GLEESON CJ, McHUGH J, GUMMOW, CALLINAN AND HEYDON JJ
MARIE MARGARET THEODORE APPELLANT
AND
MISTFORD PTY LTD & ANOR RESPONDENT
Theodore v Mistford Pty Ltd
[2005] HCA 45
1 September 2005 B75/2004
ORDER
1.Set aside order 2(b) of the orders of the Court of Appeal of the Supreme Court of Queensland made on 2 April 2004.
2. Appeal otherwise dismissed with costs.
On appeal from the Supreme Court of Queensland
Representation:
K D Dorney QC with N R Jarro for the appellant (instructed by North Coast Law)
H B Fraser QC with F W Redmond for the respondents (instructed by Klar and Klar)
Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.
CATCHWORDS
Theodore v Mistford Pty Ltd
Mortgages – Equitable mortgage by deposit of a certificate of title – Third party security – Contract provided for sale of business by respondents to third party guaranteed by appellant's son – Sale contract provided for deposit by guarantor with vendors' solicitors of instrument of mortgage of certain land owned by appellant together with duplicate certificate of title – Guarantor obtained appellant's authority to release duplicate certificate of title as security for purchase – Guarantor deposited duplicate certificate of title with vendors' solicitors four days prior to settlement – No insistence by vendors upon provision of instrument of mortgage – Whether equitable mortgage created by deposit of duplicate certificate of title – Whether duplicate certificate of title held by vendors' solicitors on account of purchaser or on account of vendor – Whether Land Title Act 1994 (Q), s 75 precludes creation of third party securities by way of deposit of a certificate of title – Whether deposit of a certificate of title must be made contemporaneously with the advance to be secured.
GLEESON CJ, McHUGH, GUMMOW, CALLINAN AND HEYDON JJ. This appeal requires some consideration of the principles governing equitable mortgages by deposit of a duplicate certificate of title. The principles governing the creation of an equitable mortgage by deposit of title deeds were developed by the English courts of equity with respect to old system conveyancing. This appeal concerns their application in the Torrens system, in particular to the deposit of the duplicate certificate of title to land under the provisions of the Land Title Act 1994 (Q) ("the Act"). Section 75 of the Act states:
"(1) An equitable mortgage of a lot may be created by leaving a certificate of title with the mortgagee.
(2) Subsection (1) does not affect the ways in which an equitable mortgage may be created."
The statute law in Queensland thus stands in marked contrast to the present position in England established by the decision in United Bank of Kuwait plc v Sahib[1]. In that case, the Court of Appeal held that the principles respecting the creation of an equitable security…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Theodore v Mistford Pty Ltd [2005] HCA 45
Case
[2005] HCA 45
Decision Date
CaseChat Overview and Summary
Theodore v Mistford Pty Ltd concerned a dispute over an alleged equitable mortgage. The appellant, Theodore, had provided her duplicate certificate of title to her son, who was acting as a guarantor for the purchase of a business by a third party from the respondents, Mistford Pty Ltd. The contract for the sale of the business stipulated that the guarantor would deposit the appellant's duplicate certificate of title with the vendors' solicitors as security for the purchase. The guarantor deposited the duplicate certificate of title with the solicitors four days before settlement, but no instrument of mortgage was ever executed or provided. The High Court of Australia considered whether an equitable mortgage had been created over the appellant's land by this deposit of the duplicate certificate of title.
The central legal issues before the High Court were whether the deposit of the duplicate certificate of title by the guarantor with the vendors' solicitors, without a formal instrument of mortgage, was sufficient to create an equitable mortgage in favour of the vendors. The Court also had to determine whether the duplicate certificate of title was held by the solicitors on behalf of the purchaser or the vendor, and whether section 75 of the *Land Title Act 1994* (Qld) precluded the creation of third-party securities by way of deposit of a certificate of title. Finally, the Court considered whether the deposit of a certificate of title must be made contemporaneously with the advance to be secured for an equitable mortgage to arise.
The High Court held that an equitable mortgage by deposit of title deeds requires an intention to create a security interest over the land. In this case, the deposit of the duplicate certificate of title was made by the guarantor, not the registered proprietor, and there was no evidence that the appellant intended to create a security interest over her land in favour of the vendors. The Court found that the solicitors held the duplicate certificate of title on behalf of the purchaser, not the vendor, and that the deposit was made in anticipation of a mortgage being executed, which never occurred. Section 75 of the *Land Title Act 1994* (Qld) was interpreted as not preventing the creation of equitable mortgages by deposit of title, but the facts did not support the creation of such a mortgage in this instance. The Court emphasised that the deposit of a certificate of title alone, without a clear intention to create a security interest, is insufficient to establish an equitable mortgage.
The High Court ordered that the order of the Court of Appeal of the Supreme Court of Queensland made on 2 April 2004, specifically order 2(b), be set aside. The appeal was otherwise dismissed with costs.
Orders
Orders of the court
1. Set aside order 2(b) of the orders of the Court of Appeal of the Supreme Court of Queensland made on 2 April 2004.