Fisher v Rural Adjustment & Finance Corporation of Western Australia
[1995] FCA 182
•31 MARCH 1995
CATCHWORDS
PROCEDURE - interlocutory orders - failure to comply with - failure to particularise allegations of fraud sufficiently - springing or guillotine orders - substantial delay and non-compliance with the orders of the Court
MORTGAGE - arrangements between mortgagees as to order of priorities - failure to consult with mortgagor - alterations and insertions in memorandum of mortgage - whether the same constitute material alterations
Transfer of Land Act 1893-1972 (W.A.)
Trade Practices Act
Federal Court Act 1976
Lenijamar Pty Ltd v AGC (Advances) Limited (1990) 27 FCR 388
Carr v Finance Corporation of Australia Limited (No.1) (1981) 147 CLR 246
Bahr v Nicolay (1988) 164 CLR 604
Kiely v Beneficial Finance Corporation Ltd (1991-1992) 6 WAR 521
Cheah Theam Swee v Equiticorp Finance Group Ltd [1992] 1 AC 472 (P.C.)
Stotter v Ararimu Holdings Ltd [1994] 2 NZLR 655 at 662
Arnold v State Bank of South Australia (1992) 38 FCR 484
Armor Coating (Marketing) Pty Ltd v General Credits (Finance) Pty Ltd (1976) 17 SASR 259
Warburton v National Westminster Finance Australia Ltd (1988) 15 NSWLR 238
No. WAG 22 of 1994
CHRISTOPHER ROBIN FISHER and FAY ANNETTE FISHER v RURAL ADJUSTMENT & FINANCE CORPORATION OF WESTERN AUSTRALIA
- AND -
No. WAG 3 of 1995
CHRISTOPHER ROBIN FISHER and FAY ANNETTE FISHER v RURAL ADJUSTMENT & FINANCE CORPORATION OF WESTERN AUSTRALIA
CORAM: O'LOUGHLIN, CARR & BRANSON JJ.
PLACE: PERTH
DATE: 31 MARCH 1995
IN THE FEDERAL COURT )
OF AUSTRALIA )
)
WESTERN AUSTRALIA )
DISTRICT REGISTRY ) No. WAG 22 of 1994
)
GENERAL DIVISION )
B E T W E E N:
CHRISTOPHER ROBIN FISHER and FAY ANNETTE FISHER
Appellants
- and -
RURAL ADJUSTMENT & FINANCE CORPORATION OF WESTERN AUSTRALIA
Respondent
AND
No. WAG 3 of 1995
B E T W E E N:
CHRISTOPHER ROBIN FISHER and FAY ANNETTE FISHER
Appellants
- and -
RURAL ADJUSTMENT & FINANCE CORPORATION OF WESTERN AUSTRALIA
Respondent
CORAM: O'LOUGHLIN, CARR & BRANSON JJ.
PLACE: PERTH
DATE: 31 MARCH 1995
MINUTES OF ORDER
No. WAG 22 of 1994
THE COURT ORDERS THAT:
The appeal be dismissed.
The appellants pay the respondent's costs of the appeal.
No. WAG 3 of 1995
THE COURT ORDERS THAT:
Subject to the terms of paragraph 3 hereof the appeal be dismissed.
The appellants pay the respondent's costs of the appeal.
Leave be granted to the respondent to present to the Court submissions with respect to whether paragraph 1 of the order of French J of 30 November 1994 should be amended to reflect the prior rights (if any) of Westpac Banking Corporation as a Mortgagee entitled to possession of:-
(a)portion of Oldfield Location 628 and being the whole of the land comprised in Certificate of Title Volume 1848 Folio 968;
(b)portion of Oldfield Location 638 and being the balance of the land comprised in Certificate of Title Volume 1848 Filio 552.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules
IN THE FEDERAL COURT )
OF AUSTRALIA )
)
WESTERN AUSTRALIA )
DISTRICT REGISTRY ) No. WAG 22 of 1994
)
GENERAL DIVISION )
B E T W E E N:
CHRISTOPHER ROBIN FISHER and FAY ANNETTE FISHER
Appellants
- and -
RURAL ADJUSTMENT & FINANCE CORPORATION OF WESTERN AUSTRALIA
Respondent
AND
No. WAG 3 of 1995
B E T W E E N:
CHRISTOPHER ROBIN FISHER and FAY ANNETTE FISHER
Appellants
- and -
RURAL ADJUSTMENT & FINANCE CORPORATION OF WESTERN AUSTRALIA
Respondent
CORAM: O'LOUGHLIN, CARR & BRANSON JJ.
PLACE: PERTH
DATE: 31 MARCH 1995
REASONS FOR JUDGMENT
INTRODUCTION
The first of these two appeals is from an order whereby the appellants' application against various parties was
dismissed as against the respondent. This was a consequence of non-compliance by the applicants with an interlocutory order for further and better particulars which in turn activated a springing or self-executing order made on 8 December 1993. The second appeal is from a judgment in favour of the respondent in its cross-claim against the appellants in the same principal application. The effect of that judgment was to order that the respondent be given possession of certain of the appellants' lands, that the appellants pay the sum of $104,606 to the respondent and also that the appellants pay the respondent's costs.
FACTUAL BACKGROUND
The appellants have farmed for a number of years. In 1978 they acquired and became the registered proprietors of a property at Hopetoun in Western Australia. For the purposes of these reasons it is necessary to identify the Location numbers of the lands so acquired. Strictly speaking, some of the land comprised only a lot within a Location but, as a matter of convenience, reference will be made simply to the Location numbers. The land which Mr and Mrs Fisher acquired in 1978 comprised Oldfield Locations 631, 638, 640, 641 and 968. When Mr and Mrs Fisher became registered as the proprietors of those lands a mortgage was registered to a Mr and Mrs Prebble, the vendors of the property, to secure payment of the balance of the purchase price. At that stage no other mortgages were registered. On 12 February 1979 a further mortgage, granted by Mr and Mrs Fisher in favour of the Bank of New South Wales (which we will refer to as "Westpac") was registered. That mortgage can conveniently be identified by its dealing number, namely B661906.
In 1981 and 1982 Mr and Mrs Fisher applied to the respondent, through Westpac, for drought relief. The respondent was formerly known as the Rural Adjustment Authority and although the legislation under which it was established has been repealed, its corporate identity, rights and obligations have been preserved. Since 1985 it has been legally designated as the Rural Adjustment & Finance Corporation of Western Australia. In these reasons it will be referred to as "Rafcorp".
Rafcorp approved Mr and Mrs Fisher's applications for drought relief and advanced to them an amount of $20,000 in June 1981 and a further amount of $20,000 in June 1982. Rafcorp took security for these advances by a third mortgage ("Mortgage C150170") registered on 3 June 1981 and a fourth mortgage ("Mortgage C403472") registered on 6 August 1982 over all of the abovementioned land.
On 20 May 1983 Rafcorp signed a letter of priority in favour of Westpac. Part of the consideration expressed in that letter of authority was Westpac's agreement to continue making advances to Mr and Mrs Fisher from time to time. The letter evidenced Rafcorp's agreement and undertaking that its mortgage C403472 (which in the letter was identified by its date, 24 June 1982) would be postponed in all respects to Westpac's mortgage B661906 (which was likewise identified by its date, 10 August 1978) "... not only as regards the moneys liabilities and interest now owing and secured thereunder but also as regards all moneys liabilities and interest hereafter to be advanced or to become due or payable thereunder or secured thereby ..." subject to the total amount to be secured in priority not exceeding the sum of $185,000 together with interest thereon.
In May 1985 Mr and Mrs Fisher wished to sell part of their land and buy an adjoining property, Oldfield Location 628. On 10 May 1985 Rafcorp wrote to Westpac stating that it required the Rafcorp debt to be cleared in full from the sale proceeds. Westpac, in response, wrote to Rafcorp on 27 May 1985 stating that Rafcorp's decision had been passed to Mr and Mrs Fisher who had expressed surprise at the request for full repayment of the debt. The letter referred to a discussion between Mr Fisher and Rafcorp about two years previously concerning the sale of portion of the property and purchase of a neighbouring property. The letter also referred to Rafcorp's indication on that occasion that it would not request full repayment or a reduction in the indebtedness provided that the property purchased would ensure the ongoing viability of Mr and Mrs Fisher's operations. The letter concluded by asking Rafcorp to reconsider the decision and stating that Mr and Mrs Fisher had indicated that following settlement they could possibly "manage a reduction of say $5,000". Westpac at the same time sent a copy of that letter to Mr Fisher. The result was that Rafcorp agreed to discharge partially its mortgages on condition that Mr and Mrs Fisher reduced their indebtedness to it by $5,000 "with the Authority giving full consideration to full pay-out after harvest".
Settlement duly took place on 2 July 1985 on which occasion the mortgage to Mr and Mrs Prebble and mortgage B661906 to Westpac were discharged.
On 12 November 1985 a mortgage granted by Mr and Mrs Fisher in favour of Westpac over all of their remaining lands was registered (Mortgage D145599). On 22 January 1986 a further letter of priority was signed by Rafcorp in favour of Westpac. That letter referred (by reference to dealing numbers and dates) to the two Rafcorp mortgages of 1981 and 1982 as being "over" the land comprised in Certificates of Title Volume 1445 Folio 689 and Volume 1487 Folio 733 which Mr M.J. Adams (who appeared for the appellants, by leave, as a MacKenzie friend) identified as including Oldfield Locations 968 and 641 being portions of the land originally acquired from Mr and Mrs Prebble. The priority letter referred to Westpac's mortgage as being dated 10 August 1968 which was an obvious typographical error for 10 August 1978 being the date of Westpac's Mortgage B661906. The letter was otherwise in identical terms to the priority letter dated 20 May 1983 and in particular included the extract quoted above.
In November 1987 Mr and Mrs Fisher sold Oldfield Location 631 to Herekino Pty Ltd. They instructed Mr Mark Regan, a solicitor conducting a settlement agency known as Mark Regan Settlements to act on their behalf. Mr Regan had previously acted for Mr and Mrs Fisher on four occasions in respect of the sale of various parts of their Hopetoun property.
On 30 September 1987 Mr Regan wrote to Rafcorp about the sale of Oldfield Location 631, advising that settlement was due on 15 November 1987. He asked Rafcorp what amount was required to clear the debt owing to it. On 19 October 1987 Rafcorp wrote to "Mark Regan Settlements" enclosing a partial discharge of mortgage and advising that Rafcorp would not be receiving any proceeds from the sale of Oldfield Location 631 as all were to be claimed by Westpac and Rafcorp would rely on its remaining securities. On 22 October 1987 Westpac wrote to Mr Regan advising that it would collect the total amount due at settlement because of the priority it had over Rafcorp. On 17 November 1987, Mr Regan wrote to Mr and Mrs Fisher enclosing a settlement statement in relation to the sale to Herekino Pty Ltd. The settlement statement itself did not show the disposition of proceeds to Westpac at settlement. Settlement was effected on 19 November 1987 and Mr Regan attended personally. On the same day he wrote to Mr and Mrs Fisher confirming that settlement had been effected and advising that an amount of $120,469.20 was received by Westpac on behalf of Mr and Mrs Fisher.
At about the same time, Mr and Mrs Fisher agreed to sell Oldfield Locations 627, 628 and 640 to Hazdot Pty Ltd for $261,000. Oldfield Location 640 was contained in Certificate of Title Volume 1699 Folio 288 which also included Oldfield Location 638. On 30 November 1987 Rafcorp received a letter from Mr Regan referring to the sale of Oldfield Location 640 and noting that the balance of the land comprised in Certificate of Title Volume 1699 Folio 288 was to be retained by Mr and Mrs Fisher. In that letter Mr Regan requested Rafcorp to prepare a partial discharge of its mortgages for Oldfield Location 640 and to advise whether it would require any of the settlement proceeds to be paid to Rafcorp, taking into account the Westpac mortgage. In a subsequent telephone conversation with an officer of Rafcorp, Mr Regan was advised that all of the proceeds were to go to Westpac. As mentioned above, the sale had originally included Oldfield Location 628 but a proposed subdivision was not approved and it was deleted from the contract. The purchase price for Oldfield Locations 640 and 627 was agreed at $244,929.00. After deduction of fees and commissions, the amount of $228,173.08 was available to Mr and Mrs Fisher and their mortgagees. Settlement was effected on 4 December 1987 and once again Mr Regan attended. At settlement, two cheques were presented by the purchaser's representatives. One for $224,337.30 was paid to Westpac as mortgagee of the property on behalf of Mr and Mrs Fisher, the other, a cheque for $6,000 was received by Mr Regan to be held to cover fencing repairs. A further payment of $3,835.78 was made by Mr Regan to Westpac as mortgagee of the property, being the balance of the deposit received from the selling agent. Rafcorp received no proceeds from the sale of Oldfield Location 640. Mr Regan wrote to Mr and Mrs Fisher on 4 December 1987 enclosing a settlement statement dated 30 November 1987. Again, that settlement statement did not show the distribution of proceeds to Westpac. The bottom line simply set out an amount of $228,173.08 as "due to you on settlement". Mr Regan's covering letter informed Mr and Mrs Fisher that settlement was effected on 4 December 1987 and that Westpac collected the funds indicated on the settlement statement on their behalf. The letter made no reference to the application of the funds in reduction of the Westpac debt. Mr Regan gave evidence in the Court below that by reason of his conversations and correspondence with Mr and Mrs Fisher, they were aware prior to both of the abovementioned settlements being effected, that Westpac was to collect all available settlement proceeds as mortgagee.
In connection with the sale to Hazdot Pty Ltd, Mr Edwin Biggs, an officer of Rafcorp, authorised the partial discharge of its mortgages over Oldfield Location 640. Registration of the discharge of Rafcorp's mortgages took place on 7 December 1987. The discharge prepared for Rafcorp related to all of the land in Certificate of Title Volume 1699 Folio 288. It therefore extended to Oldfield Location 638, although that Location was not included in the sale. Westpac also discharged its mortgage over all of the land comprised in Certificate of Title Volume 1699 Folio 288. The trial judge found that it was by inadvertence that the discharge prepared for Rafcorp related to all of the land in the relevant certificate of title. Mr and Mrs Fisher deny that the discharge by Rafcorp of its mortgage over Oldfield Location 638 was inadvertent. However, as will be seen, we do not consider that anything turns on that question.
Mr and Mrs Fisher contend that Rafcorp was paid in full on 23 November 1987 out of the proceeds of sale of Oldfield Location 631 on the basis that "Mark Regan Settlements" received the proceeds of settlement for the use of Rafcorp. They also argue that it was for Rafcorp to look to its own interests first and that if it chose to let Westpac take the proceeds of settlement in satisfaction of debt owed to Westpac, Rafcorp cannot subsequently be heard to say that the debts owing to it had not been paid out.
On 7 June 1988 Rafcorp wrote to Mr and Mrs Fisher advising that it had not received repayment of interest totalling $6478.57 which had been due on 1 April 1988. They were asked to remit the payment to Rafcorp within 28 days from the date of that letter. On 12 June 1988 Mr and Mrs Fisher wrote back to Rafcorp enclosing a copy of their budget for the next twelve months and stating that it would be "a little longer" before they were in a position to repay. On 17 April 1989 Rafcorp wrote to Mr and Mrs Fisher advising that the December 1987 discharge of the mortgages over the whole of the title including portion of Oldfield Location 638 had been in error. The letter noted that no new Certificate of Title had issued for that Location and that the original title (presumably a reference to the duplicate Certificate of Title) remained in a partly cancelled state at the Land Titles Office. Rafcorp enclosed in that letter an Application for the Issue of a Balance Title and replacement mortgages which Rafcorp asked Mr and Mrs Fisher to execute. On 11 May 1989 Rafcorp wrote again requesting return of those documents. On 28 June 1989 Rafcorp lodged a caveat against Certificate of Title Volume 1699 Folio 288 in respect of Oldfield Location 638. The following day Mr Regan wrote to Rafcorp advising that he was acting on behalf of Mr and Mrs Fisher in regard to the sale of land being Oldfield Location 641 which was comprised in Certificate of Title Volume 1445 Folio 69 over which the Rafcorp mortgages remained registered. Those lands were also subject to securities in favour of Westpac and Australian Guarantee Corporation Limited. Mr Regan, in his letter, asked Rafcorp to prepare the discharge of its mortgages in readiness for settlement and to advise the amount required at settlement. Rafcorp responded by letter dated 5 July 1989 refusing to accede to the request for discharge of those mortgages. The reason given was that the mortgages represented all Rafcorp's security. The letter further stated that since Westpac was registered ahead of Rafcorp, it was assumed that all proceeds would go to Westpac at settlement. Accordingly, the letter continued, before Rafcorp would consider the request for discharge, alternative securities had to be arranged. On the same date, Rafcorp wrote to Mr and Mrs Fisher advising them of the lodgment of the caveat and referring to Mr Regan's request to prepare discharges of the mortgages over Oldfield Location 641. The letter stated that before Rafcorp would agreed to discharge those mortgages, Mr and Mrs Fisher would have to execute mortgages which were enclosed in that letter together with a fresh application (also enclosed in the letter) for a new title. The letter contained the following paragraph:
"If you do not wish to sign the enclosed documents, then the only possible way you can provide Hazdot Pty Ltd with clear title is to pay all the corporation's loans in full."
Mr and Mrs Fisher gave evidence before the trial judge that they signed and returned the mortgage documents to Rafcorp unwitnessed. However, his Honour preferred evidence to the contrary from Mr Gregory Munro, then manager of the Ravensthorpe Branch of Westpac, that Mr and Mrs Fisher signed the Rafcorp mortgage documents in his presence on 20 July 1989 whereupon Mr Munro witnessed those signatures and then later sent them to Rafcorp. One of the appellants' grounds of appeal is that his Honour should not have accepted Mr Munro's evidence. We return to that matter below. Rafcorp received the two mortgages and the application for balance of title on 4 August 1989. The Rafcorp mortgages, one in relation to Oldfield Location 628 and the other over in relation to Oldfield Location 638, were lodged for registration at the Titles Office on 22 August 1989. At the same time, a further mortgage over Oldfield Location 638 in favour of Westpac (dated 20 July 1989 and signed by Mr and Mrs Fisher with attestation by Mr Munro to each signature) was presented for registration. By arrangement between Rafcorp and Westpac, the Westpac mortgage in relation to Oldfield Location 638 was lodged and registered as being in priority to the Rafcorp mortgage. Westpac already had a first mortgage over Oldfield Location 628.
The evidence before the trial judge was that Mr Trevor Streeton, securities officer with Rafcorp, made certain alterations to the Rafcorp mortgages to enable, in the case of the mortgage over Oldfield Location 628, registration and in the case of the mortgage over Oldfield Location 638 to enable registration ranking in priority after the new Westpac mortgage over Oldfield Location 638. The appellants' case is that these were material alterations that they had not authorised. We deal with the matter of those alterations later in these reasons.
THE PROCEEDINGS AT FIRST INSTANCE
On 31 May 1993 Mr and Mrs Fisher filed an application and a statement of claim in this Court. The respondents to that application were Westpac as first respondent, Mr Munro as second respondent and Rafcorp as third respondent. Previous proceedings against Westpac had been struck out for failure to disclose any reasonable cause of action.
On 20 July 1993 an order was made that the applicants' statement of claim be struck out but with leave to file an amended statement of claim. An amended statement of claim was filed on 24 August 1993 and further amended on 1 June 1994.
In summary, Mr and Mrs Fisher allege that on 20 July 1989, Mr Fisher made an oral agreement with Mr Munro, on behalf of Westpac, by which Westpac promised to advance to Mr and Mrs Fisher $270,000 for the purposes, amongst other things, of providing working capital and enabling the subdivision and sale of Oldfield Location 638. Mr and Mrs Fisher were to secure the advance by a mortgage over Oldfield Location 638 in favour of Westpac. It is next pleaded that for the purpose only of reducing the agreement to writing Mr and Mrs Fisher signed the mortgage to Westpac which became registered on 22 August 1989 in priority to the mortgage to Rafcorp, also registered on that date. In their statement of claim, Mr and Mrs Fisher plead that the mortgage document was printed in the form in the Fourteenth Schedule to the Transfer of Land Act 1893-1972 (W.A.) but was otherwise blank when they signed it and, in particular, contained no description of the land, the estate being mortgaged, the mortgagors, the mortgagee, principal sum, provision for repayment or rate of interest.
Westpac, it is said, breached the oral agreement by not lending Mr and Mrs Fisher the sum of $270,000. It is alleged that Westpac fraudulently procured registration of its mortgage in that the mortgage was not attested or authenticated as provided by s 145 of the Transfer of Land Act because Mr Munro had not in fact witnessed the document, and because the document contained additions made by Westpac which were not the subject of any agreement between Mr and Mrs Fisher and Westpac. Other allegations are made against Westpac including contraventions of s 52 of the Trade Practices Act, unconscionable conduct and breach of fiduciary duty. For the purposes of this appeal, it is not necessary to describe those alternative claims.
As against Rafcorp, the statement of claim alleged that Rafcorp's mortgage in respect of Oldfield Location 638 was procured by fraud because it was not attested or authenticated as provided by s 145 of the Transfer of Land Act in that Mr Munro had not in fact witnessed it and because it contained additions made by Rafcorp which were not the subject of any agreement between Mr and Mrs Fisher and Rafcorp. A further allegation made against the third respondent was that it aided and abetted what was described as Westpac's fraud. On 2 September 1993 Rafcorp filed a defence and cross-claim and on 8 September 1993 Westpac and Mr Munro did likewise. Rafcorp's cross-claim is for possession of Oldfield Locations 638 and 628 and payment of the principal sum and interest secured by its respective mortgages over those Locations. The applicants filed replies and defences to the cross-claims on 1 October 1993. All respondents' gave discovery on 11 and 26 October 1993. On 29 October 1993, at a directions hearing, orders were made that the applicants give discovery and, by 1 November 1993, provide further and better particulars of their statement of claim as had been requested by the third respondent. A springing order was made against the applicants in the event that they failed to comply with those directions. A note of French J's reasons for that order was in the following terms:
"In this case there has been substantial delay and non-compliance with orders of the Court on the part of the applicants. There has been no attempt before today to reprogram. The explanations for non-compliance, so far as they relate to the absence of counsel overseas, are unacceptable. The services of counsel are not necessary to settle particulars or discovery. And if they be necessary, other counsel should be engaged. In a case managed system, procedural justice requires attempts at compliance by all parties.
In the circumstances, I propose to make an order that the action stand dismissed unless reprogramming orders now made are complied with."
The applicants gave particulars of their statement of claim in response to Rafcorp's request, on 29 October 1993. On 1 November 1993, Rafcorp filed a request for particulars of the applicants' reply and defence to cross-claim. The applicants gave discovery on 11 November 1993 and provided particulars relating to their reply and defence to cross-claim on 12 November 1993.
On 16 November 1993 Rafcorp filed a motion for an order for further particulars of the responses to its requests for further and better particulars both of the statement of claim and the reply. On 8 December 1993 French J made orders in the following terms:
"1.On or before 17 January 1994, the applicants to give further and better answers to those contained in paras. 4, 5, 6 and 7 of the applicants' answers to the third respondent's request dated 14 September 1993 for further and better particulars of the amended substituted statement of claim.
2.On or before 17 January 1994, the applicants to give further and better answers to the third respondent's request for particulars of the applicants' reply.
3.In the event of default by the applicants to comply with orders 1 and 2, the applicants' action against the third respondent be dismissed."
In purported compliance with paragraph 1 of the order, the applicants filed further particulars of their statement of claim on 17 January 1994 but particulars of the reply were not filed until 21 January 1994. At a directions hearing on 24 January 1994 Rafcorp's counsel contended that there had been non-compliance with the order of 8 December 1993 in relation to the provision of particulars and that his client was entitled to a judgment of dismissal of the applicants' claims against it. That question was adjourned until 28 January 1994. On 27 January 1994 the applicants filed a motion, returnable on the following day, seeking an extension of time for compliance with the order of 8 December 1993. Rafcorp filed a motion on 28 January 1994 for orders that the applicants' claim as against it be dismissed and, alternatively, the statement of claim be struck out and that it have summary judgment on its cross-claim. The motion for summary judgment on the cross-claim was supported by affidavit.
French J, having heard these motions on 28 January 1994, made orders on 9 February 1994 in the following terms:
"1.The application stands dismissed as against the third respondent by operation of the order of 8 December 1993.
2.The applicants are to pay the third respondent's costs of the action.
3.The applicants' motion filed 27 January 1994 is dismissed."
On 29 April 1994 French J made an order that Rafcorp's cross-claim against the applicants be tried separately from the principal action, that the hearing of the cross-claim be on affidavit subject to the usual rights of cross-examination and that the hearing of the cross-claim be expedited.
On 2 March 1994 Mr and Mrs Fisher lodged a notice of appeal from the judgment given on 9 February 1994. That appeal was listed for hearing on 21 July 1994. In the meantime, the hearing of Rafcorp's cross-claim took place before French J on 13, 20 and 23 June 1994 following which his Honour reserved judgment.
On 14 July 1994 Mr and Mrs Fisher filed a motion in the appeal seeking that the hearing of that appeal be adjourned until French J's decision was given in respect of the cross-claim. On 21 July 1994 that appeal was adjourned to a date to be fixed and is now the first of the two appeals before this
Court.
On 30 November 1994 French J delivered judgment in respect of the cross-claim. In his reasons for judgment, his Honour rejected Mr and Mrs Fisher's contention that Rafcorp was paid in full out of the proceeds of the sale of Oldfield Location 631 and found that the position between Westpac and Rafcorp was governed by the letter of priority. His Honour did not specify which letter of authority he was referring to but added:
"In any event the Fisher's own agent, Regan, was present and plainly acting within his actual or ostensible authority in agreeing to payment of the settlement proceeds to Westpac."
His Honour stated that he had no hesitation in accepting Mr Munro's evidence that Mr and Mrs Fisher signed the Rafcorp mortgages in his presence in Hopetoun and that he had signed those documents as witness to their signatures. His Honour rejected Mr and Mrs Fisher's evidence that they had signed and returned the mortgage documents to Rafcorp unwitnessed. Further, his Honour held that none of the alterations which Rafcorp's Securities Officer had made to the mortgage documents, was material or had any effect upon Mr and Mrs Fisher's obligation to Rafcorp.
Judgment on the cross-claim was entered in favour of Rafcorp in the following terms:
"1.The cross-claimant have possession of the cross-respondents' land being:
(a)portion of Oldfield Location 628 and being the whole of the land comprised in Certificate of Title Volume 1848 Folio 968;
(b)portion of Oldfield Location 638 and being the balance of the land comprised in Certificate of Title Volume 1848 Folio 552;
2.There be judgment for the cross-claimant against the cross-respondents in the amount of $104,606 inclusive of pre-judgment interest.
3.The cross-respondent pay the cross-claimant's costs of the cross-claim.
4.There be liberty to apply within seven days to vary the form of the orders to correct any error of calculation."
That judgment forms the subject matter of the second appeal.
One further matter should be noted before the merits of the respective appeals are considered. When the two appeals were called on for hearing, Mr Adams advised the Court that Mrs Fay Annette Fisher had recently died. No formal proof of death was filed. Neither side sought an adjournment of the hearing. Mr Pettit of counsel for the respondent took no objection to the proceedings continuing to show Mrs Fisher as a party to the appeal.
In the circumstances the Court did not consider that it should act on its own motion pursuant to Order 6 rules 10 and 15 of the Federal Court Rules. Any application later made by any party can be considered at that time upon formal proof of the death of Mrs Fisher.
DISMISSAL OF APPLICATION AS AGAINST RESPONDENT
As is set out above, the first of these two appeals is from an order of French J dated 9 February 1994 whereby the applicants' application against various parties was dismissed as against the respondent. The order of dismissal was made in consequence of non-compliance by the applicants with an interlocutory order made by his Honour on 8 December 1993. The terms of the order of 8 December 1993 are set out above.
Orders in terms similar to paragraph 3 of the order of 8 December 1993 have been described as "springing" orders or "guillotine" orders (see Lenijamar Pty Ltd v AGC (Advances) Limited (1990) 27 FCR 388).
The history of this matter following the making of the order of 8 December 1993 is described above.
French J on 9 February 1994 concluded:-
"In the event, I am satisfied that the particulars filed on 17 January 1994 do not comply with the requirements of the requests in respect of which the order of 8 December 1983 (sic) was made. No particulars of the reply were filed within the required time and those filed out of time do not appear to be responsive to the request.
Given the history of this matter, I do not consider that any further extension of the time for filing proper particulars should be granted. Although I do not think it appropriate to make a determination on the strike out element of the motion, the applicants' pleaded case is marginal. There has already been strong and adequate warning in this case about the need to comply with the Court's directions. In my opinion, the applicants' claim as against the third respondent should stand dismissed.
Judgment was sought on the cross-claim, but in my opinion that is a matter for trial or a motion for summary judgment supported by evidence."
As stated paragraph 1 of the Minutes of Order dated 9 February 1994 reads as follows:-
"The application stands dismissed as against the third respondent by operation of the order of 8 December 1993."
The appellants, who although represented by solicitors and, it appears, counsel throughout the course of the proceedings before French J, are not now represented by any legal practitioner. They have raised 17 purported grounds of appeal against the decision of French J. Many of these "grounds" raise matters irrelevant to this appeal which is an appeal against his Honour's judgment of 9 February 1994. They did not seek leave to appeal (see s 24(1A) of the Federal Court Act 1976). Although the matter was not fully argued, and for that reason we have not reached a concluded view on the point, it seems to us that the judgment of French J might well be interlocutory such that the appellants require leave to appeal against it (see for example, Carr v Finance Corporation of Australia Limited (No.1) (1981) 147 CLR 246). Mr Pettit of counsel for the respondent raised no objection to our granting leave to appeal to the extent that it might have been necessary. We did so.
Mr Adams, who by leave argued the appeals on behalf of the appellants, did not contend that the further and better answers ordered to be given by the order of French J dated 8 December 1993 had in fact been given either in accordance with that order or by 9 February 1994. However grounds 9 and 10 of the appellants' Notice of Appeal against his Honour's judgment of 9 February 1994 are as follows:-
"9.The Learned Judge was wrong in ruling that his Order for the Applicants' (sic.) to provide Further and Better Particulars to the Third Respondent had not been complied with.
10.Alternatively the Learned Judge was wrong in ruling that the Order to supply Further and Better Particulars to the Third Respondent had not been substantially complied with."
As the appellants were not represented by a legal practitioner on the appeals we do not consider that any concession should be implied from Mr Adam's failure to address the Court on these grounds.
By their Amended Substituted Statement of Claim ("the Statement of Claim") the appellants have pleaded that:-
"at the time the Third Respondent [Rafcorp] lodged the Rafcor Bill of Mortgage it knew (as was the fact):
(a)that its Bill of Mortgage was not attested or authenticated as provided by s 145 of the Transfer of Land Act in that the Second Respondent had not in fact witnessed that Bill;
(b)that its Bill of Mortgage contained additions made by it which were:
(i)not the subject of any agreement between the Applicants and the Third Respondent, namely that it was to be a second ranking Bill of Mortgage behind the Westpac Bill of Mortgage;
(ii)unknown to the Applicants;
(c)that had the facts set out in sub-paragraphs (a) and (b) been declared to the Office of Land Titles the Bill of Mortgage would not be registered."
The appellants have further pleaded that notwithstanding the above Rafcorp "declared to the Office of Land Titles that its Bill of Mortgage was correct for the purposes of registration." Then by para 26 the applicants have pleaded:-
"26 The said declaration:
(a)was false;
(b)was fraudulently made (the Third Respondent then knowing the true facts) as pleaded at paragraphs 8 to 14 hereof;
(c)was made for the purpose of effecting registration of the RAFCOR Bill of Mortgage;
(d)effected the registration of the Bill."
By a Request for Particulars dated 14 September 1993 Rafcorp by its solicitor made the following request("request 4"):-
"REQUEST 4
As to paragraph 26 of the statement of claim:
(a)set out every particular in which the alleged declaration is alleged to have been
(i) false,
(ii) fraudulent;
(b)is it alleged that the third respondent knew each of these matters set out in paragraphs 8 to 14 of the statement of claim;
(c)set out every act, fact or circumstance relied upon for the allegation that the third respondent knew the matters set out in paragraphs 8, 9, 10, 11 and 12 of the statement of claim."
The response of the appellants by their then solicitors to this request was as follows:-
"Request No.4
(a)The Applicants have already provided sufficient particulars.
(b)This is not a request for particulars.
(c)Further particulars may be provided following Discovery and inspection."
On 17 January 1994 pursuant to the order of French J dated 8 December 1993 the appellants provided the following further answer to request 4:-
"Request 4 (a) Re paragraph 26
A.Particulars of falsing (sic) of Declaration
a)Particulars of the falsify (sic) of the declaration are contained in paragraphs 12, 13, 14 and 24 of the amended substituted statement of claim ("the Claim").
b)The additions to the document referred to in paragraph 14(b) and 14(c) are false as alleged in paragraphs 22(b) of the Claim.
B.Particulars of Fraud
The actions of the Third Respondent in:
(i)delivering the Balance of Title Application to the First Respondent (paragraph 7).
(ii)altering the RAFCOR document (paragraphs 14(b) and 14(c) (sic).
(iii)procuring the signature of the Second Respondent as a witness to the RAFCOR document.
(iv)attending at the Office of Titles to jointly lodge with the First Respondent.
(v)permitting the First Respondent to lodge the Application for Balance of Title.
(vi)making the declaration to the Registrar of Titles (paragraph 25).
(vii)advising the Applicants that the previous release of the Third Respondents Mortgages had been inadvertent.
(viii)failing to advise the Applicants that the First Respondent was and had been in breach of its priority arrangements and that but for those breaches the debt of the Third Respondent would have been repaid in full.
was fraudulent in that the Third Respondents knew that:
(ix)the prior release of its mortgages was not inadvertent.
(x)the Applicants were unaware of the breaches by the First Respondent of its priority arrangements with the Third Respondents (sic.)
(xi)The Applicants intended the Third Respondent to lodge the Balance of Title applications.
(xii)The Applicants had not approved the alterations to the RAFCOR document.
(xiii)The Second Respondent had not in fact witnessed the RAFCOR document.
(xiv)had the Registrar of Titles known of the matters contained in sub paragraphs (ix), (xi), (xii) and (xiii) above he would not have registered the RAFCOR document.
(xv)without the alteration to the RAFCOR document and the arrangements between the First and Third Respondents neither the Westpac document nor the RAFCOR document was capable of registration as both document (sic.) by their terms were expressed to be first mortgages.
and the conduct was undertaken and the arrangements were made in order to:
(xvi)ensure that the Registrar of Titles registered the documents.
(xvii)aid and abet the registration of the Westpac mortgage.
(xviii)achieve registration of the RAFCOR mortgage.
(xix)resolve the question of priorities between the First and Third Respondents
to the detriment of and without regard for the interests of the Applicants and to the advantage of the First and Third Respondents."
We turn first to the request for particulars of the pleading that the declaration made by Rafcorp to the Office of Land Titles that its mortgage was correct for the purposes of registration was false. The reply of 17 January 1994 asserted that the relevant particulars were contained in paragraphs 12, 13, 14 and 24 of the Statement of Claim. Paragraph 12 pleads the alleged conduct of the Second Respondent in purporting to witness the signatures of the appellants on the Rafcorp mortgage at a time later than the date upon which the appellants plead that they signed the document and on an occasion when they plead that they were not present. Paragraph 13 appears to be irrelevant to the plea that the declaration made by Rafcorp to the Office of Lands Titles was false. Paragraph 14 pleads certain alterations made by Mr Trevor Streeton, an employee of Rafcorp, to the Rafcorp mortgage. Paragraph 24 pleads knowledge in Rafcorp that its mortgage was not attested or authenticated as provided by s 145 of the Transfer of Land Act in that the signatures of the appellants had not been witnessed as asserted by the document and that the mortgage document contained additions not agreed to by the appellants, and unknown to them, which resulted in the Rafcorp mortgage taking priority behind a Westpac Mortgage. Paragraph 24 further pleads knowledge in Rafcorp of the alleged position that had such facts been declared to the Office of Land Titles the Rafcorp mortgage would not have been registered.
The learned judge at first instance concluded that paragraphs 12, 13, 14 and 24 of the Statement of Claim did not disclose particulars of falsity of the declaration pleaded in paragraph 26 of the Statement of Claim. We deal below with the question of whether the premise behind the above pleadings accurately reflects the law. That question is not directly relevant to the issue of whether the appellants provided adequate particulars of their allegation that the declaration referred to in paragraph 26 of the Statement of Claim was false. Whilst, no doubt, the particulars could have been expressed more felicitously, in our view they were adequate to inform Rafcorp of the nature of the case which it would have to meet in this regard.
In our view, however, the position is different with respect to the request for particulars as to the allegation that the declaration was made fraudulently. The relevance of the plea of fraud can be seen from paragraph (a) of the Application. This paragraph sets out the claim of the appellants for:-
"A declaration that certain registered Bills of Mortgage over land described as Oldfield location 638 situated near Hopetoun Western Australia in favour of the First
and Third Respondents was procured by the fraud of the Respondents and that registration of the Bills should be expunged pursuant to Section 200 of the Transfer of Land Act 1893 (W.A.)."
The plea of fraud is an essential aspect of the above claim for relief. The Transfer of Land Act 1893 gives indefeasibility to the title of the registered proprietor of any estate or interest in land except in the case of fraud (see Transfer of Land Act s 68).
In Bahr v Nicolay (1988) 164 CLR 604, the High Court considered the question of fraud in relation to the Western Australian Transfer of Land Act. Mason CJ and Dawson J said:
"According to the decisions of this Court actual fraud, personal dishonesty or moral turpitude lie at the heart of the two sections and their counterparts." (p 614)
Wilson and Toohey JJ arrived at the same conclusion when they said:
"The fraud referred to in ss.68 and 134 is actual fraud, involving some act of dishonesty on the part of the person whose title is sought to be impeached." (p 630)
See also the decision of the Full Court of the Supreme Court of Western Australia in Kiely v Beneficial Finance Corporation Ltd (1991-1992) 6 WAR 521 where the court, after discussing the decision in Bahr v Nicolay came to the conclusion that conduct that amounted to unconscionable conduct fell short of fraud; the Full Court emphasised that the principle of indefeasibility can only be defeated by fraud and unconscionable conduct does not amount to fraud.
The importance of providing particulars of pleadings of fraud is emphasised by Order 12 rule 2 of the Federal Court Rules. Order 12 rule 2 provides as follows:-
"A party pleading shall give particulars of any fraud, misrepresentation, breach of trust, wilful default or undue influence on which he relies."
The learned judge at first instance concluded that the particulars provided did not "logically stand as particulars of the allegation that the declaration was fraudulently made". We discuss below our reasons for concluding that nothing turns on the question of whether Rafcorp discharged its mortgage over Location 638 inadvertently. References to this aspect of the matter in the particulars may be set to one side. We agree with French J that the remaining particulars provided do not amount to particulars of the allegation that the declaration was fraudulently made. The particulars provided do not refer to acts of actual fraud or dishonesty by Rafcorp. There can be no question of constructive fraud.
Nothing in our view suggests that with the provision of more time, or the assistance of further legal advice, the appellants would be able to particularise actual fraud against Rafcorp with respect to the making of the declaration referred to in paragraph 26 of the Statement of Claim.
The other significant deficiency in the particulars provided by the appellants on 17 January 1995 identified by French J relates to the respondent's request for particulars of paragraph 30 of the Statement of Claim ("request 7"). Request 7 was made in the following terms:-
"REQUEST 7
As to paragraph 30 of the statement of claim set out every act, fact or circumstance relied upon for the allegations that:
(a)the third respondent knew the matters contained in paragraphs 19, 20, 21 and 22 of the statement of claim;
(b)the matters in each of sub-paragraphs (b), (c) and (d) thereof aided or abetted the first respondent as alleged."
Paragraph 30 of the Statement of Claim pleaded as follows:-
"Further, the Third Respondent (with knowledge of the facts pleaded at paragraphs 19 to 22 and 24 to 26) and knowing that the First Respondent could not register the Westpac document without holding the Application for Balance of Title by:
(a)delivery to the First Respondent [i.e. Westpac] Application for Balance of Title;
(b)delivering to the First Respondent the Rafcor document for the purpose of the Second Respondent [i.e. Mr Gregory Munro] witnessing the same;
(c)receiving the Rafcor document witnessed by the Second Respondent (in the circumstances where it was apparent the Rafcor document had not been witnessed by the Second Respondent);
(d)attending at the Office of Land Titles to lodge the Rafcor Bill of Mortgage in conjunction with the Application for Balance of Title and the Westpac Bill of Mortgage;
aided and abetted the First Respondent to fraudulently effect registration of its Westpac document and the Third Respondent is jointly liable with the First Respondent for the loss and damage thereby suffered by the Applicants."
The initial response of the appellants to request 7 was as follows:-
"Request No.7
(a) & (b)Sufficient particulars have already been provided."
On 17 January 1994 pursuant to the order of French J dated 8 December 1993 the appellants provided the following further answer to request 7:-
"Request 7 Re paragraph 30
By reason of the various priority agreements between the First and Third Respondents and the conduct of the Respondents the First Respondent was considered as agent of the Third Respondent. The Third Respondent is deemed to have constructive knowledge of the facts pleaded. The Third Respondent had actual knowledge of the facts pleaded at paragraphs 12, 13 and 14 of the Claim and incorporated by Reference in paragraphs 22(b)."
This answer is non-responsive to request 7. It does not provide particulars of acts, facts or circumstances relied upon to support the allegation of knowledge in Rafcorp made by paragraph 30 of the Statement of Claim. In large part the answer appears to confirm a lack of actual knowledge in Rafcorp. Again, nothing in our view suggests that with the provision of more time, or the assistance of further legal advice, the appellants would be able to provide adequate particulars of paragraph 30 of the Statement of Claim.
By a request dated 1 November 1993 Rafcorp sought certain particulars of the appellants' Reply. For present purposes the only relevant request related to paragraph 4 of the Reply which so far as is here relevant pleaded:-
"As to the facts alleged in paragraph 6 of the Defence and Crossclaim, the Applicants admit that upon the sale (in December 1987) by them of Location 640 to Hazdot Pty Ltd the Third Respondent discharged its Mortgage in respect of that land but deny that it did so without consideration .... ."
The request dated 1 November 1993 asked:-
"As to paragraph 4 of the Reply identify every act, fact, matter or circumstance relied upon for the allegation that the third respondent received consideration for the discharge of its mortgage over portion of location 638."
The initial response of the appellants to the above request was as follows:-
"The sum of $35,000.00 was received by the Third Respondent on or about the month of December 1987 from the proceeds of the sale to Hazdot Pty Ltd. Further particulars will be provided following Discovery and Inspection."
By a document dated 20 January 1994 (i.e. outside the time frame set by French J) the appellants purported to provide further particulars of paragraph 4 of their Reply. Such particulars did not support the allegations that Rafcorp received consideration for the discharge of the mortgage and that such consideration was in the sum of $35,000.00. Rather the particulars provided on 20 January 1994 are consistent with no monies having been paid to Rafcorp upon the discharge of its mortgage and all relevant monies having been received by Westpac. Again nothing in our view suggests that with the provision of more time, or the assistance of further legal advice, the appellants would be able to particularise any consideration received by Rafcorp for the discharge of its mortgage over portion of location 638.
As our above analysis makes plain we are in agreement with French J that the particulars filed by the appellants on 17 January 1994 did not comply with paragraph 1 of his Honour's order of 8 December 1993. There was not even an attempted provision of further and better answers in accord with paragraph 2 of his Honour's order on or before 17 January 1994. In our view his Honour rightly characterised the particulars which were provided on 20 January 1994 as non-responsive to the request referred to in his Honour's order.
His Honour's reasons for judgment of 9 February 1994 set out the background to his order of 8 December 1994. His Honour had made a previous springing order on 29 October 1993 noting 'substantial delay and non-compliance with the orders of the Court on the part of the applicants.'
As was pointed out by Wilcox and Gummow JJ in Lenijamar Pty Ltd v AGC (Advances) Limited at p 395 Order 10 of the Federal Court Rules which deals with directions hearings is the foundation of the Court's case management system. Order 10 rule 7 deals with procedure on default. It provides as follows:-
"(1)Where a party fails to comply with an order of the Court directing that party to take a step in the proceeding, any other party may move the Court on notice -
(a)if the party in default is an applicant - for an order that the proceeding be stayed or dismissed as to the whole or any part of he relief claimed by him in the proceeding;
(b)if the party in default is a respondent - for judgment or an order against him; or
(c)for an order that the step in the proceeding be taken within the time limited in that order.
(2)The Court may make an order of the kind mentioned in sub-rule (1) or any other order or may give such directions, and specify such consequences for non-compliance with the order, as the Court thinks just.
(3)This rule does not limit the powers of the Court to punish for contempt."
The following passage is taken from the joint judgment of Wilcox and Gummow JJ in Lenijamar Pty Ltd v AGC Ltd:-
"It is to be noted that the power given by this rule is conditioned on one circumstance only: the failure of a party to comply with an order of the Court directing that party to take a step in the proceeding. There is no requirement of intentional default or contumelious conduct, although the attitude of the applicant to the default and the Court's judgment as to whether or not the applicant genuinely wishes the matter to go to trial within a reasonable period will usually be important factors in weighing the proper exercise of the discretion confirmed by the rule. There is no requirement of "inordinate or inexcusable delay on the part of the applicant or the applicant's lawyers, although any such delay is likely to be a significant matter. There is no requirement of prejudice to the respondent, although the existence of prejudice is also likely to be significant. And it must be remembered that, in almost every case, delay adversely affects the quality of the trial and is an additional burden upon the parties ....
The discretion conferred by O 10, r 7 is unconfined, except for the condition of non-compliance with a direction. As it is impossible to forsee all of the circumstances under which the rule might be sought to be used, it is undesirable to make any exhaustive statement of the circumstances under which the power granted by the rule will appropriately be exercised. We will not attempt to do so. But two situations are obvious candidates for the exercise of the power: cases in which the history of non-compliance by an applicant is such as to indicate an inability or unwillingness to cooperate with the Court and the other party or parties in having the matter ready for trial within an acceptable period and cases - whatever the applicant's state of mind or resources - in which the non-compliance is confirming and occasioning unnecessary delay, expense or other prejudice to the respondent." (at pp 395-396)
Although circumstances calling for the making of springing or guillotine orders will be unusual, it can not be doubted that French J had the power to make the order which he did on 8 December 1994 (see O 10 r 7(2)). In our view the history of the matter justified his doing so. The history of non-compliance by the appellants with previous orders and of requests for particulars was such as to indicate an inability or unwillingness in the applicant to cooperate with the Court and Rafcorp in having the matter ready for trial within an acceptable period. Moreover such non-compliance was occasioning unnecessary delay, expense and other prejudice to Rafcorp.
It is the case, of course, that the appellants did not appeal the decision of his Honour to make the springing order of 8 December 1993. The appellants have appealed the order of his Honour of 9 February 1994. Paragraph 1 of that order is in the following terms:-
"1.The application stands dismissed as against the third respondent by operation of the order of 8 December 1993."
As paragraph 1 of the above order makes clear, the order of 8 December 1993 was self-executing. If either or both of paragraphs 1 and 2 of the order of 8 December 1993 were not complied with the applicants' action against Rafcorp was to be dismissed - by reason of the terms of paragraph 3 of the order of 8 December 1993. No discretion in this regard was retained by his Honour. As stated above, we agree with his Honour's conclusions that neither paragraph 1 nor paragraph 2 of the order of 8 December 1993 was complied with. Subject to one matter dealt with below the inevitable result of this finding is that the applicants' action against Rafcorp was dismissed by reason of paragraph 3 of the order of 8 December 1993 - not by reason of his Honour's order of 9 February 1994.
The only way in which the applicants could have avoided the above consequence was by obtaining an extension of time within which to comply with paragraph 1 and 2 of the order of 8 December 1994. At the very last moment the applicants by motion sought such an extension of time. It was not accompanied by proper answers to Rafcorp's requests for particulars. On 9 February 1994 French J dismissed the applicants' motion for an extension of time to comply with the order of 8 December 1994. As stated above we are not persuaded that the provision of more time, or the assistance of further legal advice, would have enabled the appellants to provide the particulars requested by Rafcorp. In our view his Honour's decision to dismiss the appellants' motion was appropriate in the circumstances.
JUDGMENT IN FAVOUR OF THE RESPONDENT ON ITS CROSS-CLAIM
The appellants have claimed that Westpac and Rafcorp, as mortgagees, had no right to agree, as between themselves, as to the manner in which funds from the sale of land would be appropriated in satisfaction, or partial satisfaction, of the appellants' indebtedness under the respective mortgages. In their notice of appeal, the appellants have sought, by way of relief, declarations that Rafcorp was "... obligated to receive such monies as were found to be due to it from the proceeds of the sale of Lot 1 of Oldfield Location 631" and that, the monies having gone to Westpac, Rafcorp must now "look to Westpac and not the Fishers as the source of repayment of the monies and interest thereon due it (sic)". Elsewhere in their Notice of Appeal, the appellants addressed this same issue in these terms:-
"The Fishers contention is that they were entitled to assume that these funds had been paid to Rafcorp as part of the settlement process."
As a matter of fact, and as a matter of law, there is no substance in this ground of appeal. As a matter of fact, the appellants participated in the settlement of the sale of their land through the services of their agent, Mr Regan. He had a direct involvement in the disposition of the appellants' proceeds of sale; he knew that the appellants' monies were paid to Westpac and not to Rafcorp and he raised no objection, in the name of the appellants, to this occurring. And it has not been suggested that Mr Regan acted in breach of his authority when he participated in the settlement. There was evidence that Mr Regan, as agent for the appellants, communicated with Rafcorp in September 1987, asking Rafcorp to advise of the amount needed to clear its debt. Rafcorp replied to Mr Regan that it would not recover any proceeds from the sale, as all proceeds were to be paid to Westpac. The appellants, so it would seem, would wish the court to draw the inference from this evidence that the appellants had instructed Mr Regan to cause payment of money to be made to Rafcorp but such a finding would be contrary to Mr Regan's express evidence on the subject.
Furthermore, unless there are specific contractual arrangements to the contrary (and no such arrangements exist here) it is open, in the ordinary case, as a matter of law, to mortgagees to agree to alter the priorities of their mortgages without the consent of their mortgagor: Cheah Theam Swee v Equiticorp Finance Group Ltd [1992] 1 AC 472 (P.C.) ("Cheah's case"). In that case the defendant, by a mortgage deed, ("Mortgage I") covenanted to pay certain sums of money to Equiticorp Securities Ltd, and, as security for such payment charged his parcel of shares in London Pacific Ltd "by way of first fixed charge". By a further mortgage deed, ("Mortgage II") the defendants covenanted to pay other sums of money to Capital Investments U.K. and as security for such payment charged, inter alia, the same parcel of shares "by way of second fixed charge".
Ultimately, both mortgages became vested in the plaintiff, Equiticorp Finance Group Ltd. The plaintiff obtained a judgment against the defendant in respect of the money, payment of which had been secured under Mortgage I, and thereafter, apparently through inadvertence, exercised its power of sale under Mortgage II over the parcel of shares. The proceeds of sale of the shares were applied by the plaintiff, not in satisfying the moneys due under Mortgage I (being the judgment debt) but in partial satisfaction of the debt secured by Mortgage II. The defendant took the view that he was entitled to insist that the proceeds of sale should have been applied in the order laid down in the original mortgages, in which case the judgment against him would have been fully satisfied.
The Court of Appeal of New Zealand in finding for the plaintiff had observed that a mortgagor could not recover his mortgaged property until all debts that had been secured on it had been satisfied; the court therefore concluded that there was no need for a mortgagor to consent to any variations in the priorities. An appeal to the Privy Council was unsuccessful. The judgment of their Lordships was delivered by Lord Browne-Wilkinson who said at p477:
"For these reasons, in the ordinary case a mortgagor has no right to insist on the order in which successive mortgaged debts are satisfied... The provisions in mortgage I describing the charge as a 'first... charge' are merely a description of the nature of the security which the defendant was giving: it did not confer on the defendant a contractual right to insist on the satisfaction of his debts in any particular order. There may be cases (for example where the successive mortgages carry differing rates of interest) where the mortgagor has a genuine interest in ensuring that the debts are satisfied in particular order. In such a case it will be for the mortgagor to insist upon a specific contractual provision precluding the alteration of the priorities of the mortgages.
Their Lordships' conclusions accord both with what they understand to be the generally accepted view of the law affecting subordination of debts and the law of the United States: see 59 Corpus Juris Secundum, para. 218; Putnam v Broten (1930) 232 N.W. 749. It is manifestly desirable that the law on this subject should be the same in all common law jurisdictions."
The appellants sought to distinguish Cheah's case, pointing out that it was a case that dealt with mortgages of shares (and not land) that the creditor had obtained a judgment against his debtor and that, although there had originally been two mortgagees, at the time of the hearing of the case, there were two mortgages but only one creditor. These are, of course, distinguishing features, but they are not material differences. The principle for which Cheah's case is authority, (which is found in the first sentence of the quoted passage from the judgment) has full force and application to the facts of this case. It has also been used more recently, as authority in New Zealand, in support of a wider proposition that recognises the subordination of debts with respect to a company in liquidation, in circumstances where no creditor is preferred to the general body of
creditors and only the debts of those who assent are subordinated: Stotter v Ararimu Holdings Ltd [1994] 2 NZLR 655 at 662.
The appellants also contended that Rafcorp's mortgage could not be enforced against them because of fraud coupled with deficiencies in the attestation of the mortgage and the unauthorised making of material alterations to the instrument. The appellants had said in evidence that they had signed and returned the mortgage to Rafcorp unwitnessed. However, the trial judge did not accept this evidence, preferring to believe Mr Munro, the second named respondent. Mr Munro, who was then the Ravensthorpe branch manager for Westpac, had said that the appellants had signed the mortgage in his presence on 20 July 1989, that he had witnessed their signatures and that he had sent the documents to Rafcorp. This court has not been given any cause to investigate these findings of fact and credit. In addition his Honour made a further important finding of fact that has not been challenged. He said:
"Mrs Fisher did concede however, that she signed the two mortgage documents and had intended them to reach Rafcorp and to be registered as valid mortgages."
The importance of this finding rests in the fact that the Registrar may accept an instrument for registration even though execution has not been attested "if the genuineness of the signature of the party thereto is proved...": subs 145(7) of the Transfer of Land Act 1893 (WA). In other words, and contrary to the submissions of the appellants, absence of
attestation is not fatal to the validity of a registrable instrument. A Full Court of this court came to the same conclusion when considering the equivalent South Australian legislation in Arnold v State Bank of South Australia (1992) 38 FCR 484.
It is not now disputed that Westpac and Rafcorp lodged their respective mortgages for registration at the Titles office on 22 August 1989, nor is there any doubt that the mortgagees agreed, as between themselves and without consulting the appellants, that the Westpac mortgage over Oldfield Location 638 would be lodged first in point of time so that it ranked in priority to Rafcorp's mortgage. To achieve this order of registration and to comply with the requirements of the Titles office, this meant that certain alterations had to be made to each mortgage. His Honour's findings on this matter were as follows:
"Evidence was given at the hearing by Trevor Streeton, Securities Officer with Rafcorp, that he had corrected the land description on the mortgage in relation to Oldfield Location 628 so that it read 'Portion of Oldfield Location 628'. He added the words 'Portion of' which reflected the true description of the land comprised in the Certificate of Title to which the mortgage applied. He also struck out the volume and folio numbers of the old Certificate of Title because new numbers would be inserted by the Titles Office after registration. He deleted the designations 'whole' and 'balance' and wrote the word 'whole; in the column headed 'Extent' on the mortgage document.
In relation to the mortgage in favour of Rafcorp over Location 638, he crossed out the word 'Balance' and the Certificate of Title designation 'Formerly 1699 288 NOW' and probably had the word 'WHOLE' 8typed in. A blank was left for the numbers for designation of the new Certificate of Title. The word 'Nil' appeared against the entry entitled 'ENCUMBRANCES'. He struck out the word 'Nil" and inserted the words 'Mortgage No. E175559 dated 20/7/89 in favour of Westpac Banking Corporation stamped to secure $352,800'. Streeton explained that alterations of this kind are common on documents lodged for registration. He had been twenty years in the securities side of the banking industry.
I am satisfied that none of these alterations were material or had any effect upon the obligation of the Fishers to Rafcorp. In particular, there was nothing in them which affected the arrangements between Westpac and Rafcorp under which Westpac's mortgage was registered first. The entry relating to encumbrances is not a part of the mortgage document which affects the contractual relationships between the parties."
In our opinion, the trial judge was correct in concluding that these alterations were not material and that they did not affect the contractual relationship between the parties. Support for this conclusion can be found in various decisions including the decision of the Full Court of the Supreme Court of South Australia in Armor Coating (Marketing) Pty Ltd v General Credits (Finance) Pty Ltd (1976) 17 SASR 259. In that case the instrument of mortgage, when executed by the mortgagor, was incomplete; certain details of dates and amounts of payments had not been inserted. These details were subsequently inserted in the mortgage by the solicitor for the mortgagee and the mortgage was lodged for registration. Meanwhile a notice of intention to acquire portion of the land which was the subject of the mortgage had been given by the Highways Department. In order to satisfy requisitions that had been raised by the Registrar-General, the solicitor for the mortgagee withdrew the mortgage so as to allow prior registration of the Notice of Acquisition; he then altered the description of the land on the mortgage so that it related only to that which would remain after the acquisition. The
solicitor then re-dated the mortgage and relodged it.
The mortgagor claimed that these insertions and alterations to the mortgage after its execution had the effect of rendering the mortgage void. The trial judge was of the opinion that all the insertions and alterations, both before and after the lodgement for registration conformed to the intention of the parties and must be taken to have been impliedly authorised by the mortgagor; his Honour therefore concluded that the mortgage was a valid instrument. The finding of implied authority was upheld on appeal but only in respect of the insertions and alterations that had been made prior to lodgement for registration. The Full Court did not consider that the implied authority extended to the events that took place after the initial lodgement, that is, the alteration to the description of the land and the re-dating of the mortgage; even so the Full Court still concluded that the mortgage had not been rendered void or voidable because the alteration in the description of the land was not a material alteration and the alteration in the date, if it was material, was an alteration, which in the circumstances, could only have been to the advantage of the mortgagor. The decision in the Armor Coatings case has since been referred to with approval by the New South Wales Court of Appeal in Warburton v National Westminster Finance Australia Ltd (1988) 15 NSWLR 238. None of the complaints that has been raised by the appellants amount to material alterations or insertions; none of them affected the contractual relationship between the parties.
There remains, finally, the allegation of fraud. It is difficult to imagine how the appellants could conceive of a case of fraud against Rafcorp on the facts as found by his Honour. There can be no question of constructive fraud. See the consideration of Bahr v Nicolay and Kiely v Beneficial Finance Corporation Ltd above.
The appellants also attempted to argue that the conduct of Westpac in promising to advance them $270,000 and then reneging on the arrangement somehow inculpated Rafcorp in a fraudulent activity. There was, however, no evidentiary base for this allegation. In particular, there was no evidence that pointed to Rafcorp having any knowledge of the arrangements that had been made between the appellants and Westpac in relation to the advance of $270,000.
For these reasons, except to the limited extent discussed below, the appeal must be dismissed and the stay of execution of the judgment under appeal must be lifted.
We note that the learned judge at first instance in his judgment in respect of the cross-claim ordered that Rafcorp have possession of the appellants' land being:
(a)portion of Oldfield Location 628 and being the whole of the land comprised in Certificate of Title Volume 1848 Folio 968;
(b)portion of Oldfield Location 638 and being the balance of the land comprised in Certificate of Title Volume 1848 Folio 552.
We note that the above order gives no recognition to the possible prior rights of Westpac as first mortgagee of the above land. We will hear counsel for Rafcorp on the question of whether the appeal against the above order should be allowed for the limited purpose only of prefacing the above order with the words "Subject to the rights of any prior mortgagee ....".
I certify that this and the preceding pages are a true copy of the Reasons for Judgment of O'Loughlin, Carr and Branson JJ.
Associate:
Dated:
The Appellant Mr C R Fisher
appeared in person assisted
by his friend Mr J Adams
Counsel for the Respondent : Mr K M Pettit
Solicitor for the Respondent : Crown Solicitor for the State of Western Australia
Hearing Dates : 22 and 23 March 1995
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