Topfelt Pty Limited & Anor v State Bank of NSW Limited

[1993] HCATrans 325

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S91 of 1993

B e t w e e n -

TOPFELT PTY LIMITED and

HOLESIDE PTY LIMITED

Applicants

and

STATE BANK OF NSW LIMITED

First Respondent

and

BRIAN WILLIAM HODGES

Second Respondent

Application for special leave

to appeal

Topfelt 1 26/10/93

MASON CJ DAWSON J

TOOHEY J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON TUESDAY, 26 OCTOBER 1993, AT 9.43 AM

Copyright in the High Court of Australia

MR R.A. FINKELSTEIN, OC:  May it please the Court, I appear

with my learned friend, MR D. HAMMERSCHLAG, for the

applicants. (instructed by Isenberg Spedding &

Player)

MR A. EMMETT, OC:  May it please Your Honours, I appear with

my friend, MRS. JANES, for the first respondent.

(instructed by Emery Partners)

MASON CJ:  Mr Finkelstein.

MR FINKELSTEIN:  May it please the Court. The application

concerns the operation of sections 57 and 58 of the

Real Property Act. Section 57 of the Act sets out

the circumstances which must be complied with

before a mortgagee of registered land can exercise
power of sale under section 58. By section 57(2)

it is clear that there are only two circumstances

when the power of sale might be exercised. Under

subparagraph (a) two discrete sets of circumstances

are described: first, whether there has been

default in the observance of any covenant,

agreement or condition in the mortgage - if I could

call that the first limb - and secondly, if there

has been default in the payment of any money

secured by the mortgage. We are here concerned

with the first and not the second limb of 57(2)(a).

The issue that the case raises - in fact two

issues that the case raises - are each important.

The first is whether the first limb of 57(2)(a) is

confined in its operation to promises made by a

mortgagee. By "promise" what we mean is a

provision in the mortgage and, indeed, in any

contract by which a mortgagor undertakes that he
will do or that he will refrain from doing

something, or that he will cause something to be

done.

MASON CJ: It has an element of futurity about it.

MR FINKELSTEIN: That is exactly right, as does undertakings

of a contractual nature. That is to say, the law

of contract is a law that deals with enforceable

promises. There may be one exception to that.

MASON CJ:  But they do not always have a future aspect about

them:  a warranty, for example, as to an existing

state of affairs.

MR FINKELSTEIN: That is true. The American contract

text writers explained that in terms of promise as well, that is, a warranty that a car being sold is

of sound condition at the time of sale is described

by both the leading American texts on contract,

Williston and Corbin, and by Waddams, who is a

Canadian author on the law of contract, as

Topfelt 2 MR FINKELSTEIN, QC 26/10/93

importing a promise being a promise to pay

compensation if the warranty is not as

representative.	So it still has an element of
futurity.

MASON CJ:  So that the element of futurity consists in the

enforcement, really, of the liability?

MR FINKELSTEIN: That is exactly right. But still in

definition of the promise, when still in

identifying the relevant promise, making the

assumption that contracts - and a mortgage is just

a type of contract - involves enforceable promises.

MASON CJ:  And the same can be said about warranties as to

what has happened in the past.

MR FINKELSTEIN: That may fall into a different category.

MASON CJ:  Why?

MR FINKELSTEIN: There is a decision of the Court of Appeal

Lowe v Lombank, that case, His Lordship said, of a representation

in England, a decision in 1960,

of a past fact, that that could never constitute a

contractual obligation. It may give rise to

remedies in equity, it may give rise to remedies

at common law - in tort, for example - but it does

not give rise to contractual rights. If that is

not correct, and there is a line in Williston on
contract that suggests that warranty by

representation that a past fact is true falls in

the same category as a representation of a present

fact, namely, it incorporates a promise to make

good in money any damages that result if the

statement turns out to be untrue, but there is that

difference in views.

The Americans, or at least the textbooks, so

far as I know, no cases draw this distinctions.	So
far as the textbook writers are concerned, all of

them seem to say that it is only future promises or

warranties of existing fact, and Lowe v Lombank

seems to be the only case that we can find thus far

that says that a representation of a past fact

never has contractual effect.

MASON CJ: If you accept the Williston theory, it is

difficult to draw the line between existing fact

and past fact.

MR FINKELSTEIN: That is exactly right. I do not dissent

from that. All I am saying - - -

TOOHEY J: Particularly in this case, because the - - -

Topfelt 3 MR FINKELSTEIN, QC 26/10/93

MR FINKELSTEIN: Here it is a past fact.

TOOHEY J: Is it?

MR FINKELSTEIN: Yes.

TOOHEY J: Past in what sense? I mean, past in the sense of

prior to execution of the mortgage, or

contemporaneous with the execution of the mortgage,

or what?

MR FINKELSTEIN:  The representation was made before the

execution of the mortgage. The representation was

made, I think, on 30 January and was untrue at the

time the representation was made.	The mortgage was
executed a few weeks later in February.	The

mortgage itself required the representations to be

true and specified that if they were not that
constituted an event of default. If I take the

Court to the application book, page 71, you will

see the relevant contractual provisions. At

line 15 you will see that the mortgage is dated

9 February 1990. The representation was in a

statutory declaration. The statutory declaration

was made on 30 January and it said that as of the

time of the statutory declaration the land was

possessed - the company, prospective mortgagor was

in possession of the land. That representation was
not true at the time it was made, that is at the

time of the declaration, because there was a lease

which had been granted on 9 January, a couple of
weeks before the statutory declaration which

demised a portion of the land to be the subject of

the mortgage for about a year and a half. So that

you have got a representation on 30 January which

is false. Then the mortgage, if you go back to

page 71, paragraph (5):

(5) the Mortgagor will observe the provisions

which are deemed to be incorporated herein and

which are set forth in the Memorandum filed -

then you will see that the parts of the memorandum

are set out. 4.1 at the bottom of page 71:

4.1 The Mortgagor represents and warrants to

the Mortgagee -

4.1.6, over the page:

4.1.6 (Information) all information of

whatsoever nature furnished -

that is, in the past -

to the Mortgagee for the purpose of arranging

any facilities -

Topfelt 4 MR FINKELSTEIN, QC 26/10/93

says are true and correct, must mean is true and

correct. So that the mortgage document itself

picks up the prior representations made which

include the false representation. Then in 18 of

the memorandum it says what the consequences might

be of information being false. It says that it

constitutes an event of default, 18.1.3.

TOOHEY J:  Would your argument be the same if the warranty

was included in express terms in the mortgage?

MR FINKELSTEIN:  It does not make any difference. The

argument is exactly the same, that the enforcement,

the power of sale comes about if there is a failure
to observe something which is promissory and has

got nothing to do with a representation, whether it

is incorporated into the contract or not.

In Lowe v Lombank, the case that I referred to

earlier, the representation was found in the

contract itself. It was a hire purchase agreement

and the hirer represented a number of things,
including that the car that was taken on hire had

not been examined and that the hirer was satisfied

it was roadworthy and that the hirer had not made

known to the hire purchase company that the hirer

wanted the car for a particular purpose. They were

contained in the hire purchase agreement and the contractual effect, it was not promissory.

TOOHEY J:  Does that mean that none of the mortgagee's

powers would be triggered off in this case, the

power to recover possession or appoint a receiver?

MR FINKELSTEIN: That is a different question. Those powers

may be enlivened. That depends on other provisions

in the mortgage documentation. Here the only

question is whether the power of sale is available

and we say that as a matter of a proper

construction of section 57(2)(a) you see that it is

a provision which has effect on promissory

undertakings in the mortgage. If you look at the

opening words of subparagraph (a):

default has been made in the observance of any

covenant, agreement or condition - - -

DAWSON J: Where do you get the element of futurity there,

in which words?

MR FINKELSTEIN:  A combination of all of them. "Default"

means failing to do something; in this context

"observe" means to perform. I know that there is

usually a distinction between observance of a

covenant and performance of a covenant, so that if

you have both the words "observe" and "perform" in

Topfelt 5 MR FINKELSTEIN, QC 26/10/93

relation to a covenant, "observe" could generally mean failing to conform to a negative stipulation,

whereas "performance" usually refers to the failure

to perform a positive covenant. But in the context of 57(2)(a) that distinction will not work, so that

because you have a failure to perform, a covenant, agreement, or condition - I must say that I do not

really see that there is any real distinction in

this context between covenants in a mortgage, an

agreement in a mortgage or a condition of a

mortgage.

DAWSON J:  You will have to take "default" as it is defined

in section 18.1.3, do you not?

MR FINKELSTEIN: In the mortgage itself? Not for the

purposes of construing section 57(2)(i),

Your Honour.	There you would take the word to mean
what it means in the statute.	It may have a

different meaning and you can define "default"

whichever way you like in the contractual document

itself, but that will not bear on the construction of section 57. It is not only from section 57(2),

although it is principally from section 57(2)(a)

that you see that what - - -

DAWSON J: That is right, is it, that the parties cannot

define default for themselves what would constitute

the default?

MR FINKELSTEIN:  They can for the purposes of working out

what contractual rights and remedies may exist as a

result of an event of default. But that is not the

question here, the question here is whether the

statutory power of sale is available, and the

statutory power of sale is available if, and only

if, section 57 is complied with. They are

preconditions to the statutory power given in

section 58. That is not to say that the mortgagor

and mortgagee may not have other incidents of their

legal relationship which would be brought about or

altered by reason of a default occurring as defined	in the contractual document. But, for the purposes
of determining whether the statutory power of sale is available, then you need whatever "default"
means in 57.

TOOHEY J:  I must say I have some difficulty in applying the

words "observance of a condition" to the argument

which you are putting.	I understand to involve the
performance of some obligation in the future.	How

does that square with the notion of observance of a

condition?

MR FINKELSTEIN: That, I suppose, principally depends on

what "condition" means. It can mean various things

so far as contractual documents are concerned

Topfelt 6 MR FINKELSTEIN, QC 26/10/93

including mortgages. If "condition" means not
stipulation but an event occurring before
obligations come about, such as condition precedent

or a condition subsequent, then it is hard to see

how default in observance has any relevant aspect

to it in relation to that meaning of "condition".

So that "condition" there is likely to mean some

form of promise.

Another use of the word "condition" in the law

of contract is to distinguish between important

promises and unimportant promises, that is, the

distinction between condition and warranty where

you use the word "warranty" in a different way than

I have been using it before. It probably does not

mean that either because I do not think that on a

proper construction of 57(2)(a) "condition" there

means important provisions in a mortgage as opposed

to unimportant provisions in a mortgage because
that would leave its operation relatively uncertain

and does not cover the case of innominate terms but

it is, in the context of 57(2)(a), likely to mean a

type of term or a particular type of undertaking.

DAWSON J:  If you read the words as being in terms of the

mortgage - - -

MR FINKELSTEIN:  Then it must mean promise, because it is

otherwise not contractual. That the whole point.

In the Victorian legislation where the power of

sale is enlivened in a similar way, and in most

other States, you do not have default in observance

of covenant, agreement or condition, you have

default in observance of covenant. They do not use

the words "agreement" or "condition", and probably

because in most other States it was thought to be

no need to amplify covenant by saying covenant

agreement or condition, but when you have got

default in performance that carries with it the

notion that there has to be something to be

performed by the mortgagor.	The construction is
aided, if you look at the other elements of

57 - - -

MASON CJ: Subsection (3), for example, I suppose, gives you

support.

MR FINKELSTEIN: Yes. Subsection (3) which says that you

have got a month to make good the default.

MASON CJ: Yes, and precisely the same terms are used in

subsection - - -

MR FINKELSTEIN: Exactly right. Then subsection (4) says

that if you do make good the default it is as if
the default never occurred. So that what the whole

of the section contemplates is failure to perform a

Topfelt 7 MR FINKELSTEIN, QC 26/10/93

promise, notice being given that you have not

performed the promise or the undertaking that you

promised to perform. You are given one month to

make good that default and if you do make good that

default within that period of one month, that is,

after the service of the notice, it is deemed never

to have occurred. That is, the default has never

occurred, and therefore the mortgagee has no

rights; more particularly, no right to sell. So it

is not just from section 57(2)(a) that I get the
construction but from the whole of the section,

especially subsection (3) and (4).

MASON CJ: If one goes to the general law, I take it there

is no reason why under the general law a mortgage

incorporating a power of sale cannot be structured on the basis of breach of a condition which has no

element of futurity about it.

MR FINKELSTEIN: That is true, but it may need a court order

for the sale because under Torrens the mortgagee

does not become a registered proprietor of the

land.

MASON CJ: Yes, but I was really directing my question at

the pre-existing common law situation rather than

applying the common law situation to Torrens title.

MR FINKELSTEIN: Yes, you can structure it in whichever way

you like and if, as a matter of contract, the

mortgagor gives to the mortgagee a power of sale in

certain circumstances then the mortgagor would be

bound by that.

MASON CJ: Yes. On this construction, because the power of

sale comes from the statute itself, there is a

distinctly limiting effect in relation to what

parties could have done before the introduction of

Torrens title.

MR FINKELSTEIN: Yes.
TOOHEY J:	Is there any analogy in some of the landlord and

tenant cases which provide for determination of the lease after notice where the so-called "default" is not capable of being cured?

MR FINKELSTEIN: Yes. Most of the legislation that deals

with that landlord and tenant question provides for

the giving of notice requiring a default by a

tenant to be remedied, but if the default is

incapable of remedy then the notice does not have

to specify that the default should be remedied.

That is, notice is given in any event but the

legislation itself comprehends that default of a

certain type may not be capable of being remedied.

The view that the Court of Appeal took in this

Topfelt 8 MR FINKELSTEIN, QC 26/10/93

case - Mr Justice Brownie, at first instance,

thought that you could not give a notice under

section 57(3) if you had a default that was not

capable of being remedied. That is somewhat

different to the argument - - -

MASON CJ:  To the point you are putting.

MR FINKELSTEIN: Yes. It is really a step ahead of that

argument. But the second limb of our submission,

or the second point, is that on its proper

construction the section has no operation, if there

is a default even of a promissory undertaking which

is incapable of being remedied because none of

subsection (3) and (4) then make sense, because you

cannot give that person one month to make good the

default and allow the person to make good so as the

default had never occurred. But in relation to the

landlord and tenant analogy, the Court of Appeal

did say that even if you had a default which was

not capable of remedy, you could still give a
notice under the section, it is just that when the

notice states, as it must, that the default must be

remedied, the mortgagor will never be able to

comply with the notice. So that whilst you give

the notice which in terms complies with

subsection (3), it has no practical effect because

the mortgagor can never take advantage of the right

given to him, especially under subsection (4) which

is to make good the default and treat himself as if

he had never been in breach of the mortgage.

That is really the second question. The

second question is: if you do have even a

promissory default, or a default of a promissory

undertaking, and it is a default which is not, as a

matter of law, capable of remedy, whether

section 57 operates so as to give the mortgagee a

power of sale in those circumstances, because a

notice that is given under subsection (3) assumes

that any default the subject of a notice can be

remedied, because subsection (3) says that the

mortgagor is to be given time to remedy the default

and subsection (4) says what the consequences of

remedy will be.

That was the issue that was dealt with

squarely, but briefly, by each of the courts that

have considered the question. Mr Justice Brownie,

as I said, said that you could not give a notice in

those circumstances. The Court of Appeal said that

you can, it just will not have any practical

effect. Our submission is, on the second issue,

that if you cannot give a notice which has actual

operation, that is, where events have occurred

which make subsection (3) and (4) inoperative in a

material sense, then you do not have the power of

Topfelt 9 MR FINKELSTEIN, QC 26/10/93

sale in any event. That is a subsidiary argument

to the main argument which is that it only deals

with promissory undertakings.

Each of those questions is important, not only

for this case but probably covers Torrens

legislation in every State. The language is

different: the problem is exactly the same.

MASON CJ:  Your arguments would have equal application to

the other statutes?

MR FINKELSTEIN:  Yes, they would. The only thing that I

wanted to refer the Court to is I do want to take

the Court to the passage in Lowe v Lombank.

MASON CJ: Yes.

MR FINKELSTEIN:  I have got a bundle of supplementary

documents, but they are not really supplementary

other than to the application book. Lowe v Lombank

starts at page 31, and the relevant passage in the

judgment of Mr Justice Diplock is at page 204 of

the report, and that will be at page 39 of the

supplementary documents. The hire purchase

agreement contained a provision which said that the

hirer acknowledged that he had examined the goods,

the subject to the hire, that they were of

merchantable quality and that he had not made known

to the owners expressly, or by implication, the

particular purpose for which the goods were

acquired.	Then the goods turned out to be not of
merchantable quality and the hirer was sued.	It is
at about half-way down the page 204, or 39, His Lordship says:

To call it an agreement as well as an acknowledgement by the plaintiff cannot

convert a statement as to past facts, known by

both parties to be untrue, into a contractual

obligation, which is essentially a promise by	the promiser to the promisee that acts will be
done in the future or that facts exist at the
time of the promise or will exist in the
future. To say that the hirer "agrees" that
he has not done something in the past means no
more than that the hirer, at the request of the owner, represents that he has not done that thing in the past. If intended by the
hirer to be acted upon by the person to whom
the representation is made, believed to be
true by such person and acted upon by such
person to his detriment, it can give rise to
an estoppel: it cannot give rise to any
positive contractual obligation. Although
contained in the same document as the contract, it is not a contractual promise.

Topfelt l0MR FINKELSTEIN, QC 26/10/93

And the reason why it is not a contractual

promise is because it does not require the promiser

to do anything, except in the sense that I said

earlier: Williston and Corbin would say that if

you look at it in terms of promise it can only be a

promise to pay compensation if the thing

represented or warranted turns out to be untrue.

MASON CJ: Lord Justice Diplock seems to be going further

than that: he denies that it is a promise at all

and that means that it is not enforceable by way of

an action for damages.

MR FINKELSTEIN:  As a contractual promise.

MASON CJ: That is right.

MR FINKELSTEIN: It might be enforceable in tort.

MASON CJ: It might be enforceable as a negligent

misstatement, or damages for fraudulent

misrepresentation.

MR FINKELSTEIN: Yes. I am not sure that it is right to go

so far as to say that any statement of present fact

can never be contractual because I think it is

right to say, as Williston and Corbin do say, that

in some cases you could imply the promise to pay

money.

DAWSON J:  But here both parties knew the statement was

untrue.

MR FINKELSTEIN: True, but that does not affect the law of

contract.

TOOHEY J:  I am not sure why you described it as a "past

fact". I appreciate the point you make that it was

included in a statutory declaration executed, or

made, before the execution of the mortgage. Is it

not referred to a contemporaneous situation?

MR FINKELSTEIN:  At the time of the statutory declaration.

What the statutory declaration says, and that is in

that supplementary bundle of documents as well, at page 29 - if you look at page 30 it is paragraph 8

of the declaration.

TOOHEY J:  It would not be a very big step, given the terms

of the mortgage and that incorporation clause to

which you took us to regard this as operative as at

the date of execution of the mortgage.

MR FINKELSTEIN:  On the construction of the mortgage, that

will not be so but the point that we make would be

a good point in any event.

Topfelt	llMR FINKELSTEIN, QC	26/10/93
TOOHEY J:	I appreciate that also.	You do not draw a

distinction for the purpose of argument?

MR FINKELSTEIN:  No, no, I do not. But as a matter of fact

that is not how this mortgage would operate.

Clause 8 says:

The Company is presently in occupation -

and that was false when sworn to on 30 January and

the mortgage itself - if you go back to the

application book, page 72, it is clause 4.1.6 at

the top of the page. What is being warranted by

the mortgagor is that information that was provided

was true and correct as at the date of furnishing

the same to the mortgagee. So even by the

contractual document, it does not update the

warranty to make it a warranty that speaks as at

9 February, the date of the execution of the

mortgage, but keeps it as being a representation

that was true at the time it was made, in

conformity with the language of the sworn

declaration, but our argument does not depend on

that distinction.

That might make it harder in this case for the warranty - not in any technical sense - to be

argued that it could ever be something promissory

or contractual, but our argument would be the same

if it was said that that was still current as at

the date of the execution of the mortgage. It is

still a representation of the fact, it does not

require observance or performance. It cannot

require observance or performance either true or
not true in the sense that the deponent either told
the truth or did not tell the truth at the moment
of making the statement, whether it is as at the

date of declaration or as at the date of the

mortgage. May it please the Court.

MASON CJ: Thank you, Mr Finkelstein. Yes, Mr Emmett?
MR EMMETT:	Your Honours, one starts with the proposition

that there is no rationale advanced for drawing the

distinction which, it is said, flows from the

language of the statute. Indeed, it would involve,

as Your Honour pointed out, the restriction of

rights that would otherwise be available under the

general law, and I will come back to that in

respect of another reason why leave should not be

granted in this case. It involves a narrow

construction of the words "observance" and perhaps

"covenant or condition" in a way that is just not

justified by the object of this statute. This

Court has considered section 57 and this group of

sections on a couple of occasions in the past.

Topfelt 12 26/10/93

In Bevham v Belgot, for example, which is

referred to by Mr Justice Sheller in the judgment

of the Court of Appeal, the Court was invited to

make several distinctions between the sorts of

covenants that are recognized by section 57 and the

Court said no, there are only two sorts of

covenants that are recognized by section 57,

namely, those which involve default in the payment

of money secured and other sorts of covenants. The

appellant's contention really involves saying there

are three categories: there are defaults in the
payment of money; there are defaults other than in
the payment of money which are capable of remedy;

and there are defaults other than the payment of

money which are not capable of remedy.

There is no warrant as a matter of principle

for drawing that last distinction, quite apart from

the argument, of course, that this default is

capable of remedy. As Mr Justice Sheller observed,

one could imagine a circumstance where the present

appellant could have made good the representation

by obtaining vacant possession, and although the

fact was false at the time when the mortgage was

granted, the truth is made out that the

representation is made true. So there are very

good reasons, in our submission, why, as a matter
of construction, the section should not be given

the meaning contended for in the argument.

There are, however, other good reasons why

leave should not be granted in this case.

Your Honours will be aware that there was an issue

before Mr Justice Brownie involving estoppel,

laches and the like, which was decided against the

Bank by Mr Justice Brownie, although that was a

matter raised in the notice of contention before

the Court of Appeal. Because of the view which the

Court of Appeal took it was unnecessary to deal

with the arguments and the Court did not, in fact, hear argument on the notice of contention because

of the view it took on the construction of
section 57.	So that even if Your Honours were

disposed to accept the argument, there is still

further argument that has to be addressed on the

question of the estoppel and the like.

Second, the sale has now been completed so

that it is just not clear what is the utility of

any relief which is sought in the notice of appeal.

What is sought is not damages or anything else, but

simply to set aside the sale which has now been

completed.

TOOHEY J:  Do you mean completed and perfected, in the sense

that there is a new registered proprietor of the

land?

Topfelt	13	26/10/93
MR EMMETT:	Yes.	An affidavit was filed on behalf of the

respondents setting out those matters. I do not

know whether Your Honours have got that affidavit.

MASON CJ: Yes, we have that.

MR EMMETT:  The affidavit by the respondent as distinct from

the application in support of -

MASON CJ:  The affidavit of C.B. Hughes?

MR EMMETT: That is correct, Your Honour. It attaches a

copy of the current certificate of title showing

that the second respondent, who has not appeared

today, is now the registered proprietor. So that

if any relief were granted it would involve setting

aside both the conveyance as well as the contract.

TOOHEY J:	You could not set aside the transfer, could you?
MR EMMETT:	That is the only relief that could be of any

utility to the appellant if leave were granted and

the argument were upheld.

TOOHEY J:  It is hard to see how in law, assuming it was a

transfer for consideration, could now be set aside.

MR EMMETT:  That is one of the reasons why we say it is just

not appropriate to entertain this application.

There was an application made to the Court of

Appeal for an injunction to stay completion. The

sale had not been completed at the time of argument

before the Court of Appeal. Following the Court of present applicant for a further interlocutory

injunction which was refused by the Court of Appeal

but no effort was made to apply to this Court for

interlocutory relief pending an application for

leave and completion therefore took place.

TOOHEY J: Yes, part of the relief sought in the draft

notice of appeal to this Court is an order

restraining completion of the contract of sale.

MR EMMETT:  Indeed, but no attempt was made to press on with

that application as a matter of urgency. Bearing

in mind that this contract for sale was entered
into in March 1991, the trial began in the middle

of 1992, this present point was not taken by the

present applicant until a matter of days before the

trial began. That, of course, is what gave rise to

the estoppel defence that was then raised in answer
to it. Other reasons why, as a matter of

discretion, any relief would be refused - and this,

again, has not been considered by any Court because

it has not been necessary in the view that has been

taken - is that the applicant sought to restrain

Topfelt 14 26/10/93

the completion of the sale, at no stage was there

ever any tender of the amount secured, nor any

offer to pay any amount of the amount secured.

There was evidence before Mr Justice Brownie,

that - and he makes findings to this effect - it is

likely that the present applicant simply did not

have the means to discharge the mortgage. So as a

matter of discretion any court considering an
application to restrain or to set aside would be

unlikely to grant relief, in any event.

Finally, there is the fact which was, perhaps,

adverted to, at least indirectly by Your Honour

the Chief Justice and is mentioned briefly in the

Court of Appeal, that is that there is a

contractual - and perhaps by Your Honour

Mr Justice Dawson - power of sale conferred by this

mortgage and the applicant is here really saying, "Notwithstanding there is a matter of contract, I

agreed that in these circumstances the mortgagee

could exercise a power of sale and I conferred upon

him power of attorney to enable that to be done, I

now want to stop him from purporting to exercise

the statutory power of sale which, in fact, so the

argument runs, is not as wide as the contractual

power of sale.".

So that we would say that, as a matter of

discretion, because there is a contractual power of

sale that clearly goes beyond the statutory power

of sale, the court, again, as a matter of

discretion, simply refused to grant any relief. So

that, in those circumstances, whatever merit, if
any, the argument has this is just not a case where

the Court would intervene to grant any relief.

TOOHEY J:  I suppose the mortgagee could have taken a very

long way home but could have called up the

mortgage, sued for the mortgage debt, obtained

judgment, executed and sold the land in that way.

MR EMMETT:  In fact, in the proceedings, the bank did get

judgment for the mortgage debt and judgment for

possession. Really, it could still do that, it

could enforce the judgment by having a writ of

fi fa - although it is not called that any more - a

writ of execution issue and the property could be

sold by the - - -

TOOHEY J:  So in the end the mortgagor, even on its

argument, could not hold out the mortgagee

indefinately, could they?

MR EMMETT:  Indeed. It might be a different matter

altogether if the mortgagor is here tendering the

amount secured, which I might say is now something

Topfelt 15 26/10/93

in excess of - the judgment, as appears from the

application book, was for a sum of some $400,000.

DAWSON J: That is Inglis' case, is it not, that says

that - - -

MR EMMETT:  It is perhaps not on all fours with this

because, in Inglis' case, Mrs Inglis sought to

restrain the exercise of the power of a sale on the

basis that it was an improper exercise of the

power, not a totally invalid exercise of the power.

So that I think we have to accept there might be some basis for distinguishing it but it is that sort of principle. At least as a matter of discretion it is just not appropriate to grant

leave to hear this argument.

Either this Court would have to hear all of the other arguments on the matters that have not

been disposed of below or, alternatively, the

matter would then have to go back and, in the
circumstances of the case, it is just unlikely that

any relief is ever going to be granted to the

plaintiff. So that irrespective of the merit of

the argument, and we say there is none, it would be

a startling consequence, as Mr Justice Sheller

suggests, but even if there is something in the

argument, in the appropriate case, this just is not

it. In our submission, the application should be

dismissed with costs.

MASON CJ: Yes, Mr Finkelstein.

MR FINKELSTEIN:  The purchaser from the bank, Mr Hodges, was

a party to the proceeding from the commencement and

it may not be accurate to say that, although the

contract and transfer has been perfected, the

contract is not capable of being set aside.	The
question really is whether or not the bank has
power to effect the sale.

TOOHEY J:  I am sorry, in what sense are you using the word

"contract"? It is not the contract between the

bank and the purchaser that is really in issue, is

it?

MR FINKELSTEIN: It is the conveyance.

TOOHEY J:  It is the title of the new registered proprietor

which - it is hard to see, on any basis, that that

could be attacked.

MR FINKELSTEIN: If the conveyance was effected in

circumstances where the transferee took with

knowledge of the potential for lack of power by the
transferor to make title, then it does not

automatically follow that there might not be a

Topfelt 16 MR FINKELSTEIN, QC 26/10/93

reconveyance. Hodges, the purchaser, is a party to

the suit, always was.

TOOHEY J: Yes, but unless you give "fraud" a very wide

meaning, it is hard to see how there could be any

personal equity which would render the title of the

new registered proprietor vulnerable.

MR FINKELSTEIN: Participating in a transaction where there

is absence of power to bring about the transaction

may create a trust in the purchaser.

DAWSON J: That is hardly so in the face of a decision in

his favour, is it?

MR FINKELSTEIN: If the decision is set aside, then the law

will be that there was never any power - - -

DAWSON J: That is going a long, long way, is it not?

MR FINKELSTEIN: At all events, it does affect any remedies

that we may have against the bank itself for taking

the step of selling when it had no power to sell.

So it may be that it is difficult to have a remedy

against the land itself by constructive trust but

that does not negate a remedy against the bank that

is selling the mortgagor's land when it did not

have power to sell it.

DAWSON J:	What order would you be seeking against the bank?
MR FINKELSTEIN:	In the present proceeding we do not seek

any more than - because the conveyance had not come

about, had not been perfected, we only sought a

declaration that the bank had no power to sell and

an injunction restraining it from selling.

MASON CJ: But this would be an incident to some other

proceeding that you would commence against the bank

if you were successful?

MR FINKELSTEIN:  No, in the circumstances of this case, if

it goes back - if the judgment of the Court of

Appeal is wrong, it might have to go back on

amended pleadings to take into account facts and

circumstances that have occurred since the

commencement of the proceeding. In other words,

the party would not be defeated in his rights

because something has happened since the case

commenced which required some alteration to the

nature of the claim that he was making.

I only want to say one short thing about the suggestion in the Court of Appeal that the type of

default that was here under consideration was

capable of remedy. There was reference made to one

decision of a Full Court in New South Wales, I

Topfelt 17 MR FINKELSTEIN, QC 26/10/93

think back in the 40s, to the possibility that

where premises have been let or sublet, contrary to

provision in the lease, that that was a default

capable of remedy.

That decision is not consistent with two

recent decisions of the Court of Appeal in England

on landlord and tenant law, one as late as 1985,

which suggested that a negative stipulation in a

lease preventing a lessee from subletting or

parting with possession of demised premises is a

type of covenant that is incapable of remedy. What

that means is that as at today there is a conflict

between a Full Court decision in New South Wales and the current view in England expressed by two

different courts of appeal. I think they are the

only things I want to say in reply, if the Court

pleases.

MASON CJ: Thank you, Mr Finkelstein.

In the light of the circumstances of this

case, in particular the fact that the exercise of

the power of sale has resulted in a registered

instrument of transfer, we are not persuaded that

this is a suitable vehicle for the determination of

the question of construction which the applicant

seeks to raise.	The application is therefore
refused.

You do not oppose an order for costs,

Mr Finkelstein?

MR FINKELSTEIN:	No, I do not.
MASON CJ:	The application is refused with costs.
MR EMMETT:	May it please Your Honours.
AT 10.30 AM THE MATTER WAS ADJOURNED SINE DIE

Topfelt 18 26/10/93