Re Coffey, Bartel
[1995] QSC 67
•21 April 1995
IN THE SUPREME COURT
OF QUEENSLAND O.S. No. 192 of 1995
[Re Coffey, Bartel]
IN THE MATTER of Land Title Act 1994
- and -
IN THE MATTER of a caveat lodged by FRANCIS JAMES COFFEY
- and -
IN THE MATTER of and application by LYNETTE JEAN BARTEL
JUDGMENT - DERRINGTON J.
Delivered:21 April 1995
CATCHWORDS: REAL PROPERTY - Caveat - Sale by holder of power of attorney - No condition on face - Verbal condition alleged - Owner knowingly failing to forbid auction or to warn potential purchasers - Failing to protest until filing caveat on morning of settlement of sale - Caveat removed.
Sale by agent in excess of authority - Purchaser innocent - Whether principal can have sale set aside - Conduct of principal, effect of.
Counsel:A.C. Smith for the applicant
A.P.J. Collins for the respondent
Solicitors:Howard Gill and Brown T/A for Welsh & Welsh for the applicant
Garland Waddington for the respondent
Hearing Date: 10 April 1995
JUDGMENT - DERRINGTON J.
Delivered the 21st day of April 1995
The above-named Frances James Coffey is the registered proprietor of certain land on the title of which he has registered a caveat On 29 March 1995 Mackenzie J ordered among other things that it be removed on or after 10 April 1995, the date on which this application was heard. Mr Coffey now applies to set that order aside, and its effect has been deferred pending the delivery of this judgment.
That order was obtained by Ms Bartel who was the purchaser of the land when it was sold at auction by Waters Gamble & Associates Pty Ltd ("Waters Gamble") under a power of attorney granted by Mr Coffey on 7 November 1994. At the time of its grant Mr Coffey was indebted to Waters Gamble in a substantial sum the repayment of which was secured over the land by mortgage. The terms of the mortgage are not known, but after his default he granted the power of attorney which expressly empowered Waters Gamble to sell the land for a price of not less than $100,000, and to perform all necessary ancillary acts. It was expressed to be irrevocable.
He now claims that the power of attorney was conditional. His affidavit describes his claim in these terms."1.I say that the Power of Attorney given by me in favour of Waters Gamble and Associates Pty Ltd on the 7th November, 1994 was given by me solely for the purpose of allowing Waters Gamble and Associates Pty Ltd to sell the property known as 14 Cottonwood Street, Mudjimba, Queensland as attorney in the event that I was not in a position to discharge my obligations to the said Waters Gamble and Associates under a Bill of Mortgage dated the 29th July, 1993 prior to the date upon which the mortgagee had fixed for the auction of the property, known as 14 Cottonwood Street, Mudjimba, Queensland.
2.I further say that I gave the said Power of Attorney in favour of Waters Gamble and Associates upon representations made to me by their Agent, a Norman Winston Hepburn who arranged for me to have the said Power of Attorney executed in the presence of a Solicitor, Ronald J. Curry of 7 Bungan Street, Mona Vale, New South Wales, who had been instructed by the said Norman Winston Hepburn as agent for Waters Gamble and Associates Pty Ltd.
3.I also say that the said Power of Attorney was not a general power and the appointment was made pursuant to my obligations under the said Bill of Mortgage dated the 29th July, 1993.
. . ."
He further claims that prior to the auction he had arranged suitable financial accommodation sufficient to pay out Waters Gamble and on 14 November 1994 his solicitor had enquired of Waters Gamble's solicitors as to the payout figure for that purpose. In a further letter on 25 November 1994 his solicitors indicated that he was in such a position and again enquired of the payout figure.
Significantly this letter also noted that the auction of the property was set for the following day and requested that it not proceed because he had the funds to redeem the mortgage. It is noteworthy that there was no suggestion of any binding condition limiting the power of attorney, nor any other suggestion that Waters Gamble could not proceed with the sale.
There was no reply to these letters, and on 26 November 1994 the property was sold by auction to Ms Bartel for $115,000, which was well above the limit imposed by the power of attorney. Neither Mr Coffey nor his solicitor seems to have attended the auction to warn any would-be purchasers of any relevant alleged limit to the agent's authority left unexpressed by the apparently unconditional terms of the written power of attorney.
This inaction and implied acceptance of the agent's plenary powers is consistent with the implications of a letter from Mr Coffey's solicitors of 29 November 1994 saying:"We note that the property was sold by auction on Saturday, 26 November 1994. As our client is the vendor on the contract, we would be pleased if you would supply us with a copy of the contract as soon as possible."
It is noteworthy that again there is no suggestion whatever of any lack of authority nor any warning that the sale should not proceed. That remained the position in two further letters of 6 December 1994 and 5 January 1995 which repeated requests for a copy of the contract but still made no suggestion that the sale was beyond the powers of the agent. According to the evidence, there was no reply to any of these letters.
Mr Coffey did nothing adverse to the transaction nor gave any warning of his claim until his solicitors lodged a caveat at 9.16 a.m. on the morning of the day set by the contract for settlement. No good reason is given for this delay. The excuse by his solicitor that he was required to delay its lodgment until the registration of certain other documents is manifestly incorrect, for a caveat may allow the registration of documents referred to therein, as the form of caveat actually lodged clearly indicates.
Unfortunately Ms Bartel's then solicitors could not have searched the title immediately prior to settlement, for they settled with the solicitors for Waters Gamble, presumably at some time on the same day but after the caveat was lodged. In any case, they did not lodge her transfer in the Titles Office until a time after that event.
Mr Coffey's mother and other relations have continued to reside in the house, defying the request by Ms Bartel to vacate or pay rent upon the basis that she has no title. This stance was confirmed by Mr Coffey's solicitor who, on his behalf, now claims that the transaction was beyond the powers of Waters Gamble because of the alleged conditional limitation and because he claims to have been able to fulfil it by redeeming the mortgage prior to the auction. He says that he was wrongly prevented from doing this by Waters Gamble's failure to provide him with a payout figure, and that this misconduct deprived it of its authority to sell the property. For the purpose of this application, he claims to have an arguable case to sustain the caveat and that the matter should go to trial. Meanwhile, of course, his relatives will continue to occupy the property to the exclusion of Ms Bartel.
There is a degree of urgency about the matter. Mr Coffey is a shadowy figure who cannot easily be located at the vague address provided in the caveat. Even when it was identified, he could not be contacted for personal service. His mother and brother deny knowledge of his precise whereabouts or his telephone number, claiming that he is the one who makes contact with them by his mobile telephone. It is not explained why he could not provide them with that telephone number. Further, when Ms Bartel's solicitors tried to effect service by communicating with his solicitor, that gentleman was very unhelpful, which of course is perfectly permissible, but he too claimed that his only means of contact were the occasions when his client would telephone him. He did say however that his client was aware that something was happening on the return date of the original summons to remove the caveat, but he does not explain why his client did not leave a means of communication if his presence was needed. Plainly he was simply avoiding service, and his general conduct puts in grave doubt any prospect of recovery of any award of costs or damages against him.
His allegations as to his arrangements with Water Gamble have not been contradicted, but that is outside the knowledge of Ms Bartel. Even if it were contradicted, it must be assumed in this hearing to be correct for the purpose of determining whether there is a triable issue. Despite the clear contradictory implications from the contemporary documents, the absence of any direct evidence to the contrary makes it impossible to assume that it is untrue. It is necessary therefore to determine whether, even if his allegations are true, he has any right to sustain the caveat as against Ms Bartel.
For present purposes the first important feature is that there is no suggestion whatever that at the time of the contract she had any knowledge of any alleged condition affecting the plenary power to sell, as it appeared on the face of the power of attorney. It was expressed to be irrevocable, it authorised a sale at auction, and it set a minimum purchase price which was exceeded. These matters were such as to entitle a purchaser to proceed by placing reliance on the apparently unconditional authority. There was nothing that would suggest any obligation upon the purchaser to enquire further.
There was no warning given by Mr Coffey at the time of the auction nor apart from the caveat any later notice given to Ms Bartel which would affect her position. Nor is there any suggestion that she had actual notice of the caveat before settlement, and Mr Coffey is reduced to arguing that she should have had implied notice because as a matter of usual practice her solicitor should have searched the title immediately before settlement.
It may well be correct that it is the practice of solicitors to search for caveats immediately before settling a sale on behalf of a purchaser. However, whilst a caveat operates to prohibit dealings with the title until it is removed, it does not operate as putative notice. It was certainly a rule of prudence that should have been followed by her solicitors to have searched the title before settlement, but that would have been for her own protection. It may be safely inferred that they did not settle despite knowledge of the caveat. However Mr Coffey is entitled to say that by his caveat he gave notice to anyone who chose to search the title, as would be expected of Ms Bartel, and that by her solicitor's negligence she settled the sale when by proper diligence she could have been warned against it.
In any case, even if it had amounted to notice, it would not by that fact alone have prevented the vesting of Ms Bartel's original equitable title as purchaser which came into existence at the time of the contract, if it was validly binding on Mr Coffey. The caveat had not been lodged at that time and she could have had no other possible notice of his claim. Such an equitable interest of a bona fide purchaser for value without notice of any defect in the agent's power does not necessarily prevail over the mortgagor's title if the mortgagee behaves otherwise than in good faith and if the mortgagor does nothing to cause the purchaser to believe that the mortgagee is acting in good faith (Forsyth v. Blundell (1973) 129 CLR 477 at 499). But because of this mix of factors, it is important to understand that if for example Mr Coffey's conduct had contributed to Ms Bartel's belief that Waters Gamble was acting regularly, then any default on its part would not have vitiated the sale and she would have acquired her interest in equity at the time of the contract, when she was certainly without any notice that could possibly be attributed to the caveat. It then becomes a contest between her equitable interest and the competing equity of Mr Coffey as owner whose title has been compromised by the sale by his agent.
That is clearly the basis of the reasoning in Forsyth v. Blundell. There are however two sets of circumstances in this case which may possibly distinguish it in the result, and require consideration. The first is whether in the circumstances the conduct of Waters Gamble constituted such an impropriety as to vitiate its power to sell the property to Ms Bartel. The second is that Mr Coffey's conduct as it affected Ms Bartel was far from blameless, so that in competition with her equity the question is whether his is the inferior.
The position in respect of both points is dealt with in Forsyth v. Blundell at 496-497, where the judgment of Walsh J, who spoke on this for the majority, reads as follows:
" It has been argued that a passage in the judgment of Kay J. in Warner v. Jacob (1882) 20 Ch.D. 220, at p.224, which has often been quoted in subsequent cases, is an exhaustive and correct statement of the circumstances in which a sale will be set aside or an injunction granted and it is said, therefore, that if a mortgagor has any remedy in respect of a sale not shown to have been affected by "corruption or collusion with the purchaser" or to have been at a price so low as in itself to be evidence of fraud, his only remedy can be in damages. In my opinion, this submission should not be accepted. There may be an improper exercise of a power of sale (that is one which constitutes a breach of the duty owed to the mortgagor) where although there is not any actual fraud (in the ordinary sense of that term) or any collusion between the mortgagee and the purchaser, there is improper conduct which goes beyond mere negligence in carrying out the sale. There may be impropriety of various kinds. What has sometimes been described as a fraud on the power and sometimes as a wilful or reckless disregard of the interests of the mortgagor and sometimes as a sacrificing of the interests of the mortgagor does not necessarily involve, in my opinion, the commission of actual fraud. It has been said that the word "recklessly" as used by Lord Herschell in Kennedy v. de Trafford [1897] A.C., at p.185 and in other judgments, was used in a sense analogous to that in which it was used in Derry v. Peek (1889) 14 A.C. 337: see Pendlebury v. Colonial Mutual Life Assurance Society Ltd. (1912) 13 C.L.R.,at p.680. Whether or not that view is accepted, I think it is in accordance with authority and that it should be affirmed that there may be conduct which amounts to a reckless sacrificing of the interests of a mortgagor, although it is not shown that there is an actual intention to defraud him or that there is corruption or collusion with the purchaser. It is concerning conduct of that kind that inquiry must be made in this case whether or not it warranted the granting of an injunction.
I do not doubt that as between himself and his mortgagee who has conducted himself in that way in entering into a contract of sale, a mortgagor is entitled to invoke the aid of the Court to prevent the completion of the contract. As between those parties, the proprietary right of the mortgagor will be protected against such a wrongful alienation by the mortgagee. But the critical question is whether the purchaser under the contract acquires a right which entitled him to have the contract completed and therefore precludes the grant of any injunction to restrain its completion. In dealing with that problem I leave aside for the present the statutory provisions which are said to have a bearing upon it.
It has been submitted that a person who has entered into a contract as purchaser cannot be affected in any case by impropriety on the part of the mortgagee, not involving collusion with the purchaser. It has been put as an alternative argument that, if a purchaser may be affected by notice of the facts which constitute the impropriety (not involving collusion), he can be affected only if he has such notice at the time when he enters into the contract. In my opinion, if the mortgagee does not exercise the power of sale "in good faith" (in the sense explained above) and the purchaser has knowledge of the facts which show the lack of good faith, the purchaser cannot obtain a right superior to the right of the mortgagor. Even when a contract made in such circumstances is carried to completion, in many cases the transaction may be set aside, or, alternatively, the conveyance or transfer treated as operating only as a transfer of the mortgage and of the debt secured by it, and not as a transfer of the mortgagor's interest: see Latec Investments Ltd. v. Hotel Terrigal Pty. Ltd (In Liquidation) (1965) 113 CLR 265, at pp. 274-275. But if the person who agrees to purchase has no notice of any impropriety at the date of contract and continues to have no notice at the time when it is completed, he will obtain a title which cannot be challenged by the mortgagor. (It is here assumed that all statutory and contractual conditions essential to the exercise of the power of sale have been fulfilled.)
If the purchaser is without notice of the relevant facts at the date of the contract, but the mortgagor takes action to challenge its propriety before completion and proves that on the part of the mortgagee it was improper, the question is whether the purchaser has a right which prevails over the right which the mortgagor would have, as between himself and the mortgagee, to restrain the completion of the contract. That is the question in this case."
This passage is confined in its discussion of the full principles applicable because it was the case that the mortgagor was innocent of any conduct that could affect the results. After referring to Latec Investments Ltd v. Hotel Terrigal Pty Ltd (In liquidation) (1965) 113 CLR 265, which will be discussed later, at 498 he noted concerning the mortgagor, Blundell, and the purchaser, Shell, in the case before him:
" Even if the contest between these parties should be resolved on the basis that there is a competition between equitable interests, in my opinion the position of the purchaser, so far as the applicable general principles are concerned, would not be any better. In my opinion, the situation was not one in which it was open to the purchaser to claim that, although it had not acquired a legal estate, it could maintain, against a claim by the mortgagor to prevent the completion of the sale, a defence that it was a purchaser for value without notice. After a consideration of the decision and of the judgments in Latec Investments Ltd v. Hotel Terrigal Pty. Ltd (In Liquidation), I am of opinion that the circumstances in which the interest of the trustee for the debenture holders in that case was held to prevail over the claim of the mortgagor were so different from those upon which the contest here depends that the case is not an authority upon which Shell can rely.
I am of opinion, also, that the contest cannot be resolved in favour of Shell by the application of the principles upon which in Abigail v. Lapin [1934] A.C. 491 and in Breskvar v. Wall (1971) 126 C.L.R. 376 the claims of the parties whose interests were first in time were postponed to the claims of the other parties. This is not merely for the reason that in the present case Blundell had more than an equitable interest. If his interest is considered as being for present purposes no more than an equitable interest, his conduct did not contribute in my opinion, to any false assumption or belief upon which Shell acted in entering into the transaction (see Breskvar v. Wall), nor did it affect Shell in any other way which would make it inequitable to assert against Shell the interest of Blundell."
Even assuming in Mr Coffey's favour that the condition in the authority existed as he alleges, the conduct of Waters Gamble could not have been sufficient in these circumstances to affect its authority to enter into a valid contract with Ms Bartel. Although it is alleged that he wrote letters through his solicitor seeking information from Waters Gamble as to a payout figure, as it has been indicated he did not assert that the condition constituted any inhibition to the continuation of the auction nor did he even suggest that it should not proceed, although he was fully aware that it was imminent. Further, his letters through his solicitor written after the sale made no claim of absence of authority or of invalidity of the sale and indeed impliedly ratified it, allowing Waters Gamble and Ms Bartel to proceed towards settlement. In these circumstances, and having regard to the sale price in relation to the reserve specified in the power of attorney, there cannot be said to have been any "impropriety" or "a fraud on the power" or "a wilful or reckless disregard of the interests of the mortgagor" sufficient to disestablish the sale in the way described in the passage cited above. The strange circumstances here take this case outside any simple deliberate breach of authority.
Nor is mere negligence by an agent sufficient for that result. While the impropriety that would vitiate a sale is not limited to the sale of the property at an undervalue, conversely it is not open to a mortgagor, who has held out that a mortgagee has a power of sale, to override the rights of a genuine purchaser without notice because of every fault in the agent's conduct which might give rise to an action between them.
To this point the discussion has been confined to wrongful conduct on the agent's part. There may be grounds for defeating the sale on other grounds. For example the very basis of the agent's authority may be attacked on the ground of fraud in relation to its grant: Re Cross v. National Bank Ltd (1992) Q.Conv.R. 54, 433. In that case there is simply no authority and the principal will not be responsible for the reliance which the purchaser may place on the apparent authority. (It may be otherwise if the principal also were careless in this respect.) But where, as here, the basis for the claim of lack of authority is an unexpressed condition to an authority that is unconditional on its face, a bona fide purchaser for value without notice will be unaffected by the condition: Duke of Beaufort Neeld (1845) 12 C & F 248; 8 ER 1399; Davy v. Waller (1899) 81 LT 107; Trickett v. Tomlinson (1863) 13 CB (NS) 663; 7 LT 678.
Because the principal has chosen to allow the limitation on the agent's apparent authority to remain unpublished, then as against a purchaser who enters into the transaction in reliance on the apparent authority, the principal cannot rely on either the agent's actual lack of authority or its conduct in transgressing the limitation, whether intentional or otherwise.
This seeming departure from the line of reasoning of Walsh J in Forsyth v. Blundell in respect of the effect of misconduct by a mortgagee is no departure at all. The rule is mixed. The conduct of the mortgagee forms only one part, the other being any conduct of the mortgagor that might induce a purchaser to enter the transaction. Even if the agent's conduct were to come within the type of behaviour described by Walsh J in Forsyth v. Blundell (as extended in principle in Cross v. National Bank Ltd), the result is not the same because of the presence of the other effective factor, the conduct of the principal that would render it unjust to allow him to rely, as against a purchaser, on the agent's conduct.
Consequently, Mr Coffey cannot rely on his agent's alleged misconduct, in acting in excess of authority, nor on his alleged lack of authority to defeat Ms Bartel's equitable interest derived from her status as purchaser, so that it comes down to a competition between their respective equitable interests or equities. This leads into the second point, which is whether Mr Coffey's conduct was such as to postpone his equitable claim to that of Ms Bartel. In a way the discussion of these matters separately is artificial because they are overlapping, but it is a convenient way of attributing the relevant factors to each.
As it was implied in the above-cited passage from Forsyth v. Blundell at 498, in a suitable case there could be a claim by a purchaser in an incomplete transaction to have priority over a mortgagor, notwithstanding that the latter's interest may have had priority in time. In that case, the mortgagor's conduct was irreproachable, and so its priority was retained. Where however there is conduct which affects the position of a purchaser adversely in such a way that it would be inequitable for the mortgagor to prevail, his interest will lose that priority in favour of the purchaser: cf. Latec Investments Ltd v. Hotel Terrigal Pty. Ltd. (In. Liq.) (1965) 113 C.L.R. 285.
In that case, after a sale by a mortgagor to a related company at an underprice, which could have been overturned, the mortgagor failed to take immediate action because of lack of funds and after a year the purchaser provided a floating charge to others under a debenture deed. The original mortgagor lost priority to the trustee of the debenture deed, whose position equates in principle with that of Ms Bartel in this case. For present purposes, the most significant passage of that report appears in the judgment of Kitto J at 276-278, which reads:-"In these circumstances the trustee, with the support of its co-appellants, contends that the mortgagor ought not to be given the relief to which, according to the views I have expressed, it would otherwise be entitled. As between the trustee and the mortgagor I am of opinion the contention should succeed. In all cases where a claim to enforce an equitable interest in property is opposed on the ground that after the interest is said to have arisen a third party innocently acquired an equitable interest in the same property, the problem, if the facts relied upon as having given rise to the interests be established, is to determine where the better equity lies. If the merits are equal, priority in time of creation is considered to give the better equity. This is the true meaning of the maxim qui prior est tempore potior est jure : Rice v. Rice (1853) 2 Drew. 73, at p. 78 [61 E.R. 646, at p. 648]. But where the merits are unequal, as for instance where conduct on the part of the owner of the earlier interest has led the other to acquire his interest on the supposition that the earlier did not exist, the maxim may be displaced and priority accorded to the later interest. In the present case it seems to me that there is much to be said for holding that, since during the long period of the mortgagor's delay in setting up the invalidity of the purchaser's title persons were induced to lend money on debentures in the belief that an unencumbered fee simple in the subject property formed part of the security under the trustee's floating charge, the mortgagor ought not to be allowed to insist upon its equity of redemption as against the equitable interest of the trustee.
But apart altogether from any question of estoppel by conduct, in my opinion the equitable charge of the trustee for the debenture holder stands in the way of the mortgagor's success because it was acquired for value and without any notice either of the existence of the mortgagor's right to set aside the sale or of any facts from which such a right might be inferred. The trustee, of course, has not the legal estate; its rights are purely equitable; but the case falls within one of the categories described in the judgment of Lord Westbury in Phillips v. Phillips (1861) 4 De G.F. & J. 208, at p. 218 [45 E.R. 1164, at p. 1167] in which the legal estate is not required in order that a defence of purchase for value without notice may succeed. It is the case of a suit 'where there are circumstances that give rise to an equity as distinguished from an equitable estate - as, for example, an equity to set aside a deed for fraud, or to correct it for mistake' (1861) 4 De G.F. & J., at p. 218 [45 E.R., at p. 1167]. In such a case, his Lordship said, if the purchaser under the instrument maintains the plea of purchase for value without notice 'the Court will not interfere'. It is true that if the mortgagor in the present case was entitled to have the mortgagee's sale set aside it had more than a mere equity: it had, as I have pointed out, an equity of redemption, and such an interest, being in respect of an estate in fee simple, has been considered an equitable estate ever since Lord Hardwicke decided Casborne v. Scarfe (1737) 1 Atk. 603 [26 E.R. 377] see also (1738) 2 J. & W. 194 App. [37 E.R. 600]. But each of the illustrations Lord Westbury chose was also a case where the equity was accompanied by an equitable interest which might constitute an equitable estate. So much had been shown by decisions of most eminent judges, at least twice in the ten years before his Lordship spoke: see Stump v. Gaby (1852) 2 De G. M. & G. 623 [42 E.R. 1015]; Gresley v. Mousley (1859) 4 De G. & J. 78 [45 E.R. 31] and Lord Westbury's judgment gives every indication of an intention to state systematically the effect of previous decisions and not to depart from them in any degree. The illustrations therefore make it clear, it seems to me, that the cases to which his Lordship was referring were not only those in which there is an assertion of an equity unaccompanied by an equitable interest (as was held to be the case in Westminster Bank Ltd. v. Lee [1956] Ch. 7 and National Provincial Bank Ltd. v. Hastings Car Mart Ltd. [1964] Ch.9 - indeed he may not have had them in mind at all - but those in which an equity is asserted which must be made good before an equitable interest can be held to exist. In the latter class of cases the equity is distinct from, because logically antecedent to, the equitable interest, and it is against the equity and not the consequential equitable interest that the defence must be set up. That the defence of purchase for value without notice (in the absence of the legal estate) is a good defence against the assertion of the equity in such a case had been established long before Lord Westbury's time. In Malden v. Menill (1737) 2 Atk. 8, at p. 13 [26 E.R. 402, at p. 405] for example, Lord Hardwicke had refused rectification of an instrument for mistake, as against a purchaser of an equitable interest without notice, on the ground that the mistake should not 'turn to the prejudice of a fair purchaser'. Such cases as Garrard v. Frankel (1862) 30 Beav. 445 [54 E.R. 961] and Bainbrigge v. Browne (1881) 18 Ch. D. 188 were soon to be decided on the same principle. See generally Halsbury's Laws of England, 3rd ed. vol. 14, p. 537, par. 1008. The reason of the matter, as I understand it, is that the purchaser who has relied upon the instrument as taking effect according to its terms and the party whose rights depend upon the instrument being denied that effect have equal merits, and the court, finding no reason for binding the conscience of either in favour of the other, declines to interfere between them. Consequently the party complaining of the fraud or mistake finds himself unable to set up as against the other the equitable interest he asserts; but the fact remains that it is against the preliminary equity, and not against the equitable interest itself, that the defence of purchase for value without notice has succeeded. The maxim qui prior est tempore is not applicable, for it applies only as between equitable interests, the logical basis of it being that in a competition between equitable interests the conveyance in virtue of which the later interest is claimed is considered, as Lord Westbury pointed out, to be innocent, in the sense of being intended to pass that which the conveyor is justly entitled to and no more: (1861) 4 De G.F. & J. 208, at p. 215 [45 E.R. 1164, at p. 1166]. Where a claim to an earlier equitable interest is dependent for its success upon the setting aside or rectification of an instrument, and the court, notwithstanding that the fraud or mistake (or other cause) is established, leaves the instrument to take effect according to its terms in favour of a third party whose rights have intervened, the alleged earlier equitable interest is unprovable against the third party, and consequently, so far as the case against him discloses, there is no prior equitable interest to which his conveyance can be held to be subject."
On this basis it is convenient now to review in summary the relevant conduct of the parties. Not surprisingly, some of it was also relevant to the discussion of the first point. Mr Coffey's conduct is, in these circumstances, the more significant because in law, as it has been seen, he is bound by his agent's sale, even assuming that it had been unauthorised. Accordingly his prior interest in equity as registered proprietor was overtaken by the sale which gave the purchaser an equitable interest, while at best he retained an equity to set the sale aside. But this is relevant only if his conduct, by comparison with that of Ms Bartel, left him in an equal position in equity. As it will be seen, it did not do so.
In summary the relevant features of his conduct are:
That he armed Waters Gamble with a written irrevocable power of attorney containing no condition such as he now alleges, though there was a condition as to price that was more than met. This conduct enabled the agent to hold out the authority as having no relevant unfulfilled condition.
Knowing of the impending auction, in his solicitor's letters he expressed no opposition to it nor warned Waters Gamble not to proceed with it.
Despite Waters Gamble's failure to reply to his solicitor's letters, he failed to attend the auction to warn potential purchasers of the limitation or absence of the agent's authority.
After the sale was entered into, again in his solicitor's letters he impliedly acquiesced in it and made no protest until he filed a caveat on the morning of the settlement. Even then, no urgent notice of the caveat was given to the agent, warning against completion.
The caveat was filed at a very late stage, possibly leading to Ms Bartel's solicitor's error, though this should be disregarded. This late filing was caused by Mr Coffey's solicitor's error and it is, in this respect, the equivalent of the failure of Ms Bartel's solicitor to search for a caveat at the last moment. This delay meant that at least Ms Bartel was contractually obliged to go to the cost and trouble of preparing to settle the transaction.
Of course, only the first three items relate to the competition between the claims up to the significant time when the purchaser acquired her equitable interest by entry into the contract, but the remaining items are relevant to the same extent that the purchaser's conduct has been held to be relevant; and in that respect Ms Bartel's solicitor's failure to search for a caveat has been raised as a factor against her. Indeed, it is the only matter upon which Mr Coffey can mount any kind of argument to support his claim that there is a triable issue, and it is suitable now to consider it.
This omission to search for a caveat had no adverse effect on Mr Coffey's interests. Its only relevance is that Ms Bartel settled the sale, which was quite legitimate, and again this did not adversely affect Mr Coffey's rights. At most, it could only be argued that after the time that she should have searched for the caveat, her equitable claim was not enlarged. But this does not detract from the force of her claim that by then she would have been obliged to prepare to meet her obligations under the contract.
It should also be noticed that because she has failed to obtain legal title, according to the discussions quoted above, it may be that her position in equity is not as secure as it would have been had she done so. It is not easy to understand why it should be so in equity, but in the present circumstances it makes no difference.
On any reasonable assessment of their relative strengths in equity, Ms Bartel clearly retains her priority which she gained by purchasing under a valid contract. Even had that original priority been reversed, she would still have prevailed. The adverse features of Mr Coffey's relevant conduct outweighed by far any adverse feature that could be attributed to Ms Bartel's position, and her claim must prevail, even on the facts assumed in favour of Mr Coffey.
In the circumstances of this case, because of Mr Coffey's prior conduct, the significant time was at Ms Bartel's entry into the contract, at which time she obtained equitable title to the land as purchaser. Mr Coffey's conduct to that time deprived him of any right which he may have otherwise had to defeat the sale. Once that happened, Ms Bartel's equitable title vested, and nothing of later events, and particularly notice to her through the lodgment of the caveat, if that were the case, has affected that title, which was superior to any equity held by Mr Coffey. Even if the significant time had come after the caveat, because of the relative quality of the relevant conduct of the respective parties there would have been no difference in the result.
The application of Mr Coffey is dismissed with costs.
14
2
0