Lanciana v Bellmar Holdings Pty Ltd
[2013] VSC 592
•25 January 2013 (revised 30 October 2013)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
PRACTICE COURT
No. 00049 of 2013
| PASQUALE LANCIANA | Plaintiff |
| v | |
| BELLMAR HOLDINGS PTY LTD | Defendant |
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JUDGE: | FERGUSON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 25 January 2013 | |
DATE OF JUDGMENT: | 25 January 2013 (revised 30 October 2013) | |
CASE MAY BE CITED AS: | Lanciana v Bellmar Holdings Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 592 | |
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PROPERTY – Obligation of mortgagee to produce titles to enable registration of subsequent mortgage – Property sold by registered proprietor – Registered proprietor company in liquidation – Liquidator considering whether to adopt contract of sale – First mortgagee obtained judgment for possession with execution of warrant imminent – Certificates of title ordered to be produced to enable registration of subsequent mortgage – Transfer of Land Act 1958 (Vic) s 86.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J D Mattin | Basilone Legal |
| For the Defendant | Mr P Bingham | Cornwall Stodart |
| For the Liquidator | Ms F J Bentley | Partners Legal |
HER HONOUR:
Essendon Apartment Developments Pty Ltd (in liquidation) (‘the Company’) is the registered proprietor of a property at 1048–1060 Mount Alexander Road, Essendon. The defendant, Bellmar Holdings Pty Ltd, holds a registered mortgage over the property. There is also a second registered mortgage over the property. The plaintiff, Pasquale Lanciana, holds an unregistered mortgage over the property. The mortgage is in the name of Percy Lanciana, a name by which Mr Lanciana is also known. Mr Lanciana wishes to register the mortgage and requested that Bellmar (as the first mortgagee) produce the certificates of title for the property to the Registrar of Titles to enable his mortgage to be registered. Mr Lanciana agreed to pay Bellmar’s costs in relation to production of the titles. Bellmar has refused to produce them to the Registrar. Consequently Mr Lanciana has brought the present application seeking orders requiring Bellmar to produce the certificates of title to the Registrar.
Prior to liquidation, the property had been sold by the Company for $4.3 million. When the matter first came before the Court, it was adjourned so that the liquidator could be given notice of the proceeding. There was no affidavit filed by the liquidator but he was represented by counsel on the adjourned hearing today. Counsel informed the Court that:
·the liquidator has not committed to the contract of sale;
·he has some concerns as to the validity of the contract;
·he will make a decision by next Thursday, 31 January 2013, about whether to complete the sale;
·there is another prospective purchaser;
·he thinks that the price under the current contract is a good price based on a valuation of $3.5 million by Sutherland Farrelly.
In seeking the relief that he does, Mr Lanciana relies on s 86 of the Transfer of Land Act 1958 (Vic) which provides:
when any instrument subsequent to a first mortgage is made by the registered proprietor of any land and such proprietor or the person entitled to the benefit of the subsequent instrument desires the registration of the subsequent instrument the first mortgagee if he holds the certificate of title concerned shall, upon being requested so to do by the proprietor or person entitled to the aforesaid but at the cost of the person making such request, produce such certificate of title to the registrar.
Mr Lanciana contends that as he has a mortgage in registrable form, and he is willing to pay the costs of production, Bellmar as the first mortgagee must produce the titles to the Registrar.
Bellmar submitted that the Court has very large discretionary powers in determining the application for production of the titles. It relies on Re Armitage; ex parte Andrews.[1] In that case mortgagees refused to produce the title to enable registration of the property from the registered proprietor to a purchaser. One term in the mortgage was that the mortgagees were entitled to custody of the certificate of title. At the time the production of the title was sought, the mortgagor was in default under the terms of the mortgage. In referring to the equivalent of the current s 86 of the Transfer of Land Act,[2] A’Beckett J said:
The terms of that section amount to a positive enactment, and I think this enactment overrides the covenant in this case which provides that the mortgagees are to retain the custody of the documents. This section contemplates the mortgagee holding the certificate of title, and whether he holds it under an agreement that he should hold or whether he holds it without, that positive enactment applies and overrides the covenant.[3]
[1](1891) 17 VLR 77.
[2]Transfer of Land Act 1890 s 134.
[3](1891) 17 VLR 77, 79.
His Honour then turned to consider two other provisions in the legislation which enabled the Registrar to call upon persons in the position of mortgagees who refuse to give up the certificate of title to appear. In relation to those provisions, his Honour said:
These sections give very large discretionary powers to the judge before whom mortgagees are brought to see what shall be done under such circumstances. Now, excepting the objection raised on the covenant, the only other ground of objection urged was that the mortgagor was in default and that therefore this order should not be made. I fail to see sufficient grounds in that default for refusing to give effect to the rights which the transferee has acquired from the mortgagor.
The Act did not intend that the mortgagor having given a first mortgage should be deprived of the power of alienation. That alienation can only be effectually made by registration of the transfer. In this case it is said that the transfer is for the benefit of creditors. I do not think that affects the present case. This is a transfer to a person to whom the mortgagor had a right to transfer and that person wishes to have his title completed.
As to the default, if such default had arisen, and in consequence of that default any immediate sale was in contemplation at the time which would require the control of the documents of the mortgagee, and it would be for their convenience to have such control, I might under special circumstances recognise the mortgagee's rights and would see that those rights were not hampered by the mortgagor.
Under special circumstances on the eve of the sale by the mortgagee where it might be necessary that he should have control of the certificate of title, and the want of such control would interfere with his rights, I might refuse to make the orders sought in this case. There are no such circumstances in the present case.[4]
[4]Ibid 79–80.
Whilst Mr Lanciana does not rely on the provisions to which A’Beckett J referred, Bellmar says that the application is one for injunctive relief and the same principles enunciated by A’Beckett J apply in exercising the discretion to grant that relief.
Bellmar contends that the Court should not make the orders sought. First it says that Mr Lanciana agreed not to register the mortgage so that other creditors would not know about the loan and mortgage. In fact, Bellmar did not know about the loan and mortgage until October 2012, some ten months after the mortgage was given, and it says that it may well have acted differently such that it may now be unfair for Mr Lanciana to secure registration of its mortgage. Bellmar contends that Mr Lanciana was, or should have been, aware of the provision in the Bellmar mortgage which prohibited the execution of any further security over the property without Bellmar’s consent. In this regard, Bellmar relied on the loan agreement between Mr Lanciana and the company which referred to Bellmar’s prior mortgage by reference to its registration number. Bellmar contended that the memorandum of common provisions (‘MCP’) that pertained to its mortgage, and which contains the relevant prohibition, are the same as those incorporated into the mortgage given in favour of Mr Lanciana.
Secondly, Bellmar says that Mr Lanciana only sought to register the mortgage after there was default, the property had been sold, the liquidator had been appointed, Bellmar had obtained an order for possession, and a warrant of possession had been issued, with that warrant due for execution next week. Bellmar says that Mr Lanciana has not given any explanation as to why he now seeks to register the mortgage and, notably, he has not lodged a caveat to protect his interest.
Thirdly, Bellmar says that Mr Lanciana's mortgage will be of little utility if Bellmar exercises its power of sale. Even in the context of a sale by a liquidator, Bellmar says that Mr Lanciana’s mortgage would have little utility because there are unlikely to be sufficient proceeds to pay out the prior mortgagees.
Fourthly, Bellmar is concerned that if Mr Lanciana’s mortgage is registered, he will delay or disrupt completion of the contract that has been entered into or a sale by Bellmar as mortgagee. Bellmar contends that registration would put Mr Lanciana into a bargaining position to which he would not otherwise be entitled.
Fifthly, Bellmar says that it would be inconvenienced or disadvantaged by having to produce the title at a time when Bellmar needs to be in control of the relevant documents. Bellmar contends that the orders sought would interrupt control by it of the titles and practically would interfere with its right to control the process.
The liquidator indicated through his counsel that he shared some of the concerns of Bellmar.
In St Kilda Road Pty Ltd v Parker Simmonds Securities Limited,[5] Harper J, as his Honour then was, considered whether to order production of the title by a mortgagee where the mortgagor had breached a covenant in the mortgage that prohibited the giving of further security without the first mortgagee’s consent. His Honour was satisfied that the prerequisites of s 86 of the Transfer of Land Act were satisfied. His Honour continued:
It follows that, unless the section is subject to an implied exception operating when the proprietor has entered into a subsequent mortgage in breach of a contractual obligation owed by it to the first mortgagee, s 86 applies in the circumstances of this case. The courts cannot by implication alter the plain words of an Act of parliament.
The words of s. 86 are, it seems to me, plain. It might nevertheless be said that they confer a right on the plaintiff and do not expressly preclude it from bargaining that right away. Being private - as opposed to public - rights, moreover, they may be excluded by contract. It seems to me that there is a difficulty with this argument. In my opinion, s. 86 does not so much confer a right on a registered proprietor, as impose an obligation on a first mortgagee.
If so, then it is not within the power of the first mortgagee to exclude by contract or otherwise that which parliament has included. Only parliament can, by appropriate words, insert exceptions into that which is otherwise the imposition of an obligation. This, I think, is the answer to the contention that the courts will not assist a litigant to breach a contract or allow a litigant to profit from such a breach after its commission.
If parliament by unequivocal words requires someone to do something once certain conditions are met, that person cannot avoid that obligation by demonstrating that it only arose on breach by someone else of a contract between the person in breach and the person under the obligation. This is so, it seems to me, at least where, as here, the party not in breach will, even if the obligation is enforced, retain all its remedies: The defendant in this case can still sue for damages and is not deprived of those advantages which are given to it by priority of registration.[6]
[5] [2001] VSC 412.
[6]Ibid 2–3.
I note that this reasoning is to be contrasted with the decision in Hypec Electronics Pty Ltd (In Liq) v Registrar-General,[7] a decision of the New South Wales Supreme Court. In that case the relevant legislation under consideration was in different terms to the Victorian provision and the outcome reached in that decision is thereby explained.
[7](2005) 64 NSWLR 679.
In my opinion, Mr Lanciana is entitled to the orders that he seeks. He has a mortgage in registrable form and is prepared to pay Bellmar’s costs of production. As Harper J said, the words in the statute are plain. They require the first mortgagee to produce the title when requested to do so, subject to the costs of production being met. I am not satisfied that there is any basis upon which the Court might refuse to grant the relief sought in this case. There is no evidence that the relief is sought in furtherance of a fraud or a crime and I doubt that in their absence there is a basis for refusing to make orders. In any event, the matters raised by Bellmar in this case do not give rise to a basis for refusing the orders sought.
Dealing in turn with those matters. Whilst there is evidence that the finance broker for the mortgage in favour of Mr Lanciana told him that the Company did not want the security documents lodged because the Company was arranging refinancing of its current borrowings, that does not establish that there was an agreement between the Company and Mr Lanciana that he would not register the mortgage either initially or at some later stage. There is also insufficient evidence to establish that Mr Lanciana knew, or ought to have known, that the mortgage in favour of Bellmar prohibited the giving of a mortgage to him. Even assuming for the purposes of the argument that Mr Lanciana knew that there was a registered mortgage in favour of Bellmar, and knew the number of that mortgage, it is a leap too far, in my opinion, to say that Mr Lanciana then would have, or should have, obtained a copy of the mortgage and reviewed it to ascertain the MCP number and recognise that it was the same as the MCP referred to in the mortgage he was taking.
As to the timing of the application, the first request for production of the titles was made on 1 November 2012. There then followed correspondence between the parties until the application was filed with the Court on 9 January 2013. I accept that it was not until after the property had been sold, judgment obtained by Bellmar, and a warrant of possession issued, that Mr Lanciana sought to have his mortgage registered. However, it is a matter for the mortgagee to determine when it wishes to lodge the mortgage for registration. Mr Lanciana did not wait until the eve of settlement of the sale to seek to have his mortgage registered, nor did he wait until shortly before the warrant was to be executed. He sought to have Bellmar produce the title well before either of those events. Because Bellmar refused, the present application has been made and whilst determination of the application is much closer to the date of the potential settlement of the sale, or the execution of the warrant, that is not due to any tardiness on the part of Mr Lanciana. In addition, Mr Lanciana sought production of the title more than a month before the liquidator was appointed.
As to Bellmar’s contention that there is no utility in registration of the mortgage, I cannot be satisfied on the evidence that that is so. The evidence does not establish that there will be no funds available from the proceeds of sale of the property for payment of all or part of the debt Mr Lanciana claims. Bellmar’s evidence is that the amount to be paid to it, the second mortgagee, for sale and other costs, is approximately $3.87 million which is the balance due on settlement plus or minus adjustments. Bellmar’s evidence is that it is not clear what happened to the 10 per cent deposit of $430,000. I cannot be satisfied on that evidence that there is no utility in Mr Lanciana registering his mortgage. If Mr Lanciana’s mortgage is registered, and there is a surplus of funds available after payment of debts that rank ahead of his mortgage, the liquidator, if the sale by the company proceeds, or Bellmar if it sells the property as mortgagee, would be bound to pay that surplus to Mr Lanciana. That is so, albeit that in the case of a sale by Bellmar as mortgagee Mr Lanciana’s mortgage would be expunged without the need for him to provide a discharge of mortgage on settlement.[8] I do note that the valuation on which Bellmar relies, and a valuation to which Mr Lanciana referred in correspondence, both suggest that it may be unlikely that the purchase price under the current contract would be achieved if the property were sold by one of the mortgagees. However, it cannot be known whether that will eventuate. In all the circumstances, I cannot be satisfied that there is no utility in the registration of the mortgage.
[8]Transfer of Land Act 1958 (Vic) s 77(4).
The fourth matter relied upon by Bellmar was that registration of Mr Lanciana’s mortgage would delay or obstruct a sale of the land. Bellmar wrote to Mr Lanciana’s solicitor requesting that he seek instructions as to whether once his mortgage was registered Mr Lanciana would accept the sale sum of $4.3 million and ‘assist with the sale by providing a discharge of mortgage in the event that there should be insufficient proceeds to pay out’ Mr Lanciana. Mr Lanciana has not agreed to do this. That is not unreasonable. Amongst other things, no doubt he will want to see whether the sale will proceed, if it does, what amounts are claimed in priority to his claim, and then consider whether in those circumstances he is willing to provide a discharge of the mortgage. Mr Lanciana has also sent correspondence suggesting that consideration might be given by the prior mortgagee to taking an assignment of his mortgage. I do not infer from that, or from the fact that he has not agreed to the request put by Bellmar, that Mr Lanciana will impede or frustrate a sale.
As to the suggested inconvenience to and loss of control by Bellmar if the title is produced, it seems to me that that concern is readily addressed. If the titles are produced, Bellmar will remain in control of them, albeit that it will not have physical possession. If a title is produced by a mortgagee for the purpose of registration of a dealing, then there are procedures available to enable subsequent dealings to be lodged with the Registrar of Titles and registered, and for the title to remain under the control of the mortgagee, not to be released to any party without the authority of the mortgagee.
I will make the orders sought by Mr Lanciana for production of the titles.
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