Fink v Robertson
[1907] HCA 7
•28 March 1907
864 H IG H COURT
[1907,
[HIGH COURT OF AUSTRALIA.]
FINK . .
A ppellant ;
Defendant,
ROBERTSON AND ANOTHER
Respondents.
Plaintiffs,
ON a p p e a l f r o m t h e s u p r e m e c o u r t
o f
VICTORIA.
H. C. OF A. Transjer o f Land Act 1890 (No. 1149), secs. 74, 89, 95, 121, 124, 129, 130, 2.30—
1907. Mortgage—Foreclosure—Subsequent right o f mortgagee to sue on covenant in mortgage—Extinguishment oj mortgage debt.
Melbourne,
On foreclosure under secs. 129 and 130 of the Transfer o f Land Act 1890,
March 8, 11,
12, 13, 14, 15, the title of the mortgagee, when, pursuant to sec. 130, he is registered as pro
28. prietor of the mortgaged land, is, in the absence of fraud, absolute and unimpeachable, and, by reason of the provision in sec. 130 that the mortgagee
Griffith C.J.,
Barton,
shall be deemed a transferree of the mortgaged land, and of the other pro
O’Connor, and
Hig<̂ ins J.T.visions of the Act as defining the obligations incurred by a transferree of mortgaged laud, with respect to the mortgage debt, the mortgage debt is extinguished, and, therefore, no action will lie subsequently by the mortgagee upon the covenant in the mortgage to repay the mortgage debt.
So held, by Griffith C.J., and Barton and O’Connor JJ. (Higgins J.
dissenting as to extinguishment of the mortgage debt).
In re Premier Permanent Building Land and Investment Association ; Ex
parte Lyell, 25 V. L.R., 77 ; 21 A .L .T ., 67, overruled.
Judgment of Supreme Court (Robertson v. Fink, (1906) V .L.R ., 554; 28
A.L.T., 27), reversed.
Appeal from the Supreme Court of Victoria.
By an instrument of mortgage under the provisions of the Transfer of Land Act 1890, dated 18th March 1891, Catherine Fink mortgaged a certain house and land in St. Kilda-road,
4 C.L.R.] OF AUSTRALIA,
865
Melbourne, and known as “ Tlie Grange,” of which she was the
H. C OF A.
registered proprietor, to one James Robertson to secure payment
1907.
of the sum of £17,000. The mortgage instrument, which was
F ink
V.
duly registered, was not in fact under seal. By the mortgage
R obhrtson.
the mortgagor covenanted to pay to the mortgagee, his executors or transferrees the principal sum of £17,000 on the 18th March 1894, find, so long as the principal sum or any part thereof remained unpaid, to pay interest on such amount as remained unpaid at the rate of seven per cent, per annum by equal half- yeax'ly payments on the 18th September and 18th Marcli in each and every year, the first of such payments to be made on the 18th September 1891, and also to pay all land tax and other taxes, charges, assessments, impositions, and outgoings whatsoever be coming payable in respect of the land comprised in tlie mortgage. Default having been made in payment of interest, the principal wa.s, under a power contained in the mortgage instrument, called in, but was not paid. Thereupon the mortgagee, after due com pliance with the provisions of the Act, procured an order for foreclosure, which was duly entered in the Register Book on the 1st November 1898, and on the 30th December 1898 received a certificate of title in his own name to the property. James Robertson died on the 11th June 1895, and, the principal sum and interest and certain taxes, charges and assessments still remaining unpaid, an action was brought by his executors against Catherine Fink to recover the principal sum of £17,000, together with in terest from the 18th September 1892, and the rates, taxes, and assessments, the whole amount claimed amounting to £28,754
17s.
lid .
The only defence material to this report was a contention that, by reason of the order for foreclosure procured by James Robert son, and of the registration of him as proprietor under the Trans fer of Land Act 1890 of land, the mortgage and any obligations thereunder ceased to be of any operation, and the defendant ceased to be liable in respect of the provisions for payment con tained in the mortgage.
The action was heard b̂ ̂ Ghomley J., who gave judgment for
the plaintifis ; Robertson v. Fink (1).
(1) (1906) V. L. R., 654 ;
‘2.S A. L. T., 57.
8 6 6
[1907.
H IGH COURT
H. C. OF A.
The defendant now appealed to tlie High Court.
1907.
Weigall K.C. and Starke, for the appellant.
The right which,
h'lNK:
V. under the law existing prior to the Transfer of Land Acts, a
R obertson.mortgagee had after foreclosure to sue on the covenants in the
mortgage, and thus to re-open the mortgage is inconsistent with the provisions of those Acts, and, as to land under those Acts, does not exist. As to the rights of the mortgagor and the mortgagee after foreclo.sure, see Lockhart v. H ardy (1); Ganqobell v. Holy- land (2); K inn aird v. Trollope (3). The intention of the Tran.s- fer of Land Acts is by foreclosure to put the mortgagor and mortgagee in the same position as if the mortgagor had conveyed the land and the equity of redemption to the mortgagee. Since under those Acts the legal estate does not pass to the mortgagee, there is in fact no such thing as an equity of redemption. By Sec. 130 of the Transfer of Land Act 1890 the mortgagee, upon foreclosui’e, is to be deemed to be the transferree of the mortgaged land, that is, the transferree from the mortgagor, and by virtue of sec. 95, the transferree of mortgaged land is bound to in- demnif}’’ the transferi'or against all liability in respect of the mortgage debt. Foreclosure under the Act therefore operates as an extinguishment of the debt. The same result follows if the mortgagee after foreclosure is to be treated as a transferree of the land free from the mortgage, for by sec. 89 the transferree is to be liable for all the liabilities to which he would have been liable if he had been the former propi'ietor. So under sec. 121 a cove nant is implied in the mortgage that the transferree of the mort gagor will pay the mortgage debt. That covenant runs with the land : In re Burton ; Ex parte Union Bank o f Australia Ltd. (4), disapproving of Australian Deposit and Mortgage Bank v. Lord ip). So that, in any one of those views, as soon as Robertson became registered proprietor of the land, the mortgage debt became extinguished.
[ H ig g in s J.—What more does sec. 130 provide as to a fore closure than was provided by a decree in equity for foreclosure ?] The decree did not mean what it said, but the words of the
(1) 9 Beav., .̂ 49.
(4) 27 V.L.R., 4.37. at p. 442; 23
(2) 7 Ch. 1)., 166.
A.L.T., 114, fier H ohoydJ.
(3) 39 Ch. D., 636.
(5) 2 V.L.R. (L.), 31.
4 C.L.ll.] OF AUS'L'KALIA,
867
section must be interpreted to mean what they say.
No H. C. o f A.
machinery is provided by the Act for re-opening a foreclosure. ^ ^
Under tlie Real Property Acts of New South Wales it has been
held that there is no power to re-open a foreclosure : Campbell v.
(̂,jjkktson
Bank of New South Wales ( l ) \ Matton v, Lipscomb (2). The
-----
words of sec. 114 of the Real Property Act 1863 of New South Wales are not so strong as those of sec. 130 of the Transfer of Land Act 1890. A foreclosure order under sec. 130 operates as a vesting order wdiich vests in the mortgagee the land of the mortgagor as if it had been transferred by the mortgagor to the mortgagee, and it vests the land as it existed at the date of the mortgage. Thus, in the case of a second mortgage, on a fore closure order, the second mortgagee would be registered as having the estate of the mortgagor as at the time the second mortgage was granted, and the second mortgagee would therefore have to indemnify the mortgagor against the first mortgage debt. Similar words to the words “ shall be deemed a transferree ” in sec. 130, are used in other sections with a similar object: See secs. 118 and 188. If the view is taken that a mortgagee who forecloses takes the land with the burdens which existed at the time of the registration of the mortgage, the Act works out scientifically. Sec. 124 also bears out this view. The first part of it provides for the somewhat anomalous position into which mortgagor and mortgagee have been put by the Act, giving certain rights and remedies to the mortgagee, and then the second part is a proviso that, when after foreclosure the mortgagee has become proprietor of the land, none of his rights or liabilities incident to his new ownership are to be affected by the previous part of the section.
[Counsel also referred to Bridgman v. Daw (3); A dair v. Carden (4); Ashhurner on Mortgages, ip. 374 ; Ex parte National Trustees, Executors and Agency Co. of Australia Ltd. (5); Registrar of Titles v. Paterson (6); Trust and Agency Co. v. Markwell (7); Greig v. Watsoyi (8); Canaway s Real Property Act, p. 99 ; In re Premier Permanent Building, Land and
(1) 16 N.S.W . L.R. (Eq.), 285; 11
(5) 19 A.L.T., 222.
App. Cas., 192.
(6) 2 App. Cas., 110.
(2) 16 N.S.W. L.R. (Eq.), 142.(7) 4 Q(l. S.C.R., 50.
(3) 40 W.R., 253.(8) 7 V.L.R. (Eq.), 79 ;3A .L.T., 13.
(4) 29 L.R. Ir., 469.
8 6 8
[1907.
H IG H COURT
H.C. OF A. Investment Association, Ex imrte Lyelt (1); Waring v. ITartZ
| 1907. | (2); Bell v. Rotve (3); Weigall v. Gascon (4); Conveyavcing Act |
| F ink | 1905, sec. 36.] |
V.
Robert.son.As to the question of the limitation of the action hy reason of
the Transfer of Land Act 1890, sec. 92, and the Real Property Act 1890, secs. 47, 49, counsel referred to 3 & 4 Will. IV. c. 83 ; 21 Jac. I. c. 63; Kelly v. Fuller (5); Payne v. The K ing (6); In re Currie (7); Cooper v. Cooper {S)\ Carson’s Real Property Statutes, p. 211 ; Hunter v. Nockolds (9); Sutton v. Sutton (10); la re Frisby; Allison v. Frishy (11); Kirkland v. Peatfield (12).
Mitchell K.C. and Guest, for the respondents. The Transfer of Land Act makes no alteration in the law of foreclosure. Sec. 130 merely provides a simple and expeditious way of givincr to the mortgagee the same right to obtain wliich, without the section, he would have had to bring a su it: In re Premier Permanent Building, Land and Investment Association] Ex parte Lyell (1). The legislature has, in sec. 130, followed very closely the ordinary form of a decree for foreclosure: Scton on Decrees, 1st ed., p. 211 ; Frail v. Ellis (13); Seton on Decrees, 6th ed., vol. iii., p. 1992. The ordinary position of a mortgagee is that, notwitli- ,standing he has foreclosed, he can still pursue his personal remedy against his debtor, subject only to this, that he must be in a position to give back the wliole property mortgaged : Perry V. Barker (14). Secs. 129 and 130 are merely machinery sections,
and are not intended to alter the law, except so far as it is incon- .sistent with that machinery. They are skeleton sections, and the Court must fill them in so as to provide for cases that may arise under them. Ex parte National Trustees Executors and Agency Co. of Australia Ltd. (15). Sec. 124 is very strong to show that sec. 130 was not intended to take away the right of a mortgagee after foreclosure to sue on the covenants, for after providing that a mortgagee is to have certain rights, lest it should be con-
(1) 25 V.L.R., 77 ; 21 A.L.T., 67.(8) 26 V.L.R., 649 ; 22 A.L.T., 215.
(2) 7 Ves , .932.(9) 1 Mao. & G., 640, at p. 650.
(3) 26 V.L.R., 511 ; 22 A.L.T., 156.(10) 22 Ch. L>., 511.
(4) 3 V.L.R. (L.), 294.
(11) 43 Ch. 1)., 106, at p. 110.
(5) 1 8.A. L R., 15. ,(12) (1903) 1 K.B., 756,
(6) (1902) A.C., 552.
(13) 16 Beav., 350.
(7) 25 V.L.R., 224, at p. 227 ; 21
(14) 8 Ves., 527 ; 13 Ves., 198.
A.L.T., 127.
(15) 19 A.L.7'., 222.
4 C.L.R.J OF AUSTRALIA.
869
tended that the giving of those rights until foreclosure was
FT. C. OF A.
intended to mean that the mortgagee was not to Jiave an)- rights
1907.
against the mortgagor after foreclosure, the proviso was put in that the rights of the mortgagee after foreclosure were not to be affected.
-----
[ H ig g in s J. as to those rights referred to Farrington \ Smifli (1); (Jummrrcial Bank v. Breen (2).]
One result of the contrary view would be tliat, if to secure a large debt several mortgages over different pieces of land were given, if the mortgagee foreclosed one of the mortgages the whole debt would be gone. In that view sec. 130 would be a trap for mortgagees. There was no intention to put mortgagees to their election. The provisions in secs. 113 to 130 relating to mortgages contain inherent evidence that the remedies of the mortgagee are cumulative and independent, and are not to be exclusive of one another. Those remedies may be pursued until the debt is paid. There are cases in which the foreclosure must be re-opened, e.g., in case of fraud, and means must be found for re-opening it.
[Counsel also referred on tliis point to Janiea v. James (3); Pryce v. Bary (4); Lees v. Fisher (5) ; Sadler v. Worley (6); In re K eld a y ; Ex yarte Meston (7) ; Real Property Act 1801 (Queensland) sec. 00 ; Potvers Real Property Acts of Queensland, p. 80 ; Hogg’s Australian Torrens Acts, p. 942 ; Bucknall v. Reid (8); Seton on Decrees, 6th ed., pp. 1,912, 1,990, 2,042 ; K in naird V. Trollope (9); Dixon v. Wigrani (10); Stevens v. Theatres Limited (11); British South A frica Co. v. Gonipanhia de Mocam- hique (12). As to the question of limitation they referred to Torrens A^istr<dasian Digest, col. 200; Kelly v. Fuller (13); Sinclair v. Gumpertz (14); Flanagan v. Bladen (15); In re Currie (10); Payne v. The Queen (17); Cork and Bandon R ail way Co. V. Goode (18) ; Ln re Cornwall Minerals Railway Co.
(1) 20 V .L .R ., no ; 15 A.L.T., 218.
(11) (1903), 1 Ch. 857.
(2) 15 V.L.R., 572: II A.L.T., 92.(12) (1893) A.C., 602, at p. 028.
(3) L.R., 16 Eq., 153.(13) 1 S.A. L.R., 15.
(4) 2 Drew., 41.(14) 15 W.N. N .S.W ., 125.
(5) 22 C'h. I)., 283.(15) 17 A.L.T., 69.
(6) (1894), 2 Ch., 170.
(16) 25 V.L.R., 224, at p. 233; 21
(7) 36 W.R., 585.
A.L.T., 127.
(8) 10 S..A. L.R., 188.(17) 26 V.L.R.. 705, at pp. 714, 715.
(9) 39 Ch. D., 636, at p. 649.(18) 13 C.B., 826.
(10) 2 Cr. & .L, 613.
870 H IGH COURT
[1907.
H. C. ov A.
Paget v. Foley (2); Sims v. Thomas (̂ 3); Goote on Movt-
gobges, 7th ed., p. 9.]
F ink
Weigall K.C., in reply. Apart from the Transfer of Land Act,
Robert.son.
there was much complicated law as to foreclosure and much authority to the effect that after foreclosure a mortgagee could sue upon the covenants, though there was much question as to the terms upon which he could sue. The Act should therefore be treated apart from that law and those authorities. The Act contemplates that upon foreclosure of a particular instrument the rights under it are gone. It is also the policy of the Act to keep each title separate from all others.
[H iggins J.—Is there anything in the Act which is incon
sistent with the mortgagee suing on the covenants after fore
closure ?]
Sec. 121 provides that the burden of a mortgage is to be borne by the mortgagor’s transferree, and sec. 130 makes the mortgagee after foreclosure the owner as transferree. The burden created by the registered instrument always runs with the land, and when the instrument is removed, the burden is removed.
[He also referred to Williams v. Hunt (4); Company of Tobacco-Pipe Makers v. Loder (.5); Dyson v. Morris {Q) ; Robbins on Mortgages, p. 1,003.]
Cur. adv. vult.
March 28,
The judgment of Griffith O.J., Barton and O’Connor JJ.,
was read by
Griffith C.J. This was an action upon the covenants con tained in an instrument of mortgage dated 18th March 1891, and duly registered pursuant to the Transfer of Land Act 1890. The defendant, with other defences, pleaded that the mortgagee obtained under the provisions of that Act an order for foreclosure, in pursuance of which he was registered as proprietor of the mortgaged land, and thereupon became the transferree thereof, and that a certificate of title was issued to him, and contended that thereupon her obligations under the instrument of mortgage
(1) (1897), 2 Ch., 74.(4) (1905) 1 K .B., 572.
(2) 2 Bing. N.C., 679. (5) 20L .J.(N .S .)Q .B .,414, atp. 416.
(.3) 12 A. & E., 536.
(6) 1 Hare, 413, at p. 418.
4 C.L.K.J OF A U ST R A L IA
871
were extinguished. Tlie facts were proved as alleged, but
Chornley
C- of A.
J., following, as he was bound to do, the decision of the Full Court
in In re Fremier Permanent B uiidivg dc. Association, Ex 'parte
xonk
Lyell (1), overruled this defence, and, holding that none of the
other defences were established, gave judgment for the plaintitfs.
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The Transfer of L<md Act, first passed in Victoria in 1864, established, as is well known, a new mode of conveyancing, the fundamental principle of which was that title to land and interests in land should depend upon registration, and not upon instruments inter partes. Such instruments were to be used as means for obtaining registration, but did not aflect the land itself until registered. By sec. 3 all laws. Statutes, Acts, and rules whatsoever, .so far as incon.sistent with the Act, were not to apply or be deemed to apply to land under the operation of the Act. The order for foreclosure relied upon by the appellant was issued by the Commissioner of Titles under the provisions of sec. 130, which describes the order by that name. The respoiidents contend that the use of the term “ order for foreclosure ” imports the genei'al law as to foreclosure of mortgages as it existed before the Act, except so far as that law is inconsistent with the Act. They say that it was part of the law of mortgages as regards foreclosure that a mortgagee could after foreclosure sue upon the covenants in the mortgage, and that the bringing of the action by him had the effect of opening the foreclosure. And they say that there is nothing in the Act inconsistent with this law. On the other hand the appellant contends that foreclosure under the Act cannot be opened, and that consequently, as that relief cannot be given to the mortgagor, an action for the mort gage debt will no longer lie.
It will be convenient to consider in the first place what really w'ere the principles of law and equity to which appeal is thus made. A mortgage of land was in form a conveyance of the legal estate subject to a condition, and a Court of Law regarded it merely as such, so that when the condition had happened the estate became absolute. The mortgagoi-, besides conveying the land, usually entered into a covenant for repajunent of the mort gage debt, and this covenant was of late years generally contained
(1) 25 V .L.R., 77 ; 21 A.L.T., 67.
872 H IG H COURT
[1907,
H.C. OF Ain the .same instrument. Courts of Eijuity had no jurisdiction to
| 1907. | enforce the covenant, but they asserted jurisdiction to grant |
| F ink | relief against the consequences of the breach of condition. Tliis |
V.
was done in a proceeding called a .suit for redemption.
They also
Robertson.
asserted jurisdiction to put an end to the mortgagor’s right to redeem. This was done in a proceeding called a suit for fore closure, the effect of which in the case of a legal mortgage was merely to bar the personal right of the mortgagor to ask for redemption. The covenant to pay, however, was not affected by the foreclosure, and if the mortgagee brought an action upon it in a Court of Law the defendant, unless he could prove payment or release or something equivalent, had no defence. But a Coui’t of Equity would not allow the mortgagee to proceed with the action unless he was botli able and willing to reconvey the land to the mortgagor on payment of the debt. In this .sense, and this sense only, the foreclosure was opened, or rather wa,s liable to be opened. If the mortgagee had after foreclosure parted with tlie land so that redemption was impossible, the Court would restrain the action absolutely: Palmer v. Hendrie (1). So much was settled. There is no reported case showing the conditions on whicli the Court would have allowed the mortgagee to enforce his judgment under the circumstances—whether they would have allowed the mortgagor at his option to treat the foreclosure as a satisfaction of the debt pro tunto at the date of the decree, or whether they would have regarded the liability for interest as continuing after the decree, and treated the mortgagee as a mortgagee in possession and liable to account on that basis. But it is inconceivable that, if the mortgagor was unable to redeem, the Court would have allowed the mortgagee to issue execution for the whole amount of the debt and also to retain the land.
It follows from what has been .said that it is inaccurate to say that a mortgagee by suing upon the covenant in the mortgage opened the foreclosure. His title to the land was, and remained absolute, but the Court of Equity would not allow him to recover the whole amount of the debt without reconveying the land.
In the case of an equitable mortgage without an agreement to give a legal mortgage a Court of Law recognized no title in the
(1) 27 Beav., 349.
4 C.L.H.] OF AUSTRALIA.
873
H. C. OF A.
mortgagee.
On tlie other hand a Court of Equity had no juris
1907.
diction to enforce payment of the debt.
The remedy of the
mortgagee, if he desired to make the land available in satisfaction
F ink
V.
(or perhaps in reduction) of the debt, was to institute a suit in a ĵ „bebtson for foreclosure and not for sale: James v. James (1). The decree went on to direct that on failure to pay the debt on the appointed day the defendant should convey the laud to the plaintift'. There is no instance reported in which a conveyance made in obedience to such a decree has been set aside on the ground of a subsequent action having been brought by the mortgagee to recover the debt, or in which the mortgagee has afterwards sued to recover the debt or any part of it, although, if the debt were also secured by some other instrument upon wdiich an action could be brought, the same doctrines w'ould probably have been applied. Since the Judicature Act, however, it .seems clear that after a judgment for foreclosure a separate action for the debt could not be brought upon the instrument by wdiich the equitable mortgage was created, if it was created otherwise than by mere deposit of the deeds. And we doubt if it could be brought at a ll: Williams v. Hunt (2).
This, then, being the previous law, how far is it inconsistent wdth the Transfer of Land Act 1890 ? It is necessary to refer to some of the sections of that Act in detail. It has been already pointed out that the fundamental principle of the Act is title by registration (sec. ()3). The registered proprietor, except in case of fraud, has an absolute and unchallengeable title (sec. 74).
Sec. 89 provides that a proprietor of land, or of a lease, mortgage, charge, or of any estate, right or interest in land, may transfer it by a transfer in one of the prescribed forms, and that, upon registration of the transfer, the estate or interest of the proprietor shall pass to the transferree, and pi’oceeds :—“ And such transferree shall thereupon become the proprietor thereof, and wdiilst continuing such shall be subject to and liable for all and every the same requirements and liabilities to which he would have been subject and liable if he had been the former proprietor or the original lessee mortgagee or annuitant.”
(1) L.R. 16 Piq., 15.1.
(2) (1905) 1 K.B., 512.
VOL. IV.
57
874 H IG H COURT
[1907.
| H. | C. OF A.Sec. 95 is as follows :—“ In every transfer of land under the | |
|
F inkbe implied a covenant with the transferror by the transferree,
V.
Robertson.binding the latter and his heirs executors administrators and
transferrees that he or they will pay the interest secured by such mortgage after the rate and at the times and in the manner therein specified, and will pay the annuity at the times and in the manner specified in the charge, and will indemnify and keep harmless the transferror and his representatives from and against ’ the principal sum secured by the mortgage and from and against all liability in respect of any of the covenants therein contained or by this Act declared to be implied therein on the part of the transferror.”
Sec. 113 provides that a proprietor of land may mortgage it
“ by signing a mortgage” in the prescribed form.
Sec. 114
declares that a mortgage shall, when registered, ha.ve effect as a security, but shall not operate as a transfer of the land mort gaged. It has, therefore, some of the characteristics of an equitable mortgage apart from the Statute.
The rights and remedies of the mortgagee on default are declared by secs. 116 and the following sections. Sec. 116 con fers a power of sale on default in payment or performance of covenants. Sec. 117 provides for the appropriation of the pur chase money on sale. Sec. 118 provides that, upon registration of a transfer signed by the mortgagee for the purpose of such sale, the estate of the mortgagor shall pass to the purchaser free from all charges subsequent to the date of the mortgage, and that the purchaser when registered as proprietor “ shall be deemed a transferree of such land.” Sec. 119 enumerates -certain remedies to which the mortgagee is entitled, including a right to take possession or distrain on tenants, and a right “ to foreclose the right of the mortgagor or his transferrees to redeem the mort gaged land in manner hereinafter provided.” Sec. 121 provides that in ever}'' mortgage there shall be implied covenants with the mortgagee and his transferrees by the mortgagor binding the latter and his heirs, executors, administrators, and transferrees that he or they will pay the principal money mentioned in the mortgage on the appointed day, and pay interest so long as the
4 C.L.H.] OF A USTRALIA.
875
principal reniains unpaid, and will repair and keep in repair all
H. C. OF A.
1907.
buildings upon the mortgaged land.
Sec. 123 provides that a
covenant to insure in the prescribed form shall be binding on the
F isk
V.
transferrees of the mortgagor.
R obertson.
Sec. 124 confers on the mortgagee, in addition to all other rights and powers, all the rights and remedies to which he would have been entitled if he were the owner of the legal estate, but imposes no liabilities. Secs. 125 and 126 provide for the case of certain actions brought by a mortgagee under this power. Secs. 129 and 130 deal with the right now particularly in question. A special procedure is prescribed which must be followed. After default in payment has continued for six months the mortgagee may make a written application to the Commissioner for fore closure, but before doing .so the land must have been offered for sale by jrublic auction by a licensed auctioneer alter a prescribed notice to the mortgagor. The application to the Commissioner must state this fact, and the further fact that the amount of the highest bidding was not sufficient to satisfy the mortgage debt, and that notice of the ai^plication has been given to all persons interested in the land subsequent to the mortgage, and these statements are required to be verified by statutory declaration. Tlie Commissioner is thereupon to offer the land by advertise ment for private sale, and after the expiration of a month he may issue to the applicant, i.e., the mortgagee, “ an order for foreclosure,” unless in the interval a sufficient sum has been realized by sale of the land to satisfy the principal, interest, and expenses. Sec. 130 then proceeds ;—“ Every such order for fore closure under the hand of the Registrar when entered in the register book shall have the effect of vesting in the mortgagee or Ids transferree the land mentioned in such order, free from all right and equity of redemption on the part of the mortgagor or of any person claiming through or under him subsequently to the mortgage : and such mortgagee or his transferree shall upon such entry being made be deemed a transferree of the mortgaged land, and become the proprietor thereof, and be entitled to receive a certificate of title to the same.”
In our opinion the title of the mortgagee, when so registered as proprietor, is absolute and unimpeachable except on the ground
876 H IG H COURT
[1907.
H. C. OF A.
of fraud. This is the plain meaning of the words of secs. 74
1907. and 130 when read together. We entirely concur in the reason
F ink
ing of Faucett J. in the case of Camj)hM v. Bunk of New South
V.
R obertson.Wales (1), whose judgment, after being reversed by the Full
Court of New South Wales, was restored by the Privy Council (2), who, however, decided the case on another ground and expressed no opinion on this point. Besides the reasons given by that learned Judge there is a further reason : if such an action could be brought, it would, in a case in which there were subsequent incumbrances, involve the re-opening of the register and its restoration to its original condition. Such a proceeding is, we think, wholly inconsistent with the scheme of the Act, and the Court has no jurisdiction to order it.
But, except so far as regards the exclusion of the asserted jurisdiction of Courts of Equity to re-open a foreclosure in any case in which it might be just to do so (see Campbell v. Holyland (S) ), there is no neccssaiy inconsistency between the old law and the new, so far as regards the mere effect of the order of foreclosure. If, notwithstanding such an order under the Act, the mortgagee can still sue on his covenant, we have no doubt that the Court would not allow him to recover the whole debt by execution unless he is both able and willing to restore the land on pay ment, nor in any event to issue execution for the whole debt and also retain the land. But this does not dispose of the question wliether an action on the covenant will lie after foreclosure. Tlie reasoning on each side involves a fallacy:—Thus :—“ At common law a mortgagee could sue on his covenant after foreclosure, but a Court of Equity would impose conditions upon him ; Under the Act, if a mortgagee can sue on his covenant after foreclosure the Court will in a proper case impose conditions : Therefore there is no reason why he should not sue on the covenant.” Such is the argument on one side. On the other side it is said : —“ The Court cannot impose the same conditions as before: therefore the action will no longer lie.” The only legitimate conclusion that can be drawn from the premises is that the right to sue on the covenant is not conclusively negatived by the mere
G) 16 N.S.W. L.R. (Eq.), 285.
(2) 11 App. Cas., 192.
(.8) 7 Ch. I)., 166
4 C.L.H.] OF AUSTRALIA.
877
circumstance tliat the mortgagor is no longer entitled to have H- C. of a .
the foreclosure opened on any other ground than fraud.
But this
leaves the question whether the continuance of the right to sue
F ink
V.
is consistent with the provisions of the Act entirely untouched.
Robertson.
We agree that in considering this que.stion regard must be had to the law as it existed before the Act. Now, it was a settled rule that the assignee of an equity of redemption was, in the absence of agreement to the contrary, bound to indemnify the mortgagor against the mortgage debt: Wari'iiff v. Ward (1); Dodson v. Downey (2). This obligation was generally regarded as arising from an implied contract. It followed from this doctrine, and also from the doctrine that, when land and a charge upon it are vested in the same penson in the same right, the charge is extinguished unless a contrary intention is shown, that if the mortgagor assigned his equity of redemption to the mortgagee •simpliciter, the mortgage debt became extinguished so far as it was created by and enforceable under the mortgage deed, for, as Buckley J. said :—“A man cannot be the assignee of his own debt and cannot be mortgagee of property of which he is also mortgagor ” : In re George Routledge & Sons Ltd. ; Hummel v. George Routledge Sons Ltd. (3); altliough, if by other agree ment between the parties it appeared that it was intended to keep the charge alive, effect would be given to that intention. (See per Cozens-Hardy L.J. in Capital and Counties Bank iJd. v. Rhodes (4).
Bearing this I'ule of law in mind, and regarding it as still in force except so far as it is inconsistent with the provisions of tlie Act, we proceed to consider the relevant provisions. It follows from tlie provisions of sec. 95, which has been already read, that if a mortgagor transfers the mortgaged land to the mortgagee the mortgage is extinguished. The Act does not make express provision to that effect, for it was obviously unnecessary to do so. But the mortgagee would, of course, in such a case be entitled to a certificate of title subject only to incumbrances created by the mortgagor in favour of other persons. We have already referred
to sec. 118.
By sec. 188 provision is made for obtaining a vesting
(1) 7 Ves., .‘132, atp . 337.(3) (1904) 2 Ch., 474, at p. 479.
(2) (1901) 2 Ch., 620.
(4) (1903) 1 Ch., 631, at pp. 652-3.
878 H IG H COURT
[1907.
H, C. o f A. order under the Trustee Acts iji respect of land subject to the
Act, and it is enacted that upon entry in tlie register book of an
F inkorder vesting the land in any person, such person “ shall become
V.
the transferree and be deemed to be the proprietor thereof.”
By
R obertsox.
sec. 225 persons entitled to an estate of freehold in possession on transmission bĵ devise may apply to be registered as proprietors. Sec. 226 provides that if the application is granted the applicant shall be registered as proprietor by entry in the register, and that upon such entiy being made the applicant “ shall become the transferree of such land or estate, and be deemed to be the pro prietor thereof.” Sec. 227 contains similar provisions, and uses similar language with respect to persons becoming entitled in remainder or reversion on transmission. Sec. 228 provides in like language for the registration of the husband of a female pro prietor upon her marriage. Sec. 229 provides for the registration of the survivor of joint proprietors. Sec. 230 is as follows;— “ Without lessening or prejudicing any of the other rights powers and remedies herebj ̂ given and conferred, every proprietor and every transferree when registered of any land lease mortgage or charge shall whilst continuing so registered have the same estates rights powers and remedies and be subject to the same engagements obligations and liabilities and may sue and be sued in his own name at law and in equity in respect thereof or there upon, in like manner as if he had been the original proprietor of the land by or with whom the engagement obligation or liability sued upon was entered into or incurred, or the original lessee mortgagee or annuitant.”
We are unable to see any reason for limiting the plain meaning of the words “ shall be deemed to be the transferree” (secs. 118, 130, 188) or “ shall become the transferree and be deemed to be the proprietor ” (secs. 226, 227, 228, 229), or the words “ shall have the same estates . . . and be subject to the same engagements obligations and liabilities ” (sec. 230), at any rate as between the person from whom the estate is transferred and the person who becomes the transferree or proprietor. We are of opinion that when the Statute .says in express terms that a person with respect to whom certain facts can be predicated shall be deemed to be the transferree of land the meaning is that he shall be the transferree
4 C.L.R.] OF AUSTRALIA.
879
to tlie same intent and with the same consequences as if he had
H. C. OF A.
become a transferree by registration of an instrument called an 1907.
instrument of tran.sfer, and executed by the person whose interest
F isk
V.
is transferred.
R obert.son.
The language of secs. 118 and 130 is identical in this respect. It is not suggested that a person registered as proprietor upon purchase from a mortgagor is not a transferree in the ordinary sense of the term, and we are unable to see any intelligible dis tinction between his case and that of a mortgagee becoming transferree hy virtue of an order for foreclosure.
Nor is any hardship involved in this construction, for the exercise by the mortgagee of his rights under sec. 130 is entirely optional on his part. If he desires to escape the obligations of a transferree, and to keep the mortgage alive, he can do so under the other provisions in his favour.
In our opinion the effect of sec. 230 is that, when a person voluntarily takes advantage of the provisions of the Act to become a transferree of land, he undertakes, upon becoming transferree, all the obligations attached to the ownership of the land in the hands of the person from whom it is transferred, and we think that the statutory charge created by a registered mortgage is such an obligation, at least as between him and the person from whom the land is transferred.
We think, therefore, that, when a mortgagee becomes transferree of the mortgaged land under an order for foreclosure, the same consequences follow as if he had taken a transfer from the mortgagor under the provisions of sec. 95. It follows that, as the mortgagor would be entitled to be indemnified by the mort gagee from any claims under the mortgage, the latter cannot enforce it by action against the former. The further rule that when property and the benefit of a charge upon it are vested in the same person the charge is extinguished unless a contrary intention is shown, which may be called a rule of commonsense, would also of itself dispose of the question. So far from finding any such contrary intention in the Act, to which alone in the absence of express agreement reference must be made, we find an intention plainly expressed in conformity with the general rule. We think also that the same consequences follow from see, 89,
880 H IG H COURT
[1907.
H.C. OJF A.wlien properly construed, botli for the reasons already given as to
| 1907.the meaning of the words “ deemed to be a transferree,” and also for the more technical reason that, although that section in terms |
V.
Robertson.relates only to instruments of transfer strictly so called, yet, as
every mortgage carries in gremio the capacity of being used by the mortgagee to enable him to become a transferree under sec. 130, there is no reason why a mortgagee who uses it for the purpose of enabling himself to become a transferree should be in any better position than if he had taken his transfer in another form.
If a second mortgagee obtains an order for foreclosure under the Act, all subsequent mortgages are removed from the register, and he is entitled to a certificate of title subject to the prior mortgage. But his own mortgage will not appear on the register. This is precisely what would have happened if he had obtained a transfer of the land from the mortgagor subject to the prior mortgage, and illustrates the complete analogy between the two modes of transfer, so far as regards their effect upon the title.
From this point of view it is not necessary to call in aid sec. 121, or to decide whether by the effect of that section tlie mort gagor’s covenants run with the land, so as to create a direct liability as between a mortgagee and the transferree of the mort gagor. Fellows and Stephen JJ. in the case of A ustralian Deposit and Mortgage Bank v. Lord (1), held that it did not, while Holroyd J. in In re Burton ; Ex parte The Union Bank of A ustralia Ltd. (2), expressed a contrary opinion.
The conclusion at which we have thus arrived upon the express language of the Statute is confirmed by some other considera tions. The procedure prescribed under the Statute is, in effect, an offer of the property for sale to all the world by public auction and private contract at a reserved price, and it is not until after this offer has been made and has been ineffectual that the mortgagee is allowed to become the transferree. The proceed ing is, in some respects, analogous to the ca.se of a trustee for sale being allowed to buy for himself. In that view the question
arises;—“ What is the consideration for the purchase ? ”
Only
(1) 2 V.L.R. (L.), 31.
(2) 27 V.L.R., 437, at p. 442; 23 A.L.T., 114.
4 C.L.ll. 1 OF AUSTRALIA.
881
two answers seem to be possible—either the price at which the
H. C. OF A.
1907.
property was offered to others, i.e., the mortgage debt, or the
then value of the land. The latter answer is not supported by
F ink
V.
anything in the Act itself, and would give rise to possible, and indeed probable, injustice. Suppose, for a moment, that an action on the express or implied covenants in the mortgage is not taken away, and that tlie Court if such an action is brought can impose terms on the mortgagee plaintiff. In such an event what terms would do justice as between the parties ? The Court could, no doubt, order the plaintiff to transfer the land to the defendant on payment of the mortgage debt and interest. But the de fendant may be unwilling to take it or to pay the necessary an'.ount. He has by the mortgagee’s election been deprived of the land and of all right to obtain it, and it would be impossible to put him in the same position as if the mortgagee had elected to take advantage of some other provision of the Act in his favour. It is a general rule that when a party is entitled to elect between two inconsistent rights against another, and has done so, he cannot afterwards alter his election without the con sent of the other party : Cloxigh v. London and North Western Railw ay Co. (1). In the case supposed the mortgagor has, perliaps for some years, been in the position of having no right cognizable in a Court of Justice in respect of the land, but accord ing to the argument he has, all that time, been a debtor for the full amount of the debt. But he was a debtor who would accjuire
no rights to the land by payment of the debt.
The mortgagee
was under no obligation to receive it. If the mortgagor tendered the money he would be in no better position, for he could not afterwai’ds plead the tender unless he was still ready to pay the money tendered. Ordinarily rights and obligations are mutual. In the case supposed the rights are entirely on one side—the mortgagee is entitled to keep the land, and is also entitled, at his option, until the Statute of Limitations has run, to the whole of the debt with accruing interest. The mortgagor, on the other hand, owes the money and has no right capable of enforcement. His only escape from the difficulty would be by taking advantage of the insolvency laws.
(1-) L.R., 7 Ex., -26.
882 H IG H COURT
[1907.
| H. | C. OF A.Again, if the Court could require tlie mortgagor to pay the | |
|
F inkjustice in the case of puisne mortgages whicli could not be
V.
restored to the register.
And, if the mortgagor could not pay all
R obertson.
the debt, it would be obviously unjust to allow the mortgagee to le \y the whole debt by execution without giving credit for an amount equal to the value of that which he has already. Since, then, credit must be given for some sum, how is that sum to be arrived at ? If credit is to be given for a sum equal to the value of the land at the date of the foreclosure, the mortgagee might, if the property has risen in value, have a property worth much more than the amount of the debt, and would still be entitled to recover a portion of the debt in addition. If credit is to be given for a sum equal to the value of the land at the date of the action, then, if the property has fallen in value, the mortgagor would be prejudiced by the mortgagee’s delay. A third measure of value might indeed, be suggested—the highest value of the land between the date of the foreclosure and the date of the action. Or the Court might direct the land to be sold, and the proceeds applied in payment. There is no decided case, and no principle has been cited, which offers a solution of these diffi culties, and we see no satisfactory solution. The doctrine that a surety who pays the debt is entitled to the benefit of securities held by the principal debtor is not applicable. If it were, the mortgagor would be entitled to have the land sold as soon as the obligation to pay attached, which is inconsistent with the absolute title of the mortgagee. Nor can the doctrine of marshalling be called in aid as between a mortgagor and mortga gee. We think that the legislature intended that none of these questions should arise.
It cannot be sugge.sted that an independent right to sue on the express covenants in the mortgage subsists after the implied statutory covenants (sec. 121) to the same effect are discharged, any more than that, when a debtor liable upon simple contract covenants to pay the debt, he remains liable upon the simple contract after release of the covenant.
If, therefore, there were no more in the Act, than the pro visions enabling a mortgagee to obtain an order for foreclosure
4 C.L.ll.] OF AUSTRALIA.
883
we should be strongly disposed to hold that, even without the
H. C. OF A.
other express provisions on which we rest our judgment, the 1907.
same consequences would follow.
F ink
V.
It was suggested that it would be a strange consequence if a mortgagee obtaining an order of foreclosure in respect of land of
-----
comparatively small value were tliereliy to debar himself from re-' covering any part of tlie mortgage debt, which might be much greater than the value of the land. We agree that it would be a very foolish thing for a mortgagee to obtain an order of fore closure in such a case, unless he was anxious for other reasons to become the owner of the land. But the circumstance that a statutory power may be unwisely used by the donee does not in our opinion afford any reason for cutting down the plain pro
visions of the Statute.
.
A point was made of the provi.sions of sec. 3G of the Coiivey- cmcivg Act 1904 (No. 1953), passed just after the present action was begun, which expressly prohibits any such action from being brought after 31st December 1904. It was sugge.sted that this amounts to a legislative recognition of an exi.sting right to bi’ing such an action. The danger of such an argument was pointed out by Lord Coke as long ago as 1591 [Butler avd Baker s Case (1). At best a later Act only affords an argument, and not a conclusive one. In the present case, whatever weight might otherwise be attached to the argument is much diminished by the fact that the Supreme Court of Victoria had in 1899 held that such an action would lie: In re Fremier Fermavent Building Ac. Associoiion (2), and the legislature may well have thought it desirable to prevent such actions from being brought in future, without expressing any opinion whetlier that case was or was not rightly decided. In tlie present case we are called upon to express our opinion on that (juestion, and the interpretation of Statutes is, after all, for the Court and not for the legislature. For the rea.sons we have given we are of opinion that that case was wrongly decided. The question cannot hereafter arise in Victoria, where alone that case was an authorit}’. But, the law of New South Wales being substantially the same as that of Victoria before the Act of 1904, the present decision is of more
(1) 3 Rep., 31a.
(2) 2o V.L.R., 77 ; 21 A.L.T., 67.
884 H IG H COURT
[1907.
H. C. OF A. general Australian importance than if it were a decision upon a
question which can never arise again, and would therefore be
F ink
of only academic interest except to the immediate parties.
r.
R obertson.In the view which we take of this question it is unnecessary
to consider the other numerous defences set up by tlie defendant,
some, but not all, of which were argued before us.
The appeal must therefore be allowed, and judgment must be
entered for the defendant.
H ig g in s J.
I regret that I have to differ in opinion from the
majority of the Court.
Tliis is an action brought by a mortgagee’s executors to recover principal and interest under covenants in the mortgage. Tlie mortgaged land is under the Transfer of Land Act 1890, and the mortgage necessarily was framed in the form prescribed by that Act. The mortgage is dated 18th March 1891 ; the mortgagor failed to pay the interest due ; the mortgagee foreclosed in the only form permitted by the A ct; the Registrar duly issued an “ order for foreclosure” under sec. 130; and the order was entered in the register book on 1st November 1893. The mortgagor contends, in the first place, that the foreclosure oi'der operates as a release of the mortgage debt. It is not alleged that a fore closure order under the ordinary law would so operate; but it is urged that for some reason an action on the covenant for pay ment after foreclosure is inconsistent with the Transfer of Land Act, or, in other words, that foreclosure under that Act involves a release of the debt. There is nothing in the Act expressly to this effect; and there is not, in my opinion, any necessary implication of a result so novel and so extraordinary. The nearest thing to a definition of foreclosure under the Act is in sec. 119, where it is enacted that a mortgagee “ shall be entitled to foreclose the right of the mortgagor . . . to redeem the mortgaged land.” This phraseology is precisely the phraseology that would be used as to mortgages under the ordinary law. “ Redeem ” and “ fore closure ” are words which were familiar and appropriate when the Court of Chancery interposed its benevolence against the rigour of the Common Law. The old form of mortgage was a conveyance conditioned to become void if the money lent were
4 C.L.R.] OF AUSTRALIA.
885
not repaid by a certain date. Ab soon as that day passed without
C-
payment, tlie Courts of Common Law treated the land as having 1907.
passed absolutely to the mortgagee; and yet the mortgagor
F ink
i'.
remained liable on his covenants to pay.
The mortgagee could p̂ obertson
retain the land absolutely ; and yet might recover his full debt by
Iligtrins J.
action. But the Court of Chancery compelled the mortgagee to reconvey, if at any time the mortgagor could find the money to pay principal, interest and costs. Then it was felt that some time limit should be imposed on the mortgagor, in order that the mortgagee might not be left indefinitely in a position of un certainty as to his rights with regard to the land; and therefore the Court of Chancery allowed the mortgagee to bring a suit to “ foreclose ” the right of the mortgagor to redeem. By the decree in such a suit the mortgagor was given some time—say six months—to pay up ; and if he failed to do so, an order abso lute was made for foreclosure. The usual form of the order absolute was as follows;—“ This Court doth order that the said defendant do from henceforth stand absolutely debarred and foreclosed of and from all right, title, interest and equity of redemption of in and to the said mortgaged hereditaments ” {Seton on Decrees, 3rd ed., p. 1393). These words are adopted in sec. 130. There it is said that the order for foreclosure “ shall have the effect of vesting in the mortgagee . . . the land mentioned in sucli order, free from all right and equity of redemption on the part of the mortgagor.’’ It is true that under the Act there are also the words as to vesting the land in the mortgagee; but such words are necessary, becau.se the Act pro vides tliat a mortgage shall not operate as a transfer of the land, but only as a security (sec. 114). Similar provision had to be made in a foreclosure order under the ordinary law when an equit able mortgage was the subject of the foreclosure. The equitable mortgagee had not the legal estate in the land, and so the Court used to insert a directioir that the moi tgagor execute a convey ance of the land. The proceedings for a foreclosure by order of the Registrar under the Transfer of Land Act resemble the proceedings for a foreclosure by order of the Court; but greater indulgence is shown to the mortgagor, for the order for fore closure cannot be obtained until the land has been offered first
[1907.
8 8 6
H IG H
COURT
H. C. OF A. foi- sale by auction, and secondly by advertisement for private
sale, and unless a sufficient amount lias not been offered to cover
F ink
the debt (secs. 129 and 130). Tlie.se unsuccessful attempts to sell
r.
were made in the case of this mortgage ; otherwise the Registrar
R obertson.
could not have made his order for foreclosure.
Higgrins J.
But the indulgence of Chancery followed the mortgagor even after foreclosure of his right to redeem the land. The foreclosure order, as we have seen, operated only on the land. It did not affect, or purport to affect, the debt. It said in effect, “ we are not going to help you further to get the land back, whether you pay the debt or not.” The debt remained. The mortgagee could sue, and often did sue, on the covenants for payment—especially when he found the land unequal in value to the debt, and found the mortgagor able to pay the debt or part of it. In such a case. Chancery would “ open the foreclosure ”—if the mortgagor asked for it. It would, if the mortgagor asked for it, compel the mort gagee, suing on the covenants, to reconvey the land to the mort gagor, if and when the mortgagee had been paid all that was due to him; and if the mortgagee could not reconvey the land—if he had sold it after foreclo.sure—the Court would even restrain him by injunction from proceeding with his action on the covenants. It is because of this practice of the Court that conveyancers have been in the habit of recommending their mortgagee clients to bring their action on the covenants first, and to bring the suit for foreclo.sure afterwards for any deficiency. In some cases, how ever, mortgagees have gone for foreclosure first, sometimes from motives of mercy to the mortgagors, sometimes from motives of business expediency. In the present case, the mortgagor has not made any claim to have the foreclosure opened, or to get back the land on full payment; but the mortgagee’s counsel have intimated that their clients will retransfer on payment of the debt, and will credit the mortgagor with all sums received or tliat might have been received for rent or otherwise. I can see nothing in the Act which would prevent the Court from following the old practice, from ordering the mortgagee to re-transfer the land to the mort gagor after foreclosure, on being repaid his principal, interest and costs; and I can see nothing in the Act to prevent the Court from refusing to the mortgagee a judgment on the covenants for
4 C.L.K.J OF AUSTRALIA.
887
payment if, by reason of a sale effected after tlie foreclosure,
H. C. OF A.
1907.
he can no longer retransfer the land on full payment.
In
the present case, it is not pretended that the mortgagee can
F ink
not retransfer the land. The executors of the mortgagee are Robertson
the registered proprietors. A retransfer of the land to the
Higgins J.
mortgagor would not involve a re-opening or di.sturbance of the register. All the registered transactions up to date would remain. There would be merely a registration of certain new instruments executed under the order of the Court. But even if it should be thought that the mortgagor can no longer demand an opening of the foreclosure, it by no means follows necessarily that the covenants liave been released. I have a.sked counsel for the mortgagor to point out, if they could, any single point in which the machinery of the Transfer of Land Act clashes, or is inconsistent with the right of the mortgagee to sue on his covenants after foreclosure; and they have been unable to indicate any such point. They merely rely on certain phrases, and inferences from phrases. By sec. 3 :—“ All laws Statutes Acts and rules whatsoever, ,so far as inconsistent with this Act, shall not apply . . . . to land under the operation of this Act.” But the inconsistency must be demonstrated. Frim d facie, when technical words are used in an Act, they are to be given their technical meaning, and to be treated as involving the usual consequences ; and the general policy of the law is not to be treated as altered unless you cannot give sense to the words of the Aet otherwise (per Jessel M.R., Zaii'ff v. Briggs (1); Minet V. Leman (2); Jay v. Johnstone (3)). But it is not necessary to
go even so far as this principle. It is sufficient to say that the mortgagee holds an unsatisfied covenant for payment, and there is nothing to be found in the Transfer of Land Act enacting that the covenant is to be deemed satisfied. This is an action of debt on covenant. The usual pleas used to be payment (there has been no payment), release (there has been no release), accord and satisfaction (there has been some land acquired by the mortgagee, but there has been no accord, no agreement that the land shall be taken in satisfaction of the debt). I know of no
(1) 19 Ch. U., 2-2, at p. M.
Ch., 645.
(2) 20 Beav., 269, at p. 278 ; 24 L.J.
(3) (1893) 1 Q.B., 25, at p. 28.
[1907.
8 8 8
H IG H
COURT
| H. | 0. OF A. equitable principle, nor can I find anything in the Act, that | |
|
F inksecurit3" land worth £10, to take the land as a satisfaction of the
V.
Robertson.debt, or else abstain from foreclosure. Why should foreclosure
under the Act be treated as involving a release of the mortgage
Higgins J.
debt, when it does not involve it under the ordinary law ? It is said that under this Act, as soon as a foreclosure order is made, the mortgage is treated as cancelled, is even marked “ cancelled,” and ceases to exist for all purposes. There is no authority given b}̂ the Act for any such marking or treatment. On the contrary, the Registrar has to keep the mortgage bound ujr in the register book (sec. 55); and he has to make such notes in the book and on the instruments as will allow the title to be traced downwards from or upwards to the original grant (secs. 50, 78). Contrast secs. 93, 206, cases where cancellation of a instrument or a certificate is allowable, and sec. 106 where provision is made for endorsing the word “ surrendered.” But it is said also that, under sec. 130, the mortgagee shall upon entiy of the order for foreclosure “ be deemed a transferree of the mortgaged land,” and become the proprietor, and receive a certificate of title ; that under certain other sections a transferree of land takes on him all the burdens of his transferror as to the land, and that there fore the mortgagee takes on himself the burden of his own debt, and the debt is merged. On this narrow plank of reasoning re.sts the whole of the doctrine that foreclosure operates as a release. If the Act did not say that on foreclosure the mortgagee is to be deemed a tran.sferree of the land, the case for the defendant would not be arguable. If the defendant’s argument is sound, it is extraordinary that no one ever discovered such a result in the foreclosure of land under the ordinary law. Under the ordinary law foreclosure operated as a transfer of all the interest of the mortgagor to the mortgagee : Heath v. Pugh (1) ; and under the ordinary law the purchaser of an equity of redemption, unle.ss there be an express agreement to the contrary, becomes liable to indemnify the mortgagor against the mortgage debt: Waring v. Ward (2); Bridgman Daiv (3). Ergo, according to the
(1) 6 Q.B.D., 345, at p. 360, per
(2) 7 Ves., 332, at p. 337.
Lord Selborne L.C.
(3) 40 VV.B., 2.53.
4 C .L .ll.] OF A U STRALIA.
889
defendant’s argument, under the ordinary law the mortgage debt R- C- of a . to indemnify can be deduced from an order of the Court which
was released. Yet under the ordinary law the mortgagee has
always been able to recover on the covenants after foreclosure.
Higgins J.
merely gives effect to the rights of the parties, as from a transfer hiter 2)(irtes which rests on agreement. The mortgagor does not, * on foreclosure, transfer the laud to the mortgagee. It is the registration order which transfers it. It is at this point that I find what seems to me to be the fundamental fallacy of the defendant’s contention. In other words, the presumption as to the intention of parties which arises in the case of documents made between the parties, documents which may be moulded b}̂ the parties so as to negative the presumption, cannot be applied to orders made by the Court, or by the Registrar of Titles as substituted for the Court. Moreover, it is to be noticed that according to sec. 130 the mortgagee, on foreclosure, is to be deemed a transferree of the mortgaged land—not a transferree of “ the estate and interest” of the mortgagor (as in see. 89), or of the land “ subject to the mortgage ” (as in sec. 95). The distinction between “ land ” and estates and interests in land is clearly marked throughout the Act (see, for instance, sec. 4 “ land”; secs. 63,09, 73, 74). In ordinary transfers—instruments of transfer—the land is expressed to be transferred “subject to the encumbrances notified hereunder.” The encumbrances are notified on the face of the instrument (sec. 89 and Gth Schedule); the certificate of title issued to the transferree shows the 'encum-*■ brances on its face; and the transferree knows what incum brances he has to meet. But the order for foreclosure issued by the Registrar to the mortgagee does not show the mortgage as an encumbrance. It is a clean, absolute, unimpeachable title ; and if the mortgagee after foreclosure sell the land, the purchaser from him does not by becoming registered come under any obligation to pay the mortgage debt. Sec. 89 relates merely to written instruments called “transfers” prescribing that the “estate and interest of the proprietor as set forth in such instrument ” shall pass, &c.; and the instrument would set forth anj' existing encumbrances. Sec. 95 likewise relates merely to the written
VOL.
IV .
890 H IGH COURT
[1907.
H. C. OF A.
instruments called “transfers,” in cases where they are “ subject to
1907. a mortgage.” In such cases there is implied a covenant witli the
F ink
transferror to indemnify him ; and this implied covenant may be
V.
Rorertson.negatived—it is a matter for agreement between the parties (sec.
187).
Sec. 118 relates to a sale under a power in a mortgage.
Hi^g'iris J.
The purchaser takes the “ estate and interest of the mortgagor,” and wlien registered is to be “ deemed a transferree,” but the section is exjiress to the effect that he is freed from all liability on account of the mortgage. Sec. 188 merely provides for the registration of vesting orders. If, for instance, a trustee is out of the jurisdiction, or cannot be found, the Court or Commis sioner can make an order vesting the “ land, estate or interest ” of the absent tru.stee in the new trustee; and tlie new trustee is to get just wliat the old trustee held, and no more. If in the name of the old trustee the land was stated to be subject to an encumbrance, the certificate of title issued to tlie new trustee would show that encumbrance. Secs. 225 and 226 provide machinery whereby a devisee of lands, under a will made before 1873, can become registered as proprietor, become the transferree of such land or estate. Here again the new certificate of title would show any encumbrance which the old certificate showed. Secs. 228 and 229 are to the same effect in the analogous cases. Sec. 230 is a drag-net section, obviously intended to provide that whatever burden the land was subject to in the hands of a trans ferror it shall be subject to in the hands of the transferree. The words used are vague and wide, and it may not be easy to estimate their precise effect; but it is clear they refer to cases where' the encumbrance appears on the title, not to cases where, as under an order for foreclosure, the encumbrance no longer exi.sts. and no longer appears on the face of the title. Under sec. 74 the mortgagee having become the proprietor is to hold the land under such encumbrances as may be notified on the certifi cate of title “ but absoluteljr free from all other encumbrances whatsoever.” The land is no longer under any liability to the mortgage debt; and there is no liability to indemnify against a debt which is not an encumbrance against the land. There is no need to imply an indemnity to the mortgagor; for if the mort gagee do not sue, the moi’tgagor is not hurt; and if he do sue, the
4 C.L.U.] OF AUSTRALIA.
891
Court will treat the ca.se as if there liad been no foreclosure, as if
o*'
the mortgagee were not freed from the mortgagor’s right to redeem.
1907.
If it was the intention of the legislature to create by the
F ink
V.
Transfer of Land Act an absolutely new and complete code of
Robektson.
law witli regard to land under its provisions, or, as to land fore
J.
closed, to prevent the mortgagee from suing on the covenants after foreclosure, it is hardly likely that it would have trusted to infer ence from the meaning of the phrases which are relied on by the appellant. It is to be presumed rather that the legi.slature knew of the rule established by the long course of practice in England and Victoria, and did not intend to disturb i t : Rolfe v. Flower (1). This view is continued by the expression used in sec. 124 saving the rights and liabilities of mortgagees after entry on tlie register of an order for foreclosure. But I do not wish to base my judg ment on this clause, as possibly it is su.sceptible of a narrower meaning. It is, moreover, clear that this Act was not intended to be a complete self-sufficing code of law for land under its operation. The old law as to land and as to contracts was to
remain except so far as inconsistent with this Act (sec. 3).
The
words of the Act assume that the law as to a husband’s rights ino his wife’s land would remain, and merely regulate procedure for registration (secs. 228 and 229). They a.ssume that the Statute of Uses would apply, and therefore negative it (sec. 91). They assume that the law as to conveyances by married women would apply, and regulate it (sec. 92). They a.ssunie, without saying it, that the Courts will enforce equitable mortgages b}̂ depo.sit: London Chartered Bank of Australia v. Hayes (2). They a.ssume that equity will interfere with registered proprietors by enforcing a trust or a contract, or by rectifying the consequences of fraud or mistake. There is no enactment that a mortgagee in posses sion shall be liable for wilful default; for it is assumed that the ordinary equitable rule will apply. The purpose of the Act is well expressed in the preamble:—“ Whereas it is expedient to give certainty to the title to estates in land and to facilitate the proof thereof and also to render dealings with land more simple and less expensive.” There is no indication of any intention to alter the obligation of contract.
(1) L.R., 1 r.C ., 27, at p. 48.
(2) 2V .R . (Eq.), 104.
892
[ 1907.
H IG H COURT
| H. | C. OF A. Ill my opinion, also, if the Â’ictorian legislature in the Transfer | |
|
F inkon his covenants after foreclosure, it has now made it perfectly
V.
clear that he could, by the form in whicli it has enacted see. 36 of the Conveyancing Act 1904, taking away such a power. For by
R obertson.
HiffifiMS J.
sec. 36 the legislature has taken away tliis riglit of the mortgagee for the then future time; it has taken the power away as to mortgages under the Transfer of iMnd Act, as well as to mort gages under the ordinary law : it has taken them away with the same breath, treating past foreclosures as not involving an extinguishment of the debt. If tlie legislature has at any time been misunderstood by the Court, there are many ways, such as declaratory Acts, by means of which it can indicate wliat its intention was in the previous Act. But after more than forty years of the Transfer of Land Act, Parliament merely enacts that mortgagees may no longer start actions on the covenants after foreclosure. It is not for this Court to dictate to the legislature on (juestions of policy. But I may point out that sec. 36 was not only a violent interference with vested riglits, for instance, of mortgagees who have forborne from suing in order to give mort gagors time to recover themselves financially, but that it also will force mortgagees to press mortgagors to extremity before foreclosing.
The case of Campbell v. Bank of New South, Wales (1) does not, in my opinion, affect the question. After a foreclosure by the Registrar, under the Act which corresponds to the A îctorian Transfer of Land Act, the mortgagor brouglit a suit to redeem. He relied on an ancient practice of the Court of Equity to allow redemption even after foreclosure absolute (and even though no actions were brought on the covenants), on some very exceptional cause being shown, and Faucett J. said that that practice could not exist in the face of the express words of the Act to the effect that the estate of the mortgagor was to vest in the mortgagee freed from all rigJds and equity of redemption on the part of the mortgagor. The learned Judge in noway says, or even hints, that the mortgagee’s right to sue on a covenant has gone. He also held that the Acts incorporating the Bank (which was mortgagee)
(1) 16 N.S.W . L.R. (Eq.), 28.5; 11 App. Cas., 192.
4 C.L.ll.] OF A U STRALIA.
893
did not render the foreclosure of the mortgage invalid, and he
H. C. OF A.
1907.
dismissed the plaintiff’s suit.
The Privy Council held that his
decision dismissing the suit was right. Lord
Blaclchui'n, in
F isk
expressing the view of the Judicial Committee, said (1):—“ It is
Robektson.
unnecessary to iii(|uire into a great many of the matters that
Higgins J.
have been referred to in the course of the argument; ” apparently referring to the contention that it was just and equitable, apart from the Bank’s Act, to allow redemption after foreclosure. Lord Blackburn then deals with the difficulties arising under the Bank’s Act. There is nothing in the case as reported in New South Wales or before the Privy Council, to show any grounds, either exceptional or commonplace, on which the Courts could be asked to allow redemption after foreclosure ; and I should infer that the Lords of the Privy Council simply ignored this claim as not resting on any relevant facts. Faucett J. applied his mind to the ques tion of law, assuming that there were facts. He laid stress on the words “ freed from all rights and equity of redemption,” &c. ; but he does not appear to have noticed that these are the same words that are used in a foreclosure order absolute under the ordinary law. However, there is not from first to last in his judgment, or in the opinion of the Judicial Committee, any expression tending to favour tlie view that foreclosure operates as a release of the debt.
I should add that J cannot see any justification for treating the order for foreclosure as a purchase of the land in any sense —at the value of the land, or at the amount of the mortgage debt, or on any other basis. Nothing is further from the minds of the parties than a purchase. The offering of the land for sale before foreclosing is simply a device to protect the mortgagor from the disaster of losing his land while still remaining liable for the debt. The land is offered for sale, by auction and by private contract, in order to test the market, and see whether enough cannot be obtained by sale to discharge the debt.
As the Chief Justice has intimated, the decision in this case will probably have an important effect in other States than Victoria, and possibly in other countries in which the Torrens system of title to land has been adopted. I have made up my own mind
(]) II App. Cas., 192, at p. 194.
891 HIGH COUHT
[1907.
| H. | C. OF A. on the subject, as in duty bound ; but I am relieved from the | |
|
F inkthat in another case—In re Premier Permanent Bnildhu/ cfr.
V.
Robf.rtson.
AHsociation (1)—three learaed Judges of the Supreme Court of
Victoria came to the same conclusion. It is impossible to fore cast the indirect results of the present decision. One curious result of holding that the foreclosure of a mortgage involves the release of the debt is that a mortgagee who has foreclosed one mortgage must discharge, unconditionallj", all the securities for the same debt. For instance, if he have a mortgage over Black- acre for £1,000, and if he take an additional security* over White- acre, worth £200, for the same debt; then, if he foreclose the mortgage over Whiteacre, he can be forceil to discharge the mortgage over Blackacre, without any further payment. In Victoria, the legislature made provision against this result by the 3rd sub-section of sec. 36 of the Conveyancing Act 1904; but this provision would seem to be futile, in view of the prin ciple on which this Court has decided this case. Inasmuch as the decision of the majority of the Court on this one point disposes of the case, it is not neceksary for me to consider the questions raised as to the Statutes of Limitation, and other matters. I can only say that on this point I regard the judgment of Chomley J. as right, and that if his judgment rested on this point alone the a25peal ought to be dismissed.
Higjfins J.
Aj t̂peal allowed. Jadyment to he entered
for the defendant.
Solicitors, for the appellant, Fink, Best cfc Hall.
Solicitors, for the respondents, Hedderwick, Fookes & Hedder-
'tvick.
(1) 25 V.L.R., 77; 21 A.L.T., 67.
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