PSAL Pty Ltd v Registrar of Titles [No 2] - [2018] WASC 85

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: PSAL PTY LTD -v- REGISTRAR OF TITLES [No 2] [2018] WASC 85

CORAM: PRITCHARD J

HEARD: 29 NOVEMBER 2017 & 15 MARCH 2018

DELIVERED : 22 MARCH 2018

FILE NO/S: CIV 2333 of 2014

BETWEEN: PSAL PTY LTD
Plaintiff
AND
REGISTRAR OF TITLES
First Defendant
FAYYAZ AHMAD RAJA
Second Defendant
DARUL-IMAN (WA) INC
Third Defendant

Catchwords:

Property - Real property - Torrens System - Equitable interests - Competing equitable interests

Legislation:

Transfer of Land Act 1893 (WA)

Result:

Declaration made

Category: B

Representation:

Counsel:

Plaintiff:     No appearance
First Defendant              :     Ms K McDonald
Second Defendant         :     No appearance
Third Defendant            :     Mr R Harrison

Solicitors:

Plaintiff:     No appearance
First Defendant              :     State Solicitor for Western Australia
Second Defendant         :     No appearance
Third Defendant            :     Tottle Partners

Cases referred to in judgment:

Abigail v Lapin (1934) 51 CLR 58
Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564
Barry v Heider (1914) 19 CLR 197
Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334
Brown v Heffer (1967) 116 CLR 344
Chang v Registrar of Titles (1976) 137 CLR 177
Chief Commissioner of Stamp Duties (NSW) v ISPT Pty Ltd (1998) 45 NSWLR 639
Clark v Raymor (Brisbane) Pty Ltd [1982] Qd R 479
Clark v Raymor (Brisbane) Pty Ltd [No 2] [1982] Qd R 790
Darul-Iman (WA) Inc v Raja [2010] WASC 299
Golden Mile Property Investments Pty Ltd (in liq) v Cudgegong Australia
Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 29
Haque v Haque (No 2) (1965) 114 CLR 98
Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326
IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550
Kern Corporation Ltd v Walter Reid Trading Pty Ltd (1987) 163 CLR 164
KLDE Pty Ltd v Commissioner of Stamp Duties (Qld) (1984) 155 CLR 288
Kuczborski v Queensland [2014] HCA 46; (2014) 254 CLR 51
Latec Investments Pty Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265
Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407
Lysaght v Edwards (1876) 2 Ch D 499
McWilliam v McWilliam Wines Pty Ltd (1964) 114 CLR 656
McWilliam v McWilliams Wines Pty Ltd (1964) 114 CLR 656
Omar v Darul-Iman (WA) Inc [2013] WASC 311
Omar v Darul-Iman (WA) Inc [No 2] [2013] WASC 330
PSAL Pty Ltd v Raja [2016] WASC 295
PSAL Pty Ltd v Registrar of Titles [2017] WASC 235
Raja v Darul-Iman (WA) Inc [No 2] [2011] WASCA 251
Reliance Finance Corp Pty Ltd v Heid [1982] 1 NSWLR 466
Rose v Watson (1864) 10 HL Cas 672; (1864) 11 ER 1187
Shanahan v Fitzgerald [1982] 2 NSWLR 513
Stern v McArthur (1988) 165 CLR 489
Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; (2003) 217 CLR 315
United Travel Agencies v Cain (1990) 20 NSWLR 566
University of New South Wales v Moorhouse [1975] HCA 26; (1975) 133 CLR 1

PRITCHARD J: These reasons deal with the determination of a counterclaim by the third defendant (Darul‑Iman) for relief against the plaintiff (PSAL), arising from a dispute about their competing equitable interests in land identified as Lot 100 on Deposited Plan 40528, contained in Certificate of Title Vol 2574 Folio 794 (Lot 100). (PSAL commenced the action seeking various orders against the first and second defendants, as well as Darul-Iman. However, PSAL's action was struck out on 28 July 2017 when it failed to comply with a springing order requiring it to prosecute its action.[1])
[1] PSAL Pty Ltd v Registrar of Titles [2017] WASC 235.
While PSAL initially defended the counterclaim, it did not participate in the trial of the counterclaim. Regrettably, PSAL's decision not to participate in the trial of the counterclaim left the Court without a contradictor in relation to that claim. (The second defendant (Mr Raja) did not enter an appearance in the action.[2])
[2] Although Mr Raja was declared bankrupt in 2015, Darul‑Iman did not seek any relief as against him in the counterclaim. For that reason, I formed the view that Darul-Iman did not require leave to proceed with the counterclaim.
Initially, the first defendant (Registrar) indicated an intention to abide the decision of the Court. However, in view of some of the legal issues arising from the relief sought by Darul-Iman, the Registrar entered an appearance, filed an affidavit which explained the lodgment of various dealings in relation to Lot 100, and appeared by counsel on the second day of the hearing. Counsel for the Registrar filed very helpful submissions in respect of the legal issues arising from the relief sought by Darul‑Iman, but did not make submissions about the merits of Darul‑Iman's claim as against PSAL.
For the reasons which follow, I am satisfied that Darul‑Iman's equitable interest in Lot 100 has priority over PSAL's equitable interest in Lot 100. I will make a declaration to that effect, and will then give the parties the opportunity to be heard in relation to what other relief (if any) should be granted.
In these reasons for decision, I deal with the following matters:
1.Factual findings relevant to the relief sought on the counterclaim;
2.What equitable interests in Lot 100 do Darul-Iman and PSAL have, and when did they acquire those interests?
3.Principles governing the priority as between the competing equitable interests in Lot 100 claimed by Darul Iman and PSAL;
4.Why Darul-Iman's equitable interest in Lot 100 has priority over PSAL's equitable interest in Lot 100; and
5.The relief which should be granted.

Factual findings relevant to the relief sought on the counterclaim

Some background

This action arises from a dispute between Darul-Iman, Mr Raja and PSAL which has a very long history, and which traverses several sets of related proceedings. Part of the history is referred to in the reasons for decision I gave in Omar v Darul-Iman (WA) Inc,[3] in which I varied an interlocutory injunction which had been granted earlier in those proceedings by K Martin J, and which prevented the Registrar from registering any dealing in relation to Lot 100 (injunction). Another aspect of the history of the dispute between the parties arises from a dispute about the membership and office-bearers of Darul-Iman, which was dealt with in reasons for decision given by Master Sanderson,[4] by the Court of Appeal[5] in an appeal from the Master's decision, and in reasons for decision that I published in later proceedings concerning that membership dispute.[6] Further aspects of the history of the dispute are set out in a judgment that I delivered in another related proceeding, PSAL Pty Ltd v Raja.[7] Those proceedings concerned an adjacent piece of land to Lot 100 (known as Lot 103) and which involved similar, but not identical, issues to those raised by the present action. Finally, other aspects of the history of this action are set out in a judgment I delivered when I made the springing order against PSAL following its failure to prosecute the present action.[8]

This litigation

[3] Omar v Darul-Iman (WA) Inc [2013] WASC 311.

[4] Darul-Iman (WA) Inc v Raja [2010] WASC 299.

[5] Raja v Darul-Iman (WA) Inc [No 2] [2011] WASCA 251.

[6] Omar v Darul-Iman (WA) Inc [No 2] [2013] WASC 330.

[7] PSAL Pty Ltd v Raja [2016] WASC 295.

[8] PSAL Pty Ltd v Registrar of Titles [2017] WASC 235.

In summary, the present dispute has arisen because Mr Raja, who is the registered proprietor of Lot 100, entered into a contract with Darul‑Iman for the sale of Lot 100 (Agreement). Mr Raja gave Darul‑Iman a signed transfer for the transfer of Lot 100. Darul-Iman would like to lodge that transfer with the Registrar and become the registered proprietor of Lot 100, but it cannot, because Mr Raja did not give it the duplicate certificate of title for Lot 100.
Instead, after entering into the Agreement with Darul Iman, and before giving it the signed transfer, Mr Raja obtained a loan from PSAL and granted it a mortgage over Lot 100. He defaulted on that mortgage and subsequently granted a second mortgage to PSAL over Lot 100 (second mortgage). PSAL sought to register the second mortgage and lodged it, together with the certificate of title for Lot 100, with the Registrar. The Registrar has not registered the second mortgage because the injunction was granted, prohibiting that course. The injunction was granted in the course of the litigation concerning the membership and control of Darul‑Iman.
PSAL commenced the present action seeking various orders, including an order compelling the Registrar to register the second mortgage, and an order vacating the injunction, or alternatively, an order restraining the Registrar from registering any transfer of Lot 100 until both mortgages are discharged, an order for possession of Lot 100 pursuant to the terms of the mortgages, and a declaration that its interest in Lot 100, pursuant to the loan agreement and the mortgages, takes priority over any interest in Lot 100 which is claimed by Darul‑Iman. PSAL sought that relief on the basis that its interest in Lot 100 as a mortgagee had priority over any interest that Darul-Iman may have in Lot 100 pursuant to the Agreement.[9]
[9] Statement of Claim [35].
In the counterclaim, Darul-Iman claims that by virtue of the Agreement, it obtained an equitable interest in Lot 100 as the purchaser of that land. It says that that equitable interest now reflects the fact that it has performed its side of the contract for the sale of Lot 100 and is entitled to specific performance of the Agreement. Darul-Iman says that its equitable interest in Lot 100 preceded any equitable interest that PSAL may have in Lot 100 as an equitable mortgagee, and that PSAL took that interest in Lot 100 knowing of Darul-Iman's equitable interest in Lot 100. Darul-Iman says it has done nothing to become disentitled to the priority of its equitable interest.
Darul-Iman originally sought relief comprising an order to compel PSAL to withdraw its mortgage from registration by the Registrar, a declaration that Darul-Iman is entitled to be registered as the proprietor of Lot 100, and such other relief as the Court considers just.
However, immediately before the trial commenced, counsel for Darul‑Iman advised that Darul-Iman instead sought orders to compel the Registrar to reject PSAL's second mortgage from registration, and to compel the Registrar to provide to Darul-Iman certain other dealings which had been lodged for registration on Lot 100.[10]
[10] Those dealings were the withdrawal of the PSAL caveat and the documents referred to in [57].
Having received the Registrar's submissions, counsel for Darul-Iman ultimately submitted that the preferable course would be for the Court to determine the question whether Darul-Iman was entitled to a declaration of the kind sought in its prayer for relief in the counterclaim, or in some similar terms, which resolved the question whether Darul-Iman's equitable interest in Lot 100 takes priority over PSAL's equitable interest, and then to permit the parties to consider what, if any, other relief may be warranted in the light of the Court's reasons.
In the unusual circumstances of this case, I formed the view that that was an appropriate course.

The evidence

As I have noted, PSAL initially defended the counterclaim. However, after Mr Raja was declared bankrupt, it did not seek to prosecute the action, nor did it take any further action in relation to the counterclaim. It ceased to instruct solicitors, who were permitted to withdraw with the result that PSAL became unrepresented in the proceedings. Its action was struck out by the operation of the springing order to which I have already referred. PSAL's sole director did not respond to correspondence from Darul‑Iman's solicitors. Eventually, Darul‑Iman's counsel managed to speak with PSAL's director, who made clear that PSAL would not participate further in the litigation or defend the counterclaim.
In those circumstances, I gave leave to Darul-Iman to rely on affidavit evidence at the trial of the counterclaim. Counsel for Darul‑Iman read the following affidavits:
•Affidavit of Abdul Sulaiman Bin Omar (the President of Darul‑Iman) sworn 15 November 2017;
•Affidavit of Deirdre Ann Solomon sworn 28 November 2017;
•Affidavit of Ross George Stuart Harrison sworn 7 February 2018.
In addition, counsel for Darul-Iman sought, and was granted, leave to refer to an affidavit sworn by Peter Gray Flanders sworn 19 September 2012 in related proceedings (CIV 1081 of 2012). At the time of swearing that affidavit, Mr Flanders deposed that he was a director of PSAL.
The Registrar also read an affidavit of Mark Raymond Crane sworn 8 March 2018. Mr Crane is an Assistant Registrar of Titles.
In considering the facts relevant to Darul-Iman's claim for declaratory relief, I have taken into account the admissions made by PSAL in its defence to the counterclaim.
On the basis of the evidence set out in the affidavits read by the parties, or to which they referred, and having regard to any admissions made by PSAL in its defence to the counterclaim, I make the following findings as to the facts bearing upon Darul-Iman's claim for a declaration that its equitable interest in Lot 100 takes priority over the equitable interest of PSAL in Lot 100.

Factual findings

Mr Omar and his wife, Mrs Raffae, were friends with Mr Raja. In about 2000, they began to discuss the possible joint purchase of a parcel of land located at Lot 20, Smokebush Place in High Wycombe (the Smokebush Place land) with a view to subdividing that land into four lots. Two of those lots were to be retained by Mrs Raffae and Mr Omar, and two were to be retained by Mr Raja.[11]
[11] Omar Affidavit [7] - [8].
As Mr Raja did not have enough money to buy a half share in the Smokebush Place land, Mr Omar and Mrs Raffae provided financial assistance to Mr Raja for the purchase of the land, using a financial interest Mrs Raffae had in a property in Alexander Heights. Mr Omar also paid the $1000 deposit for the purchase of the Smokebush Place land.[12]
[12] Omar Affidavit [8].
On 19 October 2002, Darul-Iman and Mr Raja entered into the Agreement by which Darul-Iman would purchase, from Mr Raja, one of the lots following the completion of the subdivision of the Smokebush Place land.[13] Darul-Iman wanted to use the land to build an Islamic centre.[14] That lot was what would become Lot 100, following the subdivision. Under the Agreement, Darul-Iman was to pay a purchase price of $200,000. The Agreement contained a number of conditions, including that Darul-Iman was to pay a deposit to Mr Raja's settlement agent; the balance of the purchase price was to be paid on settlement; settlement was to take place 14 days after the issue of a certificate of title for Lot 100; and Darul-Iman was permitted to immediately commence construction on Lot 100.
[13] Omar Affidavit [9] - [11], and Annexure ASBO1.
[14] Omar Affidavit [6].
After entering into the Agreement, Darul-Iman commenced construction work for the Islamic centre on Lot 100. The footings were prepared, and ground works and site preparation were undertaken, at a considerable cost.[15]
[15] Omar Affidavit [10].
On 21 October 2002, Darul-Iman paid a deposit of $20,000 to Mr Raja's settlement agent for the purchase of Lot 100.[16]
[16] Omar Affidavit [12].
By early 2004, the subdivision of the Smokebush Place land had still not been completed. On about 25 February 2004, Darul-Iman and Mr Raja reached an agreement that Darul-Iman would pay Mr Raja $18,000 as a contribution to the cost of subdividing the Smokebush Place land, on the condition that Mr Raja would complete the subdivision expeditiously and settle the purchase of Lot 100 upon the issue of a certificate of title for Lot 100.[17] In May 2004, Darul-Iman contributed $18,000 to cover the cost of utilities and service providers to assist with the subdivision.[18]
[17] Omar Affidavit [13].
[18] Omar Affidavit [14].
On 19 August 2004, a certificate of title for Lot 100 was issued.[19] Settlement of the sale of Lot 100 was due to take place on 2 November 2004.[20]
[19] Crane Affidavit [7].
[20] Omar Affidavit [19].
On 10 October 2004, Darul-Iman purportedly sent a letter to Mr Raja informing him that it did not have sufficient funds to settle the purchase of Lot 100 (purported repudiation letter). The purported repudiation letter was signed by Aziz Khan, who purported to be the Executive Officer of Darul-Iman, and Imtiaz Ahmed, who purported to be the President of Darul-Iman.[21] Mr Omar deposed that Mr Khan had never been a member of Darul-Iman (as I found in Omar v Darul-Iman (WA) Inc [No 2][22]). Mr Ahmed was Mr Raja's brother, and, according to Mr Omar, was acting at his direction. Mr Omar deposed that Mr Ahmed had never been the president of Darul-Iman.[23] Mr Omar deposed that the purported repudiation letter indicated that Darul‑Iman's address was a post office box in the control of Mr Raja.
[21] Flanders Affidavit, Annexure PGF-1.
[22] Omar v Darul-Iman (WA) Inc [No 2] [2013] WASC 330 [99].
[23] Omar Affidavit [17].
On 11 October 2004, Mr Raja replied to the purported repudiation letter, accepted that Darul-Iman did not have sufficient funds to complete the transfer, and advised that he regarded the Agreement as at an end.[24]
[24] Omar Affidavit [15]; Flanders Affidavit, Annexure PGF2.
By 2 November 2004, Darul-Iman had paid stamp duty on the Agreement.[25]
[25] Omar Affidavit [19].
Mr Raja refused to settle the sale of Lot 100 on 2 November 2004.[26]
[26] Omar Affidavit [19].
On 2 March 2005, Darul-Iman commenced an action in this Court (CIV 1241 of 2005) seeking, amongst other things, orders for specific performance of the Agreement and the transfer of Lot 100 to Darul‑Iman.[27] Mr Raja resisted that action. He made an application to strike out the action, or to stay it, on the basis that the persons who had brought the action were not the office-bearers of Darul-Iman, or authorised to instruct solicitors to represent it in the litigation. Determination of that application took several years. Master Sanderson dismissed the application,[28] but found that Mr Omar and those associated with him did not have authority to act on behalf of Darul-Iman to retain lawyers to bring the action. That decision was the subject of an appeal, which was upheld,[29] but the action was then stayed, pending the determination of the members and office-bearers of Darul-Iman. I determined the membership of Darul-Iman in separate proceedings in 2013.[30]
[27] Omar Affidavit [20].
[28] Darul-Iman (WA) Inc v Raja [2010] WASC 299.
[29] Raja v Darul-Iman (WA) Inc [No 2] [2011] WASCA 251.
[30] Omar v Darul-Iman (WA) Inc [No 2] [2013] WASC 330.
On 18 October 2006, Darul-Iman lodged a caveat (number J055820) on the title of Lot 100, to protect its interest as the purchaser of Lot 100 (first caveat).[31]
[31] Omar Affidavit [27]; Crane Affidavit [10], Annexure MC3.
On 21 January 2011, PSAL received an email from a mortgage broker with regard to a proposed loan to Mr Raja. The email mentioned that Lot 100 was not encumbered by any debt, but was subject to a caveat from a 'previous court case which is expected to be lifted in the next few months'.[32]
[32] Flanders Affidavit [10], Annexure PGF-4.
On 27 January 2011, PSAL received a further email from the mortgage broker, attaching more documentation in relation to the proposed loan to Mr Raja, including a copy of the Agreement, and copies of the purported repudiation letter and Mr Raja's letter in response.[33]
[33] Flanders Affidavit [11], Annexure PGF-5.
On 28 January 2011, PSAL received an email from another mortgage broker, who had been the source of Mr Raja's referral to PSAL, which attached Mr Raja's loan application.[34] That email noted that:
Lot 100 … [is] covered by a caveat from a legal dispute. The main case has been heard, and judgement awarded to [Mr Raja] … however the wording of the judgement now requires a hearing to have the application set aside, before the caveats can be lifted. This is currently being prepared by the lawyers. …
…
… While the end of the current court case with its caveats … may appear messy on the surface, reading the judgement it would appear only a matter of time before the caveats are completely lifted, leaving Lot 100 freehold.
[34] Flanders Affidavit [8], [12], Annexures PGF-6 and PGF-7.

The email also attached a copy of the judgment of Master Sanderson, in relation to the action for specific performance.[35]
[35] Flanders Affidavit, Annexure PGF-6.
On 18 February 2011, Mr Raja entered into a loan agreement with PSAL for $592,526. Mr Raja executed a mortgage in favour of PSAL over four properties, including Lot 100 (first mortgage).[36]
[36] Omar Affidavit [23]; Flanders Affidavit [14] - [15], Annexures PGF-8 and PGF-9.
On 24 February 2011, PSAL advanced the loan to Mr Raja. On the same day, it lodged a caveat (number L561930) over Lot 100 to protect its interest in Lot 100 as an equitable mortgagee (PSAL caveat).[37]
[37] Omar Affidavit [23]; Crane Affidavit [13], Annexure MC6.
On 5 April 2011, an application was made to the Registrar to change the address given for Darul-Iman on the first caveat, to an address within the control of Mr Raja. That application was made by Mr Imtiaz Ahmed, who signed the application as the President of Darul-Iman.[38] Mr Omar deposed that Mr Ahmed had no authority from Darul-Iman to do so and that Darul-Iman was not aware of this application.[39] (At the time of the application, the question of the membership and office-bearers of Darul‑Iman was still in dispute.)
[38] Crane Affidavit [14], Annexure MC7.
[39] Omar Affidavit [28].
On 9 May 2011, Mr Raja applied to the Registrar pursuant to s 138B of the Transfer of Land Act 1893 (WA) (TL Act) for a notice to be sent to Darul‑Iman requiring it to extend the caveat by order of this Court, failing which it would lapse (first caveat notice).[40] Mr Omar says Darul-Iman did not receive the first caveat notice (because it went to the address for Darul‑Iman which was within the control of Mr Raja) and accordingly, Darul‑Iman took no action to secure an order of this Court to extend the first caveat. Consequently, the first caveat lapsed.
[40] Omar Affidavit [28]; Crane Affidavit [15] - [16], Annexure MC8.
By 9 June 2011, the solicitors who were then acting for Mr Raja became aware that he had arranged for the change of address for Darul‑Iman in relation to the first caveat. They took steps to advise Darul‑Iman's solicitors as to what had occurred.[41]
[41] Omar Affidavit [30].
On 10 June 2011, a new caveat (number L650231) was lodged on the title to Lot 100, to protect Darul-Iman's interest in Lot 100 as the purchaser of that land (second caveat).[42] The address on the caveat to which notices for Darul-Iman were to be sent was Mr Omar's home address.[43]
[42] Omar Affidavit [30]; Crane Affidavit [17], Annexure MC9.
[43] Omar Affidavit [34].
On 24 August 2011, Mr Raja defaulted on his repayment of the loan from PSAL.[44]
[44] Flanders Affidavit [20].
On 26 August 2011, PSAL lodged the first mortgage for registration on the title of Lot 100. That mortgage was not able to be registered because the second caveat (and the PSAL caveat) prohibited the registration of any dealing on the title of Lot 100.[45] PSAL subsequently withdraw its mortgage from registration.[46]
[45] Crane Affidavit [20], Annexures MC11 and MC12.
[46] Crane Affidavit [21].
On 26 August 2011, Mr Raja executed a further mortgage over Lot 100 in favour of PSAL (second mortgage).[47]
[47] Flanders Affidavit [22].
On 18 October 2011, an application to withdraw the second caveat was purportedly made on behalf of Darul-Iman. That application was signed by Mr Imtiaz Ahmed (Mr Raja's brother), who again purported to be the President of Darul-Iman.[48] At that stage, the litigation to determine the question of the membership of Darul-Iman was still on foot. By then, however, Landgate had become aware of that litigation and the Registrar therefore issued a requisition notice in relation to the application in order to clarify the question of authority to act on behalf of Darul-Iman.[49] (That requisition notice was sent to the address given for Darul-Iman on the application, which was the address earlier used by Mr Raja.) The application to withdraw the second caveat was subsequently rejected.[50]
[48] Crane Affidavit, Annexure MC13.
[49] Crane Affidavit [23], Annexure MC13.
[50] Crane Affidavit [27].
On 19 December 2011, however, Mr Raja applied to the Registrar to withdraw the second caveat over Lot 100 pursuant to s 138B of the TL Act.[51]
[51] Crane Affidavit [24], Annexure MC15.
On 3 January 2012, the Registrar sent a notice pursuant to s 138B of the TL Act to Darul-Iman at the address on the second caveat (namely, Mr Omar's home address).[52] However, Mr Omar was in Malaysia at the time[53] and he did not become aware of the notice within the 21 day period. Mr Omar deposed that Mr Raja 'would have been aware that [he] was travelling to Malaysia' during that period.[54]
[52] Crane Affidavit [26], Annexure MC17.
[53] Omar Affidavit [34].
[54] Omar Affidavit [34].
On 25 January 2012, the second caveat lapsed in the absence of an order of this Court extending its operation.[55]
[55] Omar Affidavit [35], Crane Affidavit [28].
On 31 January 2012, PSAL's solicitors conducted a title search of Lot 100, which showed that the second caveat was no longer registered.[56]
[56] Flanders Affidavit [25], Annexure PGF-15.
On 31 January 2012, PSAL lodged an application to withdraw the PSAL caveat, and to register the second mortgage (no L846052) over Lot 100, together with the duplicate certificate of title for Lot 100.[57]
[57] Crane Affidavit [29].
On 16 February 2012, Mr Omar was advised by his solicitors that the second caveat had lapsed and that PSAL had lodged the second mortgage for registration.[58]
[58] Omar Affidavit [35].
On 17 February 2012, and before the PSAL caveat was withdrawn and the second mortgage registered, Mr Omar applied for an interlocutory injunction to prevent the registration of the second mortgage. Justice Kenneth Martin granted the injunction.[59] On 22 August 2013, I discharged the injunction and substituted a further injunction restraining the Registrar from registering any dealing on Lot 100. Since the injunction was granted, the applications to withdraw the PSAL caveat and register the second mortgage have been retained by the Registrar for registration, pending the discharge of the injunction.[60]
[59] Crane Affidavit [30].
[60] Crane Affidavit [32].
In his affidavit, Mr Flanders deposed that other than the documents he had been sent (to which I have referred above) and an affidavit of Darul‑Iman's solicitor, Mr Harrison, dated 17 February 2012 (which was filed in support of the injunction application, and which was served on PSAL after the injunction was granted), he did not have any other source of information or belief as to how the second caveat came to be withdrawn.[61]
[61] Flanders Affidavit [26].
On 27 August 2013, Darul-Iman and Mr Raja settled Darul‑Iman's action for specific performance of the Agreement (CIV 1241 of 2005).[62] The terms of the Settlement Deed provided that Mr Raja agreed to do all things necessary to transfer Lot 100 to Darul-Iman.[63] The parties also agreed that the $200,000 purchase price payable by Darul-Iman for Lot 100 would be set off against the legal costs incurred by Darul-Iman and Mr Omar.[64] Mr Raja provided Darul‑Iman with an executed transfer for Lot 100, but did not provide the duplicate certificate of title.[65] The duplicate certificate of title is with the Registrar (in a Registrar's Packet, together with all of the dealings awaiting registration on the title for Lot 100).
[62] Omar Affidavit [22]. The lengthy delay was attributable to the fact that related proceedings - to resolve the dispute about membership of Darul-Iman - had to be resolved before Darul-Iman was in a position to proceed to trial.
[63] Harrison Affidavit [14], Annexure RGSH1.
[64] Harrison Affidavit [15].
[65] Omar Affidavit [44].
Two other instruments are awaiting registration on the certificate of title for Lot 100. On 20 August 2013, the Commissioner for Taxation lodged a memorial to secure unpaid land tax, and on 23 December 2015, the Official Trustee in Bankruptcy lodged a caveat over Lot 100.[66]

What equitable interests in Lot 100 do Darul-Iman and PSAL have, and when did they acquire those interests?

It is apparent from the outline of facts above that both Darul-Iman and PSAL have an equitable interest in Lot 100. It is appropriate to commence by identifying the nature of those interests, and when they arose.

Darul-Iman's equitable interest in Lot 100

[66] Crane Affidavit [33], [36].

As I explained in PSAL Pty Ltd v Raja,[67] there has been a debate in the authorities as to whether, upon entry into a contract for the sale of land, a vendor becomes a trustee of the land for the purchaser, pursuant to a constructive trust, or whether the availability of specific performance is an essential prerequisite to the existence of such a constructive trust. As I explained in PSAL Pty Ltd v Raja, the weight of contemporary authority[68] supports the conclusion that the relief that equity will afford to a purchaser at the point when the parties enter into a contract for the sale of land will be different from the relief available at the point at which all conditions precedent have been established and all of that party's obligations have been performed. Once a purchaser has satisfied all of his or her obligations under a contract for the sale of land, including payment of the purchase price, the purchaser's position in equity amounts to that of a beneficial owner of the land, because the only step remaining to perform the contract will be the vendor's transfer of the title. That has been the position of Darul-Iman since 27 August 2013, when, by virtue of the Settlement Deed, Mr Raja agreed that consideration to the full value of the purchase price had been given, and provided Darul-Iman with a signed transfer.
[67] PSAL Pty Ltd v Raja [2016] WASC 295 [65].
[68] See Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; (2003) 217 CLR 315 [53] (Gleeson CJ, McHugh, Gummow, Hayne & Heydon JJ); Golden Mile Property Investments Pty Ltd (in liq) v Cudgegong AustraliaPty Ltd [2015] NSWCA 100; (2015) 105 ACSR 605 [98] - [100] (Emmett JA, Macfarlan & Gleeson JJA agreeing).
Of more significance, for present purposes, is Darul‑Iman's interest prior to that point. The Agreement was entered into in October 2002. It is unnecessary to form any view about the nature of the equitable interest in Lot 100 which Darul‑Iman may have obtained from that point,[69] because from at least 2 November 2004, the certificate of title for Lot 100 had been issued, settlement was due under the Agreement, Darul-Iman had paid the deposit and performed its obligations under the Agreement, other than for the payment of the purchase price, and had advised Mr Raja that it was in a position to settle. From that point onwards, Darul-Iman was entitled to specific performance of the Agreement. There is no doubt that once the Agreement became specifically enforceable, Mr Raja became a bare trustee who held Lot 100 on a constructive trust for the benefit of Darul-Iman.[70]
[69] For a discussion as to the nature of an equitable interest of a purchaser before a contract of sale becomes specifically enforceable, see, eg, Rose v Watson (1864) 10 HL Cas 672; (1864) 11 ER 1187, 1190 (Lord Westbury), 1192 (Lord Cranworth); Lysaght v Edwards (1876) 2 Ch D 499, 506 (Sir George Jessel MR); McWilliam v McWilliams Wines Pty Ltd (1964) 114 CLR 656, 660 - 661 (McTiernan & Taylor JJ), 662 (Menzies J); Haque v Haque (No 2) (1965) 114 CLR 98, 124 (Kitto J); Brown v Heffer (1967) 116 CLR 344, 349 (Barwick CJ, McTiernan, Kitto & Owen JJ), 351 - 352 (Windeyer J); Chang v Registrar of Titles (1976) 137 CLR 177, 184 (Mason J, and see the cases referred to therein), 189 - 190 (Jacobs J); Legione v Hateley (1983) 152 CLR 406, 423 (Gibbs CJ & Murphy J); KLDE Pty Ltd v Commissioner of Stamp Duties (Qld) (1984) 155 CLR 288, 297 (Gibbs CJ, Mason, Wilson & Dawson JJ), 300 - 301 (Brennan J); Kern Corporation Ltd v Walter Reid Trading Pty Ltd (1987) 163 CLR 164, 191 - 192 (Deane J); Stern v McArthur (1988) 165 CLR 489, 511 (Brennan J), 521 - 524 (Deane & Dawson JJ); Chief Commissioner of Stamp Duties (NSW) v ISPT Pty Ltd (1998) 45 NSWLR 639, 654 - 655 (Meagher JA); Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; (2003) 217 CLR 315 [52] - [53] (Gleeson CJ, McHugh, Gummow, Hayne & Heydon JJ); Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 29 [169] - [175] (McLure P, Newnes JA & Le Miere J agreeing); Golden Mile Property Investments Pty Ltd (in liq) v Cudgegong Australia Pty Ltd [2015] NSWCA 100; (2015) 105 ACSR 605 [98] - [100] (Emmett JA, Macfarlan & Gleeson JJA agreeing).
[70] McWilliam v McWilliam Wines Pty Ltd (1964) 114 CLR 656, 660 (McTiernan & Taylor JJ); Stern v McArthur (1988) 165 CLR 489, 522 ‑ 523 (Deane & Dawson JJ), 537 ‑ 538 (Gaudron J); Golden Mile Property Investments Pty Ltd (in liq) v Cudgegong Australia Pty Ltd [2015] NSWCA 100; (2015) 105 ACSR 605 [102] (Emmett JA, McFarlan & Gleeson JJA agreeing).
Given the circumstances, and in particular the fact that as PSAL did not participate in the trial, careful scrutiny of the uncontradicted claims of Darul‑Iman is warranted. Accordingly, I should deal with two factual matters which might be thought capable of casting some doubt over the conclusion I have reached.
The first is the consequence of the purported repudiation letter sent by Darul‑Iman (under the hand of Mr Raja's brother, Mr Ahmed) on 10 October 2004, which Mr Raja purportedly accepted as a repudiation of the Agreement the following day. It is unnecessary to determine what the effect of that correspondence was, because Mr Raja ultimately did not rely on Darul‑Iman's purported repudiation of the Agreement, and instead consented to specific performance of the Agreement.
The second issue concerns the dispute about the membership of Darul‑Iman, and the issue of who had authority to act on behalf of Darul‑Iman. To the extent that that was raised as an issue by Mr Raja, in response to the action commenced by Darul-Iman, it was not raised as an issue going to the enforceability of the Agreement per se. Rather, Mr Raja sought to argue that those purporting to act on behalf of Darul‑Iman in the action for specific enforcement did not have authority to do so. In settling the action, on the basis that the Agreement would be specifically performed, Mr Raja clearly did not dispute Darul-Iman's capacity to enter into the Agreement in the first place, or the enforceability of the Agreement on that basis.
In my view, from 2 November 2004, Darul-Iman had an equitable interest in Lot 100 in the nature of an interest as the beneficiary of a constructive trust, under which Mr Raja held Lot 100 as a trustee for the benefit of Darul-Iman as the purchaser of that land.

PSAL's interest in Lot 100

From 18 February 2011, when Mr Raja granted a mortgage to PSAL in respect of Lot 100, PSAL acquired the right to possession of Lot 100 in the event of a default by Mr Raja, and thus an equitable interest in Lot 100 as an equitable mortgagee.[71]
[71] United Travel Agencies v Cain (1990) 20 NSWLR 566, 569 (Young J); Barry v Heider (1914) 19 CLR 197, 208 (Griffith CJ), 216 (Isaacs J).
I note that there may be a question as to whether Mr Raja was entitled to grant a mortgage over Lot 100 at that point, given that by then, the Agreement was specifically enforceable. (The question would be whether Mr Raja, as a trustee of Lot 100 for the benefit of Darul-Iman, was entitled to grant a mortgage over that land, unless the mortgage was expressed to be subject to Darul-Iman's equitable interest.[72] Nothing in the terms of the mortgage suggests that it was subject to Darul-Iman's interest, although there can be no doubt that PSAL was aware of Darul‑Iman's claim to an interest in Lot 100 as the purchaser, as PSAL had been advised of the first caveat over the property on 21 January 2011, prior to granting the loan to Mr Raja, and obtaining the mortgage.) It is unnecessary to decide that question. For present purposes, I have simply proceeded on the assumption that PSAL has an equitable interest in Lot 100 as an equitable mortgagee.
[72] Shanahan v Fitzgerald [1982] 2 NSWLR 513, 515 (McLelland J).
The first mortgage was not registered, and by virtue of the injunction, the second mortgage was not registered either.
Accordingly, in this case, there exists a competition between the equitable interests in Lot 100 which are held by Darul-Iman and PSAL.

Principles governing the priority as between the competing equitable interests in Lot 100 claimed by Darul Iman and PSAL

PSAL's withdrawal of its own caveat, and the second mortgage, were lodged for registration on 31 January 2012. Had the second mortgage been registered, it would have extinguished Darul‑Iman's prior equitable interest in Lot 100 because the mortgage is inconsistent with that interest,[73] in that in the event of Mr Raja's default on the loan from PSAL, PSAL would be entitled to exercise its right to enter into possession and to sell Lot 100.

Is the lodgment of PSAL's mortgage for registration of any significance in determining priorities here?

[73] Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407, 601-2 (Mason CJ, Dawson & McHugh JJ).

In this case, PSAL's mortgage was not registered, but merely lodged for registration. That circumstance gave rise to the question whether s 53 of the TL Act has any bearing on the resolution of the competing interests of Darul-Iman and PSAL in Lot 100. Under that section, the Registrar must register an instrument presented for registration in the order, and from the time, of its presentation.[74] In the present case, the Registrar was restrained by the injunction from proceeding to register the second mortgage. But for the injunction, PSAL would be, prima facie, entitled to registration of the second mortgage.
[74] Transfer of Land Act 1893 (WA) s 53(1).
The question whether the lodgment of an instrument for registration has any bearing on the priority between the unregistered interest which underlies it, and any other equitable interest, was considered by the High Court in IAC (Finance) Pty Ltd v Courtenay.[75] In that case, the solicitor for the purchasers of land (the Courtenays) lodged a transfer of land and a mortgage for registration. However, before registration occurred, the solicitor uplifted the instruments. He had no authority to do so. After the instruments were uplifted, a new contract for the sale of the same land to another purchaser and mortgages to different mortgagees (including IAC) were lodged for registration, but not registered.
[75] IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550.
Under s 36 of the New South Wales legislation (which was in similar terms to s 53 of the TL Act), every instrument presented for registration was required to be registered in the order of time in which it was produced for registration. One of the arguments advanced by IAC was that the uplifting of the first transfer and mortgage meant that the parties to those instruments lost their statutory right to priority. The members of the Court all concluded that because the Courtenays' solicitor had no authority from them to uplift the instruments, the Courtenays could not be regarded as having lost their statutory right to priority of registration.
Another argument advanced by IAC was that the Courtenays were disentitled from insisting on their statutory right to priority of registration. That raised for consideration the characterisation of the competing priorities. The members of the Court each approached that question slightly differently.
Justice Kitto held that the case was 'one of competing equitable interests, with the addition that the Courtenays have not only the prior equity but also a statutory right to registration'.[76] His Honour held that neither of the Courtenays' interests could be postponed to the interests of the later purchaser and mortgagees unless the Courtenays had, by their acts or omissions, made it inequitable that they should be allowed to insist upon the priority which order in time prima facie gave them.[77] Justice Kitto held that by lodging the transfer for registration, the Courtenays had given notice to the world of their claim to an interest as purchasers of the land, and put the subsequent purchasers and mortgagees on inquiry as to whether that interest had ceased.[78]
[76] IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550, 575 (Kitto J).
[77] IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550, 575 (Kitto J).
[78] IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550, 579 (Kitto J).

Justice Taylor held that in resolving the competing (unregistered) interests, it was 'immaterial which was first lodged for registration', because otherwise 'little would be achieved by the lodging of a caveat to protect an unregistered interest'.[79] That was because the purpose of a caveat was to maintain the status quo for a limited time after a competing interest was lodged for registration, so that the caveator may take appropriate proceedings for the protection of their interest.[80] Like Kitto J, his Honour also held that the Courtenays' failure to lodge a caveat was of no significance here, because the later equitable interests were acquired with full knowledge of the existence of the earlier interest.[81]
[79] IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550, 588 (Taylor J).
[80] IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550, 589 (Taylor J).
[81] IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550, 590 (Taylor J).
Chief Justice Dixon also concluded that there was no conduct on the part of the Courtenays which enabled their solicitor to defraud the subsequent purchaser and mortgagees. His Honour then observed that 'I am not disposed to think that under the Torrens system a priority giving a right to registration under the statute can be lost on equitable grounds of such a character'.[82] The meaning of that observation is far from clear, and has been described as 'enigmatic'.[83]
[82] IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550, 568 (Dixon CJ).
[83] Reliance Finance Corp Pty Ltd v Heid [1982] 1 NSWLR 466, 481 (Hope JA).
In any event, the judgment of Taylor J has, more recently, been relied upon as authority for the proposition that prior to registration, it is equitable principles which govern priority, rather than any statutory right to registration.[84] Accordingly, in this case, the fact that PSAL has lodged the second mortgage for registration does not alter the position that the competing interests for determination in this case are competing equitable interests. Section 53 of the TL Act thus has no application here.

Priority as between competing equitable interests

[84] Clark v Raymor (Brisbane) Pty Ltd [1982] Qd R 479, 481-2 (Connolly J); appealed in Clark v Raymor (Brisbane) Pty Ltd [No 2] [1982] Qd R 790 (without casting doubt on this point of principle); Williams v Marac Australia Ltd (1985) 5 NSWLR 529, 534 (Hodgson J).

The general principle is that if the merits of competing equitable claims are equal, priority in the time of creation is considered to give the better equity.[85] If the merits are not equal, the priority of the interest created first may be displaced.[86]
[85] Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326, 333 (Gibbs CJ), 348 (Wilson J agreeing), 339 (Mason & Deane JJ), 345 (Murphy J).
[86] Latec Investments Pty Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265.
One of the ways in which the holder of an interest acquired first in time may lose priority is if there is some conduct on that holder's part which would merit postponement of that interest.[87] The question will be whether the party with the prior equity has, by an act or omission, conduced or contributed to a belief on the part of the holder of the later equity, at the time when it was acquired, that the prior equity was not in existence.[88]
[87] Latec Investments Pty Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265, 276 (Kitto J); Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326, 333 (Gibbs CJ), 348 (Wilson J, agreeing), 339 (Mason & Deane JJ), 345 (Murphy J).
[88] IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550, 575 - 576 (Kitto J); Abigail v Lapin (1934) 51 CLR 58, 63.
I turn to consider whether, by its conduct, Darul-Iman has become disentitled to the priority of its earlier acquisition of an equitable interest in Lot 100.

Why Darul-Iman's equitable interest in Lot 100 has priority over PSAL's equitable interest in Lot 100

In my view, nothing in the facts of this case suggests that Darul‑Iman's conduct could be characterised as an act or omission which conduced or contributed to a belief on the part of PSAL, at the time when it acquired its equitable interest in Lot 100, that Darul-Iman's prior equity was no longer in existence, so as to warrant the postponement of its interest in Lot 100 to that of PSAL.
In this case, Darul-Iman took steps to protect its interest by lodging the first caveat over Lot 100. Through no fault on the part of Darul-Iman, that caveat was removed. However, upon being notified that that had occurred, Darul-Iman took immediate steps to lodge the second caveat. In all of the circumstances, having regard to Mr Raja's prior conduct, it may have been imprudent for Darul-Iman to use Mr Omar's home address as the address provided in the caveat for notices to be sent to the caveator, because it left open the possibility that if Mr Omar was away for an extended period, as occurred in this case, Darul-Iman might not receive a notification from the Registrar under s 138B of the TL Act in time to take action to prevent the second caveat from lapsing.
Be that as it may, Darul-Iman's conduct cannot be said to have contributed to any belief on the part of PSAL that Darul-Iman's prior interest no longer existed. That is because, at least as far as PSAL was concerned, it had already been put on notice of Darul-Iman's claim to an equitable interest in Lot 100. The nature of that equitable interest was not of the kind which might simply expire, nor was likely to be withdrawn or abandoned by Darul-Iman, given that, as PSAL was aware, Darul-Iman had brought an action against Mr Raja for specific performance. In those circumstances, a prudent mortgagee would be put 'upon inquiry'[89] as to whether the interest had ceased, and would be expected to make further enquiries of its mortgagor as to the circumstances in which the purchaser's caveat had been removed. It is apparent that PSAL did not make any such enquiries. Mr Flanders' evidence was that apart from the information set out above, he had no source of information or belief as to how the second caveat had come to be removed from the title of Lot 100. In all of the circumstances, I do not think it can be said that Darul-Iman's conduct ‑ in failing to ensure that it was in a position to take action to prevent the caveat lapsing ‑ was such as to warrant the postponement of its interest to PSAL's interest.
[89] IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550, 579 (Kitto J).
In reaching that conclusion, I should say that I have not placed any reliance on Mr Omar's evidence that Mr Raja 'would have known' that he was overseas at the time that Mr Raja applied to the Registrar to issue the caveat notice. No evidentiary basis was given for that assertion. Nor have I drawn any adverse inference from the timing of PSAL's lodgment of the second mortgage for registration, which occurred very shortly after the second caveat lapsed. That timing is equally consistent with PSAL's solicitors regularly monitoring the title for Lot 100 in order to be in a position to lodge the second mortgage for registration if at any time the second caveat was removed.
Accordingly, I am satisfied that Darul-Iman's equitable interest in Lot 100 has priority over PSAL's equitable interest in Lot 100.

The relief which should be granted

Counsel for Darul-Iman sought a declaration that Darul-Iman is entitled to be registered by the Registrar as the proprietor of Lot 100. Leaving to one side, for the moment, the fact that the injunction remains in place to prevent the registration of any dealings with Lot 100, a declaration in the terms sought cannot be granted because it addresses a hypothetical question,[90] for at least two reasons.
[90] Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564, 582 (Mason CJ, Dawson, Toohey & Gaudron JJ); University of New South Wales v Moorhouse [1975] HCA 26; (1975) 133 CLR 1, 10 (Gibbs J); Kuczborski v Queensland [2014] HCA 46; (2014) 254 CLR 51 [6] (French CJ); Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334 [48].
The first, and most significant, of those reasons is that Darul-Iman has not lodged the transfer for registration. It cannot yet do so, because it does not have the duplicate certificate of title for Lot 100. That duplicate certificate of title has been lodged by PSAL with the second mortgage, for the registration of that mortgage. (The submissions made by counsel for the Registrar were to the effect that under the TL Act, the Registrar has no power to provide the duplicate certificate of title to Darul-Iman in these circumstances.) Secondly, the registration of the transfer to Darul-Iman is presently prohibited by PSAL's caveat.
Counsel for Darul-Iman indicated that, in the alternative, a declaration in terms that made clear the priority of the competing equitable interests as between Darul-Iman and PSAL would suffice, by way of initial relief. A declaration to the effect that Darul-Iman's equitable interest in Lot 100, as the purchaser of Lot 100 under the Agreement, has priority over the interest of PSAL as an equitable mortgagee can, and should, be made.
I will hear from counsel as to the precise terms of that declaration, and as to any consequential orders that Darul-Iman may seek from the Court by way of relief.