Registrar-General (NSW) v Behn

[1981] HCA 36

HIGH COURT OF AUSTRALIA

Gibbs C.J. , Mason, Murphy, Aickin and Brennan JJ.

REGISTRAR-GENERAL (N.S.W.) v. BEHN

(1981) 148 CLR 562

28 July 1981

Real Property (N.S.W.)

Real Property (N.S.W.)—Torrens System—Assurance fund—Claim—Deprivation of land by fraud—Fraudulent inducement to sell—Statutory cause of action for person deprived of land—Judgment for price under contract of sale against fraudulent purchaser—Judgment valueless—Rights against assurance fund—Real Property Act 1900 (N.S.W.), s. 126.

Decisions

July 28.
The following written judgments were delivered:-
GIBBS C.J. This appeal, which is brought from a judgment of the Court of Appeal of the Supreme Court of New South Wales, raises a question as to the construction of s. 126 of the Real Property Act 1900 (N.S.W.) as amended. It is not in contest that the respondent, the plaintiff in the original proceedings, was deprived of her land in consequence of fraud. The fraud was perpetrated by a company, Cornic Loan and Credits Pty. Ltd. ("Cornic"), through its servant or agent Bodiam. The company is now insolvent and Bodiam is dead. In consequence of the fraud, the respondent agreed to sell the land to Cornic for $50,000, which was very much more than its real value, and gave a signed transfer to Cornic. That company, on 29 September 1972, procured registration of the transfer and became registered proprietor of the land. The purpose of the fraud was to enable Cornic to use the land as security for a loan, and on 20 November 1972 there was registered a mortgage to the Commercial Bank of Australia Ltd. to secure payment of certain moneys. The amount of the mortgage debt exceeds the value of the land. Subsequently the respondent sued Cornic for the balance of the price payable under the contract of sale, and on 7 September 1973 obtained judgment by default against that company for $47,983.17. It is agreed that the judgment is quite valueless; there is no prospect that the respondent will recover anything under it. (at p565)

2. In these circumstances the respondent commenced the present action against the Registrar-General. It was agreed that the value of the land at the date of the trial was approximately $21,000 and that the respondent had received $2,016.83 as part of the moneys payable under the contract. The Court of Appeal gave judgment for the respondent for the difference, namely $18,983.17, and it is from that judgment that this appeal is brought. (at p565)

3. Section 126 of the Real Property Act, so far as it is material, provides as follows:

"(1) Any person deprived of land or of any estate, or interest in land - (a) in consequence of fraud; or (b) throught the bringing of such land under the provisions of this Act; or (c) by the registration of any other person as proprietor of such land, estate, or interest; or (d) in consequence of any error, omission, or misdescription in the Register, may bring and prosecute in any Court of competent jurisdiction an action for the recovery of damages. (2) An action under subsection (1) shall, in any case in which the land to which the action relates has been included in two or more grants, or a grant in respect of that land has otherwise incorrectly issued, be brought and prosecuted against the Under Secretary for Lands as nominal defendant and, in any other case, shall, subject to subsections (3), (4) and (5), be brought and prosecuted against the person - (a) upon whose application the land was brought under the provisions of this Act; (b) upon whose application the erroneous registration was made; or (c) who acquired title to the land, or the estate or interest therein, through the fraud, error, omission or misdescription. . . . (5) In any of the following cases, that is to say, - (a) where such person ceases to be liable for the payment of damages as aforesaid; or (b) when the person liable for damages under this section is dead, bankrupt, or insolvent, or cannot be found within the jurisdiction,

such damages with costs of action may be recovered out of the assurance fund by action against the Registrar-General as nominal defendant." (at p566)

4. If in any such action the plaintiff recovers final judgment, the amount of damages and costs is a charge on the assurance fund: s. 129. Provision is made by ss. 131 and 132 for the recovery of any amount paid in respect of a claim on the assurance fund on account of a person who comes within any of the descriptions contained in s. 126 (5) (b); the case of bankruptcy or insolvency is dealt with by s. 131 (2) as follows:
"(2) Whenever such amount has been paid on account of a person who is insolvent or bankrupt, the amount so paid shall be considered to be a debt due from the estate of such insolvent or bankrupt, and a certificate signed by the Treasurer certifying the fact of such payment in respect of a claim on the assurance fund and delivered to The Official Receiver in Bankruptcy shall be sufficient proof of such debt." (at p566)

5. Before us the argument submitted on behalf of the appellant was that the judgment which the respondent had obtained against Cornic and which remained in force had the effect that the respondent could not obtain any damages against Cornic or against the Registrar-General. It was not submitted that, if the effect of the judgment were disregarded, the Court of Appeal was wrong in holding that the damages to which the respondent was entitled should be calculated by reference to the value of the land at the date of the trial. The argument for the appellant took as its starting point the proposition that the damages that may be recovered from the Registrar-General as nominal defendant are the damages for which the person who acquired title to the land through the fraud is or was liable; in other words, the liability of the Registrar-General is co-extensive with the liability of the person primarily responsible for the fraud. For this proposition the decision in Parker v. Registrar-General (1977) 1 NSWLR 22 was cited. In that case it had been argued on behalf of the Registrar-General that the plaintiff had affirmed the contract for the sale of the land to a company which had been guilty of fraud, and that this meant that the company had acquired title, not through the fraud, but by reason of the contract. However, the company was bound by an issue estoppel which prevented it from asserting that the contract had been affirmed. The Registrar-General was not bound by the issue estoppel, but it was held that he could not rely on a defence that was not available to the company, since the question was whether the company, if sued, would have been liable (1977) 1 NSWLR, esp at pp 26-27, 31 . The conclusion reached by the Court on that question was correct. The words of s. 126 (5) show that the damages recoverable out of the assurance fund are the damages for which the person who is insolvent is liable "under this section", that is, the damages recoverable under sub-s. (1). This conclusion is supported by the provisions of ss. 131 and 132; the fact that the money paid out of the fund is recoverable from the estate of the insolvent indicates that it was contemplated that the fund was not liable for any greater amount than that for which the insolvent was liable to the person deprived of the land. (at p567)

6. Next it was submitted that the respondent could not have recovered damages from Cornic in an action for fraud, and that the Registrar-General was accordingly not liable in an action brought by the respondent under s. 126. No damages were recoverable from Cornic, it was submitted, because of the existence of the judgment in favour of the respondent against Cornic for an amount greater than the damages otherwise recoverable. It is obvious that the respondent could not be permitted to recover from Cornic both the money due under the default judgment and damages for fraud as well. If the respondent recovered in full the money due under the judgment she would suffer no damage and an action at common law for fraud brought after such recovery would be bound to fail, since damage is the gist of such an action. Then, it was said, it followed that if Cornic was solvent the existence of the default judgment, although it remained unsatisfied, meant that the respondent could not succeed in an action for fraud, because it was unthinkable that the respondent could obtain two judgments which, if both were satisfied, would allow her to recover twice over. Finally, it was submitted that since the insolvency of a defendant cannot affect the amount of damages which that defendant is liable to pay, the fact that Cornic is insolvent did not mean that the respondent could succeed in an action which must have met with failure if Cornic had been solvent. (at p568)

7. It is apparent that s. 126 (1) (a) was not intended merely to declare that a person deprived of land in consequence of fraud may bring such action as was available to him at common law. Sub-section (1) as well as sub-s. (5) creates a statutory cause of action: see Williams v. Papworth (1900) AC 563, at p 568 ; Mayer v. Coe (1968) 88 WN (NSW) (Pt 1) 549, at p 559 ; Parker v. Registrar-General (1977) 1 NSWLR, at p 30 . The rules which govern the question whether a defendant in such an action is liable and, if so, what damages he should pay are to be discovered from the provisions of the statute and not from the common law. A person who acquired title to the land through fraud will be liable at the suit of a person who was deprived of the land in consequence of such fraud. That liability may be extinguished, for example by payment, release, or the lapse of time. If a person who is so liable is insolvent the Registrar-General is liable for the damages which might have been recovered against him. Plainly the intention of the legislature is that the successful plaintiff can recover damages commensurate with the loss he has sustained in consequence of the wrongful deprivation - damages that will put him in the same position, so far as money can do, as if the deprivation had not occurred: Registrar of Titles v. Spencer (1909) 9 CLR 641, at pp 645, 653 . (at p568)

8. The crucial question in the case is whether the respondent, having successfully sued Cornic to judgment on the contract, could, while that judgment stands, successfully sue Cornic again under s. 126. There is no reason in law why the respondent could not do so. The two proceedings would be in respect of entirely different causes of action. Of course, the parties would in the second proceeding be estopped from alleging anything contrary to the record of the existing judgment, but there would be nothing in that record that would prevent the respondent from succeeding in the second action against Cornic - the principle of res judicata would have no application. If the second action had been brought in respect of the same cause of action as the first the cause of action would have merged in the judgment and the second suit would fail; see the discussion of this doctrine in Patterson v. Veitch (1958) SR (NSW) 287, at pp 289-290 , per Walsh J., and see also Halsbury's Laws of England, 4th ed., vol. 16, par. 1536. However, this doctrine has no application when the two proceedings are brought in respect of different causes of action. Moreover, since the judgment obtained by the respondent against Cornic had not been satisfied, its existence would not mean that the respondent had sustained no damage as a result of the wrongful deprivation of the land. An action brought against Cornic under s. 126 would therefore have succeeded even if Cornic had been solvent. It would not be right to say that the respondent would be able to proceed to execution on both judgments. As Walsh J. pointed out in Patterson v. Veitch (1958) SR (NSW), at p 293 , the inherent powers of the court to prevent any abuse of its process would be ample to enable it to make some order which would prevent the plaintiff from proceeding twice to execution. The power of the court to prevent a plaintiff from having double satisfaction was recognized in Morris v. Robinson (1824) 3 B &C 196, at pp 205-206 (107 ER 706, at p 710) , which was cited with apparent approval in United Australia Ltd. v. Barclays Bank Ltd. (1941) AC 1, at p 20 . The argument persuasively presented on behalf of the appellant fails, because one of the premises on which it proceeds - that an action for damages under s. 126 would not have succeeded against Cornic - is erroneous. (at p569)

9. It is unnecessary for present purposes to consider some of the other questions which are raised by s. 126. (at p569)

10. For the reasons that I have given the appeal should in my opinion be dismissed. (at p569)

MASON J. I would dismiss the appeal for the reasons given by the Chief Justice. (at p569)

MURPHY, AICKIN AND BRENNAN JJ. The respondent was the registered proprietor of an estate in fee simple in land at Silverwater, New South Wales. By the fraud of one Bodiam she was induced to enter into a contract to sell the land to Cornic Loan and Credits Pty. Ltd. ("Cornic") and to allow Cornic to have, before completion, possession of the relevant Certificate of Title and a registerable transfer. Cornic, which had neither the capacity to pay nor the intention of paying the purchase price, procured the registration of the transfer in its favour and gave a bill of mortgage (which was registered after the registration of the transfer) to a bank as security for a debt in an amount exceeding the value of the land. At all material times Cornic was insolvent, and the respondent received only $2,017 of the purchase price of $50,000 payable under the contract of sale. The value of the land at the time of the trial of the present action was $21,000. It is not now disputed that the respondent was deprived of the land by Bodiam's fraud, perpetrated as Cornic's agent. (at p570)

2. In the Supreme Court of New South Wales, Holland J. held that the respondent was entitled to bring an action under s. 126 of the Real Property Act 1900 (N.S.W.) which provides:

"(1) Any person deprived of land or of any estate, or interest in land - (a) in consequence of fraud; or (b) through the bringing of such land under the provisions of this Act; or (c) by the registration of any other person as proprietor of such land, estate, or interest; or (d) in consequence of any error, omission, or misdescription in the Register, may bring and prosecute in any Court of competent jurisdiction an action for the recovery of damages. (2) An action under subsection (1) shall, in any case in which the land to which the action relates has been included in two or more grants, or a grant in respect of that land has otherwise incorrectly issued, be brought and prosecuted against the Under Secretary for Lands as nominal defendant and, in any other case, shall, subject to subsections (3), (4) and (5), be brought and prosecuted against the person - (a) upon whose application the land was brought under the provisions of this Act; (b) upon whose application the erroneous registration was made; or (c) who acquired title to the land, or the estate or interest therein, through the fraud, error, omission or misdescription. (3) . . . (4) . . . (5) In any of the following cases, that is to say, - (a) . . . (b) when the person liable for damages under this section is dead, bankrupt, or insolvent, or cannot be found within the jurisdiction,

such damages with costs of action may be recovered out of the assurance fund by action against the Registrar-General as nominal defendant." (at p570)

3. Judgment was entered against the Registrar-General as nominal defendant (1979) 2 NSWLR 496; (1980) 1 NSWLR 589 . On appeal to the Court of Appeal Division the appeal was allowed as to damages only, which were then assessed at $18,983, the difference between the value of the land and the amount received by the respondent. The appellant does not dispute the assessment, but submits that the assurance fund cannot be liable for damages in that amount unless the respondent would be entitled to a judgment for the recovery of damages in that amount if she brought an action against Cornic under sub-ss. (1) and (2). The respondent has already recovered against Cornic a judgment in the sum of $47,983 for the unpaid balance of the purchase price, and it is submitted that she is precluded from recovering a further judgment for a lesser amount against Cornic under sub-ss. (1) and (2), and that the assurance fund is therefore not liable under sub-s. 5 (b) to pay the damages assessed. (at p571)

4. The relevant condition imposed by sub-s. (5) (b) upon the arising of the statutory right to damages out of the assurance fund is that "the person liable for damages under this section" be insolvent. The phrase "liable for damages" refers to the liability created by the section and that liability is imposed by sub-s. (2) upon a person so soon as a deprivation falling within sub-s. (1) occurs. The phrase does not refer to a liability to suffer the recovery of a judgment for damages either at the time when proceedings under sub-s. (5) are commenced or at the time when those proceedings are brought to judgment. The insolvent to whose liability sub-s. 5 (b) refers is the person upon whom sub-s. (2) (c) imposes the statutory liability, that is to say, Cornic. When liability under the section was imposed on Cornic, it was insolvent. The requirements of sub-s. 5 (b) were then fulfilled, and the cause of action against the appellant arose. (at p571)

5. The measure of the assurance fund's liability is defined to be "such damages with costs of action". The damages are "damages under this section", a reference to the damages for the recovery of which an action may be brought pursuant to sub-s. (1) either against the person primarily liable under sub-s. (2) or against the Registrar-General under sub-s. (5). There is no reason why actions should not be brought against both provided there is no double recovery of damages. The respective measures of the damages recoverable by action against the person primarily liable and against the RegistrarGeneral are the same, but the liabilities are several, and the extinction of the cause of action against the person primarily liable does not extinguish the cause of action against the Registrar-General. (at p571)

6. If the rights conferred by s. 126 upon a person deprived of land in consequence of the fraud of an insolvent were exhausted by recovering a worthless judgment against him, the remedy under sub-s. (5) would be destroyed. That is a consequence incompatible with the manifest intention of the sub-section. Nor is the cause of action conferred by sub-s. (5) destroyed or affected by an anterior judgment recovered against the fraudulent insolvent upon a non-statutory cause of action, whether in contract or in deceit. Money received by the person deprived of land which goes in diminution of damages recoverable under the section pro tanto relieves the assurance fund of its liability, but an unsatisfied and worthless judgment recovered against the person primarily liable does not diminish the damages which are recoverable by action under sub-ss. (1) and (5). (at p571)

7. The appeal should be dismissed with costs. (at p571)

Orders

Appeal dismissed with costs.