Theodore v Mistford Pty Ltd & Ors

[2005] HCATrans 443

[2005] HCATrans 443

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B75 of 2004

B e t w e e n -

MARIE MARGARET THEODORE

Appellant

and

MISTFORD PTY LTD

First Respondent

MAX EGERTON VINES AND VALERIE LYNETTE VINES

Second Respondents

GLEESON CJ
McHUGH J
GUMMOW J
CALLINAN J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON WEDNESDAY, 22 JUNE 2005, AT 12.04 PM

Copyright in the High Court of Australia

MR K.D. DORNEY, QC:   May it please the Court, I appear with MR N.R. JARRO for the appellant.  (instructed by North Coast Law)

MR H.B. FRASER, QC:   May it please the Court, I appear with my learned friend, MR F.W. REDMOND, for the respondents.  (instructed by Klar and Klar)

GLEESON CJ:   Yes, Mr Dorney.

MR DORNEY:   Your Honours, I notice that in the cases themselves that were handed up, there was no tabbing of the cases in question.  I have here five sets of the cases with tabs and it may be more useful to refer to that.  If I could hand those up.  I do apologise for the original one.

GLEESON CJ:   That is all right.

MR DORNEY:   Just briefly, in terms of that document the numbered cases are the cases that appear in the list of authorities that was sent to the High Court.  Down the back is A, B, C, D and E which are the cases attached to the reply we filed. 

Your Honours, the issues that arise in this appeal are in terms of the deposit of title deeds, whether the presumption or inference of the equitable mortgage arises where at the time of delivery of the deed there was no existing indebtedness or obligation, where the deposit is of the certificate of title of a third party and not the debtor or obligor and the deposit is not by that third party.  Here in this particular case the deposit was by the son of the mortgagor.  Lastly, if there is in existence credible evidence which in fact will set aside that presumption or inference, whether that should be looked at, and we said of course it should, and that in this particular case where the circumstances are such that that presumption or inference is set aside. 

There is a second issue of course because the deposit in this particular case was in fact made, we would submit, before the obligation arose.  The deeds were still of course present in the hands of the solicitors for the obligor or the ‑ ‑ ‑

GUMMOW J:   We are talking about a duplicate certificate of title, are we not?

MR DORNEY:   Yes, we are, your Honour.

GUMMOW J:   There is only one duplicate certificate?

MR DORNEY:   Yes, in this particular case.  The second question, as I said, is really whether, if the deposit is still in existence, that is the certificate of title is still there when the obligation arises, what that gives rise to.  We would submit that in this particular case where there is a direction for a special purpose, then you look at that particular matter first and if there is a change in that, as we submit there was in this case by the actual contract entered into at the time the obligation arose, then you look at that.

The alternative course at that stage of course is merely to say at the time of the obligation arising, the certificate of title, the duplicate certificate of title, was there.  The obligation arose.  Presumption of inference.  Look at the facts and in fact do they disturb that particular presumption or inference.  This of course is done in the context of the requirement for writing pursuant to the statute of frauds equivalents in Queensland.

If I might turn then, your Honours, to the chronology.  Really there are only, we would submit, three important dates.  There is a general period from May to July 1996 when negotiations were had between the parties.  Briefly, the appellant was not a party to the final business sale contract.  The appellant was the mother of the person who was the sole director of the purchaser company.  The son being that person was also a guarantor to the agreement, so the son through his company was the purchaser, the son was a guarantor.

The respondents to this case were in fact the vendors of the particular business sale.  Your Honours, there were negotiations between the parties through from May to July.  On 12 July 1996 there was a telephone conversation between the son and Mr Klar, who was the solicitor for the vendors.  I will come in a moment to why that is important.  The next important day is 18 July 1996 when there was an authority signed by the mother, the appellant, for her son to collect the certificate of title from her own solicitors.  On that particular day as well, the appellant and her son went to the ANZ Bank at Maroochydore, which was the local bank of the mother, in an attempt for the son to raise a loan for which the mother would then in fact be the mortgagor.  That was unsuccessful. 

It was also on that day, it would appear, that the son then took the certificate of title, duplicate certificate of title, that he had down to Mr Klar as solicitor for the vendors.  The appellant always maintained of course she gave no authority but the original trial judge and the Court of Appeal held that in fact she had given authority to her son to deal with that certificate of title as he saw fit, namely to deposit if necessary.  The final day is 22 July 1996 when the son goes to, it appears, the offices of Mr Klar.  He then executes the business sale contract, and of course the vendors also execute the contract on behalf of the company.  The son executes the contract. 

That is the essential chronology.  In terms of the essential facts, may I turn first to the business sale contract itself, your Honours.  It is at appeal book 170 and following.  It was held – and this is not in contest – that it was both prepared, dated, executed and completed all on the 22^nd.  As one can see from page 171, the vendors are the respondents, Mistford and Mr and Mrs Vines.

GUMMOW J:   Mistford had been deregistered at some stage, had it not?

MR DORNEY:   After the action was over, your Honour, yes.

GUMMOW J:   Has that been fixed up since?

MR DORNEY:   I have no idea.

MR FRASER:   Yes, it has, your Honour.

GUMMOW J:   So we do not need to worry about the ASIC involvement, do we?

MR FRASER:   No, your Honour.

MR DORNEY:   Thank you.  On the…..page the purchaser was Mobile Lab Pty Ltd.  That was the son’s company, to put it in those terms.  The guarantor, one sees about two‑thirds of the way down, clause 37, was the son, Mr Glen Theodore.  The next page deals about halfway down with the purchase price.  There is really no dispute that the price was $66,500.  The deposit there is said to be $100 but in fact the full price which was both the deposit and the first instalment were paid that day.  $19,900 was in fact the first instalment.  That appears, if your Honours turn to page 176, at 4.1(a).  So 19,900 plus the $100 was paid that day, so it is $20,000 paid that day.

That money was obtained by the son, in this case the son’s company, from the appellant who also lent the son a further $10,000 just prior to the agreement.  What we submit is important is the next page, 177, clause 4.3:

For better securing the payment to the Vendor of the balance purchase price (and interest thereon), the Purchaser warrants as follows –

It is not in dispute that the balance at that stage was $48,100.  It is (v) that is important which is over the page.  Now, (iv) is somewhat important in that it is a negative pledge which is something that is raised in a telephone conversation, but it is (v) at the top of page 178 and that reads:

that the Purchaser –

which is the company, Mobile Lab –

in support of the Guarantee contained in Clause 37 –

which is the guarantee by the son and director –

of the Standard Conditions –

the standard conditions are that it does not matter because I think it is agreed between both sides that 37 does state that –

shall procure the lodgement with the Vendor’s Solicitors on or before the Date for Completion –

which of course in this instance is the very day itself, 22^nd –

of a stamped copy of this Agreement, the unencumbered Title Deed to the freehold vacant land –

which is in fact the document in question –

and a mortgage thereover in favour of the Vendor, such mortgage to be prepared by the Vendor’s Solicitors (at the cost of the Purchaser) and to be unregistered while the Purchaser complies with the obligations on its part contained herein.

Attached to the agreement which appear on pages 186 through to 190 is what is called the deed of guarantee and indemnity.  It will be noticed that this deed of guarantee and indemnity is not contained in clause 4.3(v) but it is important because clause 14 of that at the top of page 89 is really the obligation that is said to be secured by the mortgage.  I will not read it, your Honours, but…..the obligations that the guarantor undertakes to grant the bill of mortgage.

What is also important about that particular document is back at 186 in recital B:

The Guarantor hereby acknowledges that she –

this is the mother –

has made such enquiries and received such legal, financial and other independent advice as she may desire, touching and concerning the said business and the viability thereof and the affairs of the Debtor –

That will come to be important, we submit, later.  Turning to 191, which is the unexecuted mortgage, one can see from item 5 on that particular page, about halfway down, the debt or liability secured was his obligation under the guarantee.  The amount there is referred to of 48,100.

GUMMOW J:   But this was never executed?

MR DORNEY:   It was never executed.  These documents, your Honours – and it is again not disputed – were handed to the son immediately after the execution of the business sale contract to be given to his mother.  That appears to have been done at least by August 1996.  In their unexecuted form, we would submit, so clause 4.3(v) “shall procure” could be carried out by the son obviously to the company itself.  Page 193 then deals with the personal covenant.  Neither the guarantee and indemnity nor the mortgage was executed.

Two other important points before I go on to the judgments themselves.  It is asserted in the appellant’s submissions and agreed to by the respondents’ submissions that the appellant, that is the mother, never had any dealings or contact with Mr Klar or any of the vendors from that period from 12 July 1996 until execution of the contract on 22 July and the real persons behind the vendor company who were also vendors had no contact with the appellant’s son or with Mr Klar.  The authority to conduct the negotiations in that last period was given by the vendors to Mr Klar as their solicitor.  The settlement of the contract without having obtained the executed mortgage and guarantee, which of course appeared to be a part of a requirement of clause 4.3(v), was done because the vendors’ instructions to Mr Klar were to proceed to completion in the absence of any execution of either the guarantee or the mortgage.

I then turn to the judgments.  The claim was filed in May 1998, although that does not matter in particular terms of time.  The judgment of Justice Robertson of the District Court was then given in November 2002 and the judgment of the Court of Appeal on appeal from that was given on 24 December 2003 and further orders made the following year on 2 April 2004.  Could I take your Honours to the reasons for judgment of the Court of Appeal.  A majority comprising the President ‑ ‑ ‑

GUMMOW J:   Do we not have to look at the findings of fact by the primary judge?

MR DORNEY:   Your Honour, I am happy enough to but they are set out in the – and I do not think they are in dispute.  Justice McMurdo said that the facts were set out in Justice Jerrard’s judgment.  She accepted them, so I think it is probably easier to turn to Justice Jerrard’s judgment about those matters.  The facts are set out through from pages 260 to the top of 263.  I will not take your Honours in detail through them because the facts that are set out as found there really are in accordance with those facts I have taken your Honours through.  We would submit that any additional facts really can be dealt with as particular issues arise.

CALLINAN J:   Mr Dorney, was there an agreement by your client to lend some money to her son?

MR DORNEY:   She did in fact loan some money to the son.  That is dealt with, if I might just take your Honours to it, at 261 in paragraph [18], about halfway down that particular paragraph:

That bank declined to lend Glen Theodore $60,000.00 . . . The appellant’s evidence was that she then decided not to assist her son at all in the proposed purchase; but that she relented and agreed to lend him $30,000.00, of which $20,000.00 was lent to make the initial payment of capital and $10,000.00 was lent to allow her son to buy a van.  Mr Klar had in fact already been told by Mr Theodore on 12 July 1996 that the latter would be borrowing $30,000.00 from the appellant of which $20,000.00 would be the deposit –

and I will come to the rest of that later.  So she did in fact, prior to any agreement being entered into, loan $30,000 to her son.

CALLINAN J:   It was for the purposes of purchasing the business.

MR DORNEY:   It was indeed, your Honour, yes.

CALLINAN J:   Mr Dorney, was there any evidence of any discussions between your client and her son about security being provided by the son?

MR DORNEY:   No, your Honour.  Throughout the whole of the trial the appellant denied and denied repeatedly that she authorised her son to deal with the certificate of title.  She said in fact it was taken from the house but it must have been brought back to the house after they went to the ANZ Bank by the son and then he took it later.

CALLINAN J:   I meant the son providing security to his mother.

MR DORNEY:   There is no statement by the appellant to that effect.  The trial judge found and the Court of Appeal said it was open to the trial judge to find that she had authorised her son to use ‑ ‑ ‑

CALLINAN J:   No, you do not understand what I am asking.  I am talking about discussions with respect to the provision of security by the son to his mother for the loan, that is the loan that your client was making to him.

MR DORNEY:   No, there was no discussion of any security by the son with his mother for the 30,000.  I am sorry, your Honour.  Perhaps one finding that is important is at page 262 of Justice Jerrard’s judgment at the end of paragraph [20].  His Honour refers there to:

The learned judge made the finding, not challenged by any party on the appeal, that Glen Theodore was manipulative and probably dishonest.

McHUGH J:   What was the mother’s explanation for giving written authority to her solicitors to release the title deed to the son on 18 July?

MR DORNEY:   For the purpose of going to the ANZ Bank to discuss with the ANZ Bank about her son obtaining a loan for which she would then use the mortgage as security.  Of course, that never came to fruition.

GUMMOW J:   Her case was she was happy to be in the hands of the bank because she was a bank officer’s widow, but beyond that ‑ ‑ ‑

MR DORNEY:   Beyond that she gave no authority to anyone to do anything.

GLEESON CJ:   But the finding referred to on page 261 at line 30 was contrary to her evidence.

MR DORNEY:   Yes, your Honour.  Of course, it cannot be challenged here but it was done on the fact that subsequent – and this is really set out in my learned friend’s annexure where he goes through all the correspondence.  It was done primarily on the basis that she did not through any letter of her solicitor ask for the return of the duplicate certificate of title until November 1997 – that is close to a year and a half later – and that because she had not done that, it reinforced the view that she must have permitted her son to deal with it as he did.  But there was no oral evidence that the mother at any stage gave the particular authorisation.  It was a mere inference that the trial judge made.

If I might then turn to the reasons for the decision that the Court of Appeal made, at the original hearing the District Court trial judge made a declaration that there had been an agreement by the mother with the vendors to provide the mortgage.  I will come back to that in a moment.  He then made consequential orders which basically were specific performance, that she specifically perform that agreement, which included not only executing the mortgage but executing the guarantee even though that was not included in fact in the agreement which was in writing on the 22^nd.

On appeal the majority of the Court of Appeal dealt with basically two issues.  The first was whether in fact if on the assumption – if there was express authority by the mother to the son to contract on her behalf – and we are dealing with specifically what the judge has found – then that was met by the statute of frauds equivalent, that section 11 – and perhaps it should have been section 59 but it does not matter – as they held precluded any reliance upon any contract entered into by the son supposedly with the authority of the mother.

Having said that, the majority of the Court of Appeal then went on to the next issue, which is the deposit of title deeds.  I will come to the detail of that just now.  The matter of the oral contract is dealt with at page 258 by the President at paragraphs [6] and [7].  She refers to his Honour’s finding that under clause 4.3(v) the company, that is the purchaser company, and the son as agent of the mother – and footnote 15 is important because footnote 15 actually says:

Agency is a fact accepted for present purposes but disputed by the appellant.

So the Court of Appeal, at least the majority, did not form the conclusion that apart from the authority to deal with the title deeds, the son had any authority necessarily.  That is, the appellant is not now precluded from arguing that there was no authority given to the son to contract on her behalf.

agreed to lodge with Mr Klar the appellant’s unregistered mortgage, prepared by Mr Klar, of the Buderim land in favour of the respondents . . . The appellant did not sign the contract and nor was there any evidence that Mr Theodore was authorised in writing to be her agent.  The appellant’s signature on the document authorising Mr Theodore to pick up the title deed was not and should not have been construed as her written authorisation . . . I agree with Jerrard JA that the learned primary judge erred in concluding that s 11 of the Act did not apply to prevent the respondents from relying on any obligations of the appellant under cl 4.3(v) of the contract.

[7]      As the appellant succeeds on this ground, it is unnecessary to determine whether his Honour erred in finding that Mr Theodore was acting as the appellant’s agent and was authorised to bind her in terms of cl 4.3(v) of the contract.

Now, Justice Philippides constituted the balance of the majority.  Her judgment is at 273 in paragraphs [60] and [61].  It is very brief and essentially it just says, “I agree”.  The President then moved on in the following page to deal with the “Equitable mortgage by lodging the title deed”.  Page 259, paragraph [9], the second line:

On the accepted evidence, all parties, including the appellant, intended the lodging of the title deed at the time of lodging –

I submit that the time of lodging in fact was the 18^th; there was no obligation and certainly no loan and no debtor/creditor relationship of any kind –

to be security for the purchase price of the business.  This gives rise to a presumption that the land was then charged in equity as security for the balance of the purchase price:  see Matthews v Goodday and Land Title Act 1994 (Qld) s 75(1). There is no sound reason why an equitable mortgage will not arise from the deposit of deeds belonging to a third party rather than the debtor –

We contest that.  The reference there in fact is to Re Wallis and Simmonds, which we will come to later.  Paragraph 11:

As the finding of an equitable mortgage by lodging of the title deed is a complete answer to the appellant’s claim, it becomes unnecessary to consider the appellant’s remaining grounds of appeal.

So those were the only two grounds dealt with.

Justice Jerrard, while agreeing with the first matter – and the agency argument is dealt with at appeal book 264, paragraph [31].  I think it is necessary to go to that because there seems to be some argument about what authority the son had to contract on her behalf.  At the bottom of 264:

[31]     The respondents’ further argument – and the finding implied by the learned judge – that the appellant had authorised her son as her agent to agree on her behalf that she would execute a mortgage gained support from an admission by the appellant in cross‑examination –

the admission is contained about halfway down that passage where she answered the question:

And you authorised him to advise the defendant’s solicitors that you were prepared to go in on a deed of guarantee ‑ ‑ ‑

GUMMOW J:   On what page, 65?

MR DORNEY:   Page 265, I am sorry, your Honour.

GUMMOW J:   No, I mean in her evidence.

MR DORNEY:   Your Honour, that particular passage is at I think 84, yes.  Your Honour, while we are at 84, I might just deal with the context in which that admission, so-called, was made.  If one goes to the top of page 84 – this is her evidence in cross‑examination – about line 4:

And yet you say that back in July of 1996, you had to go down there with a certificate of title in your hand and ask for a $60,000 advance on your son’s behalf –

This is obviously a reference to the ANZ Bank at Maroochydore on 18 July –

I had to go down there because I didn’t want to lend him any of my money again.

The remaining part of the paragraph deals with another question that was asked earlier.  It was then that a series of questions were asked by Mr Redmond about negotiations, et cetera, beginning at line 20.  So she was asked about negotiations, which she says, “Yes” – that is about line 25 – and then:

And he kept you informed about the progress of the negotiations?-- He told me about going down and not being enough money, and having to have extra security . . . 

And you authorised him to advise the defendants’ solicitors that you were prepared to go in on a deed of guarantee and mortgage?-- Yes.

And that you were prepared to authorise your son to deposit a certificate of title?-- Never.

Now, the context in which that admission as to advising them that she would be prepared of course is done in the context of the ANZ Bank as well.  So we would submit at best it is very equivocal.  It may be that she had in her mind the reference to the ANZ Bank and not the reference to any mortgage that her son might suggest was necessarily executed by her with respect to the purchase of the business himself.

It seems, and it is not suggested otherwise, that she really did not know of the final terms of the agreement at the time they were signed, that she was first aware of that a couple of months later when she first got the contract.  She was…..given by the son the guarantee and mortgage of course within a couple of weeks.

Anyway, Justice Jerrard back at 265 dealt with that passage, but then says at about line 17:

That was a significant admission but it was accompanied by other denials.  It entitled the defendants to a finding that they had established their pleaded representation –

the counterclaim did not actually plead an agreement; it pleaded a series of representations –

that the appellant and her son would agree to a mortgage.  It was not an admission that the appellant had agreed with the respondents to grant one.

Then if I could just briefly go to paragraph [32] as well because it has an incidental effect, about the third line:

irrespective of whatever authority the appellant gave her son, Clause 4.3(5) –

that should be (v) –

was at all times merely an agreement by the purchaser (not Glen Theodore, but guaranteed by him) to procure the lodgement . . . Neither the purchaser nor Mr Glen Theodore could claim or give any interest in Lot 65, and there was no agreement in Clause 4.3(v) by anyone to enter into a mortgage, or that one would be entered into.  Clause 4.3(v) makes no reference to the provision of any guarantee by the appellant . . . In that regard the appellant’s submission actually reflects the pleadings by the respondents.  Those did not allege any promise made by the appellant through her son to grant a mortgage.

We submit, therefore, it is really simply a case of what flows from the deposit of title deeds in the context of what occurred.  In terms of the mortgage by the deposit of title deed, his Honour Justice Jerrard in dissent, having agreed with the majority on the point of the matter of writing, whether authority was in existence or not, 266 and 267 dealt with this particular issue.

His Honour really did not go any further than saying that an inference or presumption did not arise in this case because it was a third party who was the mortgagor, or the presumed mortgagor in question.  That is dealt with at paragraphs [38] and [39].  I will just read part of [39] if I may:

I respectfully consider the inferences available from the fact of deposit of a third party’s certificate of title would include that that document had possibly been misappropriated; or else that the land owner was to take some benefit from the transaction.  In this matter the fact of the deposit of the title with Mr Klar on 18 July says very little about the terms of any equitable mortgage thereby created, particularly because Glen Theodore did so with the representation that he held the beneficial title.  Perhaps in recognition of that uncertainty the respondents were driven during the appeal to seek leave to amend their pleadings to enable them to plead acts of part performance by them.

Your Honours will see briefly that part performance is then dealt with by his Honour because there had been a request to amend to alleged part performance.  That was refused.  Further over at page 271, in terms of the estoppel argument, which of course there is no doubt is in contention in the notice of appeal, his Honour said the estoppel argument was not available either to the appellants.  So simply from those judgments, we submit, what we are really looking at in this case is whether in the context the deposit of title deeds did give rise to an equitable mortgage.

Your Honours, if I just can deal then with some of the authorities.  The major statement of principle which has been accepted since 1927 is in Coote’s Law of Mortgages.  That is dealt with in that particular book at A.  Page 86 is the first extract there and I will take your Honours to that first.  At the back of that book there is A, B, C, D right down to the back ‑ ‑ ‑

GUMMOW J:   Yes, I have it.

HEYDON J:   It actually is not.  It is 11, 12, 13, 14.

MR DORNEY:   I am sorry.

GLEESON CJ:   We have it.  It is behind tab 11.

MR DORNEY:   Behind tab 11, I apologise.  Page 86, second paragraph:

As a general rule, therefore, an agreement to give a mortgage on land, tenements . . . or on any interest in or concerning them, to secure a debt or advance, must be in writing and signed by the intending mortgagor or his agent.

But to this rule there is an important exception.  A deposit of title deeds by the owner of freeholds or leaseholds with his creditor for the purpose of securing either a debt antecedently due, or a sum of money advanced at the time of the deposit, operates as an equitable mortgage or charge, by virtue of which the depositee acquires, not merely the right of holding the deeds until the debt is paid, but also an equitable interest in the land itself.  A mere delivery of the deeds will have this operation without any express agreement, whether in writing or oral . . . as the Court would infer the intent and agreement to create a security from the relation of debtor and creditor subsisting between the parties, unless the contrary were shown; and the delivery would be sufficient part performance –

So the delivery in a sense has to be part performance of the agreement that is presumed or inferred.  It would seem then impossible that if it is ‑ ‑ ‑

GUMMOW J:   But it is part performance by the wrong party, is it not?

MR DORNEY:   Indeed, your Honour, and in fact the authorities deal with that.

GUMMOW J:   It is around the wrong way, is it not?

MR DORNEY:   They say this is really anomalous, but that is the way it has developed.  Even so, to be part performance there must be an agreement of which it is part performance.  If at the time of the actual deposit you do not have an agreement, then in a sense what can it be part performance of?  That is the important point we wish to make in this case.

Your Honour Justice Gummow, I will not take you to the detail, page 87 deals with the first decision, about halfway down, of Lord Thurlow in Russell v Russell, and that seems the point of origin of the doctrine.  At the bottom of that particular page:

But the deposit will create an equitable mortgage for the debt then due, although there be not one word spoken at the time.

GUMMOW J:   In any of the deciding cases was the amount secured future indebtedness at the time of the deposit?

MR DORNEY:   There is not any particular case of that, your Honour.  Our learned friends have brought up the case of Francis v Francis, which is a Full Court of Victoria in 1952, in which Justice Smith, we would submit, obiter in a consideration of what you would need in terms of a debt or advance proposed that you could have a future advance, that is, without any prior advances, but just a future advance.

Francis v Francis is in our learned friends’ – and I might just take your Honours briefly to that since the matter has been raised.  It is case No 6 in their list.  Right at the end of that particular case, at page 343 – the case was concerned with part performance.  The reason that the judges felt the need to have a look at this area is because in fact it is, if you like, the parallel universe, but it is parallel in terms of its development to part performance.  Page 343, about line 10:

And there do not appear to me to be sufficient reasons for confining this view –

that is the view about the presumption –

of the matter to cases in which there is a debt existing, or an advance made, at the time of the handing over of the deeds.  No doubt in such circumstances the receipt of the deeds points all the more clearly to the existence of an agreement to dispose of an interest in the land.  But even when there are no such circumstances, as for example, where deeds are handed over in pursuance of a parol agreement for the sale of land or for the granting of a mortgage of land to secure advances agreed to be made in the future, I think that the receipt of the deeds should be held to point with sufficient clearness to –

that.  He then goes on of course at the end of that particular paragraph to raise questions even about that:

Whether in such cases the plea of part performance would be sustainable at the second stage of the enquiry –

he is talking of course about the inquiry as to part performance –

referred to above is, of course, another matter, as also is the question whether specific performance could be obtained of an agreement of the kind last mentioned before any advance had been made under it.

That is really only an obiter statement.  To the contrary of that is in World Tech 5 BPR [97401] which is case No 4 in our list of cases.  Justice McLelland in the Supreme Court of New South Wales in the Equity Division, at page 11,732, just before halfway down that page:

This depends upon the intention of the parties, either proved or presumed.  It is clear that one purpose of sending the certificate of title to Centech was to facilitate the preparation by Centech’s solicitors of an instrument of mortgage for execution by Yellowin.  In the case of an intended mortgage to secure an existing indebtedness, as in the present case, and not merely moneys to be advanced or credit to be extended in the future, there is a presumption –

et cetera – again, without a consideration of the cases that might impinge on that.

McHUGH J:   Have you ever looked at any of the books on banking practice?  Banks take deposits of certificates in respect of overdrafts on which no money is lent but ‑ ‑ ‑

MR DORNEY:   Indeed, your Honour.  Your Honour, I have in fact some cases which we put in the reply, and perhaps it is best to go to that now.  They, I think, are truly numbered A, B, C and D.  The first case is Lucia Heights [1985] VR 338. I hope it is under tab A in that book. The headnote summarises the point in question:

A financier agreed to lend to a company $300,000 subject to certain conditions precedent, including, inter alia, the provision of a registered first bill of mortgage over designated land in Queensland and the provision of guarantees –

If your Honour then goes down to the finding:

Held, dismissing the appeal:  (1)  The agreement was not capable of being specifically enforced and the consideration was wholly executory.  The agreement did not therefore constitute an equitable mortgage and did not fall within the definition of mortgage –

The important point there is it did not constitute an equitable mortgage.  The passage in question, if I take your Honours to it, is at 341.  At the top of 341 Justice Murray has referred to an argument which he says:

was correct in submitting that the agreement did not fall within the definition of a mortgage, either legal or equitable . . . 

Mr Kaufman also referred to Sykes, The Law of Securities, 2nd ed, p 258 where, in discussing equitable mortgages of legal interests, the learned author refers to an express but informal agreement to give a mortgage and an implied agreement to give a mortgage, as constituting circumstances . . . The learned author says:–

“The first two types of mortgage of a legal estate rest on contract and on the capability of being enforced by judgment for specific performance.  They also demand the presence of an executed as distinct from executory consideration.  A contract for a loan is not enough.”

The authority for the latter proposition is Rodgers v Challis ‑ ‑ ‑

GUMMOW J:   I am not sure it is, is it?

MR DORNEY:   Well, your Honour, it seems to have been accepted that it is, subject to two further issues.  Your Honour, if you go to B in that list, there is the decision of the Court of Appeal in New South Wales of which the Chief Justice was a member.  That is Prime Wheat Association.  At the bottom of page 512 in the judgment of the Chief Justice – both Justices Handley and Sheppard agreed on this aspect with Chief Justice Gleeson:

The share sale agreement was not a debenture.  However, Dunford J held it was also a mortgage, and it is necessary to address that issue.

The basis upon which the Chief Commissioner contended, and Dunford J accepted, that the agreement was a mortgage was that it fell within par (d) . . . 

Dunford J correctly accepted that the agreement did not fall within the definition of mortgage in s 3, because it did not itself constitute a security by way of mortgage or charge.  However, he said that because of what is provided about the execution and delivery of securities it satisfied the definition . . . 

The principle that the question is to be considered as at the date of execution of the instrument is of importance here, especially having regard to the conditions precedent to completion.

I cannot accept that this instrument was, at the relevant time, “accompanied with the deposit of . . . documents of title”.  It was not.

But then the important point:

In holding that the share sale agreement was “an agreement . . . for making a mortgage”, Dunford J made no reference to Lucia Heights Pty Ltd v Comptroller of Stamps (Vic) [1985] VR 338, which held that an agreement which is not specifically enforceable, and which does not create an equitable mortgage, does not fall within the relevant part of the definition.

We would submit that that is an acceptance of the proposition in Lucia Heights that where you do not have terms of a future advance executed consideration you cannot have an equitable mortgage.

The next document in that list, your Honours, is an extract from the latest edition of your Honour Gummow and Lehane’s Equity:  Doctrines and Remedies 4^th edition (2002).  That should be at C, your Honours.  At the top of the page which is the beginning of paragraph [20-050] the statement is made:

The general rule is that a contract to lend money (with or without security) cannot be specifically enforced either by the proposed borrower or the proposed lender:  Loan Investment Corp of Australasia v Bonner [1970] NZLR 724 (PC). But specific performance will be ordered of an agreement to give security if the loan in question has actually been made.

The reference there at footnote 12, among others, is to Rogers v Challis.  Now, if your Honours turn over the page, there is an exception to that general rule, and that begins five lines down:

The authorities in this field are founded not upon a philosophical objection to ordering the mere payment of money but upon the proposition that damages are an adequate remedy; if it will be extremely difficult, although not impossible, to assess damages with reasonable accuracy, so that it would be an unjust imposition to leave the plaintiff to the remedy at law, specific performance may be decreed of an agreement to lend money, and Kearney J so held, after reviewing the authorities, in Wight v Haberdan –

But we would submit that is an exception, and there is no suggestion of course in this case that such an exception does arise.

GLEESON CJ:   What was the name of that recent decision of ours on the subject of equitable mortgages?

MR DORNEY:   That was Pico Holdings.

GLEESON CJ:   Pico, thank you.

MR DORNEY:   It is referred to in our outline.  I might just give you the reference again.  It is Pico Holdings Inc v Wave Vistas Pty Ltd (2005) 79 ALJR 825, the neutral reference at [2005] HCA 13.

GLEESON CJ:   Thank you.  We will adjourn now until 2.00 pm.

AT 12.50 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.12 PM:

GLEESON CJ:   Yes, Mr Dorney.

MR DORNEY:   Yes, thank you, your Honour.  Your Honours, if we might now turn to the next jurisprudential matter which is really whether in these circumstances, where presumption might otherwise arise, you will actually have full examination of the relevant facts.  I think it is not in dispute but I will take your Honours briefly to an authority to that relevant? effect, and that is, United Bank of Kuwait v Sahib, which is No 6 ‑ ‑ ‑

GUMMOW J:   What proposition is this?

MR DORNEY:   This is simply that even if you have this presumption arising the Court can still examine the total facts surrounding the particular circumstances to see whether in fact the presumption can be sustained or the inference can be rebutted.  It is at page 139.  It is a decision of the English Court of Appeal, and the reason for the analysis of this area of law was that it was held in this particular case that as a result of the 1989 English legislation that no ‑ ‑ ‑

GUMMOW J:   They do not have this doctrine any more.

MR DORNEY:   Yes, the doctrine does not exist any more.  Yes, thank you, your Honour, but in the consideration of matters at 139D and E, Lord Justice Peter Gibson said as follows:

I accept that there need not be an express contract between the depositor of the title deeds and the person with whom they are deposited for an equitable mortgage to arise – 

subject to a particular section – 

But I have already stated why it is clear from the authorities that the deposit is treated as rebuttable evidence of a contract to mortgage.  Oral evidence is admissible to establish whether or not a deposit was intended to create a mortgage security, whether or not the original deposit was intended at the outset to be security for further advances, whether or not it was agreed subsequently that that deposit should be security for further advances and whether or not any memorandum of agreement accurately stated the terms of the contract or was complete.  To allow inquiries of this sort after the Act of 1989 – 

is not allowable, but obviously permissible if you do not have that English provision.  One particular example of that is Westpac Banking Corporation v Cronin (1990) 6 BPR [97435] at 13,105 and the only reason I draw your Honours’ attention to this is because there is a reference in the judgment to a matter of onus.  In brief terms, a certificate of title had been deposited at a bank.  There was an argument between the bank manager and the depositor about what occurred.  If your Honours turn to the second last page of 13,110, about 9 lines down, Chief Justice Waddell in Equity said:

In all the circumstances, I am unable to find that either of the two versions of the conversations is correct or that either of them is incorrect.  I am left in a state of doubt as to what were the terms of the two conversations.

It then goes through the relevant authorities and ends down at the second‑last paragraph to this effect, three or four lines down:

On the other hand, it seems to me that if, as in the present case, each side relies upon an express agreement, the onus is on the plaintiff to establish that there was an agreement of a kind which would lead to an equitable mortgage.

The reason that is relevant is that the respondents have actually alleged such an oral agreement in their outline, and I will come to that in a moment.

The next issue is the third party mortgagor, and it seems to me that up until In re Wallis & Simmonds, which is case No 3, in 1974, there had been no decided case that even suggested that if it was a third party who was depositing the title deeds that they would be held to be within this particular principle.  It was a single judge decision but, of course, it was of later Lord Templeman from the House of Lords.  The particular passage, and there are several, but I will just read one at 398 between B and C:

If a deposit of title deeds to secure a debt owed by the depositor creates a charge on the land despite section 40, then logically in my judgment, whatever the origin of the rule, it ought to follow that a deposit of title deeds to secure a debt owed by a third party is equally outside [the section] and ought to raise exactly the same presumption.

His Honour then dealt with the rest of the page but did not go beyond the fact that it was a matter of logic.  He referred later in the page to the fact that if there was no previous judgment then it must have been understood that there were previous occasions that this would apply and therefore there was no case to that effect.

GUMMOW J:   Letter G, is it not, on that page?

MR DORNEY:   Yes, your Honour.

GUMMOW J:   Letter H - “the presumption”.

MR DORNEY:   Yes, your Honour, but he seems to make it wider than that in the B and C passage I read, that is, in the end you can apply the general principles such that even if you come to an agreement rather than a presumption, if you have a third party mortgage, it is still within the particular ‑ ‑ ‑

GUMMOW J:   Why would it not be, I wonder.

MR DORNEY:   Your Honour, I will come to that now, if I may?  Your Honour, there is no first instance decision or intermediate appellate decision that actually is to the contrary.  The only decision that we would submit encapsulates the problems with it is the case of Arnick Holdings, and that is No 8.  In that particular decision Justice Bryson begins about a third of the way down the page, after referring to the New South Wales equivalents, section 23C and54A, to say this:

There appears to have been a striking qualification of apparently clear statutory provisions by a course of judicial decisions.  The doctrine of part performance itself is a firmly established doctrine of the Law of New South Wales:  see Regent v Millett . . .   However, in relation to equitable mortgages by deposit the law appears to have been applied in a manner which depends to an unusual degree on assumptions about facts without actual proof of those facts, and without great attention to the principle on which the doctrine of part performance rests – 

referring to Justice Gibbs in Caton – his citation in fact –

and without attention to the requirement of the doctrine that the acts of part performance relied on must be unequivocally referable to some such contract as an agreement to give security.

To my mind there is an essential ambiguity about the act of delivery title deeds to a bank, especially someone else’s title deeds, as that act could well be referable to a wish to furnish information about their contents, or to a wish to have them kept in safe custody.

There is also ambiguity with respect to the nature of any agreement to create security which delivery of deeds, if taken as referable to the creation of security, is referable to:  either security over the documents themselves, or over the land of which they evidence title.

When as here the documents are an unregistered mortgage owned on its faced by persons other than the debtor, and a Certificate of Title to land owned by yet another person, the potential ambiguities of the event appear to me to be abundant.

Then he deals with the Re Wallis & Simmonds Case and at the top of the third of the extracted pages, it is a folio of four of the judgment, he says this:

Although Templeman J dealt briefly with the grounds on which he extended the law theretofore established, I am left with the feeling that his Lordship’s observation that it was too obvious for decision that the general rule applies when title deeds are deposited to secure a debt no matter who is the principal debtor was susceptible of a more exhaustive exposition than his Lordship gave to it.

In my view in principle if an owner of land is to be bound by security consisting of a deposit of the title deeds to his land it must be material whether the owner intended to create a security over his land, and whether he is bound, by having conferred authority or on some other basis, by the actions and by the intentions of any other person who deposited the owner’s title documents with a person who claims security.  In the present case there is a body of evidence which enables me to go deeper into an examination of the rights of the parties than a simple application of a general rule in circumstances which are not explained.

I concede that that essentially goes to the matter of presumption, that his Honour is essentially saying he cannot see the logic why it is presumed in the case of a third party rule law which, because other presumptions are equally open consistent not with the depositing for the terms of security, he, unfortunately, for our purpose at least, does not go to the stage ‑ ‑ ‑

GLEESON CJ:   But he does at the top of page 2 deal with the matter that Justice McHugh raised with you before lunch, in the first complete paragraph on the top of page 2.

MR DORNEY:   Yes, indeed, your Honour.  Such policy choices are not open to him but it does not necessarily mean that at this level the policy choice might not be open to this Court.  I mean, after all, your Honours, I know that the judgment has been around since 1974, that the textbook writers not surprisingly quoted as authority for what is stated to be, and that no judge at first instance in fact has suggested it is wrong except perhaps for Justice Bryson in an oblique way.  But in this country at this stage it is still open and proper for this Court to actually apply that particular approach.

CALLINAN J:   Mr Dorney, the other possibility – you mention, I think, two.  One of them was safekeeping ‑ ‑ ‑

MR DORNEY:   Yes, your Honour, I will come – sorry.

CALLINAN J:   It would be very easy to infer whether something was left for safekeeping or not.  You would look at the identity of the person with whom it was left and the relationship between them and then I think you mentioned pledge.

MR DORNEY:   Yes, your Honour.

CALLINAN J:   But very often associated with the pledge will be an intention to create or to give a security anyway by deposit, will there not?  To secure something that is being done for the pledgee or by the pledgor.

MR DORNEY:   Indeed, your Honour, but of course we are dealing with this area with exceptions to the statute of frauds and we submit that the correct approach ought to be one that takes account of that, that is, that the expansion should not occur in an area where otherwise, the courts of equity in England and of course in Australia, have adopted this view about ‑ ‑ ‑

CALLINAN J:   It is just I am having a little trouble in finding or thinking of situations in which, apart from the two we have just mentioned, situations in which the deposit has not been in order to provide some sort of security. 

MR DORNEY:   Indeed, your Honour, in fact if you have a look at the cases in which it has been applied, including Wallis & Simmonds, they are usually cases involving a director of one company causing that company to deposit its title deeds as security for another company of which he is also a director and obviously a controlling director of some kind.  So I agree, in those circumstances, you may examine the facts and find that in normal banking practice, for instance, that ought to be accepted.

GLEESON CJ:   Well, putting to one side the particular problem of third party mortgages with which we are concerned, in normal banking practices one of the most common reasons for dealing with security by way of equitable mortgage involving deposit of title deeds is so that customers will not have registered mortgages on their land, is it not?

MR DORNEY:   Indeed, your Honour, because ‑ ‑ ‑

GUMMOW J:   And that was to happen here, was it not?

MR DORNEY:   We will come to that in a moment but your Honour is right, that is right, but simply in this particular case that is not what happened.  It does not necessarily address the question of principle but we would submit that in the cases such as this where the son turns up with a mortgage that clearly does not belong to him, clearly belongs, it would seem, to his mother, then this principle that you should in that case not apply the statute of frauds provisions we would suggest is anomalous.  It really means that since there are other possibilities about how that came into his possession, particularly if he has no written authority from his mother, he merely turns up with it, that there should be a reluctance of courts to accept it. 

Intriguingly enough, in the case in which our learned friends have in their list called Brocklesby, at first instance the judge in equity there was faced with the position of a son who had been authorised by his father to use his title deeds to raise money for the father.  Now, initially the judge was concerned that - the evidence as it came out meant that the son in fact raised money for himself – so he was concerned that how could this theory possibly apply to a person who brings somebody else’s, like his father’s title deed, into the particular financier and then get an equitable mortgage by deposit arising from it because it was an equitable mortgage case.  He said he was fortified in the case in question because of the written ‑ ‑ ‑

GUMMOW J:   It was a priorities problem.  Was it not a priorities question?

MR DORNEY:   Your Honour, in the end it was simply a matter of, and this was the only point argued, whether the father to redeem the mortgage and get his deeds back had to pay the full amount even though it was fraudulently obtained.  I am merely putting the proposition forward that at first instance in that case, in the Chancery Division decision, the judge was concerned about the facts simply of that kind, that here was somebody attempting to raise money in a sense for himself…..on somebody else’s mortgage deeds and therefore there was a concern by the court about that circumstance and that is what we are really submitting.  Your Honour, we cannot take it beyond principle because there is no case that actually suggests that the principle should apply.

GUMMOW J:   Well, we had a case that we heard in Tasmania about guarantees in the last two years or so in which we went through authorities which indicate some tenderness towards guarantors, if you like.

MR DORNEY:   Yes, your Honour.

GUMMOW J:   Ankar, and I think that is what you are trying to tap into here with the third party mortgage.

MR DORNEY:   Well, I am tapping it even further because when I come to the facts in this case, there was in fact to be a guarantee and it was that obligation under that guarantee that was the subject of the mortgage obligation so, in a sense, if it was ruled against his Honour’s principle, we are quite happy to address the facts of this particular case but we merely put it forward as a principle that ought be considered by this Court, even though at this stage there really is no authority to the contrary of it. 

McHUGH J:   The word “deposit” itself is a loaded term, is it not, because it almost answers the question?  One has to distinguish between custody and deposit.  Ordinarily, if I give title deeds to the bank and there is nothing but the bare fact of custody, it does not seem that you could infer anything, but supposing there is some other agreement either between me and the bank or some relative of mine and the bank, why should you not make an inference in those circumstances – forget about presumption – why should you not draw an inference that I have given those deeds to the bank as security for that relative’s loan?

MR DORNEY:   Your Honour, without anything else but the deposit itself, we would submit it should not be so because there are other equally competing inferences that are open on that instance.

McHUGH J:   But if you have an agreement and then you have the deeds, why cannot you tie the two together and draw an inference as opposed to the fact that the bank just happens to have your title deeds along with a lot of other detail about you in their records?

MR DORNEY:   Your Honour, we submit that in that particular case it should be as the statute of frauds rightly requires in writing, that this particular principle or rule should not be expanded to cover that because, after all, it is an exception to that particular rule and was developed, in a sense, to prevent fraud and one can see that in the normal circumstances a person having a debt and depositing their own title deeds why the inference may well be drawn.  But why it should be drawn in the case of third parties when other inferences are really equally open ‑ ‑ ‑

McHUGH J:   Well, that is the question.  I mean, the modern law has set its face against presumptions.  I think I said something to that effect in Amann’s Case that contract case, 10 or 15 years ago in this Court but, I mean, the presumption of advancement is still there in various situations.  You say we should not extend it?

MR DORNEY:   No, your Honour.

McHUGH J:   That is artificial reasoning.

MR DORNEY:   The substance originally was there is no logical reason, but as was pointed out in Arnick, in fact there are real difficulties with applying it generally and certainly subject to the logic principle. 

CALLINAN J:   Mr Dorney, you are one party further removed too, are you not, because you are for the mother of the guarantor, not the purchaser?

MR DORNEY:   Yes, indeed.

CALLINAN J:   So it is not as if the close relationship is between the purchaser and your client.  The purchaser is the company.

MR DORNEY:   And interestingly enough, the guarantee that the mother gives is not particularly of the son’s obligation.  It is of the company’s obligation but I will come to the facts in a moment.  The issue that your Honour Justice McHugh raised really is the next point, and that is, it is clear on the facts that on the 18^th when the deposit was made there was no debt so, we submit, no presumptions, no inferences, call it what you like, of any type can be judged from that circumstance.  No one suggests there was an agreement in existence on the 18^th. 

I will come to that document because it is important.  It is at 169 of the record and this, by the way, is in the context where Mr Klar, who was the solicitor for the vendors has had represented to him, it would seem on numerous occasions, that the son is the beneficial owner of the property, that is, that he really controls what happens with this land.

McHUGH J:   Well, he says it is held in trust, the mother holds it in trust for him because of family law proceedings.

MR DORNEY:   Yes, and that is why I think that the judge at first instance talked about misleading and probably fraudulent conduct and there is no doubt that at least on three occasions, he represented to Mr Klar that he was the beneficial owner and could control what happened.  So we look at this document which is dated 18 July 1996 and given to the son when he deposited the title deeds.  The third line actually refers “to be held in safe custody” and that may merely mean because it is safe custody on your behalf, as if the son has represented that he really is the one who controls this and that fits neatly in with the obligation that his company undertakes to procure this, among other things, “as security on account of the purchase” but then “from M & V Vines”.  Of course, they are not the eventual vendors, it is also Mistford.

But it is clear that at that date negotiations had reached a fairly advanced stage but they had not reached a completed stage, so there is no agreement as at this date, therefore the best that that document could be is these particular title deeds deposited then are to be held in safe custody on your behalf for use, if you like, in this business that is intended to be sold at some later time.  The problem that our learned friends want to submit ‑ ‑ ‑

CALLINAN J:   All of that is equivocal.

MR DORNEY:   Yes, indeed.

CALLINAN J:   The way it is expressed, very equivocal. 

MR DORNEY:   Indeed, I was coming to ‑ ‑ ‑

CALLINAN J:   And that is the agreement ‑ ‑ ‑

MR DORNEY:   That is the only thing in writing. 

CALLINAN J:   That is the only record of the agreement in respect of the deposit.

MR DORNEY:   Yes, that is a fairly possible agreement and certainly, from our earlier submissions we are not submitting that in any way he was authorised to do beyond the findings of the original judge in the Court of Appeal that he could actually use them as security.  If you come to the agreement, and I took your Honours to it this morning, 4.3(v), it fits in with the notion - and this is the notion, I suppose, that is informed by the House of Lords’ decision in Brocklesby where the son is fraudulent about the use that he makes of his father’s title deeds – that what you analyse is the son’s actions. 

Now, the son’s actions in this case through himself and his company, does not purport to bind the mother to anything.  The agreement says “that the purchaser . . . shall procure the lodgement” of a number of things.  One of the things it is procuring is the title deeds.  You may say, well, it has done that, but this is a series of interdependent documents.  It is that and the mortgage and the stamped copy of the contract ‑ ‑ ‑

CALLINAN J:   Mr Dorney, I am sorry to interrupt, but do we have a copy of clause 37 of the standard conditions?

MR DORNEY:   We do not.  I understand my learned friend may have copies of standard conditions but it really is a clause that says that if you have a company who is a party to the contract of sale then a director guarantees, so 37 - and I think my learned friend may have ‑ ‑ ‑

CALLINAN J:   It may be relevant, I would have thought.  Anyway do not worry now, but I would like a ‑ ‑ ‑

MR DORNEY:   Yes, we will leave that until later because it ‑ ‑ ‑

CALLINAN J:   It is really part of the evidence before the Court. 

MR DORNEY:   Yes, your Honour.

CALLINAN J:   Well, we would like ‑ ‑ ‑

MR DORNEY:   Well, unfortunately it was not tendered but the stated conditions ‑ ‑ ‑

CALLINAN J:   Well, I do not know.  Should we look at it now?

MR DORNEY:   Yes, I am happy enough because my learned friend has produced it and I am happy enough for your Honours to look at it.  In the bundle you have been given, it must be, yes, at the end somewhere, your Honour. 

GUMMOW J:   It is the second‑last page.

MR DORNEY:   Yes, thank you, your Honour.  It is referable back to Item G, if your Honours would just turn briefly back to the second page of what has been handed to you.  Item G deals with the guarantor being the son and there provides the particular guarantee which is set out in 37.3, the guarantee at the top of the second column, “the Purchaser’s Obligations” indemnifying “the Vendor against any loss” and then the usual terms one might find in such a guarantee.

GUMMOW J:   Your point is that the letter at page 169 does not indicate any third party security.

MR DORNEY:   No, your Honour, not as such and we would submit that  whether you take it as a presumption that you have to look at or whether you take that as what is called ‑ ‑ ‑

GUMMOW J:   Well, the certificate of title, presumably the duplicate, showed your client as registered proprietor.

MR DORNEY:   Yes, no doubt.  So we would submit in its equivocal nature what has happened is that the…..which is the subject of 4.3(v) was partly, if you like, performed earlier by that deposit on that day and that is consistent with “on your behalf for this particular purpose”, but that any presumption that you might otherwise draw from the fact that as at the date of the business sale contract you had, on the one hand, an obligation coming into existence and, on the other hand, a deposit of title deeds or a continuation of a former deposit of title deeds, necessarily means that the mortgagor should have been held to enter into the contract of mortgage just is, we would submit, inconsistent with the facts because the facts of this particular subclause are that the company, in support of, in fact, the son’s guarantee then shall procure these other things, which include, among other things, the certificate of title and the executed mortgage and everything else.

As your Honour Justice Gummow pointed out, of course it was always to be held as unregistered.  But, your Honours, if the facts stopped at that, there might be even some difficulties for us, but we would submit that when you look at further evidence that is an even stronger conclusion that ought to apply and particular aspects are these.  The unexecuted guarantee of mortgage, as we addressed you this morning, was in fact given by Mr Klar to the son on that day to go away and have his mother execute.  There is no dispute about that.

We pointed out this morning that in Justice Jerrard’s judgment there was nothing in fact on the pleadings of alleging any promise through the son to grant any particular mortgage.  Mr Klar and his client, the vendors, accepted the deposit of title deeds was to have or would have in the circumstances of this case no effect.  That in fact is set out at firstly AB130, which is the cross‑examination of Mr Klar.  At the top of that particular page there is a reference there to Mr Klar believing the son was the beneficial owner had been “borne out by the fact that he had been readily able to produce the title” to him on the 18^th.  He was then asked:

Mr Klar, why didn’t you obtain the signed deed of guarantee and the duplicate mortgage . . . Because my instructions were from my clients to proceed to settlement on the 22^nd of July-----

Right?-- -----in the absence of the document . . . 

My clients were – were satisfied-----

Mmm?-- -----that Mr Theodore would be able to perform.

. . . They trusted Mr Theodore.

. . . My view would be that the documents should have been registered-----

Well, you-----?-- -----in the first instance, but my-----

-----You – you’d-----?-- -----instructions were to the contrary.

. . . it was desirable to have the signed mortgage and the deed of guarantee and the title deed when you settled?-- Indeed.

Mmm.

MR TAYLOR:   And you’d advised Mr Vines a couple of weeks earlier, hadn’t you, that – the fact that just – just obtaining the title deeds was not going to be sufficient?-- Yes, I had.

That he needed a legal mortgage –

in fact they just agree that it is a signed mortgage.  On the next page at about line 10, in dealing with this matter of a mortgage he is asked:

That is, if you – if you have a mortgage, the mortgagee’s entitled to keep the deeds; that was the reason for the keeping of the deed?-- Quite.

Now, if your Honours turn back then to an earlier passage – and this is Mr Vines, this is the client himself, at AB104, about line 22:

On the same day he noted his advice to Mr and Mrs Vines that an equitable mortgage by bare deposit does not now work.  Do you remember getting that advice from him?— I read it in correspondence subsequently.  Yes, I remember reading that.

And Mr Vines suggested that a mortgage – suggested a mortgage at Mr Theodore’s expense.  So it was you that suggested you needed a mortgage –

which seems to be an executed mortgage –

Yeah.

Further down the page:

I left it to Mr Klar’s judgment.

Now, Mr Klar’s evidence is to the same effect.  He did advise his client that it would be of no effect.  The last reference to this issue, your Honours, is at 232, which is the decision of the trial judge, paragraph [9]:

At the time of settlement neither Mr Klar (nor the defendants) had had any direct dealings with the plaintiff . . . Prior to settlement on the 22^nd July 1996, Mr Klar had advised the defendants that the holding of a certificate of title was not sufficient security for the payment of the balance of purchase price without the signed guarantee and mortgage.  Notwithstanding this advice, the defendants wanted to settle urgently and instructed Mr Klar to proceed.

But most importantly, even if that is insufficient, Mr Klar in cross‑examination admitted this.  This is at 133, just after line 10:

It is.  But you gave the documents to Glen Theodore to give to her?-- Yes.

So at that time even you understood that she may seek legal advice –

In fact, he is referring back to that recital that I took your Honours to at the beginning of the guarantee this morning that she received legal advice –

Indeed.

And there may not------?-- Or other advice.

She might not have signed the guarantee?-- Quite.

Or the mortgage to secure the guarantee?-- Yes.  That’s so.

Yes.  And that’s exactly what’s happened, isn’t it?-- Mmm-----

Well, sorry, not with regard to the legal advice but she hasn’t executed the guarantee or the mortgage?-- I understand not.

Mr Klar, of course, was authorised by the vendors to negotiate with Mr Theodore.  We would submit that if that is the approach then it is clear that all the documents in 4.3(v) are interdependent and that without the other documents, and particularly in circumstances where the titleholder can elect not to sign the guarantee – if you do not sign the guarantee, you cannot sign the mortgage that has been given to her - it cannot be that she can be held by this inference to in fact have agreed to an equitable mortgage by inference.  It is just not possible on these facts in this case, no matter how you get to the end product, when you look at all the facts, that this could apply here.

The last matter I wish to address your Honours about is simply this matter of our learned friends’ contention that there was in fact an agreement and therefore that that would override any of these particular arguments.  The problem simply is that they rely upon the judge at first instance in coming to the decision he did that there was such an agreement and they rely upon particular parts of the judgment.

We would submit that looking at the judgment as a whole that just cannot be an agreement that could have come into force.  It starts, your Honours, at paragraph [45] at 241.  This is going not to the authorisation to deposit the title deeds; it goes to the authorisation to contract.  His Honour says:

It follows from my factual conclusions that prior to completion the plaintiff authorised the son to deal with the deed in such a way as to enable him to complete the purchase of the business from the defendants which included the provision of security over the land.  It does not matter, in my opinion, that the plaintiff had no direct contact with Mr Klar prior to completion.

Then it refers to the Masters v Cameron extract and then in [46] refers to Justice McHugh’s decision in Integrated Computer Services.

[47]     I am satisfied that the plaintiff authorised the son to provide the deed as security, and that she must have anticipated a term such as Clause 4.3 of the Contract signed by the son on the 22^nd July 1996.

We would submit that is really taking the notion of an agreement entered into on the basis of a subsequent written agreement to an absurd length, certainly not a clause such as 4.3 at least.  It is also necessary then to look at [51] at 244:

Applying that analysis to the facts of this case, I have found that the son as her agent was authorised by the plaintiff to lodge the deed as security for the purchase of the business; and that a contract of the type referred to in Masters v Cameron as the first class was made; which included an agreement to enter into a mortgage over the land.

Now, at that stage, of course, that could only be an agreement for the future.  In a sense it is a section 59 of our particular Property Law Act agreement.

Clearly, the mortgaging of real property is creating an “interest in land”, however an agreement to enter into a mortgage does not thereupon create an interest in land and s 11(1)(a) does not apply.

In fact he is right, but for the wrong reasons.  The next particular provision is [58] where his Honour then restates his conclusion at 245:

I would have thought that my reasons clearly establish that I have found that there was an agreement, to which the plaintiff through the son her agent was a party, to provide security over the land by lodging the deed and providing a Mortgage and Guarantee in terms –

and if your Honours look at the orders which are at [60], it is clear that the first part of the Masters v Cameron agreement happens on not the 18^th but the 22^nd:

I declare that there was, as at the 22^nd of July, 1996 and still subsists, a binding agreement –

of that kind and then paragraph 2…..performance of that agreement.  It is clear when you look at the next page, which are the orders, that his Honour was referring to the specific unexecuted guarantee, and indemnity and mortgage later on.  We therefore submit that that is just not possible in these circumstances to be an agreement that the mother authorised her son to enter into.

If you do not have that, then in a sense you do not have any agreement because there is nothing alleged in anything that the respondents have put in their outline that suggests as at the 22^nd any words were spoken at all which might otherwise indicate a promise and an acceptance of that promise – an offer and acceptance.  There is just nothing said at the 22^nd on behalf of the mother.  So you are then left with the facts.  We submit that those facts are not sufficient to draw the inference that you have title deeds that day and you have an obligation.  We would submit that looking at the whole of the facts which I have taken your Honours through you must come to the conclusion that there was not in this case the deposit of title deeds that gave rise to the equitable mortgage.

CALLINAN J:   Mr Dorney, was it actually put to your client, or was clause 4.3 of the contract actually put to your client and was she asked whether she was aware of such a clause or anything of that kind?

MR DORNEY:   It was never put to her.  There is no evidence at all that she even knew of the content of 4.3.  As I said, there is no evidence at all of any contact between Mr Klar and her.

CALLINAN J:   Or any previous knowledge ‑ ‑ ‑

MR DORNEY:   Or any previous knowledge.

CALLINAN J:   ‑ ‑ ‑ on her part because she had given a guarantee on some other occasion or anything of that kind?

MR DORNEY:   No, nothing like that, absolutely nothing.

CALLINAN J:   It is quite a detailed clause.

MR DORNEY:   It is, your Honour, and to say on that day when no words are spoken at all on her behalf that she in fact has agreed to execute a mortgage in those terms.

CALLINAN J:   The trial judge is in effect finding that she anticipated the clause that would say that the company, the purchaser, did not owe any money to anybody else.  It seems pretty unlikely to ‑ ‑ ‑

MR DORNEY:   Well, more than unlikely.  In the absence of any words – after all, the cases establish that if in fact you allege an oral agreement the onus is on the people who are asserting it, which are the respondents.  We would submit that that is the only agreement they have identified and that agreement just cannot be sustained.

Your Honours, the last matter simply is the matter of personal liability.  In the respondents’ submission in response they accepted that the second order of the court which actually ordered direct payment by the mother was in fact beyond power.  They then submitted the first order can stay, which is in fact just a declaration of equitable mortgage, and then they say of course under that interest is at 8 per cent, the Court of Appeal ordered 5 per cent.

Now, we submit that if you have a look, among other cases, at Ryan v O’Sullivan, which is on our list, that the approach of the Equity Court in these cases is in fact to say an equitable mortgage arises, it is in the power of equity to order interest, and in a sense that is what the Court of Appeal did in this case.  They ordered it at 5 per cent.  We would submit that in fact if the appeal is found against the appellant that the order should be the same as the Court of Appeal made in terms of interest.  At the end of our reply submissions we put the particular order there that should take the place of the existing of order (b).

GUMMOW J:   That decision you refer to is in the 1940s, is it not?

MR DORNEY:   No, your Honour, it is 1956.  It is I think in the ‑ ‑ ‑

GUMMOW J:   As to 5 per cent.

MR DORNEY:   Indeed, your Honour, but the Court of Appeal in this case actually took 5 per cent as well.  What they took it from, I have no idea.  I was not on the appeal.  They ordered 5 per cent.  We would submit that it is not so much the fact that in 1956 the Victorian Supreme Court ordered 5 per cent, but they decided that they would decide what the interest rate was as the court itself.  We would submit that where the court has here decided that interest rate – and there is no notice of contention that that was wrong – we would submit it is appropriate in this case to leave the percentage there, just change the order slightly to say that in fact the principal sum bears interest at that particular rate.

GUMMOW J:   Where are the moneys at the moment?

MR DORNEY:   The moneys are held in trust.  The property has been sold and the moneys are held in trust.  So in a sense if the order as made by the Court of Appeal, if we lose, is of that kind, that is, paragraph (a) stays, paragraph (b) then just deals with interest, then the parties will in fact abide by the intent of that order.  Those are our submissions.

GLEESON CJ:   Thank you, Mr Dorney.  Yes, Mr Fraser.

MR FRASER:   Thank you, your Honours.  Your Honours, one thing that our learned friend made clear was that he did not challenge the findings that his client authorised her son to leave the certificate of title with my clients, the respondents, by way of security.  Even though my learned friend referred throughout to various bits and pieces of evidence that touched on that question, there was no challenge in the notice of appeal.  It is not entirely clear from his written submissions, but he made it perfectly clear orally that he did not challenge the various findings to the effect that the appellant authorised her son to leave the certificate of title by way of security with the respondents.

The point of the challenge therefore seems to be to contend that the son did not leave the certificate of title by way of security to support the debt that he had incurred even though he was authorised to do so.  I think your Honour Justice Callinan asked a question about the evidence in support of the findings about authority.  I had not really intended to go into it in view of the absence of a challenge but can I mention that in our submissions we do identify the places where the evidence exists and it does go well beyond, in our submission, a mere delay in seeking the return of the certificate of title.

So then the real question seems to be: did the son in fact leave the certificate of title with the respondents by way of security? I use those terms because section 75 of the Land Title Act has in a sense updated the language. Curiously it has now in effect made this doctrine a matter of substantive statute law instead of just a remedial doctrine of equity. Section 75(1) provides in terms that:

An equitable mortgage of a lot may be created by leaving a certificate of title with the mortgagee.

I have given the Court the reference to the provision of the Property Law Act that renders its provisions subject to the provisions of the Land Title Act insofar as we are talking about title under the Land Title Act.

HEYDON J:   Section 5(1)(b).

MR FRASER:   Yes, your Honour.  So curiously now the doctrine has in effect been changed into an affirmative statutory provision.  Of course the section itself cannot be taken to mean that an equitable mortgage is always created by leaving the certificate of title.  It requires the characterisation of the person with whom it is left as a mortgagee and therefore one must establish, in order to come within that section, that it was left by way of security, that is to say by way of charge under the Land Title Act.

So far as the question of whether there is an agreement is concerned, can I just give your Honours a couple of references that you have not been so far taken to.  In the findings of the trial judge at page 232 of the appeal book in paragraph [7] at a date a bit earlier than the dates my learned friend mentioned on 12 July his Honour referred to a discussion about proceeding with this terms contract and in the last sentence found:

At this time, Mr Klar [the respondents’ solicitor] advised Mr Theodore that there would be a requirement to lodge the Title Deed to the land with the Defendants’ Solicitors.

That is a reference to the evidence at page 125 of the appeal book of Mr Klar, whose evidence seems to have been accepted.  At the top of page 125 there is a reference to the discussion about the intention to enter into the vendor finance contract and arrangements as to the particular terms which ultimately were substantially reflected and towards the bottom, at about line 40, he was asked:

Was there any discussion in relation to a deposit of a title deed to land?-- Yes.

What was that?-- I suggested that, as he had previously mentioned to me, the fact that there was a vacant block of land, the title to which was in his mother’s name, but it was owned, beneficially, by him, Mr Theodore, that would he be prepared to lodge that title as security, merely a deposit of the title.  My recollection is that he agreed to do that.

And so on.  Now, my learned friends made something of the point that the son ‑ ‑ ‑

GUMMOW J:   There was a mistake, was there not, as to the quality or nature of the property in question?

MR FRASER:   In terms of the trust, the issue?

GUMMOW J:   If you are talking about a contract, yes.  He said he owned it and he did not.

MR FRASER:   He said he owned it and that was not found to be so.

GUMMOW J:   The other party, your client, contracted with him on that basis, and it was a wrong basis.  Does anything flow from that?

MR FRASER:   Well, firstly, it was not litigated on that basis, but secondly ‑ ‑ ‑

GUMMOW J:   No, we are looking at the equities of the situation though.

MR FRASER:   Yes, but our proposition is, your Honour, that he in effect used that proposition to persuade my clients to accept the title deed.  If in fact he had authority to hand over the title deed, it would not prevent the title deed from being handed over with authority.

GUMMOW J:   What is this agreement you are talking about – between whom?

MR FRASER:   Your Honour, the agreement is between the appellant and the respondents, so the first part of it is the findings of authority that we have in our favour.  So we submit, in short, that the appellant left her certificate of title with the respondents.  The second part of it is, the findings being to the effect that he did that which he was authorised to do, what did he in fact do?

GUMMOW J:   No, you have to say she held him out in some way, do you not?

MR FRASER:   With respect, not, because we have a finding of actual authority ‑ ‑ ‑

GUMMOW J:   Because he did not do what he was authorised on your theory to do.

MR FRASER:   He was authorised to leave the certificate of title and he did do that at least, we respectfully submit.

McHUGH J:   But that does not take you very far, does it?  I mean, you have to rely on an equitable mortgage – well, you have to rely on an oral agreement to take you outside of section 11 and rely on an equitable mortgage as part performance of that agreement.  So the first question is:  what is the agreement between the appellant and your clients?  Is that not the first point?

MR FRASER:   Yes, your Honour.

McHUGH J:   Now, what do you say that agreement was precisely?  The declarations in the Court of Appeal do not say what the agreement was.

MR FRASER:   Your Honour, I will come to what was agreed between the son and the respondents on the 22^nd against this background and submit that the agreement was that the appellant would leave her certificate of title with the respondents as security for her son’s obligations under the contract.  The point of it is this.  The thrust of my learned friend’s submissions was that there was no such agreement because that was interdependent with a promise by the son to procure in the future an executed guarantee and mortgage document. 

The point we make, when one looks at the provisions, is that it was not interdependent.  There were two promises.  One was by the son to leave his mother’s, the appellant’s, certificate of title as security and in addition the son promised to have her execute a guarantee and a mortgage in a particular form.  We submit that when one looks at what was actually agreed between the son and the respondents, the two were not interdependent.  Given that the simple facts are that according to the findings the appellant prior to the 22^nd, or prior to the events of the 22^nd, authorised her son to leave her certificate of title as security, what he did in the end, we submit, was what he was authorised to do.  I have taken your Honours to this bit just to show ‑ ‑ ‑

McHUGH J:   Yes, I know, but you see I do not think you are facing up to what I was putting to you.  You have to make a case that the son was an agent for his mother to make an agreement between her and your client.

MR FRASER:   Yes.

McHUGH J:   Now, it is not sufficient in the context of this case to say she authorised him to hand over deeds.  You have to go beyond that and spell out what it was she was agreeing to.  That does not take you very far to say she agreed to give him some deeds.

MR FRASER:   No, your Honour, but the findings do go beyond that.  They are to the effect – and I will take the Court to them – that she authorised him to leave her certificate of title by way of security for his obligations and we submit that ‑ ‑ ‑

McHUGH J:   With whom and for what purpose?

MR FRASER:   With my clients.  She was kept aware of the negotiations that he was having with the respondents.

GLEESON CJ:   Can I ask you a question of factual detail about that.

MR FRASER:   Yes, your Honour.

GLEESON CJ:   I think we were told a little earlier that so much of the purchase price for this business as was paid in cash came from the appellant and that it was the vendor – was that part of the purchase price that is the subject of vendor finance that we are now concerned with?

MR FRASER:   That was the $20,000 deposit.  The balance of the purchase price was provided by way of vendor finance.

GLEESON CJ:   Yes.  Now, the so‑called deposit, the $20,000, that part of the purchase price that was paid in cash came from the appellant.

MR FRASER:   Yes.

GLEESON CJ:   What I wanted to ask you was what does the evidence show as to the knowledge on the part of the appellant of the contractual arrangements between her son, her son’s company and your client?

CALLINAN J:   Including 4.3.

MR FRASER:   It shows that she had not seen the contract.  It was put to her that she was aware of it and she said she was not aware of it.  But it goes this far ‑ ‑ ‑

GUMMOW J:   We have to see that I think.

MR FRASER:   Yes, I will see if I can find it, your Honour.  I am told it is at page 142 of the record.

GUMMOW J:   This is on recall.

MR FRASER:   At line 20.  So this is talking about the meeting where she spoke to her solicitor on 9 August and she says at line 30 that it applied to a contract that she had never seen.

CALLINAN J:   That evidence seems also to establish, Mr Fraser, that at the time that she gave the certificate of title to her son there was no arrangement or there was no contract between her and her son as to the repayment of the $20,000 that she was lending or had lent or as to any security that she might take in turn from her son or any arrangements that her son would make to repay her and to protect her.

MR FRASER:   That is so, your Honour.  If I can take the Court back a bit.  What seemed to have happened, if I go back to page 60 of the record, was that first of all her son asked her to provide her deed by way of security for a loan from the bank.  At about page 60 at about line 10 I think it is:

he –

that is her son –

was asking me if he could borrow some money.  He needed some money and could he have my deed to borrow some money from the bank if they were willing.  It was his idea and I went along with it.

Then she gave him the letter of 18 July and he picked up the certificate of title with her authority and then ‑ ‑ ‑

CALLINAN J:   But had she proceeded with that, if the bank had been prepared to enter into that arrangement that was suggested, it would then inevitably have come into existence arrangements, probably enforceable arrangements, under which she would have some recourse against her son.

MR FRASER:   Yes.  Then what happened was after that that did not occur and the real contest at the trial was whether or not she had authorised her son to use her certificate of title in the way she did use it here, that is to say by way of depositing it as security for the completion of – to enable him to complete this contract. 

At page 234 there is a reference in his Honour’s judgment in paragraph [16] about the bank arrangements.  In the quoted paragraph from the appellant’s evidence, in the last bit of it, she points out that despite being told that it was not a good business to buy she relented and lent him $20,000 to go to settle that business.  Then over the page, at paragraph [19], after his Honour refers to the arrangements with the bank and some other matters and to the fact that the son must have made a number of trips, his Honour referred at about line 15:

that the plaintiff’s agreement to lend him $30,000 ($20,000 of which was for the business) occurred between the 18^th July 1996 and the 22^nd July 1996.  Her evidence is that she did not appreciate that the son had taken the title deed until on or shortly after the 22^nd July 1996.

His Honour referred to that and pointed out – if your Honours look at it, she said:

Mr Vines can’t remember what he said, but the gist of it was that 20,000 was not enough, and that they needed more security, and so he told me that he handed over my deed as security –

he had done that on the 18^th –

and I was horrified, and said, “Why did you do that?  I didn’t want you to do that”, and he said, “Oh, don’t worry.  It was – it’s only held as a naked title.”

That would seem to be a lien, as it were, on the document rather than a charge.

And I didn’t know what a naked title meant.  I assumed that I wasn’t going to have to hand it over.

I pause there.  Can I just say about that that we submit that evidence about what was in the appellant’s mind or what my instructing solicitors advised my clients and so on, none of that can be relevant to any of these questions, in my submission. 

What is clear is that even on her own evidence at about this time she became aware that her son had handed over the deed as security.  That evidence comes from page 52 – it is fully quoted there – but she gave the evidence again at page 58 of the record.  It is probably worth taking the Court to that.  At about lines 35 to 40 she agrees that her son discussed his plan to purchase the business with her.  She is then asked about that clause of the contract that your Honour Justice Callinan asked me about and she said she knew nothing about it.  She did not think she ever knew that.  At line 50 then my learned junior asks again about the evidence she gave in‑chief.  She says:

I knew that he had handed over my title deed to Klar & Klar against my – I knew nothing about that.

She sought halfway through to retract it.

But you said that he did that on the day.  He told you about that on the day that he had gone down there?-- Yes, he told me later after it was over.  After he had done it he told me.

This is what I was really referring to before when I was saying there was a little more evidence than just her failure ever to demand the document back.  Then at page 236 in the trial judge’s judgment at paragraph [23] there is a reference to her evidence to what she had told her solicitor shortly after the contract settled – that is on the 9 August meeting:

“So you told Mr Taylor about the certificate of title having been lodged with Klar and Klar at the same time that you went to see him about the deed of guarantee, mortgage –

Your Honours will recall that on the 22^nd she was given draft deeds of the guarantee mortgage –

Yes.

So what was Mr Taylor’s advice . . . ?-- He – we decided that we wouldn’t give any written authorisation for the other party to use it, and then that we would sue the other party for the return of it.”

Now, there was also in addition to that the evidence which is at page 84 of the record, which I think is quoted in Justice Jerrard’s judgment, at about line 20 – this is when he came back to the question about what she knew about the contract – she says at about line 25 that she knew about negotiations:

Yes, I knew that he was wanting to purchase the business.

And he kept you informed about the progress of the negotiations?-- He told me about going down and not being enough money, and having to have extra security.

In that context, in our submission, the finding that she allowed her son to take the certificate of title is significant.

And you authorised him to advise the defendants’ solicitors that you were prepared to go in on a deed of guarantee and mortgage?-- Yes.

Now, I do not seek to erect that into something which it is not, namely an agreement to the particular forms of a particular mortgage, but it is, in my respectful submission, evidence which is relevant to the inference that she authorised her son to leave the certificate of title by way of security for the son’s obligations, appreciating of course that there was additional money owing by him, as it were, under the contract, and there were other matters referred to by the trial judge.

Now, to get back to what seems to be, with respect, the critical question, what was actually agreed, in short our submission is that against the background that there had been a request, or in effect a demand, for the deposit of the certificate of title by way of security by the respondents’ solicitors to the appellant’s son on the 12^th, that there had been the provision of it on 18 July – and I will come back to the terms of that receipt – the real question is:  was there something that happened on the 22^nd that meant that the certificate of title was not to be left as security but was held in some form of escrow pending the execution of the mortgages and the guarantees.

GLEESON CJ:   You are relying upon an agreement made between your client and the appellant, the appellant’s agent being the son.

MR FRASER:   Yes.

GLEESON CJ:   And I think you said earlier you are relying on actual authority, not ostensible authority.

MR FRASER:   Yes.

GLEESON CJ:   So the question is whether the agreement that the son purported to make with your client was within the scope of the actual authority conferred on him by the appellant.  Does that involve a consideration of the degree of generality or specificity with which authority was conferred upon the son by the appellant?  Do you say that she authorised him to provide the certificate of title as security for whatever his obligations might happen to be?

MR FRASER:   Yes, your Honour, because it is possible to seek to confine the authority of one’s agent in a situation like this, although Brocklesby suggests in House of Lords and the Court of Appeal that ‑ ‑ ‑

GUMMOW J:   Just a minute.  Do you have any finding in your favour that that was the extent of the authority or do you wish to obtain one from us?

MR FRASER:   No, your Honour, I will take the Court to the findings about the extent of the authority.  They are in broad terms in our favour and I can take the Court to them.  Is it convenient to do that the moment after I go to the last bit of evidence that I was going to mention on this topic?  I will be submitting that they are findings of authority in the broadest possible terms and the evidence that I have taken the Court to suggests, with respect, that the appellant was content to leave it to her son to determine precisely what was to be secured by the certificate of title.  The evidence shows she appreciated that there was money to be owing by him that had to be secured and she did not confine the terms of his use of the certificate of title.  But as to what actually happened on the 22^nd, the evidence comes from Mr Klar at page 126 of the record and it really turns quite a lot on what is written in the contract and I will come to that but at page 126 he describes what happened on settlement starting at about line 45:

the matter settled on the 22^nd of July.  That’s when I received a bank cheque from Mr Theodore, I believe, in the sum of $19,900.

He did not have signed guarantee of indemnity and a deed of mortgage.

What was the arrangement struck in regard to that – or those documents?-- On the 22^nd of July, I met with Mr Glen Theodore, Mr and Mrs Max Vines, in my office.  Mr Theodore was acting for himself.  I produced the draft contracts.  The parties read through it.  It was accepted and signed off.  I then – I then told Mr Theodore that it would be necessary for him to ensure that the contract was stamped.  I gave him, therefore, a signed copy of the contract.

It refers to further down, on page 127:

I gave him execution copies of a deed of guarantee and indemnity, and a bill of mortgage, requesting that he have them signed by his mother . . . 

. . . He assured me that he would do that. 

Can I just pause to say something here.  In my submission, there are two different questions that arise.  The trial judge ordered specific performance of a contract to provide a guarantee and a mortgage, in addition, declared that the certificate of title was held as an equitable mortgage.  There is nothing necessarily inconsistent with those forms of relief.  The Court of Appeal set aside the findings that justified making the appellant personally liable to guarantee or a mortgage of personal covenance but upheld the finding of the deposit of the certificate of title creating an equitable mortgage.  Nothing practical turns on the difference now because the amount of money that has been obtained by the sale is well sufficient to pay the claim.  We do not seek, therefore, to argue that we ought to have a specific performance or any personal liability and that is why we in our submissions do not insist on maintaining an order that the appellant personally be ordered to pay money to the respondents.  We seek to establish our equitable mortgage.

Turning to what happened on the 22^nd, the certificate of title, as you know, had been lodged but of course, as my learned friend points out a number of times, at the time it was lodged on the 18^th, there was no existing indebtedness for it to secure.  There was an anticipation that in the future there would be such an indebtedness and your Honours have seen the terms of the receipt which we submit really reflect that.  Up until the contract, the son could have asked for the certificate of title back, or the mother could have by herself or by her son, and, presumably the respondents’ solicitors would have given it back.  But on the 22^nd, the contract was signed by the son, and your Honours have been taken to it, but at page 177 there was a promise by the son, we submit, to do effectively two things.  In clause 4.3, for better securing the balance of the purchase price and interest, a promise, and in (v) on page 178, that he would do two things:  “procure the lodgement with the Vendor’s Solicitors on or before the Date for Completion of” some documents, including “the unencumbered Title Deed” and a “mortgage to be prepared by the Vendor’s Solicitors”. 

What in fact happened was he fulfilled one of those obligations and the respondents were content to allow completion to go through on the basis that he had fulfilled one of them only and the second was yet to be fulfilled.  It is clear, with respect, that the son agreed that he would provide by this date – the same day as he signed the contract, as it turns out – the certificate of title by way of security and the contract was then immediately completed, my clients handed over the business, they had completion fulfilment of the obligation of the son to leave the certificate of title.  They did not have the benefit of an executed document of mortgage but the son had assured them, based no doubt on the fact that the appellant had told him that she was prepared to do it, that the appellant would go in on a mortgage. 

In my submission, when one stands back a bit and looks at the facts that occurred on this day it is really an unreal inference, with respect, to treat the parties as having regarded those obligations as interdependent in a sense that the absence of the executed mortgage on that day meant that the certificate of title should not be treated, between these parties at least, as being that which it was promised to be – security for the purchase.

The final question, in my submission, is just whether the son, when he fulfilled his contractual obligation to provide the certificate of title by way of security, as that clause says, did so with the authority of the appellant.  As to that, we rely upon the findings of the trial judge which were challenged but not disturbed in the Court of Appeal.  Can I take your Honours firstly to the conclusory findings, as it were, at paragraph [39] of the trial judge’s judgment, at page 240, which is the paragraph in which his Honour made the assessment of the appellant as “highly intelligent, astute” and so on with some distressing physical difficulties and his Honour did not think she was a liar but did not accept her evidence “that she did not know of her son’s plans to deal with the deed as he did”, and so on.  Towards the bottom, his Honour’s finding was, after referring to the coincidence of events:

it is more probable than not that she was aware, after the failure to obtain finance, that the son was going to hand over the deed as security to enable him to complete the sale of the business.

Then at paragraph [41]:

satisfied that she knew he was going to use the deed as he did and at that time she did so to help him achieve his desire.

His Honour then referred to ratification and acquiescence.  Your Honours will have noticed we have not put in a notice of contention dealing with estoppel and acquiescence for the reason that these findings are in fact not challenged.

GLEESON CJ:   Can I just ask you about that finding in paragraph [41], first sentence, the finding “that she knew he was going to use the deed as he did”.  Does that mean he was going to use the deed in some way to secure obligations under the purchase agreement or does it mean he was going to use the deed in terms of clause 4.3, et cetera?

MR FRASER:   It seems, with respect, to be a reference back to the end of paragraph [39], the finding that he was going to hand over the deed as security to enable him to complete the sale of the business and not in more specific terms.

CALLINAN J:   In paragraph [45], is there not a finding in your favour in almost exactly the terms that the Chief Justice put to you?

MR FRASER:   I was about to turn to that but in terms of the sequence, yes, I accept what your Honour Justice Callinan is saying.  In terms of the sequence it seems, firstly, to be referable to the previous one.  There are really three more findings.  Paragraph [45]:

It follows from my factual conclusions that prior to completion the plaintiff authorised the son to deal with the deed in such a way as to enable him to complete the purchase of the business from the defendants which included the provision of security over the land.  It does not matter, in my opinion, that the plaintiff had no direct contact with Mr Klar -

and we respectfully submit that is correct.  Paragraph [47], with respect, my learned friends have read rather too much into this.  His Honour, with respect, was not intending to find that she knew of or agreed to the details of that clause in the context.  His Honour said:

I am satisfied that the plaintiff authorised the son to provide the deed as security, and that she must have anticipated a term such as Clause 4.3 ‑ ‑ ‑

CALLINAN J:   Paragraph [45], having been found in your favour, there really is not any need for a finding as to how specific her knowledge was of any particular term.

MR FRASER:   That is so, in my respectful submission.  Then there is one more, which is [58] which does go a little too far perhaps - the finding in paragraph [58].  We rely upon part of which was left undisturbed in the Court of Appeal.  His Honour had delivered a copy of his Honour’s reasons seeking further submissions to the form of orders but towards the end his Honour said:

that my reasons clearly establish that I have found that there was an agreement, to which the plaintiff through the son her agent was a party, to provide security over the land by lodging the deed and providing a Mortgage and Guarantee in terms -

That bit my learned friend attacks and we do not have the benefit of a Court of Appeal finding as to the terms of the mortgage and guarantee but at least there was an agreement to provide security over the land by lodging the deed.

Your Honours, we submit that really it is not a very atypical factual situation that has occurred here. In terms of the statute of frauds, we respectfully submit that one thing that is clear from section 75 is that one can always lead parol evidence to establish what is the act of part performance and here, we submit, that the act of part performance was the appellant’s conduct in, by the agency of her son, delivering the certificate of title against the background of circumstances that her son was negotiating and then entered into a contract under which he assumed a liability and a debt. So, in my respectful submission, there is really no startling reason to think that that would not be a sufficient act of part performance. It is a typical case of the deposit of a certificate of title to secure a debt by the registered proprietor.

We also respectfully submit that some of the legal issues raised by my learned friend fall away when one has regard to the findings which are not challenged.  For example, there were quite a few submissions about the proposition that on 18 July there was no debt to secure an equitable mortgage and there could have been an equitable mortgage, I think it was said, one could not get specific performance, of a mere agreement to lend money on a security.  My recollection is a case called Wight v Haberdan in New South Wales in 1984 which says that is not necessarily always so.

GUMMOW J:   That is Justice Kearney’s decision.

MR FRASER:   Yes, and there are I think other cases but, with respect, it is not relevant here because what happened on 22 July, in my submission, cannot be put out of account, what happened with the authority of the appellant.  What happened then was there was a change in the character of the possession of the certificate of title by the respondent’s solicitor.  Up until then, had he been asked to give it back, if, for example, no contract had gone ahead, then no doubt he would have had to give it back.  But on that date, in my submission, the certificate of title was left by the appellant, with the respondents, by way of security for the appellant’s obligation.  There is no reason, in my submission, to be concerned about cases where a contract is not executed.  In this case the contract was fully executed.

GLEESON CJ:   Do you mean to say, by way of security for the appellant’s obligation?

MR FRASER:   By way of security for the appellant’s son and son’s companies obligations.  It has been pointed out that there was a distance between the son and the appellant in a sense – this was the son’s company, there is no doubt about that, there is some evidence about it being established for the purpose of buying this business.  He guaranteed its obligations but it was the company by the son which promised to provide the security.  Everybody knew that it was the appellant’s land. 

CALLINAN J:   And she knew exactly what the son was trying to achieve because of the conversation at the bank with the bank manager.

MR FRASER:   Yes.

CALLINAN J:   So she would have known the nature of the business and that it was that business that her son wanted to operate and acquire, either directly or indirectly, by a company that he controlled.

MR FRASER:   Exactly.  We submit that the same analysis really gets rid of the difficulty about the interest rate.  She was prepared to leave it to him to define the scope of the obligation that she had authorised him to secure by the deposit of her certificate of title.  In fact, what he agreed to was that it would be deposited to secure the repayment of the principal and the interest on the principal and, in our submission, that is appropriately vindicated by the order of the Court of Appeal which is at page 280 of the record in order number 2(a) that Mr Theodore, “with the authorisation of the Appellant, deposited a certificate of title . . . and thereby secured by equitable mortgage”, I think that may really means a charge these days, “the amount owing under the contract of sale for the purchase” by the purchaser of the business, and that amount includes principal and interest at the agreed rate of 8 per cent simple per annum.  So we respectfully submit that is the appropriate order.

The second order is the one that is 2(b) that I have said we have no objection to it being set aside as was sought.  It serves no practical effect in any event and we have no objection to that order being set aside, as I said.  It is unclear why the Court of Appeal made that order because the Court of Appeal did not affirm the findings of a personal liability in the appellant; they affirmed only the findings of an equitable mortgage.

GLEESON CJ:   Is your argument that whatever room for doubt about the legitimacy of the inference that is drawn in a case where there is a deposit of title deeds without more, this was a case in which, on the findings of the primary judge upheld in the Court of Appeal, we know the inference was correct?

MR FRASER:   Yes.  Of course there is always a little tension that arises in that area because – assume against me that if one simply looks at the Property Law Act provisions one needs to establish part performance. At the moment we have section 75 as, as it were, a statutory warrant for these sorts of mortgages. But if one goes back to the old law, one needs to establish part performance.

Now, of course one cannot lead evidence of a parol agreement and rely upon the parol agreement itself to create the inference.  One needs to identify the act of part performance.  Ordinarily, the part performance must – the act must by itself be unequivocally of its own nature sufficient to indicate some such contract as that alleged.  But one thing seems to be clear, and that is that in the case of a deposit of a certificate of title by way of security, one can lead evidence of the circumstances in which it was deposited in order to demonstrate that the inference should be drawn that it was deposited by way of equitable mortgage.

Having established that, one can then go on to lead direct evidence of the oral agreement, but here – can I give your Honours some references perhaps to support that proposition, without necessarily taking the Court to it, because it does not seem to be contentious.  In fact, my learned friend said it.  United Bank of Kuwait v Sahib [1997] Ch 107 per Lord Justice Peter Gibson at 139E, and per Lord Justice Phillips at 143B. Also in Francis v Francis [1952] VLR 321 per Justice Smith at 340 at about point 3 on the page. I mention that decision particularly because it is one that is treated as having particular authority in the textbooks, including I think in Meagher, Gummow and Lehane’s text on part performance in the “Specific Performance” section. It is also cited in United Bank of Kuwait v Sahib itself.

In addition to that, if one refers to Cooney v Burns (1922) 30 CLR 216, and because it is a High Court decision I should take the Court to it, I think.

GUMMOW J:   Justice Higgins is the best, I would have thought.

MR FRASER:   Thank you, your Honour.  I think your Honour has anticipated me.  The reference starts at about page 239, and then at page 242, the part that I had marked, where his Honour goes directly to the comparison with equitable mortgage.

GUMMOW J:   Yes.

MR FRASER:   And points out that by way of comparison, it seems to be relatively easier in the case of an equitable mortgage by deposit to establish the necessary requirements.  I was going to say that the references throughout the case to establishing that it was deposit as security, which of course one must establish either by presumption or by evidence, in the judgment of Justice Isaacs at page 236, at about point 9 of the page, towards the bottom, in any event, his Honour starts moving into the comparison with the mortgage at the very bottom of page 236 and over to the top of page 237.  Then about the middle of the page, referring to:

The analogy of equitable mortgages referred to by Lord Selborne is in point –

cites with approval Chief Baron Macdonald’s decision in Birch v Ellames:

“The deposit of title-deeds as security for a debt, is now settled to be evidence of an agreement to make a mortgage, and that agreement is to be carried into execution” –

The point I make by citing passages of this kind – there is a similar one by his Honour Justice Starke at page 244, about halfway down – is that one is always entitled to prove, in my respectful submission, the character of the deposit by surrounding circumstances, and that must be so, and it really gets over the difficulty that there can be other inferences.

I would also point out, with respect, that in the judgment of the Chief Justice – and I think his Honour’s judgment was a dissenting one – but in the judgment his Honour Chief Justice Knox refers – it starts at page 222 relevantly, setting out a series of conclusions about the general propositions about part performance, and the phrase about point 2 of the way down:

By the words “some such agreement as that alleged.”  I understand some agreement for the disposition of some estate or interest in the land in question.

Then over at page 224 his Honour moved to the analogy of a mortgage, at the bottom of page 224, and Lord Selborne’s judgment:

the law of equitable mortgage by deposit of title-deeds depends on the same principles –

and so on, and cites a couple of propositions:

(1)      that a valid equitable mortgage cannot be created by a mere parol agreement to give a legal mortgage if the deeds remain in the possession of the proposed mortgagor ‑ ‑ ‑

GUMMOW J:   You rely on that, do you not?

MR FRASER:   Yes.

GUMMOW J:   Because they were remaining on the 22^nd.

MR FRASER:   Yes.

GLEESON CJ:   That is consistent with what Lord Justice Phillips said in Kuwait, which was that it is not the deposit of the title deeds that creates the charge; the charge is created by the agreement.  The deposit of title deeds enables you, notwithstanding the statute of frauds, to lead parol evidence of the agreement.

MR FRASER:   That is really our point, with respect, that one can do that.  Now, in relation to other possible inferences that might arise from a deposit, which might mean it is not a sufficient act of part performance even in that respect, I was going to mention – I think I skipped over it – in the middle of page 224, in the judgment of his Honour the Chief Justice, his Honour points out:

It is, of course, possible that in some cases a title-deed may come into the possession of some person other than the owner in circumstances which would not necessarily imply an agreement for the disposition of any interest in the land –

His Honour refers to the possibility of stealing or improper obtaining or safekeeping or safe custody, say in the case of possession of land and so on.  But his Honour points out:

But the finding of the jury negatives the existence of any such circumstances in this case –

and then goes on to deal with the analogy of the mortgage.  The point we make is that it is always possible in the case of a leaving of a certificate of title, whether you happen to be the creditor who is alleged to have left it or whether you are a third party securing the debtor’s obligations, that someone has stolen it from you, or that you have left it by way of security.  But, in my submission, when one looks at the circumstances of this case, there is just no reason to consider such a possibility.  It was left by the appellant by the agency of her son, in my respectful submission.

McHUGH J:   Well, it is too late to change it, but it does seem anomalous that payment of money is not an unequivocal act of part performance, but leaving title deeds is.

MR FRASER:   Yes, your Honour.  One thing does seem to be clear – well, it has been since Thurlow’s time in the 1780s, but one thing is also clear, that here the contract was fully executed.  One of the things put against us, I think put against us by his Honour Justice Jerrard, was that we had not pleaded acts of part performance.  But we had pleaded that we executed the contract, and the contract provided for the deposit of this particular certificate of title by way of security.  It had been deposited, and we handed over the business.  In my submission ‑ ‑ ‑

McHUGH J:   Well, in strict pleading, I suppose, in answer to your counterclaim, the plaintiff should have pleaded the statute of frauds, and you would have then, under the old system of pleading, replied to that by pleading part performance.

MR FRASER:   It started in a curious way because the statement of claim alleged, in terms, that the appellant had not authorised her son to deposit the certificate of title in her application to seek the document back, and that was denied, and then we actually – pleaded in terms an equitable mortgage by deposit of the certificate of title.  That is how it went.  I might say also a curiosity of the case is that the appellant does not ask for an order for the return of the certificate of title in this appeal, and it would be difficult to see how they could, given that it was deposited with the authority of the appellant.

GUMMOW J:   The property has been sold, has it not?

MR FRASER:   Yes, it has, yes.  I am sorry, I withdraw that – yes I put ‑ ‑ ‑

GLEESON CJ:   A claim for return of the certificate title would be defective for want of parties.

MR FRASER:   Yes.  No, I was…..for I hope only a moment, but perhaps more.  In any event, can I just then return to what seems to be – I should say also one final thing about this proposition that there was no security because there was no existing debt, apart from the fact that it ignores what happened after the 18^th.  We have given the Court references in our submissions to later pages of the text in Cootes’ Law of Mortgages, which make it plain, with reference to numerous authorities, that an equitable mortgage can be created to secure further advances, advances in the future.  We have also given the Court in our list of authorities extracts from Halsbury which say the same thing and it is obvious, with respect, that it is a common enough occurrence.  One need only look at cases like Brocklesby back a long time ago.  This has been happening a lot.

GUMMOW J:   What do you say about Justice Bryson’s concerns with Lord Templeman’s decision dealing with the third party situation?

MR FRASER:   Your Honour, he does not really suggest that the decision ought not be followed.  His Honour is concerned that presumptions should not be drawn or inferences drawn so readily in such a case.  The answer to it seems to be, with respect, that one must always in every case lead evidence of the circumstances in which the deposit was made, and it has been a matter for parol evidence for a couple of hundred years now to establish those circumstances.  So if it is a concern in relation to third parties, it is a concern in relation to mortgagors who are debtors as well.

Can I say, perhaps more substantially about it, that that decision of Justice Templeman, as his Honour was, has been cited in all the leading texts as authority.  It has not been suggested in any of the texts that we have cited or any that we have seen to be wrong.  This is an area in which there is bound to have been a lot of activity and reliance upon statements in all those texts in that decision.

HEYDON J:   Those are textbooks that just – they would take the law from a judge in the Chancery Division, unless it was crazy, without adverse comment.  They report what the courts say. They are not academic, controversial writings.

MR FRASER:   We have done searches and we have not been able to find that it has sparked controversy of that kind.

GLEESON CJ:   Strictly speaking, in the present case, if the son had been telling the truth and he had been the equitable owner of that land, or for that matter if he had been the registered proprietor of that land, this would still have been a third party mortgage, because the borrower was the company.

MR FRASER:   Yes, although he was a guarantor, so he had an obligation of his own to secure those by mortgage in that situation.  That decision – I should also add – is also referred to in the United Bank of Kuwait v Sahib, that is to say, Justice Templeman’s decision referred to without any suggestion that it is not correct.

HEYDON J:   But was it attacked in that case?

MR FRASER:   I beg your Honour’s pardon?

HEYDON J:   The mere fact it is referred to in very long judgments is insignificant unless it was under attack in that case.

MR FRASER:   It could not have been under attack in that case because the issue was a rather different one, and I do not suggest it was but, in my submission, my learned friend frankly conceded that he had done the same thing we had which is to search extensively for citations and not found any disapproval of the decision anywhere, and it is my submission that the decision ought to be followed.

I also would, with respect, point out that section 75 of the Land Title Act was enacted in replacement of an earlier provision in the Real Property Act 1887 in a similar form, but section 75 was enacted in 1994 and made no limitations upon the doctrine. The policy decision of the Queensland legislature are quite different to that of in England was to actually ‑ ‑ ‑

GUMMOW J:   The English legislation has been much criticised by commerce ‑ ‑ ‑

MR FRASER:   Yes.  So, in my submission, there is no particular reason why one would ‑ ‑ ‑

GUMMOW J:   And the law reform body whose labours preceded the legislation did not talk about equitable mortgages.  They were contract chaps, they did not know about mortgages.

MR FRASER:   I suppose I should also say that often counsel are berated for not starting at the correct point in the case and section 75 does, in our respectful submission, seem to be the correct point really to start. It is a statutory command which is unlimited in terms and, in my submission, there is no reason to read into it some limitation that it cannot be created by a registered proprietor who does not happen to be the debtor. That is all I wish to say orally, may it please the Court.

GLEESON CJ:   Thank you, Mr Fraser.  Yes, Mr Dorney.

MR DORNEY:   Just briefly, your Honours, just dealing with section 75, the original section that 75 in fact replaced, of course, in 75 they were using modern English, but the original section was section 30 of the Real Property Act of 1877. It said words to the effect that an equitable mortgage may be created by deposit and the same effect as a deposit would have had before the passing of this Act. We would submit that section 75 really is no different from that and all it is doing is picking up the old law with all its bristles and effects and really is not changing the law with respect to deposit of title deeds.

A few other matters - your Honours were taken to a transcript reference at AB125 which was Mr Klar’s evidence in which he said that the son agreed to lodge the title as security.  Your Honour, that should be read subject to the actual file note of Mr Klar on that particular time.  If your Honours would just briefly turn to pages 165 and 166 – 166 first, because that in fact is a file note of the conversation earlier in the day with the son, 166 is a conversation on 12 July at 12.40.  It refers at the bottom to “suggested bare deposit of CT to land”.  It does not say anything about an agreement, but what is more important is the page before, 165, which deals with a later conversation of the same day, 12 July at 1.10, with his own clients.  Paragraph 2 refers to explained equitable mortgage by “bare deposit”, does not work, therefore would need to look at that.  Max suggests mortgage at the son’s expense.  If you go down to the bottom of that particular page, “Inst’d:  Get mtge on land” at the son’s expense.  So that particular passage we looked at in the context of the actual file note made contemporaneously by the solicitor.

My learned friend suggested that the appellant had got the unexecuted mortgage on the same day, that is the 22^nd.  The only evidence to that is at AB52, line 25, and I cannot find any modification of it, where he says:

Yes.  Well, did you receive any information or documentation?-- I received a letter from Klar and Klar asking me to sign a mortgage – a guaranteed mortgage document, and I went to see my solicitor.

All right.  Now, how long after the day that your son, Glen, came home did you receive that mortgage documentation from-----?-- Oh, I can’t remember.

-----Klar and Klar?-- A few weeks.

A few weeks after that?-- Yes, I can’t remember exactly.

From what it matters, it does not appear as if in fact she received those that day.  It was obviously some time later.  In terms of what authorisation the mother gave her son, in the passage at AB126, at the bottom of that particular page, the meeting of 22 July – and this is what I referred to before about no statements by the son:

I met with Mr Glen Theodore, Mr and Mrs Max Vines, in my office.  Mr Theodore was acting for himself.

He made no assertion at that time that he was then acting for his mother.  So the agreement that is postulated by the learned trial judge about the group being informed on that day just could not be possible.  Besides saying he is acting for himself, there is no suggestion of any words that he particularly used…..it is back to this matter of inferences.

In terms of general authority, as I took your Honours to at the beginning, it is clear from the President’s judgment that she left open the question of actual authorisation to enter into any kind of mortgage.  I concede that it is different from what one does with the deposit of title deeds, but with respect to the deposit of title deeds, his Honour made that decision in light of the appellant’s constant denial that in fact she did authorise that particular – and it comes back to one of the Chief Justice’s comments about how specific that authority has to be.

The trial judges made that decision in light of no evidence other than inferences that he can draw from various statements in various letters because my client has given no evidence of any authorisation.  We would submit that the authority that he has drawn should be no wider than the deposit he gave her – he was given by his mother authority to use the

certificate of title as security, that it does not go – and so any contract that he writes of any kind, we would submit, it has to be limited as in the context of the way in which he found it, and those are our submissions in reply.

GLEESON CJ:   Thank you, Mr Dorney.  We will reserve our decision in this matter and we will adjourn until 9.30 am tomorrow morning.

AT 3.54 PM THE MATTER WAS ADJOURNED