Black v Garnock

Black v Garnock - [2007] HCA 31 - HCA 2007 case summary — Zoe

[15]

To lodge a caveat, the purchasers from the registered proprietor required a caveatable interest. What might that interest have been, if not the interest described by Crennan J? Thus, by hypothesis, the purchasers (from the registered proprietor) have a caveatable interest in the land, the judgment creditors have no interest in the land, and there is no purchaser from the Sheriff. It may be accepted that the purpose of the 1976 amendments was to protect purchasers from the Sheriff; but in the events that occurred, there are no such persons requiring protection.
There is no statutory provision forbidding intervention, of the kind undertaken by the Court of Appeal, to protect the interest of those who had purchased from the registered proprietor; and it is accepted that by lodging a caveat the purchasers could have obtained such protection. The complaint is not that the orders of the Court of Appeal contradicted any provision of the Act, but that they intercepted impermissibly a statutory process which had as its ultimate object the making of a sale by the Sheriff and the bringing into existence of a transferee who would in due course enjoy the protection of s 105B(2). That appears to me to overstate the purpose and the legal effect of the statutory scheme. This is demonstrated by the consideration mentioned above, that is, the acknowledged consequences of lodging a caveat. The appellants' argument proves too much.
As appears from the speech of Minister Crabtree, the purpose of the 1976 amendments was to bring about the result that "a purchaser at a sale in execution takes the estate or interest then appearing upon the register"[1]. The purpose was not to turn unsecured creditors into secured creditors, or to defeat the interests of people who, to the knowledge of the judgment creditors and the Sheriff, had contracted to buy the land. It was not to require the Sheriff to sell land which the Sheriff knew had already been sold to a bona fide purchaser for full value, conduct that would ordinarily be regarded as improper. Injunctive relief of the kind given by the Court of Appeal did not negate the protection intended to be conferred on a purchaser from the Sheriff; there was no such purchaser.
In J & H Just (Holdings) Pty Ltd v Bank of New South Wales[2], Barwick CJ said of a caveat:

[19]

The essential facts of the case may be stated shortly. The appellants ("the judgment creditors") obtained a judgment in the District Court of New South Wales for a money sum against the sixth‑named respondent ("the judgment debtor"). The judgment debtor was the registered proprietor of some farming land comprised in three folios of the Register maintained under the RP Act. Some months after the judgment creditors obtained judgment against the judgment debtor, but before the issue of any writ of execution, the judgment debtor agreed to sell the land to the first to fourth‑named respondents ("the purchasers"). The contract of sale was completed at about 2.00 pm on 24 August 2005. The purchasers paid the balance of the purchase price to or at the direction of the vendor of the land, the judgment debtor. The judgment debtor, as vendor, gave the purchasers memorandums of transfer, procured certain mortgagees to provide discharges of their mortgages, and procured the holder of a registered lease to provide an instrument of surrender. It is not suggested that any of these documents (the transfers, the discharges of mortgages or the surrender) was not in registrable form.
At about 9.00 am on settlement day, the purchasers' solicitors obtained a title search with respect to the land. That search revealed no unexpected encumbrance. About half an hour after that search was made, the solicitor for the judgment creditors notified the purchasers' solicitors that the judgment creditors had an unsatisfied judgment against the judgment debtor, that a bankruptcy notice had been issued against the judgment debtor, and that the judgment creditors had obtained a charging order in respect of the deposit that had been paid under the contract of sale.
At about 11.53 am on that day (about two hours before the settlement of the sale of the land by the judgment debtor to the purchasers) a writ of execution, issued out of the District Court of New South Wales on the previous day at the instance of the judgment creditors, was recorded in respect of the land in the Register maintained by the Registrar‑General. It was not suggested in this Court, or in the courts below, that the judgment creditors acted unconscientiously in seeking the issue of the writ, or in having it recorded in the Register.
On 8 September 2005, the purchasers' solicitors were told that the transfers they had lodged in respect of the land could not be registered because a writ was recorded against the title to the land. Three weeks later the purchasers commenced proceedings in the Supreme Court of New South Wales and on 7 October 2005 Campbell J granted an interlocutory injunction restraining the judgment creditors and the Sheriff of New South Wales from executing the writ[4]. Although the order that was taken out does not record any undertaking as to damages, it was common ground in the appeal to this Court that the purchasers gave an undertaking, in the usual form, as the price for obtaining the injunction. On 2 December 2005, Lloyd AJ dismissed[5] the proceedings instituted by the purchasers, and discharged the interlocutory injunction that had been granted by Campbell J.
The purchasers appealed to the Court of Appeal of New South Wales and on 21 December 2005, an interlocutory injunction was granted[6] pending the determination of the appeal, or further order, restraining the judgment creditors and the Sheriff of New South Wales from executing the writ. The purchasers gave the usual undertaking as to damages.
By majority (Beazley and Ipp JJA; Basten JA dissenting)[7], the purchasers' appeal to the Court of Appeal was allowed. The Court of Appeal made a declaration that the purchasers "as holders of equitable interests in the land the subject of this appeal, are entitled to priority over any rights to the land that might be held" by the judgment creditors, and the judgment creditors and the Sheriff were restrained, for 60 days from the date of delivery of the Court of Appeal's reasons, from executing the writ of execution. It is against those orders that the judgment creditors appeal. Neither the judgment debtor nor the Sheriff played an active part in the appeal in this Court.
While it will be necessary to examine the reasons given by the Court of Appeal for reaching the orders against which the judgment creditors appeal, it is essential to begin with the relevant statutory provisions.

[29]

Section 105A(2) enjoins the Registrar‑General not to register a dealing which is lodged for registration within that six month period. The order of events upon which the sub‑section fixes is the recording of the writ and the subsequent lodgment of a dealing. There is no further temporal criterion, being the date of any dealing which, if registered, would give title by that registration. In particular, there is no requirement that the dealing post‑date the recording of the writ.
No warrant appears from the text or the purpose of the legislation to exclude from the prohibition upon registration imposed by the Registrar‑General dealings which are lodged in the protected period but relate to a transaction, such as the settlement of the purchase in this case, occurring in the protected period, not before it commenced. However, that is how the majority in the Court of Appeal appeared to have construed s 105A(2). Later in these reasons attention is given to the difficulties said to arise unless the legislation be read in that fashion and it is seen that those difficulties are exaggerated.
Several kinds of dealing were excepted from the application of the general prohibition imposed by s 105A(2) prohibiting the Registrar‑General, during the protected period, from registering a dealing unless the writ was referred to in the dealing as if it were a prior encumbrance. Among the excepted dealings were "a dealing which, upon registration, will record the determination of a registered lease"[13] and "a dealing by a mortgagee or chargee in exercise of the mortgagee's or chargee's powers under a mortgage or charge that was recorded in the Register before the writ was so recorded"[14]. The discharges of mortgage and the surrender of lease provided to the purchasers on settlement of the contract of sale they had made with the judgment debtor in this matter could, therefore, be registered despite the recording of the writ.
It is not necessary to notice the detail of other exceptions to the general prohibition of s 105A(2) but it is desirable to say a little more about the significance of the "protected period". First, where a writ recorded under s 105 was not, within the protected period, executed by sale, a dealing with the land lodged for registration before the writ was executed could be registered notwithstanding the recording of the writ[15]. Secondly, upon registration of a transfer or other dealing that for valuable consideration disposed of the whole estate or interest in land affected by a recording of a writ (not being a transfer pursuant to a sale under the writ) the writ lapsed in relation to that land unless the transfer or other dealing referred to the writ as if it were a prior encumbrance[16]. It follows that when the protected period had ended and the Registrar‑General was no longer prohibited by s 105A(2) from registering a transfer of the land, the writ would lapse upon registration of a transfer that, for valuable consideration, disposed of the whole estate or interest in the land.
These provisions (of s 105A(6) and s 105C) revealed that the policy of the legislature was generally similar to the policy of other much earlier (and different) legislation concerning writs of execution and Torrens title land considered by the Privy Council in Registrar of Titles v Paterson[17]. Of that earlier legislation in Victoria, the Privy Council said[18]:

[39]

To speak of the purchasers having an "equitable interest" in the land has the difficulties and limitations identified in Tanwar Enterprises Pty Ltd v Cauchi[22]. As five members of the Court pointed out in Tanwar[23]: "the 'interest' of the purchaser is commensurate with the availability of specific performance." Upon completion of the contract now under consideration the judgment debtor, as vendor, was bound to tender transfers in registrable form. In the events that happened, the transfers tendered could not be registered because of the intervening recording of the writ. To focus upon the rights and duties of the vendor and the purchasers, without regard to this intervening event, entails circularity of reasoning of the kind referred to in Tanwar.
Furthermore, to speak of the purchasers' rights as having "priority" over the writ or the rights of the judgment creditors imposes upon the debate an assumption, contrary to the explicit terms of the Act, that there is some competition between the holders of different interests in land. Section 105 of the RP Act makes plain that a writ, whether or not recorded in the Register, does not create any interest in land. Hence counsel placed no reliance upon s 43A of the RP Act[24]. As interpreted in Meriton Apartments Pty Ltd v McLaurin & Tait (Developments) Pty Ltd[25], the section confers upon a purchaser who has received a registrable instrument and paid the purchase money the same protection against notice of an earlier unregistered interest as that achieved by a purchaser who acquires the legal estate at common law. In the present case, there is no competition between unregistered interests and the unregistered interest of the purchasers cannot defeat the statutory consequence of the earlier recording of the writ.
The premises for the reasoning of the majority in the Court of Appeal were, therefore, flawed in fundamental respects. There was no competition between interests in the land. To identify the purchasers as having (as against the judgment debtor, the vendor) an interest in the land does not identify, with sufficient particularity, the nature or extent of the rights constituting that interest. In any event, to speak of the purchasers having an "interest" in the land either assumes the answer to the very question that must be decided (what is the consequence of recording the writ) or focuses upon the position as between vendor and purchasers to the exclusion of any consideration of the consequences of recording the writ.
In considering the consequences that are to be attached to the recording of the writ, it is important to understand the mischief to which the relevant provisions of the RP Act were directed. It is therefore relevant to examine, as the Court of Appeal did, the history of provisions governing the effect of judgments and execution of judgments on land under the RP Act. But it is important to examine that history bearing at the forefront of consideration that it was not until 1971, by this Court's decision in Breskvar v Wall[26], that the long‑running controversy about indefeasibility of title, stemming at least from Clements v Ellis[27], was finally resolved.
Thus when it is observed that, in 1976, new provisions concerning writs of execution were made by the Real Property (Amendment) Act 1976 (NSW), it is necessary to recognise that by then, it was clearly established that the title obtained by registration under the RP Act was not historical or derivative, but was a title which registration itself created in the proprietor. The competing view, expressed by Dixon J in Clements v Ellis[28], had been rejected.
When introducing the 1976 amending legislation the Minister for Lands said in his Second Reading Speech[29]:

[42]

Much of the oral argument of the appeal proceeded by examining what would have happened if orders restraining the Sheriff executing the writ had not been made in this case, and what would have happened if, before the writ was recorded on the Register, the purchasers had lodged caveats. It is convenient to address those questions now.
If execution of the writ had not been restrained, and the Sheriff had sold the land, a purchaser at the Sheriff's sale would have found, on searching the title, that the land was encumbered by mortgages and was subject to a registered lease. Yet, at the settlement of the purchasers' contract with the judgment debtor, the mortgagees had been paid what was owing, and the lessee had been paid a substantial sum to surrender the lease. What would a purchaser at a subsequent Sheriff's sale have been buying? What would that purchaser have paid? Would the purchase price reflect the value of vacant land, tenanted land, mortgaged or unmortgaged land? Could the mortgagees and the lessee retain what they had received from the purchasers at the judgment debtor's direction?
In the end, the answers to these questions are not relevant to the construction of the applicable provisions of the RP Act. They are questions that arise, and could arise, only because the purchasers settled the contract of sale with the judgment debtor in ignorance of the judgment creditors' procuring the recording of the writ. If the recording of the writ had been known, it may safely be assumed that settlement of that contract would not have proceeded. The several questions that would arise if, after the settlement of the sale, the Sheriff sold the land in execution of the writ are properly dismissed from consideration as not bearing upon the ordinary operation of the relevant provisions.
In any event, it is not immediately evident why the intervening settlement would have significantly reduced the price a purchaser from the Sheriff would have paid for the land, regardless of whether the discharges of mortgage and surrender of lease provided at the settlement were to be given effect according to their terms. If the surrender of the lease was effective, presumably a new purchaser would not have paid significantly less for the land than the purchasers had agreed to pay to the judgment debtor. (The purchasers from the judgment debtor had paid a substantial additional sum to the lessee to obtain vacant possession.) And if the surrender was not effective, there is again no reason to think that the land subject to lease would realise less than the price payable under the original contract, even if the new purchaser were to allow for some additional sum to be paid to secure vacant possession of the land. And so far as the registered mortgages are concerned, if the mortgagees were owed nothing by the judgment debtor, the mortgages registered on the titles would, it may be assumed, be discharged at little cost to a purchaser at the Sheriff's sale.
The other questions debated in argument are of more direct assistance in resolving the question of construction that must be decided. If, before the writ was recorded on the Register, the purchasers had lodged caveats on the titles to the land, claiming an interest as purchasers of the land, how would relevant provisions of the RP Act have operated?
The first point to notice is that the lodging of caveats and entry of particulars of caveats on the Register would not have prevented the Registrar‑General from recording the writ with respect to the land[31]. The second and more directly relevant point is that, if caveats had been lodged and particulars of the caveats entered on the Register, and if the Sheriff then sought to sell the land in execution of the writ, a purchaser at the Sheriff's sale would not have been able to obtain registration of a transfer of the land so long as those caveats remained in force. It is necessary to explain the basis for this conclusion.
While a caveat lodged under s 74F remained in force, s 74H precluded the Registrar‑General, except with the written consent of the caveator, from recording any dealing in the Register, if it appeared that the recording of the dealing was prohibited by the caveat. It would follow from s 74H, considered in isolation from the provisions of the RP Act which dealt with the recording of a writ (s 105A) and the registration of a transfer given pursuant to a sale under the writ (s 105B) that, if the purchasers in the present matter had lodged caveats over the land, before the writ was recorded, a purchaser at any sale by the Sheriff in execution of the writ could not have obtained a transfer that would be registered. Section 74H would have prohibited registration of a transfer tendered by a person who purchased the land at the Sheriff's sale.
The provisions of s 105A and s 105B neither required nor permitted a different outcome.
The prohibition in s 105A(2) focused upon a dealing that affects the land to which the recording of the writ related. As noted earlier, s 105A(2) was subject to various exceptions. But a transfer by the judgment debtor to a purchaser who had lodged a caveat and who had agreed to buy the land from the judgment debtor was not excepted from the general prohibition of s 105A(2). A transfer giving effect to a sale under the writ was excepted[32]. But the exception made by s 105A(1)(a) for a transfer giving effect to a sale under the writ was an exception to a prohibition: the prohibition directed by s 105A(2) to the Registrar‑General against registering, during the protected period, a dealing that affected the land. The temporal duration of that limitation is not immediately significant. What is important is that neither s 105A(1)(a) nor s 105A(2) required the Registrar‑General to register a transfer giving effect to a sale under the writ. Both sub‑s (1) and sub‑s (2) of s 105A (and the other provisions of that section) were consistent with effect being given to the separate and distinct prohibition contained in s 74H.
Nor does any aspect of s 105B require some different conclusion. That section was cast in terms that first, fixed when a transfer pursuant to a sale is registered (it is registered when recorded) and second, fixed the consequences of registration (the transferee holds the land free from all estates and interests except those specified in s 105B(2)). But nothing in s 105B cut down the applicability of a prohibition against registration that would arise if the provisions of s 74H were engaged.
It therefore follows that if caveats had been lodged, and if the Sheriff had then sought to sell the land in execution of a writ recorded after the caveats had been lodged, a purchaser at the Sheriff's sale could not have obtained registration of a transfer so long as the caveats remained in force.
When this intersection of the provisions of the RP Act dealing with caveats and those dealing with the recording of writs is observed, much of the difficulty apparently presented by the circumstances of this case is resolved. In particular, the purchasers under the contract of sale made with the judgment debtor had steps available under the RP Act which, if taken, would have prevented a purchaser at a subsequent sale made in execution of the writ obtaining registration as owner of the land. In addition, of course, a search of the Register conducted immediately before settlement would have revealed the recording of the writ.
It also follows from this examination of the provisions of the RP Act that the bare fact that the purchasers made their contract of sale with the judgment debtor before the writ was recorded did not constitute any sufficient reason to intercept what otherwise would have been the operation of the RP Act. And, as noted earlier, it was the bare fact of making the contract before the writ was recorded that was treated as determinative by the majority in the Court of Appeal. Neither in the Court of Appeal nor on appeal to this Court did the purchasers seek to make some alternative case. In particular, it was not said that the judgment creditors' procuring of the recording of the writ was unconscientious and it was not said that the purchasers' completion of their contract with the judgment debtor put them in any better position than their making of the contract. Nor was anything said to turn on the provisions of s 43 of the RP Act[33].

[47]

On 17 September 2004 the appellants obtained judgment in the District Court of New South Wales for about $228,000 against the sixth respondent and her husband.
Between 11 October 2004 and 19 August 2005 the appellants moved to bankrupt the sixth respondent and her husband, but later agreed to adjourn the hearing of the bankruptcy petition in exchange for assurances that the sixth respondent would sell property, including the Torrens title land in question here ("the land"), to raise funds to discharge their liabilities.
On 15 July 2005 the sixth respondent and the first to fourth respondents ("the purchasers") exchanged contracts for the sale of the land for the sum of $1,000,000. A deposit of $100,000 was paid by the purchasers.
On 19 August 2005 the sixth respondent's solicitors informed the appellants' solicitors that although settlement of the land would occur on 24 August 2005, the appellants would probably receive little of the proceeds. In consequence, on 23 August 2005, the appellants obtained a writ of execution from the District Court of New South Wales. The next day, the purchasers' solicitors made a search of the Register on which, until then, the writ of execution had not been registered. At about 9.20 am on 24 August 2005 the appellants' solicitors notified the purchasers' solicitors of the judgment in favour of the appellants, the currency of the bankruptcy proceedings, and that the appellants had obtained a charging order in respect of the deposit. To reinforce that caution, the first appellant told the principal of the purchasers' solicitors that the price of the land was less than its market value, that the purchasers were related to the sixth respondent, that there were creditors other than the appellants, and that they intended to try to prevent the sale. At the purchasers' solicitors' request, the appellants' solicitors provided, by facsimile to them, a copy of the charging order. Entry of the writ of execution on the Register was effected at 11.53 am on 24 August 2005 and settlement of the sale, without any intervening search of the Register, occurred almost two hours later.

[70]

"The system of retrospective or derivative title is the grand source of complication, uncertainty, and expense, attending the existing practice. Whenever real estate is transferred, the history of the property has to be traced back to the original grant from the Crown, through all the intermediate hands, every mortgage deed, release, conveyance, settlement, must be produced and carefully examined, to see that there are no outstanding equities affecting the title. This renders conveyancing a laborious and costly process; but if after the labour has been expended and the cost incurred, the fruits of it could be secured and held available for future occasions, we should not have so much to complain of. The grievance is, that this labour and outlay has to be repeated again and again each time the property is dealt with. The solicitor of an intending purchaser or mortgagee is not content to accept the opinion given after full enquiry by the solicitor of a recent purchaser, it may be, only ten days before. He too must be furnished with an abstract and examine all documents for himself, and this process must be gone over again and again every time the property is dealt with, each transaction adding to the labour and cost of the subsequent one and increasing the risk and uncertainty. The chain of evidence, however lengthened, is no stronger than its weakest link, and in proportion as documents of title are multiplied, so are the risks that in one of them, an important word may have been omitted or some formality in execution neglected. Heavy as are the certain costs of conveyancing, the contingent risks of expensive costs in law and equity inherent in the system of derivative titles is probably much more burdensome to the land owner. The first and leading principle of the measure which I introduce is therefore designed to cut off the very source of all costliness, insecurity, and litigation by abolishing altogether the system of retrospective titles, and ordaining that as often as the fee simple is transferred the existing title must be surrendered to the Crown, and a fresh grant from the Crown issued to the new proprietor. The principle next in importance prescribes that Registration per se and alone shall give validity to transactions affecting land. … This method is designed to give confidence and security to purchasers and mortgagees through the certainty that nothing affecting the title can have existence beyond the transactions of which they have notice in the memoranda endorsed on the grant."

[157]

No one doubts that the purchasers here could have lodged a caveat immediately after the exchange of contracts. That they had that right, and that upon doing so an appropriate notation on the Register would have served as a notice to all others of their dealing with the land, is accepted on all sides. It is unnecessary in this case to define precisely the nature of their interest after the contracts were exchanged: whether it was an actual equitable interest in the land, or an interest measurable by their right, conditional or otherwise, to obtain specific performance, or whether it was an interest commensurate with the deposit that they paid, does not matter: on any view it gave rise to a caveatable interest[63].
The fact that the purchasers might have protected themselves by lodging a caveat here may not be decisive of this case, but that the Act enabled them to do so, and also provided for a comprehensive pubic register of information relating to the folio to which they could have had timely recourse to protect themselves, are factors relevant to the proper construction and reconciliation of the two enactments governing the respective rights and interest of the parties.
I do not think it is any answer to say, in relation to the omissions of the purchasers, and to other matters to which I will refer, that, effectively, the interdiction against the registration of their interest by grant of an injunction of the court is to be equated with, and is no different from, a caveat, and that therefore they should be entitled to registration without regard to, and not subject to, a, or the, writ of execution. An injunction does not serve as a general notice to all the sufficiently interested world, as a caveat does. An injunction may not be noted on the Register as a caveat may be. An injunction is not to be elevated to the same level as a caveat. The lodgment of a caveat does not preclude the seeking and granting, in an appropriate case, of an injunction as the provisions which I have set out show: in any event, an injunction, to be effective, needs to be sought and obtained with the same expedition as the lodgment of a caveat.
The relevant legislation which is analyzed in the judgment of Gummow and Hayne JJ makes it clear, that although writs of execution do not create proprietary interests in land, they are capable of registration on the title and, for the period of their effective subsistence, confer rights upon the Sheriff to deal with the land by and on the face entirely of the Register. It is therefore of no relevance that the judgment which founds the writ may not in any particular case be for a large sum of money.
I pointed out earlier that the majority in the Court of Appeal were influenced in reaching their conclusion by the Queensland case of Austral Lighting[64]. In that case the Full Court of Queensland (Connolly J, Campbell CJ and Demack J agreeing) considered s 35 of the Real Property Act 1877 (Qld) which provided that a transfer, in consequence of a sale under a writ of execution, "shall be subject to all equitable mortgages and liens notified by any caveat lodged with the Registrar-General prior to the date of the registration of the writ of execution and to all other encumbrances liens and interests notified by memorandum entered on the register".
It seems to me that there Connolly J failed, in the same way as the majority in the Court of Appeal did here, to give full effect to the words in the section that any transfer pursuant to a Sheriff's sale "shall be subject to all equitable mortgages and liens notified by any caveat lodged with the Register-General prior to the date of the registration of the writ of execution and to all other encumbrances liens and interests notified by memorandum entered on the register". All of this is to emphasize the importance of lodgment, and the priority that it confers. It also clearly implies that nothing lodged after the registration of the writ is to affect the title that the sale under the writ will pass, because it is only after lodgment, the step leading to notification, that "other encumbrances liens and interests" can be entered on the Register.
To take the view of Connolly J that resort to the Court for protection and priority of an equitable interest should be available regardless that the writ of execution has earlier been recorded on the Register, is to fail to give effect to the clear purposes of the legislation to clarify, provide certainty and avoid litigation[65], and indeed to the language of the section itself.
For these, and the reasons given by Gummow and Hayne JJ, I would allow the appeal and join in the orders proposed by them.
CRENNAN J. This is an appeal from a decision of the New South Wales Court of Appeal[66] in which a majority (Beazley and Ipp JJA; Basten JA dissenting) upheld an appeal by the present first to fourth respondents from orders made by a judge in the Equity Division of the Supreme Court (Lloyd AJ)[67] refusing to grant them relief against the present appellants.
As the purchasers for valuable consideration[68] of a rural property, Wanaka, the first to fourth respondents ("the purchasers") were unable to register the transfer after completion under the Real Property Act 1900 (NSW) ("the Act"). This was because a writ for levy of the property[69] in respect of a total amount of $243,106.60 had been recorded in the Register on behalf of the appellants ("the judgment creditors") just over two hours before completion. In those circumstances, the purchasers sought to restrain any sale in execution of the writ together with related relief, until such time as their interest could be registered.
The purchasers obtained an interlocutory judgment on 7 October 2005 before Campbell J upon the usual undertaking as to damages[70]. The injunction permitted the sheriff to take certain preliminary steps towards selling under the writ[71], stopping short of fixing a date for sale[72]. On 2 December 2005, Lloyd AJ discharged that interlocutory judgment and dismissed the purchasers' summons[73]. A further interlocutory injunction was obtained pending an appeal to the Court of Appeal of New South Wales[74]. On the upholding of the appeal, the Court of Appeal enjoined the judgment creditors from executing the writ for 60 days[75], which had the effect that the transfer of land to the purchasers was able to be registered.
Before the introduction of ss 105-105D into the Act in 1976[76] ("the 1976 provisions"), a transferee of land pursuant to a sale by the sheriff in execution of a writ acquired the beneficial interest of the judgment debtor subject to all interests, including unregistered interests, which subsisted at the time of the entry of the writ[77].
In an article dealing with the legislation as it was and remained until the 1976 provisions, Professor Sykes described the position of purchasers who acquired an interest in land before a writ was recorded[78]:

[160]

On 15 July 2005 contracts were exchanged between the sixth respondent, Marilyn Smith, and the purchasers for the sale of Wanaka, being some 1,600 acres at South Bukalong, near Bombala, New South Wales. A deposit of $100,000 was paid. The purchasers did not lodge a caveat against dealings with the land, as they were entitled, but not obliged, to do under s 74F(1) of the Act[80]. Had the purchasers lodged a caveat that circumstance would not have prohibited the Registrar‑General from recording a writ in the Register in respect of the same land (s 74H(5)(f))[81].
Some ten months earlier, on 17 September 2004, the judgment creditors had obtained judgment in the District Court of New South Wales in the sum of approximately $228,000 against the sixth respondent, Marilyn Smith (then the registered proprietor of Wanaka), and her husband, Peter Smith. Between October 2004 and August 2005 the judgment creditors used various processes in order to enforce the judgment debt. During this time, there was correspondence between the judgment creditors and Marilyn and Peter Smith to the effect that the latter would use the interests in Wanaka and their interests in another rural property, Toorallie, to meet the judgment debt.
On 26 July 2005, Marilyn and Peter Smith's legal representatives advised the judgment creditors' solicitor of the abovementioned exchange of contracts between the purchasers and the sixth respondent and also advised that settlement was to occur on 26 August 2005. That date was brought forward to 24 August 2005.
Then on 19 August 2005 Marilyn and Peter Smith's legal representatives advised the judgment creditors' solicitor that, following settlement, "funds will not be available to pay your client in full". On 23 August 2005 at about 4.53 pm the judgment creditors obtained a writ for levy of the property in the District Court of New South Wales which was enforceable against any property owned by Marilyn and Peter Smith situated in New South Wales.
The events which took place the next day, 24 August 2005, and their sequence, are important. At 8.53 am the solicitor for the purchasers conducted a title search for Wanaka, the settlement being set down for 11.00 am. The search revealed prior encumbrances: two mortgages, a lender's caveat and a leasehold interest. A special condition in the contract provided that the lease registered on the title "must be surrendered on or before completion". The lease was surrendered on 24 August 2005 on payment of consideration of $109,258.19.
That same morning the judgment creditors obtained a charging order against the deposit ("the charging order"). At about 9.30 am the judgment creditors' solicitor made a telephone call to the purchasers' solicitor. He advised her that he acted for the judgment creditors in relation to the judgment debt owed to them by Marilyn and Peter Smith, that a bankruptcy notice had been issued against Marilyn Smith, that the sale of Wanaka might be set aside if completed and that the charging order had been obtained. However, he did not notify her of the writ. She then conducted a bankruptcy search for Marilyn Smith at about 9.48 am. No entries were disclosed. She requested, and the judgment creditors' solicitor provided, a copy of the charging order between about 10.40 am and 11.00 am.
At approximately 11.30 am the writ was lodged with the Registrar‑General to be recorded in the Register, which occurred at about 11.53 am. At about 12.15 pm the purchasers' solicitor sent a facsimile to the judgment creditors' solicitor notifying him that she had received instructions to proceed to settlement which had been delayed in the abovementioned circumstances. The purchase was completed at about 2.00 pm. The proceeds of the balance of the purchase price were paid to discharge various encumbrances.
The purchasers' solicitor obtained the documents received on completion from her Sydney agent on 25 August 2005 and forwarded these to her Sydney registration agents, Lawpoint Galloways, the following day. The writ was delivered to the sheriff on 26 August 2005. On 8 September 2005 Lawpoint Galloways informed the purchasers' solicitor that they had been unable to register the transfer as the writ was recorded on the Register. On 9 September 2005 the purchasers applied to lodge a caveat, the legal effect of which would have been to obtain "a statutory injunction"[82]. The recording of the writ precluded this course.
On 28 September 2005 the purchasers commenced proceedings in the Supreme Court of New South Wales (Equity Division) to enjoin the judgment creditors and their agents from executing the writ and for ancillary declaratory relief. The ensuing controversy between the purchasers, as holders of an unregistered equitable interest in the land, and the judgment creditors, who had the benefit of a writ for levy of the property recorded on the Register, involved questions of statutory construction.
While the parties construed the purposes of the 1976 provisions differently, and contended for different interpretations of s 105A(2), there was no dispute about certain uncontroversial principles, with which one commences a consideration of the submissions on the appeal. It was accepted that the Torrens system is a system of "title by registration"[83] and that indefeasibility of title was "the foundation of the Torrens system of title"[84]. It was also not in dispute that the purchasers had a "caveatable interest" in Wanaka once they had exchanged contracts and paid the deposit of $100,000[85] thereby, before completion, acquiring an equitable interest in land commensurate with what a court of equity would order to enforce the contract by way of specific performance[86], injunction or otherwise[87].

[177]

Relying on s 105A(2), the primary judge concluded that having recorded the writ, which precluded the purchasers from registering their interest during the protected period, the judgment creditors were entitled to have the sheriff effect a sale in accordance with the statutory procedures laid down in ss 105‑105D.
On the purchasers' appeal, the majority in the Court of Appeal (Ipp JA with whom Beazley JA agreed) found that none of the 1976 provisions relied on by the judgment creditors expressly or impliedly prevented the purchasers, prior to a sale by the sheriff, from taking action to protect their equitable interest by restraining the judgment creditors and their agents from proceeding with a sale[96]. This conclusion was based on the Court's ability to "recognize equitable estates and rights except so far as they are precluded from doing so by the Statutes"[97]. Another consideration was that s 105(3) of the Act (providing that the Registrar‑General may refuse to record a writ where it appears the land was held by the registered proprietor in a fiduciary capacity) signified an intention on the part of the legislature to protect equitable interests such as the interest obtained on an exchange of contracts[98]. The majority approved the opinion of Connolly J in Commonwealth Trading Bank of Australia v Austral Lighting Pty Ltd[99] ("Austral Lighting") dealing with a priority contest between a holder of an unregistered interest and a judgment creditor on whose behalf a writ had been recorded. The relevant provision[100], different in terms from s 105B(2), provided that a registered transfer pursuant to a sheriff's sale was subject to equitable interests notified by caveat. No provision like s 105A(2) was under consideration. In circumstances where the holder of a prior interest failed to lodge a caveat, Connolly J held that the holder of an unregistered interest created prior to the lodgment of the writ of execution may set up that interest against a judgment creditor until a sheriff's transfer has been registered[101].
Basten JA, dissenting, held that although the purchasers' interest in Wanaka arose prior to that of the judgment creditors, this is irrelevant under the statutory scheme set up by the 1976 provisions. He concluded that the purchasers' interest was to be treated like any other equitable interest not recorded on the Register, and would be defeasible by a sale by the sheriff during the statutory "protected period"[102]. His Honour said the purchasers' argument reflected the position before the 1976 provisions, as explained by Professor Sykes[103], and he regarded Austral Lighting[104] as a clear statement of accepted principle before the 1976 provisions[105]. Basten JA said the clear legislative intention of the 1976 provisions "was to allow a Sheriff's purchaser to take, through the Sheriff, the interest of the registered proprietor, subject to whatever limitations or encumbrances might be recorded on the register, but without the risk of unregistered interests taking priority"[106].

[178]

The judgment creditors adopted the reasoning and conclusions of Basten JA in the Court of Appeal and contended that the purchasers were not entitled to protect their unregistered interest in the land by an injunction. The effect of this was to defeat the "interest" of the judgment creditors arising from the recording of the writ. The interest of the judgment creditors was said to be an interest, not in the land, but an interest which enables a statutory process to take place culminating in title[107]. It was submitted that the 1976 provisions constituted a statutory scheme, the purpose of which was to enable the sheriff to transfer to a purchaser at a sheriff's sale a title unencumbered by unregistered interests. Section 105A(2) was relied on to support that submission as it precluded the purchasers from recording their interest in "the protected period" described as the period during which their interest was defeasible by the registration of an interest obtained from a sale by the sheriff. The judgment creditors construed s 105B(2) as evincing a legislative intention to alter, not only the interests and right of holders of unregistered equitable interests after the registration of transfer to the sheriff's purchaser, but also to prevent holders of unregistered equitable interests from asserting their interest against a judgment creditor during the protected period.
The purchasers contended that s 105A(2) did not have the significance ascribed to it by the judgment creditors. It was submitted that s 105A(2) did not give the judgment creditors any entitlement to insist upon a sale by the sheriff which would defeat unregistered estates or interests created prior to the recording of a writ. It was asserted that the fact that s 105A(2) deferred registration of the purchaser's entitlement did not deny the entitlement. It was submitted that nothing in the 1976 provisions conferred some priority or "indefeasibility of title" upon a judgment creditor. Rather, it was submitted that the purpose of s 105B(2) was to confer on a transferee from the sheriff, indefeasibility of title corresponding with that generally afforded by s 42; and it was this aspect of the statutory scheme which constituted the "reform" envisaged by the Minister. It was contended, more generally, that the statutory scheme evinced in the 1976 provisions simply provided machinery whereby steps towards a sale by the sheriff in execution of a writ could be taken in an orderly manner. Section 112(1) of the Civil Procedure Act 2005 (NSW) ("the CPA"), which provides that a writ of execution "binds" the land from the time the writ is delivered to the sheriff, was relied on as complementing these submissions. Further, it was said that the interpretation of s 105B(2) for which the purchasers contended was reinforced by s 43A of the Act and s 115(1) of the CPA.

[185]

Section 105B states the requirements for registration of a transfer from the sheriff and the effect of the registration. Whilst not using the epithet "paramount" (to be found in s 42) to describe the interest or estate of a purchaser from a sheriff upon registration, s 105B incorporates s 42 and operates in the same way as s 42 as the source of indefeasibility in favour of a purchaser from the sheriff.
The purpose of the detailed machinery of the 1976 provisions is to ensure that at the date of a sale by the sheriff a purchaser from the sheriff takes priority over prior unregistered purchasers for valuable consideration (or other interest holders). A purchaser from a sheriff under the previous regime acquired indefeasibility upon registration (s 42), but had no protection against prior purchasers for valuable consideration in the interim between the sale by the sheriff and registration of the transfer. A purchaser from a sheriff under the 1976 provisions not only acquires indefeasibility on the registration of the transfer (s 105B(2)) but also has priority over prior unregistered purchasers (or other interest holders) from the date of sale as a result of the operation of the machinery provisions (particularly s 105(2) and s 105A(1), (2) and (9)). Thus the effect of Coleman v De Lissa[118] is overcome. These provisions work to ensure that, prior to the registration of a transfer from the sheriff, a purchaser from the sheriff is not vulnerable to a contest between unregistered interests in which the later purchaser from the sheriff may be defeated by a prior purchaser, who has not registered a transfer.
The 1976 provisions construed as described do not preclude the holders of prior unregistered interests such as a beneficiary under a trust, a mortgagee holding an unregistered mortgage (with or without a certificate of title) or a purchaser, as here, with unregistered transfer documents, from seeking to raise their interests against a judgment creditor prior to any sale by the sheriff.
The detailed operation of the 1976 provisions will, however, preclude the holders of such interests from setting them up against a purchaser between the date of the sale by the sheriff and the registration of the transfer. That is the import of the relationship between ss 105A(2) and 105B(2) which distinguishes the 1976 provisions from the repealed legislation, the position according to Coleman v De Lissa[119] and the situation considered in Austral Lighting[120] which was only concerned with a provision protecting a purchaser from a sheriff from prior purchasers after the transfer from the sheriff had been registered.

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (256 paragraphs)

Parties

Legislation Cited (11)

Cases Cited (21)