Garafano v Reliance Finance Corporation Limited

[1992] HCATrans 362

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IN THE HIGH COURT OF AUSTRALIA	•
Office of the Registry

Sydney No Slll of 1992

B e t w e e n -

HELGA GARAFANO

Applicant

and

RELIANCE FINANCE CORPORATION

LIMITED

Respondent

Office of the Registry

Sydney No Sll2 of 1992

B e t w e e n -

CLINTON GARAFANO

Applicant

and

RELIANCE FINANCE CORPORATION

LIMITED

Applications for special leave

to appeal

MASON CJ
DEANE J

GAUDRON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON THURSDAY, 10 DECEMBER 1992, AT 11.01 AM

Copyright in the High Court of Australia

Garafano 1 10/12/92

MR J.J. GARNSEY, QC:  May it please the Court, I appear with

my learned friend, MR B.A.M. CONNELL, for the

applicants. (instructed by Horowitz & Bilinsky)

MR_ A.R. EMMETT, QC:  May it please Your Honours, I appear

with my friend,	MR T.H. BARRETT, for the respondent
in both cases.	(instructed by J.W. Walker &
D.K.L. Raphael)

MASON CJ:	Mr Garnsey.
MR GARNSEY:	If Your Honours please, could I hand to the

Court copies of the outline of submissions and

copies of an additional case?

MASON CJ:  Now, on the basis of the outline, how many

distinct points do you have?

MR GARNSEY:  Your Honour, three, if Your Honour pleases.

MASON CJ: That is, indefeasibility?

MR GARNSEY: Indefeasibility.

MASON CJ: Section 124?

MR GARNSEY:	Yes, and a matter on which the outline is silent but the affidavit is not, if Your Honour
pleases. That is the question of willingness to do equity and whether the maxim should be applied and
in what circumstances.

DEANE J: That only arises at the end of the hunt though,

does it not?

MR GARNSEY:  Yes. If Your Honour pleases, I regret it was

not dealt with in the outline.	It arises at the
end of the hunt in the judgments.	The judgments

are wrong as to the facts, but a question as to the
application of the maxim generally, and as to when

it should be applied, is also raised.

DEANE J: But there are two aspects of that; one is whether

you have to make a formal offer to do equity or
whether, in any order, provision must be made to
ensure that you do equity. If, in a modern

context, talking about offering to do equity is inappropriate, would it be any different if the

view were taken that no order should be made which

did not ensure that in fact your clients did

equity?

MR GARNSEY:  Not in substance, Your Honour.

DEANE J: That is what I am directing - I mean, your

argument has to be that not only is there no

occasion to stand up and say, "I offer to do

Garafano 2 10/12/92

equity", but that the ultimate order, if you

succeed on everything else, should not ensure that

you in fact do equity.

MR GARNSEY:	Yes, and indeed in Amadio's case which was not mentioned, this Court held it was not appropriate
in that case to require any doing of equity at all.
That was - - -

MASCON CJ: And that is your fundamental point?

MR GARNSEY: That is our first position, but the judgments

in the Court of Appeal are wrong in so far as they say there was no offer to do equity. There was an

offer to do complete equity in the case of

Mr Clinton Garafano by making allowance for the total of the moneys from reliance applied to

discharge an earlier mortgage of his. There was a

partial offer in the case of Mrs Helga Garafano as

to that proportion of the reliance moneys which she

said she understood had been borrowed under the

earlier mortgage and were applied to pay out the

earlier mortgage.

DEANE J:  But can I just press you to make sure I have not

misunderstood. Is the position this, that if one

were of the view that on an appeal the best that

you could hope for would be an order which ensured

that your clients did equity, that really there

would be nothing of substance involved in the

appeal?

MR GARNSEY:	No, Your Honour, because there is the question of priorities of interests and whether the reliance
mortgage - I am sorry, perhaps I should have answered Your Honour, at the end of the day,
"Possibly yes, depending on the figures".
DEANE J:	I see.

MR GARNSEY:  Yes, but not necessarily, if Your Honour what might be called, a clincher, if I might put it pleases. The question of doing equity was used as,

that way, both by the trial judge and the appeal

judges.

GAUDRON J: But it only arises as a clincher if you are

otherwise entitled - - -

MR GARNSEY:	Yes, and the -
GAUDRON J:	- - - which seems to be your principal points.

MR GARNSEY:  They are the principal points. Your Honours,

can I deal with the points also in reverse order?

Your Honour, a list was sent to Your Honours'

Garafano 3 10/12/92

library within the relevant time, so I did not

provide photocopies of all the cases.

DEANE J:  We seem to have them.

MR GARNSEY: If Your Honour pleases. Might I go first to

the Real Property Act?

MASON CJ:  You are dealing with the 124 point?

MR GARNSEY:  Yes, Your Honour. It is to some extent related

to the indefeasibility point.

MASON CJ: Yes.

MR GARNSEY:  And go first to section 3. I just draw

Your Honours' attention to the definitions of

"mortgage" and "mortgagor", in particular:

The proprietor of land or of any estate or

interest in land pledged as security for the

payment of a debt.

And:

"Mortgagee" - The proprietor of a mortgage.

Those definitions are perhaps neutral as to whether

a forged instrument comes within them, if

Your Honour pleases. Section 56 requires for

registration or execution of a mortgage in the

approved form and then section 124 provides that:

No proceedings ..... for possession of any

land ..... shall lie ..... except in any of the

following cases -

and (a) - this is the relevant paragraph:

The case of a mortgagee as against a mortgagor

in default.

Now, the point depends upon whether a mortgagor

under a forged mortgage which would otherwise be

void at law could ever be said to be in default.

Mr Justice Meagher, at page 88 of the appeal

book lines 15 to 28, deals with the point - refers

to Frazer v Walker as precluding the argument, but does not quite say why, except to say, at line 25:

But the Act must be construed as a whole, not

schizophrenically, and the "mortgagee"

referred to in s.124 must be the same person

whose forged mortgage is recognized as valid

for the purposes of ss 42 and 43.

Garafano 4 10/12/92

Now, if Your Honour pleases, there - - -

DEANE J:  I see you were solemnly arguing.

MR GARNSEY:  Yes. It is always a little difficult to

solemnly argue before Mr Justice Meagher,

Your Honour, but one tries and, Your Honour, no

case has ever said that because section 42 gives

indefeasibility it therefore imposes an artificial

obligation as between the parties to a document on

either of those parties.

It is one thing to say, as against third parties, matters shall be in a certain priority or

someone shall take free of any interest, even under

a forged instrument immediately it is registered,

but no case has ever said, "And you shall be deemed

to be in default to incur an obligation which under
the law otherwise you shall not incur as between

the parties to the document." What His Honour is

saying is that if your name is forged as the

mortgagor of a document you must pay the whole

debt, for instance, because of registration under

the Real Property Act. That, with the greatest

respect, is a point of considerable and vital

importance.

MASON CJ: But would you not construe the references in 124

consistently with the other provisions of the Act?

MR GARNSEY:  It depends for what purpose, if Your Honour

pleases. Section 124 does not affect, perhaps,

priority - does not affect the interpretation of

section 42 in relation to determining priority, but
section 124 does say that as between the mortgagee

and the mortgagor, the mortgagor shall not be

disturbed unless the mortgagor is in default and no

case has said that registration can make a

mortgagor in default.

One example is the decision of this Court in relation to the relevant point, an option in a	Travinto Nominees v Vlattas, 129 CLR 1, and in
lease had been rendered void by section 88B of the Industrial Arbitration Act and it was held by the
Court:

that the registration of the lease ..... had not

validated the lease or given the tenant an

indefeasible right to renew -

The grounds differed. The Chief Justice

Sir Garfield Barwick, Mr Justice McTiernan, and

Mr Justice Stephen held so:

on the ground that the illegality of the

option under s.88B would have been a bar to a

Garafano 10/12/92

suit by the tenant for specific performance of

the option and so the option to renew did not

create an equitable interest in land which

could be the subject of the indefeasibility of title provisions.

Followed by Mr Justice Menzies and

Mr Justice Gibbs:

on the ground that the provisions of the

Industrial Arbitration Act which made the
lease void, having been enacted after the Real
Property Act, prevailed over inconsistent

provisions of that Act.

Now, it is our respectful submission that, in

relation to this point, there is nothing in Frazer

v Walker, Breskvar v Wall or any of the other

cases -

GAUDRON J:  Your rights endure on your argument, I take it,

to the point where the mortgagee exercises power of

sale and there is a different registered

proprietor.

MR GARNSEY:	Yes, Your Honour.
GAUDRON J:	You say it does not totally defeat 42 or 43

because priority can be secured by transferring

out.

MR GARNSEY:  By transferring out, yes, but to that extent

one hesitates to use the word "deferred" in the

light of the use in the authorities but with - - -

GAUDRON J: A very strange sort of situation to be brought

about, is it not, even if it does not defeat the

priorities and the indefeasibility ultimately?

MR GARNSEY:	Your Honour, it has not, with the greatest respect, been found to be strange. Gibbs v Messer
has stood since 1891 or so and the ratio of that
case does not depend upon whether or not the name
forged is a fiction. Indeed, at page 255, about
point 3, in the advice, Lord Watson says, about six
lines down:

Those who deal, not with the registered proprietor, but with a forger who uses his name, do not transact on the faith of the

register; and they cannot by registration of a

forged deed acquire a valid title in their own

person, although the fact of their being

registered will enable them to pass a valid
right to third parties who purchase from them

in good faith and for onerous consideration.

Garafano 6 10/12/92

A new sort of consideration, if Your Honour

pleases. That does not depend on the forging of

any fiction, whatever the facts of the case might

have been.

In Frazer v Walker, (1967) AC 569, at

page 584E Gibbs v Messer was considered and from F

to G said:

the board was then concerned with the position

of a bona fide "purchaser" for value from a

fictitious person and the decision is founded

on a distinction drawn between such a case and

that of a bona fide purchaser from a real

registered proprietor. The decision has in

their Lordships' opinion no application as

regards adverse claims made against a

registered proprietor, such as came before the

courts in Assets Co Ltd v Mere Roihi, in Boyd

v May, Etc., of Wellington and in the present

case.

In Bahr v Nicolay, and I will not take

Your Honours to it because the references are not

in the relevant respect, but Gibbs v Messer was

referred to in relation to general statements as to

the purpose of the Torrens system without any

apparent disapproval of the decision. Bahr v

Nicolay, 164 CLR 604, and the references are in the decisions of Your Honour the Chief Justice and

Mr Justice Dawson at page 613 and in the joint
judgment of Mr Justice Wilson and Mr Justice Toohey
at page 637 and in the judgment of His Honour

Mr Justice Brennan at 652.

To complete the reference to authority, if

Your Honours please, the Supreme Court of New South

Wales in Mercantile Mutual Life Insurance Co Ltd v Gosper, (1991) 25 NSWLR 32, there was a difference

of opinion as to the circumstances in which a

personal equity should exist which could be relied

upon to defeat the indefeasibility under

section 42, but of the members of the Court,

Mr Justice Meagher referred, at pages 51 to 52 to

Frazer v Walker and, as supporting the decision of

Mr Justice Street in Mayer v Coe in the Supreme

Court of New South Wales which, along with Schultz

v Corwill Properties were cases where a mortgage

had been forged and was registered and it was held

that the mortgagee could eject the mortgagor even

though the mortgage was forged. In none of those

cases were the provisions of section 124 of the

Real Property Act considered.

So, if Your Honours please, although I said

there were three points, the first two are, with

respect, interrelated to this extent, that the

Garafano 10/12/92

position as to how section 124 relates to

section 42 and the decisions of this Court and of

the Privy Council and the two relevant decisions of

Mr Justice Street, very, very often relied upon by

mortgagees, as to how all those decisions and

section 124 interrelate, and that has not been made

clear on the authorities; even on the highest

authorities.

The position, in our respectful submission, is

not as simple, at all, as Mr Justice Meagher would
have it, particularly as the basic mortgagee cases

of Mayer v Coe and Schultz v Corwill Properties

simply did not consider section 124.

MASON CJ: What do you say about the passage in the judgment

of Chief Justice Barwick in Breskvar v Wall? That

is a passage on which Mr Justice Meagher relies on

Mercantile Mutual at page 51.

MR GARNSEY:  Yes. Your Honour, His Honour did not really

consider the cases at length.	I am sorry - did
Your Honour says page 387?

MASON CJ:  No, the passage is at 385 to 386 in Breskvar v

Wall.

MR GARNSEY:	Yes, Your Honour, I am sorry.
MASON CJ:	I had referred to the passage in

Mr Justice Meagher's judgment.

MR GARNSEY:  Your Honour, if one is considering

indefeasibility from the point of view of

priorities and subsequent estates, then, we

respectfully say, that is what His Honour was

directing His Honour's remarks to.

MASON CJ: But you accept the correctness of what he says?

MR GARNSEY:  Your Honour, we do not accept, with respect,

the correctness of what His Honour said, if it

seeks to give enforceability as between the parties

to an otherwise void instrument.

MASON CJ: But is that not precisely what His Honour is

saying and does it not flow logically from Frazer v

Walker?

MR GARNSEY:  With respect, no, Your Honour, and certainly

not for all purposes, because until Frazer v Walker

and Breskvar v Wall, the argument was whether

indefeasibility would be deferred essentially for

two further dealings. All those cases decided was

that indefeasibility under a void instrument is
void for forgery need not be deferred so far but

consistently with Gibbs v Messer, we submit, it is

Garafano 8 10/12/92

deferred until there is a further dealing, but one

does not use the register to make effective as

between persons who would not otherwise be parties bound by an instrument that instrument and that is

not the problem, in our respectful submission, that

Breskvar v Wall and Frazer v Walker and the

preceding cases which they relied upon were

directing their attention to and that is why Gibbs

v Messer was preserved without the matter being

considered at any length.

His Honour, the Chief Justice did proceed to refer to Mayer v Coe and Ratcliffe v Watters,

saying they correctly applied Frazer v Walker.

His Honour did not discuss those cases and none of the other members of the Court, I think I am

correct in saying, referred to those cases.

GAUDRON J:  But you do not dispute on your argument that the

mortgagee could exercise power of sale under the

forged mortgage and could thus pass indefeasibility

to another registered proprietor which would run as

against the mortgagor?

MR GARNSEY:  Once that was done, yes, Your Honour, but not

until it was done.

GAUDRON J: Well, why can they exercise rights under a power

of sale and not rights to regain possession?

MR GARNSEY: 

Because, as was said with Gibbs v Messer, the

purchaser obtaining the rights under the power of
sale is dealing with the mortgagee who is on the

register.  He is not dealing with the mortgagor; he

is dealing with the mortgagee who is on the
register and that was the critical matter that the

board pointed to in Gibbs v Messer.

GAUDRON J: But your argument still does come back to the

fact that as between the persons concerned there is

no title. Really that is what it comes down to,

does it not?

MR GARNSEY:  Yes.

GAUDRON J:  You have to say no title passes. So you still,

at bottom, are in conflict with section 42.

MR GARNSEY:  But we say that section 124 permits that,

Your Honour.

GAUDRON J: Permits direct inconsistency, really, with

section 42?

MR GARNSEY:  Yes, Your Honour. With respect, permits direct

inconsistency with section 42 as interpreted for

other purposes.

Garafano 9 10/12/92

GAUDRON J: Well, if you come down to say that as between -

in this case - the registered proprietor and the

mortgagee, notwithstanding that the mortgagee has a

registered title, 42(2) says so, there is no title

as between the mortgagee and the registered

proprietor.

MR GARNSEY:  Yes, Your Honour. And we say an examination of

Breskvar v Wall and Frazer v Walker shows that the

court was not deciding that that was so in a case

where the rationale of Gibbs v Messer applied.	As
Your Honour said, we do not say that if the

mortgagee exercises the power of sale and property

is sold to a purchaser who deals with the mortgagee
on the face of the register, we do not say that

section 42 does not operate to give the purchaser

an indefeasible title, and that, with respect, we

say, is all that on the proper consideration,

Breskvar v Wall and Frazer v Walker, relevantly, as

applied between mortgagee and mortgagor and

purchases from mortgagees establish. This case has

not got to the stage of any purchaser from a

mortgagee. This case is the case of the mortgagee

saying, "We have a mortgage valid as between
mortgagor and mortgagee in all respect, and deemed

to be so by section 42 of the Real Property Act and

we say that reliance says that in direct conflict

with the proper construction of section 124 of the

Real Property Act.

DEANE J: But, does it not eventually come down to this:

whether your clients are entitled to have the

register rectified as against a person who has got

on the title by use of a forged instrument?

MR GARNSEY:  Yes.

DEANE J: Well now, one can imagine circumstances in which,

were it not for these cases, one would have thought

the answer to that was pretty clearly in the

affirmative; query whether that would be so in this

case, quite apart from these cases.

MR GARNSEY: Well, if Your Honour pleases, apart from Mayer

v Coe and Schultz v Corwill, we say - when

Your Honour says "these cases", they are the two

cases we say which have led to this result.

DEANE J:  No, but you see, what I am putting to you is a

different question to whether Mr Emmett's client is

entitled to rely on the mortgage. It assumes that

for so long as the mortgage is registered, his

client is entitled to rely on it, which means his

client does not have to prove that the mortgage is

a valid mortgage. The question raises whether your

client could, putting these cases to one side,

successfully apply to have the register rectified.

Garafano 10 10/12/92

MR GARNSEY:  Your Honour, we say as to Mr Clinton Garafano,

yes, not withstanding Mr Justice Meagher's abrupt

dismissal of any personal equity, because when

one - there simply was not a finding, either

directly or of facts supporting any arming of his father with his certificate of title and, indeed,

Mr Justice Meagher goes out of the way to say,

"My decision does not depend on the finding of

facts in relation to either Mrs Garafano or

Mr Clinton Garafano." That is at page 86, line 16, where His Honour says:

However, it is, in my view, irrelevant to

consider whether the mortgages were

authorized.

And His Honour had previously considered all the

facts in relation to authorization. Now,

Your Honour, what the facts without argument

establish is that on Mr Clinton Garafano the

evidence is silent as to how his certificate of

title was dealt with, except it is clear that it

was mortgaged under a proper prior mortgage to a

mortgagee and that his father obtained the

discharge of that mortgage and the passing of the
certificate of title to the new mortgagee by reason
of the forgery. There is no suggestion that

Clinton Garafano armed his father with the title

deeds. The title deeds were in the custody of the

prior mortgagee.

DEANE J:  One problem in what I suggested to you is, of

course, that the proceedings have never been

constituted as a suit for rectification of the

register.

MR GARNSEY:	No, Your Honour, that is -
DEANE J:	I mean, the Registrar-General would have to be a

party, would he not?

MR GARNSEY:  Yes, I forgot Mr Justice Mcinerney,

Your Honour.	They were proceedings for ejectment
in the common law division.	The Registrar-General

is a party, yes, and there were cross claims,

Your Honour.

DEANE J: But none for rectification of the register?

MR GARNSEY: Well, no, I think there were, Your Honour.

DEANE J: There was? I see.

MR GARNSEY:  But it began and remained in the common law

division, but there was a cross claim. the respondent's case.

Garafano 11 10/12/92

Your Honours, in relation to the independent point of doing equity, can I hand to Your Honours copies of Amadio's case.

MASON CJ:  Mr Garnsey, could you do any better, really, on

the point you are seeking to argue, than the

passage in the judgment of Justice Menzies in

Breskvar v Wall at 398? And tell me whether that

puts the case as you would put it in relation to

indefeasibility, or whether you seek to go beyond

that?

MR GARNSEY:	Yes, I do seek to go beyond it.
MASON CJ:	Now, in what respect do you seek to go beyond

that?

MR GARNSEY:  Gibbs v Messer, at the passage that I took

Your Honour to earlier, says - the ratio of Gibbs v

Messer is dealing with someone on the faith of the

register and we submit the proper ratio is - and

the case says - that under a forged instrument you

do not deal with a person on the faith of the

register. It does not matter whether that person

is fictitious or real because - - -

MASON CJ: But you are going back to Gibbs v Messer, but you

are not taking account of the qualifications that

appear to arise from the subsequent decisions. You

see, this offers the explanation of Gibbs v Messer

that it is right, as far as it goes, but it really
depends on the proposition that it was a transfer

to a fictitious person, therefore registration

could confer no indefeasibility of title in such a

case.

MR GARNSEY:  Your Honour, that, with respect, is an

attractive way to get rid of Gibbs v Messer but as

a matter of logic and justice, with respect, it is

hard to see why that is a desirable or proper

explanation in that why should a forger be better off because he thinks up the name of a non-person	rather than acting wrongly and forging his wife's	name or relation's name or a business associate's
name? Why should section 42 operate any
differently in those circumstances?

MASON CJ: It operates differently because it confers

something on a person who is in existence whereas

in the other case it cannot confer anything upon a

person who is not in existence.

MR GARNSEY:  Your Honour, the Privy Council in Gibbs v

Messer did not look on it that way and I appreciate what Your Honour has said about the later cases but

we say that in so far as Gibbs v Messer has been

distinguished, it has been more or less per

Garafano 12 10/12/92

incuriam. There has never been an explanation

given.

MASON CJ:  If we were to take the view that the proposition

you want to put about Gibbs v Messer cannot be

sustained, do you then fall back on this passage or

is that the end of what you want to put on

indefeasibility?

MR GARNSEY:  His Honour did say that he reserved any

question arising out of the illegal use of an

instrument to obtain registration in the name of a

law breaker. We would say we would still seek to

rely on section 124, if Your Honour pleases.

MASON CJ:  I was asking about indefeasibility.

MR GARNSEY:  Yes. I do seek to make use of further

exceptions, not precisely as i icated in that

passage of which section 124 is an indication, if

Your Honour pleases. I think that is all I could

say to Your Honour - at least all I can think of,

Your Honour, at the moment.

Your Honour, in relation to the independent

point in relation to doing equity, Their Honours in the Court of Appeal, with respect, were wrong as to

the facts as to Mr Clinton Garafano; that is, he

did offer to make allowance for 100 per cent of the

reliance moneys that had been applied in discharge

of the - unless I have misunderstood the facts and

Mr Emmett, who appeared at the trial will, no

doubt, set me right but the reference is in

the - - -

GAUDRON J:  Can I just interrupt you there. Does that go to

your 124 argument or only to an indefeasibility

issue?

MR GARNSEY: Really, only to an indefeasibility issue,

Your Honour.

GAUDRON J: Yes, which you now do not see to press - am I

right in saying that - separately from 124? Or had

I misunderstood you.

MR GARNSEY:	I do, if Your Honour pleases.
MASON CJ:	No, as I understand it, you are pressing your,

what I call, extreme Gibbs v Messer argument.

MR GARNSEY:	Yes.
MASON CJ:	And then you say, in a rather half-hearted faint

way, that if that is to be rejected, well, you

would be falling back on the approach indicated by

Justice Menzies but, really, that would be

Garafano 13 10/12/92

associated with 124 because you would regard 124 as
being indicative of other exceptions to

indefeasibility. But as I understand it, not

confined to 124, is that right?

MR GARNSEY: That is so, Your Honour, but for the purpose of

this case, of course, where one is dealing with a

mortgage, section 124 would be the most pertinent

matter.

MASON CJ: But do equity, you say, is confined to the

indefeasibility argument, it has nothing to do with

124?

MR GARNSEY:  Yes, and there was a cross claim, for

rectification, if Your Honour pleases.

MASON CJ: But reverting to the discussion you had with

Justice Deane earlier, let us assume that one need

not trouble about whether you offered to do equity

but the real question is whether terms should be

imposed upon you. If terms were imposed imposed
upon you, would your clients be able to comply with

them?

MR GARNSEY:	On my instructions, at least to the extent of the offer made at the trial which is recorded in
the judgments and that is as to Mrs Helga Garafano,
I think, 150,000, or make allowance for 150,000,
and as to Mr Clinton Garafano, 44,000. I have said
a couple of times and I have not intended to mislead - - -

GAUDRON J: Is there any interest component in that?

MR GARNSEY:  I do not think so, Your Honour.

GAUDRON J: Is there an interest component to be brought

into that?

MR GARNSEY:  Your Honour, if the Court thought that an

interest component was appropriate, I feel sure I

could obtain instructions as to that, if

Your Honour pleases. But one gets into the facts

in relation to that matter for me to reply further

to Your Honour. In that Mr Clinton Garafano, for

instance, had a long-term long which was discharged

by his father without authority as a result of the
forgery and the question is what doing equity would

require in those circumstances.

DEANE J: Assume against what you would like to say that, in

the case of Mrs, doing equity would involve payment

of $359,476, plus interest, and in the case of the

son, the amount of the loan discharged, plus

interest.

Garafano	14	10/12/92
MR GARNSEY:	Yes.	In the case of the son -

DEANE J:  You might find Mr Emmett's client would settle for

those payments and we would not be troubled.

MR GARNSEY:	Your Honour, I was about to say, in the case of the son, I think my instructions would extend to
that. In the case of Mrs Garafano the position at
trial, which is as recorded by the trial judge was
150,000, and I will leave aside the precise sum in
the case of the son but, as I read the judgments,
His Honour the trial judge's findings, the son had
offered the appropriate amount, the total amount of the discharge of the earlier mortgage.

Your Honours, the judges in the Court of

Appeal interpreted the maxim, "He who seeks equity
must do equity", as imposing in these circumstances

a strict limit and a necessary 100 per cent refund plus interest, if I could put it that way. we say

that is wrong in principle and, indeed, this Court

in Commercial Bank v Amadio, 151 CLR, did not

impose any such restriction. At page 468,

Your Honour the Chief Justice agreed with

Mr Justice Deane:

that it matters not that the respondents have

not offered to do equity.

Your Honour Justice Deane dealt with that matter at

pages 480 to 481, not on the basis that it was a

necessary or strict requirement, let alone as to

quantum and there was no requirement in the order

of Commercial Bank v Amadio.

The question of the true meaning of the maxim

has been considered by the High Court in earlier

cases, one of which is referred to in the judgments
in the Court of Appeal and, indeed, at first

instance but in the light of Amadio's case, which

has been referred to to some extent in a large
number of subsequent cases to which I have not

given Your Honours reference, and in the light of

the development of unconscionability as a doctrine

of equity - - -

DEANE J: Mr Garnsey, can I distract you. Is there not a

problem before all these points you are raising and

that is that in so far as Mrs Garafano is concerned

there are concurrent findings in the court below

that she actually authorized the mortgage and in so

far as the son is concerned there is a finding in

the Court of Appeal that he is estopped from

denying authorization?

Garafano	15	10/12/92
MR GARNSEY:	Yes.	Your Honour, in relation to Mrs Garafano,

there is a fair amount of evidence but in relation
to the son there is, with respect - - -

DEANE J: But take Mrs Garafano, there is no way this Court would investigate the circumstance of this case to

decide whether those concurrent findings of fact

should be set aside unless some principle had been

disregarded in the making of them.

.MR GARNSEY:  Your Honour, His Honour Mr Justice Meagher

expressly put his decision on the independent

ground of absolutely strict indefeasibility.

DEANE J:  He seems to have put it on any ground that came to

mind.

MASON CJ: All available grounds, I think.

DEANE J: If you look at the top of page 85, there is no

doubt he also put it on the basis of express

authority.

MR GARNSEY:	Yes, Your Honour, and they are large questions of fact; I accept that, if Your Honour pleases.
But he did say, at 86 line 16:

However, it is, in my view, irrelevant to

consider whether the mortgages were
authorized.

I cannot say much more in relation to Mrs Garafano

in that respect, if Your Honour pleases. However,
in relation to Mr Clinton Garafano I would seek to

do so because like the trial judge they were elided
in the result but not in the findings nor in the

reasoning and Mr Clinton Garafano - there is simply

no evidence that he armed his father with the title

deeds and there is no finding of the trial judge to

that effect and what evidence there is is to the

contrary.

The evidence is that his title deeds were with

his prior mortgagee. His father, on the agreed

assumption, forged signature on the mortgage, dealt

with reliance and there is this recited in the

judgment of His Honour the trial judge, the way in

which the father dealt with reliance and I can take

Your Honours to the pages if necessary. They are

pages 44 to 54. And the title deeds went from the

discharging prior mortgagee to reliance.

With respect, that cannot be in any way an arming of the father with the title deeds and we

submit that the trial judge's conclusion as to

Mr Clinton Garafano is directly contrary to

His Honour's findings and we do not seek to go

Garafano 16 10/12/92

beyond those findings and they are fairly easily
dealt with by reading His Honour's judgment.

The Court of Appeal, with respect, in relation to Mr Clinton Garafano, is in no better position

and it is demonstrably, with respect, an incorrect

conclusion and, indeed, His Honour

Mr Justice Meagher says at page 86 line 7:

I find it a little less easy to see how one

can find an express authorization by him for the mortgage over his property, but it is, I think, clear that he is estopped from denial of the authority of his father by his conduct

in permitting his father to possess and use

his certificate of title.

With respect, there is simply no evidence of that

conduct and it is contrary to the findings of the

trial judge.

So, we would submit, at least in the case of

Mr Clinton Garafano, Your Honour, that that is a

matter which would not take the time of this Court

to any appreciable extent at all. We would not

seek to go beyond what the trial judge found in

His Honour's judgment to say that that conclusion

is wrong.

Your Honours, I want to say one more thing

about "He who seeks equity must do equity", if

Your Honours please, and it was this, that

notwithstanding statements as to the strict

application of the maxim in the mortgagor/mortgagee

situation in earlier authority, in Amadio's case

there was relaxation from that. There has since

been considerable development in relation to the

notion of unconscionability and there are many

cases in which Amadio's case has been considered,

either expressly or in which the maxim has not been

applied, either strictly as to 100 per cent or at

all; that is decisions usually of first instance In the United States the decisions of the judges in this country.

superior Federal Courts have investigated the

application of the maxim much more extensively and,

in my respectful submission, it will be timely for

this Court to consider the matter as it is a matter

of general importance in relation to the regulation
of the affairs of mortgagors and mortgagees but,

particularly, in the current climate.

MASON CJ: Before you resume your seat, can I take you to

page 86 of Mr Justice Meagher's judgment, line 13,

where he says:

Garafano 17 10/12/92

It follows that his Honour was correct in

finding either express authorization of the
mortgages in question or an estoppel
precluding the denial of express
authorization.

Can you take me to the passage in the judgment of the primary judge where he finds estoppel in the

case of Clinton Garafano? I take it that he does

not find express authorization.

MR GARNSEY: That is so.

MASON CJ: Well, now, can you take me to the passage where

he finds estoppel?

MR GARNSEY:  I have some difficulty in doing that,

Your Honour.

MASON CJ:  Do you mean there is no such finding?

MR GARNSEY: Well, I cannot think of - - -

GAUDRON J: Page 36 may come close.

MR GARNSEY:  Yes. Your Honour, I have put the references to

Mr Clinton Garafano in paragraph 6 of the outline

of submissions and the passage starts at 36 line 8,

refers generally to his education. He said he:

was aware of the incident in 1987 when his

father forged his mother's signature ..... He

was also aware of a suggestion his father

might have forged his signature on other

documents. Clinton Garofano also suspected

his father was intercepting his

mail ..... Clinton Garofano and his sister were

directors of F.M. Gru -

the trial judge then goes on to Mrs Garafano. The

next reference to Clinton is at page 38, lines 8 to

12:  In relation to Clinton Garofano, I do not

believe he was in a similar position to that

of his mother. He certainly did not have his

mother's business expertise or knowledge of

his father's activities to the same extent.

He had little business experience and left the

management of the Unit to his mother.

Your Honour Justice Gaudron said that page 39 might

come close - - -

GAUDRON J: 36.

MR GARNSEY:  36, I have dealt with - - -

Garafano 18 10/12/92

GAUDRON J: That is his knowledge, anyway.

MR GARNSEY:  And then the next reference that I have been

able to find to Clinton Garafano - well, from 44

to 54 there is the history of how the plaintiff

dealt with Mr Peter Garafano and I referred to it

in order to show that there was no arming of title

deeds by Clinton Garafano.	That really goes
through to 54.

Then at page 58 line 11, and I omitted this

from paragraph 6, there is a reference to a

submission:

It is also submitted that as Clinton Garofano

was a director there would be no reason to

believe that he would not, in order to secure

an advance to a company of which he was a

director, be prepared to give security over

his property to secure the advance.

That is a reference to him. It is not a reference

to what he did, it is a reference to the

reasonableness of belief. Then, at 63 across to 64

line 2 - now, with respect, that does not amount to

any finding of estoppel or facts on which an

estoppel could be mounted. That is the best I can

do, if Your Honour pleases.

MASON CJ:	Mr Emmett.
MR EMMETT:	May it please Your Honours.

MASON CJ: Obviously there may be difference between the two

cases, having regard to the findings that have been

made in Mrs Garafano's case which are not parallel,

at least on the part of the primary judge, in the
case of Clinton Garafano and, of course, there are

differences too, apparently, in the capacity of the

parties to do equity.

MR EMMETT: With respect, they were dealt with in parallel

because of the findings that His Honour the trial

judge made.

MASON CJ: Yes, but I was merely indicating to you what I

saw, for my part, at this stage of the argument as

differences between the two cases which might

invite you to direct your attention to those

differences.

MR EMMETT:  I was about to endeavour to do that,

Your Honour. There are two critical findings, in

our submission, by the trial judge which mean that

Clinton Garafano stands and falls with his mother.

They are the findings at pages 36 and 38 to which

my learned friend has taken Your Honours. At

Garafano 19 10/12/92

line 8 there is a description of Clinton Garafano,
indicating that he is not a person without

education. And at lines 11 and 12:

He is not as experienced as his mother in

property dealings and left them to her.

At page 38, the same thing. At line 8:

In relation to Clinton Garofano, I do not

believe he was in a similar position to that

of his mother. He certainly did not have his

mother's business expertise or knowledge of his father's activities to the same extent.

He had little business experience and left the

management of the Unit to his mother.

The evidence that supports that conclusion is at pages 31 and following. At line 13 - - -

GAUDRON J: But does that really take you to the son's

separate home unit? The mother's knowledge with

respect to the Bellevue Hill home and her

instructions to fix it up is one thing -

MR EMMETT:  If I can take Your Honour to page 31, which I

think will respond to what Your Honour is putting

to me:

Unit 14, 279-285 Trafalgar Street,

Petersham was bought by Clinton Garofano in September 1987, his mother having chosen it

for him. He initially contributed $2,500 and

borrowed $40,000 from the St George Building

Society. He has not paid anything directly to

the said Society, leaving it to his mother to

have the rents of the tenants paid to her.

Mrs Garofano alleges she then gave the money

to her husband to deposit with the St George

Building Society, even at a stage after she

knew he was forging her signature on

documents, stating she could not believe that

he would not make payments on his son's

account.

Clinton Garofano says he knew nothing

about his mother relying on his father to
deposit the money with the Building Society

and did not receive anything from the Building

Society informing him of the state of his

account. In fact at no time from the time of

the original advance until the mortgage was

discharged was the account ever up-to-date. It is apparent that Clinton Garofano, apart

from the sum of $2,500, has not contributed

money to the purchase price of the property,

except the rentals received. The St George

Garafano 20 10/12/92

Building Society mortgage was discharged by a

payment of some $44,000 being part of the
proceeds of an advance made by Banks of

$65,000 made on the security of a mortgage of

the property. That mortgage was repaid from

the proceeds of the advance made by the

plaintiff, and to that extent he has received

a benefit from the plaintiff.

So what is clear is in relation to this very

property Clinton Garafano just left it to his

mother to do what she thought was appropriate.	He
did not contribute a single cent after the $2500, did not even know what the state of the mortgage
was, he left it all to his mother. There is a

finding by the trial judge that he was aware that

his father was intercepting his mail, he was aware
that his father had forged his signature and

nevertheless still left it to his mother to

decide - - -

GAUDRON J:	How does this all constitute an estoppel in relation to the forging of a mortgage by his father
though?
MR EMMETT:	Your Honour, our primary submis·sion was that it

constituted an actual authorization that

Clinton Garafano left it to his mother to do what she thought was appropriate in relation to the property.

GAUDRON J: Yes, that may be so.

MR EMMETT:  And she left it to her husband. The result was

that there was a mortgage forged in favour of

Banks, so it is alleged, there is no evidence as to

how the forgery occurred, other than an assertion

which is an assumption for the purpose of these

proceedings, and perhaps I will come back to that

later. The assertion is by Clinton Garafano that

he did not put his signature on the prior mortgage

to Banks. That mortgage was discharged. By that

stage the amount secured was some $70,000-odd.	He
knew nothing about the state of the mortgage and the primary submission was that not only did
Mrs Garafano authorize the mortgage over her
property but that because Clinton Garafano left

completely to his mother the collection of rent and

the dealing with the property he must be taken to

have acquiesced in whatever she did. She in turn

left it to her husband to deal with the matter.

MASON CJ: But there does not seem to be a finding by the

primary judge of actual authorization in the case

of Clinton?

Garafano 21 10/12/92

MR EMMETT:  Except, Your Honour, at the very end of the

judgment his comment was - it is frankly obscure, I

accept - at page 63 line 24:

I am not satisfied the cross-claimants, in the circumstances, would have refused consent -

so that what he is saying, had they been asked to

consent to these mortgages, he is not satisfied

that they would have refused.

GAUDRON J: But what is that relevant to?

MR EMMETT:  The question of whether there was authority.

DEANE J: But to establish actual authority you would have

to establish that the authority given to his mother

extended to her authorizing somebody else to forge

his signature.

MR EMMETT:  Or authorizing the raising of money to discharge

a liability of some $70,000 and it is to that

extent that we claim he authorized his mother to

authorize his father, so to speak.

DEANE J: Perhaps, but you have not a finding of that. All

that you have got - and this might well be enough -

is a finding by the Court of Appeal that on the

facts of this case Clinton is estopped from denying

authority.

MR EMMETT:  If that stood that would be sufficient, yes.

DEANE J: That finding was specifically directed to the

title deed but as you point out there are other

facts which are very relevant to whether or not it

was justified.

MR EMMETT:  Yes. The title deed may, with respect, be a bit

of a red herring, the position was the same with

Mrs Garafano as it was with Clinton Garafano.

Neither of them had custody of the certificates of

title but neither of them bothered, knowing that
their mortgages must have been discharged, to find

out what had happened to the certificates of title.

DEANE J: What Justice Meagher said about the title deed

might be wrong as a completely accurate statement

but it may be correct as a shorthand way of saying

that the factual situation was such that he had

enabled his father to get the title deed by reason

of the authorities he had given and the way he

conducted things.

MR EMMETT:  I do not think we could put it any higher than

that, Your Honour. But the fact is there are those

findings and Your Honours would have to -

Garafano 22 10/12/92

MASON CJ:  We need not trouble you further, at this stage,

Mr Emmett.

MR EMMETT:	May it please Your Honours.
MASON CJ:	Mr Garnsey, do you wish to reply?

MR GARNSEY: If Your Honour pleases. It is well established

that an authorization to do certain acts does not

carry with it an authorization to do those acts

illegally or fraudulently, if Your Honour pleases,

and Kooragang Investments v Richardson and Wrench,

to which I have referred is a decision of the Privy

Council, in the context of employer and employee

but to that effect it refers to the other cases.

Here, the facts did not go anywhere near

saying that Clinton Garafano, by letting his mother
manage his property, did anything to suggest to

anyone that his father could obtain the title deeds

and deal with them at all, let alone by a forgery.

It is, in my respectful submission, stretching the

findings of the trial judge to an almost impossible

degree to say in any way that Clinton Garafano

authorized or must in some way have conducted

himself so as to be estopped from contending that

he authorized his father to obtain the title deeds and deal with them, let alone by a forgery. There

is really nothing more I can put to Your Honours,

that Your Honours have been taking the passages

from the trial judge's judgment.

MASON CJ: Thank you, Mr Garnsey. The Court will take a

short adjournment in order to consider what course

it will take.

AT 12.13 PM SHORT ADJOURNMENT

UPON RESUMING AT 12.20 PM: 

MASON CJ: The proposed appeal raises questions of some

importance which might, in appropriate

circumstances, justify the grant of special leave

to appeal. However, this Court, having regard to
the findings of authorization and/or estoppel made

in the courts below and the way in which the case

was conducted, does not consider the proposed

appeal to be a suitable vehicle for the

determination of any question of general principle.

The application for special leave is, therefore,

refused.

Garafano 23 10/12/92

MR EMMETT: If I could ask for costs?

MASON CJ:	And you do not resist costs?
MR GARNSEY:	I have nothing to say, if Your Honour pleases.
MASON CJ:	The application is refused with costs.

AT 12.21 PM THE MATTER WAS ADJOURNED SINE DIE

Garafano 24 10/12/92