Patroni v Conlan
[2004] WASC 16
PATRONI -v- CONLAN [2004] WASC 16
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2004] WASC 16 | |
| Case No: | CIV:1556/2003 | 30 SEPTEMBER & 26 NOVEMBER 2003 | |
| Coram: | PULLIN J | 12/02/04 | |
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Summary judgment for the plaintiff | ||
| B | |||
| PDF Version |
| Parties: | PETER ROMOLO PATRONI MARK ANTHONY CONLAN |
Catchwords: | Equity Claim in detinue for delivery up of mortgage document Whether trustee seeking to restore misappropriated trust funds entitled to hold the mortgage document Whether plaintiff a bona fide purchaser for value Whether plaintiff may acquire legal title after notice of breach of trust |
Legislation: | Nil |
Case References: | Lane v Conlan [2004] WASC 15 McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303 Park v Dunn [1916] NZLR 761 Redman v Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84 Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588 Australian Securities and Investments Commission v Rowena Nominees Pty Ltd [2003] WASC 106 Backstop Nominees Pty Ltd v Goscor Pty Ltd [1990] VR 468 Barlow Clowes International Ltd (in liq) v Vaughan [1992] 4 All ER 22 Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 Birch v Ellames (1794) 2 Anst 427 Bishopsgate Investment Management Ltd (in liq) v Homan [1995] Ch 211 Bolwell Fibreglass Pty Ltd v Foley [1984] VR 97 Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch 25 Boscawen v Bajwa [1996] 1 WLR 328 Conlan v Registrar of Titles (2001) 24 WAR 299 Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18 Dean & Westham Holdings Pty Ltd v Lloyd (1991) 3 WAR 235 Dean v Lloyd [1990] WAR 42 Eccles v Hall (1895) 13 NZLR 433 Foskett v McKeown [1998] Ch 265 Foskett v McKeown [2001] 1 AC 102 Frith v Cartland (1865) 2 Hem & M 417 Grugeon v Gerrard (1840) 4 Y & C Ex 119 Heartwood Nominees Pty Ltd v Oakleigh Acquisitions Pty Ltd [2003] WASC 12 In re Diplock [1948] Ch 465 John F Goulding Pty Ltd v Victorian Railways Commissioners (1932) 48 CLR 157 Monarch Petroleum NL v Citco Australia Petroleum Ltd [1986] WAR 310 Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109 Re Global Finance Group Pty Ltd; Ex parte Read (2002) 26 WAR 385 Re Goldcorp Exchange Ltd [1995] 1 AC 74 Re Oakleigh Acquisitions Pty Ltd (in liq) [2003] WASC 75 Ryan v O'Sullivan [1956] VLR 99 Space Investments Ltd v Canadian Imperial Bank Commerce Trust Co (Bahamas) [1986] 1 WLR 1072 Taylor v Blakelock (1886) 32 Ch D 560 Thorndike v Hunt (1859) DE G & J 563; 44 ER 1386 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 Wall v Cockerell (1863) 10 HL Cas 229; 11 ER 1013 Xenos v Wickham (1867) LR 2 HL 296 Young v Murphy [1996] 1 VR 279 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
MARK ANTHONY CONLAN
Defendant
Catchwords:
Equity - Claim in detinue for delivery up of mortgage document - Whether trustee seeking to restore misappropriated trust funds entitled to hold the mortgage document - Whether plaintiff a bona fide purchaser for value - Whether plaintiff may acquire legal title after notice of breach of trust
Legislation:
Nil
Result:
Summary judgment for the plaintiff
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Mr J C Giles
Defendant : Mr M J Hawkins
Solicitors:
Plaintiff : Solomon Brothers
Defendant : Jackson McDonald
Case(s) referred to in judgment(s):
Lane v Conlan [2004] WASC 15
McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303
Park v Dunn [1916] NZLR 761
Redman v Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84
Case(s) also cited:
Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588
Australian Securities and Investments Commission v Rowena Nominees Pty Ltd [2003] WASC 106
Backstop Nominees Pty Ltd v Goscor Pty Ltd [1990] VR 468
Barlow Clowes International Ltd (in liq) v Vaughan [1992] 4 All ER 22
Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334
Birch v Ellames (1794) 2 Anst 427
Bishopsgate Investment Management Ltd (in liq) v Homan [1995] Ch 211
Bolwell Fibreglass Pty Ltd v Foley [1984] VR 97
Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch 25
Boscawen v Bajwa [1996] 1 WLR 328
Conlan v Registrar of Titles (2001) 24 WAR 299
Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18
Dean & Westham Holdings Pty Ltd v Lloyd (1991) 3 WAR 235
Dean v Lloyd [1990] WAR 42
Eccles v Hall (1895) 13 NZLR 433
(Page 3)
Foskett v McKeown [1998] Ch 265
Foskett v McKeown [2001] 1 AC 102
Frith v Cartland (1865) 2 Hem & M 417
Grugeon v Gerrard (1840) 4 Y & C Ex 119
Heartwood Nominees Pty Ltd v Oakleigh Acquisitions Pty Ltd [2003] WASC 12
In re Diplock [1948] Ch 465
John F Goulding Pty Ltd v Victorian Railways Commissioners (1932) 48 CLR 157
Monarch Petroleum NL v Citco Australia Petroleum Ltd [1986] WAR 310
Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109
Re Global Finance Group Pty Ltd; Ex parte Read (2002) 26 WAR 385
Re Goldcorp Exchange Ltd [1995] 1 AC 74
Re Oakleigh Acquisitions Pty Ltd (in liq) [2003] WASC 75
Ryan v O'Sullivan [1956] VLR 99
Space Investments Ltd v Canadian Imperial Bank Commerce Trust Co (Bahamas) [1986] 1 WLR 1072
Taylor v Blakelock (1886) 32 Ch D 560
Thorndike v Hunt (1859) DE G & J 563; 44 ER 1386
Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107
Wall v Cockerell (1863) 10 HL Cas 229; 11 ER 1013
Xenos v Wickham (1867) LR 2 HL 296
Young v Murphy [1996] 1 VR 279
(Page 4)
1 PULLIN J: The plaintiff has applied for summary judgment against the defendant, requiring the defendant to deliver up to the plaintiff an undated mortgage executed by L P Ferris and M S Ferris ("Ferris'") in favour of the plaintiff over land comprised in certificate of title volume 1974 folio 395.
2 The statement of claim, which has been verified by an affidavit from the plaintiff, pleads that:
"1. The defendant is sued in his capacity as Supervisor of Rowena Nominees Pty Ltd (in liq) ('Rowena') further or alternatively as liquidator of Rowena.
2. The plaintiff made a loan to Lawrence Peter Ferris and Mark Stephen Ferris (the 'Loan'), brokered by Rowena which was a licensed finance broker.
3. As security for the Loan, Lawrence Peter Ferris and Mark Stephen Ferris charged to the plaintiff the land being Lot 601 on Diagram 84968 and being the whole of the land comprised in certificate of title volume 1974 folio 395 (the 'Property') by an undated Transfer of Land Act 1893 mortgage (the 'Mortgage').
4. The plaintiff has an immediate entitlement to possession of the Mortgage and duplicate of certificate of title to the Property (collectively 'the Documents').
5. The Documents are in the defendant's possession.
6. Despite demand, the defendant has failed or refused to deliver the Documents to the plaintiff or at the plaintiff's direction."
3 The plaintiff contends that the Ferris' have not paid the sum secured by the mortgage and now wish to exercise remedies which will be available upon registration of the mortgage. To do so, the plaintiff seeks delivery up of the mortgage document which the defendant holds and which the plaintiff claims.
4 The background is that Rowena, acting as a mortgage broker and on behalf of the plaintiff, agreed with the Ferris' that the plaintiff would advance $400,000 to the Ferris'. A letter dated
(Page 5)
- 31 July 1997 from Rowena to the plaintiff records the terms of the agreement. It provided, inter alia, that the security to be given in exchange for the loan was a first mortgage over Lot 601 Wellington Boulevard, Collie.
5 On 14 August 1997, the plaintiff paid $800,000 into Rowena's trust account. Immediately before the $800,000 was paid into the account, it was overdrawn in the sum of $424,795.90. There were further transactions after the payment in of the $800,000, which resulted in a fluctuation in the balance, but the trust account did not go into debit again until 9 September 1997. The lowest balance in the period between 14 August 1997 and 9 September 1997 was $126,603.11 on 26 August 1997.
6 On 20 August 1997, a Pamela Margaret Dougall paid the sum of $70,000 into the trust account in respect of a proposed advance to Tudorwest Management Pty Ltd of $40,000. The intention was that Mrs Dougall would advance that sum in exchange for a mortgage. According to the defendant's investigations, Mrs Dougall never became a registered mortgagee on any mortgage offered by Tudorwest Management Pty Ltd. Rowena's records, however, reveal a "link listing" showing that Mrs Dougall was linked to an advance to Tudorwest Management Pty Ltd in the sum of $102,985. I infer from the defendant's affidavit that the records suggested that $40,000 of that sum was advanced by Mrs Dougall to Tudorwest Management Pty Ltd. According to the defendant's affidavit, the balance of $30,000 was not ever paid to Mrs Dougall. I assume that the defendant mentions this figure on the basis that the "link listing" shows that $40,000 of the $70,000 was paid to Tudorwest Management Pty Ltd and the balance of $30,000 remained in the trust account and was misappropriated when the account was overdrawn on 9 September 1997.
7 On 8 September 1997, Rowena paid a total of $400,000 to the Ferris' and the Ferris' executed the mortgage, which is in a form which appears to be registrable under the Transfer of Land Act 1893 and which was executed as a deed. Covenant 23 in the mortgage provided that the Ferris' would do all things necessary for the purpose of procuring the registration of the mortgage under the provisions of the Transfer of Land Act.
8 After the mortgage was executed by the Ferris', it was retained by Rowena.
(Page 6)
9 In 1999, the defendant was appointed provisional liquidator and then liquidator of Rowena. The defendant was also appointed supervisor.
10 On 8 June 2001, Solomon Brothers, acting for the plaintiff, demanded delivery up of the mortgage, and the defendant has not complied with that demand.
11 The plaintiff has established its cause of action in detinue and seeks specific restitution of the mortgage document. The remedy of specific restitution as opposed to damages is discretionary, but in this case the plaintiff, if it is successful, should be entitled to specific restitution. See the discussion in McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303.
The Liquidator's Position
12 The defendant does not dispute that the plaintiff has made out its common law cause of action in detinue. The defendant, however, seeks to invoke the equitable jurisdiction of the Court and claims that Rowena, on behalf of Mrs Dougall, may be able to trace Mrs Dougall's money into the mortgage.
13 The plaintiff answers this by denying that Rowena could trace Mrs Dougall's money into the mortgage but says that, in any event, he was a bona fide purchaser for value of the mortgage without notice of any breach of trust by Rowena and that as a result he takes title free of any equitable interest Mrs Dougall may have. The defendant does not contend that the plaintiff had notice when the plaintiff and the Ferris' entered into the loan agreement, or when the money was paid over to the Ferris', or when the Ferris' signed the mortgage, that Rowena had been guilty of any breach of trust, but submits that before this action was commenced, the plaintiff learned the facts set out above. The plaintiff did learn of the facts before commencing these proceedings, but after 1997.
14 I will now consider whether the plaintiff gave value for the mortgage. I will also consider whether the notice of Rowena's breach of trust in relation to Mrs Dougall is a reason for denying the plaintiff the relief he claims.
Did the Plaintiff give value?
15 If the plaintiff is a bona fide purchaser for value, he must show that consideration was given for the mortgage. The
(Page 7)
- consideration must be valuable but not nominal. It need not be adequate. See Meagher Gummow and Lehane "Equity Doctrines and Remedies", 4th Ed, 8-250 and Park v Dunn [1916] NZLR 761. Such consideration must move from the purchaser: Redman v Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84.
16 The trust account was never overdrawn between the time the plaintiff paid $800,000 and the time when $400,000 was paid to the Ferris'. The plaintiff therefore always had an interest in the moneys in the trust account between the two times I have mentioned. Thus, money paid out of the account by Rowena was money in which the plaintiff had an interest. The plaintiff therefore gave valuable consideration for the mortgage.
Can the Plaintiff perfect his legal title after notice of breach of trust?
17 At the moment, the plaintiff is an equitable mortgagee of the charged land. If the plaintiff obtains the mortgage document and registers it, he will be perfecting his legal title. The Ferris', who signed the mortgage, were bona fide purchasers of the funds advanced without notice of any breach of trust and who were not trustees for Mrs Dougall and who owed no duty to her.
18 The delivery up of the mortgage document will not involve Rowena in any breach of trust or duty because Rowena is not holding the mortgage document as trustee for Mrs Dougall. A full discussion about the law relating to the acquisition of legal title after notice of a breach of trust appears in my reasons for decision in Lane v Conlan [2004] WASC 15 at [70] to [73], which case was heard immediately before this case. The reasoning in that case applies here. Once the $400,000 was advanced by Rowena to the Ferris' and the plaintiff had given value without notice of any breach of trust, then Rowena held the mortgage document qua agent for the plaintiff, and the defendant, as agent for Rowena, must deliver it up to the plaintiff on demand. See "Bowstead & Reynolds on Agency", 16th Ed, Article 53, 6-097 and Article 116, 9-120.
19 I therefore conclude that the plaintiff has established that he was a bona fide purchaser of the legal right to the mortgage, without notice of any breach of trust by Rowena. He is entitled to obtain the mortgage document from the defendant (who holds it for Rowena, which holds it as agent for the plaintiff).
(Page 8)
20 In my opinion, the plaintiff is entitled to summary judgment.
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