Dixon v Barton - [2011] NSWSC 1525

Supreme Court

New South Wales

Medium Neutral Citation: Dixon & ors v Barton & ors [2011] NSWSC 1525
Hearing dates: 17 November 2011
Decision date: 12 December 2011
Jurisdiction: Equity Division
Before: Ward J
Decision:
First defendant obliged to re-execute mortgages discharged by mistake of plaintiffs' solicitor. Orders made for restoration of plaintiffs' position as holders of registered mortgage security vis a vis second to fourth defendants as holders of unregistered equitable mortgages.

Catchwords: TORRENS SYSTEM - indefeasibility of title - mortgages - discharge in approved form - registration of discharge by mistake of mortgagees' solicitor - whether mistaken discharge falls within personal equity exception to indefeasibility of title - consideration of unconscionability - whether mortgagor has been unjustly enriched by mistaken discharge and restitution should be granted to mortgagees - HELD - mortgages mistakenly discharged in circumstances giving rise to personal equity exception to indefeasibility of title - mortgagees entitled to be restored to their position prior to discharge - unconscionable for mortgagor to benefit from mistaken discharge - CONTRACT - construction - whether terms of deed entered into between mortgagees and mortgagor released mortgagees from prior security interests and any covenants contained in mortgage agreements - HELD - terms of deed did not operate to release mortgagor from covenants contained in mortgage agreements - REAL PROPERTY - whether, if deed operates to release prior security interests, equitable mortgage arises due to permitted retention of certificate of title by mortgagees - HELD - had deed operated to release prior security interests, equitable mortgage arose by reason of implicit acknowledgement that certificate of title and discharge of mortgage not to be delivered until payment of debt under terms of deed - SUBROGATION - if deed did operate to release earlier debts and security interests, whether mortgagees can be subrogated to the rights of first and second mortgagees under discharged mortgages due to notional payment out of earlier debt - HELD - no entitlement to subrogation - LIENS - whether mortgagees have possessory lien over certificate of title - HELD - no possessory lien in circumstances where equitable mortgage by retention of certificate of title established - SPECIFIC PERFORMANCE - whether mortgagor should be obliged specifically to perform its payment obligations under deed - HELD - specific performance not appropriate as damages an adequate remedy
Legislation Cited: Contracts Review Act 1980 (NSW)
Conveyancing Act 1919 (NSW)
Corporations Act 2001 (Cth)
Duties Act 1997 (NSW)
Farm Debt Mediation Act 1994 (NSW)
Real Property Act 1900 (NSW)
Cases Cited: Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99
Bank of New South Wales v O'Connor (1889) 14 AC 273
Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221; [1998] 1 All ER 737
Barry v Heider [1914] HCA 79; (1914) 19 CLR 197
Barton v Atlantic 3 Financial (Aust) Pty Limited (deregistered) & Anor [2010] QCA 223
Barton v Atlantic 3 Financial (Aust) Pty Ltd (in liq) [2004] QSC 376; (2004) 212 ALR 348
Bellissimo v JCL Investments Pty Limited [2009] NSWSC 1260
Black v S Freedman & Company [1910] HCA 58; (1910) 12 CLR 105
Boral Recycling Pty Ltd v Wake [2009] NSWSC 712
Boscawen and others v Bajwa and another; Abbey National plc v Boscawen and others [1995] 4 All ER 769
Brunker v Perpetual Trustee Company Ltd (1937) 57 CLR 555
Burston Finance Ltd v Speirway Ltd [1974] 3 All ER 735
CH Giles & Company Ltd v Morris [1972] 1 All ER 960; 1 WLR 307
Challenger Managed Investments Ltd v Direct Money Corporation Pty Ltd [2003] NSWSC 1072; (2003) 12 BPR 22,257
Cheltenham & Gloucester Plc v Appleyard [2004] EWCA Civ 291
Citicorp Australia Ltd v Official Trustee in Bankruptcy (1996) 71 FCR 550; 141 ALR 667
Clark v Raymor (Brisbane) Pty Ltd [1982] Qd R 790
Cochrane v Cochrane (1985) 3 NSWLR 403
Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1
Cowper v Green (1841) 7 M & W 633; 151 ER 920
Dashwood v Dashwood (1927) 71 Sol Jo 911
Diamond Hill Mining Pty Limited v Huang Jin Mining Pty Limited [2011] VSC 288; (2011) 84 ACSR 616
Double Bay Newspapers Pty Limited v AW Holdings Pty Limited (1996) 42 NSWLR 409
Duke Finance Ltd (in liq) v Commonwealth Bank of Australia (1990) 22 NSWLR 236
Elder's Trustee and Executor Company Limited v Bagot's Executor and Trustee Company Limited [1964] SASR 306
Elderly Citizens Homes of South Australia Inc v Balnaves (1998) 72 SASR 210
Ex parte Langston (1810) 17 Ves 227; 34 ER 88
Farah Constructions Pty Limited v Say-Dee Pty Limited [2007] HCA 22; (2007) 230 CLR 89
FNCB-Waltons Finance Limited v Crest Realty Pty Limited (1977) 10 NSWLR 621
GE Commercial Corporation (Australia) Pty Limited v L&B Enterprises Pty Limited [2009] NSWSC 770
Ghana Commercial Bank v Chandiram [1960] AC 732
Grundy v Ley [1984] 2 NSWLR 467
Gye v McIntyre [1991] HCA 60; (1991) 171 CLR 609
Hammonds v Barclay (1802) 2 East 227
Heid v Reliance Finance Corporation Pty Limited [1983] HCA 30; (1983) 154 CLR 326
Heperu Pty Ltd v Belle [2009] NSWCA 252; (2009) 76 NSWLR 230
Hewett v Court [1983] HCA 7; (1983) 149 CLR 639
Lapin v Abigail (1930) 44 CLR 166
Latec Investments Ltd v Hotel Terrigal Pty Limited (in liq) (1965) 113 CLR 265
Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548; [1992] 4 All ER 512
Majeau Carrying Company Pty Ltd v Coastal Rutile Ltd (1973) 129 CLR 48
Mercantile Credits Ltd v Jarden Morgan Australia Ltd [1991] 1 Qd R 407
Minister for Education and Training v Canham [2004] NSWSC 274; (2004) NSW ConvR 56-080
Moffett v Dillon [1999] 2 VR 480
MPS Constructions Pty Ltd (in liq) v Rural Bank of New South Wales (1980) 4 ACLR 835
Nathanial Kelburn Dunbar Barton v Atlantic 3 Financial (Australia) Pty Limited & ors (unreported 28 October 2009)
Nearhaze Pty Ltd v The Official Trustee [1999] NSWSC 959
Paul v Speirway Ltd [1976] 2 All ER 587
PC Developments Pty Ltd v Revell (1991) 22 NSWLR 615
Performance Capital Mortgage Pty Ltd v Motive Finance & Leasing Pty Limited [2010] NSWSC 429
Peters v Lithgow Forge Pty Limited & Ors [2010] NSWSC 283
Pratt v Vizard (1833) 5 B & Ad 808; 110 ER 989
Protean Enterprises (Newmarket) Pty Ltd v Randall [1975] VR 327
Queensland Premier Mines Pty Ltd v French [2007] HCA 53; (2007) 235 CLR 81
Re St George Bank - A Division of Westpac Banking Corporation [2011] NSWSC 730
Registrar General v Gill (unreported, NSWCA, 16 August 1994)
Saffron Sun Pty Ltd v Perma-Fit Finance Pty Ltd (in liq) [2005] NSWSC 1317; (2005) 65 NSWLR 603
Scallan v Registrar-General (1988) 12 NSWLR 514
Schultz v Corwill Properties Pty Ltd (1969) 90 WN (NSW) 529
Shawyer v Amberday Pty Limited (In Liq) [2001] NSWSC 399
Shiloh Spinners Ltd v Harding [1973] AC 691
State Bank of New South Wales v Berowra Waters Holdings Pty Limited & Ors (1986) 4 NSWLR 398
State Bank of New South Wales v Geeport Developments Ltd (1991) 5 BPR 11,947
State Bank of South Australia v Rothschild Australia Ltd (1990) 8 ACLC 925
Stein v Blake [1996] AC 243; [1995] 2 All ER 961
Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489
Swiss Bank Corporation v Lloyds Bank Limited & Ors [1982] AC 584
Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422
Tresize v Bilato Nominees Pty Ltd & Northern Gold NL (1986) 83 FLR 44
Turner v Bladin (1951) 82 CLR 463
Tutt v Doyle (1997) 42 NSWLR 10
UTC Ltd (in liq) v NZI Securities Australia Ltd (1991) 4 WAR 349
Re Wallis & Simmonds (Builders) Ltd [1974] 1 All ER 561; [1974] 1 WLR 391
Webster v Southwark London Borough Council [1983] QB 698; 2 WLR 217
Whiteley v Delaney [1914] AC 132
Wilkie v Gordian Runoff Limited [2005] HCA 17; (2005) 221 CLR 522
Young v Matthew Hall Mechanical & Electrical Engineers Pty Ltd (1988) 13 ACLR 399
Texts Cited: Butt, Land Law (3rd edn)
Carter, Carter on Contract (online edn)
Halsbury's Laws of Australia (online edn)
Meagher, Gummow & Lehane, Equity: Doctrines and Remedies (4th edn)
Morgan et al, Fisher & Lightwood's Law of Mortgage (2nd Australian edn)
Young, Croft & Smith, On Equity (2009)
Category: Principal judgment
Parties: John Dixon as Trustee for the Seingensund Unit Trust, Yalbell Pty Ltd, Christopher Mark Hookham and Sharon Hookham as Trustees for the Kayak Superannuation Fund, Christopher Mark Hookham as Trustee of the Gilder Unit Trust, Peter Clark and Lyn Clark as Trustees for the Brigadoon Unit Trust, Penelope Wickham, Geoffrey Robert Chadwick and Heather Quenthlyn Chadwick, Laragh Investments Pty Ltd, James Shaw and Cynthia Fisher as Trustees of the Blunt Family Trust (First Plaintiffs)
Ian Richard Lewis and Moya Anne Lewis (Second Plaintiffs)
Nathanial Kelburn Dunbar Barton (First Defendant)
Roberts Fund Pty Ltd (Second Defendant)
Kerrie Lardner-Smith and Trent Lardner-Smith (Third Defendant)
Malcolm Nelson Johns as executor of the estate of the late Edith Pearl Welsh (Fourth Defendant)
Representation: Counsel
M Einfeld QC with J Horowitz (Plaintiffs)
N A Cotman SC with E Hyde (Defendants)
Solicitors
Osbornes Lawyers (Plaintiffs)
Malcolm Johns & Company (Defendants)

File Number(s): 11/353160

Judgment

HER HONOUR : Before me for hearing on 17 November 2011 was an application by the plaintiffs (two separate groups of investors) for relief following on from the discharge of mortgages in which they had earlier acquired an interest (by way of separate assignments of the respective mortgages). The mortgages secured loan advances (totalling some $420,000) made to the first defendant (Mr Barton) quite some time ago. The mortgages had been registered on the title of land owned by Mr Barton at Wellington, New South Wales. They were discharged following the lodgement (in the mistaken belief on the part of the plaintiffs' solicitor that this was required in advance of payment of an amount agreed between the parties to resolve their disputes Mr Barton) of executed discharges of mortgage in registrable form with the Land and Property Information office and the consequential registration of those forms.

The plaintiffs contend that (notwithstanding the registration of the respective Discharge of Mortgage forms) they retain an equitable mortgage interest in the said land and/or have a possessory lien over the certificate of title to the land. They seek relief, in essence, by way of the reinstatement of their first and second ranking security over the property (ahead of other equitable mortgages in respect of which caveats have been lodged on the title) as well as specific performance of the obligation of Mr Barton to pay the sum of $450,000 under the Settlement Deed dated 27 May 2011 by which he and the plaintiffs had settled earlier proceedings in this Court in relation to the plaintiffs' claim for moneys that had been secured by the respective mortgages.

The second to fourth defendants to these proceedings have each lodged one or more caveats on the title, claiming equitable interests in the Wellington property. Those equitable interests post-date the initial registration of the plaintiffs' mortgages on the title but pre-date the discharge of those mortgages. (I refer to those defendants as the 'mortgagee defendants' and to the plaintiffs as the 'Investors').

There is a lengthy and complicated history to the present dispute, as set out in the judgment in October 2009 of Macready AsJ ( Nathanial Kelburn Dunbar Barton v Atlantic 3 Financial (Australia) Pty Limited & ors , unreported 28 October 2009) in proceedings which had been commenced in this court in 2000. I will canvass that history only as necessary for the purposes of the present proceedings.

The defendants deny that there is an entitlement to any of the relief sought by the Investors. Mr Barton does not deny that he owes the money for which provision was made in the 2011 Deed ($450,000), he having failed to pay that sum on the Settlement Date as required under the 2011 Deed, but he does deny that this debt is secured. A consent judgment has now been signed by the parties in relation to that debt (although only recently and I do not understand it to have been filed in this Court; hence no judgment as such has been entered). It is contended for Mr Barton that there is no call for an order for specific performance of the payment obligation under the Deed; rather, that it is open to the Investors to enforce the consent judgment as judgment creditors in the ordinary course (though if unsecured they will rank after the mortgagee defendants and pari passu with other unsecured creditors).

In summary, the defendants contend that the 2011 Deed released all claims against Mr Barton, including claims to or debts in respect of any money owing under the mortgages, and all covenants contained therein, preserving only the right to payment under the 2011 Deed itself and that, with effect from the execution of the 2011 Deed, the Investors ceased to have any entitlement to assert an interest (equitable or otherwise) in the Wellington land. On the basis that the mortgages thus secured no debt when the Discharges of Mortgage were lodged and registered, it is said that there was no impediment to the discharge of the mortgages (and it is not unconscionable for Mr Barton to assert a title unencumbered by those mortgages).

The defendants contend that the registration of the Discharges of Mortgage operated to discharge the mortgages both at law and in equity. It is submitted that the discharges of mortgage were not mistaken (on the basis that they were intentionally lodged, though due to a misunderstanding as to the operation of the 2011 Deed); that the purported reliance by the Investors on the terms of the mortgage(s) is reliance on an agreement or covenant itself released by the 2011 Deed; that possession of the certificate of title may create an equitable charge but, if so, it post-dates the other mortgagee defendants' interests; that in any event any equitable interest created by the 2011 Deed is not a caveatable interest by reason of the 2011 Deed not having been stamped; that no debt becomes due and owing for the purposes of any claimed security until the judgment debt comes into existence (or until the so-called "default" debt arises after the time due for payment under the 2011 Deed); and that any interest of the Investors thus post-dates the interests of the mortgagee defendants.

The matter came before the duty judge on 11 November 2011 on an interlocutory application by the Investors for an extension of caveats that they had lodged on the title to the Wellington property (after Mr Barton failed to honour his obligations to pay the sum of $450,000 on the Settlement Date) claiming an interest in the property as equitable mortgagees. The matter was on that day fixed for an urgent final hearing, which took place before me on 17 November 2011. At the conclusion of that hearing, I extended the operation of the caveats until further order pending the delivery of my judgment. I now publish my reasons for judgment.

Issues

The following issues emerged during the course of argument:

(i) Were the mortgages mistakenly discharged in circumstances which would fall within the personal equity exception to indefeasibility of title so as to warrant relief by way of reinstatement of the Investors' mortgage interests? (Related to this issue is the claim for restitution of the mortgages on the basis of unjust enrichment.)

(ii) On the proper construction of the release contained in clause 6.3 of the 2011 Deed, did the Investors, upon execution of that deed, release their security interest in the Wellington land and any covenants under the mortgages or underlying loans so as to preclude any reliance on those agreements as giving rise to an equitable mortgage?

(iii) If the 2011 Deed did operate to release the Investors' earlier claim (or debt), as well as contractual rights under the underlying Deeds of Loan and mortgages, are the Investors nevertheless entitled to be subrogated to the rights of first and second mortgagees under the discharged mortgages by reference to a notional payment out of the earlier secured debt?

(iv) If the discharge of the mortgages operated to release any equitable mortgage arising under the provisions of the first Deed of Loan, was an equitable mortgage created by retention of the certificate of title giving Investors priority over unsecured creditors?

(v) Do the Investors have a possessory lien over the certificate of title (so as to permit them to resist a call for its production by Mr Barton)?

(vi) Should there be an order for specific performance by Mr Barton of his obligation to make payment under the 2011 Deed?

Summary

For the reasons set out below, I am of the view that:

(i) the mortgages were discharged in circumstances giving rise to the personal equity exception to indefeasibility of title and relief should be granted to restore the Investors to the position in which they were prior to the discharges of mortgage being registered (on the basis that Mr Barton would otherwise be unjustly enriched and that it is unconscionable for him in the circumstances to assert as against the Investors an unencumbered title);

(ii) the release contained in clause 6.3 of the 2011 Deed did not, on its proper construction, operate to release Mr Barton from the covenants contained in the respective mortgages that were not required to be discharged until after payment of the sum due on the Settlement Date;

(iii) on the findings above, this question does not arise; had it arisen, I would have held that the Investors were not entitled to be subrogated to rights under the mortgages that were discharged by mistake;

(iv) again, this question does not arise in light of the earlier findings; had it arisen I would have held that even if the 2011 Deed operated to release the covenants contained in the existing mortgages and Deeds of Loan, fresh equitable mortgages were created by the acknowledgement (implicit in the 2011 Deed) that the Investors could retain the certificate of title to the Wellington Land and were not obliged to provide discharges of mortgage until settlement and conditional upon payment of the settlement sum; those rights, having arisen in the circumstances of the 2011 Deed, post-date the earlier equitable mortgages of the mortgagee defendants and as unregistered interests would thus rank in priority after them but ahead of unsecured creditors;

(v) again this question does not arise; had it arisen I would have found that there was no possessory lien in circumstances where an equitable mortgage by permitted retention of title deeds had arisen; and

(vi) finally, I am not satisfied that there should be an order for specific performance of the obligation to pay the sum of $450,000.

Background Facts

The defendants do not take issue with much of the factual background asserted in the Points of Claim served by the Investors in these proceedings (accepting the matters stated in paragraphs [1] to [9], [11], [13], [14] to 117(111)], [17(v)], [19] to [24], [26] and [27]), though contending that those facts need to be considered in conjunction with other matters (and, in particular, the judgments of Moynihan J in Barton v Atlantic 3 Financial (Australia) Pty Limited [2004] QSC 376 ; (2004) 212 ALR 348; of Macready AJ in the 2000 proceedings to which I have referred above; and of the Court of Appeal in the Supreme Court of Queensland in Barton v Atlantic 3 Financial (Aust) Pty Limited (deregistered) & Anor [2010] QCA 223).

As noted, Mr Barton is the registered proprietor of the Wellington property. As at 1999, the Wellington property was subject to a registered mortgage dated 9 January 1997 in favour of I & L Securities Pty Ltd (the first mortgage). That mortgage secured a loan in the amount of $200,000 under an agreement made by Deed of Loan of that date. The mortgage expressly incorporated the terms of the Deed of Loan, which was annexed thereto, and, relevantly, the terms of a registered Memorandum of Mortgage (X004943).

Under the registered Memorandum of Mortgage, the term "Moneys Hereby Secured" was defined in (i) as including, among other things:

(ii) all moneys owing or remaining unpaid to the Mortgagee in any manner or on any account whatsoever by the Mortgagor whether alone or jointly with any other person and whether as principal or surety;

...

(iv) all moneys and amounts which may become owing to or for which the Mortgagee may become liable by reason (wholly or partly) of past events involving the Mortgagor ... or which may reasonably foreseeably become owing on any account or in any manner whatsoever by reason of the relation of banker and customer or by operation of law or equity or otherwise by reason of anything done by the Mortgagee with the consent or at the express or implied request of the Mortgagor ; (my emphasis)

Pursuant to clause 11.1 of the registered Memorandum of Mortgage the mortgage was:

a continuing security and shall not be wholly or partially discharged (even if all of the Moneys hereby Secured that are presently owing are paid) as long as any of the Moneys Hereby Secured are owing, contingently owing or may, in the opinion of the Mortgagee, become owing and payable.

Clause 26.4 provided that the mortgage and the liability of the mortgagor thereunder were not affected or discharged by, inter alia, the mortgagee "failing or neglecting to recover any of the Moneys Hereby Secured by the realisation of any collateral or other security or otherwise" (26.4(b)); any other laches, acquiescence, delay, acts, omissions or mistakes on the part of the Mortgagee or any other person (26.4(c)); or "any other act, matter or thing which but for this provision might discharge the Mortgagor from his liabilities under this Mortgage" (26.4(f)).

It is not disputed that the sum advanced under the first Deed of Loan and secured by this mortgage remains outstanding.

The Investors are all of the persons and entities who invested money in an unregistered managed investment scheme (known as the Barton Scheme) which was managed by Atlantic 3 Financial (Aust) Pty Limited (to which I will refer as Atlantic Financial, to distinguish it from a later Atlantic entity).

In 1999, in consideration for monies advanced by Atlantic Financial to I & L Securities on Mr Barton's behalf, the I & L mortgage was transferred to Atlantic. Also in 1999, Mr Barton granted Atlantic Financial a second registered mortgage (dated 21 October 1999) over the Wellington property, to secure moneys advanced by Atlantic Financial to a company known as Loawave Pty Ltd pursuant to a Deed of Loan dated 20 September 1999 (to which Deed of Loan Mr Barton was a party in his capacity as third party mortgagor). That loan facility was for an amount up to $250,000. The mortgage incorporated the provisions of a different memorandum of mortgage from that to which the first mortgage was subject. This memorandum of mortgage did, however, include a clause (clause 10) which provided that the mortgagee shall, so long as any moneys remain owing on this security, have and retain possession of the certificate of title for the mortgaged land. Mr Barton guaranteed the liability of Loawave in relation to those advances.

On 29 November 2000, Mr Barton commenced proceedings in this Court (the 2000 proceedings) seeking relief against Atlantic Financial (and other entities) in respect of both mortgages, including orders that the registered mortgage over the Wellington property be set aside or varied and, further or in the alternative, for damages against Atlantic Financial and a declaration that the mortgages were unenforceable. The claims were made both under the Contracts Review Act 1980 (NSW) and the Farm Debt Mediation Act 1994 (NSW). In those proceedings, Atlantic Financial brought a cross-claim against Mr Barton seeking possession of the Wellington property and for the amount then said to be due under the mortgages ($460,052.86 inclusive of interest to 1 April 2002 on the first Deed of Loan and $165,083.49 on the second Deed of Loan). By Amended First Cross-Claim filed on 6 August 2002, Atlantic Financial sought judgment against Mr Barton in relation to the loans secured by the respective mortgages in amounts totalling some $580,052,86 plus interest.

On 21 May 2003, Mr Barton served an Offer of Compromise on Atlantic Financial in accordance with Part 22 of the then Supreme Court Rules. That offer (to compromise "this action" as against Atlantic Financial on payment by Mr Barton of the sum of $420,000, with consent to the dismissal of the proceedings as against Atlantic Financial on the basis that there be no order as to costs) was formally accepted by Atlantic Financial by Notice of Acceptance dated 6 June 2003.

(The application subsequently brought in September 2009 in this Court, which led to the judgment of Macready AsJ to which I have referred, was an application by the Investors seeking entry of judgment against Mr Barton in favour of the Investors in the sum of $420,000 (plus interest from 6 June 2003 at the rates set out in the applicable Court rules) on the basis that there was a concluded agreement to settle the matter in 2003 and that the order was necessary to enable the agreement to be perfected. I outline in due course the reasons for the unsuccessful outcome of that application.)

Resuming the chronology of events, on 25 November 2003 orders were made that Atlantic Financial be wound up and for the appointment of liquidators (though the operation of those orders was stayed until 2 January 2004). At [14] of Macready AsJ's judgment, his Honour notes that the winding up was because Atlantic Financial was running what transpired to be an unregistered investment scheme by lending money and taking security on behalf of the Investors. At this stage, Atlantic Financial had the benefit of the accepted offer of compromise but no moneys had yet been paid by Mr Barton in satisfaction of that agreement.

By Deed of Assignment of Remainder Schemes dated 9 January 2004, Atlantic Financial (as Court Appointed Liquidator of the Remainder Scheme identified in the Deed) assigned to Atlantic 3 Funds Management Pty Limited (the other Atlantic entity foreshadowed above, to which I will refer as Atlantic Funds) "all its right title and interest in the assets of the scheme specified in the Schedule". (The condition precedent to the operation of the Deed of Assignment was the making of an order by the Supreme Court of Queensland, which was in due course made, vacating earlier orders of that Court in relation to the Barton Scheme.) The Schedule to the Deed of Assignment (in which the assets of the scheme were said to be specified) listed the following under the heading "Securities": the two mortgages, "Right of action in [the 2000 proceedings]" and "The benefit of the Deed entered into between the assignor and Nathanial Barton in settlement of the above proceedings".

Senior Counsel for the defendants (Mr Cotman SC) takes issue with the description, in the Investors' submissions, of the subject matter of this assignment (and the later corresponding assignment by Atlantic Funds) as including the benefit of Atlantic Financial's settlement with Mr Barton), referring to what was said in [15], [18] and [19] of Macready AJ's judgment, in which his Honour noted that, while the 9 January 2004 deed included the assignment of the benefit of a deed entered into between Atlantic and Barton in settlement of the 2000 proceedings, this deed appeared not to exist. (The intent of the Deed of Assignment, nevertheless, appears clearly enough to have been to assign to the assignee the benefit of whatever settlement that had been reached with Mr Barton in the 2000 proceedings, namely that which was comprised by Mr Barton's acceptance of the offer of compromise.)

In that regard, in proceedings in the Supreme Court of Queensland in 2004 ( Barton v Atlantic 3 Financial (Aust) Pty Ltd (in liq) (2004) 212 ALR 348), on 3 November 2004 Moynihan J held that the first deed of assignment (from Atlantic Financial to Atlantic Funds) was, relevantly, effective only to assign to Atlantic Funds any balance due by Mr Barton after taking into account any amounts due from Atlantic Financial to Mr Barton and setting-off the amounts so due to Mr Barton against the amounts due by him in respect of the assigned choses in action. Thus, the relevant declaration ultimately made in those proceedings was:

(1) A declaration that the assignment, pursuant to a deed dated 9 January 2004, by [Atlantic Financial] to [Atlantic Funds] of [Atlantic Financial's] choses in action as regards [Mr Barton] was only effective to assign to [Atlantic Funds] any balance due by [Mr Barton] in respect of such choses in action after:

(a) the taking into account of the amount(s) due from [Atlantic Financial] to [Mr Barton], both in his own right and as assignee (the amount(s) so due including any amount(s) that may, in this proceeding, be determined as payable by [Atlantic Financial] to Mr Barton for damages, interest or costs); and

(b) the setting-off of the amount(s) so due from [Atlantic Financial] to Mr Barton against the amount(s) due by Mr Barton in respect of such choses in action.

Moynihan J explained the circumstances in which the set-off arose as follows (there referring to Atlantic Financial as A3 and Atlantic Funds as A3FM):

The plaintiff (Barton) owed a debt to the defendant (A3), but had cross-claims which could be used to reduce that liability. On 25 November 2003, A3 was ordered to be wound up under s 461(1)(k) of the Corporations Act 2001 (Cth) (the Act), but the commencement of the winding up was stayed until 12 January 2004. On 9 January 2004, A3 assigned to another company (A3FM) its choses in action as regards Barton (including the debt), leaving A3 with insufficient funds to meet Barton's cross-claims.

Barton applied to the Supreme Court of Queensland for a declaration that s 553C of the Act operated to apply a set off between the debt and cross-claims before the assignment to A3FM.

His Honour accepted that Atlantic Funds was the assignee of rights that were the subject of the 2003 compromise but that the set-off claimed by Mr Barton as arising under s 553C operated automatically at the time the winding up was ordered, and therefore before the assignment to Atlantic Funds (applying Gye v McIntyre [1991] HCA 60; (1991) 171 CLR 609; Stein v Blake [1996] AC 243; [1995] 2 All ER 961; and Citicorp Australia Ltd v Official Trustee in Bankruptcy (1996) 71 FCR 550; 141 ALR 667).

On 4 November 2007, Atlantic Financial was deregistered. It was thus no longer in existence as at 18 May 2009 when Atlantic Funds entered into a deed of assignment to assign to the Investors the mortgages and other rights the subject of the earlier assignment by Atlantic Financial to it. (I note that the assets described in the schedule to that deed include "The benefit of any agreement reached between Atlantic and Barton in settlement of the [2000] proceedings", not referring in this instance to any deed as such.) However, as noted at [19] of Macready AsJ's judgment, Atlantic Financial had failed, before its deregistration, to transfer the legal interest in the mortgages over the Wellington property to Atlantic Funds.

As a result, an application was required in due course to be made to ASIC under s 601AF of the Corporations Act 2001 (Cth) for it to execute the relevant Transfers of Mortgage in order to transfer legal title under the respective mortgages to Atlantic Funds (and thus permit the further transfer of the legal interest in the mortgages to the Investors pursuant to the 2009 assignment). This, ASIC was not initially persuaded to do.

However, the Investors were, from the date of the May 2009 deed of assignment (as they still remain), in possession of the original certificate of title to the Wellington land even though the mortgages remained registered on the title in the name of Atlantic Funds (until the events in 2011 to which I will shortly come).

On 4 September 2009, the Investors were joined (on their own motion) as defendants to the 2000 proceedings. They sought the entry of judgment against Mr Barton in the sum of $420,000 plus interest from 5 July 2003 and otherwise the dismissal of the proceedings. On 28 October 2009, Macready AsJ refused the application for consent judgment. His Honour noted the finding by Moynihan J that what had been assigned to Atlantic Funds in the first deed of assignment was any balance due by Mr Barton after taking into account, and setting off, claims in the Queensland proceedings and hence that the question whether there was anything to set-off (against the $420,000 figure the subject of the accepted offer of compromise) depended on the outcome of the Queensland proceedings. His Honour accepted that this Court had no jurisdiction within the application before him to settle that net balance (and thus that it was necessary for the Queensland proceedings to be reinstated and prosecuted to finality). (This may be of some significance in the present context, as Mr Cotman notes that there was no concluded 'debt' as such in relation to the $420,000 but, rather, a sum against which an off-setting claim had yet to be determined, and points to the giving up by Mr Barton in the Settlement Deed of May 2011 of the Queensland claim as valuable consideration for what he contends to have been the giving up by the Investors of the security they held over the Wellington property.)

In the course of 2010-2011, various caveats were lodged on the title to the Wellington property by the respective mortgagee defendants (each claiming an interest in the land pursuant to equitable mortgages granted on various occasions from as early as May 2010 to as late as April 2011). The second defendant lodged two caveats (AF522180 and AF722079), which were recorded on the title on 28 May 2010 and 30 August 2010 respectively, claiming an interest in the land pursuant to equitable mortgages granted in May and August 2010; the third defendant lodged a caveat (AG252837), recorded on title on 24 May 2011, claiming an interest in the land pursuant to an equitable mortgage granted in April 2011; and the fourth defendant lodged a caveat (AG435707) recorded on the title on 16 August 2011, claiming an interest in the land pursuant to equitable mortgages granted in November and December 2010. Only one of those caveats was lodged after the discharge of the Investors' mortgages (and even then it was in respect of an interest that had apparently arisen before the discharge of the mortgages).

On 9 May 2011, ASIC (having earlier not been prepared to grant such relief) acted pursuant to s 601AE(2) of the Corporations Act 2001 (Cth) to execute transfers of the mortgages from Atlantic Funds to the respective Investors (the first mortgage being transferred to the first plaintiff in these proceedings and the second mortgage to the second plaintiff).

This brings me to the events that have directly led to the current situation. On 27 May 2011, Mr Barton and the Investors entered into a deed entitled Deed of Terms of Settlement (to which I will refer as the 2011 Deed) in relation to the settlement both of the Claim in the 2000 proceedings and of the proceedings between Mr Barton and Atlantic Funds in the Supreme Court of Queensland. The Claim in the 2000 proceedings was defined as "the Investors' claim against Barton in the NSW Proceedings, which is a claim by way of Notice of Motion for judgment in the amount of $420,000 plus interest and costs".

Pursuant to the 2011 Deed, Mr Barton agreed (in clause 2.1) to pay to the Investors the sum of $450,000 on the Settlement Date. The Settlement Date was defined in clause 3.1 as the date 28 days from the date that the Investors notified Mr Barton that the Transfer of Mortgage (contained in Schedule 5, namely the transfers the subject of the application to ASIC) had been registered and, relevantly, that the Investors had "executed" the Discharge of Mortgage (defined as meaning the form of discharge of mortgage in Schedule 2, that schedule including forms for the discharge of both mortgages).

Clause 4.1 then provided that:

On the Settlement Date, provided that the Payment [by Mr Barton to the Investors of the sum of $450,000] is made in full , the Investors will cause:

(a) the Certificate of Title [to the Wellington property] and the duly executed Discharge of Mortgage in registrable form to be delivered to Barton; and

(b) the Consent Orders in Schedule 3 [providing for the dismissal of the 2000 proceedings] to be filed with the Supreme Court of New South Wales; and

(c) the Consent Judgment in Schedule 4 [for entry of judgment against Mr Barton in favour of the Investors in the principal amount of $450,000 plus interest at 10% per annum for the period from the date of the deed to the date of entry of judgment] to be destroyed by Osbornes Lawyers [the solicitors acting for the Investors]. (my emphasis)

Hence, the obligation to deliver the Discharge(s) of Mortgage and the Certificate of Title to the property on the Settlement Date, under clause 4.1, was clearly made subject to payment of the settlement sum in full.

Pursuant to clause 5.1:

In the event that Barton fails to make the Payment on the Settlement Date then:

(a) The sum of $450,000 will become immediately due and payable by Barton, plus interest on that amount at the rate of 10% per annum, calculated from the date of this Deed until the date that judgment is entered; and

(b) The Investors will immediately be entitled to enter judgment in the NSW Proceedings [the 2000 Proceedings] in the sum of $450,000, plus interest as calculated above, by filing the signed Consent Judgment in Schedule 4 and Barton will not oppose the filing of that Consent Judgment; and

(c) Interest on the total amount of the Consent Judgment (that is, $450,000 plus interest as calculated above) will be payable by Barton to the Investors pursuant to Rule 36.7(1) of the Uniform Civil Procedure Rules

Mr Cotman points to clause 5.1 as providing for what was to happen in the event (as subsequently transpired) that Mr Barton failed to pay the settlement sum in full and as, in effect, pointing against any intention that the sum of $450,000 was to be secured by the mortgages. (I am not persuaded that the fact that provision was made for entry of the judgment on non-payment of the sum, without reference to the judgment debt being secured, indicates an intention that the debt was to be unsecured.)

Of particular relevance to the issues in these proceedings will be the construction of the release clauses contained in the Settlement Deed. Clause 6 was headed "Releases". Clauses 6.1 and 6.2 contained releases by Mr Barton in favour of the Investors and the Atlantic entities respectively. Relevantly, at clause 6.3, the Investors gave a release to Mr Barton in the following terms (which mirrored the terms of the release given to them by Mr Barton in clause 6.1):

The Investors hereby release Barton from all actions, debts, sums of money, accounts, contracts, agreements, covenants, actions, suits, causes of action, claims and demands of whatsoever kind or nature either at law or in equity or otherwise which the Investors may have or have or ever had or might have had or could have had against Barton on account of any matter whatsoever (other than the right to sue upon this Deed).

Under clauses 6.4 and 6.5, each of Mr Barton and then the Investors covenanted in favour of the other not to bring or pursue (or procure a third party to do so or provide financial support for or otherwise assist) any claim, dispute, demand or proceeding in any court or tribunal in respect of any matter that is the subject of a release under clause 6 and indemnified the other from any breach of that covenant.

The Investors contend that their interests as Mortgagees were not released by the provisions of the 2011 Deed and nor were they discharged by the subsequent registration of the Discharges of Mortgage.

Clause 7.1 of the 2011 Deed contained an approval and authorisation by each party for the signing by the party's legal representative of the Consent Orders and Consent Judgment. Further, Clause 7.2 obliged Mr Barton to cause the Consent Orders and Consent Judgment in the 2000 proceedings to be signed on his behalf at or before the time that the 2011 Deed was executed. The parties agreed under clause 7.3 that the Consent Orders were to be held in escrow by the Investors' solicitors "until such time as the Investors are obliged to file the Consent Orders" in accordance with the deed (and clause 7.4 similarly provided for the Consent Judgment to be held in escrow by the said solicitors until the Investors were required to destroy it pursuant to the deed).

Mr Barton did not, at or before the time the 2011 Deed was executed, cause signed consent orders or a signed consent judgment to be delivered to the Investors' solicitors, although I understand that the latter has now occurred. In submissions it was contended that Mr Barton was at all times, ready, willing and able to produce the consent judgment to the Investors' solicitors but that no request was made of him or his solicitors for him to do so. Insofar as this be relevant (and I do not consider that it is) I note that a request was clearly made in the letter of 6 July 2011 sent by the Investors' solicitors to Mr Barton's solicitor for the execution of the consent judgment enclosed with that letter. Further, it seems to me that there must have been an implied obligation on Mr Barton to deliver or cause to be delivered to the Investors' solicitors the documents that he was obliged under the 2011 Deed to sign at or before the execution of the deed, having regard to the agreement that those were to be held by the solicitors in escrow. Hence, any suggestion that Mr Barton was not obliged to deliver those documents until after a demand was made therefore would not in my opinion be compelling.

Clause 11.1 of the 2011 Deed obliged each of the parties to do all things, produce all documents and execute all deeds, instruments, transfers or other documents as may be necessary or desirable "to give full effect to the provisions of this Deed and the transactions contemplated by it". (This is relied upon by Mr Einfeld in support of his claim for relief by way of the re-execution and reinstatement of the discharged mortgages.)

Clause 12.1 provided that the 2011 Deed may be pleaded and entered by any party as an absolute bar and defence to any proceedings brought or made by another party in breach of the terms of the deed.

What has led to the present problem is that, after the Investors had executed the relevant Discharges of Mortgage and delivered them to their solicitors (those forms not being required, under the terms of the 2011 Deed, to be delivered to Mr Barton until the Settlement Date and, even then, not until payment of the settlement sum), the Discharge of Mortgage forms were lodged with the offices of Land and Property Information at the same time as the Certificate of Title and the Transfers of Mortgage to Atlantic Funds were lodged. The plaintiffs' solicitor, Mr Valmas, has given evidence, by affidavit sworn on 4 November 2011, that on 30 May 2011 he caused the original certificate of title to be lodged together with not only the transfers (from Atlantic Financial to Atlantic Funds) that had been executed by ASIC but also the discharges of mortgages executed by the Investors. At [21] of his affidavit, Mr Valmas deposes that:

I mistakenly believed that the Deed of Settlement required both the transfers of the Mortgages and the discharges of the Mortgages to be registered prior to the Settlement Date. At the time, I was anxious to ensure that everything be done quickly in order to bring about the Settlement Date. In my haste, I believe that I misread the Deed of Settlement. (emphasis as per Mr Valmas' affidavit)

Mr Valmas was not cross-examined on his affidavit and his explanation as to the circumstances in which the Discharge of Mortgage forms were lodged for registration is therefore not in issue. It is clear from his affidavit that the mistake was not that the documents had been inadvertently included in the bundle of material provided to the Registrar-General. Rather, the mistake is that Mr Valmas forwarded the documents for registration in the belief that this was required by the clause. It is not suggested that the clause imposes any such obligation. Therefore, accepting that Mr Valmas lodged the documents with the LPI believing that there was an obligation to do so, he clearly did so under a mistake as to the construction of the relevant clause.

If it were necessary to characterise the mistake as one of fact or of law, it is clear that this would be a mistake of law (namely, as to the construction of the 2011 Deed). I note this because there was an issue raised by Mr Cotman as to whether, if so, this was a mistake of the necessary quality in any event to give rise to the relief sought by the Investors; an issue that I consider later in these reasons.

By letter dated 6 July 2011, Mr Valmas notified Mr Barton's solicitor that the Transfers of Mortgage and the Discharges of Mortgage had been lodged with the LPI (which I suspect would have come as a matter of some surprise to Mr Barton's solicitor since, on whatever view is taken as to the effect of the release clause on the subsistence of a debt secured by the mortgage, the lodgement of the Discharge of Mortgage at that stage placed the Investors at a practical disadvantage in that it arguably removed an immediate incentive for Mr Barton to honour his contractual obligations). (In this regard, although it seemed in argument to be suggested by Mr Cotman that the existence on the title of the mortgages was not of such import as to provide an incentive to pay the settlement sum - because after the 2011 Deed was executed the mortgage secured no debt and hence could no longer have been relied upon in any event and Mr Barton could have called for the production of an unencumbered certificate of title - it surely cannot be the case that the registration of the discharge in advance of the settlement was something that was anticipated as likely to occur. Nevertheless the position of Mr Barton, as I understand it, is that this is not a case where opportunistic advantage has been sought to be taken of an error on the part of the Investors' solicitor.)

Mr Valmas, in his letter of 6 July 2011, in effect reminded his counterpart (Mr Johns) that settlement would be due within 28 days of receipt of advice that he had received the Certificate of Title and asked Mr Johns to advise if his client could be ready within that time. He also enclosed "in anticipation of settlement" the Consent Order and Consent Judgment (although, as noted earlier, the 2011 Deed contemplated that those would be signed by the time of execution of the deed). There was no evidence given by Mr Johns on the hearing before me. I can only assume that he acted in accordance with his duty as a solicitor and communicated the above matters to his client within a reasonable time. Whether or not he in fact did so, at the very least his knowledge as to the fact of lodgement of the discharge forms would be imputed to his client. Mr Valmas received no reply to that letter and there has been no explanation for the absence of a response to the request for advice as to Mr Barton's readiness for settlement within the period foreshadowed.

The 6 July letter contains no statement expressly drawing to the attention of the reader that the Discharge of Mortgage had been lodged under an assumption or belief that there was an obligation so to do. However, it seems to me that the fact that it had been lodged in advance of the time when it was required to be provided by the Investors (and without satisfaction of the condition to which the provision of the Discharge had expressly been made subject) was sufficient to put Mr Johns (and through him Mr Barton) on notice that the lodgement might well have been mistakenly effected - particularly when the history of the matter (and the attempts of the Investors to recoup the moneys outstanding under the mortgages) is taken into account. Any suggestion that the Investors would have chosen voluntarily to present Mr Barton with clear title to the property before receipt of the funds which had been sought (and seemingly resisted) for quite some time seems to me to be fanciful.

The Transfers and Discharges were in due course registered by the LPI (a step that Senior Counsel for the Investors (Mr Einfeld QC) contends only had the effect of discharging the security represented by the mortgages at law, not in equity). They were recorded on the title as at 13 July 2011.

By letter dated 14 July 2011, Mr Valmas notified Mr Johns that the Certificate of Title had been received and nominated the settlement date as being Friday, 12 August 2011. He requested that Mr Johns telephone him to discuss arrangements for settlement. The letter is consistent with Mr Valmas having no appreciation at this stage that registration of the discharge might not have been required before settlement. Again, that letter seems not to have been met with the courtesy of a response. There was no suggestion conveyed to Mr Valmas at that stage (at least on the evidence before me) that Mr Barton did not intend, or was unable, to pay the money due on the settlement date. (Nor did Mr Johns question Mr Valmas as to whether the discharge of the mortgages prior to the Settlement Date was intentional; indeed, the lack of any response to Mr Valmas' correspondence might suggest that Mr Barton had chosen to let sleeping dogs lie at that point. Whatever be the case in that regard, and there is no need for a finding as to this, the result seems to have been that Mr Valmas had no occasion by that stage to realise the mistake he had made - or to take any action prior to registration of the discharges to rectify that error.)

On 28 July 2011, orders were made by consent in the Supreme Court of Queensland for the dismissal of those proceedings and of an appeal that had been lodged in those proceedings, on the basis that each party was to bear its own costs of both proceedings.

Mr Valmas has deposed that he contacted Mr Johns to enquire about settlement on 9 and 11 August 2011, on both of which occasions Mr Johns' response was that he did not have instructions. However, by 12 August 2011, whether or not Mr Barton had given instructions of any kind, it must have become apparent that Mr Barton was either not prepared or not able to make the payment required under clause 2.1 since no such payment was made. There is no dispute that the whole of this sum still remains outstanding.

On 16 August 2011, as noted earlier, the fourth defendant (for whom Mr Johns also acts) proceeded to lodge its caveat in respect of an equitable mortgage dating back to December 2010 (the delay in so doing not being explained but the coincidence of the timing of its ultimate lodgement on the title and the discharge of the registered mortgages might suggest that it was appreciated that there might by then be some advantage in so doing that had not been perceived at an earlier time - again, it is not necessary to make any finding as to this).

On 1 September 2011, the Investors caused caveats to be lodged over the title to the Wellington property claiming an equitable interest in the land, Mr Valmas presumably by then realising the mistake he had made as to the construction of the 2011 Deed. As to the first of those caveats (that being lodged by the parties who had held the legal interest as assignees of the benefit of the first mortgage), the instruments pursuant to which that interest was claimed were described in an annexure to the caveat as the 1997 mortgage, the transfer in 1999 to Atlantic Financial and the transfer in 2011 to the Investors. As to the second of the caveats (lodged by the assignees of the interest in the second mortgage), the instruments noted in the caveat were the second mortgage and the 2011 transfer of mortgage to the caveators.

In each caveat the interest claimed was in the same terms:

The caveators' equitable interest arises pursuant to a mortgage over the property held by the caveators as mortgagees, which mortgage was removed from the title as a result of the caveators' solicitor mistakenly lodging with the Registrar-General a Discharge of Mortgage.

By letter dated 19 September 2011, Mr Johns wrote to the Investors' solicitors in his capacity as Mr Barton's solicitor asserting that the Investors had no equitable interest in Mr Barton's property and were "at best" unsecured creditors of his. (If, by the words "at best", it was intended to assert that Mr Barton was not indebted to the Investors for the amount that he had agreed in the Deed to pay, then Mr Johns did not identify the basis for such an assertion nor is it apparent that there would have been any such basis.) The letter went on to describe Mr Johns' 'astonishment' that Mr Valmas had sworn statutory declarations as to the existence of good and valid claims by the caveators to the estate or interest claimed in the caveats and (somewhat disingenuously in my view) said:

... the Caveats admit that the mortgages had been discharged. It was only ever a matter of contract that your clients would hand over registrable discharges; they were quite entitled to themselves register [sic] those discharges as they did.

By letter dated 4 October 2011, the Investors' solicitors responded to Mr Johns, in his capacity as the solicitor for Mr Barton, stating that the discharges had been registered in error and maintaining that, although the registration of the discharges had effected the discharge of the legal title to the mortgages, the mortgages continued to have effect whilst the moneys secured by the mortgages were outstanding. The Investors' claim that they held an equitable mortgage over the property was maintained and demand was made for the execution of identical mortgages by Mr Barton (reserving the right to rely on the power of attorney clause contained in the first mortgage in order to execute a new first mortgage - although I interpose to note that there is no suggestion that the Investors have done so).

By separate letters on that date, the Investors' solicitors wrote to Mr Johns in each case in his capacity as the solicitor for the particular mortgagee defendant in respect of that defendant's caveat, seeking consent to the registration of new mortgages in favour of the Investors on the basis that the equitable interests held through the respective (by then discharged) mortgages "predate the interest asserted by the caveator and therefore have priority over the equitable interest asserted by the caveator", and noting that by virtue of the registration of the mortgages the respective mortgagee defendant had notice of the equitable interest held by the Investors at the time of creation of the interest asserted by the caveator. (I accept that the mortgagee defendants would, by the registration on title of the mortgages, have been on notice of the legal mortgage interest and of the relevant provisions contained in the Memoranda of Mortgages. They would thereby have been on notice of the possibility that further moneys might have become secured by the mortgages. It is not immediately apparent that they would be on notice of an equitable mortgage over and beyond the mortgage interest as registered.)

By letter dated 17 October 2011, seemingly waiving legal professional privilege in the advice (though it does not seem any issue was taken as to this), Mr Johns responded to each of the 4 October 2011 letters conveying the substance of advice said to have been received (though it is not apparent when it was received) from Senior Counsel to the effect that:

... by reason of the provisions of clause 6.3 of the Deed, ...upon execution of the Deed, your clients ceased to have any entitlement to assert an interest (equitable or otherwise) in the property owned by our client ... As clause 6.3 of the Deed states, your clients' rights are limited to being able to sue upon the Deed. Your clients' position is not improved by the Discharges of mortgage irrespective of the circumstances in which they were lodged; these circumstances are solely a matter between your firm and the clients in question.

When a demand for the removal of the caveats was not complied with, lapsing notices were served on 24 October 2011 under cover of a letter that informed the Investors' solicitors that an indicative amount to pay out the caveat lenders "with priority" over the Investors was $750,000 and that there was an unsecured creditor of which they were aware (namely another law firm) in the sum of $400,000. The letter further noted that if the net sale proceeds of the property after payment out of the caveat lenders and costs of sale were less than the total amount owing by Mr Barton to the Investors and other unsecured creditors "then Mr Barton's Estate will no doubt need to be administered in accordance with the provisions of the Bankruptcy Act 1966".

These proceedings were then commenced by the Investors, seeking an extension of the operation of the caveats that had been lodged on the title.

Issues for determination

(i) Circumstances in which mortgages were discharged

As Mr Cotman notes, the Register is conclusive as to the nature and order of the interests in the land (reference being made to the recognition by the High Court in Farah Constructions Pty Limited v Say-Dee Pty Limited [2007] HCA 22; (2007) 230 CLR 89 that ss 41 and 42 of the Real Property Act 1900 (NSW) are central to the concept of indefeasibility of title), subject of course to the statutory exceptions to indefeasibility. Thus it is not necessarily the case that the Register is a complete answer to a claim of personal equities affecting a proprietary interest (relegating the Investors, as Mr Cotman suggests it does, to a claim against their solicitors for damages and/or Mr Barton in debt).

Whatever the position in relation to the construction of the release clause contained in the 2011 Deed (which I consider later in these reasons), Mr Cotman submits that the registration of the discharge of the first and second mortgages (even if that has resulted from a mistake or inadvertence on the part of the registered mortgagee), destroys the charge previously binding on the land, relying upon State Bank of New South Wales v Berowra Waters Holdings Pty Limited & Ors (1986) 4 NSWLR 398.

It is not disputed by the Investors that upon proper registration of a discharge of mortgage over Torrens system land (as these mortgages were) the land ceases to be charged with the moneys secured by the mortgage and a new indefeasible title arises (irrespective of the fact, if it be the case, that the discharge was forged: Schultz v Corwill Properties Pty Ltd (1969) 90 WN (NSW) 529; Grundy v Ley [1984] 2 NSWLR 467; or that the discharge was registered by mistake or through an inadvertence on the part of the registered mortgagee: Berowra Waters; ( Fisher & Lightwood's Law of Mortgage (2 nd Australian edn) at [32.54]).

In Berowra Waters , where the document which was registered incorrectly stated that the mortgagee had received "all moneys in full satisfaction and discharge of the ... mortgage" and the mortgagee had sought a declaration that the discharge of the mortgage was invalid and of no effect and that the record of the discharge by the Registrar-General was made in error, Needham J, as his Honour then was, (at 402) concluded as follows, dismissing the application:

1. The registration of the dealing (even assuming it was "invalid" or "ineffective") destroyed the charge previously binding on the land. Such a conclusion was reached both by Connolly J, in Associated Securities Ltd v Perry [1978] Qd R 13 and by Kearney J in Grundy v Ley [1984] 2 NSWLR 467, and is, in my opinion, required by the reasons given in Frazer v Walker .

2. The second defendant, therefore, held the land free of the mortgage unless the plaintiff could establish that it came within one of the exceptions to indefeasibility in s 42(1) or s 124.

3. The plaintiff does not come within any of those exceptions. So far as s 124(a) is concerned, registration of the dealing destroyed the charge and so that paragraph became inapplicable to the plaintiff.

4. These proceedings are proceedings for the recovery of land, and so the Court has no power to give directions to the Registrar-General to cancel the recording, because such proceedings are expressly barred (by s 124).

His Honour went on to say (of the claim by the mortgagee that there was a personal equity in its favour against the mortgagor):

Those conclusions debar the Court from making the orders sought by the plaintiff unless the plaintiff can enforce against the second defendant a "personal equity", or unless the Registrar-General has power to correct the "error", and the Court, in view of his refusal to do so without an order of the Court, can make a declaration setting out the facts from which he could draw the conclusion that he should exercise his power of correction.

The plaintiff submitted that a personal equity arose in its favour against the second defendant. The equity was said to be a personal right arising out of the mortgage against the mortgagor that the mortgage should not be discharged unless the debt had been paid.

I have some doubt as to whether this submission is correct. The right to payment is a legal right; the act of submitting the discharge for registration was the act of the plaintiff - the second defendant had no power in it. If a personal equity arose in this case, then, it would seem, it would arise in every case where a mortgage is discharged without the whole of the sum due having been paid.

But, assuming the existence of a personal equity against the second defendant arising out of the mortgage and its discharge, the reasons given in Frazer v Walker show that no action on a personal equity which falls within the prohibitions of ss 42 and 124 may be maintained (see at 585).

See also Scallan v Registrar-General (1988) 12 NSWLR 514 per Young J (as his Honour then was).

Black J considered this issue in Re St George Bank - A Division of Westpac Banking Corporation [2011] NSWSC 730 and said (at [22]):

... In my view, that decision is not authority that a mortgagee cannot bring a personal claim in equity against a mortgagor where a mortgage is discharged by mistake - indeed, Needham J expressly left open the possibility of alternative claims in observing that "[n]o questions arose of any other action open to the plaintiff, and, accordingly, I make no comment on the matter" (at 404).

There, St George had argued that it could establish an entitlement to surplus funds on sale of the formerly secured property by reason of an in personam right against the registered proprietor on the basis that any attempt on her part to assert a right to those funds would take unconscionable advantage of errors of the bank. Relevantly, in the context of the mistake made in the present case, the errors were put in two ways: first, that the certificate of title, mortgage and discharge of mortgage over the property had been handed over by mistake, notwithstanding that the loans then secured by the mortgage had not been repaid and, second, that further moneys had then been advanced to the registered proprietor

without obtaining a further mortgage over the property under a mistaken belief that the bank already had such a mortgage.

It was accepted in that case that where the mistake is properly characterised as a unilateral mistake (as is the case on the present circumstances), it is necessary to establish that the other party knew or had reason to know of the mistake in order to ground a claim for relief on that basis (by reference to Taylor v Johnson [1983] HCA 5 ; (1983) 151 CLR 422 and Tutt v Doyle (1997) 42 NSWLR 10). His Honour found that the registered proprietor knew or had reason to know of the bank's mistakes at least by the time she registered the subsequent mortgage over the property and considered that it would be unconscionable for her to assert unencumbered title to the property in circumstances where she knew or had reason to know of the bank's mistakes.

In Tutt v Doyle , Handley JA considered a claim as to the existence of a personal equity based on unilateral mistake. His Honour said:

The Doyles' cause of action falls within the principles established in Taylor v Johnson (1983) 151 CLR 422, although the facts in this case are significantly different. There was no mistake in relation to the terms or effect of the contract of sale of 3 April 1989. The Doyles' mistake related to the effect of the transfer delivered on settlement as a result of their earlier mistake in signing the plan of subdivision which enlarged lot 3063 to 2.76 hectares. The majority judgment in Taylor v Johnson included (at 432-433) the following principle:

"The particular proposition of law which we see as appropriate and adequate for disposing of the present appeal may be narrowly stated. It is that a party who entered into a written contract under a serious mistake about its contents in relation to a fundamental term will be entitled in equity to an order rescinding the contract if the other party is aware that circumstances exist which indicate that the first party is entering the contract under some serious mistake ... about either the content or subject matter of that term and deliberately sets out to ensure that the first party does not become aware of the existence of his mistake ...."

However the majority also endorsed wider principles which entitle a court of equity to grant relief for unilateral mistake in cases not covered by this principle. They approved (at 431) the statement by James LJ in Torrance v Bolton (1872) LR 8 Ch App 118 at 124, that the power to set aside a contract for unilateral mistake was based on the ordinary jurisdiction of equity "to deal with" any instrument or other transaction "in which the court is of the opinion that it is unconscientious for a person to avail himself of the legal advantage which he has obtained" . They also approved the decisions in Riverlate Properties Ltd v Paul [1975] Ch 133 at 145 and Thomas Bates & Son Ltd v Wyndham's (Lingerie) Ltd [1981] 1 WLR 505 at 514-516; [1981] 1 All ER 1077 at 1085-1086, where rectification, and not rescission, was granted on this ground. They noted (at 432) that in the United States and Canada:

"... the rule that relief from contractual obligations on the ground of unilateral mistake will be granted where enforcement of the contract would be unconscionable is well established."

In those jurisdictions relief is available where one party "knows that the other party ... might well be mistaken" or "had reason to know of" the other's mistake (at 432).

The Doyles' claim was "a mere equity" and not an equitable estate or interest in the land: see Latec Investments Ltd v Hotel Terrigal Pty Ltd (In Liq) (1965) 113 CLR 265 at 277-278, per Kitto J. Accordingly they bore the onus of establishing that the Tutts knew, or had reason to know, that the Doyles were, or might well be, mistaken. The Tutts were not required to establish that they were bona fide purchasers for value without notice of the Doyles' mistake.

The relief sought by the Doyles therefore required close attention to be given to the situation immediately before and at settlement of the purchase which took place on 23 October 1989. The Doyles had no personal equity against the Tutts unless the latter knew or had reason to know of the mistake prior to completion . On completion, the Tutts received a registrable transfer, and s 43A of the Real Property Act 1900 protected them against notice received thereafter before the transfer was registered. (my emphasis)

In Minister for Education and Training v Canham [2004] NSWSC 274; (2004) NSW ConvR 56-080 by Pearlman AJ summarised the applicable principles as follows (at [44] and [47]):

... It is well established that a registered proprietor has an indefeasible title to the land in respect of which he or she is registered, subject only to the exceptions set out in s 42 of the Real Property Act 1900 ("the RP Act") and subject only to an in personam claim against the registered proprietor: Frazer v Walker and Ors (1967) 1 AC 569 at 585; Breskvar v Wall (1971) 126 CLR 376 at 384-385.

...

The relevant principles guiding the court in its determination are as follows:

1. A personal equity arises where there is a known legal or equitable cause of action enforceable against the registered proprietor: Grgic v Australian and New Zealand Banking Group Ltd (1994) 33 NSWLR 202 at 222;

2. The personal equity includes the equity to order rectification or retransfer for mistake. Relief will be available where the registered proprietor knew, or had reason to know, that the other party was, or might well be, mistaken: Tutt and Anor v Doyle and Anor (1997) 42 NSWLR 10 per Handley JA at 14-15;

3. Unconscionability is the test - is it unconscionable for one party knowingly to take advantage of another party's mistake? per Meagher JA in Tutt v Doyle at 12. The court is able ... "exercising its jurisdiction in personam to insist upon proper conduct in accordance with the conscience which all men should obey:" per Lord Russell of Killowen delivering the judgment of the Privy Council in Oh Hiam v Tham Kong (1980) 2 BPR 97130 at 9454;

4. The personal equity may arise from the conduct of the registered proprietor both before and after registration : Bahr and Anor v Nicolay and Ors (1988) 164 CLR 604 at 638. (my emphasis)

5. And the conduct in question may be that of a person for whom the registered proprietor is responsible, such as his agent: Grgic v ANZ Bank at 223.

Mr Cotman submits that the present case can be distinguished from those (including St George and Tutt v Doyle ) where relief based on knowledge of the existence of a mistake has been granted because here there are third parties whose interests will be affected by the grant of the relief sought by the Investors (namely, the loss of the improved priority they gained with the discharge of the prior registered mortgages). I consider the position of the mortgagee defendants below.

In PC Developments Pty Ltd v Revell (1991) 22 NSWLR 615, Mahoney JA said (at p 625):

In a practical sense there are, perhaps, two approaches which may be made to a claim for equitable relief against a suggested injustice. The first is for the court to consider whether the end result of all that has happened between the parties is such that the judicial conscience finds it unacceptable; the court then looks to the remedies which, in equity, are available to relieve against that injustice. The conscience is, of course, one which is moulded by what has been done in the past by "the great equity judges" and by how they justified what they did: Chapman v Chapman [1954] AC 429 at 444; cf United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904 at 924. The second approach is to go to the individual doctrines or principles established by the law, for example, the principles as to penalties, to apply those doctrines or principles to the facts, and to give the resulting relief to the plaintiff, whether or not the end result of the transaction would otherwise have been unconscionable. In the case of the application of the common law and, perhaps, the equitable principles as to penalties, this is the practical result.

... For traditional reasons equity has seen land often as in a special position. ...

It has been reiterated that equity is no mender of bad bargains: Shiloh Spinners Ltd v Harding [1973] AC 691 at 723 and Stern v McArthur (at 514) per Brennan J. This, if it is to mean anything, must mean that equity does not intervene merely because the result of what the parties have bargained for is a loss, even a substantial loss, to one of the parties . Equity does not, I think, prevent parties agreeing that things may be done which may involve the risk of loss to one or other of them, depending upon how the risk eventuates. It does not, I think, require that they must provide, by detailed provisions, for each of the possible outcomes of such risks and in a way which will prevent either party from bearing the burden of that outcome. It is not, alone, the fact that the burden from the risk falls on one party or the other which leads to intervention. There must, I think, be something, for example, in the nature of the provisions, the circumstances of their negotiations, or the way in which the parties have acted in the exercise of their rights which warrants the conclusion that for the plaintiff to bear the burden of the outcome of the risk is inequitable or unconscionable. To hold otherwise would be, to adapt the language of Mason CJ in Stern v McArthur (at 503) "to eviscerate unconscionability of its meaning": see, also, (at 514) per Brennan J; cf per Gaudron J (at 540-541).

In Stern v McArthur , Deane J and Dawson J emphasised the necessity, for equitable intervention of this kind, that there be not merely the benefit to one party or the other, but the taking advantage of "another special vulnerability or misadventure for the unjust enrichment of himself". (my emphasis)

Mahoney JA also extracted the passage from Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489 (where Deane and Dawson JJ had referred to the weight to be given to the bargain that the parties had made) and in which their Honours (at 526 - 527) said:

... It is in that sense [that equity will generally hold parties to their bargains and not remake their contracts simply because it transpires that there has been a bad bargain] that it is said that the circumstances must be exceptional to warrant relief in favour of a purchaser who is in breach of an essential term and that there must ordinarily be something such as fraud, mistake, accident or surprise before relief will be granted. These elements do not, however, exhaust the scope of unconscionable or unconscientious behaviour; they are referred to in this context to emphasize that a strong case must be made out to warrant departure from the general approach, which is to hold the parties to their bargain. The general underlying notion is that which has long been identified as underlying much of equity's traditional jurisdiction to grant relief against unconscientious conduct, namely, that a person should not be permitted to use or insist upon his legal rights to take advantage of another's special vulnerability or misadventure for the unjust enrichment of himself : cf, eg, for example, Holdsworth, History of English Laws , 3rd ed (1945), vol V, pp 293-332; Yale, Lord Nottingham's Chancery Cases , vol II (1961) Selden Society vol 79, pp 8-9; Turner, Equity of Redemption (1931), pp 22-23; Corbin, 'The Right of a Defaulting Vendee to the Restitution of Instalments Paid', Yale Law Journal , vol 40 (1931) 1013, at 1023. (my emphasis)

Mr Einfeld submits that in the case of both mortgages it would be unconscionable for Mr Barton to assert unencumbered title to the property by reason of the mistake of the Investors' solicitors, in circumstances where Mr Barton was made aware or had reason to be aware (on 6 July 2011) of their mistake. (In this regard, I note that there seems to be no reason why Mr Barton's conscience would not equally be affected even if no knowledge of the mistake was received until a later point in time, unless by then Mr Barton had acted in some way in the belief that the discharge was not mistaken so as to render it not unconscionable for him to rely on the unencumbered title.)

As to the necessary quality of the mistake required to give rise to the operation of an in personam claim falling within the personal equities exception to indefeasibility, there is nothing in the authorities to which I have been taken (nor have I been able to find any other authority to this effect) that limits relief to cases where there has been a mistake of fact (such as the inadvertent inclusion in a bundle of documents of the discharge in question or the incorrect description of the property on the discharge form), as opposed, for example, to a mistake as to the legal obligation of the party to effect the discharge in question. The mistakes relied upon in the St George case were not only the factual mistake as to whether the sum outstanding on the mortgage had been paid out but also the mistake as to whether there remained an operative mortgage securing the further advances; the mistake in Tutt v Doyle was as to the legal effect of the transfer having regard to the earlier mistake in relation to the subdivision of the land. Further, in Stern v McArthur the principle that relief may be granted where there is unconscientious reliance on legal rights was referred to in terms that include the concept of 'misadventure' as well as that of mistake.

I see no reason in principle why a mistake as to the legal consequences of a particular action or (as is the case here) as to the time at which a party is obliged under a particular contract to take certain action (such as the delivery of an executed discharge of mortgage) could not ground an in personam claim for relief if it would be unconscionable for the other party in the circumstances to take advantage of that mistake. (It is, of course, possible that where the mistake is one of law it might be harder to establish that the other party knew or had reason to know of the mistake, but that is a different issue.)

Here, I accept that the discharges of mortgage were lodged by Mr Valmas in the mistaken belief that this was something necessary to be done in advance of the Settlement Date in order to enable his clients to comply with its obligations on that date. It seems to me that this is sufficient to give rise to unconscionability of the kind claimed if it can be said that Mr Barton knew or had reason to know that the discharges had (or might well have) been lodged by mistake (irrespective of whether he knew or had reason to know of the precise nature of the mistake that had been made) and if it would be unconscionable for him to take advantage of that mistake.

In my view, it is almost inconceivable that Mr Barton's solicitors did not appreciate that the discharges might well have been lodged by mistake, since there was no apparent reason for that to have been done in advance of the time at which the Investors were obliged to provide the discharges and before the condition to which delivery of the discharges was subject had been satisfied. There is no suggestion that Mr Barton's lawyers are not experienced lawyers. The absence of any sound commercial reason for a party, who is not yet obliged to do so, to give up its security over real property must have given Mr Johns reason to suspect that there had been a mistake of some kind. It is recognised in Tutt v Doyle and Revell that reason to know that there might well have been a mistake is sufficient for this purpose. The observation in Mr Johns' correspondence that it was open to the Investors to lodge the discharges "at any time" (they simply not being obliged to do so until the settlement date) seems to me not to be to the point. It is open to any mortgagee to give up its security in advance of payment of the debt secured without being under an obligation to do so but I venture to suggest that in commercial practice it would not often be the case that, absent a cogent reason (and none was apparent in this case), a mortgagee would do so.

I find that Mr Barton, through his solicitor, therefore had reason to know that there might well have been a mistake on the part of the Investors or their solicitors in lodging the executed discharges of mortgage in advance of the settlement. In those circumstances, is it unconscionable for him to assert as against the Investors an unencumbered title? Mr Cotman submits that it is not and that there has been no unjust enrichment as the Investors obtained what they bargained for under the 2011 Deed.

I accept that for the purposes of considering whether there is an enforceable interest as claimed in the caveat, the relevant date for assessing enforceability is the date the caveat was lodged. If the 2011 Deed operates in equity as a mortgage or charge and this is the equitable interest claimed under the caveats then, the Deed not having been stamped as a mortgage, the caveats could not be supported. Notwithstanding that the relevant equitable mortgage may only be one created by the deposit or retention of the title deed as security for performance of the obligation to make payment under the 2011 Deed, this would still arguably fall within the definition of mortgage in s 205(d) of the Act, meaning that there would be a requirement to pay duty on this as an instrument that, on the deposit of documents of title to property, becomes a mortgage or evidences the terms of a mortgage. (Whether any argument could be raised that this does not fall within the section because it is a document that on the acknowledged retention of title deeds has that effect, was not an issue explored in argument before me.) In any event, I do not consider it necessary to determine this issue because the question now before me is not as to the extension of the caveats as such, and because the basis on which I have determined that the Investors are entitled to relief is the in personam claim for restitutionary relief consequent upon the otherwise unconscionable conduct of Mr Barton in seeking to take advantage of the mistaken discharge of mortgage. Thus, I am not called upon to enforce any equitable mortgage arising under or evidenced by the 2011 Deed. Further, an undertaking has been proffered for the notification to the relevant authority of the instrument such that any determination as to the liability to stamp duty will no doubt be made in due course by that authority.

(vi) Possessory lien

In response to the defendants' submission that there is no proper reason why the Investors should be entitled to retain the Certificate of Title to the land (at [37]), the Investors submit that they have a possessory lien over the document (akin to a solicitor's lien over client documents) and are entitled to retain the Certificate of Title and to enforce their rights as though the first and second mortgages were still on title to obtain a reconveyance (or more precisely a re-execution) by Mr Barton of the first and second mortgages.

Whilst not dependent on contract, an equitable lien is said often to arise when the parties are in a contractual or quasi-contractual relationship ( Tresize v Bilato Nominees Pty Ltd & Northern Gold NL (1986) 83 FLR 44 per O'Leary CJ at 46). In Hammonds v Barclay (1802) 2 East 227 at 235, Grose J defined a lien as "...a right in one man to retain that which is in his possession belonging to another till certain demands of him the person in possession are satisfied." The circumstances in which equitable liens will be arise by implication of law were identified in Hewett v Court [1983] HCA 7; (1983) 149 CLR 639 at 663. There is, however, a distinction drawn between equitable liens and common law possessory liens.

In On Equity, the learned authors observe (at [9.200]) that a common law lien differs from an equitable lien in that the latter does not depend upon the person who has the lien having possession of the property over which the lien exists:

An equitable lien may arise in a variety of circumstances and may attach to real or personal property. The categories are not closed and it is not necessary that there be a contractual relationship between the relevant parties. A trustee, for instance, has a lien over trust property by way of indemnity to secure liabilities incurred by the trustee in the authorised conduct of the trust. Liens also arise in the context of purely equitable obligations through the implication of some equitable doctrine applicable to the circumstances. It follows that, where there is contractual relationship between the parties, an equitable lien may arise regardless of whether the contract would be specifically enforceable ( Hewett v Court (1983) 149 CLR 639 at 664 - 664; Chattey v Farmdale Holdings Inc [1998] 75 P & CR 298 at 305 - 307). As is the case with all equitable remedies, the enforcement of an equitable lien is discretionary, and is moulded to the individual circumstances of the case: Inetstore Corporation Pty Ltd (in liq) v Southern Matrix International Pty Ltd (2005) 221 ALR 179 at 182.

Here, what is sought is a declaration that there is a possessory lien. As its name implies, this will subsist only where there is factual possession of the relevant goods or documents (and generally, a possessory lien needs to be continuous Young v Matthew Hall Mechanical & Electrical Engineers Pty Ltd (1988) 13 ACLR 399 per Brisden J at 404), and where that possession arises from the actions of the owner conferring possession on the third party claiming the lien. Halsbury's states (at [295-4605]) that a general possessory lien gives a common law entitlement to the lienee to retain the relevant goods or documents as security for the payment of the full debt of the lienor, no matter on what account the indebtedness may be due. It takes effect as a right against property by implication of equity to secure the discharge of actual or potential indebtedness. In Protean Enterprises (Newmarket) Pty Ltd v Randall [1975] VR 327, Gillard J noted (at 333) that so far as possessory liens are concerned, they may only arise from possession of property given to the lienee by or with the authority of the owner of the property .

A common law possessory lien most often arises as a result of the carrying on of a quasi-public function (for example, an inn-keeper or a ship carrier) or as the result of work requiring skill and labour which is carried out in relation to the goods ( Majeau Carrying Co Pty Ltd v Coastal Rutile Ltd (1973) 129 CLR 48 at 54 - 62 per Stephen J). The common law has recognised a general lien over relevant goods or documents in favour of solicitors, bankers ( MPS Constructions Pty Ltd (in liq) v Rural Bank of New South Wales (1980) 4 ACLR 835; 49 FLR 430) factors, stockbrokers ( Mercantile Credits Ltd v Jarden Morgan Australia Ltd [1991] 1 Qd R 407 per Kelly SPJ at 410) and insurance brokers without proof of usage in the particular trade or profession. The present case falls within none of those categories unless the Investors are said to be in the position of bankers.

It has been held that whether a lien arises depends on the purpose for which the goods or documents came into the possession of the lienee, as such purpose may lead to the conclusion that the possession was so confined to that particular purpose as to exclude the implication of a lien ( Duke Finance Ltd (in liq) v Commonwealth Bank of Australia (1990) 22 NSWLR 236 per Giles J at 245, 246). Here, the title documents clearly came into the possession of the Investors as security for the loans made to Mr Barton, albeit by reference to the earlier loans not the present debt.

The common law has also recognised general liens in favour of other categories of persons, but only where a lien can be proved by evidence of usage within the particular trade (see generally Majeau Carrying v Coastal Rutile ).

It seems that four elements must be present in the particular circumstances for a common law possessory lien to have arisen: first, that the holder of the lien must be in physical possession of the goods/documents; second, that the holder of the lien must be in possession of the goods/documents to secure the discharge of actual or potential indebtedness; third, that the holder of the lien must have been in continuous possession; and, fourth, that the holder of the lien must have been given authority by the owner of the goods/documents to hold them. Those elements would be satisfied in the present case.

However, if on the facts an equitable mortgage by deposit and retention of title deeds arose (as I am satisfied would have been the case had the Investors not been able to rely on their principal claim for the reinstatement of the registered mortgages), then no equitable or possessory lien would need to be implied as a matter of law. Therefore, had the issue arisen and had I not in those circumstances been satisfied that an equitable mortgage by deposit and retention of title deeds would have arisen on the facts of this case, (as to both of which this is not the case in light of the findings above) then I would have been satisfied that a possessory lien had arisen. In the circumstances, however, it would not be necessary to impose such a lien if there were an equitable mortgage in existence.

(iv) Specific performance

Mr Einfeld refers to Turner v Bladin (1951) 82 CLR 463 at 473 as support for the proposition that this is an appropriate case in which to grant an order for the specific performance by Mr Barton of his obligations under the 2011 Deed. It is submitted that Mr Barton should be ordered to pay the moneys due to the Investors in order that they may dispose of their interests as mortgagees. Reference is made in this regard to clause 11.1 of the 2011 Deed, under which Mr Barton remains obliged to execute all documents necessary to secure the Investors' position as mortgagee (such as documents permitting the re-registration of the two mortgages). Re-conveyance is said to be an appropriate means of securing the Investors' interests ( Tutt v Doyle (1997) 42 NSWLR 10 at 17).

In Turner v Bladin (1951) 82 CLR 463 Williams, Fullagar and Kitto JJ said:

We are of opinion that the contract was specifically enforceable. We reject the contention that a contract, some part of which is not immediately performable, is not capable of specific performance. In our opinion proceedings for the specific performance of a contract which is of such a kind that it can be specifically enforced can be commenced as soon as one party threatens to refuse to perform the contract or any part thereof or actually refuses to perform any promise for which the time of performance has arrived. The court can then make a decree that the contract ought to be specifically performed and carried into execution, and can so mould its decree and order such inquiries, accounts and other proceedings under the decree as may be necessary to carry into effect all the promises of both parties whether they are presently performable or are only performable in the future. The statement of Dixon J. in J. G, Williamson Ltd. v. Lukey that " the remedy (of specific performance) is not available unless complete relief can-be given, and the contract carried into full and final execution so that the parties are put in the relation contemplated by their agreement " relied upon by counsel for the appellant lends no support to his submission. His Honour was discussing the kind of contract that is capable of specific performance and not the time at which a suit for the specific performance of such a contract may be instituted. In the present case the only terms of the agreement not presently performable at the date of the writ were the terms for the payment of the instalments which had not then become payable and Nives v. Nives is a direct authority that a vendor whose purchase money is payable by instalments, some of which are not yet payable, can obtain a decree for specific performance and an order for payment of the instalments that are overdue, the plaintiff to have liberty to apply in respect of future instalments as they become payable. We are of opinion that where the contract is of such a kind that the purchaser can sue for specific performance, the vendor can also sue for specific performance, although the claim is merely to recover a sum of money and that he can do so although at the date of the writ the contract has been fully performed except for the payment of the purchase money or some part thereof.

We are therefore of the opinion that his Honour had jurisdiction to give judgment for specific performance.

Mr Cotman maintains that an order for specific performance is not appropriate in circumstances where there is no term that requires an order for specific performance and the parties have agreed as to what would occur in the event of non-compliance with the clause 2.1 of the Deed (referring to clause 5.1(b) of the Deed) and where such an order would have the effect of transforming a judgment debt into a contempt. It is submitted that there is no impediment to the Investors obtaining the consent judgment in these proceedings and, consequently, a judgment debt which can be enforced in the usual manner.

Specific performance is a discretionary remedy. Mr Einfeld submits that an order for specific performance would be appropriate in the particular circumstances of this case because the effect of such an order would be that the Investors are able to treat a failure to pay the $450,000 owed under the Deed as a contempt of court and pursue Mr Barton in that respect. Disobedience of an order for specific performance may constitute a civil contempt ( CH Giles & Co Ltd v Morris [1972] 1 All ER 960; 1 WLR 307). In contrast, the 'mere' refusal by a party to an action to abide by a declaratory order is not a contempt of court (though if a declaratory order proves to be ineffective an injunction or other coercive order may be sought) ( Webster v Southwark London Borough Council [1983] QB 698; 2 WLR 217 at 222-4; Dashwood v Dashwood [1927] WN 276).

The historical basis of specific performance is a discretionary jurisdiction to do justice in cases where common law remedies are inadequate ( Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1988] AC 1). Principally, specific performance will be ordered where a damages award would be, in the circumstances, an inadequate remedy. In the present case, it is not suggested that damages would be difficult to assess; rather it is submitted in effect that an order for damages would not do justice between the parties, in circumstances where the damages award may prove to be unsuccessful in enabling recovery.

Carter on Contract notes at [45-020] that, in recent years, there has been a tendency to enlarge the situations in which the remedy is available and suggests that this has in part been due to a refusal by the courts to draw a sharp distinction between discretionary defences, such as hardship, and factors such as an element of personal service in the contract, which have in the past been treated as going to the 'jurisdiction' of the court. At [45-050], the authors note that although the fact that a contract obliges the plaintiff (or defendant) to pay money does not preclude the court making an order for specific performance, there has been a reluctance outside the context of sale of land cases to do so. It is noted that:

Where all that remains to be done under the contract is the payment of money specific performance is rarely ordered, because there is normally an adequate remedy under the common law, namely, to recover the sum which the defendant agreed to pay as a debt due or as damages. However, if the remedy at common law is not adequate there is a basis for arguing that specific performance should be available to the plaintiff.

I am not satisfied that specific performance is warranted in this case. It is well recognised that an order for specific performance will not be appropriate where there is an adequate remedy at law (as noted in Carter above and in Meagher Gummow & Lehane's Equitable Doctrines & Remedies 4th edition at [20-030]). I accept that this issue arises in the present case in the context of interests in land. However, the Investors are in a position to enter judgment for the amount payable. The fact that they might not ultimately recover the whole amount payable under that judgment (due to the financial position of the judgment debtor and other claims by secured and unsecured creditors) does not seem to me to provide a sufficient basis for the potential imposition of liability for contempt.

I therefore would not make an order for specific performance of the obligation to make payment under the 2011 Deed. Specific performance of an implied agreement to grant a mortgage to secure the newly created debt under that deed would of course be a different issue, but in the circumstances this does not arise given the restitutionary relief I propose to grant.

Conclusion

In summary, the Investors' principal position is that it is unconscionable for Mr Barton to seek to take advantage of the mistaken discharge of the mortgages having knowledge of the existence of such a mistake or the likelihood that registration of the discharge in advance of the date required under the Deed was due to a mistake. I accept that submission. The basis on which the defendants maintain that it is not unconscionable for Mr Barton now to assert unencumbered title is based on a construction of clause 6.3 of the 2011 Deed that I do not accept - namely, that it operated to release the security constituted by the mortgages because it released not only the debt under the initial deeds of loan (however that might ultimately have been calculated having regard to the off-setting claim in the Queensland proceedings) but also released (unspecified) "covenants", which are said to include the covenants under the registered Memorandum of Mortgage securing the first loan.

While I do not accept the submission for the Investors that the $450,000 debt provided for under the 2011 Deed is not a "new" or substitute debt (but simply a "crystallisation" of the previous obligation to pay the sum of $420,000 plus interest), such that the 2011 Deed simply modified the existing debt, I consider that the provisions of the deed make it clear that the parties' intention was that the mortgages were to be retained until payment of that amount (and hence that the parties should be taken to have intended that the provisions under the mortgage which extended the security to moneys that might become owing in the future would continue to operate). If the mortgages were intended to have been discharged on execution of the 2011 Deed there would be no purpose to be served in providing, as the parties did, that they were only required to be delivered on the settlement date and on payment of the outstanding sum on that date. Therefore, it cannot be said that there was no interest left to discharge as at the time of the mistaken discharge of mortgage (as was the basis for the contention that Mr Barton had not been unjustly enriched thereby).

As to the position of the mortgagee defendants, I accept that in relation to the benefit that has been conferred on them by registration of the discharges they are in the position of volunteers. Therefore, the Investors succeed on their primary submission.

Mr Einfeld's second submission was that if there was a new or substitute debt created by the 2011 Deed, the mortgages could not have been released insofar as the intention evidence by the deed was that this debt would become subject to the existing mortgages without the creation of any new mortgage - that being the natural consequence of the provision entitling the Investors to retain the certificate of title and not to hand over the discharge until payment in full. In this regard, I accept that clause 6.3 (which appears to be a boilerplate clause and which does not identify any particular covenants to which it refers in the text of the clause) must be read in the light of clause 4.1 and does not release the covenants contained in the mortgages that the Investors were entitled under clause 4.1 to retain until payment in full of the settlement sum.

As to the claim based on subrogation to the rights under the discharged mortgages (which is put as an alternative basis to the relief claimed) I am not satisfied that there has been any notional discharge of the earlier debt - what has occurred is that the parties have agreed to quantify the amount that is to be payable (thus obviating the necessity for a determination of the off-setting claim by Mr Barton) and to impose a fresh liability for that amount. I do not accept that it should be presumed that by so doing the Investors were to stand in the shoes of themselves wearing a different hat (i.e. as assignees of the mortgages that have now been discharged).

The next alternative argument is that there was an equitable mortgage arising by retention of the title deeds (though Mr Einfeld accepted that this might not give the Investors priority over the mortgagee defendants it would have given priority over Mr Barton and any unsecured creditors). Had I not found otherwise in relation to the principal claim for relief, I would have held that there was an equitable mortgage so arising and that it had the effect conceded in relation to priority over unregistered interests (though not over the other unregistered mortgage holders).

Finally, as to the claim for a possessory lien, it does not arise in light of the findings above. Further, in circumstances where I would otherwise have held that there was an equitable mortgage arising from the retention of title deeds this would make any claim to a possessory lien redundant. It would not be the case that there would be found to be both an equitable mortgage of this kind and a possessory lien. Therefore, it is not necessary to consider this issue further.

Orders

For the above reasons I make the following declarations and orders:

1. A declaration that the property known as Nanima, Wellington in the state of New South Wales, being the land contained and described in Folio Identifier 2/806578 (the "Land"), is subject to an equitable mortgage in favour of the First Plaintiffs in priority to any other subsisting equitable interest in the Land;

2. A declaration that the Land is subject to an equitable mortgage in favour of the Second Plaintiffs in priority to any other subsisting equitable interest in the Land other than the equitable mortgage in favour of the First Plaintiffs;

3. A declaration that the equitable mortgages in favour of the First and Second Plaintiffs secure payment by the First Defendant to the First and Second Plaintiffs of the sum of $450,000 specified in clause 2.1 of the Deed of Settlement dated 27 May 2011 between the First and Second Plaintiffs and the First Defendant, together with interest and the costs of these proceedings;

4. Order that the First Defendant execute two mortgages in registrable form, in the same terms as those contained in mortgages no. 286026 and no. 6667596, to stand as security for the payment of the said sum of $450,000, together with interest and the costs of these proceedings;

5. Order that the Second, Third and Fourth Defendants lift their caveats over the Land for the purpose of permitting the said two mortgages to be registered.

As to order 5, I consider that it would be appropriate to nominate a time within which this is to occur, failing which the Registrar-General should be ordered to effect the appropriate entries, but I will hear submissions as to the mechanics of this order. I consider that the appropriate order would be that the First Defendant pay the costs of the Plaintiffs of the proceedings and that the Second to Fourth Defendants bear their own costs of the proceedings. I will hear submissions as to costs at a convenient time if Counsel wish to make submissions that there should be any other costs order.

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Decision last updated: 05 April 2012

Medium Neutral Citation:	Dixon & ors v Barton & ors [2011] NSWSC 1525
Hearing dates:	17 November 2011
Decision date:	12 December 2011
Jurisdiction:	Equity Division
Before:	Ward J
Decision:	First defendant obliged to re-execute mortgages discharged by mistake of plaintiffs' solicitor. Orders made for restoration of plaintiffs' position as holders of registered mortgage security vis a vis second to fourth defendants as holders of unregistered equitable mortgages.
Catchwords:	TORRENS SYSTEM - indefeasibility of title - mortgages - discharge in approved form - registration of discharge by mistake of mortgagees' solicitor - whether mistaken discharge falls within personal equity exception to indefeasibility of title - consideration of unconscionability - whether mortgagor has been unjustly enriched by mistaken discharge and restitution should be granted to mortgagees - HELD - mortgages mistakenly discharged in circumstances giving rise to personal equity exception to indefeasibility of title - mortgagees entitled to be restored to their position prior to discharge - unconscionable for mortgagor to benefit from mistaken discharge - CONTRACT - construction - whether terms of deed entered into between mortgagees and mortgagor released mortgagees from prior security interests and any covenants contained in mortgage agreements - HELD - terms of deed did not operate to release mortgagor from covenants contained in mortgage agreements - REAL PROPERTY - whether, if deed operates to release prior security interests, equitable mortgage arises due to permitted retention of certificate of title by mortgagees - HELD - had deed operated to release prior security interests, equitable mortgage arose by reason of implicit acknowledgement that certificate of title and discharge of mortgage not to be delivered until payment of debt under terms of deed - SUBROGATION - if deed did operate to release earlier debts and security interests, whether mortgagees can be subrogated to the rights of first and second mortgagees under discharged mortgages due to notional payment out of earlier debt - HELD - no entitlement to subrogation - LIENS - whether mortgagees have possessory lien over certificate of title - HELD - no possessory lien in circumstances where equitable mortgage by retention of certificate of title established - SPECIFIC PERFORMANCE - whether mortgagor should be obliged specifically to perform its payment obligations under deed - HELD - specific performance not appropriate as damages an adequate remedy
Legislation Cited:	Contracts Review Act 1980 (NSW) Conveyancing Act 1919 (NSW) Corporations Act 2001 (Cth) Duties Act 1997 (NSW) Farm Debt Mediation Act 1994 (NSW) Real Property Act 1900 (NSW)
Cases Cited:	Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99 Bank of New South Wales v O'Connor (1889) 14 AC 273 Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221; [1998] 1 All ER 737 Barry v Heider [1914] HCA 79; (1914) 19 CLR 197 Barton v Atlantic 3 Financial (Aust) Pty Limited (deregistered) & Anor [2010] QCA 223 Barton v Atlantic 3 Financial (Aust) Pty Ltd (in liq) [2004] QSC 376; (2004) 212 ALR 348 Bellissimo v JCL Investments Pty Limited [2009] NSWSC 1260 Black v S Freedman & Company [1910] HCA 58; (1910) 12 CLR 105 Boral Recycling Pty Ltd v Wake [2009] NSWSC 712 Boscawen and others v Bajwa and another; Abbey National plc v Boscawen and others [1995] 4 All ER 769 Brunker v Perpetual Trustee Company Ltd (1937) 57 CLR 555 Burston Finance Ltd v Speirway Ltd [1974] 3 All ER 735 CH Giles & Company Ltd v Morris [1972] 1 All ER 960; 1 WLR 307 Challenger Managed Investments Ltd v Direct Money Corporation Pty Ltd [2003] NSWSC 1072; (2003) 12 BPR 22,257 Cheltenham & Gloucester Plc v Appleyard [2004] EWCA Civ 291 Citicorp Australia Ltd v Official Trustee in Bankruptcy (1996) 71 FCR 550; 141 ALR 667 Clark v Raymor (Brisbane) Pty Ltd [1982] Qd R 790 Cochrane v Cochrane (1985) 3 NSWLR 403 Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1 Cowper v Green (1841) 7 M & W 633; 151 ER 920 Dashwood v Dashwood (1927) 71 Sol Jo 911 Diamond Hill Mining Pty Limited v Huang Jin Mining Pty Limited [2011] VSC 288; (2011) 84 ACSR 616 Double Bay Newspapers Pty Limited v AW Holdings Pty Limited (1996) 42 NSWLR 409 Duke Finance Ltd (in liq) v Commonwealth Bank of Australia (1990) 22 NSWLR 236 Elder's Trustee and Executor Company Limited v Bagot's Executor and Trustee Company Limited [1964] SASR 306 Elderly Citizens Homes of South Australia Inc v Balnaves (1998) 72 SASR 210 Ex parte Langston (1810) 17 Ves 227; 34 ER 88 Farah Constructions Pty Limited v Say-Dee Pty Limited [2007] HCA 22; (2007) 230 CLR 89 FNCB-Waltons Finance Limited v Crest Realty Pty Limited (1977) 10 NSWLR 621 GE Commercial Corporation (Australia) Pty Limited v L&B Enterprises Pty Limited [2009] NSWSC 770 Ghana Commercial Bank v Chandiram [1960] AC 732 Grundy v Ley [1984] 2 NSWLR 467 Gye v McIntyre [1991] HCA 60; (1991) 171 CLR 609 Hammonds v Barclay (1802) 2 East 227 Heid v Reliance Finance Corporation Pty Limited [1983] HCA 30; (1983) 154 CLR 326 Heperu Pty Ltd v Belle [2009] NSWCA 252; (2009) 76 NSWLR 230 Hewett v Court [1983] HCA 7; (1983) 149 CLR 639 Lapin v Abigail (1930) 44 CLR 166 Latec Investments Ltd v Hotel Terrigal Pty Limited (in liq) (1965) 113 CLR 265 Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548; [1992] 4 All ER 512 Majeau Carrying Company Pty Ltd v Coastal Rutile Ltd (1973) 129 CLR 48 Mercantile Credits Ltd v Jarden Morgan Australia Ltd [1991] 1 Qd R 407 Minister for Education and Training v Canham [2004] NSWSC 274; (2004) NSW ConvR 56-080 Moffett v Dillon [1999] 2 VR 480 MPS Constructions Pty Ltd (in liq) v Rural Bank of New South Wales (1980) 4 ACLR 835 Nathanial Kelburn Dunbar Barton v Atlantic 3 Financial (Australia) Pty Limited & ors (unreported 28 October 2009) Nearhaze Pty Ltd v The Official Trustee [1999] NSWSC 959 Paul v Speirway Ltd [1976] 2 All ER 587 PC Developments Pty Ltd v Revell (1991) 22 NSWLR 615 Performance Capital Mortgage Pty Ltd v Motive Finance & Leasing Pty Limited [2010] NSWSC 429 Peters v Lithgow Forge Pty Limited & Ors [2010] NSWSC 283 Pratt v Vizard (1833) 5 B & Ad 808; 110 ER 989 Protean Enterprises (Newmarket) Pty Ltd v Randall [1975] VR 327 Queensland Premier Mines Pty Ltd v French [2007] HCA 53; (2007) 235 CLR 81 Re St George Bank - A Division of Westpac Banking Corporation [2011] NSWSC 730 Registrar General v Gill (unreported, NSWCA, 16 August 1994) Saffron Sun Pty Ltd v Perma-Fit Finance Pty Ltd (in liq) [2005] NSWSC 1317; (2005) 65 NSWLR 603 Scallan v Registrar-General (1988) 12 NSWLR 514 Schultz v Corwill Properties Pty Ltd (1969) 90 WN (NSW) 529 Shawyer v Amberday Pty Limited (In Liq) [2001] NSWSC 399 Shiloh Spinners Ltd v Harding [1973] AC 691 State Bank of New South Wales v Berowra Waters Holdings Pty Limited & Ors (1986) 4 NSWLR 398 State Bank of New South Wales v Geeport Developments Ltd (1991) 5 BPR 11,947 State Bank of South Australia v Rothschild Australia Ltd (1990) 8 ACLC 925 Stein v Blake [1996] AC 243; [1995] 2 All ER 961 Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489 Swiss Bank Corporation v Lloyds Bank Limited & Ors [1982] AC 584 Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422 Tresize v Bilato Nominees Pty Ltd & Northern Gold NL (1986) 83 FLR 44 Turner v Bladin (1951) 82 CLR 463 Tutt v Doyle (1997) 42 NSWLR 10 UTC Ltd (in liq) v NZI Securities Australia Ltd (1991) 4 WAR 349 Re Wallis & Simmonds (Builders) Ltd [1974] 1 All ER 561; [1974] 1 WLR 391 Webster v Southwark London Borough Council [1983] QB 698; 2 WLR 217 Whiteley v Delaney [1914] AC 132 Wilkie v Gordian Runoff Limited [2005] HCA 17; (2005) 221 CLR 522 Young v Matthew Hall Mechanical & Electrical Engineers Pty Ltd (1988) 13 ACLR 399
Texts Cited:	Butt, Land Law (3rd edn) Carter, Carter on Contract (online edn) Halsbury's Laws of Australia (online edn) Meagher, Gummow & Lehane, Equity: Doctrines and Remedies (4th edn) Morgan et al, Fisher & Lightwood's Law of Mortgage (2nd Australian edn) Young, Croft & Smith, On Equity (2009)
Category:	Principal judgment
Parties:	John Dixon as Trustee for the Seingensund Unit Trust, Yalbell Pty Ltd, Christopher Mark Hookham and Sharon Hookham as Trustees for the Kayak Superannuation Fund, Christopher Mark Hookham as Trustee of the Gilder Unit Trust, Peter Clark and Lyn Clark as Trustees for the Brigadoon Unit Trust, Penelope Wickham, Geoffrey Robert Chadwick and Heather Quenthlyn Chadwick, Laragh Investments Pty Ltd, James Shaw and Cynthia Fisher as Trustees of the Blunt Family Trust (First Plaintiffs) Ian Richard Lewis and Moya Anne Lewis (Second Plaintiffs) Nathanial Kelburn Dunbar Barton (First Defendant) Roberts Fund Pty Ltd (Second Defendant) Kerrie Lardner-Smith and Trent Lardner-Smith (Third Defendant) Malcolm Nelson Johns as executor of the estate of the late Edith Pearl Welsh (Fourth Defendant)
Representation:	Counsel M Einfeld QC with J Horowitz (Plaintiffs) N A Cotman SC with E Hyde (Defendants) Solicitors Osbornes Lawyers (Plaintiffs) Malcolm Johns & Company (Defendants)
File Number(s):	11/353160