Boe v Pry Price bayheuele - Commercial "2

Held, by Griffith C.J. and Barton and Isaacs JJ., that where a caveat | been lodged under sec. 183 of the Transfer of Land Act 1915 (Vict.)

• Sec. 72 of the Transfer of Land Act 1915 (Vict.) provides that " Notwith- standing the existence in any other person of any estate or interest... which but for this Act might be held to be paramount or to have priority, the proprietor of land or of any estate orin- terest in land under the operation of this Act shall, except in case of fraud, hold the same subject to such encumbrances as are notified on the folium of the register book constituted by the grant or certificate of title; but absolutely free from all other encum- brances whatsoever," &c.

Sec. 179 provides that "Except in the case of fraud no person contracting or dealing with or taking or proposing to take a transfer from the proprietor of any registered land lease" &e. "shall be required or in any manner concerned. to inquire or ascertain the circum. stances under or the consideration for which such proprietor or any previous proprietor thereof was registered, . . . or shall be affected by notice actual or

constructive of any trust or un tered interest, any rule of law or eq) to the contrary notwithstanding ; the knowledge that any such trust unregistered interest is in shall not of itself be imputed as frau Sec. 183 provides that " Any be ficiary or other person claiming estate or interest in land under the operation of this Act or in any lea mortgage or charge under any unre; tered instrument . . . may lo a caveat with the Registrar" i specified form "forbidding the tration of any person as transferee o proprietor of and of any instrume affecting such estate or interest eit absolutely or until after notice of | intended registration or eee gi to the caveator, or unless such instrt ment is expressed to be subject to th claim of the caveator as is required

sents in writing thereto," &c. Sec. 184 provides that " Upon receipt of such caveat the Re;

the proprietor has applied for the registration of a transfer or other dealing, H. C. or A.

; and before the expiration of fourteen days after the notice the application is 1917. withdrawn, the caveat does not lapse under the last-mentioned section on the -~

' expiration of the fourteen days but remains in full force, and, therefore, if BUTLER the application is subsequently renewed or another similar application is p,recrovaH.

made, the Registrar should give notice thereof to the caveator.

On 30th June 1915 G., who was the registered proprietor under the Transfer of Land Act of a Crown lease subject to a registered mortgage, by an agreement under seal which was never registered agreed to charge the lease with a debt ; due by him to the plaintiff, and at plaintifi's request to execute a proper and legal mortgage. On 2nd July 1915 G. agreed to sell the lease, subject only to the registered mortgage, to the defendant for valuable consideration, and on the same day the consideration money was paid and G. executed a transfer to the plaintiff in the prescribed form. Before payment the defendant caused a search to be made at the Titles Office and found that G.'s title was clear except for the registered mortgage. He had no notice, express or implied, of the plaintiff's charge under the agreement of 30th June. On 7th July the plaintiff lodged a caveat claiming an equitable estate or interest in the lease as equit- able mortgagee, and absolutely forbidding the registration of any person as transferee or proprietor of, or of any instrument affecting, G.'s estate or interest. On 12th July the defendant lodged his transfer for registration, and on 23rd September notice of his application was duly given by the Registrar to the plaintiff. On 5th October the plaintift's solicitor wrote to the defendant

shall notify the same to the person against whose application to be regis- ~

tered as proprietor or (as the ease may be) to the proprietor against whose title to deal with the estate or interest such caveat has been lodged ; and such applicant or proprietor or any person claiming under any transfer or other instrument signed by the proprietor may if he thinks fit summon the caveator to attend before the Full Court of the Supreme Court to show cause why such caveat should not be removed; and such Court may, upon proof that such caveator has been sum- moned, make such order in the premises . . + as tosuch Court seems fit. . . . 'Except in the case of a caveat lodged by or on behalf of a beneficiary claiming under any will or settlement or by the Registrar pursuant to the direction of the Commissioner every caveat lodged 'against a proprietor shall be deemed to have lapsed upon the expiration of fourteen days after notice given to the eaveator that such proprietor has ap- plied for the registration of a transfer or other dealing or the issue of a registra- tion abstract. A caveat shall not be renewed by or on behalf of the same person in respect of the same estate or

interest ; but if before the expiration of the said period of fourteen days or such further period as is specified in any order made under this section the caveator or his agent appears before a Judge and gives such undertaking or security or lodges such sum in Court as such Judge considers sufficient to-in- cemnify every person against any dam- age that may be sustained by reason of any disposition of the property being delayed, then and in such case such Judge may direct the Registrar to delay registering any dealing with the land lease mortgage or charge or issuing a registration abstract for a further period to be specified in such order, or may make such other order and in either case such order as to costs as is just."

Sec. 185 provides that "So long as any caveat remains in force prohibiting any registration or dealing, the Regis- trar shall not except in accordance with some provision of such caveat enter in the register book any change in the pro- prietorship of or any transfer or other instrument purporting to transfer or otherwise deal with or affect the estate or interest in respect to which such caveat is lodged or issue any registration abstract."

discussion the defendant's solicitor agreed with the contention of the plai solicitor that the plaintiff was entitled to priority by virtue of his eq) mortgage and said that he could not advise the defendant to resist the

register his transfer, which he did on the same day. Subsequently the de dant being advised that his transfer was entitled to priority over the pla equitable mortgage, he on 7th March 1916 again lodged his transfer for tration. The Registrar did not give notice of that application to the pl and the defendant was registered as proprietor of the lease subject registered mortgage.

In an action by the plaintiff against the defendant claiming a decla that the defendant procured his registration by fraud, with consequent reli

Held, by Griffith C.J. and Barton and Isaacs JS. (Gavan Duffy and Rich dissenting), that there was neither a contract between the plaintiff

by the defendant would constitute fraud within the meaning of sec. 72 Transfer of Land Act 1915 so as to invalidate the registration of his t

Held, also, by Griffith C.J. and Barton and Isaacs JJ., that the plaintiff, by omitting to lodge a caveat before the defendant paid the purchase money a obtained his transfer, had lost the priority arising out of his equitable having been created first in point of time; and that the registration of defendant's transfer was valid notwithstanding the existence of the plaintif caveat and the omission of the Registrar to notify the plaintiff of the defenda application. 4

Decision of aBeckett J.: Butler v. Fairclough, (1916) V.L.R., 533 A.L.T., 51, affirmed.

An action was brought in the Supreme Court by Victor Butler against William Fairclough and the Registrar of Titles of Victoria by which the plaintiff claimed : (1) a declaration that | defendant pangs Beocre the seghiiiiiion of a certain ek

rights under a mone of 30th June 1915, and that the defendar held the lease subject to the mortgage ; (2) an order that the defe ant Fairclough should execute a proper instrument of mortgage ¢ the lease for registration securing to the plaintiff the moneys cove by the mortgage of 30th June 1915, but subject to a certain tered mortgage, and should do all acts and things necessary for the

purposes of such registration ; (3) an order that a certain interim injunction which had been granted should be continued until after the registration of such instrument of mortgage ; (4) an order that the defendant the Registrar of Titles should give effect to the fore- going declaration and orders ; and (5) such further or other relief in the premises as to the Court should seem just.

The action was heard by dBeckett J., who gave judgment for the defendant Fairclough : Butler v. Fairclough (1)

From that decision the plaintiff now appealed to the High Court.

The material facts and the nature of the arguments appear in the judgments hereunder.

Mitchell K.C. and Davis, for the appellant. Starke (with him Walker), for the respondent Fairclough.

[During argument reference was made to the following : - In re Scanlan (2); Perpetual Executors and Trustees Association of Australia Ltd. v. Hosken (3); Mahony v. Hosken (4); Drake v. Templeton (5); Barry v. Heider (6); Barnes v. James (7); General Finance Agency &c. Co. v. Perpetual Executors and Trustees Associa- tion of Australia Ltd. (8) ; Shropshire Union Railways and Canal Co. v. The Queen (9) ; Cowell v. Stacey (10) ; Baker's Creek Consolidated Gold Mining Co. v. Hack (11); In re Scottish Petroleum Co, (12) ; Robertson v. Keith (13); Assets Co. Ltd. v. Mere Roihi (14); Ex parte Ford; In re Chappell (15); The Moorcock (16); Redgrave v. Hurd (17); Gaffney v. McLaughlin (18); Messer v. Gibbs (19) ; Gibbs v. Messer (20); Powell v. London and Provincial Bank (21) ; White & Tudor's Leading Cases, 8th ed., vol. 11., p. 184; Connolly v. Noone and Cairns Timber Co. (22); Leake on Contracts, 6th ed., p.

a? (1916) V.LAR, 693; 38 ALT, (11) ISNSW.LLR, (Eq.), 207, at p. 224. (12) 23 Ch. D., 413

oN) 3 ae . aa (aseey (3) CLR, 5 p. 210. yy 4 C.L.R., 379. (15) 16 Q.B.D., 305, 'at p. 307.

(5) 16 C.L.R., 153, at p. 157. (6) 19 C.L.R., 197, at p. 21 ( V.L.R., 749 (n), at p. 752°

(16) 14 P.D., 64, at p. 6: (17) 20 Ch. B., I, at 22 (18) 1S.R. (NS. (19) 13 V.L.R. (20) (1891) A.

448; Miles v. New Zealand Alford Estate Co. (1); Gre Alger (2); Nocton v. Lord Ashburton (3); Cooper v. Phibbs National Provincial Bank of England v. Jackson (5); Rice

(6); Agra Bank Ltd. v. Barry (7); Plowman y. Palmer Taylor v. London and County Banking Co. (9); Halsbury's England, vol. xutt., p. 449; Sibley v. Grosvenor (10).]

Grirrita C.J. On 30th June 1915 William Good was the re tered proprietor under the Transfer of Land Act of a Crown subject to a registered mortgage. On the same day Good, agreement under seal which has not been registered, a charge the lease with a debt then due by him to the plaintiff, the plaintiff's request to execute "a proper and legal mort On 2nd July 1915 Good agreed to sell the lease, subject to the tered mortgage, to the defendant for valuable consideration. - the same day the consideration money was paid, and Good exeet a transfer to the plaintiff in the prescribed form. Before paym the defendant caused a search to be made in the Titles Offic found that Good's title was clear except for the registered mortg: He had no notice, express or implied, of the plaintiff's charge the agreement of 30th June.

On 7th July the plaintiff lodged a caveat in the Titles 0 claiming an equitable estate or interest in the lease as equ mortgagee, and absolutely forbidding the registration of any as transferee or proprietor of, or of any instrument affecting, estate or interest.

(3) (1914) 2, at p. 957. (8) 18 C.L.R., 339. i (4) LR. 2 HLL, 149, at p. 170. (9) (1901) 2 Ch., 231, at p. 260.

of the defendant. The plaintiff's solicitor claimed that his client H. ©. or A. was entitled to priority by virtue of his equitable mortgage. After 117: some discussion the defendant's solicitor expressed the same opinion, Burrer and said that he could not advise the defendant to resist the claim. pisncrovox Under the provisions of sec. 184 of the Transfer of Land Act it was necessary for the plaintiff if he desired to prevent registration of the defendant's transfer to obtain within fourteen days from notice of its lodgment, i.e., not later than 7th October, an order from a Judge staying registration. It was then arranged that defendant should withdraw his transfer from the Titles Office, which he did on the same day. Subsequently the defendant was advised that his transfer was entitled to priority over the plaintiff's equitable mortgage, and on 7th March 1916 he again lodged his transfer for registration. The Registrar of Titles did not give notice of it to the plaintiff, being apparently of opinion that the plaintiff's caveat was no longer in

force, and the defendant was thereupon registered as proprietor of the lease subject to the registered mortgage.

Upon this state of facts several very interesting questions of law have been raised and argued before us, including the respective rights of the plaintiff and the defendant to priority apart from the transaction - to use a neutral word - of 6th October, and the effect of that transaction, including the withdrawal by the defendant of his transfer,

Before dealing with these questions it will be convenient to con- sider the nature and effect of a caveat. That depends upon the provisions of secs. 183-185 of the Transfer of Land Act. Sec. 183 provides that any beneficiary or person claiming any estate or interest in land under the operation of the Act under any unregis- tered instrument may lodge a caveat in the prescribed form for- bidding the registration of any person as transferee of, and of any instrument affecting, such estate or interest either absolutely or conditionally. By sec. 184 the Registrar of Titles is required on receipt of the caveat to notify it to the proprietor against whose title to deal with the estate or interest it has been lodged. Provisions then follow for the removal of the caveat by order of the Supreme Court at the suit of the registered proprietor or person claiming under

H.C.or A. him, The section proceeds: '' Except in the case of a cay

lodged by or on behalf of a beneficiary claiming under any settlement or by the Registrar pursuant to the direction of the missioner every caveat lodged against a proprietor shall be di to have lapsed upon the expiration of fourteen days after notice g to the caveator that such proprietor has applied for the re tion of a transfer or other dealing or the issue of a registration ab:

agent appears before a Judge and gives such undertaking or or lodges such sum in Court as such Judge considers suffici indemnify every person against any damage that may be susi by reason of any disposition of the property being delayed, then in such case such Judge may direct the Registrar to delay re ing any dealing with the land lease mortgage or charge or i a registration abstract for a further period to be specified in order, or may make such other order and in either case such as to costs as is just." The effect of these provisions is not to enlarge or add to the ing proprietary rights of the caveator upon which the caveat is founded, but to protect those rights, if he has any. In the case: caveat lodged by a beneficiary or equitable mortgagee its effect prevent the registration of any instrument the registration of wh might have the effect of defeating his equitable interest in the la without giving him an opportunity of invoking the assistance of th Court to give effect to that interest. But if he desires to do: must take prompt action, 7.e., within fourteen days, or the cai will lapse, 7.c., the protection afforded by it will cease. In the of such a caveat it might well happen that several instruments 1 be lodged by different persons, any of which, if registered, ¥ pro tanto deprive the caveator of his equitable interest. It is u gested that the effect of the section is that the caveator must ta proceedings to invoke the jurisdiction of the Court within fo days against the first of such persons who lodges an instrument registration, and that, if for any reason he does not do so, the

_ is absolutely gone and can never be revived. It is obvious that the reasons which may induce such a caveator to refrain from taking action may be various. For instance, the instrument lodged for registration may be voluntarily withdrawn, or the caveator may not desire to prevent its registration. But it would be a singular result if the whole benefit of the system were in such a case lost to the beneficiary or equitable mortgagee unless he formally invoked the intervention of the Court in a manner which would be either futile or contrary to his wishes. We are informed that until recently the Titles Office acted on the broader view, but that shortly before the re-lodging of the defendant's transfer the Registrar of Titles adopted the narrower view that a caveat absolutely and finally lapses if for any reason legal proceedings are not instituted by the caveator within fourteen days after notice of the lodgment of the first instrument capable of affecting his title.

In my opinion the object of the provision was to give a per- manent protection to such an equitable owner, subject only to the condition that he should take prompt action against any person who endeavoured to affect his rights prejudicially. The words of sec. 184 are perhaps open to a wider construction, but the provision requiring the caveator to give security seems to me to imply that the sufficiency of the security is to be estimated with regard to the possible effect of delay upon some other known party, and not to the whole value of the caveator's interest, which would be the test if his security was to be given then, once for all, and for the benefit of all the world. I think, further, that in the sentence " every caveat lodged against a proprietor shall be deemed to have lapsed upon the expiration of fourteen days &c." the words "shall be deemed to have lapsed" may be read as if transposed to follow the words "upon the expiration of fourteen days &e." and should be read secundum materiam, that is to say, that the caveat shall be deemed to have lapsed so far as regards the attempted dealing of which notice has been given to the caveator. Another point of view which leads to the same result is to regard the specified term of fourteen days as a period during which a right is maturing adversely to the caveator ; so that if that inchoate right sooner comes to an end the fourteen days cease to run. Applying the doctrine that in the case

H.C. or A. of ambiguity a document should be construed so as if possi

Oe give effect to the obvious intention of the framers, I think that ¢ ww

Burrer construction I have indicated is the true one, and that wh v.

Farncroven, 'strument is withdrawn or the registered proprietor does not

to prevent its registration such a caveat does not become inoper tive except as against the instrument lodged, and that the fo practice of the Titles Office was not only in conformity with prescribed by, the Statute.

I pass now to the case made by the plaintiff, and remark in th

first place that it is based upon the assumption of the priority of his equitable title over that of the defendant, of which priorit defendant has fraudulently attempted to deprive him. This tention is founded on the transaction of 5th October which is pleaded : - : "7. On the fifth day of October 1915 the plaintiff notified to defendant Fairclough the said mortgage of the thirtieth day ¢ June 1915 and the said caveat and informed the said defend his intention to issue a writ against him claiming an injuncti restraining the registration of the said transfer. "8. On or about the seventh day of October 1915 it was ver agreed by and between the plaintiff and the defendant Fairel by themselves or alternatively by their respective solicitors their respective knowledge and authority'that in consideration the plaintiff would not issue the said writ the defendant Fairelo would withdraw the said transfer from the Office of Titles cul wou finally abandon registration of the same. es "9. Pursuant to the said agreement the defendant Fairelot with the privity of the plaintiff on the seventh day of October 19 withdrew the said transfer from the Office of Titles and the plai forbore to issue the said writ." The statement of claim then alleged that by the practice Fi Titles Office the plaintiff was not entitled under his caveat to further notice of the lodging of any dealing with the land, and pro ceeded as follows (par. 11) : - " With the fraudulent intention of obtaining or alternatively of attempting to obtain priority | v the plaintiff's said mortgage the defendant Fairclough shortl before the seventh day of March 1916 in breach of the

agreement and without notice to the plaintiff and with knowledge or notice of the matters hereinbefore stated procured the said transfer to be again lodged at the Office of Titles for registration and pursuant to such lodging the said defendant became on the said seventh day of March 1916 and now is the registered proprietor of the said land subject only to the registered mortgage mentioned in par. 1."

He claims a declaration that the defendant procured his regis- tration in fraud of the plaintiff, with consequent relief.

Tt is plain that this claim is based entirely on an alleged fraud, which, if established, would deprive the defendant of the benefit of sec. 72 of the Statute, under which the title of a registered pro- prietor is "' except in case of fraud " unimpeachable.

The defendant in his defence alleges that he acted in good faith in re-lodging his transfer, and that he was not aware that notice of it would not be given to the plaintiff. The learned Judge was of opinion, upon very clear evidence, that both parties thought that notice would be given to the plaintiff of any instrument lodged for registration. Both were surprised on hearing that the transfer had been registered without objection.

In this Court an attempt was made for the first time to set up an alternative case based, not upon the plaintiff's original priority of right, but on his acquisition of a new right of priority by virtue of the transaction alleged in par. 8 of the statement of claim. In my opinion the alleged verbal agreement is pleaded merely by way of inducement to the subsequent charge of fraud, and not as an allega- tion of a substantive agreement for valuable consideration for a transfer or creation of rights. It would be unjust to allow such a case to be raised for the first time based upon this suggested con- struction of the pleadings, at any rate without allowing the defendant an opportunity of amending his defence by setting up the Statute of Frauds if so advised.

I proceed to consider the nature and effect of the transaction of

~ 6th October, which is put forward by the plaintiff alternatively as establishing either an agreement for valuable consideration or a promise. There is no conflict of evidence as to what took place, or as to the state of mind of the parties, both of whom believed that the

plaintiff's right under his equitable mortgage had priority over defendant's right under his unregistered transfer. - The first p to be determined is whether the parties were applying their m to the matter as a proposed bargain by which their respective right

whatever they might be, were to be affected and definitely determin or as a discussion of the most convenient way of giving effect to unquestioned right, accompanied by a promise not to deny it in future. When an agreement is sought to be deduced from a verbal conversation, two questions of fact have to be determined : firs what were the words used, and, secondly, in what sense they wer used and understood. The learned Judge, who saw the witnesse formed the conclusion that this conversation was not intended to operate as an " agreement for final surrender of such rights as 1] defendant possessed." Even if I should not myself (as I do) dra' the same inference from the words as recorded in the Judge's note: I should not feel at liberty to overrule this finding of fact. It abundantly clear that the defendant on the one hand did not think that he was selling or parting with, and that the plaintiff on the ot! did not think that he was buying or acquiring, any new right. Th elements of such a contract were therefore wanting. It was sug-_ gested that the transaction may be regarded as one of compromi of a doubtful right potentially in litigation. The same considera-_ tions negative this view.

What effect, then, can be given to the transaction? To my mi the case is as if a defendant against whom an action is threatened to restrain an alleged trespass should discontinue his alleged trespass and promise not to repeat it. It would be impossible in such a case, if there were no more in it, to infer a binding agreement to surrender - any rights that the defendant might have in the land to the plai tiff. .

I will, however, assume that the evidence establishes an agree- ment for valuable consideration. The form most favourable the plaintiff in which that agreement has been, or, indeed, can be, put is that in consideration that the plaintiff would refrain from - making immediate application to a Judge for an order directing -

the Registrar to delay registering any dealing with the land the defendant would withdraw his transfer and would not again lodge

it. In that view the defendant has committed a breach of the agreement, and is liable to the consequences of his breach. The remedy for a breach of contract is an action for damages, and in some cases redress by way of specific performance or injunction against repetition of the breach. I have already pointed out that in this case specific performance is out of the question. So is repetition. Regarding the promise then as one relating to the personal conduct of the defendant, what damages are recoverable in an action for breach of the contract ? The measure of damages in an action for breach of contract is well settled. It is such loss as may fairly and reasonably be considered as arising according to the usual course of things or may reasonably be supposed to have been in the contemplation of the parties at the time of making the contract as the probable result of a breach. The motive or state of mind of a person who is guilty of a breach of contract is not relevant to the question of damages for the breach, although if the contract itself were fraudulent the question of fraud might be material (see per Lord Chelmsford in Bain v. Fothergill (1). A breach of contract may be innocent, even accidental or unconscious. Or it may arise from a wrong view of the obligations created by the contract. Or it may be wilful, and even malicious and committed with the express intention of injuring the other party. But the measure of damages is not affected by any such considerations. A statement of claim which alleged that the defendant wilfully or maliciously or fraud- ulently committed a breach of contract would not gain any additional effect from the vituperative epithets, which would indeed be as irrelevant to the case as the ancient averment that a person accused of an offence acted at the instigation of the devil.

What, then, were the probable consequences of a breach of the defendant's promise within the contemplation of the parties ? According to law, as well as according to the practice of the Titles Office as far as known to them, the only consequence would be that the plaintiff would be obliged to assert his title by litigious pro- ceedings. No damages could, however, be recoverable for that unless it was also shown, not only that the plaintiff had lost the opportunity of taking the proceedings but that he had lost it in

It is impossible to suggest that the defendant was responsible for Registrar's neglect to give notice, or that his doing an act which if Registrar had done his duty would have been innocuous is verted by the Registrar's omission into a fraudulent one. On view of the case, therefore, the plaintiff fails to bring the defendant's registered title within the exception of sec. 72 of the Act. It settled that the term "fraud" as used in that section im personal dishonesty or moral turpitude.

If the transaction of 6th October is put as a mere promise, th e is even less foundation for a charge of fraud. Unless the learned Judge was wholly mistaken as to the facts, the defendant's state of mind when the transfer was re-lodged was that he expected his right to be challenged by the plaintiff. If after making such a prom he had endeavoured to gain some surreptitious or unfair advante over the plaintiff in contravention of his promise, the case might different. But as it stands the charge of fraud wholly fails. -

There is still another answer to the alleged agreement. _ It is cl that on 6th October both parties acted under the belief that plaintiff had priority of right. If that belief was mistaken I that the case falls within the doctrine laid down by Lord Wes in the case of Cooper v. Phibbs (1) : - " The result, therefore, is, that at the time of the agreement for the lease which it is the object of this petition to set aside, the parties dealt with one another pate a mutual mistake as to their respective rights. The petitioner did not suppose that he was, what in truth he was, tenant for life o the fishery. The other parties acted upon the impression given to them by their father, that he (their father) was the owner of fishery, and that the fishery had descended to them. In sucl state of things there can be no doubt of the rule of a Court of equity with regard to the dealing with that agreement. It is said, ' Ignor- antia juris haud excusat'; but in that maxim the word 'jus used in the sense of denoting general law, the ordinary law of country. But when the word 'jus' is used in the sense of denotin a private right, that maxim has no application. Private right ownership i i8 a matter of fact ; ; it may be the result also of matter o

• law; but if parties contract under a mutual mistake and misappre- hension as to their relative and respective rights, the result is, that that agreement is liable to be set aside as having proceeded upon a

the respondents believed themselves to be entitled to the property, the petitioner believed that he was a stranger to it, the mistake is

ep discovered, and the agreement cannot stand." The mutual mistake as to the practice of the Titles Office would of itself be sufficient to invalidate the agreement.

In that aspect of the case it is necessary to consider the question whether the view then taken as to the plaintiff's priority was well founded or ill founded. It must now be taken to be well settled that under the Australian system of registration of titles to land the

Courts will recognize equitable estates and rights except so far as they are precluded from doing so by the Statutes. This recognition is,

indeed, the foundation of the scheme of caveats which enable such tights to be temporarily protected in anticipation of legal proceed- ings. In dealing with such equitable rights the Courts in general act upon the principles which are applicable to equitable interests in land which is not subject to the Acts. In the case of a contest between two equitable claimants the first in time, all other things being equal, is entitled to priority. "But all other things must be equal, and the claimant who is first in time may lose his priority by any act or omission which had or might have had the effect of inducing a claimant later in time to act to his prejudice. Thus, if an equitable mortgagee of lands allows the mortgagor to retain posses- sion of the title deeds, a person dealing with the mortgagor on the faith of that possession is entitled to priority in the absence of special circumstances to account for it.

Under the Australian system e clear title on the register is, for some purposes at any rate, equivalent to possession of the title deeds. A person who has an equitable charge upon the land may protect it by lodging a caveat, which in my opinion operates as notice to all the world that the registered proprietor's title is subject to the equitable interest alleged in the caveat. In the present case the plaintiff might, if he had been sufficiently diligent, have regis- tered his charge of 30th June on that day. The defendant; having

• common mistake. Now, that was the case with these parties - prmcrover.

before parting' with the purchase money to Good found on searching the register that Good had a clear title, and relying on the absence of any notice of defect in, Good's title, paid the agreed price. '

The question then seems to be: Had the plaintiff when the defendant acquired his equitable right taken or failed to take all reasonable steps to prevent Good from dealing with the land with- out notice of plaintiff's title? The cases of Barnes v. James (1) and General Finance Agency &c. Co. v. Perpetual Executors and : Trustees Association of Australia Ltd. (2) are weighty pronounce- ments by dBeckett and Holroyd JJ. to the effect that this is the | decisive question.

It is contended that the holder of an equiatle charge is entitled _ to a longer time than a day before protecting his title by a caveat. - If a man having a registrable instrument neither lodges it for regis- tration nor lodges a caveat to protect it, it is clear that a registrable instrument later in date, but lodged before his, will have precedence, - notwithstanding notice of the earlier instrument received before - lodging his own. That is by reason of the express provisions of the Statute. But why should not the same principle apply in the case : of equitable interests? The alternative view would in effect give as great validity to an unregisteréd equitable assignment unprotected by caveat as to a registrable instrument lodged for registration.

I feel unable to draw any line prescribing the time within which a caveat should be lodged. The person who does not act promptly loses the advantage which he would have gained by promptitude.

For these reasons I come to the conclusion that if a suit had been brought on 3rd July between the plaintiff and defendant raising the question of priority the defendant would have been entitled to succeed, Nothing that has since happened can deprive him of this right unless the arrangement of 6th October had the effect of creating a new right in him. I have already dealt with that question. For even if the defendant obtained registration by fraud the plaintiff must recover on the strength of his own title, and if he had none he has not been prejudiced by the defendant's action.

The same consideration affords an answer to the suggested argu- ment founded on sec. 185 of the Act, which forbids an entry in the

register of any dealing with land in respect of which a caveat has H- ©. or A.

been lodged and remains in force. If the plaintiff is a stranger he Re

cannot be heard to raise the question. But, in my opinion, this Borzer v.

enactment does not bring a case in which the prohibition has been parmcrover

disregarded within the decision of the Judicial Committee in Gibbs. =, vy. Messer (1), or deprive a registered proprietor of the protection of : sec. 72.

Tt follows from what I have said that the only cause of action (if any) disclosed by the statement of claim is an action for damages for breach of agreement. This is not the case put forward, nor for the reasons given could it be sustained if it were put forward.

For all these reasons I think that the appeal fails, and must be dismissed with costs.

Barton J. Ihave read and considered the judgment which my learned brother Isaacs is to deliver. I am in general agreement with the reasons which he gives, and am of opinion that the appeal should be dismissed with costs.

Isaacs J. The appellant contends that the respondent obtained his certificate either by fraud or without authority or both. To succeed so far, would merely open the field for the contest as to which of the two parties had the better equitable right - in other words, whether the respondent had a right to be registered, disregard- ing the appellant's equitable mortgage. One very material allegation as to the better equitable right in that case is the allegation that the withdrawal of the transfer in October 1915 was the result of an agreement for valuable consideration to abandon it. I lay no stress on whether the abandonment was to be as regards the appellant only, or both as regards him and Good also. To me it is clear that the withdrawal was not the outcome of any such bargain. The transaction may be very shortly summed up. The plaintiff's solicitor insisted on the view that the equitable mortgage was para= mount, and threatened to enforce his view by action. The defendant and his solicitor, after considering the authorities, assented to that view, and undertook to withdraw the transfer without the necessity

of litigation. The plaintiff's solicitor pointed out that the w drawal must be prompt, otherwise the caveat would lapse. Accord- ingly the withdrawal was effected promptly, and before the statu tory period of lapse, and to make sure of the fact of withdrawal t] clerk of the plaintiff's solicitor went to see it was done. And th: was all. The position is not different from that where a man threaten to sue unless an alleged trespass, or nuisance, or obstruction, discontinued, and the threat is yielded to. In such a case, as in th present, the circumstance that leads to submission is not a pron but a threat. The parties do not intend thereby to create a ne or a better right, but to observe what is then understood to be existing right. Such acquiescence may or may not give rise to cumstances having the effect of estoppel, but it does not create contract having instant and enduring independent force as a startin point of the parties' rights. No question of estoppel arises here. The importance of the point as to contract does not so much relate to the question of fraud, for it cannot be said that every breach of contract is a fraud, and, on the other hand, the law does not requi e the presence of a nominal consideration to constitute a fraud; but it would have great importance in the event of the field being open, because it would create a waiver of any equity in the respondent : resting on the absence of a caveat when the transfer was taken and partly paid for. I regard the parties in that event as standing in precisely the same relative situations as those in which they stood immediately before the arrangement for withdrawal was made. - But a difference of opinion makes it necessary, or at least respectful, to state more particularly why I hold the opinion that there was no 4 contract. Of course there was an agreement that the respondent's caveat - should be withdrawn. That is, the parties were at one about it. But to make that agreement a binding contract there must have - existed two circumstances which were, in fact, absent. One wa: the intention to make an enforceable contract; the other was a valuable consideration. i ve Now, if, for instance, while the defendant's solicitor was on his way_ to the Titles Office to withdraw the dealing, some learned counsel

had pointed out to him that apparently in Scanlan's Case (1) no search for a caveat had been made, and therefore it was no authority against his client, and thereupon the solicitor had gone back and said, " I have altered my opinion, and will not withdraw the dealing but leave you to your remedy," could the present appellant have succeeded simply on a contract to withdraw, whatever the merits might otherwise be? I should say distinctly not. The fact of actual withdrawal does not add to the appellant's strength. Mr. Mitchell candidly said he could not contend that his client's rights stood in a better position after the withdrawal than before. Mr. Davis, however, contended that they did. Both learned counsel, however, urged that there was a binding contract. If there was, I should agree with Mr. Davis, because it was obviously an arrange- ment to withdraw the dealing finally, and, if the transaction was intended to be contractual and for valuable consideration, then it was a purchased paramountcy of the equitable mortgage. But what was the consideration? It was alleged to be the forbearance of the appellant from issuing process to restrain the registration of the transfer or to declare the appellant's priority. As I have said, there was no promise to forbear; there was a threat to sue unless the transfer were withdrawn.

Now, if we look closely at the matter, it was this. The mortgagee said in effect : "I shall sue unless you withdraw." The transferee said: " Wait till I consider"; and the mortgagee waited. But the waiting was not so far a consideration for the withdrawal. No withdrawal was so far promised, and might ever have been promised. The waiting up to this time was voluntary, and in any case extended only up to the time of notification whether the transferee intended to withdraw or not. He was not bound to withdraw. But in the end the transferee withdrew. The moment he did that, litigation was impossible because there was nothing in contest, and, as soon as withdrawal was promised and on its way, no injunction could possibly have been obtained, and no action affecting that transfer or based on that caveat could have been maintained by the caveator.

It must not be assumed - as the appellant's argument undoubtedly assumed - that a promise to abstain from issuing a writ is always

a valuable consideration. The position may, I think, be cla thus : -

(1) A promise not to sue for a limited period, definite or in- definite, is a valuable consideration where the substantive clai is one for which the other party is liable (Longridge v. Dorville ( 0, Fullerton v. Provincial Bank of Ireland (2) ).

(2) A promise not to sue at all, that is, an abandonment of a stantive claim, is a valuable consideration, if there be either lia bility or a bond fide belief of liability (Longridge v. Dorville () = Miles v. New Zealand Alford Estate Co. (3) ). ;

(3) A promise to abandon a suit in whole or part already com: menced is a valuable consideration where there is a bond fide claim (ibid.). :

(4) Mere temporary forbearance to sue where there is no liability is no consideration (Jones v. Ashburnham (4) ; In re Pilet (5) ; Long- : ridge v. Dorville (1); Graham v. Johnson (6) ), even if the claim be disputed (Edwards v. Baugh (7) ).

Now, under which of these four heads would this case fall even if we supposed a definite promise had been made not to sue as con- sideration for withdrawing the transfer ? <4

To my mind, only under the fourth. It is admittedly not under the first or third. It is suggested to come within the second. But, if it does, it means that the appellant abandoned a substantive | right, which is all that differentiates it from the fourth. But what | substantive right? The only substantive right in question was priority, and, if that were abandoned by the plaintiff, he must fail

now; if not abandoned, his case necessarily comes within the fourth proposition, and this branch of his argument fails, The matter is very much akin to the concluding words of -Pry LJ. in Miles's - Case (8). There was, no doubt, an "expectation" in the mind of the appellant that the respondent would not re-lodge his transfer, | but, to adopt the words of Fry L.J., " it is not right or competent for the Court to turn an expectation into a contract." In my

opinion it is not right or competent here ; and, even if the field were é

(1) 5B. & Ald., 117. (5) (1915) 3 KB, 510, at p. 626. (2) (1903) A.C., 309. (6) LR. 8 Eq., 3t, jet pias (3) 32Ch. D., 266, at pp. 290-201. (7) UM. Ww.

(4) 4 East, 455, at p. 464. (8) 32 Ch. D., at p. 300,

tion relatively as they were before the withdrawal. That would be determined by the legal result of a failure on the part of the

July - one clear day intervening. In my opinion, in the absence of some clear explanation justifying or excusing this failure it is 'one which, at all events in so simple a case as an equitable mortgage, postpones the mortgagee to the person bond fide misled by the result of a search as in the present case. The protection given by the Act to an unregistered and, perhaps, unregistrable transaction is coupled with the price of diligence in guarding others against loss arising through ignorance of the transaction. -

As to the equitable view of such a bargain as is relied on, see the concluding sentence in par. 122 of Story's Equity Jurisprudence.

In this case if the field were opened the respondent should succeed. But is the field to be opened at all, seeing that the respondent has in fact obtained registration ? He relies on secs. 72 and 179 of the Act, and says that the one relevant governing issue is whether he obtained the certificate by fraud or not.

Now, the " fraud " that is contemplated by sec. 72 is actual fraud, moral turpitude. That is finally settled by Assets Co. Ltd. v. Mere Roihi (1). Tt had already been the view taken by some Australian Courts. See Gregory v. Alger (2), and notably Smith v. Essery & Brown (3), per Williams J. And further, it must be the fraud of the registered proprietor himself or his agents. In the last-men- tioned case that learned Judge, after assenting to the view that "fraud" implies a want of bona fides, observes (4) : "" Where, how- ever, bona fides is in question, the character, degree of education, and personal qualifications of the individual, and all the surrounding circumstances, have to be considered : what kind of man the person whose conduct is impeached may be, the manner in which he told his story, are all-important."

Applying those observations to the present case, we must remember that the persons whose bona fides is in question are the defendant and his later solicitor Upton. The primary Court heard and saw

(1) (1905) A.C., 176, at p. 210. (3) 9N-Z.LR., 449. (2) 19 V.LR., 565. (4) 9N.Z.LR., at p. 465.

_ opened, the parties would be regarded as precisely in the same posi- H. C. or A.

Burter appellant to lodge a caveat from 30th June to the morning of 2nd yarcrovex.

Borer opinion impossible to say that that testimony discloses conduct

Farrorovan, the part of the respondent or his agent so indefensible morally, or al rs explanation so frail, as to practically demonstrate a dishonest mi isaace J.

concerned." Having regard to the testimony recorded, it is in my

aBeckett J. has found the two facts separately and independently (1) no contract to abandon rights and (2) no fraud. In the first a breach of contract is not necessarily fraud (Lord Oranworth L.0, in Jorden v. Money (1)). The fraud here must be what Lord Hard- wicke L.C. termed machinatio ad circumveniendum (Le Neve v. Le Neve (2)). The determination of that question depends so largely on the personal characteristics of these witnesses as they appea red to the learned Judge who saw them that, in this case, we are not in: position to say the view taken by the primary tribunal was wro1 The respondent and his solicitor were acquitted of fraud, and, in my opinion, that conclusion must stand. 4

There remains the contention raised under sec. 185, that th section constitutes a standing prohibition to the Registrar agai registering a dealing so long as a caveat forbidding it is in for The argument substantially is that the section creates an excepti from the general authority of the Registrar to register a dea and any attempt on his part to register in such case is a nullity The contention involves two assumptions: (1) that there was caveat in force, and (2) that the registration notwithstanding caveat was void,

As to the first assumption, though the Legislature, by an amending Act, No. 2845, has placed the question beyond doubt for the futur it is necessary, in view of the possibilities arising out of the recentl adopted practice in the Titles Office, to say that the caveat in th case was in force notwithstanding the events of October 1915,

Sec. 184 gives a caveator fourteen days after notice to him th the proprietor had applied to register a dealing, to consider whethe he will permit the dealing to pass unchallenged or will contest He has the whole fourteen days to consider which course he will t This necessarily contemplates a live application persisted in th whole time by the proprietor or the person whom the law regards

(1) 5 H.L.C., 185, at pp. 214-216, (2) Amb., 436, at p. 447.

ting for the proprietor in so applying. If, however, the applica- H. C. or A. n is withdrawn within fourteen days so that the caveator's rightis 1°17-

ackn owledged without a contest, the period of fourteen days of inac- Burner

vity contemplated by the section ceases to run. The Act is not 50 pamccoven. das to insist on the caveator taking proceedings against a comer saacs J.

The view acted on in the Titles Office for ly years previously was right, and in law the caveat still existed n the transfer was re-lodged in March 1916.

'Then comes tte, second pur as to nullity. ae would be a

, as he believed, became registered means and on the faith his certificate and the guarantee given by sec. 72, built on the

ind, should find that he owned nothing, that his certificate was a nullity, and, further, that he was unprovided for with regard to the assurance fund since he had been deprived of nothing. It would not ly be strange, but it would not be in consonance with the central ture of the Act - the conclusiveness of a certificate based on a and innocent transaction with the registered proprietor (see

ance a caveator, sustaining loss through "any omission mistake or misfeasance " of the office, and who is by reason of the provisions

jin an action against the Registrar. These provisions ate that the failure to observe the precautionary provision is fatal to the validity of the certificate. (See also the case of

Street Railway Co. vy. Normandin (2).) Reference may also made to the principle that where an Act creates an obligation and

H.C. or A. enforces the performance in a specified manner, it isa general 1 1917.

that performance cannot be enforced in any other manner (D Bridges (1) ; Pasmore v. Oswaldtwistle Urban District Council (2

I would add that whenever it becomes necessary to coi sec, 179, it is important to observe that the final provision in section is limited by the words "of itself" ; and on this subje I refer to the judgment of Boucaut J. in Franklin y. Ind (3) and the cases of National Bank v. National Mortgage and A Co. (4), Locher v. Howlett (5) and Kirkpatrick & Barclay v. Hutehi- son (6). The final words have reference, I think, to the equit doctrine of Le Neve v. Le Neve (7) and the case mentioned by Mr, Starke, Agra Bank Ltd. v. Barry (8).

I agree that the appeal should be dismissed with costs.

Gavan Durry anp Ricu JJ. A number of points were deb during the argument in this case with which it is unnecess to deal in the view we take of the facts. On 5th Octol 1915 the plaintiff's solicitor wrote to the defendant with re spect to the defendant's application for registration of his tran and on 5th and 6th October he discussed the matter the defendant and his solicitor. During these discussions plaintiffs solicitor never for a moment abandoned the posi he had taken up in his letter, which was that the defend transfer must not be registered unless and until a satisfa settlement had been made in respect of the plaintiff's ol The defendant was unable to find sufficient money to satist the plaintiff, and there remained the question whether he woul dispute the plaintiff's priority of title. He finally accepted h solicitor's opinion that the plaintifi's title had priority over his « and, as we think, undertook to withdraw his application for r tration and not to renew it unless and until a satisfactory ment of the plaintiff's claim had been effected. In consideration

(1) LB. & Ad., 847, at p. 859. (5) 13 N.Z.LR., 584. (2) (1898) A.C., 387, at p. 394. - (6) BNZLR., 665, at pp. 670 et. (3) 17S.A.L.R., 133, at p. 160. (7) Amb., 436.

is undertaking and subject to its performance, the plaintiff on his

part undertook not to prosecute the legal proceedings which he con- templated taking for the purpose of enforcing his priority. This, our opinion, constituted a binding contract between the parties. defendant withdrew his application, but was subsequently that he had a better title than the plaintiff, and he then loyed another solicitor to re-lodge his transfer for registration, ly assuring him that he was not precluded from doing so by arrangement or understanding with the plaintiff. Some negotia- took place for the settlement of the plaintiff's claim, but he not told anything about the renewed applicafion. The Regis- of Titles, who, perhaps incorrectly, considered the plaintiff's at to have lapsed, registered the defendant's transfer without any notice to the plaintiff. The result was that the plaintiff not informed of the defendant's renewed application until after » defendant had obtained a certificate of title. In these circum- nces we think that the plaintiff can insist on his priority notwith- ng the existence of the defendant's certificate of title, which,

'so misled the defendant, who searched before completing his title and found no caveat. In our opinion it is unnecessary to ler whether the plaintiff's failure to lodge a caveat did post- his title to that of the defendant or not. The agreement of October binds the defendant, and precludes him from relying

ly the contract which is pleaded, and we are asked to say that plaintiff amends his pleading the defendant should be at to plead and rely upon sec. 229 of the Instruments Act 1915. he should be at liberty to do so if it could help him, but tract which we find to have been made is not, in our opinion, \in the provisions of that section. The appeal should be allowed. transferor to the defendant is not a party to the action, and no er can be made which purports to affect his rights, but it is ssary to state the exact form of remedy to which the plaintiff

H.C. or A. jg entitled, as the effect of the judgment of the majority of this

1917- Court is that the judgment appealed against will stand. ees Appeal dismissed with costs,

Solicitors for the appellant, Backhouse, Skinner & Hamilton. Solicitors for the respondent Fairclough, Upton & Upton.

THE COMMERCIAL BANKING Sage ie OF SYDNEY LIMITED im axp THE FEDERAL COMMISSIONER OF TAXA- TION } RusponDEN

TION Responv! H.C. or A. Income Tax - Assessment - Company - Income - Deductions - A mount distrib 1917. shareholders - Dividend - Income for period - Accumulated profits - Appo we ment - Income exempt from taxation - Income Tax Assessment Acts 1915. No Sypyey, 34 and 47 of 1915), sec. 16 (1). April 5, 26.

Where a company which has accumulated profits distributes a dividend

Sa ene its shareholders it is always a question of fact whether the distribution is,

Gavan Duty the purposes of sec. 16 (1) of the Income Tax Assessment Act 1915, made out

3 the profits for that period or partly out of those profits and partly out accumulated profits.