Shawyer v Amberday Pty Ltd (in liq)

[2001] NSWSC 399

CITATION:	SHAWYER v. AMBERDAY P/L (IN LIQ) [2001] NSWSC 399
CURRENT JURISDICTION:	EQUITY
FILE NUMBER(S):	SC 2773/98
HEARING DATE(S):	30/04/01; 1-2/05/01
JUDGMENT DATE:	18 May 2001
PARTIES :	Gladys Shawyer - Plaintiff Amberday Pty Ltd - Defendant
JUDGMENT OF:	Bryson J at 1

COUNSEL :	D. Robinson - Plaintiff J. Chippindall - Defendant
SOLICITORS:	Cunich Lawyers M.D. Nikolaidis & Co.
CATCHWORDS:	EQUITY - Equitable interests - competition of priorities between mortgage on RPAct form, unstamped, unregistered, undated, incomplete, incorrect in statement of amount lent, held by director of borrower who regarded herself as holding it for the lender but whose counsel told the Receiver before he accepted appointment that the assets were unencumbered, and the Receiver's lien for idemnity for expenses, remuneration and liabilities incurred in receivership to which he consented to be appointed by the Court - held that the unregistered mortgage was a mere equity and did not compete with the Receiver's equitable interest - alternatively the Receiver's claim was the better equity.
LEGISLATION CITED:	Protected Estates Act 1983 (NSW) Trustee Act 1925 (NSW) Conveyancing Act 1919 (NSW)
CASES CITED:	Re Application of Central Commodities Services Pty Ltd & Ors (1984) 1 NSWLR 25 Re Ashpurton Estates Ltd [1983] Ch 110 Shirlaw v. Taylor (1991) 31 FCR 222 Weston & Anor v. Carling Constructions Pty Ltd (In prov liq) & Anor (2000) 35 ACSR 100 Hewett & Ors v. Court & Anor (1982) 149 CLR 639 Double Bay Newspapers Pty Ltd & Ors v. A.W. Holdings Pty Ltd & Ors (1997) 42 NSWLR 409 Westminster Bank Ltd v. Lee [1956] 1 Ch 7 Cave v. Cave (1880) 15 ChD 637 Phillips v. Phillips (1861) 4 De GF&J 208, 45 ER 1164 C.I.B.C. Mortgages PLC v. Pitt [1994] 1 A.C. 200, Choudhri v. Palta & Ors [1994] 1 BCLC 184 JJ Leonard Properties Pty Ltd v. Leonard (WA) Pty Ltd) (In liq) (1988) 6 ACLC 247 Nunn v. Wily [2001] NSWSC 317 Ayerst v. C&K (Construction) Ltd [1976] AC 167 Commercial Banking Co. of Sydney Ltd v. George Hudson Pty Ltd (In Liq) (1973) 131 CLR 605 Australian and New Zealand Banking Group Ltd v. Widin [1990] 26 FCR 21
DECISION:	See para 53. Summons is dismissed with costs.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON J.

FRIDAY 18 MAY 2001

2773/98 GLADYS SHAWYER v AMBERDAY PTY LTD (In Liq)

JUDGMENT

1   HIS HONOUR: These proceedings relate to competing claims in equity to interests in real property of which the defendant is registered proprietor. Amberday carried on wholesale retail butchery business under the name Natural Meats at 29 Ruddock Street Corrimal, New South Wales. It operated a large boning and slicing room, meat was packed and placed on display to the general public in a walk-in cool room, sold and delivered to local restaurants and clubs and sold wholesale. Its land was in three parcels; Lots 1 and 13 are freehold titles under the Torrens system in Folio 1/832917 and Folio 13/89943, with one main building which stood partly on one lot and partly on the other. Amberday also held a third lot, a small adjacent parcel on which some equipment stood, on a lease from year to year from the State Rail Authority of New South Wales. The claims relate to the Torrens system land. Amberday Pty Ltd acquired the land by purchase from Malcolm Waters Services Pty Ltd for $230,000; Exhibit B - the Contract for Sale was dated 25 August 1997, the purchase was settled on 3 September 1997 and Transfer 3385224 (which actually bears date 2 September 1997) was registered on 8 September 1997.

2   Amberday was formed on 12 August 1997 as a shelf company. Mrs Susanne Marie Bell and Mr Ian James Patten became directors on 28 August 1997 when the formation directors resigned, and remained directors throughout the events. Each held 25 percent of the shares, and Mrs Bell’s son and a person associated with Mr Patten each held a further 25 percent of the shares. Mrs Bell commenced proceedings 1382 of 1998 on 13 February 1998, based on oppression and her exclusion from participation in Amberday’s affairs, and in an ex parte application that day she obtained an order of this Court appointing Mr A.H.J. Wiley as interim receiver and manager of Amberday’s property. Mr Wiley was first appointed up to 18 February 1998, and his appointment was later extended. With considerable difficulty he took control of Amberday’s premises, business and affairs; these events and the difficulties appear in his report to the Court dated 17 February 1998 and second report made on 13 March 1998. Mr Wiley was unable to obtain possession of books and records appropriate to Amberday’s business, and the few records he did obtain were unsystematic and of little use. He soon concluded from his conduct of the business that Amberday was insolvent. On 14 April 1998 Amberday was wound-up by an order of this Court and Mr Wiley was appointed liquidator. In my understanding this brought his appointment as receiver and manager to an end.

3 The freehold land at Corrimal is Amberday’s only significant asset. No mortgage over the land is registered. On 13 February 1998 there were no significant encumbrances on the register; the second schedule notifications for Lot 1 related to qualified title, an easement for electrical transmission lines and an easement for signalling cables, and the notifications for Lot 13 related only to reservations and conditions in the Crown Grant. Mrs Tina Waters lodged Caveat 3673908 on 17 December 1997 and made this claim against Lot 1 and Lot 13: “The caveator claims an equitable interest in the land pending resolution of matrimonial proceedings between her and her husband, Malcolm Waters, who is a beneficial owner of Amberday Pty Ltd, by reason of matrimonial assets being used to acquire the land.” This caveat was removed in March 1998 after proceedings for its lapse had been initiated by Amberday before the receivership. On 9 March 1998 the liquidator of Malcolm Waters Services Pty Ltd lodged Caveat 3842122 and made this claim: “The caveator claims an interest in the land as beneficiary of a constructive trust arising out of the transfer of the land to the registered proprietor at an undervalue in August 1997 and in circumstances in which that transfer is void pursuant to the Corporations law.” This caveat was later withdrawn after proceedings for its lapse were initiated by Mr Wiley as liquidator. The claims by Mrs Tina Waters and Malcolm Waters Services Pty Ltd have not been taken any further and can be disregarded.

4   Caveat 3814193 was lodged on behalf of the plaintiff Mrs Shawyer on 23 February 1998. It relates only to Lot 13 and the interest claimed is: “Mortgagee pursuant to mortgage dated on or about September 1997, or alternatively, as equitable chargee pursuant to agreement between registered proprietor and caveator in or about September 1997.” The claim refers to an instrument being “unregistered mortgage of $143,000” the date of which was given as September 1997 and the parties as Amberday Pty Ltd. On 13 March 1998 Mr Wiley lodged Caveat 3854645 over Lot 13 and Caveat 3854659 over Lot 1 in which the interest claimed was “Interest in land of Andrew Hugh Jenner Wiley in his capacity as receiver and manager of Amberday Pty Ltd ACN 079683024 pursuant to Order of the Supreme Court of New South Wales 13 February 1998.” The caveats lodged by Mrs Shawyer and Mr Wiley are an epitome of the matters now in dispute.

5   Mrs Shawyer’s caveat identified her surname erroneously as “Sawyer”; however there is no room for doubt that she was the caveator. It related only to Lot 13, although at all times the interest which she claims has been supported by the same facts and circumstances for both lots. It is anomalous that Mrs Shawyer’s caveat claims an interest over Lot 13 and not over Lot 1; however Mr Wiley did not learn of the claim through the caveat. Her caveat bore a duty stamp dated 20 February 1998 for $513 which was the appropriate stamp duty on a mortgage for $143,000; clearly, no stamp duty was paid on her mortgage before then. Her caveat was verified by a statutory declaration of Mr Malcolm Waters made on 20 February 1998 and was lodged by a law stationer for Messrs Kell Heard McEwan solicitors of Wollongong with a reference code indicating Mr J.E. McEwan then a partner of that firm.

6   Mrs Shawyer’s affairs are subject to administration under the Protected Estates Act 1983 (NSW). On 14 April 1989 this Court declared that she was incapable of managing her affairs and appointed Mr Malcolm Waters, who is her son, as manager of her estate, to act under the order and direction of the Court. On 18 July 1989 the Court made detailed directions conferring authority on Mr Malcolm Waters as her manager, and among other things he was directed to open a trust account at a bank and to pay all income and other moneys to the credit of the trust account. Mr Waters was given by Order 1(c) a power to invest in any of the securities authorised by ss.14 and 15 of the Trustee Act 1925 (NSW). Section 14 provided to the effect that the duty of a trustee to exercise ordinary business prudence in investment of funds was not limited by the provisions of the Trustee Act; and of course ordinary business prudence required that an advance of money by a trustee should be secured by registered first mortgage over land and should be for no more than a reasonable proportion of its value. Mrs Shawyer’s claim relates to money advanced by Mr Waters on her behalf and out of her funds, in a transaction in which she took no part as her affairs were wholly in his hands and under his management. Mr Waters continued to be manager until he was discharged by an order of 23 June 1998 and management was committed to the Protective Commissioner.

7   In the Summons dated 11 June 1998 Claim 2 was Mrs Shawyer’s principal claim: “An order that the defendant do all such things as are necessary to register the plaintiff’s mortgage over property located at and known as 29 Ruddock Street Corrimal.” There were ancillary claims for orders extending the caveat and other matters. Mr Wiley brought a Cross-claim on 4 April 2001 and Claim 1, his principal claim, is for a declaration that “as the court-appointed receiver and manager of Amberday Pty Ltd he had and retained an equitable charge or lien over the property and assets of Amberday Pty Ltd [for] the amounts of his costs, expenses and remuneration as such receiver and manager of Amberday Pty Ltd.” Claim 2 was for a declaration that such equitable lien or charge has priority over the amount (if any) payable under the mortgage claimed by the plaintiff. He also claimed orders for a reference to determine the quantum of his charge, withdrawal of Mrs Shawyer’s caveat and discharge of her mortgage and other matters.

8   These proceedings are another instance, of which there are many, in which claims for equitable interests which require care, thought and definition have been brought forward without pleadings; there are significant disputes about material facts and there would have been great advantages if each party’s case had been carefully defined and fully pleaded in writing. The context which is economically significant relates to rights which existed and claims which arose before the liquidation commenced. The land at Corrimal has not been sold so its realisation proceeds cannot be known; however if one or both of Mrs Shawyer and Mr Wiley has a mortgage or a lien as claimed it is very unlikely that any value would be left to be administered in the liquidation. Although the quantum of Mr Wiley’s claim remains to be determined and is appropriate to be referred to a Registrar or other referee to establish, it is obvious that it will greatly exceed any resources which could possibly be available either before or after satisfaction of Mrs Shawyer’s claim. In his affidavit of 10 July 2000 Mr Wiley put forward claims that his total costs and expenses of administration as receiver and manager up to liquidation were $174,446.20, that he had then incurred solicitor’s costs of approximately $70,000 and also liabilities totalling $34,486.91 for Group Tax, Superannuation Levy, electricity charges and Workers Compensation insurance. He has a further large claim for remuneration as liquidator.

9   As receiver and manager Mr Wiley is entitled to an indemnity over the assets of Amberday and he is a secured creditor with a lien for his expenses, remuneration and costs. The entitlement of a receiver appointed by the Court to a lien is very clearly established by authority, in this Court by the decision of Needham J in Re Application of Central Commodities Services Pty Ltd & Ors (1984) 1 NSWLR 25, in which earlier authorities and texts were reviewed. That case related to a receiver of the assets of a number of companies, appointed by the Court. This decision was followed and other authorities, including later authorities were reviewed in the decision of the Full Court of the Federal Court in Shirlaw v. Taylor (1991) 31 FCR 222 at 228-231; that case related to a provisional liquidator appointed by an order of the Court. See too Weston & Anor v. Carling Constructions Pty Ltd (In prov liq) & Anor (2000) 35 ACSR 100. On the nature of an equitable lien and its treatment for the purpose of equitable remedies as proprietary counsel referred me to the judgment of Deane J in Hewett & Ors v. Court & Anor (1982) 149 CLR 639 at 663-667. In my opinion Mr Wiley’s lien is an equitable interest, proprietary in nature, and goes far beyond a disposition of the Court towards protecting the officer whom it has appointed. For the purposes of equitable remedies value was given for it. As an equitable interest it may have to participate in competitions of priorities with other equitable interests.

10   It is necessary to identify the property to which the receivership extended, as the receiver’s security interest does not go any further, and another person’s proprietary interest, whether legal or equitable, in an asset of the company may be such that on a proper view the receivership did not extend to that interest. The terms of the order appointing the receiver may set limits to the property over which he has an interest; in this case it did not. A competing legal interest which existed when the receivership began will exclude any claim by the receiver; where the competing interest is an equitable interest it may have to participate in a competition of priorities with the receiver’s interest, and priority in point of time is not necessarily conclusive; the true question is which is the better equity. As appears more fully from my decision in Double Bay Newspapers Pty Ltd & Ors v. A.W. Holdings Pty Ltd & Ors (1997) 42 NSWLR 409 I am of the view that, while equitable interests can compete in competitions of priorities with other equitable interests, other claims, referred to as mere equities, do not. It is conceivable that there may be a competition of priorities between two claims both of which are mere equities, but Mr Wiley’s claim cannot be categorised as a mere equity; although it is open to consideration to what property it extends, it is a fully constituted equitable interest.

11   In Double Bay Newspapers Pty Ltd & Ors v. A.W. Holdings Pty Ltd & Ors (1997) 42 NSWLR 409 at 423-425 I stated the basis of my view that equities (or mere equities) do not participate in competitions of priorities on the same basis as equitable interests; they may be defeated by later equitable interests acquired for value without notice of them. I there set out the passages in earlier authorities on which this view is based; Westminster Bank Ltd v. Lee [1956] 1 Ch 7 at 18-20, Cave v. Cave (1880) 15 ChD 637 at 646 and the judgment of Lord Westbury in Phillips v. Phillips (1861) 4 De GF&J 208 at 215, 45 ER 1164 form a chain of citations. In a field where the terminology is not uniform I prefer to use “mere equity” to designate the cases of which Lord Westbury said: “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 - and the purchaser under the instrument maintains the plea of purchase for valuable consideration without notice, the Court will not interfere.” (at 218) Then too I have used “equitable interest” where Lord Westbury and other authorities speak of “equitable estate”.

12   Observations by Lightman J in a book review at (2001) 117 LQR 154 at 156 have drawn my attention to his Lordship’s argument as Lightman QC, counsel for the plaintiff/respondent in C.I.B.C. Mortgages PLC v. Pitt [1994] 1 A.C. 200, argument at 203, dealing with priority and notice of an equity to set aside a charge for undue influence. His Lordship’s note narrates that the status of that equity as a mere equity was accepted by the House of Lords in the course of argument. As his Lordship’s note says, this acceptance does not appear from the report, but I see a reflexion of it in Lord Browne-Wilkinson’s treatment of priorities (at 210-211) which was confined to the question of notice without addressing priority in time. The argument of Lightman QC illustrates two difficulties of extending the impact of claims which arose earlier on persons who acquire equitable interests or equities later in time. One difficulty is the effect on their position in conscience of knowledge of facts which require interpretation, where the facts coming to knowledge may not be complete and may not be easy to interpret, and may require some discretionary decision or other judicial decision such as a finding on credit before their meaning can be seen. The other is the difficulty of imputing constructive notice of an equity unless there is a course of inquiry which can be established as reasonable by evidence or by judicial knowledge of the conduct of conveyancing business, or banking business or other business. A conclusion that some simple inquiry, or some simple further inquiry should reasonably have been made can have great attraction when it can be seen with hindsight how close some adverse fact was to being discovered, but the retrospective view does not show the person’s position in conscience. Unless there is a sound positive reason affecting the conscience of the person with an equitable interest acquired later in time and for value, that person is in my opinion exempt from an earlier mere equity.

13   A clear illustration of the limits of a receiver’s protection where property subject to the receivership was already the subject of a registered legal charge when the receivership commenced is furnished by the decision of the Court of Appeal of England in Choudhri v. Palta & Ors [1994] 1 BCLC 184, in which the competition was between the receiver’s indemnity and registered charges in favour of banks which were registered in the Charges Register at the Land Registry; those charges are for present purposes analogous to registered mortgages under the Torrens system, and in the view of the Court of Appeal it was plain that the Court had no power to order that the receiver’s costs, expenses and remuneration be paid in priority to the sums which they secured; see Scott LJ at 187. In effect the debt secured by registered charges was defined out of the assets to which the receivership and the indemnity extended. While I would respectfully say that the basis on which the Court of Appeal acted was very plain and plainly right, I am of the view that the same reasoning is not applicable where the competing claim is a claim for an equitable interest which arises out of an unregistered document. Both claims are equitable and their priority is open to appraisal and consideration of which is the better equity, and priority in time is a powerful element in that appraisal but may not be conclusive.

14   In my view a receiver and manager is not a successor in title to assets of the company and no legal or equitable title passes to him. If real property owned by the company is subject to a registered mortgage, the property which he controls is no more than the equity of redemption. If the real property is subject to a fully constituted equitable mortgage I would see the matter in the same way. However if the real property is subject to an unadjudicated claim the basis at which cannot be clearly seen from a document but which depends on establishing facts which are disputed or uncertain and on obtaining remedies which may be discretionary, my view is that the receiver’s powers extend to the whole property; a mere equity does not have a proprietary character.

15   In Shirlaw v. Taylor the Full Court referred to a further ground on which an officer under a Court appointed administration may be protected, in the nature of salvage: “The principle is that those taking the benefit of the administration should not escape bearing the burden of the proper cost of it …”. (at 230) The salvage principle does not apply to the conflicting claims in this case.

16   The amounts of the claims and the value of the property mean that it is academic to consider entitlements under the liquidation. In any event there are severe limits to granting equitable remedies to mortgagees whose securities are in need of assistance by way of equitable relief at the time of liquidation; see JJ Leonard Properties Pty Ltd v. Leonard (WA) Pty Ltd (In liq) (1988) 6 ACLC 247 and observations of Austin J in Nunn v. Wily [2001] NSWSC 317 at paras.123-133.

17   In JJ Leonards Properties Burt CJ at 250 approved the reasons of the primary judge for declining in the exercise of his discretion to order rectification on grounds which appear by reference to the citation of the judgment of Brightman LJ in In re Ashpurton Estates Ltd [1983] Ch 110 at 123, to the effect that on liquidation the existing unsecured creditors became interested in all the assets and that their interest was in the nature of a trust interest, with a beneficial interest extending to all the company’s property. Burt CJ also referred to the speech of Lord Diplock, with the concurrence of the Law Lords, in Ayerst v. C&K (Construction) Ltd [1976] AC 167 at 176 to 180; in this passage the interest of creditors arising on liquidation is identified as a trust interest in firmer language and with fuller reference to authority than in In reAshpurton Estates Ltd. Burt CJ also referred to Commercial Banking Co. of Sydney Ltd v. George Hudson Pty Ltd (In Liq) (1973) 131 CLR 605 at 613 for the statement of Menzies J: “It is a deeply rooted principle of company law that, when liquidation has commenced, one creditor should not be assisted by the court to improve its position vis-a-vis other creditors.” This appears to me to state a principle separate from Lord Diplock’s basis in which relief is withheld because of the intervention of a beneficial interest of creditors in the company’s property, although Menzies J’s principle produces similar results for any discretionary decision to grant or withhold equitable relief. The appointment of a receiver and manager operates differently.

18   The mortgage document on which the plaintiff relies is a strange document. It was prepared in accordance with a standard Land Titles Office form of mortgage. It refers to the folio identifiers for Lots 1 and 13, states that it was lodged by Kell Heard McEwan solicitors of Wollongong, with a reference indicating Mr R.J. Downs, a partner of that firm, and names Amberday Pty Ltd as mortgagor. It refers to the plaintiff as mortgagee, but her surname is misspelt as Sawyer (and the same error appears in the caveat) and the mortgage does not give an address for her. In cl.1.1 there is a covenant to repay a principal sum of $230,000; evidence shows that a loan of that amount was not ever contemplated. It provides in cl.2 for payment of interest at 8.5% per annum on monthly rests and payable calendar monthly, and then creates machinery under which $991.67 per month is to be paid by bank authority; that arithmetically represents interest at 8.5% per annum payable calendar monthly on $140,000. There are blanks at several places for the date of the document to be inserted; but no date is inserted at any place and the document does not bear date. There are blanks at several places for addresses of parties to be inserted and their addresses are not given. There is a blank in cl.1.1 for the date of repayment in the year 2000 to be inserted but no date is inserted. At places where execution is appropriate the document bears the common seal of Amberday and the signatures of Mrs Bell and Mr Patten as directors, but the place where acceptance by Mr R.J. Downs as solicitor for the mortgagee is provided for was uncompleted. The document was and is unstamped; the form is appropriate for registration but it is unregistered and, uncompleted as it is, it is not registrable. On its face it appears to be a partly completed document which was not acted on and was never fully considered or intended to be acted on.

19   In June 1997 Malcolm Waters Services Pty Ltd was in financial difficulties and Mr Waters sought to interest several persons in purchasing its assets and business. These included Mrs Susan Bell with whom he had lived in a de facto relationship for several years. Mrs Bell was a widow, had adult children and owned rural property, and had money available for investment from its sale. She had some knowledge of the business at Corrimal through her association with Mr Waters. Mr Waters also approached Mr Ian Patten, whom he had known for many years; Mr Patten had various business interests and activities, some acquaintance with the butchery trade and, in the past, had worked in the business at Corrimal. They were not earlier known to each other. Mr Waters discussed with them their purchasing the business; after discussion, he sought a price of $250,000 and they agreed to pay $230,000 for the land; it seems to have been assumed by all concerned that the ownership of the business passed with ownership of the land.

20   One of Mr Water’s concerns was to raise sufficient money to pay out two mortgages to the National Australia Bank secured on the Corrimal property and also on other property at Unanderra which he owned. As well as making arrangements for the sale of the Corrimal property to Mrs Bell and Mr Patten, or, as the arrangements developed, to the company which they were to acquire, arrangements were also made for him to sell the Unanderra land to Mrs Bell. Together the two sales would raise enough money to discharge the liability to the bank, and the bank was not prepared to release the security over the Corrimal property unless all the liabilities were discharged. Mrs Bell and Mr Patten were able and willing to bring some funds into the purchase, but not sufficient to pay $230,000. They went to a bank to seek to borrow part of the funds, Mr Waters observed the rate of interest which the bank was to charge and decided that it would be appropriate to lend them money belonging to the estate of his mother of which he was the manager, at the same rate of interest. The arrangements to lend her money to their company proceeded from there.

21   The mortgage document was prepared by Mr R.J. Downs solicitor of Kell Heard & McEwan. Mr Downs received instructions from Mr Malcolm Waters to prepare the document in August 1997. Mr Downs did not handle Mr Water’s business generally. He made a file note of a telephone conversation with Mr Waters on 18 August 1997. His note appears to record instructions to prepare a contract for sale of the Corrimal property by Malcolm Waters Services Pty Ltd for $230,000; finance (referred to in the note as “Vendor finance”) of $140,000 was to be furnished by Mrs Shawyer at 8.5% fixed for three years, interest only, monthly in arrears. Security was first registered mortgage over the property. Mr Downs did not regard himself as instructed to act for Mrs Shawyer; in his view his client was Malcolm Waters Services Pty Ltd the vendor.

22   Mr Downs prepared the form of mortgage and had it available when Mr Malcolm Waters saw him on 22 August 1997. On this occasion Mrs Bell was present as was her son. Mr Downs regarded Mrs Bell as representing the purchaser and at one point told her that he refused to advise her on a risk which affected the purchaser and that she was to seek her own advice. The form of contract which by then had been prepared was reviewed, changes to the price and conditions were considered and approved and the contract was executed by the vendor; the copy in evidence is signed only on behalf of the vendor and it does not appear when or how it was executed by the purchaser. There was discussion about payment of the deposit. There was discussion about finance and Mr Downs noted “Finance - terms okay - query signing mortgage - Malcolm to sign for mother - he to provide papers Monday. (Protective Commission).” Mr Downs also noted “Malcolm organising discharges - both properties plus release of charge.”

23   Mr Downs’ note refers to some further aspects of the transaction which are not well shown by documents in evidence. The National Australia Bank then had a registered mortgage over the Corrimal property and was not prepared to discharge it and release the Certificates of Title (which had to be obtained to register the Transfer and pass title to Amberday) unless the whole of Malcolm Waters Services’ liabilities to the bank were discharged. These liabilities were secured on the property at Corrimal but also on another property at Unanderra, and exceeded the price of $230,000 for which the Corrimal property was to be sold, and Mrs Bell agreed to purchase the property at Unanderra, the price of which would make up enough funds to release the bank’s security. The bank also had a registered charge over Malcolm Waters Services Pty Ltd to secure the same liabilities and this too was to be released.

24   Mr Downs also noted “Sue aware they need to

. execute plus stamp mortgage
. stamp contract and transfer plus submit.”

This note refers to Mr Downs pointing out to Mrs Bell that to complete the advance it was necessary for Amberday to execute and stamp the mortgage, stamp the contract and the transfer and to have these things done by settlement. These were steps which it was necessary to have done if the mortgage to Mrs Shawyer was to be registered after settlement of the advance. On this occasion 22 August 1997 Mr Downs gave Mrs Bell the form of mortgage. It is possible that Mrs Bell may have affixed Amberday’s seal and signed as director on this occasion; it is not clear whether that event occurred at Mr Downs’ office. Mrs Bell’s evidence raised the possibility that Mr Patten may also have been present and signed on that occasion, but Mr Patten’s evidence is to a different effect and in my finding he signed on a different occasion. So it was that the form of mortgage left Mr Downs’ hands in an incomplete state, no doubt in the contemplation that it would be returned executed and stamped at or before settlement, when the blanks could be completed as then appropriate.

25   Neither on this occasion or on any other time does it appear that any person concerned noticed that Mrs Shawyer’s name was misspelt or that the amount of $230,000 appeared as the amount advanced, although the contemplated advance was $140,000.

26   The evidence of Mr Patten and of Mrs Bell diverges on when and where Mr Patten completed the execution of the mortgage on behalf of Amberday by signing as director. Mrs Bell’s evidence on this subject was particularly vague. It is probable that, as Mr Patten says, he signed the document, without reading it, when she produced it to him for signature at the Corrimal premises, and it is also probable that this happened after the advance had been made and the purchase had been completed on 3 September 1997. That is to say, it should be concluded that when the advance was made the mortgage document had Amberday’s seal placed on it and Mrs Bell had signed as a director, but Mr Patten had not; after the advance had been made Mr Patten signed as a director; at some time an undated note was made by Mrs Bell in the seal register recording execution of the mortgage; but nothing else was done to complete the document or to register it. There is no reason to suppose that any directors’ resolution was passed or that any minute of a resolution was made relating to the arrangement to give a mortgage or to its execution. Throughout his receivership Mr Wiley was never able to locate any directors’ minute, or any other significant record. Probably Mr Patten and Mrs Bell kept no directors’ minutes about anything.

27   On 25 August 1997 Mr Downs attended Mr Waters on the telephone. Mr Downs’ note is in the following terms:

T/Att Malcolm Waters.
. not proceeding with mortgage. He is giving the $142,000 to Ian in Melbourne, (banking to his account) and will get personal guarantees from them later.
. I explained this was very dangerous, that an unsupported guarantee was quite worthless. He understands this not concerned.
. Has bank cheque payable to use (142K) can we bank them pay to Ian. I said no - he should change the cheque.
. Instructions
- Aware exchange done
- No security to be prepared - may require guarantee later
- Aware from accountant that tax notice issued.
- Is seeing Bank tomorrow to arrange discharges.

28   The effect of this is that Mr Waters, who then spoke of the advance as $142,000, was contemplating a completely new course in which instead of the advance to Amberday being directed to the National Australia Bank at settlement, it was for some reason to be paid to Mr Patten in Melbourne; Mrs Shawyer would not get a mortgage and Mr Patten and Mrs Bell would give personal guarantees; Mr Downs advised strongly against lending on personal guarantees; Mr Waters indicated that notwithstanding the advice no security document was to be prepared. In the circumstances it is not surprising that Mr Downs declined to handle the funds which were to be advanced.

29   From this point on Mr Downs took no further step related to the mortgage. On 28 August 1997 Mr Downs wrote to Mr Waters a rather strong letter of advice, addressed to “The Manager Malcolm Waters Pty Ltd” and actually received by Mr Malcolm Waters, which included the following:

3. The Purchaser was not proposing to execute the first registered mortgage over the property as security for the loan by Mrs Sawyer;
4. You instructed us that an unsecured loan would be made to one of the Directors of the Purchaser Company to enable the Purchaser Company to proceed and that, at some future time, the Directors of the Purchaser Company may provide a personal guarantee for repayment of that loan amount;
5. We confirmed that such an arrangement was extremely dangerous as the unsupported personal guarantees may be worthless. Notwithstanding our advice you instructed us not to take any further action in respect of the proposed first registered mortgage and not to proceed with preparation of any alternate security documents at this time.

30   When he attended on settlement on behalf of Malcolm Waters Services on 3 September 1998 Mr Downs did not produce or pay over the amount of the advance (and that was done by Mr Waters). He took no steps to obtain the mortgage in a completed form or otherwise to take security. He did not act for Mrs Shawyer, he had no instructions or responsibility to take security; he was not then aware of any contemplated arrangements to take security, he did not again see the mortgage document, and he did not give it any further attention.

31   Mr Waters’ evidence was to the effect that notwithstanding that the dealings with the mortgage were left in this way with Mr Downs, Mr Waters in fact decided and agreed with Mrs Bell that security would be taken according to the form of mortgage, and made arrangements with her for the mortgage to be stamped and registered and held by her on account of Mrs Shawyer. There are a number of circumstances which make this view of the facts quite improbable; the circumstances include the fact that neither Mr Downs or any other solicitor was involved in looking after Mrs Shawyer’s interests, although Mr Downs was readily to hand and was advising taking security, that the form of mortgage was left uncompleted, unaccepted, unstamped and unregistered, and that it was left in the actual control of Mrs Bell who was a director of the borrower, contrary to ordinary practice and common prudence which would require that the mortgage be stamped, registered and kept, with the Certificates of Title, in safe keeping on account of Mrs Shawyer. Notwithstanding the general improbability of the situation, the evidence of Mr Patten and of Mrs Bell both support a view of the facts in which the mortgage was intended to be effective, the execution by Amberday was completed by Mr Patten with that intention. The evidence of Mr Waters and Mrs Bell both support the view that Mrs Bell was asked by Mr Waters to keep the mortgage and related documents at his direction, which she interpreted as being on behalf of Mrs Shawyer. These three witnesses did not speak with one voice; there are significant differences in matters of detail and circumstances, and nothing which I regard as a clear reason for proceeding in this strange way appears from the evidence. Mrs Bell had lived with Mr Waters in a de facto relationship for several years, the relationship had resumed for several months after an interval, and then they went into a state of conflict late in 1997, and it is not unusual to hear strange and divergent accounts of events from people who have experienced conflict in a profound emotional relationship.

32   Mr Waters’ evidence was to the effect that the basis on which the documents remained with Mrs Bell after settlement was that she was to stamp them, register them, and hold them in safe custody in a box at National Australia Bank, Corrimal, until he gave further directions. Mrs Bell’s evidence was to the effect that Mr Waters directed her not to register the mortgage but to keep the mortgage unregistered for about three months when he would tell her what further was to happen. In some way Mrs Bell brought it about that the contract was stamped, the transfer to Amberday was stamped and marked, the transfer to Amberday and the discharges of National Australia Bank mortgages were registered and Amberday became the registered proprietor; and then by 15 September 1997 the registered documents were held by Messrs Manfred Dougall & Co. solicitors of Goulburn in safe custody on account of Amberday. At some times which are not clearly established Mrs Bell lodged the mortgage document for safe custody at the Corrimal branch of the National Australia Bank, then later removed it and left it in safe custody with Messrs Manfred Dougall. She was unable to give a clear or credible account of the events in which documents were stamped and registered, and appeared to have very little understanding of the processes involved.

33   Neither Mr Waters nor Mr Patten nor Mrs Bell appeared to me to be convincing as witnesses; the accounts they gave included various events and behaviour which were improbable and highly unbusinesslike. Mr Patten responded in a very combative way to cross-examination and appeared to be more concerned with creating a scene than with directing himself to a truthful narration, and he made some very unlikely claims of want of memory. Mrs Bell spoke rather widely and discursively, and did not give me the impression that she had a clear or complete recollection or understanding of events. Mr Waters appeared to me to exhibit a markedly unsatisfactory demeanour, and his conduct in the management of his mother’s affairs was so irresponsible as to be very adverse to his credit. Significant parts of the story have not been told to me, particularly the history of the consideration of some alternative scheme involving payment to Mr Patten and guarantees which it must be taken from his evidence that Mr Waters adhered to for some time and then abandoned. Unsatisfactory as all three witnesses are, their evidence does support the finding, objectively improbable as it is, that the mortgage document was intended to be effective, even though it is obvious that no-one ever addressed what it said in a considered way, and no-one ever dealt with the erroneous statement of the amount of the advance or other errors and omissions in it.

34   Notwithstanding the evidentiary difficulties, I am of the view, having regard to the evidence of the three of them, that I should find that it was intended both by Mr Waters as manager of his mother’s property and by Mrs Bell and Mr Patten as directors of Amberday that the money advanced out of Mrs Shawyer’s resources and applied towards purchase money and then further applied to discharge the obligations of Malcolm Waters Services to National Australia Bank was intended to be secured by the mortgage document. It should be inferred that in some way it was agreed that the advance of $141,828.14 which actually took place on 3 September 1997, which was drawn by Mr Waters from a bank account which he held as trustee for Mrs Shawyer, was intended to be secured by the mortgage document. It is established by Mr Downs’ notes of the interview of 22 August 1997 that it was intended by those concerned that the advance should be from three years; the form of mortgage does not express this. It appears from Mrs Bell’s evidence that in her understanding and in pursuant of an arrangement Mr Waters made with her, she held the mortgage and the Certificates of Title on behalf of Mrs Shawyer and not on behalf of Amberday; I accept that this is true.

35   On or about 3 September 1997 Messrs Manfred Dougall & Co. (who at that stage were acting for Amberday rather than for Mrs Bell) gave Mrs Bell a slip of paper with the address of the Office of State Revenue in Wollongong on it and, although she did not give a clear account herself, it is probable that she took the transfer there, produced the stamped contract and had the transfer stamped and marked for registration; it is also probable that in some way she sent the Certificates of Title, the Discharges of the National Australia Bank mortgages and the transfer to the Sydney Law Stationers who acted for Messrs Manfred Dougall & Co to register them; she may have sent them to the Law Stationers directly or she may have returned the documents to the solicitors in Goulburn. Their Odyssey is conjectural, but they reached its Ithaca at the solicitors’ office, stamped and registered, by 15 September and the Mortgage did not. At some time the mortgage was delivered by Mrs Bell to the Goulburn solicitors, but their letter of 15 September reporting on their receipt of documents does not mention it.

36   The best conclusion which can be made on the facts is that an agreement was made that a mortgage would be granted to secure money which Mrs Shawyer was to advance on the settlement of the purchase by Amberday; the agreement was made by conduct and conversations before and on 22 August 1997 by which time it had been established orally that the rate of interest was 8.5% per annum and the term was three years from the time of the advance; the amount of the advance was spoken of as $140,000 although it was contemplated that the exact amount would be established by the time of settlement and might be a little more; and in a later telephone conversation between Mr Downs and Mr Waters the amount was spoken of as $142,000. The uncompleted mortgage document is not itself the agreement to grant a mortgage, although the conduct of the parties in Mr Downs giving the document to Mrs Bell, her signing it and affixing the seal, and making arrangements to have Mr Patten sign it are evidence of the agreement. The mortgage document is available for consideration as writing or a memorandum evidencing the agreement, but is not itself the parties’ agreement.

37   It should not be found that the agreement to grant a mortgage was abandoned or varied by the kind of consideration which Mr Waters spoke of to Mr Downs relating to taking guarantees instead; evidence does not show that Mrs Bell (or Mr Patten) agreed that there should be guarantees instead of a mortgage; notwithstanding the consideration Mr Waters gave to that possibility.

38 On the proof of the facts (which in view of the state of conflict among those concerned might well have been difficult) and in the absence of any competing equitable interest or claims, Mrs Shawyer was in my opinion in a position on 13 February 1998 to enforce her claim to security in respect of the advance against Amberday. To do so it would have had to be proved that the mortgage document incorrectly referred to an advance of $230,000 and should be treated as if rectified to refer to advances of $141,828.14, and to 3 September 2000 as the date of repayment. The memorandum of mortgage is not in my opinion a sufficient writing for the creation of an interest in land within s.23C of the Conveyancing Act 1919 (NSW) or a sufficient memorandum to support proceedings under s.54A of that Act; it fails in both respects because it does not record the terms of the parties’ agreement with respect to the amount of the advance or the time of repayment. Notwithstanding these shortcomings, in a situation where there was no competition Mrs Shawyer would have been in a position to enforce the document having regard to the arrangement under which Mrs Bell held the documents, which gave the arrangement the force of an equitable mortgage by deposit of deeds, and by recourse to proprietary estoppel which in my opinion would prevent Amberday from disputing Mrs Shawyer’s entitlement after the arrangement had been acted on and the advance had been made.

39 However there is a competing claim and it is necessary to categorise Mrs Shawyer’s right as an equitable interest or a mere equity in order to address its place in the competition. Mrs Shawyer’s claim was imperfectly constituted, could only be established in a clear way by judicial process, and could not be established in a clear way by inspection of documents, inquiries as to the facts or in any other clear way which could constitute knowledge or notice of its existence. As her entitlement cannot be established in the way prescribed by ss23C and 54A, and cannot be shown in any clear way from any document, but must be established by a claim for equitable remedies in which there is a discretionary element, and in which it is necessary to establish the facts by evidence, findings of facts and the application of rules of law, I am of the view that for the purposes of competition her claim should be categorised as a mere equity. In categorising it as mere equity I contrast it with the entitlement of Mr Wiley to his lien, which is clearly spoken of in the authorities as an equitable interest in the property the subject of a lien. In my opinion then Mrs Shawyer’s claim simply does not enter into competition with Mr Wiley’s interests and cannot prevail over it.

40   If these views were wrong and it were necessary to determine which was the better equity, my view is that Mr Wiley’s interest clearly is the better equity and has the greater claim for protection by equitable remedies. It is fully constituted. Its source is an order of the Court, made publicly and ascertainable by search of the records in the Companies Register, as well as in other ways. By contrast, Mrs Shawyer does not have a fully constituted equitable interest. For over five months means were readily available to Mr Waters acting in Mrs Shawyer’s interest to make the existence of the mortgage known, and to make it fully secured, by having the document completed and stamped so as to be registrable, and by registering the document, and those things were not done. Mrs Bell’s evidence is to the effect that Mr Waters told her to leave it unregistered; his evidence is to quite a different effect, that he made arrangements with her to register it and assumed that she had done so. Although there cannot be much confidence in the evidence of either I am inclined to accept Mrs Bell’s evidence to the effect that in leaving the mortgage unregistered she acted as Mr Waters wished. Other documents which were left in her hands to be stamped and registered were stamped and registered; she had very little understanding of the processes involved, and it seems to me to some degree unlikely that she would omit attending to stamping and registration of one of the documents in her hands unless she had some reason to do so such as would be furnished by Mr Waters’ wish that the mortgage be left unregistered. The general vagueness of her evidence, and the state of conflict between them, leave a haze of uncertainty over the events, but to some small degree the probabilities favour accepting what she says.

41   In her evidence Mrs Bell said that at some later stage Mr Waters told her to tear the mortgage up, which she was not prepared to do; I do not accept the evidence that Mr Waters told her to tear up the mortgage, and I do not see what significance that would have if it were true.

42   If the true position were that Mrs Bell did agree to stamp and register the mortgage but failed to do so it would have been quite unreasonable for Mr Waters to leave the tasks of completing stamping and registering the mortgage in the unsupervised hands of Mrs Bell who was a director of the borrower company; and even more unreasonable to carry out no check or supervision by February 1998. Mrs Bell was a very unlikely person to whom to entrust the task of stamping and registering the mortgage; plainly she had no idea of what was involved in those tasks. Mrs Bell as a director of the borrower did not have any strong motivation to see that the tasks were carried out, while Mr Waters if he had chosen to do so could very readily have placed the tasks in the hands of his solicitors, who were quite capable of attending to everything that was required, of taking possession of the Certificates of Title, the transfer and mortgage at settlement or later and seeing to their registration and then retaining the Certificates of Title in Mrs Shawyer’s interests. It is unexplained why Mr Waters did not proceed in that ordinary and reasonable way, and why he left Mr Downs to think that he had decided not to take a mortgage at all. It would have been very easy for Mr Waters to give Mr Downs instructions to act in the interest of Mrs Shawyer, or if Mr Downs was not prepared to accept those instructions as well as instructions to act for the vendor, to give such instructions to some other solicitor. Anyone acting with ordinary prudence would have done so.

43   As things stood, there was no line of inquiry which Mr Wiley could take at the time when he accepted office which would have revealed the position. In fact it was represented to him and to his employee before and about the time of his accepting office that the property was unencumbered, and he accepted the appointment in that belief. Almost contemporaneously with accepting office he had searches made in the Land Titles Office and the Companies Registry, and of course neither search revealed any information about Mrs Shawyer’s supposed interest. In the circumstances there was no inquiry reasonably available to him, apart from inquiring of Amberday, for the existence of unregistered interests. Mr Waters by leaving the business and the documents in the hands of Mrs Bell had made it possible for Mrs Bell and Amberday to make effectual representations to other persons that the property was unencumbered. No information about the existence of Mrs Shawyer’s claim was available to Mr Wiley and his staff until Mrs Shawyer’s Caveat was lodged on 23 February 1998, by which time his searches had already been made and he had no occasion to make others. Also by that time he had consented to act as receiver and manager, he had been appointed by the Court, and was not in a position to withdraw without applying to the Court to be discharged and in so doing throwing up a professional responsibility which the Court had committed to him with his consent.

44   The searches which Mr Wiley had made did not precede his consent and his appointment; they were roughly contemporaneous with it, and if he had them made earlier would have produced the same negative results. In Mr Wiley’s circumstances, no other lines of inquiry were reasonably open to him, apart from the information furnished to him on behalf of and by Mrs Bell. Counsel offered criticism of Mr Wiley’s accepting information conveyed by and on behalf of Mrs Bell at face value; in my opinion there were no circumstances which made it appropriate or reasonable for Mr Wiley to doubt or further to test what he was told. It was also suggested that a further inquiry should have been made of Mr Patten, who was the other director of Amberday; in the circumstances of a contemplated ex parte application for the appointment of a receiver, this was impractical.

45   In a written formal demand dated 16 February 1998 Mr Wiley required Mr Patten to deliver, on or before 18 February 1998, all books and records of Amberday including those in a lengthy attached list, one item of which was “30. Any other deeds or documents”. A solicitor representing Mr Patten responded in a message of 17 February 1998 dealing with various documents and saying “With respect to Item 30 we hold no documents but recommend that you contact the solicitors who acted in the purchase of the land Manfred Dougall & Co. We have previously had confirmed by Mr Dougall that they hold the Certificate of Title and mortgage documents to Mrs G. Shawyer.” The mortgage document became known to Mr Wiley’s solicitor Mr Nikolaidis and to Mr Sean Thomas, who was employed by Mr Wiley and engaged in the administration, on 24 February 1998 when counsel representing Mrs Bell handed Mr Thomas the mortgage documents and the two title deeds, accompanied by statements by Mrs Bell’s counsel that he was instructed to hand the documents to the receiver. Counsel said: “These documents were held by Mrs Bell’s solicitor and he has forwarded them to me and asked me to pass them on to the receiver. This is a mortgage which Mrs Bell signed. She did not at any time deliver the mortgage and in fact, was asked by Mrs Waters to tear it up. Instead she gave all these documents to her solicitor. Nobody knows they are in existence. Your client can do with them what he chooses.” Counsel went on to say that the property was unencumbered and the mortgage was useless, it was never delivered and that Mrs Bell never parted with possession of the mortgage or the title deed. It was not suggested by Mrs Bell or her counsel on the occasion when the documents were delivered that the solicitors held them for Mrs Shawyer. Mr Wiley did not actually know of these events for some time, although he is bound in conscience by any knowledge of his solicitor and his staff member to whom he had entrusted the conduct of relevant affairs.

46   Mrs Bell’s solicitors did not act in accordance with the indication given by Mr Patten’s solicitors that Mrs Bell’s solicitors held the mortgage on account of Mrs Shawyer; if they held the documents on account of Mrs Shawyer they had no business handing them to the receiver. The incomplete state of the mortgage shows, and would suggest to any person who inquired for and saw the document, that it had not ever had the close attention which it would receive if it was regarded as important, or as taking effect. The fact that an uncompleted mortgage document and the Certificates of Title were in the control of a director of the borrower and were delivered to the receiver of the borrower were indications that there was no equitable mortgage by deposit of deeds or in any other way, not an indication that there was an equitable mortgage. The indications were made stronger by the information that was given earlier to Mr Thomas and Mr Wiley that the property was unencumbered, and by the information which accompanied the delivery of the documents. In the circumstances delivery of the mortgage did not constitute notice of an interest or claim of Mrs Shawyer. The indications were to the contrary of the existence of such a claim.

47   Mr McEwen of Kell Heard & McEwen wrote to Mr Wiley on 2 March 1998 on behalf of Mr Waters and asserted “We are instructed that a mortgage was executed by the company in her favour and that mortgage was previously supposedly held by Messrs Manfred Dougall & Co Solicitors, Goulburn.” Mr McEwen went on to say that Mr Dougall advised that all documents held by him on behalf of Amberday had been handed to a receiver, and asked Mr Wiley to forward the mortgage to Mr McEwen’s firm immediately it was located. This was not a clear assertion that the mortgage was effective. After a conversation with Mr Sean Thomas, Mr McEwen wrote again on 4 March asserting “The loan was to be secured by a mortgage over the property and a charge of the business and guarantees by each of the directors. We understand that a mortgage was prepared and executed under the seal of the company, but this mortgage was not returned to Mr Waters for the purposes of registration. We understand the mortgage was last in the possession of Mrs Sue Bell, who has indicated that she passed this on to her solicitor. Her solicitor denies having the documents. Could you please advise if you hold it.” This too was not a clear assertion that the mortgage was effective. (The suggestion made in Mr McEwen’s letter of 4 March 1998 that there was to be a charge over Amberday’s business is not borne out by any evidence.) Curiously Mr McEwen did not mention the caveat in these letters, although it had been lodged on 25 February.

48   Mr Wiley at first replied on 6 March 1998 that he was not aware of any mortgage document; however it was actually in his office and he soon came to know of it. He did not deliver it up to Mr Waters or his solicitors, but retained it until he was required to produce it in litigation. Mr Wiley was not in a position to know what the facts were relating to the execution of the mortgage and its being held by Mrs Bell and delivered to Mr Wiley as receiver and manager of Amberday, accompanied by the assertions by Mrs Bell’s counsel to which I have referred, until the hearing of the proceedings before me, as Mrs Bell did not make an affidavit in the proceedings and was called by the plaintiff to give her evidence in chief orally. Indeed Mr Wiley was not even then in a position to know clearly what the significance of the document was or whether it was effective; that information comes to him with this judgment. No significant further knowledge or notice about the mortgage was available to him by 14 April 1998 when Amberday went into liquidation and the period to which his indemnity relates closed.

49   By leaving the mortgage and the Certificates of Title in the control of Mrs Bell, Mr Waters put Amberday in a position to represent, in a way which could not be disturbed by information otherwise available to a person dealing with Amberday, that the property was unencumbered; and representations to that effect were made to Mr Thomas before Mr Wiley consented to act and again to Mr Wiley at about the time he consented to act. Mr Waters also, as I have found, made arrangements under which Mrs Bell left the mortgage unregistered. The mortgage was not and has never been registrable, even if it were lodged at the Land Titles Office with the Certificates of Title, because it has not been accepted by anyone on behalf of Mrs Shawyer (and Mr Downs, who is referred to in the document as the person to accept it for her but has not done so, has never had authority to accept it). It requires several material corrections including Mrs Shawyer’s name and the amount of the advance, and also requires the addition of dates and other material at a number of blank spaces. (There is no statement of the prior encumbrances, but Mr Downs’ evidence is that this is not necessary and I notice that the Transfer which was registered is also incomplete in this respect). In these circumstances Mr Wiley’s claim is, by an overwhelming preponderance, a better equity than Mrs Shawyer’s claim.

50   Four payments on account of interest were made; the first three by cheques of Amberday and the fourth in cash after Amberday’s bank had withdraw its services. At one part of his submissions plaintiff’s counsel asserted that the plaintiff was entitled to specific performance of the agreement to grant a mortgage under the doctrine of part performance. In my opinion there are no unequivocal acts of part performance of the agreement to grant a mortgage; the execution of the mortgage document, given its imperfections is highly equivocal and the payments of interest, while confirming that there was an agreement for a loan and interest, are not unequivocally referrable to an agreement to grant security. On making a payment as acts of part performance see Australian and New Zealand Banking Group Ltd v. Widin [1990] 26 FCR 21 at 23-24 per Wilcox J and at 33-37 per Hill J. Even if (contrary to the received Australian view) payments of money can be acts of part performance, the payments of interest made in this case could not as a matter of fact be regarded as unequivocally referrable to an agreement to grant a mortgage.

51   In my opinion Mr Wiley is in the position of a purchaser for value with respect to his equitable lien. My conclusion at 425 of Double Bay Newspapers is applicable in the present case; namely

The conclusion which I base on their observations is that a mere equity, meaning a claim to have an equitable interest which can only be enforced by succeeding in some claim to a court for equitable relief (such as a claim for rectification, a claim to set aside a conveyance obtained by fraud or (as I think) a claim the enforcement of which depends on the doctrine of part performance) does not participate in competitions of priorities with equitable interests which have been acquired in good faith, for valuable consideration and in a manner which can be clearly shown without obtaining any decision of the court upholding them.

52   In my opinion Mrs Shawyer’s claim for security is not enforceable in the winding-up and the caveat should be withdrawn.

53   Orders

(1) The Summons is dismissed with costs.
(2) On the Cross-claim Declarations 1 and 2 as claimed.
(3) Order 3 as claimed in the Cross-claim.
(4) Order that Caveat 3814193 be withdrawn within 7 days.
(5) Order that the Plaintiff Cross-defendant pay the costs of the Defendant Cross-claimant of the Cross-claim.

Last Modified: 05/22/2001