National Australia Bank Limited v McFarlane
[2003] VSC 26
•17 February 2003
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 4173 of 2003
| NATIONAL AUSTRALIA BANK LIMITED | Plaintiff |
| v | |
| LEIGH GERARD McFARLANE and REGISTRAR OF TITLE | Defendants |
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JUDGE: | ASHLEY J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 17 February 2003 | |
DATE OF JUDGMENT: | 17 February 2003 | |
CASE MAY BE CITED AS: | National Australia Bank Ltd v McFarlane & Anor | |
MEDIUM NEUTRAL CITATION: | [2003] VSC 26 | |
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Caveat - application to remove caveat – plaintiff a mortgagee in possession – sale of property by mortgagee – caveator claiming to hold a contingent equitable interest in the land as holder of an option to purchase – mortgagee’s legal interest predating the caveator’s alleged equitable interest.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A. Schlicht | Russell Kennedy |
| First Defendant | Appeared in person with Mr J. Moran |
HIS HONOUR:
The plaintiff, National Australia Bank Limited, applies for the removal of a caveat under section 90(4) of the Transfer of Land Act 1958.
The plaintiff claims to have a legal interest in the land as mortgagee by mortgage registered in May 1989. It asserts that the mortgage was then given to it by the registered proprietors, Mr and Mrs McFarlane senior.
According to the bank, the mortgagors defaulted in payments due on the mortgage. The plaintiff commenced a proceeding for possession in 1994. That proceeding eventually came on for hearing in April 2002 before Byrne J. His Honour made an order for possession. He dismissed a counterclaim seeking that the mortgage be set aside.
The registered proprietors sought to appeal. No appeal was heard on the merits. An application for extension of time within which to appeal was dismissed by the Court of Appeal.
Presently Mr and Mrs McFarlane senior have outstanding an application for special leave to appeal to the High Court against the decision of Byrne J. There is presently no stay on the orders made by his Honour. Apparently a stay was in place for a period but later applications by Mr and Mrs McFarlane for a stay were unsuccessful.
The plaintiff, having taken possession, sold the property by contract of sale dated 19 December 2002. When the matter first came before me, last Thursday, settlement was due today. But counsel for the Bank informed me today that settlement has been postponed to Wednesday of this week.
The first defendant to this proceeding, commenced by originating motion filed 10 February 2003, is Leigh Gerard McFarlane. He is a son of the registered proprietors. The second defendant is the Registrar of Titles who, has taken no part at the proceeding but has indicated that he has no objection to the making of the order sought.
Solicitors then acting for the first defendant, conveniently I shall call him the defendant, lodged a caveat on 9 May 1999. It was one of three caveats eventually lodged in respect of the property. The plaintiff has arranged for the removal of the other caveats.
The plaintiff seeks an order that the caveat be removed in respect of the subject land, in substance so that settlement can proceed. The caveat, I should make clear, refers to three parcels of land of which the subject land is but one. The originating motion and the material in support was served on the solicitors who filed the caveat. Their address was nominated on the caveat as the address for service in Victoria.
According to s. 89(4) of the Transfer of Land Act:
"Every notice relating to any ... caveat and any proceedings in respect thereof, if served at the address in Victoria specified in the caveat, shall be deemed to be duly served."
In NAB Limited v. Dyer and Anor[1], Batt J held that service of documents in a proceeding was good service if effected upon such an address for service. He qualified that proposition by adverting to there being a need to be sure that the address at which process was served was the most recent address for service advised by the caveator.
[1](1996) V Conv R 54-553.
In this case there is evidence that the caveator has not provided the Land Titles Office with any different address for service than that which was notified when the caveat was lodged. I am satisfied, then, that the court documents were properly served last week.
Notwithstanding this, the materials showed, when the matter came before me on 13 February, that the solicitors who acted for Mr McFarlane when the caveat was lodged had stated after the current material had been served on them that they no longer acted for him; although they told the plaintiff's solicitor that they had put Mr McFarlane on notice of the hearing.
Having regard to the history of the substantive proceeding between the plaintiff and Mr McFarlane's parents, it seemed to me desirable, having heard submissions for the plaintiff as to the merits of the matter, that Mr McFarlane be unequivocally put on notice of the application and be given an opportunity to respond before any order was made. I gave a series of directions to that end on 13 February and adjourned the further hearing to today at 10.30.
Mr McFarlane was in fact put on notice of the hearing on the evening of 13 February. Today he appeared before me, together with a Mr John Moran. He had given the latter what was described as a common law power of attorney to appear on his behalf. Rather than hear argument and pass upon the form and efficacy of the document, I permitted Mr Moran to speak for Mr Leigh McFarlane. I note in passing, based upon what Mr Moran told me, that on some past occasion a court in another state has recognised the efficacy of such a document but that the Court of Appeal in this state has had a contrary view.
As to the merits of the application, according to the judgment of Byrne J, undisturbed by the Court of Appeal, the plaintiff has a legal interest in the land by reason of a registered mortgage which has not been successfully impugned; and a right to possession by reason of the registered proprietors' default. That situation would alter if there was grant of leave to appeal, and then a successful appeal to the High Court. But that is in the realm of speculation. In the meantime, there is no stay on the orders of Byrne J. That has been the situation for some time.
Last Friday, perhaps the timing was no coincidence, Mr and Mrs McFarlane senior initiated an application for a stay in the High Court, an application in respect of which, as I understand it, no return date has yet been fixed. I should not assume the probability of a successful outcome to that application having regard to the past history of the litigation between the Bank and the McFarlanes.
The plaintiff, being a mortgagee by virtue of a registered mortgage and having lawfully gone into possession, was entitled to exercise power of sale. That is what it has done. It will be adversely affected if the caveat is not removed for it is highly likely that the Registrar will be unable to record the change in proprietorship. Cost will have been incurred and will have been wasted.
There were two aspects to the submissions made for the plaintiff at the outset. First, that the plaintiff's legal interest predated the equitable interest claimed by the caveator. Second, that there was no evidence of the existence of the alleged caveat equitable interest. For either or both reasons, counsel submitted, the court should order that the caveat be removed with respect to the subject land.
I should now refer to arguments that were advanced on the part of the caveator.
When the matter came on this morning, Mr Moran informed me that Mr McFarlane had not received copies of the summons and of the affidavits and exhibits in support. I asked what steps Mr McFarlane had taken since last Thursday to obtain copies of the documents. I did not receive a satisfactory reply to that inquiry. Be that as it may, I stood the matter down until 2.15 pm and ensured that copies of the documents were forthwith provided to Mr Leigh McFarlane.
At 2.15 pm Mr Moran sought leave to rely upon an affidavit sworn by Mr McFarlane in the interim period. I granted him leave to do so, just as I granted leave to the plaintiff to file and rely upon an affidavit sworn by the plaintiff's solicitor, Mr Main, this day. The affidavits reveal a conflict as to whether Mr Leigh McFarlane received copies of the summons and supporting material last week, or only today. That, as matters have transpired, has not been a dispute which I have found it necessary to resolve.
Mr Moran submitted that the documents had been short served upon Mr McFarlane because he had not received copies of them until today. Even if I accepted what Mr McFarlane said in that connection, service would not be short service having regard to s. 89(4) of the Transfer of Land Act.
Mr Moran then said that Mr McFarlane wished to have the matter adjourned so that he could go on affidavit. I asked him what Mr McFarlane wished to say on an affidavit. He did not reply to that. Later he said that Mr McFarlane had had no opportunity to produce documents showing his interest in the land. He went on to say that Mr McFarlane has not said what documents there might be, that Mr McFarlane did not understand what documents could be relevant. He told me that Mr Leigh McFarlane had taken up an option on other parcels of land owned by Mr McFarlane senior alone. He did not suggest that Mr Leigh McFarlane had done so in respect of the jointly owned land the subject of the present application.
In connection with his submission that Mr McFarlane had not had an opportunity to go on affidavit, as he put it, Mr Moran said that there had not been an opportunity for Mr Leigh McFarlane to produce to the court a share farming agreement which gives him working rights to the land. Assuming the existence of such an agreement, it would be quite unrelated to the equitable interest claimed by the caveat, and it was not suggested that it could somehow give a caveatable interest to the land otherwise.
Mr Moran told me that in the proceedings between the bank and Mr and Mrs McFarlane senior, the McFarlanes had challenged the proper incorporation of the bank. I understood him to say that that was a matter that would be reagitated if leave to appeal was granted to the McFarlanes to appeal to the High Court.
Mr Schlicht told me that Byrne J had dealt with the incorporation argument at paragraph 6 of his reasons and had said that it lacked substance. It may be that this point will be raised by the McFarlane’s on their special leave application, and on appeal if leave is granted. But, as I have already said, whilst there is an application for leave to appeal in that matter, there is no stay on the orders of Byrne J, and those orders do represent a final order of this court.
Mr Moran then referred me to an affidavit sworn by John Corcoran in support of this application on 10 February. He noted that paragraph 19 of that affidavit refers to there being two other caveats on the subject land and avers that arrangements have been made for those caveators to withdraw them. Mr Moran said that Mr McFarlane senior challenged the jurisdiction of his trustee in bankruptcy to agree to withdraw one of those caveats. That is a matter that lies between Mr McFarlane senior and the trustee. It does not bear upon this application.
Mr Moran next referred to paragraph 14 of Mr Corcoran's affidavit, noting that it refers to an affidavit made by Mr McFarlane senior in December 2002. He noted that the affidavit exhibited was unsigned. Last week Mr Schlicht drew my attention to that fact, telling me that the affidavit had indeed been executed but that it had not been possible in the time available to locate a signed copy. I note that Mr Moran did not suggest that Mr McFarlane senior had not made an affidavit in the terms of the document exhibited to paragraph 14 of Mr Corcoran's affidavit.
Mr Moran's next point adverted to the belief of the registered proprietors that there is no final judgment in this matter, for which reason it would be premature to complete the sale. He said that if a decision can be overruled on an appeal, it cannot be said to be a final judgment. That is not the law.
Mr Moran argued that the Court of Appeal had only considered whether leave to appeal should be granted out of time and that its decision could not be regarded as having left the decision of Byrne J undisturbed. It is correct to say that it did have that effect, although it is the fact that the court did not consider the merits of the matter in a full appeal setting.
Mr Moran's last point, which led on to an application that he made in reply, was that on 4 February this year Mrs McFarlane senior was before the Magistrates' Court in connection with a parking ticket. In that matter the lawfulness of the Constitution Act 1975 of this State was put in issue. As I understand it, the magistrate did not dispose of the matter on the merits but gave Mrs McFarlane an opportunity to bring the supposed issue before the High Court. As Mr Moran explained it, the contention sought to be pursued was that the 1975 Act was invalid because it purported to repeal the Constitution Act passed by the Imperial parliament in 1855. Mr Moran argued that in the event that the 1975 Act was invalid, the trial before Byrne J was in effect a nullity because the Court had been invalidly constituted. It presumably was said to follow that the Bank’s claim to be a registered mortgagee entitled to possession remained undetermined; for which reason Mr Leigh McFarlane’s caveat should remain undisturbed.
It is not clear to me that this constitutional argument was raised before Byrne J. If it was, it must have been disposed of unfavourably to Mr and Mrs McFarlane. In those circumstances it could conceivably be part of the subject matter of the outstanding application for special leave to appeal.
Mr Schlicht having replied to the matters raised by Mr Moran, the latter in his reply formally requested that I adjourn this application until an application under s. 40 of the Judiciary Act had been launched and determined, such application challenging the jurisdiction of this court to hear the present matter. Mr Moran’s adjournment application was belatedly made. It had the appearance of being an afterthought. It was made without apparent reference to Mr Leigh McFarlane – though no doubt Mr Moran would say that no such reference was necessary. Again, whilst Mr Moran did not develop the substantive argument, it bears a close similarity to, if it is not identical with, an argument raised before the Court of Appeal in recent times and disposed of adversely to the propounder.
In all, the adjournment application belatedly made should be rejected, just as should the adjournment application made on the basis that Mr Leigh McFarlane needed time to go on affidavit. It was not shown that any purpose would be achieved by my acceding to the latter application.
In my opinion, assuming, though it is uncertain, that the plaintiff carries an onus on an application such as this, it has established both aspects of the submissions which Mr Schlicht made on its behalf. But in deference of the prospect that Mr McFarlane might, if given time, show that he held an option to purchase the land, I decide the case upon the first aspect of counsel’s submissions. If the caveat itself could be evidence of the existence of an interest in the land, the equitable interest claim postdated the legal interest created in favour of the plaintiff.
In determining that the plaintiff has shown that an order should be made for removal of the caveat insofar as it relates to the subject land, I have assumed but not decided that the equitable interest asserted by the caveator, namely "a contingent equitable interest as intending purchaser" by reason of an option to purchase, was an equitable interest capable of supporting a caveat.
Finally I should note that the plaintiff pursued part only of the relief sought by paragraph 3(c) of the originating motion, namely an order directed to the Registrar that caveat W106025B be removed from the land contained in certificate of title 7504 folio 119. The caveat will remain operative with respect to the other land there referred to. I will make an order in the terms sought.
MR SCHLICHT: Two things, Your Honour. I would seek costs from the first defendant and I would provide Your Honour with the order, if Your Honour accedes to that submission, an order that the second defendant remove the caveat W106025B from the land and that the first defendant pay the plaintiff's costs.
HIS HONOUR: I'm not so sure about an order for costs. I can see why you ask for it, but any order for costs is just going to inflame the situation further, Mr Schlicht. I am not inclined to make such an order, though I agree that your client could legitimately claim to be entitled to it. I think the substance of the matter is that your client obtain the relief sought.
MR SCHLICHT: If Your Honour pleases.
HIS HONOUR: I will make an order in terms that the caveat be removed insofar as it relates to that land. It should be made crystal clear that the caveat remains in respect of the two other parcels.
MR SCHLICHT: The order that I proposed was the second defendant forthwith remove the caveat W106025B from the land contained in certificate of title volume 7504 folio 119.
HIS HONOUR: I think that would suit. I think that is sufficient.
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