Nicholls v Registrar General

[2004] NSWSC 393

CITATION:	Nicholls v Registrar General [2004] NSWSC 393
HEARING DATE(S):	5, 6 & 7 May 2004
JUDGMENT DATE:	7 May 2004
JURISDICTION:	Equity
JUDGMENT OF:	Hamilton J
DECISION:	Orders that third defendant withdraw caveat and for issue of new certificate of title.
CATCHWORDS:	CONVEYANCING [148] - Land titles under the Torrens system - Certificates of title and Crown grants generally - Issue and form of certificate - Application for cancellation of certificate and issue of new certificate of title - Order may be made in proceedings in which court makes a determination as to an estate or interest in land - What constitutes.
LEGISLATION CITED:	Bankruptcy Act 1966 (Cth) ss 5, 16, 27, 58, 149, 152, 153, 154, 139ZQ, 139ZR, & 139ZS Real Property Act 1900 ss 36(6A), 41, 74MA, & 138
CASES CITED:	Botterill v Botterill (2000) 10 BPR 18,787 Re Hannon; Ex parte Official Receiver (1945) 13 ABC 218
PARTIES :	Alan Richard Nicholls (P) Registrar General of NSW (D1) Robin Margaret Grant (D2) David Mervyn Cottrell (D3)
FILE NUMBER(S):	SC 2580/04
COUNSEL:	J T Johnson (P) Submitting appearance (D1) In Person (D2) In Person (D3)
SOLICITORS:	Sally Nash & Co (P) K C Hall (D1) In Person (D2 & D3)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HAMILTON J

FRIDAY, 7 MAY 2004

2580/04 ALAN RICHARD NICHOLLS v THE REGISTRAR GENERAL & ORS

JUDGMENT

1 HIS HONOUR: There is a great body of litigation involving the parties who are currently before me. There is no doubt that the third defendant was for a considerable time bankrupt and that the plaintiff was his trustee in bankruptcy. The third defendant was discharged from that bankruptcy by operation of law on 19 April 2004. The second defendant is his sister, Mrs Grant, and she is the registered proprietor of real property (“the property”) in which the third defendant claims to have an interest by way of life estate arising from an agreement oral and/or written between her and her brother. There are two elements in the body of litigation. There were extensive proceedings in the Federal Court of Australia relating to the bankruptcy. The second element related to possession of the property. In proceedings in the Common Law Division of this Court the plaintiff obtained an order for possession pursuant to which the second and third defendants have been removed from the property. The third defendant was at one stage resident upon the property.

2 The plaintiff is now seeking to sell the property. He is not, as is apparent from what I have already said, the registered proprietor of the property. However, whilst the bankruptcy was current, he sought to exercise rights over the property through the mechanism of ss 139ZQ and 139ZR of the Bankruptcy Act 1966 (Cth) (“the BA”). Those sections, so far as they are material, are as follows:

“139ZQ Official Receiver may require payment

(1) If a person has received any money or property as a result of a transaction that is void against the trustee of a bankrupt under Division 3, the Official Receiver ……


may require the person, by written notice given to the person, to pay to the trustee an amount equal to the money or the value of the property received.

……


139ZR Charge over property

(1) If a notice under section 139ZQ is given to a person in respect of any property:


(a) the property is charged with the liability of the person to make payments to the trustee as required by the notice; ……

……


(4) If any property being land is subject to a charge under subsection (1), the Official Receiver may certify by signed writing that the land is subject to a charge under that subsection and may lodge the certificate with the Registrar-General, Registrar of Titles or other proper officer of the State or Territory in which the land is situated.

(5) The officer with whom the certificate is lodged may register the charge as nearly as practicable in the way in which mortgages over land are registered under the law in force in the State or Territory in which the land is situated.

(6) The trustee has power to sell any property over which a charge exists under subsection (1) and, if the property is so sold, then, subject to any charges that have priority over the first-mentioned charge, the proceeds of the sale are, to the extent of the charge, to be applied in or towards the discharge of the liability to make a payment or payments to the trustee of the person to whom the notice was given.”

The trustee served on the second defendant the relevant notice and subsequently requested of the Registrar General and obtained the registration of a charge as set out in s 139ZR. It is pursuant to that charge and to recover moneys secured by it that he is now seeking to sell the property. In fact, he has entered into a contract for the sale of the property and that contract is coming up for settlement.

3 An application was made by the third defendant under s 139ZS of the BA to set aside the notice on which the statutory charge is founded. However, that application was never prosecuted to hearing, despite the large number of applications in relation to the bankruptcy that did come to hearing in the Federal Court. It may be noted at this point that, by reason of s 27 of the BA, unlike the position that once prevailed, this Court has no jurisdiction in matters under the BA. Jurisdiction in matters under the BA is conferred on only two courts, the Federal Court of Australia and the Federal Magistrates’ Court.

4 It is in this context that the present matter comes on for hearing. In it, the plaintiff seeks relief of two sorts. First he seeks under s 138 of the Real Property Act 1900 (“the RPA”) an order that the Registrar General issue a new certificate of title. Secondly, he seeks an order under s 74MA of the RPA an order that the third defendant withdraw the caveat which he has upon the title to protect the life estate which he claims in the property. Because the result of the application for an order for the withdrawal of the caveat may have an effect on the plaintiff’s standing to obtain the order under s 138, for reasons which appear hereafter, I shall determine the claim relating to the caveat first.

5 The facts stated in the caveat as supporting the third defendant’s claim to a life estate in the property are as follows:

“The registered proprietor granted the Caveator an interest in the land as a life tenant pursuant to an oral agreement made between the registered proprietor and the Caveator on or about 28 April 1998 pursuant to which the Caveator was to and did transfer to the registered proprietor his interest in the land in consideration for the registered proprietor’s natural love and affection and the grant to the Caveator of a life tenancy in the land and in consideration of an agreement made between the Caveator and the registered proprietor on 5 October 1997.”

There seems little doubt, as I have already said, that there was some agreement of this sort between the second defendant and the third defendant and it is also undoubted that the second defendant did transfer to the third defendant in 1998 the estate in fee simple in the property by a transfer which expressed the consideration for the transfer to be the registered proprietor’s natural love and affection referred to in the caveat. I should say that ad valorem duty was paid on the transfer. It was not paid on the written document that is the antecedent agreement or evidence of the antecedent agreement. But there is no doubt that the State revenue authorities have had their ad valorem duty on the transaction.

6 Various material has been laid before me and various arguments have been put as to whether that material is sufficient to create an entitlement in the second defendant to a legal life interest in the property or to create for him an equitable life interest in the property. Whether such a life estate or interest does exist, I do not need to determine. The reason for that is that, whether or not there is such a life interest, I have come to the conclusion that the caveat is not maintainable.

7 There are only two possible answers to the question as to whether or not there is or is not such a life interest. The first is, there is not such a life interest. If there is not such a life interest, then, that being the only estate or interest in land asserted by the third defendant, the third defendant has no estate or interest in the land that will support a caveat. The other possible answer to the question is, yes, there is such a life interest. Whilst, as I say, Mr Johnson, of counsel for the plaintiff, has argued before me that there is and I should find that there is no life interest, he has in the alternative submitted that, even if there is such a life interest, that life interest is not any longer vested in the third defendant, but in the plaintiff, having become so vested by reason of the role which the plaintiff played as the third defendant’s trustee in bankruptcy. If this argument be correct, then, even if there is a life interest, it is a life interest vested in the plaintiff and it is not vested in the third defendant. Therefore, although there is an estate or interest in land, that estate or interest is not vested in the plaintiff, so that again the third defendant does not have any estate or interest in land which would support a caveat.

8 I have reached a clear conclusion on Mr Johnson’s argument as to where a life interest, if it exists, is vested. He has drawn my attention to the width of the definition of “property” in s 5 of the BA. He has drawn my attention to s 58 of the BA, which provides that where a debtor becomes a bankrupt the property of the bankrupt vests forthwith in the trustee of the estate of the bankrupt. To be considered with that are the provisions of s 16 of the BA which by subs (1) provides that all the property of the bankrupt is property divisible amongst the creditors of the bankrupt. The section goes on in subs (2) to make exceptions to the property which vests, none of which is material to the present circumstances. As I have already said, it is clear that the third defendant is now discharged from the bankruptcy. Does that revest in him the life estate in the property, if it exists and was formerly his?

9 Mr Johnson draws to my attention the provision concerning the revesting of property from the trustee into the former bankrupt, if the bankruptcy terminates by annulment. It is clear that the discharge of the third defendant was by automatic discharge under s 149 of the BA. Mr Johnson draws my attention to ss 152 and 153 of the BA as to ongoing obligations of the discharged bankrupt and as to the effect of the discharge. Unlike the provisions of s 154, there is no provision in s 153 for the revesting of any property in the bankrupt. That is in accordance with the pattern of the BA, because the property remains vested in the trustee, available for division among the creditors. Furthermore, that the property continues vested in the trustee after discharge, is made quite plain by the provisions of s 152, which I have already mentioned, which require a discharged bankrupt to give assistance reasonably required by the trustee “in the realisation and distribution of such of his or her property as is vested in the trustee.” Although the decision was given under the BA, this conclusion is, in my view, confirmed by the decision of Clyne J in Re Hannon; Ex parte Official Receiver (1945) 13 ABC 218.

10 Considering the events which have happened in the light of this statutory framework, in my view, if there be a life estate, that life estate is vested in the plaintiff and the third defendant has no estate or interest in land which would support a caveat. I therefore, propose to order the third defendant to withdraw his caveat forthwith. If that order is made and not complied with, then the caveat will lapse by virtue of the provisions of the RPA.

11 The third defendant has put to me a number of submissions as to why I should not come to this conclusion. He has said that the plaintiff can do nothing in relation to the property, because he has not become registered as the proprietor of an estate in fee simple in the property, and that by reason, therefore, of s 41 of the RPA, he cannot deal with an estate or interest in the land as if he were the registered proprietor of an estate in fee simple. I am not sure that this is directly relevant to the matters that I am called upon to decide but, in any event, in my view it is not correct.

12 At common law a mortgagee, or chargee, had to hold the estate in fee simple, in order to be able to deal with that estate, which is why security transactions at common law took the form of a conveyance to the security holder, with a right in the original owner to a reconveyance of the title upon discharge of security. A totally different pattern was adopted upon the introduction in Australia of the Torrens Acts. In a situation of mortgage or charge, the registered proprietor of the estate in fee simple always remained the registered owner of that estate. Mortgages were recorded as registered charges and other forms of registered charge could also be recorded on the title. If a registered mortgagee had a power of sale, then that mortgagee, by virtue of the Acts or the instrument, could exercise a power of sale and convey effective title, although not the registered proprietor of an estate in fee simple.

13 I mention this, because it seems clear to me that it is into this pattern, generally similar Torrens legislation being in force in all States and Territories of the Commonwealth, that ss 139ZQ and 139ZR of the BA were designed to fit and, in my view, successfully so. Under those sections a registrable charge having statutory effect is created. It may be registered upon the Torrens title, as it has been in this case, and statutory power of sale is given by the BA. It seems clear to me that the intent does no violence to the scheme of the Torrens Acts, including s 41 of the RPA, that a statutory registered chargee should be able to sell the estate in fee simple in land, albeit not the registered proprietor of that estate. The third defendant further submitted that, because the trustee did not become registered as proprietor of an estate in fee simple during the subsistence of the bankruptcy, he cannot now do anything. That submission also is wrong and for reasons that appear from the provisions of the BA that I have set out above.

14 The third defendant submitted that the trustee's registered charge was subject to the life tenancy claimed by the third defendant. However, again, the pattern of statutory rights set out above renders this proposition, perhaps irrelevant rather than, wrong. It may or may not be that the statutory charge has priority over the life tenancy. That depends upon provisions in the BA. But that does not need to be determined, because the life tenancy, if it exists, for reasons that I have already laid out, is also vested in the plaintiff and the plaintiff may choose the manner in which he deals with the rights under both headings.

15 Submissions have also been put to me by the third defendant relating to the late registration of certain dealings, which is said to have significance under the provisions of s 36(6A) of the RPA. I was not able to understand entirely these submissions, but they do not seem to me to detract from the conclusion to which I have come. I am not able to see at the moment any substantial or clear case that the notices given under s 139ZQ, or the charge under s 139ZR, of the BA, are bad. Any view that I may have about that subject matter is totally irrelevant, because, as I have already said, the power to deal with that situation is vested under s 139ZS, relevantly in the present case, in the Federal Court of Australia. This Court does not have in the present circumstances any power emanating from any source to declare the notices or charge bad or make any adjudication concerning their validity. As I have said, an application apparently was made to the Federal Court under s 139ZS but, despite the lapse of some considerable time, there has been no prosecution of that application to finality.

16 I turn then to the other claim made on behalf of the plaintiff, which is for an order for the issue of a fresh certificate of title. The power to make an order to that effect is conferred in s 138(2) and (3) of the RPA. Those sub-sections are as follows:

“(2) A court may, in proceedings for the possession or production of a certificate of title or in proceedings in which the court makes a determination as to an estate or interest in land, make ancillary orders of the kind set out in subsection (3), if the court is of the opinion that the certificate of title has not been, or is not likely to be, produced by a person for the purposes of the registration of a dealing affecting the land concerned.

(3) A court may order the Registrar-General to do one or more of the following:

(a) cancel or amend a folio of the Register,
(b) cancel, amend or make a recording in a folio of the Register,
(c) create a new folio of the Register,
(d) issue a new certificate of title.”

17 The provisions of s 138(2) which stipulate the circumstances in which the jurisdiction conferred by that section may be enlivened have always seemed a little strange: see my judgment in Botterill v Botterill (2000) 10 BPR 18,787. At the commencement of the hearing before me, it seemed to me that there were not before me proceedings that met any requirement of s 138(2) so as to enliven the jurisdiction. However, I have now made a determination in these proceedings that the third defendant does not have an estate or interest in land which would support the caveat that he has lodged over the property. In those circumstances, it seems to me that the proceedings are now “proceedings ... in which the court makes a determination as to an estate or interest in land”. That being so, I have power to order the Registrar General under subs (3)(d) of s 138 to issue a new certificate of title.

18 The Court is cautious of making such orders because of the undesirability of two certificates of title relating to the same land possibly being in circulation. However, the evidence in this case shows that the second defendant, still being the registered proprietor of an estate in fee simple in the property, would be expected to have custody of the certificate of title, but does not have it in her possession. I entirely accept her word as to that fact. Equally, she believes it may have been in the possession of solicitors instructed by her, but the firm has gone out of existence, the particular solicitor involved has ceased practice and it may be that there was some dispute about the payment of costs, although the second defendant is quite categorical that she paid the solicitors’ proper costs and, again, I have no reason to doubt her word. These matters lead me to the conclusions that the certificate of title is not in her possession, she does not know where it is and it is simply not able to be located. In those circumstances, and bearing in mind the approaching settlement of a contract which the plaintiff has entered into in relation to the property under powers vested in him, I think it appropriate to make an order under s 138(3)(d) for the issue of a new certificate of title. I should add the plaintiff has also applied to me for an order under s 138(3)(a) to cancel folio identifier 361/756447 (edition 4), the lost certificate of title, to diminish the risk I have adverted to of there being more than one certificate of title in circulation and this order should also be made.

…oOo…

19 Costs are sought by the plaintiff against the second and third defendants and on an indemnity basis. The first defendant is the Registrar General who is a submitting defendant and no costs, of course, are sought against the Registrar General. As I have said, there has been a great deal of conflict between the plaintiff and the second and third defendants in various courts. It is apparent from my reasons for judgment that the defendants did not have reasons of substance for opposing the making of the orders sought and, without my going into detail about it, it is at least probable that some of the matters agitated before me have already been agitated in the litigation which has already taken place between the parties.

20 The plaintiff, in general terms, would have a good case for costs and a case for indemnity costs. That, however, is subject to one matter, unfortunate from his point of view. The summons served a little time ago on the third defendant and late on the second defendant contained a prayer that there be an order that each party bear his or her own costs of the proceedings. Appropriate threats had been made before the proceedings were commenced that, if the certificate of title was not produced and the caveat was not removed, then costs would be sought against the second and third defendants. However, nothing can alter the fact that the summons as served contained the prayer to which I have drawn attention. Because of the exigencies of the Duty List and difficulties at times in establishing teleconference links with the defendants, the matter has proceeded over parts of three days. It was only on the second day that the plaintiff’s change of direction as to costs was signalled by the circulation of short minutes of order which made it plain that indemnity costs were being sought against the second and third defendants. At that stage they had engaged in the hearing on the basis of a summons indicating that the order to be sought was that there be no order as to costs. Under those circumstances I am not prepared to order costs against them. The order as to costs will be that there be no order as to the costs of the proceedings.

21 I direct that the costs of all teleconference links be borne by the Court. I make orders in accordance with the short minutes of order initialled by me and placed with the papers.

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Last Modified: 09/03/2004