Sardon Pty Ltd v The Registrar of Titles - [2004] WASC 56

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: SARDON PTY LTD -v- THE REGISTRAR OF TITLES & ORS [2004] WASC 56

CORAM: BARKER J

HEARD: 11 SEPTEMBER 2003

DELIVERED : 31 MARCH 2004

FILE NO/S: CIV 2410 of 2002

BETWEEN: SARDON PTY LTD (ACN 009 056 875)
Plaintiff
AND
THE REGISTRAR OF TITLES
First Defendant
FRANCIS EDWARD BUTLER
DULCIE MAE BUTLER
Second Defendants

Catchwords:

Real property - Torrens system land - Transfer of Land Act 1893 (WA) - Limitation of actions - Limitation Act 1935 (WA) - Application for extension of caveat - Application under O 58 r 27(1) of the Rules of the Supreme Court 1971 - Failure to enter into possession or commence action to recover land - Whether Limitation Act provisions apply to Torrens system land - Whether lodgment of caveat constitutes entry into possession or action to recover land - Extinguishment of mortgagee's title

Legislation:

Limitation Act 1935 (WA), s 3, s 4, s 5(c), s 13, s 15, s 24, s 30, s 32, s 35, s 38

Property Law Act 1969 (WA), s 59(1)(b)
Rules of the Supreme Court 1971 (WA), O 58 r 14, r 27(1)

Transfer of Land Act 1893 (WA), s 107, s 108, s 113, s 121, s 138C

Result:

Plaintiff's application dismissed

Category: A

Representation:

Counsel:

Plaintiff:     Mr G I Chitty
First Defendant             :     No appearance
Second Defendants       :     Ms P E Cahill

Solicitors:

Plaintiff:     Muries Lawyers
First Defendant             :     No appearance
Second Defendants       :     Jackson McDonald

Case(s) referred to in judgment(s):

Addison v Billion [1983] 1 NSWLR 586
Bradlaugh v Clarke (1883) 8 App Cas 354
Cameron v Blau [1963] Qd R 421
Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42
Eng Mee Yong v Letchumanan [1980] AC 331
Harlock v Ashberry (1882) 19 Ch D 539
Heath v Pugh (1881) 6 QBD 345
In re the Australian Deposit and Mortgage Bank Ltd [1907] VLR 348
Kibble v Fairhorne [1895] 1 Ch 219
Levy v Williams [1925] VLR 615
The National Bank of Tasmania Ltd (In Liq) v McKenzie [1920] VLR 411

Case(s) also cited:

Chamberlain v Shirand Nominees Pty Ltd; unreported; SCt of WA; Library No 8332; 22 June 1990
Hilton v Dewi [2003] WASC 117
Jandric v Jandric [1999] WASC 22; (1999) ANZ ConvR 614
Martin-Smith v Woodhead [1990] WAR 62
Morgan v Banning (1999) 20 WAR 474
Rann v Hughes (1778) 7 Term Rep 350n
Royal Trust Co v Attorney-General (Alberta) [1930] AC 144
Squire v Whitton (1848) 1 HL Case 333
Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514

BARKER J:

Introduction

By an originating summons dated 10 October 2002, Sardon Pty Ltd, (which is described as "Applicant" in the originating process but having regard to the requirement of O 58 r 14 of the Rules of the Supreme Court1971 (WA) should be called the "plaintiff") seeks an order that the operation of Caveat E402359 be extended until further order of the Court.
Francis Edward Butler and Dulcie Mae Butler (Mr and Mrs Butler or the Butlers, who are described in the initiating process as the "Second Respondent", but should be referred to as the "second defendants") oppose the application of the plaintiff.
The Registrar of Titles (who is described in the originating process as the "First Respondent" but should be called the "first defendant") was served with the originating summons, but has elected not to take any part in the proceedings.
The caveat has been extended twice on an interim basis since the originating summons was lodged. It was first extended by order of Hasluck J in Chambers made 14 October 2002 until 5 November 2002. It was then further extended until further order by order of Wheeler J in Chambers made 1 November 2002.
The proceedings commenced by the originating summons are not concurrent with any other proceedings in the Court that relate to the interest which the caveat is designed to protect or any related matter.
However, the plaintiff, by application dated 9 May 2003, applied to a Case Management Registrar under O 58 r 27(1) for an order that "the plaintiff have leave to proceed as if this action was commenced by writ of summons", as well as for consequential orders concerning the filing and service of a statement of claim and defence and the giving of discovery.
That application came before Registrar Martin on 28 May 2003. Counsel for Mr and Mrs Butler opposed the application on two grounds, the second of which was that if such an order were to be made, it may have the effect of depriving the second defendants of a "limitation defence" open to them. The second defendants entertained a concern that, by the making of such an order, the plaintiff would be taken to have commenced an action for the recovery of the land the subject of the caveat or some other action, effective from the date of the originating summons and before the expiration of a relevant limitation of time under the Limitation Act 1935 (WA).
The Registrar, rather than determine the application, ordered that the plaintiff's application dated 9 May 2003 be referred to a Judge in Chambers. The intent of this order was, as I understand it, to permit the second defendants to argue the availability of the Limitation Act defence.
It was in these circumstances that the plaintiff's application dated 9 May 2002 came before me for hearing. The second defendants assumed the burden of establishing that a limitation defence was available to them and that it would have the effect negating the plaintiff's application.
The plaintiff's position was that under the Rules in an appropriate case a plaintiff may be given leave to proceed as if the originating summons proceedings were commenced by writ of summons in order to facilitate the filing of the pleadings and to obtain other interlocutory orders. In that regard it is well established that in an originating summons proceeding where factual matters are in dispute it may be convenient to make such an order so that issues in contention may be better identified: Seaman, "Civil Procedure in Western Australia" par [58.27.1]. However, where such an order is made, it does not thereby convert the originating summons proceedings into some other action. The order merely facilitates the more convenient disposition of the matter in issue in the originating summons proceedings.
Thus, it is not open to the plaintiff in this matter to seek the order it seeks on the application dated 9 May 2003 in order to convert its application to extend the operation of the caveat into an action for recovery of land the subject of the caveat, or some other action.
When the matter came on for hearing before the Case Management Registrar the second defendants plainly were concerned that the plaintiff was attempting to convert its application for extension of the caveat into a more substantive and different application. However, before me the plaintiff made it plain that it was not attempting any such conversion by seeking the order that it did. However, as noted below, it is not clear that the plaintiff has consistently maintained this position in the course of argument.
Nonetheless, it was accepted by the parties that the question of the availability of a Limitation Act defence was relevant to the maintenance of the originating summons proceedings. Thus, the application before me was argued on the basis that, if the second defendants could make out the limitation defence contended for, the plaintiff's application to the Case Management Registrar and the originating summons should be struck out.

Background

By a written "Agreement To Purchase A Business" dated 9 January 1990, Mr and Mrs Butler (as Purchasers) agreed to purchase the business, of the plaintiff (as Vendor) known as "Lesmurdie Removals". The agreement specified in par B of the particulars a gross purchase price of $158,000. As to the manner of payment of the purchase price, the agreement provided as follows:
"By a deposit $500 of which $ is paid herewith and $Nil shall be paid on acceptance. The balance of purchase price shall be paid on the day of 19 (date of settlement) see Item 2 of Offer. Possession on completion of Stocktaking on the day of 19 ." (Blank portions as in original)
The agreement further relevantly provided in par F of the particulars in respect of "Finance", as follows:
"Nominated Lender(s)      Any acceptable to the purchaser
Latest Date for Approval   21 days following acceptance
Minimum Amount of Loan        $100,000 … "
The agreement was also subject to certain "Special Conditions" that provided for the vendor to grant the purchaser a five‑year lease in respect of premises currently used by the business and for the vendor to remain full‑time with the business for a period of time following the settlement date.
A further condition of the agreement set out in condition 5 was that: "This Contract is conditional upon the Purchaser advising the Agent in writing of approval of finance on or before the latest date for approval specified in paragraph (F) of the Particulars, to a loan of not less than the amount of the loan (if any) stated in paragraph (F) … ".
Settlement of the sale and purchase of the business took place on or about 9 March 1990.
The parties agree that by the time of settlement the plaintiff had agreed to provide "vendor finance" to the Butlers in the sum of $67,000.
Vendor finance was provided by the plaintiff not insisting on immediate payment of the $67,000 that was not paid at settlement and taking the following securities:
(1)A bill of sale executed on 9 March 1990 by Mr and Mrs Butler in favour of the plaintiff in respect of the assets of the business of Lesmurdie Removals; and
(2)an unregistered mortgage dated 9 March 1990 executed by Mr and Mrs Butler in respect of all that piece of land being lot 140 on diagram 68794 and being the whole of the land comprised in certificate of title volume 1709 folio 303, which property comprised the home of Mr and Mrs Butler and of which they were the registered proprietors.
The bill of sale was expressly granted in respect of the "Moneys Hereby Secured" which expression was defined by cl 1.1 of the bill of sale to mean the aggregate of all advances or accommodation already made or granted by the Grantee (Sardon Pty Ltd) to the Borrower (being the Grantor, namely, a Mr and Mrs Butler) and in respect of which the Grantee was entitled to sue including the "Principal Sum specified in the Schedule and also all advances or accommodation which the Grantee may hereafter at its discretion and during its pleasure make or grant to the Borrower", and other moneys generally described in that definition. The "Principal Sum" was specified in the schedule in the sum of $67,000.
Under the bill of sale the "Moneys Hereby Secured" were to be paid in full on 9 June 1990, that is, three months after the settlement date.
The bill of sale provided for interest to be paid on the principal sum.
The bill of sale also noted that it was collateral to the mortgage which had been stamped to secure $67,000.
The bill of sale specified, in the schedule, the items of plant and equipment and motor vehicles to which it applied.
Mr and Mrs Butler made the following payments to the plaintiff:
(1)on 30 March 1990 the sum of $10,000 in reduction of the principal sum; and
(2)on 17 April 1990 $1172.50 by way of interest.
However, they then defaulted in paying the balance of the principal sum due on 9 June 1990.
On 12 July 1990, the plaintiff lodged caveat number E402359 over the property the subject of the unregistered mortgage.
The caveat was expressed to protect an estate or interest in the land arising by virtue of an unregistered mortgage dated 9 March 1990 to secure the sum of $67,000, and forbade the registration of any instrument unless it were expressed to be subject to the caveator's claim.
On 8 August 1990, pursuant to the bill of sale, and by reason of the default of Mr and Mrs Butler to pay the principal sum due under the bill of sale, the plaintiff appointed Norman Mel Ashton receiver and manager of the assets of Lesmurdie Removals.
Mr Ashton took control of the business on or shortly after 8 August 1990, collected moneys owing to the business and made payments to some creditors.
Mr and Mrs Butler say that a dispute arose between the parties as to whether a school bus and associated government contract which they owned was the subject of the bill of sale. They say that, to resolve this dispute, their daughter purchased the school bus from the receiver and made a payment to him on 15 October 1990 in the sum of $2500.
Mr and Mrs Butler also say that, notwithstanding this transaction, in March 1991, the plaintiff, through an agent, purported to "repossess" the same school bus and only agreed to release the bus to them on the payment of a further sum of $2000. Mr and Mrs Butler say that, rather than fall into a protracted dispute about the school bus, which they needed urgently, they agreed to pay the sum demanded, together with an amount of $216.80 on account of the agent's expenses.
In or about November 1990, Mr Ashton, as receiver and manager, ceased trading the business of Lesmurdie Removals as the business was not viable.
Mr and Mrs Butler say that, on or about 2 January 1991, Mr Ashton, as receiver and manager, finalised the receivership and made his only payment to the plaintiff in the sum of $3229.93.
Before that, on or soon after 5 November 1990, and following the cessation of the business by the receiver, the plaintiff served on Mr and Mrs Butler a notice of demand dated 5 November 1990, requiring immediate payment of all principal moneys, interest and other moneys owing under the mortgage.
Mr and Mrs Butler did not pay any money to the plaintiff pursuant to this notice of demand.
Mr and Mrs Butler say, and it is not in dispute, that the only payments they have made to the plaintiff are those set out above, comprising a total of $11,172.50.
In 1993 Mr and Mrs Butler retained their present solicitors to advise them concerning representations they say were made to them by the plaintiff and its agents prior to purchasing the business of Lesmurdie Removals. As a result, their solicitors wrote letters dated 1 April 1993 to the plaintiff, business agents who acted for the plaintiff on the sale of the business, and accountants who acted at material times for the plaintiff. The solicitors also wrote directly to Mr Robert Gadaldi, one of the directors of the plaintiff.
Mr and Mrs Butler's solicitors received a reply from solicitors acting for the plaintiff, which was dated 4 August 1993.
A "without prejudice" meeting was then held between the respective solicitors for the plaintiff and Mr and Mrs Butler. It failed to resolve the matters that had been put in issue.
The plaintiff took no further steps in relation to its earlier demand for payment of moneys under the unregistered mortgage from that time until it sent to Mr and Mrs Butler by registered post notices of default dated 6 February 2003, demanding repayment of the principal sum and interest thereon due under the mortgage.
In January 2003, just prior to serving these notices of default, the plaintiff caused its previously unregistered mortgage to be registered under the Transfer of Land Act 1893 (WA).
Mr and Mrs Butler say that they have not at any time since August 1990 given the plaintiff a written acknowledgement signed by them of the plaintiff's entitlement to any interest in respect of the mortgaged property, whether as mortgagee or otherwise. This is not disputed by the plaintiff.
The plaintiff does not dispute the chronological account of events set out above, although it plainly rejects the implication that it or its directors or agents misrepresented anything in relation to the business of Lesmurdie Removals at the time of its purchase by Mr and Mrs Butler.
By an affidavit of Patricia Elizabeth Gadaldi, dated 17 June 2003 and made for both her husband Robert Gadaldi and the plaintiff, Mrs Gadaldi says the plaintiff was wary about providing vendor finance to Mr and Mrs Butler in the first instance and encouraged them at that stage to sell the school bus they then owned, as it was valued at $75,000 and would have provided the money necessary for them to pay the purchase price in full. She says that Mr Butler said he could not sell it immediately, but could do so in the near future, which was, in fact, incorrect. She says Mr Butler told her that all he needed was a medical certificate to enable him to sell the school bus, but that was also incorrect.
Mrs Gadaldi says that the plaintiff's solicitors drew up the bill of sale to try to protect and safeguard the plaintiff.
Mrs Gadaldi says the failure of Mr and Mrs Butler to pay the principal sum of $67,000 has caused a number of difficulties, including health problems that she has suffered and has also led to the sale of her former home at Orange Grove.
Mrs Gadaldi further states that:
"The situation has not gone on over the years with complacency, my husband has tried over and over to come to a settlement agreement with the Butlers, only to be ignored."
Mrs Gadaldi recalls, for example, that, in 1993, such a request was "flatly refused". She says that, in 1994, Mr and Mrs Butler again were not interested in resolving the matter. And then again in March 1998, when Mr Gadaldi spoke to Mr Butler, Mr Butler was not interested in coming to an agreement. Mrs Gadaldi says that, in the year 2000, her husband again attempted to encourage Mr Butler to resolve the problem. Mrs Gadaldi also says that on 27 October 2002, Mr and Mrs Butler, together with their daughter, visited them. She says Mrs Butler then advised her that it was the Butlers' understanding that, after 12 years, "it was all squashed". She says Mr and Mrs Butler then offered her and her husband $15,000 for them to lift the caveat, which they refused. The Butlers do not deny these allegations concerning the various meetings or what was said by them or in their presence.
The impasse between the plaintiff and Mr and Mrs Butler has, therefore, continued more or less since the time the caveat was lodged on 12 July 1990 and Mr Ashton was appointed receiver of Lesmurdie Removals on or about 8 August 1990. Mr and Mrs Butler have failed to pay all of the principal sum of $67,000 due under the bill of sale and mortgage.
At all material times, the caveat has remained in place since it was lodged on 12 July 1990. However, (with the possible exception of the originating summons) at no material time has the plaintiff commenced any proceedings by way of action or suit in reliance on its rights or powers under the mortgage; nor has it at any time purported to apply for an order for foreclosure under the Transfer of Land Act.
In these circumstances, Mr and Mrs Butler contend that caveat E402359 cannot be sustained, as any interest that the plaintiff had in the property the subject of the caveat has been extinguished by reason of the Limitation Act.

The position under the mortgage

Under the mortgage, Mr and Mrs Butler agreed to pay on demand "so much of the Principal Sum as shall remain unpaid", together with interest and all other "Moneys Secured", which expression was defined to mean "the aggregate or any part of the Principal Sum and Interest and of other moneys due to or recoverable by the Mortgagee under the terms of this Deed or the Collateral Security". The latter expression was defined to mean "any instrument or agreement other than this Deed to secure the payment to the Mortgagee of the Moneys Secured". Plainly, the Collateral Security as defined, included the bill of sale.
By cl 2.3(1) of the mortgage, the mortgagee agreed not to demand repayment of the principal sum before the repayment date - 9 June 1990 - if every payment or instalment of the moneys secured was made within seven days of the date appointed for payment and there was otherwise no breach of the covenantor's covenants.
Under cl 3(13) of the mortgage, without being deemed to be a mortgagee in possession, the mortgagee was empowered, subject to the express provisions of the Transfer of Land Act or any other statute, upon becoming entitled to demand the payment of all moneys secured, do a number of things, including:
"(c)sell or lease the Mortgaged Property and any other property as one parcel;
…
(g)take possession of the Mortgaged property and demand and require the Mortgagor and all tenants occupiers and other persons claiming from through or under the Covenantor to vacate and give to the Mortgagee undisturbed possession of the Mortgaged Property … "

By cl 4(4) of the mortgage, any demand to be made under it was required to be in writing and signed by the party giving it and could be delivered or sent by registered post addressed to the mortgagee at the address mentioned in the mortgage. Any such demand was deemed to have been received by the addressee at the expiration of 48 hours after it was posted.
As noted, the Butlers fell into default under the mortgage when they failed to pay the whole of the principal sum on 9 June 1990.
A notice of demand was served on each of them on or soon after 5 November 1990.
By cl 3(10) of the mortgage, a period of seven days was substituted for the period of default mentioned in s 59(1)(b) of the Property Law Act 1969 (WA) and in s 108 of the Transfer of Land Act (and referred to in s 107 of that Act).
Thus, the Butlers were in default under the mortgage for the purposes of cl 3(13) of the mortgage, on any view, no later than seven days after service - say, 48 hours later than 5 November 1990, or 7 November 1990 - that is, on or about 14 November 1990.
By reference to cl 2.3(1), the plaintiff may well have been entitled to demand repayment of the whole of the principal sum on or abut 9 June 1990, but I need not decide this point against the plaintiff for present purposes.
By virtue of cl 3(13) of the mortgage, the plaintiff became entitled, inter alia, to sell the mortgaged property or take possession of it once it became entitled to demand the payment of all moneys secured. Again, at the very latest, this was 14 November 1990.
By virtue of s 121 of the Transfer of Land Act, the plaintiff would have been entitled to apply for an order for foreclosure six months after 9 June 1990, or at the very latest, six months after 14 November 1990.
The plaintiff would also have been entitled to commence an action for the recovery of the moneys due under the mortgage on the express personal covenant to repay or the covenant implied under s 113 of the Transfer of Land Act, upon the Butlers' default to repay the principal sum on 9 June 1990.

The operation and effect of the Limitation Act

The Limitation Act, as the long title to the Act states, is an Act to consolidate and amend the law relating to the limitation of time for commencing actions and suits.
By s 3 of the Act, unless inconsistent with the context or subject matter, "action" means a "civil proceeding commenced, in the Supreme Court by writ or in such other manner as may be prescribed by Rules of Court, or in a Local Court or other inferior court in the manner prescribed by or under the Act conferring jurisdiction on such court".
A "civil proceeding" is not defined in the Limitation Act but has a wide meaning and encompasses any proceeding that broadly speaking is not of a criminal nature. It has been interpreted as a process for the recovery of individual right or redress of individual wrong; inclusive in its proper legal sense, of suits by the Crown: Bradlaugh v Clarke (1883) 8 App Cas 354.
Having regard to the context in which "action" is defined, it is clear the civil proceeding is one in a court and not a mere administrative process before some administrative official or body.
It may be accepted for present purposes that an application made under s 138C of the Transfer of Land Act by the person who lodged a caveat under that Act, for an order of this Court extending the operation of the caveat, is a "civil proceeding" and thus an "action" for the purposes of the Limitation Act. By contrast, the mere lodgment of a caveat under that Act is not an "action".
The Limitation Act affects all manner of actions and suits, including actions or suits that, generally speaking, concern land. A number of the provisions deal expressly with "entry" upon land and an action "to recover any land".
The operation and effect of the Limitation Act has been the subject of relatively recent consideration by the Law Reform Commission of Western Australia in its report in Project No 36 (II) on Limitation and Notice of Actions, published in January 1997. Sykes & Walker, "The Law of Securities", The Law Book Company, 1993, 5th ed, especially in ch 19 "Limitation of Actions", also usefully discusses the Limitation Act as it relates to actions and suits with respect to land. These two sources, and the authorities to which they refer, are reflected in these reasons.
In relation to the plaintiff's mortgage, initially unregistered but more recently registered under the Transfer of Land Act, the remedies or rights available to the plaintiff as mortgagee under the mortgage and the Act in the event that the second defendants as mortgagors should default under the terms of the mortgage in respect of the repayment of the principal sum due and payable thereunder, may broadly be described as the personal right of the plaintiff to sue on the covenant to pay and the plaintiff's rights to enter, to exercise the power of sale and to foreclose on the mortgage in respect of the land to which the mortgage relates.
The right of a mortgagee to make entry or bring an action or suit to recover land is specifically controlled by s 35 of the Limitation Act. This is so even though, more generally speaking, the terms of s 4 of the Limitation Act would also appear to be applicable to such entry or such an action or suit.
Section 4 (which is based on the equivalent provision in the Real Property Limitation Act 1833 (Eng)) relevantly prevents a person from making an entry or distress or bringing an action to recover any land or rent, but within 12 years next after the time at which the right to make such entry or distress, or to bring such action, shall have first accrued to the person making or bringing the same.
An action for foreclosure of a mortgage of "old system" land has long been held to be "an action to recover land": see Heath v Pugh (1881) 6 QBD 345 at 364 per Lord Selborne LC; Harlock v Ashberry (1882) 19 Ch D 539.
The land here, however, is registered under the "Torrens system" and is effected by the Transfer of Land Act, the significance of which is discussed further below.
Section 5(c) of the Limitation Act (which also owes itself to the 1833 English Act) sets out when the right to do any of these things shall be deemed to have first accrued. Section 5(c) states that, when the person claiming such land claims in respect of an estate or interest in possession granted, appointed, or otherwise assured by any instrument (other than a Will) to him or some other person through whom he claims and no person entitled under such instrument has been in such possession or receipt, then such right shall be deemed to have first accrued "at the time of which the person claiming … became entitled to such possession or receipt by virtue of such instrument".
Thus, if an action to foreclose on the mortgage of old system land were to be brought by a plaintiff in any case it would, subject to s 35 to which I shall soon turn, be affected by ss 4 and 5(c). The question would be whether 12 years had passed since the right to bring the foreclosure action first accrued to the plaintiff. That, in turn, would be affected by the determination of the date when the plaintiff became entitled to possession under the mortgage.
Sykes & Walker, at pages 917 ‑ 918, discuss the ambit of the limitation rule set out in ss 4 and 5 of the Limitation Act to old system land, and the relevance of s 35, in these terms:
"As regards the right to bring a foreclosure action, the natural conclusion would probably be that the right would not accrue until default has occurred. However, in view of the fact that an action for foreclosure had been held to be an action to recover land, the actual result, on the original provisions of the legislation, would be that the right and title of the mortgagee would be lost after the elapse of the stipulated period as from the time of the accruer of the right of entry. It was thus possible that the rights of the mortgagee could be extinguished even when no default had occurred. [I interpolate to note that this was because the right of entry was considered to accrue to the mortgagee as from the date of the mortgage instrument, by virtue of the third rule stated in the English Act of 1833, replicated in s 5(c) of the Limitation Act]. The same could apply to other situations than that of foreclosure. In view of the first of these considerations and possibly of both, the English legislature passed s 1 of the [Real Property Limitation] Act of 1837, which was copied in all the Australian States, but has now been banished from the four 'modern State' statutes. This section, in the form in which it appears in Western Australia [s 35] but not South Australia, provides that it shall be lawful for any person claiming under any mortgage of land to make entry or bring action or suit to recover the land within 12 years next after the last payment of any part of the principal money or interest secured by such mortgage 'although more than 12 years may have elapsed since the time at which the right to make such entry or bring such action … shall have first accrued'."
In other words, s 35 of the Limitation Act was intended to ameliorate the potential loss by a mortgagee of the right to commence a foreclosure action in respect of old system land more than 12 years after the date of entry into the mortgage.
Section 35 expressly provides that:
"It shall and may be lawful for any person entitled to or claiming under any mortgage of land (being land within the definition contained in section 3) to make an entry or bring an action or suit to recover such land at any time within 12 years next after the last payment of any part of the principal money or interest secured by such mortgage, although more than 12 years may have elapsed since the time at which the right to make such entry or bring such action or suit shall have first accrued, anything herein notwithstanding."
When read with s 30, ss 4 and 35 are plainly meant to have an extinctive effect. Section 30 expressly provides that where these limitation periods apply "the right and title of such person to the land or rent, for the recovery whereof such entry, distress, action or suit respectively might have been made or brought within such period, shall be extinguished".
Sykes & Walker, at page 918, say that if there never has been any payment of principal or interest, then it would appear that one is relegated to the date on which, by virtue of ss 4 and 5(c), the right would have first accrued - that is, the date of the mortgage in the case of a right to enforce possession or the date of default in the case of foreclosure. The learned authors also state that s 35:
"… moreover, would not confer any positive extinctive effect on the lapse of time since last payment, that is to say, the mortgagee is not barred by virtue of non‑payment if, [under s 4 and s 5] of the Act, time had not run against her or him."
The learned authors further note, at page 918, that it seems that the mortgagor has the onus of showing not only that the requisite period has elapsed since the mortgagee's right to make an entry or bring an action first accrued, but also that such period has elapsed since the last payment of principal or interest: Cameron v Blau [1963] Qd R 421 at 425. I accept this is so.
In this case, the land of the second defendants, in respect of which the plaintiff initially held an unregistered mortgage which has, in more recent times, been registered, is not "old system" land, but land registered under the Transfer of Land Act - or the "Torrens system". For that reason, the question of the applicability of the Limitation Act provisions found in ss 4 and 35 is raised for consideration.
In that regard, Sykes & Walker at page 941 state:
"The application of lapse of time to the Torrens system mortgage is complicated, so far as concerns the question of remedies which depend upon the assertion of title to the land, by the extreme difficulty in most cases of determining the nature of the link between the general law limitation statutes and the Torrens title Acts, a difficulty which is heightened by the difference in formal structure between the two types of mortgage involved. The matter is further complicated by the existence of provisions in all the State Torrens statutes themselves (though not in the legislation of the Territories) which purport to allow the placing on the register of a title derived through possession, the applicability of which, however, to the mortgage situation, save now in New South Wales and Tasmania, is by no means clear. On the other hand, when one turns to the limitation of remedies to recover the mortgage debt as such, there appear to be in general no reasons why the application of the limitation principle should be any different in relation to the Torrens mortgage from what it is in relation to old title securities."
The point in relation to the Limitation Act is well made when one considers the statutory right to seek an order of foreclosure under s 121 of the Transfer of Land Act. An application for such an order would not appear to be an "action" as defined by the Limitation Act. It may be considered a proceeding of some sort, but it is not one to which the Limitation Act provisions purport to apply because it is not dealt with by a Court. This outcome makes sense when one considers the history of the Limitation Act provisions in this State. They were inherited from England and intended to apply to old system land, at a time well before the Torrens system had been introduced in Western Australia and the statutory foreclosure procedure was created.
Nonetheless, the Limitation Act provisions in ss 4 and 35 may still have application. Sykes & Walker discuss the question of extinction of title and remedies as they affect the mortgagee of a Torrens system title at pages 942 ‑ 947. They say, at 942, that, conceivably, the title of the Torrens mortgagee could be extinguished in one of three ways:
(a)by direct provisions in the Torrens title Acts allowing the placing on the register of a full statutory title in the mortgagor derived through possession;
(b)by direct application of the general law limitation provisions; or
(c)by virtue of extinguishment of the right to sue for the mortgage money.
In the present case, it is clear that the mortgagee has not taken possession of the mortgagor's land pursuant to any power it has under the mortgage or the Transfer of Land Act. In that regard, the Butlers, as mortgagors, have remained in possession of the land at all material times, and the plaintiff has not purported to enter into possession. Whether the Butlers would be entitled to a "statutory title" derived through possession is not a matter that arises for direct consideration on the application before me.
Further, there does not seem to be any statutory provision in Western Australia which extinguishes the right of the mortgagee under a mortgage to sue for the mortgage money. Indeed, Sykes & Walker, at page 942, state that this possibility is one that arises only from special statutory provisions and exists only to its full extent in New South Wales and possibly in South Australia and Tasmania.
The only relevant question falling for consideration on this application, then, is whether the title of the plaintiff as mortgagee under the mortgage has been extinguished by direct application of the Limitation Act provisions of ss 35 and 4.
In this regard, Sykes & Walker at page 945 consider the position in Western Australia. They say, firstly, that the Limitation Act provisions do not seem to directly bar the right to foreclose. This is a conclusion with which one might agree for the reasons set out above. As a matter of statutory interpretation, the administrative process of seeking an order of foreclosure from the Commissioner of Titles is not an "action" as defined by s 3 of the Limitation Act and so, on their face, neither ss 35 nor 4 would apply to it.
However, the question remains whether the mortgagee's title to the mortgagor's land in a case such as the present has otherwise been extinguished. In this regard, attention must be directed to s 30 of the Limitation Act, which provides as follows:
"At the determination of the period limited by this Act to any person for making an entry or distress, or bringing any action or suit, the right and title of such person to the land or rent, for the recovery whereof such entry, distress, action, or suit respectively might have been made or brought within such period, shall be extinguished."
Thus, where under ss 35 or 4 an action for recovery of land is no longer available by reason of the limitation period having expired, "the right and title of such person to the land … shall be extinguished".
Section 30 appears to extinguish the title that the person who might have brought such suit had in such land completely and not merely for the purpose of that action. Such a distinction may, of course, be more apparent than real. What is important to note is that entry and an action to recover land are no longer available.
Thus, Sykes & Walker at page 945 conclude that, while the right of foreclosure may not be directly barred:
" … however, as the mortgagee would lose her or his title 12 years from the time at which her or his right to enter accrued (provided there was no part payment), [Limitation Act 1935 (WA), ss 4, 35] it does seem that this fact is of no great significance. The position as to the right of the mortgagor to secure a full registered title and removal of the mortgage from the register seems to be the same as in Victoria [Transfer of Land Act1893 (WA) s 222. The phraseology is 'any person claiming to have acquired … an estate in fee simple in possession']."
Indeed, it was recognised before the enactment of a modern limitation statute introduced in Victoria in 1955, that general law limitation statutes similar to the provisions that still apply in Western Australia under the Limitation Act, applied to a Torrens mortgage.
In In re the Australian Deposit and Mortgage Bank Ltd [1907] VLR 348, the Full Court of the Supreme Court of Victoria held that, where a mortgagee of land under the Transfer of Land Act 1890 (Vic) had entered into possession of the land and was in receipt of the rents and profits thereof, his power of sale under the mortgage was not affected by the fact that his right to recover the mortgage money was barred by s 47 of the Real Property Act 1890 (Vic). Section 47 of the Victorian Act was in terms similar to s 32 of the present Western Australian Act.
Madden CJ, delivering the reasons of the Full Court, noted at 355 ‑ 356 that:
"The right of those who take security for loans so that they may be repaid has long been recognised at Common Law as being very comprehensive. The mortgagee has not only the right to sue on the covenants for principal and interest, but he also has the right conferred by the power of sale contained in the mortgage, the right of foreclosure, and further, the right to recover the mortgage money by the power of distress at the same time. It has always been held that those rights are severable, and that they or any of them may be exercised by the mortgagee for his protection and for the recovery of the mortgage moneys. It will be recognised that some of those are remedies against the land, while others are remedies which are operative by action in a court of law. To say, because one of those remedies by which the mortgagee could recover his money has by reason of sec 47 of the Real Property Act 1890 been lost to the mortgagee, he is precluded from all, is going to very great lengths. At Common Law the mortgagee has them all. These rights must be taken away from him expressly by Statute if they are to be taken away at all, and certainly the remedy by power of sale is not taken away from him expressly, and therefore we think that sec 47 of the Real Property Act 1890 by itself, giving it its fullest meaning, does not deprive the mortgagee of his power of sale."

The Full Court also dealt with the effect of s 43 of the Victorian Act, which was in the same terms as in s 30 of the Western Australian Limitation Act. It was argued that s 43 had the effect of extinguishing the right or title of a mortgagee to exercise the power of sale under a mortgage. However, Madden CJ observed that s 43 was referable to s 18 of the Victorian Act, which, in turn, was similar to s 4 of the Western Australian Limitation Act. The Chief Justice found it was not referable to s 47. The Chief Justice stated, at 357:
"The action or suit referred to in sec 43 is one for the recovery of 'the land or rent' mentioned in sec 18, and not for 'any sum of money' within sec 47."
However, in Australian Deposit and Mortgage Bank Ltd, the mortgagee was already lawfully in possession of the land to which the mortgage related when it purported to exercise the power of sale under the mortgage. The Court therefore found there was nothing in the limitation provisions which prevented the mortgagee from exercising the power of sale given to it by the mortgage. The Chief Justice added, at 357:
"It is to be remembered that the mortgagee has been and is in possession of this land, and that we are in no way at present concerned with any difficulties that might arise in other circumstances."
In Addison v Billion [1983] 1 NSWLR 586 at 591, Wootten J considered that the New South Wales equivalent of s 4 of the Western Australian Limitation Act "can have no application where a mortgagee has lawfully entered into possession".
In the present case, however, the plaintiff as mortgagee has not at any time entered into possession of the land the subject of the mortgage and is not currently in possession of the land. The question that arises is whether this fact affects the ability of the plaintiff mortgagee now to exercise a power of sale under the mortgage. In my view, it is of considerable importance.
If s 30 of the Limitation Act applies so that the mortgagee's right and title to the land has been extinguished, then it would seem to follow that the right to exercise a power of sale in respect of the land or to apply for an order of foreclosure under an Act must also have been lost.
That s 30 has this extinguishing effect is supported by what Cussen J said in the Full Court of Victoria in The National Bank of Tasmania Ltd (In Liq) v McKenzie [1920] VLR 411 at 422 ‑ 423. When referring to s 43 of the Victorian Act (the equivalent of s 30 of the Western Australian Limitation Act), Cussen J stated:
"Sec 43, for the present purpose, may be stated as a section which provides for the extinction (after the determination of the statutory period) of the right or title of a person to land (including an interest in land), for the recovery whereof an action or suit might have been brought within such period. From the terms of this section we think that it has no direct application to the extinction of personal rights and liabilities, even though they happen to be secured or charged on land."
Cussen J then adopted the distinction between personal remedies and what might be called rights against the land explained by Romer J in Kibble v Fairhorne [1895] 1 Ch 219 at 224 ‑ 225:
"A mortgagee has two remedies: one being against the land comprised in his mortgage, and the other against the mortgagor, personally, to recover the money secured; and as regards these two classes of remedies there are in the Statutes of Limitations two distinct sets of provisions. Take the Act 3 & 4 Will. 4, c.27, and it will be found that there are two sets of enactments, one dealing with the rights against the land, and the other with personal remedies. These two sets of enactments stand on an entirely different footing. As to the land, it is provided that when the statutory limitation operates, not only is the remedy against the land barred, but the mortgagee's interest in it is extinguished. In the second set of provisions - those relating to personal remedies - the statutory limitation has a different effect. There only the remedy is barred, the debt itself not being extinguished. In this case … the charge itself was extinguished … The mortgagor was, throughout the statutory period, in possession of the mortgaged property, and throughout this period the equitable mortgagee could have taken proceedings to enforce his right to the land. For instance, he could have brought a foreclosure action. That is an action for recovery of land … Therefore … on the expiration of twelve years … the mortgagee … who up to the end of that time could have taken proceedings, was barred, not only as to his remedy, but as to his right to the land, and his charge was gone."
In respect of this dicta, Cussen J added, at 423, that the words "not only as to his remedy" clearly refer to his remedy against the land, and not to a purely personal remedy. Cussen J added, at 423:
"What was said by the learned Judge suggests, as do statements by other Judges, that where a security or other charge has suffered extinction, any claim to money dependent upon or ancillary to such charge is also extinguished."
The primary question therefore appears to be whether a right accrued to the plaintiff at some point on the default of the Butlers under the mortgage, whereby the plaintiff was entitled to enter or to commence an action to recover the land the subject of the mortgage. On the face of it, upon default, the plaintiff as mortgagee accrued the right to enter and take possession of the mortgaged property: see cl 3(13)(g), referred to above. The right to exercise the power of sale then also accrued to the plaintiff under cl 3(13)(c). This power must be taken to include the power to enter the land as the exercise of the power would be inconsistent with the mortgagor's right to possession.
On the face of it, therefore, as of 14 November 1990, at the latest, the plaintiff had accrued the right to enter into possession of the land. No such entry, on the face of it, was made within 12 years of such date. Section 30 of the Limitation Act would, therefore, appear to apply so as to extinguish the right and title of the plaintiff as mortgagee to the land, at least so far as any action relating to possession of the land is concerned.
However, a question arises whether, in the factual circumstances of the present case, s 35 applies so as to make some other limitation period applicable.
As noted above, some part of the principal money secured by the mortgage was paid. Thus, s 35 is brought into operation. There is however, as also noted above, a question whether the moneys paid by the receiver appointed under the terms of the bill of sale should be treated as a "payment of any part of the principal money … secured by such mortgage", for the purposes of s 35. There is also a further question whether the later payment by the second defendants to the plaintiff in March 1991, a payment made by the Butlers in effect under protest to secure the release of the school bus they claimed was not affected by the bill of sale and which their daughter had earlier purchased in any event from the receiver, should properly be treated as a payment of part of the principal money secured by the mortgage. However, for the reasons which follow, it does not seem necessary finally to resolve these questions. I am inclined to think that, despite the second defendants' contentions to the contrary, the 1991 payment is a payment of part of the principal money secured by the mortgage.
The practical consequence of one date or the other being the date of last payment of part of the principal money secured by the mortgage is that the 12 year period for the type of mortgagee's action affected by s 35 would be one or other of the following:
(1)12 years from 17 April 1990 (when the payment of $1172.50 was made by way of interest payable on the principal sum); or
(2)12 years from 2 January 1991 (when Mr Ashton as receiver and manager finalised the receivership and made his only payment to the plaintiff in the sum of $3221.93); or
(3)12 years from 15 October 1990 (when the daughter of the second defendants purchased the school bus purportedly secured by the bill of sale from the receiver and paid him the sum of $2500.00); or
(4)12 years from March 1992 (when the second defendants, rather than fall into a protracted dispute with the plaintiff about the same school bus, paid the plaintiff the total sum of $2216.80 under protest in order to secure its release from the possession of the plaintiff who had purported to "repossess" it).
The payment referred to in (3) may be discounted because, whatever else one should make of that transaction, it was not a payment made by the second defendants under the mortgage, but a purported purchase of goods by a third party and not under the mortgage.
Of the other three dates, if one were to accept the latest payment date of principal or interest for the purposes of s 35, as March 1991 (referred to in (4) above), then the 12‑year limitation period for an action affected by s 35 would expire in March 2003.
If March 2003 is accepted as the relevant date for purposes of s 35 of the Limitation Act, the question arises whether the plaintiff, as the person who is entitled under the mortgage of the land to make an entry or bring an action to recover the land the subject of the mortgage, in fact made entry or commenced any such action by March 2003.
On the face of it, unless one is to characterise the plaintiff's lodgement of the caveat in July 1990, or the application to this Court to extend the operation of that caveat by originating summons dated 10 October 2002, as such an entry or such an action, then no such entry or action has been made or commenced by the plaintiff within the 12‑year limitation period.

The nature of the caveat and the s 138C Transfer of Land Act proceeding

In my view, the mere lodgement of the caveat does not constitute either an entry into possession of the land secured by the mortgage or an action to recover such land. It is but a temporary means of protecting an interest in land claimed by a caveator. In Eng Mee Yong v Letchumanan [1980] AC 331 at 335, Lord Diplock giving the advice of the Privy Council observed:
"The caveat under the Torrens System has often been likened to a statutory injunction of an interlocutory nature restraining the caveatee from dealing with the land pending the determination by the court of the caveator's claim to title to the land, in an ordinary action brought by the caveator against the caveatee for that purpose. Their Lordships accept this as an apt analogy with its corollary that caveats are available, in appropriate cases, for the interim protection of rights to title to land or registrable interest in land that are alleged by the caveator but not proved."
To similar effect, in Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42 at 50, Owen J (with whom the other members of the Full Court agreed) observed that:
"The purpose of the caveat is to restrain the registered proprietor from dealing with the land in a way which will defeat or derogate from the incidence attaching to that proprietary interest until the respective rights of the parties have been honoured (if there is agreement) or determined (if there is disagreement)."
If follows in my view that while a caveat may be equated with a statutory injunction of an interlocutory nature, it is not, in itself, a document or a procedure to be equated with the act of entry into possession of land under an instrument or the bringing of an action to recover land. The process of lodging a caveat is merely a process by which the right to claim some interest in an ordinary action may be preserved. Any action in respect of that interest - such as a foreclosure action - will need, independently or separately of the caveat, to be commenced in order to realise it. As noted by the Privy Council, the caveat is but "an interim protection" of rights alleged, but not proved. An "ordinary action" - as the Privy Council called it - then needs to be brought by the caveator against the caveatee in order to prove the right, if the caveator wishes to vindicate its rights.
In my view, the same observations should be made in respect of an application by a caveator under s 138C of the Transfer of Land Act to this Court for an order extending the operation of a caveat. It is but a "civil proceeding" in this Court to extend the operation of a caveat. It is not an act of entry and it is not an action to recover land. The commencement of such a civil proceeding cannot be equated with the "ordinary action" required to vindicate a right or to obtain a particular remedy provided for by a security instrument.
To put the matter directly, neither the lodgement of the caveat nor the application to this Court to extend the operation of the caveat constitutes either an entry into possession of the land or an action or suit to recover the land for the purposes of either s 35 or s 4 of the Limitation Act.

Whether caveat can be maintained

It follows, in my view, that the 12‑year time period in which the plaintiff might have sought to enter into possession or to bring an action for recovery of the land the subject of the mortgage, has passed without such action being taken. As a result, the right and title of the plaintiff as mortgagee to the land is extinguished by s 30 of the Limitation Act.
In those circumstances, the question arises whether the plaintiff is entitled to maintain its caveat and the proceedings it has commenced by originating summons to extend the caveat. Does it have a caveatable interest, that is to say, an interest or estate capable of supporting the continued operation of the caveat?
At this point it is important to emphasise, as noted earlier, that the rights of the plaintiff against the second defendants under the mortgage may be both in respect of entry into possession or recovery of the land, as well as for recovery of the money under the personal covenant set out or implied in the mortgage. Neither s 35 nor s 4 of the Limitation Act applies to an action for recovery of the money under the personal covenant in the mortgage. However, such an action would be affected by other provisions of the Limitation Act.
Section 38(1)(c)(v) of the Limitation Act provides that the limitation period for all actions founded on any "simple contract" is six years. However, s 38(1)(e)(i) provides that:
"Subject to sections 4 and 32, and to paragraph (d) of this subsection, actions of covenant or of debt upon any bond or other specialty; …
20 years."
This is subject to a proviso that is not presently relevant.
On the face of it, an action for recovery of the money under the covenant in the mortgage would be an action "of covenant" and also a "specialty" (see Sykes & Walker at page 933) and so one that might be commenced within 20 years.
However, s 32(1) of the Limitation Act, to which s 38(1)(e)(i) is subject, provides that no action or suit or other proceeding shall be brought to recover any sum of money secured, amongst other things, by a mortgage at law or in equity, but within 12 years next after a present right to receive the same shall have accrued, unless in the meantime some part of the principal sum or some interest thereon, shall have been paid, or some acknowledgement of the right thereto shall have been given in writing by the person by whom the same shall be payable, or his agent, to the person entitled thereto; and in such case no such action or suit or proceeding shall be brought but within 12 years after the payment or acknowledgement or the last of such payments or acknowledgements (if more than one) was made or given. Section 32(2) extends this rule to an action or suit on a covenant by a mortgagor in a mortgage deed.
As a result, s 32, to which s 38(1)(e)(i) is subject, appears to require an action for recovery of the moneys secured by the mortgage to be commenced within 12 years from the time the right to receive it accrued or when payment was made or some acknowledgement of the right thereto was given in writing signed by the person to whom the same was payable.
In respect of s 32 of the Limitation Act, Sykes & Walker, at page 931, confirm the view discussed above that actions for the recovery of money charged on land may be of two types: first, an action brought directly against the mortgagor on the personal covenant in the mortgage; secondly, an action "against the land", for instance by application for the appointment of a receiver or a suit for a judicial sale. The learned authors state that the last type of action must be distinguished from an action for "recovery" of the land, and that there is a difference between an action to recover land (to which ss 35 and 4 of the Limitation Act apply) and an action brought against the land to recover the money: see Levy v Williams [1925] VLR 615 at 625. (Although Romer J in Kibble's case (supra) seems to have used the expression "against the land" in a different context.)
Sykes & Walker accept, at page 932, that, although provisions such as ss 4 and 35 of the Limitation Act have an extinguishing effect on the title of the mortgagee under s 30 of the Act, they do not affect the right of the mortgagee to pursue the remedy for recovery of the money by action on the personal covenant: see National Bank of Tasmania Ltd (In Liq) v McKenzie (supra). I accept that this is so. Sykes & Walker, at 932, also contend that, conversely, the right to take action for recovery of the money may be gone, and yet title to the land may still exist, as in Levy v Williams (supra) where the personal remedy was gone but title still remained, as the mortgage was one of a reversionary interest which did not fall into possession until less than 15 years before action was brought. However, in the present case, there is no question of there being a reversionary interest in existence.
As a result, in my view, the title of the plaintiff, as mortgagee to the land, has been extinguished by s 30 of the Limitation Act, at least so far as any action relating to possession of the land is concerned. It follows, in my view, that the plaintiff is unable to assert any relevant estate or interest in that land and so is unable to maintain its caveat.

Conclusion

The second defendants have discharged an onus that they properly bear to make out the limitation period prescribed by s 35 of the Limitation Act, read in conjunction with s 4, with the effect that the plaintiff's title to the second defendants' land is extinguished by s 30 of the Act and the plaintiff can show no estate or interest sufficient to support the caveat.
Because the maintenance of the caveat cannot be justified, the application of the plaintiff to this Court by originating summons to extend the operation of the caveat, should be dismissed.
However, the plaintiff submits that if the Court should conclude that the limitation requirements of ss 35 and 4 of the Limitation Act apply, the plaintiff should nonetheless be entitled to pursue an action for the recovery of the money due and payable under the mortgage. Be that as it may - and I consider there is a formidable obstacle in the path of the plaintiff if it wishes to pursue such a cause of action, having regard to the terms of s 32 of the Limitation Act - it will be necessary for the plaintiff to institute an ordinary action to that end.
The plaintiff submits that it should be given the leave to file pleadings in the present proceedings to pursue such an action. As I have already indicated above, such a submission is misconceived. It is founded on a belief that an application by originating summons to extend the operation of a caveat may be converted into an ordinary action or a covenant or specialty by an order made under O 58 r 27(1) of the Rules of the Supreme Court. That simply is not so. If the plaintiff wishes to pursue an action for recovery of moneys due under the mortgage it must commence the appropriate ordinary action in this Court.

Whether or not such an action would be barred by the Limitation Act is an issue I need not resolve on this application.

Order

For these reasons, but subject to hearing further from counsel, it appears the following orders should be made:
(1)The plaintiff's application dated 9 May 2003,be dismissed.
(2)The originating summons filed by the plaintiff and dated 10 October 2002, be dismissed.