Mitchelson v Mitchelson

[1979] FCA 48

MITCHELSON v. MITCHELSON (1979) 37 FLR 289
Appeal - Deeds

COURT

FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
Smithers J.(1)

CATCHWORDS

Appeal - Leave to amend notice of appeal - Discretion - New ground of appeal - High Court Rules, O. 70 r. 29.

Deeds - Alteration - Materiality of alteration - Avoidance in future.

HEADNOTE

In an application for leave to amend a notice of appeal to include a further ground of appeal, pursuant to O. 70 r. 29 of the High Court Rules, the appellant sought to raise new issues, namely: (a) that an instrument of mortgage giving rise to the judgment debt was altered by or with the authority of the respondent subsequent to its execution and was thereby rendered void; (b) that certain caveats were thereafter wrongfully lodged by the respondent causing the appellant damage. The success of the issue raised in (b) depended upon the issue raised in (a) being decided in favour of the appellant.

Held: (1) It is a relevant factor in considering whether to grant leave to amend a notice of appeal to consider the liklihood of success of the proposed new ground of appeal.

Burns v. Grigg, (1967) VR 871, followed.

Hughes v. National Trustees Executors & Agency Co. of Australasia Ltd., (1978) VR 257; Vilenius v. Heinegar (1962), 36 ALJR 200, referred to.

(2) The stapling of the deed of settlement to the mortgage in the office of the registrar of titles without the knowledge or authority of the respondent did not affect the obligations of any party to the mortgage, and did not thereby avoid the mortgage.

Armor Coatings (Marketing) Pty. Ltd. v. General Credits (Finance) Pty. Ltd. (1978), 17 SASR 259, followed.

Pigot's case (1614), 11 Co Rep 26b; 77 ER 1177; Aldous v. Cornwell (1868), LR 3 QB 573, referred to.

(3) The evidence showed the lodging of the caveat was quite proper. In any event any damage allegedly suffered by the appellant occurred prior to any alleged material alteration of the instrument of mortgage and so could not have been affected by the same, as any avoidance by material alteration only operates in futuro.

(4) In the circumstances the application for leave to amend the notice of appeal should be dismissed.

HEARING

Melbourne, 1979, May 15, 21. #DATE 21:5:1979

APPLICATION.

Application by summons for leave to amend a notice of appeal.

The facts appear in the judgment.

M. Phipps, for the appellant.

E. W. Gillard, for the respondent.

Cur. adv. vult.

Solicitors for the appellant: Middletons.

Solicitors for the respondent: Stedman, Cameron, Meares & Hall.

D. LEVIN

JUDGE1

May 21.

The following judgment was delivered.

SMITHERS J. By summons dated 12th April, 1979, the applicant (the appellant) has applied for leave to amend his notice of appeal to include a further ground of appeal. The application is brought under O. 70 r. 29 of the High Court Rules which are applicable to the practice and procedure of this Court in these circumstances. See s. 38 (2) of the Federal Court of Australia Act 1976 and O. 6 r. 1 of the Federal Court of Australia Rules. Order 70 r. 29 states: "The Court or a Justice may order that any person be added as a party to an appeal, or that the proceedings be amended, and may impose such conditions as appear just and give all consequential directions." (at p290)

1. The background leading to the application may be briefly summarized as follows. On 19th September, 1978, the respondent issued a bankruptcy notice against the applicant in respect of a sum of $7,963.26 alleged to be owing to her in respect of a judgment debt. The applicant alleged that he had a counterclaim, set-off or cross demand equal to or exceeding the amount of a judgment debt which came within the terms of s. 40 (1) (g) of the Bankruptcy Act 1966. (at p290)

2. On 9th November, 1978, C. A. Sweeney J. ruled against this claim, stating: ". . . I do order as follows: the court determines that it is not satisfied that the debtor has a counterclaim, set-off or cross demand equal to or exceeding the amount of the judgment debt, being a counterclaim, set-off or cross demand that he could not have set up in the action in which the judgment was obtained." His Honour awarded costs to the respondent. (at p290)

3. From that order an appeal was brought by notice of appeal dated 29th November, 1978. That notice listed three grounds as to all of which the court has been informed the applicant no longer relies. Accordingly, this application must be decided by principles applicable to an application for an extension of time in which to appeal or to amend an otherwise valid notice of appeal by adding a new ground out of time. (at p290)

4. The ground of appeal which it is now desired to add is as follows: "4. That since the date of the declaration and determination referred to herein fresh evidence has become available to the appellant giving to the appellant a new cause of action and a new basis of counterclaim such as if known at the time of the hearing before the Honourable Mr. Justice Sweeney could have been raised under s. 40 sub-s. (1) par. (g) of the Bankruptcy Act 1966." (at p291)

5. The applicant has established that the matters upon which he relies in his new cause of action, or some of them at least, did arise after the date of the judgment given against him and after the date at which he lodged his notice of appeal. (at p291)

6. In Burns v. Grigg (1967) VR 871 the Full Court of the Supreme Court of Victoria, Barry, Little and Gowans JJ., in dealing with an application to include an additional ground of appeal considered as a relevant factor the likelihood of the appeal succeeding on the new ground. (at p291)

7. In Hughes v. National Trustees Executors & Agency Co. of Australasia Ltd. (1978) VR 257 McInerney J. discussed the principles governing the discretion to allow an appeal out of time. His Honour considered one significant question requiring attention to be the appellant's prospects of successfully prosecuting the appeal (1978) VR, at p 262 . (at p291)

8. In Vilenius v. Heinegar (1962) 36 ALJR 200 Kitto, Windeyer and Owen JJ. referred to a respondent's ". . . vested right to retain the judgment unless . . . this Court under sub-r. (2) of r. 6, for special reasons, should give special leave to appeal" (1962) 36 ALJR, at p 201 . These comments are I think applicable to the application before me. (at p291)

9. There are two matters now relied upon and encapsulated in the proposed new ground of appeal which the applicant desires to raise. They are: 1. That an instrument of mortgage dated 24th December, 1976, and giving rise to the judgment debt, was altered by or with the authority of the respondent subsequent to its execution and was thereby rendered void; 2. That the respondent wrongfully lodged caveats against land comprised in certain certificates of title in respect of an alleged equitable interest arising from a deed of settlement made between the parties dated 9th December, 1974, referred to in the mortgage mentioned in the previous paragraph and the applicant suffered damage by reason thereof. The caveats referred to had been lodged pursuant to cl. 16 of the deed of settlement which was in the following terms: "The payments hereby convenanted to be made by the husband shall be secured upon the properties set out in the second schedule to this deed as follows: (a) The husband will deliver to the wife's solicitors a registerable instrument of mortgage over each of the said properties subject to the encumbrances set out in the second schedule hereto which now affect the same; (b) The wife's solicitors will lodge caveats to protect the said mortgage but will not register the said mortgage until default on the part of the husband in making any of the said payments and until such default the said instruments will be held in escrow by the wife's solicitors." (at p292)

10. The claim outlined in par. 2 is dependent upon it being established that at the time the caveats were lodged the instrument of mortgage referred to in par. 1 had become void. Default having been made in payments provided for in the deed of settlement the respondent lodged the mortgages for registration under the Transfer of Land Act 1958 (Vic.) on 26th January, 1977. (at p292)

11. As to the matter raised in par. 1 above, the alleged alteration of the mortgage was constituted by the stapling to the original and duplicate instruments of mortgage of the original deed of settlement and a copy thereof respectively. The deed of settlement was executed by the applicant and respondent and had been approved under s. 87 (1) (k) of the Matrimonial Causes Act 1959. The stapling was effected by some person unknown while the mortgages were in the Victorian Titles Office awaiting registration. The solicitor for the respondent has deposed that neither she, nor to her knowledge any employee of her firm, personally stapled the deed to the mortgage and that she believes that it was so stapled under the direction of the Registrar of Titles. This evidence was not challenged and it was not suggested the respondent personally authorized the stapling. (at p292)

12. In the body of the instrument of mortgage it is stated that the mortgage was given in consideration of the parties having entered into the deed of settlement referred to above for the purpose of securing the obligations of the applicant thereunder. There is also a convenant to the effect that the applicant will pay the principal sum payable under that deed as and when provided for therein. (at p292)

13. Evidence given by an assistant registrar of titles establishes that it is the view of the registrar of titles that an instrument, the obligations under which can be ascertained only by reference to some other instrument referred to therein, will be registered only after production of that other instrument to the registrar to be kept in his custody in the Titles Office, to enable members of the public searching the instrument of mortgage to ascertain the effect of all its terms. The registrar of titles enforces this view and in this case did demand production of the deed of settlement and a copy thereof. The only reasonable inference on the evidence is that someone in the Titles Office must have stapled the document to the mortgage and did so not to vary its terms but by way of putting the deed of settlement and a copy thereof in a convenient place for reference in relation to the mortgage. It would be very surprising and startling if such a procedure should have rendered the instrument of mortgage void and I am satisfied that there is no prospect of the applicant being able to establish that it did so. (at p293)

14. A statement of the principles to be applied in considering the effect of an alteration to a deed is to be found in Halsbury's Laws of England (4th ed.) vol. 12, p. 552, par. 1378. That statement is as follows: "If an alteration (by erasure, inter-lineation or otherwise) is made in a material part of a deed, after its execution, by or with the consent of any party to or person entitled under it, but without the consent of the party or parties liable under it, the deed is made void." (at p293)

15. My task in considering this aspect of the proposed new ground of appeal is made easier by the fact that, only just over a year ago, a somewhat similar ground of appeal was argued before the Full Court of the Supreme Court of South Australia in Armor Coatings (Marketing) Pty. Ltd. v. General Credits (Finance) Pty. Ltd. (1978) 17 SASR 259 . In that case a mortgage had, after receiving the mortgage executed by the mortgagor, completed blanks for details of dates and amounts of payments and lodged it for registration under the Real Property Act, 1886 (S.A.). At a later time the mortgagee, because of the resumption of part of the land and requisitions of the Registrar-General of Deeds, had altered the description of the land and re-dated the mortgage. It appeared that all the alterations except the date of the mortgage itself conformed to the intention of the parties. The Full Court held that the alterations did not avoid the instrument of mortgage on two general grounds: (1) that the mortgagor in the circumstances had given to the mortgagee and its solicitors implied authority to fill in the particulars which were filled in before the mortgage was lodged and that when a document is handed by one party to the other for registration under the Torrens system, an implied authority should readily be presumed to make alterations, not departing from the parties' bargain or varying their rights inter se, which are necessary for registration; (2) that so far as the alterations made after the mortgage was lodged were concerned they were either not material, or in one case, if material were to the mortgagor's advantage and so could not be relied upon to avoid the instrument. (at p293)

16. The judgments of the Full Court discuss in detail the authorities in this area beginning with Pigot's case (1614) 11 Co Rep 26b; 77 ER 1177 . Reference may usefully be made to the following extracts. Bray C.J. said: " . . . there is a distinction between cases where the formal document in question embodies a previous agreement in fact between the parties, so that in a proper case a court of equity would rectify it to make it conform to that previous agreement, and a case where the document itself for the first time puts the parties into a contractual relationship. In the second type of case . . . there may well be no implied authority to supplement it after one party has signed it" (1978) 17 SASR, at p 277 . And again he said: ". . . Where the document is intended by both parties to be registered under the Torrens system and one party hands it to the other intending that the other should register it, or knowing that the other will endeavour to register it, an implied authority to the other should readily be presumed to make whatever alterations or additions, not departing from the bargain between the parties or varying their rights or obligations inter se, are necessary to achieve registration" (1978) 17 SASR, at p 278 . Walters J. said: "To my mind, the question of materiality depends on whether the altered writing purports to affect the legal relations previously existing, that is, whether the alteration would result in a change in the contractual obligations between the parties, as they previously existed, so as to vary injuriously the rights against, and the duties to, the party making the alteration. Thus it is stated in Chitty's Law of Contracts (17th ed., 1921) at p. 874, that: 'it is now well settled that this doctrine (in Pigot's case) is incorrect in cases where the alteration does not enhance the liability of the obligor.' In support of this statement, the learned author draws on the authority of the decision in Aldous v. Cornwell (1868) LR 3 QB 573 . There the Court of Queen's Bench held that a promissory note which did not express the time for payment, but to which, while it was in the possession of the payee he had added, without the assent of the maker, the words 'on demand' was not thereby vitiated, inasmuch as the alteration did not change the legal effect of the instrument, but only expressed the legal effect of the note as originally framed. After considering a series of authorities beginning with Pigot's case, the Court concluded its judgment by saying: 'We think we are not bound by the doctrine in Pigot's case, or the authority cited for it; and not being bound, we are certainly not disposed to lay it down as a rule of law that the addition of words which cannot possibly prejudice anyone, destroys the validity of the note (1868) LR 3 QB, at p 579 '" (1978) 17 SASR, at p 283 . (at p294)

17. The facts in this case are, if anything, even stronger than those that existed in the above decision. Here there is no evidence that the respondent or anyone authorized by her has made any alterations to the instrument of mortgage and the applicant has not seriously suggested that such evidence is available. Accordingly even on the strictest reading of the ruling in Pigot's case (1614) 11 Co Rep 26b; 77 ER 1177 the deed would not have been avoided. (at p294)

18. For the applicant it was argued that the attachment of the deed of settlement made the consideration for the mortgage certain, whereas otherwise the consideration may have been declared uncertain and the contract of mortgage a nullity. But the terms of the mortgage were never uncertain. The fact that the extent of the mortgagor's obligations had to be ascertained by reference to another document referred to therein did not create uncertainty. The terms of the mortgage itself imposed obligations the extent of which could only be ascertained by reference to the deed to which the terms of the mortgage inevitably pointed. Stapling the deed to the mortgage did nothing to affect the obligations of any party to the mortgage. Clause 16 of the deed provided that the applicant should deliver a registrable mortgage which the respondent was entitled to register upon default under the deed. Accordingly it authorized the respondent to do what was reasonably required to comply with the conditions of registration. It did not authorize any interference with the deed which might have affected the applicant's obligation thereunder. But nothing of that kind occurred. (at p295)

19. The second issue involved in the proposed new ground of appeal alleges damage suffered by reason of the lodging of caveats. But the lodging of the caveats was quite proper. In addition all events by which the alleged damage was suffered occurred a considerable period before the acts said to have avoided the mortgage were performed. There is no contention to the contrary. The damage alleged to have been suffered by the applicant was suffered before the date of the alleged alteration of the mortgage. The authorities referred to in Halsbury's Laws of England (4th ed.) vol. 12, p. 552, par. 1378, make it plain that when a deed is avoided by material alteration, that alteration only has such an effect in futuro. (at p295)

20. It appears to me therefore to be manifestly clear that the applicant has no prospect of success on the ground now sought to be added on either of the contentions made in support of it. Accordingly the summons should be dismissed with costs and I certify for counsel. (at p295)

ORDER

Summons dismissed with costs.