration of that interest.

MR STOLJAR:   It does, but our submission is that, although the relevant sections of the Act do not in their terms preclude the holder of an unregistered interest protecting that interest by way of injunction, as was happening in the present case, considered in its whole and in context, we would say that result follows, to adopt Justice Basten’s phrase, inexorably from the language of the statute.  To conclude otherwise, as again Justice Basten said, subverts the operation of the statute and fails ‑ ‑ ‑

GUMMOW J:   That assumes we know what the operation of the statute is and that is what is being debated.

MR STOLJAR:   It subverts it in the sense that the statute seems to contemplate that unregistered interests firstly are not registered but, secondly, wait their turn until the expiry of the protected period after which they can be registered.

GLEESON CJ:   The protected period is designed to protect whom against what?

MR STOLJAR:   We would say that it protects the writ and those who stand behind it, including judgment creditors and purchasers from the sheriff, and it protects them from the registration of any interest adverse to the writ.

GLEESON CJ:   A possible point of view is that it is designed to protect the purchaser from the sheriff against a surprise.  If that is right, it is not inconsistent with that scheme, is it, to enable the holder of an unregistered interest and the sheriff or the judgment creditors to fight out issues such as arose in the present case because no purchaser has come on the scene.  Nobody yet requires protection.

MR STOLJAR:   That is so, your Honour, but the reason a purchaser came on the scene is because of the injunctive remedy that was imposed.  There is nothing in the statute that suggests that different periods of time would be taken into account.  For example, there is nothing in the statute that would suggest that the situation changes before and after, for example, a sale is appointed or a purchaser actually appears.  The only relevant point of time is when the purchaser has acquired their transfer from the sheriff and lodges it for registration.

GLEESON CJ:   But I understand part of the argument against you to be that the scheme, the mischief – the purpose of this legislation as reflected in the Minister’s speech is not to improve the position of unsecured judgment creditors, vis-à-vis, for example, purchasers of real estate under contracts that have been entered into.  The purpose is to protect purchasers from the sheriff and thereby by giving that protection enable judgment creditors to have the benefit of land being sold for its full value on sheriff’s sales.

MR STOLJAR:   Yes.

GLEESON CJ:   So that the object of the legislation is to protect purchasers of sheriff’s sales from surprise not to alter the relationship of entitlements that exists between the holders of unregistered interests and unsecured creditors.

MR STOLJAR:   But if it does not alter, only by the consequences of recording the writ, the underlying rights, then the incoming purchaser may be affected by surprise in the sense that the incoming purchaser or the judgment creditor may find themselves embroiled in the kind of litigation that is currently before this Court.

GLEESON CJ:   Yes, but there is no purchaser at risk in this litigation.

MR STOLJAR:   No, your Honour, but that is because the court stepped in before.

CALLINAN J:   There is more to the whole scheme than that, Mr Stoljar, is there not?  The whole purpose of the Torrens system is to give you indefeasibility, to give you really a supreme right, as it were, of any interest

that you can get on the title.  Everything in the Act is designed to encourage you, indeed to insist upon, timely registration.  If you get on the title you get all sorts of benefits, including, in particular, indefeasibility.  If you do not get on the title when you can or protect your right to get on the title by a caveat then you suffer the disadvantages.  It is just the other side of the indefeasibility advantage.

MR STOLJAR:   Yes.

HAYNE J:   The Minister expressed the purpose as being to provide that a purchaser at a sale in execution takes the estate or interest then appearing upon the register.  The purpose is hinged about the register and the intervention that was obtained in this matter was cast in personam, was not concerned with what appeared on the register, what should appear on the register directed otherwise.

MR STOLJAR:   Yes.  We would say, as your Honour says, that the incoming purchaser from the sheriff acquires title appearing on the register.  The effect of recording of the writ is to create a protected period of six months within which that can occur.  Any defects at law in the title of the registered proprietor are irrelevant to that statutory consequence.  Unless there is anything further, your Honours, those are my submissions.

GLEESON CJ:   Thank you, Mr Stoljar.  We will reserve our decision in this matter and we will adjourn until 10.15 on Tuesday, 6 February 2007 in Canberra.

AT 2.24 PM THE MATTER WAS ADJOURNED