Grant-Taylor v Jamieson

[2002] NSWSC 634

CITATION:	Grant-Taylor v Jamieson [2002] NSWSC 634
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 3206/02
HEARING DATE(S):	16/07/02
JUDGMENT DATE:	18 July 2002
PARTIES :	Andrew Grant-Taylor - Plaintiff Ronald Philip Jamieson - First Defendant Claiyork Pty Ltd - Second Defendant Bridgecorp Australia Pty Limited - Third Defendant Registrar-General of New South Wales - Fourth Defendant
JUDGMENT OF:	Barrett J

COUNSEL :	Ms C E Adamson - Plaintiff Mr M A Ashhurst - Third Defendant
SOLICITORS:	Coudert Brothers - Plaintiff Kemp Strang - Third Defendant
CATCHWORDS:	PROCEDURE - contempt of court - whether alleged contemnor should be heard - alleged contempt by non-party by reason of participation in conduct by party in breach of order - whether alleged contemnor had knowledge of terms of order - need for knowing participation to be shown - no scope for application of principles of constructive notice
LEGISLATION CITED:	Real Property Act 1900
CASES CITED:	Attorney-General v Times Newspapers Ltd [1992] 1 AC 191 Director General of Fair Trading v Pioneer Concrete (UK) Ltd [1995] 1 AC 456 Ferguson v Eakin (unreported, NSWCA, 27 August 1997) Heatons Tansport (St Helens) Ltd v Transport and General Workers' Union [1973] AC 15 K P Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 Permewan Wright Consolidated Pty Ltd v Attorney-General (unreported, NSWCA, 11 December 1978) Re Supply of Ready Mixed Concrete [1992] 1 QB 213 Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (unreported, FCA, 1 July 1998) X Ltd v Morgan-Grampian (Publishers) Ltd [1991] 1 AC 1 Yorke v Lucas (1985) 158 CLR 661 Young v Jackman (1986) 7 NSWLR 97 Z Ltd v A [1982] 1 All ER 556
DECISION:	Direction that plaintiff not be heard refused

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

THURSDAY 18 JULY 2002

3206/02 – GRANT-TAYLOR v JAMIESON & ORS

JUDGMENT

Background

1 The substantive issues in these proceedings concern competition between interests in the first defendant’s land at McMahons Point said to arise from unregistered (or equitable) mortgages granted by him separately to the plaintiff and to the third defendant.

2 Each of the plaintiff and the third defendant has lodged a caveat under s.74F of the Real Property Act 1900 claiming an estate or interest in the first defendant’s land as equitable mortgagee. On 16 July 2002, I was to hear an interlocutory application by the plaintiff for an order under s.74K extending the operation of his caveat. The plaintiff’s need for such an order arose because of service of a notice under s.74I.

3 When the plaintiff’s application for an order under s.74K came before me, the third defendant submitted that the court should direct that the plaintiff not be heard because he was in contempt of court. By agreement, that matter was then argued as a separate and preliminary issue.

The orders of 31 December 2001 and alleged breach of them

4 The assertion that the plaintiff is in contempt of court was advanced by reference to certain orders made by the court on 31 December 2001 in separate proceedings between the present third defendant and another as plaintiffs and the present first defendant and others as defendants. The defendants in those proceedings, including the present first defendant, were restrained until further order of the court:

“from removing from Australia, disposing of, mortgaging, assigning, charging or otherwise dealing in any manner whatsoever with any of his or its assets situated within Australia, save so far as the unencumbered value of those assets exceeds $3 million …”

There followed a proviso not presently relevant.

5 The equitable mortgage upon which the plaintiff relies to support his caveat was created by documents executed by the first defendant and dated 30 January 2002. The third defendant says that the creation of that mortgage by the first defendant involved a contravention by him of the court’s order of 31 December 2001 and therefore a contempt of court, given that the order restrained, among other things, “mortgaging” and “charging” of the first defendant’s assets situated within Australia, including the land in question which is, of course, situated in New South Wales. The third defendant also says that the plaintiff, by taking the mortgage and receiving the benefit of it, so participated in the conduct of the first defendant (mortgagor) forbidden by the order of the court that the plaintiff was thereby himself guilty of contempt and forfeited any claim to seek the assistance of the court.

6 The principles upon which the third defendant relied emerge from a number of decided cases to which I now turn.

Exclusion of a contemnor

7 The third defendant seeks to invoke against the plaintiff what Hutley JA, in Permewan Wright Consolidated Pty Ltd v Attorney-General (unreported, NSWCA, 11 December 1978), referred to as the:

“… fundamental rule that a party guilty of contempt should not be heard in respect of an application made on his part to a court.”

8 What is meant here by “a party guilty of contempt”? In Young v Jackman (1986) 7 NSWLR 97, Young J traced the history of the rule to which Hutley JA had referred and deduced from it the proposition that the person concerned need not have been formally adjudged guilty of contempt; and that:

“… for the purpose of the rule a party is in contempt if the court can see that he has disobeyed an order of the court”.

9 The present plaintiff cannot, of course, be said to be in contempt in this sense. The orders of 31 December 2001 were not directed to him and are not the source of any obligation upon him. The third defendant submits, however, that the plaintiff is guilty of a different species of “contempt”, being that referred to in the latter part of the following extract from the judgment of Lord Denning MR in Z Ltd v A [1982] 1 All ER 556:

“As soon as the judge makes his order for a Mareva injunction restraining the defendant from disposing of his assets, the order takes effect at the very moment that it is pronounced: see RSC Ord 42, r 3, and Holtby v Hodgson (1889) 24 QBD 103 at 107. Even though the order has not then been drawn up, even though it has not then been served on the defendant, it has immediate effect on every asset of the defendant covered by the injunction. Every person who has knowledge of it must do what he reasonably can to preserve the asset. He must not assist in any way in the disposal of it. Otherwise he is guilty of a contempt of court .” [emphasis added]

10 Speaking of the particular case of a bank with which an account affected by a Mareva order is maintained, Lord Denning MR said:

“As soon as the bank is given notice of the Mareva injunction, it must freeze the defendant’s bank account. It must not allow any drawings to be made on it, neither by cheques drawn before the injunction nor by those drawn after it. The reason is because, if it allowed any such drawings, it would be obstructing the course of justice, as prescribed by the court which granted the injunction, and it would be guilty of a contempt of court.”

11 Eveleigh LJ took the view that a bank in the position referred to by Lord Denning can only be regarded as in contempt if it knows that what it is doing is inconsistent with the terms of the order. More specifically, Eveleigh LJ said:

“In my opinion a third party with notice of the terms of an injunction should only be liable when he knows that what he is doing is a breach of the terms of that injunction. In the great majority of cases the fact that a person does an act which is contrary to the injunction after having notice of its terms will almost inevitably mean that he is knowingly acting contrary to those terms.”

12 Knowing participation by a non-party in conduct by a party bound by an order, being conduct contrary to that order, may thus itself be a contempt. The matter was put thus by Lord Jauncey of Tullichettle in Attorney-General v Times Newspapers Ltd [1992] 1 AC 191:

“I am quite satisfied that … a person who knowingly acts in a way which will frustrate the operation of an injunction may be guilty of contempt even although he is neither named in the order nor has he assisted the person who is named to breach it. Indeed it would be extraordinary if orders of the court could be set at nought with impunity by third parties seeking to achieve that end”.

13 Lord Oliver of Aylmerton explained the position by reference to the example of C’s obstructing a right of way which a party is entitled to use and needs to use to demolish a wall in accordance with an undertaking given by that party to the court:

“C has impeded the administration of justice by deliberately thwarting an undertaking given to the court and designed to secure the removal of the wall. In circumstances such as these, it would seem to me unarguable that C is not in contempt of court in exactly the same way as if he had obstructed an officer of the court and I cannot imagine any court accepting as a defence to a motion for committal the proposition that no contempt is committed because C was not a party to the action or undertaking.”

14 The concept is thus one not merely of conduct by the non-party which causes, facilitates or contributes to a breach of an order by the party bound, but of engaging in such conduct in a way which involves knowing complicity – to the extent that Eveleigh LJ referred, in Z Ltd v A, to mens rea and said that knowledge is an essential ingredient in proving this kind of contempt. There is consequently room (and a need) to resort to general law notions relevant to participation in crime as a principal in the second degree or an aider and abettor. As is exemplified by observations of Mason ACJ, Wilson, Deane and Dawson JJ in Yorke v Lucas (1985) 158 CLR 661, such conduct can only be intentional, with the intent proceeding from “knowledge of the essential matters which go to make up the offence”.

15 The statement of Powell JA in Ferguson v Eakin (unreported, NSWCA, 27 August 1997) that:

“it is a contempt of court for anyone with notice of an order of a court so to act as to interfere with, or otherwise to obstruct, the course of justice”

seems to me to indicate quite clearly that knowledge of the course of justice laid down by the orders, as distinct from the mere existence of orders, is an essential ingredient.

16 I therefore turn to the evidence of the circumstances surrounding the creation of the mortgage by the first defendant in favour of the plaintiff and, in particular, of the state of the plaintiff’s knowledge about the orders of 31 December 2001 and their terms.

The evidence

17 On or about 16 January 2002, the third defendant submitted to the Registrar-General a request to note on the titles of several parcels of land, including the relevant land of which the first defendant is registered proprietor, the orders made by the court on 31 December 2001 at the suit of the third defendant and its co-plaintiff in those proceedings.

18 The Registrar-General subsequently issued a notification to the third defendant’s solicitors stating that the order had been “registered/recorded” on 17 January 2002. A title search shown as having been printed on 30 January 2002 (to which I shall return) discloses among the second schedule notifications “Order of Court” together with the identifying number 8247782 assigned by the Registrar-General to the request in pursuance of which the recording in relation to the orders was made.

19 Certain communications by way of faxes, e-mails and notes of telephone conversation between the solicitor for the plaintiff and the solicitor for the first defendant are in evidence. Before turning to those communications, I should record that the plaintiff’s solicitors were in Brisbane and the first defendant’s in Sydney (or, more precisely, North Sydney). Daylight saving time operated in Sydney in the relevant period, but not in Brisbane. In the description which follows, all times given are according to daylight saving time in force in Sydney, with times recorded in Brisbane having been appropriately adjusted.

20 A letter from the plaintiff’s solicitor to the first defendant’s solicitor dated 30 January 2002 (which appears to have been faxed at 1.15pm) stated a requirement of the plaintiff’s solicitor, as solicitor for the lender, that he be satisfied:

“that the document entitled ‘Order of Court’ numbered 8247782 does not adversely affect my client’s security.”

21 An e-mail sent by the plaintiff’s solicitor at 1.24pm confirmed this and added:

“Please let me know as soon as you have anything on the Order, and as soon as the documents are signed.”

22 An e-mail response sent by the first defendant’s solicitor at 2.50pm included the following:

“I further confirm my client’s undertaking that notation 8247782 on the title to Folio Identifier 15/SP63626 shall be removed immediately and in any event prior to before 14 February 2002.”

23 An e-mail from the plaintiff’s solicitor timed at 2.56pm said:

“Thanks for that. However I still need to know something more about notation 8247782 before I can consider the risks (if any) in accepting your client’s undertaking. What can you tell me?”

24 It appears that a facsimile transmission was then sent by the first defendant’s solicitor to the plaintiff’s solicitor with certain documents. The fax appears to have been sent from Sydney at 3.27pm.

25 The solicitor for the plaintiff replied by e-mail at 3.50pm:

“I have received your fax. Before releasing the Form 312 can you please
1. Confirm that each page of the mortgage and Annexure have been initialled by Ron.
2. Let me have details about notation 8247782.”

26 There is also in evidence a handwritten file note bearing a time notation 4.30pm on 30 January. Its content makes it clear that it is a note prepared by the solicitor for the plaintiff in Brisbane (so that it is timed at 5.30pm Sydney time) and that it records a conversation with the solicitor for the first defendant. The note includes the following:

“Told him I wouldn’t authorise the release of the F312 without knowing more about the order. He accepts that.”

27 An e-mail from the first defendant’s solicitor timed at 5.31pm said:

“I confirm my tel instructions that Ron has confirmed to me that he has spoken to Rodney Petrisevic today (MD of Bridgecorp) and the Order effecting his home is in the process of removal and will not hinder the due registration of the Caveat/mortgage by 14 Feb 2002.”

28 This accords with a file note of the solicitor for the plaintiff which records Mr Petrisevic’s name as “M/D Bridgecorp” and says:

“Instructions given to withdraw order.”

This note concludes:

“Told him we would accept the position about the order.”

Findings on actual knowledge

29 The whole tenor of these exchanges throughout the afternoon of 30 January 2002 is that the plaintiff’s solicitor did not know the content and effect of the orders made by the court on 31 December 2001, although he did know that some order or other was behind the 8247782 recording on the title to the first defendant’s land. Indeed, he made continuing attempts to obtain information from the solicitor for the first defendant about the significance and terms of the order. The latter, however, did not give the information sought. Rather, he took the line that the solicitor for the plaintiff really need not worry about the order because it was about to be “removed” and would not hinder action by the plaintiff to have his caveat recorded and mortgage registered by 14 February 2002.

30 The third defendant nevertheless seeks to show that the plaintiff’s solicitor was, in reality, either aware in fact of the terms of the orders or was in such a position that he should be presumed to have been so aware. The submission that the solicitor for the plaintiff had actual knowledge of the terms of the orders is advanced by reference to the fact that the plaintiff’s solicitor has produced an electronic search of the relevant title shown on its face as having been made at 11.59am on 30 January 2002 and including a notation, “8247782 – Order of Court”. There was also produced by the solicitors a copy of a page from the internet evidencing communication from a search facility at 11.02am on 30 January 2002 making it clear that an image of “dealing 8247782” had been requested. The result of the request was shown as “pending” and the delivery method as “download”. The following information and instruction were included:

“Images usually take 10 minutes to process, but can take several hours. Images will be available for collection from the Inbox. The Inbox can be accessed by clicking on the Inbox link in the header above.”

31 The two items to which I have just referred, being the electronic search at 11.59am on 30 January 2002 showing “8247782 - Order of Court” and the electronic request for “dealing 8247782” activated on the same day are said by the third defendant to be enough to show that the plaintiff’s solicitor had actual knowledge of the terms of the orders of 31 December 2001 when the mortgage was taken by him on behalf of his client late in the afternoon of 30 January 2002.

32 I do not accept this submission. There can be no doubt that the plaintiff’s solicitor knew that there was on the title a recording relating to a court order and that it was numbered 8247782. His fax of 1.15pm made that clear, as did his subsequent e-mails: in several of them, he referred to “the order” and the number 8247782. Whether he obtained the number from the search made electronically at 11.59am – indeed, whether he or someone in his office initiated the search or had it on 30 January 2002 – is something on which the evidence throws no light, apart from the fact that the solicitor’s bill to his client shows certain disbursements for land title search fees without identifying the times at which the searches were obtained. Knowledge of the existence of an order says nothing about knowledge of its terms.

33 The only evidence from which it might possibly be inferred that the plaintiff’s solicitor had notice of the terms of the orders of 31 December 2001 is the evidence that the plaintiff’s solicitor had in his possession the electronic request for downloading of “dealing 8247782”. But there is no evidence that the plaintiff’s solicitor had the electronic request on 30 January 2002 or, more importantly, that he ever had whatever it was that was eventually downloaded, assuming that anything was. The item itself does not record by whom the electronic request was made. It also makes it clear that “several hours” might elapse before the requested material became available to the person by whom the request was apparently submitted at 11.02am. Furthermore, positive action was needed to obtain the result by resort to the inbox link. There is no evidence that anyone clicked the inbox link to obtain the image sought.

34 Against this single piece of evidence centred on the electronic request stand requests made by the plaintiff’s solicitor to the first defendant’s solicitor at 1.15pm, 1.24pm, 2.56pm, 3.56pm and 4.30pm on 30 January for information about the meaning and content of the order the subject of recording 82447782. The terms of each such request make it clear, in my view, that the plaintiff’s solicitor was not in fact aware of the content of the orders of 31 December 2001 at any of those times and was genuinely seeking information on that very subject. I conclude that he was in the same position when the mortgage was given late on the same afternoon.

35 The third defendant’s attempt to make out a case of the relevant species of contempt against the plaintiff by reference to actual knowledge of the plaintiff’s solicitor of the terms of the orders of 31 December 2001 therefore fails. There was no suggestion that the plaintiff himself had such actual knowledge.

The constructive notice argument

36 It was submitted on behalf of the third defendant that, even if the plaintiff’s solicitor did not have actual knowledge of the terms of the orders of 31 December 2001, he should be taken to have had constructive notice; and that this is sufficient to ground a finding of being knowingly concerned in a contravention of the orders.

37 The concept of constructive notice is one which has developed for limited purposes. It is particularly pertinent to the operation of equity’s principles concerning a bona fide purchaser of a legal estate for value without notice. Equity works on the basis that, for these and related purposes, a person has constructive notice of matters he or she would have ascertained upon making the investigations usual in the circumstances or any further investigations indicated as reasonably required by matters actually known. The doctrine is really a reflection of the expectation that someone embarking on a particular transaction should act in a reasonable and responsible way in the furtherance of their own interests and cannot be said to have a legitimate complaint, at the expense of some competitor, if the course of conduct taken does not measure up to those standards. It is on this basis that a purchaser who, in the course of inquiries, receives notice of a relevant fact is affected with notice of other facts that could have been discovered by further proper investigation. The effect of the constructive notice is to deprive the party of the ability to resist claims which could be resisted in the absence of notice.

38 In short, doctrines of constructive notice operate to reward prudence and discourage imprudence when it comes to resolving the question whether one person should be entitled to assert and retain some interest or benefit as against another. The precise non-statutory operation of these doctrines in relation to documents and the content of documents entered on publicly accessible registers must be regarded as uncertain: see generally W J Gough, “Company Charges”, second edition (1996) at pages 820 to 836. At most, they prevent enjoyment of an interest or benefit in circumstances where search would have disclosed circumstances inconsistent with a prudent person’s electing without investigation to assume the position from which the interest or benefit is asserted.

39 I was not referred to any authority for the proposition that constructive notice can operate to make a person guilty of contempt of court; or, to put this another way, that a person having actual knowledge of the existence of a court order directed to another person is, in his or her dealings with that other person, presumed to have notice of the actual terms of the order. (I note here that the Real Property Act contains no provision fixing the world at large with notice of the content of a court order a recording of which is entered on a folio of the register.)

40 It seems to me that the mens rea relevant to contempt of court of the kind under discussion cannot exist except by reference to actual knowledge. Contempt of court can involve, for an individual, loss of liberty and, for any person, substantial penalty. It should therefore not be approached by reference to principles which, for the purpose of resolving property disputes, deem persons to know things they do not know but would have discovered had they acted prudently. In saying this, I acknowledge that different considerations may apply where someone wilfully shuts their eyes with a purpose of avoiding learning something that they would otherwise learn. On the evidence, that is not the case here.

Imputed knowledge

41 The conclusions I have reached – namely, lack of actual knowledge of the plaintiff’s solicitor of the terms of the order and the inapplicability of notions of constructive notice to fix him with knowledge of those terms – make it unnecessary for me to decide whether, in the present context, knowledge of the solicitor is to be imputed to his client. It was observed in Z Ltd v A that knowing assistance by a bank employee of a customer’s breach of the terms of an injunction will become the responsibility of the employer bank, but that was an application of principles of vicarious responsibility in the employer-employee situation: see also Re Supply of Ready Mixed Concrete [1992] 1 QB 213; Director General of Fair Trading v Pioneer Concrete (UK) Ltd [1995] 1 AC 456. Nowhere is it suggested that the employer is guilty because knowledge of the employee is imputed to the employer. There is also the point that the employer-employee relationship is more comprehensive than that between principal and agent where the overriding consideration is the scope of the agent’s authority: see, for example, Heatons Transport (St Helens) Ltd v Transport and General Workers’ Union [1973] AC 15.

Conclusion

42 The evidence does not support a conclusion that, when on 30 January 2002 the plaintiff’s solicitor acted for the plaintiff in taking a mortgage from the first defendant, the solicitor had knowledge that that action involved contravention of the orders of 31 December 2001 by the first defendant. This is because, although the solicitor was aware that some court order or other had been recorded on the title to the first defendant’s land, he did not have knowledge of the terms or effect of the order and no knowledge of those matters can be regarded as attributed to him by any legal principle.

43 In the result, therefore, the case the third defendant sought to establish in support of the proposition that the court should not (or must not) hear the plaintiff upon his application under s.74K of the Real Property Act is not made out. I therefore need not consider whether a party in contempt is automatically barred or whether the court has a discretion to hear that party. On that, however, I note the view of Young J in Young v Jackman (above) that, in this State at least, there is no judicial discretion to be exercised; whereas not only in K P Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 to which counsel referred but also in Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (unreported, FCA, 1 July 1998), single judges of the Federal Court have seen the matter as involving a judicial discretion. The House of Lords favoured the discretionary approach in X Ltd v Morgan-Grampian (Publishers) Ltd [1991] 1 AC 1.

44 Having ordered, by consent, at the conclusion of the hearing on 16 July that the plaintiff’s caveat be extended for a limited period judged sufficient to accommodate delivery of this judgment by me, I shall now proceed to hear submissions on the question whether a further extension should be ordered under s.74K of the Real Property Act. I note, in that connection, the third defendant’s concession that the plaintiff has shown that there is a serious question to be tried as to the existence of the caveatable interest claimed by the plaintiff, so that any further submissions should be largely confined to the balance of convenience.

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Last Modified: 07/19/2002